<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-09081
Morgan Stanley International Fund
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: October 31, 2004
Date of reporting period: April 30, 2004
Item 1 - Report to Shareholders
<Page>
WELCOME, SHAREHOLDER:
IN THIS REPORT, YOU'LL LEARN ABOUT HOW YOUR INVESTMENT IN MORGAN STANLEY
INTERNATIONAL FUND PERFORMED DURING THE SEMIANNUAL PERIOD. WE WILL PROVIDE AN
OVERVIEW OF THE MARKET CONDITIONS, AND DISCUSS SOME OF THE FACTORS THAT AFFECTED
PERFORMANCE DURING THE REPORTING PERIOD. IN ADDITION, THIS REPORT INCLUDES THE
FUND'S FINANCIAL STATEMENTS AND A LIST OF FUND INVESTMENTS.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING
OFFERED. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES
OF SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE
FUND SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE
MONEY INVESTING IN THIS FUND.
<Page>
Fund Report
For the six month period ended April 30, 2004
TOTAL RETURN FOR THE SIX MONTHS ENDED APRIL 30, 2004
<Table>
<Caption>
MORGAN
STANLEY
CAPITAL
INTERNATIONAL
(MSCI) LIPPER
EAFE INTERNATIONAL
CLASS A CLASS B CLASS C CLASS D INDEX(1) FUNDS INDEX(2)
10.72% 10.30% 10.46% 10.83% 12.39% 10.98%
</Table>
THE PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS
DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURE ASSUMES THE REINVESTMENT OF
ALL DISTRIBUTIONS BUT DOES NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES
CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE
INFORMATION.
MARKET CONDITIONS
The first three months of the period were marked by strong performance across
most major markets and sectors. Investors' expectations for continued growth and
low interest rates led to a sustained rally in economically sensitive sectors
such as industrials and basic materials, and markets with a preponderance of
cyclical stocks generally outperformed.
This pattern began to reverse in February 2004 when the U.S. Federal Open Market
Committee (the "Fed") abandoned its stated stance of "patience" with regard to
interest rates. U.S. employment figures also began to exceed expectations, while
many investors began to fear that the Chinese government might take excessive
steps to cool that country's robust economy. These concerns led many investors
to reallocate their portfolios toward more defensive sectors, which outperformed
cyclical sectors in the last months of the period.
Performance was largely positive across the world's markets, though results
varied widely. European markets had the highest returns as a group, with smaller
markets such as Portugal, Spain and Greece leading the pack. (Europe was also
home to the only market to decline in the period -- Finland.) Within Asia, Japan
was able to keep pace with Europe, while many of the smaller markets --
especially Singapore and Hong Kong -- lagged in concert with China's sell-off
late in the period.
PERFORMANCE ANALYSIS
Morgan Stanley International Fund underperformed both its benchmarks, the MSCI
EAFE Index ("EAFE") and the Lipper International Funds Index, for the six months
ended April 30, 2004. We adhered to our top-down approach during the period,
focusing on finding markets and sectors with a combination of attractive
valuations, fundamentals and technical factors.
This approach led us to take a number of positions that met our criteria but did
not produce outperformance. One of these was an overweighted position in Germany
relative to the EAFE. The market was appealing on the basis of fundamentals
because of its potential for positive surprises in terms of economic growth and
reform. The market's generally negative consensus also created an appealingly
low level of valuations. However, the market stalled in mid January 2004 after
rising sharply, and as a result the overweighted position proved a drag on the
Fund's performance. The Fund's holdings in several key Asian emerging markets
(notably Hong Kong, Singapore and China) also held the Fund back, as these
countries underperformed EAFE. The
2
<Page>
portfolio's below-benchmark weighting in the U.K. market initially helped
performance as that area lagged its European peers in the early months of the
period. This position proved less beneficial later, however, when the U.K.
market began to outperform, thanks to the preponderance of defensive consumer
stocks on the British exchange.
Our approach also resulted in several positions with above-market performance.
Entering the period, the energy sector offered a compelling combination of low
valuations and positive fundamentals driven by high oil prices. We built an
overweighted position relative to the EAFE, which proved highly beneficial, as
the sector went on to outperform the market. The portfolio also benefited from a
below-benchmark position in Australia, which was based on our assessment of
unattractive valuations and vulnerable fundamentals. Exposure to key smaller
markets, including an above-benchmark weighting in Austria as well as small
positions in Russia, India and Thailand, also helped performance.
3
<Page>
TOP 10 HOLDINGS
<Table>
BP 2.8%
Vodafone Group 2.3
HSBC Holdings 1.8
Total 1.7
Toyota Motor 1.6
Novartis 1.4
GlaxoSmithKline 1.4
Royal Dutch Petroleum 1.4
Telefonica 1.4
UBS 1.2
</Table>
TOP FIVE COUNTRIES
<Table>
Japan 25.7%
United Kingdom 21.2
France 8.8
Switzerland 6.7
Germany 6.0
</Table>
DATA AS OF APRIL 30, 2004. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES ARE AS A
PERCENTAGE OF NET ASSETS. PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD
NOT BE DEEMED A RECOMMENDATION TO BUY OR SELL THE SECURITIES MENTIONED. MORGAN
STANLEY IS A FULL-SERVICE SECURITIES FIRM ENGAGED IN SECURITIES TRADING AND
BROKERAGE ACTIVITIES, INVESTMENT BANKING, RESEARCH AND ANALYSIS, FINANCING AND
FINANCIAL ADVISORY SERVICES.
INVESTMENT STRATEGY
THE FUND WILL NORMALLY INVEST AT LEAST 65% OF ITS ASSETS IN A DIVERSIFIED
PORTFOLIO OF INTERNATIONAL COMMON STOCKS AND OTHER EQUITY SECURITIES. THE FUND'S
"INVESTMENT MANAGER," MORGAN STANLEY INVESTMENT ADVISORS INC. USES A "TOP-DOWN"
APPROACH THAT EMPHASIZES COUNTRY AND SECTOR SELECTION AND WEIGHTINGS OVER
INDIVIDUAL STOCK SELECTION.
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.
4
<Page>
Performance Summary
AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED APRIL 30, 2004
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES++
(SINCE 06/28/99) (SINCE 06/28/99) (SINCE 06/28/99) (SINCE 06/28/99)
SYMBOL INLAX INLBX INLCX INLDX
1 YEAR 34.92%(3) 33.95%(3) 33.97%(3) 35.31%(3)
27.83(4) 28.95(4) 32.97(4) --
SINCE INCEPTION (0.87)(3) (1.64)(3) (1.60)(3) (0.66)(3)
(1.97)(4) (2.02)(4) (1.60)(4) --
</Table>
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR MORE UP-TO-DATE INFORMATION,
INCLUDING MONTH-END PERFORMANCE FIGURES, PLEASE VISIT morganstanley.com OR SPEAK
WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL
FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. THE TABLE DOES 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.
Notes on Performance
(1) THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE INDEX MEASURES THE
PERFORMANCE FOR A DIVERSE RANGE OF GLOBAL STOCK MARKETS WITHIN EUROPE,
AUSTRALASIA, AND THE FAR EAST. THE PERFORMANCE OF THE INDEX IS LISTED IN
U.S. DOLLARS AND ASSUMES REINVESTMENT OF NET DIVIDENDS. "NET DIVIDENDS"
REFLECTS A REDUCTION IN DIVIDENDS AFTER TAKING INTO ACCOUNT WITHHOLDING OF
TAXES BY CERTAIN FOREIGN COUNTRIES REPRESENTED IN THE INDEX. INDEXES ARE
UNMANAGED AND THEIR RETURNS DO NOT INCLUDE ANY SALES CHARGES OR FEES. SUCH
COSTS WOULD LOWER PERFORMANCE. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN
INDEX.
(2) THE LIPPER INTERNATIONAL FUNDS INDEX IS AN EQUALLY WEIGHTED PERFORMANCE
INDEX OF THE LARGEST QUALIFYING FUNDS (BASED ON NET ASSETS) IN THE LIPPER
INTERNATIONAL FUNDS CLASSIFICATION. THE INDEX, WHICH IS ADJUSTED FOR
CAPITAL GAINS DISTRIBUTIONS AND INCOME DIVIDENDS, IS UNMANAGED AND SHOULD
NOT BE CONSIDERED AN INVESTMENT. THERE ARE CURRENTLY 30 FUNDS REPRESENTED
IN THIS INDEX.
(3) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT
THE DEDUCTION OF ANY SALES CHARGES.
(4) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND THE DEDUCTION OF
THE MAXIMUM APPLICABLE SALES CHARGE. SEE THE FUND'S CURRENT PROSPECTUS FOR
COMPLETE DETAILS ON FEES AND SALES CHARGES.
* THE MAXIMUM FRONT-END SALES CHARGE FOR CLASS A IS 5.25%.
** THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS B IS 5.0%.
THE CDSC DECLINES TO 0% AFTER SIX YEARS.
+ THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C IS 1.0% FOR SHARES
REDEEMED WITHIN ONE YEAR OF PURCHASE.
++ CLASS D HAS NO SALES CHARGE.
5
<Page>
MORGAN STANLEY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS - APRIL 30, 2004 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
COMMON AND PREFERRED STOCKS
AND RIGHTS (94.7% )
AUSTRALIA (2.3%)
ALUMINUM
35,142 Alumina Ltd. $ 128,567
--------------
BEVERAGES: ALCOHOLIC
61,573 Foster's Group Ltd. 217,268
21,483 Southcorp Ltd. 55,343
--------------
272,611
--------------
BEVERAGES: NON-ALCOHOLIC
15,204 Coca-Cola Amatil Ltd. 75,592
--------------
BIOTECHNOLOGY
2,879 CSL Ltd. 45,829
--------------
BUILDING PRODUCTS
44,677 CSR Ltd. 61,899
--------------
CASINO/GAMING
11,938 TABCORP Holdings Ltd. 113,625
--------------
CHEMICALS: MAJOR DIVERSIFIED
9,249 Orica Ltd. 98,576
--------------
CONSTRUCTION MATERIALS
18,926 Boral Ltd. 81,942
32,831 Rinker Group Ltd. 168,679
--------------
250,621
--------------
CONTAINERS/PACKAGING
25,643 Amcor Ltd. 128,418
--------------
ENGINEERING & CONSTRUCTION
7,273 Leighton Holdings Ltd. 54,319
--------------
FINANCIAL CONGLOMERATES
40,111 AMP Ltd. 167,007
6,303 Macquarie Bank Ltd. 157,597
16,190 Suncorp-Metway Ltd. 156,548
--------------
481,152
--------------
FOOD RETAIL
32,398 Coles Myer Ltd. 195,677
29,811 Woolworths Ltd. 253,837
--------------
449,514
--------------
GAS DISTRIBUTORS
14,025 Australian Gas Light
Company Ltd. $ 117,903
9,450 Origin Energy Ltd. 38,869
--------------
156,772
--------------
HOSPITAL/NURSING MANAGEMENT
27,157 Mayne Group Ltd. 62,513
--------------
INDUSTRIAL CONGLOMERATES
5,618 Ansell Ltd. 30,729
11,333 Wesfarmers Ltd. 233,724
--------------
264,453
--------------
INVESTMENT TRUSTS/MUTUAL
FUNDS
57,659 Macquarie Infrastructure
Group (Stapled Securities)** 114,419
--------------
MAJOR BANKS
43,611 Australia and New Zealand
Banking Group Ltd. 584,392
36,037 Commonwealth Bank of
Australia 812,634
44,194 National Australia Bank Ltd. 939,810
50,964 Westpac Banking Corp. 642,470
--------------
2,979,306
--------------
MAJOR TELECOMMUNICATIONS
65,106 Telstra Corp., Ltd. 224,567
--------------
MEDIA CONGLOMERATES
42,896 News Corp., Ltd. 395,280
61,153 News Corp., Ltd.
