-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gs94r4Zj+ImMpYfMtUXs5LF6YlOsmneD9PpDNbRbdxNgjpo8NJ42O5nz5NJNLKkK OcBOJP5K5xdcP/4/5vkQdQ== 0001047469-05-018832.txt : 20050705 0001047469-05-018832.hdr.sgml : 20050704 20050705151022 ACCESSION NUMBER: 0001047469-05-018832 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050430 FILED AS OF DATE: 20050705 DATE AS OF CHANGE: 20050705 EFFECTIVENESS DATE: 20050705 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY INTERNATIONAL FUND CENTRAL INDEX KEY: 0001072552 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-09081 FILM NUMBER: 05936592 BUSINESS ADDRESS: STREET 1: C/O MORGAN STANLEY TRUST STREET 2: HARBORSIDE FINANCIAL CENTER, PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 BUSINESS PHONE: (212) 869-6397 MAIL ADDRESS: STREET 1: C/O MORGAN STANLEY TRUST STREET 2: HARBORSIDE FINANCIAL CENTER, PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 FORMER COMPANY: FORMER CONFORMED NAME: MORGAN STANLEY DEAN WITTER INTERNATIONAL FUND DATE OF NAME CHANGE: 19981022 N-CSRS 1 a2159456zn-csrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-09081 Morgan Stanley International Fund (Exact name of registrant as specified in charter) 1221 Avenue of the Americas, New York, New York 10020 (Address of principal executive offices) (Zip code) Ronald E. Robison 1221 Avenue of the Americas, New York, New York 10020 (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 Date of fiscal year end: October 31, 2005 Date of reporting period: April 30, 2005 Item 1 - Report to Shareholders WELCOME, SHAREHOLDER: IN THIS REPORT, YOU'LL LEARN ABOUT HOW YOUR INVESTMENT IN MORGAN STANLEY INTERNATIONAL FUND PERFORMED DURING THE SEMIANNUAL PERIOD. WE WILL PROVIDE AN OVERVIEW OF THE MARKET CONDITIONS, AND DISCUSS SOME OF THE FACTORS THAT AFFECTED PERFORMANCE DURING THE REPORTING PERIOD. IN ADDITION, THIS REPORT INCLUDES THE FUND'S FINANCIAL STATEMENTS AND A LIST OF FUND INVESTMENTS. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING OFFERED. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE FUND'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. PLEASE SEE THE PROSPECTUS FOR MORE COMPLETE INFORMATION ON INVESTMENT RISKS. FUND REPORT For the six months ended April 30, 2005 TOTAL RETURN FOR THE SIX MONTHS ENDED APRIL 30, 2005
MORGAN STANLEY LIPPER CAPITAL INTERNATIONAL INTERNATIONAL LARGE-CAP (MSCI) EAFE CORE FUNDS CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2) 7.21% 6.91% 6.84% 7.39% 8.71% 7.95%
THE PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT EXPENSES. THE FUND'S TOTAL RETURNS ASSUME THE REINVESTMENT OF ALL DISTRIBUTIONS BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE AND BENCHMARK INFORMATION. MARKET CONDITIONS Overall, international markets performed well during the six months ended April 30, 2005. The MSCI EAFE Index, for example, gained 8.71 percent for the period. Market volatility was not extreme. In the United States, the Federal Open Market Committee continued to raise rates, though at a "measured" pace. Nonetheless, the period was marked by unsettling undercurrents. Many concerns pre-occupied investors, including the prospects of rising inflation, soaring oil prices, a bursting real estate bubble, and declining corporate profits. Against this backdrop, investors weighed the potential for a mid-cycle pause in economic growth versus that of a more serious global slowdown. Conditions in developed European equity markets were mixed for the period. Although lower oil prices contributed to the strength of many markets at the end of 2004, the return of high oil prices and growing concerns over economic performance subsequently tempered the pace of European markets. Data over the six months generally pointed to weakening economic conditions in Europe as industrial production, consumer confidence and retail sales faltered significantly. All major stock markets across the Asia Pacific region posted positive returns for the six month period. Although many investors grew cautious amid concerns about oil prices, inflation, tightening global monetary conditions and relatively weak economic data, those markets with domestic-driven economic growth and relatively low valuations performed well. Japan continued to display signs of recovery. Abating deflation, stabilizing financials, and improving domestic demand trends counted among the positives. Additionally, banks made notable strides in dealing with their problem loans. However, the equity market did not do as well and lagged the European bourses. PERFORMANCE ANALYSIS Morgan Stanley International Fund underperformed the Morgan Stanley Capital International EAFE Index and the Lipper International Large-Cap Core Funds Index for the six months ended April 30, 2005, assuming no deduction of applicable sales charges. Among those factors enhancing performance, the Fund was overweighted in energy stocks relative to the benchmark. Overweighted positions in Hong Kong and Singapore also enhanced overall returns. 2 In contrast, the Fund was underweighted in Switzerland and also in pharmaceutical and health care stocks relative to the benchmark index. This combination of underweightings detracted from performance. Our view was that many of these drug companies did not offer compelling valuations or fundamentals. The market, however, rewarded these stocks during the six-month period. Underweighted positions in financial stocks also slowed the Fund's relative pace. We reduced the Fund's exposure to Europe, and re-deployed assets into Japan. Our analysis indicated that the recent strength of European markets may not be justified, given the weakening of various European economies and uncertainties surrounding unification. This long-term view of the comparative merits of Europe and Japan was out of step with the market's overall sentiment during the six-month period, however, and the shift of assets hindered performance. The Fund also invests in the stocks of emerging markets, representing roughly five percent of the portfolio at the end of the reporting period, with an emphasis on Asia. The Fund's emerging market holdings contributed mixed results during the period. On the basis of equity performance, the Fund's overall allocation dampened returns. However, the currencies in which many of these stocks were priced appreciated versus the U.S. dollar. As a result, declines in the stock prices themselves were largely offset by strengthening currencies. THERE IS NO GUARANTEE THAT ANY SECURITIES MENTIONED WILL CONTINUE TO PERFORM WELL OR BE HELD BY THE FUND IN THE FUTURE. TOP 10 HOLDINGS BP PLC 2.5% HSBC Holdings PLC 1.9 Total S.A. 1.5 Royal Dutch Petroleum Co. 1.5 GlaxoSmithKline PLC 1.4 Toyota Motor Corp. 1.3 Nestle S.A. (Registered Shares) 1.2 Novartis AG (Registered Shares) 1.1 Vodafone Group PLC 1.0 Shell Transport & Trading Co. PLC 0.9
TOP FIVE COUNTRIES Japan 24.2% United Kingdom 21.5 France 7.7 Switzerland 5.7 Germany 5.6
DATA AS OF APRIL 30, 2005. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES FOR TOP 10 HOLDINGS AND TOP FIVE COUNTRIES ARE AS A PERCENTAGE OF NET ASSETS. THESE DATA ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE DEEMED A RECOMMENDATION TO BUY OR SELL THE SECURITIES MENTIONED. MORGAN STANLEY IS A FULL-SERVICE SECURITIES FIRM ENGAGED IN SECURITIES TRADING AND BROKERAGE ACTIVITIES, INVESTMENT BANKING, RESEARCH AND ANALYSIS, FINANCING AND FINANCIAL ADVISORY SERVICES. 3 INVESTMENT STRATEGY THE FUND WILL NORMALLY INVEST AT LEAST 65 PERCENT OF ITS ASSETS IN A DIVERSIFIED PORTFOLIO OF INTERNATIONAL COMMON STOCKS AND OTHER EQUITY SECURITIES. THE FUND'S "INVESTMENT ADVISER," MORGAN STANLEY INVESTMENT ADVISORS INC., USES A "TOP-DOWN" APPROACH THAT EMPHASIZES COUNTRY AND SECTOR SELECTION AND WEIGHTINGS OVER INDIVIDUAL STOCK SELECTION. FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND AND FOURTH FISCAL QUARTERS BY FILING THE SCHEDULE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC). THE SEMIANNUAL REPORTS ARE FILED ON FORM N-CSRS AND THE ANNUAL REPORTS ARE FILED ON FORM N-CSR. MORGAN STANLEY ALSO DELIVERS THE SEMIANNUAL AND ANNUAL REPORTS TO FUND SHAREHOLDERS AND MAKES THESE REPORTS AVAILABLE ON ITS PUBLIC WEB SITE, www.morganstanley.com. EACH MORGAN STANLEY FUND ALSO FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE FUND'S FIRST AND THIRD FISCAL QUARTERS ON FORM N-Q. MORGAN STANLEY DOES NOT DELIVER THE REPORTS FOR THE FIRST AND THIRD FISCAL QUARTERS TO SHAREHOLDERS, NOR ARE THE REPORTS POSTED TO THE MORGAN STANLEY PUBLIC WEB SITE. YOU MAY, HOWEVER, OBTAIN THE FORM N-Q FILINGS (AS WELL AS THE FORM N-CSR AND N-CSRS FILINGS) BY ACCESSING THE SEC'S WEB SITE, http://www.sec.gov. YOU MAY ALSO REVIEW AND COPY THEM AT THE SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE SEC'S PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING THE SEC AT (800) SEC-0330. YOU CAN ALSO REQUEST COPIES OF THESE MATERIALS, UPON PAYMENT OF A DUPLICATING FEE, BY ELECTRONIC REQUEST AT THE SEC'S E-MAIL ADDRESS (publicinfo@sec.gov) OR BY WRITING THE PUBLIC REFERENCE SECTION OF THE SEC, WASHINGTON, DC 20549-0102. PROXY VOTING POLICIES AND PROCEDURES A DESCRIPTION OF (1) THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE VOTING OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES AND (2) HOW THE FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT 12-MONTH PERIOD ENDED JUNE 30, 2004, IS AVAILABLE WITHOUT CHARGE, BY VISITING THE MUTUAL FUND CENTER ON OUR WEB SITE AT www.morganstanley.com. THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT http://www.sec.gov. HOUSEHOLDING NOTICE TO REDUCE PRINTING AND MAILING COSTS, THE FUND ATTEMPTS TO ELIMINATE DUPLICATE MAILINGS TO THE SAME ADDRESS. THE FUND DELIVERS A SINGLE COPY OF CERTAIN SHAREHOLDER DOCUMENTS, INCLUDING SHAREHOLDER REPORTS, PROSPECTUSES AND PROXY MATERIALS, TO INVESTORS WITH THE SAME LAST NAME WHO RESIDE AT THE SAME ADDRESS. YOUR PARTICIPATION IN THIS PROGRAM WILL CONTINUE FOR AN UNLIMITED PERIOD OF TIME UNLESS YOU INSTRUCT US OTHERWISE. YOU CAN REQUEST MULTIPLE COPIES OF THESE DOCUMENTS BY CALLING (800) 350-6414, 8:00 A.M. TO 8:00 P.M., ET. ONCE OUR CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS. 4 PERFORMANCE SUMMARY AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED APRIL 30, 2005
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES++ (SINCE 06/28/99) (SINCE 06/28/99) (SINCE 06/28/99) (SINCE 06/28/99) SYMBOL INLAX INLBX INLCX INLDX 1 YEAR 12.21%(3) 11.33%(3) 11.26%(3) 12.38%(3) 6.32(4) 6.33(4) 10.26(4) -- 5 YEARS (0.84)(3) (1.62)(3) (1.59)(3) (0.65)(3) (1.91)(4) (1.99)(4) (1.59)(4) -- SINCE INCEPTION 1.25(3) 0.47(3) 0.49(3) 1.46(3) 0.32(4) 0.31(4) 0.49(4) --
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT morganstanley.com OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PERFORMANCE FOR CLASS A, CLASS B, CLASS C, AND CLASS D SHARES WILL VARY DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES. * THE MAXIMUM FRONT-END SALES CHARGE FOR CLASS A IS 5.25%. ** THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS B IS 5.0%. THE CDSC DECLINES TO 0% AFTER SIX YEARS. + THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C IS 1.0% FOR SHARES REDEEMED WITHIN ONE YEAR OF PURCHASE. ++ CLASS D HAS NO SALES CHARGE. (1) THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE INDEX MEASURES THE PERFORMANCE FOR A DIVERSE RANGE OF GLOBAL STOCK MARKETS WITHIN EUROPE, AUSTRALASIA, AND THE FAR EAST. THE PERFORMANCE OF THE INDEX IS LISTED IN U.S. DOLLARS AND ASSUMES REINVESTMENT OF NET DIVIDENDS. "NET DIVIDENDS" REFLECTS A REDUCTION IN DIVIDENDS AFTER TAKING INTO ACCOUNT WITHHOLDING OF TAXES BY CERTAIN FOREIGN COUNTRIES REPRESENTED IN THE INDEX. INDEXES ARE UNMANAGED AND THEIR RETURNS DO NOT INCLUDE ANY SALES CHARGES OR FEES. SUCH COSTS WOULD LOWER PERFORMANCE. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX. (2) THE LIPPER INTERNATIONAL LARGE-CAP CORE FUNDS INDEX IS AN EQUALLY WEIGHTED PERFORMANCE INDEX OF THE LARGEST QUALIFYING FUNDS (BASED ON NET ASSETS) IN THE LIPPER INTERNATIONAL LARGE-CAP CORE FUNDS CLASSIFICATION. THE INDEX, WHICH IS ADJUSTED FOR CAPITAL GAINS DISTRIBUTIONS AND INCOME DIVIDENDS, IS UNMANAGED AND SHOULD NOT BE CONSIDERED AN INVESTMENT. THERE ARE CURRENTLY 10 FUNDS REPRESENTED IN THIS INDEX. (3) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT THE DEDUCTION OF ANY SALES CHARGES. (4) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND THE DEDUCTION OF THE MAXIMUM APPLICABLE SALES CHARGE. SEE THE FUND'S CURRENT PROSPECTUS FOR COMPLETE DETAILS ON FEES AND SALES CHARGES. 5 EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees; and (2) ongoing costs, including management fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 11/01/04 - 04/30/05. ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs, and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD * ------------- ------------- --------------- 11/01/04 - 11/01/04 04/30/05 04/30/05 ------------- ------------- --------------- CLASS A Actual (7.21% return) $ 1,000.00 $ 1,072.10 $ 6.58 Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,018.45 $ 6.41 CLASS B Actual (6.91% return) $ 1,000.00 $ 1,069.10 $ 10.41 Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,014.73 $ 10.14 CLASS C Actual (6.84% return) $ 1,000.00 $ 1,068.40 $ 10.36 Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,014.78 $ 10.09 CLASS D Actual (7.39% return) $ 1,000.00 $ 1,073.90 $ 5.30 Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,019.69 $ 5.16
