<PAGE>
- --------------------------------------------------------------------------------
MORGAN STANLEY
ASIA-PACIFIC
FUND, INC.
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
JUNE 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 LLP
200 Park Avenue
New York, New York 10166
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers 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.
<PAGE>
LETTER TO SHAREHOLDERS
- ---------
For the six months ended June 30, 1998, the Morgan Stanley Asia-Pacific Fund,
Inc. (the "Fund") had a total return, based on net asset value per share, of
- -9.24% compared to its benchmark (as defined below) return of -7.82%. For the
one year ended June 30, 1998 and for the period since the Fund's commencement of
operations on August 2, 1994 through June 30, 1998, the Fund's total return,
based on net asset value per share, was -39.03% and -33.29%, respectively,
compared with -37.90% and -41.46%, respectively, 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 capitalization of these indices at the beginning of each
month). On June 30, 1998, the closing price of the Fund's shares on the New
York Stock Exchange was $6 7/16 representing a 19.0% discount to the net asset
value per share.
JAPANESE EQUITY
During the first half of 1998, economic conditions in Japan continued to
deteriorate and both sentiment and the markets reflected a "sell Japan" attitude
by investors.
In order to solve this weak economic condition, an economic package was
announced in April with a 16 trillion yen stimulus program which contained a 12
trillion yen "mamizu" or real new spending. However, this package primarily
involved public works programs similar to previous packages and observers were
disappointed with the lack of new measures to meaningfully contribute to
long-term economic growth. At the same time, the sole currency intervention by
the Bank of Japan of more than $10 billion did not have impact on the rapidly
weakening yen. Moreover, foreigners and the Japanese public became increasingly
frustrated that the Japanese Government did not announce proposals for permanent
tax cuts or specific measures to address the non-performing loan issues during
the London G7 Summit in May.
In fact, Japan's gross domestic product for fiscal year 1997 resulted in 0.7%
growth, the lowest in 23 years and all economic data and leading indicators
confirmed the economy was only going from bad to worse. In particular,
unemployment rose to 4.1%, the highest on record since 1953, the beginning of
this statistic. The Japanese banks' non performing loans remained broadly
debated without any clear solution plans. A metaphor for these compounding
problems was perhaps the massive selling of shares in Long Term Credit Bank
(LTCB), one of Japan's largest and most established banks. To many observers it
meant the market itself requested LTCB to retreat from the financial business.
Eventually LTCB announced a merger with Sumitomo Trust to stem a complete
collapse in public confidence.
With these conditions mentioned above, investors adopted a "sell Japan"
attitude. For example, the yen weakened to 146 against the U.S. dollar and
foreign investors in Japanese equities with currency losses became increasingly
bearish. Meanwhile, both domestic individual investors and institutions chose a
flight to quality into Japanese bonds and massive outflows to non-yen
investments gained momentum. As a result, the 10-year Japanese Government bond
yielded a transistor sized 1.1% and the equity market hovered near the lows set
in 1992, 1995 and early 1998.
However, during late June some constructive measures began to emerge because
fears of Japan's deflationary cycle spreading around the globe raised sharp
criticism from U.S., Asia and Europe. China and the rest of Asia officially
complained of Japan's lack of action and President Clinton and Chinese officials
declared that the yuan will not be devalued in an attempt to regain some
confidence in the local markets. With this political agreement in June, U.S.
and Japan made a coordinated currency intervention defending the rapidly
weakening yen. Authorities believed that this currency intervention would send
a strong message to the markets that Japan would take necessary action to renew
faith for the rapidly depreciating currency and ever stagnant economy. In a
largely public gesture, U.S. Treasury Vice Secretary Summers visited Japan in
order to strongly encourage Japan to resolve its financial problems. With the
Upper House Elections looming on July 12, the Japanese government finally
proclaimed a new "Bridge Bank" for non-performing loans and hints of permanent
corporate and individual tax cuts were voiced by the leading political party
members. The result of these more favorable developments fueled some short
covering and the equity market rebounded sharply during the last several days in
June.
Importantly, while there are some encouraging signs of real change including the
recent resounding defeat of the LDP, we remain cautious on the actual process by
which these changes will be implemented. In our view, the coordinated
intervention between the U.S. and Japan was more a symbol for a pact between
Japan and the U.S. that real measures to address Japan's ailing economy will
immediately occur. Unsurprisingly, shortly after the currency intervention,
details of the
2
<PAGE>
"Total Plan," "Bridge Bank" and permanent tax cuts made daily headlines in the
media. In reality, the tax cuts and additional public works spending will mean
a ballooning budget deficit and therefore will likely hit a political wall. We
are also unclear how the "Bridge Bank" will actually work and whether such a
program can be effectively managed at a time when Japan lacks strong political
leadership. It is also evident to us that Japan's traditional political system
will be tested in light of these Government proclamations. In particular, the
public will increasingly demand a clear explanation of the rising deficit
spending to accommodate these initiatives at a time of economic weakness and
Government revenue short falls. The weakness of the yen should be net positive
for our core holdings in international blue chips but we have found no evidence
to date that exporters have used this opportunity to grow their exports for fear
of renewed backlash from the U.S. and Europe. In other words, the weak yen is
not yet exploited by the most productive sectors of the Japanese economy to spur
gross domestic product growth.
Japan is in critical shape and public lack of satisfaction with the government
is actively becoming voiced as evidenced by July 12 election results. We
believe authorities sense that unless meaningful and concrete steps are taken
immediately Japan will fall further into an abyss. We are cautiously optimistic
that there are emerging signs of a spark at the end of a long dark tunnel. Our
Fund, however, will continue to overweight defensive globally competitive blue
chips with some earnings momentum and reasonable valuation. We believe it is
prudent to limit holdings in domestic economically sensitive sectors until a
meaningful and transparent process to invigorate the domestic economy becomes
clearer and better articulated.
REST OF ASIA
The performance of the Fund's holdings in Hong Kong contributed positively to
the Fund. The continued slide in the yen forced additional pressure on the Hong
Kong/U.S. dollar peg throughout the second quarter, pressure which directly
translated into higher interest rates in Hong Kong. The Hong Kong stock market
is dominated by interest rate sensitive counters such as property and banking
shares, which led the decline of the overall market. The Fund has avoided such
stocks since the start of the year, concentrating its attention on companies
with low financial gearing and stable cash flows. Key Fund holdings such as CLP
Holdings, Hong Kong Telecommunications and Hong Kong & China Gas all held up in
the weak market. The one significant banking share the Fund does hold, HSBC,
derives an increasing amount of its revenue stream from outside Hong Kong and as
such has earnings insulated from Hong Kong's economy.
