-----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, MxSaGnaRC2L23uTj9pU0oHv2bFJudnl74azJ4sBg46rkSrXaUv2tz7jjG78oIXd5 0XLda8bpWEhvx23nrG72wA== 0001047469-98-023009.txt : 19980608 0001047469-98-023009.hdr.sgml : 19980608 ACCESSION NUMBER: 0001047469-98-023009 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980605 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY ASIA PACIFIC FUND INC CENTRAL INDEX KEY: 0000919808 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: SEC FILE NUMBER: 811-08388 FILM NUMBER: 98642726 BUSINESS ADDRESS: STREET 1: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 6175578742 MAIL ADDRESS: STREET 1: MORGAN STANLEY ASIA PACIFIC FUND STREET 2: 1221 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 FORMER COMPANY: FORMER CONFORMED NAME: MORGAN STANLEY ASIA INVESTMENT FUND INC DATE OF NAME CHANGE: 19940316 N-30B-2 1 N-30B-2 MORGAN STANLEY ASIA-PACIFIC FUND, INC. - -------------------------------------------------------------------------------- DIRECTORS AND OFFICERS Barton M. Biggs William G. Morton, Jr. CHAIRMAN OF THE BOARD DIRECTOR OF DIRECTORS Michael F. Klein Stefanie V. Chang PRESIDENT AND DIRECTOR VICE PRESIDENT Peter J. Chase Harold J. Schaaff, Jr. DIRECTOR VICE PRESIDENT John W. Croghan Joseph P. Stadler DIRECTOR VICE PRESIDENT David B. Gill Valerie Y. Lewis DIRECTOR SECRETARY Graham E. Jones Joanna M. Haigney DIRECTOR TREASURER John A. Levin Belinda A. Brady DIRECTOR ASSISTANT TREASURER - -------------------------------------------------------------------------------- INVESTMENT ADVISER Morgan Stanley Asset Management Inc. 1221 Avenue of the Americas New York, New York 10020 - -------------------------------------------------------------------------------- ADMINISTRATOR The Chase Manhattan Bank 73 Tremont Street Boston, Massachusetts 02108 - -------------------------------------------------------------------------------- CUSTODIANS Morgan Stanley Trust Company One Pierrepont Plaza Brooklyn, New York 11201 The Chase Manhattan Bank 3 Chase MetroTech Center Brooklyn, New York 11245 - -------------------------------------------------------------------------------- SHAREHOLDER SERVICING AGENT American Stock Transfer & Trust Company 40 Wall Street New York, New York 10005 (800) 278-4353 - -------------------------------------------------------------------------------- LEGAL COUNSEL Rogers & Wells LLP 200 Park Avenue New York, New York 10166 - -------------------------------------------------------------------------------- INDEPENDENT ACCOUNTANTS Price Waterhouse LLP 1177 Avenue of the Americas New York, New York 10036 - -------------------------------------------------------------------------------- For additional Fund information, including the Fund's net asset value per share and information regarding the investments comprising the Fund's portfolio, please call 1-800-221-6726. - -------------------------------------------------------------------------------- MORGAN STANLEY ASIA-PACIFIC FUND, INC. - -------------------------------------------------------------------------------- FIRST QUARTER REPORT MARCH 31, 1998 MORGAN STANLEY ASSET MANAGEMENT INC. INVESTMENT ADVISER LETTER TO SHAREHOLDERS - -------------------------------------------------------------------------------- For the three months ended March 31, 1998, the Morgan Stanley Asia-Pacific Fund, Inc. (the "Fund") had a total return, based on net asset value per share, of 1.60% compared to its benchmark (as defined below) of 3.92%. For the one year period ended March 31, 1998 and the period since the Fund's commencement of operations on August 2, 1994 through March 31, 1998, the Fund's total return, based on net asset value per share, was -23.26% and -25.29%, respectively, compared with -17.90% and -34.00%, respectively, for the benchmark. (The benchmark for investment performance is the weighted average of the percentage change month-on-month of each of two Morgan Stanley Capital International (MSCI) indices, Japan, and All-Country Asia-Pacific Free ex-Japan, where the weights are based on the respective market capitalization of these indices at the beginning of each month). On March 31, 1998, the closing price of the Fund's shares on the New York Stock Exchange was $7 5/8 representing a 14.4% discount to the net asset value per share. JAPAN REVIEW During the first quarter of 1998, two important bank rescue bills were passed by the Japanese Congress to stem a rising "Japanese Premium" resulting from a surging sea of non-performing loans. Unfortunately, this rescue