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 | 811-09081 | |||||||
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Morgan Stanley International Fund | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
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522 Fifth Avenue, New York, New York |
| 10036 | ||||||
(Address of principal executive offices) |
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Randy Takian | ||||||||
(Name and address of agent for service) | ||||||||
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Registrant’s telephone number, including area code: | 212-296-6990 |
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Date of fiscal year end: | October 31, 2008 |
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Date of reporting period: | October 31, 2008 |
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Item 1 - Report to Shareholders
INVESTMENT MANAGEMENT
Welcome, Shareholder:
In this report, you'll learn about how your investment in Morgan Stanley International Fund performed during the annual period. We will provide an overview of the market conditions, and discuss some of the factors that affected performance during the reporting period. In addition, this report includes the Fund's financial statements and a list of Fund investments.
This material must be preceded or accompanied by a prospectus for the fund being offered.
Market forecasts provided in this report may not necessarily come to pass. There is no assurance that the Fund will achieve its investment objective. The Fund is subject to market risk, which is the possibility that market values of securities owned by the Fund will decline and, therefore, the value of the Fund's shares may be less than what you paid for them. Accordingly, you can lose money investing in this Fund. Please see the prospectus for more complete information on investment risks.
Fund Report
For the year ended October 31, 2008
Total Return for the 12 Months Ended October 31, 2008+ | |||||||||||||||||||||||
Class A | Class B | Class C | Class I++ | MSCI EAFE Index1 | Lipper International Large-Cap Core Funds Index2 | ||||||||||||||||||
–44.19 | % | –44.49 | % | –44.50 | % | –44.16 | % | –46.62 | % | –46.67 | % |
+ Share classes listed above represent classes with full 12 month period total returns to report. Class R and Class W shares commenced operations on March 31, 2008 and therefore are not listed on the table above.
++ Formerly Class D shares. Renamed Class I shares effective March 31, 2008.
The performance of the Fund's share classes varies because each has different expenses. The Fund's total returns assume the reinvestment of all distributions but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. See Performance Summary for standardized performance and benchmark information.
Market Conditions
For the 12-month period ended October 31, 2008, global equity markets have suffered crushing declines. The sell-off began in May and picked up in intensity in the most recent months. The MSCI EAFE Index, a broad measure of international equity markets, finished the period at levels last seen in late 2003. For this reporting year, no market was immune from the extreme volatility, with Japan, Hong Kong, the U.K., Germany, and France suffering stunning declines. Sector returns were similarly weak across the worst performing groups: financials, materials, and industrials. The better relative performers were utilities, consumer staples and health care, although each also posted considerable double-digit declines.
The global economic numbers were unrelentingly negative since mid-September, with no end in sight. October Purchasing Manager indices (PMI) in the U.S., U.K. and Eurozone for both manufacturing and services, had the lowest readings since the surveys started in the late 1990s, or in the case of the U.S., the worst reading in 26 years. The new orders component of the PMI, historically the most crucial for equity returns, dropped to early 1980s levels. Adding to the sense of gloom were the worst U.S. car sales for 25 years and the first quarterly drop in U.S. consumption since 1991.
Abroad, there were almost daily declines in real gross domestic product (GDP) forecasts and in interest rates (including the U.K., Japan and Singapore), Chinese growth forecasts kept getting cut, and news headlines were filled with International Monetary Fund-led rescue packages and Federal Reserve-funded currency swaps — reminiscent of the late 1990s. The sharpness of the September/October downturn removed any remaining illusions of containment, decoupling or economic resilience. In general, many believe we will likely face a steep, global, synchronized recession. Views still diverge sharply, however, as to how deep the recession will run and when equities will be a compelling buy.
In our view, until there is more clarity on the speed and path of deleveraging and on the disposal of structured
2
products, we cannot get too excited about cheap equity valuations and the "unprecedented" nature of the policy stimulus. We remember how unsuccessfully Japan attempted to "grow" out of its bad asset problem, and we are still looking for more comprehensive policy action from the U.S. and Europe.
Performance Analysis
Class A, B, C and I shares of Morgan Stanley International Fund outperformed both the MSCI EAFE Index ("the Index") and the Lipper International Large-Cap Core Funds Index for the 12 months ended October 31, 2008, assuming no deduction of applicable sales charges.
The main contributors to relative performance were the below-Index weights in the financials sector and Australia, as well as the overweight positions in materials and energy held earlier in the reporting period. Detracting from relative returns were overweight positions in information technology, Singapore and Germany, and underweight positions in health care and the U.K.
Over the course of these 12 months, we moved the Fund's portfolio from overweight positions in materials, energy and emerging markets to more defensive positions. We sold the emerging markets positions, raised cash (average weight over the period of about 5 percent) and moved to overweight positions in consumer staples, health care and telecommunication services. This transition in positioning helped to cushion the portfolio during the sharp market declines.
As of the end of the period, we believe that Europe has trailed the U.S. both in its economic cycle and in the recognition of the balance sheet losses that financials need to write down. We think Japan may be relatively safer because its direct exposure to bad credit appears limited, but it too would be hurt by the global slowdown of the next year. Additionally, Japan has low domestic consumption to bolster its top line growth, but corporations still have numerous ways they could improve asset turns and margins. Additionally, we like the Japanese yen in a deleveraging world. Asia, in our view, and the emerging markets may potentially offer a premium growth story in a world largely bereft of growth, but we will stay underweight the yen until we are more certain that the brunt of this storm has passed. We still believe in the structural case for commodities and energy, but again — that is a theme for a new economic cycle. We remain conservatively positioned.
There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the Fund in the future.
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TOP 10 HOLDINGS as of 10/31/08 | |||||||
Nestle S.A (Registered Shares) | 2.4 | % | |||||
BP PLC | 2.0 | ||||||
Vodafone Group PLC | 1.9 | ||||||
Total S.A. | 1.8 | ||||||
Toyota Motor Corp. | 1.8 | ||||||
GlaxoSmithKline PLC | 1.7 | ||||||
Novartis AG (Registered Shares) | 1.7 | ||||||
Telefonica S.A. | 1.5 | ||||||
Roche Holding AG | 1.5 | ||||||
Royal Dutch Shell PLC — (A Shares) | 1.4 | ||||||
TOP FIVE COUNTRIES as of 10/31/08 | |||||||
Japan | 28.0 | % | |||||
United Kingdom | 21.3 | ||||||
France | 9.9 | ||||||
Switzerland | 8.2 | ||||||
Germany | 6.3 |
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned above. Top 10 holdings and top five countries are as a percentage of net assets. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.
Investment Strategy
The Fund will normally invest at least 65 percent of its assets in a diversified portfolio of international common stocks and other equity securities. The Fund's "Investment Adviser," Morgan Stanley Investment Advisors Inc., uses a "top-down" approach that emphasizes country and sector selection and weightings over individual stock selection. The Fund may also use derivative instruments as discussed in the Fund's prospectus. These derivative instruments will be counted toward the 65 percent policy discussed above to the extent they have economic characteristics similar to the securities included within that policy.
For More Information About Portfolio Holdings
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters. The semiannual reports and the annual reports are filed electronically with the Securities and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley also delivers the semiannual and annual reports to fund shareholders and makes these reports available on its public web site, www.morganstanley.com. Each Morgan Stanley fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Morgan Stanley public web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's web site, http://www.sec.gov. You
4
may also review and copy them at the SEC's public reference room in Washington, DC. Information on the operation of the SEC's public reference room may be obtained by calling the SEC at (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the public reference section of the SEC, Washington, DC 20549-0102.
Proxy Voting Policy and Procedures and Proxy Voting Record
You may obtain a copy of the Fund's Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 869-NEWS or by visiting the Mutual Fund Center on our Web site at www.morganstanley.com. It is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov.
You may obtain information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting the Mutual Fund Center on our Web site at www.morganstanley.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling (800) 869-NEWS, 8:00 a.m. to 8:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
5
Performance Summary
Performance of $10,000 Investment
Since Inception
6
Average Annual Total Returns—Period Ended October 31, 2008 | |||||||||||||||||||||||||||
Symbol | Class A Shares* (since 06/28/99) INLAX | Class B Shares** (since 06/28/99) INLBX | Class C Shares† (since 06/28/99) INLCX | Class I Shares†† (since 06/28/99) INLDX | Class R Shares# (since 03/31/08) INLRX | Class W Shares## (since 03/31/08) INLWX | |||||||||||||||||||||
1 Year | (44.19)%3 (47.12)4 | (44.49)%3 (47.25)4 | (44.50)%3 (45.05)4 | (44.16)%3 — | — — | — — | |||||||||||||||||||||
5 Years | 4.543 3.424 | 3.723 3.374 | 3.743 3.744 | 4.753 — | — — | — — | |||||||||||||||||||||
Since Inception | 0.833 0.254 | 0.143 0.144 | 0.063 0.064 | 1.043 — | (34.44)%3 — | (34.37)%3 — |
Performance data quoted represents past performance, which is no guarantee of future results and current performance may be lower or higher than the figures shown. For most recent month-end performance figures, please visit www.morganstanley.com/msim or speak with your Financial Advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on portfolio distributions or the redemption of portfolio shares. Returns for periods less than one year are not annualized. Performance for Class A, Class B, Class C, Class I, Class R, and Class W shares will vary due to differences in sales charges and expenses. See the Fund's current prospectus for complete details on fees and sales charges.
* The maximum front-end sales charge for Class A is 5.25%.
** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The CDSC declines to 0% after six years. Effective April 2005, Class B shares will generally convert to Class A shares approximately eight years after the end of the calendar month in which the shares were purchased. Performance for periods greater than eight years reflects this conversion.
† The maximum contingent deferred sales charge for Class C is 1.0% for shares redeemed within one year of purchase.
†† Class I (formerly Class D) has no sales charge.
# Class R has no sales charge.
## Class W has no sales charge.
(1) The Morgan Stanley Capital International (MSCI) EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the international equity market performance of developed markets, excluding the US & Canada. The term "free float" represents the portion of shares outstanding that are deemed to be available for purchase in the public equity markets by investors. As of June 2007, the MSCI EAFE Index consisted of 21 developed market country indices. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends. The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
(2) The Lipper International Large-Cap Core Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper International Large-Cap Core Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index. The Fund was in the Lipper International Large-Cap Core Funds classification as of the date of this report.
(3) Figure shown assumes reinvestment of all distributions and does not reflect the deduction of any sales charges.
(4) Figure shown assumes reinvestment of all distributions and the deduction of the maximum applicable sales charge. See the Fund's current prospectus for complete details on fees and sales charges.
‡ Ending value assuming a complete redemption on October 31, 2008.
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Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees; and (2) ongoing costs, including advisory fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 05/01/08 – 10/31/08.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs, and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value | Ending Account Value | Expenses Paid During Period@ | |||||||||||||
05/01/08 | 10/31/08 | 05/01/08 – 10/31/08 | |||||||||||||
Class A | |||||||||||||||
Actual (–38.23% return) | $ | 1,000.00 | $ | 617.70 | $ | 5.61 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,018.20 | $ | 7.00 | |||||||||
Class B | |||||||||||||||
Actual (–38.45% return) | $ | 1,000.00 | $ | 615.50 | $ | 8.65 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,014.43 | $ | 10.79 | |||||||||
Class C | |||||||||||||||
Actual (–38.49% return) | $ | 1,000.00 | $ | 615.10 | $ | 8.69 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,014.38 | $ | 10.84 | |||||||||
Class I@@ | |||||||||||||||
Actual (–38.17% return) | $ | 1,000.00 | $ | 618.30 | $ | 4.60 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,019.46 | $ | 5.74 | |||||||||
Class R@@@ | |||||||||||||||
Actual (–38.36% return) | $ | 1,000.00 | $ | 616.40 | $ | 6.66 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,016.89 | $ | 8.31 | |||||||||
Class W@@@ | |||||||||||||||
Actual (–38.30% return) | $ | 1,000.00 | $ | 617.00 | $ | 6.02 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,017.70 | $ | 7.51 |
@ Expenses are equal to the Fund's annualized expense ratios of 1.38%, 2.13%, 2.14%, 1.13%, 1.64% and 1.48% for Class A, Class B, Class C, Class I, Class R and Class W shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
@@ Formerly Class D shares. Renamed Class I shares effective March 31, 2008.
@@@ Shares were first issued on March 31, 2008.
8
Investment Advisory Agreement Approval
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Investment Adviser (as defined herein) under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Fund's Administrator (as defined herein) under the administration agreement, including accounting, clerical, bookkeeping, compliance, business management and planning, and the provision of supplies, office space and utilities at the Investment Adviser's expense. (The Investment Adviser and the Administrator together are referred to as the "Adviser" and the advisory and administration agreements together are referred to as the "Management Agreement.") The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as reported to the Board by Lipper Inc. ("Lipper").
The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the administrative and advisory services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund. The Board also concluded that the overall quality of the advisory and administrative services was satisfactory.
Performance Relative to Comparable Funds Managed by Other Advisers
On a regular basis, the Board reviews the performance of all funds in the Morgan Stanley Fund Complex, including the Fund, compared to their peers, paying specific attention to the underperforming funds. In addition, the Board specifically reviewed the Fund's performance for the one-, three- and five-year periods ended December 31, 2007, as shown in a report provided by Lipper (the "Lipper Report"), compared to the performance of comparable funds selected by Lipper (the "performance peer group"). The Board also discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. The Board concluded that the Fund's performance was competitive with that of its performance peer group.
Fees Relative to Other Proprietary Funds Managed by the Adviser with Comparable Investment Strategies
The Board reviewed the advisory and administrative fee (together, the "management fee") rate paid by the Fund under the Management Agreement. The Board noted that the management fee rate was comparable to the management fee rates charged by the Adviser to other proprietary funds it manages with investment strategies comparable to those of the Fund.
9
Fees and Expenses Relative to Comparable Funds Managed by Other Advisers
The Board reviewed the management fee rate and total expense ratio of the Fund as compared to the average management fee rate and average total expense ratio for funds, selected by Lipper (the "expense peer group"), managed by other advisers with investment strategies comparable to those of the Fund, as shown in the Lipper Report. The Board concluded that the Fund's management fee rate and total expense ratio were competitive with those of its expense peer group.
Breakpoints and Economies of Scale
The Board reviewed the structure of the Fund's management fee schedule under the Management Agreement and noted that it includes a breakpoint. The Board also reviewed the level of the Fund's management fee and noted that the fee, as a percentage of the Fund's net assets, would decrease as net assets increase because of the breakpoint. The Board concluded that the Fund's management fee would reflect economies of scale as assets increase.
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. Based on its review of the information it received, the Board concluded that the profits earned by the Adviser and affiliates were not excessive in light of the advisory, administrative and other services provided to the Fund.
Fall-Out Benefits
The Board considered so-called "fall-out benefits" derived by the Adviser and affiliates from their relationship with the Fund and the Morgan Stanley Fund Complex, such as sales charges on sales of Class A shares and "float" benefits derived from handling of checks for purchases and sales of Fund shares, through a broker-dealer affiliate of the Adviser and "soft dollar" benefits (discussed in the next section). The Board also considered that a broker-dealer affiliate of the Adviser receives from the Fund 12b-1 fees for distribution and shareholder services. The Board also considered that, from time to time, the Adviser may, directly or indirectly, effect trades on behalf of certain Morgan Stanley Funds through various electronic communications networks or other alternative trading systems in which the Adviser's affiliates have ownership interests and/or board seats. The Board concluded that the fall-out benefits were relatively small and the sales charges and 12b-1 fees were competitive with those of other broker-dealers.
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Soft Dollar Benefits
The Board considered whether the Adviser realizes any benefits as a result of brokerage transactions executed through "soft dollar" arrangements. Under such arrangements, brokerage commissions paid by the Fund and/or other funds managed by the Adviser would be used to pay for research that a securities broker obtains from third parties, or to pay for both research and execution services from securities brokers who effect transactions for the Fund. The Board recognized that the receipt of such research from brokers may reduce the Adviser's costs, but concluded that the receipt of such research strengthens the investment management resources of the Adviser, which may ultimately benefit the Fund and other funds in the Morgan Stanley Fund Complex.
Adviser Financially Sound and Financially Capable of Meeting the Fund's Needs
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement.
Historical Relationship Between the Fund and the Adviser
The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that it is beneficial for the Fund to continue its relationship with the Adviser.
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.
General Conclusion
After considering and weighing all of the above factors, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year.
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Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008
NUMBER OF SHARES | VALUE | ||||||||||
Common Stocks (e) (91.4%) | |||||||||||
Australia (1.2%) | |||||||||||
Airlines | |||||||||||
5,468 | Virgin Blue Holdings Ltd. | $ | 1,262 | ||||||||
Aluminum | |||||||||||
7,791 | Alumina Ltd. (c) | 10,905 | |||||||||
Beverages: Alcoholic | |||||||||||
15,985 | Foster's Group Ltd. | 60,938 | |||||||||
Beverages: Non-Alcoholic | |||||||||||
4,213 | Coca-Cola Amatil Ltd. | 22,604 | |||||||||
Biotechnology | |||||||||||
2,230 | CSL Ltd. | 54,352 | |||||||||
Building Products | |||||||||||
16,251 | CSR Ltd. (c) | 23,463 | |||||||||
Casino/Gaming | |||||||||||
3,127 | TABCORP Holdings Ltd. | 14,292 | |||||||||
