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.
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(Exact name of registrant as specified in charter)
1221 AVENUE OF THE AMERICAS 22ND FLOOR NEW YORK, NY 10020
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(Address of principal executive offices) (Zip code)
RONALD E. ROBISON
1221 AVENUE OF THE AMERICAS 34TH FLOOR NEW YORK, NY 10020
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-221-6726
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Date of fiscal year end: 12/31
--------------------------
Date of reporting period: 6/30/04
-------------------------
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Fund's semi-annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
SEMI-ANNUAL REPORT
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
JUNE 30, 2004
DIRECTORS
CHARLES A. FIUMEFREDDO JOSEPH J. McALINDEN
MICHAEL BOZIC VICE PRESIDENT
EDWIN J. GARN BARRY FINK
WAYNE E. HEDIEN VICE PRESIDENT
JAMES F. HIGGINS STEFANIE V. CHANG
DR. MANUEL H. JOHNSON VICE PRESIDENT
JOSEPH J. KEARNS AMY R. DOBERMAN
MICHAEL NUGENT VICE PRESIDENT
FERGUS REID JAMES W. GARRETT
TREASURER AND CHIEF
OFFICERS FINANCIAL OFFICER [MORGAN STANLEY LOGO]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD MICHAEL J. LEARY
ASSISTANT TREASURER
MITCHELL M. MERIN
PRESIDENT MARY E. MULLIN
SECRETARY MORGAN STANLEY
RONALD E. ROBISON ASIA-PACIFIC FUND, INC.
EXECUTIVE VICE PRESIDENT
AND PRINCIPAL EXECUTIVE
OFFICER
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
31 WEST 52ND STREET
NEW YORK, NEW YORK 10019
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ERNST & YOUNG LLP
200 CLARENDON STREET
BOSTON, MASSACHUSETTS 02116
FOR ADDITIONAL FUND INFORMATION, INCLUDING THE MORGAN STANLEY
FUND'S NET ASSET VALUE PER SHARE AND INFORMATION INVESTMENT MANAGEMENT INC.
REGARDING THE INVESTMENTS COMPRISING THE FUND'S INVESTMENT ADVISER
PORTFOLIO, PLEASE CALL 1-800-221-6726 OR VISIT OUR
WEBSITE AT www.morganstanley.com/im.
(C)2004 MORGAN STANLEY
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
LETTER TO STOCKHOLDERS
Overview
PERFORMANCE
For the six months ended June 30, 2004, the Morgan Stanley Asia-Pacific Fund,
Inc. (the "Fund") had a total return, based on net asset value per share of
5.48%, compared with 4.75% 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 June 30, 2004, the closing price of the Fund shares on the
New York Stock Exchange was $11.25, representing a 13.1% discount to the Fund's
net asset value per share.
FACTORS AFFECTING PERFORMANCE
- The Fund's outperformance over the six-month period was largely
attributable to stock selection in Japan and India.
- Within the Japanese market, performance was supported in particular by
stock selection and overweight positions within the materials and consumer
durables sectors relative to the Index. These sectors performed well as
investors shifted their focus to earnings growth potential from momentum
and improved domestic consumer spending drove the country's economic
recovery.
- Profit margins and return on assets of Japanese companies are hitting post
bubble highs for select Japanese companies and with recent worries about
the global economy, China's economic slowdown, interest rates and finally
elections, investors will likely focus on companies with the highest
quality and most visible earnings.
- The cyclical economy is now showing signs of permeating into the domestic
Japanese economy and real household spending in May rose 5.6%, the highest
growth rate in 21 years.
MANAGEMENT STRATEGIES
- Despite the downdraft in Asia ex-Japan, we find the economic outlook for
the region is structurally on a sounder footing and liquidity conditions
extremely favorable, even though the momentum of growth has certainly
peaked.
- Exports into China and the U.S. continue to grow at a steady pace and
domestic demand has stayed robust in most Asian countries except for South
Korea.
- We believe the Asian economies are in much better shape than a decade ago,
with huge current account surpluses, a healthier backing system and
reduced external debt levels.
- Outside of China, investment to gross domestic product has been on a
decline and capacity utilizations are rising; we believe that we are
likely to see an investment pickup in many Asian countries.
- Over the last several months, the correlation of buying Japanese stocks
with the movement of U.S. stocks has begun to break down, resulting in a
view that Japan's domestic demand may grow regardless of the world trade
environment and Japanese equities may continue to rise based on relatively
favorable valuations and growth rate. Our view is that investors will need
to become more selective than the past year, look to companies with cash
assets and discriminate between liquidity driven stocks and those with
visible earning.
