-----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, WwQhz24dd8FE1xeoXPYIyXppJ8sIz3wCi/D2Niyk9+DNnbKOit7L9gm8wSCA/j69 8jNWHekjbBUjK3Lo/IFRZw== 0000912057-96-019581.txt : 19960906 0000912057-96-019581.hdr.sgml : 19960906 ACCESSION NUMBER: 0000912057-96-019581 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960905 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY ASIA PACIFIC FUND INC CENTRAL INDEX KEY: 0000919808 STANDARD INDUSTRIAL CLASSIFICATION: [] 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: 96626104 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 N-30D 1 N-30D MORGAN STANLEY ASIA-PACIFIC FUND, INC. - --------------------------------------------- OFFICERS AND DIRECTORS Barton M. Biggs William G. Morton, Jr. CHAIRMAN OF THE BOARD DIRECTOR OF DIRECTORS James W. Grisham Frederick B. Whittemore VICE PRESIDENT VICE-CHAIRMAN OF THE Michael F. Klein BOARD OF DIRECTORS VICE PRESIDENT Warren J. Olsen Harold J. Schaaff, Jr. PRESIDENT AND DIRECTOR VICE PRESIDENT Peter J. Chase Joseph P. Stadler DIRECTOR VICE PRESIDENT John W. Croghan Valerie Y. Lewis DIRECTOR SECRETARY David B. Gill James R. Rooney DIRECTOR TREASURER Graham E. Jones Belinda A. Brady DIRECTOR ASSISTANT TREASURER John A. Levin DIRECTOR - --------------------------------------------- INVESTMENT ADVISER Morgan Stanley Asset Management Inc. 1221 Avenue of the Americas New York, New York 10020 - -------------------------------------------------------- ADMINISTRATOR The Chase Manhattan Bank 73 Tremont Street Boston, Massachusetts 02108 - -------------------------------------------------------- CUSTODIANS Morgan Stanley Trust Company (International) One Pierrepont Plaza Brooklyn, New York 11201 The Chase Manhattan Bank (Domestic) 770 Broadway New York, New York 10003 - -------------------------------------------------------- SHAREHOLDER SERVICING AGENT American Stock Transfer & Trust Company 40 Wall Street New York, New York 10005 (800) 278-4353 - -------------------------------------------------------- LEGAL COUNSEL Rogers & Wells 200 Park Avenue New York, New York 10166 - -------------------------------------------------------- INDEPENDENT ACCOUNTANTS Price Waterhouse LLP 1177 Avenue of the Americas New York, New York 10036 - -------------------------------------------------------- For additional Fund information, including the Fund's net asset value per share and information regarding the investments comprising the Fund's portfolio, please call 1-800-221-6726. ------------------------ MORGAN STANLEY ASIA-PACIFIC FUND, INC. --------------------- SEMI-ANNUAL REPORT JUNE 30, 1996 MORGAN STANLEY ASSET MANAGEMENT INC. INVESTMENT ADVISER LETTER TO SHAREHOLDERS - -------- For the six months ended June 30, 1996, the Morgan Stanley Asia-Pacific Fund, Inc. had a total return, based on net asset value per share, of 6.59% compared to its benchmark (as defined following) of 2.74%. For the period since the Fund's commencement of operations on August 2, 1994 through June 30, 1996, the Fund's total return, based on net asset value per share, was 9.52% compared with - -0.09% for the benchmark. (The benchmark for investment purposes is the weighted average of the percentage change month-on-month of each of four Morgan Stanley Capital International (MSCI) indices; Japan, Combined Asia Free ex-Japan, Australia, and New Zealand, where the weights are based on the respective market capitalizations of these indices at the beginning of the month). On June 28, 1996, the closing price of the Fund's shares on the New York Stock Exchange was $12.00 representing a 10.8% discount to the net asset value per share. JAPAN During the first half of 1996 macro conditions regarding the Japanese economy showed evidence of a meaningful recovery underway, supported by a weakening yen, economic stimulus packages and record low interest rates. Interest rate differentials between the U.S. and Japan continued to widen while the G-7 supported further strength for the dollar stating the "dollar rise is positive and promising" during the Lyon summit. With comment, it appears unanimous support for Japan sustaining a solid economic recovery remains a top priority by G-7. A low interest rate weaker yen environment coupled with a 14 trillion yen stimulus package announced in September 1995 had a very profound impact on GDP, corporate profits and business sentiment during the first half of 1996. In fact, GDP rose to 12.7% annualized for the quarter January to March 1996 (highest on record for the past 23 years), the Bank of Japan ("BOJ") May "Tankan" reported significant business confidence improvement, while corporate earnings for 1,057 listed non-financial companies rose 98% year over year on a consolidated basis. With such robust gains, concerns about monetary policy began to also rise. In February, finance minister Kubo hinted at a possible rate hike to help pensioners; also BOJ Governor Matsushita commented he was also considering a rate hike "in the future." While these comments only served to cool financial markets, in reality there was no change in policy. We believe any interest rate rises in Japan will be modest. There is no evidence to date that real demand for money has yet occurred, suggesting further stimulus to the economy is necessary for a sustainable recovery. Moreover, monetary policy comments by the authorities seem to be timed with overheating markets - and are more geared to securing a long term gradual recovery - than slowing a fragile economy just emerging from 5 straight years of decline. The solid fundamental improvements during the first half of 1996 propelled equities to the highest closing levels since 1992. While some profit taking and consolidation occurred during May as the market entered a transition from a macro driven environment to a more earnings driven market, we believe the trend is in place for the bull market to resume. Supply and demand is improving as local pension funds have begun shifting assets from fixed income to equity, prompted by the lowering of guaranteed return by life insurance companies from 4.5 to 2.5% during the last quarter. Evidence of an earnings driven market is also suggested by the all-time highs for Honda and Canon, among others. On the other hand weak DRAM prices have put pressure on semi-conductor issues, which was also one of the best relative performance sectors over the last 12 months. The main reason for the outperformance of the Fund is the big overweight position in non-Japan 2 Asia, which had outperformed the overall benchmark by a significant margin. The Fund was also overweight in several countries that rose sharply in the period with India being the most notable. ASIA EX-JAPAN The Asian markets started off on a strong note in the beginning of the year. By late February, the Combined Far East Free ex-Japan Index had already risen 12% from the start of the year. The strong run was on the back of falling global interest rates and strong portfolio flows into the Asian Pacific equities. Sentiment turned sour in early March spooked by the 3% single day drop in the Dow Jones Industrial Index. Escalating political tensions between mainland China and Taiwan depressed sentiment further. Most Asian markets recovered from their corrections and powered ahead in the second quarter of the year. The strongest gains were made in India (up 24.5%), the Philippines (up 23.3%), Indonesia (up 16.1%), Malaysia (up 15.7%), China (up 12.9%) and Hong Kong (up 10.9%). Of the major markets, the worst performing ones were South Korea (down 14.9%), Thailand (down 1.7%) and Singapore (down 0.3%). The Indian market started the year on a weak note, as investors