-----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, JUUbssDXzMEKj1Df/NgDM6vuFXu3qTinVyFxX1rtLhMkAortxU4tsMdpfPslvNsH Oz0pXi7sxJ9QwvYgumzkYA== 0000912057-02-033874.txt : 20020828 0000912057-02-033874.hdr.sgml : 20020828 20020828171138 ACCESSION NUMBER: 0000912057-02-033874 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020828 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER ASIA PACIFIC FUND INC CENTRAL INDEX KEY: 0000919808 IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-08388 FILM NUMBER: 02751568 BUSINESS ADDRESS: STREET 1: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 6175578742 MAIL ADDRESS: STREET 1: MORGAN STANLEY ASIA PACIFIC FUND STREET 2: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 FORMER COMPANY: FORMER CONFORMED NAME: MORGAN STANLEY ASIA INVESTMENT FUND INC DATE OF NAME CHANGE: 19940316 FORMER COMPANY: FORMER CONFORMED NAME: MORGAN STANLEY ASIA PACIFIC FUND INC DATE OF NAME CHANGE: 19940505 N-30D 1 a2083631zn-30d.txt N-30D SEMI-ANNUAL REPORT JUNE 30, 2002 MORGAN STANLEY ASIA-PACIFIC FUND, INC. DIRECTORS AND OFFICERS BARTON M. BIGGS WILLIAM G. MORTON, JR. CHAIRMAN OF THE DIRECTOR BOARD OF DIRECTORS MICHAEL NUGENT RONALD E. ROBISON DIRECTOR PRESIDENT AND DIRECTOR FERGUS REID JOHN D. BARRETT II DIRECTOR DIRECTOR STEFANIE V. CHANG THOMAS P. GERRITY VICE PRESIDENT DIRECTOR LORRAINE TRUTEN GERARD E. JONES VICE PRESIDENT DIRECTOR JAMES W. GARRETT [MORGAN STANLEY LOGO] JOSEPH J. KEARNS TREASURER DIRECTOR MARY E. MULLIN VINCENT R. MCLEAN SECRETARY MORGAN STANLEY ASIA-PACIFIC FUND, DIRECTOR INC. BELINDA A. BRADY C. OSCAR MORONG, JR. ASSISTANT TREASURER DIRECTOR INVESTMENT ADVISER MORGAN STANLEY INVESTMENT MANAGEMENT INC. 1221 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10020 ADMINISTRATOR JPMORGAN CHASE BANK 73 TREMONT STREET BOSTON, MASSACHUSETTS 02108 CUSTODIAN JPMORGAN CHASE BANK 3 CHASE METRO TECH CENTER BROOKLYN, NEW YORK 11245 STOCKHOLDER SERVICING AGENT AMERICAN STOCK TRANSFER & TRUST COMPANY 59 MAIDEN LANE NEW YORK, NEW YORK 10030 (800) 278-4353 LEGAL COUNSEL CLIFFORD CHANCE ROGERS & WELLS LLP 200 PARK AVENUE NEW YORK, NEW YORK 10166 INDEPENDENT AUDITOR ERNST & YOUNG LLP 200 CLARENDON STREET BOSTON, MASSACHUSETTS 02116 FOR ADDITIONAL FUND INFORMATION, INCLUDING THE FUND'S NET ASSET VALUE PER SHARE AND INFORMATION REGARDING THE INVESTMENTS COMPRISING THE FUND'S PORTFOLIO, PLEASE MORGAN STANLEY CALL 1-800-221-6726 OR VISIT OUR WEBSITE INVESTMENT MANAGEMENT INC. AT www.morganstanley.com/im. INVESTMENT ADVISER MORGAN STANLEY ASIA-PACIFIC FUND, INC. OVERVIEW LETTER TO STOCKHOLDERS For the six months ended June 30, 2002, the Morgan Stanley Asia-Pacific Fund, Inc. (the "Fund") had a total return, based on net asset value per share, of 7.68% compared with 6.67% for its benchmark. The benchmark for the Fund is comprised of two Morgan Stanley Capital International (MSCI) indices; Japan Net and All-Country Asia-Pacific Free ex-Japan Net, with each index weighted equally. On June 30, 2002, the closing price of the Fund's shares on the New York Stock Exchange was $8.60 representing a 13.6% discount to the Fund's net asset value per share. MARKET REVIEW During the six months ending June 30, 2002, Asian ex-Japan equities performed well with markets like South Korea posting strong double digit returns. While in the second quarter, even though Asian ex-Japan equities retraced some of the gains posted during the first quarter, they still ended with a positive return for the first half of the year. Despite better than expected economic data from a number of emerging Asian economies, markets declined during the second quarter. This was mainly due to a falloff from the negative sentiment in the U.S. given increased reports of corporate accounting abuse. Concerns of geo-political risks in the Indian sub-continent and the Middle East also served to undermine investor confidence. Meanwhile, the Japanese market was one of the best performers among developed nations for the first half of 2002. Its performance was led by positive indicators such as increasing industrial production, falling inventory levels and improving business confidence announced by the Bank of Japan Tankan which was in line with growing recurring profits of Japanese corporations and GDP. Although this rise can be characterized as a cyclical bull market for Japanese equities, June proved challenging when U.S. markets dropped sharply following questionable accounting by some leading U.S. companies and concerns began to emerge regarding the global economic recovery. The Fund's overweight in South Korea, one of the strongest performing markets in the region, was a strong contributor to outperformance, while stock selection in Japan, Hong Kong and Singapore also added significantly to the Fund's return. However, overweight positions in Taiwan and Singapore, which lagged the Index, detracted from the Fund's overall return. MARKET OUTLOOK Overall, Asia ex-Japan equities have been relatively resilient despite the global market turmoil. The current global bear market, resulting from deterioration in investor confidence, reflects more accounting uncertainties than economic risks. In fact, most components of the U.S. economy have been on a rising trend but have been ignored by falling equity markets in the midst of dismal revelations of accounting abuse. While GDP growth in the second quarter was soft, it is likely there will be a mild recovery during the second half. However, we need to be watchful of consumer sentiment, which has remained resilient so far, collapsing in the months ahead given that markets have been extraordinarily depressed. In the Japanese market, we believe the key to sustained upward movement remain with a soft landing in the U.S., a stable currency and continuing strong economic data from Japan. In the short-term, it appears that all the shares bought during the March-May rally are now showing unrealized losses which could mean that a resistance to upward movement may be ahead. In the long-term, although we expect some announcements regarding tax reforms to spur the economy, economic problems still remain on how to generate sustainable domestic demand-led growth before the markets can rise on a more secular basis. We seem to have a market with historically attractive valuations and improving leading indicators for a Japanese cyclical recovery which is not fully reflected in share prices. Sincerely, /s/ Ronald E. Robison Ronald E. Robison President and Director July 2002 2 MORGAN STANLEY ASIA-PACIFIC FUND, INC. JUNE 30, 2002 PORTFOLIO SUMMARY Historical Information (Unaudited)
TOTAL RETURN (%) ---------------------------------------------------------------------------------- MARKET VALUE(1) NET ASSET VALUE(2) INDEX(3) ---------------------------------------------------------------------------------- AVERAGE AVERAGE AVERAGE CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL - ------------------------------------------------------------------------------------------------------------------ Year to Date 14.82% -- (7.68)% -- 6.67% -- One Year 2.02 2.02% (2.45) (2.45) (5.18) (5.18) Five Year (15.43) (3.30) (21.57) (4.74) (35.90) (8.51) Since Inception* (25.83) (3.71) (14.19) (1.91) (35.96) (5.48)
Past performance is not predictive of future performance. [CHART]
MORGAN STANLEY ASIA- MSCI JAPAN NET AND ALL-COUNTRY PACIFIC FUND, INC.(2) ASIA-PACIFIC FREE EX-JAPAN NET(3) 1994 -5.94% -5.24% 1995 9.24% 2.88% 1996 -2.87%+ -3.63% 1997 -26.36% -29.55% 1998 -0.34% -0.30% 1999 75.39% 55.16% 2000 -27.37% -30.21% 2001 -14.60% -17.39% Six Months Ended June 30, 2002 7.68% 6.67%
Returns and Per Share Information
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------------------------------------------------- 1994* 1995 1996 1997 1998 1999 2000 2001 2002 - ----------------------------------------------------------------------------------------------------------------------------------- Net Asset Value Per Share $13.20 $14.34 $11.95 $ 8.77 $ 8.73 $ 15.26 $ 10.82 $ 9.24 $ 9.95 - ----------------------------------------------------------------------------------------------------------------------------------- Market Value Per Share $12.25 $13.33 $ 9.75 $ 7.44 $ 7.00 $ 11.81 $ 8.69 $ 7.49 $ 8.60 - ----------------------------------------------------------------------------------------------------------------------------------- Premium/(Discount) (7.2)% (7.0)% (18.4)% (15.2)% (19.8)% (22.6)% (19.7)% (18.9)% (13.6)% - ----------------------------------------------------------------------------------------------------------------------------------- Income Dividends $ 0.04 $ 0.05 $ 0.61 $ 0.02 $ 0.01 $ 0.04 $ 0.22 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Capital Gains Distributions $ 0.01 $ 0.02 -- -- -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Fund Total Return(2) (5.94)% 9.24% (2.87)%+ (26.36)% (0.34)% 75.39% (27.37)% (14.60)% 7.68% - ----------------------------------------------------------------------------------------------------------------------------------- Index Total Return(3) (5.24)% 2.88% (3.63)% (29.55)% (0.30)% 55.16% (30.21)% (17.39)% 6.67% - -----------------------------------------------------------------------------------------------------------------------------------
