-----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, JAsp02TOLDahZTHtiK1NRR9FuPQInmmXR1r1SZhH++Kiv1mHX9t2z8uOA5u1S/gV Z4/Rf0hPzRsh+M7nQlFnkA== 0001047469-04-007149.txt : 20040309 0001047469-04-007149.hdr.sgml : 20040309 20040309171456 ACCESSION NUMBER: 0001047469-04-007149 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040309 EFFECTIVENESS DATE: 20040309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY DEAN WITTER ASIA PACIFIC FUND INC CENTRAL INDEX KEY: 0000919808 IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-08388 FILM NUMBER: 04658107 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 PACIFIC FUND INC DATE OF NAME CHANGE: 19940505 FORMER COMPANY: FORMER CONFORMED NAME: MORGAN STANLEY ASIA INVESTMENT FUND INC DATE OF NAME CHANGE: 19940316 N-CSR 1 a2129607zn-csr.txt N-CSR [ANNOTATED FORM N-CSR FOR ANNUAL REPORTS] 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 America's 22nd Floor New York, NY 10020 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Ronald E. Robison 1221 Avenue of the Americas, 33rd Floor New York, New York 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: 12/31 -------------------------------------------------------------- ITEM 1. REPORTS TO STOCKHOLDERS. The Fund's as annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: [Provide annual report.] MORGAN STANLEY ASIA-PACIFIC FUND, INC. DIRECTORS Charles A. Fiumefreddo Michael Bozic Edwin J. Garn Wayne E. Hedien James F. Higgins Dr. Manuel H. Johnson Joseph J. Kearns Michael Nugent Philip J. Purcell Fergus Reid OFFICERS Charles A. Fiumefreddo CHAIRMAN OF THE BOARD Mitchell M. Merin PRESIDENT Ronald E. Robison EXECUTIVE VICE PRESIDENT AND PRINCIPAL EXECUTIVE OFFICER Joseph J. McAlinden VICE PRESIDENT Barry Fink VICE PRESIDENT Stefanie V. Chang VICE PRESIDENT James W. Garrett TREASURER AND CHIEF FINANCIAL OFFICER Michael J. Leary ASSISTANT TREASURER 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 Company 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 1-(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. (C) 2004 Morgan Stanley ANNUAL REPORT DECEMBER 31, 2003 [MORGAN STANLEY LOGO] MORGAN STANLEY ASIA-PACIFIC FUND, INC. MORGAN STANLEY INVESTMENT MANAGEMENT INC. INVESTMENT ADVISER MORGAN STANLEY ASIA-PACIFIC FUND, INC. LETTER TO STOCKHOLDERS Overview PERFORMANCE For the year ended December 31, 2003, the Morgan Stanley Asia-Pacific Fund, Inc. (the "Fund") had a total return, based on net asset value per share of 44.48%, compared with 41.92% for its benchmark. The benchmark for the Fund is comprised of two Morgan Stanley Capital International (MSCI) indices; Japan Net and All-Country Asia-Pacific Free ex-Japan Net ("the Index"), with each index weighted equally. On December 31, 2003, the closing price of the Fund shares on the New York Stock Exchange was $10.85, representing a 11.7% discount to the Fund's net asset value per share. FACTORS AFFECTING PERFORMANCE - Overall, stock selection was the main driver of the Fund's outperformance with country allocations providing a slight detraction to relative performance. - Strong stock selection in Hong Kong from select real estate, export and technology stocks were a significant contributor. - Both stock selection in Japan (select blue chip securities in the capital goods, technology and hardware equipment industries) and our country underweight (Japan underperformed the overall Index) contributed to the Fund's outperformance. - South Korean automobile-related stocks and technology stocks also contributed to relative positive performance. - The main detractor came from China, where our relative country underweight bias (where China outperformed most of its regional peers) and underweight positions in some Chinese petrochemical companies detracted from performance. - For the year 2003, all countries in the Index posted double-digit returns, with Thailand leading the group with +143.5% returns for the year. China (+87.6%), India (+78.3%), Indonesia (+76.5%), New Zealand (+55.4%), Australia (+49.5%), Taiwan (+41.9%), Philippines (+41.5%), Pakistan (+40.6%), Hong Kong (+38.1%), Singapore (+37.6%), Japan (+35.9%), South Korea (+35.0%) and Malaysia (+26.6%) all also performed well. The Index (+41.9%) outperformed the MSCI Europe, Australasia and Far East (EAFE) Index (+38.6%) and MSCI World (+33.1%) Indices. - Thailand posted the best returns in the region boosted by steady leadership, lower foreign debt, high foreign reserves and a local government focused on fueling economic growth. These factors also contributed to Moody's upgrade of Thailand's sovereign rating. China (+87.6%) was flooded with liquidity and euphoric sentiment lifted by robust economic data and strong gross domestic product (GDP) growth results during this period. In India (+78.3%) performance was driven by a good monsoon season, consistent and large inflows of foreign investment and smooth elections. MANAGEMENT STRATEGIES - In terms of portfolio positioning, in the first half of the year, the Fund maintained its position in Japan with its increased exposure to select blue chip securities in the capital goods, technology and hardware equipment industries. The Fund had assumed a defensive stance in Japanese technology by modestly reducing its portfolio weight due to geo-political concerns and the uncertainty of global economic recovery. - In the rest of Asia, the Fund shifted its stake in Hong Kong from a neutral weight to an overweight position. Hong Kong was hampered from the side effects of several factors including a sluggish economy, depressed property sector, declining exports and the severe acute respiratory syndrome (SARS) outbreak. In light of this, we believed Hong Kong presented several attractive buying opportunities. We took advantage of low book values, deep discounts, strong fundamentals and high dividend yields to increase our positions in select attractive cyclical growth stocks, in particular in Hong Kong's real estate sector. - Despite the Australian dollar's appreciation against the U.S. dollar, the Fund further increased its underweight country position based on the rationale that the Australian market was fairly valued and better opportunities were present elsewhere. - In the second half of the year, from a top down perspective, we focused on the technology sector where new product cycles ar e emerging, especially in the flat TV industry, digital cameras and DVD-recorders. - We rotated into select growth opportunities and lowered our stake in other securities whose valuations have peaked in South Korea's information technology sector. Through the quarter, we increased our position in select South Korean shipbuilding stocks as we saw growth opportunities and improving margins in the industry, where the limited supply of shipping capacity has been unable to meet increasing demand. - We also increased our stake in select Hong Kong real estate operators/managers where we saw growth opportunities. - In Taiwan, the portfolio rotated into select technology stocks manufacturing digital camera components as we focus on high conviction opportunities. Sincerely, /s/ Ronald E. Robison Ronald E. Robison Executive Vice President and Principal Executive Officer January 2004 2 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS STATEMENT OF NET ASSETS December 31, 2003
VALUE SHARES (000) - -------------------------------------------------------------------------------------------- COMMON STOCKS(97.8%) (UNLESS OTHERWISE NOTED) - -------------------------------------------------------------------------------------------- AUSTRALIA (9.6%) AIRLINES Qantas Airways Ltd. 790,650 $ 1,956 - -------------------------------------------------------------------------------------------- BEVERAGES Coca-Cola Amatil Ltd. 223,450 1,047 - -------------------------------------------------------------------------------------------- COMMERCIAL BANKS Australia & New Zealand Banking Group Ltd. 471,959 6,275 Commonwealth Bank of Australia 162,350 3,595 - -------------------------------------------------------------------------------------------- 9,870 - -------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING Downer EDI Ltd. 634,000 1,845 - -------------------------------------------------------------------------------------------- CONTAINERS & PACKAGING Amcor Ltd. 262,150 1,628 - -------------------------------------------------------------------------------------------- INSURANCE AMP Ltd. 514,100 1,937 HHG plc CDI 442,300(a) 319 Promina Group Ltd. 736,400 1,816 QBE Insurance Group Ltd. 239,050 1,905 - -------------------------------------------------------------------------------------------- 5,977 - -------------------------------------------------------------------------------------------- MEDIA News Corp., Ltd. 508,900 4,588 ============================================================================================ METALS & MINING BHP Billiton Ltd. 764,277 7,006 Rio Tinto Ltd. 201,200 5,628 - -------------------------------------------------------------------------------------------- 12,634 - -------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS Billabong International Ltd. 268,900 1,442 - -------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE MacQuarie Infrastructure Group 485,800 1,242 - -------------------------------------------------------------------------------------------- 42,229 ============================================================================================ CHINA(2.0%) COMMERCIAL BANKS CITIC International Financial 1,189,000 643 Holdings Ltd. Industrial & Commercial Bank of 1,000 2 China (Asia) Ltd. - -------------------------------------------------------------------------------------------- 645 - -------------------------------------------------------------------------------------------- ELECTRIC UTILITIES China Resources Power Holdings Co. 363,000(a) $ 170 Hongkong Electric Holdings Ltd. 106,000 419 Huaneng Power International, Inc., 'H' 780,000 1,351 - -------------------------------------------------------------------------------------------- 1,940 - -------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Kingboard Chemicals Holdings 324,000 499 - -------------------------------------------------------------------------------------------- GAS UTILITIES Hong Kong & China Gas Co. 299,000 456 - -------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES Grande Holdings Ltd. 531,000 680 - -------------------------------------------------------------------------------------------- INSURANCE China Life Insurance Co., Ltd., 'H' 1,532,000(a) 1,253 PICC Property & Casualty Co., Ltd. 868,000(a) 389 - -------------------------------------------------------------------------------------------- 1,642 - -------------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS Moulin International Holdings Ltd. 726,000 482 - -------------------------------------------------------------------------------------------- MULTILINE RETAIL Lianhua Supermarket Holdings Ltd., 'H' 81,000(a) 86 Wumart Stores, Inc., 'H' 82,000(a) 80 - -------------------------------------------------------------------------------------------- 166 - -------------------------------------------------------------------------------------------- OIL & GAS PetroChina Co., Ltd., 'H' 932,000 534 Sinopec, 'H' 1,182,000 529 - -------------------------------------------------------------------------------------------- 1,063 - -------------------------------------------------------------------------------------------- REAL ESTATE Great Eagle Holdings, Ltd. 877,000 1,050 - -------------------------------------------------------------------------------------------- 8,623 ============================================================================================ HONG KONG (8.2%) AIRLINES Cathay Pacific Airways Ltd. 1,236,000 2,348 - -------------------------------------------------------------------------------------------- COMMERCIAL BANKS Bank of East Asia 830,000 2,550 - -------------------------------------------------------------------------------------------- DISTRIBUTORS Li & Fung Ltd. 882,000 1,511 - -------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES Swire Pacific Ltd. 'A' 429,000 2,647 - --------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 3 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS (CONT'D) STATEMENT OF NET ASSETS December 31, 2003
VALUE SHARES (000) - -------------------------------------------------------------------------------------------- HONG KONG (CONT'D) ELECTRICAL EQUIPMENT Johnson Electric Holdings Ltd. 467,000 $ 596 - -------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES Techtronic Industries Co. 550,000 1,527 - -------------------------------------------------------------------------------------------- MEDIA Television Broadcasts Ltd. 87,000 439 tom.com Ltd. 2,007,000(a) 621 - -------------------------------------------------------------------------------------------- 1,060 - -------------------------------------------------------------------------------------------- METALS & MINING Asia Aluminum Holdings Ltd. 5,456,000 1,082 - -------------------------------------------------------------------------------------------- OIL & GAS CNOOC Ltd. 1,061,000 2,077 - -------------------------------------------------------------------------------------------- REAL ESTATE Cheung Kong Holdings Ltd. 610,000 4,852 Henderson Land Development Co., Ltd. 1,466,000 6,477 HongKong Land Holdings Ltd. 790,000 1,343 Hysan Development Co., Ltd. 1,903,000 2,941 - -------------------------------------------------------------------------------------------- 15,613 - -------------------------------------------------------------------------------------------- SPECIALTY RETAIL Esprit Holdings Ltd. 1,488,500 4,956 - -------------------------------------------------------------------------------------------- 35,967 ============================================================================================ INDIA(3.6%) AUTO COMPONENTS Amtek Auto Ltd. 94,000 893 - -------------------------------------------------------------------------------------------- AUTOMOBILES Hero Honda Motors Ltd. 156,075 1,535 - -------------------------------------------------------------------------------------------- COMMERCIAL BANKS Canara Bank 732,000 2,188 State Bank of India Ltd. 145,235(b) 1,943 Union Bank of India Ltd. 1,392,000 1,564 - -------------------------------------------------------------------------------------------- 5,695 - -------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS Welspun-Gujarat Stahl Ltd. 895,000(a) 979 - -------------------------------------------------------------------------------------------- DIVERSIFIED OPERATIONS Voltas Ltd. 139,000 434 - -------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT Bharat Heavy Electricals Ltd. 171,937 1,914 - -------------------------------------------------------------------------------------------- MARINE Alok Industries Ltd. 1,390,000 1,785 - -------------------------------------------------------------------------------------------- METALS & MINING Jindal Steel & Power Ltd. 