awaited the outcome of the election. The market picked up momentum heading into the election, as investors expected a victory for the ruling Congress party. The defeat of the Congress party and the formation of a coalition government only dented the market rally slightly. The market went on to make new highs for the year as strong corporate earnings came in. In the Philippines, stock indices reached record highs buoyed by bullish sentiment and record earnings. Strong economic growth and upward earnings revisions propelled the market further. Many big cap blue chip stocks made all-time highs, notably Ayala Land. Indonesia performed strongly led by index heavyweight PT Telekom, the state telecommunications company and the largest listed entity on the stock exchange. Stock indices also climbed to record setting highs. The market however corrected towards the end of the period sparked by political uncertainty. Rioting in the streets and the run-up to the next Presidential election dampened investor sentiment. The market however was well supported by strong earnings growth. The Malaysian market did unexpectedly well as foreign and domestic buying lifted the broad market. Resolutions on the tariff structures on Telekom and Tenaga, two of the largest listed entities on the stock exchange. and improving macroeconomic numbers drew investors into the market. Good reported earnings also provided support. In Singapore, measures introduced to curb property speculation sparked heavy selling in property issues. Weak economic growth and export numbers drew another wave of selling pressure. Corporate earnings were not encouraging. This was a reversal from the more bullish tone at the beginning of the year. The Thailand market was one of the worst performing markets in Asia in the first half of this year. After a brief rally in the beginning of the year, the market headed down for the most part during the period. A series of extremely weak-corporate earnings for both 1995 and first quarter 1996 prompted selling across the board. Rumors about bad debts and finance companies and banks sparked selling. On the macroeconomic front, growth continues to weaken and fears that the slowdown may accelerate further prompted the central bank to allow some commercial banks to lower lending rates and earnings were revised down sharply. The South Korea market was plagued by concerns over the twin deficits in trade and current accounts. This was caused primarily by a slowdown in major exports like seminconductors, 3 textiles and automobiles. The governments planned W2.5 trillion new equity supply in the third quarter of 1996 also discouraged stock investments. The liquidation of close to W1 trillion worth of outstanding margin positions worsened market conditions. Uncertainties over North Korea also caused concerns. OUTLOOK The Asia Pacific region continued to be one of the fastest growing regions in the world. Relatively strong economic growth in the rest of the OECD world should also buoy economic growth in this region. While there could be upward pressures on interest rates stemming from the U.S., the impact should be quite minimal. On the positive side, China is likely to begin its cyclical recovery. This will benefit the region as a whole. Countries like Thailand and South Korea, whose economies have slowed first, are also likely to see lower interest rates, which should be a good boost to their economies. The Fund successfully completed a rights offering on May 8, 1996 raising approximately $173 million (after deducting offering expenses) in order to take advantage of market opportunities in the Asia Pacific region. As of June 30, 1996, a substantial portion of the proceeds have been invested. Sincerely, [SIGNATURE] Warren J. Olsen PRESIDENT AND DIRECTOR [SIGNATURE] Ean Wah Chin SENIOR PORTFOLIO MANAGER August 14, 1996 4 Morgan Stanley Asia-Pacific Fund, Inc. Investment Summary as of June 30, 1996 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
HISTORICAL INFORMATION (UNAUDITED) TOTAL RETURN (%) ---------------------------------------------------------------------------- MARKET VALUE (1) NET ASSET VALUE (2) INDEX (1)(3) ------------------------ ------------------------ ------------------------ AVERAGE AVERAGE AVERAGE CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL ------------------------ ------------------------ ------------------------ FISCAL YEAR TO DATE 2.35%+ -- 6.59%+ -- 2.74% -- ONE YEAR 23.26+ 23.26%+ 15.65+ 15.65%+ 10.13 10.13% SINCE INCEPTION* -2.29+ -1.20+ 9.52+ 4.87+ -0.09 -0.05
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. - -------------------------------------------------------------------------------- RETURNS AND PER SHARE INFORMATION A BAR CHART REFLECTING THE DATA BELOW IS REFLECTED HERE.
YEARS ENDED DECEMBER 31: SIX MONTHS ENDED 1994* 1995 JUNE 30, 1996 (UNAUDITED) Net Asset Value Per Share $13.20 $14.34 $13.45 Market Value Per Share $12.25 $13.33 $12.00 Premium/(Discount) -7.2% -7.0% -10.8% Income Dividends $0.04 $0.05 $0.35 Capital Gains Distributions $0.01 $0.02 -- Fund Total Return (2) -5.94% 9.24% 6.59%+ Index Total Return (1)(3) ** -5.90% 0.87% 2.74%
(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. This return does not include the effect of dilution in connection with the Rights Offering. These percentages are not an indication of the performance of a shareholder's investment in the Fund based on market value due to differences between the market price of the stock and the net asset value per share of the Fund. (3) The benchmark for investment performance is the weighted average of the percentage change month-on-month of each of four Morgan Stanley Capital International (MSCI) indices; Japan, Combined Asia Free ex-Japan, Australia, and New Zealand, where the weights are based on the respective market capitalizations of these indices at the beginning of the month. * The Fund commenced operations on August 2, 1994. ** Unaudited. + Adjusted for Rights Offering. 5 Morgan Stanley Asia-Pacific Fund, Inc. Portfolio Summary as of June 30, 1996 (Unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PORTFOLIO INVESTMENTS DIVERSIFICATION EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Equity Securities 96.1% Fixed Income Securities 0.1% Short-Term Investments 3.8%
- -------------------------------------------------------------------------------- SECTORS EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Automobiles 4.1% Banking 10.5% Chemicals 5.9% Construction & Housing 3.9% Electrical & Electronics 11.3% Financial Services 5.4% Machinery & Engineering 6.0% Multi-Industry 7.1% Real Estate 8.4% Telecommunications 6.5% Other 30.9%
- -------------------------------------------------------------------------------- COUNTRY WEIGHTINGS EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Japan 39.7% India 15.7% Hong Kong 9.9% Australia 6.4% Thailand 6.4% Singapore 6.1% Indonesia 3.6% Korea 2.9% Philippines 2.9% Malaysia 2.7% China 0.3% Other 3.4%
- --------------------------------------------------------------------------------
TEN LARGEST HOLDINGS PERCENT OF NET ASSETS --------------- 1. Western Mining Corp. Ltd. 2.0% 2. Cheung Kong (Holdings) Ltd. 1.7 3. Lend Lease Corp. Ltd. 1.5 4. National Australia Bank Ltd. 1.5 5. Hutchison Whampoa Ltd. 1.4 PERCENT OF NET ASSETS --------------- 6. Broken Hill Proprietary Co. Ltd. 1.4% 7. HSBC Holdings plc 1.4 8. Housing Development Finance Corp. Ltd. 1.4 9. Bangkok Bank Ltd. 1.3 10. Toshiba Corp. 1.2 --- 14.8% --- ---
6 FINANCIAL STATEMENTS - --------- STATEMENT OF NET ASSETS (UNAUDITED) - --------- JUNE 30, 1996