package prompted little real change; all banks applied for the exact same amount - 100 billion yen - regardless of the magnitude of their non-performing loans! Most investors were disappointed with the lack of initiative over true disclosure by these banks because they did not apply for the actual required amount based on their own loan distressed portfolios. To most investors this event became a metaphor for faith in bank disclosure of non-performing loans. In addition, members of Japan's elite Ministry of Finance and Bank of Japan were arrested for accepting bribes and excessive entertainment. Both the Finance Minister Mr. Mitsuzuka and Governor of the Bank of Japan Mr. Matsushita resigned. More doubt regarding Japan's leading financial institutions and their trustworthiness because of these scandals surfaced both domestically and internationally. Almost all economic indicators such as consumption, housing starts, and auto sales also dropped sharply during the first quarter. The effects of 1997's Asia crisis began to hamper domestic production cycles with growing inventory levels and clear deflationary trends taking hold. Additionally, Japanese banks became desperate to meet BIS ratios by fiscal year end, and lending activity, particularly to smaller companies, was dramatically curtailed which in turn further weakened an already ailing economy. Japan's GDP for the fourth quarter of 1997, released in early 1998, was -0.7% (annualized) confirming the eroding economic environment. Furthermore, the Band of Japan's quarterly "Tankan" survey of corporate business sentiment was down 20 points since the previous quarter's report to -31 and personal bankruptcy rates also registered the highest reading on record with Japan's economy entering a recession. Unemployment hit an all-time high of 3.6% in March. Under such bleak domestic conditions and with Asia in turmoil the G7 meeting held in London in February was critical towards Japan and strongly worded messages were sent to stimulate the domestic economy and recognize that a crisis was looming. However, Japan and, in particular, Mr. Hashimoto, are trapped in a "catch 22"; committed to balance Japan's budget and mounting deficit by 2003, he is left with little choice but to adopt a more liberal fiscal policy. This conundrum is a major problem. For example, while Japan announced a 16 trillion yen economic stimulus package in late March, details are yet unclear and investors lack faith in the proposed package because it is still being debated almost daily. With Japan's economy becoming bleaker by the day, and obvious lack of political will, the 10-year Japanese Government Bond yield traded below 1.5% during the quarter. Because of a strong overseas equity market, particularly in Europe and the U.S., investors are reluctant to buy Japan. Japanese companies also began to lower earnings estimates, although the Fund's largest holding, Sony, announced an all-time record in earnings per share during the quarter. Despite a gloomy economic background and poor earnings outlook for most companies, the equity market bounced during the first quarter on the back of jawboning by authorities to prop falling equity prices before fiscal year end. This technical "hope" rally was led by construction, air transport, steel, paper and other low priced poor quality companies. Highly speculative stocks such as Nippon Dry Chemical miraculously rose from 400 to 1,600 in 2 months setting the tone for the quality of the rise in the market during the quarter. The Fund does not hold the above sectors and relative performance for the quarter was therefore negative. During the second quarter of 1998 we expect to see concrete details for the 16 trillion stimulus package before the U.K. summit meeting in May. While we are not con- 2 vinced the final package will contain permanent tax cuts and 8 trillion of "real" new money, we are hopeful that supply side measures will also be included. Besides the mounting pressure from G7 to stimulate the economy, recent Lower House elections in Tokyo and Nagasaki had very low voter turnout (38% compared to 55-60% in recent years) and clearly a "no vote" lack of confidence must be ringing in Prime Minister Hashimoto's ears. Over the last several years, stimulus packages have largely focused on public works - roads to nowhere, bridges to isolated islands and otherwise wasteful use of deficit spending. We believe that the market expects productive spending including amending the prohibitive Japanese tax system and additional deregulation