21,381 290 Tata Iron & Steel Co., Ltd. 1,910 $ 19 - -------------------------------------------------------------------------------------------- 309 - -------------------------------------------------------------------------------------------- PHARMACEUTICALS Ranbaxy Laboratories Ltd. 41,000 987 - -------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS Arvind Mills Ltd. 441,000(a) 638 Raymond Ltd. 150,700 760 - -------------------------------------------------------------------------------------------- 1,398 - -------------------------------------------------------------------------------------------- 15,929 ============================================================================================ INDONESIA(2.1%) AUTOMOBILES Astra International Tbk PT 4,194,000 2,490 - -------------------------------------------------------------------------------------------- COMMERCIAL BANKS Bank Central Asia Tbk PT 1,980,000 781 Bank Mandiri Persero Tbk PT 7,358,500(a) 874 Bank Rakyat Indonesia 5,835,500(a) 866 - -------------------------------------------------------------------------------------------- 2,521 - -------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS Indocement Tunggal Prakarsa Tbk PT 3,578,000(a) 903 - -------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES Telekomunikasi Indonesia Tbk PT 2,591,000 2,076 - -------------------------------------------------------------------------------------------- METALS & MINING Bumi Resources Tbk PT 10,930,500 649 - -------------------------------------------------------------------------------------------- MULTILINE RETAIL Ramayana Lestari Sentosa Tbk PT 1,607,000 830 - -------------------------------------------------------------------------------------------- 9,469 ============================================================================================ JAPAN(47.8%) AUTOMOBILES Nissan Motor Co., Ltd. 620,000 7,068 Suzuki Motor Corp. 267,000 3,944 Toyota Motor Corp. 194,300 6,551 Yamaha Motor Co., Ltd. 200,000 2,177 - -------------------------------------------------------------------------------------------- 19,740 - -------------------------------------------------------------------------------------------- BUILDING PRODUCTS Daikin Industries Ltd. 226,000 5,209 Sanwa Shutter Corp. 352,000 1,987 - -------------------------------------------------------------------------------------------- 7,196 - -------------------------------------------------------------------------------------------- CHEMICALS Daicel Chemical Industries Ltd. 670,000 2,758 Denki Kagaku Kogyo KK 1,038,000 3,335 Kaneka Corp. 540,000 4,023 Lintec Corp. 170,000 2,703 Mitsubishi Chemical Corp. 1,179,000 3,064 Nifco, Inc. 193,000 2,418
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 4 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS (CONT'D) STATEMENT OF NET ASSETS December 31, 2003
VALUE SHARES (000) - -------------------------------------------------------------------------------------------- JAPAN (CONT'D) Shin-Etsu Polymer Co., Ltd. 347,000 $ 2,114 Toyo Ink Manufacturing Co., Ltd. 300,000 1,064 - -------------------------------------------------------------------------------------------- 21,479 - -------------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES Dai Nippon Printing Co., Ltd. 210,000 2,944 COMMERCIAL SERVICES & SUPPLIES (CONT'D) Nissha Printing Co., Ltd. 63,000 821 - -------------------------------------------------------------------------------------------- 3,765 - -------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS Fujitsu Ltd. 758,000(a) 4,462 Mitsumi Electric Co., Ltd. 221,500 2,434 NEC Corp. 710,000 5,217 Toshiba Corp. 1,400,000 5,294 - -------------------------------------------------------------------------------------------- 17,407 - -------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING Kyudenko Corp. 220,000 902 Obayashi Corp. 582,000 2,596 Sanki Engineering Co., Ltd. 74,000 378 - -------------------------------------------------------------------------------------------- 3,876 - -------------------------------------------------------------------------------------------- CONSUMER FINANCE Hitachi Capital Corp. 258,300 3,575 - -------------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES Nippon Telegraph & Telephone Corp. 936 4,507 - -------------------------------------------------------------------------------------------- ELECTRIC UTILITIES Tokyo Electric Power Co., Inc. 155,100 3,395 - -------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT Furukawa Electric Co., Ltd. 414,000 1,373 - -------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Hitachi High-Technologies Corp. 70,000 1,108 Hitachi Ltd. 790,000 4,753 Kyocera Corp. 60,000 3,990 Ryosan Co., Ltd. 133,000 2,322 TDK Corp. 65,200 4,688 - -------------------------------------------------------------------------------------------- 16,861 - -------------------------------------------------------------------------------------------- FOOD & STAPLES FamilyMart Co., Ltd. 140,300 3,188 - -------------------------------------------------------------------------------------------- FOOD PRODUCTS House Foods Corp. 136,000 1,537 Nippon Meat Packers, Inc. 200,000 1,952 - -------------------------------------------------------------------------------------------- 3,489 - -------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES Casio Computer Co., Ltd. 407,000 4,299 Matsushita Electric Industrial Co., Ltd. 450,000 $ 6,211 Rinnai Corp. 78,700 1,865 Sangetsu Co., Ltd. 17,000 323 Sekisui Chemical Co., Ltd. 500,000 2,543 Sekisui House Ltd. 351,000 3,619 Sony Corp. 110,700 3,825 - -------------------------------------------------------------------------------------------- 22,685 - -------------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS Fuji Photo Film Co., Ltd. 150,000 4,834 Yamaha Corp. 281,000 5,509 - -------------------------------------------------------------------------------------------- 10,343 - -------------------------------------------------------------------------------------------- MACHINERY Amada Co., Ltd. 508,000 2,640 Daifuku Co., Ltd. 450,000 2,007 Fuji Machine Manufacturing Co., Ltd. 156,000 1,976 Fujitec Co., Ltd. 178,000 766 Kurita Water Industries Ltd. 234,000 2,818 Minebea Co., Ltd. 504,000 2,554 Mitsubishi Heavy Industries Ltd. 1,380,000 3,830 Tsubakimoto Chain Co. 580,000 1,907 - -------------------------------------------------------------------------------------------- 18,498 - -------------------------------------------------------------------------------------------- MEDIA Toho Co., Ltd. 75,000 953 - -------------------------------------------------------------------------------------------- OFFICE ELECTRONICS Canon, Inc. 121,000 5,623 Ricoh Co., Ltd. 316,000 6,225 - -------------------------------------------------------------------------------------------- 11,848 - -------------------------------------------------------------------------------------------- PHARMACEUTICALS Ono Pharmaceutical Co., Ltd. 104,000 3,904 Sankyo Co., Ltd. 226,000 4,241 Yamanouchi Pharmaceutical Co., Ltd. 154,000 4,776 - -------------------------------------------------------------------------------------------- 12,921 - -------------------------------------------------------------------------------------------- REAL ESTATE Mitsubishi Estate Co., Ltd. 390,000 3,690 - -------------------------------------------------------------------------------------------- ROAD & RAIL East Japan Railway Co. 769 3,617 - -------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Rohm Co., Ltd. 21,200 2,480 - -------------------------------------------------------------------------------------------- SOFTWARE Nintendo Co., Ltd. 55,000 5,122 - -------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS Nisshinbo Industries, Inc. 265,000 1,473 - --------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 5 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS (CONT'D) STATEMENT OF NET ASSETS December 31, 2003
VALUE SHARES (000) - -------------------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS Mitsubishi Corp. 420,000 $ 4,444 Nagase & Co., Ltd. 197,000 1,301 - -------------------------------------------------------------------------------------------- 5,745 - -------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE Mitsubishi Logistics Corp. 141,000 1,170 - -------------------------------------------------------------------------------------------- 210,396 ============================================================================================ MALAYSIA (0.1%) ELECTRIC UTILITIES YTL Corp. Bhd 505,000 574 ============================================================================================ NEW ZEALAND (0.4%) BUILDING PRODUCTS Fletcher Building Ltd. 241,800 671 - -------------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS Carter Holt Harvey Ltd. 843,000 1,038 - -------------------------------------------------------------------------------------------- 1,709 ============================================================================================ SINGAPORE (3.6%) AIRLINES Singapore Airlines Ltd. 438,000 2,889 - -------------------------------------------------------------------------------------------- COMMERCIAL BANKS Oversea-Chinese Banking Corp. 295,000 2,102 United Overseas Bank Ltd. 219,389 1,706 - -------------------------------------------------------------------------------------------- 3,808 - -------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS Brilliant Manufacturing Ltd. 589,000 243 - -------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT Unisteel Technology Ltd. 850,000 636 - -------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Venture Corp., Ltd. 171,000 2,014 - -------------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES SembCorp Industries Ltd. 827,000 614 - -------------------------------------------------------------------------------------------- MARINE Neptune Orient Lines Ltd. 970,000(a) 1,234 - -------------------------------------------------------------------------------------------- REAL ESTATE CapitaLand Ltd. 1,464,000 1,336 City Developments Ltd. 380,000 1,354 - -------------------------------------------------------------------------------------------- 2,690 - -------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE Sembcorp Logistics Ltd. 537,800 633 - -------------------------------------------------------------------------------------------- WATER UTILITIES Hyflux Ltd. 910,000 852 - -------------------------------------------------------------------------------------------- 15,613 ============================================================================================ SOUTH KOREA (10.9%) AUTO COMPONENTS Hankook Tire Co., Ltd. 113,650 858 Hyundai Mobis 107,510 $ 5,779 - -------------------------------------------------------------------------------------------- 6,637 - -------------------------------------------------------------------------------------------- CAPITAL MARKETS Daishin Securities Co., Ltd. 65,560 962 Samsung Securities Co., Ltd. 32,910 704 - -------------------------------------------------------------------------------------------- 1,666 - -------------------------------------------------------------------------------------------- CHEMICALS Grand Hall Enterprise Co., Ltd. 32,560 1,679 - -------------------------------------------------------------------------------------------- COMMERCIAL BANKS Kookmin Bank 29,270 1,096 Shinhan Financial Group Co., Ltd. 47,440 758 - -------------------------------------------------------------------------------------------- 1,854 - -------------------------------------------------------------------------------------------- CONSUMER FINANCE LG Card Co., Ltd. 21,402(a) 55 - -------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES Good Morning Shinhan Securities 218,160(a) 1,006 Co., Ltd. - -------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Samsung SDI Co., Ltd. 69,200 8,153 - -------------------------------------------------------------------------------------------- FOOD PRODUCTS Orion Corp. 21,930 1,607 - -------------------------------------------------------------------------------------------- INVESTMENT BANKING LG Investment & Securities Co., Ltd. 104,620 728 - -------------------------------------------------------------------------------------------- MACHINERY Daewoo Shipbuilding & Marine Engineering Co., Ltd. 161,510(a) 2,072 Hyundai Mipo Dockyard 94,750(a) 1,168 - -------------------------------------------------------------------------------------------- 3,240 - -------------------------------------------------------------------------------------------- MULTILINE RETAIL Hyundai Department Store Co., Ltd. 66,550(a) 2,171 - -------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Samsung Electronics Co., Ltd. 39,727 15,025 - -------------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS Cheil Industrial, Inc. 61,840 897 - -------------------------------------------------------------------------------------------- TOBACCO KT&G Corp. 45,660 792 - -------------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE STX Shipbuilding Co., Ltd. 55,320 735 - -------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES SK Telecom Co., Ltd. 8,850 1,477 - -------------------------------------------------------------------------------------------- 47,722 ============================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 6 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS (CONT'D) STATEMENT OF NET ASSETS December 31, 2003