VALUE SHARES (000) - ----------------------------------------------------------------- - ------------- COMMON STOCKS (95.5%) (Unless otherwise noted) - -------------------------------------------------- - ---------- AUSTRALIA (6.4%) BANKING National Australia Bank Ltd. 1,571,884 U.S.$ 14,516 -------------- ENERGY SOURCES Broken Hill Proprietary Co. Ltd. 985,964 13,615 -------------- METALS -- NON-FERROUS Western Mining Corp. Ltd. 2,645,655 18,922 -------------- REAL ESTATE Lend Lease Corp. Ltd. 959,277 14,702 -------------- 61,755 -------------- - ----------------------------------------------------------------- - ------------- CHINA (0.3%) AUTOMOBILES +Shenzhen North Jianshe Motorcycle 'B' 722,900 252 -------------- CHEMICALS Jilin Chemical Industrial Co. Ltd. ADR "H" 68,000 1,250 -------------- TRANSPORTATION -- ROAD & RAIL +Guangshen Railway ADR 'H' 21,000 402 -------------- UTILITIES -- ELECTRICAL & GAS Shandong Huaneng Power Co. Ltd. ADR 'H' 125,700 1,037 -------------- 2,941 -------------- - ----------------------------------------------------------------- - ------------- HONG KONG (9.9%) BANKING HSBC Holdings plc 899,148 13,590 -------------- FOOD & HOUSEHOLD PRODUCTS Charoen Pokphand Co. Ltd. 4,686,000 1,862 -------------- MULTI-INDUSTRY Citic Pacific Ltd. 1,530,000 6,187 Guangdong Investments Ltd. 9,368,000 5,930 Hutchison Whampoa Ltd. 2,195,000 13,810 Swire Pacific Ltd. 'A' 900,000 7,703 -------------- 33,630 -------------- REAL ESTATE Cheung Kong (Holdings) Ltd. 2,247,000 16,183 Hopewell Holdings 4,472,000 2,426 New World Development Co. Ltd. 1,648,000 7,643 Sun Hung Kai Properties Ltd. 708,000 7,157 Wharf (Holdings) Ltd. 1,090,000 3,901 -------------- 37,310 -------------- TELECOMMUNICATIONS +Asia Satellite Telcom Holdings 260,000 771 Hong Kong Telecom Ltd. 2,971,200 5,335 -------------- 6,106 -------------- UTILITIES -- ELECTRICAL & GAS **China Light & Power Co. Ltd. 564,000 2,557 -------------- 95,055 -------------- - ----------------------------------------------------------------- - ------------- VALUE SHARES (000) - --------------------------------------------------------- - ------------ INDIA (15.4%) APPLIANCES & HOUSEHOLD DURABLES Peico Electronics & Electric Ltd. 123,600 U.S.$ 453 -------------- AUTOMOBILES Apollo Tyres Ltd. 650,950 3,349 +Apollo Tyres Ltd. (Warrants), expiring 2/28/98 190,368 407 Autolec Industries Ltd. 152,800 442 Autolite Ltd. 232,100 1,257 Autopal Industries Ltd. 65,000 86 Escorts Ltd. 'A' 966,450 3,820 Hero Honda Ltd. 37,150 297 Jay Bharat Maruti Ltd. 53,200 83 Lumax Automatic Parts Industries Ltd. 100,825 326 +Nippondenso India Ltd. 71,400 280 Patheja Forgings and Auto Ltd. 'B' 677,700 1,520 Rico Auto Industries Ltd. 82,000 315 Sona Steering System Ltd. 92,500 207 Tata Engineering & Locomotive Ltd. 309,502 4,568 -------------- 16,957 -------------- BANKING State Bank of India Ltd. 793,481 6,762 -------------- BEVERAGES ITC Ltd. 442,200 3,913 United Breweries Ltd. 149,100 123 -------------- 4,036 -------------- BUILDING MATERIALS & COMPONENTS Associated Cement Co. Ltd. 136,552 9,358 Gujarat Ambuja Cements Ltd. 256,100 2,719 India Cements Ltd. 75,000 354 Kesoram Industries Ltd. 311,100 678 Madras Cements Ltd. 'B' 3,695 1,290 Murudeshwar Ceramics Ltd. 'B' 46,000 75 Saurashtra Cement & Chemicals Ltd. 'B' 26,200 52 -------------- 14,526 -------------- CHEMICALS Asian Paints Ltd. 71,650 887 #Gujarat Narmada Valley Fertilizers Ltd. 275,000 1,512 Gujarat Narmada Valley Fertilizers Ltd. 'A' 305,750 336 Gujarat State Fertilisers Ltd. 6,550 21 +Gujarat State Fertilisers Ltd. (Rights) 1,310 -- Hoechst India Ltd. 50,650 503 Indian Dyestuff Industries Ltd. 304,250 153 Indian Organic Chemical Ltd. 275,480 160 Indian Petro Chemical Corp. Ltd. 1,143,300 5,054 Jaysynth Dyechem Ltd. 145,800 257 Sudarshan Chemicals Inds. Ltd. 4,600 18 United Phosphorous Ltd. 97,500 888 -------------- 9,789 -------------- CONSTRUCTION & HOUSING Hindustan Construction Co. 257,700 344 Nagarjuna Construction Ltd. 151,200 436 -------------- 780 -------------- - ----------------------------------------------------------------- - -------------
The accompanying notes are an integral part of the financial statements. 7
VALUE SHARES (000) - --------------------------------------------------------- - ------------ INDIA (CONTINUED) DATA PROCESSING & REPRODUCTION Modi Xerox Ltd. 16,850 U.S.$ 69 -------------- ELECTRICAL & ELECTRONICS Bajaj Electricals Ltd. 16,350 257 BPL Ltd. 263,000 455 Rolta India Ltd. 999,500 532 -------------- 1,244 -------------- ELECTRONIC COMPONENTS & INSTRUMENTS Vikas WSP Ltd. 196,000 946 Viral Filaments Ltd. 5,000 10 -------------- 956 -------------- ENERGY EQUIPMENT & SERVICES Bharat Heavy Electricals Ltd. 2,114,400 10,773 Crompton Greaves Ltd. 490,580 3,492 Esab India Ltd. 307,265 770 Samtel India Ltd. 1,000 2 S & S Power Switchgear Ltd. 63,550 303 -------------- 15,340 -------------- FINANCIAL SERVICES Housing Development Finance Corp. Ltd. 161,356 13,456 +Industrial Finance Corp. (India) Ltd. 1,306,200 1,678 Tube Investments of India Ltd. 109,450 377 -------------- 15,511 -------------- FOOD & HOUSEHOLD PRODUCTS Dhampur Sugar Mills Ltd. 141,850 483 -------------- FOREST PRODUCTS & PAPER Ballarpur Industries Ltd. 232,264 1,070 ITC Bhadrachalam Paperboards Ltd. 193,750 583 JK Corp. Ltd. 41,200 126 +JK Corp. Ltd. GDR 61,140 191 +#JK Corp. Ltd. GDR 249,240 779 -------------- 2,749 -------------- HEALTH & PERSONAL CARE Godrej Soaps Ltd. 203,700 301 Sun Pharmaceutical Industries Ltd. 162,100 1,277 TTK Biomed Ltd. 21,500 25 -------------- 1,603 -------------- INDUSTRIAL COMPONENTS Indian Rayon & Industries Ltd. 38,700 541 Thermax Ltd. 128,000 1,454 -------------- 1,995 -------------- LEISURE & TOURISM ITC Hotels Ltd. 279,300 1,586 -------------- MACHINERY & ENGINEERING Artson Engineering Ltd. 235,600 120 DGP Windsor India Ltd. 218,800 876 Flat Products Equipments (India) Ltd. 104,900 581 +Hindustan Power Plus Ltd. 67,000 309 Veejay Lakshmi Engineering Ltd. 150,700 496 -------------- 2,382 -------------- MANUFACTURING DCL Polyesters Ltd. 195,000 91 -------------- METALS -- NON-FERROUS Hindalco Industries Ltd. 5,000 178 -------------- - ----------------------------------------------------------------- - ------------- VALUE SHARES (000) - --------------------------------------------------------- - ------------ METALS -- STEEL KEC International Ltd. 350,000 U.S.$ 1,306 Special Steels Ltd. 464,850 1,194 +Special Steels Ltd. (Rights) 10 -- Tata Iron & Steel Co. Ltd. 257,240 1,769 -------------- 4,269 -------------- MISCELLANEOUS MATERIALS & COMMODITIES Amforge Industries Ltd. 35,000 50 +***Amforge Industries Ltd. (Rights) 37 -- +***Amforge Industries Ltd. (Warrants), expiring 7/1/97 5,150 2 Bharat Forge Co. Ltd. 260,000 1,314 Cosmo Films Ltd. 175,000 601 Essel Packaging Ltd. 146,300 714 Hindustan Development Corp. 1,088,500 754 +ITW Signode India Ltd. 329,900 965 MRF Ltd. 9,550 956 +Panyam Cements & Minerals Ltd. 27,190 1,009 Polyplex Ltd. 225,000 418 Supreme Industries Ltd. 178,670 1,681 Wimco Ltd. 422,200 321 -------------- 8,785 -------------- MULTI-INDUSTRY Bajaj Hindustan Ltd. 21,000 53 Ceat Tyres Ltd. 368,000 992 Container Corp. of India Ltd. 1,199,600 7,151 EID Parry Ltd. 64,300 175 Max India Ltd. -- New 100,000 898 @+Morgan Stanley Growth Fund 13,110,100 2,568 Suashish Diamonds Ltd. 71,600 264 UTI MasterShares Ltd. 2,270,030 902 Voltas Ltd. 147,950 252 VXL Ltd. 847,000 565 -------------- 13,820 -------------- REAL ESTATE Alacrity Housing Ltd. 381,000 173 -------------- TELECOMMUNICATIONS Infosys Technology Ltd. 9,600 195 Mahanagar Telephone Nigam Ltd. 412,600 2,972 Videsh Sanchar Nigam Ltd. 260,000 9,963 -------------- 13,130 -------------- TEXTILES & APPAREL Century Textile & Industry Ltd. 11,040 1,700 Coates of India Ltd. 100,700 547 Garware Plastics & Polyester Ltd. 191,250 1,061 G.T.N. Textiles Ltd. 243,000 640 Indo Rama Synthetics Ltd. 483,000 590 +Indo Rama Synthetics Ltd. -- New 46,170 56 +***Indo Rama Synthetics Ltd. (Rights) 180 -- +J.K. Synthetics Ltd. 690,400 426 Mahavir Spinning Mills Ltd. 173,900 444 Morajee Goculdas Spinning Ltd. 125,000 429 Raymond Ltd. 253,850 2,441 +Viniyoga Clothes Ltd. 486,600 90 Viral Syntex Ltd. 5,000 4 -------------- 8,428 -------------- TRANSPORTATION -- SHIPPING Great Eastern Shipping Ltd. 'A' 1,885,355 2,703 -------------- 148,798 -------------- - ----------------------------------------------------------------- - ------------- INDONESIA (3.6%) AUTOMOBILES **Astra International (Foreign) 1,166,500 1,691 -------------- - ----------------------------------------------------------------- - -------------
