-----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, GUkXJZYixel+kt2rn3yDksh7YOOYstFINMiy05WBE54eDQOlkrbNyyt8DeMHLOYH imvFcxLNKbly/ZLhcgixVw== 0001047469-03-041228.txt : 20031217 0001047469-03-041228.hdr.sgml : 20031217 20031217131222 ACCESSION NUMBER: 0001047469-03-041228 CONFORMED SUBMISSION TYPE: N-CSRS/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030731 FILED AS OF DATE: 20031217 EFFECTIVENESS DATE: 20031217 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY LATIN AMERICAN GROWTH FUND CENTRAL INDEX KEY: 0000885410 IRS NUMBER: 136993838 STATE OF INCORPORATION: MA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: N-CSRS/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-06608 FILM NUMBER: 031059510 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 LATIN AMERICAN GROWTH FUND DATE OF NAME CHANGE: 19990628 FORMER COMPANY: FORMER CONFORMED NAME: TCW/DW LATIN AMERICAN GROWTH FUND DATE OF NAME CHANGE: 19920929 N-CSRS/A 1 a2124424zn-csrsa.txt N-CSRS/A 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: 811-06608 Morgan Stanley Latin American Growth 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: January 31, 2004 Date of reporting period: July 31, 2003 Item 1 - Report to Shareholders WELCOME, SHAREHOLDER: IN THIS REPORT, YOU'LL LEARN ABOUT HOW YOUR INVESTMENT IN MORGAN STANLEY LATIN AMERICAN GROWTH FUND PERFORMED DURING THE SEMIANNUAL PERIOD. THE PORTFOLIO MANAGEMENT TEAM WILL PROVIDE AN OVERVIEW OF THE MARKET CLIMATE AND DISCUSS SOME OF THE FACTORS THAT HELPED OR HINDERED PERFORMANCE DURING THE REPORTING PERIOD. IN ADDITION, THIS REPORT INCLUDES THE FUND'S FINANCIAL STATEMENTS AND A LIST OF FUND INVESTMENTS, AS WELL AS OTHER INFORMATION. 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 THE MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE FUND SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. Fund Report TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED JULY 31, 2003
MSCI EMERGING LIPPER MARKETS LATIN FREE LATIN AMERICAN AMERICA FUNDS CLASS A CLASS B CLASS C CLASS D INDEX(1) AVERAGE(2) 28.92% 28.35% 28.49% 28.99% 35.15% 30.05%
THE PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF ALL DISTRIBUTIONS BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION. MARKET CONDITIONS The six-month period ended July 31, 2003, was a volatile yet cautiously optimistic environment for Latin American growth investors. Concerns over oil prices and the prospect of military conflict in the Middle East dominated the first quarter of 2003. Latin American markets surged during the following quarter, buoyed by greater stability in oil prices, strong currency performances, lower interest rates and improved investor sentiment. Brazil, which weathered investor skittishness prior to its October 2002 presidential election, has since benefited from newly elected President Da Lula's reform agenda as well as from supportive trade and economic data. Venezuela was by far the best-performing market in the world, gaining 113.3 percent when domestic investors fled toward local stocks as an inflation hedge. Local shares significantly outperformed ADR equivalents, reflecting the distorting effects of capital controls and exchange restrictions. Argentina continued to fare well, benefiting from stability in oil prices. Chile was buoyed by falling interest rates, increased foreign direct investment and an improving outlook for GDP growth. Mexican equities, which benefited from consolidation in the beverage sector and low interest rates, lagged other Latin American markets with domestic activity data there remaining lackluster. PERFORMANCE ANALYSIS The Fund's underperformance of its benchmark, the MSCI Emerging Markets Free Latin America Index, resulted from stock selection and country allocation. Although the Fund's underweighted stances in Chile and Venezuela detracted from performance, its underweightings in Peru and Argentina turned out to be beneficial. The Fund was negatively affected by the capital controls in Venezuela that have created an artificial exchange rate there. Performance was further hampered by the Fund's cautious stance earlier in the period in Brazil's regulated sectors (primarily telecommunications and utilities), as we were initially wary of newly elected President Da Lula's stance on tariffs, given his previously populist platforms. 2 TOP 10 HOLDINGS Telefonos de Mexico SA-ADR 12.2% America Movil SA-Series L-ADR 10.7 Petroleo Brasileiro SA-ADR 7.6 Companhia de Bebidas-ADR PREF 7.2 Petroleo Brasileiro SA-ADR PREF 5.1 Grupo Financiero BBVA Bancomer SA 4.9 Wal-Mart de Mexico SA-SER C 4.7 Companhia Vale do Rio Doce-ADR PREF 4.3 Banco Itau Holding Fin SA-ADR PREF 3.1 Companhia Vale do Rio Doce-ADR 2.8
