N-CSRS 1 a2117678zn-csrs.txt N-CSRS ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0570 Expires: November 30, 2005 Estimated average burden hours per response....... 5.0 ----------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-08388 --------------------------------------------- MORGAN STANLEY ASIA-PACIFIC FUND, INC. ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 1221 AVENUE OF THE AMERICAS 22ND FLOOR NEW YORK, NY 10020 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) RONALD E. ROBISON 1221 AVENUE OF THE AMERICAS 34TH FLOOR NEW YORK, NY 10020 ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-800-221-6726 ---------------------------- Date of fiscal year end: 12/31 -------------------------- Date of reporting period: 6/30/03 ------------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Fund's semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: SEMI-ANNUAL REPORT MORGAN STANLEY ASIA-PACIFIC FUND, INC. JUNE 30, 2003 DIRECTORS MICHAEL BOZIC RONALD E. ROBISON CHARLES A. FIUMEFREDDO EXECUTIVE VICE PRESIDENT EDWIN J. GARN AND PRINCIPAL EXECUTIVE WAYNE E. HEDIEN OFFICER JAMES F. HIGGINS DR. MANUEL H. JOHNSON JOSEPH McALINDEN JOSEPH J. KEARNS VICE PRESIDENT MICHAEL NUGENT PHILIP J. PURCELL BARRY FINK FERGUS REID VICE PRESIDENT OFFICERS STEFANIE V. CHANG CHARLES A. FIUMEFREDDO VICE PRESIDENT CHAIRMAN OF THE BOARD JAMES W. GARRETT [MORGAN STANLEY LOGO] MITCHELL M. MERIN TREASURER AND CHIEF PRESIDENT FINANCIAL OFFICER MICHAEL LEARY MORGAN STANLEY ASSISTANT TREASURER ASIA-PACIFIC FUND, INC. MARY E. MULLIN SECRETARY INVESTMENT ADVISER MORGAN STANLEY INVESTMENT MANAGEMENT INC. 1221 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10020 ADMINISTRATOR JPMORGAN INVESTOR SERVICES 73 TREMONT STREET BOSTON, MASSACHUSETTS 02108 CUSTODIAN JPMORGAN CHASE BANK 270 PARK AVENUE NEW YORK, NEW YORK 10017 STOCKHOLDER SERVICING AGENT AMERICAN STOCK TRANSFER & TRUST COMPANY 59 MAIDEN LANE NEW YORK, NEW YORK 10030 (800) 278-4353 LEGAL COUNSEL CLIFFORD CHANCE US LLP 200 PARK AVENUE NEW YORK, NEW YORK 10166 INDEPENDENT AUDITORS 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 CALL 1-800-221-6726 OR VISIT OUR WEBSITE AT www.morganstanley.com/im. MORGAN STANLEY INVESTMENT MANAGEMENT INC. (C) 2003 MORGAN STANLEY INVESTMENT ADVISER MORGAN STANLEY ASIA-PACIFIC FUND, INC. Overview LETTER TO STOCKHOLDERS PERFORMANCE For the six months ended June 30, 2003, the Morgan Stanley Asia-Pacific Fund, Inc. (the "Fund") had a total return of 10.11%, compared to 8.35% for the Morgan Stanley Capital International (MSCI) 50/50 Japan Net and All Country Asia-Pacific Free ex-Japan Net Index (the "Index"). On June 30, 2003, the closing price of the Fund shares on the New York Stock Exchange was $8.13, representing a 13.9% discount to the Fund's net asset value per share. FACTORS AFFECTING PERFORMANCE - Overall, the first half of 2003 presented several challenges to the region, including the threat of a U.S. led war in Iraq, strained international relations, potential conflict with North Korea and the onset and spread of SARS (Severe Acute Respiratory Syndrome). These concerns were abated towards the second quarter of 2003 following the successful U.S. campaign in Iraq, South Korea easing tensions with the North and the containment of SARS - From a performance perspective the Asia Pacific region saw volatile returns during the first half of 2003. The first quarter was characterized by negative index returns (-5.6%, Index return) followed by a strong recovery in the second quarter which saw index returns surge to +14.8%. This recovery was driven by a weaker U.S. dollar, increased local stimulus packages, inflow of foreign investment, muted negative economic impact of SARS and attractive valuations. - Positive contributors to the Fund came from Japan and Hong Kong. In Japan, our higher exposure to large-cap blue-chip securities in both the capital goods and technology hardware & equipment sectors contributed positively to returns. Our overweight position in consumer discretionary stocks in Hong Kong also contributed positively to performance. - Our underweight country and banking sector decisions in Australia detracted from performance. MANAGEMENT STRATEGIES - In terms of portfolio positioning, the Fund increased its overweight in Hong Kong based on low book values, deep discounts, strong fundamentals and high dividend yields. The Fund maintained its relative overweight in Korea, Taiwan and Hong Kong, and its underweight positions in Australia and Malaysia. It maintains its relatively neutral position in Japan. Sincerely, /s/ Ronald E. Robison Ronald E. Robison Executive Vice President and Principal Executive Officer July 2003 2 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS June 30, 2003 (unaudited) STATEMENT OF NET ASSETS
VALUE SHARES (000) ------------------------------------------------------------------------------------- COMMON STOCKS(96.2%) (UNLESS OTHERWISE NOTED) ===================================================================================== AUSTRALIA (8.5%) AIRLINES Qantas Airways Ltd. 1,140,750 $ 2,511 ------------------------------------------------------------------------------------- BANKS Australia & New Zealand Banking Group Ltd. 399,350 5,003 Commonwealth Bank of Australia 162,350 3,229 ------------------------------------------------------------------------------------- 8,232 ------------------------------------------------------------------------------------- BEVERAGES Coca-Cola Amatil Ltd. 223,450 859 ------------------------------------------------------------------------------------- CONTAINERS & PACKAGING Amcor Ltd. 141,350 773 ------------------------------------------------------------------------------------- INSURANCE Promina