<Page>
[ANNOTATED FORM N-CSR FOR ANNUAL REPORTS]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file
number: 811-08388
-------------------------------------------------
Morgan Stanley Asia-Pacific Fund, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1221 Avenue of the America's 22nd Floor New York, NY 10020
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Ronald E. Robison
1221 Avenue of the Americas, 33rd Floor New York, New York 10020
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area
code: 1-800-221-6726
-----------------------------------
Date of fiscal year
end: 12/31
--------------------------------------------------------------
Date of reporting
period: 12/31
--------------------------------------------------------------
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS.
The Fund's as annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows: [Provide annual report.]
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
DIRECTORS
Charles A. Fiumefreddo
Michael Bozic
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael 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
Joseph J. McAlinden
VICE PRESIDENT
Barry Fink
VICE PRESIDENT
Stefanie V. Chang
VICE PRESIDENT
James W. Garrett
TREASURER AND CHIEF
FINANCIAL OFFICER
Michael J. Leary
ASSISTANT TREASURER
Mary E. Mullin
SECRETARY
INVESTMENT ADVISER
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
ADMINISTRATOR
JPMorgan Investor Services Company
73 Tremont Street
Boston, Massachusetts 02108
CUSTODIAN
JPMorgan Chase Bank
270 Park Avenue
New York, New York 10017
STOCKHOLDER SERVICING AGENT
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10030
1-(800) 278-4353
LEGAL COUNSEL
Clifford Chance US LLP
200 Park Avenue
New York, New York 10166
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
For additional Fund information, including the Fund's net asset value per share
and information regarding the investments comprising the Fund's portfolio,
please call 1-800-221-6726 or visit our website at www.morganstanley.com/im.
(C) 2004 Morgan Stanley
ANNUAL REPORT
DECEMBER 31, 2003
[MORGAN STANLEY LOGO]
MORGAN STANLEY
ASIA-PACIFIC FUND, INC.
MORGAN STANLEY
INVESTMENT MANAGEMENT INC.
INVESTMENT ADVISER
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
LETTER TO STOCKHOLDERS Overview
PERFORMANCE
For the year ended December 31, 2003, the Morgan Stanley Asia-Pacific Fund, Inc.
(the "Fund") had a total return, based on net asset value per share of 44.48%,
compared with 41.92% for its benchmark. The benchmark for the Fund is comprised
of two Morgan Stanley Capital International (MSCI) indices; Japan Net and
All-Country Asia-Pacific Free ex-Japan Net ("the Index"), with each index
weighted equally. On December 31, 2003, the closing price of the Fund shares on
the New York Stock Exchange was $10.85, representing a 11.7% discount to the
Fund's net asset value per share.
FACTORS AFFECTING PERFORMANCE
- Overall, stock selection was the main driver of the Fund's outperformance
with country allocations providing a slight detraction to relative
performance.
- Strong stock selection in Hong Kong from select real estate, export and
technology stocks were a significant contributor.
- Both stock selection in Japan (select blue chip securities in the capital
goods, technology and hardware equipment industries) and our country
underweight (Japan underperformed the overall Index) contributed to the
Fund's outperformance.
- South Korean automobile-related stocks and technology stocks also
contributed to relative positive performance.
- The main detractor came from China, where our relative country underweight
bias (where China outperformed most of its regional peers) and underweight
positions in some Chinese petrochemical companies detracted from
performance.
- For the year 2003, all countries in the Index posted double-digit returns,
with Thailand leading the group with +143.5% returns for the year. China
(+87.6%), India (+78.3%), Indonesia (+76.5%), New Zealand (+55.4%),
Australia (+49.5%), Taiwan (+41.9%), Philippines (+41.5%), Pakistan
(+40.6%), Hong Kong (+38.1%), Singapore (+37.6%), Japan (+35.9%), South
Korea (+35.0%) and Malaysia (+26.6%) all also performed well. The Index
(+41.9%) outperformed the MSCI Europe, Australasia and Far East (EAFE)
Index (+38.6%) and MSCI World (+33.1%) Indices.
- Thailand posted the best returns in the region boosted by steady
leadership, lower foreign debt, high foreign reserves and a local
government focused on fueling economic growth. These factors also
contributed to Moody's upgrade of Thailand's sovereign rating. China
(+87.6%) was flooded with liquidity and euphoric sentiment lifted by
robust economic data and strong gross domestic product (GDP) growth
results during this period. In India (+78.3%) performance was driven by a
good monsoon season, consistent and large inflows of foreign investment
and smooth elections.
MANAGEMENT STRATEGIES
- In terms of portfolio positioning, in the first half of the year, the Fund
maintained its position in Japan with its increased exposure to select
blue chip securities in the capital goods, technology and hardware
equipment industries. The Fund had assumed a defensive stance in Japanese
technology by modestly reducing its portfolio weight due to geo-political
concerns and the uncertainty of global economic recovery.
- In the rest of Asia, the Fund shifted its stake in Hong Kong from a
neutral weight to an overweight position. Hong Kong was hampered from the
side effects of several factors including a sluggish economy, depressed
property sector, declining exports and the severe acute respiratory
syndrome (SARS) outbreak. In light of this, we believed Hong Kong
presented several attractive buying opportunities. We took advantage of
low book values, deep discounts, strong fundamentals and high dividend
yields to increase our positions in select attractive cyclical growth
stocks, in particular in Hong Kong's real estate sector.
- Despite the Australian dollar's appreciation against the U.S. dollar, the
Fund further increased its underweight country position based on the
rationale that the Australian market was fairly valued and better
opportunities were present elsewhere.
- In the second half of the year, from a top down perspective, we focused on
the technology sector where new product cycles ar e emerging, especially
in the flat TV industry, digital cameras and DVD-recorders.
- We rotated into select growth opportunities and lowered our stake in other
securities whose valuations have peaked in South Korea's information
technology sector. Through the quarter, we increased our position in
select South Korean shipbuilding stocks as we saw growth opportunities and
improving margins in the industry, where the limited supply of shipping
capacity has been unable to meet increasing demand.
- We also increased our stake in select Hong Kong real estate
operators/managers where we saw growth opportunities.
- In Taiwan, the portfolio rotated into select technology stocks
manufacturing digital camera components as we focus on high conviction
opportunities.
Sincerely,
/s/ Ronald E. Robison
Ronald E. Robison
Executive Vice President and Principal Executive Officer
January 2004
2
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS STATEMENT OF NET ASSETS
December 31, 2003
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------------------
COMMON STOCKS(97.8%)
(UNLESS OTHERWISE NOTED)
- --------------------------------------------------------------------------------------------
AUSTRALIA (9.6%)
AIRLINES
Qantas Airways Ltd. 790,650 $ 1,956
- --------------------------------------------------------------------------------------------
BEVERAGES
Coca-Cola Amatil Ltd. 223,450 1,047
- --------------------------------------------------------------------------------------------
COMMERCIAL BANKS
Australia & New Zealand
Banking Group Ltd. 471,959 6,275
Commonwealth Bank of Australia 162,350 3,595
- --------------------------------------------------------------------------------------------
9,870
- --------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
Downer EDI Ltd. 634,000 1,845
- --------------------------------------------------------------------------------------------
CONTAINERS & PACKAGING
Amcor Ltd. 262,150 1,628
- --------------------------------------------------------------------------------------------
INSURANCE
AMP Ltd. 514,100 1,937
HHG plc CDI 442,300(a) 319
Promina Group Ltd. 736,400 1,816
QBE Insurance Group Ltd. 239,050 1,905
- --------------------------------------------------------------------------------------------
5,977
- --------------------------------------------------------------------------------------------
MEDIA
News Corp., Ltd. 508,900 4,588
============================================================================================
METALS & MINING
BHP Billiton Ltd. 764,277 7,006
Rio Tinto Ltd. 201,200 5,628
- --------------------------------------------------------------------------------------------
12,634
- --------------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
Billabong International Ltd. 268,900 1,442
- --------------------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE
MacQuarie Infrastructure Group 485,800 1,242
- --------------------------------------------------------------------------------------------
42,229
============================================================================================
CHINA(2.0%)
COMMERCIAL BANKS
CITIC International Financial 1,189,000 643
Holdings Ltd.
Industrial & Commercial Bank of 1,000 2
China (Asia) Ltd.
- --------------------------------------------------------------------------------------------
645
- --------------------------------------------------------------------------------------------
ELECTRIC UTILITIES
China Resources Power Holdings Co. 363,000(a) $ 170
Hongkong Electric Holdings Ltd. 106,000 419
Huaneng Power International, Inc., 'H' 780,000 1,351
- --------------------------------------------------------------------------------------------
1,940
- --------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Kingboard Chemicals Holdings 324,000 499
- --------------------------------------------------------------------------------------------
GAS UTILITIES
Hong Kong & China Gas Co. 299,000 456
- --------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Grande Holdings Ltd. 531,000 680
- --------------------------------------------------------------------------------------------
INSURANCE
China Life Insurance Co., Ltd., 'H' 1,532,000(a) 1,253
PICC Property & Casualty Co., Ltd. 868,000(a) 389
- --------------------------------------------------------------------------------------------
1,642
- --------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS
Moulin International Holdings Ltd. 726,000 482
- --------------------------------------------------------------------------------------------
MULTILINE RETAIL
Lianhua Supermarket Holdings Ltd., 'H' 81,000(a) 86
Wumart Stores, Inc., 'H' 82,000(a) 80
- --------------------------------------------------------------------------------------------
166
- --------------------------------------------------------------------------------------------
OIL & GAS
PetroChina Co., Ltd., 'H' 932,000 534
Sinopec, 'H' 1,182,000 529
- --------------------------------------------------------------------------------------------
1,063
- --------------------------------------------------------------------------------------------
REAL ESTATE
Great Eagle Holdings, Ltd. 877,000 1,050
- --------------------------------------------------------------------------------------------
8,623
============================================================================================
HONG KONG (8.2%)
AIRLINES
Cathay Pacific Airways Ltd. 1,236,000 2,348
- --------------------------------------------------------------------------------------------
COMMERCIAL BANKS
Bank of East Asia 830,000 2,550
- --------------------------------------------------------------------------------------------
DISTRIBUTORS
Li & Fung Ltd. 882,000 1,511
- --------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
Swire Pacific Ltd. 'A' 429,000 2,647
- --------------------------------------------------------------------------------------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) STATEMENT OF NET ASSETS
December 31, 2003
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------------------
HONG KONG (CONT'D)
ELECTRICAL EQUIPMENT
Johnson Electric Holdings Ltd. 467,000 $ 596
- --------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Techtronic Industries Co. 550,000 1,527
- --------------------------------------------------------------------------------------------
MEDIA
Television Broadcasts Ltd. 87,000 439
tom.com Ltd. 2,007,000(a) 621
- --------------------------------------------------------------------------------------------
1,060
- --------------------------------------------------------------------------------------------
METALS & MINING
Asia Aluminum Holdings Ltd. 5,456,000 1,082
- --------------------------------------------------------------------------------------------
OIL & GAS
CNOOC Ltd. 1,061,000 2,077
- --------------------------------------------------------------------------------------------
REAL ESTATE
Cheung Kong Holdings Ltd. 610,000 4,852
Henderson Land Development Co., Ltd. 1,466,000 6,477
HongKong Land Holdings Ltd. 790,000 1,343