- ---------- * EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.28%, 2.03%, 2.02% AND 1.03% RESPECTIVELY, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE ONE-HALF YEAR PERIOD). 6 INVESTMENT ADVISORY AGREEMENT APPROVAL NATURE, EXTENT AND QUALITY OF SERVICES The Board reviewed and considered the nature and extent of the investment advisory services provided by the Investment Adviser under the Advisory Agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Fund's Administrator under the Administration Agreement, including accounting, clerical, bookkeeping, compliance, business management and planning, and the provision of supplies, office space and utilities at the Adviser's expense. (The Investment Adviser and the Administrator together are referred to as the "Adviser" and the Advisory and Administration Agreements together are referred to as the "Management Agreement.") The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as reported to the Board by Lipper Inc. ("Lipper"). The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the administrative and investment advisory services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund. The Board also concluded that the overall quality of the advisory and administrative services was satisfactory. PERFORMANCE RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS The Board reviewed the Fund's performance for one-, three- and five-year periods ended November 30, 2004, as shown in reports provided by Lipper (the "Lipper Reports"), compared to the performance of comparable funds selected by Lipper (the "performance peer group"), and noted that the Fund's performance was better than its performance peer group average for all three periods. The Board concluded that the Fund's performance was satisfactory. FEES RELATIVE TO OTHER FUNDS MANAGED BY THE ADVISER WITH COMPARABLE INVESTMENT STRATEGIES The Board reviewed the advisory and administrative fees (together, the "management fee") paid by the Fund under the Management Agreement. The Board noted that the rate was comparable to the management fee rates charged by the Adviser to any other funds it manages with investment strategies comparable to those of the Fund. FEES AND EXPENSES RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS The Board reviewed the management fee rate for the Fund and the total expense ratio of the Fund. The Board noted that: (i) the Fund's management fee rate was lower than the average management fee rate for funds, 7 selected by Lipper (the "expense peer group"), managed by other advisers with investment strategies comparable to those of the Fund, as shown in the Lipper Report for this Fund, and (ii) the Fund's total expense ratio was also lower than the average total expense ratio of the mutual funds included in the Fund's expense peer group. The Board also noted that the Fund's management fee schedule did not include any breakpoints and proposed that the Adviser incorporate one or more breakpoints in the fee schedule. The Adviser agreed to implement a breakpoint in the management fee schedule on assets above $1 billion effective on May 1, 2005. The Board concluded that the Fund's management fee and total expenses were competitive with those of the Fund's expense peer group. BREAKPOINTS AND ECONOMIES OF SCALE The Board reviewed the structure of the Fund's management fee schedule under the Management Agreement and noted that it will include a breakpoint in the Management Agreement that becomes effective on May 1, 2005. The Board also reviewed the level of the Fund's anticipated new management fee and noted that the fee, as a percentage of the Fund's net assets, would decrease as net assets increase because of the new breakpoint. The Board concluded that the Fund's management fee would reflect economies of scale as assets increase. PROFITABILITY OF ADVISER AND AFFILIATES The Board considered and reviewed information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last two years from their relationship with the Fund and the Morgan Stanley Fund Complex and reviewed with the Controller of the Adviser the cost allocation methodology used to determine the Adviser's profitability. Based on their review of the information they received, the Board concluded that the profits earned by the Adviser and its affiliates were not excessive in light of the advisory, administrative and other services provided to the Fund. FALL-OUT BENEFITS The Board considered so-called "fall-out benefits" derived by the Adviser and its affiliates from their relationship with the Fund and the Fund Complex, such as "float" benefits derived from handling of checks for purchases and redemptions of Fund shares through a broker-dealer affiliate of the Adviser and "soft dollar" benefits (discussed in the next section). The Board also considered that a broker-dealer affiliate of the Adviser receives from the Fund 12b-1 fees for distribution and shareholder services. The Board also considered that an affiliate of the Adviser, through a joint venture, receives revenue in connection with trading done on behalf of the Fund through an electronic trading system network ("ECN"). The Board concluded that the float benefits and the above-referenced ECN-related revenue were relatively small and that the 12b-1 fees were competitive with those of other broker-dealer affiliates of investment advisers of mutual funds. 8 SOFT DOLLAR BENEFITS The Board considered whether the Adviser realizes any benefits as a result of brokerage transactions executed through "soft dollar" arrangements. Under such arrangements, brokerage commissions paid by the Fund and/or other funds managed by the Adviser would be used to pay for research that a securities broker obtains from third parties, or to pay for both research and execution services from securities brokers who effect transactions for the Fund. The Adviser informed the Board that it does not use Fund commissions to pay for third party research. It does use commissions to pay for research which is bundled with execution services. The Board recognized that the receipt of such research from brokers may reduce the Adviser's costs but concluded that the receipt of such research strengthens the investment management resources of the Adviser, which may ultimately benefit the Fund and other funds in the Fund Complex. ADVISER FINANCIALLY SOUND AND FINANCIALLY CAPABLE OF MEETING THE FUND'S NEEDS The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board noted that the Adviser's operations remain profitable, although increased expenses in recent years have reduced the Adviser's profitability. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement. HISTORICAL RELATIONSHIP BETWEEN THE FUND AND THE ADVISER The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that it is beneficial for the Fund to continue its relationship with the Adviser. OTHER FACTORS AND CURRENT TRENDS The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business. GENERAL CONCLUSION After considering and weighing all of the above factors, the Board concluded it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. 9 MORGAN STANLEY INTERNATIONAL FUND PORTFOLIO OF INVESTMENTS - APRIL 30, 2005 (UNAUDITED)
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS (93.8%) AUSTRALIA++ (3.9%) ALUMINUM 72,580 Alumina Ltd. $ 325,759 -------------- BEVERAGES: ALCOHOLIC 61,573 Foster's Group Ltd. 246,996 21,483 Southcorp Ltd. 71,178 -------------- 318,174 -------------- BEVERAGES: NON-ALCOHOLIC 15,483 Coca-Cola Amatil Ltd. 100,203 -------------- BIOTECHNOLOGY 2,905 CSL Ltd. 72,084 -------------- BUILDING PRODUCTS 60,569 CSR Ltd. 113,464 -------------- CASINO/GAMING 12,237 TABCORP Holdings Ltd. 148,685 -------------- CHEMICALS: MAJOR DIVERSIFIED 17,919 Orica Ltd. 220,992 -------------- CONSTRUCTION MATERIALS 37,337 Boral Ltd. 169,385 29,855 James Hardie Industries NV 130,910 59,568 Rinker Group Ltd. 531,512 -------------- 831,807 -------------- CONTAINERS/PACKAGING 56,358 Amcor Ltd. 286,747 -------------- ENGINEERING & CONSTRUCTION 7,273 Leighton Holdings Ltd. 56,342 -------------- FINANCIAL CONGLOMERATES 40,111 AMP Ltd. 211,931 6,303 Macquarie Bank Ltd. 226,417 16,632 Suncorp-Metway Ltd. 256,688 -------------- 695,036 -------------- FOOD RETAIL 32,398 Coles Myer Ltd. 217,453 30,272 Woolworths Ltd. 362,853 -------------- 580,306 -------------- GAS DISTRIBUTORS 14,025 Australian Gas Light Co. Ltd. $ 157,493 159,126 Origin Energy Ltd. 871,524 -------------- 1,029,017 -------------- HOSPITAL/NURSING MANAGEMENT 27,157 Mayne Group Ltd. 74,430 -------------- INDUSTRIAL CONGLOMERATES 5,618 Ansell Ltd. 41,088 11,333 Wesfarmers Ltd. 319,487 -------------- 360,575 -------------- INVESTMENT TRUSTS/ MUTUAL FUNDS 68,259 Macquarie Infrastructure Group (Stapled Securities)** 194,394 -------------- MAJOR BANKS 43,611 Australia and New Zealand Banking Group Ltd. 736,888 36,037 Commonwealth Bank of Australia 1,024,945 46,817 National Australia Bank Ltd. 1,068,100 50,964 Westpac Banking Corp. 775,452 -------------- 3,605,385 -------------- MAJOR TELECOMMUNICATIONS 65,106 Telstra Corp., Ltd. 246,230 -------------- MEDICAL/NURSING SERVICES 4,137 Sonic Healthcare Ltd. 38,257 -------------- MISCELLANEOUS COMMERCIAL SERVICES 29,859 Brambles Industries Ltd. 183,464 -------------- MULTI-LINE INSURANCE 51,260 Insurance Australia Group Ltd. 243,760 --------------
SEE NOTES TO FINANCIAL STATEMENTS 10
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- OIL & GAS PRODUCTION 119,185 Santos Ltd. $ 862,330 95,089 Woodside Petroleum Ltd. 1,746,822 -------------- 2,609,152 -------------- OTHER METALS/MINERALS 224,411 BHP Billiton Ltd. 2,832,070 19,465 Rio Tinto Ltd. 631,317 72,981 WMC Resources Ltd. 451,980 -------------- 3,915,367 -------------- OTHER TRANSPORTATION 28,101 Patrick Corp., Ltd. 119,433 17,097 Transurban Group 99,128 -------------- 218,561 -------------- PRECIOUS METALS 20,787 Newcrest Mining Ltd. 240,952 -------------- PROPERTY - CASUALTY INSURERS 20,533 QBE Insurance Group Ltd. 240,187 -------------- PUBLISHING: NEWSPAPERS 30,261 John Fairfax Holdings Ltd. 89,959 -------------- PULP & PAPER 28,851 PaperlinX Ltd. 63,907 -------------- REAL ESTATE DEVELOPMENT 12,506 Lend Lease Corp., Ltd. 116,792 -------------- REAL ESTATE INVESTMENT TRUSTS 1,272 Stockland (New) (Stapled Securities)** * 5,725 -------------- STEEL 45,854 BlueScope Steel Ltd. 274,650 35,544 OneSteel Ltd. 61,131 -------------- 335,781 -------------- TOTAL AUSTRALIA 17,561,494 -------------- AUSTRIA++ (0.8%) BUILDING PRODUCTS 3,760 Wienerberger AG 158,920 -------------- CONSTRUCTION MATERIALS 1,538 RHI AG* $ 43,732 -------------- ELECTRIC UTILITIES 876 Oesterreichische Elektrizitaetswirtschafts AG (Verbund) (A Shares) 218,146 -------------- MAJOR BANKS 5,752 Bank Austria Creditanstalt 530,296 18,408 Erste Bank der Oesterreichischen Sparkassen AG 888,804 -------------- 1,419,100 -------------- MAJOR TELECOMMUNICATIONS 19,214 Telekom Austria AG 369,043 -------------- OIL REFINING/MARKETING 1,983 OMV AG 609,565 -------------- OTHER TRANSPORTATION 1,083 Flughafen Wien AG 70,150 -------------- REAL ESTATE DEVELOPMENT 32,634 Immofinanz Immobilien Anlagen AG* 296,289 -------------- STEEL 684 Boehler-Uddeholm AG 88,311 1,460 Voestalpine AG 98,712 -------------- 187,023 -------------- TOTAL AUSTRIA 3,371,968 -------------- BELGIUM++ (1.1%) CHEMICALS: SPECIALTY 3,487 Solvay S.A. 396,638 -------------- ELECTRIC UTILITIES 1,216 Electrabel S.A. 564,848 -------------- ELECTRONIC EQUIPMENT/ INSTRUMENTS 3,156 Agfa Gevaert NV 102,871 -------------- FINANCIAL CONGLOMERATES 67,652 Fortis 1,879,306 --------------
SEE NOTES TO FINANCIAL STATEMENTS 11
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- MAJOR BANKS 41,052 Dexia $ 944,585 5,663 KBC Group S.A. 447,859 -------------- 1,392,444 -------------- MAJOR TELECOMMUNICATIONS 2,051 Belgacom S.A. 78,641 -------------- METAL FABRICATIONS 283 Bekaert NV 21,813 -------------- OTHER METALS/MINERALS 1,097 Cumerio* 14,800 1,097 Umicore 95,108 -------------- 109,908 -------------- PHARMACEUTICALS: OTHER 4,723 UCB S.A. 229,685 -------------- TOTAL BELGIUM 4,776,154 -------------- BRAZIL (0.1%) REGIONAL BANKS 5,300 Unibanco-Uniao de Bancos Brasileiros S.A. (GDR) (Units)+ 175,907 -------------- STEEL 5,207 Companhia Siderurgica Nacional S.A. 113,731 -------------- TOBACCO 6,000 Souza Cruz S.A. 69,680 -------------- TOTAL BRAZIL 359,318 -------------- CAYMAN ISLANDS++ (0.0%) MAJOR TELECOMMUNICATIONS 88,000 Hutchison Telecommunications International Ltd.* 83,668 -------------- CHINA++ (1.0%) AIR FREIGHT/COURIERS 179,000 Sinotrans Limited 53,010 -------------- AIRLINES 118,000 China Southern Airlines Co., Ltd.* $ 39,968 -------------- ALUMINUM 330,000 Aluminum Corp. of China Ltd. 179,703 -------------- CHEMICALS: SPECIALTY 234,000 Sinopec Shanghai Petrochemical Co. Ltd. 86,490 -------------- CONTRACT DRILLING 154,000 China Oilfield Services Ltd. 51,605 -------------- ELECTRIC UTILITIES 144,000 Huadian Power International Corp., Ltd. 44,605 306,000 Huaneng Power International, Inc. 233,188 -------------- 277,793 -------------- ELECTRICAL PRODUCTS 15,000 BYD Company Ltd. 42,649 -------------- INTEGRATED OIL 1,678,000 China Petroleum & Chemical Corp. 657,395 1,758,000 PetroChina Co., Ltd. 1,049,582 -------------- 1,706,977 -------------- LIFE/HEALTH INSURANCE 744,000 China Life Insurance Co., Ltd.* 493,843 -------------- MAJOR TELECOMMUNICATIONS 1,388,000 China Telecom Corp. Ltd. 472,601 -------------- MARINE SHIPPING 130,000 China Shipping Development Co., Ltd. 115,073 -------------- MULTI-LINE INSURANCE 262,500 Ping An Insurance (Group) Co. of China Ltd.* 402,135 -------------- OTHER METALS/MINERALS 116,000 Jiangxi Copper Co., Ltd. 55,892 --------------
SEE NOTES TO FINANCIAL STATEMENTS 12
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- OTHER TRANSPORTATION 134,000 Beijing Capital International Airport Co., Ltd. $ 47,174 122,000 Jiangsu Expressway Co., Ltd. 56,221 -------------- 103,395 -------------- STEEL 90,000 Angang New Steel Co., Ltd. 48,743 174,000 Maanshan Iron & Steel Co., Ltd.* 60,078 -------------- 108,821 -------------- TEXTILES 34,500 Weiqiao Textile Co., Ltd. 45,588 -------------- TOTAL CHINA 4,235,543 -------------- DENMARK++ (0.6%) BIOTECHNOLOGY 3,450 Novozymes A/S (B Shares) 167,603 -------------- ELECTRICAL PRODUCTS 7,600 Vestas Wind Systems A/S* 96,059 -------------- MAJOR BANKS 36,544 Danske Bank A/S 1,069,729 -------------- MAJOR TELECOMMUNICATIONS 1,900 TDC A/S 81,095 -------------- MARINE SHIPPING 55 A P Moller - Maersk A/S 485,625 -------------- MISCELLANEOUS COMMERCIAL SERVICES 1,100 ISS A/S 87,940 -------------- PHARMACEUTICALS: MAJOR 11,850 Novo Nordisk A/S (Series B) 597,093 -------------- TELECOMMUNICATION EQUIPMENT 15,500 GN Store Nord A/S 162,024 -------------- TRUCKING 1,000 DSV A/S* $ 76,211 -------------- TOTAL DENMARK 2,823,379 -------------- FINLAND++ (1.4%) BUILDING PRODUCTS 1,648 Uponor Oyj 32,646 -------------- ENGINEERING & CONSTRUCTION 2,109 Kone Oyj (B Shares)* 159,893 -------------- FOOD RETAIL 16,110 Kesko Oyj (B Shares) 388,305 -------------- INDUSTRIAL MACHINERY 11,688 Metso Oyj 211,536 -------------- INFORMATION TECHNOLOGY SERVICES 8,260 TietoEnator Oyj 249,632 -------------- MULTI-LINE INSURANCE 18,410 Sampo Oyj (A Shares) 256,565 -------------- OIL REFINING/MARKETING 21,853 Fortum Oyj 330,659 -------------- OTHER METALS/MINERALS 10,878 Outokumpu Oyj 152,632 -------------- PULP & PAPER 39,857 Stora Enso Oyj (Registered Shares) 528,445 30,171 UPM-Kymmene Oyj 602,938 -------------- 1,131,383 -------------- SPECIALTY STORES 5,463 Neste Oil Oyj* 121,976 -------------- TELECOMMUNICATION EQUIPMENT 182,408 Nokia Oyj 2,913,305 -------------- TRUCKS/CONSTRUCTION/FARM MACHINERY 2,618 Wartsila Oyj (B Shares) 69,173 -------------- TOTAL FINLAND 6,017,705 --------------
SEE NOTES TO FINANCIAL STATEMENTS 13
