MORGAN STANLEY ASIA PACIFIC FUND INC, N-30D, 1999-09-09

MORGAN STANLEY ASIA PACIFIC FUND INC
N-30D, 1999-09-09

Previous: MORGAN STANLEY ASIA PACIFIC FUND INC, NSAR-A, 1999-09-09

Next: NORTHWEST AIRLINES INC /MN, 8-A12B, 1999-09-09

<PAGE>

- --------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER
ASIA-PACIFIC FUND, INC.
- --------------------------------------------------------------------------------

SEMI-ANNUAL REPORT
JUNE 30, 1999
MORGAN STANLEY DEAN WITTER
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER

MORGAN STANLEY DEAN WITTER
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

Mary E. Mullin
SECRETARY

Belinda A. Brady
ASSISTANT TREASURER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT ADVISER

Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020

- --------------------------------------------------------------------------------
ADMINISTRATOR

The Chase Manhattan Bank
73 Tremont Street
Boston, Massachusetts 02108

- --------------------------------------------------------------------------------
CUSTODIAN

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 or visit our website at
www.msdw.com/institutional/investmentmanagement.

<PAGE>

LETTER TO SHAREHOLDERS
- ---------

For the six months ended June 30, 1999, the Morgan Stanley Dean Witter
Asia-Pacific Fund, Inc. (the "Fund") had a total return, based on net asset
value per share, of 32.42% compared to 27.06% for its benchmark (described
below). For the period since the Fund's commencement of operations on August 2,
1994 through June 30, 1999, the Fund's total return, based on net asset value
per share, was -3.00% compared with -16.15% for the benchmark. The benchmark for
the Fund is comprised of two Morgan Stanley Capital International (MSCI)
indices; Japan and All-Country Asia-Pacific Free ex-Japan with each index
weighted equally. On June 30, 1999, the closing price of the Fund's shares on
the New York Stock Exchange was $9 5/8 representing a 16.7% discount to the net
asset value per share.

All major Asian markets performed well so far in 1999, with South Korea,
Indonesia, China and Thailand as the primary leaders. Asian markets rose due to
the restoration of confidence among domestic and foreign investors, on the back
of stabilizing exchange rates and signs that economies had bottomed after the
shock of the Asian crisis.

Currency stability established in the second half of 1998, allowed local
governments to ease monetary policy and bring interest rates down quickly. Lower
interest rates eased the banking crisis in many countries, reduced government
financing costs, lowered the cost of capital for businesses and encouraged local
investors to shift from fixed income to equity investments. The power of high
Asian savings rates was illustrated by the ability of local retail and
institutional investors to subscribe to a heavy calendar of new corporate equity
issues. This new equity helped many Asian companies repair their balance sheets,
remove corporate distress risk, and enhance equity valuations. Asian countries
needed new equity and not additional debt from foreign investors; the absence of
heavy bond financing requirements mitigated the negative impacts of rising
international bond yields and the small U.S. Federal Reserve interest rate
increase. Although the economic recovery underway in many countries should not
be characterized as export-led, an increase in export orders, particularly for
electronic components, was positive particularly for the economies of Singapore
and Malaysia. After several years of economic and corporate earnings
disappointments, we are in an environment of expectation upgrades where
forecasts of economic activity are continually being revised upwards across the
region.

The South Korean economy experienced the fastest recovery from the Asian
economic downturn of 1998. Korean industrial production is above pre-crisis
levels and consensus expectations for 1999 gross domestic product growth moved
from 3% to 4% growth at the end of the 1st quarter to 5% to 7% estimates now.
The Korean economy benefited from a combination of positive factors including
strong government policy implementation, better demand and pricing for its
exports and a strong recovery in domestic confidence. The Korean government
implemented a harsh IMF-designed program in the first half of 1998 to correct
the country's macroeconomic imbalances. The government encouraged consumers and
businesses to cut back consumption and investment in early 1998. The Koreans
responded vigorously with sharp cutbacks in personal consumption, investment and
business inventory liquidation. This austerity created a rapid turnaround from
trade deficit to trade surplus and the Koreans used these surpluses, IMF aid and
better international capital market access to address the country's short-term
funding problems. The Korean government aggressively tackled its banking system
problems when it began implementing a KRW 64 trillion bank recapitalization
program. Positive trade performance, successful refinancings and banking sector
progress allowed the government to ease fiscal and monetary policies
aggressively in the second half of 1998. Interest rates fell rapidly from a
crisis high of over 30% to the 6% -7% range today. Interest rates at these
levels are at a 20-year low and the Koreans have responded by shifting fixed
income investments into equities, either directly or via a rapidly growing
mutual fund sector. The government stopped urging austerity and Korean consumers
responded by satisfying pent-up demand. Sales of consumer durables, in
particular, have risen sharply in 1999.

Listed Korean companies were the most heavily indebted in the region before the
crisis. This leverage exaggerated equity market declines when interest rates
were high, demand was falling and bankruptcies loomed. It also exaggerated the
market's recovery when interest rates fell, demand expectations and product
pricing improved and new equity issues reduced bankruptcy risks. Given the
powerful moves seen in the equity markets over the past 9 months, Korean
equities are now priced near their historic highs on measures such as price to
book value. More corporate restructuring, particularly of the largest
conglomerates known as chaebol, will be needed to transform this rally from a
strong cyclical recovery to a long-term bull market. Korean corporations have
historically traded at low multiples due to their high leverage, low returns on
equity, opaque corporate structures and poor disclosure. The market has rewarded
companies that have restructured and adopted a greater emphasis on shareholder
returns. The government has actively encouraged chaebol restructuring and has
introduced a number of regulations to reduce leverage and improve transparency
among these companies. If restructuring broadens, the market can continue to
rally and move to higher valuation multiples. If restructuring falters as the
economic recovery removes pressure on the corporate sector, the market will
stall or correct.

2
<PAGE>

Most countries in the region reported increases in exports of electronics
components during the first half of 1999. This growth has contributed to
economic forecast upgrades in Singapore and Malaysia. The value of Asian
electronics shipments has risen despite price pressures in the global personal
computer industry because price declines have forced PC manufacturers to cut
costs, which often means sourcing more product from low-cost Asian producers.
The trend towards greater outsourcing, firmly established among American
companies, is being adopted by an increasing number of Japanese companies. In
the past Japanese manufacturers often built factories in other Asian countries
in an effort to cut costs. An increasing number of Japanese companies are now
turning to outsourcing instead as part of their own restructuring efforts.
Outsourcing allows us to invest directly in the resulting growth, as we can
identify companies winning Japanese orders. Japanese outsourcing has already had
a positive impact on a number of listed Asian companies. The Fund has a
significant exposure to a number of Asian electronics companies in Korea,
Singapore and Thailand, and these investments performed well in the second
quarter as order books gained momentum.

The Hong Kong market enjoyed strong absolute returns year-to-date, yet it
continued to lag the regional benchmark. Hong Kong's adherence to its currency
board regime has lengthened its adjustment to the deflationary effects of the
Asian crisis. Hong Kong companies have not had their costs cut via devaluation,
and instead have had to cut costs by reducing employment and negotiating lower
rents, wages and other costs. Consequently, Hong Kong is experiencing deflation,
with consumer price indexes down over 3% year-on-year. The currency board ties
Hong Kong's interest rates to U.S. rates, leaving rates at very high levels in
real terms. All of these factors have put Hong Kong's recovery behind the
schedule of the rest of Asia by at least two or three quarters. The economy now
appears to be bottoming, with signs of stability emerging in consumption,
employment and perhaps price levels. A number of Hong Kong companies responded
by aggressively cutting costs during the recession and are well positioned for
the recovery.