(1) Assumes dividends and distributions, if any, were reinvested. (2) Total investment return based on net asset value per share reflects the effects of changes in net asset value on the performance of the Fund during each period, and assumes dividends and distributions, if any, were reinvested. These percentages are not an indication of the performance of a stockholder's investment in the Fund based on market value due to differences between the market price of the stock and the net asset value per share of the Fund. (3) The benchmark for investment performance is comprised of two Morgan Stanley Capital International (MSCI) indices; Japan Net and All-Country Asia-Pacific Free ex-Japan Net with each index weighted equally. The net dividends reinvested series approximate the minimum possible dividend The dividend is reinvested after deduction of withholding tax, applying the rate applicable to reinvestment. non-resident individuals who do not benefit from double taxation treaties. * The Fund commenced operations on August 2, 1994. + This return does not include the effect of the rights issued in connection with the rights offering. FOREIGN INVESTING INVOLVES CERTAIN RISKS, INCLUDING CURRENCY FLUCTUATIONS AND CONTROLS, RESTRICTIONS ON FOREIGN INVESTMENTS, LESS GOVERNMENTAL SUPERVISION AND REGULATION, LESS LIQUIDITY AND THE POTENTIAL FOR MARKET VOLATILITY AND POLITICAL INSTABILITY. 3 MORGAN STANLEY ASIA-PACIFIC FUND, INC. JUNE 30, 2002 (UNAUDITED) INVESTMENT SUMMARY Allocation of Total Investments [CHART] -------------------------------- Equity Securities 98.3% Short-Term Investments 1.7 --------------------------------
Industries [CHART] -------------------------------- Semiconductor Equipment & Products 9.1% Banks 7.4 Household Durables 7.3 Machinery 5.8 Computers & Peripherals 5.4 Electronics Equipment & Instruments 5.3 Automobiles 4.9 Metals & Mining 4.3 Chemicals 4.2 Real Estate 4.0 Other 42.3 --------------------------------
Country Weightings [CHART] -------------------------------- Japan 49.6% South Korea 14.1 Australia 9.9 China/Hong Kong 8.6 Taiwan 8.1 Singapore 5.1 India 3.0 Malaysia 0.7 Other 0.9 --------------------------------
Ten Largest Holdings*
PERCENT OF NET ASSETS - ----------------------------------------------------------------------- 1. Samsung Electronics Co., Ltd. (South Korea) 4.4% 2. SK Telecom Co., Ltd. (South Korea) 1.7 3. Nintendo Co., Ltd. (Japan) 1.6 4. Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan) 1.6 5. Sony Corp. (Japan) 1.5 6. Toyota Motor Corp. (Japan) 1.5 7. Canon, Inc. (Japan) 1.5 8. BHP Billiton Ltd. (Australia) 1.5 9. Nissan Motor Co., Ltd. (Japan) 1.4 10. Ricoh Co., Ltd. (Japan) 1.4 ---- 18.1% ====
* Excludes Short-Term Investments 4 MORGAN STANLEY ASIA-PACIFIC FUND, INC. FINANCIAL STATEMENTS JUNE 30, 2002 (UNAUDITED) STATEMENT OF NET ASSETS
VALUE SHARES (000) - ----------------------------------------------------------------------- COMMON STOCKS (96.9%) (UNLESS OTHERWISE NOTED) ======================================================================= AUSTRALIA (9.6%) AIRLINES Qantas Airlines Ltd. 854,800 $ 2,216 - ----------------------------------------------------------------------- BANKS Australia & New Zealand Banking Group Ltd. 399,350 4,341 Commonwealth Bank of Australia 224,150 4,160 - ----------------------------------------------------------------------- 8,501 - ----------------------------------------------------------------------- BEVERAGES Foster's Brewing Group Ltd. 736,750 1,960 - ----------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES Brambles Industries Ltd. 268,151 1,427 - ----------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES Telstra Corp., Ltd. 440,350 1,156 - ----------------------------------------------------------------------- FOOD & DRUG RETAILING Woolworths Ltd. 252,400 1,870 - ----------------------------------------------------------------------- INSURANCE QBE Insurance Group Ltd. 239,050 895 - ----------------------------------------------------------------------- MEDIA News Corp., Ltd. 508,900 2,776 - ----------------------------------------------------------------------- METALS & MINING BHP Billiton Ltd. 902,277 5,237 MIM Holdings Ltd. 2,500,540 1,832 Rio Tinto Ltd. 244,050 4,610 - ----------------------------------------------------------------------- 11,679 - ----------------------------------------------------------------------- PHARMACEUTICALS CSL Ltd. 68,810 1,248 - ----------------------------------------------------------------------- REAL ESTATE Lend Lease Corp., Ltd. 107,750 640 - ----------------------------------------------------------------------- 34,368 ======================================================================= CHINA/HONG KONG (8.6%) AIRLINES Cathay Pacific Airways 474,000 726 - ----------------------------------------------------------------------- BANKS Hang Seng Bank Ltd. 67,600 724 - ----------------------------------------------------------------------- COMPUTERS & PERIPHERALS Legend Group Ltd. 1,294,000 473 - ----------------------------------------------------------------------- DISTRIBUTORS Li & Fung Ltd. 422,000 568 - ----------------------------------------------------------------------- DIVERSIFIED FINANCIALS Swire Pacific Ltd. 'A' 180,600 924 - ----------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES Asia Satellite Telecommunications Holdings Ltd. 248,000 410 Pacific Century CyberWorks Ltd. 1,510,000 (a) 356 - ----------------------------------------------------------------------- 766 - ----------------------------------------------------------------------- ELECTRIC UTILITIES CLP Holdings Ltd. 162,700 647 Hong Kong Electric Holdings Ltd. 174,000 650 - ----------------------------------------------------------------------- 1,297 - ----------------------------------------------------------------------- ELECTRICAL EQUIPMENT Johnson Electric Holdings Ltd. 1,358,000 1,610 - ----------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS QPL International Holdings Ltd. 1,796,000 (a) 662 - ----------------------------------------------------------------------- HOUSEHOLD DURABLES Techtronic Industries Co., Ltd. 291,000 248 - ----------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES China Merchants Holdings International Co., Ltd. 384,000 295 Citic Pacific Ltd. 124,000 269 Hutchison Whampoa Ltd. 617,950 4,615 - ----------------------------------------------------------------------- 5,179 - ----------------------------------------------------------------------- MEDIA Television Broadcasts Ltd. 162,000 690 - ----------------------------------------------------------------------- METALS & MINING Yanzhou Coal Mining Co., Ltd. 1,422,000 524 - ----------------------------------------------------------------------- OIL & GAS CNOOC Ltd. 733,000 982 PetroChina Co., Ltd. 3,024,000 644 - ----------------------------------------------------------------------- 1,626 - ----------------------------------------------------------------------- REAL ESTATE Cheung Kong (Holdings) Ltd. 344,000 2,867 Henderson Land Development Co., Ltd. 236,000 980 New World Development Co., Ltd. 522,000 415 Sun Hung Kai Properties Ltd. 531,000 4,033 - ----------------------------------------------------------------------- 8,295 - ----------------------------------------------------------------------- SOFTWARE Travelsky Technology Ltd. 217,000 149 - ----------------------------------------------------------------------- SPECIALTY RETAIL Esprit Holdings Ltd. 1,251,000 2,398 - -----------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 5 MORGAN STANLEY ASIA-PACIFIC FUND, INC. FINANCIAL STATEMENTS JUNE 30, 2002 (UNAUDITED) STATEMENT OF NET ASSETS
