-----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, GKpXK6LwFJ2e0fp5wWYvHZQcssSL0NaVlDanUBBIvldEc4dIfMWO0EruelPJwYJ4 YRSN2T3Fh1dWm50Gq7Cm7Q== 0001047469-98-042793.txt : 19981204 0001047469-98-042793.hdr.sgml : 19981204 ACCESSION NUMBER: 0001047469-98-042793 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981202 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: 98763101 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. - -------------------------------------------------------------------------------- THIRD QUARTER REPORT SEPTEMBER 30, 1998 MORGAN STANLEY ASSET MANAGEMENT INC. INVESTMENT ADVISER MORGAN STANLEY ASIA-PACIFIC FUND, INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DIRECTORS AND OFFICERS Barton M. Biggs CHAIRMAN OF THE BOARD OF DIRECTORS Michael F. Klein PRESIDENT AND DIRECTOR Peter J. Chase DIRECTOR John W. Croghan DIRECTOR David B. Gill DIRECTOR Graham E. Jones DIRECTOR John A. Levin DIRECTOR William G. Morton, Jr. DIRECTOR Stefanie V. Chang VICE PRESIDENT Harold J. Schaaff, Jr. VICE PRESIDENT Joseph P. Stadler VICE PRESIDENT Valerie Y. Lewis SECRETARY Joanna M. Haigney TREASURER Belinda A. Brady 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 PricewaterhouseCoopers 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. LETTER TO SHAREHOLDERS - ------ For the nine months ended September 30, 1998, the Morgan Stanley Asia-Pacific Fund, Inc. (the "Fund") had a total return, based on net asset value per share, of -15.18% compared to its benchmark (as defined below) of -20.31%. For the one year period ended September 30, 1998 and the period since the Fund's commencement of operations on August 2, 1994 through September 30, 1998, the Fund's total return, based on net asset value per share, was -35.04% and - -37.65%, respectively, compared with -37.88% and -49.39 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 capitalizations of these indices at the beginning of each month). On September 30, 1998, the closing price of the Fund's shares on the New York Stock Exchange was $5 13/16 representing a 21.8% discount to the net asset value per share. During the beginning of the third quarter 1998, the Japanese equity market rebounded based on optimism that the joint currency intervention between the U.S. and Japan signaled that Japan would take imminent action addressing their ballooning non-performing loans held by financial institutions. These optimists believed that the U.S. only agreed to the coordinated intervention to stem a steadily weakening yen based on confidence that Japan's announcement of the "Total Plan" and "Bridge Bank" would be rapidly implemented. Unfortunately, this was not the case and in fact the general elections held in early July challenged the existing government leadership. A huge turnout of 58.5% of Japanese voters called for new leadership and Prime Minister Obuchi was elected. In August, stemming from the collapse of the Russian economy and subsequent sell-off in world equity markets, Japanese equities declined sharply. The free market economy since the end of the Cold War which determined pricing of financial assets around the world was abruptly put to question. From Asia and Japan, a fierce deflationary spiral was exported globally and when compounded with the political instability of leadership in both Japan, Russia and the U.S., financial assets had the highest volatility in recent history. Moreover, Japan's domestic political turmoil did not allow Japan to show the necessary leadership role in Asia at a critical time while the U.S. could do little to help neighbors in Latin America as commodity prices and currencies collapsed. This nightmarish vicious circle was punctuated by the near collapse of Long Term Capital Management as the world's liquidity and credit squeeze accelerated. Japan showed no signs of positive economic activity during the third quarter and domestic demand came to a halt and was sucked into a deflationary vortex. Official Government gross domestic product forecasts in a matter of weeks turned from +1.9% growth to -1.8%, a slump of 3.7%, while the diffusion Index of leading corporate manufacturers (September Bank of Japan survey) stood at a 5 year low of minus 51. These statistics rang alarm bells at the Bank of Japan and the non-collateralized call rate was lowered to a historical low of 25 basis points. Corporate earnings estimates were also negatively affected and downward revisions were announced even by the best managed Japanese companies. The international blue chips which supported the market and benefited from a weak yen also began lowering earnings estimates because of the anticipated weakness for demand of consumer goods in Europe and the U.S. Moreover, during the six month fiscal reporting period ended September 30, 1998 the dramatic decline in domestic equity prices led to huge "hidden losses" in the cross-holdings of listed Japanese companies. Importantly, to many observers, the tug of war between the acting Government and leading opposition parties regarding the use of public funds for troubled Long Term Credit Bank became a metaphor for the inability of the Government to implement critically necessary reform in Japan. In such an environment the long term Japanese Government Bond yielded 70 basis points in a flight to quality while the equity market fell to 12-year lows. OUTLOOK Previously, we believed that the key to the outlook for Japan was the effective and immediate resolution for Japan's non-performing loans. Today, these problems are pronounced by the global deflationary cycle, credit crunch and lack of strong unified political leadership to tackle such problems. Moreover, emerging economies such as Pakistan and India are exhibiting their anxiety over weak local economics by acts of nuclear testing, terrorists bombing of the U.S. Embassy in Africa, and North Korea has fired missiles over the Japanese Islands for the first time in history. We are hopeful that the G7 and IMF will begin addressing the mounting global recession. Encouraging signs, such as Japan pledging $30 billion through the Japan Import/Export Bank to South Asia, are beginning to emerge. However, as of yet we see no concrete proposals which may resolve the growing global crisis in both credit liquidity and deflationary spiral. While we believe that Japan will eventually address the non-performing loans and will put forth new stimulus programs to help the ailing economy, it will likely take some time to see a positive impact to the real economy. The Japanese equity market has been in a steady decline for almost 10 years and valuation measures such as price to book and cash flow are compelling on a global and his- 2 torical basis and are beginning to discount the severe economy. We therefore believe the market will hover near the current 12-year lows and support will emerge from domestic public pension funds and global investors which will look to Japan for relative performance and Japan's negative correlation with non-Japanese equity markets. We are forecasting a "soft landing" for the U.S. economy. If our assumptions are incorrect our portfolio strategy will need to remain flexible and shift to more domestic oriented defensive sectors and lower our weight in international blue chips. The third quarter of 1998 was another difficult quarter for the Asian stock markets as the MSCI All-Country Asia-Pacific Free ex-Japan Index fell 14.3%. This performance did not materially differ from the quarterly returns for the MSCI EAFE Index. Late in the quarter, when the U.S. and European markets went through a particularly rough stretch, the Asian markets actually outperformed, a phenomenon not seen for some time. A number of conditions, both technical and fundamental, have coincided to create an environment in which Asia can perform well in the near term. The paragraphs below outline these conditions, requirements for sustained performance, the key risk factors and our portfolio strategy. Macroeconomic trends have improved in a number of the crisis countries (for example, Thailand and South Korea) as current account balances have shifted into surplus and foreign reserves have been rebuilt. Painful IMF programs stabilized and then strengthened currencies in Thailand and South Korea, at the expense of deep economic