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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Arthur Lev | ||||||||
(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, 2011 |
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Date of reporting period: | October 31, 2011 |
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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 (unaudited)
For the year ended October 31, 2011
Total Return for the 12 Months Ended October 31, 2011 | |||||||||||||||||||||||||||||||
Class A | Class B | Class C | Class I | Class R | Class W | MSCI EAFE Index1 | Lipper International Large-Cap Core Funds Index2 | ||||||||||||||||||||||||
–7.95 | % | –8.58 | % | –8.54 | % | –7.66 | % | –8.10 | % | –8.03 | % | –4.08 | % | –5.91 | % |
The performance of the Fund's six 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, 2011, international developed market equities (as represented by the MSCI EAFE Index, or the "Index") declined 4.08 percent. On a regional basis, the U.K. and Asia ex-Japan led performance, while Japan and Europe ex-U.K. had weaker returns. Sector performance was the strongest in the energy, consumer staples, and health care sectors. Utilities, financials and materials had the largest declines in the Index.
The 12-month period was somewhat choppy from November 2010 to the end of July 2011 when global equity markets collapsed. From there it was a volatile and negative period, with markets heading nearly into bear market territory from early August to late September, until early October when equities rallied strongly. In August, U.S. economic data was recalibrated to lower levels, the well-regarded business institute Economic Cycle Research Institute (ECRI) called for a U.S. recession, the U.S. government almost went into default, Chinese inflation looked high and growth prospects appeared near peaks, and former French finance minister/new International Monetary Fund (IMF) president Christine Lagarde shocked the world by proclaiming that European banks were badly undercapitalized.
Since then, U.S. economic data and corporate earnings have been above expectations, the U.S. government retreated into its so-called "super committee" until late November, Chinese economic and inflation data were decent, and Europe came up with an imperfect, but improved, plan to recapitalize banks, support Greece, and ring fence Italian and Spanish debt. Bulls now say that equities are cheap, China has the flexibility to loosen policy, and the euro-zone has just put through the biggest structural growth reforms in decades — which will likely support growth and earnings coming out of a currently mild recession. However, bears contend that China cannot escape the property bubble and bad loans produced by its extraordinary 2008-2009 stimulus. European austerity and policy hesitation could lead to a deep recession that would impact Asia, the U.S., and the weakened European banks. The bear case also supposes the U.S. consumer could run out of steam once government support runs out and housing rolls back over.
In our view, both camps make valid arguments. In Europe, we view the change to technocratic governments as a good sign — but the hard work of cutting debt while nurturing growth will still be ahead — for both Europe and the U.S. Fiscal reform, if done
2
properly, can be supportive of further global equity gains, even in a low nominal growth environment, in our opinion. Fiscal reform, if done poorly — or not at all — could disrupt the markets again.
Global economic growth continues to show signs of slowing, although some economic data surprised on the upside during October in the U.S. and, to a lesser extent, in China. If this better trend continues, the U.S. and China may skirt recessions that had seemed more imminent in late August. U.S. gross domestic product (GDP) growth rebounded in the third quarter to an annualized pace of 2.5 percent (versus 1.3 percent in the prior quarter) and China's GDP came in at 9 percent. While the October U.S. Institute for Supply Management (ISM) manufacturing index decreased from the prior month (51.6), at 50.8, most of the fall was due to a decline in inventory, although the new orders component improved. U.S. consumer spending, durable goods, and labor indicators also remain steady.
European data is more concerning, as purchasing manager index (PMI) surveys deteriorated across the board and "core" European nations experienced slowing activity on the back of "peripheral" European countries' debt issues. The eurozone composite PMI manufacturing survey fell significantly to 47.1 (versus a prior 48.5), indicating the eurozone is on the brink of recession. German and French retail sales numbers have also been weak. Chinese data is mixed, but arguably weaker at the margin, with property sales continuing to drop dramatically. On a positive note, Japan's PMI climbed above 50 in October to 50.6 (versus a prior 49.3) and the unemployment rate fell from 4.3 percent to 4.1 percent in September. However, Japanese industrial production fell as heavy floods in Thailand continued to disrupt supply chains.
At the risk of oversimplifying, with valuations relatively inexpensive by our measures, we remain focused on the main question of whether the U.S., Europe, and/or China will go into recession in 2012. Europe already appears to be at the brink, and continued fiscal austerity and bank deleveraging through 2012 will likely further weigh on growth. In addition, while steps have been taken to stabilize peripheral countries' funding, significant uncertainty remains (as reflected in Italy's sovereign debt spreads). Growth in the U.S. and China is slowing (as measured by PMIs and leading economic indicators), but has generally been resilient thus far. We are concerned that China has not yet seen the full impact of policy tightening and are also concerned that the U.S. may not pass legislation to avoid a significant fiscal drag in 2012. We are looking for an improvement in European sovereign credit/bank funding, a stabilization in Chinese property sales and/or a loosening of policy, and more clarity on U.S. fiscal policy as catalysts to improve our outlook.
Performance Analysis
All share classes of Morgan Stanley International Fund underperformed the Index and the Lipper International Large-Cap Core Funds Index for the 12 months ended October 31, 2011, assuming no deduction of applicable sales charges.
The underweights to the U.K. and the health care sector, overweight positions in materials and industrials, and an
3
allocation to emerging markets detracted from portfolio performance. The major contributors to portfolio performance were the underweight allocations to utilities and financials and the overweight to energy.
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.
TOP 10 HOLDINGS+ as of 10/31/11 | |||||||
Nestle SA (Registered) | 2.7 | % | |||||
Vodafone Group PLC | 1.7 | ||||||
BHP Billiton Ltd. | 1.5 | ||||||
Royal Dutch Shell PLC, Class A | 1.3 | ||||||
Novartis AG (Registered) | 1.3 | ||||||
Siemens AG (Registered) | 1.2 | ||||||
Roche Holding AG | 1.1 | ||||||
GlaxoSmithKline PLC | 1.1 | ||||||
HSBC Holdings PLC | 1.1 | ||||||
Total SA | 1.0 | ||||||
TOP FIVE COUNTRIES as of 10/31/11 | |||||||
Japan | 22.2 | % | |||||
United Kingdom | 19.9 | ||||||
Switzerland | 8.9 | ||||||
France | 6.9 | ||||||
Germany | 6.2 |
+ Does not include open long futures contracts with an underlying face amount of $8,763,513 with net unrealized appreciation of $452,786 and open foreign currency exchange contracts with net unrealized appreciation of $110,137.
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.
4
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 Management Inc., uses a "top-down" approach that emphasizes country and sector selection and weightings over individual stock selection.
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 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 20549-1520.
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 SEC'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 SEC'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 (unaudited)
Performance of a $10,000 Investment—Class B
Over 10 Years
6
Average Annual Total Returns—Period Ended October 31, 2011 (unaudited) | |||||||||||||||||||||||||||
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 | –7.95 –12.77 4 | %3 | –8.58 –13.14 4 | %3 | –8.54 –9.45 4 | %3 | –7.66 — | %3 | –8.10 — | %3 | –8.03 — | %3 | |||||||||||||||
5 Years | –1.90 3 –2.95 4 | –2.66 3 –3.04 4 | –2.65 3 –2.65 4 | –1.68 3 — | — — | — — | |||||||||||||||||||||
10 Years | 5.06 3 4.50 4 | 4.41 3 4.41 4 | 4.28 3 4.28 4 | 5.31 3 — | — — | — — | |||||||||||||||||||||
Since Inception | 2.42 3 1.98 4 | 1.89 3 1.89 4 | 1.65 3 1.65 4 | 2.65 3 — | –5.73 3 — | –5.60 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/im 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. 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 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. The MSCI EAFE Index currently consists of 22 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, 2011.
7
Expense Example (unaudited)
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 05/01/11 – 10/31/11.
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@ | |||||||||||||
05/01/11 | 10/31/11 | 05/01/11 – 10/31/11 | |||||||||||||
Class A | |||||||||||||||
Actual (–17.66% return) | $ | 1,000.00 | $ | 823.40 | $ | 7.77 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,016.69 | $ | 8.59 | |||||||||
Class B | |||||||||||||||
Actual (–17.94% return) | $ | 1,000.00 | $ | 820.60 | $ | 11.20 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,012.91 | $ | 12.38 | |||||||||
Class C | |||||||||||||||
Actual (–17.95% return) | $ | 1,000.00 | $ | 820.50 | $ | 11.20 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,012.91 | $ | 12.38 | |||||||||
Class I | |||||||||||||||
Actual (–17.54% return) | $ | 1,000.00 | $ | 824.60 | $ | 6.62 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,017.95 | $ | 7.32 |
8
Expense Example (unaudited) continued
Beginning Account Value | Ending Account Value | Expenses Paid During Period@ | |||||||||||||
05/01/11 | 10/31/11 | 05/01/11 – 10/31/11 | |||||||||||||
Class R | |||||||||||||||
Actual (–17.74% return) | $ | 1,000.00 | $ | 822.60 | $ | 8.91 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,015.43 | $ | 9.86 | |||||||||
Class W | |||||||||||||||
Actual (–17.70% return) | $ | 1,000.00 | $ | 823.00 | $ | 8.23 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,016.18 | $ | 9.10 |
@ Expenses are equal to the Fund's annualized expense ratios of 1.69%, 2.44%, 2.44%, 1.44%, 1.94%, and 1.79% 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 184/365 (to reflect the one-half year period). If the Fund had borne all of its expenses, the annualized expense ratios would have been 1.70%, 2.45%, 2.45%, 1.45%, 1.95%, and 1.80% for Class A, Class B, Class C, Class I, Class R, and Class W shares, respectively.
9
Investment Advisory Agreement Approval (unaudited)
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 and supported its decision to approve the Management Agreement.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as determined by Lipper, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2010, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was better than its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as determined by Lipper. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. The Board noted that the Fund's management fee and total expense ratio were lower than its peer group average. After discussion, the Board concluded that the Fund's management fee, total expense ratio and performance were competitive with its peer group average.
10
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which includes a breakpoint. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and potential economies of scale of the Fund support its decision to approve the Management Agreement.
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its 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. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.
Other Benefits of the Relationship
The Board considered other benefits to the Adviser and its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, "float" benefits derived from handling of checks for purchases and sales, research received by the Adviser generated from commission dollars spent on funds' portfolio trading and fees for distribution and/or shareholder servicing. The Board reviewed with the Adviser each of these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. 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 the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
11
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. In reaching this conclusion the Board did not give particular weight to any single factor referenced above. The Board considered these factors over the course of numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors differently in reaching their individual decisions to approve the Management Agreement.
12
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011
NUMBER OF SHARES | VALUE | ||||||||||
Common Stocks (88.4%) | |||||||||||
Australia (3.5%) | |||||||||||
Beverages | |||||||||||
970 | Coca-Cola Amatil Ltd. | $ | 12,528 | ||||||||
3,666 | Foster's Group Ltd. | 20,551 | |||||||||
1,221 | Treasury Wine Estates Ltd. | 4,770 | |||||||||
37,849 | |||||||||||
Biotechnology | |||||||||||
511 | CSL Ltd. | 15,303 | |||||||||
Capital Markets | |||||||||||
362 | Macquarie Group Ltd. | 9,148 | |||||||||
Chemicals | |||||||||||
20,543 | Incitec Pivot Ltd. | 73,319 | |||||||||
4,518 | Orica Ltd. | 121,292 | |||||||||
194,611 | |||||||||||
Commercial Banks | |||||||||||
16,316 | Australia & New Zealand Banking Group Ltd. | 367,973 | |||||||||
800 | Commonwealth Bank of Australia (a) | 41,084 | |||||||||
1,186 | National Australia Bank Ltd. (a) | 31,657 | |||||||||
1,203 | Westpac Banking Corp. | 28,000 | |||||||||
468,714 | |||||||||||
Commercial Services & Supplies | |||||||||||
1,772 | Brambles Ltd. | 12,229 | |||||||||
Construction & Engineering | |||||||||||
425 | Leighton Holdings Ltd. (a) | 9,511 | |||||||||
Construction Materials | |||||||||||
5,661 | Boral Ltd. (a) | 23,127 | |||||||||
3,522 | James Hardie Industries SE CDI (b) | 22,763 | |||||||||
45,890 | |||||||||||
Containers & Packaging | |||||||||||
10,222 | Amcor Ltd. | 74,902 | |||||||||
Diversified Telecommunication Services | |||||||||||
3,853 | Telstra Corp., Ltd. | 12,531 |
NUMBER OF SHARES | VALUE | ||||||||||
Food & Staples Retailing | |||||||||||
733 | Wesfarmers Ltd. | $ | 24,658 | ||||||||
324 | Wesfarmers Ltd. (PPS) | 11,087 | |||||||||
1,629 | Woolworths Ltd. | 40,511 | |||||||||
76,256 | |||||||||||
Health Care Providers & Services | |||||||||||
310 | Sonic Healthcare Ltd. | 3,579 | |||||||||
Hotels, Restaurants & Leisure | |||||||||||
838 | Echo Entertainment Group Ltd. (b) | 3,247 | |||||||||
857 | TABCORP Holdings Ltd. | 2,637 | |||||||||
5,884 | |||||||||||
Industrial Conglomerates | |||||||||||
1,257 | CSR Ltd. (a) | 3,169 | |||||||||
Insurance | |||||||||||
2,491 | AMP Ltd. | 11,084 | |||||||||
3,028 | Insurance Australia Group Ltd. | 9,894 | |||||||||
1,154 | QBE Insurance Group Ltd. | 17,712 | |||||||||
1,016 | Suncorp Group Ltd. | 9,087 | |||||||||
47,777 | |||||||||||
Metals & Mining | |||||||||||
19,416 | Alumina Ltd. | 29,205 | |||||||||
40,753 | BHP Billiton Ltd. | 1,595,440 | |||||||||
12,307 | BlueScope Steel Ltd. (a) | 10,765 | |||||||||
5,007 | DuluxGroup Ltd. (a) | 13,687 | |||||||||
16,462 | Fortescue Metals Group Ltd. (a) | 81,981 | |||||||||
15,761 | Newcrest Mining Ltd. | 555,214 | |||||||||
11,038 | OneSteel Ltd. | 13,780 | |||||||||
3,591 | OZ Minerals Ltd. | 42,330 | |||||||||
3,431 | Rio Tinto Ltd. | 246,019 | |||||||||
1,930 | Sims Metal Management Ltd. | 27,808 | |||||||||
2,616,229 | |||||||||||
Multi-Utilities | |||||||||||
881 | AGL Energy Ltd. | 13,282 | |||||||||
Oil, Gas & Consumable Fuels | |||||||||||
773 | Caltex Australia Ltd. | 10,711 |
See Notes to Financial Statements
13
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
1,594 | Origin Energy Ltd. | $ | 23,933 | ||||||||
916 | Santos Ltd. | 12,177 | |||||||||
840 | Woodside Petroleum Ltd. | 31,613 | |||||||||
78,434 | |||||||||||
Real Estate Investment Trusts (REITs) | |||||||||||
855 | Stockland REIT (Stapled Securities) (c)(d) | 2,794 | |||||||||
Transportation Infrastructure | |||||||||||
1,444 | Transurban Group (Stapled Securities) (c) | 7,910 | |||||||||