VALUE SHARES (000) - ----------------------------------------------------------------------- CHINA/HONG KONG (CONTINUED) TEXTILES & APPAREL Texwinca Holdings Ltd. 555,000 $ 477 - ----------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES China Mobile (Hong Kong) Ltd. ADR 864,000 (a) 2,559 SmarTone Telecommunications Holdings Ltd. 839,000 (a) 946 - ----------------------------------------------------------------------- 3,505 - ----------------------------------------------------------------------- 30,841 ======================================================================= INDIA (2.5%) AUTOMOBILES Hero Honda Motors Ltd. 155,725 983 - ----------------------------------------------------------------------- BANKS HDFC Bank Ltd. ADR 53,200 (a) 686 State Bank of India Ltd. 145,235 732 - ----------------------------------------------------------------------- 1,418 - ----------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES Mahanagar Telephone Nigam Ltd. 158,127 461 - ----------------------------------------------------------------------- ELECTRICAL EQUIPMENT Bharat Heavy Electricals Ltd. 171,937 625 - ----------------------------------------------------------------------- IT CONSULTING & SERVICES Infosys Technologies Ltd. 32,850 2,208 Wipro Ltd. 20,000 607 - ----------------------------------------------------------------------- 2,815 - ----------------------------------------------------------------------- METALS & MINING Tata Iron & Steel Co., Ltd. 1,910 6 - ----------------------------------------------------------------------- OIL & GAS Bharat Petroleum Corp., Ltd. 67,300 368 Hindustan Petroleum Corp., Ltd. 69,000 374 - ----------------------------------------------------------------------- 742 - ----------------------------------------------------------------------- PHARMACEUTICALS Cipla Ltd. 9,235 178 Dr. Reddy's Laboratories Ltd. 56,984 1,103 - ----------------------------------------------------------------------- 1,281 - ----------------------------------------------------------------------- TOBACCO ITC Ltd. 58,900 771 - ----------------------------------------------------------------------- 9,102 ======================================================================== JAPAN (49.6%) AUTOMOBILES Nissan Motor Co., Ltd. 732,000 5,080 Suzuki Motor Corp. 284,000 3,512 Toyota Motor Corp. 198,600 5,280 - ----------------------------------------------------------------------- 13,872 - ----------------------------------------------------------------------- BANKS Mitsubishi Tokyo Financial Group, Inc. 45 304 - ----------------------------------------------------------------------- BUILDING PRODUCTS Sanwa Shutter Corp., Ltd. 352,000 1,065 - ----------------------------------------------------------------------- CHEMICALS Daicel Chemical Industries Ltd. 798,000 2,729 Denki Kagaku Kogyo Kabushiki Kaisha 795,000 2,539 Kaneka Corp. 492,000 3,435 Lintec Corp. 195,000 1,475 Mitsubishi Chemical Corp. 929,000 (a) 2,167 Shin-Etsu Polymer Co., Ltd. 387,000 1,382 - ----------------------------------------------------------------------- 13,727 - ----------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES Dai Nippon Printing Co., Ltd. 188,000 2,501 Nissha Printing Co., Ltd. 63,000 380 - ----------------------------------------------------------------------- 2,881 - ----------------------------------------------------------------------- COMPUTERS & PERIPHERALS Fujitsu Ltd. 571,000 3,991 Mitsumi Electric Co., Ltd. 215,500 3,396 NEC Corp. 454,000 3,166 Toshiba Corp. 1,163,000 (a) 4,745 - ----------------------------------------------------------------------- 15,298 - ----------------------------------------------------------------------- CONSTRUCTION & ENGINEERING Kurita Water Industries Ltd. 234,000 2,886 Obayashi Corp. 692,000 1,967 Sanki Engineering Co., Ltd. 70,000 336 - ----------------------------------------------------------------------- 5,189 - ----------------------------------------------------------------------- DIVERSIFIED FINANCIALS Hitachi Credit Corp. 258,300 3,455 - ----------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES Nifco, Inc. 203,000 2,018 Nippon Telephone & Telegraph Corp. 936 3,858 - ----------------------------------------------------------------------- 5,876 - ----------------------------------------------------------------------- ELECTRIC UTILITIES Tokyo Electric Power Co., Inc. 161,500 3,329 - ----------------------------------------------------------------------- ELECTRICAL EQUIPMENT Furakawa Electric Co., Ltd. 414,000 1,589 Kyudenko Corp. 220,000 835 - ----------------------------------------------------------------------- 2,424 - -----------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 6 MORGAN STANLEY ASIA-PACIFIC FUND, INC. FINANCIAL STATEMENTS JUNE 30, 2002 (UNAUDITED) STATEMENT OF NET ASSETS
VALUE SHARES (000) - ----------------------------------------------------------------------- JAPAN (CONTINUED) ELECTRONIC EQUIPMENT & INSTRUMENTS Hitachi High-Technologies Corp. 70,000 $ 993 Hitachi Ltd. 685,000 4,438 Kyocera Corp. 57,600 4,214 Ryosan Co., Ltd. 133,000 1,546 TDK Corp. 66,900 3,166 - ----------------------------------------------------------------------- 14,357 - ----------------------------------------------------------------------- FOOD & DRUG RETAILING FamilyMart Co., Ltd. 123,100 2,985 - ----------------------------------------------------------------------- FOOD PRODUCTS House Foods Corp. 136,000 1,330 Nippon Meat Packers, Inc. 147,000 1,846 - ----------------------------------------------------------------------- 3,176 - ----------------------------------------------------------------------- HOUSEHOLD DURABLES Casio Computer Co., Ltd. 401,000 1,965 Matsushita Electric Industrial Co., Ltd. 364,000 4,976 Nintendo Co., Ltd. 38,100 5,622 Rinnai Corp. 83,700 1,890 Sangetsu Co., Ltd. 17,000 275 Sekisui Chemical Co., Ltd. 399,000 1,368 Sekisui House Ltd. 351,000 2,585 Sony Corp. 100,700 5,330 - ----------------------------------------------------------------------- 24,011 - ----------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS Fuji Photo Film Co., Ltd. 148,000 4,789 Toho Co., Ltd. 45,000 517 Yamaha Corp. 242,000 2,359 - ----------------------------------------------------------------------- 7,665 - ----------------------------------------------------------------------- MACHINERY Amada Co., Ltd. 481,000 2,337 Daifuku Co., Ltd. 583,000 2,442 Daikin Industries Ltd. 245,000 4,496 Fuji Machine Manufacturing Co., Ltd. 156,000 2,426 Fujitec Co., Ltd. 178,000 878 Minebea Co., Ltd. 479,000 2,819 Mitsubishi Heavy Industries Ltd. 1,048,000 3,181 Tsubakimoto Chain Co. 713,000 2,134 - ----------------------------------------------------------------------- 20,713 - ----------------------------------------------------------------------- MARINE Mitsubishi Logistics Corp. 135,000 919 - ----------------------------------------------------------------------- OFFICE ELECTRONICS Canon, Inc. 139,000 5,265 Ricoh Co., Ltd. 291,000 5,048 - ----------------------------------------------------------------------- 10,313 - ----------------------------------------------------------------------- PHARMACEUTICALS Ono Pharmaceutical Co., Ltd. 101,000 3,614 Sankyo Co., Ltd. 261,000 3,557 Yamanouchi Pharmaceutical Co., Ltd. 167,900 4,366 - ----------------------------------------------------------------------- 11,537 - ----------------------------------------------------------------------- REAL ESTATE Mitsubishi Estate Co., Ltd. 436,000 3,572 - ----------------------------------------------------------------------- ROAD & RAIL East Japan Railway Co. 734 3,443 - ----------------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT & PRODUCTS Rohm Co., Ltd. 14,200 2,124 - ----------------------------------------------------------------------- TEXTILES & APPAREL Nisshinbo Industries, Inc. 291,000 1,355 - ----------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS Mitsubishi Corp. 461,000 3,342 Nagase & Co., Ltd. 197,000 942 - ----------------------------------------------------------------------- 4,284 - ----------------------------------------------------------------------- 177,874 ======================================================================= MALAYSIA (0.7%) HOTELS, RESTAURANTS & LEISURE Magnum Corp. Bhd 1,446,000 1,020 - ----------------------------------------------------------------------- TOBACCO British American Tobacco (Malaysia) Bhd 163,000 1,523 - ----------------------------------------------------------------------- 2,543 ======================================================================= SINGAPORE (5.1%) AEROSPACE & DEFENSE SIA Engineering Co., Ltd. 469,000 634 Singapore Technologies Engineering Ltd. 668,000 730 - ----------------------------------------------------------------------- 1,364 - ----------------------------------------------------------------------- AIRLINES Singapore Airlines Ltd. 256,000 1,868 - ----------------------------------------------------------------------- BANKS DBS Group Holdings Ltd. 258,979 1,817 Oversea-Chinese Banking Corp., Ltd. 312,700 2,070 United Overseas Bank Ltd. 415,389 2,985 - ----------------------------------------------------------------------- 6,872 - -----------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 7 MORGAN STANLEY ASIA-PACIFIC FUND, INC. FINANCIAL STATEMENTS JUNE 30, 2002 (UNAUDITED) STATEMENT OF NET ASSETS