Security selection in Malaysia also had a significant impact on the Fund's
outperformance. The Fund was concentrated in consumer oriented stocks such as
Rothman's and Nestle, which have dominant market share and the ability to pass
along price increases directly to the consumer. The market's decline was led
by companies with highly leveraged balance sheets and uncertain cash flows, as
well as the banks which had made the loans to those same companies. The Fund
avoided companies with either of those criteria in the first half of 1998.
Security selection in the Philippines made one of the largest negative
contributions to Fund's performance. This was largely due to the steep decline
in the Fund's large holding in Music Corp., a designer of content addressable
memory chips for computer networks. Delays in its next generation of products
forced the stock down, as did the indefinite postponement of its NASDAQ listing.
STRATEGY
The +9.8% rally in the Asian markets in the first quarter of 1998 proved
short-lived as the MSCI All Country Far East Free ex-Japan Index fell 33.0% in
the second quarter of 1998. This sharp decline has led to a deterioration in
the year-to-date performance to -26.9%, and marks the lowest level the index has
reached since early 1991.
Individual country performance proved to be similarly negative, as eight of the
nine component countries of the All Country Far East Free ex-Japan Index posted
losses. The best performing markets were Korea, which managed a 5.6% return
year-to-date, and the Philippines with a -4.1% fall in that same period. The
most severe declines were registered in Indonesia, China and Singapore, which
fell -57.9%, -35.3% and -33.8%, respectively.
The inability of the Japanese government to address the looming disaster in its
financial sector and the corresponding depreciation of the yen against the U.S.
dollar weighed heavily on the Asian markets in the second quarter. Aside from
the obvious impact of decreased competitiveness on international markets against
Japanese goods for Asian exports, the depreciation combined with the timid
Japanese consumer have sharply curtailed Japanese imports of Asian goods.
Furthermore, the Japanese banks which had built up enormous exposure to Asian
corporate debt over the last decade
3
<PAGE>
have begun calling in their loans at a rapid level, further contributing to the
liquidity crunch haunting the region.
On a country-by-country basis, there are a number of situations which are
worthwhile examining in closer detail. Although we retain the view that the
Chinese government will not devalue the yuan (and consequently the Hong Kong
dollar) in the short term, there are increasing pressures building up in China
which will escalate the costs this decision makes on the Chinese economy. The
competitiveness of Chinese exports have been seriously undermined by the
regional currency depreciations, with forthcoming consequences for both the
level of exports and the profitability of the export sector. Equally, if not
more important, imports in China have gained significant ground at the expense
of domestic companies. This slowdown comes at a time when the Chinese
leadership desperately needs growth throughout the economy to soak up redundant
employees from the restructuring of the State Owned Enterprises. Furthermore,
inward Foreign Direct Investment is also likely to decline sharply as flows from
Hong Kong and Japan evaporate. The impact of a yuan devaluation in the near
term would be negative for Asia, most likely resulting in the Hong Kong
dollar/U.S. dollar peg breaking and a further round of devaluation throughout
the region.
A slowing Chinese economy is just one factor that is likely to force a further
deterioration of the Hong Kong economy. Reported gross domestic product growth
in the first quarter of 1998 was -2%, and with further negative growth probable
in the second quarter of 1998 Hong Kong could be entering into a full blown
recession. Unemployment jumped to 3.5%, very high by Hong Kong standards, and
the overnight rate hit 10% by mid-June, showing further doubt in the Hong Kong
dollar/U.S. dollar currency peg. The destruction of wealth in property and
equities, as well as the steep decline in tourism, have forced retail sales down
over 10% in the first quarter of 1998. This deflation, combined with high
interest rates, is a lethal mixture for the property sector, which has fallen
40% already yet still remains ridiculously expensive by world standards. The
impact on the economy will continue to be severe.
Accurate forecasts of Indonesia's growth have become even more difficult since
the departure of long term leader Suharto. His appointee, Vice President B.J.
Habibie, originally seen as merely a caretaker, continues to solidify his power
with the ruling Golkar party in Jakarta. Although the riots and demonstrations
which forced Suharto from power have subsided, distrust of the government
remains simmering just below the surface. Equally serious, the depreciation of
the rupiah, combined with a drought brought on by El Nino, indicate that simply
feeding the 200 million people of this country could prove to be difficult. The
situation is exacerbated by the flight of many of the ethnic Chinese who
dominated the Indonesian economy but were targeted for racial attacks during the
riots earlier this year. Without their capital and commercial expertise,
distribution of even simple products will remain extremely difficult in the
rural areas. Inflation is also becoming a serious problem, to add to the
country's ills. Despite extremely cheap valuations, almost ridiculous in U.S.
dollar terms, the macroeconomic and political risks in Indonesia remain immense.
Korea on the other hand has taken the lead in confronting its problems and
trying to work through its version of the Asian financial crisis. Its Financial
Supervisory Commission, composed of a mixture of leaders from the public and
private sector, has set an aggressive timetable for dealing with financial
sector reform and corporate restructuring. Furthermore, the Korea Asset
Management Corporation (KAMC) is in the final stages of formation, a government
owned entity which will be charged with acquiring the bad debt from the banking
sector in exchange for bonds drawn on the KAMC. The government has also built
up over 40 billion U.S. dollars in foreign reserves, while the Korean current
account surplus has reached $23 billion U.S. dollars. Though immense problems
remain in the economy, the first steps have been taken to address them.
In order for there to be a true end to this financial crisis the countries of
the region must address directly the failures in their own economies. Although
the problems in Japan have proven to be the most recent catalyst, it is
important to note that the situation in Asia, and the seeds of its eventual
recovery are based within the countries themselves. The International Monetary
Fund has instituted an initial cleansing of the banking systems in the countries
under its care, but a great deal of work domestically needs to be accomplished.
The capability and desire of banks to make loans on an economic basis, and the
regulatory framework for such an environment have to occur fundamentally at the
local level. A plan has to be made and followed about how each individual
country can address the upwards of 20% non-performing loans in their system. On
the non-financial side, manufacturing over-capacity must be shuttered and demand
stimulated at the domestic level for products. And finally, corporations must
be restructured to place a greater emphasis on shareholder's return for the
region to attract the capital and expertise essential to the rebuilding process.