Banks in Hong Kong have also significantly strengthened their balance sheets
during the recession, and are as liquid as they have been in years. They have so
far, only been growing their mortgage loan portfolios but are well positioned to
respond to increases in loan demand when conditions improve. The growth in
mortgage portfolios is consistent with healthy demand for primary residential
property developments. Strong demand for competitively priced residential
property allowed the large Hong Kong developers to work off significant
inventory of unsold developments. Strong land sales in Hong Kong and liquidation
of older property developments suggest that Hong Kong property prices will move
somewhat higher. A number of studies of Hong Kong's competitiveness were
conducted recently, and the government responded with a number of initiatives of
varying degrees of effectiveness. For example, the government began a review of
the civil service and will contract out more services in the future to improve
efficiency. Telecommunications deregulation was very effective at reducing
service costs and increasing innovation. This is likely to be followed by other
utility deregulation. The government would like to encourage the development of
Hong Kong's software and technology industries, create a regional medical hub,
and enhance tourism by attracting a Disney theme park. Hong Kong should also
benefit from improved export flows and greater growth in China based on current
Chinese initiatives. During the second quarter, we increased our exposure to
Hong Kong.

Chinese equities rallied sharply in the second quarter as China cut interest
rates sharply to sustain economic growth and combat deflation. A large rate cut
in June left Chinese interest rates significantly below U.S. rates; for
instance, a Chinese saver could earn just 2.25% on a one-year deposit in a
Chinese bank. China could cut rates this low despite the renminbi's peg to the
U.S. dollar, due to a tightening of capital controls. The Chinese cut rates to
encourage consumption rather than savings and to relieve the debt burden on
Chinese state-owned enterprises. The Chinese also introduced a number of
measures to encourage investment in domestic equity markets. The authorities
hope that an equity market rally will create a wealth effect and encourage
domestic consumption. Prime Minister Zhu Rongji adopted these policies after a
trip to the United States. Stronger domestic equity markets would also
facilitate the recapitalization of state owned enterprises and reduce the cost
of bailing out the state-owned banking sector. The rally occurred despite a
deterioration of Chinese export growth, the failure of China to secure American
support for its entry to the WTO and a worsening of Sino-American relations.
During the second quarter, we moved to a modest overweight position through
Chinese equities listed in Hong Kong.

The MSCI Singapore index recorded strong absolute returns during the quarter but
lagged regional indexes. Returns lagged for foreign investors due to the erosion
of premiums on a number of blue chip stocks, including the banks and Singapore
Airlines. These premiums eroded as the Monetary Authority of Singapore announced
a plan to merge the foreign and local tranches of the bank shares. This share
class merger is a long term positive for the sector as it will facilitate bank
mergers in Singapore. In-market mergers will reduce excess bank capacity and
allow major cost cutting. The Singapore economy is enjoying a strong recovery on
the back of improved electronics exports, easy monetary and fiscal policy, a
more competitive exchange rate and improved consumer confidence. The local
property market has enjoyed a strong price increase, allowing developers to
improve their fi-

3
<PAGE>

nancial condition by liquidating unsold units. Improving conditions in Indonesia
and other ASEAN markets have also contributed to improved sentiment. We
recently reduced our exposure in Singapore marginally for a number of our
positions, as valuation targets were exceeded.

The major political event in Asia during the second quarter was the Indonesian
parliamentary elections. The elections were conducted in a far more peaceful
environment than expected. Preliminary results suggest a new coalition will be
formed to replace the current government. Following the social unrest seen in
Indonesia in early 1998, the relative lack of problems during the campaign
exceeded expectations. Social calm, falling inflation, a strengthening rupiah,
falling interest rates, higher commodity export prices and nascent signs of
economic recovery combined to make the Indonesian market the best performing
Asian market during the first half. Successful coalition building, further
progress on corporate debt restructuring and bank recapitalization will be
needed to sustain the rally.

The Thai market rallied sharply during the second quarter as interest rates fell
below pre-crisis lows. Signs of an economic recovery continued to build and an
innovative deal illustrated how banks could be recapitalized through a
combination of government and private capital. Siam Commercial Bank raised Baht
65 billion (about $1.7 billion) of fresh capital through a scheme in which the
government matched private capital. This sparked a rally in Thai financial
institutions that had not yet raised new equ ity. Asset quality among Thai banks
remains dire but meaningful progress is being made in the restructuring of
corporate debt and trends are favorable. However, at this stage a fairly rapid
recovery in economic growth and corporate earnings is needed to justify current
equity valuations. The Fund is underweight Thai equities.

Asian risk factors we will be monitoring include the large supply of upcoming
equity offerings and the danger that economic recovery will lessen the will to
implement needed economic and corporate level reforms. External risk factors
include the performance of the Japanese economy, import and economic growth in
Europe and America, U.S. monetary policy and global interest rate trends,
extreme weakness in the Euro and the performance of Western equity markets.
Upside surprises could include better than exp ected economic recovery and bank
recapitalization in Japan, and stronger than expected import demand from the
U.S. and Europe.

Along with improving fundamentals, sentiment and liquidity have been driving
equity returns in Asia over the past quarter. A rising tide has lifted most
stocks. Given the magnitude of the recent moves, some companies and perhaps some
markets have moved ahead of where they should be valued, unless further positive
growth surprises occur. We continue to believe that the best way to drive future
performance will be through stock selection, and expect that the importance of
stock selection will reassert its elf in a less buoyant market environment. We
continue to focus our efforts on identifying companies that are restructuring
and refocusing their businesses around the principle of improving returns on
equity. Restructuring broadly includes divestitures, sales of strategic stakes
to multinationals, business unit shutdowns, mergers, staff reductions or capital
management initiatives. We have seen a variety of restructuring efforts by Asian
companies over the past year and these companies continue to perfor m well in
relative and absolute terms. As mentioned above, restructuring in Japan could
also provide enhanced investment opportunities in non-Japan Asia through
outsourcing. We will continue to search for these opportunities, and build
significant positions in companies geared to the recovery in domestic
consumption currently underway in most Asian economies.

The Japanese equity markets continued to rise during the second quarter of 1999.
In part, the growing optimism among investors stemmed from the weakness of the
yen as the Bank of Japan maintained their intervention policy as well as guiding
short term interest rates to "zero". As well, a recovery in the Asian stock
market and economic activity also helped overall sentiment. Signs of an
improvement in Japanese fundamentals, including a surprisingly strong
preliminary release of first quarter gross domest ic product at an annualized
rate of 7.9% set investors scrambling to raise equity allocations to Japan.

Contrary to the indiscriminate buying during the first quarter, investors
gravitated to higher quality investments in securities showing earnings
momentum, restructuring and more reasonable valuations. This change in
leadership appeared after the first week of May, when most companies reported
full year earnings for fiscal 1999 ending March.

Volumes on all exchanges rose sharply in contrast to 1998 and the Tokyo Stock
Exchange (TSE) first section rose from around 200 million shares last October to
600 million shares during the second quarter. However, the total value on a
"good day" is still only $6 billion and on a similar day the two most active
shares in the U.S. (AOL and YAHOO) traded $8 billion or 30% more than the whole
T.S.E. We believe it is because of the relative lack of liquidity on the T.S.E.
that low priced high beta stocks surged through May as investors reallocated
their positions in Japan and increased such allocations largely through the
purchase of index related names. However, since May promising sectors such as
communications, high technology and digital related companies rose sharply as
investors became focused on fundamentals. In particular, investors rewarded
companies such as Sony and Toshiba which developed the new Play Station II and
Nintendo/Matsushita as they announced their

4
<PAGE>

"dolphin" game platform. These products are expected to play an important role
as home servers and Japan essentially has a 100% market share for these
products.

