<Page> UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-06608 Morgan Stanley Latin American Growth Fund (Exact name of registrant as specified in charter) 1221 Avenue of the Americas, New York, New York 10020 (Address of principal executive offices) (Zip code) Ronald E. Robison 1221 Avenue of the Americas, New York, New York 10020 (Name and address of agent for service) Registrant's telephone number, including area code: 212-762-4000 Date of fiscal year end: January 31, 2004 Date of reporting period: January 31, 2004 Item 1 - Report to Shareholders <Page> WELCOME, SHAREHOLDER: IN THIS REPORT, YOU'LL LEARN ABOUT HOW YOUR INVESTMENT IN MORGAN STANLEY LATIN AMERICAN GROWTH FUND PERFORMED DURING THE ANNUAL PERIOD. WE WILL PROVIDE AN OVERVIEW OF THE MARKET CONDITIONS, AND DISCUSS SOME OF THE FACTORS THAT AFFECTED PERFORMANCE DURING THE REPORTING PERIOD. IN ADDITION, THIS REPORT INCLUDES THE FUND'S FINANCIAL STATEMENTS AND A LIST OF FUND INVESTMENTS. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING OFFERED. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES OF SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE FUND'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE MONEY INVESTING IN THIS FUND. <Page> FUND REPORT For the year ended January 31, 2004 TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED JANUARY 31, 2004 <Table> <Caption> MSCI EMERGING LIPPER MARKETS LATIN LATIN AMERICAN AMERICA FUNDS CLASS A CLASS B CLASS C CLASS D INDEX(1) AVERAGE(2) 68.27% 66.94% 67.08% 68.62% 81.42% 70.28% </Table> THE PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF ALL DISTRIBUTIONS BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SEE THE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE INFORMATION. MARKET CONDITIONS After a weak first quarter in 2003, the Latin American markets rebounded dramatically in the second quarter and remained strong through the remainder of the 12-month period ended January 31, 2004. The region participated in the global equity rally that occurred on the news of a successful military operation in Iraq, the implementation of accommodative global monetary policies and a recovery in global growth. As with other emerging markets, the Latin American region received a double boost from the outperformance of commodity-related stocks as well as investors' appetite for markets that had been beaten down in the previous bear market. The Brazilian market gained 102.2 percent during the period as domestic economic data improved and political uncertainty surrounding President Luiz Inacio Lula da Silva's policy intentions abated. Chile also rebounded strongly during the period, bolstered by strong economic data and greater than expected buying among domestic pension funds helping to push valuations well beyond the premiums where Chile normally trades. The smaller markets of Argentina, Peru and Colombia also performed well, each posting high-double-digit gains on improving economic data. Mexico was the hemisphere's laggard, returning 48.71 percent. That country's market was hampered by weak economic data and disappointing progress on much needed reforms. PERFORMANCE ANALYSIS Morgan Stanley Latin American Growth Fund underperformed both the MSCI Emerging Markets Latin America Index and the Lipper Latin American Funds Average during the 12-month period ended January 31, 2004. For the year, Brazil -- and, to a lesser extent, Chile and Mexico -- were the primary detractors to relative performance. The Fund's underperformance in Venezuela remains technical in nature, as capital controls introduced there earlier this year continue to distort the market, leading Venezuelan local shares to outperform ADR equivalents significantly. In terms of positive contributors, during the year our stock selection in Peru, coupled with our overweighted position relative to the MSCI Emerging Markets Latin America Index in Brazil -- which rebounded from its early year weakness -- and Venezuela added to relative returns. In Brazil, despite positive country allocation scores overall, stock selection was the largest detractor to relative performance, because the market rally was led by already expensive lower quality companies in an area where the portfolio was underweighted. The rally turned out to be particularly strong in the regulated sectors of the economy such as utilities and telecommunications. These sectors were and are characterized by poor historical returns on capital, weak management and ineffective corporate governance, along with a significant degree of regulatory uncertainty. In Chile we found few firms to be attractive on both a fundamental and a valuation basis, so we underweighted the market relative to the MSCI benchmark. The Fund was also negatively affected by its overweighted position in the underperforming Mexican market. While our stock selection in Brazil detracted from performance, the Fund's overweighted position in that country relative to the MSCI Emerging Markets Latin America Index boosted its performance. Our stock selection in Peru was strong, particularly from holdings in the mining company Buenaventura as it benefited from a rally in gold during the period. 2 <Page> TOP 10 HOLDINGS <Table> America Movil - Series L (ADR) 11.6% Telefonos de Mexico - Series L (ADR) 8.4 Petroleo Brasileiro (ADR) 7.0 Petroleo Brasileiro (ADR) (Pref.) 6.2 Companhia Vale Do Rio (ADR) (Pref.) 5.9 Companhia de Bebidas (ADR) (Pref.) 5.1 Grupo Televisa - GPO (ADR) 4.3 Wal-Mart de Mexico - Series C 3.3 Grupo Financiero BBVA - Series B 3.3 Banco Itau Holding Fin (ADR) (Pref.) 3.3 </Table> TOP 5 COUNTRIES <Table> Brazil 49.6% Mexico 40.1 Chile 4.6 Venezuela 2.0 Luxembourg 1.5 </Table> DATA AS OF JANUARY 31, 2004. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES ARE A PERCENTAGE OF NET ASSETS. PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE DEEMED A RECOMMENDATION TO BUY THE SECURITIES MENTIONED. MORGAN STANLEY IS A FULL-SERVICE SECURITIES FIRM ENGAGED IN SECURITIES TRADING AND BROKERAGE ACTIVITIES, INVESTMENT BANKING, RESEARCH AND ANALYSIS, FINANCING AND FINANCIAL ADVISORY SERVICES. ANNUAL HOUSEHOLDING NOTICE To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling (800) 350-6414, 8:00 a.m. to 8:00 p.m. ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days. INVESTMENT STRATEGY 1. THE FUND WILL NORMALLY INVEST AT LEAST 80 PERCENT OF ITS ASSETS IN COMMON STOCKS AND OTHER EQUITY SECURITIES (INCLUDING DEPOSITARY RECEIPTS) OF LATIN AMERICAN COMPANIES. 2. IN DETERMINING WHICH SECURITIES TO BUY, HOLD OR SELL FOR THE FUND, THE FUND'S INVESTMENT MANAGER, MORGAN STANLEY INVESTMENT ADVISORS INC., SELECTS SECURITIES BASED ON ITS VIEW OF THEIR POTENTIAL FOR CAPITAL APPRECIATION; CURRENT DIVIDEND INCOME WILL NOT BE A FACTOR. 3. THE INVESTMENT MANAGER USES A TOP-DOWN COUNTRY ALLOCATION APPROACH TOGETHER WITH BOTTOM-UP STOCK SELECTION. THE APPROACH BEGINS WITH AN EVALUATION OF THE COUNTRY IN WHICH THE PROPOSED INVESTMENT IS TO BE MADE. 4. FOLLOWING THE COUNTRY LEVEL REVIEW, THE INVESTMENT MANAGER CONDUCTS A FUNDAMENTAL ANALYSIS OF SPECIFIC SECURITIES, INDUSTRIES AND COMPANIES. THE FUND'S EQUITY SECURITIES WILL PREDOMINATELY CONSIST OF THE COMMON AND PREFERRED STOCK OF COMPANIES LISTED ON A RECOGNIZED SECURITIES EXCHANGE OR TRADED IN OTHER REGULATED MARKETS. 5. THE FUND'S ASSETS WILL BE ALLOCATED AMONG THE COUNTRIES IN LATIN AMERICA IN ACCORDANCE WITH THE INVESTMENT MANAGER'S JUDGMENT AS TO WHERE FAVORABLE INVESTMENT OPPORTUNITIES EXIST. HOWEVER, THE INVESTMENT MANAGER WILL NORMALLY INVEST IN AT LEAST THREE LATIN AMERICAN COUNTRIES. 6. THE REMAINING 20 PERCENT OF THE FUND'S ASSETS MAY BE INVESTED IN LATIN AMERICAN CONVERTIBLE AND DEBT SECURITIES (INCLUDING ZERO COUPON SECURITIES AND JUNK BONDS) AND OTHER INVESTMENT COMPANIES. THE FUND MAY ALSO UTILIZE FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. 