contractions. Currency stability subsequently allowed these countries to relax monetary policy. For example, Korean won corporate bond rates have fallen from 30%+ levels in December to just over 10% currently. Lower interest rates and fiscal expansion will ultimately lead to improvements in economic performance. Foreign direct investment, primarily in the form of investments in existing companies, has improved domestic liquidity, highlighted value in certain sectors and will help facilitate corporate restructuring. One disappointing area has been the weak export performance among the Asian countries following the devaluations. Conventional economics would have suggested that exports would boom, as they did in Mexico following the 1995 devaluation. However, exports as measured in U.S. dollars have declined year-on-year in most countries due to a decline in intra-Asian trade (including trade with Japan) and declines in export prices (despite export volumes rising in most cases). Volume exports to the U.S. and Europe have actually performed reasonably well in 1998. Prices have been weak due to the number of crisis countries involved; a single devaluing country might have increased exports but region-wide competitive devaluations mitigated currency advantages. An improvement in exports would definitely speed recovery in Asia, but this is not our base case scenario. Our current strategy anticipates limited but positive export growth from Asia which when coupled with a slow improvement in domestic consumption and government spending should result in the first glimmer of gross domestic product growth in selected countries. In the countries most severely impacted by the Asian financial crisis, bank recapitalization and corporate debt restructuring are necessary to sustain strong market performance. In Korea, Thailand, Malaysia and Indonesia, banks are the key financial intermediaries yet they are saddled with massive non-performing loan portfolios. As Japan has demonstrated, insolvent banks are unable to intermediate loans regardless of how low interest rates may be. Bank recapitalization programs will include government financed capital injections, schemes to transfer bad loans into separate vehicles and incentives to encourage foreign and domestic capital injections. The Koreans are probably furthest along in their bank recapitalization; the Thai government has designed a sensible plan but implementation will take time. Banks also need strengthened bankruptcy and foreclosure laws to force large corporate borrowers to restructure their debt. Passage of a foreclosure law, probably in January, will be a key milestone for the Thai market. Foreign banks will also have to forgive some debt as part of this debt restructuring process. In general, we expect Thailand and South Korea, which have been most diligent in complying with the IMF reforms, to achieve the needed restructuring more quickly than Indonesia whose truculence with the IMF has delayed progress. We continue to believe that asset price corrections are not over in Hong Kong and that the key service sectors of finance and port services continue to face difficult conditions. Costs of doing business in Hong Kong, such as container handling charges at the port, are very high by regional standards yet volumes are weak. Deflationary forces remain strong due to the strength of the Hong Kong dollar relative to regional currencies. We do not expect currency devaluation but we do expect an extended recession, outright price deflation and persistent high interest rates. Recent yen strength has reduced pressure on the currency and should lead to lower rates. Given this development we have increased our property and finance exposure, but we remain underweight those sectors and the market. We have maintained an overweight position in Taiwan with an emphasis on technology stocks for most of the year. These positions were based on bottom-up work at the individual company level; we met impressive, professional management teams with tangible business plans who manufacture strong, niche products with good growth prospects. While these positions have outperformed