VALUE SHARES (000) - -------------------------------------------------------------------------------------------- TAIWAN (7.8%) AIRLINES Eva Airways Corp. 3,073,506 $ 1,253 - -------------------------------------------------------------------------------------------- CHEMICALS Nan Ya Plastics Corp. 682,640 985 - -------------------------------------------------------------------------------------------- COMMERCIAL BANKS Chinatrust Financial Holding Co. 3,084,037 3,097 Taishin Financial Holdings Co., Ltd. 2,133,000 1,576 - -------------------------------------------------------------------------------------------- 4,673 - -------------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS Acer, Inc. 772,310 1,148 Infortrend Technology, Inc. 320,600 1,053 - -------------------------------------------------------------------------------------------- 2,201 - -------------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING CTCI Corp. 1,363,000 1,104 - -------------------------------------------------------------------------------------------- CONSTRUCTION MATERIALS Taiwan Cement Corp. 2,427,000 1,193 - -------------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES Fubon Financial Holding Co., Ltd. 659,000 631 Polaris Securities Co., Ltd. 2,048,760(a) 959 Yuanta Core Pacific Securities Co. 1,648,951 986 - -------------------------------------------------------------------------------------------- 2,576 - -------------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT Asia Vital Components Co., Ltd. 535,000 636 Catcher Technology Co., Ltd. 158,000 570 Phoenixtec PCL 981,885 1,151 Waffer Technology Co., Ltd. 620,000 1,890 - -------------------------------------------------------------------------------------------- 4,247 - -------------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS Hon Hai Precision Industry Co., Ltd. 551,440 2,168 Ya Hsin Industrial Co., Ltd. 1,131,000 1,462 - -------------------------------------------------------------------------------------------- 3,630 - -------------------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS Asia Optical Co., Inc. 184,600 1,272 Largan Precision Co., Ltd. 250,430 2,433 - -------------------------------------------------------------------------------------------- 3,705 - -------------------------------------------------------------------------------------------- MARINE Evergreen Marine Corp. 2,324,940 2,026 Taiwan Navigation Co., Ltd. 1,634,000 1,083 - -------------------------------------------------------------------------------------------- 3,109 - -------------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT MediaTek, Inc. 249,000 2,339 Novatek Microelectronics Corp., Ltd. 399,250 $ 1,129 Sunplus Technology Co., Ltd. 476,000 890 Zyxel Communications Corp. 411,700 861 - -------------------------------------------------------------------------------------------- 5,219 - -------------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES Taiwan Cellular Corp. 498,000 433 - -------------------------------------------------------------------------------------------- 34,328 ============================================================================================ THAILAND (1.7%) AIRLINES Thai Airways International 339,800(b) 392 (Foreign) - -------------------------------------------------------------------------------------------- COMMERCIAL BANKS Bangkok Bank PCL (Foreign) 933,300(a) 2,709 Bangkok Bank PCL NVDR 244,900(a) 674 Kasikornbank PCL (Foreign) 858,500(a) 1,516 Kasikornbank PCL NVDR 401,800(a) 659 Siam Commercial Bank PCL (Foreign) 573,000(a) 781 - -------------------------------------------------------------------------------------------- 6,339 - -------------------------------------------------------------------------------------------- HOUSEHOLD DURABLES Land & Houses PCL (Foreign) 1,397,600 448 - -------------------------------------------------------------------------------------------- REAL ESTATE Asian Property Development PCL 851,800(b) 124 - -------------------------------------------------------------------------------------------- 7,303 ============================================================================================ TOTAL COMMON STOCKS (Cost $376,066) 429,862 ============================================================================================ PREFERRED STOCKS (1.1%) ============================================================================================ AUSTRALIA (0.4%) MEDIA News Corp., Ltd. (Limited Voting Shares) 229,800 1,728 - -------------------------------------------------------------------------------------------- SOUTH KOREA (0.7%) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT Samsung Electronics Co., Ltd. (Cost $2,255) 15,630 3,218 - -------------------------------------------------------------------------------------------- 4,946 ============================================================================================ INVESTMENT COMPANIES (0.8%) ============================================================================================ INDIA(0.8%) Morgan Stanley Growth Fund (Cost $1,744) 9,491,200(a)(c) 3,509 ============================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 7 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS (CONT'D) STATEMENT OF NET ASSETS December 31, 2003
NO. OF VALUE RIGHTS (000) - -------------------------------------------------------------------------------------------- RIGHTS (0.0%) SOUTH KOREA AUTO COMPONENTS Hyundai Motor Co., Ltd. (Cost $--@) 28,035(a)(b) $ 120 - -------------------------------------------------------------------------------------------- FACE AMOUNT (000) - -------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENT (0.6%) UNITED STATES (0.6%) REPURCHASE AGREEMENT J.P. Morgan Securities, Inc., 0.75%, dated 12/31/03, due 1/02/04, repurchase price $2,771 (Cost $2,771) $ 2,771(d) 2,771 - -------------------------------------------------------------------------------------------- FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.1%) Australian Dollar AUD --@ --@ Hong Kong Dollar HKD --@ --@ Indian Rupee INR 10,985 241 New Zealand Dollar NZD --@ --@ South Korean Won KRW 288 --@ Taiwan Dollar TWD 3,016 89 - -------------------------------------------------------------------------------------------- TOTAL FOREIGN CURRENCY (Cost $330) 330 ============================================================================================ TOTAL INVESTMENTS (100.4%) (Cost $383,166) 441,538 ============================================================================================ AMOUNT AMOUNT (000) (000) - -------------------------------------------------------------------------------------------- OTHER ASSETS (0.6%) Cash $ 1 Receivable for Investments Sold 2,236 Dividends Receivable 247 Tax Reclaim Receivable 5 Other 14 $ 2,503 - -------------------------------------------------------------------------------------------- LIABILITIES (-1.0%) Payable For: Dividends Declared (3,175) Investment Advisory Fees (365) Country Tax Expense (277) Investments Purchased (186) Directors' Fees and Expenses (66) Custodian Fees (55) Administrative Fees (17) Other Liabilities (126) (4,267) - -------------------------------------------------------------------------------------------- NET ASSETS (100%) Applicable to 35,791,686 issued and outstanding $ 0.01 par value shares (200,000,000 shares authorized) $ 439,774 ============================================================================================ NET ASSET VALUE PER SHARE $ 12.29 ============================================================================================ AT DECEMBER 31, 2003, NET ASSETS CONSISTED OF: Common Stock $ 358 Paid-in Capital 589,038 Undistributed (Distributions in Excess of) Net Investment Income (1,555) Accumulated Net Realized Gain (Loss) (206,163) Unrealized Appreciation (Depreciation) on Investments and Foreign Currency Translations (net of $277 deferred country tax) 58,096 ============================================================================================ TOTAL NET ASSETS $ 439,774 ============================================================================================
(a) -- Non-income producing. (b) -- Investments valued at fair value - see Note A-1 to financial statements. At December 31, 2003, the Fund held $2,579,000 of fair-valued securities, representing 0.6% of net assets. (c) -- The Morgan Stanley Growth Fund is advised by an affiliate of the adviser. During the year ended December 31, 2003, there were no purchases or sales of this security. The Fund did not derive income from this security during the year ended December 31, 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 a joint account with affiliated funds. @ -- Face/Value is less than $500. CDI -- Chess Depositary Interests NVDR-- Non-Voting Depositary Receipts THB -- Thai Baht IDR -- Indonesian Rupiah THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 8 MORGAN STANLEY ASIA-PACIFIC FUND, INC. STATEMENT OF NET ASSETS (CONT'D) STATEMENT OF NET ASSETS December 31, 2003 FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION: The Fund had the following foreign currency exchange contract(s) open at period end:
NET CURRENCY IN UNREALIZED TO EXCHANGE APPRECIATION DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION) (000) (000) DATE (000) (000) (000) - -------------------------------------------------------------------------------- US$ 12 $ 12 01/05/04 THB 480 $ 12 $ --@ US$ 11 11 01/06/04 THB 435 11 --@ US$ 23 23 01/02/04 HKD 176 23 --@ US$ 6 6 01/02/04 IDR 50,805 6 --@ HKD 16,697 2,151 01/05/04 US$ 2,151 2,151 --@ - -------------------------------------------------------------------------------- $ 2,203 $ 2,203 --@ - --------------------------------------------------------------------------------
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY CLASSIFICATION -- DECEMBER 31, 2003 (UNAUDITED)
PERCENT OF VALUE NET INDUSTRY (000) ASSETS - ----------------------------------------------------------------------- Airlines $ 8,838 2.0% Auto Components 7,650 1.7 Automobiles 23,765 5.4 Building Products 7,867 1.8 Chemicals 24,143 5.5 Commercial Banks 37,955 8.6 Computers & Peripherals 19,851 4.5 Construction & Engineering 6,825 1.6 Diversified Financial Services 6,229 1.4 Diversified Telecommunication Services 6,583 1.5 Electric Utilities 5,909 1.3 Electrical Equipment 8,766 2.0 Electronic Equipment & Instruments 31,157 7.1 Food Products 5,096 1.2 Household Durables 25,340 5.8 Insurance 7,619 1.7 Leisure Equipment & Products 14,530 3.3 Machinery 21,738 4.9 Marine 6,128 1.4 Media 8,329 1.9 Metals & Mining 14,674 3.3 Office Electronics 11,848 2.7 Pharmaceuticals 13,908 3.2 Real Estate 23,167 5.3 Semiconductors & Semiconductor Equipment 25,942 5.9 Software 5,122 1.2 Specialty Retail 4,956 1.1 Textiles, Apparel & Luxury Goods 5,210 1.2 Trading Companies & Distributors 5,745 1.3 Other 46,648 10.6 - ----------------------------------------------------------------------- $ 441,538 100.4% =======================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 9 MORGAN STANLEY ASIA-PACIFIC FUND, INC. Financial Statements STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2003 (000) - ----------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends (net of $570 of foreign taxes withheld) $ 6,243 Interest 58 =========================================================================================================== TOTAL INCOME 6,301 =========================================================================================================== EXPENSES Investment Advisory Fees 3,546 Custodian Fees 280 Professional Fees 267 Administrative Fees 133 Country Tax Expense 74 Stockholder Servicing Agent 44 Stockholder Reporting Expenses 41 Directors' Fees and Expenses 25 Other Expenses 67 =========================================================================================================== TOTAL EXPENSES 4,477 =========================================================================================================== NET INVESTMENT INCOME (LOSS) 1,824 =========================================================================================================== NET REALIZED GAIN (LOSS) ON: Investments 4,546 Foreign Currency Transactions 12 =========================================================================================================== NET REALIZED GAIN (LOSS) 4,558 =========================================================================================================== CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON: Investments (net of $277 deferred country tax) 129,547 =========================================================================================================== TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 134,105 =========================================================================================================== NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 135,929 ===========================================================================================================
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED DECEMBER 31, 2003 DECEMBER 31, 2002 (000) (000) - ---------------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS Operations: Net Investment Income (Loss) $ 1,824 $ 631 Net Realized Gain (Loss) 4,558 (2,735) Change in Unrealized Appreciation (Depreciation) 129,547 (17,251) ============================================================================================================================ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 135,929 (19,355) ============================================================================================================================ Distributions from and/or in excess of: Net Investment Income (3,175) (277) ============================================================================================================================ Capital Share Transactions: Repurchase of Shares (230,477 and 6,960,192 shares, respectively) (1,797) (68,887) ============================================================================================================================ TOTAL INCREASE (DECREASE) 130,957 (88,519) ============================================================================================================================ Net Assets: Beginning of Period 308,817 397,336 ============================================================================================================================ END OF PERIOD (INCLUDING UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT INCOME OF $(1,555) AND $(209), RESPECTIVELY) $ 439,774 $ 308,817 ============================================================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 10 MORGAN STANLEY ASIA-PACIFIC FUND, INC. SELECTED PER SHARE DATA AND RATIOS December 31, 2003
YEARS ENDED DECEMBER 31, -------------------------------------------------------------------------- 2003 2002 2001 2000 1999 - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 8.57 $ 9.24 $ 10.82 $ 15.26 $ 8.73 - ---------------------------------------------------------------------------------------------------------------------------------- Net Investment Income (Loss) 0.05+ 0.02+ (0.02) (0.01) 0.01 Net Realized and Unrealized Gain (Loss) on Investments 3.75 (0.70) (1.56) (4.50) 6.44 - ---------------------------------------------------------------------------------------------------------------------------------- Total from Investment Operations 3.80 (0.68) (1.58) (4.51) 6.45 - ---------------------------------------------------------------------------------------------------------------------------------- Distributions from and/or in excess of: Net Investment Income (0.09) (0.01) -- (0.22) (0.04) - ---------------------------------------------------------------------------------------------------------------------------------- Anti-Dilutive Effect of Shares Repurchased 0.01 0.02 0.00# 0.29 0.12 - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $ 12.29 $ 8.57 $ 9.24 $ 10.82 $ 15.26 ================================================================================================================================== PER SHARE MARKET VALUE, END OF PERIOD $ 10.85 $ 7.20 $ 7.49 $ 8.69 $ 11.81 ================================================================================================================================== TOTAL INVESTMENT RETURN: Market Value 51.87% (3.77)% (13.78)% (24.66)% 69.32% Net Asset Value (1) 44.48% (7.12)% (14.60)% (27.37)% 75.39% ================================================================================================================================== RATIOS, SUPPLEMENTAL DATA: - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (THOUSANDS) $ 439,774 $ 308,817 $ 397,336 $ 621,505 $ 949,541 - ---------------------------------------------------------------------------------------------------------------------------------- Ratio of Expenses to Average Net Assets 1.26% 1.35% 1.39% 1.26% 1.29% Ratio of Net Investment Income (Loss) to Average Net Assets 0.51% 0.17% 0.19% (0.07)% 0.10% Portfolio Turnover Rate 34% 37% 27% 35% 65% - ----------------------------------------------------------------------------------------------------------------------------------