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
Executive Vice President--
Principal Executive Officer
July 2004
2
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS
June 30, 2004 (unaudited)
VALUE
SHARES (000)
--------------------------------------------------------------------------------
COMMON STOCKS(97.0%)
(UNLESS OTHERWISE NOTED)
================================================================================
AUSTRALIA(8.8%)
AIRLINES
Qantas Airways Ltd. 790,650 $ 1,946
--------------------------------------------------------------------------------
BEVERAGES
Coca-Cola Amatil Ltd. 223,450 1,083
--------------------------------------------------------------------------------
COMMERCIAL BANKS
Australia & New Zealand
Banking Group Ltd. 471,959 6,031
National Australia Bank Ltd. 167,950 3,503
--------------------------------------------------------------------------------
9,534
--------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
Downer EDI Ltd. 634,000 1,418
--------------------------------------------------------------------------------
CONTAINERS & PACKAGING
Amcor Ltd. 262,150 1,277
--------------------------------------------------------------------------------
INSURANCE
AMP Ltd. 780,300 3,453
Promina Group Ltd. 556,900 1,557
QBE Insurance Group Ltd. 298,100 2,667
--------------------------------------------------------------------------------
7,677
--------------------------------------------------------------------------------
MEDIA
News Corp., Ltd. 508,900 4,511
--------------------------------------------------------------------------------
METALS & MINING
BHP Billiton Ltd. 764,277 6,695
Rio Tinto Ltd. 201,200 5,056
--------------------------------------------------------------------------------
11,751
--------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
Billabong International Ltd. 268,900 1,553
--------------------------------------------------------------------------------
40,750
================================================================================
CHINA(1.1%)
INSURANCE
Ping An Insurance Group Co. of
China Ltd., 'H' (a)569,000 773
--------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES
Sina Corp. (a)26,900 888
Tom Online, Inc. (a)3,085,000 522
--------------------------------------------------------------------------------
1,410
--------------------------------------------------------------------------------
METALS & MINING
Yanzhou Coal Mining Co., Ltd., 'H' 266,000 290
--------------------------------------------------------------------------------
MULTILINE RETAIL
Lianhua Supermarket Holdings
Co., Ltd., 'H' 435,000 438
Wumart Stores, Inc., 'H' (a)220,000 423
--------------------------------------------------------------------------------
861
--------------------------------------------------------------------------------
OIL & GAS
Sinopec Zhenhai Refining &
Chemical Co., Ltd., 'H' 1,590,000 $ 1,529
--------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE
Hainan Meilan International
Airport Co., Ltd., 'H' 475,000 362
--------------------------------------------------------------------------------
5,225
================================================================================
HONG KONG(7.2%)
AIRLINES
Cathay Pacific Airways Ltd. 75,000 141
--------------------------------------------------------------------------------
BUILDING PRODUCTS
Asia Aluminum Holdings Ltd. 7,298,000 711
--------------------------------------------------------------------------------
COMMERCIAL BANKS
CITIC International Financial
Holdings Ltd. 1,189,000 435
Industrial & Commercial Bank
of China (Asia) Ltd. 868,000 1,124
--------------------------------------------------------------------------------
1,559
--------------------------------------------------------------------------------
DISTRIBUTORS
Li & Fung Ltd. 648,000 947
--------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
Swire Pacific Ltd., 'A' 361,000 2,337
--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Kingboard Chemicals
Holdings Ltd. 324,000 563
--------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES
Moulin International
Holdings Ltd. 1,616,000 989
--------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Grande Holdings Ltd. 857,000 835
Techtronic Industries Co. 832,000 1,328
--------------------------------------------------------------------------------
2,163
--------------------------------------------------------------------------------
MEDIA
Television Broadcasts Ltd. 66,000 283
--------------------------------------------------------------------------------
OIL & GAS
CNOOC Ltd. 3,610,000 1,527
--------------------------------------------------------------------------------
REAL ESTATE
Great Eagle Holdings Ltd. 1,364,000 2,107
Henderson Land Development
Co., Ltd. 1,327,000 5,717
HongKong Land Holdings Ltd. 790,000 1,232
Hysan Development Co., Ltd. 2,321,000 3,452
New World Development Ltd. 2,066,800 1,524
--------------------------------------------------------------------------------
14,032
--------------------------------------------------------------------------------
SPECIALTY RETAIL
Esprit Holdings Ltd. 1,625,500 7,273
--------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 3
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS (CONT'D)
June 30, 2004 (unaudited)