Group Ltd. 736,400(a) 1,170 QBE Insurance Group Ltd. 239,050 1,500 ------------------------------------------------------------------------------------- 2,670 ------------------------------------------------------------------------------------- MEDIA News Corp., Ltd. 508,900 3,837 ------------------------------------------------------------------------------------- METALS & MINING BHP Billiton Ltd. 902,277 5,247 Rio Tinto Ltd. 244,050 4,799 ------------------------------------------------------------------------------------- 10,046 ------------------------------------------------------------------------------------- 28,928 ===================================================================================== CHINA (0.4%) ELECTRIC UTILITIES Huaneng Power International, Inc., 'H' 1,088,000 1,242 ===================================================================================== HONG KONG(10.4%) AIRLINES Cathay Pacific Airways Ltd. 972,000 1,309 ------------------------------------------------------------------------------------- BANKS Bank of East Asia 830,000 1,639 ------------------------------------------------------------------------------------- DISTRIBUTORS Li & Fung Ltd. 1,504,000 1,938 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES Hong Kong Exchanges & Clearing Ltd. 1,004,000 1,442 Swire Pacific Ltd. 'A' 587,000 2,567 ------------------------------------------------------------------------------------- 4,009 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT Johnson Electric Holdings Ltd. 1,126,000 1,393 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES Techtronic Industries Co., Ltd. 848,000 1,424 ------------------------------------------------------------------------------------- MEDIA Television Broadcasts Ltd. 268,000 $ 961 ------------------------------------------------------------------------------------- METALS & MINING Asia Aluminum Holdings Ltd. 5,456,000 721 ------------------------------------------------------------------------------------- OIL & GAS CNOOC Ltd. 1,686,000 2,486 ------------------------------------------------------------------------------------- REAL ESTATE Cheung Kong Holdings Ltd. 1,156,000 6,953 Henderson Land Development Co., Ltd. 1,081,000 3,105 Hysan Development Co., Ltd. 792,000 655 Sun Hung Kai Properties Ltd. 517,000 2,612 ------------------------------------------------------------------------------------- 13,325 ------------------------------------------------------------------------------------- SPECIALTY RETAIL Esprit Holdings Ltd. 1,562,500 3,817 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES China Mobile (Hong Kong) Ltd. 994,000 2,345 ------------------------------------------------------------------------------------- 35,367 ===================================================================================== INDIA (2.1%) AUTOMOBILES Hero Honda Motors Ltd. 155,725 850 ------------------------------------------------------------------------------------- BANKS Canara Bank 732,000 1,504 State Bank of India Ltd. 145,235(b) 1,258 Union Bank of India 780,000 583 ------------------------------------------------------------------------------------- 3,345 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT Bharat Heavy Electricals Ltd. 171,937 996 ------------------------------------------------------------------------------------- METALS & MINING Hindalco Industries Ltd. 56,000 899 Tata Iron & Steel Co., Ltd. 1,910 7 ------------------------------------------------------------------------------------- 906 ------------------------------------------------------------------------------------- PHARMACEUTICALS Ranbaxy Laboratories Ltd. 50,000 846 ------------------------------------------------------------------------------------- 6,943 ===================================================================================== INDONESIA (1.4%) AUTOMOBILES Astra International Tbk PT 4,194,000(a) 1,818 ------------------------------------------------------------------------------------- BANKS Bank Central Asia Tbk PT 1,980,000 690 Bank Mandiri Persero Tbk PT 3,450,000(a) 282 ------------------------------------------------------------------------------------- 972 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES Telekomunikasi Indonesia Tbk PT 2,904,500 1,628 -------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 3 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS June 30, 2003 (unaudited) STATEMENT OF NET ASSETS (CONT'D)
VALUE SHARES (000) ------------------------------------------------------------------------------------- INDONESIA (CONT'D) MULTILINE RETAIL Ramayana Lestari Sentosa Tbk PT 1,051,500 $ 411 ------------------------------------------------------------------------------------- 4,829 ===================================================================================== JAPAN (49.2%) AUTOMOBILES Nissan Motor Co., Ltd. 654,000 6,273 Suzuki Motor Corp. 267,000 3,484 Toyota Motor Corp. 194,300 5,049 Yamaha Motor Co., Ltd. 100,000 846 ------------------------------------------------------------------------------------- 15,652 ------------------------------------------------------------------------------------- BUILDING PRODUCTS Daikin Industries Ltd. 226,000 4,163 Sanwa Shutter Corp. 352,000 1,400 ------------------------------------------------------------------------------------- 5,563 ------------------------------------------------------------------------------------- CHEMICALS Daicel Chemical Industries Ltd. 700,000 2,228 Denki Kagaku Kogyo Kabushiki Kaisha 1,038,000 2,888 Kaneka Corp. 540,000 3,339 Lintec Corp. 185,000 1,932 Mitsubishi Chemical Corp. 1,079,000 2,209 Nifco, Inc. 193,000 2,077 Shin-Etsu Polymer Co., Ltd. 347,000 1,713 Toyo INK MFG Co., Ltd 