(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. # Amount is less than $0.005. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 11 MORGAN STANLEY ASIA-PACIFIC FUND, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2003 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. Such policies are consistently followed by the Fund in the preparation of its financial statements. Accounting principles generally accepted in the United States 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: Equity securities listed on a U.S. exchange are valued at the latest quoted sales price on the valuation date. Equity securities listed or traded on NASDAQ, for which market quotations are available, are valued at the NASDAQ Official Closing Price. Securities listed on a foreign exchange are valued at their closing price. Unlisted securities and listed securities not traded on the valuation date for which market quotations are readily available are valued at the mean between the current bid and asked prices obtained from reputable brokers. Debt securities purchased with remaining maturities of 60 days or less are valued at amortized cost, if it approximates value. All other securities and investments for which market values are not readily available, including restricted securities, and those securities for which it is inappropriate to determine prices in accordance with the aforementioned procedures, are valued at fair value as determined in good faith under procedures adopted by the Board of Directors, although the actual calculations may be done by others. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances. Most foreign markets close before the New York Stock Exchange (NYSE). Occasionally, developments that could affect the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If these developments are expected to materially affect the value of the securities, the valuations may be adjusted to reflect the estimated fair value as of the close of the NYSE, as determined in good faith under procedures established by the Board of Directors. 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 12 MORGAN STANLEY ASIA-PACIFIC FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONT'D) December 31, 2003 end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) due to securities transactions are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from sales and maturities of foreign currency exchange contracts, disposition of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and 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 13 MORGAN STANLEY ASIA-PACIFIC FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONT'D) December 31, 2003 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 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. An employee of the Administrator is an Officer of the Fund. 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 2003 and 2002 was as follows:
2003 DISTRIBUTIONS 2002 DISTRIBUTIONS PAID FROM: PAID FROM: (000) (000) - --------------------------- -------------------------- LONG-TERM LONG-TERM ORDINARY CAPITAL ORDINARY CAPITAL INCOME GAIN INCOME GAIN - --------------------------------------------------------- $ 3,175 $ -- $ 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. 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 book and tax basis differences may result in reclassifications among undistributed (distributions in excess of) net investment income (or accumulated net investment loss), accumulated net realized gain (loss) and paid-in capital. At December 31, 2003, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED ORDINARY INCOME LONG-TERM CAPITAL GAIN (000) (000) - ------------------------------------------------- $ 431 $ -- - -------------------------------------------------
14 MORGAN STANLEY ASIA-PACIFIC FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONT'D) December 31, 2003 At December 31, 2003, the U.S. Federal income tax cost basis of investments (excluding foreign currency if applicable) was approximately $385,124,000 and, accordingly, net unrealized appreciation for U.S. Federal income tax purposes was $56,084,000 of which $96,343,000 related to appreciated securities and $40,259,000 related to depreciated securities. At December 31, 2003, the Fund had a capital loss carryforward for U.S. Federal income tax purposes of approximately $205,795,000 available to offset future capital gains, of which $128,632,000 will expire on December 31, 2006, $73,333,000 will expire on December 31, 2009 and $3,830,000 will expire on December 31, 2010. During the year ended December 31, 2003, the Fund utilized capital loss carryforwards for U.S. Federal income tax purposes of $2,858,000. To the extent that capital loss carryovers are used to offset any future capital gains realized during the carryover period as provided by U.S. Federal income tax regulations, no capital gains tax liability will be incurred by the Fund for gains realized and not distributed. 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, 2003, the Fund did not defer any post-October losses to January 1, 2004, for U.S. Federal income tax purposes. F. OTHER: During the year ended December 31, 2003, the Fund made purchases and sales totaling approximately $122,970,000 and $119,367,000 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. During the year ended December 31, 2003, the Portfolio incurred a combined total of $109,000 in brokerage commissions paid to affiliated broker dealers, of which $92,000 was paid to Morgan Stanley & Co. Incorporated and $17,000 was paid to China International Capital Corporation. 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 year ended December 31, 2003, the Fund repurchased 230,477 of its shares at an average discount of 15.50% from net asset value per share. Since the inception of the program, the Fund has repurchased 15,144,005 of its shares at an average discount of 20.50% from net asset value per share. The Fund expects to continue to repurchase its outstanding shares at such time and in such amounts as it believes will further the accomplishment of the foregoing objectives, subject to review by the Board of Directors. On May 17, 2002, the Fund completed the tender offer. The Fund accepted 6,361,598 shares for payment which represented 15% of the Fund's then outstanding shares. Final payment was made on May 28, 2002 at $10.09 per share, representing 95% of the NAV per share on May 17, 2002. On December 15, 2003 the Officers of the Fund, pursuant to authority granted by the Board of Directors declared a distribution of $0.0887 per share, derived from net investment income, payable on January 9, 2004, to stockholders of record on December 24, 2003. FEDERAL TAX INFORMATION (UNAUDITED) For the year ended December 31, 2003, the Fund expects to pass through to stockholders foreign tax credits totaling approximately $577,000. For the year ended December 31, 2003, gross income derived from sources within a foreign country totaled $6,813,000. For the year ended December 31, 2003, qualified dividend income totaled 4,371,000. 15 MORGAN STANLEY ASIA-PACIFIC FUND, INC. INDEPENDENT AUDITORS' REPORT December 31, 2003 TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF MORGAN STANLEY ASIA-PACIFIC FUND, INC. We have audited the accompanying statement of net assets of Morgan Stanley Asia-Pacific Fund, Inc. (the "Fund") as of December 31, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years then ended, and the financial highlights for each of the four years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the year ended December 31, 1999 were audited by other auditors whose report, dated February 18, 2000, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2003 by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Morgan Stanley Asia-Pacific Fund, Inc. at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP Boston, Massachusetts February 11, 2004 16 MORGAN STANLEY ASIA-PACIFIC FUND, INC. Overview DIRECTOR AND OFFICER INFORMATION (UNAUDITED) INDEPENDENT DIRECTORS:
NUMBER OF PORTFOLIOS IN TERM OF FUND OFFICE AND COMPLEX POSITION(S) LENGTH OF OVERSEEN NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) DURING BY OTHER DIRECTORSHIPS DIRECTOR REGISTRANT SERVED* PAST 5 YEARS DIRECTOR** HELD BY DIRECTOR - --------------------------- ----------- ---------- ------------------------------ ------------- --------------------------------- Michael Bozic (62) Director Director Retired; Director or Trustee 208 Director of Weirton Steel c/o Kramer Levin Naftalis & since of the Retail Funds and the Corporation. Frankel LLP 2003 Institutional Funds; formerly Counsel to the Independent Vice Chairman of Kmart Directors Corporation, Chairman and 919 Third Avenue Chief Executive Officer of New York, NY 10022 Levitz Furniture Corporation and President and Chief Executive Officer of Hills Department Stores; formerly variously Chairman, Chief Executive Officer, President and Chief Operating Officer of the Sears Merchandise Group of Sears, Roebuck & Co. Edwin J. Garn (71) Director Director Director or Trustee of the 208 Director of Franklin Covey (time Summit Ventures LLC since Retail Funds and the management systems), BMW Bank of One Utah Center 2003 Institutional Funds; member of North America, Inc. (industrial 201 South Main Street the Utah Regional Advisory loan corporation), United Space Salt Lake City, UT 84111 Board of Pacific Corp.; Alliance (joint venture between formerly United States Senator Lockheed Martin and The Boeing (R-Utah) and Chairman, Senate Company) and Nuskin Asia Pacific Banking Committee, Mayor of (multilevel marketing); member of Salt Lake City, Utah, the board of various civic and Astronaut, Space Shuttle charitable organizations. Discovery and Vice Chairman, Huntsman Corporation (chemical company). Wayne E. Hedien (69) Director Director Retired; Director or Trustee 208 Director of the PMI Group Inc. WEH Associates since of the Retail Funds and the (private mortgage insurance); 5750 Old Orchard Road 2003 Institutional Funds; formerly Trustee and Vice Chairman of the Suite 530 associated with the Allstate Field Museum of Natural History; Skokie, IL 60077 Companies, most recently as director of various other Chairman of The Allstate business and charitable Corporation and Chairman and organizations. Chief Executive Officer of its wholly-owned subsidiary, Allstate Insurance Company. Dr. Manuel H. Johnson (54) Director Director Chairman of the Audit 208 Director of NVR, Inc. (home Johnson Smick since Committee and Director or construction); Chairman and International, Inc. 2003 Trustee of the Retail Funds Trustee of the Financial 2099 Pennsylvania Avenue, and the Institutional Funds; Accounting Foundation (oversight NW Suite 950 Senior Partner, Johnson Smick organization of the Financial Washington, D.C. 20006 International, Inc. Accounting Standards Board); (consulting firm); Co-Chairman Director of RBS Greenwich Capital and a founder of the Group of Holdings (financial holdings Seven Council (G7C), an company). international economic commission; formerly Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury. Joseph J. Kearns (61) Director Director Deputy Chairman of the Audit 209 Director of Electro Rent Kearns & Associates LLC since Committee and Director or Corporation (equipment leasing), PMB754 1994 Trustee of the Retail Funds The Ford Family Foundation and 23852 Pacific Coast Hwy. and the Institutional Funds; the UCLA Foundation. Malibu, CA 90265 previously Chairman of the Audit Committee of the Institutional Funds; President, Kearns & Associates LLC (investment consulting); formerly CFO of The J. Paul Getty Trust. Michael Nugent (67) Director Director Chairman of the Insurance 208 Director of various business Triumph Capital, L.P. since Committee and Director or organizations. 445 Park Avenue, 10th Floor 2001 Trustee of the Retail Funds New York, NY 10022 and the Institutional Funds; General Partner of Triumph Capital, L.P., (private investment partnership); formerly Vice President, Bankers Trust Company and BT Capital Corporation. Fergus Reid (71) Director Director Chairman of the Governance 209 Trustee and Director of certain Lumelite Plastics since Committee Director or Trustee investment companies in the 85 Charles Coleman Blvd. 2001 of the Retail Funds and the JPMorgan Funds complex managed by Pawling, NY 12564 Institutional Funds; Chairman JP Morgan Investment Management of Lumelite Plastics Inc. Corporation.
17 MORGAN STANLEY ASIA-PACIFIC FUND, INC. DIRECTOR AND OFFICER INFORMATION (CONT'D) Overview INTERESTED DIRECTORS:
NUMBER OF TERM OF PORTFOLIOS IN OFFICE AND FUND LENGTH OF OVERSEEN NAME, AGE AND ADDRESS OF POSITION(S) HELD TIME PRINCIPAL OCCUPATION(S) DURING BY OTHER DIRECTORSHIPS DIRECTOR WITH REGISTRANT SERVED* PAST 5 YEARS DIRECTOR** HELD BY DIRECTOR - --------------------------- ---------------- ---------- ------------------------------ ------------- ---------------------------- Charles A. Fiumefreddo (70) Chairman Chairman Chairman and Director or 208 None Morgan Stanley Funds and and Trustee of the Retail Funds Harborside Financial Center Director Director and the Institutional Funds; Plaza Two 3rd Floor since formerly Chief Executive Jersey City, NJ 07311 2003 Officer of the Retail Funds. James F. Higgins (55) Director Director Director or Trustee of the 208 Director of AXA Financial, Morgan Stanley since Retail Funds and the Inc. and The Equitable Life Harborside Financial Center 2003 Institutional Funds; Senior Assurance Society of the Plaza Two 2nd Floor Advisor of Morgan Stanley; United States (financial Jersey City, NJ 07311 Director of Morgan Stanley services). Distributors Inc. and Dean Witter Realty Inc.; previously President and Chief Operating Officer of the Private Client Group of Morgan Stanley and President and Chief Operating Officer of Individual Securities of Morgan Stanley. Philip J. Purcell (60) Director Director Director or Trustee of the 208 Director of American Morgan Stanley since Retail Funds and the Airlines, Inc. and its 1585 Broadway 39th Floor 2003 Institutional Funds; Chairman parent company, AMR New York, NY 10036 of the Board of Directors and Corporation. Chief Executive Officer of Morgan Stanley and Morgan Stanley DW Inc.; Director of Morgan Stanley Distributors Inc.; Chairman of the Board of Directors and Chief Executive Officer of Novus Credit Services Inc.; Director and/or officer of various Morgan Stanley subsidiaries.