(Pref. Ordinary) 522,917
--------------
918,197
--------------
MEDICAL/NURSING SERVICES
4,137 Sonic Healthcare Ltd. 26,927
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
29,859 Brambles Industries Ltd. 119,582
--------------
MULTI-LINE INSURANCE
51,260 Insurance Australia Group Ltd. 179,768
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
6
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
OIL & GAS PRODUCTION
18,851 Santos Ltd. $ 87,467
14,379 Woodside Petroleum Ltd. 171,617
--------------
259,084
--------------
OTHER METALS/MINERALS
107,508 BHP Billiton Ltd. 889,817
9,273 Rio Tinto Ltd. 217,671
35,721 WMC Resources Ltd. 123,468
--------------
1,230,956
--------------
OTHER TRANSPORTATION
28,101 Patrick Corp. Ltd. 103,416
16,674 Transurban Group 54,625
--------------
158,041
--------------
PRECIOUS METALS
11,070 Newcrest Mining Ltd. 91,064
--------------
PROPERTY - CASUALTY INSURERS
19,733 QBE Insurance Group Ltd. 165,888
--------------
PUBLISHING: NEWSPAPERS
29,390 John Fairfax Holdings Ltd. 71,046
--------------
PULP & PAPER
12,806 Paperlinx Ltd. 46,204
--------------
REAL ESTATE DEVELOPMENT
12,506 Lend Lease Corp., Ltd. 96,290
12,895 Westfield Holdings Ltd. 131,852
--------------
228,142
--------------
REAL ESTATE INVESTMENT TRUSTS
21,794 Centro Properties Group 62,592
45,605 CFS Gandel Retail Trust 45,085
2,942 CFS Gandel Retail Trust (New)
(Units)++* 2,823
59,716 General Property Trust (New)
(Units)++ 129,704
38,688 Investa Property Group 51,647
23,464 Mirvac Group 71,113
34,434 Stockland (Units)++ 128,462
1,977 Stockland (New) (Units)++ 7,290
2,474 Westfield Trust (New) (Units)++* 7,159
68,994 Westfield Trust (Units)++ 202,131
--------------
708,006
--------------
STEEL
26,546 BlueScope Steel Ltd. $ 112,635
4,735 OneSteel Ltd. 7,688
--------------
120,323
--------------
TOTAL AUSTRALIA 10,285,981
--------------
AUSTRIA (0.6%)
BUILDING PRODUCTS
6,115 Wienerberger AG 199,661
--------------
CONSTRUCTION MATERIALS
1,538 RHI AG* 33,171
--------------
ELECTRIC UTILITIES
876 Oesterreichische
Elektrizitaetswirtschafts AG
(Verbund) (A Shares) 143,378
--------------
MAJOR BANKS
5,752 Bank Austria Creditanstalt* 326,338
4,602 Erste Bank der
Oesterreichischen
Sparkassen AG 688,437
--------------
1,014,775
--------------
MAJOR TELECOMMUNICATIONS
31,013 Telekom Austria AG* 455,207
--------------
OIL REFINING/MARKETING
2,105 OMV AG 384,637
--------------
OTHER TRANSPORTATION
1,083 Flughafen Wien AG 59,822
--------------
REAL ESTATE DEVELOPMENT
32,785 Immofinanz Immobilien
Anlagen AG* 254,947
--------------
STEEL
1,009 Boehler-Uddeholm AG 81,703
3,092 Voestalpine AG 134,560
--------------
216,263
--------------
TOTAL AUSTRIA 2,761,861
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
7
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
BELGIUM (0.8%)
CHEMICALS: SPECIALTY
3,487 Solvay S.A. (A Shares) $ 292,051
--------------
ELECTRIC UTILITIES
1,216 Electrabel S.A. 399,075
--------------
ELECTRONIC
EQUIPMENT/INSTRUMENTS
11,838 Agfa Gevaert NV 268,934
--------------
FINANCIAL CONGLOMERATES
69,237 Fortis 1,506,550
--------------
MAJOR BANKS
41,052 Dexia 674,866
5,663 KBC Bankverzekeringsholding* 318,168
--------------
993,034
--------------
MAJOR TELECOMMUNICATIONS
2,051 Belgacom SA* 62,175
--------------
METAL FABRICATIONS
401 Bekaert NV 22,342
--------------
OTHER METALS/MINERALS
336 Umicore 19,441
--------------
PHARMACEUTICALS: OTHER
5,384 UCB S.A. 215,338
--------------
TOTAL BELGIUM 3,778,940
--------------
BERMUDA (0.0%)
APPAREL/FOOTWEAR
30,500 Yue Yuen Industrial (Holdings)
Ltd. 82,308
--------------
CONSTRUCTION MATERIALS
36,000 Cheung Kong Infrastructure
Holdings Ltd. 86,073
--------------
TOTAL BERMUDA 168,381
--------------
BRAZIL (0.4%)
AEROSPACE & DEFENSE
10,000 Empresa Brasileira de
Aeronautica S.A. (Pref.) 64,736
--------------
BEVERAGES: ALCOHOLIC
704,000 Companhia de Bebidas das
Americas (Pref.) $ 131,325
--------------
ELECTRIC UTILITIES
4,448,000 Centrais Electricas Brasileiras
S.A. 46,996
3,195,000 Centrais Electricas Brasileiras
S.A. (Class B) (Pref.) 35,706
3,503,000 Companhia Energetica de
Minas Gerais (Pref.) 53,709
--------------
136,411
--------------
INTEGRATED OIL
9,000 Petroleo Brasileiro S.A. 257,274
12,000 Petroleo Brasileiro S.A. (Pref.) 299,734
--------------
557,008
--------------
MAJOR TELECOMMUNICATIONS
4,895,000 Brasil Telecom Participacoes
S.A. (Pref.) 29,954
--------------
OTHER METALS/MINERALS
5,000 Companhia Vale do Rio Doce
(Class A) (Pref.) 197,615
4,000 Companhia Vale do Rio Dolce
(CVRD) 180,607
--------------
378,222
--------------
PULP & PAPER
19,000 Aracruz Celulose S.A. (Pref.)
(B Shares) 59,557
842,000 Votorantim Celulose e Papel
S.A. (Pref.) 53,303
--------------
112,860
--------------
REGIONAL BANKS
3,000 Banco Bradesco SA (Pref.) 123,475
1,613,000 Banco Itau Holding Financeira
S.A. (Pref.) 128,490
1,226,000 Unibanco-Uniao de Banco
Brasileiros S.A. 47,641
--------------
299,606
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
8
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
SPECIALTY TELECOMMUNICATIONS
6,372,000 Tele Norte Leste Participacoes
S.A. (Pref.) $ 75,769
--------------
STEEL
1,422,000 Companhia Siderurgica
Nacional S.A. 67,805
6,000 Gerdau S.A. (Pref.) 62,964
5,000 Usinas Siderurgicas de Minas
Gerais S.A. (Class A) (Pref.) 50,256
--------------
181,025
--------------
TOBACCO
3,000 Souza Cruz S.A. 26,576
--------------
WIRELESS TELECOMMUNICATIONS
5,385,000 Telecentro Oeste Celular
Participacoes S.A. (Pref.) 15,228
9,214,000 Telesp Celular Participacoes
S.A. (Pref.)* 26,276
--------------
41,504
--------------
TOTAL BRAZIL 2,034,996
--------------
CHINA (0.4%)
AIR FREIGHT/COURIERS
142,000 Sinotrans Limited 48,697
--------------
AIRLINES
84,000 China Southern Airlines Co.,
Ltd.* 35,806
--------------
ALUMINUM
196,000 Aluminum Corp. of China Ltd. 114,957
--------------
CHEMICALS: SPECIALTY
148,000 Sinopec Shanghai
Petrochemical Co. 49,332
--------------
CONTRACT DRILLING
108,000 China Oilfield Services Ltd. 31,153
--------------
ELECTRIC UTILITIES
128,000 Huadian Power International
Corp. 36,511
180,000 Huaneng Power International,
Inc. 168,455
--------------
204,966
--------------
ELECTRICAL PRODUCTS
10,000 BYD Company Ltd. $ 29,743
--------------
INTEGRATED OIL
968,000 China Petroleum & Chemical
Corp. 335,064
1,012,000 PetroChina Co. Ltd. 441,111
--------------
776,175
--------------
LIFE/HEALTH INSURANCE
427,000 China Life Insurance Co., Ltd.* 232,651
--------------
MAJOR TELECOMMUNICATIONS
508,000 China Telecom Corp. Ltd. 151,417
--------------
MARINE SHIPPING
30,000 China Shipping Development
Co., Ltd.* 17,307
--------------
OTHER METALS/MINERALS
75,000 Jiangxi Copper Co., Ltd. 29,085
--------------
OTHER TRANSPORTATION
128,000 Beijing Capital International
Airport Co., Ltd. 39,383
84,000 Jiangsu Expressway Co., Ltd.* 37,960
98,000 Zhejiang Expressway Co. Ltd. 61,248
--------------
138,591
--------------
STEEL
62,000 Angang New Steel Company
Ltd.* 23,647
110,000 Maanshan Iron & Steel Co.
Ltd. 32,082
--------------
55,729
--------------
TEXTILES
17,000 Weiqiao Textile Co. Ltd. 22,012
--------------
TOTAL CHINA 1,937,621
--------------
DENMARK (0.4%)
BIOTECHNOLOGY
1,350 Novozymes AS (Series B) 55,428
--------------
ELECTRICAL PRODUCTS
2,400 Vestas Wind Systems AS* 35,744
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
9
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
MAJOR BANKS
36,544 Danske Bank AS $ 820,810
--------------
MAJOR TELECOMMUNICATIONS
1,900 TDC AS 64,549
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
2,000 Group 4 Falck AS 49,591
1,100 ISS AS 54,904
--------------
104,495
--------------
PHARMACEUTICALS: MAJOR
16,800 Novo Nordisk AS (Series B) 797,965
--------------
TOTAL DENMARK 1,878,991
--------------
FINLAND (1.4%)
BUILDING PRODUCTS
1,178 Uponor Oyj 35,993
--------------
ENGINEERING & CONSTRUCTION
3,675 Kone Oyj (B Shares) 213,564
--------------
FOOD RETAIL
16,110 Kesko Oyj (B Shares) 296,301
--------------
INDUSTRIAL MACHINERY
17,131 Metso Oyj 209,985
--------------
INFORMATION TECHNOLOGY
SERVICES
8,260 TietoEnator Oyj 245,944
--------------
MULTI-LINE INSURANCE
21,231 Sampo Oyj (A Shares) 203,257
--------------
OIL REFINING/MARKETING
21,853 Fortum Oyj 244,823
--------------
OTHER METALS/MINERALS
10,878 Outokumpu Oyj 165,793
--------------
PULP & PAPER
39,857 Stora Enso Oyj (Registered
Shares) 537,262
30,171 UPM-Kymmene Oyj 556,001
--------------
1,093,263
--------------
TELECOMMUNICATION EQUIPMENT
266,997 Nokia Oyj 3,755,811
--------------
TRUCKS/CONSTRUCTION/FARM
MACHINERY
3,297 Wartsila Oyj (B Shares) $ 72,491
--------------
TOTAL FINLAND 6,537,225
--------------
FRANCE (8.8%)
ADVERTISING/MARKETING SERVICES
5,525 Publicis Groupe 165,501
--------------
AEROSPACE & DEFENSE
11,782 Thales S.A. 437,492
715 Zodiac S.A. 21,435
--------------
458,927
--------------
APPAREL/FOOTWEAR
21,989 LVMH (Louis Vuitton Moet
Hennessy) 1,549,217
--------------
AUTO PARTS: O.E.M.
4,022 Valeo S.A. 165,731
--------------
AUTOMOTIVE AFTERMARKET
7,399 Compagnie Generale des
Etablissements Michelin
(B Shares) 346,108
--------------
BROADCASTING
6,704 Societe Television Francaise 1 207,004
--------------
BUILDING PRODUCTS
38,989 Compagnie de Saint-Gobain 1,967,704
--------------
CHEMICALS: SPECIALTY
6,434 Air Liquide S.A. 1,126,317
--------------
CONSTRUCTION MATERIALS
781 Imerys S.A. 177,614
9,635 Lafarge S.A. 802,354
--------------
979,968
--------------
DATA PROCESSING SERVICES
757 Atos Origin SA* 43,855
--------------
ELECTRIC UTILITIES
36,915 Suez S.A. 739,552
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
10
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
ELECTRICAL PRODUCTS
4,176 Alstom* $ 7,906
19,000 Schneider Electric S.A. 1,279,438
--------------
1,287,344
--------------
ELECTRONICS/APPLIANCES
15,729 Thomson (ex-TMM) 303,428
--------------
ENGINEERING & CONSTRUCTION
21,786 Bouygues S.A. 743,703
4,370 Vinci S.A. 425,174
--------------
1,168,877
--------------
FOOD DISTRIBUTORS
6,222 Sodexho Alliance S.A. 171,544
--------------
FOOD RETAIL
18,709 Carrefour S.A. 867,767
2,465 Casino Guichard Perrachon
S.A. 219,302
--------------
1,087,069
--------------
FOOD: MAJOR DIVERSIFIED
4,046 Groupe Danone 677,739
--------------
HOTELS/RESORTS/CRUISELINES
11,064 Accor S.A. 465,582
--------------
INFORMATION TECHNOLOGY
SERVICES
6,087 Cap Gemini S.A.* 215,302
--------------
INTEGRATED OIL
42,459 Total S.A. 7,849,916
--------------
INTERNET SOFTWARE/SERVICES
2,289 Business Objects S.A.* 51,727
16,215 Wanadoo* 157,373
--------------
209,100
--------------
LIFE/HEALTH INSURANCE
4,001 Cnp Assurances 237,303
--------------
MAJOR BANKS
48,423 BNP Paribas S.A. 2,906,824
19,003 Societe Generale* 1,582,473
--------------
4,489,297
--------------
MAJOR TELECOMMUNICATIONS
59,975 France Telecom S.A.* 1,446,583
--------------
MEDIA CONGLOMERATES
52,516 Vivendi Universal S.A.* $ 1,320,789
--------------
MEDICAL SPECIALTIES
1,745 Essilor International S.A. 102,055
--------------
MOTOR VEHICLES
10,155 Peugeot S.A. 545,357
9,166 Renault S.A. 683,673
--------------
1,229,030
--------------
MULTI-LINE INSURANCE
89,362 AXA 1,881,282
--------------
OILFIELD SERVICES/EQUIPMENT
270 Technip S.A.* 37,398
--------------
OTHER CONSUMER SPECIALTIES
3,632 Societe BIC S.A. 157,537
--------------
PACKAGED SOFTWARE
2,132 Dassault Systemes S.A. 87,008
--------------
PHARMACEUTICALS: MAJOR
42,899 Aventis S.A.* 3,266,571
22,359 Sanofi-Synthelabo S.A. 1,419,899
--------------
4,686,470
--------------
PUBLISHING: BOOKS/MAGAZINES
7,187 Lagardere S.C.A. 432,726
--------------
REGIONAL BANKS
20,076 Credit Agricole S.A. 495,053
--------------
SEMICONDUCTORS
33,494 STMicroelectronics NV* 738,037
--------------
TELECOMMUNICATION EQUIPMENT
69,060 Alcatel S.A.* 1,028,554
1,111 Sagem S.A. 121,139
--------------
1,149,693
--------------
WATER UTILITIES
7,990 Veolia Environnement 212,439
--------------
TOTAL FRANCE 39,888,485
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
11
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
GERMANY (6.0%)
AIR FREIGHT/COURIERS
24,210 Deutsche Post AG
(Registered Shares) $ 533,465
--------------
AIRLINES
9,924 Deutsche Lufthansa AG 159,339
--------------
APPAREL/FOOTWEAR
713 Adidas-Salomon AG 82,305
352 Puma AG 80,937
--------------
163,242
--------------
AUTO PARTS: O.E.M.