VALUE
SHARES (000)
--------------------------------------------------------------------------------
HONG KONG (CONT'D)
TEXTILES, APPAREL & LUXURY GOODS
Fountain Set Holdings Ltd. 1,258,000 $ 839
--------------------------------------------------------------------------------
33,364
================================================================================
INDIA(2.9%)
AUTOMOBILES
Hero Honda Motors Ltd. 156,075 1,723
--------------------------------------------------------------------------------
COMMERCIAL BANKS
State Bank of India Ltd. (b)145,235 1,433
Union Bank of India Ltd. 1,392,000 1,750
--------------------------------------------------------------------------------
3,183
--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Bharat Heavy Electricals Ltd. 171,937 1,877
--------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Voltas Ltd. 230,000 525
--------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS
Hindustan Lever Ltd. 182,000 504
--------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS
Amtek Auto Ltd. 94,000 1,044
--------------------------------------------------------------------------------
MARINE
Alok Industries Ltd. 1,390,000 1,516
--------------------------------------------------------------------------------
METALS & MINING
Jindal Steel & Power Ltd. 32,381 313
Tata Iron & Steel Co., Ltd. 110 1
Welspun-Gujarat Stahl Ltd. (a)895,000 566
--------------------------------------------------------------------------------
880
--------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
Arvind Mills Ltd. (a)891,000 1,322
Raymond Ltd. 262,700 1,078
--------------------------------------------------------------------------------
2,400
--------------------------------------------------------------------------------
13,652
================================================================================
INDONESIA(2.2%)
AUTOMOBILES
Astra International Tbk PT 4,125,000 2,415
--------------------------------------------------------------------------------
COMMERCIAL BANKS
Bank Central Asia Tbk PT 3,960,000 790
Bank Internasional Indonesia
Tbk PT (a)81,850,000 1,263
Bank Mandiri Persero Tbk PT 7,358,500 920
Bank Rakyat Indonesia (a)5,835,500 1,041
--------------------------------------------------------------------------------
4,014
--------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Indocement Tunggal Prakarsa
Tbk PT (a)4,959,500 752
--------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telekomunikasi Indonesia
Tbk PT (a)1,579,500 1,244
--------------------------------------------------------------------------------
METALS & MINING
Bumi Resources Tbk PT 17,494,000 $ 1,071
--------------------------------------------------------------------------------
MULTILINE RETAIL
Ramayana Lestari Sentosa
Tbk PT (a)1,607,000 761
--------------------------------------------------------------------------------
10,257
================================================================================
JAPAN(51.8%)
AUTOMOBILES
Nissan Motor Co., Ltd. 660,000 7,356
Suzuki Motor Corp. 267,000 4,715
Toyota Motor Corp. 194,300 7,891
Yamaha Motor Co., Ltd. 200,000 3,122
--------------------------------------------------------------------------------
23,084
--------------------------------------------------------------------------------
BUILDING PRODUCTS
Daikin Industries Ltd. 221,000 5,950
Sanwa Shutter Corp. 352,000 1,885
--------------------------------------------------------------------------------
7,835
--------------------------------------------------------------------------------
CHEMICALS
Daicel Chemical Industries Ltd. 695,000 3,659
Denki Kagaku Kogyo KK 1,038,000 3,691
Kaneka Corp. 540,000 5,125
Lintec Corp. 170,000 2,552
Mitsubishi Chemical Corp. 1,179,000 3,142
Nifco, Inc. 193,000 3,064
Shin-Etsu Polymer Co., Ltd. 347,000 2,057
Toyo Ink Manufacturing Co.,
Ltd. 300,000 1,188
--------------------------------------------------------------------------------
24,478
--------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES
Dai Nippon Printing Co., Ltd. 210,000 3,363
Nissha Printing Co., Ltd. 63,000 1,009
--------------------------------------------------------------------------------
4,372
--------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS
Fujitsu Ltd. 952,000 6,727
Mitsumi Electric Co., Ltd. 221,500 2,568
NEC Corp. 765,000 5,398
Toshiba Corp. 1,400,000 5,647
--------------------------------------------------------------------------------
20,340
--------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
Kyudenko Corp. 220,000 1,104
Obayashi Corp. 582,000 3,139
Sanki Engineering Co., Ltd. 74,000 540
--------------------------------------------------------------------------------
4,783
--------------------------------------------------------------------------------
CONSUMER FINANCE
Hitachi Capital Corp. 214,300 3,997
--------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Nippon Telegraph & Telephone
Corp. 836 4,478
--------------------------------------------------------------------------------
4 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS (CONT'D)
June 30, 2004 (unaudited)
VALUE
SHARES (000)
--------------------------------------------------------------------------------
JAPAN (CONT'D)
ELECTRIC UTILITIES
Tokyo Electric Power Co., Inc.