year-to-date, the technology sector has re- 3 cently suffered relatively from downward revisions of expectations of global demand. We are vigilantly monitoring these companies for signs of erosion in their operating performance but currently believe that we hold a technology portfolio which should outperform. Last quarter we expressed our reservations about growth in China. Short-term growth prospects have improved due to heavy government spending on infrastructure. It is now likely that the government will report gross domestic product growth numbers near its target for the year. Unfortunately, due to this short term obsession with growth, the government has postponed its state-owned enterprise, bank and housing reforms proposed in the first quarter. These reforms would have placed long term growth on a more sustainable, higher quality level but would have reduced growth in the short run. In addition, prices are deflating in China whether measured on a consumer or producer price basis. Interest rate cuts have not kept pace with deflation; real rates have consequently remained high despite several cuts this year. Given capital flight and nominal rates near U.S. dollar rates, it is difficult for the Chinese to cut rates faster than the Fed. It is unlikely that a mix of state sponsored growth and high real rates will be conducive to earnings prospects of most listed Chinese companies. We continue, however, to closely monitor individual Chinese companies, regularly meeting with management and reviewing financial statements to maintain our research base on the best Chinese companies. China's actions during the Asian crisis have furthered its economic leadership of the region, and its companies still benefit from cheap labor and an immense domestic market. When the macro-economic situation stabilizes, we will be in a position to quickly accumulate the Chinese companies likely to lead growth in the world's largest market. Malaysia has chosen to opt out of the conventional IMF remedies for the financial crisis and has implemented capital controls while pursuing its own solutions. Malaysia has a very large stock of internal debt and had followed a "shadow IMF" program of tight money and tight fiscal policy in the first half of 1998. These policies proved to be very painful and during the summer the government began to ease monetary policy. When this easing led to ringgit weakness, the government imposed capital controls and adopted a policy of aggressive monetary and fiscal expansion. These policies would have accelerated ringgit weakness if the currency were tradable. The capital controls have frozen foreign portfolio investors in Malaysia for at least a one-year holding period. In this environment, we have focused on companies with the strongest market positions or franchises, preferably with some dividend support. Risk factors faced by the markets throughout the region include a potential U.S. economic slowdown, which would hurt exports to the U.S., a continued global credit contraction, which could inhibit debt refinancing or limit the financing of future growth, and a resumption of yen weakness, which could increase volatility in non-Japan Asian currencies. Upside surprises could include a successful recapitalization of Japanese banks or a strong economic recovery in Japan, which would drive non-Japan Asian exports to Japan. Year-to-date we have run a fairly defensive portfolio, emphasizing consumer and technology companies and utilities while limiting our exposure to banks and property stocks. While banking and property troubles are not yet behind us, enough positive trends are forming that we have begun to increase our bank and property positions selectively. We are focusing more of our research time and company visits on names that will benefit from lower interest rates and corporate or financial restructuring. We believe that 1999 will present us with the opportunity to invest in a number of corporate recapitalizations across the crisis economies and we want to make sure that we have identified the right franchises in advance. On January 23, 1998, the Fund commenced a share repurchase