Restructuring announcements made earlier by Japanese companies also began
showing early signs of progress. For example, Nissan Motors, owned 36% by
Renault, rose from 400 yen to 600 yen as investors gained some confidence that
production cuts, product focus and reduction of debt will be made in earnest by
Mr. Carlos Ghosn, the new COO of Nissan. On a product rationalization
restructuring story, NEC and Hitachi, both historically fierce competitors in
D-RAM manufacturing, agreed to combine forces jointly to develop a new
generation of D-RAMS. Such alliances would have hardly occurred in the Japan of
the 1970's and 1980's.

Both the rise in the OTC index and public appetite for IPO's suggested that
retail investors were active participants in the market and rewarded handsomely
by spectacular returns. Because of liquidity concerns, the Fund does not invest
in smaller companies in Japan but the sharp rally in international blue chips
and higher quality securities helped our relative performance since May. We
added to our positions in Lintec and Shinetsu Polymer during the second quarter,
with profit taking from Nissan.

While such favorable micro-developments occurred, there were signs during the
second quarter that economic activity is still modest, despite the surprisingly
strong preliminary gross domestic product numbers. For example, March department
store sales fell 7.3% for the 11th straight decline and supermarket adjusted
sales were down 8%, the second worst ever. Importantly, with rising unemployment
the consumer has yet to show meaningful signs of consumption; retail sales
account for 27% of Japan's overall gross domestic product.

The banking sector, which we do not own, in aggregate announced that they still
have 20.19 trillion yen of bad debt on May 19. Under the new disclosure rule
implemented by the Financial Supervisory Agency, these numbers showed an
increase of 6.3 trillion yen (almost 50%) from the banks original estimates and
confirm our suspicions that true non-performing loans held by banks are large
and the amounts are not simply accounting "errors."

If the U.S. Federal Reserve will maintain a mild tightening position and the
Bank of Japan maintains their "zero" short term interest rate policy, it will
allow Japan to accelerate restructuring and provide a platform for economic
recovery. It will likely become very important for Japan to show concrete
economic growth over the next year, particularly if U.S. growth slows. The U.S.
elections next year and the G7 summit in Okinawa are two milestones which will
likely provide focus for Japanese leaders and businesses to show a robust,
domestic led economic recovery. In order to achieve this goal, further
restructuring, deregulation and additional stimulus packages will be necessary,
in our view. With the rising employment rate, politicians are becoming desperate
to improve economic conditions as Japan, too, will have a lower house election
in 2000.

While we are increasingly bullish on the prospects for Japan, we intend to keep
our highly selective stock and sector weightings and believe the "generals" will
lead the charge. In particular, Sony, Fujitsu, Mitsui and TDK have reached
all-time highs and "bell-cows" such as Nippon Telephone & Telegraph the largest
capitalized company in Japan has broken out from a ten-year trading range.

Sincerely,

/s/ Michael F. Klein

Michael F. Klein
PRESIDENT AND DIRECTOR

July 1999

THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATI ON TO
PURCHASE OR SELL THE SECURITIES MENTIONED.

- --------------------------------------------------------------------------------
DAILY NET ASSET AND MARKET VALUES, AS WELL AS MONTHLY PORTFOLIO INFORMATION FOR
THE FUND, ARE AVAILABLE ON OUR WEBSITE AT
www.msdw.com/institutional/investmentmanagement.

5
<PAGE>

Morgan Stanley Dean Witter Asia-Pacific Fund, Inc.
Investment Summary as of June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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 37.50% -- 32.42% -- 27.06% --
ONE YEAR 49.51 49.51 45.41 45.41 42.01 42.01
SINCE INCEPTION* -19.23 -4.25 -3.00 -0.62 -16.15 -3.52
</TABLE>

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
- --------------------------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION

[GRAPH]

YEAR ENDED DECEMBER 31, SIX MONTHS
ENDED
JUNE 30,
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value Per Share. . . $ 13.20 $ 14.34 $ 11.95 $ 8.77 $ 8.73 $ 11.56
Market Value Per Share . . . . $ 12.25 $ 13.33 $ 9.75 $ 7.44 $ 7.00 $ 9.63
Premium/(Discount) . . . . . . -7.2% -7.0% -18.4% -15.2% -19.8% -16.7%
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% -0.34% 32.42%
Index Total Return (3) . . . . -5.24% 2.88% -3.63% -29.55% -0.30% 27.06%
</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 comprised of two Morgan Stanley
Capital International (MSCI) indices; Japan and All- Country Asia-Pacific
Free ex-Japan with each index weighted equally.
* 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>

[PIE CHART]

<TABLE>

<S> <C>
Equity Securities (97.7%)
Short-Term Investment (2.1%)
Fixed Income Securities (0.2%)

</TABLE>

- --------------------------------------------------------------------------------
SECTORS

[PIE CHART]

<TABLE>
<S> <C>
Appliances & Household Durables (4.7%)
Banking (6.7%)
Data Processing & Reproduction (5.4%)
Electric & Electronics (9.3%)
Electronic Components, Instruments (5.4%)
Health & Personal Care (4.1%)
Machinery & Engineering (4.8%)
Real Estate (5.0%)
Recreation, Other Consumer Goods (4.2%)
Telecommunications (5.7%)
Other (44.7%)

</TABLE>

- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS*

<TABLE>
<CAPTION>
PERCENT OF
NET ASSETS
----------
<S> <C>
1. Nintendo Co., Ltd. (Japan) 2.3%
2. Hutchison Whampoa Ltd. (Hong Kong) 2.1
3. Fujitsu Ltd. (Japan) 2.0
4. Sony Corp. (Japan) 1.9
5. Korea Telecom Corp. (South Korea) 1.8
6. Hitachi Ltd. (Japan) 1.7
7. Toshiba Corp. (Japan) 1.7
8. NEC Corp. (Japan) 1.6
9. Ricoh Co. Ltd. (Japan) 1.6
10. Sun Hung Kai Properties Ltd. (Japan) 1.5
----
18.2%
----
----
</TABLE>

* Excludes short-term investments.

7
<PAGE>

FINANCIAL STATEMENTS
- ---------
STATEMENT OF NET ASSETS (UNAUDITED)
- ---------
JUNE 30, 1999

<TABLE>
<CAPTION>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (96.1%)
(Unless otherwise noted)
- --------------------------------------------------------------------------------
AUSTRALIA (9.8%)
BANKING
National Australia Bank Ltd. 629,400 U.S.$ 10,376
Westpac Banking Corp., Ltd. 1,160,650 7,500
---------------
17,876
---------------
BEVERAGES & TOBACCO
Foster's Brewing Group Ltd. 1,540,700 4,326
---------------
BROADCASTING & PUBLISHING
News Corp., Ltd. 945,000 8,032
---------------
BUSINESS & PUBLIC SERVICES
Brambles Industries Ltd. 163,900 4,301
---------------
ENERGY SOURCES
(a) AAPT Ltd. 45,400 141
Broken Hill Proprietary Co. Ltd. 577,950 6,669
---------------
6,810
---------------
GOLD MINES
Normandy Mining Ltd. 1,977,700 1,312
---------------
MISC. MATERIALS & COMMODITIES
Rio Tinto Ltd. 593,650 9,697
---------------
REAL ESTATE
Lend Lease Corp., Ltd. 316,800 4,333
---------------
TELECOMMUNICATIONS
Cable & Wireless Optus Ltd. 800,600 1,816
Telstra Corp., Ltd. 1,691,000 9,653
---------------
11,469
---------------
TRANSPORTATION -- AIRLINES
Airways Ltd. 795,300 2,617
---------------
70,773
---------------