5,689 Continental AG 246,828
--------------
BROADCASTING
3,613 ProSiebenSat.1 Media AG
(Pref.) 70,997
--------------
CHEMICALS: MAJOR DIVERSIFIED
25,066 BASF AG 1,292,667
30,817 Bayer AG* 839,304
--------------
2,131,971
--------------
CHEMICALS: SPECIALTY
5,258 Linde AG 287,412
--------------
CONSTRUCTION MATERIALS
1,705 HeidelbergCement AG* 76,896
--------------
DEPARTMENT STORES
3,143 KarstadtQuelle AG 66,770
5,916 Metro AG 262,206
--------------
328,976
--------------
ELECTRIC UTILITIES
28,538 E. ON AG 1,890,941
16,993 RWE AG 737,272
--------------
2,628,213
--------------
ELECTRONIC COMPONENTS
2,245 Epcos AG* 46,913
--------------
HOUSEHOLD/PERSONAL CARE
1,721 Beiersdorf AG 187,754
1,974 Henkel KGaA - Vorzug (Pref.) 170,960
1,463 Wella AG (Pref.) 133,348
--------------
492,062
--------------
INDUSTRIAL CONGLOMERATES
5,153 MAN AG $ 189,181
54,625 Siemens AG (Registered) 3,943,463
17,270 ThyssenKrupp AG 299,633
--------------
4,432,277
--------------
INVESTMENT BANKS/BROKERS
9,677 Deutsche Boerse AG 531,978
--------------
MAJOR BANKS
36,991 Bayerische Hypo - und
Vereinsbank AG* 641,792
44,366 Commerzbank AG 764,431
40,454 Deutsche Bank AG
(Registered Shares) 3,332,449
--------------
4,738,672
--------------
MAJOR TELECOMMUNICATIONS
139,131 Deutsche Telekom AG
(Registered Shares)* 2,400,577
--------------
MEDICAL DISTRIBUTORS
1,657 Celesio AG 92,342
--------------
MEDICAL/NURSING SERVICES
2,949 Fresenius Medical Care AG 205,367
--------------
MOTOR VEHICLES
38,795 DaimlerChrysler AG
(Registered Shares) 1,738,043
350 Porsche AG (Pref.) 217,032
10,260 Volkswagen AG 451,787
5,105 Volkswagen AG (Pref.) 152,981
--------------
2,559,843
--------------
MULTI-LINE INSURANCE
17,427 Allianz AG (Registered Shares)* 1,848,180
4,396 Muenchener Rueckver AG
(Registered Shares) 475,162
--------------
2,323,342
--------------
OTHER CONSUMER SERVICES
5,732 TUI AG 119,848
--------------
PACKAGED SOFTWARE
8,217 SAP AG 1,245,470
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
12
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
PHARMACEUTICALS: MAJOR
3,377 Merck KGaA $ 180,790
8,939 Schering AG 469,665
--------------
650,455
--------------
PHARMACEUTICALS: OTHER
4,501 Altana AG 286,427
--------------
SEMICONDUCTORS
22,728 Infineon Technologies AG* 291,117
--------------
SPECIALTY STORES
2,321 Douglas Holding AG 62,573
--------------
TOTAL GERMANY 27,106,602
--------------
GREECE (0.2%)
CONSTRUCTION MATERIALS
1,300 Titan Cement Co. S.A. 59,098
--------------
MAJOR BANKS
11,447 National Bank of Greece S.A. 340,426
--------------
REGIONAL BANKS
8,200 Alpha Bank A.E. 255,456
6,896 EFG Eurobank Ergasias 146,582
--------------
402,038
--------------
TOTAL GREECE 801,562
--------------
HONG KONG (1.7%)
AIRLINES
66,000 Cathay Pacific Airways, Ltd. 119,726
--------------
APPAREL/FOOTWEAR RETAIL
56,500 Esprit Holdings Ltd. 231,786
--------------
BROADCASTING
10,000 Television Broadcasts Ltd. 46,665
--------------
COAL
66,000 Yanzhou Coal Mining Co., Ltd.
(Class H) 61,767
--------------
ELECTRIC UTILITIES
88,000 Datang International Power
Generation Co., Ltd.
(Class H) 68,818
114,300 CLP Holdings Ltd. 608,111
89,000 Hong Kong Electric
Holdings Ltd. $ 391,357
--------------
1,068,286
--------------
ELECTRONIC PRODUCTION
EQUIPMENT
3,000 ASM Pacific Technology Ltd. 12,423
--------------
ENGINEERING & CONSTRUCTION
21,000 Hopewell Holdings Ltd. 37,152
88,252 New World Development Co.,
Ltd. 70,712
--------------
107,864
--------------
FINANCIAL CONGLOMERATES
80,000 Wharf (Holdings) Ltd. (The) 219,479
--------------
GAS DISTRIBUTORS
250,483 Hong Kong & China Gas Co.,
Ltd. 430,300
--------------
HOTELS/RESORTS/CRUISELINES
73,116 Shangri-La Asia Ltd. 71,707
--------------
INDUSTRIAL CONGLOMERATES
141,900 Hutchison Whampoa Ltd. 955,059
61,000 Swire Pacific Ltd. (Class A) 398,831
--------------
1,353,890
--------------
INVESTMENT BANKS/BROKERS
67,000 Hong Kong Exchanges &
Clearing Ltd. 133,995
--------------
MAJOR BANKS
93,020 Bank of East Asia Ltd. 271,894
171,500 BOC Hong Kong (Holdings)
Ltd. 292,418
46,000 Hang Seng Bank Ltd. 583,824
--------------
1,148,136
--------------
MAJOR TELECOMMUNICATIONS
201,611 PCCW Ltd.* 138,279
--------------
MISCELLANEOUS MANUFACTURING
95,500 Johnson Electric Holdings Ltd. 84,477
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
13
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
OIL REFINING/MARKETING
18,000 Sinopec Zhenhai Refining &
Chemical Co., Ltd. (Class H) $ 16,269
--------------
PROPERTY - CASUALTY INSURERS
202,000 PICC Property & Casualty
Company Ltd.* (Class H) 70,568
--------------
PUBLISHING: NEWSPAPERS
24,000 SCMP Group Ltd. 10,153
--------------
RAILROADS
88,344 MTR Corp., Ltd. 134,210
--------------
REAL ESTATE DEVELOPMENT
98,000 Cheung Kong (Holdings) Ltd. 750,676
79,000 Hang Lung Properties Ltd. 106,848
44,000 Henderson Land Development
Co., Ltd. 197,428
15,000 Hysan Development Co., Ltd. 24,807
62,973 Sino Land Co., Ltd. 38,146
86,000 Sun Hung Kai Properties Ltd. 738,690
--------------
1,856,595
--------------
TOOLS/HARDWARE
29,500 Techtronic Industries Co., Ltd. 79,042
--------------
WHOLESALE DISTRIBUTORS
104,000 Li & Fung Ltd. 161,994
--------------
TOTAL HONG KONG 7,557,611
--------------
INDIA (1.0%)
ALUMINUM
7,600 Hindalco Industries Ltd. 190,162
--------------
CONSTRUCTION MATERIALS
2,600 Grasim Industries Ltd. 72,152
--------------
FINANCE/RENTAL/LEASING
18,900 Housing Development Finance
Corp., Ltd. 253,273
--------------
FINANCIAL PUBLISHING/SERVICES
2,800 I-Flex Solutions Ltd. 33,276
--------------
GAS DISTRIBUTORS
29,800 Gail India Ltd. 146,057
--------------
HOUSEHOLD/PERSONAL CARE
95,600 Hindustan Lever Ltd. 303,002
--------------
INFORMATION TECHNOLOGY
SERVICES
4,300 Infosys Technologies Ltd. $ 496,787
23,200 Satyam Computer Services Ltd. 167,087
2,500 Wipro Ltd. 86,669
--------------
750,543
--------------
MOTOR VEHICLES
5,000 Bajaj Auto Ltd 103,333
11,300 Hero Honda Motors Ltd. 122,461
5,500 Maruti Udyog Ltd* 67,173
--------------
292,967
--------------
OIL REFINING/MARKETING
13,600 Hindustan Petroleum Corp.,
Ltd. 140,564
66,000 Reliance Industries Ltd. 779,852
--------------
920,416
--------------
PHARMACEUTICALS: GENERIC
DRUGS
7,300 Dr. Reddy's Laboratories Ltd. 142,477
--------------
PHARMACEUTICALS: OTHER
10,300 Ranbaxy Laboratories Ltd. 245,662
--------------
REGIONAL BANKS
13,700 HDFC Bank Ltd. 115,597
44,600 ICICI Bank Ltd. 315,554
--------------
431,151
--------------
SPECIALTY TELECOMMUNICATIONS
9,300 Mahanagar Telephone Nigam
Ltd. 30,948
--------------
STEEL
20,900 Tata Iron & Steel Co., Ltd. 167,857
--------------
TOBACCO
10,200 ITC Ltd. 246,254
--------------
TRUCKS/CONSTRUCTION/FARM
MACHINERY
31,300 Larsen & Toubro Ltd. 398,609
15,100 Tata Motors Ltd. 160,304
--------------
558,913
--------------
TOTAL INDIA 4,785,110
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
14
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
IRELAND (0.5%)
CONSTRUCTION MATERIALS
12,892 CRH PLC $ 273,415
--------------
FINANCIAL CONGLOMERATES
6,900 Irish Life & Permanent PLC 106,817
--------------
INDUSTRIAL CONGLOMERATES
2,150 DCC PLC 32,717
--------------
MAJOR BANKS
48,178 Allied Irish Banks PLC 694,455
56,372 Bank of Ireland 682,879
--------------
1,377,334
--------------
PHARMACEUTICALS: OTHER
25,300 Elan Corporation PLC* 582,038
--------------
PUBLISHING: NEWSPAPERS
21,900 Independent News & Media
PLC 49,857
--------------
WHOLESALE DISTRIBUTORS
4,250 Grafton Group PLC (Units)++* 31,420
--------------
TOTAL IRELAND 2,453,598
--------------
ITALY (2.0%)
AEROSPACE & DEFENSE
87,085 Finmeccanica SpA 66,468
--------------
APPAREL/FOOTWEAR
1,582 Benetton Group SpA 18,538
--------------
BROADCASTING
20,223 Mediaset SpA 221,715
--------------
CHEMICALS: MAJOR DIVERSIFIED
1,710 Snia SpA 611
--------------
COMMERCIAL PRINTING/FORMS
109,717 Seat Pagine Gialle SpA 48,510
--------------
CONSTRUCTION MATERIALS
1,767 Italcementi SpA 22,125
--------------
ELECTRIC UTILITIES
65,980 Enel SpA 525,731
--------------
FINANCIAL CONGLOMERATES
2,989 Banca Fideuram SpA 17,048
53,638 Pirelli & C. SpA $ 54,114
--------------
71,162
--------------
INTEGRATED OIL
100,049 ENI SpA 2,033,143
--------------
INVESTMENT BANKS/BROKERS
4,683 Mediobanca SpA 54,260
--------------
LIFE/HEALTH INSURANCE
6,718 Alleanza Assicurazioni SpA 74,297
9,517 Assicurazioni Generali 250,872
2,246 Mediolanum SpA 14,586
--------------
339,755
--------------
MAJOR BANKS
127,354 Banca Intesa SpA 421,163
7,450 Banca Intesa SpA RNC 18,657
5,524 Banca Monte dei Paschi di
Siena SpA 17,209
11,358 Banca Nazionale del Lavoro
SpA* 25,449
60,947 SanPaolo IMI SpA 710,550
158,005 UniCredito Italiano SpA 736,461
--------------
1,929,489
--------------
MAJOR TELECOMMUNICATIONS
457,034 Telecom Italia SpA* 1,464,878
277,497 Telecom Italia SpA - RNC* 646,706
--------------
2,111,584
--------------
MEDICAL SPECIALTIES
2,565 Sorin SpA* 7,207
--------------
MOTOR VEHICLES
14,779 Fiat SpA* 103,947
--------------
MULTI-LINE INSURANCE
3,065 Riunione Adriatica di Sicurta
SpA 56,115
--------------
OIL & GAS PIPELINES
11,337 Snam Rete Gas SpA 50,261
--------------
REGIONAL BANKS
2,130 Banca Popolare di Milano Scrl* 12,582
12,764 Banco Popolare di Verona e
Novara Scrl 212,278
--------------
224,860
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
15
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
RESTAURANTS
2,053 Autogrill SpA* $ 29,273
--------------
SPECIALTY TELECOMMUNICATIONS
3,531 Tiscali SpA* 18,320
--------------
WIRELESS TELECOMMUNICATIONS
193,673 Telecom Italia Mobile (T.I.M.)* 1,104,601
--------------
TOTAL ITALY 9,037,675
--------------
JAPAN (25.7%)
ADVERTISING/MARKETING SERVICES
3,000 Asatsu - DK Inc. 85,342
--------------
AGRICULTURAL
COMMODITIES/MILLING
10,000 Nisshin Seifun Group Inc. 92,136
--------------
AIR FREIGHT/COURIERS
65,000 Nippon Express Co., Ltd. 379,824
22,000 Yamato Transport Co., Ltd. 334,245
--------------
714,069
--------------
AIRLINES
70,000 Japan Airlines System Corp.* 208,643
--------------
APPAREL/FOOTWEAR
13,000 Onward Kashiyama Co., Ltd. 198,097
6,000 Wacoal Corp. 61,261
--------------
259,358
--------------
APPAREL/FOOTWEAR RETAIL
3,700 Fast Retailing Co., Ltd. 288,277
1,800 Shimamura Co., Ltd. 148,396
2,500 World Co., Ltd. 84,254
--------------
520,927
--------------
AUTO PARTS: O.E.M.