4
<PAGE>
Beginning with this report, we are discontinuing our practice of designating an
individual portfolio manager to sign our reports to shareholders in order to
better reflect the "Team" investment approach of the Fund's investment adviser,
Morgan Stanley Asset Management ("MSAM"). The global emerging markets team at
MSAM has general oversight of the investment management of the Fund. Vinod Sethi
and John R. Alkire continue to share primary responsibility for the day-to-day
management of the Fund's assets. In addition, effective August 1, 1998 Timothy
D. Jensen and Ashutosh Sinha have also assumed primary responsibility for the
day-to-day management of the Fund's assets. Timothy Jensen joined MSAM in 1998.
He is a Principal and a member of MSAM's emerging markets group focusing
primarily on the East Asian markets. Prior to joining MSAM, he was a Partner at
Ardsley Partners, where he managed a portion of the emerging markets assets.
Prior to that, he was a Vice President at Bankers Trust, where he was
responsible for management of a Latin American equity portfolio. Ashutosh Sinha
joined the Adviser in 1995. He is a Vice President and a member of MSAM's
emerging markets group focusing primarily on the East Asian and Middle Eastern
markets. Prior to joining MSAM, he spent two years at SBI Funds Management
Ltd., where he was an analyst for the India Magnum Fund. Previous to that, he
worked for three years as a consultant for Citicorp Overseas Software Ltd.
Sincerely,
/s/ Michael F. Klein
Michael F. Klein
PRESIDENT AND DIRECTOR
July 1998
5
<PAGE>
Morgan Stanley Asia-Pacific Fund, Inc.
Investment Summary as of June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURN (%)
HISTORICAL -------------------------------------------------------------------------------------
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 -13.34% -- -9.24% -- -7.82% --
One Year -38.41 -38.41% -39.03 -39.03% -37.90 -37.90%
Since Inception* -45.98+ -14.56+ -33.29+ -9.83+ -41.46 -12.80
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
ENDED
JUNE 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 $ 7.95
Market Value Per Share . . . . $ 12.25 $ 13.33 $ 9.75 $ 7.44 $ 6.44
Premium/(Discount). . . . . . . -7.2% -7.0% -18.4% -15.2% -19.0%
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% -9.24%
Index Total Return (3). . . . . -5.90% 0.87% -9.17% -28.09% -7.82%
</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.
6
<PAGE>
Morgan Stanley Asia-Pacific Fund, Inc.
Portfolio Summary as of June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIVERSIFICATION OF TOTAL INVESTMENTS
[CHART]
Short-term investments (15.5%)
Equity Securities (84.5%)
- --------------------------------------------------------------------------------
SECTORS
[CHART]
Automobiles (4.2%)
Banking (4.1%)
Beverages & Tobacco (4.5%)
Chemicals (5.5%)
Electrical & Electronics (13.0%)
Electronic Components & Instruments (5.8%)
Health & Personal Care (4.4%)
Machinery & Engineering (5.9%)
Telecommunications (4.5%)
Utilities -- Electrical & Gas (4.0%)
Other (44.1%)
- --------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
[CHART]
Japan (45.6%)
India (11.7%)
Hong Kong (7.8%)
Australia (4.9%)
Malaysia (3.7%)
Singapore (2.7%)
Pakistan (2.5%)
Thailand (1.5%)
Indonesia (1.4%)
United Kingdom (1.1%)
Other (17.1%)
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*
<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Housing Development Finance Corp., Ltd. (India) 3.0%
2. Bharat Heavy Electricals Ltd. (India) 3.0
3. Hong Kong Telecommunications Ltd. (Hong Kong) 2.2
4. Container Corp. of India Ltd. (India) 2.0
5. Sony Corp. (Japan) 2.0
6. Nintendo Ltd. (Japan) 2.0
7. CLP Holdings Ltd. (Hong Kong) 1.9
8. Ricoh Co., Ltd. (Japan) 1.5
9. National Australia Bank Ltd. (Australia) 1.5
10. Lever Brothers Pakistan Ltd. (Pakistan) 1.5
----
20.6%
----
----
</TABLE>
* Excludes short-term investments.
7
<PAGE>
FINANCIAL STATEMENTS
- ------
STATEMENT OF NET ASSETS (UNAUDITED)
- ------
JUNE 30, 1998
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (84.5%)
(Unless otherwise noted)
- --------------------------------------------------------------------------------
AUSTRALIA (4.9%)
BANKING
National Australia Bank Ltd. 636,000 U.S.$ 8,399
Westpac Banking Corp., Ltd. 1,054,000 6,437
------------
14,836
------------
BROADCASTING & PUBLISHING
News Corp., Ltd. 527,600 4,311
------------
REAL ESTATE
Lend Lease Corp., Ltd. 109,000 2,207
------------
TELECOMMUNICATIONS
Telstra Corp.,Ltd. 1,798,000 4,615
------------
TRANSPORTATION - ROAD & RAIL
Brambles Industries Ltd. 104,200 2,047
------------
28,016
------------
- --------------------------------------------------------------------------------
HONG KONG (7.8%)
BROADCASTING & PUBLISHING
Television Broadcasts Ltd. 1,207,000 3,193
------------
MULTI-INDUSTRY
Hutchison Whampoa Ltd. 750,200 3,960
------------
REAL ESTATE
Li & Fung Ltd. 1,060,000 1,710
------------
TELECOMMUNICATIONS
Hong Kong Telecommunications Ltd. 6,617,800 12,428
------------
UTILITIES -- ELECTRICAL & GAS
CLP Holdings Ltd. 2,346,000 10,688
Hong Kong & China Gas Co., Ltd. 5,346,000 6,072
(a)Hong Kong & China Gas Co., Ltd.