- ------------------------------------------------------------------------------
CHINA (0.4%)
ENERGY SOURCES
Yanzhou Mining Co. Ltd. 3,769,600 1,348
---------------
HEALTH & PERSONAL CARE
Hengan International Group Co. Ltd. 3,199,000 1,619
---------------
2,967
---------------

- -------------------------------------------------------------------------------
HONG KONG (10.7%)
BANKING
Dao Heng Bank Group Ltd. 690,000 3,095
---------------
BROADCASTING & PUBLISHING
Television Broadcasts Ltd. 880,000 4,129
---------------
BUSINESS & PUBLIC SERVICES
Florens Group Ltd. 1,013,300 842
---------------
CONSTRUCTION & HOUSING
Kerry Properties Ltd. 542,000 716
---------------
ELECTRICAL & ELECTRONICS
Johnson Electric Holdings Ltd. 228,000 940
---------------
INSURANCE
Axa China Region Ltd. 787,900 630
---------------
MACHINERY & ENGINEERING
(a) Shandong International Power
Development Co. Ltd. 'H' 616,000 139
---------------
- -------------------------------------------------------------------------------
<CAPTION>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
MULTI-INDUSTRY
Citic Pacific Ltd. 652,500 U.S.$ 2,081
Hutchison Whampoa Ltd. 1,709,500 15,479
Swire Pacific Ltd. 'A' 619,600 3,067
---------------
20,627
---------------
REAL ESTATE
Cheung Kong (Holdings) Ltd. 1,118,000 9,943
New World Development Co. Ltd. 716,000 2,146
Sun Hung Kai Properties Ltd. 1,203,000 10,970
---------------
23,059
---------------
TELECOMMUNICATIONS -- INTEGRATED
Asia Satellite Telecom Holdings 151,000 355
Hong Kong Telecommunications Ltd. 3,742,900 9,721
---------------
10,076
---------------
TELECOMMUNICATIONS -- WIRELESS
China Telecom Ltd. 756,000 2,100
---------------
TELECOMMUNICATIONS
Smartone Telecommunications 1,101,000 3,917
---------------
TRANSPORTATION -- AIRLINES
Cathay Pacific Airways 1,657,000 2,542
---------------
Utilities -- Electrical & Gas
CLP Holdings Ltd. 394,000 1,915
---------------
WHOLESALE & INTERNATIONAL TRADE
Li & Fung Ltd. 1,236,000 2,963
---------------
77,690
---------------
- -------------------------------------------------------------------------------
INDIA (4.2%)
AUTOMOBILES
Escorts Ltd. 801 1
Hero Honda Ltd. 96,556 2,403
---------------
2,404
---------------
BANKING
(a) State Bank of India Ltd. 1,112 6
---------------
BEVERAGES & TOBACCO
ITC Ltd. 70,455 1,778
---------------
Broadcasting & Publishing
(a) Zee Telefilms Ltd. 20,000 670
---------------
BUILDING MATERIALS & COMPONENTS
Associated Cement Co., Ltd. 8,700 34
---------------
DATA PROCESSING & REPRODUCTION
Aptech Ltd. 22,200 366
Leading Edge Systems Ltd. 34,200 231
NIIT Ltd. 26,000 1,218
Satyam Computer Services Ltd. 40,000 1,168
---------------
2,983
---------------
ELECTRICAL & ELECTRONICS
Bharat Heavy Electricals Ltd. 550,200 3,118
Digital Equipment (India) Ltd. 109,100 1,075
Tata Infotech Ltd. 37,350 916
---------------
5,109
---------------
ELECTRONIC COMPONENTS, INSTRUMENTS
Infosys Technology Ltd. 43,150 3,605
---------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

8
<PAGE>

<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
INDIA (Continued)
FINANCIAL SERVICES
Housing Development Finance
Corp., Ltd. 37,541 U.S.$ 1,922
ICICI Ltd. - New 765,000 1,295
---------------
3,217
---------------
HEALTH & PERSONAL CARE
Reckitt & Coleman of India Ltd. 750 8
---------------
INDUSTRIAL COMPONENTS
(a) Apollo Tyres Ltd. 7,175 11
---------------
MACHINERY & ENGINEERING
Punjab Tractors Ltd. 80,900 2,470
---------------
METALS -- STEEL
Tata Iron & Steel Co., Ltd. 2,206 7
---------------
MULTI-INDUSTRY
(c) Morgan Stanley Growth Fund 26,049,150 4,321
---------------
TELECOMMUNICATIONS
Videsh Sanchar Nigam Ltd. 15,055 317
Videsh Sanchar Nigam Ltd. 39,400 830
---------------
1,147
---------------
TRANSPORTATION -- ROAD & RAIL
Container Corp. of India Ltd. 563,900 2,364
---------------
30,134
---------------
- -------------------------------------------------------------------------------
INDONESIA (1.5%)
BEVERAGES & TOBACCO
Gudang Garam 2,267,500 6,159
---------------
BUILDING MATERIALS & COMPONENTS
Semen Gresik 568,000 1,237
---------------
FOOD & HOUSEHOLD PRODUCTS
Unilever Indonesia 149,000 866
---------------
TELECOMMUNICATIONS -- INTEGRATED
Telekomunikasi Indonesia ADR 238,356 2,965
---------------
11,227

- -------------------------------------------------------------------------------
JAPAN (47.8%)
APPLIANCES & HOUSEHOLD DURABLES
Matsushita Electric Industrial Co.,
Ltd. 530,000 10,304
Sony Corp. 130,000 14,036
---------------
24,340
---------------
AUTOMOBILES
Nifco, Inc. 350,000 3,368
Nissan Motor Co. 1,470,000 7,029
Suzuki Motor Co., Ltd. 470,000 7,485
Toyota Motor Corp. 230,000 7,288
---------------
25,170
---------------
BROADCASTING & PUBLISHING
Nissha Printing Co., Ltd. 105,000 764
BUILDING MATERIALS & COMPONENTS
Fujitec Co., Ltd. 460,000 4,365
Rinnai Corp. 160,700 3,696
Sanwa Shutter Corp., Ltd. 582,000 3,159
Sekisui Chemical Co. 563,000 3,270
---------------
14,490
---------------
<CAPTION>
Value
Shares (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
BUSINESS & PUBLIC SERVICES
Dai Nippon Printing Co., Ltd. 298,000 U.S.$ 4,771
---------------
CHEMICALS
Daicel Chemical Industries Ltd. 1,190,000 4,381
Kaneka Corp. 939,000 8,856
Mitsubishi Chemical Industries 1,160,000 4,021
Nippon Pillar Packing Co. 99,000 631
Shin-Etsu Polymer Co., Ltd. 320,000 1,798
---------------
19,687
---------------
CONSTRUCTION & HOUSING
Kyudenko Co., Ltd. 380,000 2,176
Sekisui House Ltd. 495,000 5,348
---------------
7,524
---------------
DATA PROCESSING & REPRODUCTION
Canon, Inc. 362,000 10,423
Fujitsu Ltd. 710,000 14,303
Ricoh Co. Ltd. 816,000 11,247
---------------
35,973
---------------
ELECTRICAL & ELECTRONICS
Hitachi Ltd. 1,285,000 12,067
Minebea Co., Ltd. 460,000 5,138
Mitsumi Electric Co., Ltd. 353,000 9,871
NEC Corp. 920,000 11,455
Toshiba Corp. 1,675,000 11,959
---------------
50,490
---------------
ELECTRONIC COMPONENTS, INSTRUMENTS
Kyocera Corp. 118,000 6,931
Rohm Co., Ltd. 34,000 5,331
Ryosan Co., Ltd. 103,000 2,045
TDK Corp. 103,000 9,433
---------------
23,740
---------------
ENERGY EQUIPMENT & SERVICES
Kurita Water Industries Ltd. 304,000 5,458
FINANCIAL SERVICES
Hitachi Credit Corp. 293,000 5,806
FOOD & HOUSEHOLD PRODUCTS
Aiwa Co., Ltd. 85,000 2,813
Sangetsu Co., Ltd. 137,000 2,919
Yamaha Corp. 299,000 3,599
---------------
9,331
---------------
HEALTH & PERSONAL CARE
Ono Pharmaceutical Co., Ltd. 210,000 7,297
Sankyo Co., Ltd. 378,000 9,538
Yamanouchi Pharmaceutical Co., Ltd. 270,000 10,343
---------------
27,178
---------------
INDUSTRIAL COMPONENTS
Furakawa Electric Co. 983,000 4,514
---------------
MACHINERY & ENGINEERING
Amada Co., Ltd. 692,000 4,895
Daifuku Co., Ltd. 626,000 4,376
Daikin Kogyo Co. 603,000 7,009
Fuji Machine Co. 243,000 7,499
Mitsubishi Heavy Industries Ltd. 1,300,000 5,281
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