Total Australia | 3,736,002 | ||||||||||
Austria (0.4%) | |||||||||||
Commercial Banks | |||||||||||
3,697 | Erste Group Bank AG | 78,771 | |||||||||
1,070 | Raiffeisen Bank International AG (a) | 29,597 | |||||||||
108,368 | |||||||||||
Diversified Telecommunication Services | |||||||||||
8,605 | Telekom Austria AG | 97,833 | |||||||||
Electric Utilities | |||||||||||
1,397 | Verbund AG | 40,559 | |||||||||
Insurance | |||||||||||
773 | Vienna Insurance Group AG Wiener Versicherung Gruppe | 32,245 | |||||||||
Metals & Mining | |||||||||||
3,006 | Voestalpine AG | 103,121 | |||||||||
Oil, Gas & Consumable Fuels | |||||||||||
1,682 | OMV AG | 58,545 | |||||||||
Total Austria | 440,671 | ||||||||||
Belgium (0.7%) | |||||||||||
Beverages | |||||||||||
6,218 | Anheuser-Busch InBev N.V. | 345,220 | |||||||||
2,742 | Anheuser-Busch InBev N.V. VVPR (b) | 4 | |||||||||
345,224 |
NUMBER OF SHARES | VALUE | ||||||||||
Chemicals | |||||||||||
673 | Solvay SA, Class A | $ | 68,448 | ||||||||
1,595 | Umicore SA | 68,062 | |||||||||
136,510 | |||||||||||
Diversified Financial Services | |||||||||||
979 | Groupe Bruxelles Lambert SA | 75,222 | |||||||||
Diversified Telecommunication Services | |||||||||||
1,903 | Belgacom SA | 57,395 | |||||||||
Insurance | |||||||||||
5,238 | Ageas | 10,408 | |||||||||
Pharmaceuticals | |||||||||||
1,255 | UCB SA | 55,035 | |||||||||
Wireless Telecommunication Services | |||||||||||
365 | Mobistar SA | 20,706 | |||||||||
Total Belgium | 700,500 | ||||||||||
Brazil (0.1%) | |||||||||||
Commercial Banks | |||||||||||
2,600 | Banco do Brasil SA | 39,223 | |||||||||
Food Products | |||||||||||
4,428 | BRF - Brasil Foods SA | 92,204 | |||||||||
Road & Rail | |||||||||||
3,200 | All America Latina Logistica SA (d) | 15,936 | |||||||||
Total Brazil | 147,363 | ||||||||||
Canada (1.3%) | |||||||||||
Metals & Mining | |||||||||||
1,500 | Agnico-Eagle Mines Ltd. | 65,071 | |||||||||
8,700 | Barrick Gold Corp. | 429,523 | |||||||||
1,500 | Centerra Gold, Inc. | 29,737 | |||||||||
4,900 | Eldorado Gold Corp. | 92,076 | |||||||||
1,200 | Franco-Nevada Corp. | 47,542 | |||||||||
6,900 | Goldcorp, Inc. | 335,741 | |||||||||
3,300 | IAMGOLD Corp. | 70,950 | |||||||||
9,900 | Kinross Gold Corp. | 141,138 | |||||||||
3,900 | New Gold, Inc. (b) | 48,322 |
See Notes to Financial Statements
14
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
3,100 | Osisko Mining Corp. (b) | $ | 37,383 | ||||||||
6,700 | Yamana Gold, Inc. | 100,021 | |||||||||
Total Canada | 1,397,504 | ||||||||||
China (0.0%) | |||||||||||
Food Products | |||||||||||
2,000 | Chaoda Modern Agriculture Holdings Ltd. (e) | 283 | |||||||||
Household Durables | |||||||||||
57 | Skyworth Digital Holdings Ltd. (e) | 30 | |||||||||
Total China | 313 | ||||||||||
Denmark (1.0%) | |||||||||||
Chemicals | |||||||||||
1,033 | Novozymes A/S, Class B | 152,262 | |||||||||
Diversified Telecommunication Services | |||||||||||
2,971 | TDC A/S | 24,397 | |||||||||
Electrical Equipment | |||||||||||
2,012 | Vestas Wind Systems A/S (b) | 31,204 | |||||||||
Marine | |||||||||||
24 | AP Moller - Maersk A/S, Class B | 162,185 | |||||||||
Pharmaceuticals | |||||||||||
5,598 | Novo Nordisk A/S, Class B | 591,133 | |||||||||
Road & Rail | |||||||||||
2,395 | DSV A/S | 47,519 | |||||||||
Textiles, Apparel & Luxury Goods | |||||||||||
2,721 | Pandora A/S | 25,970 | |||||||||
Total Denmark | 1,034,670 | ||||||||||
Finland (1.0%) | |||||||||||
Communications Equipment | |||||||||||
55,483 | Nokia Oyj | 373,851 | |||||||||
Diversified Telecommunication Services | |||||||||||
1,196 | Elisa Oyj (a) | 25,147 |
NUMBER OF SHARES | VALUE | ||||||||||
Electric Utilities | |||||||||||
7,027 | Fortum Oyj | $ | 170,964 | ||||||||
Food & Staples Retailing | |||||||||||
2,234 | Kesko Oyj, Class B | 79,250 | |||||||||
Insurance | |||||||||||
3,148 | Sampo Oyj, Class A | 86,365 | |||||||||
Machinery | |||||||||||
1,414 | Kone Oyj, Class B | 77,741 | |||||||||
1,494 | Metso Oyj | 57,567 | |||||||||
1,351 | Wartsila Oyj | 41,011 | |||||||||
176,319 | |||||||||||
Metals & Mining | |||||||||||
2,591 | Outokumpu Oyj (a) | 21,828 | |||||||||
1,079 | Rautaruukki Oyj | 11,471 | |||||||||
33,299 | |||||||||||
Oil, Gas & Consumable Fuels | |||||||||||
1,510 | Neste Oil Oyj | 18,227 | |||||||||
Paper & Forest Products | |||||||||||
6,572 | Stora Enso Oyj, Class R | 41,525 | |||||||||
5,427 | UPM-Kymmene Oyj | 63,257 | |||||||||
104,782 | |||||||||||
Total Finland | 1,068,204 | ||||||||||
France (6.9%) | |||||||||||
Aerospace & Defense | |||||||||||
1,545 | European Aeronautic Defense and Space Co. N.V. | 45,318 | |||||||||
734 | Safran SA | 23,890 | |||||||||
726 | Thales SA | 25,541 | |||||||||
94,749 | |||||||||||
Auto Components | |||||||||||
1,354 | Cie Generale des Etablissements Michelin, Class B | 97,805 | |||||||||
Automobiles | |||||||||||
1,482 | Peugeot SA | 32,194 | |||||||||
1,305 | Renault SA | 54,422 | |||||||||
86,616 |
See Notes to Financial Statements
15
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
Beverages | |||||||||||
865 | Pernod-Ricard SA | $ | 80,606 | ||||||||
Building Products | |||||||||||
1,952 | Cie de St-Gobain | 90,324 | |||||||||
Chemicals | |||||||||||
2,064 | Air Liquide SA | 266,583 | |||||||||
Commercial Banks | |||||||||||
4,323 | BNP Paribas SA | 191,678 | |||||||||
2,976 | Credit Agricole SA | 22,812 | |||||||||
2,410 | Societe Generale SA | 69,104 | |||||||||
283,594 | |||||||||||
Commercial Services & Supplies | |||||||||||
1,618 | Edenred | 45,588 | |||||||||
218 | Societe BIC SA | 19,447 | |||||||||
65,035 | |||||||||||
Communications Equipment | |||||||||||
20,688 | Alcatel-Lucent (b) | 56,614 | |||||||||
Construction & Engineering | |||||||||||
2,794 | Bouygues SA (a) | 104,470 | |||||||||
3,086 | Vinci SA | 151,465 | |||||||||
255,935 | |||||||||||
Construction Materials | |||||||||||
340 | Imerys SA | 19,397 | |||||||||
3,137 | Lafarge SA (a) | 127,074 | |||||||||
146,471 | |||||||||||
Diversified Financial Services | |||||||||||
226 | Eurazeo | 10,761 | |||||||||
Diversified Telecommunication Services | |||||||||||
13,092 | France Telecom SA | 235,539 | |||||||||
8,484 | Vivendi SA | 190,065 | |||||||||
425,604 | |||||||||||
Electric Utilities | |||||||||||
1,122 | EDF SA (a) | 33,595 | |||||||||
Electrical Equipment | |||||||||||
4,482 | Alstom SA | 166,614 |
NUMBER OF SHARES | VALUE | ||||||||||
186 | Legrand SA | $ | 6,561 | ||||||||
4,547 | Schneider Electric SA | 263,378 | |||||||||
436,553 | |||||||||||
Energy Equipment & Services | |||||||||||
4,294 | Cie Generale de Geophysique-Veritas (b) | 93,821 | |||||||||
1,937 | Technip SA | 183,137 | |||||||||
276,958 | |||||||||||
Food & Staples Retailing | |||||||||||
6,011 | Carrefour SA | 159,467 | |||||||||
1,061 | Casino Guichard Perrachon SA | 99,262 | |||||||||
258,729 | |||||||||||
Food Products | |||||||||||
5,422 | Danone | 374,799 | |||||||||
Health Care Equipment & Supplies | |||||||||||
1,519 | Cie Generale d'Optique Essilor International SA | 109,881 | |||||||||
Hotels, Restaurants & Leisure | |||||||||||
1,618 | Accor SA | 52,711 | |||||||||
886 | Sodexo | 63,842 | |||||||||
116,553 | |||||||||||
Information Technology Services | |||||||||||
361 | Atos | 17,443 | |||||||||
2,037 | Cap Gemini SA | 77,896 | |||||||||
95,339 | |||||||||||
Insurance | |||||||||||
8,413 | AXA SA | 135,164 | |||||||||
1,997 | CNP Assurances | 30,532 | |||||||||
1,246 | SCOR SE | 28,983 | |||||||||
194,679 | |||||||||||
Machinery | |||||||||||
463 | Vallourec SA | 28,038 | |||||||||
Media | |||||||||||
1,747 | Lagardere SCA | 46,800 | |||||||||
1,010 | Publicis Groupe SA | 48,820 |
See Notes to Financial Statements
16
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
3,568 | Societe Television Francaise 1 | $ | 47,872 | ||||||||
143,492 | |||||||||||
Metals & Mining | |||||||||||
8,164 | ArcelorMittal | 168,257 | |||||||||
Multi-Utilities | |||||||||||
8,755 | GDF Suez | 246,536 | |||||||||
1,441 | Suez Environnement Co. | 22,567 | |||||||||
3,418 | Veolia Environnement SA (a) | 48,161 | |||||||||
317,264 | |||||||||||
Multiline Retail | |||||||||||
858 | PPR | 133,538 | |||||||||
Office Electronics | |||||||||||
360 | Neopost SA (a) | 27,414 | |||||||||
Oil, Gas & Consumable Fuels | |||||||||||
20,645 | Total SA | 1,079,599 | |||||||||
Personal Products | |||||||||||
381 | L'Oreal SA | 41,960 | |||||||||
Pharmaceuticals | |||||||||||
9,291 | Sanofi | 665,080 | |||||||||
Real Estate Investment Trusts (REITs) | |||||||||||
244 | Fonciere Des Regions REIT | 17,930 | |||||||||
196 | Gecina SA REIT | 19,213 | |||||||||
200 | ICADE REIT | 17,804 | |||||||||
908 | Klepierre REIT | 28,231 | |||||||||
1,280 | Unibail-Rodamco SE REIT | 254,111 | |||||||||
337,289 | |||||||||||
Semiconductors & Semiconductor Equipment | |||||||||||
6,988 | STMicroelectronics N.V. (a) | 48,160 | |||||||||
Software | |||||||||||
631 | Dassault Systemes SA | 53,099 | |||||||||
Textiles, Apparel & Luxury Goods | |||||||||||
448 | Hermes International | 151,979 |
NUMBER OF SHARES | VALUE | ||||||||||
1,555 | LVMH Moet Hennessy Louis Vuitton SA | $ | 257,711 | ||||||||
409,690 | |||||||||||
Total France | 7,310,663 | ||||||||||
Germany (6.2%) | |||||||||||
Air Freight & Logistics | |||||||||||
5,779 | Deutsche Post AG (Registered) | 87,721 | |||||||||
Airlines | |||||||||||
1,432 | Deutsche Lufthansa AG (Registered) | 19,466 | |||||||||
Auto Components | |||||||||||
355 | Continental AG (b) | 26,431 | |||||||||
Automobiles | |||||||||||
7,783 | Bayerische Motoren Werke AG | 634,284 | |||||||||
6,477 | Daimler AG (Registered) | 329,049 | |||||||||
1,112 | Porsche Automobil Holding SE (Preference) | 64,888 | |||||||||
2,021 | Volkswagen AG | 317,347 | |||||||||
839 | Volkswagen AG (Preference) | 146,773 | |||||||||
1,492,341 | |||||||||||
Capital Markets | |||||||||||
4,803 | Deutsche Bank AG (Registered) | 199,653 | |||||||||
Chemicals | |||||||||||
4,721 | BASF SE | 343,107 | |||||||||
1,254 | K+S AG | 79,471 | |||||||||
597 | Lanxess AG | 35,085 | |||||||||
503 | Linde AG | 79,857 | |||||||||
537,520 | |||||||||||
Commercial Banks | |||||||||||
3,658 | Commerzbank AG (b) | 8,948 | |||||||||
Construction & Engineering | |||||||||||
673 | Hochtief AG | 48,832 | |||||||||
Diversified Financial Services | |||||||||||
334 | Deutsche Boerse AG (b) | 18,428 |
See Notes to Financial Statements
17
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
Diversified Telecommunication Services | |||||||||||
15,622 | Deutsche Telekom AG (Registered) | $ | 198,060 | ||||||||
Electric Utilities | |||||||||||
10,627 | E.ON AG | 256,923 | |||||||||
Food & Staples Retailing | |||||||||||
2,199 | Metro AG | 101,599 | |||||||||
Health Care Providers & Services | |||||||||||
2,316 | Celesio AG | 36,592 | |||||||||
1,900 | Fresenius Medical Care AG & Co. KGaA | 138,232 | |||||||||
174,824 | |||||||||||
Hotels, Restaurants & Leisure | |||||||||||
1,659 | TUI AG (a)(b) | 10,714 | |||||||||
Household Products | |||||||||||
513 | Henkel AG & Co. KGaA (Preference) | 30,441 | |||||||||
Industrial Conglomerates | |||||||||||
12,213 | Siemens AG (Registered) | 1,280,036 | |||||||||
Insurance | |||||||||||
2,792 | Allianz SE (Registered) | 311,908 | |||||||||
1,154 | Muenchener Rueckversicherungs AG (Registered) | 154,699 | |||||||||
466,607 | |||||||||||
Machinery | |||||||||||
1,427 | GEA Group AG | 39,239 | |||||||||
375 | MAN SE | 44,584 | |||||||||
83,823 | |||||||||||
Media | |||||||||||
600 | Axel Springer AG | 24,114 | |||||||||
1,158 | ProSiebenSat.1 Media AG | 24,440 | |||||||||
48,554 | |||||||||||
Metals & Mining | |||||||||||
2,014 | ThyssenKrupp AG | 57,782 |
NUMBER OF SHARES | VALUE | ||||||||||
Multi-Utilities | |||||||||||
1,713 | RWE AG | $ | 73,099 | ||||||||
186 | RWE AG (Preference) | 6,953 | |||||||||
80,052 | |||||||||||
Personal Products | |||||||||||
439 | Beiersdorf AG | 25,296 | |||||||||
Pharmaceuticals | |||||||||||
8,281 | Bayer AG (Registered) | 528,161 | |||||||||
253 | Merck KGaA | 23,585 | |||||||||
551,746 | |||||||||||
Software | |||||||||||
10,594 | SAP AG | 638,391 | |||||||||
Textiles, Apparel & Luxury Goods | |||||||||||
1,178 | Adidas AG | 82,871 | |||||||||
77 | Puma AG Rudolf Dassler Sport | 24,727 | |||||||||
107,598 | |||||||||||
Total Germany | 6,551,786 | ||||||||||
Hong Kong (0.0%) | |||||||||||
Diversified Financial Services | |||||||||||
56 | Hong Kong Exchanges and Clearing Ltd. | 939 | |||||||||
Real Estate Management & Development | |||||||||||
45 | Henderson Land Development Co., Ltd. | 243 | |||||||||
Total Hong Kong | 1,182 | ||||||||||
India (0.0%) | |||||||||||
Oil, Gas & Consumable Fuels | |||||||||||
971 | Cairn Energy PLC (b) | 4,573 | |||||||||
Indonesia (0.3%) | |||||||||||
Automobiles | |||||||||||
5,500 | Astra International Tbk PT | 42,101 | |||||||||
Commercial Banks | |||||||||||
34,500 | Bank Central Asia Tbk PT | 31,196 |
See Notes to Financial Statements
18
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
8,500 | Bank Danamon Indonesia Tbk PT | $ | 4,698 | ||||||||
26,500 | Bank Mandiri Tbk PT | 20,941 | |||||||||
22,500 | Bank Negara Indonesia Persero Tbk PT | 10,020 | |||||||||
32,000 | Bank Rakyat Indonesia Persero Tbk PT | 23,905 | |||||||||
90,760 | |||||||||||
Construction Materials | |||||||||||
4,000 | Indocement Tunggal Prakarsa Tbk PT | 7,241 | |||||||||
10,500 | Semen Gresik Persero Tbk PT | 11,169 | |||||||||
18,410 | |||||||||||
Diversified Telecommunication Services | |||||||||||
28,000 | Telekomunikasi Indonesia Tbk PT | 23,246 | |||||||||
Food Products | |||||||||||
24,500 | Charoen Pokphand Indonesia Tbk PT | 7,235 | |||||||||
13,500 | Indofood Sukses Makmur Tbk PT | 7,898 | |||||||||
15,133 | |||||||||||
Gas Utilities | |||||||||||
31,000 | Perusahaan Gas Negara Tbk PT | 10,164 | |||||||||
Household Products | |||||||||||
4,000 | Unilever Indonesia Tbk PT | 7,024 | |||||||||
Machinery | |||||||||||
4,833 | United Tractors Tbk PT | 13,166 | |||||||||
Oil, Gas & Consumable Fuels | |||||||||||
30,200 | Adaro Energy Tbk PT | 6,760 | |||||||||
52,500 | Bumi Resources Tbk PT | 13,628 | |||||||||
1,300 | Indo Tambangraya Megah Tbk PT | 6,427 | |||||||||
2,500 | Tambang Batubara Bukit Asam Tbk PT | 5,098 | |||||||||
31,913 | |||||||||||
Pharmaceuticals | |||||||||||
15,000 | Kalbe Farma Tbk PT | 5,830 |
NUMBER OF SHARES | VALUE | ||||||||||
Tobacco | |||||||||||
2,000 | Gudang Garam Tbk PT | $ | 13,076 | ||||||||
Total Indonesia | 270,823 | ||||||||||
Ireland (0.0%) | |||||||||||
Construction Materials | |||||||||||
508 | CRH PLC | 9,141 | |||||||||
Italy (0.3%) | |||||||||||
Diversified Financial Services | |||||||||||
1,557 | Exor SpA | 33,911 | |||||||||
Electric Utilities | |||||||||||
6,585 | Enel SpA | 30,958 | |||||||||
Energy Equipment & Services | |||||||||||
2,923 | Saipem SpA | 129,851 | |||||||||
Oil, Gas & Consumable Fuels | |||||||||||
4,024 | ENI SpA | 88,611 | |||||||||
Total Italy | 283,331 | ||||||||||
Japan (22.2%) | |||||||||||
Air Freight & Logistics | |||||||||||
3,435 | Yamato Holdings Co., Ltd. (a) | 56,940 | |||||||||
Auto Components | |||||||||||
3,200 | Aisin Seiki Co., Ltd. | 101,658 | |||||||||
16,200 | Bridgestone Corp. | 378,983 | |||||||||
13,900 | Denso Corp. | 429,237 | |||||||||
2,059 | NGK Spark Plug Co., Ltd. | 25,588 | |||||||||
6,200 | Stanley Electric Co., Ltd. | 90,545 | |||||||||
3,100 | Toyota Boshoku Corp. (a) | 37,759 | |||||||||
1,200 | Toyota Industries Corp. | 33,931 | |||||||||
1,097,701 | |||||||||||
Automobiles | |||||||||||
21,509 | Honda Motor Co., Ltd. | 648,316 | |||||||||
29,705 | Nissan Motor Co., Ltd. | 273,668 | |||||||||
5,400 | Suzuki Motor Corp. | 115,145 | |||||||||
22,755 | Toyota Motor Corp. | 760,829 | |||||||||
700 | Yamaha Motor Co., Ltd. (b) | 9,994 | |||||||||
1,807,952 | |||||||||||
Beverages | |||||||||||
5,300 | Asahi Group Holdings Ltd. | 108,728 |
See Notes to Financial Statements
19
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
10,000 | Kirin Holdings Co., Ltd. | $ | 122,541 | ||||||||
231,269 | |||||||||||
Building Products | |||||||||||
10,500 | Asahi Glass Co., Ltd. | 91,946 | |||||||||
4,000 | Daikin Industries Ltd. (a) | 118,501 | |||||||||
2,262 | JS Group Corp. | 47,338 | |||||||||
6,500 | Nippon Sheet Glass Co., Ltd. | 13,995 | |||||||||
4,500 | TOTO Ltd. (a) | 37,220 | |||||||||
309,000 | |||||||||||
Capital Markets | |||||||||||
28,000 | Daiwa Securities Group, Inc. | 97,969 | |||||||||
4,400 | Matsui Securities Co., Ltd. | 20,790 | |||||||||
19,050 | Nomura Holdings, Inc. | 72,391 | |||||||||
186 | SBI Holdings, Inc. | 15,458 | |||||||||
206,608 | |||||||||||
Chemicals | |||||||||||
15,000 | Asahi Kasei Corp. | 88,833 | |||||||||