COUNTRY ALLOCATION Brazil 44.3% Mexico 41.3 Chile 5.9 Luxembourg 2.2 Venezuela 1.5
SUBJECT TO CHANGE DAILY. ALL PERCENTAGES ARE AS A PERCENTAGE OF NET ASSETS. PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE DEEMED AS A RECOMMENDATION TO BUY 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. INVESTMENT STRATEGY - - THE FUND INVESTS AT LEAST 80 PERCENT IN COMMON STOCKS AND OTHER EQUITY SECURITIES OF LATIN AMERICAN COUNTRIES. - - THE PORTFOLIO MANAGERS USE A "TOP DOWN" COUNTRY ALLOCATION APPROACH TOGETHER WITH "BOTTOM UP" STOCK SELECTION. FIRST THEY PERFORM A COUNTRY ANALYSIS, FOLLOWED BY A FUNDAMENTAL ANALYSIS OF SPECIFIC SECURITIES, INDUSTRIES AND COMPANIES. PROXY VOTING POLICIES AND PROCEDURES A DESCRIPTION OF THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE VOTING OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING (800) 869-NEWS. THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT http://www.sec.gov. 3 Performance Summary AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED JULY 31, 2003
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES++ 07/28/97 12/30/92 07/28/97 07/28/97 SYMBOL LATAX LATBX LATCX LATDX 1 YEAR 29.78%(3) 28.89%(3) 29.03%(3) 30.20%(3) 22.97(4) 23.89(4) 28.03(4) 5 YEARS (3.33)(3) (4.10)(3) (4.04)(3) (3.16)(3) (4.37)(4) (4.49)(4) (4.04)(4) 10 YEARS (0.53)(3) (0.53)(4) SINCE INCEPTION (7.12)(3) (0.31)(3) (7.80)(3) (6.94)(3) (7.95)(4) (0.31)(4) (7.80)(4)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH 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. - ---------- Notes on Performance (1) THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE LATIN AMERICA INDEX (MSCI EMF LA INDEX) IS A MARKET CAPITALIZATION WEIGHTED INDEX THAT INCLUDES SELECT SECURITIES FROM ARGENTINA, BRAZIL, CHILE, COLOMBIA, MEXICO, PERU, AND VENEZUELA. FOR THE PERIOD FROM THE FUND'S INCEPTION THROUGH DECEMBER 31, 2000, THE INDEX'S RETURNS INCLUDE THOSE OF THE MSCI EMF LA'S "GROSS" INDEX WHICH ASSUMES DIVIDENDS GROSS OF WITHHOLDING TAXES BUT NET OF DOMESTIC TAX CREDITS. FOR THE PERIOD FROM JANUARY 1, 2001 AND BEYOND, THE INDEX'S RETURNS REFLECT THOSE OF THE "NET" INDEX WHICH REFLECTS A REDUCTION IN DIVIDENDS AFTER TAKING INTO ACCOUNT WITHHOLDING OF TAXES BY CERTAIN FOREIGN COUNTRIES REPRESENTED IN THE INDEX. THE INDEX DOES NOT INCLUDE ANY EXPENSES, FEES OR CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX. (2) THE LIPPER LATIN AMERICAN FUNDS AVERAGE TRACKS THE PERFORMANCE OF ALL FUNDS IN THE LIPPER LATIN AMERICAN FUNDS CLASSIFICATION. THE AVERAGE, WHICH IS ADJUSTED FOR CAPITAL GAINS DISTRIBUTIONS AND INCOME DIVIDENDS, IS UNMANAGED AND SHOULD NOT BE CONSIDERED AN INVESTMENT. (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. * 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 CDSC FOR CLASS C IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF PURCHASE. ++ CLASS D HAS NO SALES CHARGE. 4 MORGAN STANLEY LATIN AMERICAN GROWTH FUND PORTFOLIO OF INVESTMENTS - JULY 31, 2003 (UNAUDITED)
NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS (96.1%) BRAZIL (44.3%) BEVERAGES: ALCOHOLIC 145,310 Companhia de Bebidas das Americas (ADR) (Pref.) $ 2,884,403 ------------ ELECTRIC UTILITIES 51,172 Companhia Energetica de Minas Gerais (ADR) (Pref.) 460,036 7,292,000 Companhia Energetica de Minas Gerais (Pref.) 66,536 ------------ 526,572 ------------ FOOD RETAIL 10,300 Companhia Brasileira de Distribuicao Grupo Pao de Acucar (ADR) (Pref.) 192,095 ------------ INTEGRATED OIL 150,733 Petroleo Brasileiro S.A. (ADR) 3,058,373 107,850 Petroleo Brasileiro S.A. (ADR) (Pref.) 2,048,072 1,676 Petroleo Brasileiro S.A. (Pref.) 31,884 ------------ 5,138,329 ------------ MAJOR TELECOMMUNICATIONS 15,378 Brasil Telecom Participacoes S.A. (ADR) (Pref.) 506,705 2,691,000 Brasil Telecom Participacoes S.A. (Pref.) 17,849 ------------ 524,554 ------------ OTHER METALS/MINERALS 32,000 Companhia Vale do Rio Doce (ADR) 1,114,560 54,602 Companhia Vale do Rio Doce (Class A) (ADR) (Pref.) 1,737,436 266,358 Companhia Vale do Rio Doce S.A. (Debentures)* 0 ------------ 2,851,996 ------------ PULP & PAPER 17,300 Aracruz Celulose S.A. (Class B) (ADR) (Pref.) 433,192 81,000 Klabin S.A. (Pref.)