<Page>
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
Morgan Stanley International Fund
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: October 31, 2003
Date of reporting period: October 31, 2003
Item 1 - Report to Shareholders
<Page>
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 shares may be less than what you paid for them. Accordingly you can lose
money investing in this Fund.
<Page>
Fund Report
For the year ended October 31, 2003
TOTAL RETURN FOR THE 12 MONTHS ENDED OCTOBER 31, 2003
<Table>
<Caption>
MORGAN
STANLEY LIPPER
CAPITAL INTER-
INTERNATIONAL NATIONAL
(MSCI) EAFE FUNDS
CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2)
21.31% 20.52% 20.40% 21.68% 27.03% 26.55%
</Table>
THE PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS
DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF
ALL DISTRIBUTIONS BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES
CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE
INFORMATION.
MARKET CONDITIONS
For the 12-month period ended October 31, 2003, the overall market environment
was volatile, marked by several sharp moves. After bottoming in mid-October
2002, international equity markets rallied until early December, before starting
a sell-off that lasted into mid March. The low point of this downtrend came then
as European markets broke through their October lows, though U.S. equities
managed to remain above their mid October level. The European economy softened,
and manufacturing data through March showed falling output and declining new
orders. Unemployment continued to rise and consumer confidence remained at
multiyear lows. While absolute equity valuations appeared attractive, earnings
momentum and revisions were poor.
Asian markets traded sideways, then turned negative during the first six months
of the period, predominantly as a result of geopolitical concerns. However,
economic data began to show signs of life, with increases in industrial
production, business confidence among small- and medium-size companies, and
nominal retail sales together with inventory levels hitting 15-year lows.
Global equities moved sharply above their March lows primarily because of
massive fiscal stimulus in the United States and military intervention in Iraq.
In the second quarter of 2003, cuts in short-term interest rates, declining
credit spreads, strong and steady growth in liquidity and substantial U.S. tax
cuts further fueled investors' appetite for risk, and equities surged higher
globally. From the market bottom on March 12, 2003, international equities made
steady gains until a pause in mid June. Nearly every country and sector in the
MSCI EAFE Index had double-digit returns, with information technology,
financials and small-cap stocks leading the market.
In the third quarter, better than expected economic growth and improving
prospects for corporate earnings continued to propel the international equity
markets higher. Information technology, industrials and Asia were the global
leaders, while defensive areas continued to lag. September was the weakest month
as the economic data showed signs of softening and the markets fell about 3
percent, but in October international equities proved resilient and regained
about 6 percent by month-end. The performance of the U.S. dollar was noteworthy
as it lost value against all the other major currencies in the three-month
period.
European consumer and business confidence surveys showed increased optimism,
though this sentiment has yet to be supported by corporate earnings or GDP or
industrial production data. In the U.S., the rally that began off the mid-March
bottom is the fifth major rally the markets have experienced since the peak in
March 2000. Four of those rallies failed and were followed by new lows.
2
<Page>
Asian markets appreciated across the board over the second half of the period,
with the upward momentum being reflected in increased foreign investment
throughout the region. The Japanese market rallied along with the major global
equity markets. A number of factors boosted the Japanese market, although the
primary driver was highly attractive valuations.
PERFORMANCE ANALYSIS
We attribute the Fund's underperformance relative to its benchmark primarily to
its defensive positioning going into the strong rally that began in March and
continued into June. While we increased cyclical positions in the portfolio over
this period, we did not add enough to gain ground on the benchmark.
The Fund was originally overweighted relative to the MSCI EAFE Index in U.K.
equities, which hampered performance. We reduced that exposure to an
underweighting by the end of the period, as we believe that valuations in the
U.K. may be at fair value, but rising interest rates and the predominance of
defensive sectors in the market made the U.K. less attractive. Likewise
dampening performance was the Fund's underweighted stance in Germany relative to
the MSCI EAFE Index. However, after visiting Germany toward the end of the
period we became more positive on the outlook for the market. Chancellor
Schroeder's Reform Agenda 2010 is the largest package of reforms in recent
German history, one increasingly believed by the German populace to be
inevitable.
The Fund also suffered from its underweighted position in Australia, relative to
the MSCI EAFE Index, notably in regard to that country's currency. As a
primarily commodity-based and cyclical economy, Australia and its currency both
benefited strongly from the global resurgence of confidence during the period.
The Australian dollar reached new highs, outperforming the Australian equity
market during the 12-month period.
Also weighing down the Fund's performance were its overweighted stances in
consumer staples and energy, and underweightings in financials and technology
relative to the MSCI EAFE Index during the entire period. The overweighting in
staples was driven by our view that, in the absence of evidence that the
economic recovery was sustainable, cash-generating companies with stable cash
earnings, such as consumer staples, were attractive. Similarly, we believe that
energy companies are reliable, cash-generating businesses and that analysts have
underestimated the future price of oil. High levels of debt on both the
corporate and personal levels and the high gearing of banks influenced our
underweighting in financials.
On a positive note, our overweighted stance in Asia relative to the MSCI EAFE
Index, particularly Hong Kong, added to performance. An overweighting in Japan
relative to the MSCI EAFE Index, particularly aided performance, as Japanese
equities were buoyed during the second half of the 12-month period by highly
attractive valuations, earnings releases for the fiscal year ending March 2003
confirming that past restructuring efforts were beginning to bear fruit and a
decisive move by the Japanese government in April that demonstrated its
willingness to resolve the financial crisis actively. The Fund also benefited
from an
3
<Page>
overweighted position relative to the MSCI EAFE Index in the utilities
sector, which rallied strongly.
TOP 10 HOLDINGS
<Table>
BP 2.1%
HSBC Holdings 2.0
GlaxoSmithKline 1.8
Royal Dutch Petroleum 1.7
Toyota Motor 1.6
Vodafone 1.5
Novartis 1.3
Siemens 1.2
Nokia 1.1
UBS 1.1
</Table>
TOP FIVE COUNTRIES
<Table>
Japan 28.3%
United Kingdom 19.6
Germany 6.9
France 6.7
Switzerland 6.7
</Table>
SUBJECT TO CHANGE DAILY. ALL PERCENTAGES ARE AS A PERCENTAGE OF NET ASSETS.
PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE DEEMED A
RECOMMENDATION TO BUY THE SECURITIES MENTIONED. MORGAN STANLEY IS A FULL-SERVICE
SECURITIES FIRM ENGAGED IN SECURITIES TRADING AND BROKERAGE ACTIVITIES,
INVESTMENT BANKING, RESEARCH AND ANALYSIS, FINANCING AND FINANCIAL ADVISORY
SERVICES.
INVESTMENT STRATEGY
1. THE FUND WILL NORMALLY INVEST AT LEAST 65% OF ITS ASSETS IN A DIVERSIFIED
PORTFOLIO OF INTERNATIONAL COMMON STOCKS AND OTHER EQUITY SECURITIES.
2. THE INVESTMENT TEAM BEGINS WITH THE COUNTRIES AND SECTORS REPRESENTED IN THE
MORGAN STANLEY CAPITAL INTERNATIONAL EAFE (EUROPE, AUSTRALASIA AND FAR EAST)
INDEX.
3. COUNTRY AND SECTOR-WEIGHTING DECISIONS CENTER ON AN ASSESSMENT OF THE OVERALL
GLOBAL AND REGIONAL INVESTMENT ENVIRONMENT.
4. THE PORTFOLIO MANAGERS MAY ALSO CHOOSE TO EMPHASIZE A PARTICULAR SECTOR WHEN
ITS FACTORS APPEAR COMPELLING, IN AN EFFORT TO ADD VALUE.
5. WITHIN EACH COUNTRY OR SECTOR, THE PORTFOLIO MANAGERS WILL TRY TO MATCH THE
PERFORMANCE OF A BROAD LOCAL MARKET INDEX BY INVESTING IN OPTIMIZED "BASKETS"
OF COMMON STOCKS AND OTHER EQUITY SECURITIES.
ANNUAL 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) 350-6414, 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.
PROXY VOTING POLICIES AND PROCEDURES
A DESCRIPTION OF THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE VOTING
OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES IS AVAILABLE WITHOUT
CHARGE, UPON REQUEST, BY CALLING (800) 869-NEWS (6397). THIS INFORMATION IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT
http://www.sec.gov.
4
<Page>
(This page has been left blank intentionally.)
<Page>
PERFORMANCE SUMMARY
[CHART]
PERFORMANCE OF A $10,000 INVESTMENT
<Table>
<Caption>
($ IN THOUSANDS) CLASS A++ CLASS B++ CLASS C++ CLASS D++ MSCI EAFE(1) LIPPER(2)
June 28, 1999 $ 9,475 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
July 31, 1999 $ 9,608 $ 10,130 $ 10,130 $ 10,140 $ 10,243 $ 10,232
October 31, 1999 $ 10,015 $ 10,550 $ 10,550 $ 10,580 $ 10,773 $ 10,707
January 31, 2000 $ 10,603 $ 11,140 $ 11,140 $ 11,200 $ 11,375 $ 12,149
April 30, 2000 $ 10,631 $ 11,150 $ 11,150 $ 11,240 $ 11,496 $ 12,160
July 31, 2000 $ 10,356 $ 10,850 $ 10,850 $ 10,960 $ 11,165 $ 11,973
October 31, 2000 $ 9,750 $ 10,190 $ 10,190 $ 10,320 $ 10,461 $ 11,077
January 31, 2001 $ 9,674 $ 10,089 $ 10,089 $ 10,250 $ 10,421 $ 11,070
April 30, 2001 $ 9,064 $ 9,435 $ 9,435 $ 9,607 $ 9,622 $ 10,152
July 31, 2001 $ 8,454 $ 8,781 $ 8,781 $ 8,964 $ 8,741 $ 9,376
October 31, 2001 $ 7,765 $ 8,042 $ 8,042 $ 8,225 $ 7,853 $ 8,408
January 31, 2002 $ 7,599 $ 7,862 $ 7,862 $ 8,066 $ 7,755 $ 8,519
April 30, 2002 $ 8,164 $ 8,422 $ 8,432 $ 8,664 $ 8,287 $ 9,160
July 31, 2002 $ 7,235 $ 7,451 $ 7,461 $ 7,682 $ 7,262 $ 8,033
October 31, 2002 $ 6,761 $ 6,944 $ 6,955 $ 7,181 $ 6,815 $ 7,546
January 31, 2003 $ 6,506 $ 6,680 $ 6,682 $ 6,918 $ 6,598 $ 7,370
April 30, 2003 $ 6,731 $ 6,892 $ 6,904 $ 7,157 $ 6,939 $ 7,667
July 31, 2003 $ 7,354 $ 7,514 $ 7,517 $ 7,817 $ 7,720 $ 8,587
October 31, 2003 $ 8,202 $ 8,210 $ 8,374 $ 8,737 $ 8,658 $ 9,549
</Table>
ENDING VALUE
<Table>
<Caption>
CLASS A++ CLASS B++ CLASS C++ CLASS D++ MSCI EAFE(1) LIPPER(2)
--------- --------- --------- --------- ------------ ---------
$ 8,202 $ 8,210 $ 8,374 $ 8,737 $ 8,658 $ 9,549
</Table>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
LESS THAN THEIR ORIGINAL COST. THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION
OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF
FUND SHARES. PERFORMANCE FOR CLASS A, CLASS B, CLASS C, AND CLASS D SHARES WILL
VARY DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
6
<Page>
AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED OCTOBER 31, 2003
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES^^
06/28/99 06/28/99 06/28/99 06/28/99
SYMBOL INLAX INLBX INLCX INLDX
1 YEAR 21.31%(3) 20.52%(3) 20.40%(3) 21.68%(3)
14.94(4) 15.52(4) 19.40(4) --
SINCE INCEPTION (3.27)(3) (4.02)(3) (4.00)(3) (3.06)(3)
(4.46)(4) (4.44)(4) (4.00)(4) --
</Table>
- ----------
Notes on Performance
(1) THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE INDEX MEASURES THE
PERFORMANCE FOR A DIVERSE RANGE OF GLOBAL STOCK MARKETS WITHIN EUROPE,
AUSTRALASIA, AND THE FAR EAST. THE PERFORMANCE OF THE INDEX IS LISTED IN
U.S. DOLLARS AND ASSUMES REINVESTMENT OF NET DIVIDENDS. "NET DIVIDENDS"
REFLECTS A REDUCTION IN DIVIDENDS AFTER TAKING INTO ACCOUNT WITHHOLDING OF
TAXES BY CERTAIN FOREIGN COUNTRIES REPRESENTED IN THE INDEX. INDEXES ARE
UNMANAGED AND THEIR 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 FUNDS INDEX IS AN EQUALLY WEIGHTED PERFORMANCE
INDEX OF THE LARGEST QUALIFYING FUNDS (BASED ON NET ASSETS) IN THE LIPPER
INTERNATIONAL 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.
(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.
* 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.
+ THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C IS 1% FOR SHARES
REDEEMED WITHIN ONE YEAR OF PURCHASE.
^^ CLASS D HAS NO SALES CHARGE.
++ CLOSING VALUE ASSUMING A COMPLETE REDEMPTION ON OCTOBER 31, 2003.