3,000 | Daicel Corp (a) | 17,029 | |||||||||
8,546 | Denki Kagaku Kogyo KK (a) | 32,588 | |||||||||
2,408 | JSR Corp. | 45,957 | |||||||||
5,000 | Kaneka Corp. | 27,095 | |||||||||
4,556 | Kuraray Co., Ltd. | 63,787 | |||||||||
19,500 | Mitsubishi Chemical Holdings Corp. | 118,531 | |||||||||
9,500 | Mitsui Chemicals, Inc. | 31,323 | |||||||||
2,600 | Nissan Chemical Industries Ltd. | 25,550 | |||||||||
2,400 | Nitto Denko Corp. | 101,013 | |||||||||
6,997 | Shin-Etsu Chemical Co., Ltd. | 359,395 | |||||||||
12,000 | Showa Denko KK | 21,911 | |||||||||
16,000 | Sumitomo Chemical Co., Ltd. (a) | 59,286 | |||||||||
13,608 | Teijin Ltd. | 47,621 | |||||||||
14,000 | Toray Industries, Inc. (a) | 99,594 | |||||||||
11,000 | Tosoh Corp. (a) | 35,773 | |||||||||
1,175,286 | |||||||||||
Commercial Banks | |||||||||||
3,500 | 77 Bank Ltd. (The) | 13,866 | |||||||||
3,000 | Bank of Kyoto Ltd. (The) (a) | 25,495 |
NUMBER OF SHARES | VALUE | ||||||||||
14,000 | Bank of Yokohama Ltd. (The) | $ | 64,144 | ||||||||
7,000 | Chiba Bank Ltd. (The) (a) | 42,915 | |||||||||
8,000 | Fukuoka Financial Group, Inc. | 30,974 | |||||||||
17,000 | Hokuhoku Financial Group, Inc. | 31,766 | |||||||||
8,000 | Joyo Bank Ltd. (The) (a) | 33,506 | |||||||||
73,260 | Mitsubishi UFJ Financial Group, Inc. (See Note 6) | 317,366 | |||||||||
178,600 | Mizuho Financial Group, Inc. | 250,487 | |||||||||
9,000 | Nishi-Nippon City Bank Ltd. (The) | 24,518 | |||||||||
3,900 | Resona Holdings, Inc. | 17,423 | |||||||||
17,500 | Shinsei Bank Ltd. | 19,294 | |||||||||
7,000 | Shizuoka Bank Ltd. (The) (a) | 68,196 | |||||||||
10,100 | Sumitomo Mitsui Financial Group, Inc. | 281,578 | |||||||||
55,623 | Sumitomo Mitsui Trust Holdings, Inc. | 189,957 | |||||||||
1,000 | Suruga Bank Ltd. | 8,352 | |||||||||
1,419,837 | |||||||||||
Commercial Services & Supplies | |||||||||||
5,500 | Dai Nippon Printing Co., Ltd. (a) | 57,587 | |||||||||
2,485 | Secom Co., Ltd. | 117,968 | |||||||||
6,000 | Toppan Printing Co., Ltd. | 46,613 | |||||||||
222,168 | |||||||||||
Computers & Peripherals | |||||||||||
43,000 | Fujitsu Ltd. | 229,651 | |||||||||
29,500 | NEC Corp. (b) | 66,048 | |||||||||
6,600 | Seiko Epson Corp. (a) | 87,434 | |||||||||
48,026 | Toshiba Corp. | 211,498 | |||||||||
594,631 | |||||||||||
Construction & Engineering | |||||||||||
10,546 | JGC Corp. | 296,090 | |||||||||
12,000 | Kajima Corp. (a) | 38,305 | |||||||||
9,571 | Obayashi Corp. | 43,574 | |||||||||
9,000 | Shimizu Corp. (a) | 38,349 | |||||||||
14,000 | Taisei Corp. | 37,317 | |||||||||
453,635 |
See Notes to Financial Statements
20
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
Consumer Finance | |||||||||||
1,600 | Credit Saison Co., Ltd. | $ | 31,445 | ||||||||
Containers & Packaging | |||||||||||
2,517 | Toyo Seikan Kaisha Ltd. | 38,229 | |||||||||
Diversified Consumer Services | |||||||||||
854 | Benesse Holdings, Inc. | 37,298 | |||||||||
Diversified Financial Services | |||||||||||
290 | ORIX Corp. (a) | 25,339 | |||||||||
Diversified Telecommunication Services | |||||||||||
1,900 | Nippon Telegraph & Telephone Corp. | 97,134 | |||||||||
Electric Utilities | |||||||||||
2,500 | Chubu Electric Power Co., Inc. | 45,773 | |||||||||
3,800 | Kansai Electric Power Co., Inc. (The) | 56,235 | |||||||||
1,600 | Kyushu Electric Power Co., Inc. | 21,237 | |||||||||
2,900 | Tohoku Electric Power Co., Inc. (a) | 32,029 | |||||||||
155,274 | |||||||||||
Electrical Equipment | |||||||||||
7,500 | Furukawa Electric Co., Ltd. | 20,980 | |||||||||
10,000 | GS Yuasa Corp. (a) | 51,982 | |||||||||
1,900 | Mabuchi Motor Co., Ltd. (a) | 83,341 | |||||||||
33,552 | Mitsubishi Electric Corp. | 308,949 | |||||||||
904 | Nidec Corp. (a) | 74,399 | |||||||||
5,600 | Sumitomo Electric Industries Ltd. | 62,464 | |||||||||
800 | Ushio, Inc. | 11,899 | |||||||||
614,014 | |||||||||||
Electronic Equipment, Instruments & Components | |||||||||||
5,150 | Citizen Holdings Co., Ltd. | 27,294 | |||||||||
10,400 | FUJIFILM Holdings Corp. | 255,032 | |||||||||
500 | Hirose Electric Co., Ltd. (a) | 47,992 | |||||||||
38,000 | Hitachi Ltd. | 203,955 | |||||||||
4,800 | Hoya Corp. | 105,298 |
NUMBER OF SHARES | VALUE | ||||||||||
3,500 | Ibiden Co., Ltd. (a) | $ | 76,777 | ||||||||
1,147 | Keyence Corp. (a) | 291,739 | |||||||||
3,800 | Kyocera Corp. | 334,620 | |||||||||
2,200 | Murata Manufacturing Co., Ltd. | 122,496 | |||||||||
9,500 | Nippon Electric Glass Co., Ltd. | 84,700 | |||||||||
6,104 | Omron Corp. | 130,725 | |||||||||
1,552 | TDK Corp. (a) | 63,449 | |||||||||
3,450 | Yokogawa Electric Corp. (a)(b) | 32,563 | |||||||||
1,776,640 | |||||||||||
Food & Staples Retailing | |||||||||||
2,399 | FamilyMart Co., Ltd. | 94,495 | |||||||||
6,500 | Seven & I Holdings Co., Ltd. | 173,840 | |||||||||
268,335 | |||||||||||
Food Products | |||||||||||
3,100 | Yakult Honsha Co., Ltd. (a) | 87,925 | |||||||||
Gas Utilities | |||||||||||
8,000 | Osaka Gas Co., Ltd. | 30,316 | |||||||||
10,000 | Tokyo Gas Co., Ltd. | 42,953 | |||||||||
73,269 | |||||||||||
Health Care Equipment & Supplies | |||||||||||
2,400 | Olympus Corp. (a) | 36,558 | |||||||||
2,400 | Sysmex Corp. | 79,035 | |||||||||
3,650 | Terumo Corp. | 185,307 | |||||||||
300,900 | |||||||||||
Hotels, Restaurants & Leisure | |||||||||||
650 | Oriental Land Co., Ltd. (a) | 64,739 | |||||||||
Household Durables | |||||||||||
5,050 | Casio Computer Co., Ltd. (a) | 30,965 | |||||||||
33,000 | Panasonic Corp. | 336,212 | |||||||||
7,072 | Sekisui Chemical Co., Ltd. | 55,445 | |||||||||
11,046 | Sekisui House Ltd. | 98,355 | |||||||||
7,500 | Sharp Corp. (a) | 69,196 | |||||||||
10,996 | Sony Corp. | 231,220 | |||||||||
821,393 | |||||||||||
Household Products | |||||||||||
3,600 | Unicharm Corp. | 161,700 |
See Notes to Financial Statements
21
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
Information Technology Services | |||||||||||
700 | Itochu Techno-Solutions Corp. (a) | $ | 30,276 | ||||||||
2,250 | Nomura Research Institute Ltd. | 50,818 | |||||||||
18 | NTT Data Corp. | 60,444 | |||||||||
180 | Obic Co., Ltd. | 34,438 | |||||||||
175,976 | |||||||||||
Insurance | |||||||||||
4,200 | MS&AD Insurance Group Holdings | 82,590 | |||||||||
2,200 | NKSJ Holdings, Inc. (a) | 44,229 | |||||||||
4,700 | T&D Holdings, Inc. | 46,524 | |||||||||
10,268 | Tokio Marine Holdings, Inc. | 244,389 | |||||||||
417,732 | |||||||||||
Internet Software & Services | |||||||||||
203 | Yahoo! Japan Corp. (a) | 65,495 | |||||||||
Leisure Equipment & Products | |||||||||||
3,400 | Nikon Corp. (a) | 76,312 | |||||||||
2,550 | Shimano, Inc. (a) | 126,221 | |||||||||
2,100 | Yamaha Corp. | 21,312 | |||||||||
223,845 | |||||||||||
Machinery | |||||||||||
3,553 | Amada Co., Ltd. | 23,412 | |||||||||
2,950 | Fanuc Corp. | 476,349 | |||||||||
4,700 | Hitachi Construction Machinery Co., Ltd. (a) | 90,380 | |||||||||
12,530 | IHI Corp. | 28,553 | |||||||||
11,500 | Kawasaki Heavy Industries Ltd. (a) | 29,444 | |||||||||
15,700 | Komatsu Ltd. | 386,564 | |||||||||
24,000 | Kubota Corp. | 197,393 | |||||||||
1,100 | Kurita Water Industries Ltd. | 30,334 | |||||||||
1,300 | Makita Corp. | 48,496 | |||||||||
5,000 | Minebea Co., Ltd. (a) | 17,828 | |||||||||
28,550 | Mitsubishi Heavy Industries Ltd. | 116,656 | |||||||||
2,500 | Nabtesco Corp. (a) | 54,611 | |||||||||
7,060 | NGK Insulators Ltd. | 81,355 | |||||||||
5,553 | NSK Ltd. | 41,952 |
NUMBER OF SHARES | VALUE | ||||||||||
6,051 | NTN Corp. (a) | $ | 26,706 | ||||||||
1,105 | SMC Corp. | 172,165 | |||||||||
5,000 | Sumitomo Heavy Industries Ltd. | 28,206 | |||||||||
1,000 | THK Co., Ltd. | 19,399 | |||||||||
1,869,803 | |||||||||||
Marine | |||||||||||
43,000 | Kawasaki Kisen Kaisha Ltd. | 87,547 | |||||||||
16,000 | Mitsui OSK Lines Ltd. (a) | 61,804 | |||||||||
13,015 | Nippon Yusen KK (a) | 32,936 | |||||||||
182,287 | |||||||||||
Metals & Mining | |||||||||||
7,595 | Dowa Holdings Co., Ltd. (a) | 45,874 | |||||||||
6,800 | JFE Holdings, Inc. | 128,135 | |||||||||
25,000 | Kobe Steel Ltd. | 41,731 | |||||||||
21,000 | Mitsubishi Materials Corp. | 55,987 | |||||||||
15,604 | Mitsui Mining & Smelting Co., Ltd. | 42,736 | |||||||||
95,108 | Nippon Steel Corp. (a) | 248,510 | |||||||||
83,000 | Sumitomo Metal Industries Ltd. | 156,329 | |||||||||
17,500 | Sumitomo Metal Mining Co., Ltd. | 241,120 | |||||||||
960,422 | |||||||||||
Multiline Retail | |||||||||||
1,900 | Ryohin Keikaku Co., Ltd. | 90,390 | |||||||||
Office Electronics | |||||||||||
8,704 | Canon, Inc. | 397,478 | |||||||||
7,030 | Konica Minolta Holdings, Inc. (a) | 51,209 | |||||||||
448,687 | |||||||||||
Oil, Gas & Consumable Fuels | |||||||||||
29 | INPEX Corp. | 190,792 | |||||||||
24,400 | JX Holdings, Inc. | 141,976 | |||||||||
3,400 | Showa Shell Sekiyu KK | 24,583 | |||||||||
4,000 | TonenGeneral Sekiyu KK (a) | 45,109 | |||||||||
402,460 | |||||||||||
Paper & Forest Products | |||||||||||
1,400 | Nippon Paper Group, Inc. (a) | 32,185 |
See Notes to Financial Statements
22
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
35,000 | OJI Paper Co., Ltd. (a) | $ | 173,438 | ||||||||
205,623 | |||||||||||
Personal Products | |||||||||||
4,700 | Shiseido Co., Ltd. (a) | 86,091 | |||||||||
Pharmaceuticals | |||||||||||
5,300 | Astellas Pharma, Inc. | 193,382 | |||||||||
2,600 | Chugai Pharmaceutical Co., Ltd. (a) | 40,696 | |||||||||
14,900 | Daiichi Sankyo Co., Ltd. | 289,741 | |||||||||
2,500 | Eisai Co., Ltd. (a) | 99,366 | |||||||||
700 | Hisamitsu Pharmaceutical Co., Inc. (a) | 28,208 | |||||||||
2,700 | Mitsubishi Tanabe Pharma Corp. | 46,840 | |||||||||
900 | Ono Pharmaceutical Co., Ltd. | 47,111 | |||||||||
2,800 | Otsuka Holdings Co. Ltd. | 72,083 | |||||||||
900 | Santen Pharmaceutical Co. Ltd. | 33,560 | |||||||||
3,400 | Shionogi & Co., Ltd. | 46,210 | |||||||||
11,500 | Takeda Pharmaceutical Co., Ltd. | 518,880 | |||||||||
1,416,077 | |||||||||||
Real Estate Investment Trusts (REITs) | |||||||||||
7 | Japan Real Estate Investment Corp. REIT | 59,920 | |||||||||
24 | Japan Retail Fund Investment Corp. REIT (a) | 37,441 | |||||||||
8 | Nippon Building Fund, Inc. REIT | 77,543 | |||||||||
174,904 | |||||||||||
Real Estate Management & Development | |||||||||||
4,800 | Aeon Mall Co., Ltd. | 111,941 | |||||||||
1,256 | Daito Trust Construction Co., Ltd. | 111,547 | |||||||||
7,000 | Daiwa House Industry Co., Ltd. | 87,013 | |||||||||
17,000 | Mitsubishi Estate Co., Ltd. | 287,955 | |||||||||
12,500 | Mitsui Fudosan Co., Ltd. | 206,736 |
NUMBER OF SHARES | VALUE | ||||||||||
6,500 | Sumitomo Realty & Development Co., Ltd. | $ | 134,793 | ||||||||
9,000 | Tokyu Land Corp. | 37,872 | |||||||||
977,857 | |||||||||||
Road & Rail | |||||||||||
13 | Central Japan Railway Co. (a) | 110,542 | |||||||||
3,400 | East Japan Railway Co. | 206,463 | |||||||||
6,000 | Keikyu Corp. (a) | 53,980 | |||||||||
3,000 | Keio Corp. (a) | 20,611 | |||||||||
15,550 | Kintetsu Corp. (a) | 54,569 | |||||||||
11,500 | Nippon Express Co., Ltd. | 44,596 | |||||||||
8,500 | Tobu Railway Co., Ltd. (a) | 40,693 | |||||||||
12,000 | Tokyu Corp. (a) | 58,058 | |||||||||
900 | West Japan Railway Co. | 38,149 | |||||||||
627,661 | |||||||||||
Semiconductors & Semiconductor Equipment | |||||||||||
2,450 | Advantest Corp. (a) | 28,493 | |||||||||
1,605 | Rohm Co., Ltd. | 81,761 | |||||||||
3,700 | Tokyo Electron Ltd. | 197,561 | |||||||||
307,815 | |||||||||||
Software | |||||||||||
1,700 | Konami Corp. (a) | 55,643 | |||||||||
1,508 | Nintendo Co., Ltd. | 228,077 | |||||||||
750 | Oracle Corp. Japan | 25,854 | |||||||||
1,600 | Trend Micro, Inc. | 57,256 | |||||||||
366,830 | |||||||||||
Specialty Retail | |||||||||||
1,700 | Fast Retailing Co., Ltd. | 305,365 | |||||||||
300 | Shimamura Co., Ltd. | 30,050 | |||||||||
620 | USS Co., Ltd. (a) | 51,309 | |||||||||
1,160 | Yamada Denki Co., Ltd. (a) | 83,602 | |||||||||
470,326 | |||||||||||
Textiles, Apparel & Luxury Goods | |||||||||||
2,571 | Nisshinbo Holdings, Inc. (a) | 23,379 | |||||||||
Tobacco | |||||||||||
51 | Japan Tobacco, Inc. | 255,677 |
See Notes to Financial Statements
23
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
Trading Companies & Distributors | |||||||||||
19,251 | ITOCHU Corp. | $ | 189,863 | ||||||||
17,550 | Marubeni Corp. | 101,639 | |||||||||
18,100 | Mitsubishi Corp. | 372,576 | |||||||||
13,700 | Mitsui & Co., Ltd. | 199,903 | |||||||||
8,300 | Sumitomo Corp. | 102,953 | |||||||||
966,934 | |||||||||||
Transportation Infrastructure | |||||||||||
2,000 | Mitsubishi Logistics Corp. | 22,026 | |||||||||
Wireless Telecommunication Services | |||||||||||
30 | NTT DoCoMo, Inc. | 52,991 | |||||||||
13,700 | Softbank Corp. | 445,703 | |||||||||
498,694 | |||||||||||
Total Japan | 23,365,652 | ||||||||||
Korea, Republic of (1.1%) | |||||||||||
Auto Components | |||||||||||
117 | Hyundai Mobis | 33,759 | |||||||||
Automobiles | |||||||||||
280 | Hyundai Motor Co. | 56,796 | |||||||||
420 | Kia Motors Corp. | 27,144 | |||||||||
83,940 | |||||||||||
Capital Markets | |||||||||||
360 | Daewoo Securities Co., Ltd. | 3,475 | |||||||||
142 | Samsung Securities Co., Ltd. | 7,285 | |||||||||
10,760 | |||||||||||
Chemicals | |||||||||||
142 | Cheil Industries, Inc. | 12,519 | |||||||||
88 | LG Chem Ltd. | 28,355 | |||||||||
35 | OCI Co., Ltd. | 7,194 | |||||||||
48,068 | |||||||||||
Commercial Banks | |||||||||||
380 | Hana Financial Group, Inc. | 13,426 | |||||||||
610 | Industrial Bank of Korea | 7,957 | |||||||||
710 | KB Financial Group, Inc. | 27,754 | |||||||||
1,020 | Korea Exchange Bank | 7,558 |
NUMBER OF SHARES | VALUE | ||||||||||
790 | Shinhan Financial Group Co., Ltd. | $ | 30,985 | ||||||||
470 | Woori Finance Holdings Co., Ltd. | 4,457 | |||||||||
92,137 | |||||||||||
Construction & Engineering | |||||||||||
190 | Doosan Heavy Industries and Construction Co., Ltd. | 10,123 | |||||||||
123 | GS Engineering & Construction Corp. | 10,712 | |||||||||
150 | Hyundai Engineering & Construction Co., Ltd. | 9,561 | |||||||||
70 | Samsung Engineering Co., Ltd. | 14,293 | |||||||||
44,689 | |||||||||||
Diversified Telecommunication Services | |||||||||||
420 | KT Corp. | 14,048 | |||||||||
Electric Utilities | |||||||||||
510 | Korea Electric Power Corp. (b) | 11,502 | |||||||||
Electronic Equipment, Instruments & Components | |||||||||||
450 | LG Display Co., Ltd. | 9,098 | |||||||||
115 | Samsung Electro-Mechanics Co., Ltd. | 8,750 | |||||||||
72 | Samsung SDI Co., Ltd. | 8,722 | |||||||||
26,570 | |||||||||||
Food & Staples Retailing | |||||||||||
47 | E-Mart Co., Ltd. (b) | 12,194 | |||||||||
Household Durables | |||||||||||
182 | LG Electronics, Inc. | 12,137 | |||||||||
Industrial Conglomerates | |||||||||||
339 | LG Corp. | 19,673 | |||||||||
77 | Samsung Techwin Co., Ltd. | 4,115 | |||||||||
23,788 | |||||||||||
Insurance | |||||||||||
75 | Samsung Fire & Marine Insurance Co., Ltd. | 15,877 |
See Notes to Financial Statements
24
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
Internet Software & Services | |||||||||||
83 | NHN Corp. (b) | $ | 17,328 | ||||||||
Machinery | |||||||||||
84 | Hyundai Heavy Industries Co., Ltd. | 22,587 | |||||||||
450 | Samsung Heavy Industries Co., Ltd. | 13,842 | |||||||||
36,429 | |||||||||||
Metals & Mining | |||||||||||
149 | Hyundai Steel Co. | 13,525 | |||||||||
118 | POSCO | 40,922 | |||||||||
54,447 | |||||||||||
Multiline Retail | |||||||||||
26 | Lotte Shopping Co., Ltd. | 9,331 | |||||||||
16 | Shinsegae Co., Ltd. | 4,007 | |||||||||
13,338 | |||||||||||
Oil, Gas & Consumable Fuels | |||||||||||
140 | S-Oil Corp. | 14,368 | |||||||||
126 | SK Innovation Co., Ltd. | 18,821 | |||||||||
33,189 | |||||||||||
Semiconductors & Semiconductor Equipment | |||||||||||
900 | Hynix Semiconductor, Inc. | 18,377 | |||||||||
506 | Samsung Electronics Co., Ltd. | 438,923 | |||||||||
36 | Samsung Electronics Co., Ltd. (Preference) | 20,577 | |||||||||
477,877 | |||||||||||
Tobacco | |||||||||||
221 | KT&G Corp. | 13,869 | |||||||||
Trading Companies & Distributors | |||||||||||
290 | Samsung C&T Corp. | 17,942 | |||||||||
Wireless Telecommunication Services | |||||||||||
98 | SK Telecom Co., Ltd. | 12,993 | |||||||||
Total Korea, Republic of | 1,106,881 |
NUMBER OF SHARES | VALUE | ||||||||||
Mexico (0.6%) | |||||||||||
Beverages | |||||||||||
8,500 | Fomento Economico Mexicano SAB de CV (Units) (d) | $ | 57,039 | ||||||||
2,700 | Grupo Modelo SAB de CV | 17,176 | |||||||||
74,215 | |||||||||||
Chemicals | |||||||||||
3,300 | Mexichem SAB de CV | 11,378 | |||||||||
Commercial Banks | |||||||||||
6,300 | Grupo Financiero Banorte SAB de CV, Series O | 21,485 | |||||||||
7,000 | Grupo Financiero Inbursa SA | 15,017 | |||||||||
