<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: October 31, 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 ANNUAL PERIOD. WE WILL PROVIDE AN
OVERVIEW OF THE MARKET CONDITIONS, AND DISCUSS SOME OF THE FACTORS THAT AFFECTED
PERFORMANCE DURING THE REPORTING PERIOD. IN ADDITION, THIS REPORT INCLUDES THE
FUND'S FINANCIAL STATEMENTS AND A LIST OF FUND INVESTMENTS.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING
OFFERED. MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO
PASS. THERE IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE.
THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES
OF SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE
FUND'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE
MONEY INVESTING IN THIS FUND.
<Page>
FUND REPORT
For the year ended October 31, 2004
TOTAL RETURN FOR THE 12 MONTHS ENDED OCTOBER 31, 2004
<Table>
<Caption>
MORGAN
STANLEY LIPPER
CAPITAL INTERNATIONAL LIPPER
INTERNATIONAL LARGE-CAP INTERNATIONAL
(MSCI) CORE FUNDS FUNDS
CLASS A CLASS B CLASS C CLASS D EAFE INDEX(1) INDEX(2) INDEX(3)
15.89% 14.87% 15.03% 15.97% 18.84% 15.06% 16.54%
</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. INVESTMENT RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. SEE
PERFORMANCE SUMMARY FOR ADDITIONAL PERFORMANCE INFORMATION AND INDEX DEFINITION.
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.
MARKET CONDITIONS
The international equity markets produced positive results for the 12-month
period ended October 31, 2004, though gains were largely concentrated in the
first months of the period. Equities rose sharply in the fourth calendar quarter
of 2003, rising 17 percent on improving economic conditions and still-low
interest rates. For the remainder of the period, which included most of 2004,
returns were largely flat as rising oil prices, rising U.S. interest rates and
the impending U.S. election weighed on the markets. Investors were also
concerned about the prospect of an overheated economy in China as well as a lack
of transparency in that government's policies.
Most countries within the MSCI EAFE Index provided strong returns for the
12-month period, with only Finland posting a single-digit return. Both Europe
and Asia ex-Japan rose more than 25 percent, with Japan lagging its global peers
with an 11 percent return.
PERFORMANCE ANALYSIS
Morgan Stanley International Fund underperformed both the MSCI EAFE Index and
the Lipper International Funds Index for the 12 months ended October 31, 2004.
The Fund's Class A and D shares outperformed the Lipper International Large-Cap
Core Funds Index, while its Class B and C shares did not. An underweighted
position in Australian equities relative to the MSCI EAFE Index was one major
detractor from performance. This country allocation hurt the Fund because not
only did Australian equities post strong returns in local currency terms, but
the Australian dollar also gained roughly 6 percent for the period. As the
Australian market's return to U.S. dollar investors was then greater than 24
percent, the Fund's inadequate exposure there represented a missed opportunity.
From a sector perspective, the Fund's allocation to information technology (IT)
further hindered performance, as the shift to an underweighted position late in
fourth-quarter 2003 was made just prior to the sector's sharp rally in January.
A lack of emphasis on financials stocks during the period further hurt the Fund.
Although a number of positions were unfavorable for performance, others provided
considerable gains. The Fund's exposure to emerging markets, concentrated in
Asian equities, contributed greatly to its positive returns for the period.
These markets performed especially well because of their economies' strong
fundamentals such as current-account surpluses and high savings rates, and as a
result of their proximity to China, which bolstered
2
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their exports. While an underweighted position in the consumer staples sector
relative to the MSCI EAFE Index hurt performance in the first half of the
period, this allocation was positive for the Fund over the full year.
THERE IS NO GUARANTEE THAT ANY SECURITIES MENTIONED WILL CONTINUE TO PERFORM
WELL OR BE HELD BY THE FUND IN THE FUTURE.
TOP 10 HOLDINGS
<Table>
BP 2.3%
HSBC Holdings 2.0
Vodafone Group 1.9
Toyota Motor 1.6
Total 1.6
Telefonica 1.6
Royal Dutch Petroleum 1.5
GlaxoSmithKline 1.2
Novartis 1.1
Nokia 0.9
</Table>
TOP FIVE COUNTRIES
<Table>
Japan 25.6%
United Kingdom 21.2
France 8.2
Germany 5.9
Netherlands 5.1
</Table>
DATA AS OF OCTOBER 31, 2004. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES FOR TOP 10
HOLDINGS AND TOP FIVE COUNTRIES ARE AS A PERCENTAGE OF NET ASSETS. THESE DATA
ARE 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 PERCENT 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.
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 (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 (800) SEC-0330. YOU CAN
3
<Page>
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) 869-NEWS.
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
12-MONTH PERIOD ENDED OCTOBER 31, 2004, IS AVAILABLE WITHOUT CHARGE, UPON
REQUEST, BY CALLING (800) 869-NEWS OR BY VISITING THE MUTUAL FUND CENTER ON OUR
WEB SITE AT www.morganstanley.com. THIS INFORMATION IS ALSO AVAILABLE ON THE
SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT http://www.sec.gov.
ANNUAL HOUSEHOLDING NOTICE
TO REDUCE PRINTING AND MAILING COSTS, THE FUND ATTEMPTS TO ELIMINATE DUPLICATE
MAILINGS TO THE SAME ADDRESS. THE FUND DELIVERS A SINGLE COPY OF CERTAIN
SHAREHOLDER DOCUMENTS, INCLUDING SHAREHOLDER REPORTS, PROSPECTUSES AND PROXY
MATERIALS, TO INVESTORS WITH THE SAME LAST NAME WHO RESIDE AT THE SAME ADDRESS.
YOUR PARTICIPATION IN THIS PROGRAM WILL CONTINUE FOR AN UNLIMITED PERIOD OF TIME
UNLESS YOU INSTRUCT US OTHERWISE. YOU CAN REQUEST MULTIPLE COPIES OF THESE
DOCUMENTS BY CALLING (800) 350-6414, 8:00 A.M. TO 8:00 P.M., ET. ONCE OUR
CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING
INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS.
4
<Page>
(This page has been left blank intentionally.)
5
<Page>
PERFORMANCE SUMMARY
[CHART]
PERFORMANCE OF A $10,000 INVESTMENT
($ IN THOUSANDS)
<Table>
<Caption>
CLASS A^ CLASS B^ CLASS C^ CLASS D^ MSCI EAFE(1) LIPPER INT'L LARGE-CAP CORE(2) LIPPER INT'L(3)
Jun-1999 $ 9,475 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
Jul-1999 $ 9,608 $ 10,130 $ 10,130 $ 10,140 $ 10,243 $ 10,273 $ 10,232
Oct-1999 $ 10,015 $ 10,550 $ 10,550 $ 10,580 $ 10,773 $ 10,766 $ 10,707
Jan-2000 $ 10,603 $ 11,140 $ 11,140 $ 11,200 $ 11,375 $ 12,236 $ 12,149
Apr-2000 $ 10,631 $ 11,150 $ 11,150 $ 11,240 $ 11,496 $ 12,385 $ 12,160
Jul-2000 $ 10,356 $ 10,850 $ 10,850 $ 10,960 $ 11,165 $ 12,346 $ 11,973
Oct-2000 $ 9,750 $ 10,190 $ 10,190 $ 10,320 $ 10,461 $ 11,446 $ 11,077
Jan-2001 $ 9,674 $ 10,089 $ 10,089 $ 10,250 $ 10,421 $ 11,511 $ 11,070
Apr-2001 $ 9,064 $ 9,435 $ 9,435 $ 9,607 $ 9,622 $ 10,630 $ 10,152
Jul-2001 $ 8,454 $ 8,781 $ 8,781 $ 8,964 $ 8,741 $ 9,711 $ 9,376
Oct-2001 $ 7,765 $ 8,042 $ 8,042 $ 8,225 $ 7,853 $ 8,726 $ 8,408
Jan-2002 $ 7,599 $ 7,862 $ 7,862 $ 8,066 $ 7,755 $ 8,754 $ 8,519
Apr-2002 $ 8,164 $ 8,422 $ 8,432 $ 8,664 $ 8,287 $ 9,387 $ 9,160
Jul-2002 $ 7,235 $ 7,451 $ 7,461 $ 7,682 $ 7,262 $ 8,209 $ 8,033
Oct-2002 $ 6,761 $ 6,944 $ 6,955 $ 7,181 $ 6,815 $ 7,789 $ 7,546
Jan-2003 $ 6,506 $ 6,680 $ 6,682 $ 6,918 $ 6,598 $ 7,495 $ 7,370
Apr-2003 $ 6,731 $ 6,892 $ 6,904 $ 7,157 $ 6,939 $ 7,817 $ 7,667
Jul-2003 $ 7,354 $ 7,514 $ 7,517 $ 7,817 $ 7,720 $ 8,659 $ 8,587
Oct-2003 $ 8,202 $ 8,369 $ 8,374 $ 8,737 $ 8,658 $ 9,564 $ 9,549
Jan-2004 $ 9,102 $ 9,263 $ 9,271 $ 9,694 $ 9,677 $ 10,635 $ 10,627
Apr-2004 $ 9,082 $ 9,231 $ 9,249 $ 9,683 $ 9,730 $ 10,553 $ 10,598
Jul-2004 $ 8,947 $ 9,072 $ 9,090 $ 9,541 $ 9,653 $ 10,285 $ 10,451
Oct-2004 $ 9,505 $ 9,523 $ 9,632 $ 10,133 $ 10,289 $ 11,004 $ 11,129
Ending Value
CLASS A^ CLASS B^ CLASS C^ CLASS D^ MSCI EAFE(1) LIPPER INT'L LARGE-CAP CORE(2) LIPPER INT'L(3)
$9,505 $9,523 $9,632 $10,133 $10,289 $11,004 $11,129
</Table>
6
<Page>
AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED OCTOBER 31, 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 15.89%(4) 14.87%(4) 15.03%(4) 15.97%(4)
9.80(5) 9.87(5) 14.03(5) --
5 YEARS (1.04)(4) (1.84)(4) (1.80)(4) (0.86)(4)
(2.10)(5) (2.22)(5) (1.80)(5) --
SINCE INCEPTION 0.06(4) (0.74)(4) (0.70)(4) 0.25(4)
(0.95)(5) (0.91)(5) (0.70)(5) --
</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 GRAPH AND TABLE DO NOT REFLECT THE
DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE
REDEMPTION OF FUND SHARES. PERFORMANCE FOR CLASS A, CLASS B, CLASS C, AND CLASS
D SHARES WILL VARY DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
* 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% FOR SHARES
REDEEMED WITHIN ONE YEAR OF PURCHASE.
++ CLASS D HAS NO SALES CHARGE.
(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 LARGE-CAP CORE FUNDS INDEX IS AN EQUALLY WEIGHTED
PERFORMANCE INDEX OF THE LARGEST QUALIFYING FUNDS (BASED ON NET ASSETS) IN
THE LIPPER INTERNATIONAL LARGE-CAP CORE 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
10 FUNDS REPRESENTED IN THIS INDEX. LIPPER INTRODUCED NEW CLASSIFICATIONS
IN JUNE 2004 THAT CATEGORIZE INTERNATIONAL AND GLOBAL FUNDS BASED ON THE
SIZE AND STYLE OF THE ACTUAL STOCKS IN THEIR PORTFOLIO, RATHER THAN ON
STATED OBJECTIVES. THE FUND IS IN THE INTERNATIONAL LARGE-CAP CORE FUNDS
CLASSIFICATION AS OF OCTOBER 31, 2004.
(3) 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.
(4) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT
THE DEDUCTION OF ANY SALES CHARGES.
(5) 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.
^ ENDING VALUE ASSUMING A COMPLETE REDEMPTION ON OCTOBER 31, 2004.
7
<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 05/01/04 - 10/31/04.
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 *
------------- ------------- ---------------
05/01/04 -
05/01/04 10/31/04 10/31/04
------------- ------------- ---------------
CLASS A
Actual (4.66% return) $ 1,000.00 $ 1,046.60 $ 8.13
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,017.19 $ 8.01
CLASS B
Actual (4.14% return) $ 1,000.00 $ 1,041.40 $ 11.96
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,013.42 $ 11.79
CLASS C
Actual (4.14% return) $ 1,000.00 $ 1,041.40 $ 11.96
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,013.42 $ 11.79
CLASS D
Actual (4.64% return) $ 1,000.00 $ 1,046.40 $ 6.84
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,018.45 $ 6.75
</Table>
- ----------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.58%, 2.33%,
2.33% AND 1.33% RESPECTIVELY, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER
THE PERIOD, MULTIPLIED BY 184/366 (TO REFLECT THE ONE-HALF YEAR PERIOD).