Hysan Development Co., Ltd. 1,903,000 2,941
- --------------------------------------------------------------------------------------------
15,613
- --------------------------------------------------------------------------------------------
SPECIALTY RETAIL
Esprit Holdings Ltd. 1,488,500 4,956
- --------------------------------------------------------------------------------------------
35,967
============================================================================================
INDIA(3.6%)
AUTO COMPONENTS
Amtek Auto Ltd. 94,000 893
- --------------------------------------------------------------------------------------------
AUTOMOBILES
Hero Honda Motors Ltd. 156,075 1,535
- --------------------------------------------------------------------------------------------
COMMERCIAL BANKS
Canara Bank 732,000 2,188
State Bank of India Ltd. 145,235(b) 1,943
Union Bank of India Ltd. 1,392,000 1,564
- --------------------------------------------------------------------------------------------
5,695
- --------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Welspun-Gujarat Stahl Ltd. 895,000(a) 979
- --------------------------------------------------------------------------------------------
DIVERSIFIED OPERATIONS
Voltas Ltd. 139,000 434
- --------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Bharat Heavy Electricals Ltd. 171,937 1,914
- --------------------------------------------------------------------------------------------
MARINE
Alok Industries Ltd. 1,390,000 1,785
- --------------------------------------------------------------------------------------------
METALS & MINING
Jindal Steel & Power Ltd. 21,381 290
Tata Iron & Steel Co., Ltd. 1,910 $ 19
- --------------------------------------------------------------------------------------------
309
- --------------------------------------------------------------------------------------------
PHARMACEUTICALS
Ranbaxy Laboratories Ltd. 41,000 987
- --------------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
Arvind Mills Ltd. 441,000(a) 638
Raymond Ltd. 150,700 760
- --------------------------------------------------------------------------------------------
1,398
- --------------------------------------------------------------------------------------------
15,929
============================================================================================
INDONESIA(2.1%)
AUTOMOBILES
Astra International Tbk PT 4,194,000 2,490
- --------------------------------------------------------------------------------------------
COMMERCIAL BANKS
Bank Central Asia Tbk PT 1,980,000 781
Bank Mandiri Persero Tbk PT 7,358,500(a) 874
Bank Rakyat Indonesia 5,835,500(a) 866
- --------------------------------------------------------------------------------------------
2,521
- --------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Indocement Tunggal Prakarsa Tbk PT 3,578,000(a) 903
- --------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Telekomunikasi Indonesia Tbk PT 2,591,000 2,076
- --------------------------------------------------------------------------------------------
METALS & MINING
Bumi Resources Tbk PT 10,930,500 649
- --------------------------------------------------------------------------------------------
MULTILINE RETAIL
Ramayana Lestari Sentosa Tbk PT 1,607,000 830
- --------------------------------------------------------------------------------------------
9,469
============================================================================================
JAPAN(47.8%)
AUTOMOBILES
Nissan Motor Co., Ltd. 620,000 7,068
Suzuki Motor Corp. 267,000 3,944
Toyota Motor Corp. 194,300 6,551
Yamaha Motor Co., Ltd. 200,000 2,177
- --------------------------------------------------------------------------------------------
19,740
- --------------------------------------------------------------------------------------------
BUILDING PRODUCTS
Daikin Industries Ltd. 226,000 5,209
Sanwa Shutter Corp. 352,000 1,987
- --------------------------------------------------------------------------------------------
7,196
- --------------------------------------------------------------------------------------------
CHEMICALS
Daicel Chemical Industries Ltd. 670,000 2,758
Denki Kagaku Kogyo KK 1,038,000 3,335
Kaneka Corp. 540,000 4,023
Lintec Corp. 170,000 2,703
Mitsubishi Chemical Corp. 1,179,000 3,064
Nifco, Inc. 193,000 2,418
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) STATEMENT OF NET ASSETS
December 31, 2003
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------------------
JAPAN (CONT'D)
Shin-Etsu Polymer Co., Ltd. 347,000 $ 2,114
Toyo Ink Manufacturing Co., Ltd. 300,000 1,064
- --------------------------------------------------------------------------------------------
21,479
- --------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES
Dai Nippon Printing Co., Ltd. 210,000 2,944
COMMERCIAL SERVICES & SUPPLIES (CONT'D)
Nissha Printing Co., Ltd. 63,000 821
- --------------------------------------------------------------------------------------------
3,765
- --------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS
Fujitsu Ltd. 758,000(a) 4,462
Mitsumi Electric Co., Ltd. 221,500 2,434
NEC Corp. 710,000 5,217
Toshiba Corp. 1,400,000 5,294
- --------------------------------------------------------------------------------------------
17,407
- --------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
Kyudenko Corp. 220,000 902
Obayashi Corp. 582,000 2,596
Sanki Engineering Co., Ltd. 74,000 378
- --------------------------------------------------------------------------------------------
3,876
- --------------------------------------------------------------------------------------------
CONSUMER FINANCE
Hitachi Capital Corp. 258,300 3,575
- --------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES
Nippon Telegraph & Telephone Corp. 936 4,507
- --------------------------------------------------------------------------------------------
ELECTRIC UTILITIES
Tokyo Electric Power Co., Inc. 155,100 3,395
- --------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Furukawa Electric Co., Ltd. 414,000 1,373
- --------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Hitachi High-Technologies Corp. 70,000 1,108
Hitachi Ltd. 790,000 4,753
Kyocera Corp. 60,000 3,990
Ryosan Co., Ltd. 133,000 2,322
TDK Corp. 65,200 4,688
- --------------------------------------------------------------------------------------------
16,861
- --------------------------------------------------------------------------------------------
FOOD & STAPLES
FamilyMart Co., Ltd. 140,300 3,188
- --------------------------------------------------------------------------------------------
FOOD PRODUCTS
House Foods Corp. 136,000 1,537
Nippon Meat Packers, Inc. 200,000 1,952
- --------------------------------------------------------------------------------------------
3,489
- --------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Casio Computer Co., Ltd. 407,000 4,299
Matsushita Electric Industrial Co., Ltd. 450,000 $ 6,211
Rinnai Corp. 78,700 1,865
Sangetsu Co., Ltd. 17,000 323
Sekisui Chemical Co., Ltd. 500,000 2,543
Sekisui House Ltd. 351,000 3,619
Sony Corp. 110,700 3,825
- --------------------------------------------------------------------------------------------
22,685
- --------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS
Fuji Photo Film Co., Ltd. 150,000 4,834
Yamaha Corp. 281,000 5,509
- --------------------------------------------------------------------------------------------
10,343
- --------------------------------------------------------------------------------------------
MACHINERY
Amada Co., Ltd. 508,000 2,640
Daifuku Co., Ltd. 450,000 2,007
Fuji Machine Manufacturing Co., Ltd. 156,000 1,976
Fujitec Co., Ltd. 178,000 766
Kurita Water Industries Ltd. 234,000 2,818
Minebea Co., Ltd. 504,000 2,554
Mitsubishi Heavy Industries Ltd. 1,380,000 3,830
Tsubakimoto Chain Co. 580,000 1,907
- --------------------------------------------------------------------------------------------
18,498
- --------------------------------------------------------------------------------------------
MEDIA
Toho Co., Ltd. 75,000 953
- --------------------------------------------------------------------------------------------
OFFICE ELECTRONICS
Canon, Inc. 121,000 5,623
Ricoh Co., Ltd. 316,000 6,225
- --------------------------------------------------------------------------------------------
11,848
- --------------------------------------------------------------------------------------------
PHARMACEUTICALS
Ono Pharmaceutical Co., Ltd. 104,000 3,904
Sankyo Co., Ltd. 226,000 4,241
Yamanouchi Pharmaceutical Co., Ltd. 154,000 4,776
- --------------------------------------------------------------------------------------------
12,921
- --------------------------------------------------------------------------------------------
REAL ESTATE
Mitsubishi Estate Co., Ltd. 390,000 3,690
- --------------------------------------------------------------------------------------------
ROAD & RAIL
East Japan Railway Co. 769 3,617
- --------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT
Rohm Co., Ltd. 21,200 2,480
- --------------------------------------------------------------------------------------------
SOFTWARE
Nintendo Co., Ltd. 55,000 5,122
- --------------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
Nisshinbo Industries, Inc. 265,000 1,473
- --------------------------------------------------------------------------------------------
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) STATEMENT OF NET ASSETS
December 31, 2003
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS
Mitsubishi Corp. 420,000 $ 4,444
Nagase & Co., Ltd. 197,000 1,301
- --------------------------------------------------------------------------------------------
5,745
- --------------------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE
Mitsubishi Logistics Corp. 141,000 1,170
- --------------------------------------------------------------------------------------------
210,396
============================================================================================
MALAYSIA (0.1%)
ELECTRIC UTILITIES
YTL Corp. Bhd 505,000 574
============================================================================================
NEW ZEALAND (0.4%)
BUILDING PRODUCTS
Fletcher Building Ltd. 241,800 671
- --------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS
Carter Holt Harvey Ltd. 843,000 1,038
- --------------------------------------------------------------------------------------------
1,709
============================================================================================
SINGAPORE (3.6%)
AIRLINES
Singapore Airlines Ltd. 438,000 2,889
- --------------------------------------------------------------------------------------------
COMMERCIAL BANKS
Oversea-Chinese Banking Corp. 295,000 2,102
United Overseas Bank Ltd. 219,389 1,706
- --------------------------------------------------------------------------------------------
3,808
- --------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS
Brilliant Manufacturing Ltd. 589,000 243
- --------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Unisteel Technology Ltd. 850,000 636
- --------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Venture Corp., Ltd. 171,000 2,014
- --------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES
SembCorp Industries Ltd. 827,000 614
- --------------------------------------------------------------------------------------------
MARINE
Neptune Orient Lines Ltd. 970,000(a) 1,234
- --------------------------------------------------------------------------------------------
REAL ESTATE
CapitaLand Ltd. 1,464,000 1,336
City Developments Ltd. 380,000 1,354
- --------------------------------------------------------------------------------------------
2,690
- --------------------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE
Sembcorp Logistics Ltd. 537,800 633
- --------------------------------------------------------------------------------------------
WATER UTILITIES
Hyflux Ltd. 910,000 852
- --------------------------------------------------------------------------------------------
15,613
============================================================================================
SOUTH KOREA (10.9%)
AUTO COMPONENTS
Hankook Tire Co., Ltd. 113,650 858
Hyundai Mobis 107,510 $ 5,779
- --------------------------------------------------------------------------------------------
6,637
- --------------------------------------------------------------------------------------------
CAPITAL MARKETS
Daishin Securities Co., Ltd. 65,560 962
Samsung Securities Co., Ltd. 32,910 704
- --------------------------------------------------------------------------------------------
1,666
- --------------------------------------------------------------------------------------------
CHEMICALS
Grand Hall Enterprise Co., Ltd. 32,560 1,679
- --------------------------------------------------------------------------------------------
COMMERCIAL BANKS
Kookmin Bank 29,270 1,096
Shinhan Financial Group Co., Ltd. 47,440 758
- --------------------------------------------------------------------------------------------
1,854
- --------------------------------------------------------------------------------------------
CONSUMER FINANCE
LG Card Co., Ltd. 21,402(a) 55
- --------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
Good Morning Shinhan Securities 218,160(a) 1,006
Co., Ltd.