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- FRANCE++ (7.7%) ADVERTISING/MARKETING SERVICES 3,041 Publicis Groupe $ 86,972 -------------- AEROSPACE & DEFENSE 5,234 Thales S.A. 212,081 464 Zodiac S.A. 22,497 -------------- 234,578 -------------- APPAREL/FOOTWEAR 322 Hermes International 61,311 7,935 LVMH Moet Hennessy Louis Vuitton S.A. 560,429 -------------- 621,740 -------------- AUTO PARTS: O.E.M. 4,022 Valeo S.A. 175,558 -------------- AUTOMOTIVE AFTERMARKET 3,443 Compagnie Generale des Etablissements Michelin (B Shares) 208,419 -------------- BROADCASTING 3,747 Societe Television Francaise 1* 106,008 -------------- BUILDING PRODUCTS 13,109 Compagnie de Saint-Gobain 739,287 -------------- CHEMICALS: SPECIALTY 7,077 Air Liquide S.A. 1,262,217 -------------- CONSTRUCTION MATERIALS 3,124 Imerys S.A. 222,936 9,635 Lafarge S.A. 875,719 -------------- 1,098,655 -------------- DATA PROCESSING SERVICES 757 Atos Origin S.A.* 45,526 -------------- DEPARTMENT STORES 2,041 Pinault-Printemps- Redoute S.A. 200,640 -------------- ELECTRIC UTILITIES 36,915 Suez S.A. $ 1,007,845 -------------- ELECTRICAL PRODUCTS 192,675 Alstom* 149,112 9,101 Schneider Electric S.A. 654,873 -------------- 803,985 -------------- ELECTRONICS/APPLIANCES 7,911 Thomson 195,044 -------------- ENGINEERING & CONSTRUCTION 12,692 Bouygues S.A. 505,631 3,000 Vinci S.A. 450,472 -------------- 956,103 -------------- FOOD DISTRIBUTORS 6,449 Sodexho Alliance S.A. 216,022 -------------- FOOD RETAIL 18,709 Carrefour S.A. 908,705 2,465 Casino Guichard Perrachon S.A. 182,534 -------------- 1,091,239 -------------- FOOD: MAJOR DIVERSIFIED 8,092 Groupe Danone 757,903 -------------- HOTELS/RESORTS/CRUISELINES 12,526 Accor S.A. 572,179 -------------- INFORMATION TECHNOLOGY SERVICES 6,087 Cap Gemini S.A.* 189,529 -------------- INTEGRATED OIL 29,981 Total S.A. 6,649,550 -------------- INTERNET SOFTWARE/SERVICES 2,289 Business Objects S.A.* 59,277 -------------- LIFE/HEALTH INSURANCE 4,001 CNP Assurances 271,400 -------------- MAJOR BANKS 48,423 BNP Paribas S.A. 3,188,894 19,003 Societe Generale 1,893,451 -------------- 5,082,345 --------------
SEE NOTES TO FINANCIAL STATEMENTS 14
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- MAJOR TELECOMMUNICATIONS 42,058 France Telecom S.A.* $ 1,230,453 -------------- MEDIA CONGLOMERATES 28,604 Vivendi Universal S.A.* 849,310 -------------- MEDICAL SPECIALTIES 1,745 Essilor International S.A. 124,559 -------------- MOTOR VEHICLES 3,921 PSA Peugeot Citroen 232,159 4,036 Renault S.A. 337,855 -------------- 570,014 -------------- MULTI-LINE INSURANCE 80,387 Axa 1,980,546 -------------- OILFIELD SERVICES/EQUIPMENT 270 Technip S.A. 45,745 -------------- OTHER CONSUMER SPECIALTIES 3,632 Societe BIC S.A. 196,175 -------------- OTHER TRANSPORTATION 3,943 Autoroutes du Sud de la France 203,886 -------------- PACKAGED SOFTWARE 2,132 Dassault Systemes S.A. 100,049 -------------- PHARMACEUTICALS: MAJOR 41,631 Sanofi-Aventis 3,684,298 -------------- PUBLISHING: BOOKS/MAGAZINES 4,577 Lagardere S.C.A. 330,808 -------------- REAL ESTATE DEVELOPMENT 2,321 Gecina S.A. 262,339 1,957 Klepierre 188,030 3,166 Unibail 390,543 -------------- 840,912 -------------- REGIONAL BANKS 20,076 Credit Agricole S.A. 519,497 -------------- TELECOMMUNICATION EQUIPMENT 48,348 Alcatel S.A.* 520,007 2,685 Safran S.A. 55,226 -------------- 575,233 -------------- WATER UTILITIES 7,990 Veolia Environnement $ 301,067 -------------- TOTAL FRANCE 34,184,573 -------------- GERMANY++ (5.5%) AIR FREIGHT/COURIERS 24,860 Deutsche Post AG (Registered Shares) 581,730 -------------- AIRLINES 9,924 Deutsche Lufthansa AG (Registered Shares)* 128,039 -------------- APPAREL/FOOTWEAR 1,513 Adidas-Salomon AG 234,370 502 Puma AG 115,468 -------------- 349,838 -------------- AUTO PARTS: O.E.M. 2,689 Continental AG 197,988 -------------- CHEMICALS: MAJOR DIVERSIFIED 28,266 BASF AG 1,828,559 35,117 Bayer AG 1,151,623 3,081 Lanxess* 63,638 -------------- 3,043,820 -------------- CHEMICALS: SPECIALTY 5,258 Linde AG 347,968 -------------- CONSTRUCTION MATERIALS 3,205 HeidelbergCement AG 185,444 -------------- DEPARTMENT STORES 593 KarstadtQuelle AG 5,720 5,916 Metro AG 312,296 -------------- 318,016 -------------- ELECTRIC UTILITIES 28,538 E.ON AG 2,404,016 16,993 RWE AG 1,015,288 -------------- 3,419,304 -------------- ELECTRONIC COMPONENTS 2,245 Epcos AG* 25,625 --------------
SEE NOTES TO FINANCIAL STATEMENTS 15
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- FINANCIAL CONGLOMERATES 8,394 Hypo Real Estate Holding AG* $ 348,375 -------------- HOUSEHOLD/PERSONAL CARE 1,721 Beiersdorf AG 185,915 -------------- INDUSTRIAL CONGLOMERATES 4,653 MAN AG 195,666 32,788 Siemens AG (Registered Shares) 2,402,124 16,120 ThyssenKrupp AG 296,462 -------------- 2,894,252 -------------- INVESTMENT BANKS/BROKERS 9,677 Deutsche Boerse AG 731,426 -------------- MAJOR BANKS 36,991 Bayerische Hypo - und Vereinsbank AG* 875,154 44,366 Commerzbank AG* 973,573 30,657 Deutsche Bank AG (Registered Shares) 2,503,446 -------------- 4,352,173 -------------- MAJOR TELECOMMUNICATIONS 94,181 Deutsche Telekom AG (Registered Shares) 1,759,055 -------------- MEDICAL DISTRIBUTORS 1,657 Celesio AG* 131,223 -------------- MEDICAL/NURSING SERVICES 2,949 Fresenius Medical Care AG 236,615 -------------- MOTOR VEHICLES 18,445 DaimlerChrysler AG (Registered Shares) 723,629 4,810 Volkswagen AG 200,178 -------------- 923,807 -------------- MULTI-LINE INSURANCE 13,116 Allianz AG (Registered Shares) 1,569,153 2,189 Muenchener Rueckver AG (Registered Shares) 240,047 -------------- 1,809,200 -------------- OTHER CONSUMER SERVICES 8,432 TUI AG $ 203,334 -------------- PACKAGED SOFTWARE 8,217 SAP AG 1,291,694 -------------- PHARMACEUTICALS: MAJOR 2,402 Merck KGaA 183,794 7,989 Schering AG 527,040 -------------- 710,834 -------------- PHARMACEUTICALS: OTHER 4,101 Altana AG 256,469 -------------- SEMICONDUCTORS 13,778 Infineon Technologies AG* 114,861 -------------- SPECIALTY STORES 871 Douglas Holding AG 29,541 -------------- TOTAL GERMANY 24,576,546 -------------- GREECE++ (0.3%) CASINO/GAMING 9,500 Greek Organization of Football Prognostics S.A. 249,482 -------------- CONSTRUCTION MATERIALS 3,200 Titan Cement Co. 101,234 -------------- MAJOR BANKS 14,881 National Bank of Greece S.A. 499,648 -------------- REGIONAL BANKS 9,840 Alpha Bank A.E.* 316,836 6,896 EFG Eurobank Ergasias 208,450 -------------- 525,286 -------------- TOTAL GREECE 1,375,650 -------------- HONG KONG++ (2.1%) AIRLINES 65,000 Cathay Pacific Airways Ltd. 124,091 -------------- APPAREL/FOOTWEAR 35,000 Yue Yuen Industrial (Holdings) Ltd. 99,334 --------------
SEE NOTES TO FINANCIAL STATEMENTS 16
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- APPAREL/FOOTWEAR RETAIL 54,500 Esprit Holdings Ltd. $ 408,042 -------------- BROADCASTING 19,000 Television Broadcasts Ltd. 95,636 -------------- COAL 122,000 Yanzhou Coal Mining Co., Ltd. 167,129 -------------- CONSTRUCTION MATERIALS 32,000 Cheung Kong Infrastructure Holdings Ltd. 101,442 -------------- ELECTRIC UTILITIES 108,800 CLP Holdings Ltd. 617,972 144,000 Datang International Power Generation Co., Ltd. 111,411 84,000 Hongkong Electric Holdings Ltd. 384,504 -------------- 1,113,887 -------------- ELECTRONIC PRODUCTION EQUIPMENT 3,000 ASM Pacific Technology Ltd. 12,251 -------------- ENGINEERING & CONSTRUCTION 40,000 Hopewell Holdings Ltd. 97,486 142,675 New World Development Co., Ltd. 153,730 -------------- 251,216 -------------- FINANCIAL CONGLOMERATES 76,000 Wharf (Holdings) Ltd. (The) 254,430 -------------- GAS DISTRIBUTORS 221,483 Hong Kong & China Gas Co., Ltd. 454,037 -------------- HOTELS/RESORTS/CRUISELINES 68,642 Shangri-La Asia Ltd. 104,856 -------------- INDUSTRIAL CONGLOMERATES 126,900 Hutchison Whampoa Ltd. 1,138,296 56,000 Swire Pacific Ltd. (Class A) 468,830 -------------- 1,607,126 -------------- INVESTMENT BANKS/BROKERS 67,000 Hong Kong Exchanges & Clearing Ltd. $ 163,690 -------------- MAJOR BANKS 84,695 Bank of East Asia, Ltd. (The) 248,891 223,500 BOC Hong Kong (Holdings) Ltd. 424,467 46,000 Hang Seng Bank Ltd. 629,890 -------------- 1,303,248 -------------- MAJOR TELECOMMUNICATIONS 222,611 PCCW Ltd. 132,080 -------------- MARINE SHIPPING 213,000 China Shipping Container Lines Company Ltd. 99,467 -------------- MISCELLANEOUS MANUFACTURING 96,500 Johnson Electric Holdings Ltd. 86,488 -------------- OIL REFINING/MARKETING 72,000 Sinopec Zhenhai Refining & Chemical Co., Ltd. 80,469 -------------- OTHER TRANSPORTATION 144,000 Zhejiang Expressway Co., Ltd. 100,344 -------------- PROPERTY - CASUALTY INSURERS 346,000 PICC Property & Casualty Company Ltd.* 88,537 -------------- PUBLISHING: NEWSPAPERS 24,000 SCMP Group Ltd. 11,333 -------------- RAILROADS 84,972 MTR Corp., Ltd. 135,814 -------------- REAL ESTATE DEVELOPMENT 90,000 Cheung Kong (Holdings) Ltd. 854,340 115,000 Hang Lung Properties Ltd. 177,092 45,000 Henderson Land Development Co., Ltd. 209,830
SEE NOTES TO FINANCIAL STATEMENTS 17
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- 41,443 Hysan Development Co., Ltd. $ 86,264 32,500 Kerry Properties Ltd. 71,221 64,196 Sino Land Co., Ltd. 60,505 79,000 Sun Hung Kai Properties Ltd. 758,931 -------------- 2,218,183 -------------- TOOLS/HARDWARE 56,000 Techtronic Industries Co., Ltd. 124,863 -------------- WHOLESALE DISTRIBUTORS 100,000 Li & Fung Ltd. 192,130 -------------- TOTAL HONG KONG 9,530,123 -------------- IRELAND++ (0.6%) CONSTRUCTION MATERIALS 29,692 CRH PLC 736,250 -------------- FINANCIAL CONGLOMERATES 2,000 Irish Life & Permanent PLC 33,348 -------------- INDUSTRIAL CONGLOMERATES 1,450 DCC PLC 32,329 -------------- MAJOR BANKS 48,178 Allied Irish Banks PLC 978,072 56,372 Bank of Ireland 853,103 -------------- 1,831,175 -------------- PHARMACEUTICALS: OTHER 16,100 Elan Corporation PLC* 87,614 -------------- PUBLISHING: NEWSPAPERS 11,500 Independent News & Media PLC 36,391 -------------- WHOLESALE DISTRIBUTORS 11,350 Grafton Group PLC (Units)*+ 128,864 -------------- TOTAL IRELAND 2,885,971 -------------- ITALY++ (2.3%) AEROSPACE & DEFENSE 277,055 Finmeccanica SpA 257,234 -------------- APPAREL/FOOTWEAR 1,582 Benetton Group SpA $ 14,559 -------------- BROADCASTING 13,838 Mediaset SpA 179,887 -------------- COMMERCIAL PRINTING/FORMS 74,587 Seat Pagine Gialle SpA* 28,878 -------------- CONSTRUCTION MATERIALS 1,767 Italcementi SpA 28,756 -------------- CONSUMER SUNDRIES 5,609 Luxottica Group SpA 111,769 -------------- ELECTRIC UTILITIES 65,980 Enel SpA 625,808 -------------- FINANCIAL CONGLOMERATES 2,989 Banca Fideuram SpA 15,587 118,779 Pirelli & C. SpA 134,843 -------------- 150,430 -------------- INTEGRATED OIL 129,271 Eni SpA 3,244,743 -------------- INVESTMENT BANKS/BROKERS 4,683 Mediobanca SpA 77,096 -------------- LIFE/HEALTH INSURANCE 5,636 Alleanza Assicurazioni SpA 66,948 8,121 Assicurazioni Generali SpA 249,787 2,246 Mediolanum SpA 14,595 -------------- 331,330 -------------- MAJOR BANKS 127,353 Banca Intesa SpA 608,929 7,450 Banca Intesa SpA - RNC 32,227 5,524 Banca Monte dei Paschi di Siena SpA 19,384 11,535 Banca Nazionale del Lavoro SpA* 36,343 61,170 SanPaolo IMI SpA 906,008 158,005 UniCredito Italiano SpA 886,044 -------------- 2,488,935 --------------
SEE NOTES TO FINANCIAL STATEMENTS 18
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- MAJOR TELECOMMUNICATIONS 344,805 Telecom Italia SpA $ 1,168,829 223,462 Telecom Italia SpA - RNC 629,546 -------------- 1,798,375 -------------- MOTOR VEHICLES 12,845 Fiat SpA* 84,746 -------------- MULTI-LINE INSURANCE 2,833 Riunione Adriatica di Sicurta SpA 61,685 -------------- OIL & GAS PIPELINES 11,337 Snam Rete Gas SpA 63,765 -------------- OTHER TRANSPORTATION 15,329 Autostrade SpA 404,558 -------------- REGIONAL BANKS 2,130 Banca Popolare di Milano Scarl 20,235 12,764 Banco Popolare di Verona e Novara Scarl 235,145 -------------- 255,380 -------------- RESTAURANTS 7,738 Autogrill SpA* 108,851 -------------- SPECIALTY TELECOMMUNICATIONS 3,531 Tiscali SpA* 10,370 -------------- WIRELESS TELECOMMUNICATIONS 11,022 Telecom Italia Mobile SpA (T.I.M.) 64,315 -------------- TOTAL ITALY 10,391,470 -------------- JAPAN++ (24.2%) ADVERTISING/MARKETING SERVICES 2,650 Asatsu - DK Inc. 82,561 -------------- AGRICULTURAL COMMODITIES/ MILLING 10,000 Nisshin Seifun Group Inc. 104,329 -------------- AIR FREIGHT/COURIERS 56,500 Nippon Express Co., Ltd. $ 274,276 18,035 Yamato Transport Co., Ltd. 238,493 -------------- 512,769 -------------- AIRLINES 59,000 Japan Airlines Corp. 167,609 -------------- APPAREL/FOOTWEAR 11,546 Onward Kashiyama Co., Ltd. 148,369 5,000 Wacoal Corp. 62,733 -------------- 211,102 -------------- APPAREL/FOOTWEAR RETAIL 5,400 Fast Retailing Co., Ltd. 319,633 1,700 Shimamura Co., Ltd. 140,835 2,300 World Co., Ltd. 76,263 -------------- 536,731 -------------- AUTO PARTS: O.E.M. 41,200 Denso Corporation 973,025 15,059 NGK Spark Plug Co., Ltd. 157,547 2,000 Sanden Corp. 9,441 2,900 Stanley Electric Co., Ltd. 47,081 800 Toyoda Gosei Co., Ltd. 14,607 6,550 Toyota Industries Corp. 181,909 -------------- 1,383,610 -------------- AUTOMOTIVE AFTERMARKET 57,000 Bridgestone Corp. 1,094,293 -------------- BEVERAGES: ALCOHOLIC 25,800 Asahi Breweries, Ltd. 328,859 59,051 Kirin Brewery Co., Ltd. 575,331 14,000 Sapporo Holdings, Ltd. 65,403 9,000 Takara Holdings Inc. 57,748 -------------- 1,027,341 -------------- BEVERAGES: NON-ALCOHOLIC 1,100 Coca-Cola West Japan Co., Ltd. 25,248 1,500 ITO EN, Ltd. 73,615 -------------- 98,863 --------------
SEE NOTES TO FINANCIAL STATEMENTS 19
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- BROADCASTING 27 Fuji Television Network, Inc. $ 56,886 7,300 Tokyo Broadcasting System, Inc. 137,319 -------------- 194,205 -------------- BUILDING PRODUCTS 13,462 JS Group Corp. 241,996 25,000 Nippon Sheet Glass Company, Ltd. 102,184 30,500 Toto Ltd. 259,793 -------------- 603,973 -------------- CHEMICALS: AGRICULTURAL 9,500 Nissan Chemical Industries, Ltd. 82,519 -------------- CHEMICALS: MAJOR DIVERSIFIED 76,000 Asahi Kasei Corp. 367,038 18,000 Ishihara Sangyo Kaisha, Ltd. 40,348 107,500 Mitsubishi Chemical Corp. 341,430 -------------- 748,816 -------------- CHEMICALS: SPECIALTY 12,000 Daicel Chemical Industries, Ltd. 64,547 45,588 Dainippon Ink & Chemicals, Inc. 123,933 30,546 Denki Kagaku Kogyo Kabushiki Kaisha 105,455 10,008 JSR Corp. 202,040 17,000 Kaneka Corp. 185,136 23,056 Kuraray Co., Ltd. 213,400 36,599 Mitsubishi Rayon Co., Ltd. 138,185 33,500 Mitsui Chemicals, Inc. 190,076 25,097 Shin-Etsu Chemical Co., Ltd. 927,786 16,000 Showa Denko K.K. 40,672 11,000 Sumitomo Bakelite Co., Ltd. 68,605 84,000 Sumitomo Chemical Co., Ltd. 429,785 33,500 Tosoh Corp. $ 157,348 -------------- 2,846,968 -------------- COMMERCIAL PRINTING/FORMS 28,000 Dai Nippon Printing Co., Ltd. 449,640 28,000 Toppan Printing Co., Ltd. 306,071 -------------- 755,711 -------------- COMPUTER PROCESSING HARDWARE 111,000 Fujitsu Ltd. 612,186 -------------- CONSTRUCTION MATERIALS 13,000 Taiheiyo Cement Corp. 36,415 -------------- CONTAINERS/PACKAGING 12,417 Toyo Seikan Kaisha, Ltd. 228,643 -------------- DEPARTMENT STORES 19,000 Daimaru, Inc. (The) 166,077 6,000 Hankyu Department Stores, Inc. 42,505 12,814 Isetan Co., Ltd. 153,767 26,107 Marui Co., Ltd. 335,548 26,716 Mitsukoshi, Ltd. 125,953 25,040 Takashimaya Co., Ltd. 223,271 -------------- 1,047,121 -------------- ELECTRIC UTILITIES 10,700 Chubu Electric Power Co. 256,408 32,300 Kansai Electric Power Co., Inc. (The) 649,378 6,200 Kyushu Electric Power Co., Inc. 133,213 17,600 Tohoku Electric Power Co., Inc. 339,627 48,200 Tokyo Electric Power Co., Inc. 1,156,313 -------------- 2,534,939 -------------- ELECTRICAL PRODUCTS 14,000 Fujikura Ltd. 60,756 37,500 Furukawa Electric Co., Ltd.* 165,966
SEE NOTES TO FINANCIAL STATEMENTS 20