8
<Page>
MORGAN STANLEY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2004
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON AND PREFERRED STOCKS (95.1%)
AUSTRALIA (3.2%)
ALUMINUM
66,059 Alumina Ltd. $ 271,658
---------------
BEVERAGES: ALCOHOLIC
61,573 Foster's Group Ltd. 232,493
21,483 Southcorp Ltd.* 57,826
---------------
290,319
---------------
BEVERAGES: NON-ALCOHOLIC
15,483 Coca-Cola Amatil Ltd. 85,204
---------------
BIOTECHNOLOGY
2,905 CSL Ltd. 62,556
---------------
BUILDING PRODUCTS
52,200 CSR Ltd. 105,381
---------------
CASINO/GAMING
12,237 TABCORP Holdings Ltd. 137,244
---------------
CHEMICALS: MAJOR DIVERSIFIED
15,386 Orica Ltd. 195,340
---------------
CONSTRUCTION MATERIALS
33,414 Boral Ltd. 165,891
53,839 Rinker Group Ltd. 349,417
---------------
515,308
---------------
CONTAINERS/PACKAGING
50,014 Amcor Ltd. 285,327
---------------
ENGINEERING & CONSTRUCTION
7,273 Leighton Holdings Ltd. 60,797
---------------
FINANCIAL CONGLOMERATES
40,111 AMP Ltd. 191,043
6,303 Macquarie Bank Ltd. 186,578
16,632 Suncorp-Metway Ltd. 212,900
---------------
590,521
---------------
FOOD RETAIL
32,398 Coles Myer Ltd. 231,097
29,811 Woolworths Ltd. 298,236
---------------
529,333
---------------
GAS DISTRIBUTORS
14,025 Australian Gas Light Co. Ltd. $ 137,373
9,450 Origin Energy Ltd. 47,694
---------------
185,067
---------------
HOSPITAL/NURSING MANAGEMENT
27,157 Mayne Group Ltd. 89,343
---------------
INDUSTRIAL CONGLOMERATES
5,618 Ansell Ltd. 37,637
11,333 Wesfarmers Ltd. 294,461
---------------
332,098
---------------
INVESTMENT TRUSTS/
MUTUAL FUNDS
57,659 Macquarie Infrastructure
Group (Stapled
Securities)** 159,944
---------------
MAJOR BANKS
43,611 Australia and New Zealand
Banking Group Ltd. 665,202
36,037 Commonwealth Bank
of Australia 864,930
45,459 National Australia Bank Ltd. 960,889
50,964 Westpac Banking Corp. 719,437
---------------
3,210,458
---------------
MAJOR TELECOMMUNICATIONS
65,106 Telstra Corp., Ltd. 227,334
---------------
MEDIA CONGLOMERATES
61,377 News Corp., Ltd.
(Pref. Ordinary) 481,862
42,956 News Corp., Ltd. 345,913
---------------
827,775
---------------
MEDICAL/NURSING SERVICES
4,137 Sonic Healthcare Ltd. 31,396
---------------
MISCELLANEOUS COMMERCIAL
SERVICES
29,859 Brambles Industries Ltd. 158,288
---------------
MULTI-LINE INSURANCE
51,260 Insurance Australia
Group Ltd. 206,583
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
9
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
OIL & GAS PRODUCTION
18,851 Santos Ltd. $ 116,988
14,379 Woodside Petroleum Ltd. 209,325
---------------
326,313
---------------
OTHER METALS/MINERALS
214,158 BHP Billiton Ltd. 2,217,744
17,740 Rio Tinto Ltd. 485,470
65,935 WMC Resources Ltd. 332,772
---------------
3,035,986
---------------
OTHER TRANSPORTATION
28,101 Patrick Corp., Ltd. 116,822
17,097 Transurban Group 81,175
---------------
197,997
---------------
PRECIOUS METALS
18,717 Newcrest Mining Ltd. 233,152
---------------
PROPERTY - CASUALTY INSURERS
20,121 QBE Insurance Group Ltd. 206,561
---------------
PUBLISHING: NEWSPAPERS
30,261 John Fairfax Holdings Ltd. 97,066
---------------
PULP & PAPER
25,414 PaperlinX Ltd. 91,590
---------------
REAL ESTATE DEVELOPMENT
12,506 Lend Lease Corp., Ltd. 107,907
32,906 Westfield Group
(Stapled Securities)** * 369,058
---------------
476,965
---------------
REAL ESTATE INVESTMENT TRUSTS
22,659 Centro Properties Group
(Stapled Securities)** 82,000
48,547 CFS Gandel Retail
Trust (Units)++ 56,989
1,746 CFS Gandel Retail Trust
(Units) (New)++* 1,958
59,716 General Property
Trust (Units)++ 166,097
38,688 Investa Property Group (Stapled
Securities)** 60,168
24,387 Mirvac Group (Stapled
Securities)** 82,601
36,411 Stockland (Stapled
Securities)** $ 160,352
1,281 Stockland (Units) (New)++* 5,622
---------------
615,787
---------------
STEEL
41,723 Blue Scope Steel Ltd. 241,147
31,613 OneSteel Ltd. 62,165
---------------
303,312
---------------
TOTAL AUSTRALIA 14,142,003
---------------
AUSTRIA (0.7%)
BUILDING PRODUCTS
6,115 Wienerberger AG 243,179
---------------
CONSTRUCTION MATERIALS
1,538 RHI AG* 36,088
---------------
ELECTRIC UTILITIES
876 Oesterreichische
Elektrizitaetswirtschafts AG
(Verbund) (A Shares) 172,076
---------------
MAJOR BANKS
5,752 Bank Austria Creditanstalt 426,668
18,408 Erste Bank der
Oesterreichischen
Sparkassen AG 821,252
---------------
1,247,920
---------------
MAJOR TELECOMMUNICATIONS
31,013 Telekom Austria AG 473,100
---------------
OIL REFINING/MARKETING
1,983 OMV AG 477,313
---------------
OTHER TRANSPORTATION
1,083 Flughafen Wien AG 71,374
---------------
REAL ESTATE DEVELOPMENT
32,785 Immofinanz Immobilien
Anlagen AG* 283,394
---------------
STEEL
1,009 Boehler-Uddeholm AG 96,765
3,092 Voestalpine AG 180,449
---------------
277,214
---------------
TOTAL AUSTRIA 3,281,658
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
10
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
BELGIUM (1.0%)
CHEMICALS: SPECIALTY
3,487 Solvay S.A. (A Shares) $ 352,247
---------------
ELECTRIC UTILITIES
1,216 Electrabel S.A. 455,585
---------------
ELECTRONIC EQUIPMENT/
INSTRUMENTS
11,838 Agfa Gevaert NV 373,890
---------------
FINANCIAL CONGLOMERATES
67,652 Fortis 1,722,347
---------------
MAJOR BANKS
41,052 Dexia 824,143
5,663 KBC Bankverzekeringsholding 416,011
---------------
1,240,154
---------------
MAJOR TELECOMMUNICATIONS
2,051 Belgacom* 75,531
---------------
METAL FABRICATIONS
401 Bekaert NV 26,151
---------------
OTHER METALS/MINERALS
336 Umicore 26,015
---------------
PHARMACEUTICALS: OTHER
3,616 UCB S.A. 191,517
---------------
TOTAL BELGIUM 4,463,437
---------------
BRAZIL (1.1%)
AEROSPACE & DEFENSE
23,000 Empresa Brasileira de
Aeronautica S.A. (Pref.) 152,837
---------------
BEVERAGES: ALCOHOLIC
1,162,000 Companhia de Bebidas das
Americas (Pref.) 288,536
---------------
ELECTRIC UTILITIES
7,996,000 Centrais Electricas Brasileiras
S.A. (Class B) (Pref.) 118,545
6,648,000 Companhia Energetica de
Minas Gerais (Pref.) 153,456
---------------
272,001
---------------
FOOD RETAIL
1,000 Companhia Brasileira de
Distribuicao Grupo
Pao de Acucar
(Sponsored ADR) (Pref.) $ 23,800
---------------
FOOD: MEAT/FISH/DAIRY
33,000 Sadia S.A. (Pref.) 59,669
---------------
INTEGRATED OIL
37,000 Petroleo Brasileiro
S.A. (Pref.) 1,208,639
---------------
MAJOR TELECOMMUNICATIONS
15,878,000 Brasil Telecom Participacoes
S.A. (Pref.) 97,736
---------------
OTHER METALS/MINERALS
39,000 Companhia Vale do Rio Doce
(Pref.) (Class A) 706,549
---------------
PULP & PAPER
30,000 Aracruz Celulose S.A.
(Pref.) (B Shares) 101,145
41,000 Klabin S.A. (Pref.) 67,395
1,107,000 Votorantim Celulose e Papel
S.A. (Pref.) 76,620
---------------
245,160
---------------
REGIONAL BANKS
4,000 Banco Bradesco S.A. (Pref.) 241,602
2,867 Banco Itau Holding Financeira
S.A. (Pref.) 346,436
5,300 Unibanco-Uniao de Bancos
Brasileiros S.A.
(GDR) (Units)++ 140,185
---------------
728,223
---------------
SPECIALTY TELECOMMUNICATIONS
14,194,000 Embratel Participacoes
S.A. (Pref.) 25,417
19,113 Tele Norte Leste Participacoes
S.A. (Pref.) 250,807
---------------
276,224
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
11
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
STEEL
111,000 Caemi Mineracao e Metalurgia
S.A. (Pref.)* $ 66,385
7,000 Companhia Siderurgica
Nacional S.A. 103,436
971,000 Companhia Siderurgica de
Tubarao (Pref.) 39,139
10,000 Gerdau S.A. (Pref.) 147,731
7,000 Usinas Siderurgicas de
Minas Gerais S.A.
(Class A) (Pref.) 105,884
---------------
462,575
---------------
TOBACCO
6,000 Souza Cruz S.A. 67,150
---------------
WIRELESS TELECOMMUNICATIONS
16,270,680 Tele Centro Oeste
Celular Participacoes
S.A. (Pref.)* 49,963
28,556,000 Telesp Celular Participacoes
S.A. (Pref.)* 68,113
---------------
118,076
---------------
TOTAL BRAZIL 4,707,175
---------------
CHINA (1.0%)
AIR FREIGHT/COURIERS
179,000 Sinotrans Limited 57,490
---------------
AIRLINES
118,000 China Southern Airlines
Co., Ltd.* 40,930
---------------
ALUMINUM
330,000 Aluminum Corp. of
China Ltd. 188,656
---------------
CHEMICALS: SPECIALTY
234,000 Sinopec Shanghai
Petrochemical Co. Ltd. 81,918
---------------
COAL
122,000 Yanzhou Coal Mining
Co., Ltd. 160,650
---------------
CONTRACT DRILLING
154,000 China Oilfield Services Ltd. 45,009
---------------
ELECTRIC UTILITIES
144,000 Huadian Power International
Corp., Ltd. $ 46,249
306,000 Huaneng Power
International, Inc. 229,972
---------------
276,221
---------------
ELECTRICAL PRODUCTS
15,000 BYD Company Ltd. 42,202
---------------
INTEGRATED OIL
1,678,000 China Petroleum &
Chemical Corp. 635,933
1,758,000 PetroChina Co., Ltd. 920,330
---------------
1,556,263
---------------
LIFE/HEALTH INSURANCE
744,000 China Life Insurance
Co., Ltd.* 492,240
---------------
MAJOR TELECOMMUNICATIONS
1,388,000 China Telecom Corp. Ltd. 445,786
---------------
MARINE SHIPPING
213,000 China Shipping Container
Lines Company Ltd.* 88,932
130,000 China Shipping Development
Co., Ltd. 108,556
---------------
197,488
---------------
MULTI-LINE INSURANCE
262,500 Ping An Insurance (Group)
Co. of China Ltd.* 413,107
---------------
OIL REFINING/MARKETING
72,000 Sinopec Zhenhai Refining &
Chemical Co., Ltd. 68,911
---------------
OTHER METALS/MINERALS
116,000 Jiangxi Copper Co., Ltd. 61,472
---------------
OTHER TRANSPORTATION
134,000 Beijing Capital International
Airport Co., Ltd. 48,201
122,000 Jiangsu Expressway
Co., Ltd. 51,721
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
12
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
144,000 Zhejiang Expressway
Co., Ltd. $ 97,122
---------------
197,044
---------------
PROPERTY - CASUALTY INSURERS
346,000 PICC Property & Casualty
Company Ltd.* 124,460
---------------
STEEL
90,000 Angang New Steel
Co., Ltd. 36,421
174,000 Maanshan Iron & Steel
Co., Ltd. 60,913
---------------
97,334
---------------
TEXTILES
34,500 Weiqiao Textile Co., Ltd. 50,305
---------------
TOTAL CHINA 4,597,486
---------------
DENMARK (0.4%)
BIOTECHNOLOGY
1,350 Novozymes A/S (B Shares) 60,175
---------------
ELECTRICAL PRODUCTS
2,400 Vestas Wind Systems A/S* 29,842
---------------
MAJOR BANKS
36,544 Danske Bank A/S 1,023,567
---------------
MAJOR TELECOMMUNICATIONS
1,900 TDC A/S 70,466
---------------
MISCELLANEOUS COMMERCIAL
SERVICES
2,000 Falck A/S* 16,625
1,100 ISS A/S 58,686
---------------
75,311
---------------
PHARMACEUTICALS: MAJOR
10,550 Novo Nordisk
A/S (Series B) 525,630
---------------
TOTAL DENMARK 1,784,991
---------------
FINLAND (1.6%)
BUILDING PRODUCTS
1,178 Uponor Oyj 41,423
---------------
ENGINEERING & CONSTRUCTION
3,675 Kone Oyj (B Shares) $ 236,371
---------------
FOOD RETAIL
16,110 Kesko Oyj (B Shares) 361,527
---------------
INDUSTRIAL MACHINERY
17,131 Metso Oyj 241,836
---------------
INFORMATION TECHNOLOGY
SERVICES
8,260 TietoEnator Oyj 232,365
---------------
MULTI-LINE INSURANCE
18,410 Sampo Oyj (A Shares) 219,872
---------------
OIL REFINING/MARKETING
21,853 Fortum Oyj 335,321
---------------
OTHER METALS/MINERALS
10,878 Outokumpu Oyj 187,920
---------------
PULP & PAPER
39,857 Stora Enso Oyj
(Registered Shares) 570,300
30,171 UPM-Kymmene Oyj 597,985
---------------
1,168,285
---------------
TELECOMMUNICATION EQUIPMENT
266,997 Nokia Oyj 4,127,636
---------------
TRUCKS/CONSTRUCTION/FARM
MACHINERY
3,297 Wartsila Oyj (B Shares) 89,798
---------------
TOTAL FINLAND 7,242,354
---------------
FRANCE (8.2%)
ADVERTISING/MARKETING
SERVICES
5,525 Publicis Groupe 165,175
---------------
AEROSPACE & DEFENSE
11,782 THALES 425,906
715 Zodiac S.A. 27,739
---------------
453,645
---------------
APPAREL/FOOTWEAR
21,989 LVMH Moet Hennessy Louis
Vuitton S.A. 1,509,901
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
13
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
AUTO PARTS: O.E.M.