- --------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Samsung SDI Co., Ltd. 69,200 8,153
- --------------------------------------------------------------------------------------------
FOOD PRODUCTS
Orion Corp. 21,930 1,607
- --------------------------------------------------------------------------------------------
INVESTMENT BANKING
LG Investment & Securities Co., Ltd. 104,620 728
- --------------------------------------------------------------------------------------------
MACHINERY
Daewoo Shipbuilding & Marine
Engineering Co.,
Ltd. 161,510(a) 2,072
Hyundai Mipo Dockyard 94,750(a) 1,168
- --------------------------------------------------------------------------------------------
3,240
- --------------------------------------------------------------------------------------------
MULTILINE RETAIL
Hyundai Department Store Co., Ltd. 66,550(a) 2,171
- --------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT
Samsung Electronics Co., Ltd. 39,727 15,025
- --------------------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS
Cheil Industrial, Inc. 61,840 897
- --------------------------------------------------------------------------------------------
TOBACCO
KT&G Corp. 45,660 792
- --------------------------------------------------------------------------------------------
TRANSPORTATION INFRASTRUCTURE
STX Shipbuilding Co., Ltd. 55,320 735
- --------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
SK Telecom Co., Ltd. 8,850 1,477
- --------------------------------------------------------------------------------------------
47,722
============================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) STATEMENT OF NET ASSETS
December 31, 2003
<Table>
<Caption>
VALUE
SHARES (000)
- --------------------------------------------------------------------------------------------
TAIWAN (7.8%)
AIRLINES
Eva Airways Corp. 3,073,506 $ 1,253
- --------------------------------------------------------------------------------------------
CHEMICALS
Nan Ya Plastics Corp. 682,640 985
- --------------------------------------------------------------------------------------------
COMMERCIAL BANKS
Chinatrust Financial Holding Co. 3,084,037 3,097
Taishin Financial Holdings Co., Ltd. 2,133,000 1,576
- --------------------------------------------------------------------------------------------
4,673
- --------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS
Acer, Inc. 772,310 1,148
Infortrend Technology, Inc. 320,600 1,053
- --------------------------------------------------------------------------------------------
2,201
- --------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING
CTCI Corp. 1,363,000 1,104
- --------------------------------------------------------------------------------------------
CONSTRUCTION MATERIALS
Taiwan Cement Corp. 2,427,000 1,193
- --------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES
Fubon Financial Holding Co., Ltd. 659,000 631
Polaris Securities Co., Ltd. 2,048,760(a) 959
Yuanta Core Pacific Securities Co. 1,648,951 986
- --------------------------------------------------------------------------------------------
2,576
- --------------------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT
Asia Vital Components Co., Ltd. 535,000 636
Catcher Technology Co., Ltd. 158,000 570
Phoenixtec PCL 981,885 1,151
Waffer Technology Co., Ltd. 620,000 1,890
- --------------------------------------------------------------------------------------------
4,247
- --------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS
Hon Hai Precision Industry Co., Ltd. 551,440 2,168
Ya Hsin Industrial Co., Ltd. 1,131,000 1,462
- --------------------------------------------------------------------------------------------
3,630
- --------------------------------------------------------------------------------------------
LEISURE EQUIPMENT & PRODUCTS
Asia Optical Co., Inc. 184,600 1,272
Largan Precision Co., Ltd. 250,430 2,433
- --------------------------------------------------------------------------------------------
3,705
- --------------------------------------------------------------------------------------------
MARINE
Evergreen Marine Corp. 2,324,940 2,026
Taiwan Navigation Co., Ltd. 1,634,000 1,083
- --------------------------------------------------------------------------------------------
3,109
- --------------------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT
MediaTek, Inc. 249,000 2,339
Novatek Microelectronics Corp.,
Ltd. 399,250 $ 1,129
Sunplus Technology Co., Ltd. 476,000 890
Zyxel Communications Corp. 411,700 861
- --------------------------------------------------------------------------------------------
5,219
- --------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES
Taiwan Cellular Corp. 498,000 433
- --------------------------------------------------------------------------------------------
34,328
============================================================================================
THAILAND (1.7%)
AIRLINES
Thai Airways International 339,800(b) 392
(Foreign)
- --------------------------------------------------------------------------------------------
COMMERCIAL BANKS
Bangkok Bank PCL (Foreign) 933,300(a) 2,709
Bangkok Bank PCL NVDR 244,900(a) 674
Kasikornbank PCL (Foreign) 858,500(a) 1,516
Kasikornbank PCL NVDR 401,800(a) 659
Siam Commercial Bank PCL (Foreign) 573,000(a) 781
- --------------------------------------------------------------------------------------------
6,339
- --------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES
Land & Houses PCL (Foreign) 1,397,600 448
- --------------------------------------------------------------------------------------------
REAL ESTATE
Asian Property Development PCL 851,800(b) 124
- --------------------------------------------------------------------------------------------
7,303
============================================================================================
TOTAL COMMON STOCKS
(Cost $376,066) 429,862
============================================================================================
PREFERRED STOCKS (1.1%)
============================================================================================
AUSTRALIA (0.4%)
MEDIA
News Corp., Ltd. (Limited Voting Shares) 229,800 1,728
- --------------------------------------------------------------------------------------------
SOUTH KOREA (0.7%)
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT
Samsung Electronics Co., Ltd.
(Cost $2,255) 15,630 3,218
- --------------------------------------------------------------------------------------------
4,946
============================================================================================
INVESTMENT COMPANIES (0.8%)
============================================================================================
INDIA(0.8%)
Morgan Stanley Growth Fund
(Cost $1,744) 9,491,200(a)(c) 3,509
============================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
7
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) STATEMENT OF NET ASSETS
December 31, 2003
<Table>
<Caption>
NO. OF VALUE
RIGHTS (000)
- --------------------------------------------------------------------------------------------
RIGHTS (0.0%)
SOUTH KOREA
AUTO COMPONENTS
Hyundai Motor Co., Ltd.
(Cost $--@) 28,035(a)(b) $ 120
- --------------------------------------------------------------------------------------------
<Caption>
FACE
AMOUNT
(000)
- --------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (0.6%)
UNITED STATES (0.6%)
REPURCHASE AGREEMENT
J.P. Morgan Securities, Inc.,
0.75%, dated 12/31/03,
due 1/02/04, repurchase
price $2,771 (Cost $2,771) $ 2,771(d) 2,771
- --------------------------------------------------------------------------------------------
FOREIGN CURRENCY ON DEPOSIT WITH
CUSTODIAN (0.1%)
Australian Dollar AUD --@ --@
Hong Kong Dollar HKD --@ --@
Indian Rupee INR 10,985 241
New Zealand Dollar NZD --@ --@
South Korean Won KRW 288 --@
Taiwan Dollar TWD 3,016 89
- --------------------------------------------------------------------------------------------
TOTAL FOREIGN CURRENCY
(Cost $330) 330
============================================================================================
TOTAL INVESTMENTS (100.4%)
(Cost $383,166) 441,538
============================================================================================
<Caption>
AMOUNT AMOUNT
(000) (000)
- --------------------------------------------------------------------------------------------
OTHER ASSETS (0.6%)
Cash $ 1
Receivable for Investments Sold 2,236
Dividends Receivable 247
Tax Reclaim Receivable 5
Other 14 $ 2,503
- --------------------------------------------------------------------------------------------
LIABILITIES (-1.0%)
Payable For:
Dividends Declared (3,175)
Investment Advisory Fees (365)
Country Tax Expense (277)
Investments Purchased (186)
Directors' Fees and Expenses (66)
Custodian Fees (55)
Administrative Fees (17)
Other Liabilities (126) (4,267)
- --------------------------------------------------------------------------------------------
NET ASSETS (100%)
Applicable to 35,791,686 issued and
outstanding $ 0.01 par value shares
(200,000,000 shares authorized) $ 439,774
============================================================================================
NET ASSET VALUE PER SHARE $ 12.29
============================================================================================
AT DECEMBER 31, 2003, NET ASSETS CONSISTED OF:
Common Stock $ 358
Paid-in Capital 589,038
Undistributed (Distributions in Excess of)
Net Investment Income (1,555)
Accumulated Net Realized Gain (Loss) (206,163)
Unrealized Appreciation (Depreciation) on
Investments and Foreign Currency Translations
(net of $277 deferred country tax) 58,096
============================================================================================
TOTAL NET ASSETS $ 439,774
============================================================================================
</Table>
(a) -- Non-income producing.
(b) -- Investments valued at fair value - see Note A-1 to financial statements.
At December 31, 2003, the Fund held $2,579,000 of fair-valued securities,
representing 0.6% of net assets.
(c) -- The Morgan Stanley Growth Fund is advised by an affiliate of the
adviser. During the year ended December 31, 2003, there were no purchases
or sales of this security. The Fund did not derive income from this
security during the year ended December 31, 2003.
(d) -- The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of this
statement of net assets. The investment in the repurchase agreement is
through participation in a joint account with affiliated funds.
@ -- Face/Value is less than $500.
CDI -- Chess Depositary Interests
NVDR-- Non-Voting Depositary Receipts
THB -- Thai Baht
IDR -- Indonesian Rupiah
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
8
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
STATEMENT OF NET ASSETS (CONT'D) STATEMENT OF NET ASSETS
December 31, 2003
FOREIGN CURRENCY EXCHANGE CONTRACT INFORMATION:
The Fund had the following foreign currency exchange contract(s) open at
period end:
<Table>
<Caption>
NET
CURRENCY IN UNREALIZED
TO EXCHANGE APPRECIATION
DELIVER VALUE SETTLEMENT FOR VALUE (DEPRECIATION)
(000) (000) DATE (000) (000) (000)
- --------------------------------------------------------------------------------
US$ 12 $ 12 01/05/04 THB 480 $ 12 $ --@
US$ 11 11 01/06/04 THB 435 11 --@
US$ 23 23 01/02/04 HKD 176 23 --@
US$ 6 6 01/02/04 IDR 50,805 6 --@
HKD 16,697 2,151 01/05/04 US$ 2,151 2,151 --@
- --------------------------------------------------------------------------------
$ 2,203 $ 2,203 --@
- --------------------------------------------------------------------------------
</Table>
SUMMARY OF TOTAL INVESTMENTS BY INDUSTRY
CLASSIFICATION -- DECEMBER 31, 2003
(UNAUDITED)
<Table>
<Caption>
PERCENT OF
VALUE NET
INDUSTRY (000) ASSETS
- -----------------------------------------------------------------------
Airlines $ 8,838 2.0%
Auto Components 7,650 1.7
Automobiles 23,765 5.4
Building Products 7,867 1.8
Chemicals 24,143 5.5
Commercial Banks 37,955 8.6
Computers & Peripherals 19,851 4.5
Construction & Engineering 6,825 1.6
Diversified Financial Services 6,229 1.4
Diversified Telecommunication Services 6,583 1.5
Electric Utilities 5,909 1.3
Electrical Equipment 8,766 2.0
Electronic Equipment & Instruments 31,157 7.1
Food Products 5,096 1.2
Household Durables 25,340 5.8
Insurance 7,619 1.7
Leisure Equipment & Products 14,530 3.3
Machinery 21,738 4.9
Marine 6,128 1.4
Media 8,329 1.9
Metals & Mining 14,674 3.3
Office Electronics 11,848 2.7
Pharmaceuticals 13,908 3.2
Real Estate 23,167 5.3
Semiconductors & Semiconductor Equipment 25,942 5.9
Software 5,122 1.2
Specialty Retail 4,956 1.1
Textiles, Apparel & Luxury Goods 5,210 1.2
Trading Companies & Distributors 5,745 1.3
Other 46,648 10.6
- -----------------------------------------------------------------------
$ 441,538 100.4%
=======================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
Financial Statements
STATEMENT OF OPERATIONS
<Table>
<Caption>
YEAR ENDED
DECEMBER 31, 2003
(000)
- -----------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (net of $570 of foreign taxes withheld) $ 6,243
Interest 58
===========================================================================================================
TOTAL INCOME 6,301
===========================================================================================================
EXPENSES
Investment Advisory Fees 3,546
Custodian Fees 280
Professional Fees 267
Administrative Fees 133
Country Tax Expense 74
Stockholder Servicing Agent 44
Stockholder Reporting Expenses 41
Directors' Fees and Expenses 25
Other Expenses 67
===========================================================================================================
TOTAL EXPENSES 4,477
===========================================================================================================
NET INVESTMENT INCOME (LOSS) 1,824
===========================================================================================================
NET REALIZED GAIN (LOSS) ON:
Investments 4,546
Foreign Currency Transactions 12
===========================================================================================================
NET REALIZED GAIN (LOSS) 4,558
===========================================================================================================
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments (net of $277 deferred country tax) 129,547
===========================================================================================================
TOTAL NET REALIZED GAIN (LOSS) AND CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) 134,105
===========================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 135,929
===========================================================================================================
</Table>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
(000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income (Loss) $ 1,824 $ 631
Net Realized Gain (Loss) 4,558 (2,735)
Change in Unrealized Appreciation (Depreciation) 129,547 (17,251)
============================================================================================================================
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 135,929 (19,355)
============================================================================================================================
Distributions from and/or in excess of:
Net Investment Income (3,175) (277)
============================================================================================================================
Capital Share Transactions:
Repurchase of Shares (230,477 and 6,960,192 shares, respectively) (1,797) (68,887)
============================================================================================================================
TOTAL INCREASE (DECREASE) 130,957 (88,519)
============================================================================================================================
Net Assets:
Beginning of Period 308,817 397,336
============================================================================================================================
END OF PERIOD (INCLUDING UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME OF $(1,555) AND $(209), RESPECTIVELY) $ 439,774 $ 308,817
============================================================================================================================
</Table>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
SELECTED PER SHARE DATA AND RATIOS December 31, 2003
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------
2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.57 $ 9.24 $ 10.82 $ 15.26 $ 8.73
- ----------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 0.05+ 0.02+ (0.02) (0.01) 0.01
Net Realized and Unrealized Gain (Loss) on
Investments 3.75 (0.70) (1.56) (4.50) 6.44
- ----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.80 (0.68) (1.58) (4.51) 6.45
- ----------------------------------------------------------------------------------------------------------------------------------
Distributions from and/or in excess of:
Net Investment Income (0.09) (0.01) -- (0.22) (0.04)
- ----------------------------------------------------------------------------------------------------------------------------------
Anti-Dilutive Effect of Shares Repurchased 0.01 0.02 0.00# 0.29 0.12
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.29 $ 8.57 $ 9.24 $ 10.82 $ 15.26
==================================================================================================================================
PER SHARE MARKET VALUE, END OF PERIOD $ 10.85 $ 7.20 $ 7.49 $ 8.69 $ 11.81
==================================================================================================================================
TOTAL INVESTMENT RETURN:
Market Value 51.87% (3.77)% (13.78)% (24.66)% 69.32%
Net Asset Value (1) 44.48% (7.12)% (14.60)% (27.37)% 75.39%
==================================================================================================================================
RATIOS, SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (THOUSANDS) $ 439,774 $ 308,817 $ 397,336 $ 621,505 $ 949,541
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net Assets 1.26% 1.35% 1.39% 1.26% 1.29%
Ratio of Net Investment Income (Loss) to Average Net
Assets 0.51% 0.17% 0.19% (0.07)% 0.10%
Portfolio Turnover Rate 34% 37% 27% 35% 65%
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Total investment return based on net asset value per share reflects the
effects of changes in net asset value on the performance of the Fund during
each period, and assumes dividends and distributions, if any, were
reinvested. This percentage is not an indication of the performance of a
stockholder's investment in the Fund based on market value due to
differences between the market price of the stock and the net asset value
of the Fund.