36,502 | |||||||||||
Construction Materials | |||||||||||
37,300 | Cemex SAB de CV (Units) (b)(d) | 16,317 | |||||||||
Diversified Telecommunication Services | |||||||||||
25,300 | Telefonos de Mexico SAB de CV | 19,876 | |||||||||
Food & Staples Retailing | |||||||||||
27,600 | Wal-Mart de Mexico SAB de CV, Series V | 71,242 | |||||||||
Food Products | |||||||||||
7,200 | Grupo Bimbo SAB de CV | 14,830 | |||||||||
Household Products | |||||||||||
2,400 | Kimberly-Clark de Mexico SAB de CV, Class A | 13,660 | |||||||||
Industrial Conglomerates | |||||||||||
1,200 | Alfa SAB de CV | 13,854 | |||||||||
Media | |||||||||||
10,200 | Grupo Televisa SA | 43,626 | |||||||||
Metals & Mining | |||||||||||
512 | Fresnillo PLC | 13,907 | |||||||||
14,800 | Grupo Mexico SAB de CV, Series B | 41,023 | |||||||||
420 | Industrias Penoles SAB de CV | 17,144 | |||||||||
2,500 | Minera Frisco SAB de CV (b) | 9,850 | |||||||||
81,924 |
See Notes to Financial Statements
25
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
Specialty Retail | |||||||||||
295 | Grupo Elektra SA de CV | $ | 22,733 | ||||||||
Wireless Telecommunication Services | |||||||||||
152,400 | America Movil SAB de CV | 193,716 | |||||||||
Total Mexico | 613,873 | ||||||||||
Netherlands (3.0%) | |||||||||||
Air Freight & Logistics | |||||||||||
8,488 | PostNL N.V. | 42,996 | |||||||||
8,488 | TNT Express N.V. | 71,696 | |||||||||
114,692 | |||||||||||
Beverages | |||||||||||
3,824 | Heineken N.V. | 185,202 | |||||||||
Chemicals | |||||||||||
3,503 | Akzo Nobel N.V. (a) | 184,205 | |||||||||
1,643 | Koninklijke DSM N.V. | 84,103 | |||||||||
268,308 | |||||||||||
Diversified Financial Services | |||||||||||
33,580 | ING Groep N.V. CVA (b) | 289,960 | |||||||||
Diversified Telecommunication Services | |||||||||||
24,056 | Koninklijke KPN N.V. | 314,315 | |||||||||
Energy Equipment & Services | |||||||||||
1,175 | Fugro N.V. CVA | 68,908 | |||||||||
1,865 | SBM Offshore N.V. | 40,998 | |||||||||
109,906 | |||||||||||
Food & Staples Retailing | |||||||||||
18,160 | Koninklijke Ahold N.V. | 232,222 | |||||||||
Food Products | |||||||||||
23,924 | Unilever N.V. CVA | 822,682 | |||||||||
Industrial Conglomerates | |||||||||||
12,034 | Koninklijke Philips Electronics N.V. | 249,232 | |||||||||
Insurance | |||||||||||
15,100 | Aegon N.V. (b) | 71,753 |
NUMBER OF SHARES | VALUE | ||||||||||
Media | |||||||||||
10,597 | Reed Elsevier N.V. | $ | 130,119 | ||||||||
7,033 | Wolters Kluwer N.V. | 123,795 | |||||||||
253,914 | |||||||||||
Professional Services | |||||||||||
395 | Randstad Holding N.V. | 13,967 | |||||||||
Real Estate Investment Trusts (REITs) | |||||||||||
769 | Corio N.V. REIT | 38,979 | |||||||||
Semiconductors & Semiconductor Equipment | |||||||||||
5,597 | ASML Holding N.V. | 233,714 | |||||||||
Total Netherlands | 3,198,846 | ||||||||||
Norway (2.0%) | |||||||||||
Chemicals | |||||||||||
10,517 | Yara International ASA | 496,646 | |||||||||
Commercial Banks | |||||||||||
14,486 | DnB NOR ASA | 167,524 | |||||||||
Diversified Telecommunication Services | |||||||||||
37,970 | Telenor ASA | 676,070 | |||||||||
Energy Equipment & Services | |||||||||||
3,730 | Aker Solutions ASA | 43,129 | |||||||||
3,064 | Subsea 7 SA (a)(b) | 66,166 | |||||||||
109,295 | |||||||||||
Industrial Conglomerates | |||||||||||
12,154 | Orkla ASA (a) | 105,306 | |||||||||
Metals & Mining | |||||||||||
19,537 | Norsk Hydro ASA | 101,188 | |||||||||
Oil, Gas & Consumable Fuels | |||||||||||
15,543 | Statoil ASA | 395,338 | |||||||||
Semiconductors & Semiconductor Equipment | |||||||||||
2,800 | Renewable Energy Corp. ASA (a)(b) | 2,691 | |||||||||
Total Norway | 2,054,058 |
See Notes to Financial Statements
26
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
Philippines (0.7%) | |||||||||||
Commercial Banks | |||||||||||
58,200 | Bank of the Philippine Islands | $ | 79,181 | ||||||||
34,300 | Metropolitan Bank & Trust | 56,889 | |||||||||
136,070 | |||||||||||
Diversified Financial Services | |||||||||||
7,176 | Ayala Corp. | 50,783 | |||||||||
Electric Utilities | |||||||||||
9,230 | Manila Electric Co. | 51,346 | |||||||||
Independent Power Producers & Energy Traders | |||||||||||
59,200 | Aboitiz Power Corp. | 41,036 | |||||||||
250,000 | Energy Development Corp. | 35,426 | |||||||||
76,462 | |||||||||||
Industrial Conglomerates | |||||||||||
69,000 | Aboitiz Equity Ventures, Inc. | 65,885 | |||||||||
130,700 | Alliance Global Group, Inc. | 31,524 | |||||||||
6,000 | SM Investments Corp. | 77,512 | |||||||||
174,921 | |||||||||||
Real Estate Management & Development | |||||||||||
172,300 | Ayala Land, Inc. | 64,411 | |||||||||
173,000 | SM Prime Holdings, Inc. | 52,011 | |||||||||
116,422 | |||||||||||
Wireless Telecommunication Services | |||||||||||
1,530 | Philippine Long Distance Telephone Co. | 85,334 | |||||||||
Total Philippines | 691,338 | ||||||||||
Poland (0.9%) | |||||||||||
Chemicals | |||||||||||
405 | Synthos SA | 536 | |||||||||
Commercial Banks | |||||||||||
2,638 | Bank Pekao SA | 121,958 | |||||||||
334 | BRE Bank SA (b) | 28,585 | |||||||||
8,481 | Getin Holding SA (b) | 22,616 |
NUMBER OF SHARES | VALUE | ||||||||||
15,012 | Powszechna Kasa Oszczednosci Bank Polski SA | $ | 168,864 | ||||||||
342,023 | |||||||||||
Diversified Telecommunication Services | |||||||||||
15,679 | Telekomunikacja Polska SA | 83,197 | |||||||||
Electric Utilities | |||||||||||
15,174 | PGE SA | 93,056 | |||||||||
23,900 | Tauron Polska Energia SA | 41,301 | |||||||||
134,357 | |||||||||||
Insurance | |||||||||||
1,100 | Powszechny Zaklad Ubezpieczen SA | 116,173 | |||||||||
Metals & Mining | |||||||||||
3,062 | KGHM Polska Miedz SA | 147,700 | |||||||||
Oil, Gas & Consumable Fuels | |||||||||||
7,537 | Polski Koncern Naftowy Orlen SA (b) | 93,025 | |||||||||
41,073 | Polskie Gornictwo Naftowe i Gazownictwo SA | 51,163 | |||||||||
144,188 | |||||||||||
Software | |||||||||||
646 | Asseco Poland SA | 10,030 | |||||||||
Total Poland | 978,204 | ||||||||||
Russia (0.4%) | |||||||||||
Commercial Banks | |||||||||||
7,106 | VTB Bank OJSC (Registered GDR) (a) | 33,664 | |||||||||
Metals & Mining | |||||||||||
3,209 | MMC Norilsk Nickel OJSC (ADR) (a) | 62,431 | |||||||||
Oil, Gas & Consumable Fuels | |||||||||||
12,519 | Gazprom OAO (ADR) | 145,059 | |||||||||
1,272 | LUKOIL OAO (ADR) | 73,625 | |||||||||
209 | NovaTek OAO (Registered GDR) | 29,099 |
See Notes to Financial Statements
27
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
4,144 | Rosneft Oil Co. (Registered GDR) | $ | 29,274 | ||||||||
4,000 | Surgutneftegas OJSC (ADR) (a) | 34,600 | |||||||||
1,098 | Tatneft (ADR) | 32,394 | |||||||||
344,051 | |||||||||||
Wireless Telecommunication Services | |||||||||||
1,250 | Mobile Telesystems OJSC (ADR) | 17,862 | |||||||||
Total Russia | 458,008 | ||||||||||
Singapore (1.9%) | |||||||||||
Aerospace & Defense | |||||||||||
16,000 | Singapore Technologies Engineering Ltd. | 35,838 | |||||||||
Airlines | |||||||||||
9,276 | Singapore Airlines Ltd. (a) | 85,824 | |||||||||
Commercial Banks | |||||||||||
24,413 | DBS Group Holdings Ltd. | 238,158 | |||||||||
45,093 | Oversea-Chinese Banking Corp., Ltd. | 301,397 | |||||||||
21,508 | United Overseas Bank Ltd. | 291,490 | |||||||||
831,045 | |||||||||||
Distributors | |||||||||||
31 | Jardine Cycle & Carriage Ltd. | 1,117 | |||||||||
Diversified Financial Services | |||||||||||
7,490 | Singapore Exchange Ltd. (a) | 40,023 | |||||||||
Diversified Telecommunication Services | |||||||||||
94,630 | Singapore Telecommunications Ltd. | 242,558 | |||||||||
Food & Staples Retailing | |||||||||||
7,000 | Olam International Ltd. (a) | 13,995 | |||||||||
Food Products | |||||||||||
13,000 | Wilmar International Ltd. | 55,807 | |||||||||
Hotels, Restaurants & Leisure | |||||||||||
87,000 | Genting Singapore PLC (a)(b) | 118,798 |
NUMBER OF SHARES | VALUE | ||||||||||
Industrial Conglomerates | |||||||||||
13,000 | Fraser and Neave Ltd. | $ | 63,191 | ||||||||
18,700 | Keppel Corp., Ltd. | 139,737 | |||||||||
12,511 | SembCorp Industries Ltd. | 41,206 | |||||||||
244,134 | |||||||||||
Machinery | |||||||||||
11,400 | SembCorp Marine Ltd. (a) | 37,706 | |||||||||
Media | |||||||||||
11,350 | Singapore Press Holdings Ltd. (a) | 35,106 | |||||||||
Real Estate Investment Trusts (REITs) | |||||||||||
18,000 | Ascendas Real Estate Investment Trust REIT | 29,276 | |||||||||
26,704 | CapitaMall Trust REIT | 39,529 | |||||||||
68,805 | |||||||||||
Real Estate Management & Development | |||||||||||
30,000 | CapitaLand Ltd. | 64,543 | |||||||||
6,462 | City Developments Ltd. | 55,857 | |||||||||
120,400 | |||||||||||
Road & Rail | |||||||||||
19,089 | ComfortDelGro Corp. Ltd. | 21,162 | |||||||||
Trading Companies & Distributors | |||||||||||
29,726 | Noble Group Ltd. | 36,194 | |||||||||
Total Singapore | 1,988,512 | ||||||||||
South Africa (0.3%) | |||||||||||
Beverages | |||||||||||
10,120 | SABMiller PLC | 367,218 | |||||||||
Spain (0.2%) | |||||||||||
Diversified Telecommunication Services | |||||||||||
5,923 | Telefonica SA (a) | 126,367 | |||||||||
Electric Utilities | |||||||||||
4,150 | Iberdrola SA | 30,105 |
See Notes to Financial Statements
28
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
Food & Staples Retailing | |||||||||||
6,282 | Distribuidora Internacional de Alimentacion SA (b) | $ | 28,568 | ||||||||
Oil, Gas & Consumable Fuels | |||||||||||
1,444 | Repsol YPF SA | 43,502 | |||||||||
Transportation Infrastructure | |||||||||||
546 | Abertis Infraestructuras SA (a) | 8,954 | |||||||||
Total Spain | 237,496 | ||||||||||
Sweden (3.3%) | |||||||||||
Building Products | |||||||||||
3,406 | Assa Abloy AB, Class B | 82,670 | |||||||||
Commercial Banks | |||||||||||
18,247 | Nordea Bank AB | 165,624 | |||||||||
5,400 | Svenska Handelsbanken AB, Class A | 154,652 | |||||||||
320,276 | |||||||||||
Commercial Services & Supplies | |||||||||||
1,600 | Securitas AB, Class B | 14,518 | |||||||||
Communications Equipment | |||||||||||
52,416 | Telefonaktiebolaget LM Ericsson, Class B | 545,643 | |||||||||
Construction & Engineering | |||||||||||
8,026 | Skanska AB, Class B | 130,993 | |||||||||
Diversified Financial Services | |||||||||||
6,402 | Investor AB, Class B | 124,946 | |||||||||
Diversified Telecommunication Services | |||||||||||
4,013 | Tele2 AB, Class B | 84,217 | |||||||||
32,459 | TeliaSonera AB | 224,728 | |||||||||
308,945 | |||||||||||
Health Care Equipment & Supplies | |||||||||||
4,160 | Getinge AB, Class B | 107,547 | |||||||||
Household Durables | |||||||||||
5,297 | Electrolux AB, Series B | 98,586 |
NUMBER OF SHARES | VALUE | ||||||||||
3,913 | Husqvarna AB, Class B | $ | 19,839 | ||||||||
118,425 | |||||||||||
Machinery | |||||||||||
2,826 | Alfa Laval AB | 52,739 | |||||||||
7,209 | Atlas Copco AB, Class A | 156,759 | |||||||||
4,569 | Atlas Copco AB, Class B | 88,739 | |||||||||
10,326 | Sandvik AB | 141,563 | |||||||||
568 | Scania AB, Class B | 9,524 | |||||||||
3,356 | SKF AB, Class B | 74,072 | |||||||||
6,398 | Volvo AB, Class A | 79,398 | |||||||||
11,067 | Volvo AB, Class B | 137,212 | |||||||||
740,006 | |||||||||||
Metals & Mining | |||||||||||
3,286 | SSAB AB, Class A | 31,662 | |||||||||
Oil, Gas & Consumable Fuels | |||||||||||
2,451 | Lundin Petroleum AB (b) | 59,837 | |||||||||
Paper & Forest Products | |||||||||||
859 | Holmen AB, Class B | 24,248 | |||||||||
9,321 | Svenska Cellulosa AB, Class B | 135,419 | |||||||||
159,667 | |||||||||||
Personal Products | |||||||||||
3,237 | Oriflame Cosmetics SA SDR | 128,726 | |||||||||
Specialty Retail | |||||||||||
12,916 | Hennes & Mauritz AB, Class B | 425,971 | |||||||||
Tobacco | |||||||||||
4,193 | Swedish Match AB | 144,695 | |||||||||
Total Sweden | 3,444,527 | ||||||||||
Switzerland (8.9%) | |||||||||||
Building Products | |||||||||||
361 | Geberit AG (Registered) (b) | 73,866 | |||||||||
Capital Markets | |||||||||||
5,527 | Credit Suisse Group AG (Registered) (b) | 159,322 | |||||||||
4,324 | GAM Holding AG (b) | 51,253 | |||||||||
1,827 | Julius Baer Group Ltd. (b) | 68,722 |
See Notes to Financial Statements
29
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
18,078 | UBS AG (Registered) (b) | $ | 228,060 | ||||||||
507,357 | |||||||||||
Chemicals | |||||||||||
68 | Givaudan SA (Registered) (b) | 61,812 | |||||||||
1,918 | Syngenta AG (Registered) (b) | 586,566 | |||||||||
648,378 | |||||||||||
Computers & Peripherals | |||||||||||
2,768 | Logitech International SA (Registered) (a)(b) | 26,565 | |||||||||
Construction Materials | |||||||||||
2,195 | Holcim Ltd. (Registered) (b) | 139,101 | |||||||||
Diversified Financial Services | |||||||||||
57 | Pargesa Holding SA | 4,444 | |||||||||
Diversified Telecommunication Services | |||||||||||
325 | Swisscom AG (Registered) | 130,814 | |||||||||
Electrical Equipment | |||||||||||
30,695 | ABB Ltd. (Registered) (b) | 578,686 | |||||||||
Energy Equipment & Services | |||||||||||
633 | Transocean Ltd. | 35,769 | |||||||||
Food Products | |||||||||||
49,508 | Nestle SA (Registered) | 2,865,015 | |||||||||
Health Care Equipment & Supplies | |||||||||||
144 | Straumann Holding AG (Registered) | 25,326 | |||||||||
977 | Synthes, Inc. (f) | 163,472 | |||||||||
188,798 | |||||||||||
Insurance | |||||||||||
404 | Baloise-Holding AG (Registered) | 32,828 | |||||||||
231 | Swiss Life Holding AG (Registered) (b) | 28,318 | |||||||||
2,797 | Swiss Re AG (b) | 152,985 | |||||||||
955 | Zurich Financial Services AG (b) | 219,478 | |||||||||
433,609 |
NUMBER OF SHARES | VALUE | ||||||||||
Life Sciences Tools & Services | |||||||||||
771 | Lonza Group AG (Registered) (b) | $ | 51,153 | ||||||||
Machinery | |||||||||||
482 | Schindler Holding AG | 56,667 | |||||||||
Pharmaceuticals | |||||||||||
23,666 | Novartis AG (Registered) | 1,336,954 | |||||||||
7,148 | Roche Holding AG | 1,175,158 | |||||||||
2,512,112 | |||||||||||
Professional Services | |||||||||||
193 | Adecco SA (Registered) (b) | 9,231 | |||||||||
22 | SGS SA (Registered) | 37,621 | |||||||||
46,852 | |||||||||||
Textiles, Apparel & Luxury Goods | |||||||||||
10,414 | Cie Financiere Richemont SA | 590,886 | |||||||||
977 | Swatch Group AG (The) | 409,666 | |||||||||
742 | Swatch Group AG (The) (Registered) | 54,279 | |||||||||
1,054,831 | |||||||||||
Total Switzerland | 9,354,017 | ||||||||||
Thailand (0.2%) | |||||||||||
Commercial Banks | |||||||||||
5,500 | Bangkok Bank PCL | 26,393 | |||||||||
9,900 | Bangkok Bank PCL (Foreign Registered) | 49,846 | |||||||||
22,100 | Bank of Ayudhya PCL (Foreign) | 14,456 | |||||||||
7,000 | Kasikornbank PCL | 27,835 | |||||||||
13,600 | Kasikornbank PCL (Foreign) | 54,668 | |||||||||
30,600 | Krung Thai Bank PCL | 14,893 | |||||||||
17,800 | Siam Commercial Bank PCL (Foreign) | 67,139 | |||||||||
Total Thailand | 255,230 | ||||||||||
Turkey (1.0%) | |||||||||||
Beverages | |||||||||||
5,444 | Anadolu Efes Biracilik Ve Malt Sanayii AS | 66,021 |
See Notes to Financial Statements
30
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
1,784 | Coca-Cola Icecek AS (Units) (d) | $ | 24,173 | ||||||||
90,194 | |||||||||||
Commercial Banks | |||||||||||
29,665 | Akbank TAS | 107,846 | |||||||||
49,692 | Turkiye Garanti Bankasi AS (Units) (d) | 174,496 | |||||||||
8,358 | Turkiye Halk Bankasi AS | 51,215 | |||||||||
38,513 | Turkiye Is Bankasi, Series C | 89,486 | |||||||||
21,114 | Turkiye Vakiflar Bankasi Tao, Class D | 35,876 | |||||||||
21,685 | Yapi ve Kredi Bankasi AS (b) | 40,503 | |||||||||
499,422 | |||||||||||
Diversified Financial Services | |||||||||||
13,838 | Haci Omer Sabanci Holding AS | 47,190 | |||||||||
Diversified Telecommunication Services | |||||||||||
13,794 | Turk Telekomunikasyon AS | 58,323 | |||||||||
Food & Staples Retailing | |||||||||||
2,148 | BIM Birlesik Magazalar AS | 65,301 | |||||||||
Industrial Conglomerates | |||||||||||
16,101 | KOC Holding AS | 57,329 | |||||||||
Metals & Mining | |||||||||||
15,032 | Eregli Demir ve Celik Fabrikalari TAS | 30,969 | |||||||||
Oil, Gas & Consumable Fuels | |||||||||||
3,235 | Tupras Turkiye Petrol Rafinerileri AS | 72,799 | |||||||||
Real Estate Investment Trusts (REITs) | |||||||||||
20,057 | Emlak Konut Gayrimenkul Yatirim Ortakligi AS REIT | 26,951 | |||||||||
Wireless Telecommunication Services | |||||||||||
19,356 | Turkcell Iletisim Hizmetleri AS (b) | 95,419 | |||||||||
Total Turkey | 1,043,897 |
NUMBER OF SHARES | VALUE | ||||||||||
United Kingdom (19.9%) | |||||||||||
Aerospace & Defense | |||||||||||
26,293 | BAE Systems PLC | $ | 116,140 | ||||||||
11,529 | Cobham PLC | 33,267 | |||||||||
14,154 | Rolls-Royce Holdings PLC (b) | 159,029 | |||||||||