49,350 Denso Corporation 1,039,489
18,000 NGK Spark Plug Co., Ltd. 166,498
2,000 Sanden Corp. 13,662
2,900 Stanley Electric Co., Ltd. 54,779
800 Toyoda Gosei Co., Ltd. 21,888
6,850 Toyota Industries Corp. 148,940
--------------
1,445,256
--------------
AUTOMOTIVE AFTERMARKET
58,000 Bridgestone Corp. $ 981,555
--------------
BEVERAGES: ALCOHOLIC
27,800 Asahi Breweries, Ltd. 312,303
70,000 Kirin Brewery Co., Ltd. 693,785
8,000 Takara Holdings Inc. 66,244
--------------
1,072,332
--------------
BROADCASTING
17 Fuji Television Network, Inc. 44,048
17 Fuji Television Network, Inc.
(Bonus Shares)* 44,356
7,300 Tokyo Broadcasting System,
Inc. 145,497
--------------
233,901
--------------
BUILDING PRODUCTS
26,000 Nippon Sheet Glass Company,
Ltd. 90,687
14,000 Tostem Inax Holding Corp. 266,353
35,000 Toto Ltd. 374,162
--------------
731,202
--------------
CHEMICALS: AGRICULTURAL
11,000 Nissan Chemical Industries,
Ltd. 82,415
--------------
CHEMICALS: MAJOR DIVERSIFIED
89,000 Asahi Kasei Corp. 486,202
18,000 Ishihara Sangyo Kaisha, Ltd. 39,790
129,000 Mitsubishi Chemical Corp. 350,607
--------------
876,599
--------------
CHEMICALS: SPECIALTY
12,000 Daicel Chemical Industries,
Ltd. 53,053
51,000 Dainippon Ink & Chemicals,
Inc. 124,751
35,000 Denki Kagaku Kogyo
Kabushiki Kaisha 117,005
11,000 JSR Corp. 231,700
20,000 Kaneka Corp. 184,635
28,000 Kuraray Co., Ltd. 210,038
43,000 Mitsubishi Rayon Co., Ltd. 150,761
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
16
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
40,000 Mitsui Chemicals, Inc. $ 210,545
23,797 Shin-Etsu Chemical Co., Ltd. 961,538
7,000 Showa Denko K.K. 15,918
11,000 Sumitomo Bakelite Co., Ltd. 72,051
100,000 Sumitomo Chemical Co., Ltd. 462,040
39,000 Tosoh Corp. 137,090
--------------
2,931,125
--------------
COMMERCIAL PRINTING/FORMS
34,000 Dai Nippon Printing Co., Ltd. 515,637
32,000 Toppan Printing Co., Ltd. 376,010
--------------
891,647
--------------
COMPUTER PROCESSING
HARDWARE
111,000 Fujitsu Ltd. 771,308
--------------
CONSTRUCTION MATERIALS
6,000 Taiheyo Cement Corp. 15,492
--------------
CONTAINERS/PACKAGING
14,000 Toyo Seikan Kaisha, Ltd. 252,781
--------------
DEPARTMENT STORES
16,000 Daimaru, Inc. 139,301
6,000 Hankyu Department Stores,
Inc. 49,737
11,300 Isetan Co., Ltd. 156,017
23,100 Marui Co., Ltd. 362,468
26,000 Mitsukoshi, Ltd 138,268
19,000 Takashimaya Co., Ltd. 229,109
--------------
1,074,900
--------------
ELECTRIC UTILITIES
14,900 Chubu Electric Power Co. 310,473
61,500 Kansai Electric Power Co., Inc. 1,075,888
10,600 Kyushu Electric Power Co.,
Inc. 182,461
31,900 Tohoku Electric Power Co., Inc. 512,400
89,000 Tokyo Electric Power Co., Inc. 1,906,912
--------------
3,988,134
--------------
ELECTRICAL PRODUCTS
14,000 Fujikura Ltd. 75,847
44,000 Furukawa Electric Co., Ltd.* 169,813
2,100 Mabuchi Motor Co., Ltd. 144,782
13,000 Matsushita Electric Works,
Ltd. $ 117,775
30,000 NGK Insulators, Ltd. 225,041
2,200 Nidec Corp. 237,380
44,000 Sumitomo Electric Industries,
Ltd. 406,595
1,000 Ushio Inc. 18,663
--------------
1,395,896
--------------
ELECTRONIC COMPONENTS
11,000 Alps Electric Co. Ltd. 158,453
19,000 Citizen Watch Co., Ltd. 191,584
2,200 Hirose Electric Co., Ltd. 252,129
7,100 Hoya Corp. 768,020
13,500 Murata Manufacturing Co., Ltd. 885,486
7,000 Taiyo Yuden Co., Ltd. 117,005
7,600 TDK Corp. 542,562
--------------
2,915,239
--------------
ELECTRONIC
EQUIPMENT/INSTRUMENTS
54,000 Canon, Inc. 2,832,578
29,000 Casio Computer Co., Ltd. 334,454
1,800 Keyence Corp. 432,143
13,500 Konica Minolta Holdings, Inc. 186,882
10,900 Kyocera Corp. 901,585
152,000 Matsushita Electric Industrial
Co., Ltd. 2,232,216
139,000 Mitsubishi Electric Corp. 702,682
100,000 NEC Corp. 785,468
48,000 OKI Electric Industry Co., Ltd.* 196,992
17,000 Omron Corp. 414,296
40,000 Ricoh Co., Ltd. 797,246
126,000 Sanyo Electric Co. Ltd. 570,756
200,000 Toshiba Corp. 918,645
14,000 Yokogawa Electric Corp. 190,125
--------------
11,496,068
--------------
ELECTRONIC PRODUCTION
EQUIPMENT
4,800 Advantest Corp. 364,849
20,000 Nikon Corporation 233,919
10,400 Tokyo Electron Ltd. 633,158
--------------
1,231,926
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
17
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
ELECTRONICS/APPLIANCE STORES
5,400 Yamada Denki Co., Ltd. $ 185,414
--------------
ELECTRONICS/APPLIANCES
27,000 Fuji Photo Film Co., Ltd. 868,364
12,554 Pioneer Corp. 358,263
63,000 Sharp Corp. 1,135,804
53,796 Sony Corp. 2,081,074
--------------
4,443,505
--------------
ENGINEERING & CONSTRUCTION
12,000 JGC Corp. 106,324
85,000 Kajima Corp. 297,246
45,000 Obayashi Corp. 217,702
66,000 Shimizu Corporation 278,637
7,000 Taisei Corp. 24,542
--------------
924,451
--------------
FINANCIAL CONGLOMERATES
439 Mizuho Financial Group, Inc. 2,076,083
--------------
FOOD RETAIL
15,800 Aeon Co., Ltd. 692,807
4,500 FamilyMart Co., Ltd. 129,235
24,000 Ito-Yokado Co., Ltd. 998,007
4,100 Lawson, Inc. 153,778
27,000 Seven - Eleven Japan Co., Ltd. 917,286
--------------
2,891,113
--------------
FOOD: MEAT/FISH/DAIRY
16,000 Nippon Meat Packers, Inc. 190,759
6,000 Yakult Honsha Co., Ltd. 87,244
--------------
278,003
--------------
FOOD: SPECIALTY/CANDY
42,000 Ajinomoto Co., Inc. 491,230
900 House Foods Corp. 12,198
9,000 Kikkoman Corp. 71,589
13,000 Meiji Seika Kaisha Ltd. 53,941
5,100 Nissin Food Products Co., Ltd. 127,292
7,000 Yamazaki Baking Co., Ltd. 68,617
--------------
824,867
--------------
GAS DISTRIBUTORS
145,000 Osaka Gas Co., Ltd. 401,975
175,000 Tokyo Gas Co., Ltd. $ 648,442
--------------
1,050,417
--------------
HOME BUILDING
8,500 Daito Trust Construction Co.,
Ltd. 288,005
44,000 Daiwa House Industry Co., Ltd. 492,299
26,000 Sekisui Chemical Co., Ltd. 183,964
50,000 Sekisui House, Ltd. 529,987
--------------
1,494,255
--------------
HOUSEHOLD/PERSONAL CARE
34,000 Kao Corp. 811,651
27,000 Shiseido Company, Ltd. 331,935
3,300 Uni-Charm Corp. 156,061
--------------
1,299,647
--------------
INDUSTRIAL CONGLOMERATES
189,000 Hitachi, Ltd. 1,327,007
62,000 Kawasaki Heavy Industries,
Ltd. 94,927
--------------
1,421,934
--------------
INDUSTRIAL MACHINERY
20,000 Amada Co., Ltd. 112,520
11,000 Daikin Industries Ltd. 257,610
12,600 Fanuc Ltd. 771,662
69,000 Ishikawajima-Harima Heavy
Industries Co., Ltd.* 103,144
240,000 Mitsubishi Heavy Industries,
Ltd. 660,989
4,500 SMC Corporation 515,718
1,800 THK Co., Ltd. 34,816
--------------
2,456,459
--------------
INDUSTRIAL SPECIALTIES
83,000 Asahi Glass Company, Ltd. 878,275
10,900 Nitto Denko Corp. 605,336
--------------
1,483,611
--------------
INFORMATION TECHNOLOGY
SERVICES
4,100 CSK Corp. 178,293
83 NTT Data Corp. 324,841
14,100 Softbank Corp. 638,703
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
18
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
100 TIS Inc. $ 3,796
--------------
1,145,633
--------------
INVESTMENT BANKS/BROKERS
211,000 Daiwa Securities Group Inc. 1,586,610
75,000 Nikko Cordial Corp. 426,708
145,000 Nomura Holdings, Inc. 2,354,050
--------------
4,367,368
--------------
MAJOR BANKS
439 Mitsubishi Tokyo Financial
Group, Inc. 3,905,581
78,043 Mitsui Trust Holdings, Inc. 552,198
183 Sumitomo Mitsui Financial
Group, Inc. 1,382,696
104,000 Sumitomo Trust & Banking
Co., Ltd. (The) 625,621
409 UFJ Holdings, Inc. 2,530,775
--------------
8,996,871
--------------
MAJOR TELECOMMUNICATIONS
492 Nippon Telegraph & Telephone
Corp. (NTT) 2,585,251
--------------
MARINE SHIPPING
3,000 Kamigumi Co. Ltd. 20,792
5,000 Kawasaki Kisen Kaisha, Ltd. 21,426
8,000 Mitsui O.S.K. Lines, Ltd. 35,006
79,000 Nippon Yusen Kabushiki
Kaisha 321,354
--------------
398,578
--------------
MEDICAL SPECIALTIES
11,000 Olympus Corp. 213,263
15,600 Terumo Corp. 330,712
--------------
543,975
--------------
MERCHANDISING
4,300 Shimachu Co., Ltd. 114,921
--------------
METAL FABRICATIONS
22,000 Minebea Co., Ltd. 107,429
42,000 Mitsui Mining & Smelting Co.,
Ltd. 176,934
53,000 NSK Ltd. 243,921
33,000 NTN Corp. $ 141,113
--------------
669,397
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
220 Bellsystem24, Inc. 47,755
11,000 Secom Co., Ltd. 471,372
2,000 USS Co Ltd 169,052
--------------
688,179
--------------
MISCELLANEOUS MANUFACTURING
26,000 Ebara Corp. 129,317
5,400 Kurita Water Industries Ltd. 66,485
8,000 Takuma Co., Ltd. 56,822
--------------
252,624
--------------
MOTOR VEHICLES
67,504 Honda Motor Co., Ltd. 2,709,211
203,300 Nissan Motor Co., Ltd. 2,263,596
196,700 Toyota Motor Corp. 7,110,283
2,000 Yamaha Motor Co., Ltd. 28,592
--------------
12,111,682
--------------
MOVIES/ENTERTAINMENT
600 Namco Ltd. 16,144
3,600 Oriental Land Co. Ltd. 233,521
6,400 TOHO Co., Ltd. 97,525
--------------
347,190
--------------
OFFICE EQUIPMENT/SUPPLIES
5,200 Kokuyo Co., Ltd. 64,211
--------------
OIL & GAS PRODUCTION
12,000 Teikoku Oil Co., Ltd. 61,533
--------------
OIL REFINING/MARKETING
119,000 Nippon Oil Corp. 655,481
14,300 Showa Shell Sekiyu K.K. 122,816
8,000 TonenGeneral Sekiyu K.K. 67,476
--------------
845,773
--------------
OTHER CONSUMER SERVICES
4,400 Benesse Corporation 121,181
--------------
OTHER METALS/MINERALS
20,000 Dowa Mining Co., Ltd. 110,708
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
19
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
25,000 Nippon Mining Holdings, Inc. $ 105,091
38,000 Sumitomo Metal Mining Co.,
Ltd. 231,002
--------------
446,801
--------------
OTHER TRANSPORTATION
6,000 Mitsubishi Logistics Corp. 54,303
--------------
PACKAGED SOFTWARE
3,200 Oracle Corp. 180,033
3,200 Trend Micro Inc. 122,631
--------------
302,664
--------------
PERSONNEL SERVICES
2,100 Meitec Corp. 74,008
--------------
PHARMACEUTICALS: MAJOR
45,900 Sankyo Co., Ltd. 850,385
75,000 Takeda Chemical Industries,
Ltd. 3,023,646
--------------
3,874,031
--------------
PHARMACEUTICALS: OTHER
24,800 Chugai Pharmaceutical Co.,
Ltd. 375,213
21,100 Daiichi Pharmaceutical Co.,
Ltd. 369,699
21,200 Eisai Co., Ltd. 541,620
13,200 Fujisawa Pharmaceutical Co.,
Ltd. 306,740
2,000 Kaken Pharmaceutical Co.,
Ltd. 11,125
32,000 Kyowa Hakko Kogyo Co., Ltd 212,792
27,000 Shionogi & Co., Ltd. 424,887
27,000 Taisho Pharmaceutical Co.,
Ltd. 527,134
25,000 Yamanouchi Pharmaceutical
Co., Ltd. 833,484
--------------
3,602,694
--------------
PROPERTY - CASUALTY INSURERS
106 Millea Holdings, Inc. 1,507,701
180,000 Mitsui Sumitomo Insurance
Co., Ltd. 1,694,329
66,000 Sompo Japan Insurance Inc. 594,945
--------------
3,796,975
--------------
PULP & PAPER
60 Nippon Unipac Holding $ 298,424
81,000 Oji Paper Co. Ltd. 505,608
--------------
804,032
--------------
RAILROADS
105 Central Japan Railway Co. 858,036
251 East Japan Railway Co. 1,282,515
31,000 Keihin Electric Express Railway
Co., Ltd. 187,606
15,000 Keio Electric Railway Co., Ltd. 83,983