4,022 Valeo S.A. $ 148,888
---------------
AUTOMOTIVE AFTERMARKET
7,399 Compagnie Generale
des Etablissements
Michelin (B Shares) 403,516
---------------
BROADCASTING
6,704 Societe Television
Francaise 1 202,223
---------------
BUILDING PRODUCTS
22,618 Compagnie de Saint-Gobain 1,245,076
---------------
CHEMICALS: SPECIALTY
7,077 L'Air Liquide S.A. 1,145,649
---------------
CONSTRUCTION MATERIALS
3,124 Imerys S.A. 220,106
9,635 Lafarge S.A. 881,516
---------------
1,101,622
---------------
DATA PROCESSING SERVICES
757 Atos Origin S.A.* 47,440
---------------
ELECTRIC UTILITIES
36,915 Suez S.A. 864,763
---------------
ELECTRICAL PRODUCTS
4,176 Alstom* 2,830
9,987 Schneider Electric S.A. 662,783
---------------
665,613
---------------
ELECTRONICS/APPLIANCES
15,729 Thomson 356,799
---------------
ENGINEERING & CONSTRUCTION
21,786 Bouygues S.A. 860,248
4,370 Vinci S.A. 521,632
---------------
1,381,880
---------------
FOOD DISTRIBUTORS
6,222 Sodexho Alliance S.A. 157,610
---------------
FOOD RETAIL
18,709 Carrefour S.A. 821,283
2,465 Casino Guichard Perrachon 170,681
---------------
991,964
---------------
FOOD: MAJOR DIVERSIFIED
8,092 Groupe Danone $ 678,779
---------------
HOTELS/RESORTS/CRUISELINES
11,064 Accor S.A. Ltd. 460,361
---------------
INFORMATION TECHNOLOGY
SERVICES
6,087 Cap Gemini S.A.* 153,567
---------------
INTEGRATED OIL
34,131 Total S.A. 7,113,859
---------------
INTERNET SOFTWARE/SERVICES
2,289 Business Objects S.A.* 58,539
---------------
LIFE/HEALTH INSURANCE
4,001 CNP Assurances 272,943
---------------
MAJOR BANKS
48,423 BNP Paribas 3,303,351
19,003 Societe Generale 1,766,547
---------------
5,069,898
---------------
MAJOR TELECOMMUNICATIONS
66,280 France Telecom S.A.* 1,901,840
---------------
MEDIA CONGLOMERATES
52,516 Vivendi Universal* 1,437,729
---------------
MEDICAL SPECIALTIES
1,745 Essilor International S.A. 118,707
---------------
MOTOR VEHICLES
10,155 PSA Peugeot Citroen 625,497
9,166 Renault S.A. 768,869
---------------
1,394,366
---------------
MULTI-LINE INSURANCE
80,387 AXA 1,734,082
---------------
OILFIELD SERVICES/EQUIPMENT
270 Technip S.A. 42,431
---------------
OTHER CONSUMER SPECIALTIES
3,632 Societe BIC S.A. 168,772
---------------
PACKAGED SOFTWARE
2,132 Dassault Systemes S.A. 108,448
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
14
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
PHARMACEUTICALS: MAJOR
37,625 Sanofi-Aventis $ 2,756,765
---------------
PUBLISHING: BOOKS/MAGAZINES
7,187 Lagardere S.C.A. 464,096
---------------
REGIONAL BANKS
20,076 Credit Agricole S.A. 589,667
---------------
TELECOMMUNICATION EQUIPMENT
69,060 Alcatel* 1,011,998
1,111 Sagem S.A. 101,362
---------------
1,113,360
---------------
WATER UTILITIES
7,990 Veolia Environnement 242,649
---------------
TOTAL FRANCE 36,722,622
---------------
GERMANY (5.9%)
AIR FREIGHT/COURIERS
24,210 Deutsche Post AG
(Registered Shares) 474,266
---------------
AIRLINES
9,924 Deutsche Lufthansa AG
(Registered Shares)* 131,086
---------------
APPAREL/FOOTWEAR
713 Adidas-Salomon AG 99,860
352 Puma AG 88,355
---------------
188,215
---------------
AUTO PARTS: O.E.M.
5,689 Continental AG 311,350
---------------
BROADCASTING
3,613 ProSiebenSat.1 Media
AG (Pref.) 64,864
---------------
CHEMICALS: MAJOR DIVERSIFIED
25,066 BASF AG 1,567,338
30,817 Bayer AG 875,201
---------------
2,442,539
---------------
CHEMICALS: SPECIALTY
5,258 Linde AG 318,353
---------------
CONSTRUCTION MATERIALS
1,705 HeidelbergCement AG $ 84,111
---------------
DEPARTMENT STORES
3,143 KarstadtQuelle AG 35,729
5,916 Metro AG 283,150
---------------
318,879
---------------
ELECTRIC UTILITIES
28,538 E. ON AG 2,327,430
16,993 RWE AG 902,186
---------------
3,229,616
---------------
ELECTRONIC COMPONENTS
2,245 Epcos AG* 34,132
---------------
HOUSEHOLD/PERSONAL CARE
1,721 Beiersdorf AG 163,794
1,974 Henkel KGaA - Vorzug (Pref.) 148,092
---------------
311,886
---------------
INDUSTRIAL CONGLOMERATES
5,153 MAN AG 178,566
42,138 Siemens AG
(Registered Shares) 3,144,007
17,270 ThyssenKrupp AG 324,622
---------------
3,647,195
---------------
INVESTMENT BANKS/BROKERS
9,677 Deutsche Boerse AG 484,441
---------------
MAJOR BANKS
36,991 Bayerische Hypo - und
Vereinsbank AG* 725,115
44,366 Commerzbank AG* 812,952
39,631 Deutsche Bank AG
(Registered Shares) 3,019,792
---------------
4,557,859
---------------
MAJOR TELECOMMUNICATIONS
139,131 Deutsche Telekom AG
(Registered Shares)* 2,672,160
---------------
MEDICAL DISTRIBUTORS
1,657 Celesio AG 120,412
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
15
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
MEDICAL/NURSING SERVICES
2,949 Fresenius Medical Care AG $ 226,253
---------------
MOTOR VEHICLES
38,795 DaimlerChrysler AG
(Registered Shares) 1,606,280
350 Porsche AG (Pref.) 223,307
10,260 Volkswagen AG 456,820
5,105 Volkswagen AG (Pref.) 164,369
---------------
2,450,776
---------------
MULTI-LINE INSURANCE
13,116 Allianz AG
(Registered Shares) 1,398,402
2,189 Muenchener Rueckver AG
(Registered Shares) 214,633
---------------
1,613,035
---------------
OTHER CONSUMER SERVICES
5,732 TUI AG 119,764
---------------
PACKAGED SOFTWARE
8,217 SAP AG 1,403,010
---------------
PHARMACEUTICALS: MAJOR
2,302 Merck KGaA 128,546
6,839 Schering AG 440,662
---------------
569,208
---------------
PHARMACEUTICALS: OTHER
2,901 Altana AG 146,934
---------------
SEMICONDUCTORS
22,728 Infineon Technologies AG* 248,192
---------------
SPECIALTY STORES
2,321 Douglas Holding AG 71,674
---------------
TOTAL GERMANY 26,240,210
---------------
GREECE (0.2%)
CONSTRUCTION MATERIALS
2,600 Titan Cement Co. 68,554
---------------
MAJOR BANKS
14,881 National Bank of Greece S.A. 416,340
---------------
REGIONAL BANKS
9,840 Alpha Bank A.E. 282,601
6,896 EFG Eurobank Ergasias $ 189,056
---------------
471,657
---------------
TOTAL GREECE 956,551
---------------
HONG KONG (1.8%)
AIRLINES
66,000 Cathay Pacific Airways Ltd. 114,466
---------------
APPAREL/FOOTWEAR
30,500 Yue Yuen Industrial
(Holdings) Ltd. 76,603
---------------
APPAREL/FOOTWEAR RETAIL
56,500 Esprit Holdings Ltd. 301,953
---------------
BROADCASTING
10,000 Television Broadcasts Ltd. 42,780
---------------
CONSTRUCTION MATERIALS
36,000 Cheung Kong Infrastructure
Holdings Ltd. 95,966
---------------
ELECTRIC UTILITIES
114,300 CLP Holdings Ltd. 656,373
144,000 Datang International Power
Generation Co., Ltd. 114,697
89,000 Hong Kong Electric
Holdings Ltd. 397,893
---------------
1,168,963
---------------
ELECTRONIC PRODUCTION
EQUIPMENT
3,000 ASM Pacific Technology Ltd. 9,732
---------------
ENGINEERING & CONSTRUCTION
21,000 Hopewell Holdings Ltd. 45,189
88,252 New World Development
Co., Ltd. 77,096
---------------
122,285
---------------
FINANCIAL CONGLOMERATES
80,000 Wharf (Holdings) Ltd. (The) 263,104
---------------
GAS DISTRIBUTORS
250,483 Hong Kong & China Gas
Co., Ltd. 482,688
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
16
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
HOTELS/RESORTS/CRUISELINES
73,872 Shangri-La Asia Ltd. $ 84,938
---------------
INDUSTRIAL CONGLOMERATES
141,900 Hutchison Whampoa Ltd. 1,089,225
61,000 Swire Pacific Ltd. (Class A) 431,012
---------------
1,520,237
---------------
INVESTMENT BANKS/BROKERS
67,000 Hong Kong Exchanges &
Clearing Ltd. 152,351
---------------
MAJOR BANKS
94,222 Bank of East Asia, Ltd. (The) 269,932
171,500 BOC Hong Kong
(Holdings) Ltd. 311,758
46,000 Hang Seng Bank Ltd. 611,639
---------------
1,193,329
---------------
MAJOR TELECOMMUNICATIONS
201,611 PCCW Ltd.* 122,381
---------------
MISCELLANEOUS MANUFACTURING
95,500 Johnson Electric
Holdings Ltd. 95,083
---------------
PUBLISHING: NEWSPAPERS
24,000 SCMP Group Ltd. 9,635
---------------
RAILROADS
91,472 MTR Corp., Ltd. 136,902
---------------
REAL ESTATE DEVELOPMENT
98,000 Cheung Kong (Holdings) Ltd. 812,050
79,000 Hang Lung Properties Ltd. 117,221
44,000 Henderson Land Development
Co., Ltd. 204,060
15,443 Hysan Development
Co., Ltd. 25,593
63,597 Sino Land Co., Ltd. 54,332
86,000 Sun Hung Kai
Properties Ltd. 795,478
---------------
2,008,734
---------------
TOOLS/HARDWARE
59,000 Techtronic Industries
Co., Ltd. 117,485
---------------
WHOLESALE DISTRIBUTORS
104,000 Li & Fung Ltd. $ 153,649
---------------
TOTAL HONG KONG 8,273,264
---------------
IRELAND (0.6%)
CONSTRUCTION MATERIALS
12,892 CRH PLC 308,270
---------------
FINANCIAL CONGLOMERATES
2,000 Irish Life & Permanent PLC 33,758
---------------
INDUSTRIAL CONGLOMERATES
2,150 DCC PLC 43,712
---------------
MAJOR BANKS
48,178 Allied Irish Banks PLC 840,911
56,372 Bank of Ireland 774,891
---------------
1,615,802
---------------
PHARMACEUTICALS: OTHER
16,100 Elan Corporation PLC* 415,859
---------------
PUBLISHING: NEWSPAPERS
21,900 Independent News &
Media PLC 63,848
---------------
WHOLESALE DISTRIBUTORS
4,250 Grafton Group PLC (Units)++* 38,313
---------------
TOTAL IRELAND 2,519,562
---------------
ITALY (2.1%)
AEROSPACE & DEFENSE
87,085 Finmeccanica SpA 69,375
---------------
APPAREL/FOOTWEAR
1,582 Benetton Group SpA 18,307
---------------
BROADCASTING
20,223 Mediaset SpA 231,181
---------------
COMMERCIAL PRINTING/FORMS
109,717 Seat Pagine Gialle SpA 37,248
---------------
CONSTRUCTION MATERIALS
1,767 Italcementi SpA 27,204
---------------
ELECTRIC UTILITIES
65,980 Enel SpA 598,174
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
17
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIAL CONGLOMERATES
2,989 Banca Fideuram SpA $ 15,097
53,638 Pirelli & C. SpA 59,808
---------------
74,905
---------------
INTEGRATED OIL
76,536 ENI SpA 1,742,025
---------------
INVESTMENT BANKS/BROKERS
4,683 Mediobanca SpA 65,031
---------------
LIFE/HEALTH INSURANCE
5,636 Alleanza Assicurazioni SpA 66,662
8,121 Assicurazioni Generali SpA 241,643
2,246 Mediolanum SpA 14,130
---------------
322,435
---------------
MAJOR BANKS
127,353 Banca Intesa SpA 522,737
7,450 Banca Intesa SpA - RNC 25,149
5,524 Banca Monte dei Paschi
di Siena SpA 16,529
11,535 Banca Nazionale del
Lavoro SpA* 26,771
60,947 SanPaolo IMI SpA 774,653
158,005 UniCredito Italiano SpA 850,593
---------------
2,216,432
---------------
MAJOR TELECOMMUNICATIONS
457,034 Telecom Italia SpA 1,525,308
277,497 Telecom Italia SpA - RNC 691,929
---------------
2,217,237
---------------
MOTOR VEHICLES
14,779 Fiat SpA* 107,718
---------------
MULTI-LINE INSURANCE
2,833 Riunione Adriatica di
Sicurta SpA 59,990
---------------
OIL & GAS PIPELINES
11,337 Snam Rete Gas SpA 57,697
---------------
REGIONAL BANKS
2,130 Banca Popolare di
Milano Scrl 15,007
12,764 Banco Popolare di Verona e
Novara Scrl $ 226,866
---------------
241,873
---------------
RESTAURANTS
2,053 Autogrill SpA* 30,294
---------------
SPECIALTY TELECOMMUNICATIONS
3,531 Tiscali SpA* 14,448
---------------
WIRELESS TELECOMMUNICATIONS
193,673 Telecom Italia Mobile
SpA (T.I.M.) 1,144,141
---------------
TOTAL ITALY 9,275,715
---------------
JAPAN (25.6%)
ADVERTISING/MARKETING
SERVICES
2,950 Asatsu - DK Inc. 83,872
---------------
AGRICULTURAL COMMODITIES/
MILLING
10,000 Nisshin Seifun Group Inc. 100,028
---------------
AIR FREIGHT/COURIERS
62,500 Nippon Express Co., Ltd. 301,667
21,035 Yamato Transport Co., Ltd. 283,924
---------------
585,591
---------------
AIRLINES
67,000 Japan Airlines Corp.* 183,527
---------------
APPAREL/FOOTWEAR
12,546 Onward Kashiyama
Co., Ltd. 163,535
6,000 Wacoal Corp. 68,008
---------------
231,543
---------------
APPAREL/FOOTWEAR RETAIL
5,400 Fast Retailing Co., Ltd. 343,780
2,300 Shimamura Co., Ltd. 168,801
2,500 World Co., Ltd. 73,203
---------------
585,784
---------------
AUTO PARTS: O.E.M.