7. IN PURSUING THE FUND'S INVESTMENT OBJECTIVE, THE INVESTMENT MANAGER HAS CONSIDERABLE LEEWAY IN DECIDING WHICH INVESTMENTS IT BUYS, HOLDS OR SELLS ON A DAY-TO-DAY BASIS -- AND WHICH TRADING STRATEGIES IT USES. FOR EXAMPLE, THE INVESTMENT MANAGER IN ITS DISCRETION MAY DETERMINE TO USE SOME PERMITTED TRADING STRATEGIES WHILE NOT USING OTHERS. PROXY VOTING POLICIES AND PROCEDURES A DESCRIPTION OF THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE VOTING OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING (800) 869-NEWS (6397). THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT http://www.sec.gov. 3 <Page> PERFORMANCE SUMMARY [CHART] PERFORMANCE OF A $10,000 INVESTMENT -- CLASS B <Table> <Caption> CLASS B MSCI EMF LA(1) LIPPER(2) January 31, 1994 $ 10,000 $ 10,000 $ 10,000 January 31, 1995 $ 5,988 $ 7,698 $ 6,631 January 31, 1996 $ 6,071 $ 8,305 $ 7,043 January 31, 1997 $ 7,345 $ 10,112 $ 8,833 January 31, 1998 $ 7,742 $ 10,772 $ 9,420 January 31, 1999 $ 4,636 $ 6,933 $ 5,729 January 31, 2000 $ 7,659 $ 11,961 $ 9,812 January 31, 2001 $ 7,396 $ 11,938 $ 9,892 January 31, 2002 $ 6,186 $ 10,348 $ 8,439 January 31, 2003 $ 4,646 $ 7,738 $ 6,450 January 31, 2004 $ 7,756(5) $ 14,039 $ 10,984 </Table> PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH LESS THAN THEIR ORIGINAL COST. THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PERFORMANCE FOR CLASS A, CLASS B, CLASS C, AND CLASS D SHARES WILL VARY DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES. 4 <Page> AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED JANUARY 31, 2004 <Table> <Caption> CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES++ (SINCE 07/28/97) (SINCE 12/30/92) (SINCE 07/28/97) (SINCE 07/28/97) SYMBOL LATAX LATBX LATCX LATDX 1 YEAR 68.27%(3) 66.94%(3) 67.08%(3) 68.62%(3) 59.44(4) 61.94(4) 66.08(4) - 5 YEARS 11.70(3) 10.84(3) 10.91(3) 11.93(3) 10.50(4) 10.57(4) 10.91(4) - 10 YEARS - (2.51)(3) - - - (2.51)(4) - - SINCE INCEPTION (2.69)(3) 2.09(3) (3.40)(3) (2.49)(3) (3.49)(4) 2.09(4) (3.40)(4) - </Table> Notes on Performance (1) THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS LATIN AMERICA INDEX (MSCI EM LA INDEX) IS A MARKET CAPITALIZATION WEIGHTED INDEX THAT INCLUDES SELECT SECURITIES FROM ARGENTINA, BRAZIL, CHILE, COLOMBIA, MEXICO, PERU, AND VENEZUELA. FOR THE PERIOD FROM THE FUND'S INCEPTION THROUGH DECEMBER 31, 2000, THE INDEX'S RETURNS INCLUDE THOSE OF THE MSCI EM LA'S "GROSS" INDEX WHICH ASSUMES DIVIDENDS GROSS OF WITHHOLDING TAXES BUT NET OF DOMESTIC TAX CREDITS. FOR THE PERIOD FROM JANUARY 1, 2001 AND BEYOND, THE INDEX'S RETURNS REFLECT THOSE OF THE "NET" INDEX WHICH REFLECTS A REDUCTION IN DIVIDENDS AFTER TAKING INTO ACCOUNT WITHHOLDING OF TAXES BY CERTAIN FOREIGN COUNTRIES REPRESENTED IN THE INDEX. THE INDEX DOES NOT INCLUDE ANY EXPENSES, FEES OR CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX. (2) THE LIPPER LATIN AMERICAN FUNDS AVERAGE TRACKS THE PERFORMANCE OF ALL FUNDS IN THE LIPPER LATIN AMERICAN FUNDS CLASSIFICATION. THE AVERAGE, WHICH IS ADJUSTED FOR CAPITAL GAINS DISTRIBUTIONS AND INCOME DIVIDENDS, IS UNMANAGED AND SHOULD NOT BE CONSIDERED AN INVESTMENT. (3) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT THE DEDUCTION OF ANY SALES CHARGES. (4) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND THE DEDUCTION OF THE MAXIMUM APPLICABLE SALES CHARGE. SEE THE FUND'S CURRENT PROSPECTUS FOR COMPLETE DETAILS ON FEES AND SALES CHARGES. (5) CLOSING VALUE ASSUMING A COMPLETE REDEMPTION ON JANUARY 31, 2004. * THE MAXIMUM FRONT-END SALES CHARGE FOR CLASS A IS 5.25%. ** THE MAXIMUM CDSC FOR CLASS B IS 5.0%. THE CDSC DECLINES TO 0% AFTER SIX YEARS. + THE MAXIMUM CDSC FOR CLASS C IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF PURCHASE. ++ CLASS D HAS NO SALES CHARGE. 5 <Page> MORGAN STANLEY LATIN AMERICAN GROWTH FUND PORTFOLIO OF INVESTMENTS - JANUARY 31, 2004 <Table> <Caption> NUMBER OF SHARES VALUE - ---------------------------------------------------------------------------- COMMON AND PREFERRED STOCKS (98.9%) BRAZIL (49.6%) AEROSPACE & DEFENSE 8,100 Empresa Brasileira de Aeronautica S.A. (ADR) (Pref)* $ 238,707 3,000 Empresa Brasileira de Aeronautica S.A. (Pref.) 22,007 --------------- 260,714 --------------- BEVERAGES: ALCOHOLIC 109,310 Companhia de Bebidas das Americas (ADR) (Pref.) 2,639,836 --------------- CHEMICALS: SPECIALTY 4,020,000 Braskem S.A. (Class A) (Pref.)* 91,905 --------------- ELECTRIC UTILITIES 11,700,000 Centrais Electricas Brasileiras S.A. (Class B) (Pref.) 140,719 53,406 Companhia Energetica de Minas Gerais (ADR) (Pref.)* 894,550 24,478,000 Companhia Energetica de Minas Gerais (Pref.)* 414,917 --------------- 1,450,186 --------------- FOOD RETAIL 57,200 Companhia Brasileira de Distribuicao Grupo Pao de Acucar (ADR) (Pref.) 1,315,028 --------------- INTEGRATED OIL 123,233 Petroleo Brasileiro S.A. (ADR) 3,623,050 118,261 Petroleo Brasileiro S.A. (ADR) (Pref.) 3,164,664 1,676 Petroleo Brasileiro S.A. (Pref.) $ 44,707 --------------- 6,832,421 --------------- OTHER METALS/MINERALS 7,500 Companhia Vale do Rio Doce (ADR)* 402,525 1,448 Companhia Vale do Rio Doce (Pref.) (Class A)* 68,424 64,002 Companhia Vale do Rio Doce S.A. (Class A) (ADR) (Pref.) 3,014,494 266,358 Companhia Vale do Rio Doce S.A. (Debentures)* 0 --------------- 3,485,443 --------------- PULP & PAPER 19,700 Aracruz Celulose S.A. (Class B) (ADR) (Pref.) 630,991 18,062 Votorantim Celulose e Papel S.A. (ADR) (Pref.) 544,569 2,104,000 Votorantim Celulose e Papel S.A. (Pref.) 126,161 --------------- 1,301,721 --------------- REGIONAL BANKS 45,632 Banco Bradesco S.A. (ADR) (Pref.) 1,152,208 39,658,000 Banco Bradesco S.A. (Pref.) 194,439 34,401 Banco Itau Holding Financeira S. A. (ADR) (Pref.)* 1,671,889 146,000 Banco Itau Holding Financeira S.A. (Pref.) 13,879 42,750 Unibanco-Uniao de Bancos Brasileiros S.A. (GDR) (Units)++ 995,648 --------------- 4,028,063 --------------- </Table> SEE NOTES TO FINANCIAL STATEMENTS 6 <Page> <Table> <Caption> NUMBER OF SHARES VALUE - ---------------------------------------------------------------------------- STEEL 317,000 Caemi Mineracao e Metalurgica S.A. (Pref.)* $ 142,569 2,105,000 Companhia Siderurgica Nacional S.A. 117,263 11,975 Companhia Siderurgica Nacional S.A. (ADR) 668,205 22,691 Gerdau S.A. (ADR) (Pref.) 474,696 25,769 Usinas Siderurgicas de Minas Gerais S.A. (Class A) (Pref.)* 270,070 --------------- 1,672,803 --------------- WIRELESS TELECOMMUNICATIONS 156,359 Telesp Celular Participacoes S.A. (ADR) (Pref.)* 1,177,383 421,835,000 Telesp Celular Participacoes S.A. (Pref.)* 1,236,041 --------------- 2,413,424 --------------- TOTAL BRAZIL 25,491,544 --------------- CHILE (4.6%) ELECTRIC UTILITIES 173,000 Enersis S.A. (ADR)* 1,138,340 --------------- FOOD RETAIL 21,491 Distribucion Y Servicio D&S S.A. (ADR) 359,974 --------------- REGIONAL BANKS 27,775 Banco Santander Chile S.A. (ADR) 735,482 --------------- SPECIALTY TELECOMMUNICATIONS 21,500 Empresa Nacional de Telecomunicaciones S.A.* 125,132 --------------- TOTAL CHILE 2,358,928 --------------- COLOMBIA (0.4%) BANKING 34,600 Bancolombia S.A. (ADR) (Pref.) $ 214,174 --------------- LUXEMBOURG (1.5%) BEVERAGES: ALCOHOLIC 10,900 Quilmes Industrial S.A. (Quinsa) (ADR)* 197,072 --------------- OILFIELD SERVICES/EQUIPMENT 17,585 Tenaris S.A. (ADR) 576,788 --------------- TOTAL LUXEMBOURG 773,860 --------------- MEXICO (40.1%) BEVERAGES: NON-ALCOHOLIC 26,300 Coca-Cola Femsa S.A. de C.V. (Series L) (ADR)* 612,790 --------------- BROADCASTING 55,200 Grupo Televisa S.A. - GPO (ADR) 2,235,600 --------------- CONSTRUCTION MATERIALS 32,345 Cemex S.A. de C.V. - CPO (ADR) 917,951 23,036 Cemex S.A. de C.V. - CPO 130,778 --------------- 1,048,729 --------------- DISCOUNT STORES 574,909 Wal-Mart de Mexico S.A. de C.V. (Series C) 1,675,562 379,779 Wal-Mart de Mexico S.A. de C.V. (Series V) 1,159,387 --------------- 2,834,949 --------------- ENGINEERING & CONSTRUCTION 375,000 Empresas ICA Sociedad Controladora S.A. de C.V.