976,626 | Rolls-Royce Holdings PLC, Class C (b) | 1,570 | |||||||||
310,006 | |||||||||||
Beverages | |||||||||||
35,234 | Diageo PLC | 729,818 | |||||||||
Capital Markets | |||||||||||
5,781 | 3i Group PLC | 18,975 | |||||||||
2,531 | Investec PLC | 15,299 | |||||||||
15,431 | Man Group PLC | 36,789 | |||||||||
1,714 | Schroders PLC | 39,260 | |||||||||
110,323 | |||||||||||
Chemicals | |||||||||||
1,911 | Johnson Matthey PLC | 57,424 | |||||||||
Commercial Banks | |||||||||||
40,299 | Barclays PLC | 124,594 | |||||||||
131,030 | HSBC Holdings PLC | 1,143,426 | |||||||||
57,454 | Lloyds Banking Group PLC (b) | 29,595 | |||||||||
107,782 | Royal Bank of Scotland Group PLC (b) | 41,121 | |||||||||
19,325 | Standard Chartered PLC | 450,200 | |||||||||
1,788,936 | |||||||||||
Commercial Services & Supplies | |||||||||||
12,385 | Aggreko PLC | 338,621 | |||||||||
4,556 | G4S PLC | 17,850 | |||||||||
1,852 | Serco Group PLC | 15,347 | |||||||||
371,818 | |||||||||||
Construction & Engineering | |||||||||||
12,118 | Balfour Beatty PLC | 48,846 | |||||||||
Containers & Packaging | |||||||||||
7,876 | Rexam PLC | 43,542 |
See Notes to Financial Statements
31
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
Diversified Telecommunication Services | |||||||||||
108,542 | BT Group PLC | $ | 327,797 | ||||||||
Electric Utilities | |||||||||||
13,950 | Scottish & Southern Energy PLC | 299,802 | |||||||||
Energy Equipment & Services | |||||||||||
3,695 | AMEC PLC | 54,728 | |||||||||
4,108 | Petrofac Ltd. | 94,351 | |||||||||
149,079 | |||||||||||
Food & Staples Retailing | |||||||||||
13,046 | J Sainsbury PLC | 62,233 | |||||||||
73,147 | Tesco PLC | 471,426 | |||||||||
533,659 | |||||||||||
Food Products | |||||||||||
14,443 | Unilever PLC | 482,120 | |||||||||
Health Care Equipment & Supplies | |||||||||||
17,251 | Smith & Nephew PLC | 157,390 | |||||||||
Hotels, Restaurants & Leisure | |||||||||||
2,947 | Carnival PLC | 106,758 | |||||||||
24,002 | Compass Group PLC | 217,852 | |||||||||
4,888 | Intercontinental Hotels Group PLC | 90,174 | |||||||||
9,530 | TUI Travel PLC | 26,013 | |||||||||
2,883 | Whitbread PLC | 76,496 | |||||||||
517,293 | |||||||||||
Household Products | |||||||||||
6,776 | Reckitt Benckiser Group PLC | 347,563 | |||||||||
Independent Power Producers & Energy Traders | |||||||||||
4,314 | International Power PLC | 23,390 | |||||||||
Industrial Conglomerates | |||||||||||
3,015 | Smiths Group PLC | 46,057 | |||||||||
Insurance | |||||||||||
1,422 | Admiral Group PLC | 26,806 | |||||||||
16,683 | Aviva PLC | 90,556 | |||||||||
47,626 | Legal & General Group PLC | 83,893 |
NUMBER OF SHARES | VALUE | ||||||||||
44,303 | Old Mutual PLC | $ | 77,732 | ||||||||
15,879 | Prudential PLC | 164,262 | |||||||||
27,792 | RSA Insurance Group PLC | 49,565 | |||||||||
15,153 | Standard Life PLC | 52,180 | |||||||||
544,994 | |||||||||||
Internet & Catalog Retail | |||||||||||
10,876 | Home Retail Group PLC | 17,448 | |||||||||
Machinery | |||||||||||
7,144 | Charter International PLC (a) | 102,735 | |||||||||
5,761 | Invensys PLC | 20,735 | |||||||||
123,470 | |||||||||||
Media | |||||||||||
23,145 | British Sky Broadcasting Group PLC | 259,839 | |||||||||
11,351 | Pearson PLC | 208,972 | |||||||||
18,650 | Reed Elsevier PLC | 159,646 | |||||||||
49,043 | WPP PLC | 508,283 | |||||||||
1,136,740 | |||||||||||
Metals & Mining | |||||||||||
11,462 | Anglo American PLC | 420,030 | |||||||||
11,296 | BHP Billiton PLC | 355,583 | |||||||||
2,433 | Randgold Resources Ltd. | 266,188 | |||||||||
13,612 | Rio Tinto PLC | 736,047 | |||||||||
12,598 | Xstrata PLC | 209,876 | |||||||||
1,987,724 | |||||||||||
Multi-Utilities | |||||||||||
32,213 | Centrica PLC | 152,567 | |||||||||
32,306 | National Grid PLC | 319,985 | |||||||||
472,552 | |||||||||||
Multiline Retail | |||||||||||
19,628 | Marks & Spencer Group PLC | 100,859 | |||||||||
2,785 | Next PLC | 113,752 | |||||||||
214,611 | |||||||||||
Oil, Gas & Consumable Fuels | |||||||||||
32,972 | BG Group PLC | 714,531 | |||||||||
135,584 | BP PLC | 999,394 | |||||||||
39,680 | Royal Dutch Shell PLC, Class A | 1,401,476 |
See Notes to Financial Statements
32
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
NUMBER OF SHARES | VALUE | ||||||||||
26,821 | Royal Dutch Shell PLC, Class B | $ | 962,534 | ||||||||
557 | Tullow Oil PLC | 12,503 | |||||||||
4,090,438 | |||||||||||
Pharmaceuticals | |||||||||||
13,665 | AstraZeneca PLC | 652,513 | |||||||||
51,688 | GlaxoSmithKline PLC | 1,158,562 | |||||||||
1,811,075 | |||||||||||
Professional Services | |||||||||||
1,773 | Capita Group PLC (The) | 20,646 | |||||||||
9,477 | Experian PLC | 122,792 | |||||||||
143,438 | |||||||||||
Real Estate Investment Trusts (REITs) | |||||||||||
9,395 | British Land Co., PLC REIT | 76,855 | |||||||||
6,556 | Capital Shopping Centres Group PLC REIT | 34,605 | |||||||||
8,687 | Hammerson PLC REIT | 56,480 | |||||||||
8,823 | Land Securities Group PLC REIT | 96,730 | |||||||||
8,784 | Segro PLC REIT | 34,323 | |||||||||
298,993 | |||||||||||
Road & Rail | |||||||||||
9,040 | Firstgroup PLC | 48,272 | |||||||||
Semiconductors & Semiconductor Equipment | |||||||||||
25,507 | ARM Holdings PLC | 238,939 | |||||||||
Software | |||||||||||
20,512 | Sage Group PLC (The) | 91,507 | |||||||||
Specialty Retail | |||||||||||
15,420 | Kingfisher PLC | 63,771 | |||||||||
Textiles, Apparel & Luxury Goods | |||||||||||
4,894 | Burberry Group PLC | 104,736 | |||||||||
Tobacco | |||||||||||
19,297 | British American Tobacco PLC | 883,075 | |||||||||
7,884 | Imperial Tobacco Group PLC | 287,318 | |||||||||
1,170,393 |
NUMBER OF SHARES | VALUE | ||||||||||
Trading Companies & Distributors | |||||||||||
3,506 | Bunzl PLC | $ | 45,175 | ||||||||
676 | Wolseley PLC | 19,467 | |||||||||
64,642 | |||||||||||
Water Utilities | |||||||||||
4,677 | Severn Trent PLC | 113,750 | |||||||||
1,972 | United Utilities Group PLC | 19,184 | |||||||||
132,934 | |||||||||||
Wireless Telecommunication Services | |||||||||||
656,080 | Vodafone Group PLC | 1,819,495 | |||||||||
Total United Kingdom | 20,921,035 | ||||||||||
United States (0.1%) | |||||||||||
Energy Equipment & Services | |||||||||||
7,773 | Tenaris SA (a) | 123,693 | |||||||||
Real Estate Management & Development | |||||||||||
1,774 | Lend Lease Group REIT (Stapled Securities) (c)(d) | 14,243 | |||||||||
Total United States | 137,936 | ||||||||||
Total Common Stocks (Cost $94,063,592) | 93,173,454 | ||||||||||
NUMBER OF RIGHTS | |||||||||||
Rights (0.0%) | |||||||||||
Korea, Republic of | |||||||||||
Capital Markets | |||||||||||
16 | Samsung Securities Co. Ltd. (Cost $0) (b) | 144 |
See Notes to Financial Statements
33
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
PRINCIPAL AMOUNT IN THOUSANDS | VALUE | ||||||||||
Short-Term Investments (15.8%) | |||||||||||
Securities held as Collateral on Loaned Securities (5.2%) | |||||||||||
Repurchase Agreements (1.1%) | |||||||||||
$ | 537 | Barclays Capital, Inc. (0.11%, dated 10/31/11, due 11/01/11; proceeds $536,983; fully collateralized by a U.S. Government Agency; Federal Home Loan Mortgage Corporation 3.75% due 06/28/13; valued at $547,723) | $ | 536,981 | |||||||
24 | Barclays Capital, Inc. (0.10%, dated 10/31/11, due 11/01/11; proceeds $23,839; fully collateralized by a U.S. Government Obligation; U.S. Treasury Note 1.38% due 02/15/13; valued at $24,317) | 23,839 | |||||||||
594 | Nomura Holdings, Inc. (0.16%, dated 10/31/11, due 11/01/11; proceeds $593,508; fully collateralized by U.S. Government Agencies; Federal Home Loan Mortgage Corporation 4.00% due 05/01/26; Federal National Mortgage Association 4.00% due 07/01/26; valued at $605,376) | 593,506 | |||||||||
Total Repurchase Agreements (Cost $1,154,326) | 1,154,326 |
NUMBER OF SHARES (000) | VALUE | ||||||||||
Investment Company (4.1%) | |||||||||||
4,353 | Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (See Note 6) (Cost $4,352,600) | $ | 4,352,600 | ||||||||
Total Securities held as Collateral on Loaned Securities (Cost $5,506,926) | 5,506,926 | ||||||||||
Investment Company (10.6%) | |||||||||||
11,115 | Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (See Note 6) (Cost $11,115,218) | 11,115,218 | |||||||||
Total Short-Term Investments (Cost $16,622,144) | 16,622,144 | ||||||||||
Total Investments (Cost $110,685,736) (g)(h)(i) | 104.2 | % | 109,795,742 | ||||||||
Liabilities in Excess of Other Assets | (4.2 | ) | (4,395,325 | ) | |||||||
Net Assets | 100.0 | % | $ | 105,400,417 |
ADR American Depositary Receipt.
CDI CHESS Depositary Interest.
CVA Certificaten Van Aandelen.
GDR Global Depositary Receipt.
PPS Price Protected Shares.
REIT Real Estate Investment Trust.
SDR Swedish Depositary Receipt.
VVPR Verminderde Voorheffing Précompte Réduit.
(a) All or a portion of this security was on loan at October 31, 2011.
(b) Non-income producing security.
(c) Comprised of securities in separate entities that are traded as a single stapled security.
(d) Consists of one or more classes of securities traded together as a unit; stocks with attached warrants.
(e) Security trades on the Hong Kong exchange.
See Notes to Financial Statements
34
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
(f) 144A security - Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(g) Securities are available for collateral in connection with open foreign currency exchange contracts and futures contracts.
(h) The market value and percentage of net assets, $90,917,783 and 86.3%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note 1A within the Notes to the Financial Statements.
(i) The aggregate cost for federal income tax purposes is $113,748,767. The aggregate gross unrealized appreciation is $11,016,139 and the aggregate gross unrealized depreciation is $14,969,164 resulting in net unrealized depreciation of $3,953,025.
Foreign Currency Exchange Contracts Open at October 31, 2011:
COUNTERPARTY | CONTRACTS TO DELIVER | IN EXCHANGE FOR | DELIVERY DATE | UNREALIZED APPRECIATION (DEPRECIATION) | |||||||||||||||
Credit Suisse London Branch | $ | 1,970,205 | EUR | 1,440,230 | 11/17/11 | $ | 22,338 | ||||||||||||
Deutsche Bank | EUR | 3,339,439 | $ | 4,570,306 | 11/17/11 | (49,774 | ) | ||||||||||||
Deutsche Bank | GBP | 375,886 | $ | 587,678 | 11/17/11 | (16,618 | ) | ||||||||||||
Deutsche Bank | $ | 4,676,428 | EUR | 3,418,367 | 11/17/11 | 52,848 | |||||||||||||
Deutsche Bank | $ | 2,026,839 | EUR | 1,458,493 | 11/17/11 | (9,028 | ) | ||||||||||||
J.P.Morgan Chase Bank | $ | 806,705 | EUR | 589,735 | 11/17/11 | 9,188 | |||||||||||||
Mellon Bank | $ | 2,434,483 | AUD | 2,397,041 | 11/17/11 | 87,147 | |||||||||||||
Mellon Bank | $ | 2,581,241 | AUD | 2,470,206 | 11/17/11 | 17,356 | |||||||||||||
Mellon Bank | $ | 1,726,184 | EUR | 1,261,803 | 11/17/11 | 19,507 | |||||||||||||
Royal Bank of Scotland | JPY | 154,601,658 | $ | 2,027,682 | 11/17/11 | 49,638 | |||||||||||||
Royal Bank of Scotland | $ | 289,294 | EUR | 211,472 | 11/17/11 | 3,276 | |||||||||||||
Royal Bank of Scotland | $ | 2,436,190 | JPY | 186,913,048 | 11/17/11 | (44,739 | ) | ||||||||||||
UBS AG London | CHF | 729,371 | $ | 807,872 | 11/17/11 | (23,216 | ) | ||||||||||||
UBS AG London | EUR | 2,216,286 | $ | 3,031,724 | 11/17/11 | (34,485 | ) | ||||||||||||
UBS AG London | GBP | 1,580,051 | $ | 2,525,364 | 11/17/11 | (14,822 | ) | ||||||||||||
UBS AG London | GBP | 665,159 | $ | 1,061,614 | 11/17/11 | (7,736 | ) | ||||||||||||
UBS AG London | $ | 4,141,866 | EUR | 2,972,233 | 11/17/11 | (29,812 | ) | ||||||||||||
UBS AG London | $ | 2,799,570 | GBP | 1,790,577 | 11/17/11 | 79,069 | |||||||||||||
Net Unrealized Appreciation | $ | 110,137 |
Currency Abbreviations:
AUD Australian Dollar.
CHF Swiss Franc.
EUR Euro.
GBP British Pound.
JPY Japanese Yen.
See Notes to Financial Statements
35
Morgan Stanley International Fund
Portfolio of Investments n October 31, 2011 continued
Futures Contracts Open at October 31, 2011:
NUMBER OF CONTRACTS | LONG/SHORT | DESCRIPTION, DELIVERY MONTH AND YEAR | UNDERLYING FACE AMOUNT AT VALUE | UNREALIZED APPRECIATION (DEPRECIATION) | |||||||||||||||
25 | Long | TOPIX Index, Dec-11 | $ | 2,433,784 | $ | 17,703 | |||||||||||||
11 | Long | DAX Index, Dec-11 | 2,363,829 | 311,057 | |||||||||||||||
14 | Long | ASX Index, | |||||||||||||||||
9 | Long | Dec-11 Hang Seng China ENT Index, | 1,587,039 | 89,649 | |||||||||||||||
Nov-11 | 1,146,322 | 58,417 | |||||||||||||||||
9 | Long | FTSE MIB Index, | |||||||||||||||||
Dec-11 | 999,735 | (55,041 | ) | ||||||||||||||||
7 | Long | Dow Jones Euro Stoxx 50 Index, | |||||||||||||||||
Dec-11 | 232,804 | 31,001 | |||||||||||||||||
Net Unrealized Appreciation | $ | 452,786 |
See Notes to Financial Statements
36
Morgan Stanley International Fund
Summary of Investments n October 31, 2011
INDUSTRY | VALUE | PERCENT OF TOTAL INVESTMENTS | |||||||||
Investment Company | $ | 11,115,218 | 10.7 | % | |||||||
Metals & Mining | 7,834,659 | 7.5 | |||||||||
Pharmaceuticals | 7,608,088 | 7.3 | |||||||||
Oil, Gas & Consumable Fuels | 6,945,704 | 6.7 | |||||||||
Commercial Banks | 6,922,273 | 6.6 | |||||||||
Food Products | 4,810,798 | 4.6 | |||||||||
Chemicals | 3,993,510 | 3.8 | |||||||||
Automobiles | 3,512,950 | 3.4 | |||||||||
Diversified Telecommunication Services | 3,263,657 | 3.1 | |||||||||
Machinery | 3,165,427 | 3.0 | |||||||||
Wireless Telecommunication Services | 2,744,219 | 2.6 | |||||||||
Insurance | 2,438,219 | 2.3 | |||||||||
Industrial Conglomerates | 2,197,826 | 2.1 | |||||||||
Beverages | 2,141,595 | 2.1 | |||||||||
Electronic Equipment, Instruments & Components | 1,803,210 | 1.7 | |||||||||
Food & Staples Retailing | 1,741,350 | 1.7 | |||||||||
Textiles, Apparel & Luxury Goods | 1,726,204 | 1.7 | |||||||||
Media | 1,661,432 | 1.6 | |||||||||
Electrical Equipment | 1,660,457 | 1.6 | |||||||||
Tobacco | 1,597,710 | 1.5 | |||||||||
Semiconductors & Semiconductor Equipment | 1,309,196 | 1.3 | |||||||||
Auto Components | 1,255,696 | 1.2 | |||||||||
Real Estate Management & Development | 1,229,165 | 1.2 | |||||||||
Electric Utilities | 1,215,385 | 1.2 | |||||||||
Software | 1,159,857 | 1.1 | |||||||||
Trading Companies & Distributors | 1,085,712 | 1.0 | |||||||||
Capital Markets | 1,043,993 | 1.0 | |||||||||
Construction & Engineering | 992,441 | 1.0 | |||||||||
Specialty Retail | 982,801 | 0.9 | |||||||||
Communications Equipment | 976,108 | 0.9 | |||||||||
Household Durables | 951,985 | 0.9 | |||||||||
Real Estate Investment Trusts (REITs) | 948,715 | 0.9 | |||||||||
Energy Equipment & Services | 934,551 | 0.9 | |||||||||
Multi-Utilities | 883,150 | 0.8 | |||||||||
Health Care Equipment & Supplies | 864,516 | 0.8 | |||||||||
Hotels, Restaurants & Leisure | 833,981 | 0.8 | |||||||||
Road & Rail | 760,550 | 0.7 |
INDUSTRY | VALUE | PERCENT OF TOTAL INVESTMENTS | |||||||||
Diversified Financial Services | $ | 721,946 | 0.7 | % | |||||||
Commercial Services & Supplies | 685,768 | 0.7 | |||||||||
Computers & Peripherals | 621,196 | 0.6 | |||||||||
Household Products | 560,388 | 0.5 | |||||||||
Building Products | 555,860 | 0.5 | |||||||||
Office Electronics | 476,101 | 0.5 | |||||||||
Paper & Forest Products | 470,072 | 0.5 | |||||||||
Multiline Retail | 451,877 | 0.4 | |||||||||
Aerospace & Defense | 440,593 | 0.4 | |||||||||
Construction Materials | 375,330 | 0.4 | |||||||||
Marine | 344,472 | 0.3 | |||||||||
Personal Products | 282,073 | 0.3 | |||||||||
Information Technology Services | 271,315 | 0.3 | |||||||||
Air Freight & Logistics | 259,353 | 0.3 | |||||||||
Leisure Equipment & Products | 223,845 | 0.2 | |||||||||
Professional Services | 204,257 | 0.2 | |||||||||
Health Care Providers & Services | 178,403 | 0.2 | |||||||||
Containers & Packaging | 156,673 | 0.2 | |||||||||
Water Utilities | 132,934 | 0.1 | |||||||||
Airlines | 105,290 | 0.1 | |||||||||
Independent Power Producers & Energy Traders | 99,852 | 0.1 | |||||||||
Gas Utilities | 83,433 | 0.1 | |||||||||
Internet Software & Services | 82,823 | 0.1 | |||||||||
Life Sciences Tools & Services | 51,153 | 0.1 | |||||||||
Transportation Infrastructure | 38,890 | 0.0 | |||||||||
Diversified Consumer Services | 37,298 | 0.0 | |||||||||
Consumer Finance | 31,445 | 0.0 | |||||||||
Internet & Catalog Retail | 17,448 | 0.0 | |||||||||
Biotechnology | 15,303 | 0.0 | |||||||||
Distributors | 1,117 | 0.0 | |||||||||
$ | 104,288,816 | ^ | 100.0 | % |
^ Does not include open long futures contracts with an underlying face amount of $8,763,513 with net unrealized appreciation of $452,786 and open foreign currency exchange contracts with net unrealized appreciation of $110,137. Also does not reflect the value of securities held as collateral on loaned securities.