47,000 Denso Corporation 1,127,609
17,059 NGK Spark Plug Co., Ltd. 167,899
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
18
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
2,000 Sanden Corp. $ 13,073
2,900 Stanley Electric Co., Ltd. 44,786
800 Toyoda Gosei Co., Ltd. 15,264
6,850 Toyota Industries Corp. 155,608
---------------
1,524,239
---------------
AUTOMOTIVE AFTERMARKET
58,000 Bridgestone Corp. 1,051,856
---------------
BEVERAGES: ALCOHOLIC
26,800 Asahi Breweries, Ltd. 276,430
67,051 Kirin Brewery Co., Ltd. 602,933
14,000 Sapporo Holdings, Ltd. 55,937
9,000 Takara Holdings Inc. 58,317
---------------
993,617
---------------
BEVERAGES: NON-ALCOHOLIC
1,100 Coca-Cola West Japan
Co., Ltd. 26,703
1,500 ITO EN, Ltd. 67,866
---------------
94,569
---------------
BROADCASTING
31 Fuji Television Network, Inc. 69,982
7,300 Tokyo Broadcasting
System, Inc. 117,081
---------------
187,063
---------------
BUILDING PRODUCTS
13,462 JS Group Corp. 239,816
26,000 Nippon Sheet Glass
Company, Ltd. 87,674
33,500 Toto Ltd. 300,605
---------------
628,095
---------------
CHEMICALS: AGRICULTURAL
10,500 Nissan Chemical
Industries, Ltd. 85,392
---------------
CHEMICALS: MAJOR DIVERSIFIED
91,000 Asahi Kasei Corp. 388,514
18,000 Ishihara Sangyo
Kaisha, Ltd.* 37,744
130,500 Mitsubishi Chemical Corp. 378,422
---------------
804,680
---------------
CHEMICALS: SPECIALTY
12,000 Daicel Chemical
Industries, Ltd. $ 56,787
52,588 Dainippon Ink &
Chemicals, Inc. 118,717
33,546 Denki Kagaku Kogyo
Kabushiki Kaisha 102,029
12,008 JSR Corp. 218,678
20,000 Kaneka Corp. 208,747
28,056 Kuraray Co., Ltd. 219,424
43,599 Mitsubishi Rayon Co., Ltd. 139,194
40,500 Mitsui Chemicals, Inc. 198,158
27,097 Shin-Etsu Chemical Co., Ltd. 1,031,462
16,000 Showa Denko K.K. 38,689
11,000 Sumitomo Bakelite Co., Ltd. 64,834
102,000 Sumitomo Chemical Co., Ltd. 495,211
40,500 Tosoh Corp. 171,763
---------------
3,063,693
---------------
COMMERCIAL PRINTING/FORMS
32,000 Dai Nippon Printing Co., Ltd. 438,576
31,000 Toppan Printing Co., Ltd. 299,839
---------------
738,415
---------------
COMPUTER PROCESSING
HARDWARE
138,000 Fujitsu Ltd. 822,499
---------------
CONSTRUCTION MATERIALS
13,000 Taiheyo Cement Corp. 29,470
---------------
CONTAINERS/PACKAGING
14,417 Toyo Seikan Kaisha, Ltd. 224,827
---------------
DEPARTMENT STORES
24,000 Daimaru, Inc. (The) 178,634
6,000 Hankyu Department
Stores, Inc. 41,938
16,814 Isetan Co., Ltd. 171,523
31,107 Marui Co., Ltd. 390,490
40,716 Mitsukoshi, Ltd. 180,755
28,040 Takashimaya Co., Ltd. 240,487
---------------
1,203,827
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
19
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES
10,700 Chubu Electric Power Co. $ 232,960
32,300 Kansai Electric Power
Co., Inc. (The) 606,521
6,200 Kyushu Electric Power
Co., Inc. 122,981
17,600 Tohoku Electric Power
Co., Inc. 300,731
48,200 Tokyo Electric Power
Co., Inc. (The) 1,092,661
---------------
2,355,854
---------------
ELECTRICAL PRODUCTS
14,000 Fujikura Ltd. 61,623
42,500 Furukawa Electric
Co., Ltd. (The)* 178,237
2,400 Mabuchi Motor Co., Ltd. 178,407
13,000 Matsushita Electric
Works, Ltd. 107,320
28,560 NGK Insulators, Ltd. 230,919
3,604 Nidec Corp. 390,799
42,000 Sumitomo Electric
Industries, Ltd. 398,697
1,000 Ushio Inc. 17,342
---------------
1,563,344
---------------
ELECTRONIC COMPONENTS
13,000 Alps Electric Co. Ltd. 156,806
22,500 Citizen Watch Co., Ltd. 211,675
2,600 Hirose Electric Co., Ltd. 258,109
8,000 Hoya Corp. 822,140
17,900 Murata Manufacturing
Co., Ltd. 853,830
7,000 Taiyo Yuden Co., Ltd. 73,127
9,452 TDK Corp. 657,096
---------------
3,032,783
---------------
ELECTRONIC EQUIPMENT/
INSTRUMENTS
63,904 Canon, Inc. 3,156,871
27,500 Casio Computer Co., Ltd. 327,028
2,447 Keyence Corp. 551,944
34,030 Konica Minolta Holdings, Inc. 454,505
12,500 Kyocera Corp. $ 907,953
145,500 Matsushita Electric Industrial
Co., Ltd. 2,112,341
132,552 Mitsubishi Electric Corp. 621,005
125,500 NEC Corp. 697,025
48,000 OKi Electric Industry
Co., Ltd.* 164,579
16,504 Omron Corp. 374,914
51,432 Ricoh Co., Ltd. 961,891
121,000 Sanyo Electric Co. Ltd. 387,447
8,200 Seiko Epson Corp. 339,246
222,026 Toshiba Corp. 895,486
17,000 Yokogawa Electric Corp. 221,914
---------------
12,174,149
---------------
ELECTRONIC PRODUCTION
EQUIPMENT
5,850 Advantest Corp. 409,450
23,000 Nikon Corp.* 226,155
13,200 Tokyo Electron Ltd. 716,917
---------------
1,352,522
---------------
ELECTRONICS/APPLIANCE STORES
8,800 Yamada Denki Co., Ltd. 312,534
---------------
ELECTRONICS/APPLIANCES
27,000 Fuji Photo Film Co., Ltd. 923,208
12,104 Pioneer Corp. 219,397
60,500 Sharp Corp. 836,611
51,496 Sony Corp. 1,794,845
---------------
3,774,061
---------------
ENGINEERING & CONSTRUCTION
11,546 JGC Corp. 122,472
81,000 Kajima Corp. 306,036
42,571 Obayashi Corp. 229,201
63,000 Shimizu Corporation 267,781
39,000 Taisei Corp. 139,615
---------------
1,065,105
---------------
FINANCE/RENTAL/LEASING
2,600 Acom Co., Ltd. 163,313
1,550 Aiful Corp. 154,898
4,900 Credit Saison Co., Ltd. 156,900
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
20
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
2,900 Orix Corp. $ 340,484
3,200 Promise Co., Ltd. 203,722
2,390 Takefuji Corp. 151,252
---------------
1,170,569
---------------
FINANCIAL CONGLOMERATES
439 Mizuho Financial
Group, Inc. 1,695,957
---------------
FOOD RETAIL
30,606 Aeon Co., Ltd. 490,297
4,452 FamilyMart Co., Ltd. 119,637
22,507 Ito-Yokado Co., Ltd. 807,845
4,003 Lawson, Inc. 133,849
26,000 Seven - Eleven Japan
Co., Ltd. 753,944
---------------
2,305,572
---------------
FOOD: MEAT/FISH/DAIRY
13,000 Meiji Dairies Corp. 74,166
15,000 Nippon Meat Packers, Inc. 187,305
7,000 Yakult Honsha Co., Ltd. 110,881
---------------
372,352
---------------
FOOD: SPECIALTY/CANDY
42,000 Ajinomoto Co., Inc. 465,741
900 House Foods Corp. 12,343
8,500 Kikkoman Corp. 74,828
16,000 Meiji Seika Kaisha Ltd. 65,892
5,150 Nissin Food Products
Co., Ltd. 125,746
7,000 Yamazaki Baking Co., Ltd. 61,821
---------------
806,371
---------------
GAS DISTRIBUTORS
84,000 Osaka Gas Co., Ltd. 243,582
95,000 Tokyo Gas Co., Ltd. 354,444
---------------
598,026
---------------
HOME BUILDING
8,106 Daito Trust Construction
Co., Ltd. 343,014
42,000 Daiwa House Industry
Co., Ltd. 430,037
24,572 Sekisui Chemical Co., Ltd. $ 156,433
48,046 Sekisui House, Ltd. 496,480
---------------
1,425,964
---------------
HOUSEHOLD/PERSONAL CARE
34,000 Kao Corp. 785,208
26,000 Shiseido Company, Ltd. 339,643
3,100 Uni-Charm Corp. 156,947
---------------
1,281,798
---------------
INDUSTRIAL CONGLOMERATES
249,000 Hitachi, Ltd. 1,568,745
62,000 Kawasaki Heavy
Industries, Ltd. 98,385
---------------
1,667,130
---------------
INDUSTRIAL MACHINERY
19,053 Amada Co., Ltd. 101,501
10,400 Daikin Industries Ltd. 253,443
12,050 Fanuc Ltd. 728,441
67,530 Ishikawajima-Harima Heavy
Industries Co., Ltd. 88,662
229,550 Mitsubishi Heavy
Industries, Ltd. 646,131
4,305 SMC Corporation 461,526
1,800 THK Co., Ltd. 31,318
---------------
2,311,022
---------------
INDUSTRIAL SPECIALTIES
79,500 Asahi Glass Company, Ltd. 731,397
12,400 Nitto Denko Corp. 589,138
---------------
1,320,535
---------------
INFORMATION TECHNOLOGY
SERVICES
5,900 CSK Corp. 239,076
2,700 Itochu Techno-Science Corp. 109,153
40 Net One Systems Co., Ltd. 152,640
1,700 Nomura Research
Institute, Ltd. 148,692
107 NTT Data Corp. 294,106
17,300 Softbank Corp. 784,358
3,200 TIS Inc. 108,208
---------------
1,836,233
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
21
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
INTERNET SOFTWARE/SERVICES
62 Yahoo Japan Corp.* $ 280,514
62 Yahoo Japan Corp.
(Bonus Shares) (WI)* 269,973
---------------
550,487
---------------
INVESTMENT BANKS/BROKERS
211,000 Daiwa Securities Group Inc. 1,295,457
75,000 Nikko Cordial Corp. 335,789
138,550 Nomura Holdings, Inc. 1,701,285
---------------
3,332,531
---------------
MAJOR BANKS
413 Mitsubishi Tokyo Financial
Group, Inc. 3,510,910
63,123 Mitsui Trust Holdings, Inc. 434,653
183 Sumitomo Mitsui Financial
Group, Inc. 1,190,961
94,081 Sumitomo Trust & Banking
Co., Ltd. (The) 549,184
236 UFJ Holdings, Inc.* 1,096,741
---------------
6,782,449
---------------
MAJOR TELECOMMUNICATIONS
470 Nippon Telegraph &
Telephone Corp. 1,997,733
---------------
MARINE SHIPPING
3,000 Kamigumi Co. Ltd. 21,309
5,000 Kawasaki Kisen Kaisha, Ltd. 33,390
8,000 Mitsui O.S.K. Lines, Ltd. 47,454
78,015 Nippon Yusen
Kabushiki Kaisha 392,765
---------------
494,918
---------------
MEDICAL SPECIALTIES
10,400 Olympus Corp. 201,870
14,750 Terumo Corp. 367,810
---------------
569,680
---------------
METAL FABRICATIONS
22,000 Minebea Co., Ltd. 93,511
8,000 Mitsubishi Materials Corp. 16,095
42,604 Mitsui Mining & Smelting
Co., Ltd. 168,613
50,553 NSK Ltd. $ 217,740
31,551 NTN Corp. 165,995
---------------
661,954
---------------
MISCELLANEOUS COMMERCIAL
SERVICES
220 Bellsystem 24, Inc. 56,730
700 OBIC Co., Ltd. 131,510
10,485 Secom Co., Ltd. 381,291