200,000 545 ------------------------------------------------------------------------------------- 16,931 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES Dai Nippon Printing Co., Ltd. 210,000 2,228 Nissha Printing Co., Ltd. 63,000 457 ------------------------------------------------------------------------------------- 2,685 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS Fujitsu Ltd. 720,000 2,960 Mitsumi Electric Co., Ltd. 221,500 2,296 NEC Corp. 710,000(a) 3,559 Toshiba Corp. 1,400,000 4,831 ------------------------------------------------------------------------------------- 13,646 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING Kyudenko Corp. 220,000 772 Obayashi Corp. 582,000 1,790 Sanki Engineering Co., Ltd. 74,000 364 ------------------------------------------------------------------------------------- 2,926 ------------------------------------------------------------------------------------- CONSUMER FINANCE Hitachi Capital Corp. 258,300 2,821 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES Nippon Telegraph & Telephone Corp. 936 3,683 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES Tokyo Electric Power Co., Inc. 155,100 $ 2,974 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT Furukawa Electric Co., Ltd. 414,000 1,356 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Hitachi High-Technologies Corp. 70,000 865 Hitachi Ltd. 790,000 3,359 Kyocera Corp. 54,600 3,134 Ryosan Co., Ltd. 133,000 1,747 TDK Corp. 72,200 3,577 ------------------------------------------------------------------------------------- 12,682 ------------------------------------------------------------------------------------- FOOD & STAPLES FamilyMart Co., Ltd. 127,300 2,281 ------------------------------------------------------------------------------------- FOOD PRODUCTS House Foods Corp. 136,000 1,250 Nippon Meat Packers, Inc. 200,000 1,895 ------------------------------------------------------------------------------------- 3,145 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES Casio Computer Co., Ltd. 407,000 2,608 Matsushita Electric Industrial Co., Ltd. 430,000 4,272 Rinnai Corp. 78,700 1,660 Sangetsu Co., Ltd. 17,000 275 Sekisui Chemical Co., Ltd. 500,000 1,696 Sekisui House Ltd. 351,000 2,669 Sony Corp. 105,700 2,985 ------------------------------------------------------------------------------------- 16,165 ------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS Fuji Photo Film Co., Ltd. 141,000 4,088 Yamaha Corp. 298,000 4,098 ------------------------------------------------------------------------------------- 8,186 ------------------------------------------------------------------------------------- MACHINERY Amada Co., Ltd. 508,000 1,638 Daifuku Co., Ltd. 508,000 1,940 Fuji Machine Manufacturing Co., Ltd. 156,000 1,812 Fujitec Co., Ltd. 178,000 773 Kurita Water Industries Ltd. 234,000 2,598 Minebea Co., Ltd. 504,000 2,005 Mitsubishi Heavy Industries Ltd. 1,106,000 2,874 Tsubakimoto Chain Co. 660,000 2,040 ------------------------------------------------------------------------------------- 15,680 ------------------------------------------------------------------------------------- MEDIA Toho Co., Ltd. 75,000 660 ------------------------------------------------------------------------------------- OFFICE ELECTRONICS Canon, Inc. 121,000 5,571
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 4 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS June 30, 2003 (unaudited) STATEMENT OF NET ASSETS (CONT'D)
VALUE SHARES (000) ------------------------------------------------------------------------------------- JAPAN (CONT'D) OFFICE ELECTRONICS (CONT'D) Ricoh Co., Ltd. 281,000 $ 4,606 ------------------------------------------------------------------------------------- 10,177 ------------------------------------------------------------------------------------- PHARMACEUTICALS Ono Pharmaceutical Co., Ltd. 104,000 3,232 Sankyo Co., Ltd. 226,000 2,708 Yamanouchi Pharmaceutical Co., Ltd. 154,000 4,027 ------------------------------------------------------------------------------------- 9,967 ------------------------------------------------------------------------------------- REAL ESTATE Mitsubishi Estate Co., Ltd. 470,000 3,192 ------------------------------------------------------------------------------------- ROAD & RAIL East Japan Railway Co. 769 3,431 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Rohm Co., Ltd. 21,200 2,319 ------------------------------------------------------------------------------------- SOFTWARE Nintendo Co., Ltd. 50,000 3,647 ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS Nisshinbo Industries, Inc. 265,000 1,218 ------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS Mitsubishi Corp. 529,000 3,681 Nagase & Co., Ltd. 197,000 1,024 ------------------------------------------------------------------------------------- 4,705 ------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE Mitsubishi Logistics Corp. 141,000 855 ------------------------------------------------------------------------------------- 166,547 ===================================================================================== MALAYSIA (0.3%) AUTOMOBILES Perusahaan Otomobil Nasional Bhd 224,000 477 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES YTL Corp. Bhd 505,000 532 ------------------------------------------------------------------------------------- 1,009 ===================================================================================== NEW ZEALAND (0.3%) PAPER & FOREST PRODUCTS Carter Holt Harvey Ltd. 843,000 887 ===================================================================================== SINGAPORE(4.4%) AIRLINES Singapore Airlines Ltd. 438,000 2,587 ------------------------------------------------------------------------------------- BANKS DBS Group Holdings Ltd. 318,979 1,866 Oversea-Chinese Banking Corp., Ltd. 117,000 665 United Overseas Bank Ltd. 416,389 $ 2,933 ------------------------------------------------------------------------------------- 5,464 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Venture Corp., Ltd. 171,000 1,564 ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES SembCorp Industries Ltd. 2,003,000 1,456 ------------------------------------------------------------------------------------- MARINE Neptune Orient Lines Ltd. 1,693,000(a) 1,423 ------------------------------------------------------------------------------------- REAL ESTATE CapitaLand, Ltd. 1,464,000 1,031 City Developments Ltd. 380,000 959 ------------------------------------------------------------------------------------- 1,990 ------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE Sembcorp Logistics Ltd. 537,800 574 ------------------------------------------------------------------------------------- 15,058 ===================================================================================== SOUTH KOREA (11.1%) AUTO COMPONENTS Hyundai Mobis 107,510 2,757 ------------------------------------------------------------------------------------- BANKS Shinhan Financial Group Co., Ltd. 74,480 776 ------------------------------------------------------------------------------------- CAPITAL MARKETS Daishin Securities Co., Ltd. 51,130 886 Samsung Securities Co., Ltd. 50,910 1,233 ------------------------------------------------------------------------------------- 2,119 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES Good Morning Shinhan Securities Co., Ltd 95,730(a) 425 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Samsung SDI Co., Ltd. 32,480 2,460 ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING LG Household & Health Care Ltd. 36,940 954 ------------------------------------------------------------------------------------- FOOD PRODUCTS Tong Yang Confectionery Corp. 21,930 1,354 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES LG Electronics, Inc. 42,729 1,781 ------------------------------------------------------------------------------------- MACHINERY Daewoo Shipbuilding & Marine Engineering Co., Ltd. 35,520(a) 300 Daewoo Shipbuilding & Marine Engineering Co., Ltd. GDR 51,300(a) 829 Samsung Heavy Industries Co., Ltd. 137,280 550 ------------------------------------------------------------------------------------- 1,679 ------------------------------------------------------------------------------------- MEDIA CJ Home Shopping 15,909 825 ------------------------------------------------------------------------------------- METALS & MINING POSCO 6,590 684 -------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 5 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS June 30, 2003 (unaudited) STATEMENT OF NET ASSETS (CONT'D)
VALUE SHARES (000) ------------------------------------------------------------------------------------- SOUTH KOREA (CONT'D) MULTILINE RETAIL Hyundai Department Store Co., Ltd. 45,050 $ 1,003 Shinsegae Co., Ltd. 4,260 665 ------------------------------------------------------------------------------------- 1,668 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Samsung Electronics Co., Ltd. 47,647 14,154 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES Pantech Co., Ltd. 17,840 168 SK Telecom Co., Ltd. 34,410 5,874 ------------------------------------------------------------------------------------- 6,042 ------------------------------------------------------------------------------------- 37,678 ===================================================================================== TAIWAN (7.2%) AIRLINES Eva Airways Corp. 3,016,884(a) 1,082 ------------------------------------------------------------------------------------- BANKS Chinatrust Financial Holding Co., Ltd 2,909,043 2,348 Taishin Financial Holdings Co., Ltd. 2,133,000(a) 1,111 ------------------------------------------------------------------------------------- 3,459 ------------------------------------------------------------------------------------- CHEMICALS Nan Ya Plastics Corp. 644,000 699 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS Ambit Microsystems Corp. 176,000 545 Compal Electronics, Inc. 275,000 369 Quanta Computer, Inc. 302,100 625 Quanta Storage, Inc. 11,000 79 ------------------------------------------------------------------------------------- 1,618 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING CTCI Corp. 527,000 342 ------------------------------------------------------------------------------------- CONTAINERS & PACKAGING Cheng Loong Corp. 440,000 116 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES Capital Securities Corp. 1,254,000(a) 390 Fubon Financial Holding Co., Ltd. 791,000(a) 634 Polaris Securities Co., Ltd. 1,897,000(a) 911 Yuanta Core Pacific Securities Co. 1,619,000 848 ------------------------------------------------------------------------------------- 2,783 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT Phoenixtec Power Co., Ltd. 977,000 823 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Hon Hai Precision Industry Co., Ltd. 596,200 2,165 ------------------------------------------------------------------------------------- INSURANCE Cathay Financial Holding Co., Ltd. 913,000 $ 1,117 ------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS Asia Optical Co., Inc. 64,000 333 Largan Precision Co., Ltd. 131,300 790 Premier Image Technology Corp. 704,000 1,090 ------------------------------------------------------------------------------------- 2,213 ------------------------------------------------------------------------------------- MARINE