<Page>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-06608
Morgan Stanley Latin American Growth Fund
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: January 31, 2005
Date of reporting period: July 31, 2004
Item 1 - Report to Shareholders
<Page>
WELCOME, SHAREHOLDER:
IN THIS REPORT, YOU'LL LEARN ABOUT HOW YOUR INVESTMENT IN MORGAN STANLEY LATIN
AMERICAN GROWTH FUND PERFORMED DURING THE 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 THE 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 July 31, 2004
TOTAL RETURN FOR THE 6-MONTH PERIOD ENDED JULY 31, 2004
<Table>
<Caption>
MSCI
EMERGING LIPPER
MARKETS LATIN
LATIN AMERICAN
AMERICA FUNDS
CLASS A CLASS B CLASS C CLASS D INDEX(1) AVERAGE(2)
------- ------- ------- ------- -------- ----------
2.14% 1.90% 1.87% 2.13% 1.29% 0.15%
</Table>
THE PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS
DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES ASSUME THE REINVESTMENT OF
ALL DISTRIBUTIONS BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES
CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR STANDARDIZED PERFORMANCE
INFORMATION.
MARKET CONDITIONS
Latin American markets produced mixed results for the six-month period ended
July 31, 2004 after having rallied for much of 2003. While favorable monetary
policy, improved domestic economies and a recovery of global growth had spurred
strong performance throughout the previous period, the Latin American markets
entered a much more volatile period in the first and second quarters of 2004.
After many months of relative tranquility, volatility in the Latin American
markets spiked in the second quarter with the asset class coming under selling
pressure in April and May before stabilizing in June. Despite this volatility,
Latin American markets finished the period up 1.3 percent, after gaining 73.5
percent in 2003 and another 7.1 percent in the first three months of 2004. The
recent difficulties in Latin America were primarily due to exogenous factors,
namely fears of future US interest rate hikes, instability in Iraq and slower
global growth. Concerns about China's economic slowdown also put significant
pressure on commodity prices leading to a sell-off in gold and copper producing
countries such as Peru and Chile.
The Brazilian market was especially weak over the period following its
significant rally in 2003, returning -0.96 percent for the six months. Although
in the preceding period political uncertainty surrounding the objectives of
President Lula's government had subsided and allowed for the market's strong
performance, concerns over Brazil's political environment returned in the
six-month review period as the prospects for reform weakened and apprehension
over monetary policy both there and in the U.S. hurt equities. After having cut
interest rates for 11 consecutive months, the Brazilian government stopped
making cuts in May, sending an unsettling message to local and foreign
investors. The Brazilian market was particularly hurt by a rise in risk aversion
and the fall-off in commodity prices during the period, though prices of
commodities began to improve in June. Brazil saw a considerable improvement in
performance in July, returning 8.4 percent for the last month of the period.
2
<Page>
Mexico was one of the best-performing Latin American countries for the period,
making a recovery after lagging the previous year. Concerns over the country's
potential for economic recovery abated as the economic data that was released
was generally stronger than expected. Colombia also saw relatively strong
performance as valuations remained attractive and the country saw an improvement
in its political and economic environment. Chile and Peru suffered from the drop
in commodity prices, but appeared after the final month joining other Latin
American countries in a rebound as these prices improved.
PERFORMANCE ANALYSIS
Morgan Stanley Latin American Growth Fund outperformed the MSCI Emerging Markets
Latin America Index and the Lipper Latin American Funds Average during the
6-month period ended July 31, 2004. Strong performance was driven by a number of
country allocation decisions and by stock selection within several countries,
primarily within Mexico and Brazil. An increasing emphasis on domestic demand
plays proved particularly beneficial in Mexico and Brazil. In Mexico a pick-up
in the domestic economy drove the positive performance of many securities, while
in Brazil a bottom-up process of stock selection based on earning potential and
visibility led to a focus on consumer names that greatly helped the Fund's
performance. An overweighted position in Mexico relative to the MSCI Emerging
Markets Latin America Index also proved beneficial as the country was one of the
best performing for the six months.
An underweighted position in Argentina relative to the MSCI Emerging Markets
Latin America Index also helped the Fund, as the market sold off given concerns
over the country's economic and political environment. Stock selection in
Argentina was also positive for the Fund, as we moderated our positions in
domestic names and increased the Fund's emphasis on export-oriented companies in
the country.
Stock selection in Chile and Peru served as a drag on performance, with the Fund
particularly suffering from the underperformance of Buenaventura, a large mining
company in Peru that was hurt by the worsening outlook for commodity prices that
occurred in April.