program of its Common Stock for purposes of enhancing shareholder value and reducing the discount at which the Fund's shares traded from their net asset value. From that date through September 30, 1998, the Fund repurchased 3,327,434 shares of its Common Stock at an average price per share of $6.48 and an average discount of 17.53% per share. The Fund will continue to repurchase its outstanding shares at such time and in such amounts as it believes will further the accomplishments of the foregoing objectives, subject to review by the Board of Directors. We will update you on the progress of the repurchase program in future shareholder reports. Sincerely, /s/ Michael F. Klein Michael F. Klein PRESIDENT AND DIRECTOR October 1998 4 Morgan Stanley Asia-Pacific Fund, Inc. Investment Summary as of September 30, 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 -21.75% -- -15.18% -- -20.31% -- One Year -36.44 -36.44% -35.04 -35.04% -37.88 -37.88% Since Inception* -51.23+ -15.84+ -37.65+ -10.73+ -49.39+ -15.09+
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. - -------------------------------------------------------------------------------- RETURNS AND PER SHARE INFORMATION [GRAPH]
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30, 1994* 1995 1996 1997 1998 ------- ------- ------ ------- ------------- Net Asset Value Per Share. . . . . . . . $ 13.20 $ 14.34 $11.95 $ 8.77 $ 7.43 Market Value Per Share . . . . . . . . . $ 12.25 $ 13.33 $ 9.75 $ 7.44 $ 5.81 Premium/(Discount) . . . . . . . . . . . -7.2% -7.0% -18.4% -15.2% -21.8% Income Dividends . . . . . . . . . . . . $ 0.04 $ 0.05 $ 0.61 $ 0.02 $ 0.01 Capital Gains Distributions. . . . . . . $ 0.01 $ 0.02 -- -- -- Fund Total Return (2). . . . . . . . . . -5.94% 9.24% -2.87% -26.36% -15.18% Index Total Return (3) . . . . . . . . . -5.90% 0.87% -9.17% -28.09% -20.31%
(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 each 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 Investment Summary as of September 30, 1998 (Unaudited) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DIVERSIFICATION OF TOTAL INVESTMENTS [CHART] Equity Securities (99.1%) Short-Term Investments (0.9%)
- -------------------------------------------------------------------------------- SECTORS [CHART] Telecommunications (4.2%) Other (45.8%) Automobiles (5.2%) Banking (3.0%) Beverages & Tobacco (3.5%) Chemicals (5.5%) Electrical & Electronics (12.7%) Electronic Components & Instruments (6.3%) Financial Services (3.0%) Health & Personal Care (4.5%) Machinery & Engineering (6.3%)
- -------------------------------------------------------------------------------- COUNTRY WEIGHTINGS [CHART] Hong Kong (5.9%) Australia (5.2%) Singapore (4.0%) Malaysia (2.6%) Pakistan (2.4%) Thailand (1.9%) Indonesia (1.4%) Philippines (0.7%) Other (19.1%) Japan (45.6%) India (11.2%)
- ------------------------------------------------------------------------------- TEN LARGEST HOLDINGS*
PERCENT OF NET ASSETS ---------- 1. Bharat Heavy Electricals Ltd. (India) 2.8% 2. Housing Development Finance Corp., Ltd. (India) 2.3 3. Nintendo Ltd. (Japan) 2.2 4. Sony Corp. (Japan) 1.8 5. Container Corp. of India Ltd. (India) 1.7 6. Hong Kong Telecommunications Ltd. (Hong Kong) 1.6 7. Hero Honda Ltd. (India) 1.6 8. BEC World Public Co., Ltd. (Foreign) (Thailand) 1.5 9. National Australia Bank Ltd. (Australia) 1.5 10. Fuji Photo Film Ltd. (Japan) 1.5 ----- 18.5% ----- -----
* Excludes short-term investments. 6 FINANCIAL STATEMENTS - ------- STATEMENT OF NET ASSETS (UNAUDITED) - ------- SEPTEMBER 30, 1998