Evergreen Marine Corp. 457,000 325 Yang Ming Marine Transport 635,000(a) 423 ------------------------------------------------------------------------------------- 748 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT ASE Test Ltd. 217,500(a) 1,196 Siliconware Precision Industries Co. 1,253,247(a) 798 Taiwan Semiconductor Manufacturing Co., Ltd. 2,734,584(a) 4,510 Zyxel Communications Corp. 358,000(a) 674 ------------------------------------------------------------------------------------- 7,178 ------------------------------------------------------------------------------------- 24,343 ===================================================================================== THAILAND (0.9%) BANKS Bangkok Bank PCL 244,900(a) 326 Bangkok Bank PCL (Foreign) 668,600(a),(b) 1,072 Kasikornbank PCL 401,800(a) 325 Kasikornbank PCL (Foreign) 858,500(a) 800 Siam Commercial Bank PCL (Foreign) 573,000(a) 490 ------------------------------------------------------------------------------------- 3,013 ===================================================================================== TOTAL COMMON STOCKS (Cost $364,356) 325,844 ===================================================================================== PREFERRED STOCKS(1.4%) ===================================================================================== AUSTRALIA(0.4%) MEDIA News Corp., Ltd. 229,800 1,421 ===================================================================================== SOUTH KOREA(1.0%) AUTOMOBILES Hyundai Motor Co., Ltd. 64,310 832 ===================================================================================== SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Samsung Electronics Co., Ltd. 17,910 2,555 ------------------------------------------------------------------------------------- 3,387 ===================================================================================== TOTAL PREFERRED STOCKS (Cost $4,693) 4,808 =====================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 6 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS June 30, 2003 (unaudited) STATEMENT OF NET ASSETS (CONT'D)
FACE AMOUNT VALUE (000) (000) ------------------------------------------------------------------------------------- INVESTMENT COMPANIES(0.6%) ===================================================================================== INDIA(0.6%) Morgan Stanley Growth Fund (Cost $1,744) $ 9,491,200(a),(c) $ 2,029 ===================================================================================== SHORT-TERM INVESTMENT(1.7%) ===================================================================================== UNITED STATES(1.7%) REPURCHASE AGREEMENT J.P. Morgan Securities, Inc., 1.05%, dated 6/30/03, due 7/1/03 (Cost $5,735) 5,735(d) 5,735 ===================================================================================== FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN(0.5%) ===================================================================================== Hong Kong Dollar HKD 319 41 Indonesian Rupiah IDR 817,576 99 Japanese Yen JPY 125,663 1,050 South Korean Won KRW 273 -- @ Taiwan Dollar TWD 13,314 385 ------------------------------------------------------------------------------------- TOTAL FOREIGN CURRENCY (Cost $1,578) 1,575 ===================================================================================== TOTAL INVESTMENTS(100.4%) (Cost $378,106) 339,991 ===================================================================================== AMOUNT (000) ------------------------------------------------------------------------------------- OTHER ASSETS (0.2%) Dividends Receivable $ 336 Receivable for Investments Sold 220 Interest Receivable 5 Other 56 617 ===================================================================================== LIABILITIES (-0.6%) Payable For: Investments Purchased (1,373) Investment Advisory Fees (276) Custodian Fees (73) Professional Fees (51) Directors' Fees and Expenses (46) Stockholder Reporting Expenses (32) Administrative Fees (15) Net Unrealized Loss on Foreign Currency Exchange Contracts (3) Other Liabilities (78) (1,947) ===================================================================================== NET ASSETS (100%) Applicable to 35,863,533 issued and outstanding $ 0.01 par value shares (200,000,000 shares authorized) $ 338,661 ===================================================================================== NET ASSET VALUE PER SHARE $ 9.44 ===================================================================================== VALUE (000) ------------------------------------------------------------------------------------- AT JUNE 30, 2003, NET ASSETS CONSISTED OF: Common Stock $ 359 Paid-in Capital 589,638 Undistributed (Distributions in Excess of) Net Investment Income 1,240 Accumulated Net Realized Gain (Loss) (214,465) Unrealized Appreciation (Depreciation) on Investments and Foreign Currency Translations (38,111) ===================================================================================== TOTAL NET ASSETS $ 338,661 =====================================================================================
(a) -- Non-income producing. (b) -- Securities valued at fair value - see Note A-1 to financial statements. At June 30, 2003, the Fund held $2,330,000 of fair-valued securities, representing 0.7% of net assets. (c) -- The Morgan Stanley India Growth Fund is advised by an affiliate of the adviser. During the six months ended June 30, 2003, there were no purchases or sales of this security. The Fund did not derive income from this security during the six months ended June 30, 2003. (d) -- 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 joint account with affiliated funds. @ -- Value is less than $500. GDR -- Global Depositary Receipt THB -- Thai Baht FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION: The Fund had the following foreign currency exchange contract(s) open at period end:
CURRENCY IN NET TO EXCHANGE UNREALIZED DELIVER VALUE SETTLEMENT FOR VALUE GAIN (LOSS) (000) (000) DATE (000) (000) (000) -------------------------------------------------------------------- US$ 329 $ 329 07/02/03 THB 13,704 $ 326 $ (3)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 7 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS June 30, 2003 (unaudited) STATEMENT OF NET ASSETS (CONT'D) SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY CLASSIFICATION -- JUNE 30, 2003
PERCENT VALUE OF NET INDUSTRY (000) ASSETS ---------------------------------------------------------------- Airlines $ 7,489 2.2% Automobiles 19,629 5.8 Banks 26,900 7.9 Building Products 5,563 1.7 Chemicals 17,630 5.2 Computers & Peripherals 15,264 4.5 Construction & Engineering 3,268 1.0 Diversified Financial Services 9,246 2.7 Diversified Telecommunication Services 5,311 1.6 Electric Utilities 4,748 1.4 Electrical Equipment 4,568 1.3 Electronic Equipment & Instruments 18,871 5.6 Food Products 4,499 1.3 Household Durables 19,370 5.7 Insurance 3,787 1.1 Leisure Equipment & Products 10,399 3.1 Machinery 17,359 5.1 Media 7,704 2.3 Metals & Mining 12,357 3.7 Office Electronics 10,177 3.0 Pharmaceuticals 10,813 3.2 Real Estate 18,507 5.5 Road & Rail 3,431 1.0 Semiconductors & Semiconductor Equipment 26,206 7.7 Software 3,647 1.1 Specialty Retail 3,817 1.1 Trading Companies & Distributors 4,705 1.4 Wireless Telecommunication Services 8,387 2.5 Other 36,339 10.7 ---------------------------------------------------------------- $ 339,991 100.4% ================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 8 MORGAN STANLEY ASIA-PACIFIC FUND, INC. Financial Statements STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) (000) ------------------------------------------------------------------------------------------------------------------------ INVESTMENT INCOME Dividends (net of $319 of foreign taxes withheld) $ 3,273 Interest 48 ======================================================================================================================== TOTAL INCOME 3,321 ======================================================================================================================== EXPENSES Investment Advisory Fees 1,526 Custodian Fees 106 Professional Fees 72 Administrative Fees 64 Directors' Fees and Expenses 1 Other Expenses 103 ======================================================================================================================== TOTAL EXPENSES 1,872 ======================================================================================================================== NET INVESTMENT INCOME (LOSS) 1,449 ======================================================================================================================== NET REALIZED GAIN (LOSS) ON: Investments (3,769) Foreign Currency Transactions (25) ======================================================================================================================== NET REALIZED GAIN (LOSS) (3,794) ======================================================================================================================== CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON: Investments 33,337 Foreign Currency Translations 3 ======================================================================================================================== CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 33,340 ======================================================================================================================== TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 29,546 ======================================================================================================================== NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 30,995 ========================================================================================================================
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 2003 YEAR ENDED (UNAUDITED) DECEMBER 31, 2002 (000) (000) ------------------------------------------------------------------------------------------------------------------------ INCREASE (DECREASE) IN NET ASSETS Operations: Net Investment Income (Loss) $ 1,449 $ 631 Net Realized Gain (Loss) (3,794) (2,735) Change in Unrealized Appreciation (Depreciation) 33,340 (17,251) ======================================================================================================================== NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 30,995 (19,355) ======================================================================================================================== Distributions from and/or in excess of: Net Investment Income -- (277) ======================================================================================================================== Capital Share Transactions: Repurchase of Shares (158,630 and 6,960,192 shares, respectively) (1,151) (68,887) ======================================================================================================================== TOTAL INCREASE (DECREASE) 29,844 (88,519) ======================================================================================================================== Net Assets: Beginning of Period 308,817 397,336 ======================================================================================================================== END OF PERIOD (INCLUDING UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT INCOME OF $1,240 AND $(209), RESPECTIVELY) $ 338,661 $ 308,817 ========================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 9 MORGAN STANLEY ASIA-PACIFIC FUND, INC. Financial Highlights SELECTED PER SHARE DATA AND RATIOS