(The) 155,100 $ 3,527
--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Furukawa Electric Co., Ltd. (a)414,000 1,773
--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Hitachi High-Technologies Corp. 70,000 953
Hitachi Ltd. 790,000 5,451
Kyocera Corp. 60,000 5,105
Ryosan Co., Ltd. 133,000 3,049
TDK Corp. 65,200 4,961
--------------------------------------------------------------------------------
19,519
--------------------------------------------------------------------------------
FOOD & STAPLES
FamilyMart Co., Ltd. 140,300 4,589
--------------------------------------------------------------------------------
FOOD PRODUCTS
House Foods Corp. 128,000 1,813
Nippon Meat Packers, Inc. 200,000 2,470
--------------------------------------------------------------------------------
4,283
--------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Casio Computer Co., Ltd. 325,000 4,933
Matsushita Electric Industrial
Co., Ltd. 469,000 6,675
Rinnai Corp. 78,700 2,401
Sangetsu Co., Ltd. 12,000 307
Sansui Electric Co., Ltd. (a)428,500 134
Sekisui Chemical Co., Ltd. 500,000 4,231
Sekisui House Ltd. 351,000 3,906
Sony Corp. 120,700 4,558
--------------------------------------------------------------------------------
27,145
--------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS
Fuji Photo Film Co., Ltd. 150,000 4,713
Yamaha Corp. 281,000 4,622
--------------------------------------------------------------------------------
9,335
--------------------------------------------------------------------------------
MACHINERY
Amada Co., Ltd. 508,000 3,361
Daifuku Co., Ltd. 450,000 2,303
Fuji Machine Manufacturing
Co., Ltd. 156,000 1,813
Fujitec Co., Ltd. 178,000 908
Kurita Water Industries Ltd. 260,000 3,571
Minebea Co., Ltd. 504,000 2,352
Mitsubishi Heavy Industries Ltd. 1,500,000 4,080
Tsubakimoto Chain Co. 580,000 1,993
--------------------------------------------------------------------------------
20,381
--------------------------------------------------------------------------------
MEDIA
Toho Co., Ltd. 75,000 1,093
--------------------------------------------------------------------------------
OFFICE ELECTRONICS
Canon, Inc. 131,000 $ 6,921
Ricoh Co., Ltd. 330,000 7,035
--------------------------------------------------------------------------------
13,956
--------------------------------------------------------------------------------
PHARMACEUTICALS
Ono Pharmaceutical Co., Ltd. 104,000 4,902
Sankyo Co., Ltd. 226,000 4,911
Yamanouchi Pharmaceutical
Co., Ltd. 154,000 5,193
--------------------------------------------------------------------------------
15,006
--------------------------------------------------------------------------------
REAL ESTATE
Mitsubishi Estate Co., Ltd. 245,000 3,048
--------------------------------------------------------------------------------
ROAD & RAIL
East Japan Railway Co. 769 4,324
--------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT
Rohm Co., Ltd. 21,200 2,544
--------------------------------------------------------------------------------
SOFTWARE
Nintendo Co., Ltd. 55,000 6,393
--------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
Nisshinbo Industries, Inc. 265,000 1,999
--------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS
Mitsubishi Corp. 445,000 4,334
Nagase & Co., Ltd. 197,000 1,809
--------------------------------------------------------------------------------
6,143
--------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE
Mitsubishi Logistics Corp. 111,000 1,055
--------------------------------------------------------------------------------
239,480
================================================================================
NEW ZEALAND (0.4%)
BUILDING PRODUCTS
Fletcher Building Ltd. 241,800 700
--------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS
Carter Holt Harvey Ltd. 843,000 1,110
--------------------------------------------------------------------------------
1,810
================================================================================
SINGAPORE (3.1%)
AIRLINES
Singapore Airlines Ltd. 438,000 2,856
--------------------------------------------------------------------------------
COMMERCIAL BANKS
Oversea-Chinese Banking Corp. 491,000 3,458
--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Unisteel Technology Ltd. 1,401,000 1,085
--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Venture Corp., Ltd. 171,000 1,792
--------------------------------------------------------------------------------
MARINE
Neptune Orient Lines Ltd. 970,000 1,332
--------------------------------------------------------------------------------
REAL ESTATE
CapitaCommercial Trust REIT (a)54,800 34
CapitaLand Ltd. 1,464,000 1,168
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 5
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS (CONT'D)
June 30, 2004 (unaudited)
VALUE
SHARES (000)
--------------------------------------------------------------------------------
SINGAPORE (CONT'D)
REAL ESTATE (CONT'D)
City Developments Ltd. (a)380,000 $ 1,194
--------------------------------------------------------------------------------
2,396
--------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE
SembCorp Logistics Ltd. 537,800 576
--------------------------------------------------------------------------------
WATER UTILITIES
Hyflux Ltd. 910,000 784
--------------------------------------------------------------------------------
14,279