7
<Page>
MORGAN STANLEY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2003
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
COMMON AND PREFERRED STOCKS AND
RIGHTS (98.3%)
AUSTRALIA (3.8%)
ALUMINUM
58,508 Alumina Ltd. $ 246,432
--------------
BEVERAGES: ALCOHOLIC
102,513 Foster's Group Ltd. 331,078
35,767 Southcorp Ltd. 78,357
--------------
409,435
--------------
BEVERAGES: NON-ALCOHOLIC
25,313 Coca-Cola Amatil Ltd. 105,364
--------------
BIOTECHNOLOGY
4,768 CSL Ltd. 57,282
--------------
BUILDING PRODUCTS
74,382 CSR Ltd. 111,439
--------------
CASINO/GAMING
19,284 TABCORP Holdings Ltd. 157,949
--------------
CHEMICALS: MAJOR DIVERSIFIED
15,398 Orica Ltd. 143,748
--------------
CONSTRUCTION MATERIALS
31,510 Boral Ltd. 122,475
54,660 Rinker Group Ltd. 245,289
--------------
367,764
--------------
CONTAINERS/PACKAGING
42,693 Amcor Ltd. 256,455
--------------
ENGINEERING & CONSTRUCTION
12,108 Leighton Holdings Ltd. 97,290
--------------
FINANCIAL CONGLOMERATES
10,494 Macquarie Bank Ltd. 258,377
26,954 Suncorp-Metway Ltd. 247,058
--------------
505,435
--------------
FOOD RETAIL
53,939 Coles Myer Ltd. 296,182
49,633 Woolworths Ltd. 390,041
--------------
686,223
--------------
GAS DISTRIBUTORS
23,350 Australian Gas Light Company Ltd. $ 176,565
15,557 Origin Energy Ltd. 47,275
--------------
223,840
--------------
HOSPITAL/NURSING MANAGEMENT
45,214 Mayne Group Ltd. 116,308
--------------
INDUSTRIAL CONGLOMERATES
9,353 Ansell Ltd.* 45,740
18,868 Wesfarmers Ltd. 386,686
--------------
432,426
--------------
INVESTMENT TRUSTS/MUTUAL FUNDS
95,997 Macquarie Infrastructure Group
(Stapled Securities)** 215,056
--------------
LIFE/HEALTH INSURANCE
66,781 AMP Ltd. 310,537
66,781 AMP Ltd. (Rights)* 3,870
--------------
314,407
--------------
MAJOR BANKS
72,608 Australia and New Zealand
Banking Group Ltd. 913,355
13,201 Australia and New Zealand
Banking Group Ltd. (Rights)* 40,209
59,997 Commonwealth Bank of Australia 1,165,997
73,578 National Australia Bank Ltd. 1,590,606
84,849 Westpac Banking Corp. 968,399
--------------
4,678,566
--------------
MAJOR TELECOMMUNICATIONS
108,395 Telstra Corp., Ltd. 363,097
--------------
MEDIA CONGLOMERATES
71,315 News Corp., Ltd. 632,499
101,399 News Corp., Ltd. (Pref. Ordinary) 743,100
--------------
1,375,599
--------------
MEDICAL/NURSING SERVICES
6,887 Sonic Healthcare Ltd. 33,388
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
8
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
MISCELLANEOUS COMMERCIAL SERVICES
49,712 Brambles Industries Ltd. $ 164,064
--------------
MULTI-LINE INSURANCE
85,342 Insurance Australia Group Ltd. 268,385
--------------
OIL & GAS PRODUCTION
31,385 Santos Ltd. 135,518
23,939 Woodside Petroleum Ltd. 223,821
--------------
359,339
--------------
OTHER METALS/MINERALS
178,989 BHP Billiton Ltd. 1,482,481
15,439 Rio Tinto Ltd. 388,968
58,769 WMC Resources Ltd.* 212,644
--------------
2,084,093
--------------
OTHER TRANSPORTATION
9,367 Patrick Corp. Ltd. 96,647
27,025 Transurban Group 79,450
--------------
176,097
--------------
PRECIOUS METALS
18,430 Newcrest Mining Ltd. 157,336
--------------
PROPERTY - CASUALTY INSURERS
32,209 QBE Insurance Group Ltd. 234,450
--------------
PUBLISHING: NEWSPAPERS
47,018 John Fairfax Holdings Ltd. 120,284
--------------
PULP & PAPER
21,320 Paperlinx Ltd. 76,389
--------------
REAL ESTATE DEVELOPMENT
20,822 Lend Lease Corp., Ltd. 164,954
21,468 Westfield Holdings Ltd. 215,586
--------------
380,540
--------------
REAL ESTATE INVESTMENT TRUSTS
34,172 Centro Properties Group 91,526
75,928 CFS Gandel Retail Trust 69,219
99,421 General Property Trust (Units)++ 196,028
64,412 Investa Property Group 87,854
37,675 Mirvac Group 113,422
1,597 Stockland (New)* 5,406
55,732 Stockland (Units)++ $ 191,021
4,069 Westfield Trust (New Units)++ 9,518
110,799 Westfield Trust (Units)++ 260,744
--------------
1,024,738
--------------
STEEL
44,196 BHP Steel Ltd. 169,285
7,883 OneSteel Ltd. 12,367
--------------
181,652
--------------
TOTAL AUSTRALIA 16,124,870
--------------
AUSTRIA (0.0%)
CONSTRUCTION MATERIALS
1,708 RHI AG* 24,230
--------------
OTHER TRANSPORTATION
1,083 Flughafen Wien AG 43,935
--------------
STEEL
700 Boehler-Uddeholm AG 40,061
--------------
TOTAL AUSTRIA 108,226
--------------
BELGIUM (0.6%)
CHEMICALS: SPECIALTY
4,378 Solvay S.A. (A Shares) 324,463
--------------
FINANCIAL CONGLOMERATES
69,237 Fortis 1,228,951
--------------
MAJOR BANKS
56,677 Dexia 888,622
4,337 KBC Bankverzekeringsholding 183,119
--------------
1,071,741
--------------
METAL FABRICATIONS
482 Bekaert NV 23,837
--------------
OTHER METALS/MINERALS
456 Umicore 27,622
--------------
PHARMACEUTICALS: OTHER
2,246 UCB S.A. 70,507
--------------
TOTAL BELGIUM 2,747,121
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
9
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
BERMUDA (0.1%)
APPAREL/FOOTWEAR
76,500 Yue Yuen Industrial (Holdings) Ltd. $ 216,644
--------------
CONSTRUCTION MATERIALS
88,000 Cheung Kong Infrastructure Holdings
Ltd. 190,874
--------------
TOTAL BERMUDA 407,518
--------------
CHINA (1.6%)
AIRLINES
480,000 China Eastern Airlines Corp., Ltd.* 82,796
360,000 China Southern Airlines Co., Ltd.
(Class H)* 142,499
--------------
225,295
--------------
ALUMINUM
846,000 Aluminum Corp. of China Ltd. 435,605
--------------
BEVERAGES: ALCOHOLIC
106,000 Tsingtao Brewery Co., Ltd. 137,813
--------------
CHEMICALS: SPECIALTY
716,000 Sinopec Shanghai Petrochemical Co. 202,768
--------------
ELECTRIC UTILITIES
428,000 Huadian Power
International Corp. 139,113
464,000 Huaneng Power International,
Inc. (Class H) 722,713
--------------
861,826
--------------
INTEGRATED OIL
5,216,000 China Petroleum & Chemical
Corp. (Class H) 1,728,931
3,954,000 PetroChina Co. Ltd. 1,437,864
--------------
3,166,795
--------------
MAJOR TELECOMMUNICATIONS
2,496,000 China Telecom Corp. Ltd. 827,341
--------------
MARINE SHIPPING
398,000 China Shipping Development Co., Ltd. 261,286
--------------
MISCELLANEOUS COMMERCIAL SERVICES
95,000 Travelsky Technology Ltd. $ 89,271
--------------
MOTOR VEHICLES
388,000 Qingling Motors Co. 71,422
--------------
OTHER METALS/MINERALS
359,000 Jiangxi Copper Co., Ltd. 128,239
--------------
OTHER TRANSPORTATION
426,000 Beijing Capital International
Airport Co., Ltd. 157,656
380,000 Jiangsu Expressway Co., Ltd. 190,770
445,000 Zhejiang Expressway Co. Ltd. 279,253
--------------
627,679
--------------
TOTAL CHINA 7,035,340
--------------
DENMARK (0.3%)
BIOTECHNOLOGY
1,650 Novozymes AS (Series B) 52,903
--------------
ELECTRICAL PRODUCTS
2,800 Vestas Wind Systems AS 58,615
--------------
MAJOR BANKS
51,444 Danske Bank AS 1,032,883
--------------
MISCELLANEOUS COMMERCIAL SERVICES
2,000 Group 4 Falck AS 44,669
1,100 ISS AS 52,218
--------------
96,887
--------------
TOTAL DENMARK 1,241,288
--------------
FINLAND (1.9%)
BUILDING PRODUCTS
1,458 Uponor Oyj 38,633
--------------
ENGINEERING & CONSTRUCTION
4,607 Kone Oyj (B Shares) 239,618
--------------
FOOD RETAIL
16,110 Kesko Oyj (B Shares) 249,415
--------------
INDUSTRIAL MACHINERY
21,446 Metso Oyj 239,218
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
10
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES
11,422 TietoEnator Oyj $ 301,334
--------------
MULTI-LINE INSURANCE
21,231 Sampo Oyj (A Shares) 177,861
--------------
OIL REFINING/MARKETING
21,853 Fortum Oyj 200,519
--------------
OTHER METALS/MINERALS
14,012 Outokumpu Oyj 168,780
--------------
PULP & PAPER
50,293 Stora Enso Oyj (Registered Shares) 680,870
37,804 UPM-Kymmene Oyj 704,262
--------------
1,385,132
--------------
TELECOMMUNICATION EQUIPMENT
288,727 Nokia Oyj 4,880,997
--------------
TRUCKS/CONSTRUCTION/FARM MACHINERY
4,537 Wartsila Oyj (B Shares) 77,434
--------------
TOTAL FINLAND 7,958,941
--------------
FRANCE (6.7%)
AEROSPACE & DEFENSE
14,249 Thales S.A. 408,891
779 Zodiac S.A. 22,913
--------------
431,804
--------------
AIRLINES
5,507 Air France 87,681
--------------
ALUMINUM
4,373 Pechiney S.A. (A Shares) 240,603
--------------
APPAREL/FOOTWEAR
21,989 LVMH (Louis Vuitton Moet Hennessy) 1,512,614
--------------
BUILDING PRODUCTS
38,989 Compagnie de Saint-Gobain 1,637,193
--------------
CHEMICALS: SPECIALTY
7,449 Air Liquide S.A. 1,098,953
--------------
CONSTRUCTION MATERIALS
967 Imerys S.A. $ 184,621
10,952 Lafarge S.A. 780,630
--------------
965,251
--------------
ELECTRICAL PRODUCTS
4,604 Alstom* 14,597
21,821 Schneider Electric S.A. 1,271,291
--------------
1,285,888
--------------
ENGINEERING & CONSTRUCTION
21,786 Bouygues S.A. 589,881
5,164 Vinci S.A. 372,558
--------------
962,439
--------------
FOOD DISTRIBUTORS
6,222 Sodexho Alliance S.A. 161,988
--------------
FOOD RETAIL
18,709 Carrefour S.A. 977,632
2,465 Casino Guichard Perrachon S.A. 224,615
--------------
1,202,247
--------------
FOOD: MAJOR DIVERSIFIED
4,046 Groupe Danone 607,675
--------------
HOTELS/RESORTS/CRUISELINES
9,036 Accor S.A. 353,711
--------------
INFORMATION TECHNOLOGY SERVICES
4,445 Cap Gemini S.A.* 222,962
--------------
INTEGRATED OIL
28,340 Total S.A. 4,384,319
--------------
INTERNET SOFTWARE/SERVICES
865 Business Objects S.A.* 28,225
5,258 Wanadoo* 38,938
--------------
67,163
--------------
LIFE/HEALTH INSURANCE
4,001 Cnp Assurances 181,618
--------------
MAJOR BANKS
31,162 BNP Paribas S.A. 1,629,801
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
11
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
12,773 Societe Generale $ 944,419
--------------
2,574,220
--------------
MAJOR TELECOMMUNICATIONS
41,894 France Telecom S.A.* 1,009,261
--------------
MEDIA CONGLOMERATES
31,251 Vivendi Universal S.A.* 653,421
--------------
MEDICAL SPECIALTIES
1,745 Essilor International S.A. 83,552
--------------
MOTOR VEHICLES
5,530 Peugeot S.A. 236,114
5,538 Renault S.A. 364,616
--------------
600,730
--------------
MULTI-LINE INSURANCE
89,362 AXA 1,685,433
--------------
OILFIELD SERVICES/EQUIPMENT
270 Technip S.A. 26,555
--------------
OTHER CONSUMER SPECIALTIES
3,632 Societe BIC S.A. 149,696
--------------
PACKAGED SOFTWARE
2,485 Dassault Systemes S.A. 104,952
--------------
PHARMACEUTICALS: MAJOR
42,752 Aventis S.A. 2,253,283
40,852 Sanofi-Synthelabo S.A. 2,517,120
--------------
4,770,403
--------------
PUBLISHING: BOOKS/MAGAZINES
6,082 Lagardere S.C.A. 304,512
--------------
REGIONAL BANKS
6,553 Credit Agricole S.A. 138,532
--------------
TELECOMMUNICATION EQUIPMENT
71,052 Alcatel S.A.* 933,132
821 Sagem S.A. 83,408
--------------
1,016,540
--------------
TOTAL FRANCE 28,521,916
--------------
GERMANY (6.9%)
AIR FREIGHT/COURIERS
29,281 Deutsche Post AG
(Registered Shares) $ 560,731
--------------
AIRLINES
46,070 Deutsche Lufthansa AG* 719,120
--------------
APPAREL/FOOTWEAR
459 Adidas-Salomon AG 42,329
--------------
CHEMICALS: MAJOR DIVERSIFIED
36,779 BASF AG 1,679,298
45,255 Bayer AG 1,082,375
--------------
2,761,673
--------------
CHEMICALS: SPECIALTY
7,443 Linde AG 339,755
--------------
CONSTRUCTION MATERIALS
2,262 HeidelbergCement AG* 96,188
--------------
DEPARTMENT STORES
3,723 KarstadtQuelle AG 92,103
6,950 Metro AG 282,912
--------------
375,015
--------------
ELECTRIC UTILITIES
35,181 E. ON AG 1,769,981
3,928 RWE AG 108,628
--------------
1,878,609
--------------
ELECTRONIC COMPONENTS
590 Epcos AG* 12,111
--------------
HOUSEHOLD/PERSONAL CARE
2,255 Beiersdorf AG 253,177
2,372 Henkel KGaA - Vorzug (Pref.) 173,653
1,688 Wella AG (Pref.) 133,793
--------------
560,623
--------------
INDUSTRIAL CONGLOMERATES
6,942 MAN AG 191,497
74,367 Siemens AG 4,990,903
21,625 ThyssenKrupp AG 359,070
--------------
5,541,470
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
12
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
INVESTMENT BANKS/BROKERS
11,348 Deutsche Boerse AG $ 627,913
--------------
MAJOR BANKS
44,796 Bayerische Hypo - und Vereinsbank AG* 982,244
53,089 Commerzbank AG 1,044,298
39,455 Deutsche Bank AG (Registered Shares) 2,590,373
--------------
4,616,915
--------------
MAJOR TELECOMMUNICATIONS
131,088 Deutsche Telekom AG
(Registered Shares)* 2,055,290
--------------
MEDICAL DISTRIBUTORS
2,051 Celesio AG 85,436
--------------
MEDICAL/NURSING SERVICES
3,627 Fresenius Medical Care AG 205,853
--------------
MOTOR VEHICLES
37,097 DaimlerChrysler AG (Registered Shares) 1,377,461
399 Porsche AG (Pref.) 195,070
11,757 Volkswagen AG 590,279
2,969 Volkswagen AG (Pref.) 100,624
--------------
2,263,434
--------------
MULTI-LINE INSURANCE
21,121 Allianz AG (Registered Shares) 2,253,775
12,568 Muenchener Rueckver AG
(Registered Shares)* 1,491,908
--------------
3,745,683
--------------
OTHER CONSUMER SERVICES
5,633 TUI AG 97,965
--------------
PACKAGED SOFTWARE
12,438 SAP AG 1,801,160
--------------
PHARMACEUTICALS: MAJOR
3,924 Merck KGaA 136,804
6,903 Schering AG 320,856
--------------
457,660
--------------
PHARMACEUTICALS: OTHER
753 Altana AG $ 47,233
--------------
SEMICONDUCTORS
29,388 Infineon Technologies AG* 431,182
--------------
SPECIALTY STORES
2,821 Douglas Holding AG 81,441
--------------
TOTAL GERMANY 29,404,789
--------------
GREECE (0.0%)
CONSTRUCTION MATERIALS
1,600 Titan Cement Co. S.A. 61,206
--------------
HONG KONG (4.3%)
AIRLINES
162,000 Cathay Pacific Airways, Ltd. 309,674
--------------
APPAREL/FOOTWEAR RETAIL
142,000 Esprit Holdings Ltd. 446,006
--------------
BROADCASTING
29,000 Television Broadcasts Ltd. 137,375
--------------
COAL
316,000 Yanzhou Coal Mining Co., Ltd.