The accompanying notes are an integral part of the financial statements. 8
VALUE SHARES (000) - --------------------------------------------------------- - ------------ INDONESIA (CONTINUED) BANKING **Bank International Indonesia (Foreign) 443,000 U.S.$ 2,189 -------------- BUILDING MATERIALS & COMPONENTS **Indocement Tunggal Perkasa (Foreign) 120,000 412 **Semen Gresik (Foreign) 538,500 1,567 -------------- 1,979 -------------- CHEMICALS **Sorini Corp. (Foreign) 600,000 3,300 -------------- FOREST PRODUCTS & PAPER **Barito Pacific Timber (Foreign) 1,387,000 909 **Indah Kiat Pulp & Paper (Foreign) 2,012,000 1,967 -------------- 2,876 -------------- HEALTH & PERSONAL CARE **Kalbe Farma (Foreign) 883,500 1,974 -------------- MACHINERY & ENGINEERING **United Tractors (Foreign) 28,000 44 -------------- MISCELLANEOUS MATERIALS & COMMODITIES **Charoen Pokphand Indonesia (Foreign) 874,000 1,690 -------------- TELECOMMUNICATIONS **Indosat (Foreign) 997,500 3,354 **Telekomunikasi Indonesia (Foreign) 5,559,000 8,419 -------------- 11,773 -------------- TOBACCO **Hanjaya Mandala Sampoerna (Foreign) 194,500 2,215 +**Gudang Garam (Foreign) 1,076,000 4,611 -------------- 6,826 -------------- 34,342 -------------- - ----------------------------------------------------------------- - ------------- JAPAN (39.0%) AEROSPACE & MILITARY TECHNOLOGY Mitsubishi Heavy Industries Ltd. 1,150,000 10,025 -------------- APPLIANCES & HOUSEHOLD DURABLES +Rinnai Corp. 84,100 2,000 -------------- AUTOMOBILES Asahi Tec Corp. 443,000 3,217 Kansei Corp. 154,000 1,437 Nissan Motor Co. 900,000 8,010 Suzuki Motor Co. Ltd. 630,000 8,298 -------------- 20,962 -------------- BUILDING MATERIALS & COMPONENTS Nippon Pillar Packing 157,000 1,766 Sangetsu Co. Ltd. 100,000 2,680 Sanwa Shutter Corp. Ltd. 412,000 3,882 +Sanwa Shutter Corp. Ltd. (Warrants), expiring 1/20/98 1,400 770 -------------- 9,098 -------------- BUSINESS & PUBLIC SERVICES Dai Nippon Printing Co. Ltd. 370,000 7,175 -------------- CHEMICALS Daicel Chemical Industries 912,000 5,631 Fuji Photo Film Ltd. 240,000 7,596 Kaneka Corp. 899,000 6,060 Mitsubishi Chemical Corp. 1,510,000 6,989 - ----------------------------------------------------------------- - ------------- VALUE SHARES (000) - --------------------------------------------------------- - ------------ Nifco 330,300 U.S.$ 4,260 Okura Industrial Co. Ltd. 434,000 3,116 Sekisui Chemical Co. 703,000 8,617 -------------- 42,269 -------------- CONSTRUCTION & HOUSING Kyudenko Co. Ltd. 389,000 5,231 Matsui Construction 171,000 1,370 +Nishio Rent All Co. 111,000 2,660 Nishio Rent All Co. (Warrants), expiring 2/20/98 1,055 475 Ohbayashi Corp. 820,000 7,433 Taisei Corp. Ltd. 1,080,000 7,686 Yahagi Construction 238,000 1,896 -------------- 26,751 -------------- ELECTRICAL & ELECTRONICS Canon, Inc. 400,000 8,342 Hitachi Ltd. 1,185,000 11,056 Kyocera Corp. 60,000 4,253 +Kyocera Corp. (Warrants), expiring 1/23/98 1,450 1,695 Matsushita Communication Industries 281,000 7,325 Matsushita Electric Industries Ltd. 562,000 10,487 NEC Corp. 975,000 10,613 Nintendo Ltd. 110,000 8,210 Ricoh Co. Ltd. 706,000 7,491 Sony Corp. 155,000 10,222 Stanley Electric Co. 690,000 4,797 Tokyo Electron Ltd. 245,000 7,149 Toshiba Corp. 1,630,000 11,630 -------------- 103,270 -------------- ELECTRONIC COMPONENTS & INSTRUMENTS Mitsumi Electric Co. Ltd. 388,000 6,175 Murata Manufacturing 130,000 4,935 TDK Corp. 155,000 9,272 -------------- 20,382 -------------- FINANCIAL SERVICES Hitachi Credit Corp. 188,000 3,336 Nikko Securities Co. 757,000 8,517 Nomura Securities Co. 435,000 8,515 +Sumitomo Lease 102,000 621 -------------- 20,989 -------------- HEALTH & PERSONAL CARE Sankyo Co. Ltd. 323,000 8,391 Secom Co. 130,000 8,609 Yamanouchi Pharmaceutical Co. 290,000 6,313 -------------- 23,313 -------------- INSURANCE Nichido Fire & Marine Insurance Co. 215,250 1,668 Sumitomo Marine & Fire 642,000 5,608 -------------- 7,276 -------------- MACHINERY & ENGINEERING Amada Co. Ltd. 667,000 7,199 Daifuku 431,000 6,623 Daikin Kogyo Co. 600,000 6,586 Fuji Machine Co. 329,000 9,299 Kurita Water Industries 274,600 6,706 Tsubakimoto Chain 872,000 5,958 -------------- 42,371 -------------- REAL ESTATE Daibiru Corp. 308,000 4,113 Keihanshin Real Estate Co. 205,000 1,785 Mitsubishi Real Estate Co. Ltd. 597,000 8,246 -------------- 14,144 -------------- - ----------------------------------------------------------------- - -------------
The accompanying notes are an integral part of the financial statements. 9
VALUE SHARES (000) - --------------------------------------------------------- - ------------ JAPAN (CONTINUED) RECREATION, OTHER CONSUMER GOODS Square Co. Ltd. 76,400 U.S.$ 4,494 -------------- TELECOMMUNICATIONS Nippon Telephone & Telegraph 982 7,294 -------------- TEXTILES & APPAREL Japan Vilene Co. Ltd. 304,000 2,086 -------------- TRANSPORTATION -- ROAD & RAIL Nippon Konpo Unyu Soko 245,000 2,230 -------------- WHOLESALE & INTERNATIONAL TRADE FamilyMart 162,000 7,231 Inabata & Co. 406,000 3,068 -------------- 10,299 -------------- 376,428 -------------- - ----------------------------------------------------------------- - ------------- KOREA (2.9%) APPLIANCES & HOUSEHOLD DURABLES Samsung Electronics Co. (Foreign) 41,873 3,515 Samsung Electronics Co. RFD 12,619 1,059 -------------- 4,574 -------------- BANKING +Korea Housing Bank 60,550 1,665 **Shinhan Bank Co. Ltd. (Foreign) 42,040 982 -------------- 2,647 -------------- CONSTRUCTION & HOUSING **Hyundai Engineering (Foreign) 135,502 6,192 -------------- METALS -- STEEL **Pohang Iron & Steel ADR 161,500 3,936 -------------- TELECOMMUNICATIONS **Korea Mobile Telecom (Foreign) 5,560 6,580 -------------- UTILITIES -- ELECTRICAL & GAS **Korea Electric Power (Foreign) 95,920 3,874 -------------- 27,803 -------------- - ----------------------------------------------------------------- - ------------- MALAYSIA (2.7%) BANKING Malayan Banking Bhd 430,000 4,137 -------------- LEISURE & TOURISM Genting Bhd 441,000 3,447 -------------- MACHINERY & ENGINEERING +United Engineers Ltd. 584,000 4,050 -------------- MULTI-INDUSTRY Renong Bhd 2,468,000 3,938 +Renong Bhd (Warrants), expiring 11/21/00 683,500 310 Renong Bhd 4.00%, 5/21/01 CULS 1,093,600 412 -------------- 4,660 -------------- TELECOMMUNICATIONS Telekom Malaysia Bhd 847,000 7,538 -------------- UTILITIES -- ELECTRICAL & GAS Tenaga Nasional Bhd 563,000 2,370 -------------- 26,202 -------------- - ----------------------------------------------------------------- - ------------- PHILIPPINES (2.9%) BEVERAGES San Miguel Corp. 'B' 145,800 504 -------------- CONSTRUCTION & HOUSING +DMCI Holdings, Inc. 4,947,000 3,540 -------------- - ----------------------------------------------------------------- - ------------- VALUE SHARES (000) - --------------------------------------------------------- - ------------ ENERGY SOURCES Petron Corp. 8,909,375 U.S.