+ Per share amount is based on average shares outstanding.
# Amount is less than $0.005.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
The Morgan Stanley Asia-Pacific Fund, Inc. (the "Fund") was incorporated in
Maryland on February 28, 1994, and is registered as a non-diversified,
closed-end management investment company under the Investment Company Act of
1940, as amended. The Fund's investment objective is long-term capital
appreciation through investments primarily in equity securities.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with accounting principles generally accepted in the United States.
Such policies are consistently followed by the Fund in the preparation of its
financial statements. Accounting principles generally accepted in the United
States may require management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results may
differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange are valued
at the latest quoted sales price on the valuation date. Equity securities
listed or traded on NASDAQ, for which market quotations are available, are
valued at the NASDAQ Official Closing Price. Securities listed on a foreign
exchange are valued at their closing price. Unlisted securities and listed
securities not traded on the valuation date for which market quotations are
readily available are valued at the mean between the current bid and asked
prices obtained from reputable brokers. Debt securities purchased with
remaining maturities of 60 days or less are valued at amortized cost, if it
approximates value.
All other securities and investments for which market values are not
readily available, including restricted securities, and those securities
for which it is inappropriate to determine prices in accordance with the
aforementioned procedures, are valued at fair value as determined in good
faith under procedures adopted by the Board of Directors, although the
actual calculations may be done by others. Factors considered in making
this determination may include, but are not limited to, information
obtained by contacting the issuer, analysts, or the appropriate stock
exchange (for exchange-traded securities), analysis of the issuer's
financial statements or other available documents and, if necessary,
available information concerning other securities in similar circumstances.
Most foreign markets close before the New York Stock Exchange (NYSE).
Occasionally, developments that could affect the closing prices of
securities and other assets may occur between the times at which valuations
of such securities are determined (that is, close of the foreign market on
which the securities trade) and the close of business on the NYSE. If these
developments are expected to materially affect the value of the securities,
the valuations may be adjusted to reflect the estimated fair value as of
the close of the NYSE, as determined in good faith under procedures
established by the Board of Directors.
2. REPURCHASE AGREEMENTS: The Fund may enter into repurchase agreements under
which the Fund lends excess cash and takes possession of securities with an
agreement that the counterparty will repurchase such securities. In
connection with transactions in repurchase agreements, a bank as custodian
for the Fund takes possession of the underlying securities (collateral),
with a market value at least equal to the amount of the repurchase
transaction, including principal and accrued interest. To the extent that
any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to determine the adequacy
of the collateral. In the event of default on the obligation to repurchase,
the Fund has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy by
the counterparty to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings.
The Fund, along with other affiliated investment companies, may utilize a
joint trading account for the purpose of entering into one or more
repurchase agreements.
3. FOREIGN CURRENCY TRANSLATION: The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars at the mean of the bid and asked prices of such currencies
against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rates of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange
rates and market values at the close of the period, the Fund does not
isolate that portion of the results of operations arising as a result of
changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of the securities held at period
12
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
December 31, 2003
end. Similarly, the Fund does not isolate the effect of changes in foreign
exchange rates from the fluctuations arising from changes in the market
prices of securities sold during the period. Accordingly, realized and
unrealized foreign currency gains (losses) due to securities transactions
are included in the reported net realized and unrealized gains (losses) on
investment transactions and balances.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from sales and maturities of foreign
currency exchange contracts, disposition of foreign currencies, currency
gains or losses realized between the trade and settlement dates on
securities transactions, and the difference between the amount of
investment income and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts actually received or paid. Net
unrealized currency gains (losses) from valuing foreign currency
denominated assets and liabilities at period end exchange rates are
reflected as a component of unrealized appreciation (depreciation) on
investments and foreign currency translations in the Statement of Net
Assets. The change in net unrealized currency gains (losses) on foreign
currency translations for the period is reflected in the Statement of
Operations.
A significant portion of the Fund's net assets consist of securities of
issuers located in Asia which are denominated in foreign currencies.
Changes in currency exchange rates will affect the value of and investment
income from such securities. Asian securities are subject to greater price
volatility, limited capitalization and liquidity, and higher rates of
inflation than securities of companies based in the United States. In
addition, Asian securities may be subject to substantial governmental
involvement in the economy and greater social, economic and political
uncertainty. Such securities may be concentrated in a limited number of
countries and regions and may vary throughout the year.
The Fund may use derivatives to achieve its investment objectives. The Fund may
engage in transactions in futures contracts on foreign currencies, stock
indices, as well as in options, swaps and structured notes. Consistent with the
Fund's investment objectives and policies, the Fund may use derivatives for
non-hedging as well as hedging purposes.
Following is a description of derivative instruments that the Fund has utilized
and their associated risks:
4. FOREIGN CURRENCY EXCHANGE CONTRACTS: The Fund may enter into foreign
currency exchange contracts to attempt to protect securities and related
receivables and payables against changes in future foreign exchange rates
and, in certain situations, to gain exposure to a foreign currency. A
foreign currency exchange contract is an agreement between two parties to
buy or sell currency at a set price on a future date. The market value of
the contract will fluctuate with changes in currency exchange rates. The
contract is marked-to-market daily and the change in market value is
recorded by the Fund as unrealized gain or loss. The Fund records realized
gains or losses when the contract is closed equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed. Risk may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their
contracts and is generally limited to the amount of unrealized gain on the
contracts, if any, at the date of default. Risks may also arise from
unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
5. STRUCTURED SECURITIES: The Fund may invest in interests in entities
organized and operated solely for the purpose of restructuring the
investment characteristics of sovereign debt obligations. This type of
restructuring involves the deposit with or purchase by an entity of
specified instruments and the issuance by that entity of one or more
classes of securities ("Structured Securities") backed by, or representing
interests in, the underlying instruments. Structured Securities generally
will expose the Fund to credit risks of the underlying instruments as well
as of the issuer of the Structured Security. Structured Securities are
typically sold in private placement transactions with no active trading
market. Investments in Structured Securities may be more volatile than
their underlying instruments, however, any loss is limited to the amount of
the original investment.
6. OVER-THE-COUNTER TRADING: Securities and other derivative instruments that
may be purchased or sold by the Fund may consist of instruments not traded
on an exchange. The risk of nonperformance by the obligor on such an
instrument may be greater, and the ease with which the Fund can dispose of
or enter into closing transactions with respect to such an instrument may
be less, than in the
13
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
December 31, 2003
case of an exchange-traded instrument. In addition, significant disparities
may exist between bid and asked prices for derivative instruments that are
not traded on an exchange. Derivative instruments not traded on exchanges
are also not subject to the same type of government regulation as exchange
traded instruments, and many of the protections afforded to participants in
a regulated environment may not be available in connection with such
transactions.
7. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Investments in new Indian securities are made by
making applications in the public offerings. The issue price, or a portion
thereof, is paid at the time of application and is reflected as share
application money on the Statement of Net Assets, if any. Upon allotment of
the securities, this amount plus any remaining amount of issue price is
recorded as cost of investments. Realized gains and losses on the sale of
investment securities are determined on the specific identified cost basis.
Interest income is recognized on the accrual basis. Dividend income is
recorded on the ex-dividend date (except certain dividends which may be
recorded as soon as the Fund is informed of such dividends) net of
applicable withholding taxes. Distributions to stockholders are recorded on
the ex-dividend date.
B. ADVISER: Morgan Stanley Investment Management Inc. (the "Adviser") provides
investment advisory services to the Fund under the terms of an Investment
Advisory and Management Agreement (the "Agreement"). Under the Agreement, the
Adviser is paid a fee computed weekly and payable monthly at an annual rate of
1.00% of the Fund's average weekly net assets.
C. ADMINISTRATOR: JPMorgan Chase Bank, through its corporate affiliate J.P.
Morgan Investor Services Co. (the "Administrator"), provides administrative
services to the Fund under an Administration Agreement. The Administrator is
paid a fee computed weekly and payable monthly at an annual rate of 0.02435% of
the Fund's average weekly net assets, plus $24,000 per annum. In addition, the
Fund is charged for certain out-of-pocket expenses incurred by the Administrator
on its behalf. An employee of the Administrator is an Officer of the Fund.
D. CUSTODIAN: JPMorgan Chase Bank and its affiliates serve as custodian for
the Fund. Custody fees are payable monthly based on assets held in custody,
investment purchase and sales activity and account maintenance fees, plus
reimbursement for certain out-of-pocket expenses.
E. FEDERAL INCOME TAXES: It is the Fund's intention to continue to qualify as
a regulated investment company and distribute all of its taxable income.
Accordingly, no provision for Federal income taxes is required in the financial
statements. Dividend income and distributions to stockholders are recorded on
the ex-dividend date.
The Fund may be subject to taxes imposed by countries in which it invests. Such
taxes are generally based on income and/or capital gains earned or repatriated.
Taxes are accrued and applied to net investment income, net realized gains and
net unrealized appreciation as such income and/or gains are earned.
The tax character of distributions paid may differ from the character of
distributions shown on the Statements of Changes in Net Assets due to short-term
capital gains being treated as ordinary income for tax purposes. The tax
character of distributions paid during 2003 and 2002 was as follows:
<Table>
<Caption>
2003 DISTRIBUTIONS 2002 DISTRIBUTIONS
PAID FROM: PAID FROM:
(000) (000)
- --------------------------- --------------------------
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
INCOME GAIN INCOME GAIN
- ---------------------------------------------------------
$ 3,175 $ -- $ 277 $ --
</Table>
The amount and character of income and capital gain distributions to be paid by
the Fund are determined in accordance with Federal income tax regulations, which
may differ from accounting principles generally accepted in the United States.
The book/tax differences are considered either temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for
the timing of the recognition of gains and losses on certain investment
transactions and the timing of the deductibility of certain expenses.
Permanent book and tax basis differences may result in reclassifications among
undistributed (distributions in excess of) net investment income (or accumulated
net investment loss), accumulated net realized gain (loss) and paid-in capital.