Chemicals: Major Diversified | |||||||||||
4,037 | Orica Ltd. | 52,252 | |||||||||
Construction Materials | |||||||||||
8,286 | Boral Ltd. | 24,935 | |||||||||
Containers/Packaging | |||||||||||
12,543 | Amcor Ltd. | 48,504 | |||||||||
Electric Utilities | |||||||||||
5,790 | Origin Energy Ltd. | 60,482 | |||||||||
Engineering & Construction | |||||||||||
1,853 | Leighton Holdings Ltd. (c) | 30,793 | |||||||||
Financial Conglomerates | |||||||||||
1,577 | Macquarie Group Ltd. (c) | 31,146 | |||||||||
4,240 | Suncorp-Metway Ltd. | 22,742 | |||||||||
53,888 | |||||||||||
Food Retail | |||||||||||
8,103 | Woolworths Ltd. | 150,103 | |||||||||
Gas Distributors | |||||||||||
3,841 | AGL Energy Ltd. | 35,767 |
NUMBER OF SHARES | VALUE | ||||||||||
Industrial Conglomerates | |||||||||||
1,500 | Ansell Ltd. | $ | 12,604 | ||||||||
3,197 | Wesfarmers Ltd. (c) | 45,700 | |||||||||
1,232 | Wesfarmers Ltd. (PPS) | 17,682 | |||||||||
75,986 | |||||||||||
Investment Managers | |||||||||||
10,399 | AMP Ltd. | 38,021 | |||||||||
Investment Trusts/Mutual Funds | |||||||||||
18,249 | Macquarie Infrastructure Group (Stapled Securities) (b)(c) | 23,906 | |||||||||
Major Banks | |||||||||||
2,342 | Australia and New Zealand Banking Group Ltd. | 27,205 | |||||||||
1,933 | Commonwealth Bank of Australia | 52,571 | |||||||||
2,591 | National Australia Bank Ltd. | 42,047 | |||||||||
2,703 | Westpac Banking Corp. (c) | 37,253 | |||||||||
159,076 | |||||||||||
Major Telecommunications | |||||||||||
16,799 | Telstra Corp., Ltd. | 46,124 | |||||||||
Medical/Nursing Services | |||||||||||
1,133 | Sonic Healthcare Ltd. | 10,349 | |||||||||
Miscellaneous Commercial Services | |||||||||||
7,698 | Brambles Ltd. | 40,767 | |||||||||
Multi-Line Insurance | |||||||||||
13,204 | Insurance Australia Group Ltd. | 33,483 | |||||||||
Oil & Gas Production | |||||||||||
3,996 | Santos Ltd. | 36,384 | |||||||||
3,592 | Woodside Petroleum Ltd. | 101,033 | |||||||||
137,417 | |||||||||||
Oil Refining/Marketing | |||||||||||
3,373 | Caltex Australia Ltd. | 21,088 | |||||||||
Other Metals/Minerals | |||||||||||
23,097 | BHP Billiton Ltd. | 443,760 | |||||||||
2,015 | Rio Tinto Ltd. | 104,263 | |||||||||
548,023 |
See Notes to Financial Statements
12
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Other Transportation | |||||||||||
5,155 | Asciano Group (Stapled Securities) (b) | $ | 7,250 | ||||||||
6,270 | Transurban Group (Stapled Securities) (b)(c) | 22,596 | |||||||||
29,846 | |||||||||||
Precious Metals | |||||||||||
3,316 | Newcrest Mining Ltd. | 46,114 | |||||||||
Property - Casualty Insurers | |||||||||||
5,328 | QBE Insurance Group Ltd. (c) | 91,862 | |||||||||
Publishing: Newspapers | |||||||||||
7,583 | Fairfax Media Ltd. (c) | 9,725 | |||||||||
Pulp & Paper | |||||||||||
6,686 | PaperlinX Ltd. (c) | 6,264 | |||||||||
Real Estate Development | |||||||||||
3,305 | Lend Lease Corp., Ltd. | 15,411 | |||||||||
Real Estate Investment Trusts | |||||||||||
1,340 | Stockland (Stapled Securities) (b) | 3,621 | |||||||||
Steel | |||||||||||
5,174 | BlueScope Steel Ltd. | 15,201 | |||||||||
5,597 | OneSteel Ltd. | 12,900 | |||||||||
28,101 | |||||||||||
Trucking | |||||||||||
2,983 | Toll Holdings Ltd. | 11,918 | |||||||||
Total Australia | 2,021,642 | ||||||||||
Austria (0.1%) | |||||||||||
Major Banks | |||||||||||
3,357 | Erste Group Bank AG (c) | 90,866 | |||||||||
Oil Refining/Marketing | |||||||||||
2,575 | OMV AG | 82,781 | |||||||||
Total Austria | 173,647 | ||||||||||
Belgium (0.4%) | |||||||||||
Beverages: Alcoholic | |||||||||||
1,715 | InBev NV | 69,145 |
NUMBER OF SHARES | VALUE | ||||||||||
Chemicals: Specialty | |||||||||||
1,019 | Solvay S.A. | $ | 94,973 | ||||||||
Electronic Equipment/ Instruments | |||||||||||
2,156 | Agfa Gevaert NV (a) | 9,018 | |||||||||
Financial Conglomerates | |||||||||||
688 | CNP-CIE NATL A PORTEFEUL | 37,152 | |||||||||
1,381 | Groupe Bruxelles Lambert S.A. | 101,156 | |||||||||
138,308 | |||||||||||
Major Banks | |||||||||||
3,221 | KBC Groep NV | 139,473 | |||||||||
Major Telecommunications | |||||||||||
3,124 | Belgacom S.A. | 106,889 | |||||||||
Metal Fabrications | |||||||||||
131 | Bekaert NV | 12,895 | |||||||||
Other Metals/Minerals | |||||||||||
2,270 | Umicore | 40,677 | |||||||||
Pharmaceuticals: Other | |||||||||||
2,303 | UCB S.A. | 58,905 | |||||||||
Total Belgium | 670,283 | ||||||||||
Bermuda (0.2%) | |||||||||||
Apparel/Footwear | |||||||||||
7,000 | Yue Yuen Industrial (Holdings) Ltd. | 13,862 | |||||||||
Apparel/Footwear Retail | |||||||||||
11,100 | Esprit Holdings Ltd. | 62,315 | |||||||||
Construction Materials | |||||||||||
7,000 | Cheung Kong Infrastructure Holdings Ltd. | 25,417 | |||||||||
Contract Drilling | |||||||||||
4,400 | Seadrill Ltd. | 42,185 | |||||||||
Hotels/Resorts/Cruiselines | |||||||||||
12,713 | Shangri-La Asia Ltd. | 17,781 |
See Notes to Financial Statements
13
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Investment Banks/Brokers | |||||||||||
269,063 | REXCAPITAL Financial Holdings Ltd. (a) | $ | 4,967 | ||||||||
Real Estate Development | |||||||||||
5,384 | Kerry Properties Ltd. | 13,358 | |||||||||
Specialty Stores | |||||||||||
17,346 | Chow Sang Sang Holdings International Ltd. | 7,705 | |||||||||
Wholesale Distributors | |||||||||||
69,220 | Li & Fung Ltd. (Hong Kong) | 139,184 | |||||||||
Total Bermuda | 326,774 | ||||||||||
Brazil (0.2%) | |||||||||||
Department Stores | |||||||||||
9,000 | Lojas Renner S.A. (f) | 66,467 | |||||||||
Food: Meat/Fish/Dairy | |||||||||||
6,200 | Perdigao S.A. (f) | 90,088 | |||||||||
Major Banks | |||||||||||
10,300 | Banco do Brasil S.A. (f) | 67,985 | |||||||||
Railroads | |||||||||||
12,800 | All America Latina Logistica (Units) (d)(f) | 58,963 | |||||||||
Real Estate Development | |||||||||||
13,200 | Cyrela Brazil Realty S.A. (f) | 62,877 | |||||||||
2,640 | Cyrela Commercial Properties S.A. (f) | 6,422 | |||||||||
69,299 | |||||||||||
Total Brazil | 352,802 | ||||||||||
Cayman Islands (0.1%) | |||||||||||
Agricultural Commodities/ Milling | |||||||||||
52,650 | Chaoda Modern Agriculture (Holdings) Ltd. | 35,990 | |||||||||
Apparel/Footwear | |||||||||||
28,000 | Li Ning Co., Ltd. | 34,056 | |||||||||
98,900 | Daphne International Holdings Ltd. | 20,026 | |||||||||
54,082 |
NUMBER OF SHARES | VALUE | ||||||||||
Industrial Specialties | |||||||||||
8,000 | Kingboard Chemical Holdings Ltd. | $ | 15,674 | ||||||||
Major Telecommunications | |||||||||||
16,000 | Hutchison Telecommunications International Ltd. (a) | 17,321 | |||||||||
Real Estate Development | |||||||||||
87,843 | Agile Property Holdings Ltd. | 28,591 | |||||||||
44,000 | China Resources Land Ltd. | 45,290 | |||||||||
82,000 | New World China Land Ltd. | 13,930 | |||||||||
87,811 | |||||||||||
Total Cayman Islands | 210,878 | ||||||||||
Denmark (0.6%) | |||||||||||
Biotechnology | |||||||||||
1,053 | Novozymes A/S (B Shares) | 74,984 | |||||||||
Electrical Products | |||||||||||
1,886 | Vestas Wind Systems A/S (a) | 77,631 | |||||||||
Marine Shipping | |||||||||||
25 | A P Moller - Maersk A/S (B Shares) | 144,794 | |||||||||
Pharmaceuticals: Major | |||||||||||
11,146 | Novo Nordisk A/S (B Shares) | 596,651 | |||||||||
Telecommunication Equipment | |||||||||||
7,769 | GN Store Nord A/S (a) | 16,983 | |||||||||
Trucking | |||||||||||
2,250 | DSV A/S (c) | 27,108 | |||||||||
Total Denmark | 938,151 | ||||||||||
Finland (1.2%) | |||||||||||
Building Products | |||||||||||
448 | Uponor Oyj | 4,277 | |||||||||
Electric Utilities | |||||||||||
9,486 | Fortum Oyj | 233,503 | |||||||||
Engineering & Construction | |||||||||||
2,296 | Kone Oyj (B Shares) | 51,393 | |||||||||
Food Retail | |||||||||||
1,508 | Kesko Oyj (B Shares) (c) | 35,352 |
See Notes to Financial Statements
14
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Industrial Machinery | |||||||||||
2,428 | Metso Oyj | $ | 32,316 | ||||||||
Information Technology Services | |||||||||||
3,099 | TietoEnator Oyj (c) | 34,655 | |||||||||
Marine Shipping | |||||||||||
649 | Cargotec Corp. (B Shares) | 9,014 | |||||||||
Oil Refining/Marketing | |||||||||||
2,037 | Neste Oil Oyj | 32,277 | |||||||||
Other Metals/Minerals | |||||||||||
2,897 | Outokumpu Oyj | 30,159 | |||||||||
Property - Casualty Insurers | |||||||||||
5,897 | Sampo Oyj (A Shares) | 117,775 | |||||||||
Pulp & Paper | |||||||||||
9,956 | Stora Enso Oyj (Registered Shares) | 93,372 | |||||||||
8,222 | UPM-Kymmene Oyj | 116,482 | |||||||||
209,854 | |||||||||||
Steel | |||||||||||
1,336 | Rautaruukki Oyj | 21,865 | |||||||||
Telecommunication Equipment | |||||||||||
71,669 | Nokia Oyj | 1,093,172 | |||||||||
Trucks/Construction/ Farm Machinery | |||||||||||
904 | Wartsila Oyj (c) | 22,943 | |||||||||
Total Finland | 1,928,555 | ||||||||||
France (9.9%) | |||||||||||
Advertising/Marketing Services | |||||||||||
1,763 | Publicis Groupe (c) | 39,720 | |||||||||
Aerospace & Defense | |||||||||||
1,698 | Thales S.A. | 68,162 | |||||||||
290 | Zodiac S.A. (c) | 11,345 | |||||||||
79,507 | |||||||||||
Apparel/Footwear | |||||||||||
1,148 | Hermes International (c) | 148,412 | |||||||||
3,983 | LVMH Moet Hennessy Louis Vuitton S.A. | 265,746 | |||||||||
414,158 |
NUMBER OF SHARES | VALUE | ||||||||||
Auto Parts: O.E.M. | |||||||||||
1,777 | Valeo S.A. (c) | $ | 30,874 | ||||||||
Automotive Aftermarket | |||||||||||
2,069 | Compagnie Generale des Etablissements Michelin (B Shares) | 106,578 | |||||||||
Beverages: Alcoholic | |||||||||||
2,333 | Pernod Ricard S.A. (c) | 151,994 | |||||||||
Broadcasting | |||||||||||
3,187 | Societe Television Francaise 1 (c) | 40,874 | |||||||||
Building Products | |||||||||||
5,358 | Compagnie de Saint-Gobain (c) | 206,890 | |||||||||
Chemicals: Specialty | |||||||||||
5,639 | Air Liquide S.A. (c) | 486,040 | |||||||||
Construction Materials | |||||||||||
687 | Imerys S.A. (c) | 31,145 | |||||||||
3,350 | Lafarge S.A. (c) | 220,751 | |||||||||
251,896 | |||||||||||
Department Stores | |||||||||||
1,755 | PPR (c) | 111,771 | |||||||||
Electric Utilities | |||||||||||
3,075 | Electricite de France (EDF) | 184,253 | |||||||||
16,652 | Suez S.A. (c) | 719,711 | |||||||||
903,964 | |||||||||||
Electrical Products | |||||||||||
6,839 | Schneider Electric S.A. (c) | 411,393 | |||||||||
Electronics/Appliances | |||||||||||
3,682 | Thomson (a)(c) | 5,182 | |||||||||
Engineering & Construction | |||||||||||
10,193 | Bouygues S.A. | 434,247 | |||||||||
4,906 | Vinci S.A. | 176,496 | |||||||||
610,743 | |||||||||||
Financial Conglomerates | |||||||||||
401 | Eurazeo | 24,099 |
See Notes to Financial Statements
15
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Food Retail | |||||||||||
8,305 | Carrefour S.A. (c) | $ | 350,953 | ||||||||
997 | Casino Guichard-Perrachon S.A. | 69,768 | |||||||||
420,721 | |||||||||||
Food: Major Diversified | |||||||||||
8,011 | Groupe Danone | 444,265 | |||||||||
Gas Distributors | |||||||||||
16,020 | GDF Suez | 713,336 | |||||||||
Hotels/Resorts/Cruiselines | |||||||||||
3,168 | Accor S.A. (c) | 123,432 | |||||||||
Household/Personal Care | |||||||||||
2,183 | L'Oreal S.A. | 165,025 | |||||||||
Industrial Conglomerates | |||||||||||
3,962 | Alstom | 196,922 | |||||||||
Information Technology Services | |||||||||||
578 | Atos Origin S.A. | 13,434 | |||||||||
3,295 | Cap Gemini | 106,100 | |||||||||
119,534 | |||||||||||
Integrated Oil | |||||||||||
52,515 | Total S.A. | 2,884,377 | |||||||||
Life/Health Insurance | |||||||||||
848 | CNP Assurances | 68,326 | |||||||||
Major Banks | |||||||||||
14,063 | BNP Paribas | 1,020,857 | |||||||||
5,266 | Societe Generale | 289,143 | |||||||||
1,310,000 | |||||||||||
Major Telecommunications | |||||||||||
53,155 | France Telecom S.A. (c) | 1,341,348 | |||||||||
Media Conglomerates | |||||||||||
27,935 | Vivendi | 730,666 | |||||||||
Medical Specialties | |||||||||||
3,109 | Essilor International S.A. (c) | 139,592 | |||||||||
Metal Fabrications | |||||||||||
655 | Vallourec S.A. | 73,659 | |||||||||
Miscellaneous Commercial Services | |||||||||||
1,547 | Sodexo | 74,130 |
NUMBER OF SHARES | VALUE | ||||||||||
Motor Vehicles | |||||||||||
1,825 | PSA Peugeot Citroen (c) | $ | 48,796 | ||||||||
1,792 | Renault S.A. (c) | 55,026 | |||||||||
103,822 | |||||||||||
Multi-Line Insurance | |||||||||||
22,688 | Axa | 437,206 | |||||||||
1,288 | SCOR SE | 21,150 | |||||||||
458,356 | |||||||||||
Office Equipment/Supplies | |||||||||||
724 | Neopost S.A. (c) | 60,573 | |||||||||
Oilfield Services/Equipment | |||||||||||
1,947 | Technip S.A. | 58,213 | |||||||||
Other Consumer Specialties | |||||||||||
302 | Societe BIC S.A. | 15,899 | |||||||||
Packaged Software | |||||||||||
1,269 | Dassault Systemes S.A. (c) | 52,389 | |||||||||
Pharmaceuticals: Major | |||||||||||
27,694 | Sanofi-Aventis | 1,743,129 | |||||||||
Publishing: Books/Magazines | |||||||||||
3,247 | Lagardere S.C.A. | 129,099 | |||||||||
Real Estate Development | |||||||||||
1,099 | Unibail-Rodamco | 164,425 | |||||||||
Regional Banks | |||||||||||
9,296 | Credit Agricole S.A. | 135,535 | |||||||||
Telecommunication Equipment | |||||||||||
46,646 | Alcatel-Lucent (a)(c) | 120,941 | |||||||||
1,681 | Safran S.A. (c) | 21,261 | |||||||||
142,202 | |||||||||||
Water Utilities | |||||||||||
12,687 | Veolia Environnement (c) | 311,467 | |||||||||
Total France | 16,056,125 | ||||||||||
Germany (6.1%) | |||||||||||
Air Freight/Couriers | |||||||||||
9,971 | Deutsche Post AG (Registered Shares) | 110,934 |
See Notes to Financial Statements
16
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Airlines | |||||||||||
2,914 | Deutsche Lufthansa AG (Registered Shares) | $ | 40,936 | ||||||||
Apparel/Footwear | |||||||||||
3,203 | Adidas AG | 112,067 | |||||||||
155 | Puma AG | 25,890 | |||||||||
137,957 | |||||||||||
Auto Parts: O.E.M. | |||||||||||
1,609 | Continental AG | 66,226 | |||||||||
Chemicals: Agricultural | |||||||||||
7,517 | K+S AG | 298,607 | |||||||||
Chemicals: Major Diversified | |||||||||||
19,303 | BASF SE | 648,656 | |||||||||
Chemicals: Specialty | |||||||||||
1,282 | Altana AG | 14,108 | |||||||||
1,550 | Linde AG | 128,336 | |||||||||
142,444 | |||||||||||
Department Stores | |||||||||||
1,554 | Arcandor AG (a)(c) | 3,653 | |||||||||
2,591 | Metro AG | 83,498 | |||||||||
87,151 | |||||||||||
Electric Utilities | |||||||||||
38,525 | E.ON AG | 1,470,374 | |||||||||
8,416 | RWE AG | 699,698 | |||||||||
2,170,072 | |||||||||||
Engineering & Construction | |||||||||||
832 | Hochtief AG | 25,914 | |||||||||
Food: Specialty/Candy | |||||||||||
6,407 | Suedzucker AG (c) | 71,704 | |||||||||
Hotels/Resorts/Cruiselines | |||||||||||
1,859 | TUI AG (c) | 22,816 | |||||||||
Household/Personal Care | |||||||||||
2,953 | Beiersdorf AG | 156,115 | |||||||||
Industrial Conglomerates | |||||||||||
1,755 | MAN AG | 86,390 | |||||||||
9,121 | Siemens AG (Registered Shares) | 545,703 |
NUMBER OF SHARES | VALUE | ||||||||||
5,295 | ThyssenKrupp AG | $ | 102,342 | ||||||||
734,435 | |||||||||||
Industrial Machinery | |||||||||||
1,357 | Heidelberger Druckmaschinen AG (c) | 12,916 | |||||||||
Investment Banks/Brokers | |||||||||||
5,019 | Deutsche Boerse AG | 400,764 | |||||||||
Major Banks | |||||||||||
5,232 | Commerzbank AG | 56,033 | |||||||||
2,201 | Deutsche Bank AG (Registered Shares) (c) | 83,611 | |||||||||
689 | Deutsche Postbank AG (c) | 14,145 | |||||||||
153,789 | |||||||||||
Major Telecommunications | |||||||||||
55,106 | Deutsche Telekom AG (Registered Shares) | 820,227 | |||||||||
Medical Distributors | |||||||||||
1,942 | Celesio AG | 57,657 | |||||||||
Medical/Nursing Services | |||||||||||
4,349 | Fresenius Medical Care AG & Co. KGaA | 195,162 | |||||||||
Motor Vehicles | |||||||||||
5,574 | Bayerische Motoren Werke (BMW) AG | 144,285 | |||||||||
10,027 | Daimler AG (Registered Shares) | 346,226 | |||||||||
1,282 | Volkswagen AG (c) | 818,220 | |||||||||
1,308,731 | |||||||||||
Multi-Line Insurance | |||||||||||
4,483 | Allianz SE (Registered Shares) | 335,728 | |||||||||
2,147 | Muenchener Rueckversicherungs- Gesellschaft AG (Registered Shares) | 280,888 | |||||||||
616,616 | |||||||||||
Packaged Software | |||||||||||
19,453 | SAP AG | 691,637 |
See Notes to Financial Statements
17
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Pharmaceuticals: Major | |||||||||||
1,000 | Merck KGaA | $ | 88,540 | ||||||||
Pharmaceuticals: Other | |||||||||||
12,825 | Bayer AG | 703,884 | |||||||||
Semiconductors | |||||||||||
5,977 | Infineon Technologies AG (a) | 18,938 | |||||||||
Total Germany | 9,782,828 | ||||||||||
Greece (0.4%) | |||||||||||
Casino/Gaming | |||||||||||
3,620 | OPAP S.A. | 79,318 | |||||||||
Construction Materials | |||||||||||
1,320 | Titan Cement Company S. A. | 22,725 | |||||||||
Major Banks | |||||||||||
11,334 | National Bank of Greece S.A. | 252,455 | |||||||||
Regional Banks | |||||||||||
8,671 | Alpha Bank A.E. | 127,948 | |||||||||
6,788 | EFG Eurobank Ergasias | 74,681 | |||||||||
7,125 | Piraeus Bank S.A. | 91,613 | |||||||||
294,242 | |||||||||||
Total Greece | 648,740 | ||||||||||
Hong Kong (1.1%) | |||||||||||
Airlines | |||||||||||
12,000 | Cathay Pacific Airways Ltd. | 14,732 | |||||||||
Broadcasting | |||||||||||
4,000 | Television Broadcasts Ltd. | 11,039 | |||||||||
Electric Utilities | |||||||||||
19,804 | CLP Holdings Ltd. | 134,480 | |||||||||
16,000 | Hongkong Electric Holdings Ltd. | 86,386 | |||||||||
220,866 | |||||||||||
Engineering & Construction | |||||||||||
29,021 | New World Development Co., Ltd. | 24,397 | |||||||||
Financial Conglomerates | |||||||||||
15,020 | Wharf (Holdings) Ltd. (The) | 29,499 |
NUMBER OF SHARES | VALUE | ||||||||||
Gas Distributors | |||||||||||
53,838 | Hong Kong & China Gas Co., Ltd. | $ | 95,178 | ||||||||
Industrial Conglomerates | |||||||||||
32,000 | China Resources Enterprise Ltd. | 62,806 | |||||||||
24,926 | Hutchison Whampoa Ltd. | 136,439 | |||||||||
10,500 | Swire Pacific Ltd. (Class A) | 73,266 | |||||||||
272,511 | |||||||||||
Investment Banks/Brokers | |||||||||||
12,000 | Hong Kong Exchanges & Clearing Ltd. | 122,672 | |||||||||
Major Banks | |||||||||||
19,498 | Bank of East Asia, Ltd. (The) | 38,458 | |||||||||
43,000 | BOC Hong Kong (Holdings) Ltd. | 48,168 | |||||||||
8,400 | Hang Seng Bank Ltd. | 104,133 | |||||||||
190,759 | |||||||||||
Major Telecommunications | |||||||||||
43,637 | PCCW Ltd. | 16,329 | |||||||||
Other Consumer Services | |||||||||||
234,000 | China Travel International Investment Hong Kong Ltd. | 32,821 | |||||||||
Railroads | |||||||||||
17,308 | MTR Corp., Ltd. | 38,664 | |||||||||
Real Estate Development | |||||||||||
18,000 | Cheung Kong (Holdings) Ltd. | 175,281 | |||||||||
66,500 | Hang Lung Properties Ltd. | 160,682 | |||||||||
8,000 | Henderson Land Development Co., Ltd. | 28,464 | |||||||||
8,000 | Hopewell Holdings Ltd. | 24,433 | |||||||||
7,708 | Hysan Development Co., Ltd. | 11,913 | |||||||||
15,142 | Sino Land Co., Ltd. | 12,984 | |||||||||
24,000 | Sun Hung Kai Properties Ltd. | 206,495 | |||||||||
620,252 | |||||||||||
Real Estate Investment Trusts | |||||||||||
20,741 | Link REIT | 36,134 | |||||||||
Total Hong Kong | 1,725,853 |
See Notes to Financial Statements
18
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Indonesia (0.0%) | |||||||||||
Motor Vehicles | |||||||||||
79,500 | PT Astra International Tbk | $ | 69,091 | ||||||||
Ireland (0.2%) | |||||||||||
Construction Materials | |||||||||||
9,081 | CRH PLC | 202,504 | |||||||||
Major Banks | |||||||||||
13,315 | Allied Irish Banks PLC | 72,581 | |||||||||
Total Ireland | 275,085 | ||||||||||
Italy (1.8%) | |||||||||||
Electric Utilities | |||||||||||
61,624 | Enel S.p.A. | 413,658 | |||||||||
Integrated Oil | |||||||||||
40,039 | Eni S.p.A. | 954,068 | |||||||||
Life/Health Insurance | |||||||||||
3,821 | Alleanza Assicurazioni S.p.A. | 25,500 | |||||||||
10,896 | Assicurazioni Generali S.p.A. | 274,658 | |||||||||
300,158 | |||||||||||
Major Banks | |||||||||||
133,629 | Intesa Sanpaolo | 489,102 | |||||||||
112,849 | UniCredit S.p.A. | 275,853 | |||||||||
764,955 | |||||||||||
Major Telecommunications | |||||||||||
167,750 | Telecom Italia S.p.A. (c) | 193,104 | |||||||||
Motor Vehicles | |||||||||||
7,887 | Fiat S.p.A. (a) | 62,727 | |||||||||
Oilfield Services/Equipment | |||||||||||
4,029 | Saipem S.p.A. | 75,880 | |||||||||
Regional Banks | |||||||||||
7,229 | Banco Popolare Societa Cooperativa | 90,167 | |||||||||
7,680 | Unione di Banche Italiane ScpA | 129,327 | |||||||||
219,494 | |||||||||||
Total Italy | 2,984,044 |
NUMBER OF SHARES | VALUE | ||||||||||
Japan (28.0%) | |||||||||||
Advertising/Marketing Services | |||||||||||
1,350 | Asatsu - DK Inc. (c) | $ | 30,100 | ||||||||
Agricultural Commodities/Milling | |||||||||||
7,000 | Nisshin Seifun Group Inc. | 75,113 | |||||||||
Air Freight/Couriers | |||||||||||
24,500 | Nippon Express Co., Ltd. | 100,275 | |||||||||
8,035 | Yamato Holdings Co., Ltd. (c) | 88,372 | |||||||||
188,647 | |||||||||||
Airlines | |||||||||||
28,000 | Japan Airlines Corp. (a) | 63,713 | |||||||||
Apparel/Footwear | |||||||||||
5,546 | Onward Holdings Co., Ltd. (c) | 40,187 | |||||||||
2,000 | Wacoal Holdings Corp. (c) | 21,579 | |||||||||
61,766 | |||||||||||
Apparel/Footwear Retail | |||||||||||
2,400 | Fast Retailing Co., Ltd. (c) | 252,886 | |||||||||
800 | Shimamura Co., Ltd. (c) | 55,434 | |||||||||
308,320 | |||||||||||
Auto Parts: O.E.M. | |||||||||||
19,000 | Denso Corp. | 375,208 | |||||||||
6,059 | NGK Spark Plug Co., Ltd. | 57,757 | |||||||||
2,400 | Stanley Electric Co., Ltd. | 31,141 | |||||||||
2,700 | Toyota Industries Corp. | 61,750 | |||||||||
525,856 | |||||||||||
Automotive Aftermarket | |||||||||||
25,900 | Bridgestone Corp. (c) | 448,875 | |||||||||
Beverages: Alcoholic | |||||||||||
11,800 | Asahi Breweries, Ltd. | 196,789 | |||||||||
25,051 | Kirin Holdings Co., Ltd. | 274,209 | |||||||||
8,000 | Sapporo Holdings Ltd. (c) | 43,678 | |||||||||
5,000 | Takara Holdings Inc. | 24,146 | |||||||||
538,822 | |||||||||||
Beverages: Non-Alcoholic | |||||||||||
1,500 | ITO EN, Ltd. (c) | 24,057 |
See Notes to Financial Statements
19
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Broadcasting | |||||||||||
13 | Fuji Media Holdings, Inc. | $ | 15,585 | ||||||||