================================================================================
SOUTH KOREA(8.5%)
AIRLINES
Korean Air Lines Co., Ltd. (a)141,460 1,838
--------------------------------------------------------------------------------
AUTO COMPONENTS
Hankook Tire Co., Ltd. 397,820 3,480
Hyundai Mobis 71,790 3,190
--------------------------------------------------------------------------------
6,670
--------------------------------------------------------------------------------
CAPITAL MARKETS
Daishin Securities Co., Ltd. 94,590 1,069
LG Investment & Securities
Co., Ltd. (a)224,640 1,609
--------------------------------------------------------------------------------
2,678
--------------------------------------------------------------------------------
COMMERCIAL BANKS
Pusan Bank 179,800 997
--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Samsung SDI Co., Ltd. 75,820 7,979
--------------------------------------------------------------------------------
FOOD PRODUCTS
Orion Corp. 21,930 1,356
--------------------------------------------------------------------------------
MACHINERY
Daewoo Shipbuilding & Marine
Engineering Co., Ltd. 45,590 551
Hyundai Mipo Dockyard
Co., Ltd. (a)122,785 1,882
STX Shipbuilding Co., Ltd. 55,320 580
--------------------------------------------------------------------------------
3,013
--------------------------------------------------------------------------------
MULTILINE RETAIL
Hyundai Department Store Co.,
Ltd. 66,550 1,652
--------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT
Samsung Electronics Co., Ltd. 22,687 9,374
--------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
Cheil Industrial, Inc. 128,440 1,491
--------------------------------------------------------------------------------
TOBACCO
KT&G Corp. 45,660 1,056
--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
SK Telecom Co., Ltd. 6,460 1,063
--------------------------------------------------------------------------------
39,167
================================================================================
TAIWAN(7.7%)
AUTO COMPONENTS
Cheng Shin Rubber Industry
Co., Ltd. 537,000 $ 704
--------------------------------------------------------------------------------
COMMERCIAL BANKS
China Development Financial
Holding Corp. 2,589,000 1,327
Chinatrust Financial Holding
Co., Ltd. 3,084,037 3,445
Taishin Financial Holdings Co.,
Ltd. 2,133,000 1,760
--------------------------------------------------------------------------------
6,532
--------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS
Acer, Inc. 772,310 1,088
Infortrend Technology, Inc. 644,600 1,844
--------------------------------------------------------------------------------
2,932
--------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
CTCI Corp. 1,812,000 896
--------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Taiwan Cement Corp. 2,427,000 1,099
--------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
Polaris Securities Co., Ltd. (a)1,375,760 725
--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Asia Vital Components Co., Ltd. 535,000 615
Catcher Technology Co., Ltd. 231,000 740
Phoenixtec Power Co., Ltd. (a)981,885 965
Richtek Technology Corp. (a)125,000 363
Waffer Technology Co., Ltd. 620,000 1,256
--------------------------------------------------------------------------------
3,939
--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Hon Hai Precision Industry Co.,
Ltd. 551,440 2,053
Ya Hsin Industrial Co., Ltd. 1,131,000 1,398
--------------------------------------------------------------------------------
3,451
--------------------------------------------------------------------------------
INSURANCE
Cathay Financial Holding Co.,
Ltd. 275,000 496
--------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS
Asia Optical Co., Inc. 426,600 2,593
Largan Precision Co., Ltd. 250,430 2,402
--------------------------------------------------------------------------------
4,995
--------------------------------------------------------------------------------
MARINE
Evergreen Marine Corp. 1,654,940 1,400
Taiwan Navigation Co., Ltd. 353,000 245
--------------------------------------------------------------------------------
1,645
--------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT
Faraday Technology Corp. 375,000 704
MediaTek, Inc. 249,000 1,988
6 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS (CONT'D)
June 30, 2004 (unaudited)
VALUE
SHARES (000)
--------------------------------------------------------------------------------
TAIWAN (CONT'D)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONT'D)
Novatek Microelectronics
Corp., Ltd. 399,250 $ 1,320
Sunplus Technology Co., Ltd. 1,033,000 1,800
--------------------------------------------------------------------------------
5,812
--------------------------------------------------------------------------------
SOFTWARE
Chaun-Choung Technology
Corp. 120,000 229
Cyberlink Corp. 324,000 801
Springsoft, Inc. 509,000 1,167
--------------------------------------------------------------------------------
2,197
--------------------------------------------------------------------------------
SPECIALTY RETAIL
Tsann Kuen Enterprise Co., Ltd. 304,000 380
--------------------------------------------------------------------------------
35,803
================================================================================
THAILAND(3.3%)
AIRLINES
Thai Airways International PCL
(Foreign) 875,700 1,209