At December 31, 2003, the components of distributable earnings on a tax basis
were as follows:
<Table>
<Caption>
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY INCOME LONG-TERM CAPITAL GAIN
(000) (000)
- -------------------------------------------------
$ 431 $ --
- -------------------------------------------------
</Table>
14
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
December 31, 2003
At December 31, 2003, the U.S. Federal income tax cost basis of investments
(excluding foreign currency if applicable) was approximately $385,124,000 and,
accordingly, net unrealized appreciation for U.S. Federal income tax purposes
was $56,084,000 of which $96,343,000 related to appreciated securities and
$40,259,000 related to depreciated securities.
At December 31, 2003, the Fund had a capital loss carryforward for U.S. Federal
income tax purposes of approximately $205,795,000 available to offset future
capital gains, of which $128,632,000 will expire on December 31, 2006,
$73,333,000 will expire on December 31, 2009 and $3,830,000 will expire on
December 31, 2010.
During the year ended December 31, 2003, the Fund utilized capital loss
carryforwards for U.S. Federal income tax purposes of $2,858,000.
To the extent that capital loss carryovers are used to offset any future capital
gains realized during the carryover period as provided by U.S. Federal income
tax regulations, no capital gains tax liability will be incurred by the Fund for
gains realized and not distributed. To the extent that capital gains are offset,
such gains will not be distributed to the stockholders.
Net capital and currency losses incurred after October 31, and within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. For the year ended December 31, 2003, the Fund did not defer any
post-October losses to January 1, 2004, for U.S. Federal income tax purposes.
F. OTHER: During the year ended December 31, 2003, the Fund made purchases and
sales totaling approximately $122,970,000 and $119,367,000 respectively, of
investment securities other than long-term U.S. Government securities, purchased
options and short-term investments. There were no purchases or sales of
long-term U.S. Government securities.
During the year ended December 31, 2003, the Portfolio incurred a combined total
of $109,000 in brokerage commissions paid to affiliated broker dealers, of which
$92,000 was paid to Morgan Stanley & Co. Incorporated and $17,000 was paid to
China International Capital Corporation.
On January 23, 1998, the Fund commenced a share repurchase program for purposes
of enhancing stockholder value and reducing the discount at which the Fund's
shares trade from their net asset value. For the year ended December 31, 2003,
the Fund repurchased 230,477 of its shares at an average discount of 15.50% from
net asset value per share. Since the inception of the program, the Fund has
repurchased 15,144,005 of its shares at an average discount of 20.50% from net
asset value per share. The Fund expects to continue to repurchase its
outstanding shares at such time and in such amounts as it believes will further
the accomplishment of the foregoing objectives, subject to review by the Board
of Directors.
On May 17, 2002, the Fund completed the tender offer. The Fund accepted
6,361,598 shares for payment which represented 15% of the Fund's then
outstanding shares. Final payment was made on May 28, 2002 at $10.09 per share,
representing 95% of the NAV per share on May 17, 2002.
On December 15, 2003 the Officers of the Fund, pursuant to authority granted by
the Board of Directors declared a distribution of $0.0887 per share, derived
from net investment income, payable on January 9, 2004, to stockholders of
record on December 24, 2003.
FEDERAL TAX INFORMATION (UNAUDITED)
For the year ended December 31, 2003, the Fund expects to pass through to
stockholders foreign tax credits totaling approximately $577,000. For the year
ended December 31, 2003, gross income derived from sources within a foreign
country totaled $6,813,000. For the year ended December 31, 2003, qualified
dividend income totaled 4,371,000.
15
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
INDEPENDENT AUDITORS' REPORT December 31, 2003
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
We have audited the accompanying statement of net assets of Morgan Stanley
Asia-Pacific Fund, Inc. (the "Fund") as of December 31, 2003, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years then ended, and the financial highlights for
each of the four years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the year
ended December 31, 1999 were audited by other auditors whose report, dated
February 18, 2000, expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. 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 December 31, 2003 by correspondence with the custodian and brokers
or by other appropriate auditing procedures where replies from brokers were not
received. 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 Asia-Pacific Fund, Inc. at December 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 four years in the period then ended, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2004
16
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
Overview
DIRECTOR AND OFFICER INFORMATION (UNAUDITED)
INDEPENDENT DIRECTORS:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS IN
TERM OF FUND
OFFICE AND COMPLEX
POSITION(S) LENGTH OF OVERSEEN
NAME, AGE AND ADDRESS OF HELD WITH TIME PRINCIPAL OCCUPATION(S) DURING BY OTHER DIRECTORSHIPS
DIRECTOR REGISTRANT SERVED* PAST 5 YEARS DIRECTOR** HELD BY DIRECTOR
- --------------------------- ----------- ---------- ------------------------------ ------------- ---------------------------------
Michael Bozic (62) Director Director Retired; Director or Trustee 208 Director of Weirton Steel
c/o Kramer Levin Naftalis & since of the Retail Funds and the Corporation.
Frankel LLP 2003 Institutional Funds; formerly
Counsel to the Independent Vice Chairman of Kmart
Directors Corporation, Chairman and
919 Third Avenue Chief Executive Officer of
New York, NY 10022 Levitz Furniture Corporation
and President and Chief
Executive Officer of Hills
Department Stores; formerly
variously Chairman, Chief
Executive Officer, President
and Chief Operating Officer of
the Sears Merchandise Group of
Sears, Roebuck & Co.
Edwin J. Garn (71) Director Director Director or Trustee of the 208 Director of Franklin Covey (time
Summit Ventures LLC since Retail Funds and the management systems), BMW Bank of
One Utah Center 2003 Institutional Funds; member of North America, Inc. (industrial
201 South Main Street the Utah Regional Advisory loan corporation), United Space
Salt Lake City, UT 84111 Board of Pacific Corp.; Alliance (joint venture between
formerly United States Senator Lockheed Martin and The Boeing
(R-Utah) and Chairman, Senate Company) and Nuskin Asia Pacific
Banking Committee, Mayor of (multilevel marketing); member of
Salt Lake City, Utah, the board of various civic and
Astronaut, Space Shuttle charitable organizations.
Discovery and Vice Chairman,
Huntsman Corporation (chemical
company).
Wayne E. Hedien (69) Director Director Retired; Director or Trustee 208 Director of the PMI Group Inc.
WEH Associates since of the Retail Funds and the (private mortgage insurance);
5750 Old Orchard Road 2003 Institutional Funds; formerly Trustee and Vice Chairman of the
Suite 530 associated with the Allstate Field Museum of Natural History;
Skokie, IL 60077 Companies, most recently as director of various other
Chairman of The Allstate business and charitable
Corporation and Chairman and organizations.
Chief Executive Officer of its
wholly-owned subsidiary,
Allstate Insurance Company.
Dr. Manuel H. Johnson (54) Director Director Chairman of the Audit 208 Director of NVR, Inc. (home
Johnson Smick since Committee and Director or construction); Chairman and
International, Inc. 2003 Trustee of the Retail Funds Trustee of the Financial
2099 Pennsylvania Avenue, and the Institutional Funds; Accounting Foundation (oversight
NW Suite 950 Senior Partner, Johnson Smick organization of the Financial
Washington, D.C. 20006 International, Inc. Accounting Standards Board);
(consulting firm); Co-Chairman Director of RBS Greenwich Capital
and a founder of the Group of Holdings (financial holdings
Seven Council (G7C), an company).
international economic
commission; formerly Vice
Chairman of the Board of
Governors of the Federal
Reserve System and Assistant
Secretary of the U.S.
Treasury.
Joseph J. Kearns (61) Director Director Deputy Chairman of the Audit 209 Director of Electro Rent
Kearns & Associates LLC since Committee and Director or Corporation (equipment leasing),
PMB754 1994 Trustee of the Retail Funds The Ford Family Foundation and
23852 Pacific Coast Hwy. and the Institutional Funds; the UCLA Foundation.
Malibu, CA 90265 previously Chairman of the
Audit Committee of the
Institutional Funds;
President, Kearns & Associates
LLC (investment consulting);
formerly CFO of The J. Paul
Getty Trust.
Michael Nugent (67) Director Director Chairman of the Insurance 208 Director of various business
Triumph Capital, L.P. since Committee and Director or organizations.
445 Park Avenue, 10th Floor 2001 Trustee of the Retail Funds
New York, NY 10022 and the Institutional Funds;
General Partner of Triumph
Capital, L.P., (private
investment partnership);
formerly Vice President,
Bankers Trust Company and BT
Capital Corporation.
Fergus Reid (71) Director Director Chairman of the Governance 209 Trustee and Director of certain
Lumelite Plastics since Committee Director or Trustee investment companies in the
85 Charles Coleman Blvd. 2001 of the Retail Funds and the JPMorgan Funds complex managed by
Pawling, NY 12564 Institutional Funds; Chairman JP Morgan Investment Management
of Lumelite Plastics Inc.
Corporation.
</Table>
17
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
DIRECTOR AND OFFICER INFORMATION (CONT'D) Overview
INTERESTED DIRECTORS:
<Table>
<Caption>
NUMBER OF
TERM OF PORTFOLIOS IN
OFFICE AND FUND
LENGTH OF OVERSEEN
NAME, AGE AND ADDRESS OF POSITION(S) HELD TIME PRINCIPAL OCCUPATION(S) DURING BY OTHER DIRECTORSHIPS
DIRECTOR WITH REGISTRANT SERVED* PAST 5 YEARS DIRECTOR** HELD BY DIRECTOR
- --------------------------- ---------------- ---------- ------------------------------ ------------- ----------------------------
Charles A. Fiumefreddo (70) Chairman Chairman Chairman and Director or 208 None
Morgan Stanley Funds and and Trustee of the Retail Funds
Harborside Financial Center Director Director and the Institutional Funds;
Plaza Two 3rd Floor since formerly Chief Executive
Jersey City, NJ 07311 2003 Officer of the Retail Funds.
James F. Higgins (55) Director Director Director or Trustee of the 208 Director of AXA Financial,
Morgan Stanley since Retail Funds and the Inc. and The Equitable Life
Harborside Financial Center 2003 Institutional Funds; Senior Assurance Society of the
Plaza Two 2nd Floor Advisor of Morgan Stanley; United States (financial
Jersey City, NJ 07311 Director of Morgan Stanley services).
Distributors Inc. and Dean
Witter Realty Inc.; previously
President and Chief Operating
Officer of the Private Client
Group of Morgan Stanley and
President and Chief Operating
Officer of Individual
Securities of Morgan Stanley.
Philip J. Purcell (60) Director Director Director or Trustee of the 208 Director of American
Morgan Stanley since Retail Funds and the Airlines, Inc. and its
1585 Broadway 39th Floor 2003 Institutional Funds; Chairman parent company, AMR
New York, NY 10036 of the Board of Directors and Corporation.
Chief Executive Officer of
Morgan Stanley and Morgan
Stanley DW Inc.; Director of
Morgan Stanley Distributors
Inc.; 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>
* Each Director serves an indefinite term, until his or her successor is
elected.
** The Fund Complex includes all funds advised by Morgan Stanley Investment
Management Inc. and any funds that have an investment adviser have an
investment adviser that is an affiliated entity of Morgan Stanley Investment
Management Inc. (including, but not limited to, Morgan Stanley Investment
Advisors Inc. and Van Kampen Asset Management Inc.).
*** Additionally, a description of the Fund's proxy voting policies and
procedures is available without charge at our website at
www.morganstanley.com/im/legal, at the SEC's website at www.sec.gov or by
calling 1(800) 281-2715.
18
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
DIRECTOR AND OFFICER INFORMATION (CONT'D) Overview
OFFICERS:
<Table>
<Caption>
TERM OF OFFICE AND
POSITION(S) HELD LENGTH OF TIME
NAME, AGE AND ADDRESS OF EXECUTIVE OFFICER WITH REGISTRANT SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ------------------------------------------ ---------------- ------------------- --------------------------------------------
Mitchell M. Merin (50) President President since President and Chief Operating Officer of
Morgan Stanley Investment Management Inc. 2003 Morgan Stanley Investment Management
1221 Avenue of the Americas 33rd Floor Inc.; President, Director and Chief
New York, NY 10020 Executive Officer of Morgan Stanley
Investment Advisors Inc. and Morgan
Stanley Services Company Inc.; Chairman,
Chief Executive Officer and Director of
Morgan Stanley Distributors Inc.;
Chairman and Director of Morgan Stanley
Trust; Director of various Morgan
Stanley subsidiaries; President of the
Institutional Funds and the Retail
Funds; Trustee and President of the Van
Kampen Open-End and Closed-End funds.