3,000 | Tokyo Broadcasting System, Inc. | 52,723 | |||||||||
68,308 | |||||||||||
Building Products | |||||||||||
6,862 | JS Group Corp. (c) | 91,336 | |||||||||
9,500 | Nippon Sheet Glass Company, Ltd. (c) | 30,880 | |||||||||
14,500 | Toto Ltd. (c) | 103,038 | |||||||||
225,254 | |||||||||||
Chemicals: Agricultural | |||||||||||
5,500 | Nissan Chemical Industries, Ltd. | 44,240 | |||||||||
Chemicals: Major Diversified | |||||||||||
36,000 | Asahi Kasei Corp. | 137,502 | |||||||||
26,500 | Mitsubishi Chemical Holdings Corp. (c) | 108,653 | |||||||||
246,155 | |||||||||||
Chemicals: Specialty | |||||||||||
6,000 | Daicel Chemical Industries, Ltd. | 21,626 | |||||||||
13,546 | Denki Kagaku Kogyo Kabushiki Kaisha | 30,517 | |||||||||
22,588 | DIC Corp. | 36,144 | |||||||||
4,208 | JSR Corp. (c) | 48,812 | |||||||||
8,000 | Kaneka Corp. (c) | 37,754 | |||||||||
10,556 | Kuraray Co., Ltd. | 79,718 | |||||||||
17,099 | Mitsubishi Rayon Co., Ltd. (c) | 37,327 | |||||||||
14,500 | Mitsui Chemicals, Inc. (c) | 51,300 | |||||||||
10,897 | Shin-Etsu Chemical Co., Ltd. | 570,269 | |||||||||
19,000 | Showa Denko K.K. | 28,469 | |||||||||
38,000 | Sumitomo Chemical Co., Ltd. | 115,184 | |||||||||
16,000 | Tosoh Corp. (c) | 32,417 | |||||||||
1,089,537 | |||||||||||
Commercial Printing/Forms | |||||||||||
12,500 | Dai Nippon Printing Co., Ltd. | 147,201 | |||||||||
13,000 | Toppan Printing Co., Ltd. | 95,304 | |||||||||
242,505 |
NUMBER OF SHARES | VALUE | ||||||||||
Computer Processing Hardware | |||||||||||
49,000 | Fujitsu Ltd. | $ | 194,997 | ||||||||
Construction Materials | |||||||||||
15,000 | Taiheiyo Cement Corp. | 17,880 | |||||||||
Containers/Packaging | |||||||||||
5,617 | Toyo Seikan Kaisha, Ltd. | 70,158 | |||||||||
Department Stores | |||||||||||
3,000 | H20 Retailing Corp. (c) | 18,486 | |||||||||
10,887 | Isetan Mitsukoshi Holdings Ltd. (a)(c) | 103,721 | |||||||||
10,500 | J. Front Retailing Co., Ltd. | 47,438 | |||||||||
12,407 | Marui Group Co., Ltd. (c) | 77,039 | |||||||||
9,540 | Takashimaya Co., Ltd. (c) | 74,466 | |||||||||
321,150 | |||||||||||
Electric Utilities | |||||||||||
14,500 | Chubu Electric Power Co., Inc. | 381,766 | |||||||||
22,200 | Kansai Electric Power Co., Inc. (The) | 564,799 | |||||||||
8,600 | Kyushu Electric Power Co., Inc. | 200,247 | |||||||||
16,700 | Tohoku Electric Power Co., Inc. (c) | 379,474 | |||||||||
26,100 | Tokyo Electric Power Co., Inc. (The) | 749,379 | |||||||||
2,275,665 | |||||||||||
Electrical Products | |||||||||||
4,000 | Fuji Electric Holdings Co., Ltd. (c) | 5,954 | |||||||||
6,000 | Fujikura Ltd. | 17,555 | |||||||||
19,500 | Furukawa Electric Co., Ltd. (The) (c) | 58,392 | |||||||||
700 | Mabuchi Motor Co., Ltd. (c) | 27,473 | |||||||||
7,500 | Panasonic Electric Works Co., Ltd. | 64,661 | |||||||||
9,060 | NGK Insulators, Ltd. | 95,928 | |||||||||
2,804 | Nidec Corp. (c) | 144,282 | |||||||||
18,400 | Sumitomo Electric Industries, Ltd. | 147,818 | |||||||||
1,100 | Ushio Inc. (c) | 14,930 | |||||||||
576,993 |
See Notes to Financial Statements
20
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Electronic Components | |||||||||||
4,900 | Alps Electric Co., Ltd. | $ | 26,590 | ||||||||
8,950 | Citizen Holdings Co., Ltd. (c) | 49,134 | |||||||||
800 | Hirose Electric Co., Ltd. | 69,937 | |||||||||
10,900 | Hoya Corp. (c) | 202,046 | |||||||||
3,200 | Ibiden Co., Ltd. (c) | 61,368 | |||||||||
5,300 | Murata Manufacturing Co., Ltd. | 183,677 | |||||||||
7,500 | Nippon Electric Glass Co., Ltd. | 46,098 | |||||||||
3,000 | Taiyo Yuden Co., Ltd. (c) | 14,217 | |||||||||
3,452 | TDK Corp. (c) | 115,327 | |||||||||
768,394 | |||||||||||
Electronic Equipment/ Instruments | |||||||||||
26,904 | Canon Inc. | 925,808 | |||||||||
847 | Keyence Corp. | 163,566 | |||||||||
12,030 | Konica Minolta Holdings, Inc. | 78,312 | |||||||||
4,300 | Kyocera Corp. | 251,198 | |||||||||
56,500 | Panasonic Corporation | 878,543 | |||||||||
57,552 | Mitsubishi Electric Corp. | 354,701 | |||||||||
52,500 | NEC Corp. (c) | 157,763 | |||||||||
13,000 | Oki Electric Industry Co., Ltd. (c)(a) | 10,707 | |||||||||
5,804 | Omron Corp. | 82,325 | |||||||||
16,432 | Ricoh Co., Ltd. | 174,787 | |||||||||
3,000 | Seiko Epson Corp. (c) | 45,549 | |||||||||
75,026 | Toshiba Corp. | 270,405 | |||||||||
5,750 | Yokogawa Electric Corp. (c) | 26,516 | |||||||||
3,420,180 | |||||||||||
Electronic Production Equipment | |||||||||||
5,150 | Advantest Corp. (c) | 75,449 | |||||||||
5,700 | Tokyo Electron Ltd. (c) | 188,441 | |||||||||
263,890 | |||||||||||
Electronics/Appliance Stores | |||||||||||
3,200 | Yamada Denki Co., Ltd. (c) | 173,407 | |||||||||
Electronics/Appliances | |||||||||||
10,550 | Casio Computer Co., Ltd. (c) | 68,749 | |||||||||
12,000 | FUJIFILM Holdings Corp. | 265,768 | |||||||||
8,000 | Nikon Corp. | 111,746 |
NUMBER OF SHARES | VALUE | ||||||||||
5,204 | Pioneer Corp. (c) | $ | 15,315 | ||||||||
52,000 | Sanyo Electric Co., Ltd. (a)(c) | 77,835 | |||||||||
22,500 | Sharp Corp. | 158,842 | |||||||||
19,896 | Sony Corp. (c) | 455,188 | |||||||||
1,153,443 | |||||||||||
Engineering & Construction | |||||||||||
6,000 | Chiyoda Corp. (c) | 34,230 | |||||||||
5,000 | Comsys Holdings Corp. | 36,205 | |||||||||
8,546 | JGC Corp. | 90,713 | |||||||||
35,000 | Kajima Corp. | 103,164 | |||||||||
23,571 | Obayashi Corp. (c) | 114,461 | |||||||||
7,000 | Okumura Corp. (c) | 27,329 | |||||||||
23,000 | Shimizu Corp. (c) | 114,704 | |||||||||
34,000 | Taisei Corp. (c) | 77,637 | |||||||||
598,443 | |||||||||||
Finance/Rental/Leasing | |||||||||||
820 | Acom Co., Ltd. (c) | 30,983 | |||||||||
500 | Aeon Credit Service Co., Ltd. (c) | 5,432 | |||||||||
600 | Aiful Corp. (c) | 2,854 | |||||||||
2,100 | Credit Saison Co., Ltd. | 22,128 | |||||||||
200 | Mitsubishi UFJ Lease Finance Co., Ltd. (c) | 4,876 | |||||||||
260 | Orix Corp. | 27,595 | |||||||||
1,050 | Promise Co., Ltd. (c) | 18,671 | |||||||||
1,350 | Takefuji Corp. (c) | 11,007 | |||||||||
123,546 | |||||||||||
Financial Conglomerates | |||||||||||
288 | Mizuho Financial Group, Inc. (c) | 689,762 | |||||||||
354 | SBI Holdings Inc. | 42,183 | |||||||||
731,945 | |||||||||||
Food Retail | |||||||||||
12,803 | Aeon Co., Ltd. (c) | 122,170 | |||||||||
2,152 | FamilyMart Co., Ltd. | 85,948 | |||||||||
1,903 | Lawson, Inc. | 93,734 | |||||||||
20,900 | Seven & I Holdings Co., Ltd. | 585,354 | |||||||||
887,206 |
See Notes to Financial Statements
21
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Food: Meat/Fish/Dairy | |||||||||||
8,000 | Meiji Dairies Corp. (c) | $ | 37,023 | ||||||||
7,000 | Nippon Meat Packers, Inc. (c) | 97,100 | |||||||||
3,700 | Yakult Honsha Co., Ltd. (c) | 93,390 | |||||||||
227,513 | |||||||||||
Food: Specialty/Candy | |||||||||||
20,000 | Ajinomoto Co., Inc. (c) | 175,067 | |||||||||
5,500 | Kikkoman Corp. (c) | 54,914 | |||||||||
7,000 | Meiji Seika Kaisha, Ltd. (c) | 29,085 | |||||||||
2,400 | Nissin Food HoldingsProducts Co., Ltd. | 68,870 | |||||||||
5,000 | Yamazaki Baking Co., Ltd. (c) | 66,959 | |||||||||
394,895 | |||||||||||
Gas Distributors | |||||||||||
45,000 | Osaka Gas Co., Ltd. | 161,441 | |||||||||
52,000 | Tokyo Gas Co., Ltd. | 226,495 | |||||||||
387,936 | |||||||||||
Home Building | |||||||||||
4,556 | Daito Trust Construction Co., Ltd. | 191,405 | |||||||||
24,000 | Daiwa House Industry Co., Ltd. | 211,644 | |||||||||
15,072 | Sekisui Chemical Co., Ltd. | 87,525 | |||||||||
28,046 | Sekisui House, Ltd. | 284,332 | |||||||||
774,906 | |||||||||||
Household/Personal Care | |||||||||||
16,500 | Kao Corp. | 476,978 | |||||||||
9,500 | Shiseido Company, Ltd. (c) | 192,438 | |||||||||
1,400 | Unicharm Corp. | 99,904 | |||||||||
769,320 | |||||||||||
Industrial Conglomerates | |||||||||||
87,000 | Hitachi, Ltd. | 404,011 | |||||||||
32,500 | Kawasaki Heavy Industries, Ltd. (c) | 58,658 | |||||||||
462,669 | |||||||||||
Industrial Machinery | |||||||||||
8,553 | Amada Co., Ltd. | 39,921 | |||||||||
5,000 | Daikin Industries, Ltd. (c) | 112,373 |
NUMBER OF SHARES | VALUE | ||||||||||
5,150 | Fanuc Ltd. | $ | 349,539 | ||||||||
29,530 | IHI Corp. | 36,543 | |||||||||
99,550 | Mitsubishi Heavy Industries, Ltd. | 317,958 | |||||||||
1,905 | SMC Corp. | 181,951 | |||||||||
12,000 | Sumitomo Heavy Industries, Ltd. | 36,600 | |||||||||
1,300 | THK Co., Ltd. (c) | 17,693 | |||||||||
1,092,578 | |||||||||||
Industrial Specialties | |||||||||||
33,500 | Asahi Glass Co., Ltd. | 214,610 | |||||||||
5,600 | Nitto Denko Corp. | 123,178 | |||||||||
337,788 | |||||||||||
Information Technology Services | |||||||||||
1,900 | CSK Holdings Corp. | 15,846 | |||||||||
1,100 | IT Holdings Corp. (a) | 12,071 | |||||||||
900 | Itochu Techno-Solutions Corp. (c) | 21,468 | |||||||||
3,550 | Nomura Research Institute, Ltd. | 57,751 | |||||||||
38 | NTT Data Corp. | 124,581 | |||||||||
280 | OBIC Co., Ltd. | 35,181 | |||||||||
24,600 | Softbank Corp. | 240,120 | |||||||||
507,018 | |||||||||||
Internet Software/Services | |||||||||||
454 | Yahoo Japan Corp. (c) | 148,628 | |||||||||
Investment Banks/Brokers | |||||||||||
74,000 | Daiwa Securities Group Inc. | 411,022 | |||||||||
7,500 | Matsui Securities Co., Ltd. (c) | 48,290 | |||||||||
53,750 | Nomura Holdings, Inc. | 499,769 | |||||||||
24,000 | Shinko Securities Co., Ltd. | 58,511 | |||||||||
1,017,592 | |||||||||||
Life/Health Insurance | |||||||||||
2 | Sony Financial Holdings Inc. | 6,590 | |||||||||
7,250 | T&D Holdings, Inc. | 278,942 | |||||||||
285,532 |
See Notes to Financial Statements
22
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Major Banks | |||||||||||
43,000 | Bank of Yokohama, Ltd. (The) (c) | $ | 206,412 | ||||||||
24,000 | Chiba Bank, Ltd. (The) | 116,831 | |||||||||
20,623 | Chuo Mitsui Trust Holdings, Inc. | 81,119 | |||||||||
25,000 | Joyo Bank, Ltd. (The) (c) | 117,273 | |||||||||
252,360 | Mitsubishi UFJ Financial Group, Inc. | 1,554,029 | |||||||||
142 | Resona Holdings, Inc. (c) | 146,421 | |||||||||
35,500 | Shinsei Bank, Ltd. (c) | 53,942 | |||||||||
22,000 | Shizuoka Bank, Ltd. (The) (c) | 192,156 | |||||||||
182 | Sumitomo Mitsui Financial Group, Inc. (c) | 738,900 | |||||||||
44,081 | Sumitomo Trust & Banking Co., Ltd. (The) | 205,000 | |||||||||
3,412,083 | |||||||||||
Major Telecommunications | |||||||||||
51 | Nippon Telegraph & Telephone Corp. | 209,317 | |||||||||
Marine Shipping | |||||||||||
5,000 | Mitsui O.S.K. Lines, Ltd. (c) | 26,476 | |||||||||
32,015 | Nippon Yusen Kabushiki Kaisha | 153,473 | |||||||||
179,949 | |||||||||||
Medical Specialties | |||||||||||
5,400 | Olympus Corp. (c) | 103,157 | |||||||||
5,450 | Terumo Corp. | 229,742 | |||||||||
332,899 | |||||||||||
Metal Fabrications | |||||||||||
12,000 | Minebea Co., Ltd. | 32,021 | |||||||||
53,000 | Mitsubishi Materials Corp. | 122,056 | |||||||||
32,604 | Mitsui Mining & Smelting Co., Ltd. (c) | 59,210 | |||||||||
19,553 | NSK Ltd. | 81,613 | |||||||||
15,051 | NTN Corp. (c) | 56,050 | |||||||||
350,950 |
NUMBER OF SHARES | VALUE | ||||||||||
Miscellaneous Commercial Services | |||||||||||
7,285 | Secom Co., Ltd. | $ | 281,993 | ||||||||
1,190 | USS Co., Ltd. | 72,984 | |||||||||
354,977 | |||||||||||
Miscellaneous Manufacturing | |||||||||||
10,527 | Ebara Corp. (c) | 20,757 | |||||||||
2,500 | Kurita Water Industries Ltd. (c) | 56,712 | |||||||||
77,469 | |||||||||||
Motor Vehicles | |||||||||||
44,909 | Honda Motor Co., Ltd. | 1,115,349 | |||||||||
66,505 | Nissan Motor Co., Ltd. | 347,864 | |||||||||
72,355 | Toyota Motor Corp. | 2,852,361 | |||||||||
1,100 | Yamaha Motor Co., Ltd. | 12,080 | |||||||||
4,327,654 | |||||||||||
Movies/Entertainment | |||||||||||
1,750 | Oriental Land Co., Ltd. (c) | 124,143 | |||||||||
2,850 | TOHO Co., Ltd. | 55,300 | |||||||||
179,443 | |||||||||||
Office Equipment/Supplies | |||||||||||
2,500 | Kokuyo Co., Ltd. (c) | 17,897 | |||||||||
Oil & Gas Production | |||||||||||
15 | INPEX Corporation | 87,227 | |||||||||
Oil Refining/Marketing | |||||||||||
44,000 | Nippon Oil Corp. | 182,177 | |||||||||
5,800 | Showa Shell Sekiyu K.K. | 46,690 | |||||||||
8,000 | TonenGeneral Sekiyu K.K. (c) | 67,583 | |||||||||
296,450 | |||||||||||
Other Consumer Services | |||||||||||
1,954 | Benesse Corp. | 82,242 | |||||||||
Other Metals/Minerals | |||||||||||
16,595 | Dowa Holdings Co., Ltd. | 51,056 | |||||||||
12,250 | Nippon Mining Holdings, Inc. | 37,934 | |||||||||
28,500 | Sumitomo Metal Mining Co., Ltd. | 213,514 | |||||||||
302,504 |
See Notes to Financial Statements
23
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Other Transportation | |||||||||||
3,000 | Mitsubishi Logistics Corp. | $ | 27,547 | ||||||||
Packaged Software | |||||||||||
1,100 | Fuji Soft Inc. (c) | 18,436 | |||||||||
1,250 | Oracle Corp. Japan (c) | 55,070 | |||||||||
2,700 | Trend Micro Inc. (c) | 66,835 | |||||||||
140,341 | |||||||||||
Personnel Services | |||||||||||
1,200 | Meitec Corp. | 23,832 | |||||||||
Pharmaceuticals: Major | |||||||||||
21,500 | Takeda Pharmaceutical Co., Ltd. | 1,083,549 | |||||||||
Pharmaceuticals: Other | |||||||||||
12,800 | Astellas Pharma Inc. | 523,287 | |||||||||
6,806 | Chugai Pharmaceutical Co., Ltd. (c) | 96,362 | |||||||||
17,800 | Daiichi Sankyo Co., Ltd. | 364,261 | |||||||||
6,003 | Eisai Co., Ltd. (c) | 197,334 | |||||||||
8,032 | Kyowa Hakko Kogyo Co., Ltd (c) | 66,489 | |||||||||
7,181 | Shionogi & Co., Ltd. | 121,857 | |||||||||
4,959 | Taisho Pharmaceutical Co., Ltd. | 89,512 | |||||||||
1,459,102 | |||||||||||
Property - Casualty Insurers | |||||||||||
1,000 | Aioi Insurance Company, Limited | 4,066 | |||||||||
23,868 | Millea Holdings, Inc. | 744,503 | |||||||||
1,000 | Tokio Marine Holdings, Inc. | 6,132 | |||||||||
27,000 | Sompo Japan Insurance Inc. | 192,254 | |||||||||
946,955 | |||||||||||
Pulp & Paper | |||||||||||
27 | Nippon Paper Group, Inc. (c) | 72,165 | |||||||||
32,000 | Oji Paper Co., Ltd. | 122,210 | |||||||||
194,375 | |||||||||||
Railroads | |||||||||||
39 | Central Japan Railway Co. | 319,079 | |||||||||
96 | East Japan Railway Co. | 682,183 |
NUMBER OF SHARES | VALUE | ||||||||||
12,000 | Keihin Electric Express Railway Co., Ltd. (c) | $ | 92,676 | ||||||||
8,000 | Keio Corp. (c) | 41,287 | |||||||||
44,550 | Kintetsu Corp. (c) | 170,619 | |||||||||
24,500 | Tobu Railway Co., Ltd. (c) | 125,355 | |||||||||
27,000 | Tokyu Corp. | 105,649 | |||||||||
16 | West Japan Railway Co. | 70,853 | |||||||||
1,607,701 | |||||||||||
Real Estate Development | |||||||||||
200 | AEON Mall Co., Ltd. | 4,891 | |||||||||
3,450 | Leopalace21 Corp. (c) | 26,297 | |||||||||
30,000 | Mitsubishi Estate Co., Ltd. | 528,075 | |||||||||
21,500 | Mitsui Fudosan Co., Ltd. | 370,154 | |||||||||
8,500 | Sumitomo Realty & Development Co., Ltd. (c) | 136,378 | |||||||||
8,000 | Tokyo Tatemono Co., Ltd. (c) | 32,692 | |||||||||
1,000 | TOKYU LAND CORP | 2,796 | |||||||||
1,101,283 | |||||||||||
Real Estate Investment Trusts | |||||||||||
2 | Japan Prime Realty Investment Corporation (c) | 3,563 | |||||||||
15 | Japan Real Estate Investment Corp. | 133,247 | |||||||||
14 | Japan Retail Fund Investment Corp. | 51,883 | |||||||||
20 | Nippon Building Fund Inc. | 193,919 | |||||||||
1 | Nomura Real Estate Office Fund, Inc. | 5,699 | |||||||||
388,311 | |||||||||||
Recreational Products | |||||||||||
2,700 | Konami Corp. (c) | 49,318 | |||||||||
2,208 | Nintendo Co., Ltd. | 696,397 | |||||||||
2,750 | Shimano Inc. (c) | 80,190 | |||||||||
3,700 | Yamaha Corp. | 35,598 | |||||||||
861,503 | |||||||||||
Regional Banks | |||||||||||
10,500 | 77 Bank, Ltd. (The) | 49,822 | |||||||||
10,000 | Bank of Kyoto, Ltd. (The) (c) | 104,709 | |||||||||
21,000 | Fukuoka Financial Group, Inc. | 68,574 |
See Notes to Financial Statements
24
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
1,000 | Gunma Bank Ltd. (The) | $ | 5,172 | ||||||||
1,000 | Hachijuni Bank Ltd. (The) | 4,890 | |||||||||
1,000 | Hiroshima Bank Ltd. (The) | 3,701 | |||||||||
40,000 | Hokuhoku Financial Group, Inc. | 78,641 | |||||||||
20,000 | Nishi-Nippon City Bank, Ltd. (The) (c) | 43,260 | |||||||||
1 | Sapporo Hokuyo Holdings Inc. | 4,383 | |||||||||
1,000 | Suruga Bank Ltd. | 9,291 | |||||||||
372,443 | |||||||||||
Semiconductors | |||||||||||
1,500 | NEC Electronics Corp. (a)(c) | 15,260 | |||||||||
3,605 | Rohm Co., Ltd. | 170,405 | |||||||||
4,000 | Sanken Electric Co., Ltd (c) | 14,277 | |||||||||
199,942 | |||||||||||
Specialty Insurance | |||||||||||
12,300 | Mitsui Sumitomo insurance Group Holdings, Inc. (a) | 350,524 | |||||||||
Specialty Stores | |||||||||||
2,300 | Shimachu Co., Ltd. | 53,536 | |||||||||
5,000 | UNY Co., Ltd. | 39,248 | |||||||||
92,784 | |||||||||||
Steel | |||||||||||
9,600 | JFE Holdings, Inc. (c) | 251,670 | |||||||||
49,000 | Kobe Steel, Ltd. | 79,059 | |||||||||
125,108 | Nippon Steel Corp. | 418,089 | |||||||||
75,000 | Sumitomo Metal Industries, Ltd. | 199,340 | |||||||||
948,158 | |||||||||||
Textiles | |||||||||||
4,571 | Nisshinbo Industries, Inc. (c) | 26,966 | |||||||||
23,608 | Teijin Ltd. | 60,776 | |||||||||
36,000 | Toray Industries, Inc. (c) | 166,843 | |||||||||
254,585 | |||||||||||
Tobacco | |||||||||||
112 | Japan Tobacco Inc. | 397,693 |
NUMBER OF SHARES | VALUE | ||||||||||
Trucks/Construction/ Farm Machinery | |||||||||||
1,000 | Hitachi Construction Machinery Co., Ltd. (c) | $ | 11,426 | ||||||||
30,200 | Komatsu Ltd. | 327,924 | |||||||||
42,000 | Kubota Corp. | 215,822 | |||||||||
555,172 | |||||||||||
Wholesale Distributors | |||||||||||
42,051 | Itochu Corp. | 227,066 | |||||||||
59,550 | Marubeni Corp. | 236,058 | |||||||||
38,800 | Mitsubishi Corp. | 644,001 | |||||||||
48,000 | Mitsui & Co., Ltd. | 461,415 | |||||||||
28,500 | Sumitomo Corp. | 255,579 | |||||||||
1,824,119 | |||||||||||
Wireless Telecommunications | |||||||||||
66 | NTT DoCoMo, Inc. | 104,713 | |||||||||
Total Japan | 45,310,633 | ||||||||||
Luxembourg (0.3%) | |||||||||||
Investment Trusts/ Mutual Funds | |||||||||||
1,178 | Reinet Investments SCA (a) | 12,135 | |||||||||
Oilfield Services/Equipment | |||||||||||
4,900 | Acergy S.A. | 34,229 | |||||||||
Steel | |||||||||||
15,516 | ArcelorMittal (c) | 402,668 | |||||||||
Total Luxembourg | 449,032 | ||||||||||
Mexico (0.2%) | |||||||||||
Discount Stores | |||||||||||
50,850 | Wal-Mart de Mexico S.A.B. de C.V. (Series V) (f) | 135,745 | |||||||||
Home Building | |||||||||||
2,600 | Desarrolladora Homex S.A.B. de C.V. (ADR) (a)(c)(f) | 60,528 | |||||||||
14,300 | Urbi, Desarrollos Urbanos, S.A.B. de C.V. (a)(f) | 21,104 | |||||||||
81,632 |
See Notes to Financial Statements
25
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Real Estate Development | |||||||||||
28,100 | Corporacion GEO, S.A.B. de C.V. (Series B) (a)(f) | $ | 38,872 | ||||||||
Total Mexico | 256,249 | ||||||||||
Netherlands (2.3%) | |||||||||||
Aerospace & Defense | |||||||||||
5,007 | European Aeronautic Defence and Space Co. (c) | 83,338 | |||||||||
Air Freight/Couriers | |||||||||||
8,661 | TNT N.V. | 181,329 | |||||||||
Beverages: Alcoholic | |||||||||||
6,238 | Heineken N.V. | 210,498 | |||||||||
Chemicals: Major Diversified | |||||||||||
2,090 | Koninklijke DSM N.V. | 58,156 | |||||||||
Construction Materials | |||||||||||
6,557 | James Hardie Industries N.V. (CDI) | 18,603 | |||||||||
Electronic Equipment/ Instruments | |||||||||||
1,904 | Oce N.V. (c) | 8,891 | |||||||||
Electronic Production Equipment | |||||||||||
7,231 | ASML Holding N.V. | 126,192 | |||||||||
Financial Conglomerates | |||||||||||
23,274 | ING Groep N.V. (Dutch Certificates) | 215,187 | |||||||||
Food Retail | |||||||||||
13,755 | Koninklijke Ahold NV | 147,547 | |||||||||
Food: Major Diversified | |||||||||||
46,688 | Unilever N.V. (Share Certificates) (c) | 1,125,547 | |||||||||
Industrial Conglomerates | |||||||||||
12,525 | Koninklijke (Royal) Philips Electronics N.V. (c) | 231,242 | |||||||||
Industrial Specialties | |||||||||||
3,661 | Akzo Nobel N.V. (c) | 152,337 | |||||||||
Life/Health Insurance | |||||||||||
33,015 | Aegon N.V. | 135,261 |
NUMBER OF SHARES | VALUE | ||||||||||
Major Telecommunications | |||||||||||
38,559 | Koninklijke (Royal) KPN N.V. | $ | 542,556 | ||||||||
Oilfield Services/Equipment | |||||||||||
1,326 | Furgo N.V. (Share Certificates) | 47,974 | |||||||||
3,275 | SBM Offshore N.V. (c) | 57,563 | |||||||||
105,537 | |||||||||||
Personnel Services | |||||||||||
395 | Randstad Holding N.V. (c) | 7,681 | |||||||||
Publishing: Books/Magazines | |||||||||||
8,953 | Reed Elsevier N.V. (c) | 119,799 | |||||||||
5,806 | Wolters Kluwer N.V. | 102,858 | |||||||||
222,657 | |||||||||||
Semiconductors | |||||||||||
14,956 | STMicroelectronics N.V. | 122,826 | |||||||||
Total Netherlands | 3,695,385 | ||||||||||
Norway (0.8%) | |||||||||||
Chemicals: Agricultural | |||||||||||
8,815 | Yara International ASA (c) | 184,068 | |||||||||
Engineering & Construction | |||||||||||
3,760 | Aker Solutions ASA (c) | 20,496 | |||||||||
Financial Conglomerates | |||||||||||
8,333 | DnB NOR ASA | 48,105 | |||||||||
Food: Specialty/Candy | |||||||||||
15,690 | Orkla ASA | 104,354 | |||||||||
Industrial Conglomerates | |||||||||||
15,651 | Norsk Hydro ASA | 65,800 | |||||||||
Integrated Oil | |||||||||||
29,092 | StatoilHydro ASA | 581,862 | |||||||||
Major Telecommunications | |||||||||||
23,459 | Telenor ASA | 139,705 | |||||||||
Marine Shipping | |||||||||||
6,660 | Prosafe Production Public Limited (a)(c) | 16,520 | |||||||||
Miscellaneous Manufacturing | |||||||||||
515 | Tomra Systems ASA (c) | 2,393 |
See Notes to Financial Statements
26
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Other (0.0%) | |||||||||||
Oilfield Services/Equipment | |||||||||||
6,660 | Prosafe SE | $ | 24,650 | ||||||||
Telecommunication Equipment | |||||||||||
6,017 | Tandberg ASA (c) | 74,491 | |||||||||
Total Norway | 1,262,444 | ||||||||||
Portugal (0.2%) | |||||||||||
Electric Utilities | |||||||||||
38,947 | Energias de Portugal, S.A. | 134,176 | |||||||||
Major Telecommunications | |||||||||||
17,109 | Portugal Telecom, SGPS, S.A. (Registered Shares) | 113,164 | |||||||||
Other Transportation | |||||||||||
6,851 | Brisa (c) | 52,867 | |||||||||
Regional Banks | |||||||||||
53,608 | Banco Comercial Portugues, S.A. (Registered Shares) (c) | 63,096 | |||||||||