(Class H) 231,859
--------------
ELECTRIC UTILITIES
444,000 Beijing Datang Power
Generation Co., Ltd. 284,341
274,300 CLP Holdings Ltd. 1,239,355
216,000 HongKong Electric
Holdings Ltd. 842,479
--------------
2,366,175
--------------
ELECTRONIC PRODUCTION EQUIPMENT
7,000 ASM Pacific Technology Ltd. 26,176
--------------
ENGINEERING & CONSTRUCTION
53,000 Hopewell Holdings Ltd. 88,009
232,252 New World Development Co., Ltd. 148,736
--------------
236,745
--------------
FINANCIAL CONGLOMERATES
193,000 Wharf (Holdings) Ltd. (The) 485,699
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
13
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
GAS DISTRIBUTORS
603,483 Hong Kong & China Gas Co., Ltd. $ 835,096
--------------
HOTELS/RESORTS/CRUISELINES
128,000 Shangri-La Asia Ltd. 122,752
--------------
INDUSTRIAL CONGLOMERATES
343,900 Hutchison Whampoa Ltd. 2,667,178
147,500 Swire Pacific Ltd. (Class A) 899,981
--------------
3,567,159
--------------
INVESTMENT BANKS/BROKERS
167,000 Hong Kong Exchanges & Clearing Ltd. 363,300
--------------
MAJOR BANKS
222,166 Bank of East Asia Ltd. 663,481
429,500 BOC Hong Kong (Holdings) Ltd. 743,615
108,800 Hang Seng Bank Ltd. 1,358,512
--------------
2,765,608
--------------
MAJOR TELECOMMUNICATIONS
518,611 PCCW Ltd.* 370,508
--------------
MISCELLANEOUS MANUFACTURING
229,500 Johnson Electric Holdings Ltd. 298,378
--------------
PUBLISHING: NEWSPAPERS
68,000 SCMP Group Ltd. 33,263
--------------
RAILROADS
216,844 MTR Corp., Ltd. 294,485
440,000 The Guangshen Railway Co., Ltd. 121,774
--------------
416,259
--------------
REAL ESTATE DEVELOPMENT
233,000 Cheung Kong (Holdings) Ltd. 1,942,042
195,000 Hang Lung Properties Ltd. 254,779
111,000 Henderson Land Development Co., Ltd. 465,804
43,000 Hysan Development Co., Ltd. 62,271
172,111 Sino Land Co., Ltd. 89,728
206,000 Sun Hung Kai Properties Ltd. $ 1,743,515
--------------
4,558,139
--------------
TEXTILES
428,000 Sinopec Yizheng Chemical 89,804
--------------
TOOLS/HARDWARE
74,000 Techtronic Industries Co., Ltd. 203,849
--------------
WHOLESALE DISTRIBUTORS
256,000 Li & Fung Ltd. 430,044
--------------
TOTAL HONG KONG 18,293,868
--------------
INDIA (0.5%)
ALUMINUM
5,100 Hindalco Industries Ltd. 123,585
--------------
FINANCE/RENTAL/LEASING
8,200 Housing Development Finance Corp.,
Ltd. 94,048
--------------
GAS DISTRIBUTORS
17,400 Gail India Ltd. 62,491
--------------
HOUSEHOLD/PERSONAL CARE
51,100 Hindustan Lever Ltd. 196,825
--------------
INFORMATION TECHNOLOGY SERVICES
2,100 Infosys Technologies Ltd. 219,657
9,400 Satyam Computer Service Ltd. 63,475
1,000 Wipro Ltd. 29,636
--------------
312,768
--------------
MOTOR VEHICLES
2,800 Bajaj Auto Ltd 56,534
7,600 Hero Honda Motors Ltd. 59,259
--------------
115,793
--------------
OIL REFINING/MARKETING
7,600 Hindustan Petroleum Corp., Ltd. 55,193
34,900 Reliance Industries Ltd. 374,407
--------------
429,600
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
14
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
PHARMACEUTICALS: OTHER
4,400 Dr. Reddy's Laboratories Ltd. $ 116,013
6,000 Ranbaxy Laboratories Ltd. 130,132
--------------
246,145
--------------
REGIONAL BANKS
4,100 HDFC Bank Ltd. 28,613
19,300 ICICI Bank Ltd. 105,633
--------------
134,246
--------------
STEEL
14,400 Tata Iron & Steel Co., Ltd. 113,869
--------------
TOBACCO
5,800 ITC Ltd. 111,151
--------------
TRUCKS/CONSTRUCTION/FARM MACHINERY
24,700 Larsen & Toubro Ltd. 221,635
8,400 Tata Motors Ltd. 69,398
--------------
291,033
--------------
TOTAL INDIA 2,231,554
--------------
IRELAND (0.1%)
CONSTRUCTION MATERIALS
15,492 CRH PLC 277,312
--------------
FINANCIAL CONGLOMERATES
6,900 Irish Life & Permanent PLC 96,207
--------------
INDUSTRIAL CONGLOMERATES
2,600 DCC PLC 34,748
--------------
WHOLESALE DISTRIBUTORS
5,600 Grafton Group PLC (Units) 34,667
--------------
TOTAL IRELAND 442,934
--------------
ITALY (1.8%)
AEROSPACE & DEFENSE
157,323 Finmeccanica SpA 111,589
--------------
APPAREL/FOOTWEAR
2,647 Benetton Group SpA 31,333
--------------
BROADCASTING
13,164 Mediaset SpA 132,367
--------------
CONSTRUCTION MATERIALS
3,035 Italcementi SpA $ 36,347
--------------
ELECTRIC UTILITIES
33,862 Enel SpA 210,798
--------------
FINANCIAL CONGLOMERATES
5,001 Banca Fideuram SpA 31,248
98,106 Pirelli & Co. SpA 75,717
--------------
106,965
--------------
INTEGRATED OIL
64,758 ENI SpA 1,023,564
--------------
LIFE/HEALTH INSURANCE
11,241 Alleanza Assicurazioni SpA 111,990
15,926 Assicurazioni Generali 364,874
3,759 Mediolanum SpA 26,141
--------------
503,005
--------------
MAJOR BANKS
262,093 Banca Intesa SpA 879,477
12,467 Banca Intesa SpA - RNC 31,159
9,243 Banca Monte dei Paschi di Siena SpA 27,433
19,007 Banca Nazionale del Lavoro SpA* 43,106
101,988 Sanpaolo IMI SpA 1,142,340
342,401 UniCredito Italiano SpA 1,679,855
--------------
3,803,370
--------------
MAJOR TELECOMMUNICATIONS
184,953 Telecom Italia SpA* 480,450
14,798 Telecom Italia SpA - RNC* 25,547
--------------
505,997
--------------
MEDICAL SPECIALTIES
7,159 Snia SpA 14,911
--------------
MOTOR VEHICLES
2,589 Fiat SpA* 20,191
--------------
MULTI-LINE INSURANCE
5,129 Riunione Adriatica di Sicurta SpA 79,763
--------------
REGIONAL BANKS
3,564 Banca Popolare di Milano 18,104
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
15
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
27,625 Banco Popolare di Verona
e Novara Scrl $ 425,133
7,836 Mediobanca SpA 78,430
--------------
521,667
--------------
RESTAURANTS
3,435 Autogrill SpA* 43,284
--------------
SPECIALTY TELECOMMUNICATIONS
1,269 Tiscali SpA* 8,399
--------------
WIRELESS TELECOMMUNICATIONS
134,142 Telecom Italia Mobile SpA (T.I.M.) 616,206
--------------
TOTAL ITALY 7,769,756
--------------
JAPAN (28.3%)
ADVERTISING/MARKETING SERVICES
3,800 Asatsu - DK Inc. 90,674
--------------
AGRICULTURAL COMMODITIES/MILLING
11,000 Nisshin Seifun Group Inc. 90,092
--------------
AIR FREIGHT/COURIERS
76,000 Nippon Express Co., Ltd. 342,660
28,000 Yamato Transport Co., Ltd. 371,857
--------------
714,517
--------------
AIRLINES
83,000 Japan Airlines System Corp. 238,415
--------------
APPAREL/FOOTWEAR
16,000 Onward Kashiyama Co., Ltd. 179,475
6,000 Wacoal Corp. 49,577
--------------
229,052
--------------
APPAREL/FOOTWEAR RETAIL
400 Fast Retailing Co., Ltd. 24,289
1,200 Shimamura Co., Ltd. 83,338
3,000 World Co., Ltd. 81,265
--------------
188,892
--------------
AUTO PARTS: O.E.M.
58,450 Denso Corporation 1,107,792
26,000 NGK Spark Plug Co., Ltd. 217,907
2,000 Sanden Corp. 10,726
3,000 Stanley Electric Co., Ltd. $ 63,812
900 Toyoda Gosei Co., Ltd. 26,589
7,250 Toyota Industries Corp. 133,783
--------------
1,560,609
--------------
AUTOMOTIVE AFTERMARKET
63,000 Bridgestone Corp. 824,652
--------------
BEVERAGES: ALCOHOLIC
32,600 Asahi Breweries, Ltd. 272,037
93,000 Kirin Brewery Co., Ltd. 743,087
9,000 Takara Holdings Inc. 70,685
--------------
1,085,809
--------------
BROADCASTING
19 Fuji Television Network, Inc. 101,036
8,600 Tokyo Broadcasting System, Inc. 137,666
--------------
238,702
--------------
BUILDING PRODUCTS
28,000 Nippon Sheet Glass Company, Ltd. 86,029
16,000 Tostem Inax Holding Corp. 284,920
47,000 Toto Ltd. 390,919
--------------
761,868
--------------
CHEMICALS: AGRICULTURAL
14,000 Nissan Chemical Industries, Ltd. 121,916
--------------
CHEMICALS: MAJOR DIVERSIFIED
105,000 Asahi Kasei Corp. 500,136
23,000 Ishihara Sangyo Kaisha, Ltd.* 47,250
147,000 Mitsubishi Chemical Corp. 384,838
--------------
932,224
--------------
CHEMICALS: SPECIALTY
13,000 Daicel Chemical Industries, Ltd. 55,068
62,000 Dainippon Ink & Chemicals, Inc. 123,425
40,000 Denki Kagaku Kogyo Kabushiki Kaisha 121,444
13,000 JSR Corp. 275,339
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
16
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
24,000 Kaneka Corp. $ 186,965
33,000 Kuraray Co., Ltd. 248,377
48,000 Mitsubishi Rayon Co., Ltd. 178,020
45,000 Mitsui Chemicals, Inc. 262,613
29,197 Shin-Etsu Chemical Co., Ltd. 1,085,499
8,000 Showa Denko K.K.* 15,490
14,000 Sumitomo Bakelite Co., Ltd. 85,901
117,000 Sumitomo Chemical Co., Ltd. 436,051
46,000 Tosoh Corp. 128,370
--------------
3,202,562
--------------
COMMERCIAL PRINTING/FORMS
40,000 Dai Nippon Printing Co., Ltd. 617,398
37,000 Toppan Printing Co., Ltd. 339,024
--------------
956,422
--------------
COMPUTER PROCESSING HARDWARE
118,000 Fujitsu Ltd.* 739,042
--------------
CONSTRUCTION MATERIALS
6,000 Taiheyo Cement Corp. 14,835
--------------
CONTAINERS/PACKAGING
20,000 Toyo Seikan Kaisha, Ltd. 233,615
--------------
DEPARTMENT STORES
6,000 Hankyu Department Stores, Inc. 43,905
8,600 Isetan Co., Ltd. 88,963
17,800 Marui Co., Ltd. 225,878
12,000 Takashimaya Co., Ltd. 87,483
--------------
446,229
--------------
ELECTRIC UTILITIES
16,400 Chubu Electric Power Co. 328,716
84,100 Kansai Electric Power Co., Inc. 1,452,504
11,200 Kyushu Electric Power Co., Inc. 184,885
40,600 Tohoku Electric Power Co., Inc. 657,660
119,700 Tokyo Electric Power Co., Inc. (The) 2,551,554
--------------
5,175,319
--------------
ELECTRICAL PRODUCTS
16,000 Fujikura Ltd. $ 96,137
56,000 Furukawa Electric Co., Ltd. 211,763
2,700 Mabuchi Motor Co., Ltd. 205,672
13,000 Matsushita Electric Works, Ltd. 97,609
37,000 NGK Insulators, Ltd. 252,586
2,700 Nidec Corp. 261,385
49,000 Sumitomo Electric Industries, Ltd. 420,916
1,000 Ushio Inc. 17,044
--------------
1,563,112
--------------
ELECTRONIC COMPONENTS
12,000 Alps Electric Co. Ltd. 201,036
24,000 Citizen Watch Co., Ltd. 196,564
2,300 Hirose Electric Co., Ltd. 282,456
8,300 Hoya Corp. 750,704
16,900 Murata Manufacturing Co., Ltd. 960,140
9,000 Taiyo Yuden Co., Ltd. 130,079
7,700 TDK Corp. 503,954
--------------
3,024,933
--------------
ELECTRONIC EQUIPMENT/INSTRUMENTS
61,000 Canon, Inc. 2,949,914
40,000 Casio Computer Co., Ltd. 355,968
2,400 Keyence Corp. 527,516
16,000 Konica Minolta Holdings, Inc. 210,163
13,000 Kyocera Corp. 782,293
178,000 Matsushita Electric Industrial
Co., Ltd. 2,344,532
178,000 Mitsubishi Electric Corp. 794,455
107,000 NEC Corp. 944,432
51,000 OKI Electric Industry Co., Ltd.* 225,770
18,200 Omron Corp. 398,709
46,000 Ricoh Co., Ltd. 871,830
158,000 Sanyo Electric Co. Ltd. 723,861
203,000 Toshiba Corp. 813,771
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
17
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
5,000 Yokogawa Electric Corp. $ 58,404
--------------
12,001,618
--------------
ELECTRONIC PRODUCTION EQUIPMENT
6,600 Advantest Corp. 491,355
19,000 Nikon Corporation* 288,256
10,300 Tokyo Electron Ltd. 737,787
--------------
1,517,398
--------------
ELECTRONICS/APPLIANCE STORES
600 Yamada Denki Co., Ltd. 19,089
--------------
ELECTRONICS/APPLIANCES
30,000 Fuji Photo Film Co., Ltd. 883,556
14,854 Pioneer Corp. 369,966
86,000 Sharp Corp. 1,353,204
68,296 Sony Corp. 2,377,726
--------------
4,984,452
--------------
ENGINEERING & CONSTRUCTION
15,000 JGC Corp. 128,852
101,000 Kajima Corp. 378,257
51,000 Obayashi Corp. 232,261
77,000 Shimizu Corporation 297,473
8,000 Taisei Corp. 27,779
--------------
1,064,622
--------------
FINANCE/RENTAL/LEASING
9,130 Acom Co., Ltd. 408,323
1,350 Aiful Corp. 85,288
8,000 Credit Saison Co., Ltd. 167,258
6,300 Orix Corp. 529,725
8,700 Promise Co., Ltd. 390,674
9,670 Takefuji Corp. 572,236
--------------
2,153,504
--------------
FOOD RETAIL
14,000 Aeon Co., Ltd. 461,958
12,000 Ito-Yokado Co., Ltd. 440,687
300 Lawson, Inc. 11,454
10,000 Seven - Eleven Japan Co., Ltd. 316,335
--------------
1,230,434
--------------
FOOD: MEAT/FISH/DAIRY
20,000 Nippon Meat Packers, Inc. $ 199,436
6,000 Yakult Honsha Co., Ltd. 93,264
--------------
292,700
--------------
FOOD: SPECIALTY/CANDY
47,000 Ajinomoto Co., Inc. 474,230
900 House Foods Corp. 9,735
11,000 Kikkoman Corp. 71,594
15,000 Meiji Seika Kaisha Ltd. 57,813
5,400 Nissin Food Products Co., Ltd. 123,943
9,000 Yamazaki Baking Co., Ltd. 66,594
--------------
803,909
--------------
GAS DISTRIBUTORS
161,000 Osaka Gas Co., Ltd. 444,905
223,000 Tokyo Gas Co., Ltd. 764,212
--------------
1,209,117
--------------
HOME BUILDING
11,000 Daito Trust Construction Co., Ltd. 339,969
55,000 Daiwa House Industry Co., Ltd. 592,946
28,000 Sekisui Chemical Co., Ltd. 137,697
62,000 Sekisui House, Ltd. 608,108
--------------
1,678,720
--------------
HOUSEHOLD/PERSONAL CARE
36,000 Kao Corp. 739,569
32,000 Shiseido Company, Ltd. 335,679
3,600 Uni-Charm Corp. 167,876
--------------
1,243,124
--------------
INDUSTRIAL CONGLOMERATES
214,000 Hitachi, Ltd. 1,256,649
66,000 Kawasaki Heavy Industries, Ltd. 83,392
--------------
1,340,041
--------------
INDUSTRIAL MACHINERY
24,000 Amada Co., Ltd. 103,627
12,000 Daikin Industries Ltd. 255,795