to stimulate domestic demand. In our opinion, a "V" shaped recovery is unlikely to occur in the Japanese economy despite fiscal stimulus and that the conservative attitude of consumers will not magically change overnight. Capital expenditure which has already been dropping off sharply is also expected to be reduced 46% because of Japan's credit crunch and a stagnate Asian economy and oversupply. Therefore, we believe that Japan's equity market will be in a trading range and the Fund will continue to be overweight in globally competitive Japanese companies with good valuation and fundamentals. In particular, the most recent rally in domestic issues has allowed blue-chips to correct and they are expected to provide superior relative returns during the coming months. On a micro basis there are signs of positive change in Japan; SEIYU has divested Family Mart holdings to C.Itoh, some companies began focusing on return on equity, a record number of companies have announced share buy-backs and leading companies are providing option related incentive schemes to their employees. Typical of Japan, however, corporate Japan is "making haste slowly" and the local economy remains an enigma within a highly globalized world economy. ASIA EXCLUDING JAPAN The devastating slide which haunted the Asian markets in the second half of 1997 was finally reversed in the first quarter of 1998, with the regional MSCI All-Country Asia-Pacific Free ex-Japan Index climbing 9.8% in the quarter. Although this gain pushed the Index to 318.1, it is strong evidence of the size of the Asian collapse; the Index is at the same level which it traded at almost five years ago in the second quarter of 1993. The region wide index masked a vast disparity between the performance of individual markets. Four of the nine countries covered by the MSCI All-Country Asia-Pacific Free ex-Japan Index rose by over 30%, led by Korea (+59.1%) and Thailand (+43.4%), two of the worst performing markets over the last two years. Malaysia (+33.9%) and the Philippines (+34.9%) also demonstrated strong performances. Indonesia by contrast actually fell 11.2%, while Hong Kong and Singapore managed minor positive returns of 1.0% and 2.1%, respectively. Although many of the problems which triggered the Asian financial crisis still abound, it appears that both the equity and currency markets have stabilized. In Thailand, Korea and the Philippines, announcements of IMF agreements are finally being followed, albeit with varying levels of concrete action. This has lent considerable strength to markets throughout the region. Sharp appreciations in many of the regional currencies, most notably the baht, whose depreciation triggered the crisis, has renewed the confidence of international investors flooding into Asia. Despite this strong regional performance, we remain cautious of the markets' ability to continue a rapid rise, at least in the short term. We are especially wary of the banking shares, which dominate many of the exchanges. Much of the bad news regarding corporate bankruptcy is still to emerge, and when combined with the collapse of loan growth, many banks are likely to see their non-performing loans as a percentage of total assets skyrocket. It will be a difficult path to steer for banks throughout the region, and those that do survive will require massive amounts of re-capitalization. The dilutive effects of this exercise will make it very difficult for any regional bank to post strong performance even in the medium term, with solid profits at least 3-4 years away. Property shares are also likely to suffer, with huge oversupply forcing further corrections in property prices. On a country by country basis, weaknesses in the banking and property sectors will obviously have a negative impact on the Hong Kong market. The maintenance of the Hong Kong dollar peg to the U.S. dollar has buoyed confidence in the Hong Kong government, but the consequent loss of competitiveness versus its neighbors is likely to lead to intense asset deflation as the prices of the world's most expensive property are forced down to reasonable levels. Furthermore, the Chinese economy continues to slow down. Though official figures are sketchy, secondary evidence such as electricity consumption leads to the conclusion that Chinese growth will be far below the targeted 9%. Immense debt problems in the Chinese banking sectors will also retard development, and the net result on Hong Kong as a 3 gateway to the world's biggest market is that it is expected to suffer