3
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TOP 10 HOLDINGS
<Table>
America Movil S.A. de C.V. - Series L (ADR) 12.8%
Petroleo Brasileiro S.A. 12.2
Companhia Vale do Rio Doce 7.3
Wal Mart de Mexico S.A. de C.V. - Series V 7.2
Grupo Televisa S.A. - CPO (ADR) 6.7
Banco Itau Holding Fin S.A. 4.7
Telesp Celular Part S.A. 4.2
Banco Bradesco S.A. 3.8
Telefonos de Mexico S.A. de C.V. - Series L (ADR) 3.7
Enersis S.A. (ADR) 2.5
</Table>
TOP 5 COUNTRIES
<Table>
Brazil 49.3%
Mexico 39.6
Chile 4.2
Venezuela 1.9
Luxembourg 1.3
</Table>
DATA AS OF JULY 31, 2004. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES FOR THE TOP
10 HOLDINGS AND THE TOP 5 COUNTRIES 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 80% OF ITS ASSETS IN COMMON STOCKS AND
OTHER EQUITY SECURITIES (INCLUDING DEPOSITARY RECEIPTS) OF LATIN AMERICAN
COMPANIES. IN DETERMINING WHICH SECURITIES TO BUY, HOLD OR SELL FOR THE FUND,
THE FUND'S "INVESTMENT MANAGER," MORGAN STANLEY INVESTMENT ADVISORS INC.,
SELECTS SECURITIES BASED ON ITS VIEW OF THEIR POTENTIAL FOR CAPITAL
APPRECIATION; CURRENT DIVIDEND INCOME WILL NOT BE A FACTOR. THE INVESTMENT
MANAGER USES A "TOP-DOWN" COUNTRY ALLOCATION APPROACH TOGETHER WITH "BOTTOM-UP"
STOCK SELECTION. THE APPROACH BEGINS WITH AN EVALUATION OF THE COUNTRY IN WHICH
THE PROPOSED INVESTMENT IS TO BE MADE. FOLLOWING THE COUNTRY LEVEL REVIEW, THE
INVESTMENT MANAGER CONDUCTS A FUNDAMENTAL ANALYSIS OF SPECIFIC SECURITIES,
INDUSTRIES AND COMPANIES.
FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS
EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN
ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND
AND FOURTH FISCAL QUARTERS BY FILING THE SCHEDULE ELECTRONICALLY WITH THE
SECURITIES AND EXCHANGE COMMISSION (SEC). THE SEMIANNUAL REPORTS ARE FILED ON
FORM N-CSRS AND THE ANNUAL REPORTS ARE FILED ON FORM N-CSR. MORGAN STANLEY ALSO
DELIVERS THE SEMIANNUAL AND ANNUAL REPORTS TO FUND SHAREHOLDERS, AND MAKES THESE
REPORTS AVAILABLE ON ITS PUBLIC WEB SITE, www.morganstanley.com. EACH MORGAN
STANLEY FUND ALSO FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC
FOR THE FUND'S FIRST AND THIRD FISCAL QUARTERS ON FORM N-Q. MORGAN STANLEY DOES
NOT DELIVER THE REPORTS FOR THE FIRST AND THIRD FISCAL QUARTERS TO SHAREHOLDERS,
NOR ARE THE REPORTS POSTED TO THE MORGAN STANLEY PUBLIC WEB SITE. YOU MAY,
HOWEVER, OBTAIN THE FORM N-Q FILINGS
4
<Page>
(AS WELL AS THE FORM N-CSR AND N-CSRS FILINGS) BY ACCESSING THE SEC'S WEB SITE,
http://www.sec.gov. YOU MAY ALSO REVIEW AND COPY THEM AT THE SEC'S PUBLIC
REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE SEC'S
PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING THE SEC AT 1-800-SEC-0330. YOU
CAN ALSO REQUEST COPIES OF THESE MATERIALS, UPON PAYMENT OF A DUPLICATING FEE,
BY ELECTRONIC REQUEST AT THE SEC'S E-MAIL ADDRESS (publicinfo@sec.gov) OR BY
WRITING THE PUBLIC REFERENCE SECTION OF THE SEC, WASHINGTON, DC 20549-0102. YOU
MAY OBTAIN COPIES OF A FUND'S FISCAL QUARTER FILINGS BY CONTACTING MORGAN
STANLEY CLIENT RELATIONS AT (800) 847-2424.
PROXY VOTING POLICIES AND PROCEDURES
A DESCRIPTION OF (1) THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE
VOTING OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES; AND (2) HOW THE
FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT
TWELVE-MONTH PERIOD ENDED JULY 31 IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY
CALLING (800) 869-NEWS OR BY VISITING THE MUTUAL FUND CENTER ON OUR WEBSITE AT
www.morganstanley.com. THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND
EXCHANGE COMMISSION'S WEBSITE AT http://www.sec.gov.
5
<Page>
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED JULY 31, 2004
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES++
(SINCE 07/28/97) (SINCE 12/30/92) (SINCE 07/28/97) (SINCE 07/28/97)
SYMBOL LATAX LATBX LATCX LATDX
1 YEAR 33.32%(3) 32.54%(3) 32.47%(3) 33.51%(3)
26.32(4) 27.54(4) 31.47(4) --
5 YEARS 6.17(3) 5.37(3) 5.39(3) 6.36(3)
5.03(4) 5.05(4) 5.39(4) --
10 YEARS -- 0.16(3) -- --
-- 0.16(4) -- --
SINCE INCEPTION (2.20)(3) 2.17(3) (2.91)(3) (2.02)(3)
(2.95)(4) 2.17(4) (2.91)(4) --
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT 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.
* 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 CDSC FOR CLASS C IS 1% FOR SHARES REDEEMED WITHIN ONE YEAR OF
PURCHASE.
++ CLASS D HAS NO SALES CHARGE.
(1) THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS LATIN AMERICA
INDEX (MSCI EM LA INDEX) IS A MARKET CAPITALIZATION WEIGHTED INDEX THAT
INCLUDES SELECT SECURITIES FROM ARGENTINA, BRAZIL, CHILE, COLOMBIA, MEXICO,
PERU, AND VENEZUELA. FOR THE PERIOD FROM THE FUND'S INCEPTION THROUGH
DECEMBER 31, 2000, THE INDEX'S RETURNS INCLUDE THOSE OF THE MSCI EM LA'S
"GROSS" INDEX WHICH ASSUMES DIVIDENDS GROSS OF WITHHOLDING TAXES BUT NET OF
DOMESTIC TAX CREDITS. FOR THE PERIOD FROM JANUARY 1, 2001 AND BEYOND, THE
INDEX'S RETURNS REFLECT THOSE OF THE "NET" INDEX WHICH REFLECTS A REDUCTION
IN DIVIDENDS AFTER TAKING INTO ACCOUNT WITHHOLDING OF TAXES BY CERTAIN
FOREIGN COUNTRIES REPRESENTED IN THE INDEX. THE INDEX DOES NOT INCLUDE ANY
EXPENSES, FEES OR CHARGES. SUCH COSTS WOULD LOWER PERFORMANCE. IT IS NOT
POSSIBLE TO INVEST DIRECTLY IN AN INDEX.