16,300 Fanuc Ltd. 979,393
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
18
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
90,000 Ishikawajima-Harima Heavy
Industries Co., Ltd. $ 122,716
307,000 Mitsubishi Heavy Industries, Ltd. 842,778
5,600 SMC Corporation 673,466
1,900 THK Co., Ltd. 38,515
--------------
3,016,290
--------------
INDUSTRIAL SPECIALTIES
102,000 Asahi Glass Company, Ltd. 804,800
14,800 Nitto Denko Corp. 776,257
--------------
1,581,057
--------------
INFORMATION TECHNOLOGY SERVICES
5,000 CSK Corp. 189,074
95 NTT Data Corp. 420,553
15,600 Softbank Corp. 801,200
--------------
1,410,827
--------------
INVESTMENT BANKS/BROKERS
233,000 Daiwa Securities Group Inc. 1,702,863
82,000 Nikko Cordial Corp. 442,014
175,000 Nomura Holdings, Inc. 3,003,363
--------------
5,148,240
--------------
MAJOR BANKS
209,000 Bank of Yokohama Ltd. (The) 902,418
56,000 Chiba Bank, Ltd. (The) 240,778
364 Mitsubishi Tokyo Financial Group, Inc. 2,613,944
141,043 Mitsui Trust Holdings, Inc.* 750,024
734,000 Resona Holdings, Inc.* 1,074,211
66,000 Shizuoka Bank, Ltd. (The) 465,558
141,000 Sumitomo Trust & Banking
Co., Ltd. (The) 786,965
397 UFJ Holdings, Inc.* 1,696,119
--------------
8,530,017
--------------
MAJOR TELECOMMUNICATIONS
641 Nippon Telegraph & Telephone
Corp. (NTT) 2,860,931
--------------
MARINE SHIPPING
3,000 Kamigumi Co. Ltd. $ 19,526
5,000 Kawasaki Kisen Kaisha, Ltd. 20,044
8,000 Mitsui O.S.K. Lines, Ltd. 32,506
86,000 Nippon Yusen Kabushiki Kaisha 365,858
--------------
437,934
--------------
MEDICAL SPECIALTIES
13,000 Olympus Corp. 284,792
18,800 Terumo Corp. 357,168
--------------
641,960
--------------
METAL FABRICATIONS
24,000 Minebea Co., Ltd. 136,569
55,000 Mitsui Mining & Smelting Co., Ltd. 219,980
62,000 NSK Ltd. 255,304
36,000 NTN Corp. 187,510
--------------
799,363
--------------
MISCELLANEOUS COMMERCIAL SERVICES
230 Bellsystem 24, Inc. 52,268
13,000 Secom Co., Ltd. 508,136
--------------
560,404
--------------
MISCELLANEOUS MANUFACTURING
28,000 Ebara Corp. 112,244
6,600 Kurita Water Industries Ltd. 80,033
12,000 Takuma Co., Ltd. 61,740
--------------
254,017
--------------
MOTOR VEHICLES
75,604 Honda Motor Co., Ltd. 2,982,650
228,400 Nissan Motor Co., Ltd. 2,557,847
247,300 Toyota Motor Corp. 7,036,169
2,000 Yamaha Motor Co., Ltd. 22,671
--------------
12,599,337
--------------
MOVIES/ENTERTAINMENT
600 Namco Ltd. 16,526
3,700 Oriental Land Co. Ltd. 203,145
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
19
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
7,100 TOHO Co., Ltd. $ 87,387
--------------
307,058
--------------
OFFICE EQUIPMENT/SUPPLIES
5,400 Kokuyo Co., Ltd. 56,106
--------------
OIL & GAS PRODUCTION
13,000 Teikoku Oil Co., Ltd. 59,795
--------------
OIL REFINING/MARKETING
155,000 Nippon Oil Corp. 765,067
18,000 Showa Shell Sekiyu K.K. 144,478
9,000 TonenGeneral Sekiyu K.K. 73,466
--------------
983,011
--------------
OTHER CONSUMER SERVICES
5,600 Benesse Corporation 137,442
--------------
OTHER METALS/MINERALS
23,000 Dowa Mining Co., Ltd. 124,189
34,500 Nippon Mining Holdings, Inc. 126,070
42,000 Sumitomo Metal Mining Co., Ltd. 287,865
--------------
538,124
--------------
OTHER TRANSPORTATION
6,000 Mitsubishi Logistics Corp. 52,195
--------------
PACKAGED SOFTWARE
3,400 Oracle Corp. 199,346
3,200 Trend Micro Inc.* 88,137
--------------
287,483
--------------
PERSONNEL SERVICES
2,300 Meitec Corp. 82,165
--------------
PHARMACEUTICALS: MAJOR
53,400 Sankyo Co., Ltd. 854,322
89,600 Takeda Chemical Industries, Ltd. 3,168,294
--------------
4,022,616
--------------
PHARMACEUTICALS: OTHER
32,600 Chugai Pharmaceutical Co., Ltd. 464,063
24,100 Daiichi Pharmaceutical Co., Ltd. 368,039
25,300 Eisai Co., Ltd. 593,346
15,400 Fujisawa Pharmaceutical
Co., Ltd. (Japan) $ 317,771
2,000 Kaken Pharmaceutical Co., Ltd. 10,072
35,000 Kyowa Hakko Kogyo Co., Ltd 206,163
32,000 Shionogi & Co., Ltd. 536,679
35,000 Taisho Pharmaceutical Co., Ltd. 603,536
29,600 Yamanouchi Pharmaceutical Co., Ltd. 742,623
--------------
3,842,292
--------------
PROPERTY - CASUALTY INSURERS
114 Millea Holdings, Inc. 1,357,513
208,000 Mitsui Sumitomo Insurance Co., Ltd. 1,713,008
75,000 Sompo Japan Insurance Inc. 620,398
--------------
3,690,919
--------------
PULP & PAPER
72 Nippon Unipac Holding 339,024
98,000 Oji Paper Co. Ltd. 521,134
--------------
860,158
--------------
RAILROADS
135 Central Japan Railway Co. 1,180,529
309 East Japan Railway Co. 1,398,800
34,000 Keihin Electric Express
Railway Co., Ltd. 198,727
16,000 Keio Electric Railway
Co., Ltd. 84,501
142,000 Kinki Nippon Railway Co., Ltd.* 427,252
86,000 Tobu Railway Co., Ltd. 300,973
99,000 Tokyu Corp. 490,455
29 West Japan Railway Co. 107,817
--------------
4,189,054
--------------
REAL ESTATE DEVELOPMENT
86,000 Mitsubishi Estate Co., Ltd. 823,961
57,000 Mitsui Fudosan Co., Ltd. 530,052
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
20
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
3,000 Sumitomo Realty &
Development Co., Ltd. $ 27,816
--------------
1,381,829
--------------
RECREATIONAL PRODUCTS
8,600 Konami Corp. 261,885
9,900 Nintendo Co., Ltd. 764,031
9,400 Shimano, Inc. 179,438
12,400 Yamaha Corp. 249,668
--------------
1,455,022
--------------
REGIONAL BANKS
70,000 Bank of Fukuoka, Ltd. (The) 292,064
--------------
RESTAURANTS
12,800 Skylark Co., Ltd. 210,715
--------------
SEMICONDUCTORS
7,300 Rohm Co., Ltd. 983,420
--------------
SPECIALTY STORES
1,000 UNY Co., Ltd. 10,399
--------------
STEEL
42,400 JFE Holdings, Inc. 1,083,029
548,000 Nippon Steel Corp. 1,125,789
27,000 Sumitomo Metal Industries, Ltd. 25,034
--------------
2,233,852
--------------
TEXTILES
12,000 Nisshinbo Industries, Inc. 59,885
72,000 Teijin Ltd. 213,362
107,000 Toray Industries, Inc. 444,496
--------------
717,743
--------------
TOBACCO
48 Japan Tobacco, Inc. 320,262
--------------
TRUCKS/CONSTRUCTION/FARM MACHINERY
98,000 Komatsu Ltd. 530,043
98,000 Kubota Corp. 352,768
--------------
882,811
--------------
WHOLESALE DISTRIBUTORS
107,000 Itochu Corp. 360,849
112,000 Marubeni Corporation 201,582
74,000 Mitsubishi Corp. $ 767,512
11,000 Mitsui & Co., Ltd. 79,993
70,000 Sumitomo Corporation 485,501
--------------
1,895,437
--------------
WIRELESS TELECOMMUNICATIONS
648 NTT DoCoMo, Inc. 1,401,909
--------------
TOTAL JAPAN 120,706,477
--------------
LUXEMBOURG (0.1%)
STEEL
26,498 Arcelor 376,208
--------------
NETHERLANDS (5.6%)
AEROSPACE & DEFENSE
20,862 European Aeronautic Defense
and Space Co.* 422,440
--------------
AIR FREIGHT/COURIERS
42,311 TPG NV 908,172
--------------
BEVERAGES: ALCOHOLIC
33,353 Heineken NV 1,184,798
--------------
CHEMICALS: SPECIALTY
3,384 DSM NV 154,432
--------------
CONSTRUCTION MATERIALS
24,986 James Hardie Industries NV 126,605
--------------
ELECTRONIC EQUIPMENT/INSTRUMENTS
1,555 OCE NV 20,548
--------------
ELECTRONIC PRODUCTION EQUIPMENT
34,317 ASML Holding NV* 592,843
--------------
FINANCIAL CONGLOMERATES
85,595 ING Groep NV (Share Certificates) 1,768,890
--------------
FOOD: MAJOR DIVERSIFIED
40,574 Unilever NV (Share Certificates) 2,346,000
--------------
INDUSTRIAL CONGLOMERATES
91,335 Koninklijke (Royal) Philips
Electronics NV 2,450,806
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
21
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
INDUSTRIAL SPECIALTIES
19,074 Akzo Nobel NV $ 600,318
--------------
INTEGRATED OIL
161,781 Royal Dutch Petroleum Co. 7,145,302
--------------
INVESTMENT BANKS/BROKERS
6,787 Euronext NV 165,311
--------------
LIFE/HEALTH INSURANCE
115,287 Aegon NV 1,504,736
--------------
MAJOR BANKS
99,201 ABN AMRO Holding NV 2,071,878
--------------
MAJOR TELECOMMUNICATIONS
91,423 Koninklijke (Royal) KPN NV* 691,838
--------------
PERSONNEL SERVICES
13,701 Vedior NV 196,582
--------------
PUBLISHING: BOOKS/MAGAZINES
28,536 Reed Elsevier NV 316,322
13,681 Wolters Kluwer NV 191,388
--------------
507,710
--------------
SEMICONDUCTORS
44,662 STMicroelectronics NV 1,183,435
--------------
WHOLESALE DISTRIBUTORS
8,060 Hagemeyer NV 23,222
--------------
TOTAL NETHERLANDS 24,065,866
--------------
NEW ZEALAND (0.0%)
FOREST PRODUCTS
62,696 Carter Holt Harvey Ltd. 70,320
--------------
MAJOR TELECOMMUNICATIONS
22,779 Telecom Corporation of
New Zealand Ltd. 67,573
--------------
TOTAL NEW ZEALAND 137,893
--------------
NORWAY (0.3%)
FOOD: SPECIALTY/CANDY
11,900 Orkla ASA 247,878
--------------
INDUSTRIAL CONGLOMERATES
10,967 Norsk Hydro ASA 613,293
--------------
INTEGRATED OIL
4,200 Statoil ASA $ 39,244
--------------
MISCELLANEOUS MANUFACTURING
8,315 Tomra Systems ASA 47,550
--------------
PULP & PAPER
8,600 Norske Skogindustrier ASA 162,524
--------------
REGIONAL BANKS
21,400 DnB Holding ASA 124,183
557 Gjensidige NOR ASA 22,696
--------------
146,879
--------------
TELECOMMUNICATION EQUIPMENT
5,800 Tandberg ASA* 40,584
--------------
TOTAL NORWAY 1,297,952
--------------
RUSSIA (1.0%)
ELECTRIC UTILITIES
30,000 AO Mosenergo (Sponsored ADR) 206,250
49,000 RAO Unified Energy Systems
(Sponsored ADR) 1,249,500
--------------
1,455,750
--------------
INTEGRATED OIL
9,500 Lukoil (Sponsored ADR) 775,437
10,616 YUKOS (ADR) 497,625
--------------
1,273,062
--------------
OIL & GAS PIPELINES
5,800 OAO Gazprom (Sponsored ADR)
(Registered Shares) 139,200
--------------
OIL & GAS PRODUCTION
25,400 Surgutneftegaz (ADR) 638,175
--------------
OTHER METALS/MINERALS
13,100 JSC MMC Norilsk Nickel (ADR) 681,200
--------------
SPECIALTY TELECOMMUNICATIONS
8,110 Rostelecom (Sponsored ADR) 92,454
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
22
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
WIRELESS TELECOMMUNICATIONS
1,900 AO VimpelCom (Sponsored ADR)* $ 123,690
--------------
TOTAL RUSSIA 4,403,531
--------------
SINGAPORE (1.8%)
AEROSPACE & DEFENSE
291,000 Singapore Technologies
Engineering Ltd. 322,776
--------------
AIRLINES
117,000 Singapore Airlines Ltd. 813,621
--------------
BEVERAGES: ALCOHOLIC
29,880 Fraser & Neave Ltd. 211,221
--------------
ELECTRONIC COMPONENTS
16,000 Venture Corp., Ltd. 173,793
--------------
FINANCIAL CONGLOMERATES
91,000 Keppel Corp., Ltd. 311,178
--------------
HOTELS/RESORTS/CRUISELINES
15,000 Overseas Union Enterprise Ltd. 60,345
84,000 United Overseas Land, Ltd. 92,690
--------------
153,035
--------------
MAJOR BANKS
154,115 DBS Group Holdings Ltd. 1,266,577
--------------
MAJOR TELECOMMUNICATIONS
819,100 Singapore Telecommunications Ltd. 809,685
--------------
MISCELLANEOUS MANUFACTURING
6,099 Haw Par Corp., Ltd. 15,353
--------------
PUBLISHING: NEWSPAPERS
49,000 Singapore Press Holdings Ltd. 554,770
--------------
REAL ESTATE DEVELOPMENT
190,750 Capitaland Ltd. 178,691
94,000 City Developments Ltd. 326,839
--------------
505,530
--------------
REGIONAL BANKS
147,950 Oversea - Chinese Banking Corp., Ltd. $ 1,028,848
--------------
151,104 United Overseas Bank, Ltd. 1,181,043
--------------
2,209,891
--------------
SEMICONDUCTORS
40,000 Chartered Semiconductor
Manufacturing Ltd.* 39,310
--------------
SPECIALTY STORES
20,024 Cycle & Carriage Ltd. 69,048
--------------
TRUCKS/CONSTRUCTION/FARM MACHINERY
173,000 SembCorp Industries Ltd. 131,241
--------------
TOTAL SINGAPORE 7,587,029
--------------
SPAIN (2.5%)
AIRLINES
89,431 Iberia Lineas Aereas de Espana S.A. 217,309
--------------
BROADCASTING
613 Antena 3 Television, S.A.* 19,920
--------------
ELECTRIC UTILITIES
40,013 Endesa S.A. 631,982
34,626 Iberdrola S.A. 574,943
8,933 Union Fenosa, S.A. 143,676
--------------
1,350,601
--------------
ENGINEERING & CONSTRUCTION
3,898 Acciona S.A. 203,643
6,391 ACS, Actividades de Construccion y
Servicios, S.A. 267,848
9,659 Fomento de Construcciones y
Contratas S.A. 313,611
14,902 Grupo Dragados, S.A. 302,961
10,264 Grupo Ferrovial, S.A. 291,686
--------------
1,379,749
--------------
GAS DISTRIBUTORS
76,001 Gas Natural SDG, S.A. 1,453,661
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
23
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES
1,877 Indra Sistemas S.A. $ 21,024
--------------
MAJOR BANKS
62,910 Banco Bilbao Vizcaya Argentaria, S.A. 718,468
88,515 Banco Santander Central Hispano, S.A. 844,971
--------------
1,563,439
--------------
MAJOR TELECOMMUNICATIONS
181,100 Telefonica S.A. (Spain)* 2,242,194
--------------
MISCELLANEOUS COMMERCIAL SERVICES
56,225 Amadeus Global Travel
Distribution S.A. (A Shares) 351,313
--------------
OIL REFINING/MARKETING
50,278 Repsol YPF, S.A. 872,650
--------------
OTHER TRANSPORTATION
18,678 Abertis Infraestructuras, S.A. 250,703
--------------
REAL ESTATE DEVELOPMENT
10,272 Sacyr Vallehermoso S.A. 136,210
--------------
REGIONAL BANKS
2,570 Banco Popular Espanol S.A. 133,016