accordingly. The Fund will concentrate on stocks with a strong and dependable cash flow such as utilities, which should continue to perform as other portions of the economy weaken. Similarly, our outlook for the Singapore market is generally pessimistic. We are wary of the banking stocks which dominate the exchange, due to their large exposure to other regional economies as well as the lack of transparency which clouds any detailed analysis of the sector. The Fund will concentrate on certain electronics companies which supply international companies in growth areas. Following their recent gains, the Fund is also likely to rotate out of Korea and Thailand. Both countries enjoyed very positive developments during the first quarter; Korea successfully completed key discussion with its labor unions while Thailand basked in the afterglow of the abolition of its foreign currency controls as well as the increasing powerbase of its new prime minister. Although these developments are very positive for the economies, the ensuing rapid increases in both the equity and currency markets appear to be over-stretched, and we will look to take profits in order to rotate into other, less successful markets. One such market is likely to be Indonesia, which has borne the worst of the currency crisis as the rupiah depreciated by as much as 80% from its prevailing level of the year before. Though it continues to play a dangerous game of 'chicken' with the IMF, we feel that in the end the country will have little choice but to implement the key reforms the IMF has demanded. At its lowest levels, the currency appears to have priced in the risk of an ignition of hyperinflation, and a number of solid companies trade at bombed out valuations. Taiwan also will likely command increased attention from the Fund, though it has been the best performing East Asian market over the year. Huge foreign reserves as well as a stable currency have enabled Taiwan to emerge from the regional crisis relatively intact, and it should continue to enjoy strong growth relative to its neighbors. Its economy has a diversified base of world competitive electronics companies, whose ties with MNCs will continue to allow certain Taiwanese companies to enjoy enviable growth. Furthermore, the Fund is likely to overweight India which has separated itself from the East Asian conflagration in the minds of most investors. Still in the early stages of development, it has developed few of the economic excesses which cut down the more advanced Asian economies, and there is little rationale for the belief it will fall into a similar trap. The equity market itself has traded sideways for the last four years, while companies have taken substantial charges to restructure their operations. As those efficiency improvements begin to take effect, rapid earnings growth should lead to increased share prices. On a stock specific basis, the Fund will continue to emphasize stocks of well run companies that are in non-financial businesses and whose management has consistently achieved high returns on equity. Companies with irreplaceable franchises, world competitive technology and/or strong links with multinationals, as well as those which do not require external financing will increasingly trade at a premium to the market as the effect of the Asian financial crisis continues to impact the domestic economies of the Asian region. On a long term basis, these companies will have the capability and the opportunity to reap the eventual rewards of the bombed out Asian markets. Sincerely, /s/ Michael F. Klein Michael F. Klein PRESIDENT AND DIRECTOR /s/ Vinod Sethi Vinod Sethi PORTFOLIO MANAGER /s/ John R. Alkire John R. Alkire PORTFOLIO MANAGER April 1998 4 MORGAN STANLEY ASIA-PACIFIC FUND, INC. INVESTMENT SUMMARY AS OF MARCH 31, 1998 (UNAUDITED) - --------------------------------------------------------------------------------
HISTORICAL INFORMATION TOTAL RETURN (%) ------------------------------------------------------------------------------------ MARKET VALUE (1) NET ASSET VALUE (2) INDEX (3) ------------------------ ---------------------- ------------------------ AVERAGE AVERAGE AVERAGE CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL ---------- -------- ---------- ------- ---------- -------- FISCAL YEAR TO DATE 2.52% -- 1.60% -- 3.92% -- ONE YEAR -21.53 -21.53% -23.26 -23.26% -17.90 -17.90% SINCE INCEPTION* -36.09+ -11.51+ -25.29+ -7.65+ -34.00 -10.73
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. - -------------------------------------------------------------------------------- RETURNS AND PER SHARE INFORMATION [GRAPH]