* 129,497 --------------- INDUSTRIAL CONGLOMERATES 135,600 Alfa, S.A. (Class A) 506,263 --------------- </Table> SEE NOTES TO FINANCIAL STATEMENTS 7 <Page> <Table> <Caption> NUMBER OF SHARES VALUE - ---------------------------------------------------------------------------- MAJOR TELECOMMUNICATIONS 96,600 Carso Global Telecom (Series A1)* $ 139,023 125,691 Telefonos de Mexico S.A. de C.V. (Series L) (ADR) 4,325,027 --------------- 4,464,050 --------------- OTHER METALS/MINERALS 121,300 Grupo Mexico S.A. de C.V. (Series B)* 373,374 --------------- OTHER TRANSPORTATION 24,500 Grupo Aeroportuario del Sureste S.A. de C.V. (Series B) (ADR) 474,075 --------------- REAL ESTATE DEVELOPMENT 21,300 Corporacion GEO, S.A. de C.V. (Series B)* 135,749 --------------- REGIONAL BANKS 51,000 Grupo Financiero Banorte S.A. de C.V. (O shares) 173,212 1,747,643 Grupo Financiero BBVA Bancomer, S.A. de C.V. (Series B)* 1,673,074 --------------- 1,846,286 --------------- WIRELESS TELECOMMUNICATIONS 191,353 America Movil S.A. de C.V. (Series L) (ADR) 5,979,781 --------------- TOTAL MEXICO 20,641,143 --------------- PERU (0.7%) PRECIOUS METALS 16,000 Compania de Minas Buenaventura S.A. (ADR) 374,400 --------------- VENEZUELA (2.0%) MAJOR TELECOMMUNICATIONS 56,400 Compania Anonima Nacional Telefonos de Venezuela (Class D) (ADR) $ 1,030,992 --------------- TOTAL COMMON AND PREFERRED STOCKS (COST $42,571,829) 50,885,041 --------------- <Caption> PRINCIPAL AMOUNT IN THOUSANDS - --------------- SHORT-TERM INVESTMENT (0.2%) REPURCHASE AGREEMENT $ 116 Joint repurchase agreement account 1.02% due 02/02/04 (dated 01/30/04; proceeds $116,010) (a) (COST $116,000) 116,000 --------------- TOTAL INVESTMENTS (COST $42,687,829) (b) 99.1% 51,001,041 OTHER ASSETS IN EXCESS OF LIABILITIES 0.9 439,754 ----- --------------- NET ASSETS 100.0% $ 51,440,795 ===== =============== </Table> ADR AMERICAN DEPOSITORY RECEIPT. GDR GLOBAL DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. ++ CONSISTS OF ONE OR MORE CLASS OF SECURITIES TRADED TOGETHER AS A UNIT; STOCKS WITH ATTACHED WARRANTS. (a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS. (b) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $42,785,514. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $8,602,656 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $387,129, RESULTING IN NET UNREALIZED APPRECIATION OF $8,215,527. SEE NOTES TO FINANCIAL STATEMENTS 8 <Page> FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JANUARY 31, 2004: <Table> <Caption> UNREALIZED CONTRACTS IN EXCHANGE DELIVERY APPRECIATION/ TO DELIVER FOR DATE (DEPRECIATION) - ------------------------------------------------------- $ 23,355 MXN 255,253 02/03/04 $ (281) $ 7,378 BRL 21,712 02/02/04 20 BRL 518,480 $ 175,935 02/04/04 (719) -------------- Net unrealized depreciation $ (980) ============== </Table> CURRENCY ABBREVIATIONS: <Table> BRL Brazilian Real. MXN Mexican Peso. </Table> SUMMARY OF INVESTMENTS <Table> <Caption> PERCENT OF INDUSTRY VALUE NET ASSETS - --------------------------------------------------------------------- Aerospace & Defense $ 260,714 0.5% Banking 214,174 0.4 Beverages: Alcoholic 2,836,908 5.5 Beverages: Non-Alcoholic 612,790 1.2 Broadcasting 2,235,600 4.4 Chemicals: Specialty 91,905 0.2 Construction Materials 1,048,729 2.0 Discount Stores 2,834,949 5.5 Electric Utilities 2,588,526 5.0 Engineering & Construction 129,497 0.3 Food Retail 1,675,002 3.3 Industrial Conglomerates 506,263 1.0 Integrated Oil 6,832,421 13.3 Major Telecommunications 5,495,042 10.7 Oilfield Services/ Equipment 576,788 1.1 Other Metals/Minerals 3,858,817 7.5 Other Transportation 474,075 0.9 Precious Metals $ 374,400 0.7% Pulp & Paper 1,301,721 2.5 Real Estate Development 135,749 0.3 Regional Banks 6,609,830 12.8 Specialty Telecommunications 125,132 0.2 Steel 1,672,803 3.3 Wireless Telecommunications 8,393,206 16.3 Repurchase Agreement 116,000 0.2 ------------- ---- $ 51,001,041 99.1% ============= ==== <Caption> PERCENT OF TYPE OF INVESTMENT VALUE NET ASSETS - --------------------------------------------------------------------- Common Stocks $ 30,986,014 60.2% Preferred Stocks 19,899,027 38.7 Short-Term Investment 116,000 0.2 ------------- ---- $ 51,001,041 99.1% ============= ==== </Table> SEE NOTES TO FINANCIAL STATEMENTS 9 <Page> MORGAN STANLEY LATIN AMERICAN GROWTH FUND FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES JANUARY 31, 2004 <Table> ASSETS: Investments in securities, at value (cost $42,687,829) $ 51,001,041 Cash (including $164,942 in foreign currency) 165,070 Receivable for: Investments sold 1,027,058 Dividends 449,683 Shares of beneficial interest sold 37,382 Prepaid expenses and other assets 81,089 -------------- TOTAL ASSETS 52,761,323 -------------- LIABILITIES: Unrealized depreciation on open forward foreign currency contracts 980 Payable for: Investments purchased 1,072,712 Shares of beneficial interest redeemed 64,873 Investment management fee 57,149 Distribution fee 42,276 Accrued expenses and other payables 82,538 -------------- TOTAL LIABILITIES 1,320,528 -------------- NET ASSETS $ 51,440,795 ============== COMPOSITION OF NET ASSETS: Paid-in-capital $ 72,353,765 Net unrealized appreciation 8,312,764 Accumulated undistributed net investment income 121,740 Accumulated net realized loss (29,347,474) -------------- NET ASSETS $ 51,440,795 ============== CLASS A SHARES: Net Assets $ 647,125 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 51,493 NET ASSET VALUE PER SHARE $ 12.57 ============== MAXIMUM OFFERING PRICE PER SHARE, (NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 13.27 ============== CLASS B SHARES: Net Assets $ 46,208,970 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 3,830,676 NET ASSET VALUE PER SHARE $ 12.06 ============== CLASS C SHARES: Net Assets $ 998,066 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 82,672 NET ASSET VALUE PER SHARE $ 12.07 ============== CLASS D SHARES: Net Assets $ 3,586,634 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 282,945 NET ASSET VALUE PER SHARE $ 12.68 ============== </Table> SEE NOTES TO FINANCIAL STATEMENTS 10 <Page> STATEMENT OF OPERATIONS FOR THE YEAR ENDED JANUARY 31, 2004 <Table> NET INVESTMENT INCOME: INCOME Dividends (net of $196,714 foreign withholding tax) $ 1,513,659 Interest 3,787 -------------- TOTAL INCOME 1,517,446 -------------- EXPENSES Investment management fee 515,667 Distribution fee (Class A shares) 885 Distribution fee (Class B shares) 386,531 Distribution fee (Class C shares) 5,086 Transfer agent fees and expenses 174,731 Professional fees 68,253 Shareholder reports and notices 64,328 Registration fees 43,262 Custodian fees 29,958 Trustees' fees and expenses 5,766 Other 3,877 -------------- TOTAL EXPENSES 1,298,344 -------------- NET INVESTMENT INCOME 219,102 -------------- NET REALIZED AND UNREALIZED GAIN (LOSS): NET REALIZED GAIN/LOSS ON: Investments 3,385,418 Foreign exchange transactions (38,093) -------------- NET REALIZED GAIN 3,347,325 -------------- NET CHANGE IN UNREALIZED DEPRECIATION ON: Investments 17,426,828 Translation of forward foreign currency contracts, other assets and liabilities denominated in foreign currencies 602 -------------- NET APPRECIATION 17,427,430 -------------- NET GAIN 20,774,755 -------------- NET INCREASE $ 20,993,857 ============== </Table> SEE NOTES TO FINANCIAL STATEMENTS 11 <Page> STATEMENT OF CHANGES IN NET ASSETS <Table> <Caption> FOR THE YEAR FOR THE YEAR ENDED ENDED JANUARY 31, 2004 JANUARY 31, 2003 ---------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $ 219,102 $ 109,281 Net realized gain (loss) 3,347,325 (5,548,408) Net change in unrealized depreciation 17,427,430 (8,339,982) ---------------- ---------------- NET INCREASE (DECREASE) 20,993,857 (13,779,109) ---------------- ---------------- DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Class A shares -- (5,559) Class B shares -- (153,752) Class C shares -- (2,362) Class D shares -- (40,073) ---------------- ---------------- TOTAL DIVIDENDS -- (201,746) ---------------- ---------------- Net decrease from transactions in shares of beneficial interest (4,085,596) (18,151,319) ---------------- ---------------- NET INCREASE (DECREASE) 16,908,261 (32,132,174) NET ASSETS: Beginning of period 34,532,534 66,664,708 ---------------- ---------------- END OF PERIOD (INCLUDING ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME OF $121,740 AND DIVIDENDS IN EXCESS OF NET INVESTMENT INCOME OF $59,269, RESPECTIVELY) $ 51,440,795 $ 34,532,534 ================ ================ </Table> SEE NOTES TO FINANCIAL STATEMENTS 12 <Page> MORGAN