(2) THE LIPPER LATIN AMERICAN FUNDS AVERAGE TRACKS THE PERFORMANCE OF ALL FUNDS
IN THE LIPPER LATIN AMERICAN FUNDS CLASSIFICATION. THE AVERAGE, WHICH IS
ADJUSTED FOR CAPITAL GAINS DISTRIBUTIONS AND INCOME DIVIDENDS, IS UNMANAGED
AND SHOULD NOT BE CONSIDERED AN INVESTMENT.
(3) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT
THE DEDUCTION OF ANY SALES CHARGES.
(4) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND THE DEDUCTION OF
THE MAXIMUM APPLICABLE SALES CHARGE. SEE THE FUND'S CURRENT PROSPECTUS FOR
COMPLETE DETAILS ON FEES AND SALES CHARGES.
6
<Page>
EXPENSE EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees; distribution and service (12b-1) fees; and other Fund expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 02/01/04 - 07/31/04.
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only. Therefore, the second line of the table is useful in
comparing ongoing costs, and will not help you determine the relative total cost
of owning different funds that have transactional costs, such as sales charges
(loads), and redemption fees, or exchange fees.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD *
------------- ------------- ---------------
02/01/04 -
02/01/04 07/31/04 07/31/04
------------- ------------- ---------------
CLASS A
Actual $ 1,000.00 $ 1,021.36 $ 11.96
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,013.03 $ 11.96
CLASS B
Actual $ 1,000.00 $ 1,019.00 $ 14.06
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,010.94 $ 14.00
CLASS C
Actual $ 1,000.00 $ 1,018.73 $ 14.46
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,010.54 $ 14.40
CLASS D
Actual $ 1,000.00 $ 1,021.31 $ 11.31
Hypothetical (5% return before expenses) $ 1,000.00 $ 1,013.67 $ 11.27
</Table>
- ----------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 2.38%,
2.80%, 2.88% AND 2.25% RESPECTIVELY, MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 182/366 (TO REFLECT THE ONE-HALF
YEAR PERIOD).
7
<Page>
MORGAN STANLEY LATIN AMERICAN GROWTH FUND
PORTFOLIO OF INVESTMENTS - JULY 31, 2004 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON AND PREFERRED STOCKS (97.9%)
BRAZIL (49.3%)
AEROSPACE & DEFENSE
15,000 Empresa Brasileira de
Aeronautica S.A.
(ADR) (Pref.)* $ 429,000
3,000 Empresa Brasileira de
Aeronautica S.A. (Pref.) 21,525
--------------
450,525
--------------
AIRLINES
8,800 Gol - Linhas Aereas
Inteligentes S.A. (Pref.)* 149,600
--------------
ELECTRIC UTILITIES
32,506 Companhia Energetica de
Minas Gerais (ADR) (Pref.)* 596,810
36,823,000 Companhia Energetica de
Minas Gerais (Pref.) 675,109
21,203,000 Companhia Paranaense de
Energia - Copel (Pref.) 76,867
--------------
1,348,786
--------------
FOOD RETAIL
22,500 Companhia Brasileira de
Distribuicao Grupo Pao
de Acucar (ADR) (Pref.) 426,150
--------------
HOUSEHOLD/PERSONAL CARE
18,200 Natura Cosmeticos S.A. 311,624
--------------
INTEGRATED OIL
61,611 Petroleo Brasileiro S.A. (ADR) 1,742,359
107,261 Petroleo Brasileiro
S.A. (ADR) (Pref.) 2,751,245
5,107 Petroleo Brasileiro
S.A. (Pref.) 131,333
--------------
4,624,937
--------------
MAJOR TELECOMMUNICATIONS
121,403,000 Tele Celular Sul Participacoes
S.A. (Pref.) 155,901
--------------
OTHER METALS/MINERALS
1,448 Companhia Vale do Rio Doce
(Class A) (Pref.) $ 63,794
61,602 Companhia Vale do Rio Doce
S.A. (Class A) (ADR) (Pref.) 2,716,648
--------------
2,780,442
--------------
PULP & PAPER
4,200 Aracruz Celulose S.A.
(Class B) (ADR) (Pref.) 145,320
17,362 Votorantim Celulose e Papel
S.A. (ADR) (Pref.) 620,865
2,104,000 Votorantim Celulose e Papel
S.A. (Pref.) 150,328
--------------
916,513
--------------
RAILROADS
17,000 All America Latina Logistica* 288,558
--------------
REGIONAL BANKS
21,963 Banco Bradesco S.A. 1,012,275
9,031 Banco Bradesco S.A. (Pref.) 417,204
26,135 Banco Itau Holding Financeira
S.A. (ADR) (Pref.)* 1,208,482
6,392,797 Banco Itau Holding Financeira
S.A. (Pref.) 593,581
27,950 Unibanco-Uniao de
Bancos Brasileiros
S.A. (GDR) (Units)++ 606,795
--------------
3,838,337
--------------
SPECIALTY TELECOMMUNICATIONS
80,852,300 Embratel Participacoes
S.A. (Pref.) 211,116
--------------
STEEL
11,352 Companhia Siderurgica
Nacional S.A. 164,430
5,100 Companhia Siderurgica
Nacional S.A. (ADR) 73,950
42,382 Gerdau S.A. (ADR) (Pref.) 602,672
4,728 Gerdau S.A. (Pref.) 67,238
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
8
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
50,026 Usinas Siderurgicas de
Minas Gerais S.A.