$ 4,081 -------------- MULTI-INDUSTRY Ayala Corp. 'B' 1,455,400 2,749 JG Summit Holdings 'B' 6,423,700 2,403 -------------- 5,152 -------------- REAL ESTATE Ayala Land, Inc. 'B' 1,417,350 2,543 C&P Homes, Inc. 2,963,600 2,573 SM Prime Holdings, Inc. 9,637,680 2,501 -------------- 7,617 -------------- TELECOMMUNICATIONS Philippine Long Distance Telephone 'B' 64,250 3,826 -------------- UTILITIES -- ELECTRICAL & GAS Manila Electric Co. 'B' 285,270 2,994 -------------- 27,714 -------------- - ----------------------------------------------------------------- - ------------- SINGAPORE (6.1%) BANKING Development Bank of Singapore (Foreign) 706,000 8,806 Oversea-Chinese Banking Corp. (Foreign) 480,000 5,613 +Oversea-Chinese Banking Corp. (Foreign) (Rights) 48,000 386 United Overseas Bank (Foreign) 979,200 9,369 -------------- 24,174 -------------- BEVERAGES Fraser & Neave 388,400 4,019 -------------- BROADCASTING & PUBLISHING Singapore Press Holdings (Foreign) 120,000 2,356 -------------- FINANCIAL SERVICES Kay Hian James Capel Holdings Ltd. (Foreign) 1,416,000 1,495 -------------- MACHINERY & ENGINEERING Keppel Corp. 978,000 8,179 Sembawang Corp. 250,000 1,240 -------------- 9,419 -------------- MULTI-INDUSTRY Singapore Technologies Industrial Corp. 1,990,000 5,275 Straits Steamship Land Ltd. 1,469,000 4,914 -------------- 10,189 -------------- REAL ESTATE +City Developments Ltd. 323,000 2,518 DBS Land Ltd. 1,276,000 4,377 -------------- 6,895 -------------- 58,547 -------------- - ----------------------------------------------------------------- - ------------- THAILAND (6.3%) BANKING Bangkok Bank Ltd. (Foreign) 958,300 12,987 Siam Commercial Bank Co. Ltd. (Foreign) 632,500 9,169 Thai Farmers Bank Ltd. (Foreign) 1,024,000 11,214 -------------- 33,370 -------------- BUILDING MATERIALS & COMPONENTS Siam Cement Co. Ltd. (Foreign) 48,700 2,390 -------------- - ----------------------------------------------------------------- - -------------
The accompanying notes are an integral part of the financial statements. 10
VALUE SHARES (000) - --------------------------------------------------------- - ------------ THAILAND (CONTINUED) ELECTRICAL & ELECTRONICS Shinawatra Computer Co. Ltd. (Foreign) 186,800 U.S.$ 4,047 -------------- FINANCIAL SERVICES Finance One Co. Ltd. (Foreign) 1,119,527 7,233 National Finance & Securities Co. Ltd. (Foreign) 792,400 3,527 Phatra Thanakit Co. Ltd. (Foreign) 513,135 3,578 -------------- 14,338 -------------- TELECOMMUNICATIONS Advanced Information Services Co. Ltd. (Foreign) 127,100 1,883 +**TelecomAsia Corp. Ltd. (Foreign) 920,000 1,957 **United Communication Industry (Foreign) 175,000 2,344 -------------- 6,184 -------------- 60,329 -------------- - ----------------------------------------------------------------- - ------------- TOTAL COMMON STOCKS (Cost U.S. $883,501) 919,914 -------------- - ----------------------------------------------------------------- - ------------- FACE AMOUNT (000) - --------------------------------------------------------- - ------------ FIXED INCOME SECURITIES (0.1%) - --------------------------------------------------------- - ------------ INDIA (0.1%) METALS -- STEEL **Special Steels Ltd. 14.00%, 12/6/02 INR 2,980 11 -------------- MISCELLANEOUS MATERIALS & COMMODITIES **Amforge Industries, zero coupon 12/1/96 5,150 7 -------------- MULTI-INDUSTRY Max India Part B, zero coupon 12/1/96 100,000 898 -------------- - ----------------------------------------------------------------- - ------------- TOTAL FIXED INCOME SECURITIES (Cost U.S. $759) 916 -------------- - ----------------------------------------------------------------- - ------------- SHORT-TERM INVESTMENT (2.7%) - --------------------------------------------------------- - ------------ UNITED STATES (2.7%) REPURCHASE AGREEMENT Chase Securities, Inc. 5.15%, dated 6/28/96, due 7/1/96, to be repurchased at U.S.$26,278, collateralized by U.S.$25,805 United States Treasury Notes 7.125%, due 9/30/99, valued at U.S.$26,382 (Cost U.S.$26,267) U.S.$ 26,267 26,267 -------------- - ----------------------------------------------------------------- - ------------- FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (1.0%) Australian Dollar AUD 2 1 Hong Kong Dollar HKD 3,003 388 Indian Rupee INR 58,082 1,649 Indonesian Rupiah IDR 1,690,154 726 Japanese Yen JPY 611,711 5,595 Korean Won KRW 70,958 88 Malaysian Ringgit MYR 432 173 Singapore Dollar SGD 190 135 Thai Baht THB 32,957 1,298 -------------- (Cost U.S. $10,134) 10,053 -------------- - ----------------------------------------------------------------- - ------------- TOTAL INVESTMENTS (99.3%) (Cost U.S. $920,661) 957,150 -------------- - ----------------------------------------------------------------- - ------------- AMOUNT AMOUNT (000) (000) - --------------------------------------------------------- - ------------ OTHER ASSETS (1.7%) Cash U.S.$ 9 Net Unrealized Gain on Forward Foreign Currency Exchange Contracts 8,657 Receivable for Investments Sold 4,911 Dividends Receivable 2,389 Foreign Withholding Tax Reclaim Receivable 44 Deferred Organization Costs 34 Interest Receivable 11 Other Assets 69 U.S.$ 16,124 --------------- -------------- - ----------------------------------------------------------------- - ------------- LIABILITIES (-1.0%) Deferred Indian Taxes (1,000) Payable for: Investments Purchased (6,280) Investment Advisory Fees (770) Custodian Fees (530) Rights Offering Costs (467) Professional Fees (89) Administrative Fees (75) Shareholder Reporting Expenses (61) Directors' Fees and Expenses (18) Other Liabilities (319) (8,609) --------------- -------------- - ----------------------------------------------------------------- - ------------- NET ASSETS (100%) Applicable to 71,654,508 issued and outstanding U.S. $0.01 par value shares (200,000,000 shares authorized) U.S.$ 963,665
------------- - ----------------------------------------------------------------- - ------------- NET ASSET VALUE PER SHARE U.S.$ 13.45
------------- - ----------------------------------------------------------------- - ------------- AT JUNE 30, 1996, NET ASSETS CONSISTED OF: - ----------------------------------------------------------------- Common Stock U.S.$ 717 Capital Surplus 927,925 Accumulated Net Investment Loss (25,150) Accumulated Net Realized Gain 16,056 Unrealized Appreciation on Investments and Foreign Currency Translations (net of accrued foreign tax of U.S.$1,013 on unrealized appreciation) 44,117 - ----------------------------------------------------------------- - ------------- TOTAL NET ASSETS U.S.$ 963,665
------------- - ----------------------------------------------------------------- - -------------
+ -- Non-income producing. ** -- Securities (totaling U.S.$62,782 or 6.5% of net assets at June 30, 1996) valued at fair value -- see note A-1 to financial statements. *** -- Security valued at fair value as determined based on the market value of the underlying security less subscription costs. @ -- The Fund is advised by an affiliate. # -- 144A Security -- certain conditions for public sale may exist. ADR -- American Depositary Receipt. CULS -- Convertible Unsecured Loan Stock. GDR -- Global Depositary Receipt. RFD -- Ranked for Dividend. NOTE: Prior governmental approval for foreign investments may be required under certain circumstances in some markets, and foreign ownership limitations may also be imposed by the charters of individual companies in such markets. As a result, an additional class of shares designated as "foreign" may be created and offered for investment. The "local" and "foreign" shares' market values may vary.