--------------
STEEL
2,960 Acerinox S.A. 128,267
--------------
TOBACCO
14,458 Altadis, S.A. 348,974
--------------
WATER UTILITIES
9,850 Sociedad General de Aguas
de Barcelona, S.A. 129,133
--------------
TOTAL SPAIN 10,598,163
--------------
SWEDEN (2.8%)
AIRLINES
5,181 SAS AB 45,194
--------------
APPAREL/FOOTWEAR RETAIL
37,700 Hennes & Mauritz AB (B Shares) 794,538
--------------
ELECTRONICS/APPLIANCES
30,400 Electrolux AB (Series B) $ 619,397
--------------
ENGINEERING & CONSTRUCTION
58,930 Skanska AB (B Shares)* 405,234
--------------
HOUSEHOLD/PERSONAL CARE
14,786 Svenska Cellulosa AB (B Shares) 554,513
--------------
INDUSTRIAL MACHINERY
1,600 Alfa Laval AB 20,986
19,000 Assa Abloy AB (B Shares) 186,303
16,970 Atlas Copco AB (A Shares) 592,117
9,169 Atlas Copco AB (B Shares) 297,740
33,109 Sandvik AB 978,159
--------------
2,075,305
--------------
INFORMATION TECHNOLOGY SERVICES
28,200 WM-Data AB (B Shares)* 54,584
--------------
LIFE/HEALTH INSURANCE
77,562 Skandia Forsakrings AB 282,482
--------------
MAJOR BANKS
30,200 Skandinaviska Enskilda Banken AB 361,502
53,000 Svenska Handelsbanken AB (A Shares) 928,013
--------------
1,289,515
--------------
MAJOR TELECOMMUNICATIONS
2,785 Tele2 AB (B Shares)* 139,200
115,848 TeliaSonera AB 503,058
--------------
642,258
--------------
METAL FABRICATIONS
10,777 SKF AB (B Shares) 378,776
--------------
MISCELLANEOUS COMMERCIAL SERVICES
43,200 Securitas AB (B Shares) 528,117
--------------
PULP & PAPER
7,300 Holmen AB (B Shares) 243,092
--------------
REGIONAL BANKS
172,184 Nordea AB 1,061,240
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
24
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
STEEL
8,400 SSAB Svenskt Stal AB (Series A) $ 121,944
--------------
TELECOMMUNICATION EQUIPMENT
886,298 Telefonaktiebolaget LM
Ericsson (B Shares)* 1,512,377
--------------
TOBACCO
25,600 Swedish Match AB 207,009
--------------
TRUCKS/CONSTRUCTION/FARM MACHINERY
8,190 Volvo AB (A Shares) 218,496
27,730 Volvo AB (B Shares) 769,807
--------------
988,303
--------------
TOTAL SWEDEN 11,803,878
--------------
SWITZERLAND (6.7%)
BUILDING PRODUCTS
110 Geberit AG 45,075
226 Schindler Holding AG* 50,514
--------------
95,589
--------------
CHEMICALS: AGRICULTURAL
6,923 Syngenta AG 369,051
--------------
CHEMICALS: SPECIALTY
4,518 Ciba Specialty Chemicals AG
(Registered Shares)* 297,396
8,859 Clariant AG (Registered Shares)* 124,087
2,550 Lonza Group AG (Registered Shares) 124,441
--------------
545,924
--------------
COMPUTER PERIPHERALS
1,718 Logitech International S.A.
(Registered Shares)* 68,479
--------------
CONSTRUCTION MATERIALS
9,650 Holcim Ltd. (Regular Shares) 404,060
--------------
ELECTRONIC EQUIPMENT/INSTRUMENTS
954 Kudelski S.A. - Bearer* 27,649
--------------
FINANCIAL CONGLOMERATES
75,952 UBS AG (Registered Shares) $ 4,640,191
--------------
FOOD: MAJOR DIVERSIFIED
18,653 Nestle S.A. (Registered Shares) 4,085,816
--------------
HOUSEHOLD/PERSONAL CARE
699 Givaudan S.A. (Registered Shares) 313,514
--------------
INDUSTRIAL CONGLOMERATES
57,445 ABB Ltd.* 335,973
118 Sulzer AG (Registered Shares) 27,913
700 Unaxis Holding AG (Registered Shares) 91,007
--------------
454,893
--------------
MAJOR BANKS
73,383 Credit Suisse Group 2,572,396
--------------
MAJOR TELECOMMUNICATIONS
1,627 Swisscom AG (Registered Shares) 470,935
--------------
MISCELLANEOUS COMMERCIAL SERVICES
591 SGS Societe Generale de
Surveillance Holding S.A. 332,003
--------------
MULTI-LINE INSURANCE
7,642 Zurich Financial Services AG* 973,612
--------------
OTHER CONSUMER SPECIALTIES
1,979 Swatch Group AG (B Shares) 209,740
2,208 Swatch Group AG (Registered Shares) 46,884
--------------
256,624
--------------
PERSONNEL SERVICES
13,524 Adecco S.A. (Registered Shares) 793,485
--------------
PHARMACEUTICALS: MAJOR
149,576 Novartis AG (Registered Shares) 5,672,343
39,563 Roche Holding AG 3,257,124
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
25
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
12,159 Roche Holding AG - Bearer $ 1,508,325
--------------
10,437,792
--------------
PROPERTY - CASUALTY INSURERS
24,602 Swiss Re (Registered Shares) 1,540,604
--------------
SPECIALTY STORES
192 Valora Holding AG 44,202
--------------
TOTAL SWITZERLAND 28,426,819
--------------
THAILAND (1.0%)
AGRICULTURAL COMMODITIES/MILLING
626,472 Charoen Pokphand Foods PCL
(Alien Shares) 74,550
--------------
BROADCASTING
25,100 BEC World PCL (Alien Shares) 151,855
--------------
CONSTRUCTION MATERIALS
28,000 Siam City Cement PCL (Alien Shares) 147,000
47,994 The Siam Cement PCL 242,370
86,000 The Siam Cement PCL (Alien Shares) 485,900
--------------
875,270
--------------
ELECTRIC UTILITIES
48,576 Electricity Generating PCL 75,293
--------------
ELECTRONIC COMPONENTS
88,700 Delta Electronics PCL (Alien Shares) 62,644
10,956 Hana Microelectronics PCL
(Alien Shares) 27,390
--------------
90,034
--------------
FINANCE/RENTAL/LEASING
107,500 TISCO Finance PCL (Alien Shares)* 89,359
--------------
FINANCIAL CONGLOMERATES
179,200 National Finance PCL (Alien Shares) 73,472
--------------
HOME BUILDING
495,533 Land & Houses PCL 149,899
372,708 Land & Houses PCL (Alien Shares) $ 125,789
--------------
275,688
--------------
MAJOR BANKS
158,800 Kasikornbank PCL* 167,732
238,922 Kasikornbank PCL (Alien Shares)* 265,801
--------------
433,533
--------------
OIL & GAS PRODUCTION
29,239 PTT Exploration & Production PCL
(Alien Shares) 137,423
--------------
OIL REFINING/MARKETING
207,900 PTT PCL (Alien Shares) 493,763
--------------
REGIONAL BANKS
98,600 Bangkok Bank PCL* 211,990
189,700 Bangkok Bank PCL (Alien Shares)* 443,424
140,600 Siam Commercial Bank PCL (Alien
Shares)* 144,994
66,939 Siam Commercial Bank PCL (Conv Pfd)
(Alien Shares)* 69,868
--------------
870,276
--------------
STEEL
118,100 Sahaviriya Steel Industries PCL
(Alien Shares)* 114,409
--------------
TELECOMMUNICATION EQUIPMENT
323,300 Shin Corp. PCL (Alien Shares) 187,514
--------------
WIRELESS TELECOMMUNICATIONS
249,400 Advanced Info Service PCL
(Alien Shares) 386,570
--------------
TOTAL THAILAND 4,329,009
--------------
UNITED KINGDOM (19.6%)
ADVERTISING/MARKETING SERVICES
39,704 WPP Group PLC 377,479
--------------
AEROSPACE & DEFENSE
425,296 BAE Systems PLC 1,317,803
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
26
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
3,054 Cobham PLC $ 60,915
201,129 Rolls-Royce Group PLC 646,197
--------------
2,024,915
--------------
AIR FREIGHT/COURIERS
20,746 Exel PLC 266,439
--------------
AIRLINES
137,518 British Airways PLC* 484,319
--------------
AUTO PARTS: O.E.M.
48,219 GKN PLC 225,339
--------------
BEVERAGES: ALCOHOLIC
176,874 Diageo PLC 2,075,418
--------------
BROADCASTING
179,996 Granada PLC 357,342
--------------
CABLE/SATELLITE TV
78,165 British Sky Broadcasting Group PLC* 847,033
--------------
CATALOG/SPECIALTY DISTRIBUTION
83,739 GUS PLC 1,020,865
--------------
CHEMICALS: MAJOR DIVERSIFIED
78,933 Imperial Chemical Industries PLC 258,946
--------------
CHEMICALS: SPECIALTY
32,612 BOC Group PLC 443,682
--------------
COMMERCIAL PRINTING/FORMS
37,374 De La Rue PLC 177,505
--------------
CONSTRUCTION MATERIALS
26,707 BPB PLC 150,471
48,516 Hanson PLC 335,161
15,151 RMC Group PLC 157,770
--------------
643,402
--------------
CONTAINERS/PACKAGING
31,615 Rexam PLC 230,181
--------------
DEPARTMENT STORES
174,251 Marks & Spencer Group PLC* 848,983
--------------
DRUGSTORE CHAINS
30,447 Boots Group PLC 367,314
--------------
ELECTRIC UTILITIES
187,206 National Grid Transco PLC $ 1,192,627
38,099 Scottish & Southern Energy PLC 395,764
98,297 Scottish Power PLC 582,528
--------------
2,170,919
--------------
ELECTRONIC EQUIPMENT/INSTRUMENTS
92,350 Invensys PLC 46,910
--------------
ELECTRONICS/APPLIANCE STORES
130,322 Dixons Group PLC 299,548
18,193 Kesa Electricals PLC* 75,162
--------------
374,710
--------------
ENGINEERING & CONSTRUCTION
18,285 AMEC PLC 78,794
12,451 Balfour Beatty PLC 40,372
--------------
119,166
--------------
FINANCIAL CONGLOMERATES
290,513 Lloyds TSB Group PLC 2,013,087
--------------
FINANCIAL PUBLISHING/SERVICES
64,062 Reuters Group PLC 278,496
--------------
FOOD RETAIL
71,241 Sainsbury (J.) PLC 341,671
273,933 Tesco PLC 1,095,783
--------------
1,437,454
--------------
FOOD: MAJOR DIVERSIFIED
149,281 Unilever PLC 1,270,132
--------------
FOOD: SPECIALTY/CANDY
93,395 Cadbury Schweppes PLC 597,360
--------------
GAS DISTRIBUTORS
123,089 Centrica PLC 384,524
--------------
HOME BUILDING
1,934 Taylor Woodrow PLC 7,335
--------------
HOME IMPROVEMENT CHAINS
79,590 Kingfisher PLC 380,702
--------------
HOUSEHOLD/PERSONAL CARE
55,004 Reckitt Benckiser PLC 1,154,846
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
27
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
INDUSTRIAL CONGLOMERATES
26,786 Smiths Group PLC $ 318,159
25,395 Tomkins PLC 120,827
--------------
438,986
--------------
INDUSTRIAL SPECIALTIES
42,472 Pilkington PLC 62,565
--------------
INFORMATION TECHNOLOGY SERVICES
30,115 LogicaCMG PLC 156,541
44,035 Misys PLC 223,680
--------------
380,221
--------------
INTEGRATED OIL
196,124 BG Group PLC 892,457
1,318,661 BP PLC 9,131,975
279,232 Shell Transport & Trading Co. PLC 1,739,888
--------------
11,764,320
--------------
LIFE/HEALTH INSURANCE
40,176 Friends Provident PLC 93,366
83,406 Prudential PLC 645,742
--------------
739,108
--------------
MAJOR BANKS
362,148 Barclays PLC 3,047,549
194,919 HBOS PLC 2,262,403
583,924 HSBC Holdings PLC 8,749,996
140,669 Royal Bank of Scotland Group PLC 3,760,874
--------------
17,820,822
--------------
MAJOR TELECOMMUNICATIONS
442,194 BT Group PLC 1,388,881
--------------
MARINE SHIPPING
47,054 Peninsular & Oriental Steam
Navigation Co. (The) 220,293
--------------
MEDICAL SPECIALTIES
49,866 Amersham PLC 619,317
32,198 Smith & Nephew PLC 255,279
--------------
874,596
--------------
MISCELLANEOUS COMMERCIAL SERVICES
69,115 Brambles Industries PLC $ 208,891
5,488 Davis Service Group PLC (The) 35,218
178,504 Hays PLC 368,736
202,948 Rentokil Initial PLC 767,157
12,884 Securicor PLC 19,034
51,166 Serco Group PLC 154,105
--------------
1,553,141
--------------
MISCELLANEOUS MANUFACTURING
13,502 Fki PLC 26,405
21,011 IMI PLC 123,092
33,590 Kidde PLC 57,301
2,840 Novar PLC 6,371
--------------
213,169
--------------
MOVIES/ENTERTAINMENT
33,399 Carlton Communications PLC 122,151
36,946 EMI Group PLC 109,475
--------------
231,626
--------------
MULTI-LINE INSURANCE
38,702 Aviva PLC 316,839
276,056 Legal & General Group PLC 486,115
27,012 Royal & Sun Alliance Insurance
Group PLC 40,134
--------------
843,088
--------------
OTHER METALS/MINERALS
157,512 BHP Billiton PLC 1,234,151
69,542 Rio Tinto PLC 1,682,626
--------------
2,916,777
--------------
OTHER TRANSPORTATION
82,973 BAA PLC 654,683
--------------
PACKAGED SOFTWARE
83,904 Sage Group (The) PLC 264,954
--------------
PERSONNEL SERVICES
74,241 Capita Group PLC 310,805
--------------
PHARMACEUTICALS: MAJOR
88,017 AstraZeneca PLC 4,125,161
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
28
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
359,995 GlaxoSmithKline PLC $ 7,692,439
--------------
11,817,600
--------------
PRECIOUS METALS
15,782 Johnson Matthey PLC 262,411
--------------
PUBLISHING: BOOKS/MAGAZINES
25,987 Pearson PLC 268,407
46,957 Reed Elsevier PLC 364,145
--------------
632,552
--------------
PULP & PAPER
24,672 Bunzl PLC 192,163
--------------
SEMICONDUCTORS
88,301 ARM Holdings PLC* 170,069
--------------
TOBACCO
76,751 British American Tobacco PLC 925,928
32,426 Imperial Tobacco Group PLC 536,409
--------------
1,462,337
--------------
WATER UTILITIES
30,503 Kelda Group PLC 229,445
26,983 Severn Trent PLC 323,468
--------------
552,913
--------------
WHOLESALE DISTRIBUTORS
14,860 Electrocomponents PLC 87,560
49,278 Wolseley PLC 602,627
--------------
690,187
--------------
WIRELESS TELECOMMUNICATIONS
3,107,612 Vodafone Group PLC 6,511,488
--------------
TOTAL UNITED KINGDOM 83,854,558
--------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------
TOTAL COMMON AND PREFERRED STOCKS
AND RIGHTS (COST $418,395,184) $ 419,936,710
--------------
SHORT-TERM INVESTMENT (0.6%)
REPURCHASE AGREEMENT
$ 2,427 Joint repurchase agreement account
1.05% due 11/03/03 (dated 10/31/03;
proceeds $2,427,212) (a)
(COST $2,427,000) $ 2,427,000
--------------
<Caption>
TOTAL INVESTMENTS
(COST $420,822,184) (b)(c) 98.9% 422,363,710
OTHER ASSETS IN EXCESS OF
LIABILITIES 1.1 4,616,168
----- --------------
NET ASSETS 100.0% $ 426,979,878
===== ==============
</Table>
- ----------
ADR AMERICAN DEPOSITORY RECEIPT.