9
<PAGE>

<TABLE>
<CAPTION>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
JAPAN (CONTINUED)
MACHINERY & ENGINEERING (CONTINUED)
Tsubakimoto Chain Co. 872,000 U.S.$ 3,110
---------------
32,170
---------------
MERCHANDISING
Family Mart Co., Ltd. 97,200 4,463
---------------
MULTI-INDUSTRY
Lintec Corp. 235,000 2,368
---------------
REAL ESTATE
Keihanshin Real Estate Co. 64,000 617
Mitsubishi Estate Co. Ltd. 415,000 4,055
---------------
4,672
---------------
RECREATION, OTHER CONSUMER GOODS
Casio Computer Co., Ltd. 522,000 3,973
Fuji Photo Film Ltd. 252,000 9,549
Nintendo Co., Ltd. 120,000 16,888
---------------
30,410
---------------
TELECOMMUNICATIONS
Nippon Telephone & Telegraph Corp. 932 10,872
---------------
WHOLESALE & INTERNATIONAL TRADE
Inabata & Co. 296,000 1,232
---------------
345,423
---------------
- -------------------------------------------------------------------------------
MALAYSIA (2.8%)
BANKING
Commerce Asset Holding Bhd 699,000 1,729
Malayan Banking Bhd 666,000 1,998
Public Bank Bhd 1,375,000 1,046
---------------
4,773
---------------
BEVERAGES & TOBACCO
Carlsberg Brewery (Malaysia) Bhd 1,380,000 3,922
Rothmans of Pall Mall Bhd 705,000 5,334
---------------
9,256
---------------
FOOD & HOUSEHOLD PRODUCTS
Nestle Bhd 953,000 3,762
---------------
MULTI-INDUSTRY
Sime Darby Bhd 4,000 5
---------------
TELECOMMUNICATIONS - INTEGRATED
Telekom Malaysia Bhd 653,000 2,440
---------------
20,236
---------------
- -------------------------------------------------------------------------------
NEW ZEALAND (0.9%)
TELECOMMUNICATIONS
Telecom Corp. of New Zealand Ltd. 1,264,100 5,428
---------------
TRANSPORTATION - AIRLINES
Air New Zealand Ltd. 'B' 505,000 1,044
---------------
6,472
---------------
- -------------------------------------------------------------------------------
PAKISTAN (0.9%)
BANKING
Askari Bank 50,445 11
---------------
FOOD & HOUSEHOLD PRODUCTS
Lever Brothers Pakistan Ltd. 235,580 3,480
---------------
- -------------------------------------------------------------------------------
<CAPTION>
Value
Shares (000)
------------------------------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS - INTEGRATED
Pakistan Telecommunications Co., Ltd. 7,628,500 U.S.$ 2,886
----------------
UTILITIES - ELECTRICAL & GAS
(a) Hub Power Co., Ltd. 1,740,000 468
----------------
6,845
----------------
------------------------------------------------------------------------------
PHILIPPINES (1.3%)
BANKING
(a) Philippine National Bank 230,000 624
----------------
BEVERAGES & TOBACCO
(a) LA Tondena Distillers, Inc. 1,127,300 1,336
San Miguel Corp. 'B' 980,320 2,142
----------------
3,478
----------------
REAL ESTATE
Ayala Land, Inc. 'B' 1 -@
SM Prime Holdings, Inc. 'B' 8,646,180 1,958
----------------
1,958
----------------
TELECOMMUNICATIONS - INTEGRATED
Philippine Long Distance Telephone Co. 54,730 1,672
----------------
UTILITIES - ELECTRICAL & GAS
Manila Electric Co. 'B' 394,650 1,424
----------------
9,156
----------------
------------------------------------------------------------------------------
SINGAPORE (3.2%)
AEROSPACE & MILITARY TECHNOLOGY
Singapore Technologies Engineering Ltd. 872,000 988
----------------
BANKING
City Developments Ltd. 366,000 2,344
Oversea-Chinese Banking Corp., Ltd. 402,000 3,353
(Foreign)
Overseas Union Bank Ltd. 'F' 209,000 1,007
United Overseas Bank Ltd. (Foreign) 286,000 1,999
----------------
8,703
----------------
BEVERAGES & TOBACCO
Rothmans Industries Ltd. 160,000 1,344
----------------
BROADCASTING & PUBLISHING
Singapore Press Holdings Ltd. 238,600 4,065
----------------
ELECTRICAL & ELECTRONICS
Natsteel Electronics Ltd. 667,000 2,919
----------------
ELECTRONIC COMPONENTS, INSTRUMENTS
Venture Manufacturing Ltd. 414,000 3,186
----------------
HEALTH & PERSONAL CARE
Parkway Holdings 310,000 765
----------------
TRANSPORTATION - SHIPPING
Sembcorp Logistics Ltd. 335,200 1,319
----------------
23,289
----------------
------------------------------------------------------------------------------
SOUTH KOREA (8.7%)
APPLIANCES & HOUSEHOLD DURABLES
Samsung Electronics 85,797 9,414
----------------
------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