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- 1,900 Mabuchi Motor Co., Ltd. $ 114,098 12,000 Matsushita Electric Works, Ltd. 101,071 25,560 NGK Insulators, Ltd. 263,015 2,804 Nidec Corp. 328,907 37,000 Sumitomo Electric Industries, Ltd. 386,741 1,000 Ushio Inc. 19,312 -------------- 1,439,866 -------------- ELECTRONIC COMPONENTS 11,000 Alps Electric Co. Ltd. 172,679 17,500 Citizen Watch Co., Ltd. 159,741 2,000 Hirose Electric Co., Ltd. 204,104 6,500 Hoya Corp. 679,384 14,400 Murata Manufacturing Co., Ltd. 716,144 5,000 Taiyo Yuden Co., Ltd. 51,825 7,652 TDK Corp. 535,590 -------------- 2,519,467 -------------- ELECTRONIC EQUIPMENT/ INSTRUMENTS 50,904 Canon, Inc. 2,652,423 24,500 Casio Computer Co., Ltd. 335,782 1,947 Keyence Corp. 430,780 28,030 Konica Minolta Holdings, Inc. 270,495 10,100 Kyocera Corp. 738,145 128,500 Matsushita Electric Industrial Co., Ltd. 1,881,731 116,552 Mitsubishi Electric Corp. 617,415 101,500 NEC Corp. 559,694 37,000 OKi Electric Industry Co., Ltd. 138,344 13,504 Omron Corp. 294,139 41,432 Ricoh Co., Ltd. 661,415 108,000 Sanyo Electric Co. Ltd. 311,541 6,200 Seiko Epson Corp. 215,217 179,026 Toshiba Corp. 733,437 14,000 Yokogawa Electric Corp. 182,604 -------------- 10,023,162 -------------- ELECTRONIC PRODUCTION EQUIPMENT 4,650 Advantest Corp. $ 327,836 11,400 Tokyo Electron Ltd. 588,663 -------------- 916,499 -------------- ELECTRONICS/APPLIANCE STORES 7,200 Yamada Denki Co., Ltd. 346,049 -------------- ELECTRONICS/APPLIANCES 27,000 Fuji Photo Film Co., Ltd. 893,651 19,000 Nikon Corp. 199,871 11,004 Pioneer Corp. 187,835 53,500 Sharp Corp. 836,447 45,296 Sony Corp. 1,669,597 -------------- 3,787,401 -------------- ENGINEERING & CONSTRUCTION 11,546 JGC Corp. 118,391 70,000 Kajima Corp. 266,319 42,571 Obayashi Corp. 249,039 54,000 Shimizu Corporation 256,490 39,000 Taisei Corp. 136,870 -------------- 1,027,109 -------------- FINANCE/RENTAL/LEASING 4,300 Acom Co., Ltd. 276,762 1,300 Aeon Credit Service Co., Ltd. 85,829 2,550 Aiful Corp. 190,431 1,275 Aiful Corp. (Bonus Shares) (WI)* 92,937 8,200 Credit Saison Co., Ltd. 280,476 4,800 Orix Corp. 653,944 5,300 Promise Co., Ltd. 343,206 3,830 Takefuji Corp. 242,297 -------------- 2,165,882 -------------- FINANCIAL CONGLOMERATES 439 Mizuho Financial Group, Inc. 2,064,276 --------------
SEE NOTES TO FINANCIAL STATEMENTS 21
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- FOOD RETAIL 27,603 Aeon Co., Ltd. $ 428,692 4,252 FamilyMart Co., Ltd. 132,071 19,507 Ito-Yokado Co., Ltd. 669,275 3,703 Lawson, Inc. 143,677 23,000 Seven - Eleven Japan Co., Ltd. 647,348 -------------- 2,021,063 -------------- FOOD: MEAT/FISH/DAIRY 13,000 Meiji Dairies Corp. 72,256 13,000 Nippon Meat Packers, Inc. 164,223 7,000 Yakult Honsha Co., Ltd. 138,789 -------------- 375,268 -------------- FOOD: SPECIALTY/CANDY 42,000 Ajinomoto Co., Inc. 504,980 900 House Foods Corp. 12,853 8,500 Kikkoman Corp. 81,953 16,000 Meiji Seika Kaisha Ltd. 76,925 5,150 Nissin Food Products Co., Ltd. 136,714 7,000 Yamazaki Baking Co., Ltd. 62,094 -------------- 875,519 -------------- GAS DISTRIBUTORS 84,000 Osaka Gas Co., Ltd. 264,116 95,000 Tokyo Gas Co., Ltd. 380,604 -------------- 644,720 -------------- HOME BUILDING 7,006 Daito Trust Construction Co., Ltd. 280,530 37,000 Daiwa House Industry Co., Ltd. 415,260 22,572 Sekisui Chemical Co., Ltd. 163,596 42,046 Sekisui House, Ltd. 444,669 -------------- 1,304,055 -------------- HOUSEHOLD/PERSONAL CARE 34,000 Kao Corp. 781,365 23,000 Shiseido Company, Ltd. 292,774 2,700 Uni-Charm Corp. 120,691 -------------- 1,194,830 -------------- INDUSTRIAL CONGLOMERATES 201,000 Hitachi, Ltd. $ 1,180,346 58,000 Kawasaki Heavy Industries, Ltd. 112,285 -------------- 1,292,631 -------------- INDUSTRIAL MACHINERY 18,053 Amada Co., Ltd. 111,936 9,400 Daikin Industries Ltd. 234,650 10,650 Fanuc Ltd. 629,838 63,530 Ishikawajima-Harima Heavy Industries Co., Ltd.* 104,236 201,550 Mitsubishi Heavy Industries, Ltd. 535,782 3,805 SMC Corporation 401,036 1,800 THK Co., Ltd. 33,731 -------------- 2,051,209 -------------- INDUSTRIAL SPECIALTIES 70,500 Asahi Glass Company, Ltd. 781,193 12,400 Nitto Denko Corp. 676,951 -------------- 1,458,144 -------------- INFORMATION TECHNOLOGY SERVICES 5,900 CSK Corp. 225,796 2,700 Itochu Techno-Science Corp. 86,812 40 Net One Systems Co., Ltd. 101,463 1,700 Nomura Research Institute, Ltd. 161,966 104 NTT Data Corp. 320,458 15,800 Softbank Corp. 635,966 3,200 TIS Inc. 115,095 -------------- 1,647,556 -------------- INTERNET SOFTWARE/SERVICES 124 Yahoo Japan Corp. 277,939 124 Yahoo Japan Corp. (Bonus Shares) (WI)* 277,656 -------------- 555,595 --------------
SEE NOTES TO FINANCIAL STATEMENTS 22
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- INVESTMENT BANKS/BROKERS 206,000 Daiwa Securities Group Inc. $ 1,304,035 71,000 Nikko Cordial Corp. 331,909 122,550 Nomura Holdings, Inc. 1,557,287 -------------- 3,193,231 -------------- MAJOR BANKS 76,000 Bank of Yokohama Ltd. (The) 434,460 45,000 Chiba Bank, Ltd. (The) 277,401 44,000 Joyo Bank, Ltd. (The) 220,060 228 Mitsubishi Tokyo Financial Group, Inc. 1,978,895 52,123 Mitsui Trust Holdings, Inc. 517,448 288,000 Resona Holdings, Inc.* 543,863 34,000 Shinsei Bank, Ltd. 184,459 36,000 Shizuoka Bank, Ltd. (The) 335,371 183 Sumitomo Mitsui Financial Group, Inc. 1,182,152 77,081 Sumitomo Trust & Banking Co., Ltd. (The) 482,217 228 UFJ Holdings, Inc.* 1,200,341 -------------- 7,356,667 -------------- MAJOR TELECOMMUNICATIONS 414 Nippon Telegraph & Telephone Corp. (NTT) 1,732,543 -------------- MARINE SHIPPING 3,000 Kamigumi Co. Ltd. 23,457 5,000 Kawasaki Kisen Kaisha, Ltd. 32,630 8,000 Mitsui O.S.K. Lines, Ltd. 50,530 71,015 Nippon Yusen Kabushiki Kaisha 420,032 -------------- 526,649 -------------- MEDICAL SPECIALTIES 9,400 Olympus Corp. 190,520 12,850 Terumo Corp. 382,324 -------------- 572,844 -------------- METAL FABRICATIONS 22,000 Minebea Co., Ltd. $ 87,495 113,000 Mitsubishi Materials Corp. 261,916 67,604 Mitsui Mining & Smelting Co., Ltd. 290,776 44,553 NSK Ltd. 220,143 27,551 NTN Corp. 146,609 -------------- 1,006,939 -------------- MISCELLANEOUS COMMERCIAL SERVICES 700 OBIC Co., Ltd. 126,892 9,485 Secom Co., Ltd. 380,128 2,500 USS Co. Ltd. 197,667 -------------- 704,687 -------------- MISCELLANEOUS MANUFACTURING 23,527 Ebara Corp. 94,686 5,400 Kurita Water Industries Ltd. 84,037 6,500 Takuma Co., Ltd. 52,594 -------------- 231,317 -------------- MOTOR VEHICLES 57,109 Honda Motor Co., Ltd. 2,749,266 170,305 Nissan Motor Co., Ltd. 1,680,738 165,555 Toyota Motor Corp. 6,022,897 2,000 Yamaha Motor Co., Ltd. 35,106 -------------- 10,488,007 -------------- MOVIES/ENTERTAINMENT 1,200 Namco Ltd. 16,076 3,600 Oriental Land Co. Ltd. 226,043 5,550 TOHO Co., Ltd. 87,779 -------------- 329,898 -------------- OFFICE EQUIPMENT/SUPPLIES 5,200 Kokuyo Co., Ltd. 67,234 -------------- OIL & GAS PRODUCTION 11,000 Teikoku Oil Co., Ltd. 78,438 -------------- OIL REFINING/MARKETING 99,000 Nippon Oil Corp. 696,185 12,800 Showa Shell Sekiyu K.K. 128,699
SEE NOTES TO FINANCIAL STATEMENTS 23
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- 8,000 TonenGeneral Sekiyu K.K. $ 85,427 -------------- 910,311 -------------- OTHER CONSUMER SERVICES 3,754 Benesse Corp. 121,803 -------------- OTHER METALS/MINERALS 34,095 Dowa Mining Co., Ltd. 224,291 21,000 Nippon Mining Holdings, Inc. 126,622 64,500 Sumitomo Metal Mining Co., Ltd. 453,360 -------------- 804,273 -------------- OTHER TRANSPORTATION 6,000 Mitsubishi Logistics Corp. 62,195 -------------- PACKAGED SOFTWARE 3,050 Oracle Corp. 133,095 7,200 Trend Micro Inc. 264,450 -------------- 397,545 -------------- PERSONNEL SERVICES 2,100 Meitec Corp. 69,356 -------------- PHARMACEUTICALS: MAJOR 24,905 Sankyo Co., Ltd. 518,732 59,000 Takeda Pharmaceutical Co., Ltd. 2,872,606 -------------- 3,391,338 -------------- PHARMACEUTICALS: OTHER 28,600 Astellas Pharma Inc. 1,038,542 13,806 Chugai Pharmaceutical Co., Ltd. 215,524 16,103 Daiichi Pharmaceutical Co., Ltd. 373,418 16,203 Eisai Co., Ltd. 539,435 32 Kyowa Hakko Kogyo Co., Ltd 237 20,181 Shionogi & Co., Ltd. 280,879 9,959 Taisho Pharmaceutical Co., Ltd. 213,257 -------------- 2,661,292 -------------- PROPERTY - CASUALTY INSURERS 106 Millea Holdings, Inc. $ 1,443,342 151,000 Mitsui Sumitomo Insurance Co., Ltd. 1,373,830 55,000 Sompo Japan Insurance Inc. 533,980 -------------- 3,351,152 -------------- PULP & PAPER 61 Nippon Paper Group, Inc. 262,699 69,000 Oji Paper Co. Ltd. 368,157 -------------- 630,856 -------------- RAILROADS 88 Central Japan Railway Co. 723,910 211 East Japan Railway Co. 1,098,166 26,500 Keihin Electric Express Railway Co., Ltd. 160,687 15,000 Keio Electric Railway Co., Ltd. 84,797 103,550 Kintetsu Corp. 321,838 57,500 Tobu Railway Co., Ltd. 215,433 64,000 Tokyu Corp. 309,996 28 West Japan Railway Co. 103,809 -------------- 3,018,636 -------------- REAL ESTATE DEVELOPMENT 95,000 Mitsubishi Estate Co., Ltd. 1,019,886 82,500 Mitsui Fudosan Co., Ltd. 920,490 31,500 Sumitomo Realty & Development Co., Ltd. 359,339 -------------- 2,299,715 -------------- REAL ESTATE INVESTMENT TRUSTS 23 Japan Real Estate Investments Corp. 189,462 22 Nippon Building Fund Inc. 197,070 -------------- 386,532 -------------- RECREATIONAL PRODUCTS 6,900 Konami Corp. 148,174 6,808 Nintendo Co., Ltd. 776,420
SEE NOTES TO FINANCIAL STATEMENTS 24
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- 6,450 Shimano, Inc. $ 213,863 7,900 Yamaha Corp. 117,051 -------------- 1,255,508 -------------- REGIONAL BANKS 21,000 77 Bank, Ltd. (The) 142,566 34,000 Bank of Fukuoka, Ltd. (The) 206,165 61,000 Hokuhoku Financial Group, Inc. 172,826 -------------- 521,557 -------------- RESTAURANTS 8,807 Skylark Co., Ltd. 146,294 -------------- SEMICONDUCTORS 2,000 NEC Electronics Corp. 90,321 6,605 Rohm Co., Ltd. 622,912 -------------- 713,233 -------------- SPECIALTY STORES 4,300 Shimachu Co., Ltd. 110,916 10,000 UNY Co., Ltd. 116,144 -------------- 227,060 -------------- STEEL 30,800 JFE Holdings, Inc. 853,938 159,000 Kobe Steel Ltd. 287,354 410,108 Nippon Steel Corp. 1,039,318 242,000 Sumitomo Metal Industries, Ltd. 428,826 -------------- 2,609,436 -------------- TELECOMMUNICATION EQUIPMENT 4,000 Uniden Corp. 80,517 -------------- TEXTILES 6,571 Nisshinbo Industries, Inc. 51,418 53,608 Teijin Ltd. 242,781 75,000 Toray Industries, Inc. 334,687 -------------- 628,886 -------------- TOBACCO 59 Japan Tobacco, Inc. 759,194 -------------- TRUCKS/CONSTRUCTION/ FARM MACHINERY 64,500 Komatsu Ltd. $ 455,174 87,000 Kubota Corp. 449,670 -------------- 904,844 -------------- WHOLESALE DISTRIBUTORS 74,051 Itochu Corp. 365,931 73,550 Marubeni Corporation 239,977 67,000 Mitsubishi Corp. 917,115 30,000 Mitsui & Co., Ltd. 285,204 50,000 Sumitomo Corporation 423,026 -------------- 2,231,253 -------------- WIRELESS TELECOMMUNICATIONS 541 NTT DoCoMo, Inc. 835,860 -------------- TOTAL JAPAN 107,928,105 -------------- LUXEMBOURG++ (0.1%) STEEL 25,974 Arcelor 525,447 -------------- MALAYSIA++ (0.8%) AGRICULTURAL COMMODITIES/ MILLING 60,000 IOI Corporation Berhad 144,686 31,400 Kuala Lumpur Kepong Berhad 53,712 -------------- 198,398 -------------- BUILDING PRODUCTS 6,600 O.Y.L. Industries Berhad 61,690 -------------- CABLE/SATELLITE TV 87,700 Astro All Asia Networks PLC* 120,232 -------------- CASINO/GAMING 63,300 Berjaya Sports Toto Berhad 67,050 30,400 Genting Berhad 147,345 53,400 Magnum Corporation Berhad 29,121
SEE NOTES TO FINANCIAL STATEMENTS 25
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- 22,100 Tanjong PLC $ 73,949 -------------- 317,465 -------------- ELECTRIC UTILITIES 51,000 Malakoff Berhad 98,761 74,000 Tenaga Nasional Berhad 206,583 74,666 YTL Corp. Berhad 105,437 -------------- 410,781 -------------- ENGINEERING & CONSTRUCTION 36,000 Gamuda Berhad 44,011 -------------- FINANCIAL CONGLOMERATES 119,000 AMMB Holdings Berhad 78,993 -------------- FOOD: MAJOR DIVERSIFIED 9,000 Nestle (Malaysia) Berhad 57,143 -------------- HOTELS/RESORTS/CRUISELINES 39,800 Resorts World Berhad 100,279 -------------- MAJOR BANKS 144,100 Malayan Banking Berhad 441,332 -------------- MAJOR TELECOMMUNICATIONS 72,000 Telekom Malaysia Berhad 183,238 -------------- MARINE SHIPPING 46,100 Malaysian International Shipping Berhad 216,378 -------------- MOTOR VEHICLES 22,000 Proton Holdings Berhad 45,464 -------------- OIL & GAS PIPELINES 12,000 Petronas Gas Berhad 22,307 -------------- OTHER TRANSPORTATION 139,000 Plus Expressways Berhad 109,514 -------------- REAL ESTATE DEVELOPMENT 64,500 SP Setia Berhad 68,010 -------------- REGIONAL BANKS 114,000 Commerce Asset-Holdings Berhad 134,532 60,600 Hong Leong Bank Berhad 81,441 84,000 Public Bank Berhad 152,696 112,000 RHB Capital Berhad 66,428 -------------- 435,097 -------------- TOBACCO 13,400 British American Tobacco Berhad $ 151,871 -------------- WHOLESALE DISTRIBUTORS 116,700 Sime Darby Berhad 181,391 -------------- WIRELESS TELECOMMUNICATIONS 61,000 Maxis Communications Berhad 155,085 -------------- TOTAL MALAYSIA 3,398,679 -------------- NETHERLANDS++ (4.7%) AEROSPACE & DEFENSE 12,252 European Aeronautic Defense and Space Co.* 348,549 -------------- AIR FREIGHT/COURIERS 31,573 TPG NV 858,237 -------------- BEVERAGES: ALCOHOLIC 31,110 Heineken NV 987,989 -------------- CHEMICALS: SPECIALTY 4,082 DSM NV 274,025 -------------- ELECTRONIC EQUIPMENT/ INSTRUMENTS 4,702 Oce NV 70,004 -------------- ELECTRONIC PRODUCTION EQUIPMENT 24,266 ASML Holding NV* 350,526 -------------- FINANCIAL CONGLOMERATES 93,722 ING Groep NV (Share Certificates) 2,568,218 -------------- FOOD: MAJOR DIVERSIFIED 30,276 Unilever NV (Share Certificates) 1,949,956 -------------- INDUSTRIAL CONGLOMERATES 41,496 Koninklijke (Royal) Philips Electronics NV 1,034,463 -------------- INDUSTRIAL SPECIALTIES 14,608 Akzo Nobel NV 599,459 --------------
SEE NOTES TO FINANCIAL STATEMENTS 26
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- INTEGRATED OIL 111,681 Royal Dutch Petroleum Co. $ 6,509,790 -------------- INVESTMENT BANKS/BROKERS 5,529 Euronext NV 182,006 -------------- LIFE/HEALTH INSURANCE 77,116 Aegon NV 966,858 -------------- MAJOR BANKS 87,002 ABN AMRO Holding NV 2,128,128 -------------- MAJOR TELECOMMUNICATIONS 65,694 Koninklijke (Royal) KPN NV 547,995 -------------- PERSONNEL SERVICES 10,370 Vedior NV 159,378 -------------- PUBLISHING: BOOKS/ MAGAZINES 19,235 Reed Elsevier NV 276,694 7,245 VNU NV 203,799 10,142 Wolters Kluwer NV (Share Certificates) 180,434 -------------- 660,927 -------------- REAL ESTATE DEVELOPMENT 3,292 Rodamco Europe NV 248,532 -------------- REAL ESTATE INVESTMENT TRUSTS 4,011 Corio NV 215,202 1,634 Wereldhave NV 160,845 -------------- 376,047 -------------- SEMICONDUCTORS 12,758 STMicroelectronics NV 180,850 -------------- WHOLESALE DISTRIBUTORS 3,478 Hagemeyer NV* 7,860 -------------- TOTAL NETHERLANDS 21,009,797 -------------- NEW ZEALAND++ (0.0%) FOREST PRODUCTS 47,022 Carter Holt Harvey Ltd. 63,886 -------------- MAJOR TELECOMMUNICATIONS 23,290 Telecom Corporation of New Zealand Ltd. $ 103,174 -------------- TOTAL NEW ZEALAND 167,060 -------------- NORWAY++ (0.5%) CHEMICALS: AGRICULTURAL 13,167 Yara International ASA* 175,267 -------------- FINANCIAL CONGLOMERATES 14,953 DnB NOR ASA 142,443 -------------- FOOD: SPECIALTY/CANDY 11,900 Orkla ASA 397,711 -------------- INDUSTRIAL CONGLOMERATES 8,467 Norsk Hydro ASA 665,998 -------------- INTEGRATED OIL 26,000 Statoil ASA 457,105 -------------- MAJOR TELECOMMUNICATIONS 8,200 Telenor ASA 68,387 -------------- MISCELLANEOUS MANUFACTURING 6,715 Tomra Systems ASA 24,583 -------------- PULP & PAPER 6,700 Norske Skogindustrier ASA 116,732 -------------- TELECOMMUNICATION EQUIPMENT 1,300 Tandberg ASA 13,244 -------------- TOTAL NORWAY 2,061,470 -------------- PORTUGAL++ (0.2%) CABLE/SATELLITE TV 1,244 PT Multimedia Servicos de Telecomunicacoes e Multimedia SGPS S.A. 29,456 -------------- ELECTRIC UTILITIES 43,649 Energias de Portugal, S.A. 117,986 -------------- MAJOR TELECOMMUNICATIONS 29,820 Portugal Telecom, SGPS, S.A. (Registered Shares) 327,173 --------------