See Notes to Financial Statements
37
Morgan Stanley International Fund
Financial Statements
Statement of Assets and Liabilities
October 31, 2011
Assets: | |||||||
Investments in securities, at value (cost $94,530,433) (including $5,090,177 for securities loaned) | $ | 94,010,558 | |||||
Investments in affiliates, at value (cost $16,155,303) | 15,785,184 | ||||||
Total investments in securities, at value (cost $110,685,736) | 109,795,742 | ||||||
Unrealized appreciation on open foreign currency exchange contracts | 340,367 | ||||||
Cash (including foreign currency valued at $647,574 with a cost of $656,654) | 647,574 | ||||||
Receivable for: | |||||||
Variation margin | 527,687 | ||||||
Dividends | 247,882 | ||||||
Foreign withholding taxes reclaimed | 71,773 | ||||||
Dividends from affiliates | 6,304 | ||||||
Shares of beneficial interest sold | 5,209 | ||||||
Prepaid expenses and other assets | 2,859 | ||||||
Total Assets | 111,645,397 | ||||||
Liabilities: | |||||||
Collateral on securities loaned, at value | 5,506,926 | ||||||
Unrealized depreciation on open foreign currency exchange contracts | 230,230 | ||||||
Payable for: | |||||||
Shares of beneficial interest redeemed | 232,718 | ||||||
Investment advisory fee | 57,355 | ||||||
Transfer agent fee | 54,934 | ||||||
Distribution fee | 34,352 | ||||||
Administration fee | 7,059 | ||||||
Investments purchased | 1,570 | ||||||
Deferred Capital Gain Country Tax | 544 | ||||||
Accrued expenses and other payables | 119,292 | ||||||
Total Liabilities | 6,244,980 | ||||||
Net Assets | $ | 105,400,417 | |||||
Composition of Net Assets: | |||||||
Paid-in-capital | $ | 123,907,100 | |||||
Net unrealized depreciation (Net of $544 Deferred Capital Gain Country tax) | (337,823 | ) | |||||
Accumulated undistributed net investment income | 402,370 | ||||||
Accumulated net realized loss | (18,571,230 | ) | |||||
Net Assets | $ | 105,400,417 | |||||
Class A Shares: | |||||||
Net Assets | $ | 85,115,809 | |||||
Shares Outstanding (unlimited shares authorized, $.01 par value) | 7,606,394 | ||||||
Net Asset Value Per Share | $ | 11.19 | |||||
Maximum Offering Price Per Share, (net asset value plus 5.54% of net asset value) | $ | 11.81 | |||||
Class B Shares: | |||||||
Net Assets | $ | 7,448,072 | |||||
Shares Outstanding (unlimited shares authorized, $.01 par value) | 675,873 | ||||||
Net Asset Value Per Share | $ | 11.02 | |||||
Class C Shares: | |||||||
Net Assets | $ | 12,049,649 | |||||
Shares Outstanding (unlimited shares authorized, $.01 par value) | 1,107,873 | ||||||
Net Asset Value Per Share | $ | 10.88 | |||||
Class I Shares: | |||||||
Net Assets | $ | 622,540 | |||||
Shares Outstanding (unlimited shares authorized, $.01 par value) | 55,189 | ||||||
Net Asset Value Per Share | $ | 11.28 | |||||
Class R Shares: | |||||||
Net Assets | $ | 79,554 | |||||
Shares Outstanding (unlimited shares authorized, $.01 par value) | 7,149 | ||||||
Net Asset Value Per Share | $ | 11.13 | |||||
Class W Shares: | |||||||
Net Assets | $ | 84,793 | |||||
Shares Outstanding (unlimited shares authorized, $.01 par value) | 7,598 | ||||||
Net Asset Value Per Share | $ | 11.16 |
See Notes to Financial Statements
38
Morgan Stanley International Fund
Financial Statements continued
Statement of Operations
For the year ended October 31, 2011
Net Investment Income: Income | |||||||
Dividends (net of $336,604 foreign withholding tax) | $ | 3,495,305 | |||||
Income from securities loaned - net | 142,145 | ||||||
Dividends from affiliates (net of $775 foreign withholding tax) (Note 6) | 25,456 | ||||||
Interest | 2,980 | ||||||
Total Income | 3,665,886 | ||||||
Expenses | |||||||
Investment advisory fee (Note 4) | 832,960 | ||||||
Distribution fee (Class A shares) (Note 5) | 252,673 | ||||||
Distribution fee (Class B shares) (Note 5) | 113,409 | ||||||
Distribution fee (Class C shares) (Note 5) | 147,113 | ||||||
Distribution fee (Class R shares) (Note 5) | 448 | ||||||
Distribution fee (Class W shares) (Note 5) | 327 | ||||||
Transfer agent fees and expenses | 237,799 | ||||||
Custodian fees | 145,066 | ||||||
Professional fees | 118,942 | ||||||
Administration fee (Note 4) | 102,518 | ||||||
Registration fees | 76,476 | ||||||
Shareholder reports and notices | 65,512 | ||||||
Trustees' fees and expenses | 4,420 | ||||||
Other | 122,347 | ||||||
Total Expenses | 2,220,010 | ||||||
Less: rebate from Morgan Stanley affiliated cash sweep (Note 6) | (11,612 | ) | |||||
Net Expenses | 2,208,398 | ||||||
Net Investment Income | 1,457,488 | ||||||
Realized and Unrealized Gain (Loss): Realized Gain (Loss) on: | |||||||
Investments | 6,393,970 | ||||||
Investments in affiliates (Note 6) | (30,379 | ) | |||||
Futures contracts | (1,800,065 | ) | |||||
Foreign currency exchange contracts | (629,421 | ) | |||||
Foreign currency translation | (208,922 | ) | |||||
Net Realized Gain | 3,725,183 | ||||||
Change in Unrealized Appreciation/Depreciation on: | |||||||
Investments (Net of Increase in Deferred Capital Gain Country tax accruals of $544) | (14,297,789 | ) | |||||
Investments in affiliates (Note 6) | 9,993 | ||||||
Futures contracts | 308,119 | ||||||
Foreign currency exchange contracts | (65,986 | ) | |||||
Foreign currency translation | (144,455 | ) | |||||
Net Change in Unrealized Appreciation/Depreciation | (14,190,118 | ) | |||||
Net Loss | (10,464,935 | ) | |||||
Net Decrease | $ | (9,007,447 | ) |
See Notes to Financial Statements
39
Morgan Stanley International Fund
Financial Statements continued
Statements of Changes in Net Assets
FOR THE YEAR ENDED OCTOBER 31, 2011 | FOR THE YEAR ENDED OCTOBER 31, 2010^ | ||||||||||
Increase (Decrease) in Net Assets: Operations: | |||||||||||
Net investment income | $ | 1,457,488 | $ | 1,119,890 | |||||||
Net realized gain | 3,725,183 | 1,196,136 | |||||||||
Net change in unrealized appreciation/depreciation | (14,190,118 | ) | 11,161,791 | ||||||||
Net Increase (Decrease) | (9,007,447 | ) | 13,477,817 | ||||||||
Dividends to Shareholders from Net Investment Income: | |||||||||||
Class A shares | (1,252,005 | ) | (2,237,415 | ) | |||||||
Class B shares | (29,130 | ) | (235,383 | ) | |||||||
Class C shares | (73,316 | ) | (237,045 | ) | |||||||
Class I shares | (9,843 | ) | (15,223 | ) | |||||||
Class R shares | (921 | ) | (1,546 | ) | |||||||
Class W shares | (1,057 | ) | (1,680 | ) | |||||||
Total Dividends | (1,366,272 | ) | (2,728,292 | ) | |||||||
Net decrease from transactions in shares of beneficial interest | (22,590,414 | ) | (25,486,498 | ) | |||||||
Net Decrease | (32,964,133 | ) | (14,736,973 | ) | |||||||
Net Assets: | |||||||||||
Beginning of period | 138,364,550 | 153,101,523 | |||||||||
End of Period (Including accumulated undistributed net investment income of $402,370 and $1,030,350, respectively) | $ | 105,400,417 | $ | 138,364,550 |
^ Beginning with the year ended October 31, 2011, the Fund was audited by Ernst & Young LLP. The previous year was audited by another independent registered public accounting firm.
See Notes to Financial Statements
40
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2011
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 shares, Class B shares, Class C shares, Class I shares, Class R shares 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 shares, Class R shares, and Class W shares are not subject to a sales charge. Additionally, Class A shares, Class B shares, Class C shares, Class R shares and Class W shares incur distribution expenses.
The Fund will assess a 2% redemption fee, on Class A shares, Class B shares, Class C shares, Class I shares, Class R shares 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. These fees, if any, are included on the Statements of Changes in Net Assets.
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 security listed or traded on the New York Stock Exchange ("NYSE") or American Stock Exchange or other domestic 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 ask price; (3) an equity 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 ask price; (4) all other domestic securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and ask price. In cases where a security is traded on more than one domestic 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 Management Inc. (the "Adviser"), a wholly owned subsidiary of Morgan Stanley, determines that the latest sale price, the bid price or the mean between the last reported bid and ask price do not reflect a security's fair 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
41
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2011 continued
Fund's Trustees. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If 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 Adviser using a pricing service and/or procedures approved by the Trustees of the Fund; (7) certain securities may be valued by an outside pricing service approved by the Fund's Trustees; (8) investments in 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 sixty 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, which approximates fair value.
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 as earned.
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. Foreign Currency Translation — 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 foreign currency exchange contracts are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income 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 gains/losses on foreign currency exchange contracts and foreign currency translations. Pursuant to U.S. federal income tax regulations, certain foreign exchange gains/losses included in realized and unrealized gains/losses 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
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Notes to Financial Statements n October 31, 2011 continued
of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of the securities held.
E. 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 recognizes the tax effects of a tax position taken or expected to be taken in a tax return only if it is more likely than not to be sustained based solely on its technical merits as of the reporting date. The more-likely-than-not threshold must continue to be met in each reporting period to support continued recognition of the benefit. The difference between the tax benefit recognized in the financial statements for a tax position taken and the tax benefit claimed in the income tax return is referred to as an unrecognized tax benefit. There are no 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, 2011 remains subject to examination by taxing authorities.
F. Securities 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, 2011 were $5,090,177 and $5,533,055, respectively. The Fund received cash collateral of which $5,506,926 was subsequently invested in Repurchase Agreements and Morgan Stanley Institutional Liquidity Funds as reported in the Portfolio of Investments. The remaining collateral of $26,130 was received in the form of U.S. Government 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.
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Notes to Financial Statements n October 31, 2011 continued
G. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date.
H. Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.
I. Indemnifications — The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
2. Fair Valuation Measurements
Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures ("ASC 820"), defines fair value as the value that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs); and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below.
• Level 1 — unadjusted quoted prices in active markets for identical investments
• Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 — significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances
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Notes to Financial Statements n October 31, 2011 continued
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used as of October 31, 2011 in valuing the Fund's investments carried at fair value:
FAIR VALUE MEASUREMENTS AT OCTOBER 31, 2011 USING | |||||||||||||||||||
INVESTMENT TYPE | TOTAL | UNADJUSTED QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL INVESTMENTS (LEVEL 1) | OTHER SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2) | SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) | |||||||||||||||
Assets: | |||||||||||||||||||
Common Stocks | |||||||||||||||||||
Aerospace & Defense | $ | 440,593 | $ | 1,570 | $ | 439,023 | — | ||||||||||||
Air Freight & Logistics | 259,353 | — | 259,353 | — | |||||||||||||||
Airlines | 105,290 | — | 105,290 | — | |||||||||||||||
Auto Components | 1,255,696 | — | 1,255,696 | — | |||||||||||||||
Automobiles | 3,512,950 | — | 3,512,950 | — | |||||||||||||||
Beverages | 2,141,595 | 74,215 | 2,067,380 | — | |||||||||||||||
Biotechnology | 15,303 | — | 15,303 | — | |||||||||||||||
Building Products | 555,860 | — | 555,860 | — | |||||||||||||||
Capital Markets | 1,043,849 | — | 1,043,849 | — | |||||||||||||||
Chemicals | 3,993,510 | 11,378 | 3,982,132 | — | |||||||||||||||
Commercial Banks | 6,922,273 | 75,725 | 6,846,548 | — | |||||||||||||||
Commercial Services & Supplies | 685,768 | — | 685,768 | — | |||||||||||||||
Communications Equipment | 976,108 | — | 976,108 | — | |||||||||||||||
Computers & Peripherals | 621,196 | — | 621,196 | — | |||||||||||||||
Construction & Engineering | 992,441 | — | 992,441 | — | |||||||||||||||
Construction Materials | 375,330 | 16,317 | 359,013 | — | |||||||||||||||
Consumer Finance | 31,445 | — | 31,445 | — | |||||||||||||||
Containers & Packaging | 156,673 | — | 156,673 | — | |||||||||||||||
Distributors | 1,117 | — | 1,117 | — | |||||||||||||||
Diversified Consumer Services | 37,298 | — | 37,298 | — | |||||||||||||||
Diversified Financial Services | 721,946 | — | 721,946 | — | |||||||||||||||
Diversified Telecommunication Services | 3,263,657 | 19,876 | 3,243,781 | — | |||||||||||||||
Electric Utilities | 1,215,385 | — | 1,215,385 | — | |||||||||||||||
Electrical Equipment | 1,660,457 | — | 1,660,457 | — | |||||||||||||||
Electronic Equipment, Instruments & Components | 1,803,210 | — | 1,803,210 | — | |||||||||||||||
Energy Equipment & Services | 934,551 | — | 934,551 | — | |||||||||||||||
Food & Staples Retailing | 1,741,350 | 71,242 | 1,670,108 | — | |||||||||||||||
Food Products | 4,810,798 | 107,317 | 4,703,481 | — |
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Notes to Financial Statements n October 31, 2011 continued
FAIR VALUE MEASUREMENTS AT OCTOBER 31, 2011 USING | |||||||||||||||||||
INVESTMENT TYPE | TOTAL | UNADJUSTED QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL INVESTMENTS (LEVEL 1) | OTHER SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2) | SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) | |||||||||||||||
Assets: | |||||||||||||||||||
Common Stocks | |||||||||||||||||||
Gas Utilities | $ | 83,433 | — | $ | 83,433 | — | |||||||||||||
Health Care Equipment & Supplies | 864,516 | — | 864,516 | — | |||||||||||||||
Health Care Providers & Services | 178,403 | — | 178,403 | — | |||||||||||||||
Hotels, Restaurants & Leisure | 833,981 | — | 833,981 | — | |||||||||||||||
Household Durables | 951,985 | — | 951,985 | — | |||||||||||||||
Household Products | 560,388 | $ | 13,660 | 546,728 | — | ||||||||||||||
Independent Power Producers & Energy Traders | 99,852 | — | 99,852 | — | |||||||||||||||
Industrial Conglomerates | 2,197,826 | 13,854 | 2,183,972 | — | |||||||||||||||
Information Technology Services | 271,315 | — | 271,315 | — | |||||||||||||||
Insurance | 2,438,219 | — | 2,438,219 | — | |||||||||||||||
Internet & Catalog Retail | 17,448 | — | 17,448 | — | |||||||||||||||
Internet Software & Services | 82,823 | — | 82,823 | — | |||||||||||||||
Leisure Equipment & Products | 223,845 | — | 223,845 | — | |||||||||||||||
Life Sciences Tools & Services | 51,153 | — | 51,153 | — | |||||||||||||||
Machinery | 3,165,427 | 56,667 | 3,108,760 | — | |||||||||||||||
Marine | 344,472 | — | 344,472 | — | |||||||||||||||
Media | 1,661,432 | 43,626 | 1,617,806 | — | |||||||||||||||
Metals & Mining | 7,834,659 | 1,465,521 | 6,369,138 | — | |||||||||||||||
Multi-Utilities | 883,150 | — | 883,150 | — | |||||||||||||||
Multiline Retail | 451,877 | — | 451,877 | — | |||||||||||||||
Office Electronics | 476,101 | — | 476,101 | — | |||||||||||||||
Oil, Gas & Consumable Fuels | 6,945,704 | 34,600 | 6,911,104 | — | |||||||||||||||
Paper & Forest Products | 470,072 | — | 470,072 | — | |||||||||||||||
Personal Products | 282,073 | — | 282,073 | — | |||||||||||||||
Pharmaceuticals | 7,608,088 | — | 7,608,088 | — | |||||||||||||||
Professional Services | 204,257 | — | 204,257 | — | |||||||||||||||
Real Estate Investment Trusts (REITs) | 948,715 | — | 948,715 | — | |||||||||||||||
Real Estate Management & Development | 1,229,165 | — | 1,229,165 | — | |||||||||||||||
Road & Rail | 760,550 | 15,936 | 744,614 | — | |||||||||||||||
Semiconductors & Semiconductor Equipment | 1,309,196 | — | 1,309,196 | — | |||||||||||||||
Software | 1,159,857 | — | 1,159,857 | — | |||||||||||||||
Specialty Retail | 982,801 | 22,733 | 960,068 | — | |||||||||||||||
Textiles, Apparel & Luxury Goods | 1,726,204 | — | 1,726,204 | — | |||||||||||||||
Tobacco | 1,597,710 | — | 1,597,710 | — | |||||||||||||||
Trading Companies & Distributors | 1,085,712 | — | 1,085,712 | — | |||||||||||||||
Transportation Infrastructure | 38,890 | — | 38,890 | — | |||||||||||||||
Water Utilities | 132,934 | — | 132,934 | — |
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Notes to Financial Statements n October 31, 2011 continued
FAIR VALUE MEASUREMENTS AT OCTOBER 31, 2011 USING | |||||||||||||||||||
INVESTMENT TYPE | TOTAL | UNADJUSTED QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL INVESTMENTS (LEVEL 1) | OTHER SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2) | SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) | |||||||||||||||
Assets: | |||||||||||||||||||
Common Stocks | |||||||||||||||||||
Wireless Telecommunication Services | $ | 2,744,219 | $ | 211,578 | $ | 2,532,641 | — | ||||||||||||
Total Common Stocks | 93,173,454 | 2,255,815 | 90,917,639 | — | |||||||||||||||
Rights | 144 | — | 144 | — | |||||||||||||||
Short-Term Investments | |||||||||||||||||||
Repurchase Agreements | 1,154,326 | — | 1,154,326 | — | |||||||||||||||
Investment Company | 15,467,818 | 15,467,818 | — | — | |||||||||||||||
Total Short-Term Investments | 16,622,144 | 15,467,818 | 1,154,326 | — | |||||||||||||||
Foreign Currency Exchange Contracts | 340,367 | — | 340,367 | — | |||||||||||||||
Futures | 507,827 | 507,827 | — | — | |||||||||||||||
Total Assets | 110,643,936 | 18,231,460 | 92,412,476 | — | |||||||||||||||
Liabilities: | |||||||||||||||||||
Foreign Currency Exchange Contracts | (230,230 | ) | — | (230,230 | ) | — | |||||||||||||
Futures | (55,041 | ) | (55,041 | ) | — | — | |||||||||||||
Total Liabilities | (285,271 | ) | (55,041 | ) | (230,230 | ) | — | ||||||||||||
Total | $ | 110,358,665 | $ | 18,176,419 | $ | 92,182,246 | — |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes. The Fund recognizes transfers between the levels as of the end of the period. As of October 31, 2011, securities with a total value of $87,355,184 transferred from Level 1 to Level 2. At October 31, 2011, the fair market value of certain securities were adjusted due to developments which occurred between the time of the close of the foreign markets on which they trade and the close of business on the NYSE which resulted in their Level 2 classification.
3. Derivatives
The Fund uses derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. Derivatives are financial instruments whose value is based on the value of another underlying asset, interest rate, index or financial instrument. A derivative instrument often has risks similar to its underlying instrument and may have additional risks, including imperfect correlation between the value of the derivative and the underlying instrument, risks of default by the other party to certain transactions, magnification of losses incurred due to changes in the market value
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Notes to Financial Statements n October 31, 2011 continued
of the securities, instruments, indices or interest rates to which they relate, and risks that the transactions may not be liquid. The use of derivatives involves risks that are different from, and possibly greater than, the risks associated with other portfolio investments. Derivatives may involve the use of highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments. All of the Fund's holdings, including derivative instruments, are marked-to-market each day with the change in value reflected in unrealized appreciation (depreciation). Upon disposition, a realized gain or loss is recognized.
Certain derivative transactions may give rise to a form of leverage. Leverage associated with derivative transactions may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet earmarking or segregation requirements, pursuant to applicable Securities and Exchange Commission rules and regulations, or may cause the Fund to be more volatile than if the Fund had not been leveraged. Although the Adviser seeks to use derivatives to further the Fund's investment objectives, there is no assurance that the use of derivatives will achieve this result.
Following is a description of the derivative instruments and techniques that the Fund used during the period and their associated risks:
Foreign Currency Exchange Contracts In connection with its investments in foreign securities, the Fund entered into contracts with banks, brokers or dealers to purchase or sell foreign currencies at a future date. A foreign currency exchange contract ("currency contracts") is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the currency contract. Currency contracts are used to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. In addition, the Fund may use cross currency hedging or proxy hedging with respect to currencies in which the Fund has or expects to have portfolio or currency exposure. Cross currency hedges involve the sale of one currency against the positive exposure to a different currency and may be used for hedging purposes or to establish an active exposure to the exchange rate between any two currencies. Hedging the Fund's currency risks involves the risk of mismatching the Fund's objectives under a currency contract with the value of securities denominated in a particular currency. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is an additional risk to the effect that currency contracts create exposure to currencies in which the Fund's securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. A currency contract is marked-to-market daily and the change in market value is recorded by the Fund as unrealized gain or (loss). The Fund records realized gains (losses)
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Notes to Financial Statements n October 31, 2011 continued
when the currency contract is closed equal to the difference between the value of the currency contract at the time it was opened and the value at the time it was closed.
Futures A futures contract is a standardized agreement between two parties to buy or sell a specific quantity of an underlying instrument at a specific price at a specific future time. The value of a futures contract tends to increase and decrease in tandem with the value of the underlying instrument. Futures contracts are bilateral agreements, with both the purchaser and the seller equally obligated to complete the transaction. Depending on the terms of the particular contract, futures contracts are settled through either physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). A decision as to whether, when and how to use futures involves the exercise of skill and judgment and even a well-conceived futures transaction may be unsuccessful because of market behavior or unexpected events. In addition to the derivatives risks discussed above, the prices of futures can be highly volatile, using futures can lower total return, and the potential loss from futures can exceed the Fund's initial investment in such contracts.
FASB ASC 815, Derivatives and Hedging: Overall ("ASC 815"), is intended to improve financial reporting about derivative instruments by requiring enhanced disclosures to enable investors to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund's financial position and results of operations.
The following table sets forth the fair value of the Fund's derivative contracts by primary risk exposure as of October 31, 2011.
PRIMARY RISK EXPOSURE | ASSET DERIVATIVES STATEMENT OF ASSETS AND LIABILITIES LOCATION | FAIR VALUE | LIABILITY DERIVATIVES STATEMENT OF ASSETS AND LIABILITIES LOCATION | FAIR VALUE | |||||||||||||||
Equity Risk | Variation margin | $ | 507,827 | † | Variation margin | $ | (55,041 | )† | |||||||||||
Foreign Currency Risk | Unrealized appreciation on open foreign currency exchange contracts | 340,367 | Unrealized depreciation on open foreign currency exchange contracts | (230,230 | ) | ||||||||||||||
$ | 848,194 | $ | (285,271 | ) |
† Includes cumulative appreciation/depreciation of futures contracts as reported in the Portfolio of Investments. Only current day's variation margin is reported within the Statement of Assets and Liabilities.