Total Portugal | 363,303 | ||||||||||
Russia (0.1%) | |||||||||||
Electric Utilities | |||||||||||
434 | RAO Unified Energy System of Russia (Registered GDR) (a) | 23,788 | |||||||||
Food: Meat/Fish/Dairy | |||||||||||
1,700 | Wimm-Bill-Dann Foods (ADR) (c)(f) | 74,698 | |||||||||
Total Russia | 98,486 | ||||||||||
Singapore (1.1%) | |||||||||||
Aerospace & Defense | |||||||||||
31,334 | Singapore Technologies Engineering Ltd. | 49,599 | |||||||||
Air Freight/Couriers | |||||||||||
36,000 | Singapore Post Ltd. | 17,185 | |||||||||
Airlines | |||||||||||
12,277 | Singapore Airlines Ltd. | 92,621 | |||||||||
Electronic Components | |||||||||||
6,740 | Venture Corp., Ltd. | 24,509 |
NUMBER OF SHARES | VALUE | ||||||||||
Hospital/Nursing Management | |||||||||||
14,000 | Parkway Holdings Ltd. | $ | 15,001 | ||||||||
Industrial Conglomerates | |||||||||||
32,000 | Fraser & Neave Ltd. | 59,942 | |||||||||
26,000 | Keppel Corp. Ltd. | 80,090 | |||||||||
140,032 | |||||||||||
Investment Banks/Brokers | |||||||||||
18,490 | Singapore Exchange Ltd. (c) | 65,056 | |||||||||
Major Banks | |||||||||||
25,413 | DBS Group Holdings Ltd. | 194,551 | |||||||||
57,093 | Oversea-Chinese Banking Corp., Ltd. | 191,489 | |||||||||
386,040 | |||||||||||
Major Telecommunications | |||||||||||
166,630 | Singapore Telecommunications Ltd. | 280,363 | |||||||||
Marine Shipping | |||||||||||
18,000 | Neptune Orient Lines Ltd. (c) | 15,103 | |||||||||
Miscellaneous Commercial Services | |||||||||||
15,946 | Raffles Education Corp., Ltd. (c) | 6,077 | |||||||||
Other Transportation | |||||||||||
45,089 | ComfortDelGro Corp., Ltd. | 36,836 | |||||||||
Publishing: Newspapers | |||||||||||
35,350 | Singapore Press Holdings Ltd. (c) | 76,861 | |||||||||
Real Estate Development | |||||||||||
28,000 | Capitaland Ltd. | 55,304 | |||||||||
12,462 | City Developments Ltd. (c) | 54,229 | |||||||||
9,000 | Keppel Land Ltd. (c) | 11,492 | |||||||||
6,000 | Singapore Land Ltd. (c) | 13,475 | |||||||||
14,683 | UOL Group Ltd. | 18,986 | |||||||||
153,486 | |||||||||||
Real Estate Investment Trusts | |||||||||||
23,000 | Ascendas Real Estate Investment Trust | 24,810 | |||||||||
20,704 | CapitaMall Trust (c) | 27,109 |
See Notes to Financial Statements
27
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
4,800 | K-REIT Asia | $ | 2,521 | ||||||||
54,440 | |||||||||||
Regional Banks | |||||||||||
26,508 | United Overseas Bank Ltd. | 236,085 | |||||||||
Specialty Stores | |||||||||||
5,031 | Jardine Cycle & Carriage Ltd. | 31,965 | |||||||||
Trucks/Construction/ Farm Machinery | |||||||||||
20,000 | Cosco Corp Ltd. (c) | 10,768 | |||||||||
19,511 | SembCorp Industries Ltd. | 32,906 | |||||||||
18,400 | SembCorp Marine Ltd. (c) | 22,434 | |||||||||
66,108 | |||||||||||
Total Singapore | 1,747,367 | ||||||||||
South Africa (0.0%) | |||||||||||
Pulp & Paper | |||||||||||
4,693 | Mondi Ltd. (c) | 19,521 | |||||||||
Spain (3.6%) | |||||||||||
Apparel/Footwear Retail | |||||||||||
11,858 | Industria de Diseno Textil, S.A. (c) | 400,602 | |||||||||
Broadcasting | |||||||||||
1,557 | Antena 3 de Television S.A. (c) | 8,322 | �� | ||||||||
Electric Utilities | |||||||||||
71,085 | Iberdola S.A. | 514,321 | |||||||||
7,630 | Union Fenosa S.A. (c) | 161,771 | |||||||||
676,092 | |||||||||||
Engineering & Construction | |||||||||||
572 | Acciona S.A. (c) | 54,228 | |||||||||
3,694 | ACS, Actividades de Construccion y Servicios, S.A. (c) | 136,988 | |||||||||
2,457 | Cintra Concesiones de Infraestructuras de Transporte S.A. | 21,855 | |||||||||
395 | Fomento de Construcciones y Contratas S.A. (c) | 15,694 | |||||||||
740 | Grupo Ferrovial, S.A. | 22,811 | |||||||||
251,576 |
NUMBER OF SHARES | VALUE | ||||||||||
Gas Distributors | |||||||||||
3,751 | Gas Natural SDG, S.A. (c) | $ | 116,984 | ||||||||
Information Technology Services | |||||||||||
762 | Indra Sistemas, S.A. (c) | 14,913 | |||||||||
Integrated Oil | |||||||||||
20,252 | Repsol YPF, S.A. | 386,181 | |||||||||
Major Banks | |||||||||||
28,201 | Banco Bilbao Vizcaya Argentaria, S.A. (c) | 327,424 | |||||||||
74,849 | Banco Santander S.A. (c) | 809,606 | |||||||||
1,137,030 | |||||||||||
Major Telecommunications | |||||||||||
134,104 | Telefonica S.A. (c) | 2,480,549 | |||||||||
Other Transportation | |||||||||||
4,825 | Abertis Infraestructuras S.A. | 82,865 | |||||||||
Property - Casualty Insurers | |||||||||||
11,100 | Mapfre S.A. (c) | 35,304 | |||||||||
Real Estate Development | |||||||||||
891 | Sacyr Vallehermoso S.A. (c) | 8,227 | |||||||||
Regional Banks | |||||||||||
18,043 | Banco Popular Espanol S.A. (c) | 164,895 | |||||||||
Steel | |||||||||||
2,621 | Acerinox, S.A. (c) | 33,187 | |||||||||
Total Spain | 5,796,727 | ||||||||||
Sweden (1.8%) | |||||||||||
Advertising/Marketing Services | |||||||||||
3,361 | Eniro AB (c) | 7,847 | |||||||||
Apparel/Footwear Retail | |||||||||||
7,246 | Hennes & Mauritz AB (B Shares) (c) | 261,657 | |||||||||
Broadcasting | |||||||||||
1,407 | Modern Times Group AB (B Shares) | 30,511 | |||||||||
Electronics/Appliances | |||||||||||
4,900 | Electrolux AB (B Shares) (c) | 45,047 |
See Notes to Financial Statements
28
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Engineering & Construction | |||||||||||
7,162 | Skanska AB (B Shares) | $ | 62,987 | ||||||||
Financial Conglomerates | |||||||||||
7,705 | Investor AB-B Shares | 115,840 | |||||||||
Household/Personal Care | |||||||||||
13,358 | Svenska Cellulosa AB (B Shares) | 99,267 | |||||||||
Industrial Machinery | |||||||||||
2,000 | Alfa Laval AB (c) | 14,417 | |||||||||
5,940 | Assa Abloy AB (B Shares) (c) | 66,487 | |||||||||
36,120 | Atlas Copco AB (A Shares) (c) | 301,923 | |||||||||
7,444 | Atlas Copco AB (B Shares) | 55,828 | |||||||||
16,445 | Sandvik AB (c) | 106,835 | |||||||||
545,490 | |||||||||||
Major Banks | |||||||||||
10,538 | Svenska Handelsbanken AB (A Shares) | 192,961 | |||||||||
Major Telecommunications | |||||||||||
3,992 | Tele2 AB (B Shares) | 34,396 | |||||||||
49,970 | TeliaSonera AB | 220,281 | |||||||||
254,677 | |||||||||||
Medical Specialties | |||||||||||
4,160 | Getinge AB (B Shares) | 58,430 | |||||||||
Miscellaneous Commercial Services | |||||||||||
1,600 | Securitas AB (B Shares) | 15,400 | |||||||||
2,000 | Securitas Systems AB | 2,005 | |||||||||
17,405 | |||||||||||
Oil & Gas Production | |||||||||||
5,026 | Lundin Petroleum AB (a) | 24,175 | |||||||||
Pulp & Paper | |||||||||||
1,250 | Holmen AB (B Shares) (c) | 35,630 | |||||||||
Regional Banks | |||||||||||
37,468 | Nordea Bank AB | 300,457 | |||||||||
Steel | |||||||||||
3,977 | SSAB Svenskt Stal AB (Series A) | 40,549 |
NUMBER OF SHARES | VALUE | ||||||||||
Telecommunication Equipment | |||||||||||
67,708 | Telefonaktiebolaget LM Ericsson (B Shares) | $ | 477,459 | ||||||||
Tobacco | |||||||||||
6,493 | Swedish Match AB | 89,511 | |||||||||
Tools/Hardware | |||||||||||
4,900 | Husqvarna AB (B Shares) (c) | 34,345 | |||||||||
Trucks/Construction/ Farm Machinery | |||||||||||
11,185 | Volvo AB (A Shares) (c) | 58,664 | |||||||||
17,750 | Volvo AB (B Shares) (c) | 93,381 | |||||||||
152,045 | |||||||||||
Total Sweden | 2,846,290 | ||||||||||
Switzerland (8.2%) | |||||||||||
Biotechnology | |||||||||||
907 | Lonza Group AG (Registered Shares) | 75,498 | |||||||||
Building Products | |||||||||||
778 | Geberit AG (Registered Shares) | 80,907 | |||||||||
969 | Schindler Holding AG (Participation Certificates) | 42,332 | |||||||||
123,239 | |||||||||||
Chemicals: Agricultural | |||||||||||
2,954 | Syngenta AG (Registered Shares) | 550,933 | |||||||||
Chemicals: Specialty | |||||||||||
1,354 | Ciba Holding AG | 56,396 | |||||||||
Computer Peripherals | |||||||||||
3,938 | Logitech Intenational S.A. (Registered Shares) (a) | 59,243 | |||||||||
Construction Materials | |||||||||||
4,328 | Holcim Ltd. (Registered Shares) | 246,746 | |||||||||
Electronic Equipment/ Instruments | |||||||||||
984 | Kudelski S.A. (Bearer Shares) | 10,391 |
See Notes to Financial Statements
29
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Financial Conglomerates | |||||||||||
12,267 | UBS AG (Registered Shares) | $ | 209,310 | ||||||||
Food: Major Diversified | |||||||||||
99,008 | Nestle S.A. (Registered Shares) | 3,859,278 | |||||||||
Household/Personal Care | |||||||||||
127 | Givaudan S.A. (Registered Shares) | 87,031 | |||||||||
Industrial Conglomerates | |||||||||||
32,592 | ABB Ltd. (Registered Shares) | 430,941 | |||||||||
146 | OC Oerlikon Corp. AG (Registered Shares) (a) | 11,316 | |||||||||
442,257 | |||||||||||
Investment Banks/Brokers | |||||||||||
3,064 | Julius Baer Holding AG (Registered Shares) | 120,612 | |||||||||
Life/Health Insurance | |||||||||||
424 | Swiss Life Holding AG (Registered Shares) (a) | 38,416 | |||||||||
Major Banks | |||||||||||
17,919 | Credit Suisse Group (Registered Shares) | 683,906 | |||||||||
Major Telecommunications | |||||||||||
581 | Swisscom AG (Registered Shares) | 177,689 | |||||||||
Medical Specialties | |||||||||||
2,730 | Nobel Biocare Holding AG (Registered Shares) | 46,980 | |||||||||
178 | Straumann Holding AG (Registered Shares) | 30,439 | |||||||||
1,355 | Synthes, Inc. | 174,952 | |||||||||
252,371 | |||||||||||
Miscellaneous Commercial Services | |||||||||||
22 | SGS SA (Registered Shares) | 21,729 | |||||||||
Multi-Line Insurance | |||||||||||
634 | Baloise Holding AG (Registered Shares) | 34,083 |
NUMBER OF SHARES | VALUE | ||||||||||
2,226 | Zurich Financial Services AG (Registered Shares) | $ | 450,263 | ||||||||
484,346 | |||||||||||
Other Consumer Specialties | |||||||||||
8,607 | Compagnie Financiere Richemont S.A. (A Bearer Shares) | 183,005 | |||||||||
519 | Swatch Group AG (Bearer Shares) | 81,175 | |||||||||
1,148 | Swatch Group AG (Registered Shares) | 33,396 | |||||||||
297,576 | |||||||||||
Personnel Services | |||||||||||
238 | Adecco S.A. (Registered Shares) | 8,320 | |||||||||
Pharmaceuticals: Major | |||||||||||
53,453 | Novartis AG (Registered Shares) | 2,704,115 | |||||||||
16,087 | Roche Holding AG | 2,462,369 | |||||||||
5,166,484 | |||||||||||
Property - Casualty Insurers | |||||||||||
8,036 | Swiss Re (Registered Shares) | 334,800 | |||||||||
Total Switzerland | 13,306,571 | ||||||||||
United Kingdom (21.3%) | |||||||||||
Advertising/Marketing Services | |||||||||||
47,264 | WPP Group PLC | 285,544 | |||||||||
12,062 | Yell Group PLC | 11,949 | |||||||||
297,493 | |||||||||||
Aerospace & Defense | |||||||||||
62,075 | BAE Systems PLC | 348,738 | |||||||||
21,833 | Cobham PLC | 66,104 | |||||||||
10,426 | Meggitt PLC | 22,895 | |||||||||
36,657 | Rolls-Royce Group PLC (a) | 194,431 | |||||||||
632,168 | |||||||||||
Airlines | |||||||||||
14,329 | British Airways PLC | 31,461 |
See Notes to Financial Statements
30
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Apparel/Footwear | |||||||||||
7,072 | Burberry Group PLC | $ | 31,325 | ||||||||
Auto Parts: O.E.M. | |||||||||||
10,171 | GKN PLC | 19,624 | |||||||||
2,453 | TI Automotive Ltd. (A Shares) (a) | 0 | |||||||||
19,624 | |||||||||||
Beverages: Alcoholic | |||||||||||
76,098 | Diageo PLC | 1,165,611 | |||||||||
5,753 | SABMiller PLC | 91,655 | |||||||||
1,257,266 | |||||||||||
Broadcasting | |||||||||||
122,532 | ITV PLC | 58,768 | |||||||||
Cable/Satellite TV | |||||||||||
34,381 | British Sky Broadcasting Group PLC | 209,632 | |||||||||
Casino/Gaming | |||||||||||
9,958 | Ladbrokes PLC | 25,404 | |||||||||
7,263 | William Hill PLC | 22,428 | |||||||||
47,832 | |||||||||||
Catalog/Specialty Distribution | |||||||||||
10,876 | Home Retail Group PLC | 34,718 | |||||||||
Chemicals: Major Diversified | |||||||||||
3,408 | Johnson Matthey PLC | 51,168 | |||||||||
Containers/Packaging | |||||||||||
10,347 | Rexam PLC | 62,725 | |||||||||
Department Stores | |||||||||||
21,582 | Marks & Spencer Group PLC | 76,128 | |||||||||
3,491 | Next PLC (c) | 59,280 | |||||||||
135,408 | |||||||||||
Electric Utilities | |||||||||||
5,345 | International Power PLC | 19,132 | |||||||||
90,982 | National Grid PLC | 1,033,062 | |||||||||
28,994 | Scottish & Southern Energy PLC | 568,350 | |||||||||
2,445 | United Utilities Group PLC | 27,590 | |||||||||
1,648,134 |
NUMBER OF SHARES | VALUE | ||||||||||
Electronics/Appliance Stores | |||||||||||
26,580 | DSG International PLC (c) | $ | 13,896 | ||||||||
4,063 | Kesa Electricals PLC | 5,203 | |||||||||
19,099 | |||||||||||
Engineering & Construction | |||||||||||
6,913 | AMEC PLC | 57,600 | |||||||||
10,421 | Balfour Beatty PLC | 41,797 | |||||||||
99,397 | |||||||||||
Financial Conglomerates | |||||||||||
94,210 | Lloyds TSB Group PLC | 305,916 | |||||||||
50,526 | Old Mutual PLC | 41,090 | |||||||||
347,006 | |||||||||||
Financial Publishing/Services | |||||||||||
5,187 | Thomson Reuters PLC (c) | 89,675 | |||||||||
Food Retail | |||||||||||
26,917 | Sainsbury (J) PLC | 123,113 | |||||||||
145,756 | Tesco PLC | 796,729 | |||||||||
919,842 | |||||||||||
Food: Major Diversified | |||||||||||
43,095 | Unilever PLC | 971,592 | |||||||||
Food: Specialty/Candy | |||||||||||
30,280 | Cadbury PLC | 278,253 | |||||||||
16,542 | Tate & Lyle PLC | 98,104 | |||||||||
376,357 | |||||||||||
Gas Distributors | |||||||||||
76,961 | Centrica PLC | 378,326 | |||||||||
Home Building | |||||||||||
3,603 | Barratt Developments PLC (c) | 4,470 | |||||||||
1,777 | Berkeley Group Holdings PLC (The) (Units) (a)(d) | 21,405 | |||||||||
3,901 | Persimmon PLC (c) | 18,852 | |||||||||
17,270 | Taylor Wimpey PLC | 2,783 | |||||||||
47,510 | |||||||||||
Home Improvement Chains | |||||||||||
16,731 | Kingfisher PLC | 30,731 |
See Notes to Financial Statements
31
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Hotels/Resorts/Cruiselines | |||||||||||
2,950 | Carnival PLC | $ | 64,463 | ||||||||
6,141 | InterContinental Hotels Group PLC | 52,083 | |||||||||
116,546 | |||||||||||
Household/Personal Care | |||||||||||
33,259 | Reckitt Benckiser Group PLC | 1,397,916 | |||||||||
Industrial Conglomerates | |||||||||||
7,012 | Smiths Group PLC | 90,197 | |||||||||
18,353 | Tomkins PLC | 33,858 | |||||||||
124,055 | |||||||||||
Information Technology Services | |||||||||||
5,721 | Invensys PLC (a) | 14,234 | |||||||||
25,495 | LogicaCMG PLC | 28,242 | |||||||||
15,724 | Misys PLC | 27,925 | |||||||||
70,401 | |||||||||||
Integrated Oil | |||||||||||
69,084 | BG Group PLC | 1,016,303 | |||||||||
388,554 | BP PLC | 3,211,043 | |||||||||
84,913 | Royal Dutch Shell PLC (A Shares) | 2,321,547 | |||||||||
53,836 | Royal Dutch Shell PLC (B Shares) | 1,438,928 | |||||||||
7,987,821 | |||||||||||
Investment Banks/Brokers | |||||||||||
3,493 | Close Brothers Group PLC | 30,350 | |||||||||
1,519 | ICAP PLC | 7,561 | |||||||||
869 | London Stock Exchange Group PLC | 7,822 | |||||||||
45,733 | |||||||||||
Investment Managers | |||||||||||
6,149 | 3i Group PLC | 53,726 | |||||||||
34,340 | Man Group PLC | 197,040 | |||||||||
2,418 | Schroders PLC | 31,075 | |||||||||
281,841 | |||||||||||
Life/Health Insurance | |||||||||||
62,385 | Aviva PLC | 374,090 | |||||||||
49,144 | Friends Provident PLC | 56,097 |
NUMBER OF SHARES | VALUE | ||||||||||
45,244 | Prudential PLC | $ | 232,263 | ||||||||
12,741 | Standard Life PLC | 49,022 | |||||||||
711,472 | |||||||||||
Major Banks | |||||||||||
97,155 | Barclays PLC | 286,126 | |||||||||
57,739 | HBOS PLC | 94,107 | |||||||||
104,374 | HSBC Holdings PLC (Registered Shares) | 1,259,843 | |||||||||
230,481 | Royal Bank of Scotland Group PLC | 254,198 | |||||||||
11,161 | Standard Chartered PLC | 185,300 | |||||||||
2,079,574 | |||||||||||
Major Telecommunications | |||||||||||
229,097 | BT Group PLC | 431,828 | |||||||||
Medical Specialties | |||||||||||
25,628 | Smith & Nephew PLC | 234,854 | |||||||||
Metal Fabrications | |||||||||||
739 | Melrose PLC | 1,063 | |||||||||
Miscellaneous Commercial Services | |||||||||||
10,545 | BBA Aviation PLC | 13,580 | |||||||||
10,926 | Experian Group Ltd. | 60,118 | |||||||||
4,556 | G4S PLC | 13,739 | |||||||||
5,673 | Rentokil Initial PLC | 4,112 | |||||||||
1,852 | Serco Group PLC | 11,020 | |||||||||
102,569 | |||||||||||
Miscellaneous Manufacturing | |||||||||||
8,325 | IMI PLC | 37,014 | |||||||||
Multi-Line Insurance | |||||||||||
160,135 | Legal & General Group PLC | 185,164 | |||||||||
32,152 | Royal & Sun Alliance Insurance Group PLC | 71,590 | |||||||||
256,754 | |||||||||||
Other Metals/Minerals | |||||||||||
21,355 | Anglo American PLC | 527,383 | |||||||||
34,548 | BHP Billiton PLC | 586,312 | |||||||||
15,864 | Rio Tinto PLC | 739,822 |
See Notes to Financial Statements
32
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
10,703 | Xstrata PLC | $ | 182,090 | ||||||||
2,035,607 | |||||||||||
Other Transportation | |||||||||||
3,603 | Arriva PLC | 35,010 | |||||||||
9,153 | FirstGroup PLC | 60,536 | |||||||||
9,091 | Stagecoach Group PLC | 27,088 | |||||||||
122,634 | |||||||||||
Packaged Software | |||||||||||
33,514 | Sage Group PLC (The) | 93,383 | |||||||||
Personnel Services | |||||||||||
1,773 | Capita Group PLC | 18,257 | |||||||||
4,987 | Hays PLC | 5,482 | |||||||||
23,739 | |||||||||||
Pharmaceuticals: Major | |||||||||||
41,172 | AstraZeneca PLC | 1,750,429 | |||||||||
141,982 | GlaxoSmithKline PLC | 2,736,843 | |||||||||
4,487,272 | |||||||||||
Publishing: Books/Magazines | |||||||||||
16,862 | Pearson PLC | 165,289 | |||||||||
23,068 | Reed Elsevier PLC | 202,616 | |||||||||
367,905 | |||||||||||
Publishing: Newspapers | |||||||||||
7,603 | Daily Mail and General Trust PLC | 35,776 | |||||||||
6,167 | United Business Media Ltd. | 39,941 | |||||||||
75,717 | |||||||||||
Pulp & Paper | |||||||||||
7,623 | Bunzl PLC | 76,491 | |||||||||
11,731 | Mondi PLC | 42,588 | |||||||||
119,079 | |||||||||||
Railroads | |||||||||||
3,313 | National Express Group PLC | 30,562 | |||||||||
Restaurants | |||||||||||
35,655 | Compass Group PLC | 166,800 | |||||||||
4,485 | Punch Taverns PLC | 11,437 | |||||||||
3,327 | Whitbread PLC | 47,924 | |||||||||
226,161 |
NUMBER OF SHARES | VALUE | ||||||||||
Retail - Specialty | |||||||||||
12,576 | Enterprise Inns PLC | $ | 19,657 | ||||||||
Semiconductors | |||||||||||
30,903 | ARM Holdings PLC | 48,151 | |||||||||
2,965 | CSR PLC (c)(a) | 9,733 | |||||||||
57,884 | |||||||||||
Specialty Stores | |||||||||||
7,209 | Galiform PLC (c) | 2,623 | |||||||||
Tobacco | |||||||||||
48,996 | British American Tobacco PLC | 1,345,556 | |||||||||
15,446 | Imperial Tobacco Group PLC | 415,359 | |||||||||
1,760,915 | |||||||||||
Utilities | |||||||||||
9,721 | Severn Trent PLC | 214,489 | |||||||||
Wholesale Distributors | |||||||||||
16,483 | Electrocomponents PLC (c) | 37,893 | |||||||||
11,167 | Wolseley PLC | 61,304 | |||||||||
99,197 | |||||||||||
Wireless Telecommunications | |||||||||||
1,565,071 | Vodafone Group PLC | 3,014,581 | |||||||||
Total United Kingdom | 34,428,103 | ||||||||||
United States (0.0%) | |||||||||||
Specialty Stores | |||||||||||
1,148 | Signet Jewelers Ltd. (c)(f) | 11,684 | |||||||||
Total Common Stocks (Cost $186,042,177) | 147,756,293 | ||||||||||
Preferred Stocks (e) (0.3%) | |||||||||||
Brazil (0.0%) | |||||||||||
Food: Meat/Fish/Dairy | |||||||||||
22,666 | Sadia S.A. | 45,196 |
See Notes to Financial Statements
33
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES | VALUE | ||||||||||
Germany (0.2%) | |||||||||||
Electric Utilities | |||||||||||
634 | RWE AG NV | $ | 39,852 | ||||||||
Household/Personal Care | |||||||||||
3,447 | Henkel AG & Co. KGaA | 99,765 | |||||||||
Motor Vehicles | |||||||||||
1,632 | Porsche Automobil Holding SE (c) | 143,839 | |||||||||
1,157 | Volkswagen AG | 71,428 | |||||||||
215,267 | |||||||||||
Total Germany | 354,884 | ||||||||||
Japan (0.0%) | |||||||||||
Beverages: Non-Alcoholic | |||||||||||
509 | ITO EN, Ltd. | 5,528 | |||||||||
Total Preferred Stocks (Cost $756,981) | 405,608 | ||||||||||
NUMBER OF RIGHTS | |||||||||||
Japan (0.0%) | |||||||||||
Other Metals/Minerals | |||||||||||
22,095 | Dowa Mining Co. (Cost $0) (a) | 0 |
NUMBER OF WARRANTS | EXPIRATION DATE | ||||||||||||||
Malaysia (0.0%) | |||||||||||||||
Hotels/Resorts/ Cruiselines | |||||||||||||||
12,370 | IJM LAND BHD WARRANT (Cost $6,453) | 9/11/13 | 610 |
PRINCIPAL AMOUNT IN THOUSANDS | VALUE | ||||||||||
Short-Term Investments (22.1%) | |||||||||||
Securities held as Collateral on Loaned Securities (12.5%) | |||||||||||
Repurchase Agreements (3.8%) | |||||||||||
$ | 3,921 | Deutsche Bank Securities (0.60% dated 10/31/08, due 11/03/08; proceeds $3,921,367) fully collateralized by convertible bonds at the date of this Portfolio of Investments as follows: Conmed Corp 2.50%, due 11/15/24 and Hologic Inc. 2.00% due 12/15/37; valued at $4,080,144 | $ | 3,921,302 | |||||||
1,318 | Banc of America Securities LLC (0.25% dated 10/31/08, due 11/03/08; proceeds $1,317,623) fully collateralized by U.S. Government Agency security at the date of this Portfolio of Investments as follows: FNMA 5.00%, due 04/01/35; valued at $1,345,838 | 1,317,613 | |||||||||
840 | Banc of America Securities LLC (0.60% dated 10/31/08, due 10/03/08; proceeds $840,293) fully collateralized by common stocks at the date of this Portfolio of Investments as follows: Pfizer Inc. valued at $88 7,402 | 840,279 | |||||||||
Total Repurchase Agreements (Cost $6,079,194) | 6,079,194 |
See Notes to Financial Statements
34
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
NUMBER OF SHARES (000) | VALUE | ||||||||||||||
Investment Company (g) (8.7%) | |||||||||||||||
14,118 | Morgan Stanley Institutional Liquidity Funds-Money Market Portfolio - Institutional Class (Cost $14,117,582) | $ | 14,117,582 | ||||||||||||
Total Securities held as Collateral on Loaned Securities (Cost $20,196,776) | 20,196,776 | ||||||||||||||
Investment Company (g) (9.6%) | |||||||||||||||
16,126 | Morgan Stanley Institutional Liquidity Funds-Money Market Portfolio - Institutional Class (Cost $15,544,538) | 15,544,538 | |||||||||||||
Total Short-Term Investments (Cost $35,741,314) | 35,741,314 | ||||||||||||||
Total Investments (Cost $222,546,925) (h)(i) | 113.8 | % | 183,903,825 | ||||||||||||
Liabilities in Excess of Other Assets | (13.8 | ) | (22,224,119 | ) | |||||||||||
Net Assets | 100.0 | % | $ | 161,679,706 |
ADR American Depositary Receipt.