The accompanying notes are an integral part of the financial statements. 11 - --------------------------------------------- - --------- JUNE 30, 1996 EXCHANGE RATES: - ---------------------------------------------------- AUD Australian Dollar 1.272 = U.S.$1.00 HKD Hong Kong Dollar 7.408 = U.S.$1.00 IDR Indonesian Rupiah 2,327.500 = U.S.$1.00 INR Indian Rupee 35.230 = U.S.$1.00 JPY Japanese Yen 109.325 = U.S.$1.00 KRW Korean Won 811.200 = U.S.$1.00 MYR Malaysian Ringgit 2.495 = U.S.$1.00 PHP Philippines Peso 26.200 = U.S.$1.00 SGD Singapore Dollar 1.411 = U.S.$1.00 THB Thai Baht 25.385 = U.S.$1.00 - ---------------------------------------------------- - ------------- FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION: Under the terms of forward foreign currency exchange contracts open at June 30, 1996, the Fund is obligated to deliver or is to receive foreign currency in exchange for U.S. dollars as indicated below:
CURRENCY IN NET TO EXCHANGE UNREALIZED DELIVER VALUE SETTLEMENT FOR VALUE GAIN(LOSS) (000) (000) DATE (000) (000) (000) - -------------- ------------ ----------- ------------ ------------ ----------- U.S.$ 628 U.S.$ 628 7/1/96 INR 22,000 U.S.$ 624 U.S.$ (4) JPY 15,409,500 141,339 7/17/96 U.S.$150,000 150,000 8,661 ------------ ------------ ----------- U.S.$141,967 U.S.$150,624 U.S.$ 8,657 ------------ ------------ ----------- ------------ ------------ -----------
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY CLASSIFICATION -- JUNE 30, 1996 (UNAUDITED)
PERCENT VALUE OF NET INDUSTRY (000) ASSETS - --------------------------------------------------------------- - ------------ Aerospace & Military Technology U.S.$ 10,025 1.1% Appliances & Household Durables 7,027 0.7 Automobiles 39,862 4.1 Banking 101,385 10.5 Beverages 8,559 0.9 Broadcasting & Publishing 2,356 0.2 Building Materials & Components 27,993 2.9 Business & Public Services 7,175 0.7 Chemicals 56,608 5.9 Construction & Housing 37,263 3.9 Data Processing & Reproduction 69 0.0 Electrical & Electronics 108,561 11.3 Electronic Components & Instruments 21,338 2.2 Energy Equipment & Services 15,340 1.6 Energy Sources 17,696 1.8 Financial Services 52,333 5.4 Food & Household Products 2,345 0.2 Forest Products & Paper 5,625 0.6 Health & Personal Care 26,890 2.8 Industrial Components 1,995 0.2 Insurance 7,276 0.8 Leisure & Tourism 5,033 0.5 Machinery & Engineering 58,266 6.0 Manufacturing 91 0.0 Metals -- Non-Ferrous 19,100 2.0 Metals -- Steel 8,216 0.9 Miscellaneous Materials & Commodities 10,482 1.1 Multi-Industry 68,349 7.1 Real Estate 80,841 8.4 Recreation, Other Consumer Goods 4,494 0.5 Telecommunications 62,431 6.5 Textiles & Apparel 10,514 1.1 Tobacco 6,826 0.7 Transportation -- Road & Rail 2,632 0.3 Transportation -- Shipping 2,703 0.3 Utilities -- Electrical & Gas 12,832 1.3 Wholesale & International Trade 10,299 1.1 Other 36,320 3.7 ------------ ------- U.S.$957,150 99.3% ------------ ------- ------------ ------- - --------------------------------------------------------- - ------------
The accompanying notes are an integral part of the financial statements. 12
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) STATEMENT OF OPERATIONS (000) - --------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends............................................................................... U.S.$ 5,880 Interest................................................................................ 756 Less: Foreign Taxes Withheld............................................................ (543) - --------------------------------------------------------------------------------------------------------------- Total Income.......................................................................... 6,093 - --------------------------------------------------------------------------------------------------------------- EXPENSES Investment Advisory Fees................................................................ 4,288 Custodian Fees.......................................................................... 1,109 Administrative Fees..................................................................... 426 Transfer Agent Fees..................................................................... 227 Professional Fees....................................................................... 82 Shareholder Reporting Expenses.......................................................... 51 Directors' Fees and Expenses............................................................ 37 Other Expenses.......................................................................... 107 - --------------------------------------------------------------------------------------------------------------- Total Expenses........................................................................ 6,327 - --------------------------------------------------------------------------------------------------------------- Net Investment Loss............................................................... (234) - --------------------------------------------------------------------------------------------------------------- NET REALIZED GAIN Investment Securities Sold.............................................................. 2,289 Foreign Currency Transactions........................................................... 27,142 - --------------------------------------------------------------------------------------------------------------- Net Realized Gain................................................................. 29,431 - --------------------------------------------------------------------------------------------------------------- CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION Appreciation on Investments............................................................. 31,888 Appreciation on Foreign Currency Translations........................................... (15,888) - --------------------------------------------------------------------------------------------------------------- Change in Unrealized Appreciation/Depreciation.................................... 16,000 - --------------------------------------------------------------------------------------------------------------- Total Net Realized Gain and Change in Unrealized Appreciation/Depreciation.................. 45,431 - --------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... U.S.$ 45,197 - --------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1996 YEAR ENDED (UNAUDITED) DECEMBER 31, 1995 STATEMENT OF CHANGES IN NET ASSETS (000) (000) - --------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS Operations: Net Investment Income (Loss)........................................ U.S.$ (234) U.S.$ 2,594 Net Realized Gain (Loss)............................................ 29,431 (10,313) Change in Unrealized Appreciation/Depreciation...................... 16,000 72,710 - --------------------------------------------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations................ 45,197 64,991 - --------------------------------------------------------------------------------------------------------------- Distributions: Net Investment Income............................................... (24,783) (2,598) In Excess of Net Investment Income.................................. -- (133) In Excess of Net Realized Gain...................................... -- (1,169) - --------------------------------------------------------------------------------------------------------------- Total Distributions................................................. (24,783) (3,900) - --------------------------------------------------------------------------------------------------------------- Capital Share Transactions: Common Stock Issued Through Rights Offering (18,000,000 shares)..... 174,487 -- Offering Costs...................................................... (650) -- - --------------------------------------------------------------------------------------------------------------- Net Increase in Net Assets Resulting From Capital Share Transactions....................................................... 173,837 -- - --------------------------------------------------------------------------------------------------------------- Total Increase...................................................... 194,251 61,091 Net Assets: Beginning of Period................................................. 769,414 708,323 - --------------------------------------------------------------------------------------------------------------- End of Period (including accumulated (distributions in excess of) net investment income (loss) of U.S.$25,150 and U.S. $133, respectively)...................................................... U.S.$963,665 U.S.$769,414 - --------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 13 FINANCIAL HIGHLIGHTS