STANLEY LATIN AMERICAN GROWTH FUND NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2004 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley Latin American Growth Fund (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified, open-end management investment company. The Fund's investment objective is long-term capital appreciation. The Fund seeks to achieve its objective by investing primarily in equity securities of Latin American issuers. The Fund was organized as a Massachusetts business trust on February 25, 1992 and commenced operations on December 30, 1992. On July 28, 1997, the Fund converted to a multiple class share structure. The Fund offers Class A shares, Class B shares, Class C shares and Class D shares. The four classes are substantially the same except that most Class A shares are subject to a sales charge imposed at the time of purchase and some Class A shares, and most Class B shares and Class C shares are subject to a contingent deferred sales charge imposed on shares redeemed within one year, six years and one year, respectively. Class D shares are not subject to a sales charge. Additionally, Class A shares, Class B shares and Class C shares incur distribution expenses. The following is a summary of significant accounting policies: A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or traded on the New York Stock Exchange ("NYSE") or American Stock Exchange or other exchange is valued at its latest sale price prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (2) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) all other portfolio securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (4) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (5) when market quotations are not readily available or Morgan Stanley Investment Advisors Inc. (the "Investment Manager") determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Fund's Trustees or by the Investment Manager using a pricing service and/or procedures approved 13 <Page> by the Trustees of the Fund; (6) certain portfolio securities may be valued by an outside pricing service approved by the Fund's Trustees; and (7) short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Dividend income and other distributions are recorded on the ex-dividend date except for certain dividends on foreign securities which are recorded as soon as the Fund is informed after the ex-dividend date. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily. C. REPURCHASE AGREEMENTS -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated entities managed by the Investment Manager, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements and are collateralized by cash, U.S. Treasury or federal agency obligations. The Fund may also invest directly with institutions in repurchase agreements. The Fund's custodian receives the collateral, which is marked-to-market daily to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest. D. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than distribution fees), and realized and unrealized gains and losses are allocated to each class of shares based upon the relative net asset value on the date such items are recognized. Distribution fees are charged directly to the respective class. E. FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS -- The books and records of the Fund are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities, other assets and liabilities and forward foreign currency contracts ("forward contracts") are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the exchange rates prevailing on the respective dates of such transactions. The resultant exchange gains and losses are recorded as realized and unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. federal income tax regulations, certain foreign exchange gains/losses included in realized and unrealized gain/loss are included in or are a reduction of ordinary income for federal income tax purposes. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of the securities. Forward contracts are valued daily at the appropriate exchange rates. The resultant unrealized exchange gains and losses are recorded as unrealized foreign currency gain or loss. The Fund records realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (compensated) by entering into a closing transaction prior to delivery. 14 <Page> F. FEDERAL INCOME TAX POLICY -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to shareholders are recorded on the ex-dividend date. H. USE OF ESTIMATES -- The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. 2. INVESTMENT MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement, the Fund pays the Investment Manager a management fee, accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined as of the close of each business day: 1.25% to the portion of daily net assets not exceeding $500 million and 1.20% to the portion of the daily net assets exceeding $500 million. 3. PLAN OF DISTRIBUTION Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan provides that the Fund will pay the Distributor a fee which is accrued daily and paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the lesser of: (a) the average daily aggregate gross sales of the Class B shares since the inception of the Fund (not including reinvestment of dividend or capital gain distributions) less the average daily aggregate net asset value of the Class B shares redeemed since the Fund's inception upon which a contingent deferred sales charge has been imposed or waived; or (b) the average daily net assets of Class B; and (iii) Class C -- up to 1.0% of the average daily net assets of Class C. In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by the Distributor but not yet recovered may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B shares. Although there is no legal obligation for the Fund to pay expenses incurred in excess of payments made to the Distributor under the Plan and the proceeds of contingent deferred sales charges paid by investors upon redemption of shares, if for any reason the Plan is terminated, the Trustees will consider at that time the manner in which to treat such expenses. The Distributor has advised the Fund that such excess amounts totaled $22,184,061 at January 31, 2004. 15 <Page> In the case of Class A shares and Class C shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily net assets of Class A or Class C, respectively, will not be reimbursed by the Fund through payments in any subsequent year, except that expenses representing a gross sales credit to Morgan Stanley Financial Advisors or other selected broker-dealer representatives may be reimbursed in the subsequent calendar year. For the year ended January 31, 2004, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.23% and 1.0%, respectively. The Distributor has informed the Fund that for the year ended January 31, 2004, it received contingent deferred sales charges from certain redemptions of the Fund's Class B shares and Class C shares of $14,446 and $105, respectively and received $5,729 in front-end sales charges from sales of the Fund's Class A shares. The respective shareholders pay such charges which are not an expense of the Fund. 4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the year ended January 31, 2004 aggregated $31,350,853 and $34,988,519, respectively. For the year ended January 31, 2004, the Fund incurred brokerage commissions of $2,273 with Morgan Stanley & Co., Inc., an affiliate of the Investment Manager and Distributor, for the portfolio transactions executed on behalf of the Fund. At January 31, 2004, Morgan Stanley Fund of Funds -- International Portfolio, an affiliate of the Investment Manager and Distributor, held 189,137 Class D shares of beneficial interest of the Fund. Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is the Fund's transfer agent. At January 31, 2004, the Fund had transfer agent fees and expenses payable of approximately $4,700. 