CDI CHESS Depositary Interest.
GDR Global Depositary Receipt.
PPS Price Protected Share.
(a) Non-income producing security.
(b) Comprised of securities in separate entities that are traded as a single stapled security.
(c) All or a portion of this security was on loan at October 31, 2008.
(d) Consists of one or more class of securities traded together as a unit; stocks with attached warrants.
(e) Securities with total market value equal to $147,466,468 have been valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees.
(f) Security noted was not fair valued in accordance with (e) above.
(g) See Note 4 to the financial statements regarding investments in Morgan Stanley Institutional Liquidity Funds-Money Market Portfolio — Institutional Class.
(h) Securities have been designated as collateral in an amount equal to $80,600,117 in connection with open forward foreign currency contracts and open futures contracts.
(i) The aggregate cost for federal income tax purposes is $225,951,674. The aggregate gross unrealized appreciation is $10,151,228 and the aggregate gross unrealized depreciation is $52,199,077, resulting in net unrealized deprecation of $42,047,849.
Futures Contracts Open at October 31, 2008:
NUMBER OF CONTRACTS | LONG/SHORT | DESCRIPTION, DELIVERY, MONTH AND YEAR | UNDERLYING FACE AMOUNT AT VALUE | UNREALIZED APPRECIATION (DEPRECIATION) | |||||||||||||||
81 | Long | FTSE 100 Index Future | $ | 5,707,686 | $ | (147,307 | ) | ||||||||||||
December/2008 | |||||||||||||||||||
17 | Long | DAX Index Future | 2,743,630 | (198,686 | ) | ||||||||||||||
December/2008 | |||||||||||||||||||
26 | Long | HANG SENG Index Future | 2,336,630 | 270,790 | |||||||||||||||
November/2008 | |||||||||||||||||||
18 | Short | TOPIX Index Future | (1,560,451 | ) | 4,611 | ||||||||||||||
December/2008 | |||||||||||||||||||
87 | Short | DJ Euro Stoxx 50 Future | (2,874,164 | ) | 109,506 | ||||||||||||||
December/2008 | |||||||||||||||||||
Net Unrealized Appreciation | $ | 38,914 |
See Notes to Financial Statements
35
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2008 continued
Forward Foreign Currency Contracts Open at October 31, 2008:
CONTRACTS TO DELIVER | IN EXCHANGE FOR | DELIVERY DATE | UNREALIZED APPRECIATION (DEPRECIATION) | ||||||||||||
$ | 2,051,040 | EUR | 1,584,048 | 11/03/08 | $ | (32,090 | ) | ||||||||
$ | 1,333,219 | GBP | 812,503 | 11/03/08 | (25,620 | ) | |||||||||
$ | 136,508 | NOK | 900,000 | 11/03/08 | (2,884 | ) | |||||||||
EUR | 5,306,988 | $ | 7,486,674 | 12/11/08 | 731,397 | ||||||||||
$ | 24,104,748 | EUR | 17,040,456 | 12/11/08 | (2,413,914 | ) | |||||||||
EUR | 2,575,527 | $ | 3,644,010 | 12/11/08 | 365,616 | ||||||||||
$ | 22,879,336 | EUR | 16,192,029 | 12/11/08 | (2,268,468 | ) | |||||||||
$ | 7,661,248 | EUR | 5,444,650 | 12/11/08 | (730,742 | ) | |||||||||
EUR | 30,385,536 | $ | 42,877,029 | 12/11/08 | 4,199,214 | ||||||||||
$ | 10,898,638 | EUR | 7,725,695 | 12/11/08 | (1,064,584 | ) | |||||||||
EUR | 5,695,522 | $ | 8,047,944 | 12/11/08 | 798,101 | ||||||||||
$ | 6,122,864 | EUR | 4,334,014 | 12/11/08 | (606,088 | ) | |||||||||
EUR | 486,563 | $ | 712,815 | 12/11/08 | 93,468 | ||||||||||
GBP | 1,246,424 | $ | 2,190,203 | 12/11/08 | 189,155 | ||||||||||
$ | 1,372,418 | GBP | 783,120 | 12/11/08 | (115,172 | ) | |||||||||
GBP | 966,141 | $ | 1,552,643 | 12/11/08 | 1,570 | ||||||||||
$ | 1,246,039 | JPY | 123,220,803 | 12/11/08 | 7,041 | ||||||||||
JPY | 124,222,672 | $ | 1,163,134 | 12/11/08 | (100,134 | ) | |||||||||
JPY | 270,920 | $ | 2,536 | 12/11/08 | (218 | ) | |||||||||
Net Unrealized Depreciation | $ | (974,352 | ) |
Currency Abbreviations:
GBP British Pound.
EUR Euro.
JPY Japanese Yen.
NOK Norwegian Krone.
See Notes to Financial Statements
36
Morgan Stanley International Fund
Summary of Investments n October 31, 2008
INDUSTRY | VALUE | PERCENT OF TOTAL INVESTMENTS | |||||||||
Short-Term Investments | $ | 35,741,314 | 19.4 | % | |||||||
Pharmaceuticals: Major | 13,165,625 | 7.2 | |||||||||
Integrated Oil | 12,794,309 | 7.0 | |||||||||
Major Banks | 11,093,533 | 6.0 | |||||||||
Electric Utilities | 8,800,252 | 4.8 | |||||||||
Major Telecommunications | 7,171,190 | 3.9 | |||||||||
Food: Major Diversified | 6,400,682 | 3.5 | |||||||||
Motor Vehicles | 6,087,292 | 3.3 | |||||||||
Electronic Equipment/ Instruments | 3,448,480 | 1.9 | |||||||||
Wireless Telecommunications | 3,119,294 | 1.7 | |||||||||
Other Metals/Minerals | 2,956,970 | 1.6 | |||||||||
Household/Personal Care | 2,774,439 | 1.5 | |||||||||
Industrial Conglomerates | 2,745,909 | 1.5 | |||||||||
Food Retail | 2,560,771 | 1.4 | |||||||||
Beverages: Alcoholic | 2,288,663 | 1.2 | |||||||||
Real Estate Development | 2,273,034 | 1.2 | |||||||||
Tobacco | 2,248,119 | 1.2 | |||||||||
Pharmaceuticals: Other | 2,221,891 | 1.2 | |||||||||
Wholesale Distributors | 2,062,500 | 1.1 | |||||||||
Financial Conglomerates | 1,913,187 | 1.0 | |||||||||
Chemicals: Specialty | 1,869,390 | 1.0 | |||||||||
Multi-Line Insurance | 1,849,555 | 1.0 | |||||||||
Telecommunication Equipment | 1,804,307 | 1.0 | |||||||||
Regional Banks | 1,786,247 | 1.0 | |||||||||
Investment Banks/Brokers | 1,777,396 | 1.0 | |||||||||
Engineering & Construction | 1,776,139 | 1.0 | |||||||||
Railroads | 1,735,890 | 0.9 | |||||||||
Gas Distributors | 1,727,527 | 0.9 | |||||||||
Industrial Machinery | 1,683,300 | 0.9 | |||||||||
Life/Health Insurance | 1,539,165 | 0.8 | |||||||||
Property - Casualty Insurers | 1,526,696 | 0.8 | |||||||||
Steel | 1,474,528 | 0.8 | |||||||||
Electronics/Appliances | 1,203,672 | 0.7 | |||||||||
Chemicals: Agricultural | 1,077,848 | 0.6 | |||||||||
Electrical Products | 1,066,017 | 0.6 | |||||||||
Chemicals: Major Diversified | 1,056,387 | 0.6 | |||||||||
Apparel/Footwear Retail | 1,032,894 | 0.6 | |||||||||
Medical Specialties | 1,018,146 | 0.6 |
INDUSTRY | VALUE | PERCENT OF TOTAL INVESTMENTS | |||||||||
Packaged Software | $ | 977,750 | 0.5 | % | |||||||
Food: Specialty/Candy | 947,310 | 0.5 | |||||||||
Home Building | 904,048 | 0.5 | |||||||||
Recreational Products | 861,503 | 0.5 | |||||||||
Aerospace & Defense | 844,612 | 0.5 | |||||||||
Construction Materials | 810,706 | 0.4 | |||||||||
Trucks/Construction/ Farm Machinery | 796,268 | 0.4 | |||||||||
Electronic Components | 792,903 | 0.4 | |||||||||
Information Technology Services | 746,521 | 0.4 | |||||||||
Media Conglomerates | 730,666 | 0.4 | |||||||||
Department Stores | 721,947 | 0.4 | |||||||||
Publishing: Books/ Magazines | 719,661 | 0.4 | |||||||||
Apparel/Footwear | 713,150 | 0.4 | |||||||||
Auto Parts: O.E.M. | 642,580 | 0.3 | |||||||||
Miscellaneous Commercial Services | 617,654 | 0.3 | |||||||||
Pulp & Paper | 584,723 | 0.3 | |||||||||
Building Products | 583,123 | 0.3 | |||||||||
Automotive Aftermarket | 555,453 | 0.3 | |||||||||
Industrial Specialties | 505,799 | 0.3 | |||||||||
Air Freight/Couriers | 498,095 | 0.3 | |||||||||
Real Estate Investment Trusts | 482,506 | 0.3 | |||||||||
Metal Fabrications | 438,567 | 0.2 | |||||||||
Food: Meat/Fish/Dairy | 437,495 | 0.2 | |||||||||
Oil Refining/Marketing | 432,596 | 0.2 | |||||||||
Semiconductors | 399,590 | 0.2 | |||||||||
Electronic Production Equipment | 390,082 | 0.2 | |||||||||
Advertising/Marketing Services | 375,160 | 0.2 | |||||||||
Marine Shipping | 365,380 | 0.2 | |||||||||
Other Transportation | 352,595 | 0.2 | |||||||||
Specialty Insurance | 350,524 | 0.2 | |||||||||
Investment Managers | 319,862 | 0.2 | |||||||||
Other Consumer Specialties | 313,475 | 0.2 | |||||||||
Water Utilities | 311,467 | 0.2 |
See Notes to Financial Statements
37
Morgan Stanley International Fund
Summary of Investments n October 31, 2008 continued
INDUSTRY | VALUE | PERCENT OF TOTAL INVESTMENTS | |||||||||
Oilfield Services/Equipment | $ | 298,509 | 0.2 | % | |||||||
Hotels/Resorts/Cruiselines | 280,575 | 0.2 | |||||||||
Textiles | 254,585 | 0.1 | |||||||||
Oil & Gas Production | 248,819 | 0.1 | |||||||||
Airlines | 244,725 | 0.1 | |||||||||
Commercial Printing/ Forms | 242,505 | 0.1 | |||||||||
Restaurants | 226,161 | 0.1 | |||||||||
Broadcasting | 217,822 | 0.1 | |||||||||
Utilities | 214,489 | 0.1 | |||||||||
Cable/Satellite TV | 209,632 | 0.1 | |||||||||
Medical/Nursing Services | 205,511 | 0.1 | |||||||||
Biotechnology | 204,834 | 0.1 | |||||||||
Computer Processing Hardware | 194,997 | 0.1 | |||||||||
Electronics/Appliance Stores | 192,506 | 0.1 | |||||||||
Containers/Packaging | 181,387 | 0.1 | |||||||||
Movies/Entertainment | 179,443 | 0.1 | |||||||||
Publishing: Newspapers | 162,303 | 0.1 | |||||||||
Internet Software/Services | 148,628 | 0.1 | |||||||||
Specialty Stores | 146,761 | 0.1 | |||||||||
Casino/Gaming | 141,442 | 0.1 | |||||||||
Discount Stores | 135,745 | 0.1 | |||||||||
Finance/Rental/Leasing | 123,546 | 0.1 | |||||||||
Miscellaneous Manufacturing | 116,876 | 0.1 | |||||||||
Other Consumer Services | 115,063 | 0.1 | |||||||||
Agricultural Commodities/Milling | 111,103 | 0.1 | |||||||||
Financial Publishing/ Services | 89,675 | 0.0 | |||||||||
Office Equipment/ Supplies | 78,470 | 0.0 | |||||||||
Personnel Services | 63,572 | 0.0 | |||||||||
Computer Peripherals | 59,243 | 0.0 | |||||||||
Medical Distributors | 57,657 | 0.0 | |||||||||
Beverages: Non-Alcoholic | 52,189 | 0.0 | |||||||||
Precious Metals | 46,114 | 0.0 | |||||||||
Contract Drilling | 42,185 | 0.0 |
INDUSTRY | VALUE | PERCENT OF TOTAL INVESTMENTS | |||||||||
Trucking | $ | 39,026 | 0.0 | % | |||||||
Investment Trusts/ Mutual Funds | 36,041 | 0.0 | |||||||||
Catalog/Specialty Distribution | 34,718 | 0.0 | |||||||||
Tools/Hardware | 34,345 | 0.0 | |||||||||
Home Improvement Chains | 30,731 | 0.0 | |||||||||
Retail - Specialty | 19,657 | 0.0 | |||||||||
Hospital/ Nursing Management | 15,001 | 0.0 | |||||||||
Aluminum | 10,905 | 0.0 | |||||||||
$ | 183,903,825 | * | 100.0 | % |
* Does not include open short/long futures contracts with underlying face amount of $15,222,561 and net unrealized appreciation of $38,914. Also open forward foreign currency contracts with net unrealized depreciation of $974,352.
See Notes to Financial Statements
38
Morgan Stanley International Fund
Financial Statements
Statement of Assets and Liabilities
October 31, 2008
Assets: | |||||||
Investments in securities, at value (cost $192,884,805) (Including $19,548,226 of securities loaned) | $ | 154,241,705 | |||||
Investment in affiliate, at value (cost $29,662,120) | 29,662,120 | ||||||
Unrealized appreciation on open forward foreign currency contracts | 6,385,562 | ||||||
Cash (including $239,237 in foreign currency, at value with cost of $239,268 and $3,500,127 in segregation) | 3,731,316 | ||||||
Receivable for: | |||||||
Dividends | 589,683 | ||||||
Investments sold | 364,420 | ||||||
Foreign withholding taxes reclaimed | 344,421 | ||||||
Dividends from affiliate | 31,360 | ||||||
Compensated forward foreign currency contracts | 24,175 | ||||||
Shares of beneficial interest sold | 15,646 | ||||||
Prepaid expenses and other assets | 530,234 | ||||||
Total Assets | 195,920,642 | ||||||
Liabilities: | |||||||
Collateral on securities loaned at value | 20,196,776 | ||||||
Unrealized depreciation on open forward foreign currency contracts | 7,359,914 | ||||||
Payable for: | |||||||
Investments purchased | 3,937,282 | ||||||
Variation margin | 1,199,487 | ||||||
Compensated forward foreign currency contracts | 957,682 | ||||||
Shares of beneficial interest redeemed | 248,480 | ||||||
Investment advisory fee | 89,488 | ||||||
Distribution fee | 65,457 | ||||||
Transfer agent fee | 30,788 | ||||||
Administration fee | 11,498 | ||||||
Accrued expenses and other payables | 144,084 | ||||||
Total Liabilities | 34,240,936 | ||||||
Net Assets | $ | 161,679,706 | |||||
Composition of Net Assets: | |||||||
Paid-in-capital | $ | 214,374,232 | |||||
Net unrealized depreciation | (39,574,159 | ) | |||||
Accumulated undistributed net investment income | 898,948 | ||||||
Accumulated net realized loss | (14,019,315 | ) | |||||
Net Assets | $ | 161,679,706 | |||||
Class A Shares: | |||||||
Net Assets | $ | 104,618,511 | |||||
Shares Outstanding (unlimited authorized, $.01 par value) | 11,263,718 | ||||||
Net Asset Value Per Share | $ | 9.29 | |||||
Maximum Offering Price Per Share, (net asset value plus 5.54% of net asset value) | $ | 9.80 | |||||
Class B Shares: | |||||||
Net Assets | $ | 30,185,496 | |||||
Shares Outstanding (unlimited authorized, $.01 par value) | 3,284,886 | ||||||
Net Asset Value Per Share | $ | 9.19 | |||||
Class C Shares: | |||||||
Net Assets | $ | 16,659,713 | |||||
Shares Outstanding (unlimited authorized, $.01 par value) | 1,828,473 | ||||||
Net Asset Value Per Share | $ | 9.11 | |||||
Class I Shares@@: | |||||||
Net Assets | $ | 10,084,740 | |||||
Shares Outstanding (unlimited authorized, $.01 par value) | 1,080,969 | ||||||
Net Asset Value Per Share | $ | 9.33 | |||||
Class R Shares@@@: | |||||||
Net Assets | $ | 65,594 | |||||
Shares Outstanding (unlimited authorized, $.01 par value) | 7,072 | ||||||
Net Asset Value Per Share | $ | 9.28 | |||||
Class W Shares@@@: | |||||||
Net Assets | $ | 65,652 | |||||
Shares Outstanding (unlimited authorized, $.01 par value) | 7,072 | ||||||
Net Asset Value Per Share | $ | 9.28 |
@@ Formerly Class D shares. Renamed Class I shares effective March 31, 2008.
@@@ Shares were first issued on March 31, 2008.
^ Net of capital gain country tax of $64,074.
See Notes to Financial Statements
39
Morgan Stanley International Fund
Financial Statements continued
Statement of Operations
For the year ended October 31, 2008
Net Investment Income: Income | |||||||
Dividends (net of $569,539 foreign withholding tax) | $ | 7,534,180 | |||||
Dividends from affiliate | 512,890 | ||||||
Income from securities loaned - net | 310,985 | ||||||
Interest | 116,682 | ||||||
Total Income | 8,474,737 | ||||||
Expenses | |||||||
Investment advisory fee | 1,807,113 | ||||||
Distribution fee (Class A shares) | 411,424 | ||||||
Distribution fee (Class B shares) | 669,496 | ||||||
Distribution fee (Class C shares) | 274,774 | ||||||
Distribution fee (Class R shares) | 274 | ||||||
Distribution fee (Class W shares) | 192 | ||||||
Transfer agent fees and expenses | 455,981 | ||||||
Administration fee | 222,413 | ||||||
Custodian fees | 181,457 | ||||||
Shareholder reports and notices | 99,343 | ||||||
Professional fees | 87,320 | ||||||
Registration fees | 76,424 | ||||||
Trustees' fees and expenses | 5,521 | ||||||
Other | 155,103 | ||||||
Total Expenses | 4,446,835 | ||||||
Less: expense offset | (587 | ) | |||||
Less: rebate from Morgan Stanley affiliated cash sweep (Note 4) | (18,201 | ) | |||||
Net Expenses | 4,428,047 | ||||||
Net Investment Income | 4,046,690 | ||||||
Realized and Unrealized Gain (Loss): Realized Gain(Loss) on: | |||||||
Investments | 28,876,617 | ^ | |||||
Futures contracts | (11,043,848 | ) | |||||
Foreign exchange transactions | (2,365,959 | ) | |||||
Net Realized Gain | 15,466,810 | ||||||
Change in Unrealized Appreciation/Depreciation on: | |||||||
Investments | (161,170,517 | ) | |||||
Futures contracts | (1,674 | ) | |||||
Translation of forward foreign currency contracts, other assets and liabilities denominated in foreign currencies | (1,617,996 | ) | |||||
Net Change in Unrealized Appreciation/Depreciation | (162,790,187 | ) | |||||
Net Loss | (147,323,377 | ) | |||||
Net Decrease | $ | (143,276,687 | ) |
^ Net of capital gain country tax of $64,074.