3,500 USS Co. Ltd. 283,319
---------------
852,850
---------------
MISCELLANEOUS MANUFACTURING
25,527 Ebara Corp. 118,147
1,000 Hitachi Chemical Co., Ltd. 15,812
5,400 Kurita Water Industries Ltd. 79,773
7,500 Takuma Co., Ltd. 55,256
---------------
268,988
---------------
MOTOR VEHICLES
64,709 Honda Motor Co., Ltd. 3,129,405
194,305 Nissan Motor Co., Ltd. 2,193,204
188,355 Toyota Motor Corp. 7,347,749
2,000 Yamaha Motor Co., Ltd. 30,471
---------------
12,700,829
---------------
MOVIES/ENTERTAINMENT
600 Namco Ltd. 7,016
600 Namco Ltd. (Bonus
Shares) (WI)* 7,022
3,600 Oriental Land Co. Ltd. 214,905
6,250 TOHO Co., Ltd. 90,146
---------------
319,089
---------------
OFFICE EQUIPMENT/SUPPLIES
5,200 Kokuyo Co., Ltd. 55,502
---------------
OIL & GAS PRODUCTION
12,000 Teikoku Oil Co., Ltd. 65,968
---------------
OIL REFINING/MARKETING
113,000 Nippon Oil Corp. 718,324
13,800 Showa Shell Sekiyu K.K. 123,831
8,000 TonenGeneral Sekiyu K.K. 69,821
---------------
911,976
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
22
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
OTHER CONSUMER SERVICES
4,254 Benesse Corp. $ 118,535
---------------
OTHER METALS/MINERALS
20,095 Dowa Mining Co., Ltd. 121,477
24,000 Nippon Mining Holdings, Inc. 114,253
39,500 Sumitomo Metal Mining
Co., Ltd. 266,766
---------------
502,496
---------------
OTHER TRANSPORTATION
6,000 Mitsubishi Logistics Corp. 53,556
---------------
PACKAGED SOFTWARE
3,050 Oracle Corp. 153,263
7,200 Trend Micro Inc. 345,480
---------------
498,743
---------------
PERSONNEL SERVICES
2,100 Meitec Corp. 79,144
---------------
PHARMACEUTICALS: MAJOR
34,900 Sankyo Co., Ltd. 725,229
64,000 Takeda Pharmaceutical
Co., Ltd. 3,095,117
---------------
3,820,346
---------------
PHARMACEUTICALS: OTHER
20,800 Chugai Pharmaceutical
Co., Ltd. 326,136
17,100 Daiichi Pharmaceutical
Co., Ltd. 333,536
18,200 Eisai Co., Ltd. 524,322
12,200 Fujisawa Pharmaceutical
Co., Ltd. 319,203
2,000 Kaken Pharmaceutical
Co., Ltd. 11,712
28,000 Kyowa Hakko Kogyo
Co., Ltd. 196,241
22,000 Shionogi & Co., Ltd. 341,834
22,000 Taisho Pharmaceutical
Co., Ltd. 397,733
25,000 Yamanouchi Pharmaceutical
Co., Ltd. 918,579
---------------
3,369,296
---------------
PROPERTY - CASUALTY INSURERS
106 Millea Holdings, Inc. $ 1,401,719
172,000 Mitsui Sumitomo Insurance
Co., Ltd. 1,413,432
63,000 Sompo Japan Insurance Inc. 549,844
---------------
3,364,995
---------------
PULP & PAPER
61 Nippon Paper Group, Inc. 271,380
81,000 Oji Paper Co. Ltd. 462,879
---------------
734,259
---------------
RAILROADS
101 Central Japan Railway Co. 818,532
240 East Japan Railway Co. 1,262,681
29,500 Keihin Electric Express
Railway Co., Ltd. 170,530
15,000 Keio Electric Railway
Co., Ltd. 79,484
116,550 Kintetsu Corp. 370,996
64,500 Tobu Railway Co., Ltd. 229,683
73,000 Tokyu Corp. 330,972
28 West Japan Railway Co. 111,873
---------------
3,374,751
---------------
REAL ESTATE DEVELOPMENT
108,000 Mitsubishi Estate Co., Ltd. 1,141,513
92,500 Mitsui Fudosan Co., Ltd. 982,927
36,500 Sumitomo Realty &
Development Co., Ltd. 401,648
---------------
2,526,088
---------------
REAL ESTATE INVESTMENT TRUSTS
23 Japan Real Estate
Investments Corp. 184,226
22 Nippon Building Fund Inc. 185,359
---------------
369,585
---------------
RECREATIONAL PRODUCTS
6,900 Konami Corp. 155,767
7,508 Nintendo Co., Ltd. 848,169
7,350 Shimano, Inc. 180,852
7,900 Yamaha Corp. 120,809
---------------
1,305,597
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
23
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
RESTAURANTS
9,807 Skylark Co., Ltd. $ 162,663
---------------
SEMICONDUCTORS
3,000 NEC Electronics Corp. 146,784
8,205 Rohm Co., Ltd. 843,208
---------------
989,992
---------------
SPECIALTY STORES
4,300 Shimachu Co., Ltd. 100,118
10,000 UNY Co., Ltd. 100,217
---------------
200,335
---------------
STEEL
31,800 JFE Holdings, Inc. 854,548
22,000 Kobe Steel Ltd. 30,755
445,108 Nippon Steel Corp. 1,042,663
7,000 Nisshin Steel Co., Ltd. 15,340
60,000 Sumitomo Metal
Industries, Ltd. 72,542
---------------
2,015,848
---------------
TELECOMMUNICATION EQUIPMENT
5,000 Uniden Corp. 108,388
---------------
TEXTILES
6,571 Nisshinbo Industries, Inc. 43,509
66,608 Teijin Ltd. 259,209
91,000 Toray Industries, Inc. 425,475
---------------
728,193
---------------
TOBACCO
62 Japan Tobacco, Inc. 545,216
---------------
TRUCKS/CONSTRUCTION/FARM
MACHINERY
73,500 Komatsu Ltd. 492,222
89,000 Kubota Corp. 406,036
---------------
898,258
---------------
WHOLESALE DISTRIBUTORS
85,051 Itochu Corp.* 366,329
84,550 Marubeni Corporation 222,017
67,000 Mitsubishi Corp. 741,069
30,000 Mitsui & Co., Ltd. 252,479
57,000 Sumitomo Corporation 424,795
---------------
2,006,689
---------------
WIRELESS TELECOMMUNICATIONS
580 NTT DoCoMo, Inc. $ 1,024,464
---------------
Total Japan 114,006,859
---------------
Luxembourg (0.1%)
STEEL
21,473 Arcelor 401,978
---------------
Malaysia (0.7%)
AGRICULTURAL COMMODITIES/
MILLING
60,000 IOI Corporation Berhad 149,980
31,400 Kuala Lumpur
Kepong Berhad 54,943
---------------
204,923
---------------
BUILDING PRODUCTS
6,600 O.Y.L. Industries Berhad 67,728
---------------
CABLE/SATELLITE TV
87,700 Astro All Asia
Networks PLC* 119,995
---------------
CASINO/GAMING
63,300 Berjaya Sports Toto Berhad 64,957
30,400 Genting Berhad 135,182
53,400 Magnum Corporation Berhad 35,267
22,100 Tanjong PLC 75,014
---------------
310,420
---------------
ELECTRIC UTILITIES
51,000 Malakoff Berhad 89,238
74,000 Tenaga Nasional Berhad 216,129
70,000 YTL Corp. Berhad 83,989
---------------
389,356
---------------
ENGINEERING & CONSTRUCTION
36,000 Gamuda Berhad 47,362
---------------
FINANCIAL CONGLOMERATES
119,000 AMMB Holdings Berhad 103,329
---------------
FOODS & BEVERAGES
9,000 Nestle (Malaysia) Berhad 53,282
---------------
HOTELS/RESORTS/CRUISELINES
39,800 Resorts World Berhad 100,011
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
24
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
MAJOR BANKS
144,100 Malayan Banking Berhad $ 417,077
---------------
MAJOR TELECOMMUNICATIONS
72,000 Telekom Malaysia Berhad 217,866
---------------
MARINE SHIPPING
46,100 Malaysian International
Shipping Berhad 163,755
---------------
MOTOR VEHICLES
22,000 Proton Holdings Berhad 49,204
---------------
OIL & GAS PIPELINES
12,000 Petronas Gas Berhad 22,102
---------------
OTHER TRANSPORTATION
139,000 Plus Expressways Berhad 93,996
---------------
REAL ESTATE DEVELOPMENT
64,500 SP Setia Berhad 64,492
---------------
REGIONAL BANKS
114,000 Commerce Asset-
Holdings Berhad 137,982
60,600 Hong Leong Bank Berhad 83,713
84,000 Public Bank Berhad 153,611
112,000 RHB Capital Berhad 61,297
---------------
436,603
---------------
TOBACCO
13,400 British American
Tobacco Berhad 160,426
---------------
WHOLESALE DISTRIBUTORS
116,700 Sime Darby Berhad 175,027
---------------
WIRELESS TELECOMMUNICATIONS
61,000 Maxis Communications
Berhad 138,034
---------------
Total Malaysia 3,334,988
---------------
Netherlands (5.1%)
AEROSPACE & DEFENSE
17,588 European Aeronautic Defense
and Space Co.* 502,646
---------------
AIR FREIGHT/COURIERS
34,466 TPG NV 834,718
---------------
BEVERAGES: ALCOHOLIC
33,961 Heineken NV $ 1,070,015
---------------
CHEMICALS: SPECIALTY
2,492 DSM NV 135,937
---------------
CONSTRUCTION MATERIALS
26,134 James Hardie Industries NV 123,104
---------------
ELECTRONIC EQUIPMENT/
INSTRUMENTS
4,702 OCE NV 65,476
---------------
ELECTRONIC PRODUCTION
EQUIPMENT
26,490 ASML Holding NV* 378,359
---------------
FINANCIAL CONGLOMERATES
102,313 ING Groep NV
(Share Certificates) 2,714,673
---------------
FOOD: MAJOR DIVERSIFIED
33,051 Unilever NV
(Share Certificates) 1,927,162
---------------
INDUSTRIAL CONGLOMERATES
74,860 Koninklijke (Royal) Philips
Electronics NV 1,775,671
---------------
INDUSTRIAL SPECIALTIES
13,830 Akzo Nobel NV 521,514
---------------
INTEGRATED OIL
121,919 Royal Dutch Petroleum Co. 6,639,688
---------------
INVESTMENT BANKS/BROKERS
5,529 Euronext NV 160,487
---------------
LIFE/HEALTH INSURANCE
84,184 Aegon NV 923,603
---------------
MAJOR BANKS
94,977 ABN AMRO Holding NV 2,277,133
---------------
MAJOR TELECOMMUNICATIONS
100,456 Koninklijke (Royal) KPN NV 805,401
---------------
PERSONNEL SERVICES
11,320 Vedior NV 166,751
---------------
PUBLISHING: BOOKS/MAGAZINES
26,385 Reed Elsevier NV 347,507
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
25
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
10,664 VNU NV $ 291,948
13,073 Wolters Kluwer NV
(Share Certificates) 238,878
---------------
878,333
---------------
SEMICONDUCTORS
33,494 STMicroelectronics NV 618,876
---------------
WHOLESALE DISTRIBUTORS
5,168 Hagemeyer NV* 9,450
---------------
TOTAL NETHERLANDS 22,528,997
---------------
NEW ZEALAND (0.0%)
FOREST PRODUCTS
47,022 Carter Holt Harvey Ltd. 69,171
---------------
MAJOR TELECOMMUNICATIONS
23,290 Telecom Corporation of
New Zealand Ltd. 91,945
---------------
TOTAL NEW ZEALAND 161,116
---------------
NORWAY (0.4%)