16 <Page> 5. SHARES OF BENEFICIAL INTEREST Transactions in shares of beneficial interest were as follows: <Table> <Caption> FOR THE YEAR FOR THE YEAR ENDED ENDED JANUARY 31, 2004 JANUARY 31, 2003 ---------------------------- ----------------------------- SHARES AMOUNT SHARES AMOUNT ------------ -------------- ------------ --------------- CLASS A SHARES Sold 42,684 $ 498,529 11,758 $ 117,308 Reinvestment of dividends -- -- 647 5,385 Redeemed (31,240) (332,161) (26,931) (255,052) ----------- -------------- ----------- --------------- Net increase (decrease)--Class A 11,444 166,368 (14,526) (132,359) ----------- -------------- ----------- --------------- CLASS B SHARES Sold 319,093 3,276,124 226,513 2,125,386 Reinvestment of dividends -- -- 17,246 139,347 Redeemed (1,105,881) (10,166,806) (1,850,942) (15,722,837) ----------- -------------- ----------- --------------- Net decrease--Class B (786,788) (6,890,682) (1,607,183) (13,458,104) ----------- -------------- ----------- --------------- CLASS C SHARES Sold 55,618 581,610 4,480 44,946 Reinvestment of dividends -- -- 283 2,288 Redeemed (14,923) (141,884) (14,795) (125,864) ----------- -------------- ----------- --------------- Net increase (decrease)--Class C 40,695 439,726 (10,032) (78,630) ----------- -------------- ----------- --------------- CLASS D SHARES Sold 272,717 2,822,902 238,833 1,879,342 Reinvestment of dividends -- -- 156 1,305 Redeemed (63,982) (623,910) (704,359) (6,362,873) ----------- -------------- ----------- --------------- Net increase (decrease)--Class D 208,735 2,198,992 (465,370) (4,482,226) ----------- -------------- ----------- --------------- Net decrease in Fund (525,914) $ (4,085,596) (2,097,111) $ (18,151,319) =========== ============== =========== =============== </Table> 6. FEDERAL INCOME TAX STATUS The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital. 17 <Page> The tax character of distributions paid was as follows: <Table> <Caption> FOR THE YEAR FOR THE YEAR ENDED ENDED JANUARY 31, 2004 JANUARY 31, 2003 ---------------- ---------------- Ordinary income -- $ 201,746 </Table> As of January 31, 2004, the tax-basis components of accumulated losses were as follows: <Table> Undistributed ordinary income $ 183,294 Undistributed long-term gains -- ------------- Net accumulated earnings 183,294 Foreign tax credit pass-through 136,813 Capital loss carryforward* (29,249,788) Post-October losses (1,652) Temporary differences (196,714) Net unrealized appreciation 8,215,077 ------------- Total accumulated losses $ (20,912,970) ============= </Table> *During the year ended January 31, 2004 the Fund utilized $1,050,646 of its net capital loss carryforward. As of January 31, 2004, the Fund had a net capital loss carryforward of $29,249,788 of which $19,838,661 will expire on January 31, 2005, $3,057,904 will expire on January 31, 2007, $2,899,656 will expire on January 31, 2008 and $3,453,567 will expire on January 31, 2011 to offset future capital gains to the extent provided by regulations. As of January 31, 2004, the Fund had temporary book/tax differences attributable to post-October losses (foreign currency losses incurred after October 31 within the taxable year which are deemed to arise on the first business day of the Fund's next taxable year), capital loss deferrals on wash sales and foreign tax credit pass-through and permanent book/tax differences attributable to foreign currency losses and an expired capital loss carryforward. To reflect reclassifications arising from the permanent differences, paid-in-capital was charged $56,575,173, accumulated undistributed net investment income was charged $38,093 and accumulated net realized loss was credited $56,613,266. 7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS The Fund may enter into forward contracts to facilitate settlement of foreign currency denominated portfolio transactions or to manage foreign currency exposure associated with foreign currency denominated securities. Forward contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in foreign exchange rates 18 <Page> underlying the forward contracts. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. At January 31, 2004, the Fund's cash balance consisted principally of interest bearing deposits with J.P. Morgan Chase, the Fund's custodian. At January 31, 2004, investment in securities of issuers in Mexico and Brazil represented 40.1% and 49.6% of net assets, respectively. These investments, as well as other non-U.S. investments which involve risks and considerations not present with respect to U.S. securities, may be affected by economic or political developments in these regions. 8. LEGAL MATTERS The Investment Manager, certain affiliates of the Investment Manager and certain investment companies advised by the Investment Manager or its affiliates, including the Fund, are named as defendants in a number of recently filed, similar class action complaints. These complaints generally allege that defendants, including the Fund, violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Investment Manager and certain affiliates of the Investment Manager allegedly offered economic incentives to brokers and others to steer investors to the funds advised by the Investment Manager or its affiliates rather than funds managed by other companies, and (ii) that the funds advised by the Investment Manager or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their alleged efforts to steer investors to these funds. The complaints seek, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The defendants intend to move to dismiss these actions and otherwise vigorously to defend them. While the Fund believes that it has meritorious defenses, the ultimate outcome of these matters is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of these matters. 19 <Page> MORGAN STANLEY LATIN AMERICAN GROWTH FUND FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period: <Table> <Caption> FOR THE YEAR ENDED JANUARY 31, ------------------------------------------------------- 2004 2003 2002 2001 2000 -------- -------- -------- -------- -------- CLASS A SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 7.47 $ 10.02 $ 11.90 $ 12.26 $ 7.33 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss)++ 0.11 0.08 0.14 0.00 (0.01) Net realized and unrealized gain (loss) 4.99 (2.51) (2.02) (0.36) 4.94 -------- -------- -------- -------- -------- Total income (loss) from investment operations 5.10 (2.43) (1.88) (0.36) 4.93 -------- -------- -------- -------- -------- Less dividends from net investment income - (0.12) - - - -------- -------- -------- -------- -------- Net asset value, end of period $ 12.57 $ 7.47 $ 10.02 $ 11.90 $ 12.26 ======== ======== ======== ======== ======== TOTAL RETURN+ 68.27% (24.40)% (15.80)% (2.62)% 66.71% RATIOS TO AVERAGE NET ASSETS(1): Expenses 2.43% 2.52% 2.20% 1.96% 2.28% Net investment income 1.25% 0.91% 1.15% 0.05% 0.16% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 647 $ 299 $ 547 $ 936 $ 751 Portfolio turnover rate 78% 57% 73% 44% 59% </Table> - ---------- ++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. + DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. (1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 20 <Page> <Table> <Caption> FOR THE YEAR ENDED JANUARY 31, ------------------------------------------------------- 2004 2003 2002 2001 2000 -------- -------- -------- -------- -------- CLASS B SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 7.23 $ 9.66 $ 11.55 $ 11.99 $ 7.24 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss)++ 0.05 0.01 0.04 (0.09) (0.06) Net realized and unrealized gain (loss) 4.78 (2.41) (1.93) (0.35) 4.81 -------- -------- -------- -------- -------- Total income (loss) from investment operations 4.83 (2.40) (1.89) (0.44) 4.75 -------- -------- -------- -------- -------- Less dividends from net investment income - (0.03) - - - -------- -------- -------- -------- -------- Net asset value, end of period $ 12.06 $ 7.23 $ 9.66 $ 11.55 $ 11.99 ======== ======== ======== ======== ======== TOTAL RETURN+ 66.94% (24.90)% (16.36)% (3.43)% 65.19% RATIOS TO AVERAGE NET ASSETS(1): Expenses 3.20% 3.27% 2.96% 2.77% 3.06% Net investment income (loss) 0.48% 0.16% 0.39% (0.76)% (0.62)% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 