* Each Director serves an indefinite term, until his or her successor is elected. ** The Fund Complex includes all funds advised by Morgan Stanley Investment Management Inc. and any funds that have an investment adviser have an investment adviser that is an affiliated entity of Morgan Stanley Investment Management Inc. (including, but not limited to, Morgan Stanley Investment Advisors Inc. and Van Kampen Asset Management Inc.). *** Additionally, a description of the Fund's proxy voting policies and procedures is available without charge at our website at www.morganstanley.com/im/legal, at the SEC's website at www.sec.gov or by calling 1(800) 281-2715. 18 MORGAN STANLEY ASIA-PACIFIC FUND, INC. DIRECTOR AND OFFICER INFORMATION (CONT'D) Overview OFFICERS:
TERM OF OFFICE AND POSITION(S) HELD LENGTH OF TIME NAME, AGE AND ADDRESS OF EXECUTIVE OFFICER WITH REGISTRANT SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS - ------------------------------------------ ---------------- ------------------- -------------------------------------------- Mitchell M. Merin (50) President President since President and Chief Operating Officer of Morgan Stanley Investment Management Inc. 2003 Morgan Stanley Investment Management 1221 Avenue of the Americas 33rd Floor Inc.; President, Director and Chief New York, NY 10020 Executive Officer of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc.; Chairman, Chief Executive Officer and Director of Morgan Stanley Distributors Inc.; Chairman and Director of Morgan Stanley Trust; Director of various Morgan Stanley subsidiaries; President of the Institutional Funds and the Retail Funds; Trustee and President of the Van Kampen Open-End and Closed-End funds. Ronald E. Robison (64) Executive Vice Executive Vice Chief Global Operations Officer and Morgan Stanley Investment Management Inc. President and President and Managing Director of Morgan Stanley 1221 Avenue of the Americas 33rd Floor Principal Principal Investment Management Inc.; Managing New York, NY 10020 Executive Executive Officer Director of Morgan Stanley & Co. Officer since 2003 Incorporated; Managing Director of Morgan Stanley; Managing Director, Chief Administrative Officer and Director of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc.; Chief Executive Officer and Director of Morgan Stanley Trust; Executive Vice President and Principal Executive Officer of the Institutional Funds and the Retail Funds; previously President and Director of the Institutional Funds. Barry Fink (48) Vice President Vice President General Counsel and Managing Director of Morgan Stanley Investment Management Inc. since 2003 Morgan Stanley Investment Management; 1221 Avenue of the Americas 22nd Floor Managing Director, Secretary and New York, NY 10020 Director of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc.; Assistant Secretary of Morgan Stanley DW Inc.; Vice President and General Counsel of the Retail Funds; Vice President of the Institutional Funds; Vice President and Secretary of Morgan Stanley Distributors Inc.; previously Secretary of the Retail Funds; previously Vice President and Assistant General Counsel of Morgan Stanley Investment Advisors Inc. and Morgan Stanley Services Company Inc. Joseph J. McAlinden (60) Vice President Vice President Managing Director and Chief Investment Morgan Stanley Investment Management Inc. since 2003 Officer of Morgan Stanley Investment 1221 Avenue of the Americas 33rd Floor Advisors Inc. and Morgan Stanley New York, NY 10020 Investment Management Inc.; Director of Morgan Stanley Trust, Chief Investment Officer of the Van Kampen Funds; Vice President of the Institutional Funds and the Retail Funds. Stefanie V. Chang (36) Vice President Vice President Executive Director of Morgan Stanley & Morgan Stanley Investment Management Inc. since 2001 Co. Incorporated and Morgan Stanley 1221 Avenue of the Americas 22nd Floor Investment Management Inc.; Vice New York, NY 10020 President of the Institutional Funds and the Retail Funds; formerly practiced law with the New York law firm of Rogers & Wells (now Clifford Chance US LLP). James W. Garrett (34) Treasurer and Treasurer since Executive Director of Morgan Stanley & Morgan Stanley Investment Management Inc. Chief Financial 2002 Co. Incorporated and Morgan Stanley 1221 Avenue of the Americas 34th Floor Officer CFO since Investment Management Inc.; Treasurer New York, NY 10020 2003 and Chief Financial Officer of the Institutional Funds; previously with Price Waterhouse LLP (now PricewaterhouseCoopers LLP). Michael J. Leary (37) Assistant Assistant Assistant Director and Vice President of J.P. Morgan Investor Services Co. Treasurer Treasurer Fund Administration, J.P. Morgan 73 Tremont Street since 2003 Investor Services Co. (formerly Chase Boston, MA 02108 Global Funds Company); formerly Audit Manager at Ernst & Young LLP. Mary E. Mullin (36) Secretary Secretary since Executive Director of Morgan Stanley & Morgan Stanley Investment Management Inc. 2001 Co. Incorporated and Morgan Stanley 1221 Avenue of the Americas 22nd Floor Investment Management Inc.; Secretary of New York, NY 10020 the Institutional Funds and the Retail Funds; formerly practiced law with the New York law firms of McDermott, Will & Emery and Skadden, Arps, Slate, Meagher & Flom LLP.
- ---------- * Each Officer serves an indefinite term, until his or her successor is elected. 19 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 20 ITEM 2. CODE OF ETHICS. (a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Fund or a third party. (b) No information need be disclosed pursuant to this paragraph. (c) The Fund has not amended its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto. (d) The Fund has not granted a waiver or an implicit waiver from a provision of its Code of Ethics. (e) Not applicable. (f) (1) The Fund Code of Ethics is attached hereto as Exhibit A. (2) Not applicable. (3) Not applicable. For Retail and Institutional Funds ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Fund's Board of Directors has determined that it has two "audit committee financial experts" serving on its audit committee, each of whom are "independent" Directors: Dr. Manuel H. Johnson and Joseph J. Kearns. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Directors in the absence of such designation or identification. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a)(b)(c)(d) and (g). Based on fees billed for the periods shown: 2003
REGISTRANT COVERED ENTITIES(1) AUDIT FEES $ 55,105 N/A NON-AUDIT FEES AUDIT-RELATED FEES $ 6,000(7) $ 93,000(2) TAX FEES $ 2,575(3) $ 163,414(4) ALL OTHER FEES $ 0 $ 341,775(5) TOTAL NON-AUDIT FEES $ 8,575 $ 598,189 TOTAL $ 63,680 $ 598,189
2002
REGISTRANT COVERED ENTITIES(1) AUDIT FEES $ 53,500 N/A NON-AUDIT FEES AUDIT-RELATED FEES $ 4,500(7) $ 179,000(2) TAX FEES $ 2,500(3) $ 0 ALL OTHER FEES $ 0 $ 595,150(6) TOTAL NON-AUDIT FEES $ 7,000 $ 774,150 TOTAL $ 60,500 $ 774,150
N/A- Not applicable, as not required by Item 4. (1) Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant. (2) Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities' and funds advised by the Adviser or its affiliates, specifically attestation services provided in connection with a SAS 70 Report. (3) Tax Fees represent tax advice and compliance services provided in connection with the review of the Registrant's tax return. (4) Tax Fees represent tax advice services provided to Covered Entities, including research and identification of Passive Foreign Investment Company entities. 2 (5) All Other Fees represent attestation services provided in connection with performance presentation standards. (6) All Other Fees represent attestation services provided in connection with performance presentation standards, general industry education seminars provided, and a regulatory review project performed. (7) Amounts represent fees billed for services provided for the annual filing with the Japanese securities regulators. (e)(1) The audit committee's pre-approval policies and procedures are as follows: AUDIT COMMITTEE AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY AND PROCEDURES OF THE MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS AS ADOPTED JULY 31, 2003(1) 1. STATEMENT OF PRINCIPLES The Audit Committee of the Board is required to review and, in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities in order to assure that services performed by the Independent Auditors do not impair the auditor's independence from the Fund. The SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committee's administration of the engagement of the independent auditor. The SEC's rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee ("GENERAL PRE-APPROVAL"); or require the specific pre-approval of the Audit Committee or its delegate ("SPECIFIC PRE-APPROVAL"). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated) if it is to be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee. - ---------- (1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the "POLICY"), adopted as of the date above, supercedes and replaces all prior versions that may have been adopted from time to time. 3 For both types of pre-approval, the Audit Committee will consider whether such services are consistent with the SEC's rules on auditor independence. The Audit Committee will also consider whether the Independent Auditors are best positioned to provide the most effective and efficient services, for reasons such as its familiarity with the Fund's business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance the Fund's ability to manage or control risk or improve audit quality. All such factors will be considered as a whole, and no one factor should necessarily be determinative. The Audit Committee is also mindful of the relationship between fees for audit and non-audit services in deciding whether to pre-approve any such services and may determine for each fiscal year, the appropriate ratio between the total amount of fees for Audit, Audit-related and Tax services for the Fund (including any Audit-related or Tax service fees for Covered Entities that were subject to pre-approval), and the total amount of fees for certain permissible non-audit services classified as All Other services for the Fund (including any such services for Covered Entities subject to pre-approval). The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations. The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee's responsibilities to pre-approve services performed by the Independent Auditors to management. The Fund's Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors' independence. 2. DELEGATION As provided in the Act and the SEC's rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. 3. AUDIT SERVICES 4 The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Fund's financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will monitor the Audit services engagement as necessary, but no less than on a quarterly basis, and will also approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items. In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings. The Audit Committee has pre-approved the following Audit services. All other Audit services not listed below must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated): - Statutory audits or financial audits for the Fund - Services associated with SEC registration statements (including new funds), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings (e.g., comfort letters for closed-end fund offerings, consents), and assistance in responding to SEC comment letters - Consultations by the Fund's management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard setting bodies (Note: Under SEC rules, some consultations may be "audit related" services rather than "audit" services) 4. AUDIT-RELATED SERVICES Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Fund's financial statements and, to the extent they are Covered Services, the Covered Entities or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC's rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as "Audit services"; assistance with understanding and 5 implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and/or N-CSR. The Audit Committee has pre-approved the following Audit-related services. All other Audit-related services not listed below must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated): - Attest procedures not required by statute or regulation (including agreed upon procedures related to the Closed-End Fund asset coverage tests required by the rating agencies and/or lenders and agreed upon procedures related to fund profitability analysis in connection with 15c management contract renewal process - Services associated with registration statement with Japanese regulatory authorities, including issuance of consent and opinion for Morgan Stanley Asia-Pacific Fund - Due diligence services pertaining to potential fund mergers - Issuance of SAS-70 reports on internal controls of a service provider - Consultations by the Fund's management as to the accounting or disclosure treatment of transactions or events and/or the actual or potential impact of final or proposed rules, standards or interpretations by the SEC, FASB, or other regulatory or standard-setting bodies (Note: Under SEC rules, some consultations may be "audit" services rather than "audit-related" services) - Information systems reviews not performed in connection with the audit (e.g., application data center and technical reviews) - General assistance with implementation of the requirements of SEC rules or listing standards promulgated pursuant to the Sarbanes-Oxley Act 5. TAX SERVICES The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditor's independence, and the SEC has stated that the Independent Auditors may provide such services. Hence, the Audit Committee believes it may grant general pre-approval to those Tax services that have historically been provided by the Independent Auditors, that the Audit Committee has reviewed and believes would not impair the independence of the Independent Auditors, and that are consistent with the SEC's rules on auditor independence. The Audit Committee will not permit the retention of the Independent Auditors in connection with a transaction initially recommended by the Independent Auditors, the sole business purpose of which may be tax avoidance and the tax treatment 6 of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee will consult with Director of Tax or outside counsel to determine that the tax planning and reporting positions are consistent with this policy. Pursuant to the preceding paragraph, the Audit Committee has pre-approved the following Tax Services. All Tax services involving large and complex transactions not listed below must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated), including tax services proposed to be provided by the Independent Auditors to any executive officer or trustee/director/managing general partner of the Fund, in his or her individual capacity, where such services are paid for by the Fund (generally applicable only to internally managed investment companies): - U.S. federal, state and local tax planning and advice - U.S. federal, state and local tax compliance - International tax planning and advice - International tax compliance - Review/preparation of federal, state, local and international income, franchise, and other tax returns - Identification of Passive Foreign Investment Companies - Preparation of local Indian Tax Returns - Domestic and foreign tax planning, compliance, and advice - Assistance with tax audits and appeals before the IRS and similar state, local and foreign agencies - Tax advice and assistance regarding statutory, regulatory or administrative developments (e.g., excise tax reviews, evaluation of Fund's tax compliance function) - Review the calculations of taxable income from corporate actions including reorganizations related to bankruptcy filings and provide guidance related to the foregoing 6. ALL OTHER SERVICES The Audit Committee believes, based on the SEC's rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC's rules on auditor independence. The Audit Committee has pre-approved the following All Other services. Permissible All Other services not listed below must be specifically pre-approved by the 7 Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated): - Risk management advisory services, e.g., assessment and testing of security infrastructure controls The following is a list of the SEC's prohibited non-audit services. The SEC's rules and relevant guidance should be consulted to determine the precise definitions of these services and the applicability of exceptions to certain of the prohibitions: - Bookkeeping or other services related to the accounting records or financial statements of the audit client - Financial information systems design and implementation - Appraisal or valuation services, fairness opinions or contribution-in-kind reports - Actuarial services - Internal audit outsourcing services - Management functions - Human resources - Broker-dealer, investment adviser or investment banking services - Legal services - Expert services unrelated to the audit 7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services. For each fiscal year, the Audit Committee may determine the appropriate ratio between the total amount of fees for Audit, Audit-related, and Tax services for the Fund (including any Audit-related or Tax services fees for Covered Entities subject to pre-approval), and the total amount of fees for certain permissible non-audit services classified as All Other services for the Fund (including any such services for Covered Entities subject to pre-approval). 8. PROCEDURES All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund's Chief Financial Officer and must include a detailed description of the services to be rendered. The Fund's Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the Independent Auditors and the 8 Fund's Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC's rules on auditor independence. The Audit Committee has designated the Fund's Chief Financial Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Fund's Chief Financial Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Fund's Chief Financial Officer and management will immediately report to the chairman of the Audit Committee any breach of this Policy that comes to the attention of the Fund's Chief Financial Officer or any member of management. The Audit Committee will also review the internal auditor's annual internal audit plan to determine that the plan provides for the monitoring of the Independent Auditors' services. 9. ADDITIONAL REQUIREMENTS The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor's independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with Independence Standards Board No. 1, and discussing with the Independent Auditors its methods and procedures for ensuring independence. 10. COVERED ENTITIES Covered Entities include the Fund's investment adviser(s) and any entity controlling, controlled by or under common control with the Fund's investment adviser(s) that provides ongoing services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Fund's audit committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include: MORGAN STANLEY RETAIL FUNDS Morgan Stanley Investment Advisors Inc. Morgan Stanley & Co. Incorporated Morgan Stanley DW Inc. Morgan Stanley Investment Management Morgan Stanley Investments LP Van Kampen Asset Management Inc. Morgan Stanley Services Company, Inc. 9 Morgan Stanley Distributors Inc. Morgan Stanley Trust FSB MORGAN STANLEY INSTITUTIONAL FUNDS Morgan Stanley Investment Management Inc. Morgan Stanley Investments LP Morgan Stanley & Co. Incorporated Morgan Stanley Distribution, Inc. Morgan Stanley AIP GP LP Morgan Stanley Alternative Investment Partners LP (e)(2) Beginning with non-audit service contracts entered into on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services were pre-approved by the audit committee pursuant to the Audit Committee's pre-approval policies and procedures (attached hereto). (f) Not applicable. (g) See table above. (h) The audit committee of the Board of Trustees has considered whether the provision of services other than audit services performed by the auditors to the Registrant and Covered Entities is compatible with maintaining the auditors' independence in performing audit services. 10 ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED.] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. The Fund and its investment advisor's Proxy Voting Policies and Procedures are as follows: I. POLICY STATEMENT INTRODUCTION - Morgan Stanley Investment Management's ("MSIM") policies and procedures for voting proxies with respect to securities held in the accounts of clients applies to those MSIM entities that provide discretionary Investment Management services and for which a MSIM entity has the authority to vote their proxies. The policies and procedures and general guidelines in this section will be reviewed and, as necessary, updated periodically to address new or revised proxy voting issues. The MSIM entities covered by these policies and procedures currently include the following: Morgan Stanley Investment Advisors Inc., Morgan Stanley Alternative Investment Partners, L.P., Morgan Stanley AIP GP LP, Morgan Stanley Investment Management Inc., Morgan Stanley Investment Group Inc., Morgan Stanley Investment Management Limited, Morgan Stanley Investment Management Company, Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan Stanley Investment Management Private Limited, Morgan Stanley Investments LP, Morgan Stanley Hedge Fund Partners GP LP, Morgan Stanley Hedge Fund Partners LP, Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., and Van Kampen Advisors Inc. (each a "MSIM Affiliate" and collectively referred to as the "MSIM Affiliates"). 11 Each MSIM Affiliate will vote proxies as part of its authority to manage, acquire and dispose of account assets. With respect to the MSIM registered management investment companies (Van Kampen, Institutional and Advisor Funds)(collectively referred to as the "MSIM Funds"), each MSIM Fund will vote proxies pursuant to authority granted under its applicable investment advisory agreement or, in the absence of such authority, as authorized by its Board of Directors or Trustees. A MSIM Affiliate will not vote proxies if the "named fiduciary" for an ERISA account has reserved the authority for itself, or in the case of an account not governed by ERISA, the Investment Management Agreement does not authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will, in a prudent and diligent manner, vote proxies in the best interests of clients, including beneficiaries of and participants in a client's benefit plan(s) for which we manage assets, consistent with the objective of maximizing long-term investment returns ("Client Proxy Standard"). In certain situations, a client or its fiduciary may provide a MSIM Affiliate with a statement of proxy voting policy. In these situations, the MSIM Affiliate will comply with the client's policy unless to do so would be inconsistent with applicable laws or regulations or the MSIM Affiliate's fiduciary responsibility. PROXY RESEARCH SERVICES - To assist the MSIM Affiliates in their responsibility for voting proxies and the overall global proxy voting process, Institutional Shareholder Services ("ISS") and the Investor Responsibility Research Center ("IRRC") have been retained as experts in the proxy voting and corporate governance area. ISS and IRRC are independent advisers that specialize in providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors, custodians, consultants, and other institutional investors. The services provided to MSIM Affiliates include in-depth research, global issuer analysis, and voting recommendations. In addition to research, ISS provides vote execution, reporting, and recordkeeping. MSIM's Proxy Review Committee (see Section IV.A. below) will carefully monitor and supervise the services provided by the proxy research services. VOTING PROXIES FOR CERTAIN NON-US COMPANIES - While the proxy voting process is well established in the United States and other developed markets with a number of tools and services available to assist an investment manager, voting proxies of non-US companies located in certain jurisdictions, particularly emerging markets, may involve a number of problems that may restrict or prevent a MSIM Affiliate's ability to vote such proxies. These problems include, but are not limited to: (i) proxy statements and ballots being written in a language other than English; (ii) untimely and/or inadequate notice of shareholder meetings; (iii) restrictions on the ability of holders outside the issuer's jurisdiction of organization to exercise votes; (iv) requirements to vote proxies in person, (v) the imposition of restrictions on the sale of the securities for a period of time in proximity to the shareholder meeting; and (vi) requirements to provide local agents with power of attorney to facilitate the MSIM Affiliate's voting instructions. As a result, clients' non-U.S. proxies will be voted on a best efforts basis only, consistent with the Client Proxy Standard. ISS has been retained to provide assistance to the MSIM Affiliates in connection with voting their clients' non-US proxies. II. GENERAL PROXY VOTING GUIDELINES 12 To ensure consistency in voting proxies on behalf of its clients, MSIM Affiliates will follow (subject to any exception set forth herein) these Proxy Voting Policies and Procedures, including the guidelines set forth below. These guidelines address a broad range of issues, including board size and composition, executive compensation, anti-takeover proposals, capital structure proposals and social responsibility issues and are meant to be general voting parameters on issues that arise most frequently. The MSIM Affiliates, however, may vote in a manner that is contrary to the following general guidelines, pursuant to the procedures set forth in Section IV. below, provided the vote is consistent with the Client Proxy Standard. III. GUIDELINES A. MANAGEMENT PROPOSALS 1. When voting on routine ballot items the following proposals are generally voted in support of management, subject to the review and approval of the Proxy Review Committee, as appropriate. - Selection or ratification of auditors. - Approval of financial statements, director and auditor reports. - Election of Directors. - Limiting Directors' liability and broadening indemnification of Directors. - Requirement that a certain percentage (up to 66 2/3%) of its Board's members be comprised of independent and unaffiliated Directors. - Requirement that members of the company's compensation, nominating and audit committees be comprised of independent or unaffiliated Directors. - Recommendations to set retirement ages or require specific levels of stock ownership by Directors. - General updating/corrective amendments to the charter. - Elimination of cumulative voting. - Elimination of preemptive rights. - Provisions for confidential voting and independent tabulation of voting results. 13 - Proposals related to the conduct of the annual meeting except those proposals that relate to the "transaction of such other business which may come before the meeting." 2. The following non-routine proposals, which potentially may have a substantive financial or best interest impact on a shareholder, are generally voted in support of management, subject to the review and approval of the Proxy Review Committee, as appropriate. CAPITALIZATION CHANGES - Capitalization changes that eliminate other classes of stock and voting rights. - Proposals to increase the authorization of existing classes of common stock (or securities convertible into common stock) if: (i) a clear and legitimate business purpose is stated; (ii) the number of shares requested is reasonable in relation to the purpose for which authorization is requested; and (iii) the authorization does not exceed 100% of shares currently authorized and at least 30% of the new authorization will be outstanding. - Proposals to create a new class of preferred stock or for issuances of preferred stock up to 50% of issued capital. - Proposals for share repurchase plans. - Proposals to reduce the number of authorized shares of common or preferred stock, or to eliminate classes of preferred stock. - Proposals to effect stock splits. - Proposals to effect reverse stock splits if management proportionately reduces the authorized share amount set forth in the corporate charter. Reverse stock splits that do not adjust proportionately to the authorized share amount will generally be approved if the resulting increase in authorized shares coincides with the proxy guidelines set forth above for common stock increases. COMPENSATION - Director fees, provided the amounts are not excessive relative to other companies in the country or industry. 14 - Employee stock purchase plans that permit discounts up to 15%, but only for grants that are part of a broad based employee plan, including all non-executive employees. - Establishment of Employee Stock Option Plans and other employee ownership plans. ANTI-TAKEOVER MATTERS - Modify or rescind existing supermajority vote requirements to amend the charters or bylaws. - Adoption of anti-greenmail provisions provided that the proposal: (i) defines greenmail; (ii) prohibits buyback offers to large block holders not made to all shareholders or not approved by disinterested shareholders; and (iii) contains no anti-takeover measures or other provisions restricting the rights of shareholders. 3. The following non-routine proposals, which potentially may have a substantive financial or best interest impact on the shareholder, are generally voted AGAINST (notwithstanding management support), subject to the review and approval of the Proxy Review Committee, as appropriate. - Capitalization changes that add classes of stock which substantially dilute the voting interests of existing shareholders. - Proposals to increase the authorized number of shares of existing classes of stock that carry preemptive rights or supervoting rights. - Creation of "blank check" preferred stock. - Changes in capitalization by 100% or more. - Compensation proposals that allow for discounted stock options that have not been offered to employees in general. - Amendments to bylaws that would require a supermajority shareholder vote to pass or repeal certain provisions. - Proposals to indemnify auditors. 