* 78,000 13,562 Votorantim Celulose e Papel S.A. (ADR) (Pref.) $ 313,825 2,104,000 Votorantim Celulose e Papel S.A. (Pref.) 97,053 ------------ 922,070 ------------ REGIONAL BANKS 39,882 Banco Bradesco S.A. (ADR) (Pref.) 803,622 35,043 Banco Itau Holding Financeira S.A. (ADR) (Pref.) 1,253,839 2,789,000 Banco Itau Holding Financeira S.A. (Pref.) 200,019 14,600 Unibanco-Uniao de Bancos Brasileiros S.A. (ADR) (Units)++ 253,018 ------------ 2,510,498 ------------ SPECIALTY TELECOMMUNICATIONS 50,700 Tele Norte Leste Participacoes S.A. (ADR) (Pref.) 558,714 6,775,000 Tele Norte Leste Participacoes S.A. (Pref.) 74,822 ------------ 633,536 ------------ STEEL 30,375 Companhia Siderurgica Nacional S.A. (ADR) 827,415 53,691 Gerdau S.A. (ADR) (Pref.) 619,057 37,064 Usinas Siderurgicas de Minas Gerais S.A. (Class A) (Pref.) 190,561 ------------ 1,637,033 ------------ TOTAL BRAZIL 17,821,086 ------------ CHILE (5.9%) BEVERAGES: ALCOHOLIC 23,600 Compania Cervecerias Unidas S.A. (ADR) 437,780 ------------ FOOD RETAIL 17,991 Distribucion y Servicio D&S S.A. (ADR) 243,418 ------------ MAJOR TELECOMMUNICATIONS 44,500 Cia de Telecomunicaciones de Chile S.A. (Series A) (ADR) 587,845 ------------
SEE NOTES TO FINANCIAL STATEMENTS 5
NUMBER OF SHARES VALUE - -------------------------------------------------------------------------------- REGIONAL BANKS 19,721 Banco de Chile (ADR) $ 403,295 30,775 Banco Santander Chile S.A. (ADR) 697,054 ------------ 1,100,349 ------------ TOTAL CHILE 2,369,392 ------------ LUXEMBOURG (2.2%) OILFIELD SERVICES/EQUIPMENT 34,585 Tenaris S.A. (ADR) 876,038 ------------ MEXICO (41.3%) BEVERAGES: NON-ALCOHOLIC 15,600 Coca-Cola Femsa S.A. de C.V. (Series L) (ADR) 343,200 15,870 Fomento Economico Mexicano, S.A. de C.V. (ADR) (Units)++ 609,567 172,800 Fomento Economico Mexicano, S.A. de C.V. (Units)++ 660,569 ------------ 1,613,336 ------------ CONSTRUCTION MATERIALS 2,536 Cemex S.A. de C.V. - CPO 11,971 41,655 Cemex S.A. de C.V. - CPO (ADR) 983,058 ------------ 995,029 ------------ DISCOUNT STORES 707,609 Wal-Mart de Mexico S.A. de C.V. (Series C) 1,890,163 3,879 Wal-Mart de Mexico S.A. de C.V. (Series V) 11,504 ------------ 1,901,667 ------------ INDUSTRIAL CONGLOMERATES 78,000 Alfa, S.A. (Class A) 159,026 ------------ MAJOR TELECOMMUNICATIONS 96,600 Carso Global Telecom (Series A1)* $ 115,342 158,491 Telefonos de Mexico S.A. de C.V. (Series L) (ADR) 4,891,032 ------------ 5,006,374 ------------ OTHER TRANSPORTATION 33,400 Grupo Aeroportuario del Sureste S.A. de C.V. (Series B) (ADR) 502,336 ------------ REGIONAL BANKS 58,400 Grupo Financiero Banorte S.A. de C.V. (O shares)* 154,344 2,346,743 Grupo Financiero BBVA Bancomer, S.A. de C.V. (Series B)* 1,960,326 ------------ 2,114,670 ------------ WIRELESS TELECOMMUNICATIONS 192,453 America Movil S.A. de C.V. (Series L) (ADR) 4,299,400 ------------ TOTAL MEXICO 16,591,838 ------------ PERU (0.9%) PRECIOUS METALS 10,600 Compania de Minas Buenaventura S.A. (ADR) 352,450 ------------ VENEZUELA (1.5%) MAJOR TELECOMMUNICATIONS 46,600 Compania Anonima Nacional Telefonos de Venezuela (Class D) (ADR) 607,198 ------------ TOTAL COMMON AND PREFERRED STOCKS (COST $38,499,569) 38,618,002 ------------
SEE NOTES TO FINANCIAL STATEMENTS 6
PRINCIPAL AMOUNT IN THOUSANDS VALUE - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT (0.4%) REPURCHASE AGREEMENT $ 175 Joint repurchase agreement account 1.11% due 08/01/03 (dated 07/31/03; proceeds $175,005) (a) (COST $175,000) $ 175,000 ------------ TOTAL INVESTMENTS (COST $38,674,569) (b) 96.5% 38,793,002 OTHER ASSETS IN EXCESS OF LIABILITIES 3.5 1,412,077 ----- ------------ NET ASSETS 100.0% $ 40,205,079 ===== ============
- ---------- ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. ++ CONSISTS OF ONE OR MORE CLASS OF SECURITIES TRADED TOGETHER AS A UNIT; STOCKS WITH ATTACHED WARRANTS. (a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS. (b) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $3,125,334 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $3,006,901, RESULTING IN NET UNREALIZED APPRECIATION OF $118,433. SEE NOTES TO FINANCIAL STATEMENTS 7 SUMMARY OF INVESTMENTS - JULY 31, 2003 (UNAUDITED)
PERCENT OF INDUSTRY VALUE NET ASSETS - -------------------------------------------------------------------------------- Beverages: Alcoholic $ 3,322,183 8.3% Beverages: Non-Alcoholic 1,613,336 4.0 Construction Materials 995,029 2.5 Discount Stores 1,901,667 4.7 Electric Utilities 526,572 1.3 Food Retail 435,513 1.1 Industrial Conglomerates 159,026 0.4 Integrated Oil 5,138,329 12.8 Major Telecommunications 6,725,971 16.7 Oilfield Services/Equipment 876,038 2.2 Other Metals/Minerals 2,851,996 7.1 Other Transportation 502,336 1.2 Precious Metals 352,450 0.9 Pulp & Paper 922,070 2.3 Regional Banks $ 5,725,517 14.2% Repurchase Agreement 175,000 0.4 Specialty Telecommunications 633,536 1.6 Steel 1,637,033 4.1 Wireless Telecommunications 4,299,400 10.7 ------------ ---- $ 38,793,002 96.5% ============ ==== PERCENT OF TYPE OF INVESTMENT VALUE NET ASSETS - -------------------------------------------------------------------------------- Common Stocks $ 26,050,282 64.8% Preferred Stocks 12,567,720 31.3 Short-Term Investment 175,000 0.4 ------------ ---- $ 38,793,002 96.5% ============ ====