SEE NOTES TO FINANCIAL STATEMENTS 27
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- OTHER TRANSPORTATION 18,426 Brisa-Auto Estradas de Portugal, S.A. $ 146,989 -------------- REGIONAL BANKS 102,901 Banco Comercial Portugues, S.A. 276,083 -------------- TOTAL PORTUGAL 897,687 -------------- SINGAPORE++ (1.7%) AEROSPACE & DEFENSE 139,334 Singapore Technologies Engineering Ltd. 211,209 -------------- AIR FREIGHT/COURIERS 146,000 Singapore Post Ltd. 76,695 -------------- AIRLINES 54,000 Singapore Airlines Ltd. 369,512 -------------- COMPUTER PERIPHERALS 6,043 Creative Technology, Ltd. 52,113 -------------- ELECTRONIC COMPONENTS 23,696 Venture Corp., Ltd. 201,840 -------------- ELECTRONIC PRODUCTION EQUIPMENT 109,000 St Assembly Test Services Ltd. 66,255 -------------- FINANCIAL CONGLOMERATES 58,000 Keppel Corp., Ltd. 379,238 -------------- HOSPITAL/NURSING MANAGEMENT 69,000 Parkway Holdings Ltd. 70,123 -------------- HOTELS/RESORTS/CRUISELINES 8,962 Overseas Union Enterprise Ltd. 46,599 -------------- INDUSTRIAL CONGLOMERATES 19,000 Fraser & Neave Ltd. 180,086 -------------- INVESTMENT BANKS/BROKERS 85,479 Singapore Exchange Ltd. 97,156 -------------- MAJOR BANKS 116,393 DBS Group Holdings Ltd. $ 1,017,197 111,039 Oversea - Chinese Banking Corp., Ltd. 910,585 -------------- 1,927,782 -------------- MAJOR TELECOMMUNICATIONS 710,633 Singapore Telecommunications 1,111,440 -------------- MARINE SHIPPING 52,000 Neptune Orient Lines Ltd. 108,270 -------------- OTHER TRANSPORTATION 189,068 ComfortDelgro Corp. Ltd. 201,418 -------------- PUBLISHING: NEWSPAPERS 165,329 Singapore Press Holdings Ltd. 440,179 -------------- REAL ESTATE DEVELOPMENT 110,000 Capitaland Ltd. 171,465 62,455 City Developments Ltd. 263,531 40,000 Keppel Land Ltd. 61,658 17,000 Singapore Land Ltd. 61,383 43,925 United Overseas Land, Ltd. 59,598 -------------- 617,635 -------------- REAL ESTATE INVESTMENT TRUSTS 83,000 Ascendas Real Estate Investment Trust 100,396 71,700 Capitamall Trust 95,487 -------------- 195,883 -------------- REGIONAL BANKS 123,489 United Overseas Bank, Ltd. 1,079,814 -------------- SEMICONDUCTORS 110,000 Chartered Semiconductor Manufacturing Ltd.* 64,302 -------------- SPECIALTY STORES 12,000 Cycle & Carriage Ltd. 89,654 --------------
SEE NOTES TO FINANCIAL STATEMENTS 28
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- TRUCKS/CONSTRUCTION/ FARM MACHINERY 97,353 SembCorp Industries Ltd. $ 117,313 62,000 SembCorp Marine Ltd. 74,022 -------------- 191,335 -------------- TOTAL SINGAPORE 7,778,538 -------------- SPAIN++ (3.7%) APPAREL/FOOTWEAR RETAIL 8,857 Industria de Diseno Textil, S.A. 262,639 -------------- CABLE/SATELLITE TV 2,320 Antena 3 Television, S.A. 46,429 -------------- ELECTRIC UTILITIES 40,068 Endesa S.A. 874,957 32,852 Iberdrola S.A. 856,124 8,476 Union Fenosa, S.A. 254,214 -------------- 1,985,295 -------------- ENGINEERING & CONSTRUCTION 1,325 Acciona S.A. 113,986 11,567 ACS Actividades de Construccion y Servicios S.A. 281,973 9,046 Cintra Concesiones de Infraestructuras de Transporte S.A. 96,812 1,456 Fomento de Construcciones y Contratas S.A. 78,653 2,955 Grupo Ferrovial, S.A. 168,375 -------------- 739,799 -------------- GAS DISTRIBUTORS 72,107 Gas Natural SDG, S.A. 2,055,101 -------------- INFORMATION TECHNOLOGY SERVICES 2,821 Indra Sistemas S.A. 48,791 -------------- INTEGRATED OIL 51,430 Repsol YPF, S.A. 1,306,413 -------------- MAJOR BANKS 133,951 Banco Bilbao Vizcaya Argentaria, S.A. $ 2,073,769 187,614 Banco Santander Central Hispano, S.A. 2,189,343 -------------- 4,263,112 -------------- MAJOR TELECOMMUNICATIONS 226,335 Telefonica S.A. 3,846,549 -------------- MISCELLANEOUS COMMERCIAL SERVICES 33,396 Amadeus Global Travel Distribution S.A. (A Shares) 311,688 -------------- OTHER TRANSPORTATION 17,721 Abertis Infraestructuras, S.A. 389,444 -------------- REAL ESTATE DEVELOPMENT 3,276 Sacyr Vallehermoso S.A. 55,111 -------------- REGIONAL BANKS 7,436 Banco Popular Espanol S.A. 463,043 -------------- STEEL 10,545 Acerinox S.A. 157,014 -------------- TOBACCO 13,717 Altadis, S.A. 581,788 -------------- WATER UTILITIES 9,345 Sociedad General de Aguas de Barcelona, S.A. 190,877 -------------- TOTAL SPAIN 16,703,093 -------------- SWEDEN++ (2.2%) ADVERTISING/MARKETING SERVICES 4,900 Eniro AB 55,710 -------------- APPAREL/FOOTWEAR RETAIL 14,600 Hennes & Mauritz AB (B Shares) 503,868 --------------
SEE NOTES TO FINANCIAL STATEMENTS 29
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- BROADCASTING 1,500 Modern Times Group MTG AB (B Shares)* $ 46,238 -------------- ELECTRONICS/APPLIANCES 9,400 Electrolux AB (Series B) 190,005 -------------- ENGINEERING & CONSTRUCTION 17,580 Skanska AB (B Shares) 211,603 -------------- HOUSEHOLD/PERSONAL CARE 12,086 Svenska Cellulosa AB (B Shares) 420,742 -------------- INDUSTRIAL MACHINERY 950 Alfa Laval AB 13,296 15,100 Assa Abloy AB (B Shares) 195,453 5,520 Atlas Copco AB (A Shares) 250,947 3,669 Atlas Copco AB (B Shares) 152,274 9,309 Sandvik AB 364,828 -------------- 976,798 -------------- INFORMATION TECHNOLOGY SERVICES 15,675 WM-Data AB (B Shares) 39,769 -------------- LIFE/HEALTH INSURANCE 19,662 Skandia Forsakrings AB 92,433 -------------- MAJOR BANKS 25,500 Skandinaviska Enskilda Banken AB 450,028 41,500 Svenska Handelsbanken AB (A Shares) 933,321 -------------- 1,383,349 -------------- MAJOR TELECOMMUNICATIONS 2,485 Tele2 AB (B Shares)* 78,728 63,548 TeliaSonera AB 332,462 -------------- 411,190 -------------- MEDICAL SPECIALTIES 7,600 Getinge AB (B Shares) 109,047 -------------- METAL FABRICATIONS 3,127 SKF AB (B Shares)* 131,831 -------------- MISCELLANEOUS COMMERCIAL SERVICES 43,200 Securitas AB (B Shares) $ 693,906 -------------- PULP & PAPER 5,550 Holmen AB (B Shares) 147,726 -------------- REGIONAL BANKS 148,484 Nordea Bank AB 1,410,048 -------------- STEEL 1,600 SSAB Svenskt Stal AB (Series A) 36,877 -------------- TELECOMMUNICATION EQUIPMENT 566,552 Telefonaktiebolaget LM Ericsson (B Shares) 1,680,123 -------------- TOBACCO 25,600 Swedish Match AB 302,113 -------------- TRUCKS/CONSTRUCTION/ FARM MACHINERY 4,600 Scania AB (B Shares) 178,331 4,757 Volvo AB (A Shares) 185,750 9,930 Volvo AB (B Shares) 402,826 -------------- 766,907 -------------- TOTAL SWEDEN 9,610,283 -------------- SWITZERLAND++ (5.7%) BIOTECHNOLOGY 490 Serono SA (B Shares) 311,990 -------------- BUILDING PRODUCTS 185 Geberit AG 123,996 391 Schindler Holding AG 142,875 -------------- 266,871 -------------- CHEMICALS: AGRICULTURAL 6,507 Syngenta AG* 672,270 -------------- CHEMICALS: SPECIALTY 3,518 Ciba Specialty Chemicals AG (Registered Shares) 219,979 11,799 Clariant AG (Registered Shares)* 184,540
SEE NOTES TO FINANCIAL STATEMENTS 30
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- 1,910 Lonza Group AG (Registered Shares) $ 114,853 -------------- 519,372 -------------- COMPUTER PERIPHERALS 1,251 Logitech International S.A. (Registered Shares)* 71,845 -------------- CONSTRUCTION MATERIALS 8,985 Holcim Ltd. (Registered Shares) 545,473 -------------- ELECTRONIC EQUIPMENT/ INSTRUMENTS 329 Kudelski S.A. - Bearer* 10,809 -------------- FINANCIAL CONGLOMERATES 49,540 UBS AG (Registered Shares) 3,967,187 -------------- FOOD: MAJOR DIVERSIFIED 19,725 Nestle S.A. (Registered Shares) 5,173,530 -------------- HOUSEHOLD/PERSONAL CARE 399 Givaudan S.A. (Registered Shares) 250,761 -------------- INDUSTRIAL CONGLOMERATES 78,670 ABB Ltd.* 487,956 -------------- MAJOR BANKS 35,965 Credit Suisse Group 1,512,116 -------------- MAJOR TELECOMMUNICATIONS 847 Swisscom AG (Registered Shares) 291,946 -------------- MEDICAL SPECIALTIES 1,220 Nobel Biocare Holding AG 260,637 550 Straumann AG (Registered Shares) 118,566 2,590 Synthes, Inc. 293,355 -------------- 672,558 -------------- MISCELLANEOUS COMMERCIAL SERVICES 281 SGS S.A. 189,861 -------------- MULTI-LINE INSURANCE 2,415 Zurich Financial Services AG* $ 407,421 -------------- OTHER CONSUMER SPECIALTIES 17,123 Compagnie Financiere Richemont AG (Series A) (Units)+ 509,517 1,099 Swatch Group AG (B Shares) 140,534 2,258 Swatch Group AG (Registered Shares) 59,171 -------------- 709,222 -------------- PERSONNEL SERVICES 3,741 Adecco S.A. (Registered Shares) 180,524 -------------- PHARMACEUTICALS: MAJOR 103,068 Novartis AG (Registered Shares) 5,009,559 31,380 Roche Holding AG 3,791,740 -------------- 8,801,299 -------------- PROPERTY - CASUALTY INSURERS 3,341 Swiss Re (Registered Shares) 221,266 -------------- SPECIALTY STORES 82 Valora Holding AG 17,850 -------------- TOTAL SWITZERLAND 25,282,127 -------------- THAILAND++ (1.1%) AGRICULTURAL COMMODITIES/ MILLING 561,072 Charoen Pokphand Foods PCL (Alien Shares) 61,994 -------------- BROADCASTING 225,000 BEC World PCL (Alien Shares) 78,687 -------------- CONSTRUCTION MATERIALS 25,100 Siam City Cement PCL (Alien Shares) 176,832 42,694 Siam Cement PCL (The)* 244,892
SEE NOTES TO FINANCIAL STATEMENTS 31
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- 77,200 Siam Cement PCL (The ) (Alien Shares) $ 466,328 -------------- 888,052 -------------- ELECTRIC UTILITIES 43,076 Electricity Generating PCL (Alien Shares) 85,729 -------------- ELECTRONIC COMPONENTS 79,600 Delta Electronics PCL (Alien Shares) 35,705 48,280 Hana Microelectronics PCL (Alien Shares) 23,859 -------------- 59,564 -------------- FINANCE/RENTAL/LEASING 160,800 National Finance PCL (Alien Shares) 53,790 96,500 TISCO Finance PCL (Alien Shares) 57,603 -------------- 111,393 -------------- HOME BUILDING 438,533 Land & Houses PCL* 78,665 327,808 Land & Houses PCL (Alien Shares) 61,297 -------------- 139,962 -------------- MAJOR BANKS 142,500 Kasikornbank PCL* 194,095 213,422 Kasikornbank PCL (Alien Shares) 301,725 -------------- 495,820 -------------- OIL & GAS PRODUCTION 25,839 PTT Exploration & Production PCL (Alien Shares) 227,876 -------------- OIL REFINING/MARKETING 186,600 PTT PCL (Alien Shares) 945,768 -------------- REGIONAL BANKS 88,500 Bangkok Bank PCL* 222,752 170,200 Bangkok Bank PCL (Alien Shares) 462,970 126,200 Siam Commercial Bank PCL (Alien Shares) $ 151,114 -------------- 836,836 -------------- STEEL 1,060,000 Sahaviriya Steel Industries PCL (Alien Shares) 55,337 -------------- TELECOMMUNICATION EQUIPMENT 290,100 Shin Corp. PCL (Alien Shares) 275,691 -------------- WIRELESS TELECOMMUNICATIONS 223,800 Advanced Info Service PCL (Alien Shares) 538,799 -------------- TOTAL THAILAND 4,801,508 -------------- UNITED KINGDOM++ (21.5%) ADVERTISING/MARKETING SERVICES 34,438 Aegis Group PLC 63,344 30,676 WPP Group PLC 333,693 19,898 Yell Group PLC 152,622 -------------- 549,659 -------------- AEROSPACE & DEFENSE 140,514 BAE Systems PLC 685,789 4,652 Cobham PLC 114,938 21,756 Meggitt Holdings, PLC 107,057 81,019 Rolls-Royce Group PLC* 367,548 4,743,200 Rolls-Royce Group PLC (Class B)* 9,268 -------------- 1,284,600 -------------- AIR FREIGHT/COURIERS 19,337 Exel PLC 304,696 -------------- AIRLINES 28,648 British Airways PLC* 130,679 -------------- AUTO PARTS: O.E.M. 20,979 GKN PLC 92,438 -------------- BEVERAGES: ALCOHOLIC 166,956 Diageo PLC 2,470,518 --------------
SEE NOTES TO FINANCIAL STATEMENTS 32
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- BROADCASTING 120,216 ITV PLC $ 278,180 -------------- CABLE/SATELLITE TV 34,821 British Sky Broadcasting Group PLC 360,223 -------------- CASINO/GAMING 106,962 Hilton Group PLC 558,650 27,402 William Hill PLC 282,013 -------------- 840,663 -------------- CATALOG/SPECIALTY DISTRIBUTION 29,150 GUS PLC 464,357 -------------- CHEMICALS: MAJOR DIVERSIFIED 64,278 Imperial Chemical Industries PLC 310,098 14,671 Johnson Matthey PLC 256,700 -------------- 566,798 -------------- CHEMICALS: SPECIALTY 28,903 BOC Group PLC 535,339 -------------- COMMERCIAL PRINTING/FORMS 35,528 De La Rue PLC 250,920 -------------- CONSTRUCTION MATERIALS 24,228 BPB PLC 210,834 40,001 Hanson PLC 369,264 -------------- 580,098 -------------- CONTAINERS/PACKAGING 26,861 Rexam PLC 236,057 -------------- DEPARTMENT STORES 51,013 Marks & Spencer Group PLC 329,146 8,016 Next PLC 227,018 -------------- 556,164 -------------- DRUGSTORE CHAINS 30,080 Boots Group PLC 345,610 -------------- ELECTRIC UTILITIES 173,055 National Grid Transco PLC 1,702,059 41,522 Scottish & Southern Energy PLC $ 744,795 97,765 Scottish Power PLC 790,688 -------------- 3,237,542 -------------- ELECTRONIC EQUIPMENT/ INSTRUMENTS 59,525 Invensys PLC* 14,615 -------------- ELECTRONICS/APPLIANCE STORES 58,907 Dixons Group PLC 160,351 7,934 Kesa Electricals PLC 40,276 -------------- 200,627 -------------- ENGINEERING & CONSTRUCTION 10,546 AMEC PLC 65,217 22,775 Balfour Beatty PLC 132,700 -------------- 197,917 -------------- FINANCIAL CONGLOMERATES 226,968 Lloyds TSB Group PLC 1,948,241 -------------- FINANCIAL PUBLISHING/SERVICES 46,445 Reuters Group PLC 341,862 -------------- FOOD RETAIL 53,416 Sainsbury (J) PLC 288,268 303,225 Tesco PLC 1,788,674 -------------- 2,076,942 -------------- FOOD: MAJOR DIVERSIFIED 147,629 Unilever PLC 1,404,476 -------------- FOOD: SPECIALTY/CANDY 100,114 Cadbury Schweppes PLC 1,006,185 35,138 Tate & Lyle PLC 312,013 -------------- 1,318,198 -------------- GAS DISTRIBUTORS 102,369 Centrica PLC 434,051 -------------- HOME BUILDING 7,671 Barratt Developments PLC 87,249 3,439 Bellway PLC 50,249 3,603 Berkeley Group Holdings PLC (The) 53,024 8,634 Persimmon PLC 111,702
SEE NOTES TO FINANCIAL STATEMENTS 33