(Warrants), expiring 9/30/99 243,000 17
Hong Kong Electric Holdings Ltd. 1,875,000 5,808
------------
22,585
------------
43,876
------------
- --------------------------------------------------------------------------------
INDIA (11.7%)
APPLIANCES & HOUSEHOLD DURABLES
Supreme Industries Ltd. 150 1
------------
AUTOMOBILES
Autolite Ltd. 500 --@
(a)Autopal Industries Ltd. 100 --@
Bajaj Auto Ltd. 250 3
Bajaj Tempo Ltd. 707 3
(a,c)Bajaj Tempo Ltd. (Rights) 1,717 2
(a)Escorts Ltd. 1,600 3
Hero Honda Ltd. 263,328 5,437
MRF Ltd. 18,000 820
------------
6,268
------------
- --------------------------------------------------------------------------------
BANKING
Industrial Finance Corp., (India) Ltd. 1,800 U.S.$ 1
State Bank of India Ltd. 273,712 1,364
------------
1,365
------------
BEVERAGES & TOBACCO
ITC Ltd. 17,203 265
------------
BUILDING MATERIALS & COMPONENTS
Associated Cement Co., Ltd. 910 26
Panyam Cements & Mineral Industries Ltd. 15 --@
Saurashtra Cement & Chemicals Ltd. 50 --@
------------
26
------------
CHEMICALS
Birla VXL Ltd. 125 --@
Gujarat Narmada Valley
Fertilizers Co., Ltd. GDR 144A 275,000 551
Gujarat Narmada Valley
Fertilizers Co., Ltd. 324 --@
Indian Petro Chemical Corp., Ltd. 310 --@
Jaysynth Dyechem Ltd. 400 --@
------------
551
------------
CONSTRUCTION & HOUSING
Alacrity Housing Ltd. 127,600 7
Hindustan Construction Ltd. 2,300 1
Hindustan Development
Corp., Ltd. 66,580 15
------------
23
------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Infosys Technology Ltd. 44,200 2,317
------------
ENERGY EQUIPMENT & SERVICES
Bharat Heavy Electricals Ltd. 2,881,000 16,712
------------
ENERGY SOURCES
(a)Esab India Ltd. 346,865 625
------------
FINANCIAL SERVICES
Housing Development
Finance Corp., Ltd. 238,282 16,820
UTI MasterShares Ltd. 22,750 7
------------
16,827
------------
FOOD & HOUSEHOLD PRODUCTS
Smithkline Beecham
Consumer Health Care Ltd. 384,600 3,519
------------
HEALTH & PERSONAL CARE
Sun Pharmaceutical Industries Ltd. 100 1
------------
INDUSTRIAL COMPONENTS
Apollo Tyres Ltd. 401,575 834
(a,b)Apollo Tyres Ltd. (Warrants) 2,150 --@
Essel Packaging Ltd. 50 --@
KEC International Ltd. 50 --@
------------
834
------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
INDIA (CONTINUED)
LEISURE & TOURISM
ITC Hotels Ltd. 650 U.S.$ 1
------------
MACHINERY & ENGINEERING
Crompton Greaves Ltd. 50 --@
DGP Windsor India Ltd. 203,900 71
Veejay Lakshmi Engineering Ltd. 149,100 74
------------
145
------------
METALS - STEEL
Tata Iron & Steel Co., Ltd. 250 1
(a,b)Tata SSL Ltd. - New 50 --@
------------
1
------------
MISCELLANEOUS MATERIALS & COMMODITIES
Vikas WSP Ltd. 115,000 271
------------
MULTI-INDUSTRY
JK Corp Ltd. 100 --@
JK Corp. Ltd. GDR 144A 249,240 95
(a,d)Morgan Stanley Growth Fund 32,892,200 4,654
(a)Voltas Ltd. 50 --@
------------
4,749
------------
TEXTILES & APPAREL
(a)G.T.N. Textiles Ltd. 14,400 11
(a)Garware Plastics & Polyester Ltd. 39 --@
(a)J.K. Synthetics Ltd. 2,984 --@
Mahavir Spinning Mills Ltd. 150 --@
Raymond Ltd. 136 --@
(a,b)Viniyoga Clothes Ltd. 5,400 --@
------------
11
------------
TRANSPORTATION - ROAD & RAIL
Container Corp. of India Ltd. 1,059,600 11,421
------------
TRANSPORTATION - SHIPPING
Great Eastern Shipping Ltd. 2,640 2
------------
65,935
------------
- --------------------------------------------------------------------------------
INDONESIA (1.4%)
BEVERAGES & TOBACCO
Bat Indonesia 294,500 519
Gudang Garam (Foreign) 4,441,500 2,620
------------
3,139
------------
FOOD & HOUSEHOLD PRODUCTS
Unilever Indonesia 2,413,500 4,581
------------
HEALTH & PERSONAL CARE
SQUIBB Indonesia 49,000 24
------------
7,744
------------
- --------------------------------------------------------------------------------
JAPAN (45.6%)
APPLIANCES & HOUSEHOLD DURABLES
Rinnai Corp. 160,700 2,435
------------
AUTOMOBILES
Nissan Motor Co. 1,620,000 5,107
Suzuki Motor Co., Ltd. 570,000 5,181
Toyota Motor Corp. 270,000 6,993
------------
17,281
------------
BUILDING MATERIALS & COMPONENTS
Sangetsu Co., Ltd. 147,000 U.S.$ 1,898
Sanwa Shutter Corp., Ltd. 582,000 2,561
------------
4,459
------------
BUSINESS & PUBLIC SERVICES
Dai Nippon Printing Co., Ltd. 270,000 4,314
------------
CHEMICALS
Daicel Chemical Industries Ltd. 1,440,000 3,054
Fuji Photo Film Ltd. 222,000 7,735
Kaneka Corp. 899,000 4,734
Mitsubishi Chemical Industries 1,760,000 3,187
Nifco, Inc. 330,000 2,619
Okura Industrial Co., Ltd. 407,000 1,072
Sekisui Chemical Co. 623,000 3,191
Shin-Etsu Polymer Co., Ltd. 15,000 60
------------
25,652
------------
CONSTRUCTION & HOUSING
Kyudenko Co., Ltd. 389,000 2,548
Sekisui House Ltd. 387,000 3,001
------------
5,549
------------
DATA PROCESSING & REPRODUCTION
Fujitsu Ltd. 760,000 8,005
Nissha Printing Co., Ltd. 105,000 644
Ricoh Co., Ltd. 816,000 8,600
------------
17,249
------------
ELECTRICAL & ELECTRONICS
Canon, Inc. 362,000 8,226
Hitachi Ltd. 1,085,000 7,084
Kyocera Corp. 100,000 4,891