4. The following types of non-routine proposals, which potentially may have a potential financial or best interest impact on an issuer, are voted as determined by the Proxy Review Committee. 15 CORPORATE TRANSACTIONS - Mergers, acquisitions and other special corporate transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings and recapitalizations) will be examined on a case-by-case basis. In all cases, ISS and IRRC research and analysis will be used along with MSIM Affiliates' research and analysis, based on, among other things, MSIM internal company-specific knowledge. - Change-in-control provisions in non-salary compensation plans, employment contracts, and severance agreements that benefit management and would be costly to shareholders if triggered. - Shareholders rights plans that allow appropriate offers to shareholders to be blocked by the board or trigger provisions that prevent legitimate offers from proceeding. - Executive/Director stock option plans. Generally, stock option plans should meet the following criteria: (i) Whether the stock option plan is incentive based; (ii) For mature companies, should be no more than 5% of the issued capital at the time of approval; (iii) For growth companies, should be no more than 10% of the issued capital at the time of approval. ANTI-TAKEOVER PROVISIONS - Proposals requiring shareholder ratification of poison pills. - Anti-takeover and related provisions that serve to prevent the majority of shareholders from exercising their rights or effectively deter the appropriate tender offers and other offers. B. SHAREHOLDER PROPOSALS 1. The following shareholder proposals are generally supported, subject to the review and approval of the Proxy Review Committee, as appropriate: - Requiring auditors to attend the annual meeting of shareholders. - Requirement that members of the company's compensation, nominating and audit committees be comprised of independent or unaffiliated Directors. 16 - Requirement that a certain percentage of its Board's members be comprised of independent and unaffiliated Directors. - Confidential voting. - Reduction or elimination of supermajority vote requirements. 2. The following shareholder proposals will be voted as determined by the Proxy Review Committee. - Proposals that limit tenure of directors. - Proposals to limit golden parachutes. - Proposals requiring directors to own large amounts of stock to be eligible for election. - Restoring cumulative voting in the election of directors. - Proposals that request or require disclosure of executive compensation in addition to the disclosure required by the Securities and Exchange Commission ("SEC") regulations. - Proposals that limit retirement benefits or executive compensation. - Requiring shareholder approval for bylaw or charter amendments. - Requiring shareholder approval for shareholder rights plan or poison pill. - Requiring shareholder approval of golden parachutes. - Elimination of certain anti-takeover related provisions. - Prohibit payment of greenmail. 3. The following shareholder proposals are generally not supported, subject to the review and approval of the Committee, as appropriate. - Requirements that the issuer prepare reports that are costly to provide or that would require duplicative efforts or expenditures that are of a non-business nature or would provide no pertinent information from the perspective of institutional shareholders. 17 - Restrictions related to social, political or special interest issues that impact the ability of the company to do business or be competitive and that have a significant financial or best interest impact to the shareholders. - Proposals that require inappropriate endorsements or corporate actions. IV. ADMINISTRATION OF PROXY POLICIES AND PROCEDURES A. PROXY REVIEW COMMITTEE 1. The MSIM Proxy Review Committee ("Committee") is responsible for creating and implementing MSIM's Proxy Voting Policy and Procedures and, in this regard, has expressly adopted them. Following are some of the functions and responsibilities of the Committee. (a) The Committee, which will consist of members designated by MSIM's Chief Investment Officer, is responsible for establishing MSIM's proxy voting policies and guidelines and determining how MSIM will vote proxies on an ongoing basis. (b) The Committee will periodically review and have the authority to amend as necessary MSIM's proxy voting policies and guidelines (as expressed in these Proxy Voting Policy and Procedures) and establish and direct voting positions consistent with the Client Proxy Standard. (c) The Committee will meet at least monthly to (among other matters): (1) address any outstanding issues relating to MSIM's Proxy Voting Policy and Procedures; and (2) generally review proposals at upcoming shareholder meetings of MSIM portfolio companies in accordance with this Policy and Procedures including, as appropriate, the voting results of prior shareholder meetings of the same issuer where a similar proposal was presented to shareholders. The Committee, or its designee, will timely communicate to ISS MSIM's Proxy Voting Policy and Procedures (and any amendments to them and/or any additional guidelines or procedures it may adopt). (d) The Committee will meet on an ad hoc basis to (among other matters): (1) authorize "split voting" (i.e., allowing certain shares of the same issuer that are the subject of the same proxy solicitation and held by one or more MSIM portfolios to be voted differently than other shares) and/or "override voting" (i.e., voting all MSIM portfolio shares in a manner contrary to the Procedures); (2) review and approve upcoming votes, as appropriate, for matters 18 for which specific direction has been provided in Sections I, II, and III above; and (3) determine how to vote matters for which specific direction has not been provided in Sections I, II and III above. Split votes will generally not be approved within a single Global Investor Group team. The Committee may take into account ISS recommendations and the research provided by IRRC as well as any other relevant information they may request or receive. (e) In addition to the procedures discussed above, if the Committee determines that an issue raises a potential material conflict of interest, or gives rise to the appearance of a potential material conflict of interest, the Committee will designate a special committee to review, and recommend a course of action with respect to, the conflict(s) in question ("Special Committee"). The Special Committee may request the assistance of the Law and Compliance Departments and will have sole discretion to cast a vote. In addition to the research provided by ISS and IRRC, the Special Committee may request analysis from MSIM Affiliate investment professionals and outside sources to the extent it deems appropriate. (f) The Committee and the Special Committee, or their designee(s), will document in writing all of their decisions and actions, which documentation will be maintained by the Committee and the Special Committee, or their designee(s) for a period of at least 6 years. To the extent these decisions relate to a security held by a MSIM U.S. registered investment company, the Committee and Special Committee, or their designee(s), will report their decisions to each applicable Board of Trustees/Directors of those investment companies at each Board's next regularly Scheduled Board meeting. The report will contain information concerning decisions made by the Committee and Special Committee during the most recently ended calendar quarter immediately preceding the Board meeting. The Committee and Special Committee, or their designee(s), will timely communicate to applicable PMs, the Compliance Departments and, as necessary to ISS, decisions of the Committee and Special Committee so that, among other things, ISS will vote proxies consistent with their decisions. ITEM 8. [RESERVED.] ITEM 9. CONTROLS AND PROCEDURES. 19 (a) The Fund's chief executive officer and chief financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) There were no changes in the Fund's internal control over financial reporting that occurred during the registrant's most recent second fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting. ITEM 10. EXHIBITS. (a) [Attach the Code of Ethics] (b)(1) [Attach the 302 Certification of Chief Executive Officer] (b)(2) [Attach the 302 Certification of Chief Financial Officer] [Note: the 906 Certifications are not exhibits to the Form but are filed with the Form.] 20 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: /s/ Ronald E. Robison ----------------------------------------------------------------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: 2/18/2004 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: /s/ Ronald E. Robison ----------------------------------------------------------------------------- Name: Ronald E. Robison Title: Principal Executive Officer Date: 2/18/2004 By: /s/ James W. Garrett ----------------------------------------------------------------------------- Name: James W. Garrett Title: Chief Financial Officer Date: 2/18/2004 EX-99.CODEETH 3 a2129607zex-99_codeeth.txt EX-99.CODEETH EXHIBIT 99.CODE ETHIC CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS ADOPTED JULY 31, 2003 I. This Code of Ethics (the "Code") for the investment companies within the Morgan Stanley complex identified in Exhibit A (collectively, "Funds" and each, a "Fund") applies to each Fund's Principal Executive Officer, President, Principal Financial Officer and Treasurer (or persons performing similar functions) ("Covered Officers" each of whom are set forth in Exhibit B) for the purpose of promoting: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. - full, fair, accurate, timely and understandable disclosure in reports and documents that a company files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Fund; - compliance with applicable laws and governmental rules and regulations; - prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and - accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. Any question about the application of the Code should be referred to the General Counsel or his/her designee (who is set forth in Exhibit C). II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes, or appears to interfere, with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as "affiliated persons" (as defined in the Investment Company Act) of the Fund. The Fund's and its investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall 1 outside the parameters of this Code, unless or until the General Counsel determines that any violation of such programs and procedures is also a violation of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Fund and its investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund or for the investment adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Fund and its investment adviser. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the investment adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Directors/Trustees ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund. Each Covered Officer must not: - use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally (directly or indirectly) to the detriment of the Fund; - cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Fund; or - use material non-public knowledge of portfolio transactions made or contemplated for, or actions proposed to be taken by, the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. Each Covered Officer must, at the time of signing this Code, report to the General Counsel all affiliations or significant business relationships outside the Morgan Stanley complex and must update the report annually. Conflict of interest situations should always be approved by the General Counsel and communicated to the relevant Fund or Fund's Board. Any activity or relationship that would present such a conflict for a Covered Officer would likely also present a conflict for the Covered 2 Officer if an immediate member of the Covered Officer's family living in the same household engages in such an activity or has such a relationship. Examples of these include: - service or significant business relationships as a director on the board of any public or private company; - accepting directly or indirectly, anything of value, including gifts and gratuities in excess of $100 per year from any person or entity with which the Fund has current or prospective business dealings, not including occasional meals or tickets for theatre or sporting events or other similar entertainment; provided it is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; - any ownership interest in, or any consulting or employment relationship with, any of the Fund's service providers, other than its investment adviser, principal underwriter, or any affiliated person thereof; and - a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. DISCLOSURE AND COMPLIANCE - Each Covered Officer should familiarize himself/herself with the disclosure and compliance requirements generally applicable to the Funds; - each Covered Officer must not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund's Directors/Trustees and auditors, or to governmental regulators and self-regulatory organizations; - each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and their investment advisers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and - it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: 3 - upon adoption of the Code (thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he has received, read and understands the Code; - annually thereafter affirm to the Boards that he has complied with the requirements of the Code; - not retaliate against any other Covered Officer, other officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and - notify the General Counsel promptly if he/she knows or suspects of any violation of this Code. Failure to do so is itself a violation of this Code. The General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any waivers(1) sought by a Covered Officer must be considered by the Board of the relevant Fund or Funds. The Funds will follow these procedures in investigating and enforcing this Code: - the General Counsel will take all appropriate action to investigate any potential violations reported to him; - if, after such investigation, the General Counsel believes that no violation has occurred, the General Counsel is not required to take any further action; - any matter that the General Counsel believes is a violation will be reported to the relevant Fund's Audit Committee; - if the directors/trustees/managing general partners who are not "interested persons" as defined by the Investment Company Act (the "Independent Directors/Trustees/Managing General Partners") of the relevant Fund concur that a violation has occurred, they will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer or other appropriate disciplinary actions; - the Independent Directors/Trustees/Managing General Partners of the relevant Fund will be responsible for granting waivers of this Code, as appropriate; and - any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. - ---------- (1) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics." 4 V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' investment advisers, principal underwriters, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code unless any provision of this Code conflicts with any applicable federal or state law, in which case the requirements of such law will govern. The Funds' and their investment advisers' and principal underwriters' codes of ethics under Rule 17j-1 under the Investment Company Act and Morgan Stanley's Code of Ethics are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibits A, B or C, must be approved or ratified by a majority vote of the Board of each Fund, including a majority of Independent Directors/Trustees/Managing General Partners. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Independent Directors/Trustees/Managing General Partners of the relevant Fund or Funds and their counsel, the relevant Fund or Funds and their counsel and the relevant investment adviser and its counsel. 5 VIII. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion I have read and understand the terms of the above Code. I recognize the responsibilities and obligations incurred by me as a result of my being subject to the Code. I hereby agree to abide by the above Code. - ------------------------- Date: ------------------- 6 EXHIBIT A FUND LIST MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS AT JULY 31, 2003 RETAIL FUNDS OPEN-END RETAIL FUNDS TAXABLE MONEY MARKET FUNDS 1. Active Assets Government Securities Trust ("AA GOVERNMENT") 2. Active Assets Institutional Government Securities Trust ("AA INSTITUTIONAL GOVERNMENT") 3. Active Assets Institutional Money Trust ("AA INSTITUTIONAL MONEY") 4. Active Assets Money Trust ("AA MONEY") 5. Morgan Stanley Liquid Asset Fund Inc. ("LIQUID ASSET") 6. Morgan Stanley U.S. Government Money Market Trust ("GOVERNMENT MONEY") Tax-Exempt Money Market Funds 7. Active Assets California Tax-Free Trust ("AA CALIFORNIA") 8. Active Assets Tax-Free Trust ("AA TAX-FREE") 9. Morgan Stanley California Tax-Free Daily Income Trust ("CALIFORNIA TAX-FREE DAILY") 10. Morgan Stanley New York Municipal Money Market Trust ("NEW YORK MONEY") 11. Morgan Stanley Tax-Free Daily Income Trust ("TAX-FREE DAILY") EQUITY FUNDS 12. Morgan Stanley 21st Century Trend Fund ("21ST CENTURY TREND")* 13. Morgan Stanley Aggressive Equity Fund ("AGGRESSIVE EQUITY")* 14. Morgan Stanley Allocator Fund ("ALLOCATOR FUND")* 15. Morgan Stanley All Star Growth Fund ("ALL STAR GROWTH")* 16. Morgan Stanley American Opportunities Fund ("AMERICAN OPPORTUNITIES")* 17. Morgan Stanley Biotechnology Fund ("BIOTECHNOLOGY FUND")* 18. Morgan Stanley Capital Opportunities Trust ("CAPITAL OPPORTUNITIES")* 19. Morgan Stanley Developing Growth Securities Trust ("DEVELOPING GROWTH")* 20. Morgan Stanley Dividend Growth Securities Inc. ("DIVIDEND GROWTH")* 21. Morgan Stanley Equity Fund ("EQUITY FUND")* 22. Morgan Stanley European Growth Fund Inc. ("EUROPEAN GROWTH")* 23. Morgan Stanley Financial Services Trust ("FINANCIAL SERVICES")* 24. Morgan Stanley Fund of Funds ("FUND OF FUNDS")* - Domestic Portfolio 7 - International Portfolio 25. Morgan Stanley Fundamental Value Fund ("FUNDAMENTAL VALUE")* 26. Morgan Stanley Global Advantage Fund ("GLOBAL ADVANTAGE")* 27. Morgan Stanley Global Dividend Growth Securities ("GLOBAL DIVIDEND GROWTH")* 28. Morgan Stanley Global Utilities Fund ("GLOBAL UTILITIES")* 29. Morgan Stanley Growth Fund ("GROWTH FUND")* 30. Morgan Stanley Health Sciences Trust ("HEALTH SCIENCES")* 31. Morgan Stanley Income Builder Fund ("INCOME BUILDER")* 32. Morgan Stanley Information Fund ("INFORMATION FUND")* 33. Morgan Stanley International Fund ("INTERNATIONAL FUND")* 34. Morgan Stanley International SmallCap Fund ("INTERNATIONAL SMALLCAP")* 35. Morgan Stanley International Value Equity Fund ("INTERNATIONAL VALUE")* 36. Morgan Stanley Japan Fund ("JAPAN FUND")* 37. Morgan Stanley KLD Social Index Fund ("KLD SOCIAL INDEX")* 38. Morgan Stanley Latin American Growth Fund ("LATIN AMERICAN")* 39. Morgan Stanley Market Leader Trust ("MARKET LEADER")* 40. Morgan Stanley Mid-Cap Value Fund (MID-CAP VALUE")* 41. Morgan Stanley Nasdaq-100 Index Fund ("NASDAQ-100")* 42. Morgan Stanley Natural Resource Development Securities Inc. ("NATURAL RESOURCE")* 43. Morgan Stanley New Discoveries Fund ("NEW DISCOVERIES")* 44. Morgan Stanley Next Generation Trust ("NEXT GENERATION")* 45. Morgan Stanley Pacific Growth Fund Inc. ("PACIFIC GROWTH")* 46. Morgan Stanley Real Estate Fund ("REAL ESTATE")* 47. Morgan Stanley Small-Mid Special Value Fund (SMALL-MID SPECIAL VALUE")* 48. Morgan Stanley S&P 500 Index Fund ("S&P500 INDEX")* 49. Morgan Stanley Special Growth Fund ("SMALL CAP GROWTH")* 50. Morgan Stanley Special Value Fund ("SPECIAL VALUE")* 51. Morgan Stanley Tax-Managed Growth Fund ("TAX-MANAGED GROWTH")* 52. Morgan Stanley Technology Fund ("TECHNOLOGY FUND")* 53. Morgan Stanley Total Market Index Fund ("TOTAL MARKET INDEX")* 54. Morgan Stanley Total Return Trust ("TOTAL RETURN")* 55. Morgan Stanley Utilities Fund ("UTILITIES FUND")* 56. Morgan Stanley Value-Added Market Series ("VALUE-ADDED")* 57. Morgan Stanley Value Fund ("VALUE FUND")* BALANCED FUNDS 58. Morgan Stanley Balanced Growth Fund ("BALANCED GROWTH")* 59. Morgan Stanley Balanced Income Fund ("BALANCED INCOME")* ASSET ALLOCATION FUND 60. Morgan Stanley Strategist Fund ("STRATEGIST FUND")* 8 TAXABLE FIXED-INCOME FUNDS 61. Morgan Stanley Convertible Securities Trust ("CONVERTIBLE SECURITIES")* 62. Morgan Stanley Diversified Income Trust ("DIVERSIFIED INCOME")* 63. Morgan Stanley Federal Securities Trust ("FEDERAL SECURITIES")* 64. Morgan Stanley High Yield Securities Inc ("HIGH YIELD SECURITIES")* 65. Morgan Stanley Intermediate Income Securities ("INTERMEDIATE INCOME")* 66. Morgan Stanley Limited Duration Fund ("LIMITED DURATION FUND") 67. Morgan Stanley Limited Duration U.S. Treasury Trust ("LIMITED DURATION TREASURY") 68. Morgan Stanley Total Return Income Securities Fund ("TOTAL RETURN INCOME")* 69. Morgan Stanley U.S. Government Securities Trust ("GOVERNMENT SECURITIES")* TAX-EXEMPT FIXED-INCOME FUNDS 70. Morgan Stanley California Tax-Free Income Fund ("CALIFORNIA TAX-FREE")* 71. Morgan Stanley Hawaii Municipal Trust ("HAWAII MUNICIPAL") 72. Morgan Stanley Limited Term Municipal Trust ("LIMITED TERM MUNICIPAL") 73. Morgan Stanley Multi-State Municipal Series Trust ("MULTI-STATE SERIES") - Arizona Series - Florida Series - New Jersey Series - Pennsylvania Series 74. Morgan Stanley New York Tax-Free Income Fund ("NEW YORK TAX-FREE")* 75. Morgan Stanley Tax-Exempt Securities Trust ("TAX-EXEMPT SECURITIES")* SPECIAL PURPOSE FUNDS 76. Morgan Stanley Select Dimensions Investment Series ("SELECT DIMENSIONS") - American Opportunities Portfolio - Balanced Growth Portfolio - Capital Opportunities Portfolio - Developing Growth Portfolio - Dividend Growth Portfolio - Flexible Income Portfolio - Global Equity Portfolio - Growth Portfolio - Money Market Portfolio - Utilities Portfolio - Value-Added Portfolio 77. Morgan Stanley Variable Investment Series ("VARIABLE INVESTMENT") - Aggressive Equity Portfolio - Dividend Growth Portfolio - Equity Portfolio 9 - European Growth Portfolio - Global Advantage Portfolio - Global Dividend Growth Portfolio - High Yield Portfolio - Income Builder Portfolio - Information Portfolio - Limited Duration Portfolio - Money Market Portfolio - Pacific Growth Protfolio - Quality Income Plus Portfolio - S&P 500 Index Portfolio - Strategist Portfolio - Utilities Portfolio CLOSED-END RETAIL FUNDS TAXABLE FIXED-INCOME CLOSED-END FUNDS 78. Morgan Stanley Government Income Trust ("GOVERNMENT INCOME") 79. Morgan Stanley Income Securities Inc. ("INCOME SECURITIES") 80. Morgan Stanley Prime Income Trust ("PRIME INCOME") TAX-EXEMPT FIXED-INCOME CLOSED-END FUNDS 81. Morgan Stanley California Insured Municipal Income Trust ("CALIFORNIA INSURED MUNICIPAL") 82. Morgan Stanley California Quality Municipal Securities ("CALIFORNIA QUALITY MUNICIPAL") 83. Morgan Stanley Insured California Municipal Securities ("INSURED CALIFORNIA SECURITIES") 84. Morgan Stanley Insured Municipal Bond Trust ("INSURED MUNICIPAL BOND") 85. Morgan Stanley Insured Municipal Income Trust ("INSURED MUNICIPAL INCOME") 86. Morgan Stanley Insured Municipal Securities ("INSURED MUNICIPAL SECURITIES") 87. Morgan Stanley Insured Municipal Trust ("INSURED MUNICIPAL TRUST") 88. Morgan Stanley Municipal Income Opportunities Trust ("MUNICIPAL OPPORTUNITIES") 89. Morgan Stanley Municipal Income Opportunities Trust II ("MUNICIPAL OPPORTUNITIES II") 90. Morgan Stanley Municipal Income Opportunities Trust III ("MUNICIPAL OPPORTUNITIES III") 91. Morgan Stanley Municipal Premium Income Trust ("MUNICIPAL PREMIUM") 92. Morgan Stanley New York Quality Municipal Securities ("NEW YORK QUALITY MUNICIPAL") 93. Morgan Stanley Quality Municipal Income Trust ("QUALITY MUNICIPAL INCOME") 94. Morgan Stanley Quality Municipal Investment Trust ("QUALITY MUNICIPAL INVESTMENT") 95. Morgan Stanley Quality Municipal Securities ("QUALITY MUNICIPAL SECURITIES") *- Denotes Retail Multi-Class Fund TERM TRUST 1. TCW/DW Term Trust 2003 ("TERM TRUST 2003") 10 INSTITUTIONAL FUNDS OPEN-END INSTITUTIONAL FUNDS 1. Morgan Stanley Institutional Fund, Inc. ("INSTITUTIONAL FUND INC.") ACTIVE PORTFOLIOS: - Active International Allocation Portfolio - Asian Equity Portfolio - Asian Real Estate Portfolio - Emerging Markets Portfolio - Emerging Markets Debt Portfolio - Equity Growth Portfolio - European Value Equity Portfolio - European Real Estate Portfolio - Focus Equity Portfolio - Global Franchise Portfolio - Global Value Equity Portfolio - International Equity Portfolio - International Magnum Portfolio - International Small Cap Portfolio - Japanese Value Equity Portfolio - Latin American Portfolio - Money Market Portfolio - Municipal Money Market Portfolio - Small Company Growth Portfolio - Technology Portfolio - U.S. Real Estate Portfolio - Value Equity Portfolio INACTIVE PORTFOLIOS: - China Growth Portfolio - Gold Portfolio - Micro-Cap Portfolio - Mortgage Backed Securities Portfolio - U.S. Equity Portfolio - Municipal Bond Portfolio 2. Morgan Stanley Institutional Fund Trust ("INSTITUTIONAL FUND TRUST") ACTIVE PORTFOLIOS: - Advisory Foreign Fixed Income Portfolio 11 - Advisory Foreign Fixed Income II Portfolio - Advisory Mortgage Portfolio - Balanced Portfolio - Cash Reserves Portfolio - U.S. Core Fixed Income Portfolio - Equity Portfolio - Core Plus Fixed Income Portfolio - Investment Grade Fixed Income Portfolio - High Yield Portfolio - Intermediate Duration Portfolio - International Fixed income Portfolio - Limited Duration Portfolio - Mid-Cap Growth Portfolio - Multi-Asset Class Portfolio - Municipal Portfolio - Small-Cap Growth Portfolio - Strategic Small Value Portfolio - U.S. Small-Cap Growth Portfolio - U.S. Mid-Cap Core Portfolio - Value Portfolio INACTIVE PORTFOLIOS: - Balanced Plus Portfolio - Growth Portfolio - New York Municipal Portfolio - Targeted Duration Portfolio - Value II Portfolio 3. The Universal Institutional Funds, Inc. ("UNIVERSAL FUNDS") ACTIVE PORTFOLIOS: - Active International Allocation Portfolio - Core Plus Fixed Income Portfolio - Emerging Markets Debt Portfolio - Emerging Markets Equity Portfolio - Equity and Income Portfolio - Equity Growth Portfolio - Global Franchise Portfolio - Global Value Equity Portfolio - High Yield Portfolio - International Magnum Portfolio - Mid-Cap Growth Portfolio - Money Market Portfolio - Small Company Growth Portfolio 12 - Technology Portfolio - U.S. Mid-Cap Core Portfolio - U.S. Real Estate Portfolio - Value Portfolio INACTIVE PORTFOLIOS: - Asian Equity Portfolio - Balanced Portfolio - Capital Preservation Portfolio - Core Equity Portfolio - International Fixed Income Portfolio - Investment Grade Fixed Income Portfolio - Latin American Portfolio - Multi-Asset Class Portfolio - Targeted Duration Portfolio 4. Morgan Stanley Institutional Liquidity Funds ("LIQUIDITY FUNDS") CLOSED-END INSTITUTIONAL FUNDS 5. Morgan Stanley Asia-Pacific Fund, Inc. ("ASIA-PACIFIC FUND") 6. Morgan Stanley Eastern Europe Fund, Inc. ("EASTERN EUROPE") 7. Morgan Stanley Emerging Markets Debt Fund, Inc. ("EMERGING MARKETS DEBT") 8. Morgan Stanley Emerging Markets Fund, Inc. ("EMERGING MARKETS FUND") 9. Morgan Stanley Global Opportunity Bond Fund, Inc. ("GLOBAL OPPORTUNITY") 10. Morgan Stanley High Yield Fund, Inc. ("HIGH YIELD FUND") 11. The Latin American Discovery Fund, Inc. ("LATIN AMERICAN DISCOVERY") 12 The Malaysia Fund, Inc. ("MALAYSIA FUND") 13. The Thai Fund, Inc. ("THAI FUND") 14. The Turkish Investment Fund, Inc. ("TURKISH INVESTMENT") CLOSED-END HEDGE FUND 15. Morgan Stanley Institutional Fund of Hedge Funds ("FUND OF HEDGE FUNDS") 13 EXHIBIT B INSTITUTIONAL FUNDS COVERED OFFICERS Mitchell M. Merin - President Ronald E. Robison - Executive Vice President and Principal Executive Officer James W. Garrett - Chief Financial Officer and Treasurer RETAIL FUNDS COVERED OFFICERS Mitchell M. Merin - President Ronald E. Robison - Executive Vice President and Principal Executive Officer Frank Smith - Chief Financial Officer and Treasurer 14 EXHIBIT C GENERAL COUNSEL Barry Fink 15 EX-99.CERT 4 a2129607zex-99_cert.txt EX-99.CERT Exhibit 99.CERT I, Ronald E. Robison, certify that: 1. I have reviewed this report on Form N-CSR of Morgan Stanley Asia-Pacific Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; [b) Omitted.] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: February 18, 2004 /s/ Ronald E. Robison ----------------------------- Principal Executive Officer I, James Garrett, certify that: 1. I have reviewed this report on Form N-CSR of Morgan Stanley Asia-Pacific Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; [b) Omitted.] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: February 18, 2004 /s/ James Garrett ----------------------------- Principal Financial Officer EX-99.906CERT 5 a2129607zex-99_906cert.txt EX-99.906CERT Exhibit 99.906CERT Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Morgan Stanley Asia-Pacific Fund, Inc. In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended December 31, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: February 18, 2004 /s/ Ronald E. Robison ----------------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement required by Section 906 has been provided to Morgan Stanley Asia-Pacific Fund, Inc. and will be retained by Morgan Stanley Asia-Pacific Fund, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This written statement required by Section 906 is being furnished with this report, but not being filed as part of this Report. Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Name of Issuer: Morgan Stanley Asia-Pacific Fund, Inc. In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended December 31, 2003 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: February 18, 2004 /s/ James Garrett ----------------------------- James Garrett Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to Morgan Stanley Asia-Pacific Fund, Inc. and will be retained by Morgan Stanley Asia-Pacific Fund, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. This written statement required by Section 906 is being furnished with this report, but not being filed as part of this Report. -----END PRIVACY-ENHANCED MESSAGE-----