46,209 $ 33,372 $ 60,159 $ 99,431 $136,699 Portfolio turnover rate 78% 57% 73% 44% 59% </Table> - ---------- ++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. + DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. (1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 21 <Page> <Table> <Caption> FOR THE YEAR ENDED JANUARY 31, ------------------------------------------------------- 2004 2003 2002 2001 2000 -------- -------- -------- -------- -------- CLASS C SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 7.23 $ 9.69 $ 11.57 $ 12.02 $ 7.24 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss)++ 0.04 0.01 0.04 (0.09) (0.06) Net realized and unrealized gain (loss) 4.80 (2.42) (1.92) (0.36) 4.84 -------- -------- -------- -------- -------- Total income (loss) from investment operations 4.84 (2.41) (1.88) (0.45) 4.78 -------- -------- -------- -------- -------- Less dividends from net investment income - (0.05) - - - -------- -------- -------- -------- -------- Net asset value, end of period $ 12.07 $ 7.23 $ 9.69 $ 11.57 $ 12.02 ======== ======== ======== ======== ======== TOTAL RETURN+ 67.08% (24.88)% (16.34)% (3.42)% 65.47% RATIOS TO AVERAGE NET ASSETS(1): Expenses 3.20% 3.24% 2.88% 2.77% 2.95% Net investment income (loss) 0.48% 0.19% 0.47% (0.76)% (0.51)% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 998 $ 304 $ 504 $ 887 $ 776 Portfolio turnover rate 78% 57% 73% 44% 59% - ---------- </Table> ++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. + DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. (1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 22 <Page> <Table> <Caption> FOR THE YEAR ENDED JANUARY 31, ------------------------------------------------------- 2004 2003 2002 2001 2000 -------- -------- -------- -------- -------- CLASS D SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 7.52 $ 10.11 $ 11.97 $ 12.30 $ 7.35 -------- -------- -------- -------- -------- Income (loss) from investment operations: Net investment income (loss)++ 0.13 0.15 0.14 0.00 (0.02) Net realized and unrealized gain (loss) 5.03 (2.59) (2.00) (0.33) 4.97 -------- -------- -------- -------- -------- Total income (loss) from investment operations 5.16 (2.44) (1.86) (0.33) 4.95 -------- -------- -------- -------- -------- Less dividends from net investment income - (0.15) - - - -------- -------- -------- -------- -------- Net asset value, end of period $ 12.68 $ 7.52 $ 10.11 $ 11.97 $ 12.30 ======== ======== ======== ======== ======== TOTAL RETURN+ 68.62% (24.24)% (15.54)% (2.37)% 66.80% RATIOS TO AVERAGE NET ASSETS(1): Expenses 2.20% 2.27% 1.96% 1.77% 2.06% Net investment income 1.48% 1.16% 1.39% 0.24% 0.38% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 3,587 $ 558 $ 5,455 $ 9,262 $ 588 Portfolio turnover rate 78% 57% 73% 44% 59% </Table> - ---------- ++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD. + CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD. (1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 23 <Page> MORGAN STANLEY LATIN AMERICAN GROWTH FUND INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF MORGAN STANLEY LATIN AMERICAN GROWTH FUND: We have audited the accompanying statement of assets and liabilities of Morgan Stanley Latin American Growth Fund (the "Fund"), including the portfolio of investments, as of January 31, 2004, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five 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. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of January 31, 2004, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Morgan Stanley Latin American Growth Fund as of January 31, 2004, 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 five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP NEW YORK, NEW YORK MARCH 18, 2004 24 <Page> MORGAN STANLEY LATIN AMERICAN GROWTH FUND TRUSTEE AND OFFICER INFORMATION INDEPENDENT TRUSTEES: <Table> <Caption> NUMBER OF PORTFOLIOS TERM OF IN FUND POSITION(S) OFFICE AND COMPLEX NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE - --------------------------------------- ----------- ------------- ------------------------- ------------- -------------------- Michael Bozic (63) Trustee Since Retired; Director or 208 Director of Weirton c/o Kramer Levin Naftalis & Frankel LLP April 1994 Trustee of the Retail Steel Corporation. Counsel to the Independent Trustees Funds (since April 1994) 919 Third Avenue and the Institutional New York, NY Funds (since July 2003); formerly Vice Chairman of Kmart Corporation (December 1998-October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991 - July 1995); formerly variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co. Edwin J. Garn (71) Trustee Since Director or Trustee of 208 Director of Franklin c/o Summit Ventures LLC January 1993 the Retail Funds (since Covey (time 1 Utah Center January 1993) and the management systems), 201 S. Main Street Institutional Funds BMW Bank of North Salt Lake City, UT (since July 2003); member America, Inc. of the Utah Regional (industrial loan Advisory Board of Pacific corporation), United Corp.; formerly United Space Alliance (joint States Senator (R-Utah) venture between (1974-1992) and Chairman, Lockheed Martin and Senate Banking Committee the Boeing Company) (1980-1986), Mayor of and Nuskin Asia Salt Lake City, Utah Pacific (multilevel (1971-1974), Astronaut, marketing); member of Space Shuttle Discovery the board of various (April 12-19, 1985), and civic and charitable Vice Chairman, Huntsman organizations. Corporation (chemical company). Wayne E. Hedien (69) Trustee Since Retired; Director or 208 Director of The PMI c/o Kramer Levin Naftalis & Frankel LLP September Trustee of the Retail Group Inc. (private Counsel to the Independent Trustees 1997 Funds (since September mortgage insurance); 919 Third Avenue 1997) and the Trustee and Vice New York, NY Institutional Funds Chairman of The Field (since July 2003); Museum of Natural formerly associated with History; director of the Allstate Companies various other (1966-1994), most business and recently as Chairman of charitable The Allstate Corporation organizations. (March 1993-December 1994) and Chairman and Chief Executive Officer of its wholly-owned subsidiary, Allstate Insurance Company (July 1989-December 1994). </Table> 25 <Page> <Table> <Caption> NUMBER OF PORTFOLIOS TERM OF IN FUND POSITION(S) OFFICE AND COMPLEX NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE - --------------------------------------- ----------- ------------- ------------------------- ------------- -------------------- Dr. Manuel H. Johnson (54) Trustee Since Chairman of the Audit 208 Director of NVR, Inc. c/o Johnson Smick International, Inc. July 1991 Committee and Director or (home construction); 2099 Pennsylvania Avenue, N.W. Trustee of the Retail Chairman and Trustee Suite 950 Funds (since July 1991) of the Financial Washington, D.C. and the Institutional Accounting Foundation Funds (since July 2003); (oversight Senior Partner, Johnson organization of the Smick International, Financial Accounting Inc., a consulting firm; Standards Board); Co-Chairman and a founder Director of RBS of the Group of Seven Greenwich Capital Council (G7C), an Holdings (financial international economic holding company). 