(Class A) (Pref.) $ 710,774
--------------
1,619,064
--------------
WIRELESS TELECOMMUNICATIONS
62,659 Telesp Celular Participacoes
S.A. (ADR) (Pref.)* 413,549
434,355,202 Telesp Celular Participacoes
S.A. (Pref.)* 1,162,762
--------------
1,576,311
--------------
TOTAL BRAZIL 18,697,864
--------------
CHILE (4.2%)
ELECTRIC UTILITIES
158,800 Enersis S.A. (ADR)* 944,860
--------------
REGIONAL BANKS
24,375 Banco Santander Chile
S.A. (ADR) 648,375
--------------
TOTAL CHILE 1,593,235
--------------
COLOMBIA (0.7%)
BANKING
43,200 Bancolombia S.A.
(ADR) (Pref.) 287,280
--------------
LUXEMBOURG (1.3%)
OILFIELD SERVICES/EQUIPMENT
13,385 Tenaris S.A. (ADR) 475,970
--------------
MEXICO (39.6%)
BEVERAGES: NON-ALCOHOLIC
30,500 Coca-Cola Femsa S.A. de C.V.
(Series L) (ADR) (Mexico)* 625,250
16,000 Fomento Economico Mexicano,
S.A. de C.V. (ADR) (Units)++* 703,040
--------------
1,328,290
--------------
BROADCASTING
54,100 Grupo Televisa S.A. - CPO
(ADR) 2,542,700
--------------
CONSTRUCTION MATERIALS
22,914 Cemex S.A. de C.V. - CPO $ 129,474
32,240 Cemex S.A. de C.V. - CPO
(ADR) 908,523
--------------
1,037,997
--------------
DISCOUNT STORES
891,982 Wal-Mart de Mexico S.A. de
C.V. (Series V) 2,719,316
--------------
ENGINEERING & CONSTRUCTION
264,300 Empresas ICA Sociedad
Controladora S.A. de C.V.* 77,565
--------------
INDUSTRIAL CONGLOMERATES
51,300 Alfa, S.A. (Class A) 169,876
--------------
MAJOR TELECOMMUNICATIONS
71,200 Carso Global Telecom
(Series A1)* 101,358
44,891 Telefonos de Mexico S.A. de
C.V. (Series L) (ADR) 1,386,234
--------------
1,487,592
--------------
OTHER METALS/MINERALS
63,800 Grupo Mexico S.A. de C.V.
(Series B)* 213,785
--------------
OTHER TRANSPORTATION
14,800 Grupo Aeroportuario del
Sureste S.A. de
C.V. (Series B) (ADR) 315,240
--------------
REAL ESTATE DEVELOPMENT
150,400 Corporacion GEO, S.A. de
C.V. (Series B)* 205,540
--------------
REGIONAL BANKS
22,700 Grupo Financiero Banorte S.A.
de C.V. (O shares) 83,502
--------------
WIRELESS TELECOMMUNICATIONS
135,653 America Movil S.A.
de C.V. (Series L) (ADR) 4,846,882
--------------
TOTAL MEXICO 15,028,285
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
9
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
PERU (0.9%)
PRECIOUS METALS
15,400 Compania de Minas
Buenaventura S.A. (ADR) $ 331,562
--------------
VENEZUELA (1.9%)
MAJOR TELECOMMUNICATIONS
37,000 Compania Anonima Nacional
Telefonos de Venezuela
(Class D) (ADR) 738,890
--------------
TOTAL COMMON AND PREFERRED
STOCKS
(COST $33,667,103) 37,153,086
--------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS
- --------------
SHORT-TERM INVESTMENT (0.1%)
REPURCHASE AGREEMENT
$ 43 Joint repurchase agreement
account 1.35% due 08/02/04
(dated 07/30/04;
proceeds $43,005) (a)
(COST $43,000) 43,000
--------------
TOTAL INVESTMENTS
(COST $33,710,103)(b) 98.0% 37,196,086
OTHER ASSETS IN EXCESS OF
LIABILITIES 2.0 762,411
----- --------------
NET ASSETS 100.0% $ 37,958,497
===== ==============
</Table>
- ----------
ADR AMERICAN DEPOSITORY RECEIPT.
GDR GLOBAL DEPOSITORY RECEIPT.
* NON-INCOME PRODUCING SECURITY.
++ CONSISTS OF ONE OR MORE CLASS OF SECURITIES TRADED TOGETHER AS A UNIT;
STOCKS WITH ATTACHED WARRANTS.
(a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS.
(b) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES THE
AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED
APPRECIATION IS $4,739,328 AND THE AGGREGATE GROSS UNREALIZED
DEPRECIATION IS $1,253,345, RESULTING IN NET UNREALIZED APPRECIATION
OF $3,485,983.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JULY 31, 2004:
<Table>
<Caption>
UNREALIZED
CONTRACTS IN EXCHANGE DELIVERY APPRECIATION/
TO DELIVER FOR DATE (DEPRECIATION)
- --------------------------------------------------------
$ 56,922 MXN 650,484 08/03/04 $ 63
$ 13,874 BRL 41,970 08/02/04 (55)
BRL 40,416 $ 13,360 08/04/04 52
MXN 760,725 $ 66,681 08/02/04 38
-----
Net unrealized appreciation $ 98
=====
</Table>
CURRENCY ABBREVIATIONS:
BRL Brazilian Real.