Matsushita Electric Industrial
Co., Ltd. 482,000 7,754
NEC Corp. 835,000 7,789
Nintendo Ltd. 120,000 11,124
Sony Corp. 130,000 11,207
Tokyo Electron Ltd. 163,000 4,997
Toshiba Corp. 1,930,000 7,894
------------
70,966
------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Mitsumi Electric Co., Ltd. 403,000 7,123
Murata Manufacturing Co. 180,000 5,843
TDK Corp. 103,000 7,616
------------
20,582
------------
FINANCIAL SERVICES
Hitachi Credit Corp. 218,000 3,672
------------
HEALTH & PERSONAL CARE
Ono Pharmaceutical Co., Ltd. 100,000 2,395
Sankyo Co., Ltd. 333,000 7,591
Yamanouchi Pharmaceutical
Co., Ltd. 315,000 6,567
------------
16,553
------------
INDUSTRIAL COMPONENTS
Furakawa Electric Co. 1,083,000 3,649
------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONTINUED)
INSURANCE
Sumitomo Marine & Fire Co. 492,000 U.S.$ 2,754
------------
MACHINERY & ENGINEERING
Amada Co., Ltd. 882,000 4,295
Daifuku Co., Ltd. 626,000 2,335
Daikin Kogyo Co. 623,000 4,018
Fuji Machine Co. 269,000 7,141
Fujitec Co., Ltd. 510,000 3,090
Kurita Water Industries Ltd. 304,000 3,597
Mitsubishi Heavy Industries Ltd. 1,300,000 4,914
Tsubakimoto Chain Co. 872,000 2,925
------------
32,315
------------
MERCHANDISING
Family Mart Co., Ltd. 87,200 3,321
------------
MISCELLANEOUS MATERIALS & COMMODITIES
Autobacs Seven Co. 50,000 1,432
Nippon Pillar Packing Co. 157,000 589
------------
2,021
------------
MULTI-INDUSTRY
Lintec Corp. 150,000 1,309
------------
REAL ESTATE
Keihanshin Real Estate Co. 205,000 759
Mitsubishi Estate Co., Ltd. 415,000 3,652
------------
4,411
------------
RECREATION -- OTHER CONSUMER GOODS
Casio Computer Co., Ltd. 522,000 4,854
Yamaha Corp. 299,000 2,912
------------
7,766
------------
TELECOMMUNICATIONS
Nippon Telephone & Telegraph Corp. 932 7,732
------------
TEXTILES & APPAREL
Shimamura Co., Ltd. 78,900 2,135
------------
WHOLESALE & INTERNATIONAL TRADE
Inabata & Co. 406,000 1,254
------------
257,379
------------
- --------------------------------------------------------------------------------
MALAYSIA (3.7%)
BEVERAGES & TOBACCO
Carlsberg Brewery Malaysia Bhd 1,712,000 5,198
Guinness Anchor Bhd 3,592,000 3,808
R.J. Reynolds Bhd 1,714,000 2,375
Rothmans of Pall Mall Bhd 616,600 4,271
------------
15,652
------------
FOOD & HOUSEHOLD PRODUCTS
Nestle Bhd 1,194,000 5,409
------------
21,061
------------
- --------------------------------------------------------------------------------
NEW ZEALAND (0.5%)
Forest Products & Paper
Fletcher Challenge Forests 79,520 U.S.$ 45
Fletcher Challenge Paper 1,988,000 2,210
------------
2,255
------------
TELECOMMUNICATIONS
Telecom Corp. of New Zealand Ltd. 246,000 527
------------
2,782
------------
- --------------------------------------------------------------------------------
PAKISTAN (2.5%)
BANKING
Askari Bank 2,843,925 842
------------
CHEMICALS
Engro Chemicals Ltd. 916,490 974
Fauji Fertilizer Co., Ltd. 1,124,000 1,213
(a)ICI Pakistan Ltd. 4,500,000 1,161
------------
3,348
------------
ENERGY SOURCES
Shell Pakistan Ltd. 499,600 1,604
------------
HEALTH & PERSONAL CARE
Lever Brothers Pakistan Ltd. 442,880 8,348
------------
14,142
------------
- --------------------------------------------------------------------------------
PHILIPPINES (0.9%)
BEVERAGES & TOBACCO
LA Tondena Distillers, Inc. 2,652,600 1,336
San Miguel Corp. 'B' 990,200 1,306
------------
2,642
------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Ionics Circuit, Inc. 1,521,300 484
(a)Music Corp. 4,330,600 384
------------
868
------------
REAL ESTATE
Ayala Land, Inc. 'B' 1 --@
SM Prime Holdings, Inc. 'B' 9,637,680 1,525
------------
1,525
------------
5,035
------------
- --------------------------------------------------------------------------------
SINGAPORE (2.7%)
BEVERAGES & TOBACCO
Rothmans Industries Ltd. 838,000 3,720
------------
BROADCASTING & PUBLISHING
Singapore Press Holdings Ltd. 61,100 409
------------
BUSINESS & PUBLIC SERVICES
Informatics Holdings Ltd. 849,000 193
------------
ELECTRICAL & ELECTRONICS
Venture Manufacturing Ltd. 643,000 1,218
------------
ELECTRONIC COMPONENTS & INSTRUMENTS
(a)Creative Technology Ltd. 263,700 3,263
Natsteel Electronics Ltd. 3,201,000 5,362
------------
8,625
------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
SINGAPORE (CONTINUED)
MACHINERY & ENGINEERING
(a)Singapore Technologies Engineering Ltd. 1,343,000 U.S.$ 946
------------
15,111
------------
- --------------------------------------------------------------------------------
SRI LANKA (0.2%)
CHEMICALS
Lanka Lubricants Ltd. 1,800,000 1,376
------------
- --------------------------------------------------------------------------------
THAILAND (1.5%)
BROADCASTING & PUBLISHING
BEC World
Public Co., Ltd. (Foreign) 1,629,400 6,216
Grammy Entertainment Public Co., Ltd.
(Foreign) 259,200 602
------------
6,818
------------
ELECTRICAL & ELECTRONICS
(a,b)GSS Array Technology Public Co. Ltd.