122,000 Kintetsu Corp. 437,688
67,000 Tobu Railway Co., Ltd. 287,108
76,000 Tokyu Corp. 379,380
28 West Japan Railway Co. 108,824
--------------
3,625,140
--------------
REAL ESTATE DEVELOPMENT
113,000 Mitsubishi Estate Co., Ltd. 1,335,976
95,000 Mitsui Fudosan Co., Ltd. 1,045,706
38,000 Sumitomo Realty &
Development Co., Ltd. 426,545
--------------
2,808,227
--------------
REAL ESTATE INVESTMENT TRUSTS
23 Japan Real Estate Investments
Corp. 158,987
22 Nippon Building Fund Inc. 161,243
--------------
320,230
--------------
RECREATIONAL PRODUCTS
7,100 Konami Corp. 182,035
8,100 Nintendo Co., Ltd. 764,649
7,600 Shimano, Inc. 177,985
7,900 Yamaha Corp. 148,152
--------------
1,272,821
--------------
RESTAURANTS
10,300 Skylark Co., Ltd. 202,025
--------------
SEMICONDUCTORS
7,300 Rohm Co., Ltd. 910,681
--------------
SPECIALTY STORES
10,000 UNY Co., Ltd. 117,050
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
20
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
STEEL
30,800 JFE Holdings, Inc. $ 690,614
436,000 Nippon Steel Corp. 912,448
27,000 Sumitomo Metal Industries,
Ltd. 32,533
--------------
1,635,595
--------------
TEXTILES
7,000 Nisshinbo Industries, Inc. 45,470
67,000 Teijin Ltd. 201,522
90,000 Toray Industries, Inc. 411,759
--------------
658,751
--------------
TOBACCO
35 Japan Tobacco, Inc. 279,670
--------------
TRUCKS/CONSTRUCTION/FARM
MACHINERY
77,000 Komatsu Ltd. 438,784
89,000 Kubota Corp. 386,220
--------------
825,004
--------------
WHOLESALE DISTRIBUTORS
89,000 Itochu Corp.* 376,545
88,000 Marubeni Corporation 221,634
67,000 Mitsubishi Corp. 638,558
14,000 Mitsui & Co., Ltd. 115,419
60,000 Sumitomo Corporation 460,409
--------------
1,812,565
--------------
WIRELESS TELECOMMUNICATIONS
580 NTT DoCoMo, Inc. 1,150,752
--------------
TOTAL JAPAN 116,986,396
--------------
LUXEMBOURG (0.1%)
STEEL
21,473 Arcelor 356,603
--------------
NETHERLANDS (4.7%)
AEROSPACE & DEFENSE
17,588 European Aeronautic Defense
and Space Co.* 444,660
--------------
AIR FREIGHT/COURIERS
34,466 TPG NV 742,936
--------------
BEVERAGES: ALCOHOLIC
27,169 Heineken NV* $ 1,145,897
--------------
CHEMICALS: SPECIALTY
2,492 DSM NV 119,377
--------------
CONSTRUCTION MATERIALS
15,008 James Hardie Industries NV 72,559
--------------
ELECTRONIC
EQUIPMENT/INSTRUMENTS
4,702 OCE NV 79,157
--------------
ELECTRONIC PRODUCTION
EQUIPMENT
26,490 ASML Holding NV* 421,511
--------------
FINANCIAL CONGLOMERATES
105,558 ING Groep NV (Share
Certificates) 2,261,455
--------------
FOOD: MAJOR DIVERSIFIED
33,051 Unilever NV (Share
Certificates)* 2,176,114
--------------
INDUSTRIAL CONGLOMERATES
74,860 Koninklijke (Royal) Philips
Electronics NV 2,037,922
--------------
INDUSTRIAL SPECIALTIES
13,830 Akzo Nobel NV 503,762
--------------
INTEGRATED OIL
131,784 Royal Dutch Petroleum Co. 6,406,149
--------------
INVESTMENT BANKS/BROKERS
5,529 Euronext NV 160,785
--------------
LIFE/HEALTH INSURANCE
93,911 Aegon NV 1,228,764
--------------
MAJOR BANKS
89,551 ABN AMRO Holding NV 1,946,422
--------------
MAJOR TELECOMMUNICATIONS
100,456 Koninklijke (Royal) KPN NV 723,402
--------------
PERSONNEL SERVICES
11,161 Vedior NV (Share Certificates) 162,082
--------------
PUBLISHING: BOOKS/MAGAZINES
26,385 Reed Elsevier NV 370,522
10,412 VNU N.V. 291,182
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
21
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
12,571 Wolters Kluwer NV (Share
Certificates) $ 211,629
--------------
873,333
--------------
WHOLESALE DISTRIBUTORS
5,168 Hagemeyer NV* 11,146
--------------
TOTAL NETHERLANDS 21,517,433
--------------
NEW ZEALAND (0.0%)
FOREST PRODUCTS
62,696 Carter Holt Harvey Ltd. 82,381
--------------
MAJOR TELECOMMUNICATIONS
23,290 Telecom Corporation of New
Zealand Ltd. 82,480
--------------
TOTAL NEW ZEALAND 164,861
--------------
NORWAY (0.3%)
CHEMICALS: AGRICULTURAL
10,967 Yara International ASA* 77,475
--------------
FINANCIAL CONGLOMERATES
14,953 DnB NOR ASA 94,744
--------------
FOOD: SPECIALTY/CANDY
11,900 Orkla ASA 287,733
--------------
INDUSTRIAL CONGLOMERATES
10,967 Norsk Hydro ASA 643,765
--------------
INTEGRATED OIL
16,900 Statoil ASA 211,084
--------------
MAJOR TELECOMMUNICATIONS
8,200 Telenor ASA 53,867
--------------
MISCELLANEOUS MANUFACTURING
6,715 Tomra Systems ASA 26,995
--------------
PULP & PAPER
6,700 Norske Skogindustrier ASA 121,989
--------------
TELECOMMUNICATION EQUIPMENT
1,300 Tandberg ASA* 11,740
--------------
TOTAL NORWAY 1,529,392
--------------
PORTUGAL (0.2%)
CABLE/SATELLITE TV
1,829 Pt Multimedia - Servicos de
Telecomunicacoes e
Multimedia SGPS SA $ 41,551
--------------
ELECTRIC UTILITIES
43,649 Electricidade de Portugal, S.A. 119,245
--------------
MAJOR TELECOMMUNICATIONS
60,523 Portugal Telecom, SGPS, S.A.
(Registered Shares) 656,294
--------------
REGIONAL BANKS
102,901 Banco Comercial Portugues,
S.A. 239,194
--------------
TOTAL PORTUGAL 1,056,284
--------------
SINGAPORE (0.8%)
AEROSPACE & DEFENSE
94,334 Singapore Technologies
Engineering Ltd. 104,729
--------------
AIRLINES
36,000 Singapore Airlines Ltd. 228,384
--------------
BEVERAGES: ALCOHOLIC
10,000 Fraser & Neave Ltd. 78,125
--------------
COMPUTER PERIPHERALS
2,793 Creative Technology, Ltd. 29,203
--------------
ELECTRONIC COMPONENTS
13,696 Venture Corp., Ltd. 153,662
--------------
FINANCIAL CONGLOMERATES
36,000 Keppel Corp., Ltd. 151,198
--------------
HOTELS/RESORTS/CRUISELINES
8,962 Overseas Union Enterprise Ltd. 32,376
--------------
INVESTMENT BANKS/BROKERS
60,479 Singapore Exchange Ltd. 57,907
--------------
MAJOR BANKS
64,393 DBS Group Holdings Ltd. 540,895
59,039 Oversea - Chinese Banking
Corp., Ltd. 419,626
--------------
960,521
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
22
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
MAJOR TELECOMMUNICATIONS
377,220 Singapore Telecommunications
Ltd. $ 518,500
--------------
MARINE SHIPPING
53,000 Neptune Orient Lines Ltd. 60,708
--------------
OTHER TRANSPORTATION
165,068 ComfortDelgro Corp. Ltd. 119,263
--------------
PUBLISHING: NEWSPAPERS
23,842 Singapore Press Holdings Ltd. 294,104
--------------
REAL ESTATE DEVELOPMENT
69,000 Capitaland Ltd. 65,255
35,455 City Developments Ltd. 127,042
34,925 United Overseas Land, Ltd. 36,722
--------------
229,019
--------------
REGIONAL BANKS
69,489 United Overseas Bank, Ltd. 559,210
--------------
SEMICONDUCTORS
72,000 Chartered Semiconductor
Manufacturing Ltd.* 63,440
--------------
TRUCKS/CONSTRUCTION/FARM
MACHINERY
58,353 SembCorp Industries Ltd. 49,016
--------------
TOTAL SINGAPORE 3,689,365
--------------
SPAIN (4.9%)
BROADCASTING
814 Antena 3 Television, S.A.* 41,354
--------------
ELECTRIC UTILITIES
56,183 Endesa S.A. 1,029,299
46,064 Iberdrola S.A. 907,939
11,884 Union Fenosa, S.A. 246,769
--------------
2,184,007
--------------
ENGINEERING & CONSTRUCTION
4,388 Acciona S.A. 271,035
15,470 ACS Actividades de
Construccion y Servicios, S.A. 751,270
10,896 Fomento de Construcciones y
Contratas S.A. 386,837
11,190 Grupo Ferrovial, S.A. $ 446,079
--------------
1,855,221
--------------
GAS DISTRIBUTORS
101,106 Gas Natural SDG, S.A. 2,479,842
--------------
INFORMATION TECHNOLOGY
SERVICES
3,956 Indra Sistemas S.A. 51,288
--------------
INTEGRATED OIL
72,383 Repsol YPF, S.A. 1,523,834
--------------
MAJOR BANKS
187,822 Banco Bilbao Vizcaya
Argentaria, S.A. 2,477,782
263,067 Banco Santander Central
Hispano, S.A. 2,824,254
--------------
5,302,036
--------------
MAJOR TELECOMMUNICATIONS
428,889 Telefonica S.A.* 6,377,435
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
46,827 Amadeus Global Travel
Distribution S.A. (A Shares) 276,052
--------------
OTHER TRANSPORTATION
24,848 Abertis Infraestructuras, S.A. 414,736
--------------
REAL ESTATE DEVELOPMENT
13,665 Sacyr Vallehermoso S.A. 213,346
--------------
REGIONAL BANKS
10,427 Banco Popular Espanol S.A. 575,082
--------------
STEEL
3,904 Acerinox S.A. 201,238
--------------
TOBACCO
19,234 Altadis, S.A. 543,429
--------------
WATER UTILITIES
13,104 Sociedad General de Aguas de
Barcelona, S.A. 210,396
--------------
TOTAL SPAIN 22,249,296
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
23
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
SWEDEN (2.6%)
ADVERTISING/MARKETING SERVICES
9,200 Eniro AB $ 74,651
--------------
APPAREL/FOOTWEAR RETAIL
37,700 Hennes & Mauritz AB
(B Shares) 922,653
--------------
BROADCASTING
2,900 Modern Times Group MTG AB
(B Shares)* 48,960
--------------
ELECTRONICS/APPLIANCES
30,400 Electrolux AB (Redemption
Rights)* 9,748
30,400 Electrolux AB (Series B) 600,767
--------------
610,515
--------------
ENGINEERING & CONSTRUCTION
48,480 Skanska AB (B Shares) 390,205
--------------
HOUSEHOLD/PERSONAL CARE
12,086 Svenska Cellulosa AB
(B Shares) 473,734
--------------
INDUSTRIAL MACHINERY
1,350 Alfa Laval AB 20,318
15,700 Assa Abloy AB (B Shares) 191,090
13,920 Atlas Copco AB (A Shares) 488,236
7,469 Atlas Copco AB (B Shares) 241,443
27,209 Sandvik AB 884,901
--------------
1,825,988
--------------
INFORMATION TECHNOLOGY
SERVICES
15,675 WM-Data AB (B Shares) 34,875
--------------
LIFE/HEALTH INSURANCE
77,562 Skandia Forsakrings AB 304,527
--------------
MAJOR BANKS
25,500 Skandinaviska Enskilda
Banken AB (A Shares) 370,441
41,500 Svenska Handelsbanken AB
(A Shares) 801,116
--------------
1,171,557
--------------
MAJOR TELECOMMUNICATIONS
5,185 Tele2 AB (B Shares)* 235,469
115,848 TeliaSonera AB 476,073
--------------
711,542
--------------
METAL FABRICATIONS
8,827 SKF AB (B Shares) $ 302,670
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
43,200 Securitas AB (B Shares) 621,916
--------------
PULP & PAPER
5,550 Holmen AB (B Shares) 156,529
--------------
REGIONAL BANKS
148,484 Nordea Bank AB 1,000,789
--------------
STEEL
6,700 SSAB Svenskt Stal AB
(Series A) 110,046
--------------
TELECOMMUNICATION EQUIPMENT
789,052 Telefonaktiebolaget LM
Ericsson* (B Shares) 2,137,625
--------------
TOBACCO
25,600 Swedish Match AB 257,980
--------------
TRUCKS/CONSTRUCTION/FARM
MACHINERY
4,157 Volvo AB (A Shares)* 137,100
10,430 Volvo AB (B Shares)* 356,953
--------------
494,053
--------------
TOTAL SWEDEN 11,650,815
--------------
SWITZERLAND (6.7%)
BIOTECHNOLOGY
580 Serono SA (B Shares) 347,839
--------------
BUILDING PRODUCTS
95 Geberit AG 57,780
201 Schindler Holding AG 54,842
--------------
112,622
--------------
CHEMICALS: AGRICULTURAL
5,883 Syngenta AG 471,103
--------------
CHEMICALS: SPECIALTY
3,718 Ciba Specialty Chemicals AG
(Registered Shares)* 258,274
7,239 Clariant AG (Registered
Shares) 91,912
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
24
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
2,170 Lonza Group AG
(Registered Shares) $ 104,849
--------------
455,035
--------------
COMPUTER PERIPHERALS
2,521 Logitech International S.A.