THREE MONTHS YEARS ENDED DECEMBER 31: ENDED ------------------------ MARCH 31, 1994* 1995 1996 1997 1998 ---------- -------- ---------- ---------- ------------ Net Asset Value Per Share. . . $ 13.20 $ 14.34 $ 11.95 $ 8.77 $ 8.91 Market Value Per Share . . . . $ 12.25 $ 13.33 $ 9.75 $ 7.44 $ 7.63 Premium/(Discount) . . . . . . -7.2% -7.0% -18.4% -15.2% -14.4% Income Dividends . . . . . . . $ 0.04 $ 0.05 $ 0.61 $ 0.02 -- Capital Gains Distributions. . $ 0.01 $ 0.02 -- -- -- Fund Total Return (2). . . . . -5.94% 9.24% -2.87%+ -26.36% 1.60% Index Total Return (3) . . . . -5.90% 0.87% -9.17% -28.09% 3.92%
(1) Assumes dividends and distributions, if any, were reinvested. (2) Total investment return based on net asset value per share reflects the effects of changes in net asset value on the performance of the Fund during each period, and assumes dividends and distributions, if any, were reinvested. These percentages are not an indication of the performance of a shareholder's investment in the Fund based on market value due to differences between the market price of the stock and the net asset value per share of the Fund. (3) The benchmark for investment performance is the weighted average of the percentage change month-on-month of two Morgan Stanley Capital International (MSCI) indices; Japan and All-Country Asia-Pacific Free ex-Japan, where the weights are based on the respective market capitalizations of these indices at the beginning of the month. * The Fund commenced operations on August 2, 1994. + This return does not include the effect of the rights issued in connection with the Rights Offering. 5 MORGAN STANLEY ASIA-PACIFIC FUND, INC. PORTFOLIO SUMMARY AS OF MARCH 31, 1998 (UNAUDITED) - -------------------------------------------------------------------------------- DIVERSIFICATION OF TOTAL INVESTMENTS [CHART] Equity Securities 93.3% Short-Term Investments 6.7%
- -------------------------------------------------------------------------------- SECTORS [CHART] Banking 6.2% Beverages & Tobacco 5.6% Chemicals 5.7% Electrical & Electronics 13.2% Electronic Components & Instruments 6.3% Energy Equipment & Servcies 4.1% Health & Personal Care 4.8% Machinery & Engineering 5.2% Telecommunications 6.2% Utilities -- Electrical & Gas 4.1% Other 38.6%
- -------------------------------------------------------------------------------- COUNTRY WEIGHTINGS Other 8.5% Philippines 1.3% Indonesia 3.1% Thailand 3.5% Pakistan 4.0% Australia 4.5% Malaysia 5.1% Singapore 5.4% Hong Kong 7.9% Japan 42.9% India 13.8%
- -------------------------------------------------------------------------------- TEN LARGEST HOLDINGS*
PERCENT OF NET ASSETS ----------- 1. Bharat Heavy Electricals Ltd. (India) 4.1% 2. Housing Development Finance Corp. Ltd. (India) 3.0 3. Lever Brothers (Pakistan) 2.2 4. Hong Kong Telecommunications Ltd. (Hong Kong) 2.1 5. Unilever Indonesia (Indonesia) 2.0 6. CLP Holdings Ltd. (Hong Kong) 1.9 7. Sony Corp. (Japan) 1.8 8. Container Corp. of India Ltd. (India) 1.8 9. Nintendo Ltd. (Japan) 1.8 10. TDK Corp. (Japan) 1.6 ---- 22.3% ---- ----
* Excludes short-term investments. 6 INVESTMENTS (UNAUDITED) MARCH 31, 1998
VALUE SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS (93.4%) (Unless otherwise noted) - -------------------------------------------------------------------------------- AUSTRALIA (4.5%) BANKING National Australia Bank Ltd. 636,000 U.S.$ 9,049 Westpac Banking Corp. Ltd. 1,054,000 7,055 ------------ 16,104 ------------ BROADCASTING & PUBLISHING News Corp. Ltd. 527,600 3,479 ------------ REAL ESTATE Lend Lease Corp. Ltd. 109,000 2,538 ------------ TELECOMMUNICATIONS Telstra Corp. Ltd. 1,798,000 4,626 ------------ TRANSPORTATION -- ROAD & RAIL Brambles Industries Ltd. 104,200 2,168 ------------ 28,915 ------------ - ------------------------------------------------------------------------------- HONG KONG (7.9%) BROADCASTING & PUBLISHING Television Broadcasts Ltd. 1,207,000 3,178 ------------ MULTI-INDUSTRY Hutchison Whampoa Ltd. 750,200 5,276 ------------ REAL ESTATE Li & Fung Ltd. 1,060,000 1,683 ------------ TELECOMMUNICATIONS Hong Kong Telecommunications Ltd. 6,617,800 13,665 ------------ UTILITIES -- ELECTRICAL & GAS CLP Holdings Ltd. 2,346,000 11,808 Hong Kong and China Gas Co. Ltd. 4,860,000 8,154 Hongkong Electric Holdings Ltd. 1,875,000 6,437 ------------ 26,399 ------------ 50,201 ------------ - -------------------------------------------------------------------------------- INDIA (13.8%) APPLIANCES & HOUSEHOLD DURABLES Supreme Industries Ltd. 250 1 ------------ AUTOMOBILES Autolite Ltd. 61,500 43 Autopal Industries Ltd. 100 --@ Bajaj Auto Ltd. 250 4 Bajaj Tempo Ltd. 707 4 Bajaj Tempo Ltd. (Rights) 1,717 5 Bharat Forge Co., Ltd. 210 --@ Ceat Ltd. 21,600 13 Escorts Ltd. 1,925 4 Hero Honda Ltd. 263,550 5,829 MRF Ltd. 18,000 916 ------------ 6,818 ------------ BANKING Industrial Finance Corp. (India) Ltd. 1,800 2 State Bank of India Ltd. 1,174,112 8,262 ------------ 8,264 ------------ - -------------------------------------------------------------------------------- BEVERAGES & TOBACCO ITC Ltd. 46,273 U.S.