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) Trustee Since Deputy Chairman of the 209 Director of Electro PMB754 July 2003 Audit Committee and Rent Corporation 23852 Pacific Coast Highway Director or Trustee of (equipment leasing), Malibu, CA the Retail Funds (since The Ford Family July 2003) and the Foundation, and the Institutional Funds UCLA Foundation. (since August 1994); previously Chairman of the Audit Committee of the Institutional Funds (October 2001-July 2003); President, Kearns & Associates LLC (investment consulting); formerly CFO of the J. Paul Getty Trust. Michael E. Nugent (67) Trustee Since Chairman of the Insurance 208 Director of various c/o Triumph Capital, L.P. July 1991 Committee and Director or business 445 Park Avenue Trustee of the Retail organizations. New York, NY Funds (since July 1991) and the Institutional Funds (since July 2001); General Partner of Triumph Capital, L.P., a private investment partnership; formerly Vice President, Bankers Trust Company and BT Capital Corporation (1984-1988). Fergus Reid (71) Trustee Since Chairman of the 209 Trustee and Director c/o Lumelite Plastics Corporation July 2003 Governance Committee and of certain investment 85 Charles Colman Blvd. Director or Trustee of companies in the Pawling, NY the Retail Funds (since JPMorgan Funds July 2003) and the complex managed by JP Institutional Funds Morgan Investment (since June 1992); Management Inc. Chairman of Lumelite Plastics Corporation. </Table> 26 <Page> INTERESTED TRUSTEES: <Table> <Caption> NUMBER OF PORTFOLIOS TERM OF IN FUND POSITION(S) OFFICE AND COMPLEX NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS INTERESTED TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE - --------------------------------------- ----------- ------------- ------------------------- ------------- -------------------- Charles A. Fiumefreddo (70) Chairman of Since Chairman and Director or 208 None c/o Morgan Stanley Trust the Board July 1991 Trustee of the Retail Harborside Financial Center, and Trustee Funds (since July 1991) Plaza Two, and the Institutional Jersey City, NJ Funds (since July 2003); formerly Chief Executive Officer of the Retail Funds (until September 2002). James F. Higgins (55) Trustee Since Director or Trustee of 208 Director of AXA c/o Morgan Stanley Trust June 2000 the Retail Funds (since Financial, Inc. and Harborside Financial Center, June 2000) and the The Equitable Life Plaza Two, Institutional Funds Assurance Society of Jersey City, NJ (since July 2003); Senior the United States Advisor of Morgan Stanley (financial services). (since August 2000); Director of the Distributor and Dean Witter Realty Inc.; previously President and Chief Operating Officer of the Private Client Group of Morgan Stanley (May 1999-August 2000), and President and Chief Operating Officer of Individual Securities of Morgan Stanley (February 1997-May 1999). Philip J. Purcell (60) Trustee Since Director or Trustee of 208 Director of American 1585 Broadway April 1994 the Retail Funds (since Airlines, Inc. and New York, NY April 1994) and the its parent company, Institutional Funds AMR Corporation. (since July 2003); Chairman of the Board of Directors and Chief Executive Officer of Morgan Stanley and Morgan Stanley DW Inc.; Director of the Distributor; Chairman of the Board of Directors and Chief Executive Officer of Novus Credit Services Inc.; Director and/or officer of various Morgan Stanley subsidiaries. </Table> - ---------- * THIS IS THE EARLIEST DATE THE TRUSTEE BEGAN SERVING THE FUNDS ADVISED BY MORGAN STANLEY INVESTMENT ADVISORS INC. (THE "INVESTMENT MANAGER ") (THE "RETAIL FUNDS "). ** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICES AS DIRECTOR/TRUSTEE FOR THE RETAIL FUNDS AND THE FUNDS ADVISED BY MORGAN STANLEY INVESTMENT MANAGEMENT INC., MORGAN STANLEY INVESTMENTS LP AND MORGAN STANLEY AIP GP LP (THE "INSTITUTIONAL FUNDS") REFLECT THE EARLIEST DATE THE DIRECTOR/TRUSTEE BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS AS APPLICABLE. *** THE FUND COMPLEX INCLUDES ALL OPEN-END AND CLOSED-END FUNDS (INCLUDING ALL OF THEIR PORTFOLIOS) ADVISED BY THE INVESTMENT MANAGER AND ANY FUNDS THAT HAVE AN INVESTMENT ADVISOR THAT IS AN AFFILIATED PERSON OF THE INVESTMENT MANAGER (INCLUDING BUT NOT LIMITED TO MORGAN STANLEY INVESTMENT MANAGEMENT INC. AND MORGAN STANLEY INVESTMENTS LP). 27 <Page> OFFICERS: <Table> <Caption> TERM OF POSITION(S) OFFICE AND NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS** - ------------------------------ --------------- ---------------- --------------------------------------------------- Mitchell M. Merin (50) President Since May 1999 President and Chief Operating Officer of Morgan 1221 Avenue of the Americas Stanley Investment Management Inc.; President, New York, NY Director and Chief Executive Officer of the Investment Manager and Morgan Stanley Services; Chairman and Director of the Distributor; Chairman and Director of the Transfer Agent; Director of various Morgan Stanley subsidiaries; President of the Institutional Funds (since July 2003) and President of the Retail Funds (since May 1999); Trustee (since July 2003) and President (since December 2002) of the Van Kampen Closed-End Funds; Trustee (since May 1999) and President (since October 2002) of the Van Kampen Open-End Funds. Ronald E. Robison (65) Executive Vice Since Chief Global Operations Officer and Managing 1221 Avenue of the Americas President and April 2003 Director of Morgan Stanley Investment Management New York, NY Principal Inc.; Managing Director of Morgan Stanley & Co. Executive Incorporated; Managing Director of Morgan Stanley; Officer Managing Director, Chief Administrative Officer and Director of the Investment Manager and Morgan Stanley Services; Chief Executive Officer and Director of the Transfer Agent; Managing Director and Director of the Distributor; Executive Vice President and Principal Executive Officer of the Institutional Funds (since July 2003); previously President and Director of the Institutional Funds (March 2001-July 2003). Barry Fink (49) Vice President Since General Counsel (since May 2000) and Managing 1221 Avenue of the Americas and General February 1997 Director (since December 2000) of Morgan Stanley New York, NY Counsel Investment Management; Managing Director (since December 2000), Secretary (since February 1997) and Director (since July 1998) of the Investment Manager and Morgan Stanley Services; Assistant Secretary of Morgan Stanley DW; Vice President of the Institutional Funds (since July 2003); Managing Director, Secretary and Director of the Distributor; previously Secretary of the Retail Funds (February 1997-July 2003); previously Vice President and Assistant General Counsel of the Investment Manager and Morgan Stanley Services (February 1997-December 2001). Joseph J. McAlinden (61) Vice President Since July 1995 Managing Director and Chief Investment Officer of 1221 Avenue of the Americas the Investment Manager and Morgan Stanley New York, NY Investment Management Inc., Director of the Transfer Agent, Chief Investment Officer of the Van Kampen Funds; Vice President of the Institutional Funds (since July 2003) and the Retail Funds (since July 1995). Stefanie V. Chang (37) Vice President Since July 2003 Executive Director of Morgan Stanley & Co. 1221 Avenue of the Americas Incorporated and Morgan Stanley Investment New York, NY Management Inc. and Vice President of the Institutional Funds (since December 1997) and the Retail Funds (since July 2003); formerly practiced law with the New York law firm of Rogers & Wells (now Clifford Chance LLP). </Table> 28 <Page> <Table> <Caption> TERM OF POSITION(S) OFFICE AND NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS** - ------------------------------ --------------- ---------------- --------------------------------------------------- Francis J. Smith (38) Treasurer and Treasurer since Executive Director of the Investment Manager and c/o Morgan Stanley Trust Chief Financial July 2003 and Morgan Stanley Services (since December 2001); Harborside Financial Center, Officer Chief Financial previously Vice President of the Retail Funds Plaza Two, Officer since (September 2002-July 2003); previously Vice Jersey City, NJ September 2002 President of the Investment Manager and Morgan Stanley Services (August 2000-November 2001) and Senior Manager at PricewaterhouseCoopers LLP (January 1998-August 2000). Thomas F. Caloia (57) Vice President Since July 2003 Executive Director (since December 2002) and c/o Morgan Stanley Trust Assistant Treasurer of the Investment Manager, the Harborside Financial Center, Distributor and Morgan Stanley Services; Plaza Two, previously Treasurer of the Retail Funds (April Jersey City, NJ 1989-July 2003); formerly First Vice President of the Investment Manager, the Distributor and Morgan Stanley Services. Mary E. Mullin (36) Secretary Since July 2003 Vice President of Morgan Stanley & Co. Incorporated 1221 Avenue of the Americas and Morgan Stanley Investment Management Inc.; New York, NY Secretary of the Institutional Funds (since June 1999) and the Retail Funds (since July 2003); formerly practiced law with the New York law firms of McDermott, Will & Emery and Skadden, Arps, Slate, Meagher & Flom LLP. </Table> - ----------- * THIS IS THE EARLIEST DATE THE OFFICER BEGAN SERVING THE RETAIL FUNDS. EACH OFFICER SERVES AN INDEFINITE TERM, UNTIL HIS OR HER SUCCESSOR IS ELECTED. ** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICE AS AN OFFICER FOR THE RETAIL AND INSTITUTIONAL FUNDS REFLECT THE EARLIEST DATE THE OFFICER BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS AS APPLICABLE. 