(Registered Shares)* 109,452
--------------
CONSTRUCTION MATERIALS
8,195 Holcim Ltd. (Regular Shares) 423,476
--------------
ELECTRONIC EQUIPMENT/
INSTRUMENTS
709 Kudelski S.A. - Bearer* 21,479
--------------
FINANCIAL CONGLOMERATES
75,952 UBS AG (Registered Shares) 5,402,112
--------------
FOOD: MAJOR DIVERSIFIED
18,653 Nestle S.A. (Registered
Shares) 4,722,279
--------------
HOUSEHOLD/PERSONAL CARE
559 Givaudan S.A. (Registered
Shares) 278,292
--------------
INDUSTRIAL CONGLOMERATES
48,580 ABB Ltd.* 273,722
98 Sulzer AG (Registered Shares)* 25,415
--------------
299,137
--------------
MAJOR BANKS
73,383 Credit Suisse Group 2,588,456
--------------
MAJOR TELECOMMUNICATIONS
1,627 Swisscom AG (Registered
Shares) 505,455
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
591 SGS S.A. 310,188
--------------
MULTI-LINE INSURANCE
7,642 Zurich Financial Services AG* 1,209,177
--------------
OTHER CONSUMER SPECIALTIES
4,569 Compagnie Financiere
Richemont AG (Series A) $ 117,611
1,979 Swatch Group AG (B Shares) 263,108
2,208 Swatch Group AG (Registered
Shares) 59,478
--------------
440,197
--------------
PERSONNEL SERVICES
7,751 Adecco S.A. (Registered
Shares)* 346,689
--------------
PHARMACEUTICALS: MAJOR
147,358 Novartis AG (Registered
Shares) 6,574,014
44,160 Roche Holding AG 4,635,505
2,351 Roche Holding AG - Bearer 346,589
--------------
11,556,108
--------------
PROPERTY - CASUALTY INSURERS
11,579 Swiss Re (Registered Shares) 762,341
--------------
SPECIALTY STORES
192 Valora Holding AG 45,125
--------------
TOTAL SWITZERLAND 30,406,562
--------------
THAILAND (1.0%)
AGRICULTURAL
COMMODITIES/MILLING
561,072 Charoen Pokphand Foods
PCL (Alien Shares) 51,598
--------------
BROADCASTING
225,000 BEC World PCL (Alien Shares) 103,459
--------------
CONSTRUCTION MATERIALS
25,100 Siam City Cement Co. PCL
(Alien Shares) 134,231
42,694 The Siam Cement PCL 224,054
77,200 The Siam Cement PCL (Alien
Shares) 416,713
--------------
774,998
--------------
ELECTRIC UTILITIES
43,076 Electricity Generating PCL 72,662
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
25
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS
79,600 Delta Electronics (Thailand)
PCL (Alien Shares) $ 51,222
9,656 Hana Microelectronics PCL
(Alien Shares) 32,817
--------------
84,039
--------------
FINANCE/RENTAL/LEASING
160,800 National Finance PCL (Alien
Shares) 65,902
96,500 TISCO Finance PCL (Alien
Shares) 71,140
--------------
137,042
--------------
HOME BUILDING
438,533 Land & Houses PCL 112,877
327,808 Land & Houses PCL (Alien
Shares) 90,930
--------------
203,807
--------------
MAJOR BANKS
142,500 Kasikornbank PCL* 172,712
213,422 Kasikornbank PCL (Alien
Shares)* 258,671
--------------
431,383
--------------
OIL & GAS PRODUCTION
25,839 PTT Exploration & Production
PCL (Alien Shares) 174,344
--------------
OIL REFINING/MARKETING
186,600 PTT PCL (Alien Shares) 680,818
--------------
REGIONAL BANKS
88,500 Bangkok Bank PCL* 208,998
170,200 Bangkok Bank PCL (Alien
Shares)* 416,823
126,200 Siam Commercial Bank PCL
(Alien Shares) 145,860
59,939 Siam Commercial Bank PCL
(Conv Pfd) (Alien Shares) 68,528
--------------
840,209
--------------
STEEL
106,000 Sahaviriya Steel Industries
PCL (Alien Shares)* $ 68,873
--------------
TELECOMMUNICATION
EQUIPMENT
290,100 Shin Corp. PCL (Alien Shares) 255,548
--------------
WIRELESS
TELECOMMUNICATIONS
223,800 Advanced Info Service PCL
(Alien Shares) 492,163
--------------
TOTAL THAILAND 4,370,943
--------------
UNITED KINGDOM (21.2%)
ADVERTISING/MARKETING
SERVICES
61,639 Aegis Group PLC 98,870
67,783 WPP Group PLC 669,817
25,383 Yell Group PLC 143,234
--------------
911,921
--------------
AEROSPACE & DEFENSE
351,048 BAE Systems PLC 1,308,667
2,571 Cobham PLC 61,048
8,331,050 Rolls Royce Group (Rights) 14,807
166,621 Rolls-Royce Group PLC 685,554
--------------
2,070,076
--------------
AIR FREIGHT/COURIERS
20,746 Exel PLC 261,790
--------------
AIRLINES
26,739 British Airways PLC* 134,253
--------------
AUTO PARTS: O.E.M.
48,219 GKN PLC 196,252
--------------
BEVERAGES: ALCOHOLIC
176,874 Diageo PLC 2,378,120
--------------
BROADCASTING
249,655 ITV PLC 547,984
--------------
CABLE/SATELLITE TV
78,165 British Sky Broadcasting
Group PLC 925,225
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
26
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
CASINO/GAMING
89,823 Hilton Group PLC $ 396,711
31,159 William Hill PLC 296,831
--------------
693,542
--------------
CATALOG/SPECIALTY DISTRIBUTION
83,739 GUS PLC 1,162,357
--------------
CHEMICALS: MAJOR DIVERSIFIED
65,059 Imperial Chemical Industries
PLC 253,517
--------------
CHEMICALS: SPECIALTY
26,849 BOC Group PLC 432,570
--------------
COMMERCIAL PRINTING/FORMS
37,374 De La Rue PLC 219,202
--------------
CONSTRUCTION MATERIALS
21,494 BPB PLC 138,862
39,147 Hanson PLC 299,177
11,957 RMC Group PLC 125,063
--------------
563,102
--------------
CONTAINERS/PACKAGING
25,663 Rexam PLC 208,328
--------------
DEPARTMENT STORES
174,251 Marks & Spencer Group PLC 855,536
--------------
DRUGSTORE CHAINS
30,447 Boots Group PLC 330,633
--------------
ELECTRIC UTILITIES
187,206 National Grid Transco PLC 1,423,215
38,099 Scottish & Southern Energy
PLC 462,144
98,297 Scottish Power PLC 669,550
--------------
2,554,909
--------------
ELECTRONIC EQUIPMENT/
INSTRUMENTS
81,533 Invensys PLC* 28,257
--------------
ELECTRONICS/APPLIANCE STORES
130,322 Dixons Group PLC 359,592
18,193 Kesa Electricals PLC 91,182
--------------
450,774
--------------
ENGINEERING & CONSTRUCTION
14,906 AMEC PLC $ 80,140
10,062 Balfour Beatty PLC 44,976
--------------
125,116
--------------
FINANCIAL CONGLOMERATES
214,320 Lloyds TSB Group PLC 1,605,540
--------------
FINANCIAL PUBLISHING/SERVICES
81,983 Reuters Group PLC 543,492
--------------
FOOD RETAIL
71,241 Sainsbury (J.) PLC 352,627
273,933 Tesco PLC 1,211,067
--------------
1,563,694
--------------
FOOD: MAJOR DIVERSIFIED
149,281 Unilever PLC 1,411,487
--------------
FOOD: SPECIALTY/CANDY
93,395 Cadbury Schweppes PLC 744,469
--------------
GAS DISTRIBUTORS
123,089 Centrica PLC 478,004
--------------
HOME BUILDING
11,749 Barratt Developments PLC 128,734
12,147 Persimmon PLC 141,623
5,071 Taylor Woodrow PLC 25,416
23,647 Wimpey (George) PLC 172,419
--------------
468,192
--------------
HOME IMPROVEMENT CHAINS
79,590 Kingfisher PLC 400,672
--------------
HOTELS/RESORTS/CRUISELINES
9,364 Carnival PLC 420,559
42,294 InterContinental Hotels Group
PLC 396,141
--------------
816,700
--------------
HOUSEHOLD/PERSONAL CARE
55,004 Reckitt Benckiser PLC 1,433,141
--------------
INDUSTRIAL CONGLOMERATES
22,283 Smiths Group PLC 276,631
21,201 Tomkins PLC 101,926
--------------
378,557
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
27
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
INDUSTRIAL MACHINERY
11,498 Fki PLC $ 23,194
--------------
INDUSTRIAL SPECIALTIES
35,014 Pilkington PLC 51,651
--------------
INFORMATION TECHNOLOGY
SERVICES
35,674 LogicaCMG PLC 137,585
24,297 Misys PLC 89,605
--------------
227,190
--------------
INTEGRATED OIL
210,626 BG Group PLC 1,219,431
1,467,072 BP PLC 12,711,207
629,931 Shell Transport & Trading Co.
PLC 4,355,152
--------------
18,285,790
--------------
LIFE/HEALTH INSURANCE
40,176 Friends Provident PLC 100,681
83,406 Prudential PLC 656,692
--------------
757,373
--------------
MAJOR BANKS
250,846 Barclays PLC 2,267,038
145,347 HBOS PLC 1,887,066
583,924 HSBC Holdings PLC 8,385,490
107,271 Royal Bank of Scotland Group
PLC 3,227,751
--------------
15,767,345
--------------
MAJOR TELECOMMUNICATIONS
454,163 BT Group PLC 1,440,823
119,038 Cable & Wireless PLC* 261,284
--------------
1,702,107
--------------
MARINE SHIPPING
47,054 Peninsular & Oriental Steam
Navigation Co. (The) 180,848
--------------
MEDICAL SPECIALTIES
32,198 Smith & Nephew PLC 327,616
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
69,115 Brambles Industries PLC 257,960
5,488 Davis Service Group PLC (The) $ 37,455
178,504 Hays PLC 374,361
202,948 Rentokil Initial PLC 678,115
12,884 Securicor PLC 27,937
51,166 Serco Group PLC 195,515
--------------
1,571,343
--------------
MISCELLANEOUS MANUFACTURING
17,175 IMI PLC 114,088
28,079 Kidde PLC 55,893
2,230 Novar PLC 5,073
--------------
175,054
--------------
MOTOR VEHICLES
2,453 TI Automotive Ltd. 0
--------------
MOVIES/ENTERTAINMENT
44,261 EMI Group PLC 202,956
36,794 Rank Group PLC 207,953
--------------
410,909
--------------
MULTI-LINE INSURANCE
38,702 Aviva PLC 379,006
276,056 Legal & General Group PLC 458,743
27,012 Royal & Sun Alliance Insurance
Group PLC 38,527
--------------
876,276
--------------
OTHER METALS/MINERALS
130,924 BHP Billiton PLC 1,048,274
57,830 Rio Tinto PLC 1,271,404
--------------
2,319,678
--------------
PACKAGED SOFTWARE
56,800 Sage Group (The) PLC 174,392
--------------
PERSONNEL SERVICES
74,241 Capita Group PLC 409,040
--------------
PHARMACEUTICALS: MAJOR
92,654 AstraZeneca PLC 4,342,452
310,094 GlaxoSmithKline PLC 6,431,688
--------------
10,774,140
--------------
PRECIOUS METALS
12,836 Johnson Matthey PLC 203,610
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
28
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------
PUBLISHING: BOOKS/MAGAZINES
14,554 EMAP PLC $ 223,619
43,800 Pearson PLC 512,225
68,231 Reed Elsevier PLC 636,652
--------------
1,372,496
--------------
PUBLISHING: NEWSPAPERS
17,261 Daily Mail and General Trust 205,696
18,959 United Business Media PLC 155,001
--------------
360,697
--------------
PULP & PAPER
24,672 Bunzl PLC 206,641
--------------
RESTAURANTS
118,244 Compass Group PLC 746,051
19,780 Enterprise Inns PLC 214,446
41,452 Mitchells & Butlers PLC 186,392
20,431 Whitbread PLC 270,525
--------------
1,417,414
--------------
SEMICONDUCTORS
43,039 ARM Holdings PLC 89,115
--------------
SPECIALTY STORES
9,191 MFI Furniture Group PLC 25,605
--------------
TOBACCO
76,751 British American Tobacco PLC 1,166,302
32,426 Imperial Tobacco Group PLC 719,808
--------------
1,886,110
--------------
WATER UTILITIES
30,503 Kelda Group PLC 251,548
26,983 Severn Trent PLC 375,502
--------------
627,050
--------------
WHOLESALE DISTRIBUTORS
22,834 Electrocomponents PLC 144,678
40,419 Wolseley PLC 593,730
--------------
738,408
--------------
WIRELESS TELECOMMUNICATIONS
4,244,619 Vodafone Group PLC 10,335,227
--------------
TOTAL UNITED KINGDOM 96,443,731
--------------
TOTAL COMMON AND PREFERRED
STOCKS AND RIGHTS
(COST $395,948,557) 431,436,320
--------------
SHORT-TERM INVESTMENT (2.5% )
REPURCHASE AGREEMENT
$ 11,175 Joint repurchase agreement
account 1.01% due 05/03/04
(dated 04/30/04; proceeds
$11,175,941) (a)
(Cost $11,175,000) $ 11,175,000
--------------
TOTAL INVESTMENTS
(COST $407,123,557) (b) (c) 97.2% 442,611,320
OTHER ASSETS IN EXCESS OF
LIABILITIES 2.8 12,959,502
----- --------------
NET ASSETS 100.0% $ 455,570,822
===== ==============
</Table>
ADR AMERICAN DEPOSITORY RECEIPT.
++ CONSISTS OF ONE OR MORE CLASS OF SECURITIES TRADED TOGETHER AS A UNIT;
STOCKS WITH ATTACHED WARRANTS.
* NON-INCOME PRODUCING SECURITY.
** COMPRISED OF SECURITIES IN SEPARATE ENTITIES THAT ARE TRADED AS A SINGLE
STAPLED SECURITY.
(a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS.
(b) SECURITIES HAVE BEEN DESIGNATED AS COLLATERAL IN AN AMOUNT EQUAL TO
$102,811,216, IN CONNECTION WITH OPEN FORWARD FOREIGN CURRENCY CONTRACTS
AND OPEN FUTURES CONTRACTS.
(c) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE
AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED
APPRECIATION IS $59,211,248 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION
IS $23,723,485, RESULTING IN NET UNREALIZED APPRECIATION OF
$35,487,763.
SEE NOTES TO FINANCIAL STATEMENTS
29
<Page>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2004:
<Table>
<Caption>
UNREALIZED
CONTRACTS IN EXCHANGE DELIVERY APPRECIATION
TO DELIVER FOR DATE (DEPRECIATION)
$ 1,520,115 CHF 1,969,126 5/06/04 $ (258)
$ 77,183 DKK 479,194 5/06/04 (28)
EUR 395,481 $ 474,063 5/06/04 198
NOK 62,740 $ 9,136 5/06/04 (2)
SEK 3,445,624 $ 451,039 5/06/04 94
JPY 1,024,464,235 $ 9,330,275 5/06/04 49,027
$ 333,550 EUR 278,274 5/06/04 (122)
$ 25,009,830 EUR 20,300,022 6/17/04 (718,824)
$ 7,255,266 EUR 5,890,880 6/17/04 (206,240)
EUR 3,586,664 $ 4,415,184 6/17/04 123,381
EUR 1,732,790 $ 2,135,144 6/17/04 61,687
$ 19,334,589 EUR 15,705,133 6/17/04 (541,827)
$ 18,409,789 EUR 14,943,011 6/17/04 (528,983)
EUR 13,311,483 $ 16,386,701 6/17/04 458,181
EUR 45,922,278 $ 56,522,977 6/17/04 1,572,379
$ 16,573,245 EUR 13,451,764 6/17/04 (476,865)
EUR 1,228,500 $ 1,507,713 6/17/04 37,690
$ 4,551,638 EUR 3,753,000 6/17/04 (60,799)
$ 4,573,852 EUR 3,760,000 6/17/04 (74,636)
EUR 972,060 $ 1,147,070 6/17/04 (16,097)
$ 5,430,613 EUR 4,590,000 6/17/04 61,781
JPY 2,411,203,200 $ 22,260,000 6/17/04 382,533
$ 9,342,400 JPY 1,024,464,235 6/17/04 (47,172)
-----------
Net unrealized appreciation $ 75,098
===========
</Table>
CURRENCY ABBREVIATIONS:
DKK Danish Krone.