$ 836 ------------ BUILDING MATERIALS & COMPONENTS Associated Cement Co. Ltd. 935 35 Panyam Cements and Mineral Industries Ltd. 15 --@ Saurashtra Cement & Chemicals Ltd. 50 --@ ------------ 35 ------------ CHEMICALS Birla VXL Ltd. 23,225 8 Gujarat Narmada Valley Fertilizers Ltd. GDR 275,000 550 Gujarat Narmada Valley Fertilizers Ltd. 324 --@ Indian Petro Chemical Corp. Ltd. 1,710 3 Jaysynth Dyechem Ltd. 400 --@ ------------ 561 ------------ CONSTRUCTION & HOUSING Alacrity Housing Ltd. 381,000 43 Hindustan Construction Ltd. 2,300 1 Hindustan Development Corp. Ltd. 66,580 18 ------------ 62 ------------ ELECTRONIC COMPONENTS & INSTRUMENTS Infosys Technology Ltd. 44,200 2,045 Rolta India Ltd. 207,900 129 ------------ 2,174 ------------ ENERGY EQUIPMENT & SERVICES Bharat Heavy Electricals Ltd. 2,881,000 26,035 ------------ ENERGY SOURCES Esab India Ltd. 346,865 1,023 ------------ FINANCIAL SERVICES Housing Development Finance Corp. Ltd. 238,282 19,175 UTI MasterShares Ltd. 329,330 106 ------------ 19,281 ------------ FOOD & HOUSEHOLD PRODUCTS Smithkline Beecham Consumer Health Care Ltd. 384,600 4,306 ------------ HEALTH & PERSONAL CARE Sun Pharmaceutical Industries Ltd. 600 4 ------------ INDUSTRIAL COMPONENTS Apollo Tyres Ltd. 667,025 1,375 Essel Packaging Ltd. 135 --@ ITW Signode India Ltd. 1,132 2 KEC International Ltd. 60,950 58 ------------ 1,435 ------------ LEISURE & TOURISM ITC Hotels Ltd. 950 3 ------------ MACHINERY & ENGINEERING Crompton Greaves Ltd. 7,460 8 DGP Windsor India Ltd. 203,900 121 Veejay Lakshmi Engineering Ltd. 149,100 99 ------------ 228 ------------ - --------------------------------------------------------------------------------
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VALUE SHARES (000) - -------------------------------------------------------------------------------- METALS -- STEEL Tata Iron & Steel Co., Ltd. 250 U.S.$ 1 Tata SSL Ltd. - New 49,150 18 ------------ 19 ------------ MISCELLANEOUS MATERIALS & COMMODITIES Vikas WSP Ltd. 115,000 328 ------------ MULTI-INDUSTRY Century Textiles & Industries Ltd. 6,100 11 J.K. Corp. Ltd. 100 --@ J.K. Corp. Ltd. GDR 249,240 95 Kesoram Industries Ltd. 30 --@ *Morgan Stanley Growth Fund 32,892,200 4,995 Voltas Ltd. 920 1 ------------ 5,102 ------------ RECREATION, OTHER CONSUMER GOODS Tube Investments of India Ltd. 50 --@ ------------ TEXTILES & APPAREL Coates of India Ltd. 9,550 29 G.T.N. Textiles Ltd. 22,700 17 Garware Plastics & Polyester Ltd. 75 --@ J.K. Synthetics Ltd. 2,984 --@ Mahavir Spinning Mills Ltd. 150 --@ Raymond Ltd. 140 --@ Viniyoga Clothes Ltd. 5,400 --@ ------------ 46 ------------ TRANSPORTATION -- ROAD & RAIL Container Corp. of India Ltd. 1,059,600 11,265 ------------ TRANSPORTATION -- SHIPPING Great Eastern Shipping Ltd. 2,820 3 ------------ 87,829 ------------ - ------------------------------------------------------------------------------ INDONESIA (3.1%) BEVERAGES & TOBACCO Bat Indonesia 294,500 1,004 Gudang Garam (Foreign) 4,441,500 6,149 ------------ 7,153 ------------ FOOD & HOUSEHOLD PRODUCTS Mayora Indah 1,643,000 138 Unilever Indonesia 2,413,500 12,556 ------------ 12,694 ------------ HEALTH & PERSONAL CARE SQUIBB Indonesia 49,000 41 ------------ 19,888 ------------ - ------------------------------------------------------------------------------ JAPAN (42.9%) APPLIANCES & HOUSEHOLD DURABLES Aiwa Co., Ltd. 45,000 1,262 Rinnai Corp. 160,700 2,531 ------------ 3,793 ------------ AUTOMOBILES Nissan Motor Co. 1,000,000 3,825 Suzuki Motor Co. Ltd. 630,000 5,905 Toyota Motor Corp. 270,000 7,188 ------------ 16,918 ------------ - -------------------------------------------------------------------------------- BUILDING MATERIALS & COMPONENTS Sangetsu Co. Ltd. 147,000 U.S.