Ronald E. Robison (64) Executive Vice Executive Vice Chief Global Operations Officer and
Morgan Stanley Investment Management Inc. President and President and Managing Director of Morgan Stanley
1221 Avenue of the Americas 33rd Floor Principal Principal Investment Management Inc.; Managing
New York, NY 10020 Executive Executive Officer Director of Morgan Stanley & Co.
Officer since 2003 Incorporated; Managing Director of
Morgan Stanley; Managing Director, Chief
Administrative Officer and Director of
Morgan Stanley Investment Advisors Inc.
and Morgan Stanley Services Company
Inc.; Chief Executive Officer and
Director of Morgan Stanley Trust;
Executive Vice President and Principal
Executive Officer of the Institutional
Funds and the Retail Funds; previously
President and Director of the
Institutional Funds.
Barry Fink (48) Vice President Vice President General Counsel and Managing Director of
Morgan Stanley Investment Management Inc. since 2003 Morgan Stanley Investment Management;
1221 Avenue of the Americas 22nd Floor Managing Director, Secretary and
New York, NY 10020 Director of Morgan Stanley Investment
Advisors Inc. and Morgan Stanley
Services Company Inc.; Assistant
Secretary of Morgan Stanley DW Inc.;
Vice President and General Counsel of
the Retail Funds; Vice President of the
Institutional Funds; Vice President and
Secretary of Morgan Stanley Distributors
Inc.; previously Secretary of the Retail
Funds; previously Vice President and
Assistant General Counsel of Morgan
Stanley Investment Advisors Inc. and
Morgan Stanley Services Company Inc.
Joseph J. McAlinden (60) Vice President Vice President Managing Director and Chief Investment
Morgan Stanley Investment Management Inc. since 2003 Officer of Morgan Stanley Investment
1221 Avenue of the Americas 33rd Floor Advisors Inc. and Morgan Stanley
New York, NY 10020 Investment Management Inc.; Director of
Morgan Stanley Trust, Chief Investment
Officer of the Van Kampen Funds; Vice
President of the Institutional Funds and
the Retail Funds.
Stefanie V. Chang (36) Vice President Vice President Executive Director of Morgan Stanley &
Morgan Stanley Investment Management Inc. since 2001 Co. Incorporated and Morgan Stanley
1221 Avenue of the Americas 22nd Floor Investment Management Inc.; Vice
New York, NY 10020 President of the Institutional Funds and
the Retail Funds; formerly practiced law
with the New York law firm of Rogers &
Wells (now Clifford Chance US LLP).
James W. Garrett (34) Treasurer and Treasurer since Executive Director of Morgan Stanley &
Morgan Stanley Investment Management Inc. Chief Financial 2002 Co. Incorporated and Morgan Stanley
1221 Avenue of the Americas 34th Floor Officer CFO since Investment Management Inc.; Treasurer
New York, NY 10020 2003 and Chief Financial Officer of the
Institutional Funds; previously with
Price Waterhouse LLP (now
PricewaterhouseCoopers LLP).
Michael J. Leary (37) Assistant Assistant Assistant Director and Vice President of
J.P. Morgan Investor Services Co. Treasurer Treasurer Fund Administration, J.P. Morgan
73 Tremont Street since 2003 Investor Services Co. (formerly Chase
Boston, MA 02108 Global Funds Company); formerly Audit
Manager at Ernst & Young LLP.
Mary E. Mullin (36) Secretary Secretary since Executive Director of Morgan Stanley &
Morgan Stanley Investment Management Inc. 2001 Co. Incorporated and Morgan Stanley
1221 Avenue of the Americas 22nd Floor Investment Management Inc.; Secretary of
New York, NY 10020 the Institutional Funds and the Retail
Funds; formerly practiced law with the
New York law firms of McDermott, Will &
Emery and Skadden, Arps, Slate, Meagher
& Flom LLP.
</Table>
- ----------
* Each Officer serves an indefinite term, until his or her successor is
elected.
19
<Page>
MORGAN STANLEY ASIA-PACIFIC FUND, INC.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
Pursuant to the Dividend Reinvestment and Cash Purchase Plan (the "Plan"),
each stockholder will be deemed to have elected, unless American Stock Transfer
& Trust Company (the "Plan Agent") is otherwise instructed by the stockholder in
writing, to have all distributions automatically reinvested in Fund shares.
Participants in the Plan have the option of making additional voluntary cash
payments to the Plan Agent, annually, in any amount from $100 to $3,000, for
investment in Fund shares.
Dividend and capital gain distributions will be reinvested on the
reinvestment date in full and fractional shares. If the market price per share
equals or exceeds net asset value per share on the reinvestment date, the Fund
will issue shares to participants at net asset value. If net asset value is less
than 95% of the market price on the reinvestment date, shares will be issued at
95% of the market price. If net asset value exceeds the market price on the
reinvestment date, participants will receive shares valued at market price. The
Fund may purchase shares of its Common Stock in the open market in connection
with dividend reinvestment requirements at the discretion of the Board of
Directors. Should the Fund declare a dividend or capital gain distribution
payable only in cash, the Plan Agent will purchase Fund shares for participants
in the open market as agent for the participants.
The Plan Agent's fees for the reinvestment of dividends and distributions
will be paid by the Fund. However, each participant's account will be charged a
pro rata share of brokerage commissions incurred on any open market purchases
effected on such participant's behalf. A participant will also pay brokerage
commissions incurred on purchases made by voluntary cash payments. Although
stockholders in the Plan may receive no cash distributions, participation in the
Plan will not relieve participants of any income tax which may be payable on
such dividends or distributions.
In the case of stockholders, such as banks, brokers or nominees, that hold
shares for others who are the beneficial owners, the Plan Agent will administer
the Plan on the basis of the number of shares certified from time to time by the
stockholder as representing the total amount registered in the stockholder's
name and held for the account of beneficial owners who are participating in the
Plan.
Stockholders who do not wish to have distributions automatically reinvested
should notify the Plan Agent in writing. There is no penalty for
non-participation or withdrawal from the Plan, and stockholders who have
previously withdrawn from the Plan may rejoin at any time. Requests for
additional information or any correspondence concerning the Plan should be
directed to the Plan Agent at:
Morgan Stanley Asia-Pacific Fund, Inc.
American Stock Transfer & Trust Company
Dividend Reinvestment and Cash Purchase Plan
59 Maiden Lane
New York, New York 10030
1-800-278-4353
20
<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) The Fund has not amended its Code of Ethics during the period covered by
the shareholder report presented in Item 1 hereto.
(d) The Fund has not granted a waiver or an implicit waiver from a provision of
its Code of Ethics.
(e) Not applicable.
(f)
(1) The Fund Code of Ethics is attached hereto as Exhibit A.
(2) Not applicable.
(3) Not applicable.
For Retail and Institutional Funds
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Fund's Board of Directors has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Directors: 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
<Page>
member of the audit committee and Board of Directors in the absence of such
designation or identification.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2003
<Table>
<Caption>
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 55,105 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ 6,000(7) $ 93,000(2)
TAX FEES $ 2,575(3) $ 163,414(4)
ALL OTHER FEES $ 0 $ 341,775(5)
TOTAL NON-AUDIT FEES $ 8,575 $ 598,189
TOTAL $ 63,680 $ 598,189
</Table>
2002
<Table>
<Caption>
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 53,500 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ 4,500(7) $ 179,000(2)
TAX FEES $ 2,500(3) $ 0
ALL OTHER FEES $ 0 $ 595,150(6)
TOTAL NON-AUDIT FEES $ 7,000 $ 774,150
TOTAL $ 60,500 $ 774,150
</Table>
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and
any entity controlling, controlled by or under common control
with the Adviser that provides ongoing services to the
Registrant.
(2) Audit-Related Fees represent assurance and related services
provided that are reasonably related to the performance of the
audit of the financial statements of the Covered Entities' and
funds advised by the Adviser or its affiliates, specifically
attestation services provided in connection with a SAS 70 Report.
(3) Tax Fees represent tax advice and compliance services provided
in connection with the review of the Registrant's tax return.
(4) Tax Fees represent tax advice services provided to Covered
Entities, including research and identification of Passive
Foreign Investment Company entities.
2
<Page>
(5) All Other Fees represent attestation services provided in
connection with performance presentation standards.
(6) All Other Fees represent attestation services provided in
connection with performance presentation standards, general
industry education seminars provided, and a regulatory review
project performed.
(7) Amounts represent fees billed for services provided for the
annual filing with the Japanese securities regulators.
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS
AS ADOPTED JULY 31, 2003(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.
The SEC has issued rules specifying the types of services that an
independent auditor may not provide to its audit client, as well as the audit
committee's administration of the engagement of the independent auditor. The
SEC's rules establish two different approaches to pre-approving services, which
the SEC considers to be equally valid. Proposed services either: may be
pre-approved without consideration of specific case-by-case services by the
Audit Committee ("GENERAL PRE-APPROVAL"); or require the specific pre-approval
of the Audit Committee or its delegate ("SPECIFIC PRE-APPROVAL"). The Audit
Committee believes that the combination of these two approaches in this Policy
will result in an effective and efficient procedure to pre-approve services
performed by the Independent Auditors. As set forth in this Policy, unless a
type of service has received general pre-approval, it will require specific
pre-approval by the Audit Committee (or by any member of the Audit Committee to
which pre-approval authority has been delegated) if it is to be provided by the
Independent Auditors. Any proposed services exceeding pre-approved cost levels
or budgeted amounts will also require specific pre-approval by the Audit
Committee.
- ----------
(1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and
Procedures (the "POLICY"), adopted as of the date above, supercedes and
replaces all prior versions that may have been adopted from time to time.
3
<Page>
For both types of pre-approval, the Audit Committee will consider whether
such services are consistent with the SEC's rules on auditor independence. The
Audit Committee will also consider whether the Independent Auditors are best
positioned to provide the most effective and efficient services, for reasons
such as its familiarity with the Fund's business, people, culture, accounting
systems, risk profile and other factors, and whether the service might enhance
the Fund's ability to manage or control risk or improve audit quality. All such
factors will be considered as a whole, and no one factor should necessarily be
determinative.
The Audit Committee is also mindful of the relationship between fees for
audit and non-audit services in deciding whether to pre-approve any such
services and may determine for each fiscal year, the appropriate ratio between
the total amount of fees for Audit, Audit-related and Tax services for the Fund
(including any Audit-related or Tax service fees for Covered Entities that were
subject to pre-approval), and the total amount of fees for certain permissible
non-audit services classified as All Other services for the Fund (including any
such services for Covered Entities subject to pre-approval).
The appendices to this Policy describe the Audit, Audit-related, Tax and
All Other services that have the general pre-approval of the Audit Committee.
The term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers and provides a different period and states
otherwise. The Audit Committee will annually review and pre-approve the services
that may be provided by the Independent Auditors without obtaining specific
pre-approval from the Audit Committee. The Audit Committee will add to or
subtract from the list of general pre-approved services from time to time, based
on subsequent determinations.
The purpose of this Policy is to set forth the policy and procedures by
which the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes that
implementation of the Policy will not adversely affect the Independent Auditors'
independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may
delegate either type of pre-approval authority to one or more of its members.
The member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the Audit Committee at its next
scheduled meeting.
3. AUDIT SERVICES
4
<Page>
The annual Audit services engagement terms and fees are subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the
Independent Auditors to be able to form an opinion on the Fund's financial
statements. These other procedures include information systems and procedural
reviews and testing performed in order to understand and place reliance on the
systems of internal control, and consultations relating to the audit. The Audit
Committee will monitor the Audit services engagement as necessary, but no less
than on a quarterly basis, and will also approve, if necessary, any changes in
terms, conditions and fees resulting from changes in audit scope, Fund structure
or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the Independent Auditors reasonably
can provide. Other Audit services may include statutory audits and services
associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4,
etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the following Audit services. All
other Audit services not listed below must be specifically pre-approved by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated):
- Statutory audits or financial audits for the Fund
- Services associated with SEC registration statements (including new funds),
periodic reports and other documents filed with the SEC or other documents
issued in connection with securities offerings (e.g., comfort letters for
closed-end fund offerings, consents), and assistance in responding to SEC
comment letters
- Consultations by the Fund's management as to the accounting or disclosure
treatment of transactions or events and/or the actual or potential impact
of final or proposed rules, standards or interpretations by the SEC, FASB,
or other regulatory or standard setting bodies (Note: Under SEC rules, some
consultations may be "audit related" services rather than "audit" services)
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Fund's
financial statements and, to the extent they are Covered Services, the Covered
Entities or that are traditionally performed by the Independent Auditors.