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 2003 -------------------------------------------------------------- (UNAUDITED) 2002 2001 2000 1999 1998 --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 8.57 $ 9.24 $ 10.82 $ 15.26 $ 8.73 $ 8.77 --------------------------------------------------------------------------------------------------------------------------------- Net Investment Income (Loss) 0.04+ 0.02+ (0.02) (0.01) 0.01 0.06 Net Realized and Unrealized Gain (Loss) on Investments 0.83 (0.70) (1.56) (4.50) 6.44 (0.17) --------------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations 0.87 (0.68) (1.58) (4.51) 6.45 (0.11) --------------------------------------------------------------------------------------------------------------------------------- Distributions from and/or in excess of: Net Investment Income -- (0.01) -- (0.22) (0.04) (0.01) --------------------------------------------------------------------------------------------------------------------------------- Anti-Dilutive Effect of Share Repurchase Program 0.00# 0.02 0.00# 0.29 0.12 0.08 --------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $ 9.44 $ 8.57 $ 9.24 $ 10.82 $ 15.26 $ 8.73 ================================================================================================================================= PER SHARE MARKET VALUE, END OF PERIOD $ 8.13 $ 7.20 $ 7.49 $ 8.69 $ 11.81 $ 7.00 ================================================================================================================================= TOTAL INVESTMENT RETURN: Market Value 12.92%** (3.77)% (13.78)% (24.66)% 69.32% (5.77)% Net Asset Value (1) 10.11%** (7.12)% (14.60)% (27.37)% 75.39% (0.34)% ================================================================================================================================= RATIOS, SUPPLEMENTAL DATA: --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (THOUSANDS) $ 338,661 $ 308,817 $ 397,336 $ 621,505 $ 949,541 $ 587,156 --------------------------------------------------------------------------------------------------------------------------------- Ratio of Expenses to Average Net Assets 1.23%* 1.35% 1.39% 1.26% 1.29% 1.42% Ratio of Net Investment Income (Loss) to Average Net Assets 0.95%* 0.17% 0.19% (0.07)% 0.10% 0.80% Portfolio Turnover Rate 15%** 37% 27% 35% 65% 42% ---------------------------------------------------------------------------------------------------------------------------------
# Amount is less than $0.005 per share. (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. + Per share amount is based on average shares outstanding. * Annualized ** Not Annualized THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 10 MORGAN STANLEY ASIA-PACIFIC FUND, INC. June 30, 2003 (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 accounting principles generally accepted in the United States of America. Such policies are consistently followed by the Fund in the preparation of its financial statements. Accounting principles generally accepted in the United States of America 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. For all other securities and investments for which market values are not readily available, including restricted securities, and where prices determined in accordance with the aforementioned procedures are not reflective of fair market value, values are determined in good faith, under fair valuation procedures adopted by the Board of Directors, although actual calculations may be done by others. 2. 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. 3. 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 11 MORGAN STANLEY ASIA-PACIFIC FUND, INC. June 30, 2003 (unaudited) NOTES TO FINANCIAL STATEMENTS (CONT'D) 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 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. 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. 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 has utilized and their associated risks: 4. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign currency exchange contracts 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. 5. 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. 6. 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. 7. 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 12 MORGAN STANLEY ASIA-PACIFIC FUND, INC. June 30, 2003 (unaudited) NOTES TO FINANCIAL STATEMENTS (CONT'D) 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 dividends) net of applicable withholding taxes. Distributions to stockholders are recorded on the ex-dividend date. 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 Co. (the "Administrator"), provides administrative services to the Fund under an Administration Agreement. The Administrator is paid a fee computed weekly and payable monthly at an annual rate of 0.02435% of the Fund's average weekly net assets, plus $24,000 per annum. In addition, the Fund is 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. FEDERAL INCOME 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 Federal income taxes is required in the financial statements. Dividend income and distributions to stockholders are recorded on the ex-dividend date. 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. The tax character of distributions paid may differ from the character of distributions shown on the Statements of Changes in Net Assets due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during 2002 and 2001 was as follows:
2002 DISTRIBUTIONS 2001 DISTRIBUTIONS PAID FROM: PAID FROM: (000) (000) ------------------------------ ------------------------ LONG-TERM LONG-TERM ORDINARY CAPITAL ORDINARY CAPITAL INCOME GAIN INCOME GAIN --------------------------------------------------------- $ 277 $ -- $ -- $ --