$ 1,929 Sanwa Shutter Corp. Ltd. 552,000 2,894 ------------ 4,823 ------------ BUSINESS & PUBLIC SERVICES Dai Nippon Printing Co. Ltd. 270,000 4,454 ------------ CHEMICALS Daicel Chemical Industries Ltd. 1,140,000 2,274 Fuji Photo Film Ltd. 232,000 8,629 Kaneka Corp. 949,000 4,974 Mitsubishi Chemical Industries 2,060,000 3,785 Nifco Inc. 330,000 2,376 Okura Industrial Co. Ltd. 419,000 1,100 Sekisui Chemical Co. 653,000 3,697 Shin-Etsu Polymer Co. Ltd. 15,000 55 ------------ 26,890 ------------ CONSTRUCTION & HOUSING Kyudenko Co. Ltd. 389,000 2,579 Sekisui House Ltd. 387,000 3,163 ------------ 5,742 ------------ DATA PROCESSING & REPRODUCTION Fujitsu Ltd. 910,000 9,486 Nissha Printing 105,000 639 Ricoh Co. Ltd. 866,000 8,702 ------------ 18,827 ------------ ELECTRICAL & ELECTRONICS Canon, Inc. 420,000 9,480 Hitachi Ltd. 1,185,000 8,620 Kyocera Corp. 100,000 5,249 Matsushita Electric Industrial Co. Ltd. 562,000 9,019 NEC Corp. 925,000 9,295 Nintendo Ltd. 130,000 11,211 Sony Corp. 135,000 11,440 Stanley Electric Co. 289,000 936 Tokyo Electron Ltd. 163,000 5,488 Toshiba Corp. 2,130,000 8,626 ------------ 79,364 ------------ ELECTRONIC COMPONENTS & INSTRUMENTS Mitsumi Electric Co. Ltd. 423,000 6,059 Murata Manufacturing Co. 180,000 4,967 TDK Corp. 135,000 10,428 ------------ 21,454 ------------ FINANCIAL SERVICES Hitachi Credit Corp. 218,000 3,711 ------------ HEALTH & PERSONAL CARE Ono Pharmaceutical Co., Ltd. 90,000 1,951 Sankyo Co. Ltd. 341,000 9,462 Yamanouchi Pharmaceutical Co., Ltd. 315,000 7,228 ------------ 18,641 ------------ INDUSTRIAL COMPONENTS Furukawa Electric Co. 1,083,000 4,272 ------------ - -------------------------------------------------------------------------------
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VALUE SHARES (000) - -------------------------------------------------------------------------------- INSURANCE Sumitomo Marine & Fire Co. 542,000 U.S.$ 3,349 ------------ MACHINERY & ENGINEERING Amada Co. Ltd. 932,000 4,158 Daifuku Co. Ltd. 626,000 2,591 Daikin Kogyo Co. 673,000 3,099 Fuji Machine Co. 329,000 8,709 Fujitec Co. Ltd. 510,000 3,339 Kurita Water Industries Ltd. 304,000 3,192 Mitsubishi Heavy Industries Ltd. 1,300,000 4,943 Tsubakimoto Chain Co. 872,000 2,995 ------------ 33,026 ------------ MERCHANDISING FamilyMart 87,200 3,270 ------------ MISCELLANEOUS MATERIALS & COMMODITIES Autobacs Seven Co. 50,000 1,788 Nippon Pillar Packing Co. 157,000 821 ------------ 2,609 ------------ MULTI-INDUSTRY Lintec 150,000 1,912 ------------ REAL ESTATE Keihanshin Real Estate Co. 205,000 876 Mitsubishi Estate Co. Ltd. 390,000 3,802 ------------ 4,678 ------------ RECREATION, OTHER CONSUMER GOODS Casio Computer Co., Ltd. 270,000 2,329 Yamaha Corp. 199,000 1,940 ------------ 4,269 ------------ TELECOMMUNICATIONS Nippon Telephone & Telegraph Corp. 1,032 8,590 ------------ TEXTILES & APPAREL Shimamura Co. Ltd. 78,900 1,757 ------------ WHOLESALE & INTERNATIONAL TRADE Inabata & Co. 406,000 1,522 ------------ 273,871 ------------ - -------------------------------------------------------------------------------- MALAYSIA (5.1%) BEVERAGES & TOBACCO Carlsberg Brewery Malaysia Bhd 1,600,000 6,225 Guinness Anchor Bhd 3,223,000 5,298 R.J. Reynolds Bhd 1,714,000 3,146 Rothmans of Pall Mall Bhd 616,600 5,152 ------------ 19,821 ------------ ENERGY SOURCES Petronas Gas Bhd 2,352,000 6,251 ------------ FOOD & HOUSEHOLD PRODUCTS Nestle Bhd 1,194,000 6,608 ------------ 32,680 ------------ - -------------------------------------------------------------------------------- NEW ZEALAND (0.4%) FOREST PRODUCTS & PAPER Fletcher Challenge Forests 79,520 56 Fletcher Challenge Paper 1,988,000 2,802 ------------ 2,858 ------------ - -------------------------------------------------------------------------------- VALUE SHARES (000) - -------------------------------------------------------------------------------- PAKISTAN (4.0%) BANKING Askari Bank 2,843,925 U.S.$ 1,465 ------------ CHEMICALS Engro Chemicals Ltd. 1,092,600 2,524 Fauji Fertilizer Co. Ltd. 1,124,000 2,090 ICI Pakistan Ltd. 6,000,000 2,323 ------------ 6,937 ------------ ENERGY SOURCES Shell Pakistan Ltd. 459,400 3,017 ------------ HEALTH & PERSONAL CARE Lever Brothers 426,680 14,029 ------------ 25,448 ------------ - -------------------------------------------------------------------------------- PHILIPPINES (1.3%) BEVERAGES & TOBACCO LA Tondena Distillers Inc. 2,652,600 2,129 San Miguel Corp. 'B' 990,200 1,720 ------------ 3,849 ------------ ELECTRONIC COMPONENTS & INSTRUMENTS Ionics Circuit Inc. 1,221,300 635 Music Corp. 4,278,400 1,660 ------------ 2,295 ------------ REAL ESTATE Ayala Land, Inc. 'B' 1 --@ SM Prime Holdings, Inc. 