(Foreign) 466,200 1,105
------------
ELECTRONIC COMPONENTS & INSTRUMENTS
Delta Electronics
Public Co., Ltd. (Foreign) 82,500 469
------------
8,392
------------
- --------------------------------------------------------------------------------
UNITED KINGDOM (1.1%)
BANKING
HSBC Holdings plc 252,600 6,178
------------
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost U.S.$599,914) 477,027
------------
- --------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------
<S> <C> <C>
FIXED INCOME SECURITIES (0.0%)
- --------------------------------------------------------------------------------
INDIA (0.0%)
METALS -- STEEL
(b)Tata SSL Ltd. - New 14.00%,
12/6/02 (Cost U.S.$2) INR 2 1
------------
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (14.8%)
- --------------------------------------------------------------------------------
UNITED STATES (14.8%)
REPURCHASE AGREEMENT
Chase Securities, Inc. 5.40%,
dated 6/30/98, due 7/1/98,
to be repurchased at U.S.$83,411,
collateralized by U.S.$75,785,
United States Treasury Notes,
7.00%, due 7/15/06, valued at
U.S.$85,204
(Cost U.S.$83,398) U.S.$ 83,398 83,398
------------
- --------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (0.7%)
Australian Dollar AUD 7 U.S.$ 4
Hong Kong Dollar HKD 2,975 384
Indian Rupee INR 33,431 789
Indonesian Rupiah IDR 22 --@
Japanese Yen JPY 166,258 1,199
Malaysian Ringgit MYR 1,354 326
New Zealand Dollar NZD 20 10
Pakistani Rupee PKR 62,122 1,348
Philippine Peso PHP 434 11
Singapore Dollar SGD 76 45
Sri Lankan Rupee LKR 1,760 27
Thai Baht THB 816 19
------------
(Cost U.S.$4,236) 4,162
------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (100.0%)
(Cost $687,550) 564,588
------------
- --------------------------------------------------------------------------------
OTHER ASSETS (0.5%)
Cash U.S.$ 7
Dividends Receivable 1,574
Receivable for Investments Sold 936
Foreign Withholding Tax Reclaim
Receivable 449
Interest Receivable 13
Deferred Organization Costs 12
Other Assets 95 3,086
------------ ------------
- --------------------------------------------------------------------------------
LIABILITIES (-0.5%)
Payable For:
Investments Purchased (1,023)
Dividends Declared (638)
Custodian Fees (596)
Investment Advisory Fees (459)
Shareholder Reporting Expenses (119)
Professional Fees (106)
Directors' Fees and Expenses (69)
Administrative Fees (49)
Fund Shares Redeemed (7)
Net Unrealized Loss on Foreign
Currency Exchange Contracts (2)
Other Liabilities (100) (3,168)
------------ ------------
- --------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 70,987,808, issued and
outstanding U.S.$0.01 par value shares
(100,000,000 shares authorized) U.S.$564,506
------------
------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 7.95
------------
------------
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
(000)
- --------------------------------------------------------------------------------
AT JUNE 30, 1998, NET ASSETS CONSISTED OF:
- --------------------------------------------------------------------------------
<S> <C>
Common Stock U.S.$ 710
Capital Surplus 923,387
Accumulated Net Investment Loss (3,497)
Accumulated Net Realized Loss (233,459)
Unrealized Depreciation on Investments and
Foreign Currency Translations (net of
accrued foreign tax of U.S.$374 on
unrealized appreciation) (122,635)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$ 564,506
--------------
--------------
- --------------------------------------------------------------------------------
</TABLE>
(a) -- Non-income producing
(b) -- Security valued at fair value - see note A-1 to financial
statements.
(c) -- Security valued at fair value as determined based on the market
value of the underlying security less subscription costs.
(d) -- The Fund is advised by an affiliate.
@ -- Amount is less than U.S.$500.
144A -- Certain conditions for public sale may exist.
GDR -- Global Depositary Receipt
Note: Prior governmental approval for foreign investments may be required
under certain circumstances in some emerging markets, and foreign
ownership limitations may also be imposed by the charters of
individual companies in emerging markets. As a result, an additional
class of shares designated as "foreign" may be created, and offered
for investment. The "local" and "foreign" shares' market values may
vary.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
Under the terms of foreign currency exchange contracts open at June 30,
1998, the Fund is obligated to deliver or is to receive foreign
currency in exchange for U.S. dollars as indicated below:
<TABLE>
<CAPTION>
CURRENCY IN NET
TO EXCHANGE UNREALIZED
DELIVER VALUE SETTLEMENT FOR VALUE LOSS
(000) (000) DATE (000) (000) (000)
- ---------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
U.S.$ 555 U.S.$ 555 07/01/98 SGD 934 U.S.$ 553 U.S.$ (2)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
- --------------------------------------------------------------------------------
JUNE 30, 1998 EXCHANGE RATES:
- --------------------------------------------------------------------------------
AUD Australian Dollar 1.613 = U.S. $ 1.00
HKD Hong Kong Dollar 7.748 = U.S. $ 1.00
INR Indian Rupee 42.400 = U.S. $ 1.00
IDR Indonesian Rupiah 14,750.000 = U.S. $ 1.00
JPY Japanese Yen 138.620 = U.S. $ 1.00
MYR Malaysian Ringgit 4.150 = U.S. $ 1.00
NZD New Zealand Dollar 1.925 = U.S. $ 1.00
PKR Pakistani Rupee 46.105 = U.S. $ 1.00
PHP Philippine Peso 41.700 = U.S. $ 1.00
SGD Singapore Dollar 1.690 = U.S. $ 1.00
LKR Sri Lankan Rupee 65.400 = U.S. $ 1.00
THB Thai Baht 42.200 = U.S. $ 1.00
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION -- JUNE 30, 1998
<TABLE>
<CAPTION>
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C>
Appliances & Household Durables U.S.$ 2,436 0.4%
Automobiles 23,549 4.2
Banking 23,221 4.1
Beverages & Tobacco 25,418 4.5
Broadcasting & Publishing 14,731 2.6
Building Materials & Components 4,485 0.8
Business & Public Services 4,507 0.8
Chemicals 30,927 5.5
Construction & Housing 5,572 1.0
Data Processing & Reproduction 17,249 3.0
Electrical & Electronics 73,289 13.0
Electronic Components & Instruments 32,861 5.8
Energy Equipment & Services 16,712 3.0
Energy Sources 2,229 0.4
Financial Services 20,499 3.6
Food & Household Products 13,509 2.4
Forest Products & Paper 2,255 0.4
Health & Personal Care 24,926 4.4
Industrial Components 4,483 0.8
Insurance 2,754 0.5
Leisure & Tourism 1 0.0
Machinery & Engineering 33,406 5.9
Merchandising 3,321 0.6
Metals -- Steel 2 0.0
Miscellaneous Materials & Commodities 2,292 0.4
Multi-Industry 10,018 1.8
Real Estate 9,853 1.7
Recreation -- Other Consumer Goods 7,766 1.4
Telecommunications 25,302 4.5
Textiles & Apparel 2,146 0.4
Transportation -- Road & Rail 13,468 2.4
Transportation -- Shipping 2 0.0
Utilities -- Electrical & Gas 22,585 4.0
Wholesale & International Trade 1,254 0.2
Other 87,560 15.5
-------------- -----
U.S.$ 564,588 100.0%
-------------- -----
-------------- -----
- --------------------------------------------------------------------------------
</TABLE>
SUMMARY OF TOTAL INVESTMENTS BY COUNTRY --
JUNE 30, 1998
<TABLE>
<CAPTION>
PERCENT
VALUE OF NET
COUNTRY (000) ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C>
Australia U.S.$ 28,016 4.9%
Hong Kong 43,876 7.8
India 65,936 11.7
Indonesia 7,744 1.4
Japan 257,379 45.6
Malaysia 21,061 3.7
New Zealand 2,782 0.5
Pakistan 14,142 2.5
Phillippines 5,035 0.9
Singapore 15,111 2.7
Sri Lanka 1,376 0.2
Thailand 8,392 1.5
United States (short-term investment) 83,398 14.8
United Kingdom 6,178 1.1
Other 4,162 0.7
-------------- -----
U.S.$ 564,588 100.0%
-------------- -----
-------------- -----
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1998
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.$ 5,823
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,763
Less: Foreign Taxes Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (579)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,007
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,055
Custodian Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 687
Administrative Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314