++ CONSISTS OF ONE OR MORE CLASS OF SECURITIES TRADED TOGETHER AS A UNIT;
STOCK WITH ATTACHED WARRANTS.
* NON-INCOME PRODUCING SECURITY.
** COMPRISED OF SECURITIES IN SEPARATE ENTITIES THAT ARE TRADED AS A
SINGLE STAPLED SECURITY.
(a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS.
(b) SECURITIES HAVE BEEN DESIGNATED AS COLLATERAL IN AN AMOUNT EQUAL TO
$87,919,803 IN CONNECTION WITH FORWARD FOREIGN CURRENCY CONTRACTS AND
OPEN FUTURES CONTRACTS.
(c) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $433,618,361.
THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $45,295,284 AND THE
AGGREGATE GROSS UNREALIZED DEPRECIATION IS $56,549,935, RESULTING IN
NET UNREALIZED DEPRECIATION OF $11,254,651.
FUTURES CONTRACTS OPEN AT OCTOBER 31, 2003:
<Table>
<Caption>
NUMBER OF LONG/ DESCRIPTION, DELIVERY MONTH, UNDERLYING FACE UNREALIZED
CONTRACTS SHORT AND YEAR AMOUNT AT VALUE APPRECIATION
- ---------------------------------------------------------------------------------------------------------
15 Long EURX DAX Index Future December/2003 $ 1,587,686 $ 100,443
16 Long EURX IBEX 35 Index Future November/2003 1,320,853 11,663
66 Long EURX CAC40 10 EURO Future December/2003 2,584,313 127,022
----------
Total unrealized appreciation $ 239,129
==========
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
29
<Page>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCTOBER 31, 2003:
<Table>
<Caption>
UNREALIZED
CONTRACTS IN EXCHANGE DELIVERY APPRECIATION
TO DELIVER FOR DATE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------
GBP 3,431,518 $ 5,835,673 11/03/03 $ 25,427
$ 5,377,085 EUR 4,607,456 11/03/03 (45,798)
HKD 30,035 $ 3,867 11/04/03 1
EUR 3,586,664 $ 3,957,884 12/11/03 (187,344)
$ 6,501,175 EUR 5,890,880 12/11/03 307,111
EUR 49,509,778 $ 54,609,286 12/11/03 (2,610,816)
$ 22,294,818 EUR 20,300,022 12/11/03 1,166,594
$ 18,754,534 EUR 17,020,333 12/11/03 916,432
$ 13,978,869 EUR 12,775,728 12/11/03 786,465
EUR 12,147,483 $ 13,472,480 12/11/03 (566,770)
$ 17,338,565 EUR 15,519,039 12/11/03 597,305
EUR 1,732,790 $ 1,933,635 12/11/03 (69,008)
------------
Net unrealized appreciation $ 319,599
============
</Table>
CURRENCY ABBREVIATIONS:
GBP British Pound.
EUR Euro.
HKD Hong Kong Dollar.
SEE NOTES TO FINANCIAL STATEMENTS
30
<Page>
MORGAN STANLEY INTERNATIONAL FUND
SUMMARY OF INVESTMENTS - OCTOBER 31, 2003
<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -----------------------------------------------------------
Advertising/
Marketing Services $ 468,153 0.1%
Aerospace & Defense 3,313,524 0.8
Agricultural Commodities/
Milling 164,642 0.0
Air Freight/Couriers 2,449,859 0.6
Airlines 3,140,628 0.7
Aluminum 1,046,225 0.2
Apparel/Footwear 2,031,972 0.5
Apparel/Footwear Retail 1,429,436 0.3
Auto Parts: O.E.M. 1,785,948 0.4
Automotive Aftermarket 824,652 0.2
Beverages: Alcoholic 5,104,494 1.2
Beverages: Non-Alcoholic 105,364 0.0
Biotechnology 110,185 0.0
Broadcasting 1,037,561 0.2
Building Products 2,644,722 0.6
Cable/Satellite TV 847,033 0.2
Casino/Gaming 157,949 0.0
Catalog/
Specialty Distribution 1,020,865 0.2
Chemicals: Agricultural 490,967 0.1
Chemicals: Major Diversified 4,096,591 1.0
Chemicals: Specialty 6,312,539 1.5
Coal 231,859 0.1
Commercial Printing/Forms 1,133,927 0.3
Computer Peripherals 68,479 0.0
Computer Processing
Hardware 739,042 0.2
Construction Materials 4,083,344 1.0
Containers/Packaging 720,251 0.2
Department Stores 1,670,227 0.4
Drugstore Chains 367,314 0.1
Electric Utilities 15,545,290 3.6
Electrical Products 2,907,615 0.7
Electronic Components 3,300,871 0.8
Electronic Equipment/
Instruments 12,096,725 2.8
Electronic Production
Equipment 2,136,417 0.5
Electronics/Appliance Stores 393,799 0.1
Electronics/Appliances 5,603,849 1.3
Engineering & Construction $ 4,504,863 1.1%
Finance/Rental/Leasing 2,336,911 0.6
Financial Conglomerates 11,230,074 2.6
Financial Publishing/Services 278,496 0.1
Food Distributors 161,988 0.0
Food Retail 4,805,773 1.1
Food: Major Diversified 8,309,623 1.9
Food: Meat/Fish/Dairy 292,700 0.1
Food: Specialty/Candy 1,649,147 0.4
Forest Products 70,320 0.0
Gas Distributors 4,168,729 1.0
Home Building 1,961,743 0.5
Home Improvement Chains 380,702 0.1
Hospital/
Nursing Management 116,308 0.0
Hotels/Resorts/Cruiselines 629,498 0.1
Household/Personal Care 4,023,445 0.9
Industrial Conglomerates 14,873,822 3.5
Industrial Machinery 5,330,813 1.3
Industrial Specialties 2,243,940 0.5
Information Technology
Services 2,703,720 0.6
Integrated Oil 28,796,607 6.7
Internet Software/Services 67,163 0.0
Investment Banks/Brokers 6,304,764 1.5
Investment Trusts/
Mutual Funds 215,056 0.1
Life/Health Insurance 3,525,356 0.8
Major Banks 56,091,480 13.1
Major Telecommunications 14,305,789 3.4
Marine Shipping 919,513 0.2
Media Conglomerates 2,029,020 0.5
Medical Distributors 85,436 0.0
Medical Specialties 1,615,019 0.4
Medical/Nursing Services 239,241 0.1
Metal Fabrications 1,201,976 0.3
Miscellaneous Commercial
Services 3,675,200 0.9
Miscellaneous Manufacturing 828,467 0.2
Motor Vehicles 15,670,907 3.7
Movies/Entertainment 538,684 0.1
Multi-Line Insurance 7,773,825 1.8
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
31
<Page>
<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -----------------------------------------------------------
Office Equipment/Supplies $ 56,106 0.0%
Oil & Gas Pipelines 139,200 0.0
Oil & Gas Production 1,194,732 0.3
Oil Refining/Marketing 2,979,543 0.7
Oilfield Services/
Equipment 26,555 0.0
Other Consumer Services 235,407 0.1
Other Consumer Specialties 406,320 0.1
Other Metals/Minerals 6,544,835 1.5
Other Transportation 1,805,292 0.4
Packaged Software 2,458,549 0.6
Personnel Services 1,383,037 0.3
Pharmaceuticals: Major 31,506,071 7.4
Pharmaceuticals: Other 4,206,177 1.0
Precious Metals 419,747 0.1
Property - Casualty Insurers 5,465,973 1.3
Publishing: Books/
Magazines 1,444,774 0.3
Publishing: Newspapers 708,317 0.2
Pulp & Paper 2,919,458 0.7
Railroads 4,605,313 1.1
Real Estate Development 6,962,248 1.6
Real Estate Investment Trusts 1,024,738 0.2
Recreational Products 1,455,022 0.3
Regional Banks 5,507,811 1.3
Repurchase Agreement 2,427,000 0.6
Restaurants 253,999 0.1
Semiconductors 2,807,416 0.7
Specialty Stores 205,090 0.1
Specialty Telecommunications 100,853 0.0
Steel 3,310,262 0.8
Telecommunication Equipment 7,638,012 1.8
Textiles 807,547 0.2
Tobacco 2,449,733 0.6
Tools/Hardware 203,849 0.0
Trucks/Construction/
Farm Machinery 2,370,822 0.6
Water Utilities 682,046 0.2
Wholesale Distributors 3,073,557 0.7
Wireless Telecommunications 9,039,863 2.1
--------------- ----
$ 422,363,710 98.9%
=============== ====
</Table>
<Table>
<Caption>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- -----------------------------------------------------------
Common Stocks $ 419,219,623 98.2%
Preferred Stocks 673,008 0.1
Rights 44,079 0.0
Short-Term Investments 2,427,000 0.6
--------------- ----
$ 422,363,710 98.9%
=============== ====
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
32
<Page>
MORGAN STANLEY INTERNATIONAL FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2003
<Table>
ASSETS:
Investments in securities, at value (cost $420,822,184) $ 422,363,710
Cash (including $456,528 in foreign currency and $3,048,134 segregated
in connection with open futures contracts) 3,504,702
Unrealized appreciation on open forward foreign currency contracts 319,599
Receivable for:
Investments sold 8,854,504
Dividends 663,955
Shares of beneficial interest sold 655,902
Foreign withholding taxes reclaimed 393,229
Variation margin 239,435
Prepaid expenses and other assets 53,574
----------------
TOTAL ASSETS 437,048,610
----------------
LIABILITIES:
Payable for:
Investments purchased 8,512,694
Shares of beneficial interest redeemed 490,153
Investment management fee 363,133
Compensated forward foreign currency contracts 322,814
Distribution fee 210,475
Accrued expenses and other payables 169,463
----------------
TOTAL LIABILITIES 10,068,732
----------------
NET ASSETS $ 426,979,878
================
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 617,872,569
Net unrealized appreciation 2,162,529
Accumulated undistributed net investment income 3,089,884
Accumulated net realized loss (196,145,104)
----------------
NET ASSETS $ 426,979,878
================
CLASS A SHARES:
Net Assets $ 63,421,570
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 7,895,842
NET ASSET VALUE PER SHARE $ 8.03
================
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 8.47
================
CLASS B SHARES:
Net Assets $ 205,543,974
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 25,928,548
NET ASSET VALUE PER SHARE $ 7.93
================
CLASS C SHARES:
Net Assets $ 25,470,818
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 3,214,379
NET ASSET VALUE PER SHARE $ 7.92
================
CLASS D SHARES:
Net Assets $ 132,543,516
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 16,432,599
NET ASSET VALUE PER SHARE $ 8.07
================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
33
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2003
<Table>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $864,656 foreign withholding tax) $ 10,207,923
Interest 103,976
----------------
TOTAL INCOME 10,311,899
----------------
EXPENSES
Investment management fee 3,971,394
Distribution fee (Class A shares) 114,063
Distribution fee (Class B shares) 1,982,703
Distribution fee (Class C shares) 241,005
Transfer agent fees and expenses 920,326
Custodian fees 236,374
Shareholder reports and notices 121,995
Registration fees 66,908
Professional fees 56,881
Trustees' fees and expenses 12,127
Other 67,163
----------------
TOTAL EXPENSES 7,790,939
----------------
NET INVESTMENT INCOME 2,520,960
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
NET REALIZED GAIN/LOSS ON:
Investments (53,969,214)
Futures contracts 1,449,163
Foreign exchange transactions 316,546
----------------
NET REALIZED LOSS (52,203,505)
----------------
NET CHANGE IN UNREALIZED DEPRECIATION ON:
Investments 126,994,053
Futures contracts 506,944
Translation of forward currency contracts and other assets and liabilities denominated
in foreign currencies 503,800
----------------
NET APPRECIATION 128,004,797
----------------
NET GAIN 75,801,292
----------------
NET INCREASE $ 78,322,252
================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
34
<Page>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 2,520,960 $ 587,395
Net realized loss (52,203,505) (88,740,632)
Net change in unrealized depreciation 128,004,797 23,648,444
---------------- ----------------
NET INCREASE (DECREASE) 78,322,252 (64,504,793)
---------------- ----------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares (569,363) (364,072)
Class C shares (47,598) --
Class D shares (1,783,043) (1,503,216)
---------------- ----------------
TOTAL DIVIDENDS (2,400,004) (1,867,288)
---------------- ----------------
Net decrease from transactions in shares of beneficial interest (57,055,643) (66,791,171)
---------------- ----------------
NET INCREASE (DECREASE) 18,866,605 (133,163,252)
NET ASSETS:
Beginning of period 408,113,273 541,276,525
---------------- ----------------
END OF PERIOD
(Including accumulated undistributed net investment income of
$3,089,884 and $1,896,981, respectively) $ 426,979,878 $ 408,113,273
================ ================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
35
<Page>
MORGAN STANLEY INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 2003
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 seeks to achieve its objective by investing,
under normal circumstances, at least 65% of its total assets in a diversified
portfolio of international common stocks and other equity securities. The Fund
was organized as a Massachusetts business trust on October 23, 1998 and
commenced operations June 28, 1999.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four 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 one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or traded
on the New York or American Stock Exchange or other exchange is valued at its
latest sale price prior to the time when assets are valued; if there were no
sales that day, the security is valued at the mean between the last reported bid
and asked price; (2) an equity portfolio security listed or traded on the Nasdaq
is valued at the Nasdaq Official Closing Price; if there were no sales that day,
the security is valued at the mean between the last reported bid and asked
price; (3) all other equity portfolio securities for which over-the-counter
market quotations are readily available are valued at the mean between the last
reported bid and asked price. In cases where a security is traded on more than
one exchange, the security is valued on the exchange designated as the primary
market; (4) 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; (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 or Morgan Stanley Investment Advisors Inc. (the "Investment
Manager") or Morgan Stanley Investment Management Inc. (the "Sub-Advisor"), an
affiliate of the Investment Manager, determines that the latest sale price, the
bid price or the mean between the last reported bid and asked price do not
reflect a security's market value, portfolio securities are valued at their fair
value as determined in good faith under procedures established by and under the
general supervision of the Fund's Trustees; (7) certain portfolio securities may
be valued by an outside pricing service approved by the Fund's Trustees; and (8)
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
36
<Page>
value on the 61st day. Short-term debt securities having a maturity date of
sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date
except for certain dividends on foreign securities which are recorded as soon as
the Fund is informed after the ex-dividend date. Discounts are accreted and
premiums are amortized over the life of the respective securities. Interest
income is accrued daily.