The following tables set forth by primary risk exposure the Fund's realized gains (losses) and change in unrealized appreciation (depreciation) by type of derivative contract for the year ended October 31, 2011 in accordance with ASC 815.
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Notes to Financial Statements n October 31, 2011 continued
AMOUNT OF REALIZED LOSS ON DERIVATIVE CONTRACTS
PRIMARY RISK EXPOSURE | FUTURES | FOREIGN CURRENCY EXCHANGE | |||||||||
Equity Risk | $ | (1,800,065 | ) | — | |||||||
Foreign Currency Risk | — | $ | (629,421 | ) | |||||||
Total | $ | (1,800,065 | ) | $ | (629,421 | ) |
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVE CONTRACTS
PRIMARY RISK EXPOSURE | FUTURES | FOREIGN CURRENCY EXCHANGE | |||||||||
Equity Risk | $ | 308,119 | — | ||||||||
Foreign Currency Risk | — | $ | (65,986 | ) | |||||||
Total | $ | 308,119 | $ | (65,986 | ) |
For the year ended October 31, 2011, the average monthly original value of futures contracts was $9,929,012 and the average monthly principal amount of foreign currency exchange contracts was $32,092,198.
4. Investment Advisory/Administration Agreements
Pursuant to an Investment Advisory Agreement, the Fund pays the Adviser an advisory fee, accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined at 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 exceeding $1 billion.
Pursuant to an Administration Agreement with Morgan Stanley Services Company Inc. (the "Administrator"), an affiliate of the 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 a Sub-Administration 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.
5. Plan of Distribution
Shares of the Fund are distributed by Morgan Stanley Distribution, Inc. (the "Distributor"), an affiliate of the 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
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Notes to Financial Statements n October 31, 2011 continued
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 1.00% of the average daily net assets of Class B shares; and (iii) Class C — up to 1.00% 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.
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 $18,065,763 at October 31, 2011.
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 Smith Barney 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, 2011, the distribution fee was accrued for Class A, Class C, Class R and Class W shares at the annual rate of 0.25%, 0.99%, 0.50% and 0.35%, respectively.
The Distributor has informed the Fund that for the year ended October 31, 2011, it received contingent deferred sales charges from certain redemptions of the Fund's Class B shares and Class C shares of $9,000 and $203, respectively, and received $8,005 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.
6. Security Transactions and Transactions with Affiliates
The cost of purchases and proceeds from sales of investment securities, excluding short-term investments, for the year ended October 31, 2011 aggregated $37,589,391 and $56,332,223, respectively.
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds – Money Market Portfolio (the "Liquidity Funds"), an open-end management investment company managed by the
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Notes to Financial Statements n October 31, 2011 continued
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 its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the year ended October 31, 2011, advisory fees paid were reduced by $11,612 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of the Liquidity Funds during the year ended October 31, 2011 is as follows:
VALUE OCTOBER 31, 2010 | PURCHASES AT COST | SALES | DIVIDEND INCOME | VALUE OCTOBER 31, 2011 | |||||||||||||||
$ | 15,953,008 | $ | 57,244,489 | $ | 57,729,679 | $ | 15,156 | $ | 15,467,818 |
For the year ended October 31, 2011, the Fund had transactions with Mitsubishi UFJ Financial Group, Inc., an affiliate of the Adviser, Administrator and Distributor:
VALUE OCTOBER 31, 2010 | PURCHASES AT COST | SALES | NET REALIZED LOSS | DIVIDEND INCOME | VALUE OCTOBER 31, 2011 | ||||||||||||||||||
$ | 366,099 | — | $ | 28,346 | $ | (30,379 | ) | $ | 10,300 | $ | 317,366 |
Morgan Stanley Services Company Inc., an affiliate of the Adviser 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.
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 GAAP. 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
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distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital.
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
The tax character of distributions paid was as follows:
FOR THE YEAR ENDED OCTOBER 31, 2011 | FOR THE YEAR ENDED OCTOBER 31, 2010 | ||||||||||
Ordinary income | $ | 1,366,272 | $ | 2,728,292 |
As of October 31, 2011, the tax-basis components of accumulated losses were as follows:
Undistributed ordinary income | $ | 602,089 | |||||||||
Undistributed long-term gains | — | ||||||||||
Net accumulated earnings | 602,089 | ||||||||||
Capital loss carryforward | (15,579,002 | ) | |||||||||
Temporary differences | (18,779 | ) | |||||||||
Net unrealized depreciation | (3,510,991 | ) | |||||||||
Total accumulated losses | $ | (18,506,683 | ) |
As of October 31, 2011, $7,150,186 of the Fund's net capital loss carryforward expired. During the year ended October 31, 2011, the Fund utilized $3,584,030 of its net capital loss carryforward. As of October 31, 2011, the Fund had a net capital loss carryforward of $15,579,002, to offset future capital gains to the extent provided by regulations, which will expire according to the following schedule.
AMOUNT | EXPIRATION | ||||||
$ | 14,780,909 | October 31, 2017 | |||||
798,093 | October 31, 2018 |
As of October 31, 2011, 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"), capital loss deferrals on wash sales and nondeductible expenses.
53
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2011 continued
Permanent differences, primarily due to foreign currency losses, tax adjustments on PFICs sold by the Fund and an expired capital loss carryforward, resulted in the following reclassifications among the Fund's components of net assets at October 31, 2011:
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME | ACCUMULATED NET REALIZED LOSS | PAID-IN-CAPITAL | |||||||||
$ | (719,196 | ) | $ | 7,892,953 | $ | (7,173,757 | ) |
8. Expense Offset
The Fund has entered into an arrangement with State Street (the "Custodian"), whereby credits realized on uninvested cash balances were used to offset a portion of the Fund's expenses. If applicable, these custodian credits are shown as "expense offset" in the Statement of Operations.
9. Purposes of and Risks Relating to Certain Financial Instruments
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, 2011, investments in securities of issuers in Japan and United Kingdom represented 22.2% and 19.9%, 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.
At October 31, 2011, the Fund's cash balance consisted of interest bearing deposits with State Street, the Fund's Custodian.
54
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2011 continued
10. Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:
FOR THE YEAR ENDED OCTOBER 31, 2011 | FOR THE YEAR ENDED OCTOBER 31, 2010^ | ||||||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||||||||||||
CLASS A SHARES | |||||||||||||||||||
Sold | 239,164 | $ | 2,966,253 | 731,038 | $ | 8,335,895 | |||||||||||||
Conversion from Class B | 229,694 | 2,845,003 | 38,527 | 437,041 | |||||||||||||||
Reinvestment of dividends | 97,533 | 1,212,331 | 187,478 | 2,170,992 | |||||||||||||||
Redeemed | (1,674,626 | ) | (20,588,427 | ) | (2,268,165 | ) | (25,602,200 | ) | |||||||||||
Net decrease — Class A | (1,108,235 | ) | (13,564,840 | ) | (1,311,122 | ) | (14,658,272 | ) | |||||||||||
CLASS B SHARES | |||||||||||||||||||
Sold | 14,781 | 181,764 | 69,514 | 814,590 | |||||||||||||||
Conversion to Class A | (232,571 | ) | (2,845,003 | ) | (39,094 | ) | (437,041 | ) | |||||||||||
Reinvestment of dividends | 2,214 | 27,271 | 19,413 | 222,279 | |||||||||||||||
Redeemed | (281,682 | ) | (3,434,191 | ) | (788,979 | ) | (8,767,126 | ) | |||||||||||
Net decrease — Class B | (497,258 | ) | (6,070,159 | ) | (739,146 | ) | (8,167,298 | ) | |||||||||||
CLASS C SHARES | |||||||||||||||||||
Sold | 14,747 | 175,873 | 37,753 | 439,900 | |||||||||||||||
Reinvestment of dividends | 5,832 | 70,914 | 20,327 | 230,305 | |||||||||||||||
Redeemed | (264,764 | ) | (3,201,181 | ) | (295,225 | ) | (3,230,418 | ) | |||||||||||
Net decrease — Class C | (244,185 | ) | (2,954,394 | ) | (237,145 | ) | (2,560,213 | ) | |||||||||||
CLASS I SHARES | |||||||||||||||||||
Sold | 1,843 | 24,048 | 774 | 9,339 | |||||||||||||||
Reinvestment of dividends | 676 | 8,456 | 1,148 | 13,362 | |||||||||||||||
Redeemed | (2,364 | ) | (28,785 | ) | (11,212 | ) | (125,958 | ) | |||||||||||
Net increase (decrease) — Class I | 155 | 3,719 | (9,290 | ) | (103,257 | ) | |||||||||||||
CLASS R SHARES | |||||||||||||||||||
Sold | 141 | $ | 1,804 | 565 | $ | 6,478 | |||||||||||||
Reinvestment of dividends | 5 | 57 | 7 | 80 | |||||||||||||||
Redeemed | (512 | ) | (6,673 | ) | (396 | ) | (4,183 | ) | |||||||||||
Net increase (decrease) — Class R | (366 | ) | (4,812 | ) | 176 | 2,375 | |||||||||||||
CLASS W SHARES | |||||||||||||||||||
Sold | — | — | — | 54 | |||||||||||||||
Reinvestment of dividends and distributions | 5 | 72 | 10 | 113 | |||||||||||||||
Net increase — Class W | 5 | 72 | 10 | 167 | |||||||||||||||
Net decrease in Fund | (1,849,884 | ) | $ | (22,590,414 | ) | (2,296,517 | ) | $ | (25,486,498 | ) |
^ Beginning with the year ended October 31, 2011, the Fund was audited by Ernst & Young LLP. The previous year was audited by another independent registered public accounting firm.
55
Morgan Stanley International Fund
Notes to Financial Statements n October 31, 2011 continued
11. Accounting Pronouncement
In May 2011, FASB issued Accounting Standards Update ("ASU") 2011-04. The amendments in this update are the results of the work of FASB and the International Accounting Standards Board to develop common requirements for measuring fair value and for disclosing information about fair value measurements, which are effective during interim and annual periods beginning after December 15, 2011. Consequently, these amendments improve the comparability of fair value measurements presented and disclosed in the financial statements prepared in accordance with GAAP and International Financial Reporting Standards. At this time, the Fund's management is evaluating the implications of ASU 2011-04.
56
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, | |||||||||||||||||||||||
2011 | 2010^ | 2009^ | 2008^ | 2007^ | |||||||||||||||||||
Class A Shares | |||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.30 | $ | 11.32 | $ | 9.29 | $ | 16.94 | $ | 13.14 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income(1) | 0.16 | 0.11 | 0.12 | 0.24 | 0.15 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (1.12 | ) | 1.10 | 1.91 | (7.61 | ) | 3.86 | ||||||||||||||||
Total income (loss) from investment operations | (0.96 | ) | 1.21 | 2.03 | (7.37 | ) | 4.01 | ||||||||||||||||
Less dividends from net investment income | (0.15 | ) | (0.23 | ) | — | (0.28 | ) | (0.21 | ) | ||||||||||||||
Net asset value, end of period | $ | 11.19 | $ | 12.30 | $ | 11.32 | $ | 9.29 | $ | 16.94 | |||||||||||||
Total Return(2) | (7.95 | )% | 10.79 | % | 21.85 | % | (44.19 | )% | 31.03 | % | |||||||||||||
Ratios to Average Net Assets(3): | |||||||||||||||||||||||
Total expenses | 1.57 | %(4) | 1.50 | %(4) | 1.69 | %(4) | 1.36 | %(4) | 1.33 | %(4)(5) | |||||||||||||
Net investment income | 1.29 | %(4) | 0.97 | %(4) | 1.30 | %(4) | 1.71 | %(4) | 1.18 | %(4)(5) | |||||||||||||
Rebate from Morgan Stanley affiliate | 0.01 | % | 0.02 | % | 0.01 | % | 0.01 | % | 0.00 | %(6) | |||||||||||||
Supplemental Data: | |||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 85,116 | $ | 107,160 | $ | 113,446 | $ | 104,619 | $ | 193,043 | |||||||||||||
Portfolio turnover rate | 33 | % | 15 | % | 36 | % | 31 | % | 22 | % |
^ Beginning with the year ended October 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.
(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) The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."
(5) If the Fund had borne all of its expenses that were reimbursed or waived by the 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 | % |
(6) Amount is less than 0.005%.
See Notes to Financial Statements
57
Morgan Stanley International Fund
Financial Highlights continued
FOR THE YEAR ENDED OCTOBER 31, | |||||||||||||||||||||||
2011 | 2010^ | 2009^ | 2008^ | 2007^ | |||||||||||||||||||
Class B Shares | |||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.08 | $ | 11.11 | $ | 9.19 | $ | 16.69 | $ | 12.97 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income(1) | 0.07 | 0.02 | 0.05 | 0.13 | 0.08 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (1.10 | ) | 1.08 | 1.87 | (7.53 | ) | 3.75 | ||||||||||||||||
Total income (loss) from investment operations | (1.03 | ) | 1.10 | 1.92 | (7.40 | ) | 3.83 | ||||||||||||||||
Less dividends from net investment income | (0.03 | ) | (0.13 | ) | — | (0.10 | ) | (0.11 | ) | ||||||||||||||
Net asset value, end of period | $ | 11.02 | $ | 12.08 | $ | 11.11 | $ | 9.19 | $ | 16.69 | |||||||||||||
Total Return(2) | (8.58 | )% | 9.95 | % | 20.89 | % | (44.49 | )% | 29.58 | % | |||||||||||||
Ratios to Average Net Assets(3): | |||||||||||||||||||||||
Total expenses | 2.32 | %(4) | 2.25 | %(4) | 2.44 | %(4) | 2.10 | %(4) | 2.08 | %(4)(5) | |||||||||||||
Net investment income | 0.54 | %(4) | 0.22 | %(4) | 0.55 | %(4) | 0.90 | %(4) | 0.43 | %(4)(5) | |||||||||||||
Rebate from Morgan Stanley affiliate | 0.01 | % | 0.02 | % | 0.01 | % | 0.01 | % | 0.00 | %(6) | |||||||||||||
Supplemental Data: | |||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 7,448 | $ | 14,175 | $ | 21,247 | $ | 30,185 | $ | 99,635 | |||||||||||||
Portfolio turnover rate | 33 | % | 15 | % | 36 | % | 31 | % | 22 | % |
^ Beginning with the year ended October 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.
(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) The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."
(5) If the Fund had borne all of its expenses that were reimbursed or waived by the 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 | % |
(6) Amount is less than 0.005%.
See Notes to Financial Statements
58
Morgan Stanley International Fund
Financial Highlights continued
FOR THE YEAR ENDED OCTOBER 31, | |||||||||||||||||||||||
2011 | 2010^ | 2009^ | 2008^ | 2007^ | |||||||||||||||||||
Class C Shares | |||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||
Net asset value, beginning of period | $ | 11.95 | $ | 11.02 | $ | 9.11 | $ | 16.63 | $ | 12.94 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income(1) | 0.07 | 0.02 | 0.05 | 0.13 | 0.06 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (1.08 | ) | 1.06 | 1.86 | (7.47 | ) | 3.76 | ||||||||||||||||
Total income (loss) from investment operations | (1.01 | ) | 1.08 | 1.91 | (7.34 | ) | 3.82 | ||||||||||||||||
Less dividends from net investment income | (0.06 | ) | (0.15 | ) | — | (0.18 | ) | (0.13 | ) | ||||||||||||||
Net asset value, end of period | $ | 10.88 | $ | 11.95 | $ | 11.02 | $ | 9.11 | $ | 16.63 | |||||||||||||
Total Return(2) | (8.54 | )% | 9.89 | % | 20.97 | % | (44.50 | )% | 29.58 | % | |||||||||||||
Ratios to Average Net Assets(3): | |||||||||||||||||||||||
Total expenses | 2.31 | %(4) | 2.25 | %(4) | 2.44 | %(4) | 2.07 | %(4) | 2.08 | %(4)(5) | |||||||||||||
Net investment income | 0.55 | %(4) | 0.22 | %(4) | 0.55 | %(4) | 0.96 | %(4) | 0.43 | %(4)(5) | |||||||||||||
Rebate from Morgan Stanley affiliate | 0.01 | % | 0.02 | % | 0.01 | % | 0.01 | % | 0.00 | %(6) | |||||||||||||
Supplemental Data: | |||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 12,050 | $ | 16,163 | $ | 17,507 | $ | 16,660 | $ | 37,085 | |||||||||||||
Portfolio turnover rate | 33 | % | 15 | % | 36 | % | 31 | % | 22 | % |
^ Beginning with the year ended October 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.
(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) The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."
(5) If the Fund had borne all of its expenses that were reimbursed or waived by the 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 | % |
(6) Amount is less than 0.005%.
See Notes to Financial Statements
59
Morgan Stanley International Fund
Financial Highlights continued
FOR THE YEAR ENDED OCTOBER 31, | |||||||||||||||||||||||
2011 | 2010^ | 2009^ | 2008^ | 2007^ | |||||||||||||||||||
Class I Shares | |||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||
Net asset value, beginning of period | $ | 12.39 | $ | 11.40 | $ | 9.33 | $ | 17.00 | $ | 13.23 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income(1) | 0.19 | 0.14 | 0.16 | 0.27 | 0.21 | ||||||||||||||||||
Net realized and unrealized gain (loss) | (1.12 | ) | 1.10 | 1.91 | (7.64 | ) | 3.83 | ||||||||||||||||
Total income (loss) from investment operations | (0.93 | ) | 1.24 | 2.07 | (7.37 | ) | 4.04 | ||||||||||||||||
Less dividends from net investment income | (0.18 | ) | (0.25 | ) | — | (0.30 | ) | (0.27 | ) | ||||||||||||||
Net asset value, end of period | $ | 11.28 | $ | 12.39 | $ | 11.40 | $ | 9.33 | $ | 17.00 | |||||||||||||
Total Return(2) | (7.66 | )% | 11.05 | % | 22.19 | % | (44.16 | )% | 31.33 | % | |||||||||||||
Ratios to Average Net Assets(3): | |||||||||||||||||||||||
Total expenses | 1.32 | %(4) | 1.25 | %(4) | 1.44 | %(4) | 1.10 | %(4) | 1.08 | %(4)(5) | |||||||||||||
Net investment income | 1.54 | %(4) | 1.22 | %(4) | 1.55 | %(4) | 1.95 | %(4) | 1.43 | %(4)(5) | |||||||||||||
Rebate from Morgan Stanley affiliate | 0.01 | % | 0.02 | % | 0.01 | % | 0.01 | % | 0.00 | %(6) | |||||||||||||
Supplemental Data: | |||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 623 | $ | 682 | $ | 733 | $ | 10,085 | $ | 22,888 | |||||||||||||
Portfolio turnover rate | 33 | % | 15 | % | 36 | % | 31 | % | 22 | % |
^ Beginning with the year ended October 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.
(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) The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."
(5) If the Fund had borne all of its expenses that were reimbursed or waived by the 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 | % |
(6) Amount is less than 0.005%.
See Notes to Financial Statements
60
Morgan Stanley International Fund
Financial Highlights continued
FOR THE YEAR ENDED OCTOBER 31, | FOR THE PERIOD MARCH 31, 2008@@@ | ||||||||||||||||||
THROUGH | |||||||||||||||||||
2011 | 2010^ | 2009^ | OCTOBER 31, 2008^ | ||||||||||||||||
Class R Shares | |||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||
Net asset value, beginning of period | $ | 12.23 | $ | 11.27 | $ | 9.28 | $ | 14.14 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment income(1) | 0.13 | 0.08 | 0.10 | 0.15 | |||||||||||||||
Net realized and unrealized gain (loss) | (1.11 | ) | 1.09 | 1.89 | (5.01 | ) | |||||||||||||
Total income (loss) from investment operations | (0.98 | ) | 1.17 | 1.99 | (4.86 | ) | |||||||||||||
Less dividends from net investment income | (0.12 | ) | (0.21 | ) | — | — | |||||||||||||
Net asset value, end of period | $ | 11.13 | $ | 12.23 | $ | 11.27 | $ | 9.28 | |||||||||||
Total Return(2) | (8.10 | )% | 10.47 | % | 21.57 | % | (34.44 | )%(5) | |||||||||||
Ratios to Average Net Assets(3): | |||||||||||||||||||
Total expenses | 1.82 | %(4) | 1.75 | %(4) | 1.94 | %(4) | 1.62 | %(4)(6) | |||||||||||
Net investment income | 1.04 | %(4) | 0.72 | %(4) | 1.05 | %(4) | 1.96 | %(4)(6) | |||||||||||
Rebate from Morgan Stanley affiliate | 0.01 | % | 0.02 | % | 0.01 | % | 0.01 | %(6) | |||||||||||
Supplemental Data: | |||||||||||||||||||
Net assets, end of period, in thousands | $ | 80 | $ | 92 | $ | 83 | $ | 66 | |||||||||||
Portfolio turnover rate | 33 | % | 15 | % | 36 | % | 31 | % |
@@@ The date shares were first issued.