29 <Page> TRUSTEES Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien James F. Higgins Dr. Manuel H. Johnson Joseph J. Kearns Michael E. Nugent Philip J. Purcell Fergus Reid OFFICERS Charles A. Fiumefreddo CHAIRMAN OF THE BOARD Mitchell M. Merin PRESIDENT Ronald E. Robison EXECUTIVE VICE PRESIDENT and PRINCIPAL EXECUTIVE OFFICER Barry Fink VICE PRESIDENT and GENERAL COUNSEL Joseph J. McAlinden VICE PRESIDENT Stefanie V. Chang VICE PRESIDENT Francis J. Smith TREASURER and CHIEF FINANCIAL OFFICER Thomas F. Caloia VICE PRESIDENT Mary E. Mullin SECRETARY TRANSFER AGENT Morgan Stanley Trust Harborside Financial Center, Plaza Two Jersey City, New Jersey 07311 INDEPENDENT AUDITORS Deloitte & Touche LLP Two World Financial Center New York, New York 10281 INVESTMENT MANAGER Morgan Stanley Investment Advisors Inc. 1221 Avenue of the Americas New York, New York 10020 This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its trustees. It is available, without charge, by calling (800) 869-NEWS. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing. Investments and services offered through Morgan Stanley DW Inc., member SIPC. Morgan Stanley Distributors Inc., member NASD. (C)2004 Morgan Stanley [MORGAN STANLEY LOGO] 37939RPT-00-13912 Co4-AP 3/04 [GRAPHIC] MORGAN STANLEY FUNDS MORGAN STANLEY LATIN AMERICAN GROWTH FUND ANNUAL REPORT JANUARY 31, 2004 [MORGAN STANLEY LOGO] <Page> Item 2. Code of Ethics. (a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Fund or a third party. (b) No information need be disclosed pursuant to this paragraph. (c) Not applicable. (d) Not applicable. (e) Not applicable. (f) (1) The Fund's Code of Ethics is attached hereto as Exhibit A. (2) Not applicable. (3) Not applicable. Item 3. Audit Committee Financial Expert. The Fund's Board of Trustees has determined that it has two "audit committee financial experts" serving on its audit committee, each of whom are "independent" Trustees: Dr. Manuel H. Johnson and Joseph J. Kearns. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification. <Page> Item 4. Principal Accountant Fees and Services. (a)(b)(c)(d) and (g). Based on fees billed for the periods shown: 2004 <Table> <Caption> REGISTRANT COVERED ENTITIES(1) AUDIT FEES $ 34,290 N/A NON-AUDIT FEES AUDIT-RELATED FEES $ 684(2) $ 2,847,161(2) TAX FEES $ 6,515(3) $ 736,810(4) ALL OTHER FEES $ 0 $ 0 TOTAL NON-AUDIT FEES $ 7,199 $ 3,583,971 TOTAL $ 41,489 $ 3,583,971 </Table> 2003 <Table> <Caption> REGISTRANT COVERED ENTITIES(1) AUDIT FEES $ 33,460 N/A NON-AUDIT FEES AUDIT-RELATED FEES $ 656(2) $ 2,818,115(2) TAX FEES $ 8,797(3) $ 365,427(4) ALL OTHER FEES $ 0 $ 501,166(5) TOTAL NON-AUDIT FEES $ 9,453 $ 3,684,708 TOTAL $ 42,913 $ 3,684,708 </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 data verification and agreed-upon procedures related to asset securitizations and agreed-upon procedures engagements. (3) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the preparation and review of the Registrant's tax returns. (4) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the review of Covered Entities' tax returns. (5) All other fees represent project management for future business applications and improving business and operational processes. <Page> (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. The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations. - ---------- (1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the "POLICY"), adopted as of the date above, supercedes and replaces all prior versions that may have been adopted from time to time. <Page> The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee's responsibilities to pre-approve services performed by the Independent Auditors to management. The Fund's Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors' independence. 2. DELEGATION As provided in the Act and the SEC's rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. 3. AUDIT SERVICES The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Fund's financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items. In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings. The Audit Committee has pre-approved the Audit services in Appendix B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). <Page> 4. AUDIT-RELATED SERVICES Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Fund's financial statements and, to the extent they are Covered Services, the Covered Entities or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC's rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as "Audit services"; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and/or N-CSR. The Audit Committee has pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 5. TAX SERVICES The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditor's independence, and the SEC has stated that the Independent Auditors may provide such services. Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 6. ALL OTHER SERVICES The Audit Committee believes, based on the SEC's rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC's rules on auditor independence. <Page> The Audit Committee has pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services. 8. PROCEDURES All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund's Chief Financial Officer and must include a detailed description of the services to be rendered. The Fund's Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the Independent Auditors and the Fund's Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC's rules on auditor independence. The Audit Committee has designated the Fund's Chief Financial Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Fund's Chief Financial Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Fund's Chief Financial Officer and management will immediately report to the chairman of the Audit Committee any breach of this Policy that comes to the attention of the Fund's Chief Financial Officer or any member of management. 9. ADDITIONAL REQUIREMENTS The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor's independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with Independence Standards Board No. <Page> 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. 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 <Page> Covered Entities is compatible with maintaining the auditors' independence in performing audit services. Item 5. Audit Committee of Listed Registrants. Applicable only for reports covering periods ending on or after the earlier of (i) the first annual shareholder meeting after January 15, 2004 or (ii) October 31, 2004. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Applicable only to annual reports filed by closed-end funds. Item 8. [Reserved.] Item 9 - Controls and Procedures (a) The Fund's principal executive officer and principal financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Fund's internal controls or in other factors that could significantly affect the Fund's internal controls subsequent to the date of their evaluation. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. <Page> Item 10 Exhibits (a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto. (b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Morgan Stanley Latin American Growth Fund /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer March 19, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer March 19, 2004 /s/ Francis Smith Francis Smith Principal Financial Officer March 19, 2004