See Notes to Financial Statements
40
Morgan Stanley International Fund
Financial Statements continued
Statements of Changes in Net Assets
FOR THE YEAR ENDED OCTOBER 31, 2008 | FOR THE YEAR ENDED OCTOBER 31, 2007 | ||||||||||
Increase (Decrease) in Net Assets: Operations: | |||||||||||
Net investment income | $ | 4,046,690 | $ | 2,509,860 | |||||||
Net realized gain | 15,466,810 | 68,764,200 | |||||||||
Net change in unrealized appreciation/depreciation | (162,790,187 | ) | 14,242,054 | ||||||||
Net Increase (Decrease) | (143,276,687 | ) | 85,516,114 | ||||||||
Dividends to Shareholders from Net Investment Income: | |||||||||||
Class A shares | (3,252,306 | ) | (1,452,280 | ) | |||||||
Class B shares | (620,256 | ) | (1,374,886 | ) | |||||||
Class C shares | (403,193 | ) | (299,910 | ) | |||||||
Class I shares@@ | (405,123 | ) | (457,373 | ) | |||||||
Total Dividends | (4,680,878 | ) | (3,584,449 | ) | |||||||
Net decrease from transactions in shares of beneficial interest | (43,013,851 | ) | (92,719,912 | ) | |||||||
Net Decrease | (190,971,416 | ) | (10,788,247 | ) | |||||||
Net Assets: | |||||||||||
Beginning of period | 352,651,122 | 363,439,369 | |||||||||
End of Period (Including undistributed net investment income of $898,948 and $3,205,575, respectively) | $ | 161,679,706 | $ | 352,651,122 |
@@ Formerly Class D shares. Renamed Class I shares effective March 31, 2008.
See Notes to Financial Statements
41
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2008
1. Organization and Accounting Policies
Morgan Stanley International Fund (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund's investment objective is long-term capital growth. The Fund was organized as a Massachusetts business trust on October 23, 1998 and commenced operations June 28, 1999. On March 31, 2008, the Fund commenced offering Class R and Class W shares.
The Fund offers Class A, Class B, Class C, Class I, Class R and Class W shares. The six classes are substantially the same except that most Class A shares are subject to a sales charge imposed at the time of purchase and some Class A shares, and most Class B shares and Class C shares are subject to a contingent deferred sales charge imposed on shares redeemed within eighteen months, six years and one year, respectively. Class I, Class R and Class W shares are not subject to a sales charge. Additionally, Class A, Class B, Class C, Class R and Class W shares incur distribution expenses. Effective March 31, 2008 Class D shares were renamed Class I shares.
The Fund will assess a 2% redemption fee, on Class A, Class B, Class C, Class I, Class R and Class W shares, which is paid directly to the Fund, for shares redeemed or exchanged within thirty days of purchase, subject to certain exceptions. The redemption fee is designed to protect the Fund and its remaining shareholders from the effects of short-term trading.
The following is a summary of significant accounting policies:
A. Valuation of Investments — (1) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (2) an equity portfolio security listed or traded on the New York Stock Exchange ("NYSE") or American Stock Exchange or other exchange is valued at its latest sale price prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (4) all other portfolio securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (5) futures are valued at the latest price published by the commodities exchange on which they trade; (6) when market quotations are not readily available including circumstances under which Morgan Stanley Investment Advisors Inc. (the "Investment Adviser") determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Occasionally, developments affecting the closing prices of securities and other
42
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2008 continued
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 developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Fund's Trustees or by the Investment Adviser using a pricing service and/or procedures approved by the Trustees of the Fund; (7) certain portfolio securities may be valued by an outside pricing service approved by the Fund's Trustees; (8) investments in open-end mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value as of the close of each business day; and (9) short-term debt securities having a maturity date of more than six ty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost.
B. Accounting for Investments — Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Dividend income and other distributions are recorded on the ex-dividend date except for certain dividends on foreign securities which are recorded as soon as the Fund is informed after the ex-dividend date. Discounts are accreted and premiums are amortized over the life of the respective securities and are included in interest income. Interest income is accrued daily.
C. Multiple Class Allocations — Investment income, expenses (other than distribution fees), and realized and unrealized gains and losses are allocated to each class of shares based upon the relative net asset value on the date such items are recognized. Distribution fees are charged directly to the respective class.
D. Futures Contracts — A futures contract is an agreement between two parties to buy and sell financial instruments or contracts based on financial indices at a set price on a future date. Upon entering into such a contract, the Fund is required to pledge to the broker cash, U.S. Government securities or other liquid portfolio securities equal to the minimum initial margin requirements of the applicable futures exchange. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments known as variation margin are recorded by the Fund as unrealized gains and losses. Upon closing of the contract, the Fund realizes a gain or loss 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.
E. Foreign Currency Translation and Forward Foreign Currency Contracts — The books and records of the Fund are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities, other assets and liabilities and forward foreign currency contracts ("forward contracts") are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income
43
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2008 continued
and expenses are translated at the exchange rates prevailing on the respective dates of such transactions. The resultant exchange gains and losses are recorded as realized and unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. federal income tax regulations, certain foreign exchange gains/losses included in realized and unrealized gain/loss are included in or are a reduction of ordinary income for federal income tax purposes. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of the securities. Forward contracts are valued daily at the appropriate exchange rates. The resultant unrealized exchange gains and losses are recorded as unrealized foreign currency gain or loss. The Fund records realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (com pensated) by entering into a closing transaction prior to delivery.
F. Security Lending — The Fund may lend securities to qualified financial institutions, such as broker-dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Fund. The Fund receives cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked-to-market daily, by the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.
Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in high-quality short-term investments. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent.
The value of loaned securities and related collateral outstanding at October 31, 2008 are $19,548,226 and $20,315,736, respectively. The Fund received cash collateral of $20,196,776 which was subsequently invested in Repurchase Agreements and Morgan Stanley Institutional Liquidity Funds as reported in the Portfolio of Investments. The remaining collateral of $118,960 received in the form of common stock, U.S. and foreign Government Agencies and Obligations, which the Fund cannot sell or re-pledge and accordingly are not reflected in the Portfolio of Investments. The Fund has the right under the lending agreement to recover the securities from the borrower on demand.
G. Federal Income Tax Policy — It is the Fund's policy to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required. The Fund files tax returns with the U.S. Internal Revenue Service, New York State and New York City. The Fund adopted the provisions of the Financial Accounting Standards Board ("FASB") Interpretation No. 48 ("FIN 48") Accounting for Uncertainty in Income Taxes on April 29, 2008. FIN 48 sets forth a minimum threshold for financi al statement recognition of the benefit of a tax position taken
44
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2008 continued
or expected to be taken in a tax return. The implementation of FIN 48 did not result in any unrecognized tax benefits in the accompanying financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in other expenses in the Statement of Operations. Each of the tax years in the four year period ended October 31, 2008, remains subject to examination by taxing authorities.
H. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date.
I. Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.
2. Investment Advisory/Administration Agreements
Pursuant to an Investment Advisory Agreement with the Investment Adviser, the Fund pays an advisory fee, accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined as of the close of each business day: 0.65% to the portion of the daily net assets not exceeding $1 billion and 0.60% to the portion of the daily net assets in excess of $1 billion.
Pursuant to an Administration Agreement with Morgan Stanley Services Company Inc. ("the Administrator"), an affiliate of the Investment Adviser, the Fund pays an administration fee, accrued daily and payable monthly, by applying the annual rate of 0.08% to the Fund's daily net assets.
Under an agreement between the Administrator and State Street Bank and Trust Company ("State Street"), State Street provides certain administrative services to the Fund. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
3. Plan of Distribution
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Adviser and Administrator. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan provides that the Fund will pay the Distributor a fee which is accrued daily and paid monthly at the following annual rates: (i) Class A — up to 0.25% of the average daily net assets of Class A shares; (ii) Class B — up to 1.0% of the average daily net assets of Class B shares; (iii) Class C — up to 1.0% of the average daily net assets of Class C shares; (iv) Class R — up to 0.50% of the average daily net assets of Class R shares; and (v) Class W — up to 0.35% of the average daily net assets of Class W shares.
45
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2008 continued
In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by the Distributor but not yet recovered may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B shares. Although there is no legal obligation for the Fund to pay expenses incurred in excess of payments made to the Distributor under the Plan and the proceeds of contingent deferred sales charges paid by investors upon redemption of shares, if for any reason the Plan is terminated, the Trustees will consider at that time the manner in which to treat such expenses. The Distributor has advised the Fund that such excess amounts totaled $18,009,607 at October 31, 2008.
In the case of Class A, Class C, Class R and Class W shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25%, 1.00%, 0.50% or 0.35% of the average daily net assets of Class A, Class C, Class R or Class W shares, respectively, will not be reimbursed by the Fund through payments in any subsequent year, except that expenses representing a gross sales credit to Morgan Stanley Financial Advisors and other authorized financial representatives at the time of sale may be reimbursed in the subsequent calendar year. For the year ended October 31, 2008, the distribution fee was accrued for Class A, Class C, Class R and Class W shares at the annual rate of 0.25%, 0.97%, 0.50% and 0.35%, respectively.
The Distributor has informed the Fund that for the year ended October 31, 2008, it received contingent deferred sales charges from certain redemptions of the Fund's Class A shares, Class B shares and Class C shares of $896, $68,953 and $1,935, respectively and received $62,498 in front-end sales charges from sales of the Fund's Class A shares. The respective shareholders pay such charges which are not an expense of the Fund.
4. Security Transactions and Transactions with Affiliates
The Fund invests in Morgan Stanley Institutional Liquidity Funds-Money Market Portfolio - Institutional Class, an open-end management investment company managed by an affiliate of the Investment Adviser, both directly, and as a portion of the securities held as collateral on loaned securities. Investment advisory fees paid by the Fund are reduced by an amount equal to the advisory and administrative service fees paid by Morgan Stanley Institutional Liquidity Funds-Money Market Portfolio - Institutional Class with respect to assets invested by the Fund in Morgan Stanley Institutional Liquidity Funds-Money Market Portfolio - Institutional Class. For the year ended October 31, 2008, advisory fees paid were reduced by $18,201 relating to the Fund's investment in Morgan Stanley Institutional Liquidity Funds-Money Market Portfolio - Institutional Class. Income distributions earned by the Fund are recorded as dividends from affiliate i n the Statement of Operations and totaled $512,890 for year ended October 31, 2008. During the year ended October 31, 2008, cost of purchases and sales of
46
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2008 continued
investments in Morgan Stanley Institutional Liquidity Funds-Money Market Portfolio - Institutional Class aggregated $98,196,137 and $89,021,210, respectively.
The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the year ended October 31, 2008 aggregated $79,059,587 and $130,936,782, respectively.
Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator, and Distributor, is the Fund's transfer agent.
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan") which allows each independent Trustee to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Trustees. Each eligible Trustee generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund.
5. Purposes of and Risks Relating to Certain Financial Instruments
The Fund may enter into forward contracts for many purposes, including to facilitate settlement of foreign currency denominated portfolio transactions or to manage foreign currency exposure associated with foreign currency denominated securities.
To hedge against adverse interest rate, foreign currency and market risks, the Fund may purchase and sell interest rate, currency and index futures ("futures contracts").
Forward contracts and futures contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rates underlying the forward contracts or an unfavorable change in the value of the securities underlying the futures contracts. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
The Fund may lend securities to qualified financial institutions, such as broker-dealers, to earn additional income. Risks in securities lending transactions are that a borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.
At October 31, 2008, investments in securities of issuers in Japan and United Kingdom represented 28.0% and 21.3%, respectively, of the Fund's net assets. These investments, as well as other non-U.S. investments, which involve risks and considerations not present with respect to U.S. securities, may be affected by economic or political developments in these countries.
47
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2008 continued
At October 31, 2008, the Fund's cash balance consisted principally of interest deposits with State Street Bank and Trust Company, the Fund's custodian.
6. Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:
FOR THE YEAR ENDED OCTOBER 31, 2008 | FOR THE YEAR ENDED OCTOBER 31, 2007 | ||||||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||||||||||||
CLASS A SHARES | |||||||||||||||||||
Sold | 1,856,307 | $ | 26,102,984 | 1,302,836 | $ | 19,623,783 | |||||||||||||
Conversion from Class B | 946,937 | 14,002,051 | 5,091,894 | 77,565,898 | |||||||||||||||
Reinvestment of dividends and distributions | 193,424 | 2,970,999 | 100,076 | 1,363,035 | |||||||||||||||
Redeemed | (3,127,917 | ) | (41,637,171 | ) | (6,035,617 | ) | (82,173,956 | ) | |||||||||||
Net increase (decrease) — Class A | (131,249 | ) | 1,438,863 | 459,189 | 16,378,760 | ||||||||||||||
CLASS B SHARES | |||||||||||||||||||
Sold | 587,224 | 8,741,208 | 822,174 | 12,075,106 | |||||||||||||||
Conversion to Class A | (953,850 | ) | (14,002,051 | ) | (5,156,674 | ) | (77,565,898 | ) | |||||||||||
Reinvestment of dividends and distributions | 35,376 | 540,896 | 87,184 | 1,179,605 | |||||||||||||||
Redeemed | (2,353,773 | ) | (31,431,192 | ) | (2,596,205 | ) | (37,102,280 | ) | |||||||||||
Net decrease — Class B | (2,685,023 | ) | (36,151,139 | ) | (6,843,521 | ) | (101,413,467 | ) | |||||||||||
CLASS C SHARES | |||||||||||||||||||
Sold | 169,988 | 2,437,002 | 270,024 | 3,923,053 | |||||||||||||||
Reinvestment of dividends and distributions | 24,520 | 371,732 | 19,416 | 261,724 | |||||||||||||||
Redeemed | (596,305 | ) | (7,952,119 | ) | (420,507 | ) | (6,030,252 | ) | |||||||||||
Net decrease — Class C | (401,797 | ) | (5,143,384 | ) | (131,067 | ) | (1,845,475 | ) | |||||||||||
CLASS I SHARES@@ | |||||||||||||||||||
Sold | 33,461 | 425,230 | 71,254 | 1,048,307 | |||||||||||||||
Reinvestment of dividends and distributions | 22,722 | 349,696 | 28,871 | 394,384 | |||||||||||||||
Redeemed | (321,825 | ) | (4,133,122 | ) | (490,485 | ) | (7,282,421 | ) | |||||||||||
Net decrease — Class I | (265,642 | ) | (3,358,197 | ) | (390,360 | ) | (5,839,730 | ) | |||||||||||
CLASS R SHARES@@@ | |||||||||||||||||||
Sold | 7,072 | 100,003 | — | — | |||||||||||||||
Net increase — Class R | 7,072 | 100,003 | — | — | |||||||||||||||
CLASS W SHARES@@@ | |||||||||||||||||||
Sold | 7,072 | 100,003 | — | — | |||||||||||||||
Net increase — Class W | 7,072 | 100,003 | — | — | |||||||||||||||
Net decrease in Fund | (3,469,567 | ) | $ | (43,013,851 | ) | (6,905,759 | ) | $ | (92,719,912 | ) |
@@ Formerly Class D shares. Renamed Class I shares effective March 31, 2008.
@@@ Shares were first issued on March 31, 2008.
48
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2008 continued
7. Federal Income Tax Status
The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital.
The tax character of distributions paid was as follows:
FOR THE YEAR ENDED OCTOBER 31, 2008 | FOR THE YEAR ENDED OCTOBER 31, 2007 | ||||||||||
Ordinary income | $ | 4,680,878 | $ | 3,584,449 | |||||||
As of October 31, 2008, the tax-basis components of accumulated losses were as follows: | |||||||||||
Net accumulated earnings | — | ||||||||||
Capital loss carryforward | (10,683,669 | ) | |||||||||
Temporary differences | (3,417 | ) | |||||||||
Net unrealized depreciation | (42,007,440 | ) | |||||||||
Total accumulated losses | $ | (52,694,526 | ) |
During the year ended October 31, 2008, the Fund utilized $18,462,639 of its net capital loss carryforward. As of October 31, 2008, the Fund had a net capital loss carryforward of $10,683,669, to offset future capital gains to the extent provided by regulations, which will expire on October 31, 2011.
As of October 31, 2008, the Fund had temporary book/tax differences primarily attributable to the mark-to-market of open forward foreign currency exchange contracts and passive foreign investment companies ("PFICs") and capital loss deferrals on wash sales.
Permanent differences, primarily due to foreign currency losses, tax adjustments on PFICs sold by the Fund and a net operating loss, resulted in the following reclassifications among the Fund's components of net assets at October 31, 2008:
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME | ACCUMULATED NET REALIZED LOSS | PAID-IN-CAPITAL | |||||||||
$ | (1,672,439 | ) | $ | 2,182,570 | $ | (510,131 | ) |
49
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2008 continued
8. Expense Offset
The expense offset represents a reduction of the fees and expenses for interest earned on cash balances maintained by the Fund with the transfer agent.
9. Accounting Pronouncements
On September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("SFAS 157"), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.
On March 19, 2008, FASB released Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 ("SFAS 161"). SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk related contingent features in derivative agreements. The application of SFAS 161 is required for fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. At this time, management is evaluating the implications of SFAS 161 and its impact on the financial statements has not yet been determined.
50
Morgan Stanley International Fund
Financial Highlights
Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE YEAR ENDED OCTOBER 31, | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||
Net asset value, beginning of period | $ | 16.94 | $ | 13.14 | $ | 10.70 | $ | 9.19 | $ | 8.03 | |||||||||||||
Income from investment operations: | |||||||||||||||||||||||
Net investment income(1) | 0.24 | 0.15 | 0.14 | 0.13 | 0.06 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (7.61 | ) | 3.86 | 2.52 | 1.50 | 1.20 | |||||||||||||||||
Total income (loss) from investment operations | (7.37 | ) | 4.01 | 2.66 | 1.63 | 1.26 | |||||||||||||||||
Less dividends from net investment income | (0.28 | ) | (0.21 | ) | (0.22 | ) | (0.12 | ) | (0.10 | ) | |||||||||||||
Net asset value, end of period | $ | 9.29 | $ | 16.94 | $ | 13.14 | $ | 10.70 | $ | 9.19 | |||||||||||||
Total Return(2) | (44.19 | )% | 31.03 | % | 25.21 | % | 17.65 | % | 15.89 | % | |||||||||||||
Ratios to Average Net Assets(3): | |||||||||||||||||||||||
Total expenses (before expense offset) | 1.36 | %(5) | 1.33 | %(4)(5) | 1.30 | %(4) | 1.30 | % | 1.57 | % | |||||||||||||
Net investment income | 1.71 | %(5) | 1.18 | %(4)(5) | 1.18 | %(4) | 1.27 | % | 0.67 | % | |||||||||||||
Supplemental Data: | |||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 104,619 | $ | 193,043 | $ | 143,730 | $ | 115,680 | $ | 83,766 | |||||||||||||
Portfolio turnover rate | 31 | % | 22 | % | 13 | % | 22 | % | 33 | % |
(1) The per share amounts were computed using an average number of shares outstanding during the period.
(2) Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.
(3) Reflects overall Fund ratios for investment income and non-class specific expenses.
(4) If the Fund had borne all its expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2007 | 1.34 | % | 1.17 | % | |||||||
October 31, 2006 | 1.32 | 1.16 |
(5) Reflects rebate of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Fund-Money Market Portfolio — Institutional Class during the period. The rebate had an effect of a 0.01% for the period ended October 31, 2008 and an effect of less than 0.005% for the period ended October 31, 2007.
See Notes to Financial Statements
51
Morgan Stanley International Fund
Financial Highlights continued
FOR THE YEAR ENDED OCTOBER 31, | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||
Class B Shares | |||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||
Net asset value, beginning of period | $ | 16.69 | $ | 12.97 | $ | 10.55 | $ | 9.06 | $ | 7.93 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)(1) | 0.13 | 0.08 | 0.05 | 0.05 | (0.01 | ) | |||||||||||||||||
Net realized and unrealized gain (loss) | (7.53 | ) | 3.75 | 2.49 | 1.48 | 1.19 | |||||||||||||||||
Total income (loss) from investment operations | (7.40 | ) | 3.83 | 2.54 | 1.53 | 1.18 | |||||||||||||||||
Less dividends from net investment income | (0.10 | ) | (0.11 | ) | (0.12 | ) | (0.04 | ) | (0.05 | ) | |||||||||||||
Net asset value, end of period | $ | 9.19 | $ | 16.69 | $ | 12.97 | $ | 10.55 | $ | 9.06 | |||||||||||||
Total Return(2) | (44.49 | )% | 29.58 | % | 24.28 | % | 16.88 | % | 14.87 | % | |||||||||||||
Ratios to Average Net Assets(3): | |||||||||||||||||||||||
Total expenses (before expense offset) | 2.10 | %(5) | 2.08 | %(4)(5) | 2.05 | %(4) | 2.05 | % | 2.33 | % | |||||||||||||
Net investment income (loss) | 0.90 | %(5) | 0.43 | %(4)(5) | 0.43 | %(4) | 0.52 | % | (0.09 | )% | |||||||||||||
Supplemental Data: | |||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 30,185 | $ | 99,635 | $ | 166,184 | $ | 163,974 | $ | 193,796 | |||||||||||||
Portfolio turnover rate | 31 | % | 22 | % | 13 | % | 22 | % | 33 | % |
(1) The per share amounts were computed using an average number of shares outstanding during the period.
(2) Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.
(3) Reflects overall Fund ratios for investment income and non-class specific expenses.
(4) If the Fund had borne all its expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2007 | 2.09 | % | 0.42 | % | |||||||
October 31, 2006 | 2.07 | 0.41 |
(5) Reflects rebate of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Fund-Money Market Portfolio — Institutional Class during the period. The rebate had an effect of a 0.01% for the period ended October 31, 2008 and an effect of less than 0.005% for the period ended October 31, 2007.
See Notes to Financial Statements
52
Morgan Stanley International Fund
Financial Highlights continued
FOR THE YEAR ENDED OCTOBER 31, | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||
Net asset value, beginning of period | $ | 16.63 | $ | 12.94 | $ | 10.54 | $ | 9.06 | $ | 7.92 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income (loss)(1) | 0.13 | 0.06 | 0.06 | 0.05 | (0.01 | ) | |||||||||||||||||
Net realized and unrealized gain (loss) | (7.47 | ) | 3.76 | 2.48 | 1.47 | 1.20 | |||||||||||||||||
Total income (loss) from investment operations | (7.34 | ) | 3.82 | 2.54 | 1.52 | 1.19 | |||||||||||||||||
Less dividends from net investment income | (0.18 | ) | (0.13 | ) | (0.14 | ) | (0.04 | ) | (0.05 | ) | |||||||||||||
Net asset value, end of period | $ | 9.11 | $ | 16.63 | $ | 12.94 | $ | 10.54 | $ | 9.06 | |||||||||||||
Total Return(2) | (44.50 | )% | 29.58 | % | 24.34 | % | 16.81 | % | 15.03 | % | |||||||||||||
Ratios to Average Net Assets(3): | |||||||||||||||||||||||
Total expenses (before expense offset) | 2.07 | %(5) | 2.08 | %(4)(5) | 2.04 | %(4) | 2.05 | % | 2.31 | % | |||||||||||||
Net investment income (loss) | 0.96 | %(5) | 0.43 | %(4)(5) | 0.44 | %(4) | 0.52 | % | (0.07 | )% | |||||||||||||
Supplemental Data: | |||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 16,660 | $ | 37,085 | $ | 30,552 | $ | 22,856 | $ | 24,527 | |||||||||||||
Portfolio turnover rate | 31 | % | 22 | % | 13 | % | 22 | % | 33 | % |
(1) The per share amounts were computed using an average number of shares outstanding during the period.
(2) Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.
(3) Reflects overall Fund ratios for investment income and non-class specific expenses.
(4) If the Fund had borne all its expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2007 | 2.09 | % | 0.42 | % | |||||||
October 31, 2006 | 2.06 | 0.42 |
(5) Reflects rebate of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Fund-Money Market Portfolio — Institutional Class during the period. The rebate had an effect of a 0.01% for the period ended October 31, 2008 and an effect of less than 0.005% for the period ended October 31, 2007.