10
<PAGE>

<TABLE>
<CAPTION>
VALUE
SHARES (000)
------------------------------------------------------------------------------
<S> <C> <C>
SOUTH KOREA (Continued)
BANKING
Hana Bank 90,870 U.S.$ 1,335
Housing & Commercial Bank 87,250 2,751
Housing & Commercial Bank, Korea GDR 7,400 229
Kookmin Bank 56,830 1,154
Kookmin Bank GDR 29,500 600
Koram Bank 76,580 959
Korea Exchange Bank 249,760 1,403
----------------
8,431
----------------
CHEMICALS
Korea Chemical Co. Ltd. 16,510 1,483
L.G. Chemical Ltd. 39,040 1,063
----------------
2,546
----------------
ELECTRICAL & ELECTRONICS
LG Electronics 58,170 1,608
----------------
ELECTRONIC COMPONENTS, INSTRUMENTS
Samsung Electro-Mechanics Co. 74,889 2,588
----------------
ENERGY SOURCES
Yukong Ltd. (Foreign) 60,518 1,741
----------------
FINANCIAL SERVICES
Daewoo Securities Co. 32,260 627
Good Morning Securities Co. Ltd. 112,940 698
----------------
1,325
----------------
INSURANCE
Samsung Fire & Marine Insurance Co. 4,460 3,140
----------------
METALS - STEEL
Pohang Iron & Steel Ltd. ADR 186,600 6,274
----------------
MISC. MATERIALS & COMMODITIES
Hankuk Glass Industry Co., Ltd. 28,020 750
----------------
TELECOMMUNICATIONS - INTEGRATED
Korea Telecom Corp. 71,440 4,740
(a) Korea Telecom Corp. ADR 202,600 8,104
----------------
12,844
----------------
TELECOMMUNICATIONS - WIRELESS
(b) SK Telecom Co., Ltd. 2,160 2,965
----------------
UTILITIES - ELECTRICAL & GAS
Korea Electric Power Corp. ADR 453,900 9,305
----------------
62,931
----------------
- -------------------------------------------------------------------------------
SRI LANKA (0.1%)
INDUSTRIAL COMPONENTS
Lanka Lubricants Ltd. 590,300 478
----------------
- -------------------------------------------------------------------------------
TAIWAN (2.0%)
BANKING
International Commercial Bank of China 545,000 705
(a) Taishin International Bank 985,000 732
----------------
1,437
----------------
CHEMICALS
Nan Ya Plastic Corp. 639,000 1,058
----------------
------------------------------------------------------------------------------
<CAPTION>
VALUE
SHARES (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
ELECTRICAL & ELECTRONICS
(a) Siliconware Precision Industries Co. 372,000 U.S.$ 708
(a) Taiwan Semiconductor
Manufacturing Co. Ltd. ADR 105,300 3,580
----------------
4,288
----------------
ELECTRONIC COMPONENTS, INSTRUMENTS
Asustek Computer Inc. GDR 190,240 2,744
Compal Electronics 203,000 798
(a) Compeq Manufacturing Co., Ltd. 141,000 825
(a) Hon Hai Precision Industry 139,000 1,257
----------------
5,624
----------------
METALS - STEEL
China Steel Corp. 859,000 649
----------------
TEXTILES & APPAREL
(a) Far East Textile 697,000 1,036
TRANSPORTATION - SHIPPING
Evergreen Marine Corp. 557,000 697
----------------
14,789
----------------
- -------------------------------------------------------------------------------
THAILAND (1.8%)
BANKING
(a) Siam Commercial Bank Public Co.
Ltd. (Preferred) 285,200 406
Thai Farmers Bank Ltd. (Foreign) 347,100 1,073
----------------
1,479
----------------
BROADCASTING & PUBLISHING
BEC World Public Co., Ltd. (Foreign) 316,000 1,970
----------------
BUILDING MATERIALS & COMPONENTS
Siam Cement Public Co. Ltd. (Foreign) 43,000 1,306
Siam City Cement Public Co.,
Ltd. (Foreign) 251,933 1,038
----------------
2,344
----------------
ELECTRICAL & ELECTRONICS
Delta Electronics Public Co.,
Ltd. (Foreign) 183,015 1,538
Shinawatra Computer Public
Co., Ltd. (Foreign) 111,000 518
----------------
2,056
----------------
REAL ESTATE
Golden Land Property
Development Public Co., Ltd. 3,555,300 2,097
----------------
TELECOMMUNICATIONS - WIRELESS
Advanced Info. Services
Public Co., Ltd. (Foreign) 207,400 2,811
----------------
12,757
----------------
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost U.S.$597,886) 695,167
----------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

11
<PAGE>

<TABLE>
<CAPTION>
NO. OF VALUE
RIGHTS (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
RIGHTS (0.0%)
------------------------------------------------------------------------------
INDIA
BUILDING MATERIALS & COMPONENTS
(a,b) Associated Cement Co. 8,700 U.S.$ 11
----------------
------------------------------------------------------------------------------
SOUTH KOREA
TELECOMMUNICATIONS - WIRELESS
(a,b) SK Telecom Co., Ltd. ADR 2,160 271
----------------
------------------------------------------------------------------------------
TOTAL RIGHTS
(Cost U.S.$-) 282
----------------
------------------------------------------------------------------------------
<CAPTION>
NO. OF
WARRANTS
------------------------------------------------------------------------------
<S> <C> <C>
WARRANTS (1.1%)
------------------------------------------------------------------------------
HONG KONG (0.1%)
BANKING
(a) HSBC Holdings plc, expiring
10/13/99 1,334,000 671
----------------
- -------------------------------------------------------------------------------
SINGAPORE (0.9%)
TRANSPORTATION - AIRLINES
(a) Singapore Airlines Ltd., expiring
4/9/02 7,171,000 6,403
----------------
- -------------------------------------------------------------------------------
THAILAND (0.1%)
BANKING
(a) Siam Commercial Bank Public Co.
Ltd., expiring 5/10/02 1,727,300 1,112
----------------
------------------------------------------------------------------------------
TOTAL WARRANTS
(Cost U.S.$4,958) 8,186
----------------
------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT
(000)
------------------------------------------------------------------------------
<S> <C> <C>
FIXED INCOME SECURITIES (0.2%)
------------------------------------------------------------------------------
SINGAPORE (0.2%)
FINANCIAL SERVICES
Finlayson Global Corp., Ltd.
0.00%, 2/19/04 (Cost
U.S.$1,150) U.S.$ 1,150 1,736
----------------
- -------------------------------------------------------------------------------
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (1.3%)
------------------------------------------------------------------------------
REPURCHASE AGREEMENT
Chase Securities, Inc. 4.55%,
dated 6/30/99, due 7/1/99,
to be repurchased at
U.S.$9,032, collateralized by
U.S.$9,935 Federal National
Mortgage Association,
5.25%, due 1/15/09, valued
at U.S.$9,352
(Cost U.S.$9,031) U.S.$ 9,031 U.S.$ 9,031
----------------
- -------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (0.9%)
Hong Kong Dollar HKD 2,751 355
Indian Rupee INR 85,216 1,963
Japanese Yen JPY 13,195 109
Malaysian Ringgit MYR 17 5
Pakistani Rupee PKR 126 2
Singapore Dollar SGD 18 11
Sri Lankan Rupee LKR 158 2
Taiwan Dollar TWD 117,940 3,651
Thai Baht THB 904 25
----------------
(Cost U.S.$6,129) 6,123
----------------
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.6%)
(Cost $619,154) 720,525
----------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

12
<PAGE>

Amount Amount
(000) (000)
- -------------------------------------------------------------------------------
<S> <C> <C>
OTHER ASSETS (1.7%)
Cash U.S.$ 4
Receivable for Investments
Sold 10,781
Dividends Receivable 1,864
Foreign Withholding Tax
Reclaim Receivable 48
Receivable Due from
Investment Advisor 5
Deferred Organization Costs 1
Interest Receivable 1
Other Assets 111 U.S.$ 12,815
---------------- ----------------
- -------------------------------------------------------------------------------
LIABILITIES (-1.3%)
Deferred Country Taxes (1,483)
Payable For:
Investments Purchased (6,496)
Investment Advisory Fees (576)
Fund Shares Repurchased (643)
Custodian Fees (320)
Professional Fees (155)
Shareholder Reporting Expenses (122)
Directors' Fees and Expenses (99)
Administrative Fees (60)
Other Liabilities (265) (8,736)
---------------- ----------------
NET ASSETS (100%)
Applicable to 62,546,174, issued and
outstanding U.S.$0.01 par value shares
(100,000,000 shares authorized) U.S.$ 723,121
----------------
- -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE U.S.$ 11.56
----------------
- -------------------------------------------------------------------------------
AT JUNE 30, 1999, NET ASSETS CONSISTED OF:
Common Stock U.S.$ 625
Capital Surplus 855,980
Undistributed Net Investment Income 169
Accumulated Net Realized Loss (233,467)
Unrealized Appreciation on Investments and
Foreign Currency Translations 99,814
- -------------------------------------------------------------------------------
TOTAL NET ASSETS U.S.$ 723,121
- -------------------------------------------------------------------------------
(a) - Non-income producing
(b) - Security valued at fair value - see note A-1 to financial
statements.
(c) - The Fund is advised by an affiliate.
@ - Value is less than U.S.$500.
ADR - American Depositary Receipt
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.