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- 18,763 Taylor Woodrow PLC $ 102,844 12,544 Wimpey (George), PLC 93,642 -------------- 498,710 -------------- HOME IMPROVEMENT CHAINS 35,611 Kingfisher PLC 167,763 -------------- HOTELS/RESORTS/CRUISELINES 11,492 Carnival PLC 592,964 42,644 InterContinental Hotels Group PLC 506,468 -------------- 1,099,432 -------------- HOUSEHOLD/PERSONAL CARE 51,252 Reckitt Benckiser PLC 1,663,281 -------------- INDUSTRIAL CONGLOMERATES 23,810 Smiths Group PLC 390,216 40,460 Tomkins PLC 190,156 -------------- 580,372 -------------- INDUSTRIAL MACHINERY 8,278 Fki PLC 14,739 -------------- INDUSTRIAL SPECIALTIES 76,673 Pilkington PLC 158,571 -------------- INFORMATION TECHNOLOGY SERVICES 38,188 LogicaCMG PLC 119,742 25,500 Misys PLC 99,087 -------------- 218,829 -------------- INTEGRATED OIL 170,276 BG Group PLC 1,315,593 1,090,238 BP PLC 11,100,141 462,609 Shell Transport & Trading Co. PLC 4,140,904 -------------- 16,556,638 -------------- LIFE/HEALTH INSURANCE 78,742 Friends Provident PLC 241,889 68,087 Prudential PLC 613,718 -------------- 855,607 -------------- MAJOR BANKS 265,515 Barclays PLC 2,733,422 132,897 HBOS PLC $ 1,963,144 533,902 HSBC Holdings PLC 8,530,274 118,318 Royal Bank of Scotland Group PLC 3,568,111 -------------- 16,794,951 -------------- MAJOR TELECOMMUNICATIONS 269,141 BT Group PLC 1,027,957 60,818 Cable & Wireless PLC 139,387 -------------- 1,167,344 -------------- MARINE SHIPPING 14,210 Associated British Ports Holdings PLC 125,202 43,671 Peninsular & Oriental Steam Navigation Co. (The) 224,034 -------------- 349,236 -------------- MEDICAL SPECIALTIES 29,884 Smith & Nephew PLC 307,508 -------------- MISCELLANEOUS COMMERCIAL SERVICES 24,128 BBA Group PLC 128,020 64,147 Brambles Industries PLC 357,691 5,488 Davis Service Group PLC (The) 45,044 29,284 Group 4 Securicor PLC* 73,616 170,364 Hays PLC 425,052 193,028 Rentokil Initial PLC 578,967 48,638 Serco Group PLC 221,974 -------------- 1,830,364 -------------- MISCELLANEOUS MANUFACTURING 18,159 IMI PLC 138,194 -------------- MOTOR VEHICLES 2,453 TI Automotive Ltd.* 0 -------------- MOVIES/ENTERTAINMENT 25,828 EMI Group PLC 117,475 39,247 Rank Group PLC 194,670 -------------- 312,145 --------------
SEE NOTES TO FINANCIAL STATEMENTS 34
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- MULTI-LINE INSURANCE 102,866 Aviva PLC $ 1,160,506 251,633 Legal & General Group PLC 502,726 104,161 Royal & Sun Alliance Insurance Group PLC 150,618 -------------- 1,813,850 -------------- OTHER METALS/MINERALS 77,328 Anglo American PLC 1,722,480 134,385 BHP Billiton PLC 1,637,148 58,309 Rio Tinto PLC 1,757,673 -------------- 5,117,301 -------------- OTHER TRANSPORTATION 7,128 Arriva PLC 68,915 54,380 BAA PLC 602,197 18,131 FirstGroup PLC 110,379 27,544 Stagecoach Group PLC 54,433 -------------- 835,924 -------------- PACKAGED SOFTWARE 57,936 Sage Group (The) PLC 216,802 -------------- PERSONNEL SERVICES 70,900 Capita Group PLC 509,856 -------------- PHARMACEUTICALS: MAJOR 72,697 AstraZeneca PLC 3,186,098 255,712 GlaxoSmithKline PLC 6,433,342 -------------- 9,619,440 -------------- PUBLISHING: BOOKS/ MAGAZINES 8,195 EMAP PLC 124,655 25,056 Pearson PLC 304,434 39,546 Reed Elsevier PLC 386,567 -------------- 815,656 -------------- PUBLISHING: NEWSPAPERS 9,804 Daily Mail and General Trust 125,009 10,787 United Business Media PLC 102,276 -------------- 227,285 -------------- PULP & PAPER 20,993 Bunzl PLC $ 204,772 -------------- RAILROADS 6,822 National Express Group PLC 109,703 -------------- REAL ESTATE DEVELOPMENT 36,732 British Land Company PLC 574,730 20,142 Hammerson PLC 327,835 32,872 Land Securities Group PLC 836,552 17,759 Liberty International PLC 320,366 28,465 Slough Estates PLC 261,087 -------------- 2,320,570 -------------- RESTAURANTS 138,618 Compass Group PLC 619,864 23,616 Enterprise Inns PLC 328,705 35,301 Mitchells & Butlers PLC 201,981 16,896 Punch Taverns PLC 204,181 20,109 Whitbread PLC 326,797 -------------- 1,681,528 -------------- SEMICONDUCTORS 45,515 ARM Holdings PLC 83,664 -------------- SPECIALTY STORES 9,191 MFI Furniture Group PLC 17,854 47,369 Signet Group PLC 91,668 -------------- 109,522 -------------- STEEL 201,843 Corus Group PLC* 168,237 -------------- TOBACCO 72,440 British American Tobacco PLC 1,355,204 30,600 Imperial Tobacco Group PLC 875,088 -------------- 2,230,292 -------------- WATER UTILITIES 28,442 Kelda Group PLC 343,177 24,794 Severn Trent PLC 459,430 -------------- 802,607 --------------
SEE NOTES TO FINANCIAL STATEMENTS 35
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- WHOLESALE DISTRIBUTORS 24,166 Electrocomponents PLC $ 106,226 25,263 Wolseley PLC 507,855 -------------- 614,081 -------------- WIRELESS TELECOMMUNICATIONS 1,792,156 Vodafone Group PLC 4,675,616 -------------- TOTAL UNITED KINGDOM 95,891,860 -------------- TOTAL COMMON STOCKS (COST $354,880,642) 418,229,216 -------------- PREFERRED STOCKS (1.2%) BRAZIL (1.1%) AEROSPACE & DEFENSE 22,844 Empresa Brasileira de Aeronautica S.A. 163,607 -------------- BEVERAGES: ALCOHOLIC 1,123,375 Companhia de Bebidas das Americas 307,553 -------------- CONTAINERS/PACKAGING 41,000 Klabin SA 62,135 -------------- ELECTRIC UTILITIES 7,544,007 Centrais Electricas Brasileiras S.A. (Class B) 98,656 6,648,000 Companhia Energetica de Minas Gerais 186,478 -------------- 285,134 -------------- FOOD RETAIL 1,000 Companhia Brasileira de Distribuicao Grupo Pao de Acucar (Sponsored ADR) 20,100 -------------- FOOD: MEAT/FISH/DAIRY 33,000 Sadia S.A. 52,753 -------------- INTEGRATED OIL 37,000 Petroleo Brasileiro S.A. 1,360,095 -------------- MAJOR TELECOMMUNICATIONS 15,878,000 Brasil Telecom Participacoes S.A. 102,722 -------------- OTHER METALS/MINERALS 37,552 Companhia Vale do Rio Doce (Class A) $ 879,643 -------------- PULP & PAPER 29,976 Aracruz Celulose S.A. (B Shares) 92,517 5,535 Votorantim Celulose e Papel S.A. 60,776 -------------- 153,293 -------------- REGIONAL BANKS 12,000 Banco Bradesco S.A. 369,271 2,867 Banco Itau Holding Financeira SA 492,345 -------------- 861,616 -------------- SPECIALTY TELECOMMUNICATIONS 8,278,844 Embratel Participacoes S.A.* 13,660 19,113 Tele Norte Leste Participacoes S.A. 282,091 -------------- 295,751 -------------- STEEL 111,000 Caemi Mineracao e Metalurgia S.A. 85,646 971,000 Companhia Siderurgica de Tubarao 48,219 15,000 Gerdau S.A. 147,492 7,000 Usinas Siderurgicas de Minas Gerais S.A. (Class A) 140,679 -------------- 422,036 -------------- WIRELESS TELECOMMUNICATIONS 16,270,680 Tele Centro Oeste Celular Participacoes S.A. 57,235 28,556,000 Telesp Celular Participacoes S.A.* 60,903 -------------- 118,138 -------------- TOTAL BRAZIL 5,084,576 --------------
SEE NOTES TO FINANCIAL STATEMENTS 36
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------- GERMANY++(0.1%) BROADCASTING 1,963 ProSiebenSat.1 Media AG $ 33,698 -------------- HOUSEHOLD/PERSONAL CARE 1,974 Henkel KGaA - Vorzug 170,301 -------------- MOTOR VEHICLES 150 Porsche AG 97,028 2,455 Volkswagen AG 77,238 -------------- 174,266 -------------- TOTAL GERMANY 378,265 -------------- TOTAL PREFERRED STOCKS (COST $3,992,359) 5,462,841 -------------- CONVERTIBLE PREFERRED STOCKS (0.0%) 59,939 Siam Commercial Bank PCL (Alien Shares) (COST $62,143) 71,392 -------------- RIGHTS (0.0%) AUSTRIA (0.0%) REAL ESTATE DEVELOPMENT 32,634 Immofinanz Immobilien Anlagan AG* 2,237 -------------- BRAZIL (0.0%) SPECIALTY TELECOMMUNICATIONS 197 Tele Norte Leste Participacoes S.A.* 140 -------------- SWEDEN (0.0%) STEEL 1,600 SSAB Svenskt Stal* 0 -------------- TOTAL RIGHTS (COST $0) 2,377 --------------
PRINCIPAL AMOUNT IN THOUSANDS VALUE - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENT (3.1%) REPURCHASE AGREEMENT $ 13,852 Joint repurchase agreement account 2.95% due 05/02/05 (dated 04/29/05; proceeds $13,855,405) (a) (COST $13,852,000) $ 13,852,000 -------------- TOTAL INVESTMENTS (COST $372,787,144) (b) (c) 98.1% 437,617,826 OTHER ASSETS IN EXCESS OF LIABILITIES 1.9 8,663,603 ----- -------------- NET ASSETS 100.0% $ 446,281,429 ===== ==============
- ---------- ADR AMERICAN DEPOSITARY RECEIPT. GDR GLOBAL DEPOSITARY RECEIPT. * NON-INCOME PRODUCING SECURITY. ** COMPRISED OF SECURITIES IN SEPARATE ENTITIES THAT ARE TRADED AS A SINGLE STAPLED SECURITY. WI SECURITY PURCHASED ON A WHEN-ISSUED BASIS. + CONSISTS OF ONE OR MORE CLASS OF SECURITIES TRADED TOGETHER AS A UNIT; STOCKS WITH ATTACHED WARRANTS. ++ SECURITIES WITH TOTAL MARKET VALUE EQUAL TO $418,312,356 HAVE BEEN VALUED AT THEIR FAIR VALUE AS DETERMINED IN GOOD FAITH UNDER PROCEDURES ESTABLISHED BY AND UNDER THE GENERAL SUPERVISION OF THE FUND'S TRUSTEES. (a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS. (b) SECURITIES HAVE BEEN DESIGNATED AS COLLATERAL IN AN AMOUNT EQUAL TO $110,011,669, IN CONNECTION WITH OPEN FORWARD FOREIGN CURRENCY CONTRACTS, OPEN FUTURES CONTRACTS AND SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. (c) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $81,487,236, AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $16,656,554 RESULTING IN NET UNREALIZED APPRECIATION OF $64,830,682. SEE NOTES TO FINANCIAL STATEMENTS 37 FUTURES CONTRACTS OPEN AT APRIL 30, 2005:
UNREALIZED NUMBER OF DESCRIPTION, DELIVERY UNDERLYING FACE APPRECIATION CONTRACTS LONG/SHORT MONTH, AND YEAR AMOUNT AT VALUE (DEPRECIATION) - --------------------------------------------------------------------------------- 30 Short EURX CAC40 10 EURO Future June/2005 $ (1,481,008) $ 43,092 21 Long EURX DAX Index Future June/2005 2,841,252 (85,515) 43 Short EURX STOXX 50 Future June/2005 (1,608,191) 70,662 90 Long HANG SENG Index Future May/2005 7,927,150 53,511 73 Long TOPIX Index Future June/2005 7,811,243 (450,553) 190 Long MSCI Taiwan Index Future May/2005 4,569,500 19,000 -------------- Net unrealized depreciation $ (349,803) ==============
SEE NOTES TO FINANCIAL STATEMENTS 38 FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2005:
UNREALIZED CONTRACTS IN EXCHANGE DELIVERY APPRECIATION TO DELIVER FOR DATE (DEPRECIATION) - -------------------------------------------------------------------------------- $ 4,469,618 TWD 139,832,000 5/23/2005 $ 10,971 EUR 546,000 $ 734,763 6/16/2005 31,613 $ 7,295,667 EUR 5,444,650 6/16/2005 (283,939) EUR 45,085,543 $ 60,455,204 6/16/2005 2,393,141 $ 21,346,859 EUR 15,913,509 6/16/2005 (853,123) $ 13,546,917 EUR 10,091,414 6/16/2005 (550,991) EUR 7,170,664 $ 9,615,287 6/16/2005 380,762 EUR 1,192,790 $ 1,599,824 6/16/2005 63,725 $ 14,644,538 EUR 10,916,133 6/16/2005 (586,524) $ 16,729,542 EUR 12,479,704 6/16/2005 (657,930) EUR 300,000 $ 396,957 6/16/2005 10,611 EUR 770,175 $ 995,459 6/16/2005 3,612 $ 5,705,657 JPY 592,310,000 6/16/2005 (38,053) $ 3,351,624 JPY 348,552,135 6/16/2005 (16,452) JPY 67,370,000 $ 638,397 6/16/2005 (6,243) -------------- Net unrealized depreciation $ (98,820) ==============
CURRENCY ABBREVIATIONS: GBP British Pound. DKK Danish Krone. EUR Euro. JPY Japanese Yen. TWD New Taiwan Dollar. SEK Swedish Krona. CHF Swiss Franc. SEE NOTES TO FINANCIAL STATEMENTS 39 MORGAN STANLEY INTERNATIONAL FUND SUMMARY OF INVESTMENTS - APRIL 30, 2005 (UNAUDITED)
PERCENT OF INDUSTRY VALUE NET ASSETS - -------------------------------------------------------------------------------- Major Banks $ 59,347,439 13.3% Integrated Oil 37,791,311 8.5 Pharmaceuticals: Major 26,804,302 6.0 Major Telecommunications 16,144,942 3.6 Electric Utilities 15,885,037 3.6 Financial Conglomerates 14,509,521 3.3 Repurchased Agreement 13,852,000 3.1 Motor Vehicles 12,286,304 2.8 Other Metals/Minerals 11,035,016 2.5 Electronic Equipment/Instruments 10,221,461 2.3 Food: Major Diversified 9,343,008 2.1 Industrial Conglomerates 9,135,788 2.1 Real Estate Development 9,083,986 2.0 Regional Banks 7,431,556 1.7 Multi-Line Insurance 6,975,162 1.6 Wireless Telecommunications 6,387,813 1.4 Chemicals: Specialty 6,269,017 1.4 Food Retail 6,177,955 1.4 Telecommunication Equipment 5,700,137 1.3 Construction Materials 5,177,358 1.2 Beverages: Alcoholic 5,111,575 1.2 Steel 4,719,740 1.1 Gas Distributors 4,616,926 1.0 Chemicals: Major Diversified 4,580,426 1.0 Investment Banks/Brokers 4,444,605 1.0 Electronics/Appliances 4,172,450 0.9 Tobacco 4,094,938 0.9 Miscellaneous Commercial Services 4,001,910 0.9 Property - Casualty Insurers 3,901,142 0.9 Household/Personal Care 3,885,830 0.9 Engineering & Construction 3,643,993 0.8 Wholesale Distributors 3,355,579 0.8 Railroads 3,264,153 0.7 Industrial Machinery 3,254,282 0.7 Pharmaceuticals: Other 3,235,060 0.7 Life/Health Insurance 3,011,471 0.7 Oil & Gas Production 2,915,466 0.7 Oil Refining/Marketing $ 2,876,772 0.6% Other Transportation 2,846,378 0.6 Electronic Components 2,806,496 0.6 Food: Specialty/Candy 2,591,428 0.6 Aerospace & Defense 2,499,777 0.6 Pulp & Paper 2,448,669 0.6 Information Technology Services 2,394,106 0.5 Air Freight/Couriers 2,387,137 0.5 Electrical Products 2,382,559 0.5 Finance/Rental/Leasing 2,277,275 0.5 Industrial Specialties 2,216,174 0.5 Department Stores 2,121,941 0.5 Packaged Software 2,006,090 0.5 Building Products 1,976,851 0.4 Home Building 1,942,727 0.4 Restaurants 1,936,673 0.4 Trucks/Construction/Farm Machinery 1,932,259 0.4 Hotels/Resorts/Cruiselines 1,923,345 0.4 Marine Shipping 1,900,698 0.4 Auto Parts: O.E.M. 1,849,594 0.4 Publishing: Books/Magazines 1,807,391 0.4 Medical Specialties 1,786,516 0.4 Apparel/Footwear Retail 1,711,280 0.4 Casino/Gaming 1,556,295 0.4 Electronic Production Equipment 1,345,531 0.3 Automotive Aftermarket 1,302,712 0.3 Apparel/Footwear 1,296,573 0.3 Water Utilities 1,294,551 0.3 Recreational Products 1,255,508 0.3 Metal Fabrications 1,160,583 0.3 Semiconductors 1,156,910 0.3 Commercial Printing/Forms 1,035,509 0.2 Broadcasting 1,012,539 0.2 Real Estate Investment Trusts 964,187 0.2 Airlines 959,898 0.2 Chemicals: Agricultural 930,056 0.2
SEE NOTES TO FINANCIAL STATEMENTS 40
PERCENT OF INDUSTRY VALUE NET ASSETS - -------------------------------------------------------------------------------- Personnel Services $ 919,114 0.2% Other Consumer Specialties 905,397 0.2 Media Conglomerates 849,310 0.2 Containers/Packaging 813,582 0.2 Publishing: Newspapers 805,147 0.2 Advertising/Marketing Services 774,902 0.2 Textiles 674,474 0.2 Movies/Entertainment 642,043 0.1 Internet Software/Services 614,872 0.1 Computer Processing Hardware 612,186 0.1 Specialty Stores 595,603 0.1 Cable/Satellite TV 556,340 0.1 Biotechnology 551,677 0.1 Electronics/Appliance Stores 546,676 0.1 Aluminum 505,462 0.1 Miscellaneous Manufacturing 480,582 0.1 Catalog/Specialty Distribution 464,357 0.1 Food: Meat/Fish/Dairy 428,021 0.1 Agricultural Commodities/Milling 364,721 0.1 Drugstore Chains 345,610 0.1 Financial Publishing/Services 341,862 0.1 Other Consumer Services 325,137 0.1 Specialty Telecommunications 306,261 0.1 Medical/Nursing Services 274,872 0.1 Precious Metals 240,952 0.1 Food Distributors 216,022 0.1 Beverages: Non-Alcoholic 199,066 0.1 Investment Trusts/Mutual Funds 194,394 0.0 Home Improvement Chains 167,763 0.0 Coal 167,129 0.0 Hospital/Nursing Management 144,553 0.0 Medical Distributors $ 131,223 0.0% Tools/Hardware 124,863 0.0 Computer Peripherals 123,958 0.0 Consumer Sundries 111,769 0.0 Oil & Gas Pipelines 86,072 0.0 Trucking 76,211 0.0 Office Equipment/Supplies 67,234 0.0 Forest Products 63,886 0.0 Contract Drilling 51,605 0.0 Oilfield Services/Equipment 45,745 0.0 Data Processing Services 45,526 0.0 -------------- ------- $ 437,617,826* 98.1% ============== =======