CHEMICALS: AGRICULTURAL
10,967 Yara International ASA* 117,611
---------------
FINANCIAL CONGLOMERATES
14,953 DnB NOR ASA 126,876
---------------
FOOD: SPECIALTY/CANDY
11,900 Orkla ASA 339,375
---------------
INDUSTRIAL CONGLOMERATES
8,467 Norsk Hydro ASA 623,963
---------------
INTEGRATED OIL
14,200 Statoil ASA 205,831
---------------
MAJOR TELECOMMUNICATIONS
8,200 Telenor ASA 65,389
---------------
MISCELLANEOUS MANUFACTURING
6,715 Tomra Systems ASA 29,649
---------------
PULP & PAPER
6,700 Norske Skogindustrier ASA 122,121
---------------
TELECOMMUNICATION EQUIPMENT
1,300 Tandberg ASA 12,256
---------------
TOTAL NORWAY 1,643,071
---------------
PORTUGAL (0.2%)
CABLE/SATELLITE TV
1,829 PT Multimedia Servieos de
Telecomunicacoes e
Multimedia SGPS S.A. $ 42,752
---------------
ELECTRIC UTILITIES
43,649 Energias de Portugal, S.A. 129,488
---------------
MAJOR TELECOMMUNICATIONS
60,523 Portugal Telecom, SGPS,
S.A. (Registered Shares) 683,360
---------------
REGIONAL BANKS
102,901 Banco Comercial
Portugues, S.A. 243,422
---------------
TOTAL PORTUGAL 1,099,022
---------------
RUSSIA (0.6%)
ELECTRIC UTILITIES
4,000 A Tatneft (Sponsored ADR) 136,200
4,900 RAO Unified Energy Systems
(Sponsored ADR) 154,044
---------------
290,244
---------------
INTEGRATED OIL
7,100 Lukoil (Sponsored ADR) 887,500
7,402 YUKOS Corp. (ADR)* 122,318
---------------
1,009,818
---------------
OIL & GAS PIPELINES
4,352 OAO Gazprom (Sponsored
ADR) (Registered Shares) 162,384
---------------
OIL & GAS PRODUCTION
5,600 Surgutneftegaz
(Sponsored ADR) 223,300
7,900 Surgutneftegaz (Sponsored
ADR) (Pref.) 421,070
---------------
644,370
---------------
OTHER METALS/MINERALS
4,500 JSC MMC Norilsk
Nickel (ADR) 279,000
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
26
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
SPECIALTY TELECOMMUNICATIONS
7,900 Rostelecom
(Sponsored ADR) $ 111,390
---------------
TOTAL RUSSIA 2,497,206
---------------
SINGAPORE (1.6%)
AEROSPACE & DEFENSE
154,334 Singapore Technologies
Engineering Ltd. 193,962
---------------
AIR FREIGHT/COURIERS
201,000 Singapore Post Ltd. 97,297
---------------
AIRLINES
61,000 Singapore Airlines Ltd. 392,483
---------------
BEVERAGES: ALCOHOLIC
19,000 Fraser & Neave Ltd. 156,524
---------------
COMPUTER PERIPHERALS
6,843 Creative Technology, Ltd. 77,359
---------------
ELECTRONIC COMPONENTS
26,696 Venture Corp., Ltd. 253,636
---------------
FINANCIAL CONGLOMERATES
63,000 Keppel Corp., Ltd. 303,067
---------------
HOTELS/RESORTS/CRUISELINES
8,962 Overseas Union
Enterprise Ltd. 39,340
---------------
INVESTMENT BANKS/BROKERS
129,479 Singapore Exchange Ltd. 137,031
---------------
MAJOR BANKS
121,393 DBS Group Holdings Ltd. 1,138,744
106,039 Oversea - Chinese Banking
Corp., Ltd. 879,939
---------------
2,018,683
---------------
MAJOR TELECOMMUNICATIONS
586,633 Singapore
Telecommunications 853,669
---------------
MARINE SHIPPING
118,000 Neptune Orient Lines Ltd. 210,740
---------------
OTHER TRANSPORTATION
216,068 ComfortDelgro Corp. Ltd. $ 185,795
---------------
PUBLISHING: NEWSPAPERS
180,329 Singapore Press
Holdings Ltd. 509,648
---------------
REAL ESTATE DEVELOPMENT
123,000 Capitaland Ltd. 136,831
72,455 City Developments Ltd. 274,484
53,925 United Overseas Land, Ltd. 72,959
---------------
484,274
---------------
REAL ESTATE INVESTMENT TRUSTS
75,000 Ascendas Real Estate
Investment Trust 70,355
68,700 Capitamall Trust 69,815
---------------
140,170
---------------
REGIONAL BANKS
131,489 United Overseas Bank, Ltd. 1,067,409
---------------
SEMICONDUCTORS
134,000 Chartered Semiconductor
Manufacturing Ltd.* 81,383
---------------
TRUCKS/CONSTRUCTION/FARM
MACHINERY
105,353 SembCorp Industries Ltd. 96,927
---------------
TOTAL SINGAPORE 7,299,397
---------------
SPAIN (4.5%)
BROADCASTING
648 Antena 3 Television, S.A.* 41,720
---------------
ELECTRIC UTILITIES
44,750 Endesa S.A. 910,399
36,690 Iberdrola S.A. 805,070
9,466 Union Fenosa, S.A. 231,190
---------------
1,946,659
---------------
ENGINEERING & CONSTRUCTION
25,802 ACS Actividades de
Construccion y
Servicios S.A. 501,164
5,704 Grupo Ferrovial, S.A. 253,164
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
27
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
11,156 Sacyr Vallehermoso S.A. $ 171,753
---------------
926,081
---------------
GAS DISTRIBUTORS
80,532 Gas Natural SDG, S.A. 2,195,454
---------------
INFORMATION TECHNOLOGY
SERVICES
3,151 Indra Sistemas S.A. 46,819
---------------
INTEGRATED OIL
57,439 Repsol YPF, S.A. 1,247,869
---------------
MAJOR BANKS
149,602 Banco Bilbao Vizcaya
Argentaria, S.A. 2,352,942
209,535 Banco Santander Central
Hispano, S.A. 2,344,409
---------------
4,697,351
---------------
MAJOR TELECOMMUNICATIONS
428,889 Telefonica S.A. 7,096,560
---------------
MISCELLANEOUS COMMERCIAL
SERVICES
37,298 Amadeus Global Travel
Distribution S.A.
(A Shares) 306,666
---------------
OTHER TRANSPORTATION
19,792 Abertis Infraestructuras, S.A. 371,269
---------------
REGIONAL BANKS
8,305 Banco Popular Espanol S.A. 472,360
---------------
STEEL
12,440 Acerinox S.A. 173,228
---------------
TOBACCO
15,320 Altadis, S.A. 563,595
---------------
WATER UTILITIES
10,437 Sociedad General de Aguas
de Barcelona, S.A. 185,106
---------------
TOTAL SPAIN 20,270,737
---------------
SWEDEN (2.6%)
ADVERTISING/MARKETING
SERVICES
9,200 Eniro AB 77,977
---------------
APPAREL/FOOTWEAR RETAIL
37,700 Hennes & Mauritz AB
(B Shares) $ 1,099,739
---------------
BROADCASTING
2,900 Modern Times Group MTG
AB (B Shares)* 64,522
---------------
ELECTRONICS/APPLIANCES
30,400 Electrolux AB (Series B) 564,713
---------------
ENGINEERING & CONSTRUCTION
48,480 Skanska AB (B Shares) 529,041
---------------
HOUSEHOLD/PERSONAL CARE
12,086 Svenska Cellulosa
AB (B Shares) 450,728
---------------
INDUSTRIAL MACHINERY
1,350 Alfa Laval AB 18,975
15,700 Assa Abloy AB (B Shares) 212,357
4,320 Atlas Copco AB (A Shares) 179,110
69 Atlas Copco AB (B Shares) 2,641
11,109 Sandvik AB 416,646
---------------
829,729
---------------
INFORMATION TECHNOLOGY
SERVICES
15,675 WM-Data AB (B Shares) 31,000
---------------
LIFE/HEALTH INSURANCE
19,662 Skandia Forsakrings AB 73,326
---------------
MAJOR BANKS
25,500 Skandinaviska Enskilda
Banken AB 425,060
41,500 Svenska Handelsbanken
AB (A Shares) 899,880
---------------
1,324,940
---------------
MAJOR TELECOMMUNICATIONS
5,185 Tele2 AB (B Shares) 172,492
115,848 TeliaSonera AB 621,871
---------------
794,363
---------------
METAL FABRICATIONS
6,727 SKF AB (B Shares) 261,326
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
28
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
MISCELLANEOUS COMMERCIAL
SERVICES
43,200 Securitas AB (B Shares) $ 591,948
---------------
PULP & PAPER
5,550 Holmen AB (B Shares) 172,482
---------------
REGIONAL BANKS
148,484 Nordea Bank AB 1,284,736
---------------
STEEL
6,700 SSAB Svenskt Stal AB
(Series A) 132,978
---------------
TELECOMMUNICATION EQUIPMENT
789,052 Telefonaktiebolaget LM
Ericsson (B Shares)* 2,296,154
---------------
TOBACCO
25,600 Swedish Match AB 282,978
---------------
TRUCKS/CONSTRUCTION/FARM
MACHINERY
4,157 Volvo AB (A Shares) 152,386
10,430 Volvo AB (B Shares) 395,600
---------------
547,986
---------------
TOTAL SWEDEN 11,410,666
---------------
SWITZERLAND (3.7%)
BUILDING PRODUCTS
45 Geberit AG 29,380
91 Schindler Holding AG 29,192
---------------
58,572
---------------
CHEMICALS: AGRICULTURAL
2,993 Syngenta AG 286,097
---------------
CHEMICALS: SPECIALTY
1,918 Ciba Specialty Chemicals AG
(Registered Shares) 132,207
3,629 Clariant AG
(Registered Shares)* 49,209
1,110 Lonza Group AG
(Registered Shares) 54,353
---------------
235,769
---------------
COMPUTER PERIPHERALS
1,251 Logitech International S.A.
(Registered Shares)* $ 65,079
---------------
CONSTRUCTION MATERIALS
4,155 Holcim Ltd. (Regular Shares) 222,583
---------------
ELECTRONIC EQUIPMENT/
INSTRUMENTS
329 Kudelski S.A. - Bearer* 9,996
---------------
FINANCIAL CONGLOMERATES
37,182 UBS AG (Registered Shares) 2,685,868
---------------
FOOD: MAJOR DIVERSIFIED
7,883 Nestle S.A.
(Registered Shares) 1,868,971
---------------
HOUSEHOLD/PERSONAL CARE
259 Givaudan S.A.
(Registered Shares) 162,268
---------------
INDUSTRIAL CONGLOMERATES
22,960 ABB Ltd.* 132,990
38 Sulzer AG (Registered Shares) 12,850
---------------
145,840
---------------
MAJOR BANKS
35,965 Credit Suisse Group 1,232,750
---------------
MAJOR TELECOMMUNICATIONS
847 Swisscom AG
(Registered Shares) 305,741
---------------
MISCELLANEOUS COMMERCIAL
SERVICES
281 SGS S.A. 179,462
---------------
MULTI-LINE INSURANCE
2,415 Zurich Financial
Services AG 344,653
---------------
OTHER CONSUMER SPECIALTIES
3,879 Compagnie Financiere
Richemont AG (Series A) 110,230
899 Swatch Group AG (B Shares) 120,775
928 Swatch Group AG
(Registered Shares) 25,633
---------------
256,638
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
29
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
PERSONNEL SERVICES
3,741 Adecco S.A.