'B' 9,637,680 1,877 ------------ 1,877 ------------ 8,021 ------------ - -------------------------------------------------------------------------------- SINGAPORE (5.4%) BANKING United Overseas Bank (Foreign) 1,108,200 6,142 ------------ BEVERAGES & TOBACCO Rothmans Industries Ltd. 838,000 3,737 ------------ BROADCASTING & PUBLISHING Singapore Press Holdings Ltd. 287,100 3,289 ------------ BUSINESS & PUBLIC SERVICES Informatics Holdings Ltd. 644,000 279 ------------ CONSTRUCTION & HOUSING Jurong Shipyard Ltd. 184,000 957 ------------ ELECTRICAL & ELECTRONICS Venture Manufacturing Ltd. 643,000 2,389 ------------ ELECTRONIC COMPONENTS & INSTRUMENTS Creative Technology Ltd. 338,000 7,605 Natsteel Electronics Ltd. 3,201,000 6,225 ------------ 13,830 ------------ TELECOMMUNICATIONS Singapore Telecommunications, Ltd. 2,053,000 3,611 ------------ 34,234 ------------ - -------------------------------------------------------------------------------- SRI LANKA (0.3%) CHEMICALS Lanka Lubricants Ltd. 1,800,000 1,659 ------------ - --------------------------------------------------------------------------------
9
VALUE SHARES (000) - -------------------------------------------------------------------------------- THAILAND (3.5%) BROADCASTING & PUBLISHING BEC World Public Co., Ltd. (Foreign) 1,629,400 U.S.$ 8,944 Grammy Entertainment Public Co. Ltd. 259,200 1,331 ------------ 10,275 ------------ ELECTRICAL & ELECTRONICS GSS Array Technology Public Co., Ltd. (Foreign) 466,200 2,132 ------------ ELECTRONIC COMPONENTS & INSTRUMENTS Delta Electronics Public Co., Ltd. (Foreign) 55,000 730 ------------ TELECOMMUNICATIONS Advanced Information Services Co. Ltd. (Foreign) 1,201,900 9,346 ------------ 22,483 ------------ - -------------------------------------------------------------------------------- UNITED KINGDOM (1.2%) BANKING HSBC Holdings plc 252,600 7,726 ------------ - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost U.S.$654,733) 595,813 ------------ - -------------------------------------------------------------------------------- FACE AMOUNT (000) - -------------------------------------------------------------------------------- FIXED INCOME SECURITIES (0.0%) - -------------------------------------------------------------------------------- INDIA (0.0%) METALS -- STEEL Tata SSL Ltd. - New 14.00%, 12/6/02 (Cost U.S.$2) INR 2 2 ------------ - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS (5.4%) - -------------------------------------------------------------------------------- UNITED STATES (5.4%) REPURCHASE AGREEMENT Chase Securities, Inc., 5.60%, dated 3/31/98, due 4/1/98, to be repurchased at U.S.$34,528, collateralized by U.S.$35,435 United States Treasury Notes, 5.50%, due 3/31/03, valued at U.S.$35,263 (Cost U.S.$34,523) U.S.$34,523 34,523 ------------ - -------------------------------------------------------------------------------- AMOUNT VALUE (000) (000) - -------------------------------------------------------------------------------- FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (1.3%) Australian Dollar AUD 58 U.S.$ 38 Hong Kong Dollar HKD 845 109 Indian Rupee INR 300,343 7,603 Indonesian Rupiah IDR 240 --@ Japanese Yen JPY 8,520 64 Malaysian Ringgit MYR 757 207 Pakistani Rupee PKR 11,903 270 Philippine Peso PHP 346 9 Singapore Dollar SGD 70 43 ------------ (Cost U.S.$8,375) 8,343 ------------ - -------------------------------------------------------------------------------- TOTAL INVESTMENTS (100.1%) (Cost U.S.$697,633) 638,681 ------------ - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (-0.1)% Other Assets U.S.$40,459 Liabilities (41,329) (870) ----------- ------------ - -------------------------------------------------------------------------------- NET ASSETS (100%) Applicable to 71,594,508 issued and outstanding U.S.$0.01 par value shares (100,000,000 shares authorized) U.S.$637,811 ------------ ------------ - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE U.S.$ 8.91 - --------------------------------------------------------------------------------
@-- Value is less than U.S.$500. *-- The Fund is advised by an affiliate. GDR -- Global Depositary Receipt NOTE: Prior governmental approval for foreign investments may be required under certain circumstances in some emerging markets, and foreign ownership limitations may also be imposed by the charters of individual companies in emerging markets. As a result, an additional class of shares designated as "foreign" may be created, and offered for investment. The "local" and "foreign" shares' market values may vary. 10 -----END PRIVACY-ENHANCED MESSAGE-----