--------------------------------------------------------------------------------
COMMERCIAL BANKS
Bangkok Bank PCL (Foreign) (a)(b)1,040,300 2,503
Bangkok Bank PCL NVDR (a)244,900 562
Kasikornbank PCL (Foreign) (a)1,209,700 1,537
Kasikornbank PCL NVDR (a)(b)401,800 496
Krung Thai Bank PCL (Foreign) 3,430,300 922
Siam Commercial Bank
PCL (Foreign) (b)573,000 647
--------------------------------------------------------------------------------
6,667
--------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
Italian-Thai Development PCL
(Foreign) 3,504,000 864
Sino Thai Engineering &
Construction PCL (Foreign) 3,141,600 852
--------------------------------------------------------------------------------
1,716
--------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Land & Houses PCL (Foreign) 2,988,000 712
--------------------------------------------------------------------------------
METALS & MINING
Banpu PCL (Foreign) 182,900 594
--------------------------------------------------------------------------------
OIL & GAS
PTT PCL (Foreign) 275,000 1,034
--------------------------------------------------------------------------------
REAL ESTATE
Asian Property Development
PCL 9,160,300 967
--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Advanced Info Service PCL
(Foreign) 538,400 1,197
Total Access Communication
PCL (a)368,000 $ 953
--------------------------------------------------------------------------------
2,150
--------------------------------------------------------------------------------
15,049
================================================================================
TOTAL COMMON STOCKS
(Cost $391,935) 448,836
================================================================================
PREFERRED STOCKS (1.3%)
AUSTRALIA (0.4%)
MEDIA
News Corp., Ltd. 229,800 1,888
--------------------------------------------------------------------------------
SOUTH KOREA (0.9%)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT
Samsung Electronics Co., Ltd. 15,630 4,102
--------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $3,434) 5,990
================================================================================
INVESTMENT COMPANY (0.6%)
INDIA (0.6%)
DIVERSIFIED FINANCIAL SERVICES
Morgan Stanley Growth Fund
(Cost $1,744) (c)9,491,200 2,760
================================================================================
NO. OF
WARRANTS
--------------------------------------------------------------------------------
WARRANTS (0.0%)
SINGAPORE (0.0%)
REAL ESTATE
City Developments Ltd., expiring 5/10/06
(Cost $@--) (a)38,000 65
================================================================================
FACE
AMOUNT
(000)
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (0.9%)
UNITED STATES (0.9%)
REPURCHASE AGREEMENT
J.P. Morgan Securities, Inc., 1.25%,
dated 6/30/04, due 7/1/04,
repurchase price $4,199
(Cost $4,199) $ (d)4,199 4,199
================================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 7
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS (CONT'D)
June 30, 2004 (unaudited)
VALUE
(000)
--------------------------------------------------------------------------------
TOTAL INVESTMENTS (99.8%)
(Cost $401,312) $ 461,850
================================================================================
AMOUNT
(000)
--------------------------------------------------------------------------------
OTHER ASSETS (0.8%)
Foreign Currency
(Cost $2,136) $ 2,136
Receivable for Investments
Sold 965
Dividends Receivable 502
Tax Reclaim Receivable 5
Other 18 3,626
================================================================================
LIABILITIES (-0.6%)
Payable For:
Investments Purchased (1,007)
Bank Overdraft (664)
Dividends Declared (432)
Investment Advisory Fees (369)
Directors' Fees and
Expenses (35)
Custodian Fees (33)
Administrative Fees (17)
Other Liabilities (196) (2,753)
================================================================================
NET ASSETS (100%)
Applicable to 35,743,072, issued and
outstanding $ 0.01 par value shares
(200,000,000 shares authorized) $ 462,723
================================================================================
NET ASSET VALUE PER SHARE $ 12.95
================================================================================
AT JUNE 30, 2004, NET ASSETS CONSISTED OF:
Common Stock $ 357
Paid-in Capital 588,517
Undistributed (Distributions in Excess of) Net
Investment Income (226)
Accumulated Net Realized Gain (Loss) (186,462)
Unrealized Appreciation (Depreciation)
on Investments, Foreign Currency Exchange
Contracts and Translations 60,537
--------------------------------------------------------------------------------
TOTAL NET ASSETS $ 462,723
================================================================================
(a) Non-income producing.
(b) Security was valued at fair value - At June 30, 2004, the Fund held fair
valued securities valued at $5,079,000 representing 1.1% of net assets.
(c) The Morgan Stanley Growth Fund, acquired at a cost of $1,744,059, is
advised by an affiliate of the Adviser. During the six months ended June
30, 2004, there were no purchases or sales of this security. The Fund
derived $313,690 of income from this security during the six months ended
June 30, 2004, before any applicable withholding taxes.
(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.
@ Value/Face Amount is less than $500.