EUR Euro.
JPY Japanese Yen.
NOK Norwegian Krone.
SEK Swedish Krona.
CHF Swiss Franc.
FUTURES CONTRACTS OPEN AT APRIL 30, 2004:
<Table>
<Caption>
UNREALIZED
NUMBER OF LONG/ DESCRIPTION, DELIVERY MONTH UNDERLYING FACE APPRECIATION
CONTRACTS SHORT AND YEAR AMOUNT AT VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------
64 Long EURX CAC40 10 EURO Future June/2004 $ 2,771,005 $ 61,286
39 Long EURX DAX Index Future June/2004 4,647,279 108,847
45 Long EURX DAX Index Future June/2004 5,362,245 (195,299)
23 Long EURX DAX Index Future June/2004 2,740,703 57,246
104 Long EURX STOXX 50 JUNE/2004 3,424,360 57,461
----------
Net unrealized appreciation $ 89,541
==========
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
30
<Page>
MORGAN STANLEY INTERNATIONAL FUND
SUMMARY OF INVESTMENTS - APRIL 30, 2004 (UNAUDITED)
<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------------------------------------------------------------------------------
Advertising/Marketing Services $ 1,237,415 0.3%
Aerospace & Defense 3,209,596 0.7
Agricultural Commodities/Milling 143,734 0.0
Air Freight/Couriers 2,300,957 0.5
Airlines 886,151 0.2
Aluminum 433,686 0.1
Apparel/Footwear 2,072,663 0.5
Apparel/Footwear Retail 1,675,366 0.4
Auto Parts: O.E.M. 2,054,067 0.5
Automotive Aftermarket 1,327,663 0.3
Beverages: Alcoholic 5,078,410 1.1
Beverages: Non-Alcoholic 75,592 0.0
Biotechnology 449,096 0.1
Broadcasting 1,522,039 0.3
Building Products 3,109,081 0.7
Cable/Satellite TV 966,776 0.2
Casino/Gaming 807,167 0.2
Catalog/Specialty Distribution 1,162,357 0.3
Chemicals: Agricultural 630,993 0.1
Chemicals: Major Diversified 3,361,274 0.7
Chemicals: Specialty 5,693,219 1.2
Coal 61,767 0.0
Commercial Printing/Forms 1,159,359 0.3
Computer Peripherals 138,655 0.0
Computer Processing Hardware 771,308 0.2
Construction Materials 3,703,146 0.8
Containers/Packaging 589,527 0.1
Contract Drilling 31,153 0.0
Data Processing Services 43,855 0.0
Department Stores 2,259,412 0.5
Drugstore Chains 330,633 0.1
Electric Utilities 14,764,569 3.2
Electrical Products 2,748,727 0.6
Electronic Components 3,199,853 0.7
Electronic Equipment/Instruments 11,893,895 2.6
Electronic Production Equipment 1,665,860 0.4
Electronics/Appliance Stores $ 636,188 0.1%
Electronics/Appliances 5,357,448 1.2
Engineering & Construction 4,839,617 1.1
Finance/Rental/Leasing 390,315 0.1
Financial Conglomerates 13,976,292 3.1
Financial Publishing/Services 576,768 0.1
Food Distributors 171,544 0.0
Food Retail 6,287,691 1.4
Food: Major Diversified 8,987,619 2.0
Food: Meat/Fish/Dairy 278,003 0.1
Food: Specialty/Candy 1,857,069 0.4
Forest Products 82,381 0.0
Gas Distributors 4,741,392 1.0
Home Building 2,166,254 0.5
Home Improvement Chains 400,672 0.1
Hospital/Nursing Management 62,513 0.0
Hotels/Resorts/Cruiselines 1,386,365 0.3
Household/Personal Care 4,279,878 0.9
Industrial Conglomerates 10,864,652 2.4
Industrial Machinery 4,515,626 1.0
Industrial Specialties 2,039,024 0.4
Information Technology Services 2,670,775 0.6
Integrated Oil 37,643,099 8.3
Internet Software/Services 209,100 0.0
Investment Banks/Brokers 5,306,293 1.2
Investment Trusts/Mutual Funds 114,419 0.0
Life/Health Insurance 3,100,373 0.7
Major Banks 56,995,870 12.5
Major Telecommunications 21,001,225 4.6
Marine Shipping 657,441 0.1
Media Conglomerates 2,238,986 0.5
Medical Distributors 92,342 0.0
Medical Specialties 980,853 0.2
Medical/Nursing Services 232,294 0.1
Merchandising 114,921 0.0
Metal Fabrications 994,409 0.2
Miscellaneous Commercial Services 3,691,755 0.8
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
31
<Page>
<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------------------------------------------------------------------------------
Miscellaneous Manufacturing $ 539,150 0.1%
Motor Vehicles 16,297,469 3.6
Movies/Entertainment 758,099 0.2
Multi-Line Insurance 6,729,217 1.5
Office Equipment/Supplies 64,211 0.0
Oil & Gas Pipelines 50,261 0.0
Oil & Gas Production 494,961 0.1
Oil Refining/Marketing 3,092,736 0.7
Oilfield Services/Equipment 37,398 0.0
Other Consumer Services 241,029 0.1
Other Consumer Specialties 597,734 0.1
Other Metals/Minerals 4,589,976 1.0
Other Transportation 944,756 0.2
Packaged Software 1,809,534 0.4
Personnel Services 991,819 0.2
Pharmaceuticals: Generic Drugs 142,477 0.0
Pharmaceuticals: Major 32,339,169 7.1
Pharmaceuticals: Other 4,932,159 1.1
Precious Metals 294,674 0.1
Property - Casualty Insurers 4,795,772 1.1
Publishing: Books/Magazines 2,678,555 0.6
Publishing: Newspapers 785,857 0.2
Pulp & Paper 2,541,518 0.6
Railroads 3,759,350 0.8
Real Estate Development 5,590,276 1.2
Real Estate Investment Trusts 1,028,236 0.2
Recreational Products 1,272,821 0.3
Regional Banks 5,067,192 1.1
Repurchase Agreement 11,175,000 2.5
Restaurants 1,648,712 0.4
Semiconductors 2,092,390 0.5
Specialty Stores 250,353 0.1
Specialty Telecommunications 125,037 0.0
Steel 3,113,552 0.7
Telecommunication Equipment 7,310,417 1.6
Textiles 680,763 0.1
Tobacco 3,240,019 0.7
Tools/Hardware 79,042 0.0
Trucks/Construction/Farm Machinery 1,999,477 0.4
Water Utilities $ 1,049,885 0.2%
Wholesale Distributors 2,755,533 0.6
Wireless Telecommunications 13,124,247 2.9
------------- ----
$ 442,611,320 97.2%
============= ====
</Table>
<Table>
<Caption>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- -------------------------------------------------------------------------------
Common Stocks $ 429,189,822 94.2%
Preferred Stocks 2,221,943 0.5
Rights 24,555 0.0
Short-Term Investment 11,175,000 2.5
------------- ----
$ 442,611,320 97.2%
============= ====
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
32
<Page>
MORGAN STANLEY INTERNATIONAL FUND
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
APRIL 30, 2004 (UNAUDITED)
<Table>
ASSETS:
Investments in securities, at value (cost $407,123,557) $ 442,611,320
Unrealized appreciation on open forward foreign currency contracts 75,098
Cash (including $870,589 in foreign currency and $2,220,951 segregated in
connection with open futures contracts) 3,092,411
Receivable for:
Investments sold 13,629,691
Dividends 1,815,426
Shares of beneficial interest sold 485,359
Foreign withholding taxes reclaimed 406,668
Variation margin 192,218
Prepaid expenses and other assets 116,581
-------------
TOTAL ASSETS 462,424,772
-------------
LIABILITIES:
Payable for:
Investments purchased 5,344,931
Shares of beneficial interest redeemed 675,017
Investment management fee 386,607
Distribution fee 215,948
Accrued expenses and other payables 231,447
-------------
TOTAL LIABILITIES 6,853,950
-------------
NET ASSETS $ 455,570,822
=============
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 605,536,227
Net unrealized appreciation 35,449,641
Accumulated net investment loss (160,922)
Accumulated net realized loss (185,254,124)
-------------
NET ASSETS $ 455,570,822
=============
CLASS A SHARES:
Net Assets $ 79,888,779
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 9,083,249
NET ASSET VALUE PER SHARE $ 8.80
=============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 9.29
=============
CLASS B SHARES:
Net Assets $ 207,821,759
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 23,889,966
NET ASSET VALUE PER SHARE $ 8.70
=============
CLASS C SHARES:
Net Assets $ 26,006,205
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 2,990,464
NET ASSET VALUE PER SHARE $ 8.70
=============
CLASS D SHARES:
Net Assets $ 141,854,079
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 16,065,587
NET ASSET VALUE PER SHARE $ 8.83
=============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
33
<Page>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2004 (UNAUDITED)
<Table>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $413,154 foreign withholding tax) $ 4,856,347
Interest 54,500
-------------
TOTAL INCOME 4,910,847
-------------
EXPENSES
Investment management fee 2,276,408
Distribution fee (Class A shares) 80,982
Distribution fee (Class B shares) 1,071,552
Distribution fee (Class C shares) 126,993
Transfer agent fees and expenses 433,747
Custodian fees 135,521
Shareholder reports and notices 62,605
Registration fees 43,603
Professional fees 31,985
Trustees' fees and expenses 1,574
Other 38,230
-------------
TOTAL EXPENSES 4,303,200
-------------
NET INVESTMENT INCOME 607,647
-------------
NET REALIZED AND UNREALIZED GAIN:
NET REALIZED GAIN ON:
Investments 8,975,157
Futures contracts 790,092
Foreign exchange transactions 1,125,731
-------------
NET REALIZED GAIN 10,890,980
-------------
NET CHANGE IN UNREALIZED APPRECIATION ON:
Investments 33,864,723
Futures contracts (171,534)
Translation of forward foreign currency contracts and other assets and
liabilities denominated in foreign currencies (406,077)
-------------
NET APPRECIATION 33,287,112
-------------
NET GAIN 44,178,092
-------------
NET INCREASE $ 44,785,739
=============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
34
<Page>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 2004 OCTOBER 31, 2003
-------------- ----------------
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 607,647 $ 2,520,960
Net realized gain (loss) 10,890,980 (52,203,505)
Net change in unrealized appreciation/depreciation 33,287,112 128,004,797
-------------- ----------------
NET INCREASE 44,785,739 78,322,252
-------------- ----------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME
Class A shares (765,430) (569,363)
Class B shares (1,153,468) --
Class C shares (145,401) (47,598)
Class D shares (1,794,154) (1,783,043)
-------------- ----------------
TOTAL DIVIDENDS (3,858,453) (2,400,004)
-------------- ----------------
Net decrease from transactions in shares of beneficial interest (12,336,342) (57,055,643)
-------------- ----------------
NET INCREASE 28,590,944 18,866,605
NET ASSETS:
Beginning of period 426,979,878 408,113,273
-------------- ----------------
END OF PERIOD
(INCLUDING A NET INVESTMENT LOSS OF $160,922 AND ACCUMULATED UNDISTRIBUTED
NET INVESTMENT INCOME OF $3,089,884, RESPECTIVELY) $ 455,570,822 $ 426,979,878
============== ================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
35
<Page>
MORGAN STANLEY INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS - APRIL 30, 2004 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley International Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is
long-term capital growth. The Fund was organized as a Massachusetts business
trust on October 23, 1998 and commenced operations June 28, 1999.
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) futures are valued at the latest
price published by the commodities exchange on which they trade; (6) when market
quotations are not readily available or Morgan Stanley Investment Advisors Inc.
(the "Investment Manager"), 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 by the Trustees of the Fund;
(7) certain portfolio securities may be valued by an outside pricing service
36
<Page>
approved by the Fund's Trustees; and (8) short-term debt securities having a
maturity date of more than sixty days at time of purchase are valued on a
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date
except for certain dividends on foreign securities which are recorded as soon as
the Fund is informed after the ex-dividend date. Discounts are accreted and
premiums are amortized over the life of the respective securities. Interest
income is accrued daily.
C. REPURCHASE AGREEMENTS -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
entities managed by the Investment Manager, may transfer uninvested cash
balances into one or more joint repurchase agreement accounts. These balances
are invested in one or more repurchase agreements and are collateralized by
cash, U.S. Treasury or federal agency obligations. The Fund may also invest
directly with institutions in repurchase agreements. The Fund's custodian
receives the collateral, which is marked-to-market daily to determine that the
value of the collateral does not decrease below the repurchase price plus
accrued interest.
D. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
E. FUTURES CONTRACTS -- A futures contract is an agreement between two parties
to buy and sell financial instruments or contracts based on financial indices at
a set price on a future date. Upon entering into such a contract, the Fund is
required to pledge to the broker cash, U.S. Government securities or other
liquid portfolio securities equal to the minimum initial margin requirements of
the applicable futures exchange. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments known as
variation margin are recorded by the Fund as unrealized gains and losses. Upon
closing of the contract, the Fund realizes a gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed.
F. FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS -- The
books and records of the Fund are maintained in U.S. dollars as follows: (1) the
foreign currency market value of investment securities, other assets and
liabilities and forward foreign currency contracts ("forward contracts") are
translated at the exchange rates prevailing at the end of the period; and (2)
purchases, sales, income
37
<Page>
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.
G. FEDERAL INCOME TAX POLICY -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
I. USE OF ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined at the close of
each business day: 1.0% to the portion of daily net assets not exceeding $1
billion and 0.95% to the portion of daily net assets in excess of $1 billion.
Prior to December 30, 2003, under a Sub-Advisory Agreement between Morgan
Stanley Investment Management Inc. ("the Sub-Advisor") and the Investment
Manager, the Sub-Advisor provided the Fund with investment advice and portfolio
management relating to the Fund's investments in securities, subject to the
overall supervision of the Investment Manager. Effective December 30, 2003, the
Investment Manager assumed the Sub-Advisor's responsibility. For the period
November 1, 2003 through December 29, 2003, the Investment Manager paid the
Sub-Advisor compensation of $281,312.
