<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.
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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
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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.
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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