NVDR Non-Voting Depositary Receipt
REIT Real Estate Investment Trust
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Fund had the following foreign currency exchange contract(s) open at
period end:
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
-------------------------------------------------------------------
US$ 3 $ 3 7/2/04 HKD 25 $ 3 $ @--
US$ 177 177 7/2/04 THB 7,260 177 @--
US$ 182 182 7/2/04 THB 7,428 182 @--
SGD 101 59 7/2/04 US$ 59 $ 59 @--
-------------------------------------------------------------------
$ 421 $ 421 $ @--
===================================================================
HKD -- Hong Kong Dollar
SGD -- Singapore Dollar
THB -- Thai Baht
8 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS (CONT'D)
June 30, 2004 (unaudited)
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION - JUNE 30, 2004
PERCENT
VALUE OF NET
INDUSTRY (000) ASSETS
--------------------------------------------------------------------
Commercial Banks $ 35,944 7.8%
Electronic Equipment &
Instruments 33,304 7.2
Household Durables 30,545 6.6
Automobiles 27,222 5.9
Chemicals 24,478 5.3
Machinery 23,394 5.1
Computers & Peripherals 23,272 5.0
Semiconductors &
Semiconductor Equipment 21,832 4.7
Real Estate 20,508 4.4
Leisure Equipment & Products 15,374 3.3
Pharmaceuticals 15,006 3.2
Metals & Mining 14,585 3.1
Office Electronics 13,956 3.0
Building Products 9,246 2.0
Insurance 8,946 1.9
Construction & Engineering 8,813 1.9
Electrical Equipment 8,674 1.9
Software 8,590 1.9
Textiles, Apparel & Luxury Goods 8,282 1.8
Airlines 7,990 1.7
Media 7,775 1.7
Specialty Retail 7,653 1.7
Auto Components 7,374 1.6
Trading Companies & Distributors 6,143 1.3
Diversified Financial Services 5,822 1.3
Diversified Telecommunication
Services 5,722 1.2
Food Products 5,639 1.2
Food & Staples 4,589 1.0
Marine 4,493 1.0
Other 46,679 10.1
--------------------------------------------------------------------
$ 461,850 99.8%
====================================================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 9
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
Financial Statements
SIX MONTHS ENDED
JUNE 30, 2004
(UNAUDITED)
STATEMENT OF OPERATIONS (000)
-----------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of $306 of foreign taxes withheld) $ 4,461
Interest 36
===========================================================================================================
TOTAL INCOME 4,497
===========================================================================================================
EXPENSES
Investment Advisory Fees 2,295
Custodian Fees 183
Administrative Fees 80
Professional Fees 77
Stockholder Reporting Expenses 31
Stockholder Servicing Fees 23
Directors' Fees and Expenses 5
Other Expenses 42
===========================================================================================================
TOTAL EXPENSES 2,736
===========================================================================================================
NET INVESTMENT INCOME (LOSS) 1,761
===========================================================================================================
NET REALIZED GAIN (LOSS) ON:
Investments 19,814
Foreign Currency Transactions (113)
===========================================================================================================
NET REALIZED GAIN (LOSS) 19,701
===========================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments 2,443
Foreign Currency Exchange Contracts and Translations (2)
===========================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 2,441
===========================================================================================================
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 22,142
===========================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 23,903
===========================================================================================================
SIX MONTHS ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
STATEMENT OF CHANGES IN NET ASSETS (000) (000)
-----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss) $ 1,761 $ 1,824
Net Realized Gain (Loss) 19,701 4,558
Change in Unrealized Appreciation (Depreciation) 2,441 129,547
===========================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 23,903 135,929
===========================================================================================================
Distributions from and/or in excess of:
Net Investment Income (432) (3,175)
===========================================================================================================
Capital Share Transactions:
Repurchase of Shares (48,614 and 230,477 shares, respectively) (522) (1,797)
===========================================================================================================
TOTAL INCREASE (DECREASE) 22,949 130,957
===========================================================================================================
Net Assets:
Beginning of Period 439,774 308,817
===========================================================================================================
END OF PERIOD (INCLUDING UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS
OF) NET INVESTMENT INCOME OF $(226) AND $(1,555), RESPECTIVELY) $462,723 $439,774
===========================================================================================================
10 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
SELECTED PER SHARE DATA AND RATIOS
Financial Highlights
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, 2004 ------------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.29 $ 8.57 $ 9.24 $ 10.82 $ 15.26 $ 8.73
---------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 0.05+ 0.05+ 0.02+ (0.02) (0.01) 0.01
Net Realized and Unrealized Gain (Loss)
on Investments 0.62 3.75 (0.70) (1.56) (4.50) 6.44
---------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.67 3.80 (0.68) (1.58) (4.51) 6.45
---------------------------------------------------------------------------------------------------------------------------
Distributions from and/or in excess of:
Net Investment Income (0.01) (0.09) (0.01) -- (0.22) (0.04)
---------------------------------------------------------------------------------------------------------------------------
Anti-Dilutive Effect of Shares
Repurchased 0.00# 0.01 0.02 0.00# 0.29 0.12
---------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.95 $ 12.29 $ 8.57 $ 9.24 $ 10.82 $ 15.26
===========================================================================================================================
PER SHARE MARKET VALUE, END OF PERIOD $ 11.25 $ 10.85 $ 7.20 $ 7.49 $ 8.69 $ 11.81
===========================================================================================================================
TOTAL INVESTMENT RETURN:
Market Value 3.80%** 51.87% (3.77)% (13.78)% (24.66)% 69.32%
Net Asset Value (1) 5.48%** 44.48% (7.12)% (14.60)% (27.37)% 75.39%
===========================================================================================================================
RATIOS, SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (THOUSANDS) $462,723 $439,774 $308,817 $397,336 $621,505 $949,541
---------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.19%* 1.26% 1.35% 1.39% 1.26% 1.29%
Ratio of Net Investment Income (Loss) to
Average Net Assets 0.77%* 0.51% 0.17% 0.19% (0.07)% 0.10%
Portfolio Turnover Rate 14%** 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.