VALUE SHARES (000) - -------------------------------------------------------------------------------- COMMON STOCKS (81.5%) (Unless otherwise noted) - -------------------------------------------------------------------------------- AUSTRALIA (5.2%) BANKING National Australia Bank Ltd. 636,000 U.S.$ 7,692 Westpac Banking Corp., Ltd. 1,054,000 5,805 ------------ 13,497 ------------ BROADCASTING & PUBLISHING News Corp., Ltd. 527,600 3,405 ------------ REAL ESTATE Lend Lease Corp., Ltd. 109,000 2,328 ------------ TELECOMMUNICATIONS Telstra Corp., Ltd. 1,798,000 5,041 ------------ TRANSPORTATION -- ROAD & RAIL Brambles Industries Ltd. 104,200 2,251 ------------ 26,522 ------------ - -------------------------------------------------------------------------------- HONG KONG (5.9%) BROADCASTING & PUBLISHING Television Broadcasts Ltd. 901,000 2,302 ------------ ELECTRICAL & ELECTRONICS VTech Holdings Ltd. 258,000 1,029 ------------ MULTI-INDUSTRY Hutchison Whampoa Ltd. 528,200 2,781 ------------ REAL ESTATE Li & Fung Ltd. 1,060,000 1,710 ------------ TELECOMMUNICATIONS Hong Kong Telecommunications Ltd. 4,056,500 7,983 Smartone Telecommunications 486,000 1,327 ------------ 9,310 ------------ UTILITIES -- ELECTRICAL & GAS CLP Holdings Ltd. 935,000 4,561 Hong Kong & China Gas Co., Ltd. 2,803,300 3,437 Hong Kong Electric Holdings Ltd. 1,365,000 4,695 ------------ 12,693 ------------ 29,825 ------------ - -------------------------------------------------------------------------------- INDIA (11.2%) APPLIANCES & HOUSEHOLD DURABLES Supreme Industries Ltd. 150 1 ------------ AUTOMOBILES Autolite Ltd. 500 --@ Autopal Industries Ltd. 100 --@ Bajaj Auto Ltd. 250 4 Bajaj Tempo Ltd. 707 2 Bajaj Tempo Ltd. (Rights) 1,717 1 Escorts Ltd. 1,450 3 Hero Honda Ltd. 526,526 7,929 MRF Ltd. 18,000 680 Punjab Tractors Ltd. 80,900 1,558 ------------ 10,177 ------------ - -------------------------------------------------------------------------------- BANKING State Bank of India Ltd. 11,312 53 ------------ BEVERAGES & TOBACCO ITC Ltd. 17,153 279 ------------ BUILDING MATERIALS & COMPONENTS Associated Cement Co., Ltd. 876 23 Saurashtra Cement & Chemicals Ltd. 50 --@ 23 ------------ CHEMICALS Birla VXL Ltd. 25 --@ Gujarat Narmada Valley Fertilizers Co. Ltd. GDR 324 --@ Jaysynth Dyechem Ltd. 400 --@ ------------ --@ ------------ CONSTRUCTION & HOUSING Alacrity Housing Ltd. 127,600 11 Hindustan Construction Ltd. 2,300 1 Hindustan Development Corp., Ltd. 100 --@ ------------ 12 ------------ ELECTRONIC COMPONENTS & INSTRUMENTS Infosys Technology Ltd. 44,200 2,614 ------------ ENERGY EQUIPMENT & SERVICES Bharat Heavy Electricals Ltd. 2,110,800 13,989 ------------ ENERGY SOURCES Esab India Ltd. 65 --@ ------------ FINANCIAL SERVICES Housing Development Finance Corp., Ltd. 206,452 11,767 Industrial Finance Corp., (India) Ltd. 1,500 1 UTI-MasterShares Ltd. 15,600 4 ------------ 11,772 ------------ FOOD & HOUSEHOLD PRODUCTS Smithkline Beecham Consumer Health Care Ltd. 384,600 4,351 ------------ INDUSTRIAL COMPONENTS Apollo Tyres Ltd. 2,900 5 Apollo Tyres Ltd. (Warrants) 2,150 -- ------------ 5 ------------ LEISURE & TOURISM ITC Hotels Ltd. 550 2 ------------ MACHINERY & ENGINEERING Crompton Greaves Ltd. 50 --@ DGP Windsor India Ltd. 203,900 81 Veejay Lakshmi Engineering Ltd. 149,100 79 ------------ 160 ------------ METALS -- STEEL Tata Iron & Steel Co., Ltd. 150 --@ Tata SSL Ltd. - New 50 --@ ------------ --@ ------------ MULTI-INDUSTRY (a)Morgan Stanley Growth Fund 32,888,250 4,651 ------------ - --------------------------------------------------------------------------------
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VALUE SHARES (000) - -------------------------------------------------------------------------------- INDIA (CONTINUED) RECREATION -- OTHER CONSUMER GOODS Wimco Ltd. 300 U.S.$ --@ ------------ TEXTILES & APPAREL G.T.N. Textiles Ltd. 14,300 10 J.K. Synthetics Ltd. 2,984 --@ Mahavir Spinning Mills Ltd. 100 --@ Raymond Ltd. 136 --@ Viniyoga Clothes Ltd. 5,400 -- ------------ 10 ------------ TRANSPORTATION -- ROAD & RAIL Container Corp. of India Ltd. 1,059,600 8,741 ------------ TRANSPORTATION -- SHIPPING Great Eastern Shipping Ltd. 2,640 1 ------------ 56,841 ------------ - -------------------------------------------------------------------------------- INDONESIA (1.4%) BEVERAGES & TOBACCO Bat Indonesia 294,500 410 Gudang Garam 4,441,500 2,377 ------------ 2,787 ------------ FOOD & HOUSEHOLD PRODUCTS Unilever Indonesia 2,413,500 4,083 ------------ HEALTH & PERSONAL CARE SQUIBB Indonesia 49,000 33 ------------ 6,903 ------------ - -------------------------------------------------------------------------------- JAPAN (45.6%) APPLIANCES & HOUSEHOLD DURABLES Rinnai Corp. 160,700 2,519 ------------ AUTOMOBILES