Because the Audit Committee believes that the provision of Audit-related
services does not impair the independence of the auditor and is consistent with
the SEC's rules on auditor independence, the Audit Committee may grant general
pre-approval to Audit-related services. Audit-related services include, among
others, accounting consultations related to accounting, financial reporting or
disclosure matters not classified as "Audit services"; assistance with
understanding and
5
<Page>
implementing new accounting and financial reporting guidance from rulemaking
authorities; agreed-upon or expanded audit procedures related to accounting
and/or billing records required to respond to or comply with financial,
accounting or regulatory reporting matters; and assistance with internal control
reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the following Audit-related services.
All other Audit-related services not listed below must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated):
- Attest procedures not required by statute or regulation (including agreed
upon procedures related to the Closed-End Fund asset coverage tests
required by the rating agencies and/or lenders and agreed upon procedures
related to fund profitability analysis in connection with 15c management
contract renewal process
- Services associated with registration statement with Japanese regulatory
authorities, including issuance of consent and opinion for Morgan Stanley
Asia-Pacific Fund
- Due diligence services pertaining to potential fund mergers
- Issuance of SAS-70 reports on internal controls of a service provider
- Consultations by the Fund's management as to the accounting or disclosure
treatment of transactions or events and/or the actual or potential impact
of final or proposed rules, standards or interpretations by the SEC, FASB,
or other regulatory or standard-setting bodies (Note: Under SEC rules, some
consultations may be "audit" services rather than "audit-related" services)
- Information systems reviews not performed in connection with the audit
(e.g., application data center and technical reviews)
- General assistance with implementation of the requirements of SEC rules or
listing standards promulgated pursuant to the Sarbanes-Oxley Act
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide Tax
services to the Fund and, to the extent they are Covered Services, the Covered
Entities, such as tax compliance, tax planning and tax advice without impairing
the auditor's independence, and the SEC has stated that the Independent Auditors
may provide such services. Hence, the Audit Committee believes it may grant
general pre-approval to those Tax services that have historically been provided
by the Independent Auditors, that the Audit Committee has reviewed and believes
would not impair the independence of the Independent Auditors, and that are
consistent with the SEC's rules on auditor independence. The Audit Committee
will not permit the retention of the Independent Auditors in connection with a
transaction initially recommended by the Independent Auditors, the sole business
purpose of which may be tax avoidance and the tax treatment
6
<Page>
of which may not be supported in the Internal Revenue Code and related
regulations. The Audit Committee will consult with Director of Tax or outside
counsel to determine that the tax planning and reporting positions are
consistent with this policy.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved
the following Tax Services. All Tax services involving large and complex
transactions not listed below must be specifically pre-approved by the Audit
Committee (or by any member of the Audit Committee to which pre-approval has
been delegated), including tax services proposed to be provided by the
Independent Auditors to any executive officer or trustee/director/managing
general partner of the Fund, in his or her individual capacity, where such
services are paid for by the Fund (generally applicable only to internally
managed investment companies):
- U.S. federal, state and local tax planning and advice
- U.S. federal, state and local tax compliance
- International tax planning and advice
- International tax compliance
- Review/preparation of federal, state, local and international income,
franchise, and other tax returns
- Identification of Passive Foreign Investment Companies
- Preparation of local Indian Tax Returns
- Domestic and foreign tax planning, compliance, and advice
- Assistance with tax audits and appeals before the IRS and similar state,
local and foreign agencies
- Tax advice and assistance regarding statutory, regulatory or administrative
developments (e.g., excise tax reviews, evaluation of Fund's tax compliance
function)
- Review the calculations of taxable income from corporate actions including
reorganizations related to bankruptcy filings and provide guidance related
to the foregoing
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the following All Other services.
Permissible All Other services not listed below must be specifically
pre-approved by the
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Audit Committee (or by any member of the Audit Committee to which pre-approval
has been delegated):
- Risk management advisory services, e.g., assessment and testing of security
infrastructure controls
The following is a list of the SEC's prohibited non-audit services. The
SEC's rules and relevant guidance should be consulted to determine the precise
definitions of these services and the applicability of exceptions to certain of
the prohibitions:
- Bookkeeping or other services related to the accounting records or
financial statements of the audit client
- Financial information systems design and implementation
- Appraisal or valuation services, fairness opinions or contribution-in-kind
reports
- Actuarial services
- Internal audit outsourcing services
- Management functions
- Human resources
- Broker-dealer, investment adviser or investment banking services
- Legal services
- Expert services unrelated to the audit
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be provided
by the Independent Auditors will be established annually by the Audit Committee.
Any proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the
overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services. For each fiscal year, the Audit
Committee may determine the appropriate ratio between the total amount of fees
for Audit, Audit-related, and Tax services for the Fund (including any
Audit-related or Tax services fees for Covered Entities subject to
pre-approval), and the total amount of fees for certain permissible non-audit
services classified as All Other services for the Fund (including any such
services for Covered Entities subject to pre-approval).
8. PROCEDURES
All requests or applications for services to be provided by the Independent
Auditors that do not require specific approval by the Audit Committee will be
submitted to the Fund's Chief Financial Officer and must include a detailed
description of the services to be rendered. The Fund's Chief Financial Officer
will determine whether such services are included within the list of services
that have received the general pre-approval of the Audit Committee. The Audit
Committee will be informed on a timely basis of any such services rendered by
the Independent Auditors. Requests or applications to provide services that
require specific approval by the Audit Committee will be submitted to the Audit
Committee by both the Independent Auditors and the
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Fund's Chief Financial Officer, and must include a joint statement as to
whether, in their view, the request or application is consistent with the SEC's
rules on auditor independence.
The Audit Committee has designated the Fund's Chief Financial Officer to
monitor the performance of all services provided by the Independent Auditors and
to determine whether such services are in compliance with this Policy. The
Fund's Chief Financial Officer will report to the Audit Committee on a periodic
basis on the results of its monitoring. Both the Fund's Chief Financial Officer
and management will immediately report to the chairman of the Audit Committee
any breach of this Policy that comes to the attention of the Fund's Chief
Financial Officer or any member of management.
The Audit Committee will also review the internal auditor's annual internal
audit plan to determine that the plan provides for the monitoring of the
Independent Auditors' services.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an annual
basis to meet its responsibility to oversee the work of the Independent Auditors
and to assure the auditor's independence from the Fund, such as reviewing a
formal written statement from the Independent Auditors delineating all
relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any entity
controlling, controlled by or under common control with the Fund's investment
adviser(s) that provides ongoing services to the Fund(s). Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Fund's
audit committee must pre-approve non-audit services provided not only to the
Fund but also to the Covered Entities if the engagements relate directly to the
operations and financial reporting of the Fund. This list of Covered Entities
would include:
MORGAN STANLEY RETAIL FUNDS
Morgan Stanley Investment Advisors Inc.
Morgan Stanley & Co. Incorporated
Morgan Stanley DW Inc.
Morgan Stanley Investment Management
Morgan Stanley Investments LP
Van Kampen Asset Management Inc.
Morgan Stanley Services Company, Inc.
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Morgan Stanley Distributors Inc.
Morgan Stanley Trust FSB
MORGAN STANLEY INSTITUTIONAL FUNDS
Morgan Stanley Investment Management Inc.
Morgan Stanley Investments LP
Morgan Stanley & Co. Incorporated
Morgan Stanley Distribution, Inc.
Morgan Stanley AIP GP LP
Morgan Stanley Alternative Investment Partners LP
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to the
Registrant and Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
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ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED.]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Fund and its investment advisor's Proxy Voting Policies and Procedures are
as follows:
I. POLICY STATEMENT
INTRODUCTION - Morgan Stanley Investment Management's ("MSIM") policies and
procedures for voting proxies with respect to securities held in the accounts of
clients applies to those MSIM entities that provide discretionary Investment
Management services and for which a MSIM entity has the authority to vote their
proxies. The policies and procedures and general guidelines in this section will
be reviewed and, as necessary, updated periodically to address new or revised
proxy voting issues. The MSIM entities covered by these policies and procedures
currently include the following: Morgan Stanley Investment Advisors Inc., Morgan
Stanley Alternative Investment Partners, L.P., Morgan Stanley AIP GP LP, Morgan
Stanley Investment Management Inc., Morgan Stanley Investment Group Inc., Morgan
Stanley Investment Management Limited, Morgan Stanley Investment Management
Company, Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan
Stanley Investment Management Private Limited, Morgan Stanley Investments LP,
Morgan Stanley Hedge Fund Partners GP LP, Morgan Stanley Hedge Fund Partners LP,
Van Kampen Investment Advisory Corp., Van Kampen Asset Management Inc., and Van
Kampen Advisors Inc. (each a "MSIM Affiliate" and collectively referred to as
the "MSIM Affiliates").
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Each MSIM Affiliate will vote proxies as part of its authority to manage,
acquire and dispose of account assets. With respect to the MSIM registered
management investment companies (Van Kampen, Institutional and Advisor
Funds)(collectively referred to as the "MSIM Funds"), each MSIM Fund will vote
proxies pursuant to authority granted under its applicable investment advisory
agreement or, in the absence of such authority, as authorized by its Board of
Directors or Trustees. A MSIM Affiliate will not vote proxies if the "named
fiduciary" for an ERISA account has reserved the authority for itself, or in the
case of an account not governed by ERISA, the Investment Management Agreement
does not authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will, in
a prudent and diligent manner, vote proxies in the best interests of clients,
including beneficiaries of and participants in a client's benefit plan(s) for
which we manage assets, consistent with the objective of maximizing long-term
investment returns ("Client Proxy Standard"). In certain situations, a client or
its fiduciary may provide a MSIM Affiliate with a statement of proxy voting
policy. In these situations, the MSIM Affiliate will comply with the client's
policy unless to do so would be inconsistent with applicable laws or regulations
or the MSIM Affiliate's fiduciary responsibility.
PROXY RESEARCH SERVICES - To assist the MSIM Affiliates in their responsibility
for voting proxies and the overall global proxy voting process, Institutional
Shareholder Services ("ISS") and the Investor Responsibility Research Center
("IRRC") have been retained as experts in the proxy voting and corporate
governance area. ISS and IRRC are independent advisers that specialize in
providing a variety of fiduciary-level proxy-related services to institutional
investment managers, plan sponsors, custodians, consultants, and other
institutional investors. The services provided to MSIM Affiliates include
in-depth research, global issuer analysis, and voting recommendations. In
addition to research, ISS provides vote execution, reporting, and recordkeeping.
MSIM's Proxy Review Committee (see Section IV.A. below) will carefully monitor
and supervise the services provided by the proxy research services.
VOTING PROXIES FOR CERTAIN NON-US COMPANIES - While the proxy voting process is
well established in the United States and other developed markets with a number
of tools and services available to assist an investment manager, voting proxies
of non-US companies located in certain jurisdictions, particularly emerging
markets, may involve a number of problems that may restrict or prevent a MSIM
Affiliate's ability to vote such proxies. These problems include, but are not
limited to: (i) proxy statements and ballots being written in a language other
than English; (ii) untimely and/or inadequate notice of shareholder meetings;
(iii) restrictions on the ability of holders outside the issuer's jurisdiction
of organization to exercise votes; (iv) requirements to vote proxies in person,
(v) the imposition of restrictions on the sale of the securities for a period of
time in proximity to the shareholder meeting; and (vi) requirements to provide
local agents with power of attorney to facilitate the MSIM Affiliate's voting
instructions. As a result, clients' non-U.S. proxies will be voted on a best
efforts basis only, consistent with the Client Proxy Standard. ISS has been
retained to provide assistance to the MSIM Affiliates in connection with voting
their clients' non-US proxies.