SEE NOTES TO FINANCIAL STATEMENTS 8 FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES JULY 31, 2003 (UNAUDITED) ASSETS: Investments in securities, at value (cost $38,674,569) $ 38,793,002 Receivable for: Investments sold 1,381,819 Dividends 98,186 Shares of beneficial interest sold 12,500 Prepaid expenses and other assets 92,985 ------------- TOTAL ASSETS 40,378,492 ------------- LIABILITIES: Payable for: Investment management fee 42,399 Shares of beneficial interest redeemed 35,893 Distribution fee 32,397 Accrued expenses and other payables 62,724 ------------- TOTAL LIABILITIES 173,413 ------------- NET ASSETS $ 40,205,079 ============= COMPOSITION OF NET ASSETS: Paid-in-capital 129,458,616 Net unrealized appreciation 105,794 Accumulated undistributed net investment income 112,299 Accumulated net realized loss (89,471,630) ------------- NET ASSETS $ 40,205,079 ============= CLASS A SHARES: Net Assets $ 309,401 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 32,130 NET ASSET VALUE PER SHARE $ 9.63 ============= MAXIMUM OFFERING PRICE PER SHARE, (NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 10.16 ============= CLASS B SHARES: Net Assets $ 37,810,469 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 4,074,878 NET ASSET VALUE PER SHARE $ 9.28 ============= CLASS C SHARES: Net Assets $ 352,423 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 37,949 NET ASSET VALUE PER SHARE $ 9.29 ============= CLASS D SHARES: Net Assets $ 1,732,786 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 178,607 NET ASSET VALUE PER SHARE $ 9.70 =============
SEE NOTES TO FINANCIAL STATEMENTS 9 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JULY 31, 2003 (UNAUDITED) NET INVESTMENT INCOME: DIVIDEND INCOME (net of $86,928 foreign withholding tax) $ 785,505 ------------- EXPENSES Investment management fee 229,265 Distribution fee (Class A shares) 358 Distribution fee (Class B shares) 175,253 Distribution fee (Class C shares) 1,659 Transfer agent fees and expenses 84,790 Shareholder reports and notices 42,345 Professional fees 32,537 Registration fees 22,040 Custodian fees 13,747 Trustees' fees and expenses 9,780 Other 2,163 ------------- TOTAL EXPENSES 613,937 ------------- NET INVESTMENT INCOME 171,568 ------------- NET REALIZED AND UNREALIZED GAIN (LOSS): NET REALIZED LOSS ON: Investments (158,504) Foreign exchange transactions (5,061) ------------- NET REALIZED LOSS (163,565) ------------- NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON: Investments 9,232,050 Translation of other assets and liabilities denominated in foreign currencies (11,590) ------------- NET APPRECIATION 9,220,460 ------------- NET GAIN 9,056,895 ------------- NET INCREASE $ 9,228,463 =============
SEE NOTES TO FINANCIAL STATEMENTS 10 STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED JULY 31, 2003 JANUARY 31, 2003 ------------- ---------------- (UNAUDITED) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $ 171,568 $ 109,281 Net realized loss (163,565) (5,548,408) Net change in unrealized depreciation 9,220,460 (8,339,982) ------------- ---------------- NET INCREASE (DECREASE) 9,228,463 (13,779,109) ------------- ---------------- DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Class A shares -- (5,559) Class B shares -- (153,752) Class C shares -- (2,362) Class D shares -- (40,073) ------------- ---------------- TOTAL DIVIDENDS -- (201,746) ------------- ---------------- Decrease from transactions in shares of beneficial interest (3,555,918) (18,151,319) ------------- ---------------- NET INCREASE (DECREASE) 5,672,545 (32,132,174) NET ASSETS: Beginning of period 34,532,534 66,664,708 ------------- ---------------- END OF PERIOD (Including accumulated undistributed net investment income of $112,299 and dividends in excess of net investment income of $59,269, respectively) $ 40,205,079 $ 34,532,534 ============= ================