MXN Mexican Peso.
SEE NOTES TO FINANCIAL STATEMENTS
10
<Page>
MORGAN STANLEY LATIN AMERICAN GROWTH FUND
SUMMARY OF INVESTMENTS - JULY 31, 2004 (UNAUDITED)
<Table>
<Caption>
PERCENT OF
INDUSTRY* VALUE NET ASSETS
- --------------------------------------------------------------------------------
Wireless Telecommunications $ 6,423,193 16.9%
Integrated Oil 4,624,937 12.2
Regional Banks 4,570,214 12.0
Other Metals/Minerals 2,994,227 7.9
Discount Stores 2,719,316 7.2
Broadcasting 2,542,700 6.7
Major Telecommunications 2,382,383 6.3
Electric Utilities 2,293,646 6.0
Steel 1,619,064 4.3
Beverages: Non-Alcoholic 1,328,290 3.5
Construction Materials 1,037,998 2.7
Pulp & Paper 916,513 2.4
Oilfield Services/Equipment 475,970 1.3
Aerospace & Defense 450,525 1.2
Food Retail 426,150 1.1
Precious Metals 331,562 0.9
Other Transportation 315,240 0.8
Household/Personal Care 311,623 0.8
Railroads 288,558 0.8
Banking 287,280 0.8
Specialty Telecommunications 211,116 0.6
Real Estate Development 205,540 0.5
Industrial Conglomerates 169,876 0.4
Airlines 149,600 0.4
Engineering & Construction 77,565 0.2
Repurchase Agreement 43,000 0.1
------------- ----
$ 37,196,086 98.0%
============= ====
</Table>
- ----------
* DOES NOT INCLUDE OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS USED TO
HEDGE FOREIGN CURRENCY EXPOSURE ON UNSETTLED PORTFOLIO TRANSACTIONS.
<Table>
<Caption>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- --------------------------------------------------------------------------------
Common Stocks $ 22,367,933 58.9%
Preferred Stocks 14,785,153 39.0
Short-Term Investment 43,000 0.1
------------- ----
$ 37,196,086 98.0%
============= ====
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
11
<Page>
MORGAN STANLEY LATIN AMERICAN GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2004 (UNAUDITED)
<Table>
ASSETS:
Investments in securities, at value (cost $33,710,103) $ 37,196,086
Cash (including $21,351 in foreign currency) 22,252
Receivable for:
Investments sold 1,029,788
Dividends 122,277
Prepaid expenses and other assets 49,265
--------------
TOTAL ASSETS 38,419,668
--------------
LIABILITIES:
Payable for:
Investments purchased 293,386
Shares of beneficial interest redeemed 76,349
Investment management fee 40,815
Accrued expenses and other payables 50,621
--------------
TOTAL LIABILITIES 461,171
--------------
NET ASSETS $ 37,958,497
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 58,657,138
Net unrealized appreciation 3,485,913
Accumulated undistributed net investment income 200,709
Accumulated net realized loss (24,385,263)
--------------
NET ASSETS $ 37,958,497
==============
CLASS A SHARES:
Net Assets $ 525,653
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 41,471
NET ASSET VALUE PER SHARE $ 12.68
==============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 13.38
==============
CLASS B SHARES:
Net Assets $ 35,953,415
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 2,935,664
Net Asset Value Per Share $ 12.25
==============
CLASS C SHARES:
Net Assets $ 459,686
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 37,496
Net Asset Value Per Share $ 12.26
==============
CLASS D SHARES:
Net Assets $ 1,019,743
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 79,832
Net Asset Value Per Share $ 12.77
==============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
12
<Page>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 2004 (UNAUDITED)
<Table>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $45,904 foreign withholding tax) $ 884,566
Interest 1,975
--------------
TOTAL INCOME 886,541
--------------
EXPENSES
Investment management fee 282,148
Distribution fee (Class A shares) 397
Distribution fee (Class B shares) 114,883
Distribution fee (Class C shares) 2,047
Transfer agent fees and expenses 74,873
Registration fees 61,962
Shareholder reports and notices 31,921
Professional fees 27,728
Custodian fees 24,081
Trustees' fees and expenses 187
Other 4,051
--------------
TOTAL EXPENSES 624,278
--------------
NET INVESTMENT INCOME 262,263
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
NET REALIZED GAIN/LOSS ON:
Investments 4,970,304
Foreign exchange transactions (8,093)
--------------
NET REALIZED GAIN 4,962,211
--------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments (4,827,229)
Translation of forward foreign currency contracts, other assets
and liabilities denominated in foreign currencies 378
--------------
NET DEPRECIATION (4,826,851)
--------------
NET GAIN 135,360
--------------
Net Increase $ 397,623
==============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
13
<Page>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JULY 31, 2004 JANUARY 31, 2004
------------- ----------------
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 262,263 $ 219,102
Net realized gain 4,962,211 3,347,325
Net change in unrealized appreciation/depreciation (4,826,851) 17,427,430
------------ ------------
NET INCREASE 397,623 20,993,857
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares (6,436) --
Class B shares (145,586) --
Class C shares (1,757) --
Class D shares (29,515) --
------------ ------------
TOTAL DIVIDENDS (183,294) --
------------ ------------
Net decrease from transactions in shares of beneficial interest (13,696,627) (4,085,596)
------------ ------------
NET INCREASE (DECREASE) (13,482,298) 16,908,261
NET ASSETS:
Beginning of period 51,440,795 34,532,534
------------ ------------
END OF PERIOD
(INCLUDING ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME OF $200,709
AND $121,740, RESPECTIVELY) $ 37,958,497 $ 51,440,795
============ ============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
14
<Page>
MORGAN STANLEY LATIN AMERICAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS - JULY 31, 2004 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Latin American Growth Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a non-diversified,
open-end management investment company. The Fund's investment objective is
long-term capital appreciation. The Fund was organized as a Massachusetts
business trust on February 25, 1992 and commenced operations on December 30,
1992. On July 28, 1997, the Fund converted to a multiple class share structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or traded
on the New York Stock Exchange ("NYSE") or American Stock Exchange or other
exchange is valued at its latest sale price prior to the time when assets are