VALUE SHARES (000) - ----------------------------------------------------------------------- SINGAPORE (CONTINUED) DIVERSIFIED FINANCIALS Keppel Corp., Ltd. 309,000 $ 720 - ----------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES Singapore Telecommunications Ltd. 133,000 103 - ----------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Venture Manufacturing (Singapore) Ltd. 195,000 1,556 - ----------------------------------------------------------------------- MARINE Neptune Orient Lines 1,300,000 (a) 750 - ----------------------------------------------------------------------- MEDIA Singapore Press Holdings Ltd. 100,600 1,133 - ----------------------------------------------------------------------- REAL ESTATE Capitaland, Ltd. 1,361,000 1,178 City Developments Ltd. 250,000 806 - ----------------------------------------------------------------------- 1,984 - ----------------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT & PRODUCTS Chartered Semiconductor Manufacturing Ltd. 485,000 (a) 988 - ----------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE Sembcorp Logistics Ltd. 671,800 840 - ----------------------------------------------------------------------- 18,178 ======================================================================= SOUTH KOREA (12.7%) AUTO COMPONENTS Hyundai Mobis 141,420 2,986 - ----------------------------------------------------------------------- AUTOMOBILES Hyundai Motor Co., Ltd. 132,690 3,987 - ----------------------------------------------------------------------- BANKS Hana Bank 38,015 543 Kookmin Bank 40,357 1,959 Shinhan Financial Group Co., Ltd. 167,260 2,364 - ----------------------------------------------------------------------- 4,866 - ----------------------------------------------------------------------- CHEMICALS LG Chem Ltd. 31,980 1,156 - ----------------------------------------------------------------------- DIVERSIFIED FINANCIALS Samsung Securities Co., Ltd. 20,360 (a) 582 Seoul Securities Co., Ltd. 70,930 271 - ----------------------------------------------------------------------- 853 - ----------------------------------------------------------------------- ELECTRIC UTILITIES Korea Electric Power Corp. 20,680 378 Korea Electric Power Corp. ADR 62,600 656 - ----------------------------------------------------------------------- 1,034 - ----------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Hyundai Development Co. 139,830 (a) 891 Samsung Electro-Mechanics Co., Ltd. 34,131 1,654 - ----------------------------------------------------------------------- 2,545 - ----------------------------------------------------------------------- FOOD PRODUCTS Tongyang Confectionery Corp. 19,790 868 - ----------------------------------------------------------------------- HOUSEHOLD DURABLES Humax Co., Ltd. 43,010 939 LG Electronics Ltd. 26,169 (a) 1,044 - ----------------------------------------------------------------------- 1,983 - ----------------------------------------------------------------------- HOUSEHOLD PRODUCTS LG Household & Health Care Ltd. 14,730 443 - ----------------------------------------------------------------------- INSURANCE Hyundai Marine & Fire Insurance Co., Ltd. 17,230 513 - ----------------------------------------------------------------------- MEDIA CJ39 Shopping Corp. 11,868 813 - ----------------------------------------------------------------------- METALS & MINING POSCO 21,070 2,338 POSCO ADR 20,700 565 - ----------------------------------------------------------------------- 2,903 - ----------------------------------------------------------------------- MULTILINE RETAIL Shinsegae Co., Ltd. 5,320 902 - ----------------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT & PRODUCTS Samsung Electronics Co., Ltd. 50,357 13,772 - ----------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES SK Telecom Co., Ltd. 17,400 3,898 SK Telecom Co., Ltd. ADR 88,900 2,204 - ----------------------------------------------------------------------- 6,102 - ----------------------------------------------------------------------- 45,726 ======================================================================= TAIWAN (8.1%) AIRLINES Eva Airways Corp. 1,889,000 (a) 769 - ----------------------------------------------------------------------- BANKS Fubon Financial Holding Co., Ltd. 1,531,928 1,531 Taipei Bank 986,000 788 Taishin Financial Holdings Co., Ltd. 2,459,000 (a) 1,325 - ----------------------------------------------------------------------- 3,644 - -----------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 8 MORGAN STANLEY ASIA-PACIFIC FUND, INC. FINANCIAL STATEMENTS JUNE 30, 2002 (UNAUDITED) STATEMENT OF NET ASSETS
VALUE SHARES (000) - ------------------------------------------------------------------------- TAIWAN (CONTINUED) COMMUNICATIONS EQUIPMENT Accton Technology Corp. 1,381,000 (a) $ 2,377 - ------------------------------------------------------------------------- COMPUTERS & PERIPHERALS Acer Peripherals Inc. 427,120 690 Asustek Computer, Inc. 455,800 (a) 1,371 Compal Electronics, Inc. 384,000 369 Largan Precision Co., Ltd. 81,000 (a) 575 Quanta Computer, Inc. 274,000 771 - ------------------------------------------------------------------------- 3,776 - ------------------------------------------------------------------------- CONSTRUCTION MATERIALS Taiwan Cement Corp. 766,000 (a) 252 - ------------------------------------------------------------------------- DIVERSIFIED FINANCIALS Chinatrust Financial Holding Co., Ltd. 4,098,043 (a) 3,618 Sinopac Holdings Co. 1,768,668 (a) 773 - ------------------------------------------------------------------------- 4,391 - ------------------------------------------------------------------------- ELECTRICAL EQUIPMENT Phoenixtec Power Co., Ltd. 489,000 379 - ------------------------------------------------------------------------- FOOD & DRUG RETAILING President Chain Store Corp. 262,226 491 - ------------------------------------------------------------------------- METALS & MINING China Steel Corp. 688,670 355 - ------------------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT & PRODUCTS Advanced Semiconductor Engineering, Inc. 509,000 (a) 338 ASE Test Ltd. 42,500 (a) 412 Novatek Microelectronics Corp., Ltd. 328,000 (a) 884 Orient Semiconductor Electronics Ltd. 1,160,000 (a) 359 Siliconware Precision Industries Co. 1,375,247 (a) 963 Taiwan Semiconductor Manufacturing Co., Ltd. 2,740,584 (a) 5,578 United Microelectronics Corp. 2,566,910 (a) 3,081 - ------------------------------------------------------------------------- 11,615 - ------------------------------------------------------------------------- TEXTILES & APPAREL Formosa Chemicals & Fibre Corp. 621,440 565 - ------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES Taiwan Cellular Corp. 322,425 (a) 412 - ------------------------------------------------------------------------- 29,026 ========================================================================= TOTAL COMMON STOCKS (Cost $372,563) 347,658 ========================================================================= PREFERRED STOCKS (1.1%) ========================================================================= AUSTRALIA (0.3%) MEDIA News Corp., Ltd. 229,800 1,059 - ------------------------------------------------------------------------- SOUTH KOREA (0.8%) AUTOMOBILES Hyundai Motor Co., Ltd. 64,310 706 - ------------------------------------------------------------------------- SEMICONDUCTOR EQUIPMENT & PRODUCTS Samsung Electronics Co., Ltd. 15,100 2,046 - ------------------------------------------------------------------------- 2,752 ========================================================================= TOTAL PREFERRED STOCKS (Cost $4,031) 3,811 ========================================================================= INVESTMENT COMPANIES (0.5%) ========================================================================= INDIA (0.5%) Morgan Stanley Growth Fund (Cost $1,744) 9,491,200 (a,c) 1,748 - ------------------------------------------------------------------------- FACE AMOUNT (000) - ------------------------------------------------------------------------- SHORT-TERM INVESTMENT (1.2%) ========================================================================= UNITED STATES (1.2%) REPURCHASE AGREEMENT J.P. Morgan Securities Inc., 1.95%, dated 6/28/02, due 7/01/02 (Cost $4,350) $ 4,350 (b) 4,350 ========================================================================= FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.5%) ========================================================================= Hong Kong Dollar HKD 494 63 Indian Rupee INR 353 7 Japanese Yen JPY 104,148 871 Singapore Dollar SGD 24 14 Taiwan Dollar TWD 24,615 737 - ------------------------------------------------------------------------- TOTAL FOREIGN CURRENCY (Cost $1,688) 1,692 =========================================================================