Nissan Motor Co. 1,620,000 4,509 Suzuki Motor Co., Ltd. 570,000 5,737 Toyota Motor Corp. 270,000 6,032 ------------ 16,278 ------------ BUILDING MATERIALS & COMPONENTS Sangetsu Co., Ltd. 147,000 1,685 Sanwa Shutter Corp., Ltd. 582,000 2,208 ------------ 3,893 ------------ BUSINESS & PUBLIC SERVICES Dai Nippon Printing Co., Ltd. 270,000 3,465 ------------ CHEMICALS Daicel Chemical Industries Ltd. 1,440,000 2,299 Fuji Photo Film Ltd. 222,000 7,643 Kaneka Corp. 939,000 5,275 Mitsubishi Chemical Industries 1,360,000 2,610 Nifco, Inc. 330,000 2,632 Okura Industrial Co., Ltd. 407,000 793 Sekisui Chemical Co. 623,000 2,364 Shin-Etsu Polymer Co., Ltd. 15,000 57 ------------ 23,673 ------------ CONSTRUCTION & HOUSING Kyudenko Co., Ltd. 389,000 2,308 Sekisui House Ltd. 387,000 3,144 ------------ 5,452 ------------ DATA PROCESSING & REPRODUCTION Fujitsu Ltd. 760,000 6,569 Nissha Printing Co., Ltd. 105,000 615 Ricoh Co. Ltd. 816,000 7,531 ------------ 14,715 ------------ ELECTRICAL & ELECTRONICS Canon, Inc. 362,000 7,345 Hitachi Ltd. 1,085,000 4,768 Kyocera Corp. 100,000 4,365 Matsushita Electric Industrial Co., Ltd. 482,000 6,549 NEC Corp. 895,000 5,802 Nintendo Ltd. 120,000 11,286 Sony Corp. 130,000 9,036 Tokyo Electron Ltd. 163,000 3,976 Toshiba Corp. 1,975,000 7,103 ------------ 60,230 ------------ ELECTRONIC COMPONENTS & INSTRUMENTS Mitsumi Electric Co., Ltd. 403,000 7,365 Murata Manufacturing Co. 173,000 5,842 TDK Corp. 103,000 7,016 ------------ 20,223 ------------ FINANCIAL SERVICES Hitachi Credit Corp. 218,000 3,401 ------------ HEALTH & PERSONAL CARE Ono Pharmaceutical Co., Ltd. 100,000 2,403 Sankyo Co., Ltd. 333,000 7,366 Yamanouchi Pharmaceutical Co., Ltd. 315,000 6,783 ------------ 16,552 ------------ INDUSTRIAL COMPONENTS Furakawa Electric Co. 1,083,000 3,078 ------------ INSURANCE Sumitomo Marine & Fire Co. 492,000 2,360 ------------ MACHINERY & ENGINEERING Amada Co., Ltd. 882,000 4,070 Daifuku Co., Ltd. 626,000 2,311 Daikin Kogyo Co. 623,000 4,340 Fuji Machine Co. 253,000 6,634 Fujitec Co., Ltd. 510,000 2,607 Kurita Water Industries Ltd. 304,000 3,162 Mitsubishi Heavy Industries Ltd. 1,300,000 4,447 Tsubakimoto Chain Co. 872,000 1,999 ------------ 29,570 ------------ MERCHANDISING Family Mart Co., Ltd. 87,200 3,334 ------------ - --------------------------------------------------------------------------------
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VALUE SHARES (000) - -------------------------------------------------------------------------------- JAPAN (CONTINUED) MISCELLANEOUS MATERIALS & COMMODITIES Autobacs Seven Co. 50,000 U.S.$ 1,329 Nippon Pillar Packing Co. 157,000 350 ------------- 1,679 ------------- MULTI-INDUSTRY Lintec Corp. 215,000 1,765 ------------- REAL ESTATE Keihanshin Real Estate Co. 205,000 661 Mitsubishi Estate Co. Ltd. 415,000 2,714 ------------- 3,375 ------------- RECREATION -- OTHER CONSUMER GOODS Casio Computer Co., Ltd. 522,000 3,330 Yamaha Corp. 299,000 2,256 ------------- 5,586 ------------- TELECOMMUNICATIONS Nippon Telephone & Telegraph Corp. 932 6,793 ------------- TEXTILES & APPAREL Shimamura Co., Ltd. 78,900 2,658 ------------- WHOLESALE & INTERNATIONAL TRADE Inabata & Co. 406,000 898 ------------- 231,497 ------------- - -------------------------------------------------------------------------------- MALAYSIA (2.6%) BEVERAGES & TOBACCO Carlsberg Brewery (Malaysia) Bhd 1,712,000 3,343 Guinness Anchor Bhd 3,592,000 2,360 R.J. Reynolds Bhd 1,714,000 1,183 Rothmans of Pall Mall Bhd 616,600 2,408 ------------- 9,294 ------------- FOOD & HOUSEHOLD PRODUCTS Nestle Bhd 1,194,000 3,866 ------------- 13,160 ------------- - -------------------------------------------------------------------------------- NEW ZEALAND (0.3%) FOREST PRODUCTS & PAPER Fletcher Challenge Forests 79,520 16 Fletcher Challenge Paper 1,988,000 995 ------------- 1,011 ------------- TELECOMMUNICATIONS Telecom Corp. of New Zealand Ltd. 246,000 437 ------------- 1,448 ------------- - -------------------------------------------------------------------------------- PAKISTAN (2.3%) BANKING Askari Bank 2,843,925 790 ------------- CHEMICALS Engro Chemicals Ltd. 916,490 1,103 Fauji Fertilizer Co., Ltd. 1,124,000 1,050 ICI Pakistan Ltd. 4,500,000 1,076 ------------- 3,229 ------------- - -------------------------------------------------------------------------------- ENERGY SOURCES Shell Pakistan Ltd. 499,600 1,707 ------------- HEALTH & PERSONAL CARE Lever Brothers Pakistan Ltd. 442,880 6,217 ------------- 11,943 ------------- - -------------------------------------------------------------------------------- PHILIPPINES (0.7%) BEVERAGES & TOBACCO LA Tondena Distillers, Inc. 2,652,600 594 San Miguel Corp. 