SIX MONTHS PERIOD FROM ENDED YEAR ENDED AUGUST 2, 1994* JUNE 30, 1996 DECEMBER 31, TO DECEMBER 31, SELECTED PER SHARE DATA AND RATIOS: (UNAUDITED) 1995 1994 - --------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD.... U.S.$ 14.34 U.S.$ 13.20 U.S.$ 14.10 - --------------------------------------------------------------------------------------------- Offering Costs.......................... (0.01) -- (0.03) - --------------------------------------------------------------------------------------------- Net Investment Income (Loss)............ (0.01) 0.05 0.05 Net Realized and Unrealized Gain (Loss) on Investments......................... 0.94 1.16 (0.87) - --------------------------------------------------------------------------------------------- Total from Investment Operations.... 0.93 1.21 (0.82) - --------------------------------------------------------------------------------------------- Distributions: Net Investment Income............... (0.35) (0.05) (0.04) In Excess of Net Investment Income............................ -- (0.00)# -- In Excess of Net Realized Gain...... -- (0.02) (0.01) - --------------------------------------------------------------------------------------------- Total Distributions................. (0.35) (0.07) (0.05) - --------------------------------------------------------------------------------------------- Decrease in Net Asset Value due to Shares Issued through Rights Offering............................... (1.46) -- -- - --------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD.......... U.S.$ 13.45 U.S.$ 14.34 U.S.$ 13.20 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- PER SHARE MARKET VALUE, END OF PERIOD... U.S.$ 12.00 U.S.$ 13.33 U.S.$ 12.25 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- TOTAL INVESTMENT RETURN: Market Value........................ 2.35%+ 9.38% (12.71)% Net Asset Value (1)................. 6.59%+ 9.24% (5.94)% - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- RATIOS, SUPPLEMENTAL DATA: - --------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (THOUSANDS)... U.S.$963,665 U.S.$769,414 U.S.$708,323 - --------------------------------------------------------------------------------------------- Ratio of Expenses to Average Net Assets................................. 1.47%** 1.36% 1.31%** Ratio of Net Investment Income (Loss) to Average Net Assets..................... (0.05)%** 0.36% 0.89%** Portfolio Turnover Rate................. 17% 21% 2% Average Commission Rate (2)............. U.S.$0.0204 N/A N/A - --------------------------------------------------------------------------------------------- *Commencement of Operations. **Annualized. #Amount is less than U.S.$0.01. +Adjusted for Rights Offering. (1)Total investment return based on net asset value per share reflects the effects of changes in net asset value on the performance of the Fund during each period, and assumes dividends and distributions, if any, were reinvested. This return does not include the effect of dilution in connection with the Rights Offering. This percentage is not an indication of the performance of a shareholder's investment in the Fund based on market value due to differences between the market price of the stock and the net asset value of the Fund. (2)Beginning with fiscal year 1996, the Fund is required to disclose the average commission rate per share it paid for portfolio trades on which commissions were charged during the period.
The accompanying notes are an integral part of the financial statements. 14 NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996 (UNAUDITED) - ------------ 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. The following significant accounting policies, which are in conformity with generally accepted accounting principles for investment companies, are consistently followed by the Fund in the preparation of its financial statements. Generally accepted accounting principles may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates. 1. SECURITY VALUATION: In valuing the Fund's assets, all listed securities for which market quotations are readily available are valued at the last sale price on the valuation date, or if there was no sale on such date, at the mean between the current bid and asked prices. Securities which are traded over-the-counter are valued at the average of the mean of current bid and asked prices obtained from reputable brokers. Short-term securities which mature in 60 days or less are valued at amortized cost. All other securities and assets for which market values are not readily available (including investments which are subject to limitations as to their sale) are valued at fair value as determined in good faith by the Board of Directors (the "Board"), although the actual calculations may be done by others. 2. TAXES: It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable income. Accordingly, no provision for U.S. Federal income taxes is required in the financial statements. The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued and applied to net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. 3. REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements, a bank as custodian for the Fund takes possession of the underlying securities, with a market value at least equal to the amount of the repurchase transaction, including principal and accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to determine the adequacy of the collateral. In the event of default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the counter-party to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. 4. FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the mean of the bid and asked prices of such currencies against U.S. dollars last quoted by a major bank as follows: - investments, other assets and liabilities at the prevailing rates of exchange on the valuation date; - investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions. Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of the securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from sales and maturities of forward foreign currency exchange contracts, disposition of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) from valuing foreign currency denominated assets and liabilities and forward foreign currency contracts at period end exchange rates are reflected as a component of unrealized appreciation (depreciation) in the Statement of Net Assets. The change in net unrealized currency gains (losses) for the period is reflected in the Statement of Operations. 5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into forward foreign currency exchange contracts to attempt to protect securities and related receivables and payables against changes in future foreign exchange rates. A forward 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 15 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. OTHER: Security transactions are accounted for on the date the securities are purchased or sold. Investments in new Indian securities are made by making applications in the public offerings. The issue price, or a portion thereof, is paid at the time of application and is reflected as share application money on the Statement of Net Assets, if any. Upon allotment of the securities, this amount plus any remaining amount of issue price is recorded as cost of investments. Realized gains and losses on the sale of investment securities are determined on the specific identified cost basis. Interest income is recognized on the accrual basis. Dividend income is recorded on the ex-dividend date (except certain dividends which may be recorded as soon as the Fund is informed of such dividend) net of applicable withholding taxes where recovery of such taxes is not reasonably assured. Distributions to shareholders are recorded on the ex-date. The amount and character of income and capital gain distributions to be paid are determined in accordance with Federal income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing book and tax treatments for foreign currency transactions, the timing of the recognition of gains and losses on securities and forward foreign currency exchange contracts. Permanent book and tax basis differences relating to shareholder distributions may result in reclassifications to undistributed net investment income (loss), accumulated net realized gain (loss) and capital surplus. Adjustments for permanent book-tax differences, if any, are not reflected in ending undistributed net investment income (loss) for the purpose of calculating net investment income (loss) per share in the financial highlights. B. Morgan Stanley Asset Management Inc. (the "Adviser") provides investment advisory services to the Fund under the terms of an Investment Advisory and Management Agreement (the "Agreement"). Under the Agreement, the Adviser is paid a fee computed weekly and payable monthly at an annual rate of 1.00% of the Fund's average weekly net assets. C. The Chase Manhattan Bank, through its affiliate Chase Global Funds Services Company (the "Administrator"), provides administrative services to the Fund under an Administration Agreement. Under the Administration Agreement, the Administrator is paid a fee computed weekly and payable monthly at an annual rate of .09% of the Fund's average weekly net assets, plus $65,000 per annum. In addition, the Fund is charged certain out-of-pocket expenses by the Administrator. The Chase Manhattan Bank acts as custodian for the Fund's assets held in the United States. D. Morgan Stanley Trust Company (the "International Custodian"), an affiliate of the Adviser, acts as custodian for the Fund's assets held outside the United States in accordance with a Custody Agreement. Custodian fees are payable monthly based on assets under custody, investment purchase and sale activity, an account maintenance fee, plus reimbursement for certain out-of-pocket expenses. Investment transaction fees vary by country and security type. For the six months ended June 30, 1996, the Fund incurred International Custodian fees of $1,105,000 of which $528,000 was payable to the International Custodian at June 30, 1996. In addition, for the six months ended June 30, 1996, the Fund has earned interest income of $17,000 and incurred interest expense of $6,000 on balances with the International Custodian. E. For the six months ended June 30, 1996, the Fund made purchases and sales totaling $291,391,000 and $138,773,000, respectively, of investment