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 accounting principles generally accepted in the United States of America. The book/tax differences are considered either 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 differences may result in reclassifications among undistributed (distributions in excess of) net investment income, accumulated net realized gain (loss) and paid-in capital. Adjustments for permanent book-tax differences, if any, are not reflected in ending undistributed (distributions in excess of) net investment income for the purpose of calculating net investment income (loss) per share in the financial highlights. At December 31, 2002, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED ORDINARY INCOME LONG-TERM CAPITAL GAIN (000) (000) ------------------------------------------------------- $ -- $ -- -------------------------------------------------------
At June 30, 2003, the U.S. Federal income tax cost basis of investments (excluding foreign currency if applicable) was approximately $376,528,000 and, accordingly, net unrealized depreciation for U.S. Federal income tax purposes was $38,112,000 of which $37,536,000 related to appreciated securities and $75,648,000 related to depreciated securities. At December 31, 2002, the Fund had a capital loss carryforward for U.S. Federal income tax purposes of approximately $208,653,000 available to offset future capital gains, of which $131,491,000 will expire on December 31, 13 MORGAN STANLEY ASIA-PACIFIC FUND, INC. June 30, 2003 (unaudited) NOTES TO FINANCIAL STATEMENTS (CONT'D) 2006, $73,332,000 will expire on December 31, 2009 and $3,830,000 will expire on December 31, 2010. 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, 2002, the Fund deferred to January 1, 2003, for U.S. Federal income tax purposes, capital losses of $651,000 and post-October currency losses of $19,000. F. OTHER: During the six months ended June 30, 2003, the Fund made purchases and sales totaling approximately $47,733,000 and $45,087,000 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. For the six months ended June 30, 2003, the Fund incurred $34,000 of brokerage commissions with Morgan Stanley & Co., an affiliate of the Adviser. 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 "Compensation Plan"). Under the Compensation 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 will be 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 Compensation Plan. At June 30, 2003, the deferred fees payable under the Compensation Plan totaled $44,200 and are included in Payable for Directors' Fees and Expenses on the Statement of Net Assets. The deferred portion of Directors' Fees and Expenses shown on the Statement of Operations is impacted by fluctuations in the market value of the investments selected by each Director. For the six months ended June 30, 2003, Directors' Fees and Expenses were decreased by $3,400 due to these fluctuations. 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, 2003, the Fund repurchased 158,630 of its shares at an average discount of 16.39% from net asset value per share. Since the inception of the program, the Fund has repurchased 15,072,158 of its shares at an average discount of 20.53% 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. PROPOSAL: 1. To elect the following Directors, effective July 31, 2003:
VOTES IN VOTES FAVOR OF AGAINST --------------------------- 1) Michael Bozic 29,661,275 615,871 2) Charles A. Fiumefreddo 29,661,275 615,871 3) Edwin J. Garn 29,661,375 615,771 4) Wayne E. Hedien 29,661,526 616,619 5) James F. Higgins 29,661,375 615,771 6) Dr. Manuel H. Johnson 29,661,375 615,771 7) Philip J. Purcell 29,661,526 616,619
Also effective July 31, 2003, John D. Barrett II, Thomas P. Gerrity, Gerard E. Jones, Vincent R. McLean, C. Oscar Morong, Jr. and William G. Morton, Jr. have resigned from the Board of Directors. 14 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 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 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, that 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, New York 10030 1-800-278-4353 15 ITEM 2. CODE OF ETHICS. Not applicable for semi-annual reports. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for semi-annual reports. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable for semi-annual reports. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable for semi-annual reports. ITEM 6. [RESERVED.] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable for semi-annual reports. ITEM 8. [RESERVED.] ITEM 9. CONTROLS AND PROCEDURES. The Fund's principal executive officer and principal financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Fund's internal controls or in other factors that could significantly affect the Fund's internal controls subsequent to the date of their evaluation. ITEM 10. EXHIBITS. (a) Code of Ethics - Not applicable for semi-annual reports. (b) Certifications of Principal Executive Officer and Principal Financial Officer attached hereto as part of EX-99.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Morgan Stanley Asia-Pacific Fund, Inc. By: Ronald E. Robison Name: Ronald E. Robison Title: Principal Executive Officer Date: August 19, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: Ronald E. Robison Name: Ronald E. Robison Title: Principal Executive Officer Date: August 19, 2003 By: James W. Garrett Name: James W. Garrett Title: Principal Financial Officer Date: August 19, 2003