C. REPURCHASE AGREEMENTS -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
entities managed by the Investment Manager, may transfer uninvested cash
balances into one or more joint repurchase agreement accounts. These balances
are invested in one or more repurchase agreements and are collateralized by
cash, U.S. Treasury or federal agency obligations. The Fund may also invest
directly with institutions in repurchase agreements. The Fund's custodian
receives the collateral, which is marked-to-market daily to determine that the
value of the collateral does not decrease below the repurchase price plus
accrued interest.
D. 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.
E. FUTURES CONTRACTS -- A futures contract is an agreement between two parties
to buy and sell financial instruments or contracts based on financial indices at
a set price on a future date. Upon entering into such a contract, the Fund is
required to pledge to the broker cash, U.S. Government securities or other
liquid portfolio securities equal to the minimum initial margin requirements of
the applicable futures exchange. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments known as
variation margin are recorded by the Fund as unrealized gains and losses. Upon
closing of the contract, the Fund realizes a gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed.
F. FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS -- The
books and records of the Fund are maintained in U.S. dollars as follows: (1) the
foreign currency market value of investment securities, other assets and
liabilities and forward foreign currency contracts ("forward contracts") are
translated at the exchange rates prevailing at the end of the period; and (2)
purchases, sales, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. The resultant exchange
gains and losses are recorded as realized and unrealized gain/loss on foreign
exchange transactions. Pursuant to U.S. Federal income tax regulations, certain
37
<Page>
foreign exchange gains/losses included in realized and unrealized gain/loss are
included in or are a reduction of ordinary income for federal income tax
purposes. The Fund does not isolate that portion of the results of operations
arising as a result of changes in the foreign exchange rates from the changes in
the market prices of the securities. Forward contracts are valued daily at the
appropriate exchange rates. The resultant unrealized exchange gains and losses
are recorded as unrealized foreign currency gain or loss. The Fund records
realized gains or losses on delivery of the currency or at the time the forward
contract is extinguished (compensated) by entering into a closing transaction
prior to delivery.
G. FEDERAL INCOME TAX POLICY -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
I. USE OF ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management 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: 1.0% to the portion of daily net assets not exceeding $1
billion and 0.95% to the portion of daily net assets in excess of $1 billion.
Under a Sub-Advisory Agreement between the Sub-Advisor and the Investment
Manager, the Sub-Advisor provides the Fund with investment advice and portfolio
management relating to the Fund's investments in securities, subject to the
overall supervision of the Investment Manager. As compensation for its services
provided pursuant to the Sub-Advisory Agreement, the Investment Manager paid the
Sub-Advisor compensation of $1,588,558 for the year ended October 31, 2003.
On October 23, 2003, the Board of Trustees of the Fund determined to terminate
the Sub-Advisory Agreement. Therefore, effective on or about December 30, 2003,
the Investment Manager will assume direct responsibility for investment of the
Fund's portfolio.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager and Sub-Advisor. The Fund
has adopted a Plan of Distribution (the "Plan")
38
<Page>
pursuant to Rule 12b-1 under the Act. The Plan provides that the Fund will pay
the Distributor a fee which is accrued daily and paid monthly at the following
annual rates: (i) Class A -- up to 0.25% of the average daily net assets of
Class A; (ii) Class B -- 1.0% of the average daily net assets of Class B; and
(iii) Class C -- up to 1.0% of the average daily net assets of Class C.
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
$22,231,401 at October 31, 2003.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Financial Advisors or other selected
broker-dealer representatives may be reimbursed in the subsequent calendar year.
For the year ended October 31, 2003, the distribution fee was accrued for Class
A shares and Class C shares at the annual rate of 0.21% and 1.0%, respectively.
The Distributor has informed the Fund that for the year ended October 31, 2003,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $33,775, $562,688
and $2,575, respectively and received $24,699 in front-end sales charges from
sales of the Fund's Class A shares. The respective shareholders pay such charges
which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended October 31, 2003 aggregated
$167,508,945 and $219,400,357, respectively.
Morgan Stanley Trust, an affiliate of the Investment Manager, Sub-Advisor and
Distributor, is the Fund's transfer agent. At October 31, 2003, the Fund had
transfer agent fees and expenses payable of approximately $3,000.
39
<Page>
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
CLASS A SHARES
Sold 33,698,871 $ 228,777,057 14,014,187 $ 103,437,631
Reinvestment of dividends 83,954 552,418 44,953 347,486
Redeemed (32,511,231) (223,778,567) (12,323,831) (91,196,477)
----------- ------------- ----------- -------------
Net increase -- Class A 1,271,594 5,550,908 1,735,309 12,588,640
----------- ------------- ----------- -------------
CLASS B SHARES
Sold 2,174,402 14,869,053 7,782,148 59,007,084
Redeemed (9,245,751) (62,480,968) (19,433,255) (145,843,044)
----------- ------------- ----------- -------------
Net decrease -- Class B (7,071,349) (47,611,915) (11,651,107) (86,835,960)
----------- ------------- ----------- -------------
CLASS C SHARES
Sold 1,380,301 9,030,658 3,153,039 23,108,929
Reinvestment of dividends 6,602 43,180 -- --
Redeemed (2,146,478) (14,221,194) (4,307,755) (31,840,343)
----------- ------------- ----------- -------------
Net decrease -- Class C (759,575) (5,147,356) (1,154,716) (8,731,414)
----------- ------------- ----------- -------------
CLASS D SHARES
Sold 11,129,166 73,840,652 13,331,817 100,332,174
Reinvestment of dividends 222,220 1,466,651 162,573 1,259,940
Redeemed (12,802,046) (85,154,583) (11,515,228) (85,404,551)
----------- ------------- ----------- -------------
Net increase (decrease) -- Class D (1,450,660) (9,847,280) 1,979,162 16,187,563
----------- ------------- ----------- -------------
Net decrease in Fund (8,009,990) $ (57,055,643) (9,091,352) $ (66,791,171)
=========== ============= =========== =============
</Table>
6. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward contracts to facilitate settlement of foreign
currency denominated portfolio transactions or to manage foreign currency
exposure associated with foreign currency denominated securities. The Fund may
also purchase and sell interest rate, currency and index futures contracts
("futures contracts") that are traded on U.S. and foreign commodity exchanges on
such underlying securities as U.S. Treasury bonds, notes, bills and GNMA
certificates and/or any foreign government fixed-income security, on various
currencies and on such indexes of U.S. and foreign securities as may exist or
come into existence.
Forward contracts and futures contracts involve elements of market risk in
excess of the amounts reflected in the Statement of Assets and Liabilities. The
Fund bears the risk of an unfavorable change in the foreign exchange rates
underlying the forward contracts or an unfavorable change in the value of the
underlying securities. Risks may also arise upon entering into these contracts
from the potential inability of the counterparties to meet the terms of their
contracts.
40
<Page>
At October 31, 2003, there were outstanding forward contracts and outstanding
index futures contracts.
At October 31, 2003, investments in securities of issuers in Japan represented
28.3% 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 this
region.
At October 31, 2003, the Fund's cash balance consisted principally of interest
bearing deposits with J.P. Morgan Chase, the Fund's custodian.
7. FEDERAL INCOME TAX STATUS
The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for tax purposes are reported as distributions of paid-in-capital.
The tax character of distributions paid was as follows:
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002
---------------- ----------------
Ordinary income $ 2,400,004 $ 1,867,288
</Table>
As of October 31, 2003, the tax-basis components of accumulated losses were as
follows:
<Table>
Undistributed ordinary income $ 3,844,581
Undistributed long-term gains --
----------------
Net accumulated earnings 3,844,581
Foreign tax credit pass-through 814,407
Capital loss carryforward* (183,733,776)
Temporary differences (864,656)
Net unrealized depreciation (10,953,247)
----------------
Total accumulated losses $ (190,892,691)
================
</Table>
*As of October 31, 2003, the Fund had a net capital loss carryforward of
$183,733,776 of which $35,159,161 will expire on October 31, 2009, $93,856,873
will expire on October 31, 2010 and $54,717,742 will expire on October 31, 2011
to offset future capital gains to the extent provided by regulations.
41
<Page>
As of October 31, 2003, the Fund had temporary book/tax differences primarily
attributable to the mark-to-market of passive foreign investment companies
("PFICs"), foreign tax credit pass-through and capital loss deferrals on wash
sales and permanent book/tax differences attributable to foreign currency gains
and tax adjustments on PFICs sold by the Fund. To reflect reclassifications
arising from the permanent differences, accumulated net realized loss was
charged and accumulated undistributed net investment income was credited
$1,071,947.
42
<Page>
MORGAN STANLEY INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<Table>
<Caption>
FOR THE PERIOD
FOR THE YEAR ENDED OCTOBER 31, JUNE 28, 1999*
------------------------------------------------------------ THROUGH
2003 2002 2001 2000 OCTOBER 31, 1999
------------ ------------ ------------ ------------ ----------------
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 6.70 $ 7.77 $ 10.29 $ 10.57 $ 10.00
------------ ------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income++ 0.08 0.04 0.06 0.11 0.01
Net realized and unrealized gain (loss) 1.33 (1.03) (2.07) (0.39) 0.56
------------ ------------ ------------ ------------ ------------
Total income (loss) from investment
operations 1.41 (0.99) (2.01) (0.28) 0.57
------------ ------------ ------------ ------------ ------------
Less dividends and distributions from:
Net investment income (0.08) (0.08) - - -
Net realized gain - - (0.51) - -
------------ ------------ ------------ ------------ ------------
Total dividends and distributions (0.08) (0.08) (0.51) - -
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 8.03 $ 6.70 $ 7.77 $ 10.29 $ 10.57
============ ============ ============ ============ ============
TOTAL RETURN+ 21.31% (12.93)% (20.36)% (2.65)% 5.70%(1)
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 1.58% 1.56% 1.46%(4) 1.47% 1.81%(2)
Net investment income 1.02% 0.54% 0.73% 0.95% 0.31%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 63,422 $ 44,373 $ 37,974 $ 46,535 $ 38,506
Portfolio turnover rate 43% 39% 37% 84% 14%(1)
</Table>
- ----------
* COMMENCEMENT OF OPERATIONS.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
43
<Page>
<Table>
<Caption>
FOR THE PERIOD
FOR THE YEAR ENDED OCTOBER 31, JUNE 28, 1999*
-------------------------------------------------------------- THROUGH
2003 2002 2001 2000 OCTOBER 31, 1999
------------ ------------ ------------ ------------ ----------------
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 6.58 $ 7.62 $ 10.19 $ 10.55 $ 10.00
------------ ------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income (loss)++ 0.01 (0.02) 0.00 0.02 (0.02)
Net realized and unrealized gain (loss) 1.34 (1.02) (2.06) (0.38) 0.57
------------ ------------ ------------ ------------ ------------
Total income (loss) from investment
operations 1.35 (1.04) (2.06) (0.36) 0.55
------------ ------------ ------------ ------------ ------------
Less distributions from net
realized gain - - (0.51) - -
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 7.93 $ 6.58 $ 7.62 $ 10.19 $ 10.55
============ ============ ============ ============ ============
TOTAL RETURN+ 20.52% (13.65)% (21.08)% (3.41)% 5.50%(1)
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 2.37% 2.32% 2.24%(4) 2.22% 2.56%(2)
Net investment income (loss) 0.23% (0.22)% (0.06)% 0.20% (0.44)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period,
in thousands $ 205,544 $ 217,216 $ 340,158 $ 561,375 $ 465,258
Portfolio turnover rate 43% 39% 37% 84% 14%(1)
</Table>
- ----------
* COMMENCEMENT OF OPERATIONS.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
44
<Page>
<Table>
<Caption>
FOR THE PERIOD
FOR THE YEAR ENDED OCTOBER 31, JUNE 28, 1999*
-------------------------------------------------------------- THROUGH
2003 2002 2001 2000 OCTOBER 31, 1999
------------ ------------ ------------ ------------ ----------------
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 6.59 $ 7.62 $ 10.19 $ 10.55 $ 10.00
------------ ------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income (loss)++ 0.01 (0.01) (0.01) 0.02 (0.02)
Net realized and unrealized gain (loss) 1.33 (1.02) (2.05) (0.38) 0.57
------------ ------------ ------------ ------------ ------------
Total income (loss) from investment
operations 1.34 (1.03) (2.06) (0.36) 0.55
------------ ------------ ------------ ------------ ------------
Less dividends and distributions from:
Net investment income (0.01) - - - -
Net realized gain - - (0.51) - -
------------ ------------ ------------ ------------ ------------
Total dividends and distributions (0.01) - (0.51) - -
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 7.92 $ 6.59 $ 7.62 $ 10.19 $ 10.55
============ ============ ============ ============ ============
TOTAL RETURN+ 20.40% (13.52)% (21.08)% (3.41)% 5.50%(1)
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 2.37% 2.18% 2.24%(4) 2.22% 2.56%(2)
Net investment income (loss) 0.23% (0.08)% (0.06)% 0.20% (0.44)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period,
in thousands $ 25,471 $ 26,195 $ 39,079 $ 69,640 $ 69,811
Portfolio turnover rate 43% 39% 37% 84% 14%(1)
</Table>
- ----------
* COMMENCEMENT OF OPERATIONS.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
45
<Page>
<Table>
<Caption>
FOR THE PERIOD
FOR THE YEAR ENDED OCTOBER 31, JUNE 28, 1999*
-------------------------------------------------------------- THROUGH
2003 2002 2001 2000 OCTOBER 31, 1999
------------ ------------ ------------ ------------ ----------------
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 6.73 $ 7.80 $ 10.32 $ 10.58 $ 10.00
------------ ------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income++ 0.08 0.06 0.08 0.15 0.01
Net realized and unrealized gain (loss) 1.36 (1.04) (2.09) (0.41) 0.57
------------ ------------ ------------ ------------ ------------
Total income (loss) from investment
operations 1.44 (0.98) (2.01) (0.26) 0.58
------------ ------------ ------------ ------------ ------------
Less dividends and distributions from:
Net investment income (0.10) (0.09) - - -
Net realized gain - - (0.51) - -
------------ ------------ ------------ ------------ ------------
Total dividends and distributions (0.10) (0.09) (0.51) - -
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 8.07 $ 6.73 $ 7.80 $ 10.32 $ 10.58
============ ============ ============ ============ ============
TOTAL RETURN+ 21.68% (12.70)% (20.30)% (2.46)% 5.80%(1)
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 1.37% 1.32% 1.24%(4) 1.22% 1.56%(2)
Net investment income 1.23% 0.78% 0.94% 1.20% 0.56%(2)
SUPPLEMENTAL DATA:
Net assets, end of period,
in thousands $ 132,544 $ 120,329 $ 124,065 $ 98,465 $ 1,336
Portfolio turnover rate 43% 39% 37% 84% 14%(1)
</Table>
- ----------
* COMMENCEMENT OF OPERATIONS.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE
PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
46
<Page>
MORGAN STANLEY INTERNATIONAL FUND
INDEPENDENT AUDITORS' REPORT
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, 2003, and the related statements of operations for the year
then ended and changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2003, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Morgan
Stanley International Fund as of October 31, 2003, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America.