valued; if there were no sales that day, the security is valued at the mean
between the last reported bid and asked price; (2) an equity portfolio security
listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price;
if there were no sales that day, the security is valued at the mean between the
last reported bid and asked price; (3) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the mean
between the last reported bid and asked price. In cases where a security is
traded on more than one exchange, the security is valued on the exchange
designated as the primary market; (4) for equity securities traded on foreign
exchanges, the last reported sale price or the latest bid price may be used if
there were no sales on a particular day; (5) when market quotations are not
readily available or Morgan Stanley Investment Advisors Inc. (the "Investment
Manager") determines that the latest sale price, the bid price or the mean
between the last reported bid and asked price do not reflect a security's market
value, portfolio securities are valued at their fair value as determined in good
faith under procedures established by and under the general supervision of the
Fund's Trustees. Occasionally, developments affecting the closing prices of
securities and other assets may occur between the times at which valuations of
such securities are determined (that is, close of the foreign market on which
the securities trade) and the close of business on the NYSE. If developments
occur during such periods that are expected to materially affect the value of
such securities, such valuations may be adjusted to reflect the estimated fair
value of such securities as of the close of the NYSE, as determined in good
faith by the Fund's Trustees or by the Investment Manager using a pricing
service and/or procedures approved by the Trustees of the Fund; (6) certain
portfolio securities may be valued by an outside pricing service
15
<Page>
approved by the Fund's Trustees; and (7) short-term debt securities having a
maturity date of more than sixty days at time of purchase are valued on a
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date
except for certain dividends on foreign securities which are recorded as soon as
the Fund is informed after the ex-dividend date. Discounts are accreted and
premiums are amortized over the life of the respective securities. Interest
income is accrued daily.
C. REPURCHASE AGREEMENTS -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
entities managed by the Investment Manager, may transfer uninvested cash
balances into one or more joint repurchase agreement accounts. These balances
are invested in one or more repurchase agreements and are collateralized by
cash, U.S. Treasury or federal agency obligations. The Fund may also invest
directly with institutions in repurchase agreements. The Fund's custodian
receives the collateral, which is marked-to-market daily to determine that the
value of the collateral does not decrease below the repurchase price plus
accrued interest.
D. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
E. FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS -- The
books and records of the Fund are maintained in U.S. dollars as follows: (1) the
foreign currency market value of investment securities, other assets and
liabilities and forward foreign currency contracts ("forward contracts") are
translated at the exchange rates prevailing at the end of the period; and (2)
purchases, sales, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. The resultant exchange
gains and losses are recorded as realized and unrealized gain/loss on foreign
exchange transactions. Pursuant to U.S. federal income tax regulations, certain
foreign exchange gains/losses included in realized and unrealized gain/loss are
included in or are a reduction of ordinary income for federal income tax
purposes. The Fund does not isolate that portion of the results of operations
arising as a result of changes in the foreign exchange rates from the changes in
the market prices of the securities. Forward contracts are valued daily at the
appropriate exchange rates. The resultant unrealized exchange gains and losses
are recorded as unrealized foreign currency gain or loss. The Fund records
realized gains or losses on delivery of the currency or at the time the forward
contract is extinguished (compensated) by entering into a closing transaction
prior to delivery.
16
<Page>
F. FEDERAL INCOME TAX POLICY -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
H. USE OF ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined as of the close
of each business day: 1.25% to the portion of daily net assets not exceeding
$500 million and 1.20% to the portion of the daily net assets exceeding $500
million.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- up to 1.0% of the lesser
of: (a) the average daily aggregate gross sales of the Class B shares since the
inception of the Fund (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Class B
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the average daily net assets of
Class B; and (iii) Class C -- up to 1.0% of the average daily net assets of
Class C.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts totaled
$22,260,645 at July 31, 2004.
17
<Page>
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Financial Advisors or other selected
broker-dealer representatives may be reimbursed in the subsequent calendar year.
For the six months ended July 31, 2004, the distribution fee was accrued for
Class A shares and Class C shares at the annual rate of 0.13% and 0.63%,
respectively.
The Distributor has informed the Fund that for the six months ended July 31,
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 $135, $8,634 and
$198, respectively and received $2,290 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 July 31, 2004 aggregated
$13,439,566 and $27,401,867, respectively.
For the six months ended July 31, 2004, the Fund incurred brokerage commissions
of $561 with Morgan Stanley & Co., Inc., an affiliate of the Investment Manager
and Distributor, for the portfolio transactions executed on behalf of the Fund.
At July 31, 2004, Morgan Stanley Fund of Funds -- International Portfolio, an
affiliate of the Investment Manager and Distributor, held 56,975 Class D shares
of beneficial interest of the Fund.
Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is
the Fund's transfer agent. At July 31, 2004, the Fund had transfer agent fees
and expenses payable of approximately $6,900.
18
<Page>
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
JULY 31, 2004 JANUARY 31, 2004
-------------------------- ---------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
CLASS A SHARES
Sold 5,285 $ 69,970 42,684 $ 498,529
Reinvestment of dividends 450 5,487 -- --
Redeemed (15,757) (196,532) (31,240) (332,161)
---------- ------------- ---------- ------------
Net increase (decrease) -- Class A (10,022) (121,075) 11,444 166,368
---------- ------------- ---------- ------------
CLASS B SHARES
Sold 89,736 1,145,753 319,093 3,276,124
Reinvestment of dividends 11,175 131,642 -- --
Redeemed (995,923) (11,764,106) (1,105,881) (10,166,806)
---------- ------------- ---------- ------------
Net decrease -- Class B (895,012) (10,486,711) (786,788) (6,890,682)
---------- ------------- ---------- ------------
CLASS C SHARES
Sold 4,560 58,401 55,618 581,610
Reinvestment of dividends 141 1,665 -- --
Redeemed (49,877) (604,633) (14,923) (141,884)
---------- ------------- ---------- ------------
Net increase (decrease) -- Class C (45,176) (544,567) 40,695 439,726
---------- ------------- ---------- ------------
CLASS D SHARES
Sold 16,266 219,804 272,717 2,822,902
Reinvestment of dividends 458 5,627 -- --
Redeemed (219,837) (2,769,705) (63,982) (623,910)
---------- ------------- ---------- ------------
Net increase (decrease) -- Class D (203,113) (2,544,274) 208,735 2,198,992
---------- ------------- ---------- ------------
Net decrease in Fund (1,153,323) $ (13,696,627) (525,914) $ (4,085,596)
========== ============= ========== ============
</Table>
6. FEDERAL INCOME TAX STATUS
The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for tax purposes are reported as distributions of paid-in-capital.
As of January 31, 2004, the Fund had a net capital loss carryforward of
$29,249,788 of which $19,838,661 will expire on January 31, 2005, $3,057,904
will expire on January 31, 2007, $2,899,656
19
<Page>
will expire on January 31, 2008 and $3,453,567 will expire on January 31, 2011
to offset future capital gains to the extent provided by regulations.
As of January 31, 2004, the Fund had temporary book/tax differences attributable
to post-October losses (foreign currency losses incurred after October 31 within
the taxable year which are deemed to arise on the first business day of the
Fund's next taxable year), capital loss deferrals on wash sales and foreign tax
credit pass-through.
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward contracts to facilitate settlement of foreign
currency denominated portfolio transactions or to manage foreign currency
exposure associated with foreign currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
At July 31, 2004, the Fund's cash balance consisted principally of interest
bearing deposits with J.P. Morgan Chase, the Fund's custodian.
At July 31, 2004, investment in securities of issuers in Mexico and Brazil
represented 39.6% and 49.3% of net assets, respectively. These investments, as
well as other non-U.S. investments which involve risks and considerations not
present with respect to U.S. securities, may be affected by economic or
political developments in these regions.
8. LEGAL MATTERS
The Investment Manager, certain affiliates of the Investment Manager, 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.
20
<Page>
The complaint seeks, among other things, unspecified compensatory damages,
rescissionary damages, fees and costs. The defendants have moved to dismiss the
action and intend to otherwise vigorously 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.
9. FUND LIQUIDATION
On April 22, 2004, the Board of Trustees of the Fund recommended the liquidation
of the Fund. The liquidation is subject to the approval of the Fund's
shareholders at a meeting scheduled to be held on or about September 28, 2004.
If approved, the liquidation will occur as soon as is reasonable and
practicable.
Effective April 30, 2004, the Fund ceased offering its shares and ceased
accruing its distribution fee.
21
<Page>
MORGAN STANLEY LATIN AMERICAN GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED JANUARY 31,
MONTHS ENDED -------------------------------------------------------
JULY 31, 2004 2004 2003 2002 2001 2000
------------- -------- -------- -------- -------- --------
(UNAUDITED)
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value,
beginning of period $ 12.57 $ 7.47 $ 10.02 $ 11.90 $ 12.26 $ 7.33
--------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income (loss)++ 0.10 0.11 0.08 0.14 0.00 (0.01)
Net realized and unrealized
gain (loss) 0.16 4.99 (2.51) (2.02) (0.36) 4.94
--------- -------- -------- -------- -------- --------
Total income (loss) from
investment operations 0.26 5.10 (2.43) (1.88) (0.36) 4.93
--------- -------- -------- -------- -------- --------
Less dividends from net
investment income (0.15) - (0.12) - - -
--------- -------- -------- -------- -------- --------
Net asset value, end of period $ 12.68 $ 12.57 $ 7.47 $ 10.02 $ 11.90 $ 12.26
========= ======== ======== ======== ======== ========
TOTAL RETURN+ 2.14%(1) 68.27% (24.40)% (15.80)% (2.62)% 66.71%
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 2.38%(2) 2.43% 2.52% 2.20% 1.96% 2.28%
Net investment income 1.55%(2) 1.25% 0.91% 1.15% 0.05% 0.16%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands $ 526 $ 647 $ 299 $ 547 $ 936 $ 751