The accompanying notes are an integral part of the financial statements. 9 MORGAN STANLEY ASIA-PACIFIC FUND, INC. FINANCIAL STATEMENTS JUNE 30, 2002 (UNAUDITED) STATEMENT OF NET ASSETS
VALUE (000) - ------------------------------------------------------------------------- TOTAL INVESTMENTS (100.2%) (Cost $384,376) $ 359,259 ========================================================================= VALUE (000) - ------------------------------------------------------------------------- OTHER ASSETS (0.1%) Cash $ 1 Dividends Receivable 264 Receivable for Investments Sold 230 Tax Reclaim Receivable 5 Interest Receivable 1 Other 68 569 ========================================================================= LIABILITIES (-0.3%) Payable For: Investment Advisory Fees (291) Investments Purchased (247) Professional Fees (239) Custodian Fees (123) Transfer Agent Fees (80) Directors' Fees and Expenses (71) Stockholder Reporting Expenses (70) Administrative Fees (42) Other Liabilities (35) (1,198) ========================================================================= NET ASSETS (100.0%) Applicable to 36,049,057 issued and outstanding $ 0.01 par value shares (100,000,000 shares authorized) $ 358,630 ========================================================================= NET ASSET VALUE PER SHARE $ 9.95 ========================================================================= AT JUNE 30, 2002, NET ASSETS CONSISTED OF: Common Stock $ 360 Paid-in Capital 591,068 Undistributed Net Investment Income (Loss) 253 Accumulated Net Realized Gain (Loss) (207,937) Unrealized Appreciation (Depreciation) on Investments and Foreign Currency Translations (25,114) ========================================================================= TOTAL NET ASSETS $ 358,630 =========================================================================
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION: The Fund had the following foreign currency exchange contract(s) open at period end:
CURRENCY IN NET TO EXCHANGE UNREALIZED DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS) (000) (000) DATE (000) (000) (000) ============================================================================== US$ 172 $172 7/01/02 SGD 303 $172 $ --@ ==============================================================================
(a) -- Non-income producing. (b) -- The repurchase agreement is fully collateralized by U.S. government and/or agency obligations based on market prices at the date of this statement of net assets. The investment in the repurchase agreement is through participation in a joint account with affiliated funds. (c) -- Fund is advised by an affiliate. @ -- Value is less than $500. ADR -- American Depositary Receipt HKD -- Hong Kong Dollar INR -- Indian Rupee JPY -- Japanese Yen SGD -- Singapore Dollar TWD -- Taiwan Dollar The accompanying notes are an integral part of the financial statements. 10 MORGAN STANLEY ASIA-PACIFIC FUND, INC. FINANCIAL STATEMENTS JUNE 30, 2002 (UNAUDITED) STATEMENT OF NET ASSETS SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY CLASSIFICATION -- JUNE 30, 2002
PERCENT VALUE OF NET INDUSTRY (000) ASSETS - ------------------------------------------------------------- Airlines $ 5,579 1.6% Automobiles 17,502 4.9 Banks 26,329 7.4 Chemicals 14,883 4.2 Commercial Services & Supplies 4,308 1.2 Computers & Peripherals 19,547 5.4 Construction & Engineering 5,189 1.5 Diversified Financials 10,343 2.9 Diversified Telecommunication Services 8,362 2.3 Electric Utilities 5,660 1.6 Electrical Equipment 5,038 1.4 Electronic Equipment & Instruments 19,120 5.3 Food & Drug Retailing 5,346 1.5 Food Products 4,044 1.1 Household Durables 26,242 7.3 Industrial Conglomerates 5,179 1.4 Leisure Equipment & Products 7,665 2.1 Machinery 20,713 5.8 Media 6,471 1.8 Metals & Mining 15,467 4.3 Office Electronics 10,313 2.9 Pharmaceuticals 14,066 3.9 Real Estate 14,491 4.0 Semiconductor Equipment & Products 32,591 9.1 Trade Companies & Distributors 4,284 1.2 Wireless Telecommunication Services 10,019 2.8 Other 40,508 11.3 - ------------------------------------------------------------ $ 359,259 100.2% ============================================================
The accompanying notes are an integral part of the financial statements. 11 MORGAN STANLEY ASIA-PACIFIC FUND, INC. FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2002 (UNAUDITED) STATEMENT OF OPERATIONS (000) - ------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends (net of $362 of foreign taxes withheld) $ 3,340 Interest 95 ========================================================================================================================= TOTAL INCOME 3,435 ========================================================================================================================= EXPENSES Investment Advisory Fees 2,016 Administrative Fees 220 Custodian Fees 171 Professional Fees 110 Stockholder Reporting Expenses 84 Transfer Agent Fees 55 Directors' Fees and Expenses 3 Country Tax Expense 1 Other Expenses 105 ========================================================================================================================= TOTAL EXPENSES 2,765 ========================================================================================================================= NET INVESTMENT INCOME (LOSS) 670 ========================================================================================================================= NET REALIZED GAIN (LOSS) ON: Investments 200 ========================================================================================================================= CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON: Investments 29,060 Foreign Currency Translations 26 ========================================================================================================================= CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 29,086 ========================================================================================================================= TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 29,286 ========================================================================================================================= NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 29,956 ========================================================================================================================= SIX MONTHS ENDED JUNE 30, 2002 YEAR ENDED (UNAUDITED) DECEMBER 31, 2001 STATEMENT OF CHANGES IN NET ASSETS (000) (000) - ------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS Operations: Net Investment Income (Loss) $ 670 $ 859 Net Realized Gain (Loss) 200 (70,098) Change in Unrealized Appreciation (Depreciation) 29,086 (18,155) ========================================================================================================================= NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 29,956 (87,394) ========================================================================================================================= Capital Share Transactions: Repurchase of Shares (6,933,298 and 14,446,519 shares, respectively) (68,662) (136,775) ========================================================================================================================= TOTAL INCREASE (DECREASE) (38,706) (224,169) ========================================================================================================================= Net Assets: Beginning of Period 397,336 621,505 ========================================================================================================================= END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) OF $253 AND $(417), RESPECTIVELY) $ 358,630 $ 397,336 =========================================================================================================================