Deloitte & Touche LLP
NEW YORK, NEW YORK
DECEMBER 19, 2003
47
<Page>
MORGAN STANLEY INTERNATIONAL FUND
TRUSTEE AND OFFICER INFORMATION
INDEPENDENT TRUSTEES:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- ------------------------------------ ------------ ------------ --------------------------- -------------- ---------------------
Michael Bozic (62) Trustee Since Retired; Director or Trustee 211 Director of Weirton
c/o Mayer, Brown, Rowe & Maw LLP April 1994 of the Retail Funds and Steel Corporation.
Counsel to the Independent TCW/DW Term Trust 2003
Directors (since April 1994) and the
1675 Broadway Institutional Funds (since
New York, NY July 2003); formerly 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); formerly
variously Chairman, Chief
Executive Officer, President
and Chief Operating Officer
(1987-1991) of the Sears
Merchandise Group of Sears,
Roebuck& Co.
Edwin J. Garn (71) Trustee Since Director or Trustee of the 211 Director of Franklin
c/o Summit Ventures LLC January Retail Funds and TCW/DW Covey (time
1 Utah Center 1993 Term Trust 2003 (since management systems),
201 S. Main Street January 1993) and the BMW Bank of North
Salt Lake City, UT Institutional Funds (since America, Inc.
July 2003); member of the (industrial loan
Utah Regional Advisory corporation), United
Board of Pacific Corp.; Space Alliance
formerly United States (joint venture
Senator (R-Utah) between Lockheed
(1974-1992) and Chairman, Martin and the
Senate Banking Committee Boeing Company) and
(1980-1986), Mayor of Salt Nuskin Asia Pacific
Lake City, Utah (multilevel
(1971-1974), Astronaut, marketing); member
Space Shuttle Discovery of the board of
(April 12-19, 1985), and various civic and
Vice Chairman, Huntsman charitable
Corporation (chemical organizations.
company).
Wayne E. Hedien (69) Trustee Since Retired; Director or Trustee 211 Director of The PMI
c/o Mayer, Brown, Rowe & Maw LLP September of the Retail Funds and Group Inc. (private
Counsel to the Independent 1997 TCW/DW Term Trust 2003; mortgage insurance);
Directors (Since September 1997) and Trustee and Vice
1675 Broadway the Institutional Funds Chairman of The
New York, NY (since July 2003); formerly Field Museum of
associated with the Allstate Natural History;
Companies (1966-1994), most director of various
recently as Chairman of The other business and
Allstate Corporation charitable
(March 1993-December 1994) organizations.
and Chairman and Chief
Executive Officer of its
wholly-owned subsidiary,
Allstate Insurance Company
(July 1989-December 1994).
</Table>
48
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- ------------------------------------ ------------ ------------ --------------------------- -------------- ---------------------
Dr. Manuel H. Johnson (54) Trustee Since Chairman of the Audit 211 Director of NVR,
c/o Johnson Smick International, July 1991 Committee and Director or Inc. (home
Inc. Trustee of the Retail Funds construction);
2099 Pennsylvania Avenue, N.W. and TCW/DW Term Trust 2003 Chairman and Trustee
Suite 950 (since July 1991) and the of the Financial
Washington, D.C. Institutional Funds (since Accounting
July 2003); Senior Partner, Foundation
Johnson Smick International, (oversight
Inc., a consulting firm; organization of the
Co-Chairman and a founder of Financial Accounting
the Group of Seven Council Standards Board);
(G7C), an international Director of RBS
economic commission; Greenwich Capital
formerly Vice Chairman of Holdings (financial
the Board of Governors of holding company).
the Federal Reserve System
and Assistant Secretary of
the U.S. Treasury.
Joseph J. Kearns (61) Trustee Since Deputy Chairman of the Audit 212 Director of Electro
PMB754 July 2003 Committee and Director or Rent Corporation
23852 Pacific Coast Highway Trustee of the Retail Funds (equipment leasing),
Malibu, CA and TCW/DW Term Trust 2003 The Ford Family
(since July 2003) and the Foundation, and the
Institutional Funds (since UCLA Foundation.
August 1994); previously
Chairman of the Audit
Committee of the
Institutional Funds
(October 2001-July 2003);
President, Kearns &
Associates LLC (investment
consulting); formerly CFO of
the J. Paul Getty Trust.
Michael E. Nugent (67) Trustee Since Chairman of the Insurance 211 Director of various
c/o Triumph Capital, L.P. July 1991 Committee and Director or business
445 Park Avenue Trustee of the Retail Funds organizations.
New York, NY and TCW/DW Term Trust 2003
(since July 1991) and the
Institutional Funds (since
July 2001); General Partner
of Triumph Capital, L.P., a
private investment
partnership; formerly Vice
President, Bankers Trust
Company and BT Capital
Corporation (1984-1988).
Fergus Reid (71) Trustee Since Chairman of the Governance 212 Trustee and Director
85 Charles Colman Blvd. July 2003 Committee and Director or of certain
Pawling, NY Trustee of the Retail Funds investment companies
and TCW/DW Term Trust 2003 in the JPMorgan
(since July 2003) and the Funds complex
Institutional Funds (since managed by JP Morgan
June 1992); Chairman of Investment
Lumelite Plastics Management Inc.
Corporation.
</Table>
49
<Page>
INTERESTED TRUSTEES:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- ------------------------------------ ------------ ------------ --------------------------- -------------- ---------------------
Charles A. Fiumefreddo (70) Chairman of Since Chairman and Director or 211 None
c/o Morgan Stanley Trust the Board July 1991 Trustee of the Retail Funds
Harborside Financial Center, and Trustee and TCW/DW Term Trust 2003
Plaza Two, (since July 1991) and the
Jersey City, NJ Institutional Funds (since
July 2003); formerly Chief
Executive Officer of the
Retail Funds and the TCW/DW
Term Trust 2003 (until
September 2002).
James F. Higgins (55) Trustee Since Director or Trustee of the 211 Director of AXA
c/o Morgan Stanley Trust June 2000 Retail Funds and TCW/DW Term Financial, Inc. and
Harborside Financial Center, Trust 2003 (since June 2000) The Equitable Life
Plaza Two, and the Institutional Funds Assurance Society of
Jersey City, NJ (since July 2003); Senior the United States
Advisor of Morgan Stanley (financial
(since August 2000); Director services).
of the Distributor and Dean
Witter Realty Inc.;
previously President and
Chief Operating Officer of
the Private Client Group of
Morgan Stanley
(May 1999-August 2000), and
President and Chief
Operating Officer of
Individual Securities of
Morgan Stanley (February
1997-May 1999).
Philip J. Purcell (60) Trustee Since Director or Trustee of the 211 Director of American
1585 Broadway April 1994 Retail Funds and TCW/DW Term Airlines, Inc. and
New York, NY Trust 2003 (since April 1994) its parent company,
and the Institutional Funds AMR Corporation.
(since July 2003); Chairman
of the Board of Directors
and Chief Executive Officer
of Morgan Stanley and Morgan
Stanley DW Inc.; Director of
the Distributor; Chairman of
the Board of Directors and
Chief Executive Officer of
Novus Credit Services Inc.;
Director and/or officer of
various Morgan Stanley
subsidiaries.
</Table>
- ----------
* THIS IS THE EARLIEST DATE THE TRUSTEE BEGAN SERVING THE FUNDS ADVISED BY
MORGAN STANLEY INVESTMENT ADVISORS INC. (THE "INVESTMENT MANAGER")
(THE "RETAIL FUNDS").
** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICES AS
DIRECTOR/TRUSTEE FOR THE RETAIL FUNDS AND THE FUNDS ADVISED BY MORGAN
STANLEY INVESTMENT MANAGEMENT INC., MORGAN STANLEY INVESTMENTS LP AND
MORGAN STANLEY AIP GP LP (THE "INSTITUTIONAL FUNDS") REFLECT THE EARLIEST
DATE THE DIRECTOR/TRUSTEE BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS
AS APPLICABLE.
*** THE FUND COMPLEX INCLUDES ALL OPEN-END AND CLOSED-END FUNDS (INCLUDING ALL
OF THEIR PORTFOLIOS) ADVISED BY THE INVESTMENT MANAGER AND ANY FUNDS THAT
HAVE AN INVESTMENT ADVISOR THAT IS AN AFFILIATED PERSON OF THE INVESTMENT
MANAGER (INCLUDING BUT NOT LIMITED TO MORGAN STANLEY INVESTMENT MANAGEMENT
INC. AND MORGAN STANLEY INVESTMENTS LP).
50
<Page>
OFFICERS
<Table>
<Caption>
TERM OF
POSITION(S) OFFICE AND
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF
EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS**
- ------------------------------------ ------------ ---------------- ------------------------------------------------------------
Mitchell M. Merin (50) President Since May 1999 President and Chief Operating Officer of Morgan Stanley
1221 Avenue of the Americas Investment Management Inc.; President, Director and Chief
New York, NY Executive Officer of the Investment Manager and Morgan
Stanley Services; Chairman, Chief Executive Officer and
Director of the Distributor; Chairman and Director of the
Transfer Agent; Director of various Morgan Stanley
subsidiaries; President Morgan Stanley Investments LP
(since February 2003); President of the Institutional Funds
(since July 2003) and President of the Retail Funds and
TCW/DW Term Trust 2003 (since May 1999); Trustee (since
July 2003) and President (since December 2002) of the Van
Kampen Closed-End Funds; Trustee (since May 1999) and
President (since October 2002) of the Van Kampen Open-End
Funds.
Ronald E. Robison (64) Executive Since Chief Global Operations Officer and Managing Director of
1221 Avenue of the Americas Vice April 2003 Morgan Stanley Investment Management Inc.; Managing
New York, NY President Director of Morgan Stanley & Co. Incorporated; Managing
and Director of Morgan Stanley; Managing Director, Chief
Principal Administrative Officer and Director of the Investment
Executive Manager and Morgan Stanley Services; Chief Executive
Officer Officer and Director of the Transfer Agent; Executive Vice
President and Principal Executive Officer of the
Institutional Funds (since July 2003); and the TCW/DW Term
Trust 2003 (since April 2003); previously President of the
Institutional Funds (March 2001-July 2003) and Director of
the Institutional Funds (March 2001-July 2003).
Barry Fink (48) Vice Since General Counsel (since May 2000) and Managing Director
1221 Avenue of the Americas President February 1997 (since December 2000) of Morgan Stanley Investment
New York, NY and Management; Managing Director (since December 2000),
General Secretary (since February 1997) and Director (since
Counsel July 1998) of the Investment Manager and Morgan Stanley
Services; Assistant Secretary of Morgan Stanley DW; Chief
Legal Officer of Morgan Stanley Investments LP (since
July 2002); Vice President of the Institutional Funds
(since July 2003); Vice President and Secretary of the
Distributor; previously Secretary of the Retail Funds
(February 1997-July 2003); previously Vice President and
Assistant General Counsel of the Investment Manager and
Morgan Stanley Services (February 1997-December 2001).
Joseph J. McAlinden (60) Vice Since July 1995 Managing Director and Chief Investment Officer of the
1221 Avenue of the Americas President Investment Manager, Morgan Stanley Investment Management
New York, NY Inc. and Morgan Stanley Investments LP; Director of the
Transfer Agent, Chief Investment Officer of the Van Kampen
Funds; Vice President of the Institutional Funds (since
July 2003) and the Retail Funds (since July 1995).
Stefanie V. Chang (36) Vice Since July 2003 Executive Director of Morgan Stanley & Co. and Morgan
1221 Avenue of the Americas President Stanley Investment Management Inc. and Vice President of
New York, NY the Institutional Funds (since December 1997) and the
Retail Funds (since July 2003); formerly practiced law with
the New York law firm of Rogers & Wells (now Clifford
Chance LLP).
</Table>
51
<Page>
<Table>
<Caption>
TERM OF
POSITION(S) OFFICE AND
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF
EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS**
- ------------------------------------ ------------ ---------------- ------------------------------------------------------------
Francis J. Smith (38) Treasurer Treasurer since Executive Director of the Investment Manager and Morgan
c/o Morgan Stanley Trust and July 2003 and Stanley Services (since December 2001); previously Vice
Harborside Financial Center, Chief Chief Financial President of the Retail Funds (September 2002-July 2003);
Plaza Two, Financial Officer since previously Vice President of the Investment Manager and
Jersey City, NJ Officer September 2002 Morgan Stanley Services (August 2000-November 2001) and
Senior Manager at PricewaterhouseCoopers LLP
(January 1998-August 2000).
Thomas F. Caloia (57) Vice Since July 2003 Executive Director (since December 2002) and Assistant
c/o Morgan Stanley Trust President Treasurer of the Investment Manager, the Distributor and
Harborside Financial Center, Morgan Stanley Services; previously Treasurer of the
Plaza Two, Retail Funds (April 1989-July 2003); formerly First Vice
Jersey City, NJ President of the Investment Manager, the Distributor and
Morgan Stanley Services.
Mary E. Mullin (36) Secretary Since July 2003 Vice President of Morgan Stanley & Co. Incorporated and
1221 Avenue of the Americas Morgan Stanley Investment Management Inc.; Secretary of
New York, NY the Institutional Funds (since June 1999) and the Retail
Funds (since July 2003); formerly practiced law with the
New York law firms of McDermott, Will & Emery and Skadden,
Arps, Slate, Meagher & Flom LLP.
</Table>
- ----------
* THIS IS THE EARLIEST DATE THE OFFICER BEGAN SERVING THE RETAIL FUNDS. EACH
OFFICER SERVES AN INDEFINITE TERM, UNTIL HIS OR HER SUCCESSOR IS ELECTED.
** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICE AS AN OFFICER
FOR THE RETAIL AND INSTITUTIONAL FUNDS REFLECT THE EARLIEST DATE THE OFFICER
BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS AS APPLICABLE.
52
<Page>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael E. Nugent
Philip J. Purcell
Fergus Reid
OFFICERS
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
Mitchell M. Merin
PRESIDENT
Ronald E. Robison
EXECUTIVE VICE PRESIDENT and PRINCIPAL EXECUTIVE OFFICER
Barry Fink
VICE PRESIDENT and GENERAL COUNSEL
Joseph J. McAlinden
VICE PRESIDENT
Stefanie V. Chang
VICE PRESIDENT
Francis J. Smith
TREASURER and CHIEF FINANCIAL OFFICER
Thomas F. Caloia
VICE PRESIDENT
Mary E. Mullin
SECRETARY
TRANSFER AGENT
Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020
SUB ADVISOR
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
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.
Investments and services offered through Morgan Stanley DW Inc., member SIPC.
Morgan Stanley Distributors Inc., member NASD.
(C) 2003 Morgan Stanley
[MORGAN STANLEY LOGO]
36075RPT-00-13015K03-OP-11/03
[MORGAN STANLEY FUNDS LOGO]
MORGAN STANLEY INTERNATIONAL FUND
ANNUAL REPORT
OCTOBER 31, 2003
[MORGAN STANLEY LOGO]
<Page>
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 A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Trustees has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: Dr. Manuel H. Johnson and Joseph J. Kearns. 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
Applicable only for reports covering fiscal years ending on or after December
15, 2003.
<Page>
Item 5. Audit Committee of Listed Registrants.
Applicable only for reports covering periods ending on or after the earlier of
(i) the first annual shareholder meeting after January 15, 2004 or (ii) October
31, 2004.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Applicable only to annual reports filed by closed-end funds.
Item 8. [Reserved.]
Item 9 - 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.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
<Page>
Item 10 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/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
December 18, 2003
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/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
December 18, 2003
/s/ Francis Smith
Francis Smith
Principal Financial Officer
December 18, 2003