See Notes to Financial Statements
53
Morgan Stanley International Fund
Financial Highlights continued
FOR THE YEAR ENDED OCTOBER 31, | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||
Class I Shares@@ | |||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||
Net asset value, beginning of period | $ | 17.00 | $ | 13.23 | $ | 10.76 | $ | 9.24 | $ | 8.07 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income(1) | 0.27 | 0.21 | 0.15 | 0.15 | 0.08 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (7.64 | ) | 3.83 | 2.57 | 1.51 | 1.20 | |||||||||||||||||
Total income (loss) from investment operations | (7.37 | ) | 4.04 | 2.72 | 1.66 | 1.28 | |||||||||||||||||
Less dividends from net investment income | (0.30 | ) | (0.27 | ) | (0.25 | ) | (0.14 | ) | (0.11 | ) | |||||||||||||
Net asset value, end of period | $ | 9.33 | $ | 17.00 | $ | 13.23 | $ | 10.76 | $ | 9.24 | |||||||||||||
Total Return(2) | (44.16 | )% | 31.33 | % | 25.61 | % | 18.03 | % | 15.97 | % | |||||||||||||
Ratios to Average Net Assets(3): | |||||||||||||||||||||||
Total expenses (before expense offset) | 1.10 | %(5) | 1.08 | %(4)(5) | 1.05 | %(4) | 1.05 | % | 1.33 | % | |||||||||||||
Net investment income | 1.95 | %(5) | 1.43 | %(4)(5) | 1.43 | %(4) | 1.52 | % | 0.91 | % | |||||||||||||
Supplemental Data: | |||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 10,085 | $ | 22,888 | $ | 22,974 | $ | 134,631 | $ | 143,890 | |||||||||||||
Portfolio turnover rate | 31 | % | 22 | % | 13 | % | 22 | % | 33 | % |
@@ Formerly Class D shares. Renamed Class I shares effective March 31, 2008.
(1) The per share amounts were computed using an average number of shares outstanding during the period.
(2) Calculated based on the net asset value as of the last business day of the period.
(3) Reflects overall Fund ratios for investment income and non-class specific expenses.
(4) If the Fund had borne all its expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2007 | 1.09 | % | 1.42 | % | |||||||
October 31, 2006 | 1.07 | 1.41 |
(5) Reflects rebate of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Fund-Money Market Portfolio — Institutional Class during the period. The rebate had an effect of a 0.01% for the period ended October 31, 2008 and an effect of less than 0.005% for the period ended October 31, 2007.
See Notes to Financial Statements
54
Morgan Stanley International Fund
Financial Highlights continued
FOR THE PERIOD MARCH 31, 2008@@@ THROUGH OCTOBER 31, 2008 | |||||||
Class R Shares | |||||||
Selected Per Share Data: | |||||||
Net asset value, beginning of period | $ | 14.14 | |||||
Loss from investment operations: | |||||||
Net investment income(1) | 0.15 | ||||||
Net realized and unrealized loss | (5.01 | ) | |||||
Total loss from investment operations | (4.86 | ) | |||||
Less dividends from net investment income | 0.00 | ||||||
Net asset value, end of period | $ | 9.28 | |||||
Total Return(2)(5) | (34.44 | )% | |||||
Ratios to Average Net Assets(3)(6): | |||||||
Total expenses (before expense offset) | 1.62 | %(4) | |||||
Net investment income | 1.96 | %(4) | |||||
Supplemental Data: | |||||||
Net assets, end of period, in thousands | $ | 66 | |||||
Portfolio turnover rate(5) | 31 | % |
@@@ The date shares were first issued.
(1) The per share amounts were computed using an average number of shares outstanding during the period.
(2) Calculated based on the net asset value as of the last business day of the period.
(3) Reflects overall Fund ratios for investment income and non-class specific expenses.
(4) Reflects rebate of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Fund-Money Market Portfolio — Institutional Class during the period. The rebate had an effect of a 0.01%.
(5) Not annualized.
(6) Annualized.
See Notes to Financial Statements
55
Morgan Stanley International Fund
Financial Highlights continued
FOR THE PERIOD MARCH 31, 2008@@@ THROUGH OCTOBER 31, 2008 | |||||||
Class W Shares | |||||||
Selected Per Share Data: | |||||||
Net asset value, beginning of period | $ | 14.14 | |||||
Loss from investment operations: | |||||||
Net investment income(1) | 0.16 | ||||||
Net realized and unrealized loss | (5.02 | ) | |||||
Total loss from investment operations | (4.86 | ) | |||||
Less dividends from net investment income | 0.00 | ||||||
Net asset value, end of period | $ | 9.28 | |||||
Total Return(2)(5) | (34.37 | )% | |||||
Ratios to Average Net Assets(3)(6): | |||||||
Total expenses (before expense offset) | 1.47 | %(4) | |||||
Net investment income | 2.11 | %(4) | |||||
Supplemental Data: | |||||||
Net assets, end of period, in thousands | $ | 66 | |||||
Portfolio turnover rate(5) | 31 | % |
@@@ The date shares were first issued.
(1) The per share amounts were computed using an average number of shares outstanding during the period.
(2) Calculated based on the net asset value as of the last business day of the period.
(3) Reflects overall Fund ratios for investment income and non-class specific expenses.
(4) Reflects rebate of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Fund-Money Market Portfolio — Institutional Class during the period. The rebate had an effect of a 0.01%.
(5) Not annualized.
(6) Annualized.
See Notes to Financial Statements
56
Morgan Stanley International Fund
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
Morgan Stanley International Fund:
We have audited the accompanying statement of assets and liabilities of Morgan Stanley International Fund (the "Fund"), including the portfolio of investments, as of October 31, 2008, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2008, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Morgan Stanley International Fund as of October 31, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
December 29, 2008
57
Morgan Stanley International Fund
An Important Notice Concerning Our U.S. Privacy Policy (unaudited)
We are required by federal law to provide you with a copy of our Privacy Policy annually.
The following Policy applies to current and former individual investors in Morgan Stanley Advisor funds. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law.
We Respect Your Privacy
We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information."
1. What Personal Information Do We Collect About You?
To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources.
For example:
n We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us.
n We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources.
n We may obtain information about your creditworthiness and credit history from consumer reporting agencies.
n We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements.
n If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, your use of our Web sites and your product and service
58
Morgan Stanley International Fund
An Important Notice Concerning Our U.S. Privacy Policy (unaudited) continued
preferences, through the use of "cookies." "Cookies" recognize your computer each time your return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies.
2. When Do We Disclose Personal Information We Collect About You?
To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law.
A. Information We Disclose to Our Affiliated Companies. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law.
B. Information We Disclose to Third Parties. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to nonaffiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal informatio n with others except to fulfill that limited purpose.
3. How Do We Protect the Security and Confidentiality of Personal Information We Collect About You?
We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information.
59
Morgan Stanley International Fund
Trustee and Officer Information (unaudited)
Independent Trustees:
Name, Age and Address of Independent Trustee | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Independent Trustee** | Other Directorships Held by Independent Trustee | ||||||||||||||||||
Frank L. Bowman (63) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | Trustee | Since August 2006 | President and Chief Executive Officer, Nuclear Energy Institute (policy organization) (since February 2005); Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); Chairperson of the Insurance Sub-Committee of the Insurance, Valuation and Compliance Committee (since February 2007); formerly, variously, Admiral in the U.S. Navy, Director of Naval Nuclear Propulsion Program and Deputy Administrator – Naval Reactors in the National Nuclear Security Administration at the U.S. Department of Energy (1996-2004). Honorary Knight Commander of the Most Excellent Order of the British Empire. | 180 | Director of the National Energy Foundation, the U.S. Energy Association, the American Council for Capital Formation and the Armed Services YMCA of the USA. | ||||||||||||||||||
Michael Bozic (67) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | Trustee | Since April 1994 | Private investor; Chairperson of the Insurance, Valuation and Compliance Committee (since October 2006); Director or Trustee of the Retail Funds (since April 1994) and Institutional Funds (since July 2003); formerly, Chairperson of the Insurance Committee (July 2006-September 2006); Vice Chairman of Kmart Corporation (December 1998-October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co. | 182 | Director of various business organizations. | ||||||||||||||||||
60
Morgan Stanley International Fund
Trustee and Officer Information (unaudited) continued
Name, Age and Address of Independent Trustee | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Independent Trustee** | Other Directorships Held by Independent Trustee | ||||||||||||||||||
Kathleen A. Dennis (55) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | Trustee | Since August 2006 | President, Cedarwood Associates (mutual fund and investment management) (since July 2006); Chairperson of the Money Market and Alternatives Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly, Senior Managing Director of Victory Capital Management (1993-2006). | 180 | Director of various non-profit organizations. | ||||||||||||||||||
Dr. Manuel H. Johnson (59) c/o Johnson Smick Group, Inc. 888 16th Street, N.W. Suite 740 Washington, D.C. 20006 | Trustee | Since July 1991 | Senior Partner, Johnson Smick International, Inc. (consulting firm); Chairperson of the Investment Committee (since October 2006) and Director or Trustee of the Retail Funds (since July 1991) and Institutional Funds (since July 2003); Co-Chairman and a founder of the Group of Seven Council (G7C) (international economic commission); formerly, Chairperson of the Audit Committee (July 1991-September 2006); Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury. | 182 | Director of NVR, Inc. (home construction); Director of Evergreen Energy. | ||||||||||||||||||
Joseph J. Kearns (66) c/o Kearns & Associates LLC PMB754 23852 Pacific Coast Highway Malibu, CA 90265 | Trustee | Since August 1994 | President, Kearns & Associates LLC (investment consulting); Chairperson of the Audit Committee (since October 2006) and Director or Trustee of the Retail Funds (since July 2003) and Institutional Funds (since August 1994); formerly, Deputy Chairperson of the Audit Committee (July 2003-September 2006) and Chairperson of the Audit Committee of the Institutional Funds (October 2001-July 2003); CFO of the J. Paul Getty Trust. | 183 | Director of Electro Rent Corporation (equipment leasing) and The Ford Family Foundation. | ||||||||||||||||||
61
Morgan Stanley International Fund
Trustee and Officer Information (unaudited) continued
Name, Age and Address of Independent Trustee | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Independent Trustee** | Other Directorships Held by Independent Trustee | ||||||||||||||||||
Michael F. Klein (49) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | Trustee | Since August 2006 | Managing Director, Aetos Capital, LLC (since March 2000) and Co-President, Aetos Alternatives Management, LLC (since January 2004); Chairperson of the Fixed-Income Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly, Managing Director, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management, President, Morgan Stanley Institutional Funds (June 1998-March 2000) and Principal, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management (August 1997-December 1999). | 180 | Director of certain investment funds managed or sponsored by Aetos Capital, LLC. Director of Sanitized AG and Sanitized Marketing AG (specialty chemicals). | ||||||||||||||||||
Michael E. Nugent (72) c/o Triumph Capital, L.P. 445 Park Avenue New York, NY 10022 | Chairperson of the Board and Trustee | Chairperson of the Boards since July 2006 and Trustee since July 1991 | General Partner, Triumph Capital, L.P. (private investment partnership); Chairperson of the Boards of the Retail Funds and Institutional Funds (since July 2006); Director or Trustee of the Retail Funds (since July 1991) and Institutional Funds (since July 2001); formerly, Chairperson of the Insurance Committee (until July 2006). | 182 | None. | ||||||||||||||||||
62
Morgan Stanley International Fund
Trustee and Officer Information (unaudited) continued
Name, Age and Address of Independent Trustee | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Independent Trustee** | Other Directorships Held by Independent Trustee | ||||||||||||||||||
W. Allen Reed (61) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | Trustee | Since August 2006 | Chairperson of the Equity Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly, President and CEO of General Motors Asset Management; Chairman and Chief Executive Officer of the GM Trust Bank and Corporate Vice President of General Motors Corporation (August 1994-December 2005). | 180 | Director of Temple-Inland Industries (packaging and forest products); Director of Legg Mason, Inc. and Director of the Auburn University Foundation. | ||||||||||||||||||
Fergus Reid (76) c/o Lumelite Plastics Corporation 85 Charles Colman Blvd. Pawling, NY 12564 | Trustee | Since June 1992 | Chairman of Lumelite Plastics Corporation; Chairperson of the Governance Committee and Director or Trustee of the Retail Funds (since July 2003) and Institutional Funds (since June 1992). | 183 | Trustee and Director of certain investment companies in the JPMorgan Funds complex managed by J.P. Morgan Investment Management Inc. | ||||||||||||||||||
Interested Trustee:
Name, Age and Address of Interested Trustee | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Interested Trustee** | Other Directorships Held by Interested Trustee | ||||||||||||||||||
James F. Higgins (60) c/o Morgan Stanley Trust Harborside Financial Center Plaza Two Jersey City, NJ 07311 | Trustee | Since June 2000 | Director or Trustee of the Retail Funds (since June 2000) and Institutional Funds (since July 2003); Senior Advisor of Morgan Stanley (since August 2000). | 181 | Director of AXA Financial, Inc. and The Equitable Life Assurance Society of the United States (financial services). | ||||||||||||||||||
* This is the earliest date the Trustee began serving the funds advised by Morgan Stanley Investment Advisors Inc. (the "Investment Adviser") (the "Retail Funds") or the funds advised by Morgan Stanley Investment Management Inc. and Morgan Stanley AIP GP LP (the "Institutional Funds").
** The Fund Complex includes all open-end and closed-end funds (including all of their portfolios) advised by the Investment Adviser and any funds that have an investment adviser that is an affiliated person of the Investment Adviser (including, but not limited to, Morgan Stanley Investment Management Inc.).
63
Morgan Stanley International Fund
Trustee and Officer Information (unaudited) continued
Executive Officers:
Name, Age and Address of Executive Officer | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | ||||||||||||
Randy Takian (34) 522 Fifth Avenue New York, NY 10036 | President and Principal Executive Officer | President and Principal Executive Officer (since September 2008) | President and Principal Executive Officer (since September 2008) of funds in the Fund Complex; President and Chief Executive Officer of Morgan Stanley Services Company Inc. (since September 2008). President of the Investment Adviser (since July 2008). Head of the Retail and Intermediary business within Morgan Stanley Investment Management (since July 2008). Head of Liquidity and Bank Trust business (since July 2008) and the Latin American franchise (since July 2008) at Morgan Stanley Investment Management. Managing Director, Director and/or Officer of the Investment Adviser and various entities affiliated with the Investment Adviser. Formerly Head of Strategy and Product Development for the Alternatives Group and Senior Loan Investment Management. Formerly with Bank of America (July 1996-March 2006), most recently as Head of the Strategy, Mergers and Acquisitions team for Global Wealth and Investment Management. | ||||||||||||
Kevin Klingert (46) 522 Fifth Avenue New York, NY 10036 | Vice President | Since June 2008 | Chief Operating Officer of the Global Fixed Income Group of Morgan Stanley Investment Management Inc. and the Investment Adviser (since March 2008). Head of Global Liquidity Portfolio Management and co-Head of Liquidity Credit Research of Morgan Stanley Investment Management (since December 2007). Managing Director of Morgan Stanley Investment Management Inc. and the Investment Adviser (since December 2007). Previously, Managing Director on the Management Committee and head of Municipal Portfolio Management and Liquidity at BlackRock (October 1991 to January 2007). | ||||||||||||
Dennis F. Shea (55) 522 Fifth Avenue New York, NY 10036 | Vice President | Since February 2006 | Managing Director and (since February 2006) Chief Investment Officer – Global Equity of Morgan Stanley Investment Management; Vice President of the Retail Funds and Institutional Funds (since February 2006). Formerly, Managing Director and Director of Global Equity Research at Morgan Stanley. | ||||||||||||
Amy R. Doberman (46) 522 Fifth Avenue New York, NY 10036 | Vice President | Since July 2004 | Managing Director and General Counsel, U.S. Investment Management of Morgan Stanley Investment Management (since July 2004); Vice President of the Retail Funds and Institutional Funds (since July 2004); Vice President of the Van Kampen Funds (since August 2004); Secretary (since February 2006) and Managing Director (since July 2004) of the Investment Adviser and various entities affiliated with the Investment Adviser. Formerly, Managing Director and General Counsel – Americas, UBS Global Asset Management (July 2000-July 2004). | ||||||||||||
Carsten Otto (45) 522 Fifth Avenue New York, NY 10036 | Chief Compliance Officer | Since October 2004 | Managing Director and Global Head of Compliance for Morgan Stanley Investment Management (since April 2007); and Chief Compliance Officer of the Retail Funds and Institutional Funds (since October 2004). Formerly, U.S. Director of Compliance (October 2004-April 2007) and Assistant Secretary and Assistant General Counsel of the Retail Funds. | ||||||||||||
Stefanie V. Chang Yu (42) 522 Fifth Avenue New York, NY 10036 | Vice President | Since December 1997 | Managing Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Vice President of the Retail Funds (since July 2002) and Institutional Funds (since December 1997). Formerly, Secretary of various entities affiliated with the Investment Adviser. | ||||||||||||
64
Morgan Stanley International Fund
Trustee and Officer Information (unaudited) continued
Name, Age and Address of Executive Officer | Position(s) Held with Registrant | Term of Office and Length of Time Served* | Principal Occupation(s) During Past 5 Years | ||||||||||||
Francis J. Smith (43) c/o Morgan Stanley Trust Harborside Financial Center Plaza Two Jersey City, NJ 07311 | Treasurer and Chief Financial Officer | Treasurer since July 2003 and Chief Financial Officer since September 2002 | Executive Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Treasurer and Chief Financial Officer of the Retail Funds (since July 2003). | ||||||||||||
Mary E. Mullin (41) 522 Fifth Avenue New York, NY 10036 | Secretary | Since June 1999 | Executive Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Secretary of the Retail Funds (since July 2003) and Institutional Funds (since June 1999). | ||||||||||||
* This is the earliest date the Officer began serving the Retail Funds or Institutional Funds.
2008 Federal Tax Notice (unaudited)
For Federal income tax purposes, the following information is furnished with respect to the Fund's earnings for its taxable year ended October 31, 2008. During the taxable year, the Fund passed through foreign tax credits of $580,957, which were derived from $4,144,112 of net income from sources within foreign countries.
In January, the Fund provides tax information to shareholders for the preceding calendar year.
65
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Trustees
Frank L. Bowman
Michael Bozic
Kathleen A. Dennis
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Michael E. Nugent
W. Allen Reed
Fergus Reid
Officers
Michael E. Nugent
Chairperson of the Board
Randy Takian
President and Principal Executive Officer
Kevin Klingert
Vice President
Dennis F. Shea
Vice President
Amy R. Doberman
Vice President
Carsten Otto
Chief Compliance Officer
Stefanie V. Chang Yu
Vice President
Francis J. Smith
Treasurer and Chief Financial Officer
Mary E. Mullin
Secretary
Transfer Agent
Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
Legal Counsel
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019
Counsel to the Independent Trustees
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036
Investment Adviser
Morgan Stanley Investment Advisors Inc.
522 Fifth Avenue
New York, New York 10036
This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its trustees. It is available, without charge, by calling (800) 869-NEWS.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
Morgan Stanley Distributors Inc., member FINRA.
© 2008 Morgan Stanley
INLANN
IU08-06209P-Y10/08
INVESTMENT MANAGEMENT
Morgan Stanley
International Fund
Annual Report
October 31, 2008
Item 2. Code of Ethics.
(a) The Trust/Fund has adopted a code of ethics (the “Code of Ethics”) that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Trust/Fund or a third party.
(b) No information need be disclosed pursuant to this paragraph.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Trust/Fund’s Code of Ethics is attached hereto as Exhibit 12 A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund’s Board of Trustees has determined that Joseph J. Kearns, an “independent” Trustee, is an “audit committee financial expert” serving on its audit committee. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committ ee and Board of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2008
|
| Registrant |
| Covered Entities(1) |
| ||
Audit Fees |
| $ | 39,725 |
| N/A |
| |
|
|
|
|
|
| ||
Non-Audit Fees |
|
|
|
|
| ||
Audit-Related Fees |
| $ | — | (2) | $ | 6,418,000 | (2) |
Tax Fees |
| $ | 7,797 | (3) | $ | 881,000 | (4) |
All Other Fees |
| $ |
| $ |
| ||
Total Non-Audit Fees |
| $ | 7,797 |
| $ | 7,299,000 |
|
|
|
|
|
|
| ||
Total |
| $ | 47,522 |
| $ | 7,299,000 |
|
2007
|
| Registrant |
| Covered Entities(1) |
| ||
Audit Fees |
| $ | 50,000 |
| N/A |
| |
|
|
|
|
|
| ||
Non-Audit Fees |
|
|
|
|
| ||
Audit-Related Fees |
| $ | — | (2) | $ | 5,041,000 | (2) |
Tax Fees |
| $ | 7,447 | (3) | $ | 761,000 | (4) |
All Other Fees |
| $ |
| $ | (5) | ||
Total Non-Audit Fees |
| $ | 7,447 |
| $ | 5,802,000 |
|
|
|
|
|
|
| ||
Total |
| $ | 57,447 |
| $ | 5,802,000 |
|
N/A- Not applicable, as not required by Item 4. | ||
|
| |
(1) | Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant. | |
(2) | Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities’ and funds advised by the Adviser or its affiliates, specifically data verification and agreed-upon procedures related to asset securitizations and agreed-upon procedures engagements. | |
(3) | Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the preparation and review of the Registrant’s tax returns. | |
(4) | Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the review of Covered Entities’ tax returns. | |
(5) | All other fees represent project management for future business applications and improving business and operational processes. | |
(e)(1) The audit committee’s pre-approval policies and procedures are as follows:
APPENDIX A
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS
AS ADOPTED AND AMENDED JULY 23, 2004,(1)
1. Statement of Principles
The Audit Committee of the Board is required to review and, in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities in order to assure that services performed by the Independent Auditors do not impair the auditor’s independence from the Fund.
The SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committee’s administration of the engagement of the independent auditor. The SEC’s rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee (“general pre-approval”); or require the specific pre-approval of the Audit Committee or its delegate (“specific pre-approval”). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated) if it is to be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee.
The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations.
The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee’s responsibilities to pre-approve services performed by the Independent Auditors to management.
The Fund’s Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors’ independence.
(1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the “Policy”), adopted as of the date above, supersedes and replaces all prior versions that may have been adopted from time to time.
2. Delegation
As provided in the Act and the SEC’s rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
3. Audit Services
The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Fund’s financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items.
In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
4. Audit-related Services
Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Fund’s financial statements and, to the extent they are Covered Services, the Covered Entities or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC’s rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as “Audit services”; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved
by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
5. Tax Services
The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditor’s independence, and the SEC has stated that the Independent Auditors may provide such services.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
6. All Other Services
The Audit Committee believes, based on the SEC’s rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC’s rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
7. Pre-Approval Fee Levels or Budgeted Amounts
Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services.
8. Procedures
All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund’s Chief Financial Officer and must include a detailed description of the services to be rendered. The Fund’s Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the Independent Auditors and the Fund’s Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence.
The Audit Committee has designated the Fund’s Chief Financial Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Fund’s Chief Financial Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Fund’s Chief Financial Officer and management will immediately report to the chairman of the Audit Committee any breach of this Policy that comes to the attention of the Fund’s Chief Financial Officer or any member of management.
9. Additional Requirements
The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor’s independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with Independence Standards Board No. 1, and discussing with the Independent Auditors its methods and procedures for ensuring independence.
10. Covered Entities
Covered Entities include the Fund’s investment adviser(s) and any entity controlling, controlled by or under common control with the Fund’s investment adviser(s) that provides ongoing services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Fund’s audit committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include:
Morgan Stanley Retail Funds
Morgan Stanley Investment Advisors Inc.
Morgan Stanley & Co. Incorporated
Morgan Stanley DW Inc.
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Van Kampen Asset Management
Morgan Stanley Services Company, Inc.
Morgan Stanley Distributors Inc.
Morgan Stanley Trust FSB
Morgan Stanley Institutional Funds
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Advisors Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Morgan Stanley & Co. Incorporated
Morgan Stanley Distribution, Inc.
Morgan Stanley AIP GP LP
Morgan Stanley Alternative Investment Partners LP
(e)(2) Beginning with non-audit service contracts entered into on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services were pre-approved by the audit committee pursuant to the Audit Committee’s pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees/Directors has considered whether the provision of services other than audit services performed by the auditors to the Registrant and Covered Entities is compatible with maintaining the auditors’ independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Fund has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are:
Joseph Kearns, Michael Nugent and Allen Reed.
(b) Not applicable.
Item 6. Schedule of Investments
(a) See Item 1.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
The Fund’s/Trust’s and its Investment Advisor’s Proxy Voting Policies and Procedures are as follows:
FEBRUARY 28, 2008
MORGAN STANLEY INVESTMENT MANAGEMENT
PROXY VOTING POLICY AND PROCEDURES
I. POLICY STATEMENT
Introduction - Morgan Stanley Investment Management’s (“MSIM”) policy and procedures for voting proxies (“Policy”) with respect to securities held in the accounts of clients applies to those MSIM entities that provide discretionary investment management services and for which an MSIM entity has authority to vote proxies. This Policy is reviewed and updated as necessary to address new and evolving proxy voting issues and standards.
The MSIM entities covered by this Policy currently include the following: Morgan Stanley Investment Advisors Inc., Morgan Stanley AIP GP LP, Morgan Stanley Investment Management Inc., Morgan Stanley Investment Management Limited, Morgan Stanley Investment Management Company, Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan Stanley Investment Management Private Limited, Van Kampen Asset Management, and Van Kampen Advisors Inc. (each an “MSIM Affiliate” and collectively referred to as the “MSIM Affiliates” or as “we” below).