'B' 891,200 1,151 ------------- 1,745 ------------- ELECTRONIC COMPONENTS & INSTRUMENTS Ionics Circuit, Inc. 1,521,300 264 Music Corp. 4,330,600 117 ------------- 381 ------------- REAL ESTATE Ayala Land, Inc. 'B' 1 --@ SM Prime Holdings, Inc. 'B' 9,637,680 1,190 ------------- 1,190 ------------- 3,316 ------------- - -------------------------------------------------------------------------------- SINGAPORE (4.0%) BEVERAGES & TOBACCO Rothmans Industries Ltd. 838,000 3,552 ------------- BUSINESS & PUBLIC SERVICES Informatics Holdings Ltd. 2,139,000 640 ------------- ELECTRICAL & ELECTRONICS Venture Manufacturing Ltd. 693,000 2,136 ------------- ELECTRONIC COMPONENTS & INSTRUMENTS Creative Technology Ltd. 136,400 1,228 Natsteel Electronics Ltd. 3,201,000 7,020 ------------- 8,248 ------------- MACHINERY & ENGINEERING Singapore Technologies Engineering Ltd. 2,189,000 2,102 ------------- TRANSPORTATION -- AIRLINES Singapore Airlines Ltd. 659,000 3,614 ------------- 20,292 ------------- - -------------------------------------------------------------------------------- SRI LANKA (0.2%) CHEMICALS Lanka Lubricants Ltd. 1,800,000 1,091 ------------- - -------------------------------------------------------------------------------- THAILAND (1.9%) BROADCASTING & PUBLISHING BEC World Public Co., Ltd. (Foreign) 1,629,400 7,745 Grammy Entertainment Public Co., Ltd. (Foreign) 259,200 793 ------------- 8,538 ------------- - --------------------------------------------------------------------------------
9
VALUE SHARES (000) - -------------------------------------------------------------------------------- THAILAND (CONTINUED) ELECTRICAL & ELECTRONICS GSS Array Technology Public Co., Ltd. (Foreign) 466,200 U.S.$ 884 ------------- ELECTRONIC COMPONENTS & INSTRUMENTS Delta Electronics Public Co., Ltd. (Foreign) 82,500 476 ------------- 9,898 ------------- - -------------------------------------------------------------------------------- UNITED KINGDOM (0.2%) BANKING HSBC Holdings plc 60,600 1,111 ------------- - -------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost U.S.$562,116) 413,847 ------------- - -------------------------------------------------------------------------------- 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 ------------- - -------------------------------------------------------------------------------- FOREIGN CURRENCY ON DEPOSIT WITH CUSTODIAN (0.7%) Australian Dollar AUD 60 35 Hong Kong Dollar HKD 496 64 Indian Rupee INR 54,844 1,292 Japanese Yen JPY 2,615 19 Malaysian Ringgit MYR 671 160 New Zealand Dollar NZD 28 14 Pakistani Rupee PKR 71,175 1,315 Singapore Dollar SGD 1,303 773 ------------- (Cost U.S.$3,948) 3,672 ------------- - -------------------------------------------------------------------------------- TOTAL INVESTMENTS (82.2%) (Cost U.S.$566,066) 417,521 ------------- - -------------------------------------------------------------------------------- OTHER ASSETS AND LIABILITIES (17.8%) Other Assets U.S.$ 94,507 Liabilities (4,318) 90,189 -------------- ------------- - -------------------------------------------------------------------------------- NET ASSETS (100%) Applicable to 68,333,074 issued and outstanding U.S.$0.01 par value shares (100,000,000 shares authorized) U.S.$ 507,710 ------------- ------------- - -------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE U.S.$ 7.43 ------------- ------------- - --------------------------------------------------------------------------------
@ Value is less than U.S.$500. (a) 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. - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----