38
<Page>
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 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
$21,439,928 at April 30, 2004.
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 six months ended April 30, 2004, the distribution fee was accrued for
Class A shares and Class C shares at the annual rate of 0.22% and 0.96%,
respectively.
The Distributor has informed the Fund that for the six months ended April 30,
2004, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $1,644, $275,935
and $1,051, respectively and received $41,632 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 six months ended April 30, 2004 aggregated
$102,414,633 and $133,796,581, respectively.
39
<Page>
Morgan Stanley Trust, an affiliate of the Investment Manager, Sub-Advisor and
Distributor, is the Fund's transfer agent. At April 30, 2004, the Fund had
transfer agent fees and expenses payable of approximately $7,000.
Effective April 1, 2004, the Fund began an unfunded Deferred Compensation Plan
(the "Compensation Plan"), which allows each independent Trustee to defer
payment of all, or a portion, of the fees he receives for serving on the Board
of Trustees. Each eligible Trustee generally may elect to have the deferred
amounts credited with a return equal to the total return on one or more of the
Morgan Stanley funds that are offered as investment options under the
Compensation Plan. Appreciation/depreciation and distributions received from
these investments are recorded with an offsetting increase/decrease in the
deferred compensation obligation and do not affect the net asset value of the
Fund.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 2004 OCTOBER 31, 2003
------------------------------ ------------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
CLASS A SHARES
Sold 3,555,826 $ 31,156,488 33,698,871 $ 228,777,057
Reinvestment of dividends 88,825 753,234 83,954 552,418
Redeemed (2,457,244) (21,334,119) (32,511,231) (223,778,567)
------------- ------------- ------------- -------------
Net increase -- Class A 1,187,407 10,575,603 1,271,594 5,550,908
------------- ------------- ------------- -------------
CLASS B SHARES
Sold 1,330,333 11,480,429 2,174,402 14,869,053
Reinvestment of dividends 123,296 1,036,918 -- --
Redeemed (3,492,211) (30,160,516) (9,245,751) (62,480,968)
------------- ------------- ------------- -------------
Net decrease -- Class B (2,038,582) (17,643,169) (7,071,349) (47,611,915)
------------- ------------- ------------- -------------
CLASS C SHARES
Sold 184,349 1,584,200 1,380,301 9,030,658
Reinvestment of dividends 16,051 134,827 6,602 43,180
Redeemed (424,315) (3,639,268) (2,146,478) (14,221,194)
------------- ------------- ------------- -------------
Net decrease -- Class C (223,915) (1,920,241) (759,575) (5,147,356)
------------- ------------- ------------- -------------
CLASS D SHARES
Sold 1,695,941 14,906,816 11,129,166 73,840,652
Reinvestment of dividends 177,395 1,507,858 222,220 1,466,651
Redeemed (2,240,348) (19,763,209) (12,802,046) (85,154,583)
------------- ------------- ------------- -------------
Net decrease -- Class D (367,012) (3,348,535) (1,450,660) (9,847,280)
------------- ------------- ------------- -------------
Net decrease in Fund (1,442,102) $ (12,336,342) (8,009,990) $ (57,055,643)
============= ============= ============= =============
</Table>
40
<Page>
6. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward contracts to facilitate settlement of foreign
currency denominated portfolio transactions or to manage foreign currency
exposure associated with foreign currency denominated securities. The Fund may
also purchase and sell interest rate, currency and index futures contracts
("futures contracts") that are traded on U.S. and foreign commodity exchanges on
such underlying securities as U.S. Treasury bonds, notes, bills and GNMA
certificates and/or any foreign government fixed-income security, on various
currencies and on such indexes of U.S. and foreign securities as may exist or
come into existence.
Forward contracts and futures contracts involve elements of market risk in
excess of the amounts reflected in the Statement of Assets and Liabilities. The
Fund bears the risk of an unfavorable change in the foreign exchange rates
underlying the forward contracts or an unfavorable change in the value of the
underlying securities. Risks may also arise upon entering into these contracts
from the potential inability of the counterparties to meet the terms of their
contracts.
At April 30, 2004, investments in securities of issuers in Japan represented
25.7% of the Fund's net assets. These investments, as well as other non-U.S.
investments, which involve risks and considerations not present with respect to
U.S. securities, may be affected by economic or political developments in this
region.
At April 30, 2004, the Fund's cash balance consisted principally of interest
bearing deposits with J.P. Morgan Chase, the Fund's custodian.
7. FEDERAL INCOME TAX STATUS
The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for tax purposes are reported as distributions of paid-in-capital.
As of October 31, 2003, the Fund had net capital loss carryforward of
$183,733,776 of which $35,159,161 will expire on October 31, 2009, $93,856,873
will expire on October 31, 2010 and $54, 717,742 will expire on October 31, 2011
to offset future capital gains to the extent provided by regulations.
41
<Page>
As of October 31, 2003, the Fund had temporary book/tax differences primarily
attributable to the mark-to-market of passive foreign investment companies,
foreign tax credit pass-through and capital loss deferrals on wash sales.
8. LEGAL MATTERS
The Investment Manager, certain affiliates of the Investment Manager, certain
officers of such affiliates and certain investment companies advised by the
Investment Manager or its affiliates, including the Fund, are named as
defendants in a number of similar class action complaints which were recently
consolidated. This consolidated action also names as defendants certain
individual Trustees and Directors of the Morgan Stanley funds. The consolidated
amended complaint generally alleges 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 recommend the funds advised by the Investment Manager or its
affiliates to investors 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
efforts to recommend these funds to investors. The complaint seeks, among other
things, unspecified compensatory damages, rescissionary damages, fees and costs.
The defendants intend to move to dismiss the action and otherwise vigorously to
defend it. While the Fund believes that it has meritorious defenses, the
ultimate outcome of this matter 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 this matter.
42
<Page>
MORGAN STANLEY INTERNATIONAL FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31, JUNE 28, 1999*
MONTHS ENDED ----------------------------------------------- THROUGH
APRIL 30, 2004 2003 2002 2001 2000 OCTOBER 31, 1999
-------------- -------- -------- -------- -------- ----------------
(UNAUDITED)
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 8.03 $ 6.70 $ 7.77 $ 10.29 $ 10.57 $ 10.00
-------------- -------- -------- -------- -------- ----------------
Income (loss) from investment
operations:
Net investment income++ 0.03 0.08 0.04 0.06 0.11 0.01
Net realized and unrealized gain
(loss) 0.84 1.33 (1.03) (2.07) (0.39) 0.56
-------------- -------- -------- -------- -------- ----------------
Total income (loss) from
investment operations 0.87 1.41 (0.99) (2.01) (0.28) 0.57
-------------- -------- -------- -------- -------- ----------------
Less dividends and distributions
from:
Net investment income (0.10) (0.08) (0.08) - - -
Net realized gain - - - (0.51) - -
-------------- -------- -------- -------- -------- ----------------
Total dividends and distributions (0.10) (0.08) (0.08) (0.51) - -
-------------- -------- -------- -------- -------- ----------------
Net asset value, end of period $ 8.80 $ 8.03 $ 6.70 $ 7.77 $ 10.29 $ 10.57
============== ======== ======== ======== ======== ================
TOTAL RETURN+ 10.72%(1) 21.31% (12.93)% (20.36)% (2.65)% 5.70%(1)
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 1.55%(2) 1.58% 1.56% 1.46%(4) 1.47% 1.81%(2)
Net investment income 0.61%(2) 1.02% 0.54% 0.73% 0.95% 0.31%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands $ 79,889 $ 63,422 $ 44,373 $ 37,974 $ 46,535 $ 38,506
Portfolio turnover rate 23%(1) 43% 39% 37% 84% 14%(1)
</Table>
- ----------
* COMMENCEMENT OF OPERATIONS.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
43
<Page>
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31, JUNE 28, 1999*
MONTHS ENDED ------------------------------------------------ THROUGH
APRIL 30, 2004 2003 2002 2001 2000 OCTOBER 31, 1999
-------------- --------- ---------- --------- --------- ----------------
(UNAUDITED)
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of
period $ 7.93 $ 6.58 $ 7.62 $ 10.19 $ 10.55 $ 10.00
-------------- --------- --------- --------- --------- ----------------
Income (loss) from investment
operations:
Net investment income (loss)++ (0.01) 0.01 (0.02) 0.00 0.02 (0.02)
Net realized and unrealized gain
(loss) 0.83 1.34 (1.02) (2.06) (0.38) 0.57
-------------- --------- --------- --------- --------- ----------------
Total income (loss) from
investment operations 0.82 1.35 (1.04) (2.06) (0.36) 0.55
-------------- --------- --------- --------- --------- ----------------
Less dividends and distributions
from:
Net investment income (0.05) - - - - -
Net realized gain - - - (0.51) - -
-------------- --------- --------- --------- --------- ----------------
Total dividends and distributions (0.05) - - (0.51) - -
-------------- --------- --------- --------- --------- ----------------
Net asset value, end of period $ 8.70 $ 7.93 $ 6.58 $ 7.62 $ 10.19 $ 10.55
============== ========= ========= ========= ========= ================
TOTAL RETURN+ 10.30%(1) 20.52% (13.65)% (21.08)% (3.41)% 5.50%(1)
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 2.33%(2) 2.37% 2.32% 2.24%(4) 2.22% 2.56%(2)
Net investment income (loss) (0.17)%(2) 0.23% (0.22)% (0.06)% 0.20% (0.44)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands $ 207,822 $ 205,544 $ 217,216 $ 340,158 $ 561,375 $ 465,258
Portfolio turnover rate 23%(1) 43% 39% 37% 84% 14%(1)
</Table>
- ----------
* COMMENCEMENT OF OPERATIONS.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
44
<Page>
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31, JUNE 28, 1999*
MONTHS ENDED ----------------------------------------------- THROUGH
APRIL 30, 2004 2003 2002 2001 2000 OCTOBER 31, 1999
-------------- -------- -------- -------- -------- ----------------
(UNAUDITED)
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 7.92 $ 6.59 $ 7.62 $ 10.19 $ 10.55 $ 10.00
-------------- -------- -------- -------- -------- ----------------
Income (loss) from investment
operations:
Net investment income (loss)++ (0.01) 0.01 (0.01) (0.01) 0.02 (0.02)
Net realized and unrealized gain
(loss) 0.84 1.33 (1.02) (2.05) (0.38) 0.57
-------------- -------- -------- -------- -------- ----------------
Total income (loss) from
investment operations 0.83 1.34 (1.03) (2.06) (0.36) 0.55
-------------- -------- -------- -------- -------- ----------------
Less dividends and distributions
from:
Net investment income (0.05) (0.01) - - - -
Net realized gain - - - (0.51) - -
-------------- -------- -------- -------- -------- ----------------
Total dividends and distributions (0.05) (0.01) - (0.51) - -
-------------- -------- -------- -------- -------- ----------------
Net asset value, end of period $ 8.70 $ 7.92 $ 6.59 $ 7.62 $ 10.19 $ 10.55
============== ======== ======== ======== ======== ================
TOTAL RETURN+ 10.46%(1) 20.40% (13.52)% (21.08)% (3.41)% 5.50%(1)
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 2.29%(2) 2.37% 2.18% 2.24%(4) 2.22% 2.56%(2)
Net investment income (loss) (0.13)%(2) 0.23% (0.08)% (0.06)% 0.20% (0.44)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands $ 26,006 $ 25,471 $ 26,195 $ 39,079 $ 69,640 $ 69,811
Portfolio turnover rate 23%(1) 43% 39% 37% 84% 14%(1)
</Table>
- ----------
* COMMENCEMENT OF OPERATIONS.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
45
<Page>
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31, JUNE 28, 1999*
MONTHS ENDED ------------------------------------------------ THROUGH
APRIL 30, 2004 2003 2002 2001 2000 OCTOBER 31, 1999
-------------- --------- -------- --------- -------- ----------------
(UNAUDITED)
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 8.07 $ 6.73 $ 7.80 $ 10.32 $ 10.58 $ 10.00
-------------- --------- --------- --------- -------- ----------------
Income (loss) from investment
operations:
Net investment income++ 0.04 0.08 0.06 0.08 0.15 0.01
Net realized and unrealized gain
(loss) 0.83 1.36 (1.04) (2.09) (0.41) 0.57
-------------- --------- --------- --------- -------- ----------------
Total income (loss) from
investment operations 0.87 1.44 (0.98) (2.01) (0.26) 0.58
-------------- --------- --------- --------- -------- ----------------
Less dividends and distributions
from:
Net investment income (0.11) (0.10) (0.09) - - -
Net realized gain - - - (0.51) - -
-------------- --------- --------- --------- -------- ----------------
Total dividends and distributions (0.11) (0.10) (0.09) (0.51) - -
-------------- --------- --------- --------- -------- ----------------
Net asset value, end of period $ 8.83 $ 8.07 $ 6.73 $ 7.80 $ 10.32 $ 10.58
============== ========= ========= ========= ======== ================
TOTAL RETURN+ 10.83%(1) 21.68% (12.70)% (20.30)% (2.46)% 5.80%(1)
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 1.33%(2) 1.37% 1.32% 1.24%(4) 1.22% 1.56%(2)
Net investment income 0.83%(2) 1.23% 0.78% 0.94% 1.20% 0.56%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands $ 141,854 $ 132,544 $ 120,329 $ 124,065 $ 98,465 $ 1,336
Portfolio turnover rate 23%(1) 43% 39% 37% 84% 14%(1)
</Table>
- ----------
* COMMENCEMENT OF OPERATIONS.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
46
<Page>
(This page has been left blank intentionally.)
<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
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
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
The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors and accordingly they do not
express an opinion thereon.
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]
[GRAPHIC]
MORGAN STANLEY FUNDS
MORGAN STANLEY
INTERNATIONAL FUND
SEMIANNUAL REPORT
APRIL 30, 2004
[MORGAN STANLEY LOGO]
36075RPT-RA04-00247P-Y04/04
<Page>
Item 2. Code of Ethics.
Not applicable for semiannual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semiannual reports.
Item 4. Principal Accountant Fees and Services
Not applicable for semiannual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semiannual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semiannual reports.
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.
<Page>
(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.
Item 10 Exhibits
(a) Code of Ethics - Not applicable for semiannual reports.
(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.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley International Fund
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
June 22, 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
June 22, 2004
/s/ Francis Smith
Francis Smith
Principal Financial Officer
June 22, 2004