Shareholder Reporting Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Professional Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Transfer Agent Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Directors' Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Country Tax Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
- ----------------------------------------------------------------------------------------------------------------------------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,443
- ----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,564
- ----------------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80,594)
Foreign Currency Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,657)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Realized Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84,251)
- ----------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,718
Appreciation on Foreign Currency Translations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 429
- ----------------------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,147
- ----------------------------------------------------------------------------------------------------------------------------------
Total Net Realized Loss and Change in Unrealized Appreciation/Depreciation . . . . . . . . . . . . . . . . . . (61,104)
- ----------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.$ (58,540)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.$ 2,564 U.S.$ 2,126
Net Realized Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (84,251) (149,087)
Change in Unrealized Appreciation/Depreciation. . . . . . . . . . . . . . . . . . . . . 23,147 (79,512)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations. . . . . . . . . . . . . . . . . . (58,540) (226,473)
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Investment Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (638) (1,751)
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchase of Shares (666,700 shares) . . . . . . . . . . . . . . . . . . . . . . . . . (4,489) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Decrease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (63,667) (228,224)
Net Assets:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 628,173 856,397
- ----------------------------------------------------------------------------------------------------------------------------------
End of Period (including accumulated net investment loss of U.S.$3,497 and U.S.$5,423,
respectively). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.S.$ 564,506 U.S.$ 628,173
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31, PERIOD FROM
SELECTED PER SHARE DATA JUNE 30, 1998 --------------------------------------------- AUGUST 2, 1994* TO
AND RATIOS: (UNAUDITED) 1997 1996 1995 DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD . . . . U.S.$ 8.77 U.S.$ 11.95 U.S.$ 14.34 U.S.$ 13.20 U.S.$ 14.10
- ------------------------------------------------------------------------------------------------------------------------------------
Offering Costs . . . . . . . . . . . . . . . -- -- (0.01) -- (0.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income . . . . . . . . . . . 0.04 0.03 0.02 0.05 0.05
Net Realized and Unrealized
Gain (Loss) on Investments . . . . . . . (0.86) (3.19) (0.33) 1.16 (0.87)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations . . . (0.82) (3.16) (0.31) 1.21 (0.82)
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions: . . . . . . . . . . . . . . .
Net Investment Income . . . . . . . . . . (0.01) (0.02) (0.60) (0.05) (0.04)
In Excess of Net Investment Income . . . -- -- (0.01) (0.00)# --
In Excess of Net Realized Gain . . . . . -- -- -- (0.02) (0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions . . . . . . . . . (0.01) (0.02) (0.61) (0.07) (0.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Decrease in Net Asset Value due to
Shares Issued through Rights Offering . . -- -- (1.46) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Net Asset Value due to
Repurchase of Shares . . . . . . . . . . 0.01 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD . . . . . . . U.S.$ 7.95 U.S.$ 8.77 U.S.$ 11.95 U.S.$ 14.34 U.S.$ 13.20
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD . . . U.S.$ 6.44 U.S.$ 7.44 U.S.$ 9.75 U.S.$ 13.33 U.S.$ 12.25
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value . . . . . . . . . . . . . . (13.34)% (23.46)% (14.72)%+ 9.38% (12.71)%
Net Asset Value (1) . . . . . . . . . . . (9.24)% (26.36)% (2.87)%+ 9.24% (5.94)%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) . . . U.S.$564,506 U.S.$628,173 U.S.$856,397 U.S.$769,414 U.S.$708,323
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets . . 1.45%** 1.34% 1.39% 1.36% 1.31%**
Ratio of Net Investment Income to
Average Net Assets . . . . . . . . . . . 0.84%** 0.25% 0.16% 0.36% 0.89%**
Portfolio Turnover Rate . . . . . . . . . . 23% 66% 28% 21% 2%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of operations
** Annualized
# Amount is less than U.S.$0.01.
+ This return does not include the effect of the rights issued in
connection with the 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 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.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1998
- -------------
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 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 foreign currency contracts at period
end exchange rates are reflected as a component of unrealized appreciation
(depreciation) on investments and foreign currency translations in the
Statement of Net Assets. The change in net unrealized currency gains
(losses) for the period is reflected in the Statement of Operations.
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The Fund intends to use derivatives more actively than it has in the past. The
Fund intends to engage in transactions in futures contracts on foreign
currencies, stock indices, as well as in options, swaps and structured notes.
Consistent with the Fund's investment objectives and policies, the Fund intends
to use derivatives for non-hedging as well as hedging purposes.
Following is a description of derivative instruments and their associated risks
that the Fund intends to utilize:
5. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign
currency exchange contracts generally to attempt to protect securities and
related receivables and payables against changes in future foreign exchange
rates and, in certain situations, to gain exposure to a foreign currency. A
foreign currency exchange contract is an agreement between two parties to
buy or sell currency at a set price on a future date. The market value of
the contract will fluctuate with changes in currency exchange rates. The
contract is marked-to-market daily and the change in market value is
recorded by the Fund as unrealized gain or loss. The Fund records realized
gains or losses when the contract is closed equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed. Risk may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their
contracts and is generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
6. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: The Fund
may make forward commitments to purchase or sell securities. Payment and
delivery for securities which have been purchased or sold on a forward
commitment basis can take place a month or more (not to exceed 120 days)
after the date of the transaction. Additionally, the Fund may purchase
securities on a when-issued or delayed delivery basis. Securities purchased
on a when-issued or delayed delivery basis are purchased for delivery
beyond the normal settlement date at a stated price and yield, and no
income accrues to the Fund on such securities prior to delivery. When the
Fund enters into a purchase transaction on a when-issued or delayed
delivery basis, it either establishes a segregated account in which it
maintains liquid assets in an amount at least equal in value to the Fund's
commitments to purchase such securities or denotes such securities on the
custody statement for its regular custody account. Purchasing securities on
a forward commitment or when-issued or delayed-delivery basis may involve a
risk that the market price at the time of delivery may be lower than the
agreed upon purchase price, in which case there could be an unrealized loss
at the time of delivery.