* Annualized
** Not Annualized
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 11
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2004 (unaudited)
The Morgan Stanley Asia-Pacific Fund, Inc. (the "Fund") was incorporated in
Maryland on February 28, 1994, and is registered as a non-diversified,
closed-end management investment company under the Investment Company Act of
1940 (the "1940 Act"), 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
12
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 2004 (unaudited)
foreign exchange rates from the fluctuations arising from changes in the
market prices of the securities held at period end. Similarly, the Fund
does not isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of securities sold
during the period. Accordingly, realized and unrealized foreign currency
gains (losses) due to securities transactions are included in the reported
net realized and unrealized gains (losses) on investment transactions and
balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of foreign
currency exchange contracts, disposition of foreign currencies, currency
gains or losses realized between the trade and settlement dates on
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)
June 30, 2004 (unaudited)
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 & Co., 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. The Custodian holds cash, securities, and other assets of the Fund as
required by the 1940 Act. 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.
14
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
June 30, 2004 (unaudited)
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 $--
-----------------------------------------------------
At June 30, 2004, the U.S. Federal income tax cost basis of investments was
approximately $401,312,000 and, accordingly, net unrealized appreciation for
U.S. Federal income tax purposes was $60,538,000 of which $98,761,000 related to
appreciated securities and $38,223,000 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.
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. CONTRACTUAL OBLIGATIONS: The Fund enters into contracts that contain a
variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts and expects the risk of loss to be remote.
G. OTHER: During the six months ended June 30, 2004, the Fund made purchases and
sales totaling approximately $65,266,000 and $68,130,000 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 six months ended June 30, 2004, the Fund incurred a combined total of
$33,600 in brokerage commissions paid to affiliated broker dealers, of which
$32,500 was paid to Morgan Stanley & Co. Incorporated and $1,100 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 six months ended June 30, 2004,
the Fund repurchased 48,614 of its shares at an average discount of 15.97% from
net asset value per share. Since the inception of the program, the Fund has
repurchased 15,192,619 of its shares at an average discount of 20.48% 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 June 21, 2004 the Officers of the Fund, pursuant to authority granted by the
Board of Directors declared a distribution of $0.0121 per share, derived from
net investment income, payable on July 15, 2004, to stockholders of record on
June 30, 2004.
H. SUPPLEMENTAL PROXY INFORMATION:
The Annual Meeting of the Stockholders of the Fund was held on June 22, 2004.
The following is a summary of the proposal presented and the total number of
shares voted:
PROPOSAL:
1. To elect the following Directors:
VOTES IN VOTES
FAVOR OF AGAINST
-------------------------------------------------------------
Wayne E. Hedien 26,964,395 1,719,125
James F. Higgins 26,964,394 1,719,126
Dr. Manuel H. Johnson 26,982,445 1,701,075
PROXY VOTING POLICIES AND PROCEDURES AND PROXY VOTING RECORD
A copy of (1) the Fund's policies and procedures with respect to the voting of
proxies relating to the Fund's portfolio securities; and (2) how the Fund voted
proxies relating to portfolio securities during the most recent twelve-month
period ended June 30, 2004 is available without charge, upon request, by calling
1-800-548-7786 or by visiting our website at www.morganstanley.com/im. This
information is also available on the Securities and Exchange Commission's
website at www.sec.gov.
15
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
16
ITEM 2. CODE OF ETHICS. Not applicable for semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable for semi-annual
reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable for semi-annual
reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable for semi-annual
reports.
ITEM 6. [RESERVED.]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. Not applicable for semi-annual reports.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS MORGAN STANLEY CLOSED-END FUNDS SHARE
REPURCHASE PROGRAM
Morgan Stanley Asia-Pacific Fund, Inc.
1/1/04-6/30/04
Total Number of Shares Maximum Number of
Purchased as Part of Publicly Shares that May Yet Be
Total Number of Shares Average Price Paid Announced Plans or Purchased Under the Plans
Period Purchased per Share Programs or Programs
------ ---------------------- ------------------ ----------------------------- -------------------------
January - - - Unlimited
February - - - Unlimited
March - - - Unlimited
April - - - Unlimited
May 48,614 $10.68 48,614 Unlimited
June - - - Unlimited
*The Share Repurchase Program commenced on 1/23/1998
**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.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable.
Not Applicable
ITEM 10. CONTROLS AND PROCEDURES.
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes 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 resaonably likely to materially affect,
the registrant's internal control over financial reporting.
ITEM 11. EXHIBITS.
(a) Code of Ethics - Not applicable for semi-annual reports.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Morgan Stanley Asia-Pacific Fund, Inc.
By: /s/ Ronald E. Robison
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: August 19, 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: August 19, 2004
By: /s/ James W. Garrett
Name: James W. Garrett
Title: Principal Financial Officer
Date: August 19, 2004