- -------------------------------------------------------------------------------
JUNE 30, 1999 EXCHANGE RATES:
- -------------------------------------------------------------------------------
HKD Hong Kong Dollar 7.758 = U.S. $ 1.00
INR Indian Rupee 43.405 = U.S. $ 1.00
JPY Japanese Yen 120.870 = U.S. $ 1.00
MYR Malaysian Ringgit 3.800 = U.S. $ 1.00
PKR Pakistani Rupee 52.467 = U.S. $ 1.00
SGD Singapore Dollar 1.702 = U.S. $ 1.00
LKR Sri Lankan Rupee 71.550 = U.S. $ 1.00
TWD Taiwan Dollar 32.300 = U.S. $ 1.00
THB Thai Baht 36.885 = U.S. $ 1.00
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

13
<PAGE>

SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION - JUNE 30, 1999 (Unaudited)

PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
- -----------------------------------------------------------------
<S> <C> <C>
Aerospace & Military Technology U.S.$ 988 0.1%
Appliances & Household Durables 33,754 4.7
Automobiles 27,574 3.8
Banking 48,218 6.7
Beverages & Tobacco 26,341 3.6
Broadcasting & Publishing 19,630 2.7
Building Materials & Components 18,116 2.5
Business & Public Services 9,914 1.4
Chemicals 23,291 3.2
Construction & Housing 8,240 1.1
Data Processing & Reproduction 38,956 5.4
Electrical & Electronics 67,410 9.3
Electronic Components, Instruments 38,743 5.4
Energy Equipment & Services 5,458 0.7
Energy Sources 9,899 1.4
Financial Services 12,084 1.7
Food & Household Products 17,439 2.4
Gold Mines 1,312 0.2
Health & Personal Care 29,570 4.1
Industrial Components 5,003 0.7
Insurance 3,770 0.5
Machinery & Engineering 34,779 4.8
Merchandising 4,463 0.6
Metals -- Steel 6,930 1.0
Misc. Materials & Commodities 10,447 1.5
Multi-Industry 27,321 3.8
Real Estate 36,119 5.0
Recreation, Other Consumer Goods 30,410 4.2
Telecommunications - Integrated 32,883 4.6
Telecommunications - Wireless 8,147 1.1
Telecommunications 32,833 4.5
Textiles & Apparel 1,036 0.1
Transportation - Airlines 12,606 1.7
Transportation - Road & Rail 2,364 0.3
Transportation - Shipping 2,016 0.3
Utilities - Electrical & Gas 13,112 1.8
Wholesale & International Trade 4,195 0.6
Other 15,154 2.1
--------------- ----
U.S.$ 720,525 99.6%
--------------- ----
--------------- ----
- -----------------------------------------------------------------
</TABLE>

SUMMARY OF TOTAL INVESTMENTS BY COUNTRY -
JUNE 30, 1999 (Unaudited)

PERCENT
VALUE OF NET
COUNTRY (000) ASSETS
- ---------------------------------------------------------------------
<S> <C> <C>
Australia U.S.$ 70,773 9.8
China 2,967 0.4
Hong Kong 78,361 10.8
India 30,145 4.2
Indonesia 11,227 1.5
Japan 345,423 47.8
Malaysia 20,236 2.8
New Zealand 6,472 0.9
Pakistan 6,845 0.9
Philippines 9,156 1.3
Singapore 31,428 4.3
South Korea 63,202 8.7
Sri Lanka 478 0.1
Taiwan 14,789 2.0
Thailand 13,869 1.9
United States (short-term investments) 9,031 1.3
Other 6,123 0.9
------------------------------
U.S.$ 720,525 99.6%
------------------------------
------------------------------
- -------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

14
<PAGE>

SIX MONTHS
ENDED
JUNE 30, 1999
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Dividends ......................................................................................... U.S.$ 5,961
Interest .......................................................................................... 175
Less: Foreign Taxes Withheld ...................................................................... (538)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Income .................................................................................... 5,598
- ---------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees .......................................................................... 3,113
Custodian Fees .................................................................................... 337
Administrative Fees ............................................................................... 321
Shareholder Reporting Expenses .................................................................... 88
Professional Fees ................................................................................. 83
Transfer Agent Fees ............................................................................... 28
Directors' Fees and Expenses ...................................................................... 64
Country Tax Expense ............................................................................... 3
Amortization of Organization Costs ................................................................ 6
Other Expenses .................................................................................... 19
- ---------------------------------------------------------------------------------------------------------------------------------
Total Expenses .................................................................................. 4,062
- ---------------------------------------------------------------------------------------------------------------------------------
Net Investment Income .......................................................................... 1,536
- ---------------------------------------------------------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS)
Investment Securities Sold ........................................................................ 21,539
Foreign Currency Transactions ..................................................................... 884
- ---------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain ............................................................................... 22,423
- ---------------------------------------------------------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
Appreciation on Investments ....................................................................... 152,555
Depreciation on Foreign Currency Translations ..................................................... (1,898)
- ---------------------------------------------------------------------------------------------------------------------------------
Change in Unrealized Appreciation/Depreciation .................................................. 150,657
- ---------------------------------------------------------------------------------------------------------------------------------
Total Net Realized Gain and Change in Unrealized Appreciation/Depreciation ............................ 173,080
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............................................. U.S.$ 174,616
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income .................................................................. U.S.$ 1,536 U.S.$ 4,614
Net Realized Gain (Loss) ............................................................... 22,423 (110,951)
Change in Unrealized Appreciation/Depreciation ......................................... 150,657 94,939
- ---------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting from Operations ........................ 174,616 (11,398)
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions:
In Excess of Net Investment Income ..................................................... -- (639)
- ---------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Repurchase of Shares (4,728,400 shares and 4,379,934 shares, respectively) ............. (38,651) (28,980)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) .............................................................. 135,965 (41,017)
Net Assets:
Beginning of Period .................................................................... 587,156 628,173
- ---------------------------------------------------------------------------------------------------------------------------------
End of Period (including undistributed net investment income (accumulated
net investment loss) of U.S.$169 and U.S.$(1,367), respectively) ..................... 723,121 U.S.$ 587,156
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

15
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
SELECTED PER SHARE DATA 1999 ---------------------------------
AND RATIOS: (UNAUDITED) 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..... U.S.$ 8.73 U.S.$ 8.77 U.S.$ 11.95
- ----------------------------------------------------------------------------------------------
Offering Costs ........................... -- -- --
- ----------------------------------------------------------------------------------------------
Net Investment Income .................... 0.02 0.06 0.03
Net Realized and Unrealized Gain (Loss)
on Investments .................... 2.70 (0.17) (3.19)
- ----------------------------------------------------------------------------------------------
Total from Investment Operations ..... 2.72 (0.11) (3.16)
- ----------------------------------------------------------------------------------------------
Distributions:
Net Investment Income .................. -- -- (0.02)
In Excess of Net Investment Income ..... -- (0.01) --
In Excess of Net Realized Gain ......... -- -- --
- ----------------------------------------------------------------------------------------------
Total Distributions .................. -- (0.01) (0.02)
- ----------------------------------------------------------------------------------------------
Decrease in Net Asset Value
due to Shares Issued through
Rights Offering ....................... -- -- --
Anti-Dilutive Effect of
Shares Repurchased .................... 0.11 0.08 --
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ........... U.S.$ 11.56 U.S.$ 8.73 U.S.$ 8.77
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD .... U.S.$ 9.63 U.S.$ 7.00 U.S.$ 7.44
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value ........................... 37.50% (5.77)% (23.46)%
Net Asset Value (1) .................... 32.42% (0.34)% (26.36)%
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) .... U.S.$723,121 U.S.$587,156 U.S.$628,173
- ----------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets .. 1.31%** 1.42% 1.34%
Ratio of Net Investment Income to
Average Net Assets ..................... 0.49%** 0.80% 0.25%
Portfolio Turnover Rate .................. 35% 42% 66%
- ----------------------------------------------------------------------------------------------