Each MSIM Affiliate will use its best efforts to vote proxies as part of its authority to manage, acquire and dispose of account assets. With respect to the MSIM registered management investment companies (Van Kampen, Institutional and Advisor Funds—collectively referred to herein as the “MSIM Funds”), each MSIM Affiliate will vote proxies under this Policy pursuant to authority granted under its applicable investment advisory agreement or, in the absence of such authority, as authorized by the Board of Directors/Trustees of the MSIM Funds. An MSIM Affiliate will not vote proxies if the “named fiduciary” for an ERISA account has reserved the authority for itself, or in the case of an account not governed by ERISA, the investment management or investment advisory agreement does not authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will vote proxies in a prudent and diligent manner and in the best interests of clients, including beneficiaries of and participants in a client’s benefit plan(s) for which the MSIM Affiliates manage assets, consistent with the objective of maximizing long-term investment returns (“Client Proxy Standard”). In certain situations, a client or its fiduciary may provide an MSIM Affiliate with a proxy voting policy. In these situations, the MSIM Affiliate will comply with the client’s policy.
Proxy Research Services - RiskMetrics Group ISS Governance Services (“ISS”) and Glass Lewis (together with other proxy research providers as we may retain from time to time, the “Research Providers”) are independent advisers that specialize in providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors, custodians, consultants, and other institutional investors. The services
provided include in-depth research, global issuer analysis, and voting recommendations. While we may review and utilize the recommendations of the Research Providers in making proxy voting decisions, we are in no way obligated to follow such recommendations. In addition to research, ISS provides vote execution, reporting, and recordkeeping.
Voting Proxies for Certain Non-U.S. Companies - Voting proxies of companies located in some jurisdictions, particularly emerging markets, may involve several problems that can restrict or prevent the ability to vote such proxies or entail significant costs. These problems include, but are not limited to: (i) proxy statements and ballots being written in a language other than English; (ii) untimely and/or inadequate notice of shareholder meetings; (iii) restrictions on the ability of holders outside the issuer’s jurisdiction of organization to exercise votes; (iv) requirements to vote proxies in person; (v) the imposition of restrictions on the sale of the securities for a period of time in proximity to the shareholder meeting; and (vi) requirements to provide local agents with power of attorney to facilitate our voting instructions. As a result, we vote clients’ non-U.S. proxies on a best efforts basis only, after weighing the costs and benefits of voting such proxies, consistent with the Client Proxy Standard. ISS has been retained to provide assistance in connection with voting non-U.S. proxies.
II. GENERAL PROXY VOTING GUIDELINES
To promote consistency in voting proxies on behalf of its clients, we follow this Policy (subject to any exception set forth herein), including the guidelines set forth below. These guidelines address a broad range of issues, and provide general voting parameters on proposals that arise most frequently. However, details of specific proposals vary, and those details affect particular voting decisions, as do factors specific to a given company. Pursuant to the procedures set forth herein, we may vote in a manner that is not in accordance with the following general guidelines, provided the vote is approved by the Proxy Review Committee (see Section III for description) and is consistent with the Client Proxy Standard. Morgan Stanley AIP GP LP will follow the procedures as described in Appendix A.
We endeavor to integrate governance and proxy voting policy with investment goals and to follow the Client Proxy Standard for each client. At times, this may result in split votes, for example when different clients have varying economic interests in the outcome of a particular voting matter (such as a case in which varied ownership interests in two companies involved in a merger result in different stakes in the outcome). We also may split votes at times based on differing views of portfolio managers, but such a split vote must be approved by the Proxy Review Committee.
We may abstain on matters for which disclosure is inadequate.
A. Routine Matters. We generally support routine management proposals. The following are examples of routine management proposals:
· Approval of financial statements and auditor reports.
· General updating/corrective amendments to the charter, articles of association or bylaws.
· Most proposals related to the conduct of the annual meeting, with the following exceptions. We generally oppose proposals that relate to “the transaction of such other business which may come before the meeting,” and open-ended requests for adjournment. However, where management specifically states the reason for requesting an adjournment and the requested adjournment would facilitate passage of a proposal that would otherwise be supported under this Policy (i.e. an uncontested corporate transaction), the adjournment request will be supported.
We generally support shareholder proposals advocating confidential voting procedures and independent tabulation of voting results.
B. Board of Directors
1. Election of directors: In the absence of a proxy contest, we generally support the board’s nominees for director except as follows:
a. We consider withholding support from or voting against interested directors if the company’s board does not meet market standards for director independence, or if otherwise we believe board independence is insufficient. We refer to prevalent market standards as promulgated by a stock exchange or other authority within a given market (e.g., New York Stock Exchange or Nasdaq rules for most U.S. companies, and The Combined Code on Corporate Governance in the United Kingdom). Thus, for an NYSE company with no controlling shareholder, we would expect that at a minimum a majority of directors should be independent as defined by NYSE. Where we view market standards as inadequate, we may withhold votes based on stronger independence standards. Market standards notwithstanding, we generally do not view long board tenure alone as a basis to classify a director as non-independent, although lack of board turnover and fresh perspective can be a negative factor in voting on directors.
i. At a company with a shareholder or group that controls the company by virtue of a majority economic interest in the company, we have a reduced expectation for board independence, although we believe the presence of independent directors can be helpful, particularly in staffing the audit committee, and at times we may withhold support from or vote against a nominee on the view the board or its committees are not sufficiently independent.
ii. We consider withholding support from or voting against a nominee if he or she is affiliated with a major shareholder that has representation on a board disproportionate to its economic interest.
b. Depending on market standards, we consider withholding support from or voting against a nominee who is interested and who is standing for election as a member of the company’s compensation, nominating or audit committee.
c. We consider withholding support from or voting against a nominee if we believe a direct conflict exists between the interests of the nominee and the public shareholders, including failure to meet fiduciary standards of care and/or loyalty. We may oppose directors where we conclude that actions of directors are unlawful, unethical or negligent. We consider opposing individual board members or an entire slate if we believe the board is entrenched and/or dealing inadequately with performance problems, and/or acting with insufficient independence between the board and management.
d. We consider withholding support from or voting against a nominee standing for election if the board has not taken action to implement generally accepted governance practices for which there is a “bright line” test. For example, in the context of the U.S. market, failure to eliminate a dead hand or slow hand poison pills would be seen as a basis for opposing one or more incumbent nominees.
e. In markets that encourage designated audit committee financial experts, we consider voting against members of an audit committee if no members are designated as such.
f. We consider withholding support from or voting against a nominee who has failed to attend at least 75% of board meetings within a given year without a reasonable excuse.
g. We consider withholding support from or voting against a nominee who serves on the board of directors of more than six companies (excluding investment companies). We also consider voting against a director who otherwise appears to have too many commitments to serve adequately on the board of the company.
2. Board independence: We generally support U.S. shareholder proposals requiring that a certain percentage (up to 662/3%) of the company’s board members be independent directors, and promoting all-independent audit, compensation and nominating/governance committees.
3. Board diversity: We consider on a case-by-case basis shareholder proposals urging diversity of board membership with respect to social, religious or ethnic group.
4. Majority voting: We generally support proposals requesting or requiring majority voting policies in election of directors, so long as there is a carve-out for plurality voting in the case of contested elections.
5. Proxy access: We consider on a case-by-case basis shareholder proposals to provide procedures for inclusion of shareholder nominees in company proxy statements.
6. Proposals to elect all directors annually: We generally support proposals to elect all directors annually at public companies (to “declassify” the Board of Directors) where such action is supported by the board, and otherwise consider the issue on a case-by-case basis based in part on overall takeover defenses at a company.
7. Cumulative voting: We generally support proposals to eliminate cumulative voting in the U.S. market context. (Cumulative voting provides that shareholders may concentrate their votes for one or a handful of candidates, a system that can enable a minority bloc to place representation on a board). U.S. proposals to establish cumulative voting in the election of directors generally will not be supported.
8. Separation of Chairman and CEO positions: We vote on shareholder proposals to separate the Chairman and CEO positions and/or to appoint a non-executive Chairman based in part on prevailing practice in particular markets, since the context for such a practice varies. In many non-U.S. markets, we view separation of the roles as a market standard practice, and support division of the roles in that context.
9. Director retirement age and term limits: Proposals recommending set director retirement ages or director term limits are voted on a case-by-case basis.
10. Proposals to limit directors’ liability and/or broaden indemnification of directors. Generally, we will support such proposals provided that the officers and directors are eligible for indemnification and liability protection if they have acted in good faith on company business and were found innocent of any civil or criminal charges for duties performed on behalf of the company.
C. Corporate transactions and proxy fights. We examine proposals relating to mergers, acquisitions and other special corporate transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings and recapitalizations) on a case-by-case basis. However, proposals for mergers or other significant transactions that are friendly and approved by the Research Providers generally will be supported and in those instances will not need to be reviewed by the Proxy Review Committee, where there is no
portfolio manager objection and where there is no material conflict of interest. We also analyze proxy contests on a case-by-case basis.
D. Changes in capital structure.
1. We generally support the following:
· Management and shareholder proposals aimed at eliminating unequal voting rights, assuming fair economic treatment of classes of shares we hold.
· Management proposals to increase the authorization of existing classes of common stock (or securities convertible into common stock) if: (i) a clear business purpose is stated that we can support and the number of shares requested is reasonable in relation to the purpose for which authorization is requested; and/or (ii) the authorization does not exceed 100% of shares currently authorized and at least 30% of the total new authorization will be outstanding.
· Management proposals to create a new class of preferred stock or for issuances of preferred stock up to 50% of issued capital, unless we have concerns about use of the authority for anti-takeover purposes.
· Management proposals to authorize share repurchase plans, except in some cases in which we believe there are insufficient protections against use of an authorization for anti-takeover purposes.
· Management proposals to reduce the number of authorized shares of common or preferred stock, or to eliminate classes of preferred stock.
· Management proposals to effect stock splits.
· Management proposals to effect reverse stock splits if management proportionately reduces the authorized share amount set forth in the corporate charter. Reverse stock splits that do not adjust proportionately to the authorized share amount generally will be approved if the resulting increase in authorized shares coincides with the proxy guidelines set forth above for common stock increases.
· Management proposals for higher dividend payouts.
2. We generally oppose the following (notwithstanding management support):
· Proposals to add classes of stock that would substantially dilute the voting interests of existing shareholders.
· Proposals to increase the authorized or issued number of shares of existing classes of stock that are unreasonably dilutive, particularly if there are no preemptive rights for existing shareholders.
· Proposals that authorize share issuance at a discount to market rates, except where authority for such issuance is de minimis, or if there is a special situation that we believe justifies such authorization (as may be the case, for example, at a company under severe stress and risk of bankruptcy).
· Proposals relating to changes in capitalization by 100% or more.
We consider on a case-by-case basis shareholder proposals to increase dividend payout ratios, in light of market practice and perceived market weaknesses, as well as individual company payout history and current circumstances. For example, currently we perceive low payouts to shareholders as a concern at some Japanese companies, but may deem a low payout ratio as appropriate for a growth company making good use of its cash, notwithstanding the broader market concern.
E. Takeover Defenses and Shareholder Rights
1. Shareholder rights plans: We generally support proposals to require shareholder approval or ratification of shareholder rights plans (poison pills). In voting on rights plans or similar takeover defenses, we consider on a case-by-case basis whether the company has demonstrated a need for the defense in the context of promoting long-term share value; whether provisions of the defense are in line with generally accepted governance principles; and the specific context if the proposal is made in the midst of a takeover bid or contest for control.
2. Supermajority voting requirements: We generally oppose requirements for supermajority votes to amend the charter or bylaws, unless the provisions protect minority shareholders where there is a large shareholder. In line with this view, in the absence of a large shareholder we support reasonable shareholder proposals to limit such supermajority voting requirements.
3. Shareholder rights to call meetings: We consider proposals to enhance shareholder rights to call meetings on a case-by-case basis.
4. Reincorporation: We consider management and shareholder proposals to reincorporate to a different jurisdiction on a case-by-case basis. We oppose such proposals if we believe the main purpose is to take advantage of laws or judicial precedents that reduce shareholder rights.
5. Anti-greenmail provisions: Proposals relating to the adoption of anti-greenmail provisions will be supported, provided that the proposal: (i) defines greenmail; (ii) prohibits buyback offers to large block holders (holders of at least 1% of the
outstanding shares and in certain cases, a greater amount, as determined by the Proxy Review Committee) not made to all shareholders or not approved by disinterested shareholders; and (iii) contains no anti-takeover measures or other provisions restricting the rights of shareholders.
6. Bundled proposals: We may consider opposing or abstaining on proposals if disparate issues are “bundled” and presented for a single vote.
F. Auditors. We generally support management proposals for selection or ratification of independent auditors. However, we may consider opposing such proposals with reference to incumbent audit firms if the company has suffered from serious accounting irregularities and we believe rotation of the audit firm is appropriate, or if fees paid to the auditor for non-audit-related services are excessive. Generally, to determine if non-audit fees are excessive, a 50% test will be applied (i.e., non-audit-related fees should be less than 50% of the total fees paid to the auditor). We generally vote against proposals to indemnify auditors.
G. Executive and Director Remuneration.
1. We generally support the following proposals:
· Proposals for employee equity compensation plans and other employee ownership plans, provided that our research does not indicate that approval of the plan would be against shareholder interest. Such approval may be against shareholder interest if it authorizes excessive dilution and shareholder cost, particularly in the context of high usage (“run rate”) of equity compensation in the recent past; or if there are objectionable plan design and provisions.
· Proposals relating to fees to outside directors, provided the amounts are not excessive relative to other companies in the country or industry, and provided that the structure is appropriate within the market context. While stock-based compensation to outside directors is positive if moderate and appropriately structured, we are wary of significant stock option awards or other performance-based awards for outside directors, as well as provisions that could result in significant forfeiture of value on a director’s decision to resign from a board (such forfeiture can undercut director independence).
· Proposals for employee stock purchase plans that permit discounts up to 15%, but only for grants that are part of a broad-based employee plan, including all non-executive employees.
· Proposals for the establishment of employee retirement and severance plans, provided that our research does not indicate that approval of the plan would be against shareholder interest.
2. Shareholder proposals requiring shareholder approval of all severance agreements will not be supported, but proposals that require shareholder approval for agreements in excess of three times the annual compensation (salary and bonus) generally will be supported. We generally oppose shareholder proposals that would establish arbitrary caps on pay. We consider on a case-by-case basis shareholder proposals that seek to limit Supplemental Executive Retirement Plans (SERPs), but support such proposals where we consider SERPs to be excessive.
3. Shareholder proposals advocating stronger and/or particular pay-for-performance models will be evaluated on a case-by-case basis, with consideration of the merits of the individual proposal within the context of the particular company and its labor markets, and the company’s current and past practices. While we generally support emphasis on long-term components of senior executive pay and strong linkage of pay to performance, we consider whether a proposal may be overly prescriptive, and the impact of the proposal, if implemented as written, on recruitment and retention.
4. We consider shareholder proposals for U.K.-style advisory votes on pay on a case-by-case basis.
5. We generally support proposals advocating reasonable senior executive and director stock ownership guidelines and holding requirements for shares gained in option exercises.
6. Management proposals effectively to re-price stock options are considered on a case-by-case basis. Considerations include the company’s reasons and justifications for a re-pricing, the company’s competitive position, whether senior executives and outside directors are excluded, potential cost to shareholders, whether the re-pricing or share exchange is on a value-for-value basis, and whether vesting requirements are extended.
H. Social, Political and Environmental Issues. We consider proposals relating to social, political and environmental issues on a case-by-case basis to determine whether they will have a financial impact on shareholder value. However, we generally vote against proposals requesting reports that are duplicative, related to matters not material to the business, or that would impose unnecessary or excessive costs. We may abstain from voting on proposals that do not have a readily determinable financial impact on
shareholder value. We generally oppose proposals requiring adherence to workplace standards that are not required or customary in market(s) to which the proposals relate.
I. Fund of Funds. Certain Funds advised by an MSIM Affiliate invest only in other MSIM Funds. If an underlying fund has a shareholder meeting, in order to avoid any potential conflict of interest, such proposals will be voted in the same proportion as the votes of the other shareholders of the underlying fund, unless otherwise determined by the Proxy Review Committee.
III. ADMINISTRATION OF POLICY
The MSIM Proxy Review Committee (the “Committee”) has overall responsibility for creating and implementing the Policy, working with an MSIM staff group (the “Corporate Governance Team”). The Committee, which is appointed by MSIM’s Chief Investment Officer of Global Equities (“CIO”), consists of senior investment professionals who represent the different investment disciplines and geographic locations of the firm. Because proxy voting is an investment responsibility and impacts shareholder value, and because of their knowledge of companies and markets, portfolio managers and other members of investment staff play a key role in proxy voting, although the Committee has final authority over proxy votes.
The Committee Chairperson is the head of the Corporate Governance Team, and is responsible for identifying issues that require Committee deliberation or ratification. The Corporate Governance Team, working with advice of investment teams and the Committee, is responsible for voting on routine items and on matters that can be addressed in line with these Policy guidelines. The Corporate Governance Team has responsibility for voting case-by-case where guidelines and precedent provide adequate guidance, and to refer other case-by-case decisions to the Proxy Review Committee.
The Committee will periodically review and have the authority to amend, as necessary, the Policy and establish and direct voting positions consistent with the Client Proxy Standard.
A. Committee Procedures
The Committee will meet at least monthly to (among other matters) address any outstanding issues relating to the Policy or its implementation. The Corporate Governance Team will timely communicate to ISS MSIM’s Policy (and any amendments and/or any additional guidelines or procedures the Committee may adopt).
The Committee will meet on an ad hoc basis to (among other matters): (1) authorize “split voting” (i.e., allowing certain shares of the same issuer that are the subject of the same proxy solicitation and held by one or more MSIM portfolios to be voted differently than other shares) and/or “override voting” (i.e., voting all MSIM portfolio shares in a manner contrary to the Policy); (2) review and approve upcoming votes, as appropriate, for matters for which specific direction has been provided in this Policy; and (3)
determine how to vote matters for which specific direction has not been provided in this Policy.
Members of the Committee may take into account Research Providers’ recommendations and research as well as any other relevant information they may request or receive, including portfolio manager and/or analyst research, as applicable. Generally, proxies related to securities held in accounts that are managed pursuant to quantitative, index or index-like strategies (“Index Strategies”) will be voted in the same manner as those held in actively managed accounts, unless economic interests of the accounts differ. Because accounts managed using Index Strategies are passively managed accounts, research from portfolio managers and/or analysts related to securities held in these accounts may not be available. If the affected securities are held only in accounts that are managed pursuant to Index Strategies, and the proxy relates to a matter that is not described in this Policy, the Committee will consider all available information from the Research Providers, and to the extent that the holdings are significant, from the portfolio managers and/or analysts.
B. Material Conflicts of Interest
In addition to the procedures discussed above, if the Committee determines that an issue raises a material conflict of interest, the Committee will request a special committee to review, and recommend a course of action with respect to, the conflict(s) in question (“Special Committee”).
The Special Committee shall be comprised of the Chairperson of the Proxy Review Committee, the Chief Compliance Officer or his/her designee, a senior portfolio manager (if practicable, one who is a member of the Proxy Review Committee) designated by the Proxy Review Committee, and MSIM’s relevant Chief Investment Officer or his/her designee, and any other persons deemed necessary by the Chairperson. The Special Committee may request the assistance of MSIM’s General Counsel or his/her designee who will have sole discretion to cast a vote. In addition to the research provided by Research Providers, the Special Committee may request analysis from MSIM Affiliate investment professionals and outside sources to the extent it deems appropriate.
C. Identification of Material Conflicts of Interest
A potential material conflict of interest could exist in the following situations, among others:
1. The issuer soliciting the vote is a client of MSIM or an affiliate of MSIM and the vote is on a material matter affecting the issuer.
2. The proxy relates to Morgan Stanley common stock or any other security issued by Morgan Stanley or its affiliates except if echo voting is used, as with MSIM Funds, as described herein.
3. Morgan Stanley has a material pecuniary interest in the matter submitted for a vote (e.g., acting as a financial advisor to a party to a merger or acquisition for which Morgan Stanley will be paid a success fee if completed).
If the Chairperson of the Committee determines that an issue raises a potential material conflict of interest, depending on the facts and circumstances, the Chairperson will address the issue as follows:
1. If the matter relates to a topic that is discussed in this Policy, the proposal will be voted as per the Policy.
2. If the matter is not discussed in this Policy or the Policy indicates that the issue is to be decided case-by-case, the proposal will be voted in a manner consistent with the Research Providers, provided that all the Research Providers have the same recommendation, no portfolio manager objects to that vote, and the vote is consistent with MSIM’s Client Proxy Standard.
3. If the Research Providers’ recommendations differ, the Chairperson will refer the matter to the Committee to vote on the proposal. If the Committee determines that an issue raises a material conflict of interest, the Committee will request a Special Committee to review and recommend a course of action, as described above. Notwithstanding the above, the Chairperson of the Committee may request a Special Committee to review a matter at any time as he/she deems necessary to resolve a conflict.
D. Proxy Voting Reporting
The Committee and the Special Committee, or their designee(s), will document in writing all of their decisions and actions, which documentation will be maintained by the Committee and the Special Committee, or their designee(s), for a period of at least 6 years. To the extent these decisions relate to a security held by an MSIM Fund, the Committee and Special Committee, or their designee(s), will report their decisions to each applicable Board of Trustees/Directors of those Funds at each Board’s next regularly scheduled Board meeting. The report will contain information concerning decisions made by the Committee and Special Committee during the most recently ended calendar quarter immediately preceding the Board meeting.
The Corporate Governance Team will timely communicate to applicable portfolio managers and to ISS, decisions of the Committee and Special Committee so that, among other things, ISS will vote proxies consistent with their decisions.
MSIM will promptly provide a copy of this Policy to any client requesting it. MSIM will also, upon client request, promptly provide a report indicating how each proxy was voted with respect to securities held in that client’s account.
MSIM’s Legal Department is responsible for filing an annual Form N-PX on behalf of each MSIM Fund for which such filing is required, indicating how all proxies were voted with respect to such Fund’s holdings.
APPENDIX A
The following procedures apply to accounts managed by Morgan Stanley AIP GP LP (“AIP”).
Generally, AIP will follow the guidelines set forth in Section II of MSIM’s Proxy Voting Policy and Procedures. To the extent that such guidelines do not provide specific direction, or AIP determines that consistent with the Client Proxy Standard, the guidelines should not be followed, the Proxy Review Committee has delegated the voting authority to vote securities held by accounts managed by AIP to the Liquid Markets investment team and the Private Markets investment team of AIP. A summary of decisions made by the investment teams will be made available to the Proxy Review Committee for its information at the next scheduled meeting of the Proxy Review Committee.
In certain cases, AIP may determine to abstain from determining (or recommending) how a proxy should be voted (and therefore abstain from voting such proxy or recommending how such proxy should be voted), such as where the expected cost of giving due consideration to the proxy does not justify the potential benefits to the affected account(s) that might result from adopting or rejecting (as the case may be) the measure in question.
Waiver of Voting Rights
For regulatory reasons, AIP may either 1) invest in a class of securities of an underlying fund (the “Fund”) that does not provide for voting rights; or 2) waive 100% of its voting rights with respect to the following:
1. Any rights with respect to the removal or replacement of a director, general partner, managing member or other person acting in a similar capacity for or on behalf of the Fund (each individually a “Designated Person,” and collectively, the “Designated Persons”), which may include, but are not limited to, voting on the election or removal of a Designated Person in the event of such Designated Person’s death, disability, insolvency, bankruptcy, incapacity, or other event requiring a vote of interest holders of the Fund to remove or replace a Designated Person; and
2. Any rights in connection with a determination to renew, dissolve, liquidate, or otherwise terminate or continue the Fund, which may include, but are not limited to, voting on the renewal, dissolution, liquidation, termination or continuance of the Fund upon the occurrence of an event described in the Fund’s organizational documents; provided, however, that, if the Fund’s organizational documents
require the consent of the Fund’s general partner or manager, as the case may be, for any such termination or continuation of the Fund to be effective, then AIP may exercise its voting rights with respect to such matter.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Applicable only to reports covering periods ending on or after December 31, 2005.
Item 9. Closed-End Fund Repurchases
REGISTRANT PURCHASE OF EQUITY SECURITIES
Period |
| (a) Total |
| (b) Average |
| (c) Total |
| (d) Maximum |
mo-da-year — |
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| N/A |
| N/A |
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| N/A |
| N/A |
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| N/A |
| N/A |
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| N/A |
| N/A |
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| N/A |
| N/A |
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| N/A |
| N/A |
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| N/A |
| N/A |
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| N/A |
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Total |
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| N/A |
| N/A |
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
(a) The Trust’s/Fund’s principal executive officer and principal financial officer have concluded that the Trust’s/Fund’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust/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 second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto.
(b) A separate certification for each principal executive officer and principal financial officer of the registrant are 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.
Morgan Stanley International Fund
/s/ Randy Takian |
|
Randy Takian | |
Principal Executive Officer | |
December 17, 2008 |
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.
/s/ Randy Takian |
|
Randy Takian | |
Principal Executive Officer | |
December 17, 2008 | |
| |
/s/ Francis Smith |
|
Francis Smith | |
Principal Financial Officer | |
December 17, 2008 |