SEE NOTES TO FINANCIAL STATEMENTS 11 NOTES TO FINANCIAL STATEMENTS JULY 31, 2003 (UNAUDITED) 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley Latin American Growth Fund (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified, open-end management investment company. The Fund's investment objective is long-term capital appreciation. The Fund seeks to achieve its objective by investing primarily in equity securities of Latin American issuers. The Fund was organized as a Massachusetts business trust on February 25, 1992 and commenced operations on December 30, 1992. On July 28, 1997, the Fund converted to a multiple class share structure. 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 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 equity 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) when market quotations are not readily available or Morgan Stanley Investment Advisors Inc. (the "Investment Manager") 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; (6) certain portfolio securities may be valued by an outside pricing service approved by the Fund's Trustees; and (7) 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. 12 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 Manager, 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. 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 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. F. 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. 13 G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to shareholders are recorded on the ex-dividend date. H. 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 MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement, the Fund pays the Investment Manager a management fee, accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined as of the close of each business day: 1.25% to the portion of daily net assets not exceeding $500 million and 1.20% to the portion of the daily net assets exceeding $500 million. 3. PLAN OF DISTRIBUTION Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager. 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 -- 1.0% of the lesser of: (a) the average daily aggregate gross sales of the Class B shares since the inception of the Fund (not including reinvestment of dividend or capital gain distributions) less the average daily aggregate net asset value of the Class B shares redeemed since the Fund's inception upon which a contingent deferred sales charge has been imposed or waived; or (b) 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. 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 $22,171,924 at July 31, 2003. 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 14 representatives may be reimbursed in the subsequent calendar year. For the six months ended July 31, 2003, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.25% and 1.0%, respectively. The Distributor has informed the Fund that for the six months ended July 31, 2003, it received contingent deferred sales charges from certain redemptions of the Fund's Class B shares and Class C shares of $6,280 and $46, respectively and received $349 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 July 31, 2003 aggregated $10,766,631 and $14,932,634, respectively. At July 31, 2003, Morgan Stanley Fund of Funds -- International Portfolio, an affiliate of the Investment Manager and Distributor, held 159,663 Class D shares of beneficial interest of the Fund. Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is the Fund's transfer agent. 5. FEDERAL INCOME TAX STATUS The amount of dividends and distributions from net investment income and net realized 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. At January 31, 2003, the Fund had a net capital loss carryforward of $86,880,785 to offset future capital gains to the extent provided by regulations, available through January 31 of the following years:
FOR THE YEAR ENDED JANUARY 31, ------------------------------------------------------------------------ 2004 2005 2007 2008 2011 ------------ ------------ ------------ ------------ ------------ $ 57,625,819 $ 19,838,661 $ 3,057,904 $ 2,899,656 $ 3,458,745 ============ ============ ============ ============ ============
As of January 31, 2003, the Fund had temporary book/tax differences primarily attributable to post-October losses (capital and foreign currency losses incurred after October 31 within the taxable year 15 which are deemed to arise on the first business day of the Fund's next taxable year) and capital loss deferrals on wash sales. 6. SHARES OF BENEFICIAL INTEREST Transactions in shares of beneficial interest were as follows:
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED JULY 31, 2003 JANUARY 31, 2003 ------------------------ --------------------------- (UNAUDITED) SHARES AMOUNT SHARES AMOUNT -------- ------------ ---------- ------------- CLASS A SHARES Sold 4,000 $ 36,669 11,758 $ 117,308 Reinvestment of dividends -- -- 647 5,385 Redeemed (11,919) (99,761) (26,931) (255,052) -------- ------------ ---------- ------------- Net decrease -- Class A (7,919) (63,092) (14,526) (132,359) -------- ------------ ---------- ------------- CLASS B SHARES Sold 98,586 776,287 226,513 2,125,386 Reinvestment of dividends -- -- 17,246 139,347 Redeemed (641,172) (5,153,040) (1,850,942) (15,722,837) -------- ------------ ---------- ------------- Net decrease -- Class B (542,586) (4,376,753) (1,607,183) (13,458,104) -------- ------------ ---------- ------------- CLASS C SHARES Sold 4,198 32,997 4,480 44,946 Reinvestment of dividends -- -- 283 2,288 Redeemed (8,226) (69,927) (14,795) (125,864) -------- ------------ ---------- ------------- Net decrease -- Class C (4,028) (36,930) (10,032) (78,630) -------- ------------ ---------- ------------- CLASS D SHARES Sold 139,517 1,221,360 238,833 1,879,342 Reinvestment of dividends -- -- 156 1,305 Redeemed (35,120) (300,503) (704,359) (6,362,873) -------- ------------ ---------- ------------- Net increase (decrease) -- Class D 104,397 920,857 (465,370) (4,482,226) -------- ------------ ---------- ------------- Net decrease in Fund (450,136) $ (3,555,918) (2,097,111) $ (18,151,319) ======== ============ ========== =============
7. 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. Forward 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 16 rates underlying the forward contracts. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. At July 31, 2003, there were no outstanding forward contracts. At July 31, 2003, investments in securities of issuers in Brazil and Mexico represented 44.3% and 41.3% of net assets, respectively. These investments, as well as other non-U.S. investments which involve risks and considerations not present with respect to U.S. securities, may be affected by economic or political developments in these regions. 17 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 JANUARY 31, MONTHS ENDED ------------------------------------------------------------ JULY 31, 2003 2003 2002 2001 2000 1999 ------------- -------- -------- -------- -------- -------- (UNAUDITED) CLASS A SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 7.47 $ 10.02 $ 11.90 $ 12.26 $ 7.33 $ 12.14 ------------- -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss)++ 0.07 0.08 0.14 0.00 (0.01) 0.15 Net realized and unrealized gain (loss) 2.09 (2.51) (2.02) (0.36) 4.94 (4.96) ------------- -------- -------- -------- -------- -------- Total income (loss) from investment operations 2.16 (2.43) (1.88) (0.36) 4.93 (4.81) ------------- -------- -------- -------- -------- -------- Less dividends from net investment income - (0.12) - - - - ------------- -------- -------- -------- -------- -------- Net asset value, end of period $ 9.63 $ 7.47 $ 10.02 $ 11.90 $ 12.26 $ 7.33 ============= ======== ======== ======== ======== ======== TOTAL RETURN+ 28.92%(1) (24.40)% (15.80)% (2.62)% 66.71% (39.62)% RATIOS TO AVERAGE NET ASSETS(3): Expenses 2.63%(2) 2.52% 2.20% 1.96% 2.28% 2.21% Net investment income 1.65%(2) 0.91% 1.15% 0.05% 0.16% 1.26% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 309 $ 299 $ 547 $ 936 $ 751 $ 58 Portfolio turnover rate 30%(1) 57% 73% 44% 59% 27%
- ---------- ++ 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. SEE NOTES TO FINANCIAL STATEMENTS 18
FOR THE SIX FOR THE YEAR ENDED JANUARY 31, MONTHS ENDED ------------------------------------------------------------ JULY 31, 2003 2003 2002 2001 2000 1999 ------------- -------- -------- -------- --------- --------- (UNAUDITED) CLASS B SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 7.23 $ 9.66 $ 11.55 $ 11.99 $ 7.24 $ 12.09 ------------- -------- -------- -------- --------- --------- Income (loss) from investment operations: Net investment income (loss)++ 0.04 0.01 0.04 (0.09) (0.06) 0.05 Net realized and unrealized gain (loss) 2.01 (2.41) (1.93) (0.35) 4.81 (4.90) ------------- -------- -------- -------- --------- --------- Total income (loss) from investment operations 2.05 (2.40) (1.89) (0.44) 4.75 (4.85) ------------- -------- -------- -------- --------- --------- Less dividends from net investment income - (0.03) - - - - ------------- -------- -------- -------- --------- --------- Net asset value, end of period $ 9.28 $ 7.23 $ 9.66 $ 11.55 $ 11.99 $ 7.24 ============= ======== ======== ======== ========= ========= TOTAL RETURN+ 28.35%(1) (24.90)% (16.36)% (3.43)% 65.19 % (40.12)% RATIOS TO AVERAGE NET ASSETS(3): Expenses 3.38%(2) 3.27% 2.96% 2.77% 3.06% 2.98% Net investment income (loss) 0.90%(2) 0.16% 0.39% (0.76)% (0.62)% 0.49% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 37,810 $ 33,372 $ 60,159 $ 99,431 $ 136,699 $ 105,678 Portfolio turnover rate 30%(1) 57% 73% 44% 59% 27%