<CAPTION>
PERIOD FROM
AUGUST 2, 1994*
SELECTED PER SHARE DATA -------------------------------- TO
AND RATIOS: 1996 1995 DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ..... U.S.$ 14.34 U.S.$ 13.20 U.S.$ 14.10
- ------------------------------------------------------------------------------------------------
Offering Costs ........................... (0.01) -- (0.03)
- ------------------------------------------------------------------------------------------------
Net Investment Income .................... 0.02 0.05 0.05
Net Realized and Unrealized Gain (Loss)
on Investments .................... (0.33) 1.16 (0.87)
- ------------------------------------------------------------------------------------------------
Total from Investment Operations ..... (0.31) 1.21 (0.82)
- ------------------------------------------------------------------------------------------------
Distributions:
Net Investment Income .................. (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 .................. (0.61) (0.07) (0.05)
- ------------------------------------------------------------------------------------------------
Decrease in Net Asset Value
due to Shares Issued through
Rights Offering ....................... (1.46) -- --
Anti-Dilutive Effect of
Shares Repurchased .................... -- -- --
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ........... U.S.$ 11.95 U.S.$ 14.34 U.S.$ 13.20
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
PER SHARE MARKET VALUE, END OF PERIOD .... U.S.$ 9.75 U.S.$ 13.33 U.S.$ 12.25
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
Market Value ........................... (14.72)%+ 9.38% (12.71)%
Net Asset Value (1) .................... (2.87)%+ 9.24% (5.94)%
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
RATIOS, SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) .... U.S.$856,397 U.S.$769,414 U.S.$708,323
- ------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets .. 1.39% 1.36% 1.31%**
Ratio of Net Investment Income to
Average Net Assets ..................... 0.16% 0.36% 0.89%**
Portfolio Turnover Rate .................. 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.

16
<PAGE>

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- ----------

The Morgan Stanley Dean Witter Asia-Pacific Fund, Inc. (formerly 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.

17
<PAGE>

The Fund may use derivatives to achieve its investment objective. The Fund may
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 may use derivatives for
non-hedging as well as hedging purposes.

Following is a description of derivative instruments that the Fund may utilize
and their associated risks:

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

18
<PAGE>

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-dividend
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, net operating losses 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 Dean Witter Investment 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.

D. The Chase Manhattan Bank serves as custodian for the Fund. Custody fees are
payable monthly based on assets held in custody, investment purchase and sales
activity and account maintenance fees, plus reimbursement for certain
out-of-pocket expenses.

E. During the six months ended June 30, 1999, the Fund made purchases and
sales totaling $215,442,000 and $247,033,000, 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. At June 30, 1999, the U.S. Federal income tax cost basis of
securities was $613,025,000 and, accordingly, net unrealized appreciation was
$101,377,000 of which $150,665,000 related to appreciated securities and
$49,288,000 related to depreciated securities. At December 31, 1998, the Fund
had a capital loss carryforward for U.S. Federal income tax purposes of
approximately $243,446,000 available to offset future capital gains of which
$5,069,000 will expire on December 31, 2003, $93,503,000 will expire on December
31, 2005 and $144,874,000 will expire on December 31, 2006. To the extent that
capital gains are offset, such gains will not be distributed to the
shareholders.

F. For the six months ended June 30, 1999, the Fund incurred $216,000 of
brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliate of
the Adviser.

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

19
<PAGE>

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,
1999 totaled $93,000 and are included in Payable for Directors' Fees and
Expenses on the Statement of Net Assets.

J. On January 23, 1998, the Fund commenced a share repurchase program for
purposes of enhancing shareholder value and reducing the discount at which the
Fund's shares traded from their net asset value. For the six months ended June
30, 1999, the Fund repurchased 4,728,400 shares of its Common Stock at an
average price per share of $8.12 and an average discount of 15.76% from net
asset value per share. The Fund expects to continue to repurchase its
outstanding shares at such time and in such amounts as it believes will further
the accomplishment of the foregoing objectives, subject to review by the Board
of Directors.

K. Supplemental Proxy Information

The Annual Meeting of the Stockholders of the Morgan Stanley Asia-Pacific Fund,
Inc. was held on June 21, 1999. 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: Peter J. Chase ................46,201,182 -- 491,019 --
David B. Gill .................46,201,165 -- 491,036 --
Michael F. Klein ..............46,200,984 -- 491,217 --

2. To ratify the selection of PricewaterhouseCoopers LLP
as independent accountants of the Fund ..........................46,421,012 147,584 -- 123,608

3. To approve an amendment to the Fund's Articles of
Incorporation to change the name of the fund to
Morgan Stanley Dean Witter Asia-Pacific Fund, Inc. ........46,164,672 385,004 -- 142,528
</TABLE>

20
<PAGE>

YEAR 2000 DISCLOSURE (UNAUDITED):

The investment advisory services provided to the Fund by the Adviser depend on
the smooth operation of its computer systems. Many computer and software systems
in use today cannot recognize the year 2000, but revert to 1900 or some other
date, due to the manner in which dates were encoded and calculated. That failure
could have a negative impact on the handling of securities trades, pricing and
account services. The Adviser has been actively working on necessary changes to
its own computer systems to deal with the year 2000 problem and expects that its
systems will be adapted before that date. There can be no assurance, however,
that the Adviser will be successful. In addition, other unaffiliated service
providers may be faced with similar problems. The Adviser is monitoring their
remedial efforts, but, there can be no assurance that they and the services they
provide will not be adversely affected.

In addition, it is possible that the markets for securities in which the Fund
invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.

21
<PAGE>

DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN

Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each shareholder will be deemed to have elected, unless American Stock Transfer
& Trust Company (the "Plan Agent") is otherwise instructed by the shareholder in
writing, to have all distributions automatically reinvested in Fund shares.
Participants in the Plan have the option of making additional voluntary cash
payments to the Plan Agent, annually, in any amount from $100 to $3,000, for
investment in Fund shares.

Dividend and capital gain distributions will be reinvested on the
reinvestment date in full and fractional shares. If the market price per share
equals or exceeds net asset value per share on the reinvestment date, the Fund
will issue shares to participants at net asset value. If net asset value is less
than 95% of the market price on the reinvestment date, shares will be issued at
95% of the market price. If net asset value exceeds the market price on the
reinvestment date, participants will receive shares valued at market price. The
Fund may purchase shares of its Common Stock in the open market in connection
with dividend reinvestment requirements at the discretion of the Board of
Directors. Should the Fund declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will purchase Fund shares for participants
in the open market as agent for the participants.

The Plan Agent's fees for the reinvestment of dividends and distributions
will be paid by the Fund. However, each participant's account will be charged a
pro rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
shareholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends or distributions.

In the case of shareholders, such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
shareholder as representing the total amount registered in the shareholder's
name and held for the account of beneficial owners who are participating in the
Plan.

Shareholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and shareholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:

Morgan Stanley Dean Witter 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