The accompanying notes are an integral part of the financial statements. 12 MORGAN STANLEY ASIA-PACIFIC FUND, INC. FINANCIAL HIGHLIGHTS SELECTED PER SHARE DATA AND RATIOS
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 2002 ---------------------------------------------------------------- (UNAUDITED) 2001 2000 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $ 9.24 $ 10.82 $ 15.26 $ 8.73 $ 8.77 $ 11.95 - ------------------------------------------------------------------------------------------------------------------------------------ Net Investment Income (Loss) 0.02 (0.02) (0.01) 0.01 0.06 0.03 Net Realized and Unrealized Gain (Loss) on Investments 0.67 (1.56) (4.50) 6.44 (0.17) (3.19) - ------------------------------------------------------------------------------------------------------------------------------------ Total from Investment Operations 0.69 (1.58) (4.51) 6.45 (0.11) (3.16) - ------------------------------------------------------------------------------------------------------------------------------------ Distributions from and/or in excess of: Net Investment Income -- -- (0.22) (0.04) (0.01) (0.02) - ------------------------------------------------------------------------------------------------------------------------------------ Anti--Dilutive Effect of Shares Repurchased 0.02 0.00# 0.29 0.12 0.08 -- - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD $ 9.95 $ 9 .24 $ 10.82 $ 15.26 $ 8.73 $ 8.77 ==================================================================================================================================== PER SHARE MARKET VALUE, END OF PERIOD $ 8.60 $ 7 .49 $ 8.69 $ 11.81 $ 7.00 $ 7.44 ==================================================================================================================================== TOTAL INVESTMENT RETURN: Market Value 14.82%+ (13.78)% (24.66)% 69.32% (5.77)% (23.46)% Net Asset Value (1) 7.68%+ (14.60)% (27.37)% 75.39% (0.34)% (26.36)% ==================================================================================================================================== RATIOS, SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSETS, END OF PERIOD (THOUSANDS) $ 358,630 $397,336 $621,505 $949,541 $ 587,156 $628,173 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of Expenses to Average Net Assets 1.37%* 1.39% 1.26% 1.29% 1.42% 1.34% Ratio of Net Investment Income (Loss) to Average Net Assets 0.33%* 0.19% (0.07)% 0.10% 0.80% 0.25% Portfolio Turnover Rate 19%+ 27% 35% 65% 42% 66% - ------------------------------------------------------------------------------------------------------------------------------------
+ Not annualized * Annualized # Amount is less than $0.005. (1) Total investment return based on net asset value per share reflects the effects of changes in net asset value on the performance of the Fund during each period, and assumes dividends and distributions, if any, were reinvested. This percentage is not an indication of the performance of a stockholder's investment in the Fund based on market value due to differences between the market price of the stock and the net asset value of the Fund. The accompanying notes are an integral part of the financial statements. 13 MORGAN STANLEY ASIA-PACIFIC FUND, INC. JUNE 30, 2002 (UNAUDITED) NOTES TO FINANCIAL STATEMENTS The Morgan Stanley Asia-Pacific Fund, Inc. (the "Fund") was incorporated in Maryland on February 28, 1994, and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended. The Fund's investment objective is long-term capital appreciation through investments primarily in equity securities. A. ACCOUNTING POLICIES: The following significant accounting policies are in conformity with generally accepted accounting principles. Such policies are consistently followed by the Fund in the preparation of its financial statements. Generally accepted accounting principles may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates. 1. SECURITY VALUATION: In valuing the Fund's assets, all listed securities for which market quotations are readily available are valued at the last sale price on the valuation date, or if there was no sale on such date, at the mean between the current bid and asked prices or the bid price if only bid quotations are available. Securities which are traded over-the-counter are valued at the mean of the current bid and asked prices obtained from reputable brokers. Securities may be valued by independent pricing services. The prices provided by a pricing service take into account broker dealer market price quotations for institutional size trading in similar groups of securities, security quality, maturity, coupon and other security characteristics as well as any developments related to the specific securities. Short-term securities which mature in 60 days or less are valued at amortized cost. All other securities and assets for which market values are not readily available (including investments which are subject to limitations as to their sale, if any), and those securities for which it is inappropriate to determine prices in accordance with the aforementioned procedures, are valued at fair value as determined in good faith under procedures approved by the Board of Directors. 2. TAXES: It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for U.S. Federal income taxes is required in the financial statements. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on either income or capital gains earned or repatriated. The Fund accrues such taxes when the related income or capital gains is earned. 3. REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements under which the Fund lends excess cash and takes possession of securities with an agreement that the counterparty will repurchase such securities. In connection with transactions in repurchase agreements, a bank as custodian for the Fund takes possession of the underlying securities (collateral), with a market value at least equal to the amount of the repurchase transaction, including principal and accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to determine the adequacy of the collateral. In the event of default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the counterparty to the agreement, realization and/ or retention of the collateral or proceeds may be subject to legal proceedings. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements. 4. FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the mean of the bid and asked prices of such currencies against U.S. dollars last quoted by a major bank as follows: - investments, other assets and liabilities - at the prevailing rates of exchange on the valuation date; - investment transactions and investment income - at the prevailing rates of exchange on the dates of such transactions. Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of the securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) due to securities transactions are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from sales and maturities of foreign currency exchange contracts, disposition of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and 14 MORGAN STANLEY ASIA-PACIFIC FUND, INC. JUNE 30, 2002 (UNAUDITED) NOTES TO FINANCIAL STATEMENTS (CONT'D) the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of unrealized appreciation (depreciation) on investments and foreign currency translations in the Statement of Net Assets. The change in net unrealized currency gains (losses) on foreign currency translations for the period is reflected in the Statement of Operations. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability. The Fund may use derivatives to achieve its investment objectives. The Fund may engage in transactions in futures contracts on foreign currencies, stock indices, as well as in options, swaps and structured notes. Consistent with the Fund's investment objectives and policies, the Fund may use derivatives for non-hedging as well as hedging purposes. Following is a description of derivative instruments that the Fund may utilize and their associated risks: 5. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign currency exchange contracts generally to attempt to protect securities and related receivables and payables against changes in future foreign exchange rates and, in certain situations, to gain exposure to a foreign currency. A foreign currency exchange contract is an agreement between two parties to buy or sell currency at a set price on a future date. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked-to-market daily and the change in market value is recorded by the Fund as unrealized gain or loss. The Fund records realized gains or losses when the contract is closed equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Risk may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and is generally limited to the amount of unrealized gain on the contracts, if any, at the date of default. Risks may also arise from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. 6. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: The Fund may make forward commitments to purchase or sell securities. Payment and delivery for securities which have been purchased or sold on a forward commitment basis can take place a month or more (not to exceed 120 days) after the date of the transaction. Additionally, the Fund may purchase securities on a when-issued or delayed delivery basis. Securities purchased on a when-issued or delayed delivery basis are purchased for delivery beyond the normal settlement date at a stated price and yield, and no income accrues to the Fund on such securities prior to delivery. When the Fund enters into a purchase transaction on a when-issued or delayed delivery basis, it either establishes a segregated account in which it maintains liquid assets in an amount at least equal in value to the Fund's commitments to purchase such securities or denotes such assets as segregated on the Fund's records. Purchasing securities on a forward commitment or when-issued or delayed delivery basis may involve a risk that the market price at the time of delivery may be lower than the agreed upon purchase price, in which case there could be an unrealized loss at the time of delivery. 7. SWAP AGREEMENTS: The Fund may enter into swap agreements to exchange the return generated by one security, instrument or basket of instruments for the return generated by another security, instrument or basket of instruments. The following summarizes swaps which may be entered into by the Fund: INTEREST RATE SWAPS: Interest rate swaps involve the exchange of commitments to pay and receive interest based on a notional principal amount. Net periodic interest payments to be received or paid are accrued daily and are recorded in the Statement of Operations as an adjustment to interest income. Interest rate swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as unrealized appreciation or depreciation in the Statement of Operations. TOTAL RETURN SWAPS: Total return swaps involve commitments to pay interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the security, instrument or basket of instruments underlying the transaction exceeds or falls short of the offsetting interest obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Total return swaps are marked-to-market daily based upon quotations from market makers and the change, if any, is recorded as unrealized gains or losses in the Statement of Operations. Periodic payments received or made at the end of each measurement period, but prior to termination, are recorded as realized gains or losses in the Statement of Operations. Realized gains or losses on maturity or termination of interest rate and total return swaps are presented in the Statement of 15 MORGAN STANLEY ASIA-PACIFIC FUND, INC. JUNE 30, 2002 (UNAUDITED) NOTES TO FINANCIAL STATEMENTS (CONT'D) Operations. Because there is no organized market for these swap agreements, the value reported in the Statement of Net Assets may differ from that which would be realized in the event the Fund terminated its position in the agreement. Risks may arise upon entering into these agreements from the potential inability of the counterparties to meet the terms of the agreements and are generally limited to the amount of net interest payments to be received and/or favorable movements in the value of the underlying security, instrument or basket of instruments, if any, at the date of default. Risks also arise from potential losses from adverse market movements, and such losses could exceed the related amounts shown in the Statement of Net Assets. 8. STRUCTURED SECURITIES: The Fund may invest in interests in entities organized and operated solely for the purpose of restructuring the investment characteristics of sovereign debt obligations. This type of restructuring involves the deposit with or purchase by an entity of specified instruments and the issuance by that entity of one or more classes of securities ("Structured Securities") backed by, or representing interests in, the underlying instruments. Structured Securities generally will expose the Fund to credit risks of the underlying instruments as well as of the issuer of the Structured Security. Structured Securities are typically sold in private placement transactions with no active trading market. Investments in Structured Securities may be more volatile than their underlying instruments, however, any loss is limited to the amount of the original investment. 9. OVER-THE-COUNTER TRADING: Securities and other derivative instruments that may be purchased or sold by the Fund may consist of instruments not traded on an exchange. The risk of nonperformance by the obligor on such an instrument may be greater, and the ease with which the Fund can dispose of or enter into closing transactions with respect to such an instrument may be less, than in the case of an exchange-traded instrument. In addition, significant disparities may exist between bid and asked prices for derivative instruments that are not traded on an exchange. Derivative instruments not traded on exchanges are also not subject to the same type of government regulation as exchange traded instruments, and many of the protections afforded to participants in a regulated environment may not be available in connection with such transactions. During the six months ended June 30, 2002, the Fund's investments in derivative instruments included foreign currency exchange contracts, structured securities and over-the-counter trading. 10. OTHER: Security transactions are accounted for on the date the securities are purchased or sold. Investments in new Indian securities are made by making applications in the public offerings. The issue price, or a portion thereof, is paid at the time of application and is reflected as share application money on the Statement of Net Assets, if any. Upon allotment of the securities, this amount plus any remaining amount of issue price is recorded as cost of investments. Realized gains and losses on the sale of investment securities are determined on the specific identified cost basis. Interest income is recognized on the accrual basis. Dividend income is recorded on the ex-dividend date (except certain dividends which may be recorded as soon as the Fund is informed of such dividend) net of applicable withholding taxes. Distributions to stockholders are recorded on the ex-dividend date. The amount and character of income and capital gain distributions to be paid by the Fund are determined in accordance with Federal income tax regulations, which may differ from generally accepted accounting principles. The book/tax differences are either considered temporary or permanent in nature. Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains and losses on certain investment transactions and the timing of the deductibility of certain expenses. Permanent book and tax basis differences may result in reclassifications among undistributed net investment income (loss), accumulated net realized gain (loss) and paid-in capital. Adjustments for permanent book-tax differences, if any, are not reflected in ending undistributed net investment income (loss) for the purpose of calculating net investment income (loss) per share in the financial highlights. B. ADVISER: Morgan Stanley Investment Management Inc. (the "Adviser") provides investment advisory services to the Fund under the terms of an Investment Advisory and Management Agreement (the "Agreement"). Under the Agreement, the Adviser is paid a fee computed weekly and payable monthly at an annual rate of 1.00% of the Fund's average weekly net assets. C. ADMINISTRATOR: JPMorgan Chase Bank, through its corporate affiliate J.P. Morgan Investor Services Company (the "Administrator"), provides administrative services to the Fund under an Administration Agreement. Under the Administration Agreement, the Administrator is paid a fee computed weekly and payable monthly at an annual rate of 0.09% of the Fund's average weekly net assets, plus $65,000 per annum. In addition, the Fund is 16 MORGAN STANLEY ASIA-PACIFIC FUND, INC. JUNE 30, 2002 (UNAUDITED) NOTES TO FINANCIAL