- ---------- * DOES NOT INCLUDE OPEN LONG AND SHORT FUTURES CONTRACTS WITH UNDERLYING FACE AMOUNTS OF $23,149,145 AND $3,089,199, RESPECTIVELY, AND NET UNREALIZED DEPRECIATION OF $463,557 AND UNREALIZED APPRECIATION OF $113,754, RESPECTIVELY. ALSO OPEN FORWARD FOREIGN CURRENCY CONTRACTS WITH NET UNREALIZED DEPRECIATION OF $98,820. SEE NOTES TO FINANCIAL STATEMENTS 41 MORGAN STANLEY INTERNATIONAL FUND FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2005 (UNAUDITED) ASSETS: Investments in securities, at value (cost $372,787,144) $ 437,617,826 Cash (including $2,334,612 in foreign currency at value with cost of $2,337,080 and $5,075,282 in segregation) 7,410,237 Unrealized appreciation on open forward foreign currency contracts 2,894,435 Receivable for: Investments sold 2,425,629 Dividends 1,852,204 Foreign withholding taxes reclaimed 411,826 Shares of beneficial interest sold 335,252 Prepaid expenses and other assets 123,247 --------------- TOTAL ASSETS 453,070,656 --------------- LIABILITIES: Unrealized depreciation on open forward foreign currency contracts 2,993,255 Payable for: Investments purchased 1,977,991 Shares of beneficial interest redeemed 435,072 Variation margin 429,748 Compensated forward foreign currency contracts 307,420 Investment advisory fee 243,297 Distribution fee 195,816 Administration fee 29,944 Accrued expenses and other payables 176,684 --------------- TOTAL LIABILITIES 6,789,227 --------------- NET ASSETS $ 446,281,429 =============== COMPOSITION OF NET ASSETS: Paid-in-capital $ 549,181,612 Net unrealized appreciation 64,388,426 Accumulated undistributed net investment income 467,801 Accumulated net realized loss (167,756,410) --------------- NET ASSETS $ 446,281,429 =============== CLASS A SHARES: Net Assets $ 107,301,329 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 11,005,103 NET ASSET VALUE PER SHARE $ 9.75 =============== MAXIMUM OFFERING PRICE PER SHARE, (NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 10.29 =============== CLASS B SHARES: Net Assets $ 173,881,950 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 18,023,474 NET ASSET VALUE PER SHARE $ 9.65 =============== CLASS C SHARES: Net Assets $ 23,374,556 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 2,424,431 NET ASSET VALUE PER SHARE $ 9.64 =============== CLASS D SHARES: Net Assets $ 141,723,594 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 14,469,777 NET ASSET VALUE PER SHARE $ 9.79 ===============
SEE NOTES TO FINANCIAL STATEMENTS 42 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 2005 (UNAUDITED) NET INVESTMENT INCOME: INCOME Dividends (net of $512,397 foreign withholding tax) $ 5,753,437 Interest 297,348 --------------- TOTAL INCOME 6,050,785 --------------- EXPENSES Investment advisory fee 1,509,011 Distribution fee (Class A shares) 113,034 Distribution fee (Class B shares) 997,638 Distribution fee (Class C shares) 123,746 Transfer agent fees and expenses 405,574 Administration fee 185,724 Custodian fees 102,535 Shareholder reports and notices 74,446 Professional fees 31,785 Registration fees 28,114 Trustees' fees and expenses 2,920 Other 55,250 --------------- TOTAL EXPENSES 3,629,777 --------------- NET INVESTMENT INCOME 2,421,008 --------------- NET REALIZED AND UNREALIZED GAIN: NET REALIZED GAIN ON: Investments 10,420,347 Futures contracts 2,382,989 Foreign exchange transactions 1,288,811 --------------- NET REALIZED GAIN 14,092,147 --------------- NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON: Investments 17,414,836 Futures contracts (493,783) Translation of forward foreign currency contracts and other assets and liabilities denominated in foreign currencies (1,217,950) --------------- NET APPRECIATION 15,703,103 --------------- NET GAIN 29,795,250 --------------- NET INCREASE $ 32,216,258 ===============
SEE NOTES TO FINANCIAL STATEMENTS 43 STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED APRIL 30, 2005 OCTOBER 31, 2004 -------------- ---------------- (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $ 2,421,008 $ 1,584,158 Net realized gain 14,092,147 15,527,795 Net change in unrealized appreciation 15,703,103 46,522,794 -------------- ---------------- NET INCREASE 32,216,258 63,634,747 -------------- ---------------- DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Class A shares (1,047,932) (765,430) Class B shares (769,484) (1,153,468) Class C shares (106,040) (145,401) Class D shares (2,076,588) (1,794,154) -------------- ---------------- TOTAL DIVIDENDS (4,000,044) (3,858,453) -------------- ---------------- Net decrease from transactions in shares of beneficial interest (27,914,284) (40,776,673) -------------- ---------------- NET INCREASE 301,930 18,999,621 NET ASSETS: Beginning of period 445,979,499 426,979,878 -------------- ---------------- END OF PERIOD (INCLUDING ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME OF $467,801 AND $2,046,837, RESPECTIVELY) $ 446,281,429 $ 445,979,499 ============== ================
SEE NOTES TO FINANCIAL STATEMENTS 44 MORGAN STANLEY INTERNATIONAL FUND NOTES TO FINANCIAL STATEMENTS - APRIL 30, 2005 (UNAUDITED) 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley International Fund (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund's investment objective is long-term capital growth. The Fund was organized as a Massachusetts business trust on October 23, 1998 and commenced operations June 28, 1999. The Fund offers Class A shares, Class B shares, Class C shares and Class D shares. The four classes are substantially the same except that most Class A shares are subject to a sales charge imposed at the time of purchase and some Class A shares, and most Class B shares and Class C shares are subject to a contingent deferred sales charge imposed on shares redeemed within one year, six years and one year, respectively. Class D shares are not subject to a sales charge. Additionally, Class A shares, Class B shares and Class C shares incur distribution expenses. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or traded on the New York Stock Exchange ("NYSE") or American Stock Exchange or other exchange is valued at its latest sale price prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (2) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) all other portfolio securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (4) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (5) futures are valued at the latest price published by the commodities exchange on which they trade; (6) when market quotations are not readily available or Morgan Stanley Investment Advisors Inc. (the "Investment Adviser") ,determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Fund's Trustees or by the Investment Adviser using a pricing service and/or procedures approved by the Trustees of the Fund; (7) certain portfolio securities may be valued by an outside pricing service 45 approved by the Fund's Trustees; and (8) short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Dividend income and other distributions are recorded on the ex-dividend date except for certain dividends on foreign securities which are recorded as soon as the Fund is informed after the ex-dividend date. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily. C. REPURCHASE AGREEMENTS -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated entities managed by the Investment Adviser, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements and are collateralized by cash, U.S. Treasury or federal agency obligations. The Fund may also invest directly with institutions in repurchase agreements. The Fund's custodian receives the collateral, which is marked-to-market daily to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest. D. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than distribution fees), and realized and unrealized gains and losses are allocated to each class of shares based upon the relative net asset value on the date such items are recognized. Distribution fees are charged directly to the respective class. E. FUTURES CONTRACTS -- A futures contract is an agreement between two parties to buy and sell financial instruments or contracts based on financial indices at a set price on a future date. Upon entering into such a contract, the Fund is required to pledge to the broker cash, U.S. Government securities or other liquid portfolio securities equal to the minimum initial margin requirements of the applicable futures exchange. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments known as variation margin are recorded by the Fund as unrealized gains and losses. Upon closing of the contract, the Fund realizes a gain or loss 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. F. FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS -- The books and records of the Fund are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities, other assets and liabilities and forward foreign currency contracts ("forward contracts") are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the exchange rates prevailing on the respective dates of such 46 transactions. The resultant exchange gains and losses are recorded as realized and unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. federal income tax regulations, certain foreign exchange gains/losses included in realized and unrealized gain/loss are included in or are a reduction of ordinary income for federal income tax purposes. 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 changes in the market prices of the securities. Forward contracts are valued daily at the appropriate exchange rates. The resultant unrealized exchange gains and losses are recorded as unrealized foreign currency gain or loss. The Fund records realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (compensated) by entering into a closing transaction prior to delivery. G. FEDERAL INCOME TAX POLICY -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to shareholders are recorded on the ex-dividend date. I. USE OF ESTIMATES -- The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. 2. INVESTMENT ADVISORY/ADMINISTRATION AGREEMENTS Pursuant to an Investment Advisory Agreement, the Fund pays the Investment Adviser an advisory fee, accrued daily and payable monthly, by applying the annual rate of 0.65% to the net assets of the Fund determined as of the close of each business day. Pursuant to an Administration Agreement with Morgan Stanley Services Company Inc. ("the Administrator"), an affiliate of the Investment Adviser, the Fund pays an administration fee, accrued daily and payable monthly, by applying the annual rate of 0.08% to the Fund's daily net assets. 3. PLAN OF DISTRIBUTION Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Adviser and Administrator. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan provides that the Fund will pay the Distributor a fee which is accrued daily and paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the average daily net assets of Class A; (ii) Class B -- up to 1.0% of the average daily net assets of Class B; and (iii) Class C -- up to 1.0% of the average daily net assets of Class C. 47 In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by the Distributor but not yet recovered may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B shares. Although there is no legal obligation for the Fund to pay expenses incurred in excess of payments made to the Distributor under the Plan and the proceeds of contingent deferred sales charges paid by investors upon redemption of shares, if for any reason the Plan is terminated, the Trustees will consider at that time the manner in which to treat such expenses. The Distributor has advised the Fund that such excess amounts totaled $19,926,147 at April 30, 2005. In the case of Class A shares and Class C shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily net assets of Class A or Class C, respectively, will not be reimbursed by the Fund through payments in any subsequent year, except that expenses representing a gross sales credit to Morgan Stanley Financial Advisors or other selected broker-dealer representatives may be reimbursed in the subsequent calendar year. For the six months ended April 30, 2005, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.25% and 0.99%, respectively. The Distributor has informed the Fund that for the six months ended April 30, 2005, it received contingent deferred sales charges from certain redemptions of the Fund's Class B shares and Class C shares of $191,246 and $1,347, respectively and received $27,295 in front-end sales charges from sales of the Fund's Class A shares. The respective shareholders pay such charges which are not an expense of the Fund. 4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended April 30, 2005 aggregated $45,349,664 and $73,291,811, respectively. Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and Distributor, is the Fund's transfer agent. The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan") which allows each independent Trustee to defer payment of all, or a portion, of the fees he receives for serving on the Board of Trustees. Each eligible Trustee generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund. 48 5. SHARES OF BENEFICIAL INTEREST Transactions in shares of beneficial interest were as follows:
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED APRIL 30, 2005 OCTOBER 31, 2004 ------------------------------ ------------------------------ (UNAUDITED) SHARES AMOUNT SHARES AMOUNT ------------- ------------- ------------- ------------- CLASS A SHARES Sold 3,530,069 $ 34,815,960 5,568,257 $ 48,803,046 Reinvestment of dividends 104,282 1,035,517 88,825 753,234 Redeemed (1,739,427) (17,219,472) (4,442,745) (38,827,899) ------------- ------------- ------------- ------------- Net increase -- Class A 1,894,924 18,632,005 1,214,337 10,728,381 ------------- ------------- ------------- ------------- CLASS B SHARES Sold 1,156,938 11,328,955 2,029,109 17,561,668 Reinvestment of dividends 69,959 689,091 123,296 1,036,918 Redeemed (4,592,758) (44,886,898) (6,691,618) (57,927,196) ------------- ------------- ------------- ------------- Net decrease -- Class B (3,365,861) (32,868,852) (4,539,213) (39,328,610) ------------- ------------- ------------- ------------- CLASS C SHARES Sold 139,885 1,362,801 284,158 2,452,466 Reinvestment of dividends 9,863 97,057 16,051 134,827 Redeemed (433,224) (4,230,706) (806,681) (6,943,031) ------------- ------------- ------------- ------------- Net decrease -- Class C (283,476) (2,770,848) (506,472) (4,355,738) ------------- ------------- ------------- ------------- CLASS D SHARES Sold 1,008,995 10,051,692 3,339,028 29,357,682 Reinvestment of dividends 177,714 1,770,033 177,395 1,507,858 Redeemed (2,284,992) (22,728,314) (4,380,962) (38,686,246) ------------- ------------- ------------- ------------- Net decrease -- Class D (1,098,283) (10,906,589) (864,539) (7,820,706) ------------- ------------- ------------- ------------- Net decrease in Fund (2,852,696) $ (27,914,284) (4,695,887) $ (40,776,673) ============= ============= ============= =============
6. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS The Fund may enter into forward contracts to facilitate settlement of foreign currency denominated portfolio transactions or to manage foreign currency exposure associated with foreign currency denominated securities. The Fund may also purchase and sell interest rate, currency and index futures contracts ("futures contracts") that are traded on U.S. and foreign commodity exchanges on such underlying securities as U.S. Treasury bonds, notes, bills and GNMA certificates and/or any foreign government fixed-income security, on various currencies and on such indexes of U.S. and foreign securities as may exist or come into existence. Forward contracts and futures contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rates underlying the forward contracts or an unfavorable change in the value of 49 the underlying securities. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. At April 30, 2005, the Fund's cash balance consisted principally of interest bearing deposits with J.P. Morgan Chase, the Fund's custodian. 7. FEDERAL INCOME TAX STATUS The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital. As of October 31, 2004, the Fund had a net capital loss carryforward of $171, 982,273 of which $23,562,966 will expire on October 31, 2009, $93,972,230 will expire on October 31, 2010 and $54,447,077 will expire on October 31, 2011 to offset future capital gains to the extent provided by regulations. As of October 31, 2004, the Fund had temporary book/tax differences primarily attributable to the mark-to-market of open forward foreign currency exchange contracts and passive foreign investment companies ("PFICs"), foreign tax credit pass-through and capital loss deferrals on wash sales. 8. LEGAL MATTERS The Investment Adviser, certain affiliates of the Investment Adviser, certain officers of such affiliates and certain investment companies advised by the Investment Adviser or its affiliates, including the Fund, are named as defendants in a consolidated class action. This consolidated action also names as defendants certain individual Trustees and Directors of the Morgan Stanley funds. The consolidated amended complaint generally alleges that defendants, including the Fund, violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Investment Adviser and certain affiliates of the Investment Adviser allegedly offered economic incentives to brokers and others to recommend the funds advised by the Investment Adviser or its affiliates to investors rather than funds managed by other companies, and (ii) that the funds advised by the Investment Adviser or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their efforts to recommend these funds to investors. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The defendants have moved to dismiss the action and intend to otherwise vigorously defend it. On March 10, 2005, Plaintiffs sought leave to supplement their complaint to assert claims on behalf of other investors. While the Fund and Adviser believe that each has meritorious defenses, the ultimate outcome of this matter is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of this matter. 50 MORGAN STANLEY INTERNATIONAL FUND FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31, MONTHS ENDED ------------------------------------------------------------------- APRIL 30, 2005 2004 2003 2002 2001 2000 -------------- ----------- ----------- ---------- ---------- ---------- (UNAUDITED) CLASS A SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 9.19 $ 8.03 $ 6.70 $ 7.77 $ 10.29 $ 10.57 -------------- ----------- ----------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income++ 0.07 0.06 0.08 0.04 0.06 0.11 Net realized and unrealized gain (loss) 0.61 1.20 1.33 (1.03) (2.07) (0.39) -------------- ----------- ----------- ---------- ---------- ---------- Total income (loss) from investment operations 0.68 1.26 1.41 (0.99) (2.01) (0.28) -------------- ----------- ----------- ---------- ---------- ---------- Less dividends and distributions from: Net investment income (0.12) (0.10) (0.08) (0.08) - - Net realized gain - - - - (0.51) - -------------- ----------- ----------- ---------- ---------- ---------- Total dividends and distributions (0.12) (0.10) (0.08) (0.08) (0.51) - -------------- ----------- ----------- ---------- ---------- ---------- Net asset value, end of period $ 9.75 $ 9.19 $ 8.03 $ 6.70 $ 7.77 $ 10.29 ============== =========== =========== ========== ========== ========== TOTAL RETURN+ 7.21%(1) 15.89% 21.31% (12.93)% (20.36)% (2.65)% RATIOS TO AVERAGE NET ASSETS(3): Expenses 1.28%(2) 1.57% 1.58% 1.56% 1.46%(4) 1.47% Net investment income 1.33%(2) 0.67% 1.02% 0.54% 0.73% 0.95% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 107,301 $ 83,766 $ 63,422 $ 44,373 $ 37,974 $ 46,535 Portfolio turnover rate 10%(1) 33% 43% 39% 37% 84%
- ---------- ++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. + DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. (1) NOT ANNUALIZED. (2) ANNUALIZED. (3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. (4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%. SEE NOTES TO FINANCIAL STATEMENTS 51
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31, MONTHS ENDED ------------------------------------------------------------------- APRIL 30, 2005 2004 2003 2002 2001 2000 -------------- ----------- ----------- ---------- ---------- ---------- (UNAUDITED) CLASS B SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 9.06 $ 7.93 $ 6.58 $ 7.62 $ 10.19 $ 10.55 -------------- ----------- ----------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss)++ 0.03 (0.01) 0.01 (0.02) 0.00 0.02 Net realized and unrealized gain (loss) 0.60 1.19 1.34 (1.02) (2.06) (0.38) -------------- ----------- ----------- ---------- ---------- ---------- Total income (loss) from investment operations 0.63 1.18 1.35 (1.04) (2.06) (0.36) -------------- ----------- ----------- ---------- ---------- ---------- Less dividends and distributions from: Net investment income (0.04) (0.05) - - - - Net realized gain - - - - (0.51) - -------------- ----------- ----------- ---------- ---------- ---------- Total dividends and distributions (0.04) (0.05) - - (0.51) - -------------- ----------- ----------- ---------- ---------- ---------- Net asset value, end of period $ 9.65 $ 9.06 $ 7.93 $ 6.58 $ 7.62 $ 10.19 ============== =========== =========== ========== ========== ========== TOTAL RETURN+ 6.91%(1) 14.87% 20.52% (13.65)% (21.08)% (3.41)% RATIOS TO AVERAGE NET ASSETS(3): Expenses 2.03%(2) 2.33% 2.37% 2.32% 2.24%(4) 2.22% Net investment income (loss) 0.58%(2) (0.09)% 0.23% (0.22)% (0.06)% 0.20% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 173,882 $ 193,796 $ 205,544 $ 217,216 $ 340,158 $ 561,375 Portfolio turnover rate 10%(1) 33% 43% 39% 37% 84%
- ---------- ++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. + DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. (1) NOT ANNUALIZED. (2) ANNUALIZED. (3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. (4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%. SEE NOTES TO FINANCIAL STATEMENTS 52
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31, MONTHS ENDED ------------------------------------------------------------------- APRIL 30, 2005 2004 2003 2002 2001 2000 -------------- ----------- ----------- ---------- ---------- ---------- (UNAUDITED) CLASS C SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 9.06 $ 7.92 $ 6.59 $ 7.62 $ 10.19 $ 10.55 -------------- ----------- ----------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income (loss)++ 0.03 (0.01) 0.01 (0.01) (0.01) 0.02 Net realized and unrealized gain (loss) 0.59 1.20 1.33 (1.02) (2.05) (0.38) -------------- ----------- ----------- ---------- ---------- ---------- Total income (loss) from investment operations 0.62 1.19 1.34 (1.03) (2.06) (0.36) -------------- ----------- ----------- ---------- ---------- ---------- Less dividends and distributions from: Net investment income (0.04) (0.05) (0.01) - - - Net realized gain - - - - (0.51) - -------------- ----------- ----------- ---------- ---------- ---------- Total dividends and distributions (0.04) (0.05) (0.01) - (0.51) - -------------- ----------- ----------- ---------- ---------- ---------- Net asset value, end of period $ 9.64 $ 9.06 $ 7.92 $ 6.59 $ 7.62 $ 10.19 ============== =========== =========== ========== ========== ========== TOTAL RETURN+ 6.84%(1) 15.03% 20.40% (13.52)% (21.08)% (3.41)% RATIOS TO AVERAGE NET ASSETS(3): Expenses 2.02%(2) 2.31% 2.37% 2.18% 2.24%(4) 2.22% Net investment income (loss) 0.59%(2) (0.07)% 0.23% (0.08)% (0.06)% 0.20% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 23,375 $ 24,527 $ 25,471 $ 26,195 $ 39,079 $ 69,640 Portfolio turnover rate 10%(1) 33% 43% 39% 37% 84%
- ---------- ++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. + DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. (1) NOT ANNUALIZED. (2) ANNUALIZED. (3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. (4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%. SEE NOTES TO FINANCIAL STATEMENTS 53
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31, MONTHS ENDED ------------------------------------------------------------------- APRIL 30, 2005 2004 2003 2002 2001 2000 -------------- ----------- ----------- ---------- ---------- ---------- (UNAUDITED) CLASS D SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 9.24 $ 8.07 $ 6.73 $ 7.80 $ 10.32 $ 10.58 -------------- ----------- ----------- ---------- ---------- ---------- Income (loss) from investment operations: Net investment income++ 0.08 0.08 0.08 0.06 0.08 0.15 Net realized and unrealized gain (loss) 0.61 1.20 1.36 (1.04) (2.09) (0.41) -------------- ----------- ----------- ---------- ---------- ---------- Total income (loss) from investment operations 0.69 1.28 1.44 (0.98) (2.01) (0.26) -------------- ----------- ----------- ---------- ---------- ---------- Less dividends and distributions from: Net investment income (0.14) (0.11) (0.10) (0.09) - - Net realized gain - - - - (0.51) - -------------- ----------- ----------- ---------- ---------- ---------- Total dividends and distributions (0.14) (0.11) (0.10) (0.09) (0.51) - -------------- ----------- ----------- ---------- ---------- ---------- Net asset value, end of period $ 9.79 $ 9.24 $ 8.07 $ 6.73 $ 7.80 $ 10.32 ============== =========== =========== ========== ========== ========== TOTAL RETURN+ 7.39%(1) 15.97% 21.68% (12.70)% (20.30)% (2.46)% RATIOS TO AVERAGE NET ASSETS(3): Expenses 1.03%(2) 1.33% 1.37% 1.32 % 1.24%(4) 1.22% Net investment income 1.58%(2) 0.91% 1.23% 0.78 % 0.94% 1.20% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 141,724 $ 143,890 $ 132,544 $ 120,329 $ 124,065 $ 98,465 Portfolio turnover rate 10%(1) 33% 43% 39% 37% 84%
- ---------- ++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. + CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. (1) NOT ANNUALIZED. (2) ANNUALIZED. (3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. (4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%. SEE NOTES TO FINANCIAL STATEMENTS 54 TRUSTEES Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien James F. Higgins Dr. Manuel H. Johnson Joseph J. Kearns Michael E. Nugent Fergus Reid OFFICERS Charles A. Fiumefreddo CHAIRMAN OF THE BOARD Mitchell M. Merin PRESIDENT Ronald E. Robison EXECUTIVE VICE PRESIDENT and PRINCIPAL EXECUTIVE OFFICER Joseph J. McAlinden VICE PRESIDENT Barry Fink VICE PRESIDENT Amy R. Doberman VICE PRESIDENT Carsten Otto CHIEF COMPLIANCE OFFICER Stefanie V. Chang VICE PRESIDENT Francis J. Smith TREASURER and CHIEF FINANCIAL OFFICER Thomas F. Caloia VICE PRESIDENT Mary E. Mullin SECRETARY TRANSFER AGENT Morgan Stanley Trust Harborside Financial Center, Plaza Two Jersey City, New Jersey 07311 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP Two World Financial Center New York, New York 10281 INVESTMENT ADVISER Morgan Stanley Investment Advisors Inc. 1221 Avenue of the Americas New York, New York 10020 The financial statements included herein have been taken from the records of the Fund without examination by the independent auditors and accordingly they do not express an opinion thereon. This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its trustees. It is available, without charge, by calling (800) 869-NEWS. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing. Investments and services offered through Morgan Stanley DW Inc., member SIPC. Morgan Stanley Distributors Inc., member NASD. (C) 2005 Morgan Stanley [MORGAN STANLEY LOGO] 36075RPT-RA05-OO446P-Y04/05 [GRAPHIC] MORGAN STANLEY FUNDS MORGAN STANLEY INTERNATIONAL FUND SEMIANNUAL REPORT APRIL 30, 2005 [MORGAN STANLEY LOGO] Item 2. Code of Ethics. Not applicable for semiannual reports. Item 3. Audit Committee Financial Expert. Not applicable for semiannual reports. Item 4. Principal Accountant Fees and Services Not applicable for semiannual reports. Item 5. Audit Committee of Listed Registrants. Not applicable for semiannual reports. Item 6. Refer to Item 1. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable for semiannual reports. Item 8. Portfolio Managers of Closed-End Management Investment Companies Applicable only to reports filed by closed-end funds. Item 9. Closed-End Fund Repurchases Applicable to reports filed by closed-end funds. Item 10. Submission of Matters to a Vote of Security Holders Not applicable. Item 11. Controls and Procedures (a) The Fund's principal executive officer and principal financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits (a) Code of Ethics - Not applicable for semiannual reports. (b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Morgan Stanley International Fund /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer June 16, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer June 16, 2005 /s/ Francis Smith Francis Smith Principal Financial Officer June 16, 2005 EX-99.CERT 2 a2159456zex-99_cert.txt EX 99.CERT Exhibit 99.CERT EXHIBIT 12 B1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER CERTIFICATIONS I, Ronald E. Robison, certify that: 1. I have reviewed this report on Form N-CSR of Morgan Stanley International Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: June 16, 2005 /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer EXHIBIT 12 B2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER CERTIFICATIONS I, Francis Smith, certify that: 1. I have reviewed this report on Form N-CSR of Morgan Stanley International Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: June 16, 2005 /s/ Francis Smith Francis Smith Principal Financial Officer EX-99.906CERT 3 a2159456zex-99_906cert.txt EX 99.906CERT Exhibit 99.906CERT SECTION 906 CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Morgan Stanley International Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended April 30, 2005 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: June 16, 2005 /s/ Ronald E. Robison --------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement required by Section 906 has been provided to Morgan Stanley International Fund and will be retained by Morgan Stanley International Fund and furnished to the Securities and Exchange Commission or its staff upon request. SECTION 906 CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Morgan Stanley International Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended April 30, 2005 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: June 16, 2005 /s/ Francis Smith ----------------- Francis Smith Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to Morgan Stanley International Fund and will be retained by Morgan Stanley International Fund and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----