(Registered Shares) $ 180,521
---------------
PHARMACEUTICALS: MAJOR
98,978 Novartis AG
(Registered Shares) 4,730,597
29,110 Roche Holding AG 2,982,392
---------------
7,712,989
---------------
PHARMACEUTICALS: OTHER
490 Serono S.A. (B Shares) 305,353
---------------
PROPERTY - CASUALTY INSURERS
3,341 Swiss Re
(Registered Shares) 205,544
---------------
SPECIALTY STORES
162 Valora Holding AG 37,154
---------------
TOTAL SWITZERLAND 16,501,848
---------------
THAILAND (1.0%)
AGRICULTURAL COMMODITIES/
MILLING
561,072 Charoen Pokphand Foods
PCL (Alien Shares) 47,832
---------------
BROADCASTING
225,000 BEC World PCL
(Alien Shares) 86,043
---------------
CONSTRUCTION MATERIALS
25,100 Siam City Cement PCL
(Alien Shares) 124,720
42,694 The Siam Cement PCL* 239,182
77,200 The Siam Cement PCL
(Alien Shares) 481,384
---------------
845,286
---------------
ELECTRIC UTILITIES
43,076 Electricity Generating PCL* 69,249
---------------
ELECTRONIC COMPONENTS
79,600 Delta Electronics PCL
(Alien Shares) 32,573
48,280 Hana Microelectronics PCL
(Alien Shares) $ 22,461
---------------
55,034
---------------
FINANCE/RENTAL/LEASING
96,500 TISCO Finance PCL
(Alien Shares) 53,121
---------------
FINANCIAL CONGLOMERATES
160,800 National Finance PCL
(Alien Shares) 45,825
---------------
HOME BUILDING
438,533 Land & Houses PCL* 96,134
327,808 Land & Houses PCL
(Alien Shares) 79,846
---------------
175,980
---------------
MAJOR BANKS
142,500 Kasikornbank PCL* 158,796
213,422 Kasikornbank PCL
(Alien Shares)* 244,327
---------------
403,123
---------------
OIL & GAS PRODUCTION
25,839 PTT Exploration & Production
PCL (Alien Shares) 200,141
---------------
OIL REFINING/MARKETING
186,600 PTT PCL (Alien Shares) 772,671
---------------
REGIONAL BANKS
88,500 Bangkok Bank PCL* 201,553
170,200 Bangkok Bank PCL
(Alien Shares)* 397,983
126,200 Siam Commercial Bank PCL
(Alien Shares) 132,179
59,939 Siam Commercial Bank PCL
(Conv Pref.) (Alien Shares) 65,699
---------------
797,414
---------------
STEEL
106,000 Sahaviriya Steel Industries
PCL (Alien Shares)* 68,420
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
30
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT
290,100 Shin Corp. PCL
(Alien Shares) $ 256,147
---------------
WIRELESS TELECOMMUNICATIONS
223,800 Advanced Info Service PCL
(Alien Shares) 509,689
---------------
TOTAL THAILAND 4,385,975
---------------
UNITED KINGDOM (21.2%)
ADVERTISING/MARKETING
SERVICES
64,393 Aegis Group PLC 120,656
68,678 WPP Group PLC 689,473
26,592 Yell Group PLC 178,789
---------------
988,918
---------------
AEROSPACE & DEFENSE
172,327 BAE Systems PLC 754,215
2,600 Cobham PLC 66,055
161,733 Rolls-Royce Group PLC* 770,241
5,143,109 Rolls-Royce Group PLC
(Class B)* 9,448
---------------
1,599,959
---------------
AIR FREIGHT/COURIERS
20,342 Exel PLC 264,380
---------------
AIRLINES
28,648 British Airways PLC* 113,278
---------------
AUTO PARTS: O.E.M.
48,219 GKN PLC 189,336
---------------
BEVERAGES: ALCOHOLIC
175,637 Diageo PLC 2,350,470
---------------
BROADCASTING
240,962 ITV PLC 473,632
---------------
CABLE/SATELLITE TV
78,629 British Sky Broadcasting
Group PLC 734,485
---------------
CASINO/GAMING
89,835 Hilton Group PLC 425,357
31,377 William Hill PLC 281,857
---------------
707,214
---------------
CATALOG/SPECIALTY DISTRIBUTION
80,548 GUS PLC $ 1,318,383
---------------
CHEMICALS: MAJOR DIVERSIFIED
66,418 Imperial Chemical
Industries PLC 255,611
13,091 Johnson Matthey PLC 228,217
---------------
483,828
---------------
CHEMICALS: SPECIALTY
27,154 BOC Group PLC 437,464
---------------
COMMERCIAL PRINTING/FORMS
37,374 De La Rue PLC 221,759
---------------
CONSTRUCTION MATERIALS
22,069 BPB PLC 170,373
39,922 Hanson PLC 294,814
12,369 RMC Group PLC 193,249
---------------
658,436
---------------
CONTAINERS/PACKAGING
26,814 Rexam PLC 212,053
---------------
DEPARTMENT STORES
167,609 Marks & Spencer
Group PLC 1,105,353
---------------
DRUGSTORE CHAINS
42,338 Boots Group PLC 511,759
---------------
ELECTRIC UTILITIES
182,053 National Grid Transco PLC 1,583,532
43,680 Scottish & Southern
Energy PLC 669,604
102,848 Scottish Power PLC 830,827
---------------
3,083,963
---------------
ELECTRONIC EQUIPMENT/
INSTRUMENTS
81,642 Invensys PLC* 22,871
---------------
ELECTRONICS/APPLIANCE STORES
125,355 Dixons Group PLC 395,501
18,192 Kesa Electricals PLC 90,899
---------------
486,400
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
31
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
ENGINEERING & CONSTRUCTION
12,246 AMEC PLC $ 71,312
10,062 Balfour Beatty PLC 50,138
---------------
121,450
---------------
FINANCIAL CONGLOMERATES
238,770 Lloyds TSB Group PLC 1,890,454
---------------
FINANCIAL PUBLISHING/SERVICES
82,975 Reuters Group PLC 565,116
---------------
FOOD RETAIL
82,073 Sainsbury (J) PLC 388,605
473,191 Tesco PLC 2,494,753
---------------
2,883,358
---------------
FOOD: MAJOR DIVERSIFIED
155,305 Unilever PLC 1,309,505
---------------
FOOD: SPECIALTY/CANDY
105,319 Cadbury Schweppes PLC 875,456
36,964 Tate & Lyle PLC 288,078
---------------
1,163,534
---------------
GAS DISTRIBUTORS
107,692 Centrica PLC 476,277
---------------
HOME BUILDING
12,147 Persimmon PLC 137,901
14,425 Taylor Woodrow PLC 61,345
---------------
199,246
---------------
HOME IMPROVEMENT CHAINS
13,565 Barratt Developments PLC 126,090
76,557 Kingfisher PLC 425,070
23,647 Wimpey (George), PLC 152,038
---------------
703,198
---------------
HOTELS/RESORTS/CRUISELINES
9,367 Carnival PLC 495,911
42,398 InterContinental Hotels
Group PLC 519,104
---------------
1,015,015
---------------
HOUSEHOLD/PERSONAL CARE
53,917 Reckitt Benckiser PLC 1,479,740
---------------
INDUSTRIAL CONGLOMERATES
22,388 Smiths Group PLC $ 306,600
21,749 Tomkins PLC 99,483
---------------
406,083
---------------
INDUSTRIAL MACHINERY
11,498 Fki PLC 25,241
---------------
INDUSTRIAL SPECIALTIES
35,014 Pilkington PLC 55,477
---------------
INFORMATION TECHNOLOGY
SERVICES
38,188 LogicaCMG PLC 123,817
25,500 Misys PLC 100,831
---------------
224,648
---------------
INTEGRATED OIL
179,129 BG Group PLC 1,168,163
1,042,342 BP PLC 10,100,476
458,143 Shell Transport & Trading
Co. PLC 3,608,397
---------------
14,877,036
---------------
LIFE/HEALTH INSURANCE
82,836 Friends Provident PLC 206,951
71,626 Prudential PLC 526,966
---------------
733,917
---------------
MAJOR BANKS
279,321 Barclays PLC 2,729,759
139,807 HBOS PLC 1,873,542
561,665 HSBC Holdings PLC 9,074,493
124,470 Royal Bank of Scotland
Group PLC 3,669,855
---------------
17,347,649
---------------
MAJOR TELECOMMUNICATIONS
467,501 BT Group PLC 1,595,220
116,225 Cable & Wireless PLC 223,113
---------------
1,818,333
---------------
MARINE SHIPPING
45,942 Peninsular & Oriental Steam
Navigation Co. (The) 226,180
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
32
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
MEDICAL SPECIALTIES
31,437 Smith & Nephew PLC $ 267,093
---------------
MISCELLANEOUS COMMERCIAL SERVICES
67,482 Brambles Industries PLC 326,026
5,488 Davis Service
Group PLC (The) 36,495
29,284 Group 4 Securicor* 62,671
179,222 Hays PLC 423,885
203,065 Rentokil Initial PLC 578,197
51,166 Serco Group PLC 204,902
---------------
1,632,176
---------------
MISCELLANEOUS MANUFACTURING
17,620 IMI PLC 112,964
28,765 Kidde PLC 88,773
2,230 Novar PLC 4,875
---------------
206,612
---------------
MOTOR VEHICLES
2,453 TI Automotive Ltd.* 0
---------------
MOVIES/ENTERTAINMENT
46,358 EMI Group PLC 180,326
37,809 Rank Group PLC 198,642
---------------
378,968
---------------
MULTI-LINE INSURANCE
108,215 Aviva PLC 1,083,411
264,718 Legal & General
Group PLC 481,424
109,576 Royal & Sun Alliance
Insurance Group PLC 150,465
---------------
1,715,300
---------------
OTHER METALS/MINERALS
132,657 BHP Billiton PLC 1,348,829
58,569 Rio Tinto PLC 1,532,099
---------------
2,880,928
---------------
PACKAGED SOFTWARE
60,947 Sage Group (The) PLC 205,446
---------------
PERSONNEL SERVICES
74,586 Capita Group PLC $ 481,948
---------------
PHARMACEUTICALS: MAJOR
69,362 AstraZeneca PLC 2,843,970
244,929 GlaxoSmithKline PLC 5,160,750
---------------
8,004,720
---------------
PUBLISHING: BOOKS/MAGAZINES
14,919 EMAP PLC 215,413
44,358 Pearson PLC 487,284
69,120 Reed Elsevier PLC 617,726
---------------
1,320,423
---------------
PUBLISHING: NEWSPAPERS
17,687 Daily Mail and General Trust 235,397
19,879 United Business Media PLC 174,190
---------------
409,587
---------------
PULP & PAPER
26,988 Bunzl PLC 204,629
---------------
RESTAURANTS
119,186 Compass Group PLC 492,626
20,247 Enterprise Inns PLC 230,229
42,484 Mitchells & Butlers PLC 222,228
20,653 Whitbread PLC 308,069
---------------
1,253,152
---------------
SEMICONDUCTORS
45,515 ARM Holdings PLC 81,312
---------------
SPECIALTY STORES
9,191 MFI Furniture Group PLC 17,306
---------------
TOBACCO
76,206 British American
Tobacco PLC 1,147,921
32,190 Imperial Tobacco
Group PLC 752,172
---------------
1,900,093
---------------
WATER UTILITIES
29,920 Kelda Group PLC 307,518
26,082 Severn Trent PLC 438,640
---------------
746,158
---------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
33
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
WHOLESALE DISTRIBUTORS
24,166 Electrocomponents PLC $ 129,072
40,034 Wolseley PLC 692,035
---------------
821,107
---------------
WIRELESS TELECOMMUNICATIONS
3,253,004 Vodafone Group PLC 8,336,197
---------------
TOTAL UNITED KINGDOM 94,348,553
---------------
TOTAL COMMON AND
PREFERRRED STOCKS
(COST $376,681,595) 424,097,441
---------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ------------
SHORT-TERM INVESTMENT (0.5%)
REPURCHASE AGREEMENT
$ 2,398 Joint repurchase agreement
account 1.82% due
11/01/04 (dated 10/29/04;
proceeds $2,398,364) (a)
(COST $2,398,000) 2,398,000
---------------
TOTAL INVESTMENTS
(COST $379,079,595) (b)(c) 95.6% $ 426,495,441
OTHER ASSETS IN EXCESS OF
LIABILITIES 4.4 19,484,058
----- ---------------
NET ASSETS 100.0% $ 445,979,499
===== ===============
</Table>
- ----------
ADR AMERICAN DEPOSITORY RECEIPT.