- ---------- ++ 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. SEE NOTES TO FINANCIAL STATEMENTS 19
FOR THE SIX FOR THE YEAR ENDED JANUARY 31, MONTHS ENDED ------------------------------------------------------------ JULY 31, 2003 2003 2002 2001 2000 1999 ------------- -------- -------- -------- -------- -------- (UNAUDITED) CLASS C SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 7.23 $ 9.69 $ 11.57 $ 12.02 $ 7.24 $ 12.10 ------------- -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss)++ 0.04 0.01 0.04 (0.09) (0.06) 0.06 Net realized and unrealized gain (loss) 2.02 (2.42) (1.92) (0.36) 4.84 (4.92) ------------- -------- -------- -------- -------- -------- Total income (loss) from investment operations 2.06 (2.41) (1.88) (0.45) 4.78 (4.86) ------------- -------- -------- -------- -------- -------- Less dividends from net investment income - (0.05) - - - - ------------- -------- -------- -------- -------- -------- Net asset value, end of period $ 9.29 $ 7.23 $ 9.69 $ 11.57 $ 12.02 $ 7.24 ============= ======== ======== ======== ======== ======== TOTAL RETURN+ 28.49%(1) (24.88)% (16.34)% (3.42)% 65.47% (40.17)% RATIOS TO AVERAGE NET ASSETS(3): Expenses 3.38%(2) 3.27% 2.88% 2.77% 2.95% 2.98% Net investment income (loss) 0.90%(2) 0.16% 0.47% (0.76)% (0.51)% 0.49% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 352 $ 304 $ 504 $ 887 $ 776 $ 369 Portfolio turnover rate 30%(1) 57% 73% 44% 59% 27%
- ---------- ++ 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. SEE NOTES TO FINANCIAL STATEMENTS 20
FOR THE SIX FOR THE YEAR ENDED JANUARY 31, MONTHS ENDED ------------------------------------------------------------ JULY 31, 2003 2003 2002 2001 2000 1999 ------------- -------- -------- -------- -------- -------- (UNAUDITED) CLASS D SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 7.52 $ 10.11 $ 11.97 $ 12.30 $ 7.35 $ 12.16 ------------- -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss)++ 0.07 0.15 0.14 0.00 (0.02) 0.16 Net realized and unrealized gain (loss) 2.11 (2.59) (2.00) (0.33) 4.97 (4.97) ------------- -------- -------- -------- -------- -------- Total income (loss) from investment operations 2.18 (2.44) (1.86) (0.33) 4.95 (4.81) ------------- -------- -------- -------- -------- -------- Less dividends from net investment income - (0.15) - - - - ------------- -------- -------- -------- -------- -------- Net asset value, end of period $ 9.70 $ 7.52 $ 10.11 $ 11.97 $ 12.30 $ 7.35 ============= ======== ======== ======== ======== ======== TOTAL RETURN+ 28.99%(1) (24.24)% (15.54)% (2.37)% 66.80% (39.56)% RATIOS TO AVERAGE NET ASSETS(3): Expenses 2.38%(2) 2.27% 1.96% 1.77% 2.06% 1.98% Net investment income 1.90%(2) 1.16% 1.39% 0.24% 0.38% 1.49% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 1,733 $ 558 $ 5,455 $ 9,262 $ 588 $ 5 Portfolio turnover rate 30%(1) 57% 73% 44% 59% 27%
- ---------- ++ 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. SEE NOTES TO FINANCIAL STATEMENTS 21 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 Philip J. Purcell Fergus Reid OFFICERS Charles A. Fiumefreddo CHAIRMAN OF THE BOARD Mitchell M. Merin PRESIDENT Ronald E. Robison EXECUTIVE VICE PRESIDENT and PRINCIPAL EXECUTIVE OFFICER Barry Fink VICE PRESIDENT and GENERAL COUNSEL Joseph J. McAlinden VICE PRESIDENT Stefanie V. Chang VICE PRESIDENT Francis 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 AUDITORS Deloitte & Touche LLP Two World Financial Center New York, New York 10281 INVESTMENT MANAGER 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) 2003 Morgan Stanley [MORGAN STANLEY LOGO] [GRAPHIC] MORGAN STANLEY LATIN AMERICAN GROWTH FUND SEMIANNUAL REPORT JULY 31, 2003 [MORGAN STANLEY LOGO] 37939RPT-12088H03-OP-8/03 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. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable for semiannual reports. Item 8. [Reserved.] Item 9 - 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. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Fund's internal controls or in other factors that could significantly affect the Fund's internal controls subsequent to the date of their evaluation. (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 10 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 Latin American Growth Fund /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer September 22, 2003 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 September 22, 2003 /s/ Francis Smith Francis Smith Principal Financial Officer September 22, 2003 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 Latin American Growth Fund /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer December 8, 2003 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 December 8, 2003 /s/ Francis Smith Francis Smith Principal Financial Officer December 8, 2003 EX-99.CERT 3 a2124424zex-99_cert.txt EX-99.CERT EXHIBIT 10 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 Latin American Growth 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) 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) Omitted.] 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: September 22, 2003 /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer EXHIBIT 10 B2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER CERTIFICATIONS I, Francis Smith, certify that: 6. I have reviewed this report on Form N-CSR of Morgan Stanley Latin American Growth Fund; 7. 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; 8. 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; 9. 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) for the registrant and have: b) 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) Omitted.] e) 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 f) 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 10. 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): c) 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 d) 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: September 22, 2003 /s/ Francis Smith Francis Smith Principal Financial Officer EXHIBIT 10 B3 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 Latin American Growth 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) 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) Omitted.] 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: December 8, 2003 /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer EXHIBIT 10 B4 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER CERTIFICATIONS I, Francis Smith, certify that: 6. I have reviewed this report on Form N-CSR of Morgan Stanley Latin American Growth Fund; 7. 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; 8. 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; 9. 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) for the registrant and have: b) 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) Omitted.] e) 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 f) 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 10. 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): c) 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 d) 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: December 8, 2003 /s/ Francis Smith Francis Smith Principal Financial Officer EX-99.906CERT 4 a2124424zex-99_906cert.txt EX-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 Latin American Growth Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended July 31, 2003 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: September 22, 2003 /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 Latin American Growth Fund and will be retained by Morgan Stanley Latin American Growth 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 Latin American Growth Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended July 31, 2003 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: September 22, 2003 /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 Latin American Growth Fund and will be retained by Morgan Stanley Latin American Growth 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 Latin American Growth Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended July 31, 2003 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: December 8, 2003 /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 Latin American Growth Fund and will be retained by Morgan Stanley Latin American Growth 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 Latin American Growth Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended July 31, 2003 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: December 8, 2003 /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 Latin American Growth Fund and will be retained by Morgan Stanley Latin American Growth Fund and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----