7. SWAP AGREEMENTS: The Fund may enter into swap agreements to exchange the
return generated by one security, instrument or basket of instruments for
the return generated by another security, instrument or basket of
instruments. The following summarizes swaps which may be entered into by
the Fund:
INTEREST RATE SWAPS: Interest rate swaps involve the exchange of
commitments to pay and receive interest based on a notional principal
amount. Net periodic interest payments to be received or paid are accrued
daily and are recorded in the Statement of Operations as an adjustment to
interest income. Interest rate swaps are marked-to-market daily based upon
quotations from market makers and the change, if any, is recorded as
unrealized appreciation or depreciation in the Statement of Operations.
TOTAL RETURN SWAPS: Total return swaps involve commitments to pay interest
in exchange for a market-linked return based on a notional amount. To the
extent the total return of the security, instrument or basket of
instruments underlying the transaction exceeds or falls short of the
offsetting interest obligation, the Fund will receive a payment from or
make a payment to the counterparty, respectively. Total return swaps are
marked-to-market daily based upon quotations from market makers and the
change, if any, is recorded as unrealized gains or losses in the Statement
of Operations. Periodic payments received or made at the end of each
measurement period, but prior to termination, are recorded as realized
gains or losses in the Statement of Operations.
Realized gains or losses on maturity or termination of interest rate and
total return swaps are presented in the Statement of Operations. Because
there is no organized market for these swap agreements, the value reported
in the Statement of Net Assets may differ from that which would be realized
in the event the Fund terminated its position in the agreement. Risks may
arise upon entering into these agreements from the potential inability of
the counterparties to meet the terms of the agreements and are generally
limited to the amount of net interest payments to be received and/or
favorable movements in the value of the underlying security, instrument or
basket of instruments, if any, at the date of default.
8. STRUCTURED SECURITIES: The Fund may invest in interests in entities
organized and operated solely for the purpose of restructuring the
investment characteristics of sovereign debt obligations. This type of
restructuring involves the deposit with or purchase by an entity of
specified instruments and the issuance by that entity of one or more
classes of securities ("Structured Securities") backed by, or representing
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interests in, the underlying instruments. Structured Securities generally
will expose the Fund to credit risks of the underlying instruments as well
as of the issuer of the structured security. Structured Securities are
typically sold in private placement transactions with no active trading
market. Investments in structured securities may be more volatile than
their underlying instruments, however, any loss is limited to the amount of
the original investment.
9. OVER-THE-COUNTER TRADING: Derivative instruments that may be purchased or
sold by the Fund are expected to regularly consist of instruments not
traded on an exchange. The risk of nonperformance by the obligor on such an
instrument may be greater, and the ease with which the Fund can dispose of
or enter into closing transactions with respect to such an instrument may
be less, than in the case of an exchange-traded instrument. In addition,
significant disparities may exist between bid and asked prices for
derivative instruments that are not traded on an exchange. Derivative
instruments not traded on exchanges are also not subject to the same type
of government regulation as exchange traded instruments, and many of the
protections afforded to participants in a regulated environment may not be
available in connection with such transactions.
10. 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 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 corporate 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 0.09% 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, 1998, the Fund incurred International Custodian fees of
$678,000 of which $584,000 was payable to the International Custodian at June
30, 1998. In addition, for the six months ended June 30, 1998, the Fund has
earned interest income of $14,000 and incurred interest expense of $1,000 on
balances with the International Custodian.
E. During the six months ended June 30, 1998, the Fund made purchases and
sales totaling $137,568,000 and $126,815,000, 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, 1998, the Fund incurred $95,000 of
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliate of
the Adviser. At June 30, 1998, the U.S. Federal income tax cost basis of
securities was $683,314,000 and, accordingly, net unrealized depreciation was
$122,888,000 of which $30,891,000 related to appreciated securities and
$153,779,000 related to depreciated securities. At December 31, 1997, the Fund
had a capital loss carryforward for U.S. Federal income tax purposes of ap-
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proximately $98,555,000 available to offset future capital gains of which
$5,069,000 will expire on December 31, 2003 and $93,486,000 will expire on
December 31, 2005. To the extent that capital gains are offset, such gains will
not be distributed to the shareholders.
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.
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 $820,000 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,
1998 totaled $53,000 and are included in Payable for Directors' Fees and
Expenses on the Statement of Net Assets.
J. During June 30, 1998, the Board declared a distribution of $0.01 per
share, derived from net investment income, payable on July 15, 1998, to
shareholders of record on June 30, 1998. Also in June, the Board of Directors
amended your Fund's by-laws to require advance notice of any proposals to be
made at stockholders' meetings. For annual meetings the notice must be given to
the Fund's secretary at least 60 days before the anniversary date of the
previous year's annual meeting. This year's annual meeting of stockholders was
held on June 24. This provision was adopted to permit the Fund's stockholders
and Directors to consider every stockholder proposal on an informed basis and in
an organized fashion, taking into account the interests of all affected
constituencies.
K. During December 1997, the Board authorized the Fund to repurchase up to
14,331,000 shares of its Common Stock in the open market. During the six months
ended June 30, 1998, the Fund repurchased 666,700 shares of its Common Stock at
an average price per share of $6.65 and an average discount of 17.90% per share.
Such shares are included as authorized but unissued shares of the Fund.
L. Supplemental Proxy Information
The Annual Meeting of the Stockholders of the Morgan Stanley Asia-Pacific Fund,
Inc. was held on June 24, 1998. The following is a summary of each proposal
presented and the total number of shares voted:
<TABLE>
<CAPTION>
VOTES IN VOTES AUTHORITY VOTES
PROPOSAL: FAVOR OF AGAINST WITHHELD ABSTAINED
- -------- -------- ------- -------- ---------
<S> <C> <C> <C> <C>
1. To elect the following Directors: Michael F. Klein . . . . . . .49,474,611 -- 3,628,290 --
Barton M. Biggs. . . . . . . .49,487,159 -- 3,615,747 --
John A. Levin. . . . . . . . .49,488,159 -- 3,614,747 --
William G. Morton, Jr. . . . .49,488,059 -- 3,614,847 --
2. To ratify the selection of PricewaterhouseCoopers LLP as
independent accountants of the Fund. . . . . . . . . . . . . . . .52,195,223 757,911 -- 149,768
</TABLE>
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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 10005
1-800-278-4353
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