securities other than long-term U.S. Government securities and short-term investments. There were no purchases and sales of long-term U.S. Government securities. For the six months ended June 30, 1996, the Fund incurred $72,000 of brokerage commissions with Morgan Stanley & Co. Incorporated, an affiliate of the Adviser. At June 30, 1996, the U.S. Federal income tax cost basis of securities was $910,527,000 and accordingly, net unrealized appreciation for U.S. Federal income tax purposes was $36,570,000 of which $86,117,000 related to appreciated securities and $49,547,000 related to depreciated securities. At December 31, 1995, the Fund had a capital loss carryforward for U.S. Federal income tax purposes of approximately $12,396,000 available to offset future capital gains which will expire on December 31, 2003. To the extent that capital gains are offset, such gains will not be distributed to the shareholders. For the year ended December 31, 1995, the Fund expects to defer to January 1, 1996 for U.S. Federal income tax purposes, post-October currency losses of $197,000. F. In connection with its organization and initial public offering of shares, the Fund incurred $55,000 and $1,724,000 of organization and offering costs, respectively. The organization costs are being amortized on a straight-line basis over a five year period beginning August 2, 1994, the date the Fund commenced operations. The offering costs were charged to capital. 16 G. A significant portion of the Fund's net assets consist of securities of issuers located in Asia which are denominated in foreign currencies. Changes in currency exchange rates will affect the value of and investment income from such securities. Asian securities are subject to greater price volatility, limited capitalization and liquidity, and higher rates of inflation than securities of companies based in the United States. In addition, Asian securities may be subject to substantial governmental involvement in the economy and greater social, economic and political uncertainty. H. The Fund issued to its shareholders of record as of the close of business on April 16, 1996 transferable Rights to subscribe for up to an aggregate of 18,000,000 shares of Common Stock of the Fund at a rate of one share of Common Stock for three Rights held at the subscription price of $10.00 per share. During May 1996 the Fund issued a total of 18,000,000 shares of Common Stock on exercise of such Rights. Rights' offering costs of $650,000 were charged directly against the proceeds of the Offering. The Fund was advised that Morgan Stanley & Co. Incorporated, an affiliate of the Adviser, received commissions of $3,062,000, dealer manager fees of $1,650,000 and reimbursement of its expenses of $125,000 in connection with its participation in the Rights Offering. I. Each Director of the Fund who is not an officer of the Fund or an affiliated person as defined under the Investment Company Act of 1940, as amended, may elect to participate in the Director's Deferred Compensation Plan (the "Plan"). Under the Plan, such Directors may elect to defer payment of a percentage of their total fees earned as a Director of the Fund. These deferred portions are treated, based on an election by the Director, as if they were either invested in the Fund's shares or invested in U.S. Treasury Bills, as defined under the Plan. The deferred fees payable, under the Plan, at June 30, 1996 totaled $22,000 and are included in Payable for Directors' Fees and Expenses on the Statement of Net Assets. J. SUPPLEMENTAL PROXY INFORMATION The Annual Meeting of the Stockholders of the Morgan Stanley Asia-Pacific Fund, Inc. was held on June 5, 1996. The following is a summary of each proposal presented and the total number of shares voted:
VOTES IN VOTES VOTES VOTES PROPOSAL: FAVOR OF AGAINST WITHHELD ABSTAINED - ------------------------------------------------------------------------------ ---------- --------- ----------- ----------- 1. To elect the following Directors: Peter J. Chase .......................... 42,076,780 -- 479,291 -- David B. Gill ................................. 42,076,278 -- 479,793 -- Warren J. Olsen ............................... 42,076,478 -- 479,592 -- 2. To ratify the selection of Price Waterhouse LLP as independent public accountants of the Fund.................................................... 42,349,325 145,322 -- 61,424
- -------------------------------------------------------------------------------- SUMMARY OF QUARTERLY RESULTS OF OPERATIONS* (UNAUDITED) - --------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) AND NET INCREASE CHANGE IN (DECREASE) IN NET INVESTMENT UNREALIZED NET ASSETS INVESTMENT APPRECIATION/ RESULTING FROM INCOME INCOME (LOSS) DEPRECIATION OPERATIONS ---------------- ---------------- ---------------- ---------------- PER PER PER PER QUARTER ENDED AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARE - ---------------------------------------- -------- ------ -------- ------ -------- ------ -------- ------ June 30, 1996........................... $ 3,213 $0.05 $ (389 ) $(0.01) $ 6,716 $0.22 $ 6,327 $0.21 March 31, 1996.......................... 2,880 0.05 155 0.00 38,715 0.72 38,870 0.72 -------- ------ -------- ------ -------- ------ -------- ------ Total............................... $ 6,093 $0.10 $ (234 ) $(0.01) $45,431 $0.94 $45,197 $0.93 -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ December 31, 1995....................... $ 2,242 $0.05 $ (428 ) $(0.01) $38,673 $0.72 $38,245 $0.71 September 30, 1995...................... 2,907 0.05 401 0.01 21,730 0.40 22,131 0.41 June 30, 1995........................... 3,978 0.07 1,660 0.03 24,696 0.46 26,356 0.49 March 31, 1995.......................... 3,185 0.06 961 0.02 (22,702 ) (0.42 ) (21,741 ) (0.40 ) -------- ------ -------- ------ -------- ------ -------- ------ Total............................... $12,312 $0.23 $ 2,594 $0.05 $62,397 $1.16 $64,991 $1.21 -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ December 31, 1994....................... $ 3,669 $0.07 $ 1,255 $0.02 $(42,875) $(0.80) $(41,620) $(0.78) September 30, 1994**.................... 3,146 0.06 1,503 0.03 (3,452 ) (0.07 ) (2,039 ) (0.04 ) -------- ------ -------- ------ -------- ------ -------- ------ Total............................... $ 6,815 $0.13 $ 2,758 $0.05 $(46,327) $(0.87) $(43,659) $(0.82) -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ -------- ------ - ----------------------------------------------------------------------------------------------------------------
*Expressed in thousands of U.S. dollars except per share amounts. **The Fund commenced operations on August 2, 1994 The Fund may purchase shares of its Common Stock in the open market at such prices and in such amounts as the Board of Directors may deem advisable. 17 DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"), each shareholder will be deemed to have elected, unless American Stock Transfer & Trust Company (the "Plan Agent") is otherwise instructed by the shareholder in writing, to have all distributions automatically reinvested in Fund shares. Participants in the Plan have the option of making additional voluntary cash payments to the Plan Agent, annually, in any amount from $100 to $3,000, for investment in Fund shares. Dividend and capital gain distributions will be reinvested on the reinvestment date in full and fractional shares. If the market price per share equals or exceeds net asset value per share on the reinvestment date, the Fund will issue shares to participants at net asset value. If net asset value is less than 95% of the market price on the reinvestment date, shares will be issued at 95% of the market price. If net asset value exceeds the market price on the reinvestment date, participants will receive shares valued at market price. The Fund may purchase shares of its Common Stock in the open market in connection with dividend reinvestment requirements at the discretion of the Board of Directors. Should the Fund declare a dividend or capital gain distribution payable only in cash, the Plan Agent will purchase Fund shares for participants in the open market as agent for the participants. The Plan Agent's fees for the reinvestment of dividends and distributions will be paid by the Fund. However, each participant's account will be charged a pro rata share of brokerage commissions incurred on any open market purchases effected on such participant's behalf. A participant will also pay brokerage commissions incurred on purchases made by voluntary cash payments. Although shareholders in the Plan may receive no cash distributions, participation in the Plan will not relieve participants of any income tax which may be payable on such dividends or distributions. In the case of shareholders, such as banks, brokers or nominees, which hold shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by the shareholder as representing the total amount registered in the shareholder's name and held for the account of beneficial owners who are participating in the Plan. Shareholders who do not wish to have distributions automatically reinvested should notify the Plan Agent in writing. There is no penalty for non-participation or withdrawal from the Plan, and shareholders who have previously withdrawn from the Plan may rejoin at any time. Requests for additional information or any correspondence concerning the Plan should be directed to the Plan Agent at: Morgan Stanley Asia-Pacific Fund, Inc. American Stock Transfer & Trust Company Dividend Reinvestment and Cash Purchase Plan 40 Wall Street New York, NY 10003 1-800-278-4353 18 -----END PRIVACY-ENHANCED MESSAGE-----