^ Beginning with the year ended October 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.
(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) The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."
(5) Not annualized.
(6) Annualized.
See Notes to Financial Statements
61
Morgan Stanley International Fund
Financial Highlights continued
FOR THE YEAR ENDED OCTOBER 31, | FOR THE PERIOD MARCH 31, 2008@@@ | ||||||||||||||||||
THROUGH | |||||||||||||||||||
2011 | 2010^ | 2009^ | OCTOBER 31, 2008^ | ||||||||||||||||
Class W Shares | |||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||
Net asset value, beginning of period | $ | 12.27 | $ | 11.30 | $ | 9.28 | $ | 14.14 | |||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment income(1) | 0.15 | 0.10 | 0.11 | 0.16 | |||||||||||||||
Net realized and unrealized gain (loss) | (1.12 | ) | 1.09 | 1.91 | (5.02 | ) | |||||||||||||
Total income (loss) from investment operations | (0.97 | ) | 1.19 | 2.02 | (4.86 | ) | |||||||||||||
Less dividends from net investment income | (0.14 | ) | (0.22 | ) | — | — | |||||||||||||
Net asset value, end of period | $ | 11.16 | $ | 12.27 | $ | 11.30 | $ | 9.28 | |||||||||||
Total Return(2) | (8.03 | )% | 10.67 | % | 21.77 | % | (34.37 | )%(5) | |||||||||||
Ratios to Average Net Assets(3): | |||||||||||||||||||
Total expenses | 1.67 | %(4) | 1.60 | %(4) | 1.79 | %(4) | 1.47 | %(4)(6) | |||||||||||
Net investment income | 1.19 | %(4) | 0.87 | %(4) | 1.20 | %(4) | 2.11 | %(4)(6) | |||||||||||
Rebate from Morgan Stanley affiliate | 0.01 | % | 0.02 | % | 0.01 | % | 0.01 | %(6) | |||||||||||
Supplemental Data: | |||||||||||||||||||
Net assets, end of period, in thousands | $ | 85 | $ | 93 | $ | 86 | $ | 66 | |||||||||||
Portfolio turnover rate | 33 | % | 15 | % | 36 | % | 31 | % |
@@@ The date shares were first issued.
^ Beginning with the year ended October 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.
(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) The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."
(5) Not annualized.
(6) Annualized.
See Notes to Financial Statements
62
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, 2011, and the related statements of operations and changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 2010 and the financial highlights for periods ended prior to November 1, 2010 were audited by another independent registered public accounting firm whose report, dated December 23, 2010, expressed an unqualified opinion on that statement of changes in net assets and those financial highlights.
We conducted our audit 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 was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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, 2011, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audit provides 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, 2011, the results of its operations, the changes in its net assets, and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
December 22, 2011
63
Morgan Stanley International Fund
Change in Independent Registered Public Accounting Firm (unaudited)
On June 7, 2011, Deloitte & Touche LLP were dismissed as the Independent Registered Public Accounting Firm of the Fund.
The reports of Deloitte & Touche LLP on the financial statements of the Fund for the past two fiscal years contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle.
In connection with its audits for the two most recent fiscal years, there have been no disagreements with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Deloitte & Touche LLP, would have caused them to make reference thereto in their reports on the financial statements for such years.
On June 7, 2011, the Fund, with the approval of its Board of Trustees and its Audit Committee, engaged Ernst & Young LLP as its new Independent Registered Public Accounting Firm.
64
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 ("Policy") annually.
This Policy applies to current and former individual clients of Morgan Stanley Distribution, Inc., as well as current and former individual investors in Morgan Stanley mutual funds and related companies.
This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. 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 and understand your concerns about safeguarding such information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what nonpublic personal information we collect about you, how we collect it, when we may share it with others, and how others may use it. It discusses the steps you may take to limit our sharing of information about you with affiliated Morgan Stanley companies ("affiliated companies"). It also discloses how you may limit our affiliates' use of shared information for marketing purposes. Throughout this Policy, we refer to the nonpublic information that personally identifies you or your accounts as "personal information."
1. What Personal Information Do We Collect About You?
To better serve you and manage our business, it is important that we collect and maintain accurate information about you. We obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our websites and from third parties and other sources.
For example:
• We collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through application forms you submit to us.
• 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.
65
Morgan Stanley International Fund
An Important Notice Concerning Our U.S. Privacy Policy (unaudited) continued
• We may obtain information about your creditworthiness and credit history from consumer reporting agencies.
• We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements.
• 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 preferences, through the use of ''cookies.'' ''Cookies'' recognize your computer each time you 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 better serve you, to manage our business and as otherwise required or permitted by law, we may disclose personal information we collect about you to other affiliated companies and to nonaffiliated third parties.
a. Information We Disclose to Our Affiliated Companies. In order to manage your account(s) effectively, including servicing and processing your transactions, to let you know about products and services offered by us and affiliated companies, to manage our business, and as otherwise required or permitted by law, we may disclose personal information about you to other affiliated companies. Offers for products and services from affiliated companies are developed under conditions designed to safeguard your personal information.
b. Information We Disclose to Third Parties. We do not disclose personal information that we collect about you to nonaffiliated third parties except to enable them to provide marketing services on our behalf, to perform joint marketing agreements with other financial institutions, and as otherwise required or permitted by law. For example, some instances where we may disclose information about you to 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 a nonaffiliated third party, they are required to limit their use of personal information about you to the particular purpose for which it was shared and they are not allowed to share personal information about you with others except to fulfill that limited purpose or as may be required by law.
66
Morgan Stanley International Fund
An Important Notice Concerning Our U.S. Privacy Policy (unaudited) continued
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 about you, and we require them to adhere to confidentiality standards with respect to such information.
4. How Can You Limit Our Sharing of Certain Personal Information About You With Our Affiliated Companies for Eligibility Determination?
We respect your privacy and offer you choices as to whether we share with our affiliated companies personal information that was collected to determine your eligibility for products and services such as credit reports and other information that you have provided to us or that we may obtain from third parties ("eligibility information"). Please note that, even if you direct us not to share certain eligibility information with our affiliated companies, we may still share your personal information, including eligibility information, with those companies under circumstances that are permitted under applicable law, such as to process transactions or to service your account. We may also share certain other types of personal information with affiliated companies — such as your name, address, telephone number, e-mail address and account number(s), and information about your transactions and experiences with us.
5. How Can You Limit the Use of Certain Personal Information About You by our Affiliated Companies for Marketing?
You may limit our affiliated companies from using certain personal information about you that we may share with them for marketing their products or services to you. This information includes our transactions and other experiences with you such as your assets and account history. Please note that, even if you choose to limit our affiliated companies from using certain personal information about you that we may share with them for marketing their products and services to you, we may still share such personal information about you with them, including our transactions and experiences with you, for other purposes as permitted under applicable law.
67
Morgan Stanley International Fund
An Important Notice Concerning Our U.S. Privacy Policy (unaudited) continued
6. How Can You Send Us an Opt-Out Instruction?
If you wish to limit our sharing of certain personal information about you with our affiliated companies for "eligibility purposes" and for our affiliated companies' use in marketing products and services to you as described in this notice, you may do so by:
• Calling us at (800) 869-6397
Monday–Friday between 8a.m. and 6p.m. (EST)
• Writing to us at the following address:
Morgan Stanley Privacy Department
Harborside Financial Center
201 Plaza Two, 3rd Floor
Jersey City, NJ 07311
If you choose to write to us, your written request should include: your name, address, telephone number and account number(s) to which the opt-out applies and should not be sent with any other correspondence. In order to process your request, we require that the request be provided by you directly and not through a third party. Once you have informed us about your privacy preferences, your opt-out preference will remain in effect with respect to this Policy (as it may be amended) until you notify us otherwise. If you are a joint account owner, we will accept instructions from any one of you and apply those instructions to the entire account. Please allow approximately 30 days from our receipt of your opt-out for your instructions to become effective.
Please understand that if you opt-out, you and any joint account holders may not receive certain Morgan Stanley or our affiliated companies' products and services that could help you manage your financial resources and achieve your investment objectives.
If you have more than one account with us or our affiliates, you may receive multiple privacy policies from us, and would need to follow the directions stated in each particular policy for each account you have with us.
7. What if an affiliated company becomes a nonaffiliated third party?
If, at any time in the future, an affiliated company becomes a nonaffiliated third party, further disclosures of personal information made to the former affiliated company will be limited to those described in Section 2(b) above relating to nonaffiliated third parties. If you elected under Section 6 to limit disclosures we make to affiliated companies, or use of personal information by affiliated companies, your election will not apply to use by any former affiliated company of your personal information in their possession once it becomes a nonaffiliated third party.
68
Morgan Stanley International Fund
An Important Notice Concerning Our U.S. Privacy Policy (unaudited) continued
Special Notice to Residents of Vermont
This section supplements our Policy with respect to our individual clients who have a Vermont address and supersedes anything to the contrary in the above Policy with respect to those clients only.
The State of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with affiliated companies and nonaffiliated third parties other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with nonaffiliated third parties or other affiliated companies unless you provide us with your written consent to share such information ("opt-in").
If you wish to receive offers for investment products and services offered by or through other affiliated companies, please notify us in writing at the following address:
Morgan Stanley Privacy Department
Harborside Financial Center
201 Plaza Two, 3rd Floor
Jersey City, NJ 07311
Your authorization should include: your name, address, telephone number and account number(s) to which the opt-in applies and should not be sent with any other correspondence. In order to process your authorization, we require that the authorization be provided by you directly and not through a third-party.
Special Notice to Residents of California
The following section supplements our Policy with respect to our individual clients who have a California address and supersedes anything to the contrary in the above Policy with respect to those clients only.
In response to a California law, if your account has a California home address, your personal information will not be disclosed to nonaffiliated third parties except as permitted by applicable California law, and we will limit sharing such personal information with our affiliates to comply with California privacy laws that apply to us.
69
Morgan Stanley International Fund
Trustee and Officer Information (unaudited)
Independent Trustees:
Name, Age and Address of Independent Trustee | Position(s) Held with Registrant | 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 (67) 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, Strategic Decisions, LLC (consulting) (since February 2009); Director or Trustee of various Morgan Stanley Funds (since August 2006); Chairperson of the Insurance Sub-Committee of the Compliance and Insurance Committee (since February 2007); served as President and Chief Executive Officer of the Nuclear Energy Institute (policy organization) (February 2005 through November 2008); retired as Admiral, U.S. Navy after serving over 38 years on active duty including 8 years as Director of the Naval Nuclear Propulsion Program in the Department of the Navy and the U.S. Department of Energy (1996-2004); served as Chief of Naval Personnel (July 1994-September 1996); and on the joint staff as Director of Political-Military Affairs (June 1992 to July 1994); Knighted as Honorary Knight Commander of the Most Excellent Order of the British Empire; Awarded the Officer de l'Orde National du Mérite by the French Government; elected to the National Academy of Engineering (2009). | 102 | Director of BP p.l.c.; Director of Naval and Nuclear Technologies LLP; Director of the Armed Services YMCA of the USA and the Naval Submarine League; Director of the American Shipbuilding Suppliers Association; Member of the National Security Advisory Council of the Center for U.S. Global Engagement and a member of the CNA military Advisory Board. | ||||||||||||||||||
Michael Bozic (70) 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 Compliance and Insurance Committee (since October 2006); Director or Trustee of various Morgan Stanley Funds (since April 1994); 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. | 104 | Director of various business organizations. | ||||||||||||||||||
70
Morgan Stanley International Fund
Trustee and Officer Information (unaudited) continued
Name, Age and Address of Independent Trustee | Position(s) Held with Registrant | 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 (58) 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 consulting) (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 Morgan Stanley Funds (since August 2006); formerly, Senior Managing Director of Victory Capital Management (1993-2006). | 102 | Director of various non-profit organizations. | ||||||||||||||||||
Dr. Manuel H. Johnson (62) 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 various Morgan Stanley Funds (since July 1991); 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. | 104 | Director of NVR, Inc. (home construction); Director of Evergreen Energy; Director of Greenwich Capital Holdings. | ||||||||||||||||||
Joseph J. Kearns (69) c/o Kearns & Associates LLC PMB754 22631 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 various Morgan Stanley Funds (since August 1994); formerly, Deputy Chairperson of the Audit Committee (July 2003-September 2006) and Chairperson of the Audit Committee of various Morgan Stanley Funds (since August 1994); CFO of the J. Paul Getty Trust. | 105 | Director of Electro Rent Corporation (equipment leasing) and The Ford Family Foundation. | ||||||||||||||||||
71
Morgan Stanley International Fund
Trustee and Officer Information (unaudited) continued
Name, Age and Address of Independent Trustee | Position(s) Held with Registrant | 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 (53) 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 Morgan Stanley Funds (since August 2006); formerly, Managing Director, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management, President, Morgan Stanley Funds (June 1998-March 2000) and Principal, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management (August 1997-December 1999). | 102 | 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 (75) 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 various Morgan Stanley Funds (since July 2006); Director or Trustee of the Funds (since July 1991); formerly, Chairperson of the Insurance Committee (until July 2006). | 104 | None. | ||||||||||||||||||
72
Morgan Stanley International Fund
Trustee and Officer Information (unaudited) continued
Name, Age and Address of Independent Trustee | Position(s) Held with Registrant | 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 (64) 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 Morgan Stanley 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). | 102 | Director of Temple-Inland Industries (packaging and forest products); Director of Legg Mason, Inc. and Director of the Auburn University Foundation; formerly, Director of iShares, Inc. (2001-2006). | ||||||||||||||||||
Fergus Reid (79) c/o Joe Pietryka, Inc. 85 Charles Colman Blvd. Pawling, NY 12564 | Trustee | Since June 1992 | Chairman, Joe Pietryka, Inc.; Chairperson of the Governance Committee and Director or Trustee of various Morgan Stanley Funds (since June 1992). | 105 | Trustee and Director of certain investment companies in the JPMorgan Funds complex managed by JP Morgan Investment Management Inc. | ||||||||||||||||||
Interested Trustee:
Name, Age and Address of Interested Trustee | Position(s) Held with Registrant | 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 (63) c/o Morgan Stanley Services Company Inc. Harborside Financial Center 201 Plaza Two Jersey City, NJ 07311 | Trustee | Since June 2000 | Director or Trustee of various Morgan Stanley Funds (since June 2000); Senior Advisor of Morgan Stanley (since August 2000). | 103 | Director of AXA Financial, Inc. and The Equitable Life Assurance Society of the United States (financial services). | ||||||||||||||||||
* Each Trustee serves an indefinite term, until his or her successor is elected.
** The Fund Complex includes all open-end and closed-end funds (including all of their portfolios) advised by Morgan Stanley Investment Management Inc. (the "Adviser") (as of December 31, 2010) and any funds that have an adviser that is an affiliated person of the Adviser (including, but not limited to, Morgan Stanley AIP GP LP).
*** This includes any directorships at public companies and registered investment companies held by the Trustee at any time during the past five years.
73
Morgan Stanley International Fund
Trustee and Officer Information (unaudited) continued
Executive Officers:
Name, Age and Address of Executive Officer | Position(s) Held with Registrant | Length of Time Served* | Principal Occupation(s) During Past 5 Years | ||||||||||||
Arthur Lev (50) 522 Fifth Avenue New York, NY 10036 | President and Principal Executive Officer – Equity and Fixed Income Funds | Since June 2011 | President and Principal Executive Officer (since June 2011) of the Equity and Fixed Income Funds in the Fund Complex; Head of the Long Only Business of Morgan Stanley Investment Management (since February 2011); Managing Director of the Adviser and various entities affiliated with the Adviser (since December 2006). Formerly, Chief Strategy Officer of Morgan Stanley Investment Management's Traditional Asset Management business (November 2010-February 2011); General Counsel of Morgan Stanley Investment Management (December 2006-October 2010); Partner and General Counsel of FrontPoint Partners LLC (July 2002 to December 2006); Managing Director and General Counsel of Morgan Stanley Investment Management (May 2000 to June 2002). | ||||||||||||
Mary Ann Picciotto (38) c/o Morgan Stanley Services Company Inc. Harborside Financial Center 201 Plaza Two Jersey City, NJ 07311 | Chief Compliance Officer | Since May 2010 | Executive Director of the Adviser and various entities affiliated with the Adviser; Chief Compliance Officer of various Morgan Stanley Funds (since May 2010); Chief Compliance Officer of the Adviser (since April 2007). | ||||||||||||
Stefanie V. Chang Yu (45) 522 Fifth Avenue New York, NY 10036 | Vice President | Since December 1997 | Managing Director of the Adviser and various entities affiliated with the Adviser; Vice President of various Morgan Stanley Funds (since December 1997). Formerly, Secretary of the Adviser. | ||||||||||||
Francis J. Smith (46) c/o Morgan Stanley Services Company Inc. Harborside Financial Center 201 Plaza Two Jersey City, NJ 07311 | Treasurer and Principal Financial Officer | Treasurer since July 2003 and Principal Financial Officer since September 2002 | Executive Director of the Adviser and various entities affiliated with the Adviser; Treasurer and Principal Financial Officer of various Morgan Stanley Funds (since July 2003). | ||||||||||||
Mary E. Mullin (44) 522 Fifth Avenue New York, NY 10036 | Secretary | Since June 1999 | Executive Director of the Adviser and various entities affiliated with the Adviser; Secretary of various Morgan Stanley Funds (since June 1999). | ||||||||||||
* Each officer serves an indefinite term, until his or her successor is elected.
2011 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, 2011. When distributed, certain earnings may be subject to a maximum tax rate of 15% as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund designated up to a maximum of $3,736,504 as taxable at this lower rate.
During the taxable year ended October 31, 2011, the Fund intends to pass through foreign tax credits of $309,519, and has derived income of $3,842,665 from sources within foreign countries.
In January, the Fund provides tax information to shareholders for the preceding calendar year.
74
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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
Arthur Lev
President and Principal Executive Officer
Mary Ann Picciotto
Chief Compliance Officer
Stefanie V. Chang Yu
Vice President
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Transfer Agent
Morgan Stanley Services Company Inc.
P.O. Box 219886
Kansas City, Missouri 64121
Custodian
State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
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 Management 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 Distribution, Inc., member FINRA.
© 2011 Morgan Stanley
INVESTMENT MANAGEMENT
Morgan Stanley
International Fund
Annual Report
October 31, 2011
INLANN
IU11-02639P-Y10/11
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the “Code of Ethics”) that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Fund or a third party.
(b) No information need be disclosed pursuant to this paragraph.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f)
(1) The 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 committee 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:
2011
|
| Registrant |
| Covered Entities(1) |
| ||
Audit Fees |
| $ | 35,460 |
| N/A |
| |
|
|
|
|
|
| ||
Non-Audit Fees |
|
|
|
|
| ||
Audit-Related Fees |
| $ |
| (2) | $ | 6,501,000 | (2) |
Tax Fees |
| $ | 6,770 | (3) | $ | 1,350,000 | (4) |
All Other Fees |
| $ |
|
| $ |
|
|
Total Non-Audit Fees |
| $ | 6,770 |
| $ | 7,851,000 |
|
|
|
|
|
|
| ||
Total |
| $ | 42,230 |
| $ | 7,851,000 |
|
2010
|
| Registrant |
| Covered Entities(1) |
| ||
Audit Fees |
| $ | 39,400 |
| N/A |
| |
|
|
|
|
|
| ||
Non-Audit Fees |
|
|
|
|
| ||
Audit-Related Fees |
| $ |
| (2) | $ | 6,909,000 | (2) |
Tax Fees |
| $ | 7,811 | (3) | $ | 1,013,000 | (4) |
All Other Fees |
| $ |
|
| $ |
| (5) |
Total Non-Audit Fees |
| $ | 7,811 |
| $ | 7,922,000 |
|
|
|
|
|
|
| ||
Total |
| $ | 47,211 |
| $ | 7,922,000 |
|
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.
(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.
The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee’s responsibilities to pre-approve services performed by the Independent Auditors to management.
The Fund’s Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors’ independence.
2. Delegation
As provided in the Act and the SEC’s rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
3. Audit Services
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
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 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) Refer to Item 1.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Applicable only to reports filed by closed-end funds.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Applicable only to reports filed by closed-end funds.
Item 9. Closed-End Fund Repurchases
Applicable only to reports filed by closed-end funds.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
(a) The Fund’s principal executive officer and principal financial officer have concluded that the Fund’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.
(b) There were no changes in the registrant’s internal control over financial reporting that occurred during the 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/ Arthur Lev |
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Arthur Lev |
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Principal Executive Officer |
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December 15, 2011 |
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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/ Arthur Lev |
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Arthur Lev |
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Principal Executive Officer |
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December 15, 2011 |
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/s/ Francis Smith |
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Francis Smith |
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Principal Financial Officer |
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December 15, 2011 |
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