STATEMENTS (CONT'D) charged for certain out-of-pocket expenses incurred by the Administrator on its behalf. D. CUSTODIAN: JPMorgan Chase Bank and its affiliates serve as custodian for the Fund. Custody fees are payable monthly based on assets held in custody, investment purchase and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses. E. OTHER: During the six months ended June 30, 2002, the Fund made purchases and sales totaling approximately $75,004,000 and $133,377,000 respectively, of investment securities other than long-term U.S. Government securities, purchased options and short-term investments. There were no purchases or sales of long-term U.S. Government securities. At June 30, 2002, the U.S. Federal income tax cost basis of investments (excluding foreign currency if applicable) was approximately $382,688,000 and, accordingly, net unrealized depreciation for U.S. Federal income tax purposes was $25,121,000, of which $41,963,000 related to appreciated securities and $67,084,000 related to depreciated securities. At December 31, 2001, the Fund had a capital loss carryforward for U.S. Federal income tax purposes of approximately $204,823,000 available to offset future capital gains, of which $131,491,000 will expire on December 31, 2006 and $73,332,000 will expire on December 31, 2009. To the extent that capital gains are offset, such gains will not be distributed to the stockholders. Net capital and currency losses incurred after October 31, and within the taxable year are deemed to arise on the first business day of the Fund's next taxable year. For the year ended December 31, 2001, the Fund deferred to January 1, 2002, for U.S. Federal income tax purposes, capital losses of $382,000, post-October passive foreign investment company losses of $200,000 and post-October currency losses of $67,000. For the six months ended June 30, 2002, the Fund incurred $17,000 of brokerage commissions with Morgan Stanley & Co., an affiliate of the Adviser. A significant portion of the Fund's net assets consist of securities of issuers located in Asia which are denominated in foreign currencies. Changes in currency exchange rates will affect the value of and investment income from such securities. Asian securities are subject to greater price volatility, limited capitalization and liquidity, and higher rates of inflation than securities of companies based in the United States. In addition, Asian securities may be subject to substantial governmental involvement in the economy and greater social, economic and political uncertainty. Such securities may be concentrated in a limited number of countries and regions and may vary throughout the year. Each Director of the Fund who is not an officer of the Fund or an affiliated person as defined under the Investment Company Act of 1940, as amended, may elect to participate in the Directors' Deferred Compensation Plan (the "Plan"). Under the Plan, such Directors may elect to defer payment of a percentage of their total fees earned as a Director of the Fund. These deferred portions are treated, based on an election by the Director, as if they were either invested in the Fund's shares or invested in U.S. Treasury Bills, as defined under the Plan. At June 30, 2002, the deferred fees payable under the Plan totaled $71,000 and are included in Payable for Directors' Fees and Expenses on the Statement of Net Assets. On January 23, 1998, the Fund commenced a share repurchase program for purposes of enhancing stockholder value and reducing the discount at which the Fund's shares trade from their net asset value. For the six months ended June 30, 2002, the Fund repurchased 571,700 of its shares at an average discount of 16.42% from net asset value per share. From the inception of the program through June 30, 2002, the Fund has repurchased 14,886,634 of its shares at an average discount of 20.57% from net asset value per share. The Fund expects to continue to repurchase its outstanding shares at such time and in such amounts as it believes will further the accomplishment of the foregoing objectives, subject to review by the Board of Directors. On December 13, 2001, with the aim of enhancing stockholder value and reducing the discount at which the Fund's shares have been trading, the Board of Directors of the Fund authorized the Fund to conduct a tender offer during the second quarter of 2002 for up to 15% of the Funds shares, at a price equal to 95% of the Fund's net asset value per share ("NAV") on the last day of the tender period, or such later date as to which the offer is extended. On May 17, 2002, the Fund completed the tender offer. The Fund accepted 6,361,598 shares for payment which represented 15% of the Fund's then outstanding shares. Final payment was made on May 28, 2002 at $10.09 per share, representing 95% of the NAV per share on May 17, 2002. 17 MORGAN STANLEY ASIA-PACIFIC FUND, INC. JUNE 30, 2002 (UNAUDITED) NOTES TO FINANCIAL STATEMENTS (CONT'D) F. SUPPLEMENTAL PROXY INFORMATION: The Annual Meeting of the Stockholders of the Fund was held on June 6, 2002. The following is a summary of the proposals presented and the total number of shares voted: PROPOSAL: - --------- 1. To elect the following Directors:
VOTES IN VOTES FAVOR OF AGAINST - --------------------------------------------------------------- Ronald E. Robison 34,945,969 1,623,509 Michael Nugent 34,944,692 1,624,786 Joseph J. Kearns 34,945,969 1,623,509 Fergus Reid 34,945,969 1,623,509
2. Approval of a recommendation that the Board of Directors convert the Fund to an open-end fund or merge the fund with an open-end fund:
VOTES IN VOTES VOTES FAVOR OF AGAINST ABSTAINED - --------------------------------------------------------------- 4,514,412 15,416,362 1,555,926
18 MORGAN STANLEY ASIA-PACIFIC FUND, INC. DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"), each stockholder will be deemed to have elected, unless American Stock Transfer & Trust Company (the "Plan Agent") is otherwise instructed by the stockholder in writing, to have all distributions automatically reinvested in Fund shares. Participants in the Plan have the option of making additional voluntary cash payments to the Plan Agent, annually, in any amount from $100 to $3,000, for investment in Fund shares. Dividend and capital gain distributions will be reinvested on the reinvestment date. If the market price per share equals or exceeds net asset value per share on the reinvestment date, the Fund will issue shares to participants at net asset value. If net asset value is less than 95% of the market price on the reinvestment date, shares will be issued at 95% of the market price. If net asset value exceeds the market price on the reinvestment date, participants will receive shares valued at market price. The Fund may purchase shares of its Common Stock in the open market in connection with dividend reinvestment requirements at the discretion of the Board of Directors. Should the Fund declare a dividend or capital gain distribution payable only in cash, the Plan Agent will purchase Fund shares for participants in the open market as agent for the participants. The Plan Agent's fees for the reinvestment of dividends and distributions will be paid by the Fund. However, each participant's account will be charged a pro rata share of brokerage commissions incurred on any open market purchases effected on such participant's behalf. A participant will also pay brokerage commissions incurred on purchases made by voluntary cash payments. Although stockholders in the Plan may receive no cash distributions, participation in the Plan will not relieve participants of any income tax which may be payable on such dividends or distributions. In the case of stockholders, such as banks, brokers or nominees, which hold shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by the stockholder as representing the total amount registered in the stockholder's name and held for the account of beneficial owners who are participating in the Plan. Stockholders who do not wish to have distributions automatically reinvested should notify the Plan Agent in writing. There is no penalty for non-participation or withdrawal from the Plan, and stockholders who have previously withdrawn from the Plan may rejoin at any time. Requests for additional information or any correspondence concerning the Plan should be directed to the Plan Agent at: Morgan Stanley Asia-Pacific Fund, Inc. American Stock Transfer & Trust Company Dividend Reinvestment and Cash Purchase Plan 59 Maiden Lane New York, NY 10030 1-800-278-4353 19 -----END PRIVACY-ENHANCED MESSAGE-----