II. GENERAL PROXY VOTING GUIDELINES
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To ensure consistency in voting proxies on behalf of its clients, MSIM
Affiliates will follow (subject to any exception set forth herein) these Proxy
Voting Policies and Procedures, including the guidelines set forth below. These
guidelines address a broad range of issues, including board size and
composition, executive compensation, anti-takeover proposals, capital structure
proposals and social responsibility issues and are meant to be general voting
parameters on issues that arise most frequently. The MSIM Affiliates, however,
may vote in a manner that is contrary to the following general guidelines,
pursuant to the procedures set forth in Section IV. below, provided the vote is
consistent with the Client Proxy Standard.
III. GUIDELINES
A. MANAGEMENT PROPOSALS
1. When voting on routine ballot items the following proposals are
generally voted in support of management, subject to the review and
approval of the Proxy Review Committee, as appropriate.
- Selection or ratification of auditors.
- Approval of financial statements, director and auditor reports.
- Election of Directors.
- Limiting Directors' liability and broadening indemnification of
Directors.
- Requirement that a certain percentage (up to 66 2/3%) of its
Board's members be comprised of independent and unaffiliated
Directors.
- Requirement that members of the company's compensation,
nominating and audit committees be comprised of independent or
unaffiliated Directors.
- Recommendations to set retirement ages or require specific levels
of stock ownership by Directors.
- General updating/corrective amendments to the charter.
- Elimination of cumulative voting.
- Elimination of preemptive rights.
- Provisions for confidential voting and independent tabulation of
voting results.
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- Proposals related to the conduct of the annual meeting except
those proposals that relate to the "transaction of such other
business which may come before the meeting."
2. The following non-routine proposals, which potentially may have a
substantive financial or best interest impact on a shareholder, are
generally voted in support of management, subject to the review and
approval of the Proxy Review Committee, as appropriate.
CAPITALIZATION CHANGES
- Capitalization changes that eliminate other classes of stock and
voting rights.
- Proposals to increase the authorization of existing classes of
common stock (or securities convertible into common stock) if:
(i) a clear and legitimate business purpose is stated; (ii) the
number of shares requested is reasonable in relation to the
purpose for which authorization is requested; and (iii) the
authorization does not exceed 100% of shares currently authorized
and at least 30% of the new authorization will be outstanding.
- Proposals to create a new class of preferred stock or for
issuances of preferred stock up to 50% of issued capital.
- Proposals for share repurchase plans.
- Proposals to reduce the number of authorized shares of common or
preferred stock, or to eliminate classes of preferred stock.
- Proposals to effect stock splits.
- Proposals to effect reverse stock splits if management
proportionately reduces the authorized share amount set forth in
the corporate charter. Reverse stock splits that do not adjust
proportionately to the authorized share amount will generally be
approved if the resulting increase in authorized shares coincides
with the proxy guidelines set forth above for common stock
increases.
COMPENSATION
- Director fees, provided the amounts are not excessive relative to
other companies in the country or industry.
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- Employee stock purchase plans that permit discounts up to 15%,
but only for grants that are part of a broad based employee plan,
including all non-executive employees.
- Establishment of Employee Stock Option Plans and other employee
ownership plans.
ANTI-TAKEOVER MATTERS
- Modify or rescind existing supermajority vote requirements to
amend the charters or bylaws.
- Adoption of anti-greenmail provisions provided that the proposal:
(i) defines greenmail; (ii) prohibits buyback offers to large
block holders not made to all shareholders or not approved by
disinterested shareholders; and (iii) contains no anti-takeover
measures or other provisions restricting the rights of
shareholders.
3. The following non-routine proposals, which potentially may have a
substantive financial or best interest impact on the shareholder, are
generally voted AGAINST (notwithstanding management support), subject
to the review and approval of the Proxy Review Committee, as
appropriate.
- Capitalization changes that add classes of stock which
substantially dilute the voting interests of existing
shareholders.
- Proposals to increase the authorized number of shares of existing
classes of stock that carry preemptive rights or supervoting
rights.
- Creation of "blank check" preferred stock.
- Changes in capitalization by 100% or more.
- Compensation proposals that allow for discounted stock options
that have not been offered to employees in general.
- Amendments to bylaws that would require a supermajority
shareholder vote to pass or repeal certain provisions.
- Proposals to indemnify auditors.
4. The following types of non-routine proposals, which potentially may
have a potential financial or best interest impact on an issuer, are
voted as determined by the Proxy Review Committee.
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CORPORATE TRANSACTIONS
- Mergers, acquisitions and other special corporate transactions
(i.e., takeovers, spin-offs, sales of assets, reorganizations,
restructurings and recapitalizations) will be examined on a
case-by-case basis. In all cases, ISS and IRRC research and
analysis will be used along with MSIM Affiliates' research and
analysis, based on, among other things, MSIM internal
company-specific knowledge.
- Change-in-control provisions in non-salary compensation plans,
employment contracts, and severance agreements that benefit
management and would be costly to shareholders if triggered.
- Shareholders rights plans that allow appropriate offers to
shareholders to be blocked by the board or trigger provisions
that prevent legitimate offers from proceeding.
- Executive/Director stock option plans. Generally, stock option
plans should meet the following criteria:
(i) Whether the stock option plan is incentive based;
(ii) For mature companies, should be no more than 5% of the
issued capital at the time of approval;
(iii) For growth companies, should be no more than 10% of the
issued capital at the time of approval.
ANTI-TAKEOVER PROVISIONS
- Proposals requiring shareholder ratification of poison pills.
- Anti-takeover and related provisions that serve to prevent the
majority of shareholders from exercising their rights or
effectively deter the appropriate tender offers and other offers.
B. SHAREHOLDER PROPOSALS
1. The following shareholder proposals are generally supported, subject
to the review and approval of the Proxy Review Committee, as
appropriate:
- Requiring auditors to attend the annual meeting of shareholders.
- Requirement that members of the company's compensation,
nominating and audit committees be comprised of independent or
unaffiliated Directors.
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- Requirement that a certain percentage of its Board's members be
comprised of independent and unaffiliated Directors.
- Confidential voting.
- Reduction or elimination of supermajority vote requirements.
2. The following shareholder proposals will be voted as determined by the
Proxy Review Committee.
- Proposals that limit tenure of directors.
- Proposals to limit golden parachutes.
- Proposals requiring directors to own large amounts of stock to be
eligible for election.
- Restoring cumulative voting in the election of directors.
- Proposals that request or require disclosure of executive
compensation in addition to the disclosure required by the
Securities and Exchange Commission ("SEC") regulations.
- Proposals that limit retirement benefits or executive
compensation.
- Requiring shareholder approval for bylaw or charter amendments.
- Requiring shareholder approval for shareholder rights plan or
poison pill.
- Requiring shareholder approval of golden parachutes.
- Elimination of certain anti-takeover related provisions.
- Prohibit payment of greenmail.
3. The following shareholder proposals are generally not supported,
subject to the review and approval of the Committee, as appropriate.
- Requirements that the issuer prepare reports that are costly to
provide or that would require duplicative efforts or expenditures
that are of a non-business nature or would provide no pertinent
information from the perspective of institutional shareholders.
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- Restrictions related to social, political or special interest
issues that impact the ability of the company to do business or
be competitive and that have a significant financial or best
interest impact to the shareholders.
- Proposals that require inappropriate endorsements or corporate
actions.
IV. ADMINISTRATION OF PROXY POLICIES AND PROCEDURES
A. PROXY REVIEW COMMITTEE
1. The MSIM Proxy Review Committee ("Committee") is responsible for
creating and implementing MSIM's Proxy Voting Policy and Procedures
and, in this regard, has expressly adopted them. Following are some of
the functions and responsibilities of the Committee.
(a) The Committee, which will consist of members designated by MSIM's
Chief Investment Officer, is responsible for establishing MSIM's
proxy voting policies and guidelines and determining how MSIM
will vote proxies on an ongoing basis.
(b) The Committee will periodically review and have the authority to
amend as necessary MSIM's proxy voting policies and guidelines
(as expressed in these Proxy Voting Policy and Procedures) and
establish and direct voting positions consistent with the Client
Proxy Standard.
(c) The Committee will meet at least monthly to (among other
matters): (1) address any outstanding issues relating to MSIM's
Proxy Voting Policy and Procedures; and (2) generally review
proposals at upcoming shareholder meetings of MSIM portfolio
companies in accordance with this Policy and Procedures
including, as appropriate, the voting results of prior
shareholder meetings of the same issuer where a similar proposal
was presented to shareholders. The Committee, or its designee,
will timely communicate to ISS MSIM's Proxy Voting Policy and
Procedures (and any amendments to them and/or any additional
guidelines or procedures it may adopt).
(d) The Committee will meet on an ad hoc basis to (among other
matters): (1) authorize "split voting" (i.e., allowing certain
shares of the same issuer that are the subject of the same proxy
solicitation and held by one or more MSIM portfolios to be voted
differently than other shares) and/or "override voting" (i.e.,
voting all MSIM portfolio shares in a manner contrary to the
Procedures); (2) review and approve upcoming votes, as
appropriate, for matters
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for which specific direction has been provided in Sections I, II,
and III above; and (3) determine how to vote matters for which
specific direction has not been provided in Sections I, II and
III above. Split votes will generally not be approved within a
single Global Investor Group team. The Committee may take into
account ISS recommendations and the research provided by IRRC as
well as any other relevant information they may request or
receive.
(e) In addition to the procedures discussed above, if the Committee
determines that an issue raises a potential material conflict of
interest, or gives rise to the appearance of a potential material
conflict of interest, the Committee will designate a special
committee to review, and recommend a course of action with
respect to, the conflict(s) in question ("Special Committee").
The Special Committee may request the assistance of the Law and
Compliance Departments and will have sole discretion to cast a
vote. In addition to the research provided by ISS and IRRC, the
Special Committee may request analysis from MSIM Affiliate
investment professionals and outside sources to the extent it
deems appropriate.
(f) The Committee and the Special Committee, or their designee(s),
will document in writing all of their decisions and actions,
which documentation will be maintained by the Committee and the
Special Committee, or their designee(s) for a period of at least
6 years. To the extent these decisions relate to a security held
by a MSIM U.S. registered investment company, the Committee and
Special Committee, or their designee(s), will report their
decisions to each applicable Board of Trustees/Directors of those
investment companies at each Board's next regularly Scheduled
Board meeting. The report will contain information concerning
decisions made by the Committee and Special Committee during the
most recently ended calendar quarter immediately preceding the
Board meeting.
The Committee and Special Committee, or their designee(s), will timely
communicate to applicable PMs, the Compliance Departments and, as necessary to
ISS, decisions of the Committee and Special Committee so that, among other
things, ISS will vote proxies consistent with their decisions.
ITEM 8. [RESERVED.]
ITEM 9. CONTROLS AND PROCEDURES.
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(a) The Fund's chief executive officer and chief financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient
to ensure that information required to be disclosed by the Fund in this
Form N-CSR was recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms, based upon such officers' evaluation of these controls and procedures
as of a date within 90 days of the filing date of the report.
(b) There were no changes in the Fund's internal control over financial
reporting that occurred during the registrant's most recent second fiscal
half-year that has materially affected, or is reasonably likely to materially
affect, the Fund's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) [Attach the Code of Ethics]
(b)(1) [Attach the 302 Certification of Chief Executive Officer]
(b)(2) [Attach the 302 Certification of Chief Financial Officer]
[Note: the 906 Certifications are not exhibits to the Form but are filed with
the Form.]
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Morgan Stanley Asia-Pacific Fund, Inc.
--------------------------------------------------------------------
By: /s/ Ronald E. Robison
-----------------------------------------------------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: 2/18/2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Ronald E. Robison
-----------------------------------------------------------------------------
Name: Ronald E. Robison
Title: Principal Executive Officer
Date: 2/18/2004
By: /s/ James W. Garrett
-----------------------------------------------------------------------------
Name: James W. Garrett
Title: Chief Financial Officer
Date: 2/18/2004