Portfolio turnover rate 30%(1) 78% 57% 73% 44% 59%
</Table>
- ----------
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
SEE NOTES TO FINANCIAL STATEMENTS
22
<Page>
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED JANUARY 31,
MONTHS ENDED --------------------------------------------------------
JULY 31, 2004 2004 2003 2002 2001 2000
------------- -------- -------- -------- -------- ---------
(UNAUDITED)
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value,
beginning of period $ 12.06 $ 7.23 $ 9.66 $ 11.55 $ 11.99 $ 7.24
--------- -------- -------- -------- -------- ---------
Income (loss) from investment operations:
Net investment income
(loss)++ 0.07 0.05 0.01 0.04 (0.09) (0.06)
Net realized and
unrealized gain (loss) 0.17 4.78 (2.41) (1.93) (0.35) 4.81
--------- -------- -------- -------- -------- ---------
Total income (loss) from
investment operations 0.24 4.83 (2.40) (1.89) (0.44) 4.75
--------- -------- -------- -------- -------- ---------
Less dividends from net
investment income (0.05) - (0.03) - - -
--------- -------- -------- -------- -------- ---------
Net asset value, end of period $ 12.25 $ 12.06 $ 7.23 $ 9.66 $ 11.55 $ 11.99
========= ======== ======== ======== ======== =========
TOTAL RETURN+ 1.90%(1) 66.94% (24.90)% (16.36)% (3.43)% 65.19%
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 2.80%(2) 3.20% 3.27% 2.96% 2.77% 3.06%
Net investment income (loss) 1.13%(2) 0.48% 0.16% 0.39% (0.76)% (0.62)%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands $ 35,953 $ 46,209 $ 33,372 $ 60,159 $ 99,431 $ 136,699
Portfolio turnover rate 30%(1) 78% 57% 73% 44% 59%
</Table>
- ----------
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
SEE NOTES TO FINANCIAL STATEMENTS
23
<Page>
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED JANUARY 31,
MONTHS ENDED -------------------------------------------------------
JULY 31, 2004 2004 2003 2002 2001 2000
------------- -------- -------- -------- -------- --------
(UNAUDITED)
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value,
beginning of period $ 12.07 $ 7.23 $ 9.69 $ 11.57 $ 12.02 $ 7.24
--------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income
(loss)++ 0.06 0.04 0.01 0.04 (0.09) (0.06)
Net realized and
unrealized gain (loss) 0.17 4.80 (2.42) (1.92) (0.36) 4.84
--------- -------- -------- -------- -------- --------
Total income (loss) from
investment operations 0.23 4.84 (2.41) (1.88) (0.45) 4.78
--------- -------- -------- -------- -------- --------
Less dividends from net
investment income (0.04) - (0.05) - - -
--------- -------- -------- -------- -------- --------
Net asset value, end of period $ 12.26 $ 12.07 $ 7.23 $ 9.69 $ 11.57 $ 12.02
========= ======== ======== ======== ======== ========
TOTAL RETURN+ 1.87%(1) 67.08% (24.88)% (16.34)% (3.42)% 65.47%
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 2.88%(2) 3.20% 3.24% 2.88% 2.77% 2.95%
Net investment income (loss) 1.05%(2) 0.48% 0.19% 0.47% (0.76)% (0.51)%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands $ 460 $ 998 $ 304 $ 504 $ 887 $ 776
Portfolio turnover rate 30%(1) 78% 57% 73% 44% 59%
</Table>
- ----------
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
SEE NOTES TO FINANCIAL STATEMENTS
24
<Page>
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED JANUARY 31,
MONTHS ENDED -------------------------------------------------------
JULY 31, 2004 2004 2003 2002 2001 2000
------------- -------- -------- -------- -------- --------
(UNAUDITED)
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value,
beginning of period $ 12.68 $ 7.52 $ 10.11 $ 11.97 $ 12.30 $ 7.35
--------- -------- -------- -------- -------- --------
Income (loss) from investment operations:
Net investment income
(loss)++ 0.11 0.13 0.15 0.14 0.00 (0.02)
Net realized and
unrealized gain (loss) 0.15 5.03 (2.59) (2.00) (0.33) 4.97
--------- -------- -------- -------- -------- --------
Total income (loss) from
investment operations 0.26 5.16 (2.44) (1.86) (0.33) 4.95
--------- -------- -------- -------- -------- --------
Less dividends from net
investment income (0.17) - (0.15) - - -
--------- -------- -------- -------- -------- --------
Net asset value, end of period $ 12.77 $ 12.68 $ 7.52 $ 10.11 $ 11.97 $ 12.30
========= ======== ======== ======== ======== ========
TOTAL RETURN+ 2.13%(1) 68.62% (24.24)% (15.54)% (2.37)% 66.80%
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 2.25%(2) 2.20% 2.27% 1.96% 1.77% 2.06%
Net investment income 1.68%(2) 1.48% 1.16% 1.39% 0.24% 0.38%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands $ 1,020 $ 3,587 $ 558 $ 5,455 $ 9,262 $ 588
Portfolio turnover rate 30%(1) 78% 57% 73% 44% 59%
</Table>
- ----------
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE
PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
SEE NOTES TO FINANCIAL STATEMENTS
25
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<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 REGISTERED PUBLIC ACCOUNTING FIRM
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]
37939RPT-RA04-00535P-Y07/04
[GRAPHIC]
MORGAN STANLEY FUNDS
MORGAN STANLEY
LATIN AMERICAN
GROWTH FUND
SEMIANNUAL REPORT
JULY 31, 2004
[MORGAN STANLEY LOGO]
<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 Latin American Growth Fund
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
September 20, 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
September 20, 2004
/s/ Francis Smith
Francis Smith
Principal Financial Officer
September 20, 2004