GDR GLOBAL DEPOSITORY RECEIPT.
* NON-INCOME PRODUCING SECURITY.
** COMPRISED OF SECURITIES IN SEPARATE ENTITIES THAT ARE TRADED AS A
SINGLE STAPLED SECURITY.
WI SECURITY PURCHASED ON A WHEN-ISSUED BASIS.
++ 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) SECURITIES HAVE BEEN DESIGNATED AS COLLATERAL IN AN AMOUNT EQUAL TO
$102,290,414, IN CONNECTION WITH OPEN FORWARD FOREIGN CURRENCY
CONTRACTS, OPEN FUTURES CONTRACTS AND SECURITIES PURCHASED ON A
WHEN-ISSUED BASIS.
(c) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $389,451,257.
THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $59,904,720 AND THE
AGGREGATE GROSS UNREALIZED DEPRECIATION IS $22,860,536, RESULTING IN
NET UNREALIZED APPRECIATION OF $37,044,184.
FUTURES CONTRACTS OPEN AT OCTOBER 31, 2004:
<Table>
<Caption>
UNREALIZED
NUMBER OF DESCRIPTION/DELIVERY UNDERLYING FACE APPRECIATION
CONTRACTS LONG/SHORT MONTH, AND YEAR AMOUNT AT VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------
80 Long EURX CAC40 10
EURO Future
December/2004 $ 3,796,716 $ (2,184)
110 Long EURX DAX
Index Future
December/2004 13,983,064 59,851
37 Long HANG SENG
Index Future
November/2004 3,099,178 69,536
--------------
Net unrealized appreciation $ 127,203
==============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
34
<Page>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCTOBER 31, 2004:
<Table>
<Caption>
UNREALIZED
CONTRACTS IN EXCHANGE DELIVERY APPRECIATION
TO DELIVER FOR DATE (DEPRECIATION)
- ----------------------------------------------------------------
$ 1,628,788 JPY 173,024,554 11/02/04 $ 5,523
EUR 46,635,778 $ 57,184,792 12/16/04 (2,443,715)
EUR 3,586,664 $ 4,394,492 12/16/04 (191,417)
EUR 817,790 $ 1,002,790 12/16/04 (42,836)
$ 7,059,132 EUR 5,749,650 12/16/04 292,370
$ 15,279,900 EUR 12,479,704 12/16/04 676,650
$ 16,085,456 EUR 13,096,133 12/16/04 659,259
$ 18,265,006 EUR 14,931,539 12/16/04 826,461
$ 18,603,097 EUR 15,179,511 12/16/04 805,425
$ 4,377,845 EUR 3,442,000 12/16/04 23,096
--------------
Net unrealized appreciation $ 610,816
==============
</Table>
CURRENCY ABBREVIATIONS:
EUR Euro.
JPY Japanese Yen.
SEE NOTES TO FINANCIAL STATEMENTS
35
<Page>
MORGAN STANLEY INTERNATIONAL FUND
SUMMARY OF INVESTMENTS - OCTOBER 31, 2004
<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -----------------------------------------------------------------
Major Banks $ 58,292,914 13.1%
Integrated Oil 35,601,028 8.0
Pharmaceuticals: Major 23,389,658 5.2
Major Telecommunications 23,033,931 5.2
Motor Vehicles 16,702,893 3.7
Electric Utilities 15,302,212 3.4
Electronic Equipment/Instruments 12,646,382 2.8
Financial Conglomerates 12,250,684 2.7
Wireless Telecommunications 11,270,601 2.5
Industrial Conglomerates 10,161,929 2.3
Telecommunication Equipment 7,913,941 1.8
Other Metals/Minerals 7,680,366 1.7
Food Retail 7,095,554 1.6
Regional Banks 6,333,364 1.4
Multi-Line Insurance 6,306,622 1.4
Real Estate Development 5,843,947 1.3
Food: Major Diversified 5,784,417 1.3
Chemicals: Specialty 5,771,030 1.3
Beverages: Alcoholic 5,149,481 1.1
Electronics/Appliances 4,695,573 1.0
Engineering & Construction 4,490,372 1.0
Pharmaceuticals: Other 4,428,959 1.0
Investment Banks/Brokers 4,331,872 1.0
Construction Materials 4,116,002 0.9
Gas Distributors 3,937,512 0.9
Steel 3,932,887 0.9
Chemicals: Major Diversified 3,926,387 0.9
Property - Casualty Insurers 3,901,560 0.9
Miscellaneous Commercial Services 3,796,701 0.9
Household/Personal Care 3,686,420 0.8
Tobacco 3,519,458 0.8
Railroads 3,511,653 0.8
Industrial Machinery 3,407,828 0.8
Electronic Components 3,375,585 0.8
Wholesale Distributors 3,204,235 0.7
Aerospace & Defense 2,972,424 0.7
Life/Health Insurance 2,818,464 0.6
Pulp & Paper 2,738,526 0.6
Publishing: Books/Magazines $ 2,662,852 0.6%
Department Stores 2,628,059 0.6
Oil Refining/Marketing 2,566,192 0.6
Information Technology Services 2,524,632 0.6
Repurchase Agreement 2,398,000 0.5
Building Products 2,389,454 0.5
Air Freight/Couriers 2,313,742 0.5
Food: Specialty/Candy 2,309,280 0.5
Electrical Products 2,301,001 0.5
Media Conglomerates 2,265,504 0.5
Packaged Software 2,215,647 0.5
Auto Parts: O.E.M. 2,173,813 0.5
Apparel/Footwear 2,024,569 0.5
Semiconductors 2,019,755 0.5
Apparel/Footwear Retail 1,987,476 0.4
Industrial Specialties 1,897,526 0.4
Home Building 1,801,190 0.4
Electronic Production Equipment 1,740,613 0.4
Hotels/Resorts/Cruiselines 1,699,665 0.4
Trucks/Construction/Farm Machinery 1,632,969 0.4
Automotive Aftermarket 1,455,372 0.3
Restaurants 1,446,109 0.3
Broadcasting 1,394,028 0.3
Catalog/Specialty Distribution 1,318,383 0.3
Advertising/Marketing Services 1,315,942 0.3
Recreational Products 1,305,597 0.3
Marine Shipping 1,293,081 0.3
Oil & Gas Production 1,236,792 0.3
Finance/Rental/Leasing 1,223,690 0.3
Water Utilities 1,173,913 0.3
Other Transportation 1,171,031 0.3
Casino/Gaming 1,154,878 0.3
Real Estate Investment Trusts 1,125,542 0.3
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
36
<Page>
<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -----------------------------------------------------------------
Publishing: Newspapers $ 1,089,784 0.2%
Commercial Printing/Forms 997,422 0.2
Airlines 975,770 0.2
Medical Specialties 955,480 0.2
Metal Fabrications 949,431 0.2
Personnel Services 908,364 0.2
Cable/Satellite TV 897,232 0.2
Computer Processing Hardware 822,499 0.2
Electronics/Appliance Stores 798,934 0.2
Textiles 778,498 0.2
Containers/Packaging 722,207 0.2
Home Improvement Chains 703,198 0.2
Movies/Entertainment 698,057 0.2
Internet Software/Services 609,026 0.1
Miscellaneous Manufacturing 600,332 0.1
Financial Publishing/Services 565,116 0.1
Drugstore Chains 511,759 0.1
Chemicals: Agricultural 489,100 0.1
Aluminum 460,314 0.1
Food: Meat/Fish/Dairy 432,021 0.1
Other Consumer Specialties 425,410 0.1
Specialty Telecommunications 402,062 0.1
Agricultural Commodities/Milling 352,783 0.1
Specialty Stores 326,469 0.1
Medical/Nursing Services 257,649 0.1
Oil & Gas Pipelines 242,183 0.1
Other Consumer Services 238,299 0.1
Precious Metals 233,152 0.1
Beverages: Non-Alcoholic 179,773 0.0
Coal 160,650 0.0
Investment Trusts/Mutual Funds 159,944 0.0
Food Distributors 157,610 0.0
Computer Peripherals 142,438 0.0
Biotechnology 122,731 0.0
Medical Distributors 120,412 0.0
Tools/Hardware $ 117,485 0.0%
Hospital/Nursing Management 89,343 0.0
Forest Products 69,171 0.0
Office Equipment/Supplies 55,502 0.0
Foods & Beverages 53,282 0.0
Data Processing Services 47,440 0.0
Contract Drilling 45,009 0.0
Oilfield Services/Equipment 42,431 0.0
------------- ----
$ 426,495,441* 95.6%
============= ====
</Table>
<Table>
<Caption>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- -----------------------------------------------------------------
Common Stocks $ 418,131,774 93.8%
Preferred Stocks 5,965,667 1.3
Short-Term Investment 2,398,000 0.5
------------- ----
$ 426,495,441* 95.6%
============= ====
</Table>
- ----------
* DOES NOT INCLUDE OPEN LONG FUTURES CONTRACTS WITH AN UNDERLYING FACE
AMOUNT OF $20,878,958 AND NET UNREALIZED APPRECIATION OF $127,203 AND
OPEN FORWARD FOREIGN CURRENCY CONTRACTS WITH NET UNREALIZED APPRECIATION
OF $610,816.
SEE NOTES TO FINANCIAL STATEMENTS
37
<Page>
MORGAN STANLEY INTERNATIONAL FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2004
<Table>
ASSETS:
Investments in securities, at value (cost $379,079,595) $ 426,495,441
Cash (including $17,760,294 in foreign currency, at value with a cost of
$17,264,553 and $2,737,540 in segregation) 20,498,200
Unrealized appreciation on forward foreign currency contracts 610,816
Receivable for:
Dividends 692,461
Shares of beneficial interest sold 393,151
Foreign withholding taxes reclaimed 311,365
Compensated forward foreign currency contracts 74,266
Variation margin 24,885
Prepaid expenses and other assets 28,190
--------------
TOTAL ASSETS 449,128,775
--------------
LIABILITIES:
Payable for:
Investments purchased 1,634,311
Shares of beneficial interest redeemed 702,474
Investment management fee 374,111
Distribution fee 201,205
Compensated forward foreign currency contracts 96,625
Accrued expenses and other payables 140,550
--------------
TOTAL LIABILITIES 3,149,276
--------------
NET ASSETS $ 445,979,499
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 577,095,896
Net unrealized appreciation 48,685,323
Accumulated undistributed net investment income 2,046,837
Accumulated net realized loss (181,848,557)
--------------
NET ASSETS $ 445,979,499
==============
CLASS A SHARES:
Net Assets $ 83,766,525
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 9,110,179
NET ASSET VALUE PER SHARE $ 9.19
==============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 9.70
==============
CLASS B SHARES:
Net Assets $ 193,795,719
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 21,389,335
NET ASSET VALUE PER SHARE $ 9.06
==============
CLASS C SHARES:
Net Assets $ 24,526,687
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 2,707,907
NET ASSET VALUE PER SHARE $ 9.06
==============
CLASS D SHARES:
Net Assets $ 143,890,568
Shares Outstanding (unlimited authorized, $.01 par value) 15,568,060
NET ASSET VALUE PER SHARE $ 9.24
==============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
38
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2004
<Table>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $887,920 foreign withholding tax) $ 9,879,946
Interest 176,290
--------------
TOTAL INCOME 10,056,236
--------------
EXPENSES
Investment management fee 4,495,700
Distribution fee (Class A shares) 181,262
Distribution fee (Class B shares) 2,058,701
Distribution fee (Class C shares) 250,485
Transfer agent fees and expenses 844,531
Custodian fees 251,252
Shareholder reports and notices 142,613
Registration fees 81,818
Professional fees 70,386
Trustees' fees and expenses 4,587
Other 90,743
--------------
TOTAL EXPENSES 8,472,078
--------------
NET INVESTMENT INCOME 1,584,158
--------------
NET REALIZED AND UNREALIZED GAIN:
NET REALIZED GAIN ON:
Investments 13,337,091
Futures contracts 1,065,699
Foreign exchange transactions 1,125,005
--------------
NET REALIZED GAIN 15,527,795
--------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments 45,888,364
Futures contracts (114,655)
Translation of forward foreign currency contracts and other assets and
liabilities denominated in foreign currencies 749,085
--------------
NET APPRECIATION 46,522,794
--------------
NET GAIN 62,050,589
--------------
NET INCREASE $ 63,634,747
==============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
39
<Page>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,584,158 $ 2,520,960
Net realized gain (loss) 15,527,795 (52,203,505)
Net change in unrealized appreciation 46,522,794 128,004,797
---------------- ----------------
NET INCREASE 63,634,747 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 (40,776,673) (57,055,643)
---------------- ----------------
NET INCREASE 18,999,621 18,866,605
NET ASSETS:
Beginning of period 426,979,878 408,113,273
---------------- ----------------
END OF PERIOD
(INCLUDING ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME OF $2,046,837
AND $3,089,884, RESPECTIVELY) $ 445,979,499 $ 426,979,878
================ ================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
40
<Page>
MORGAN STANLEY INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS - OCTOBER 31, 2004
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
41
<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 and expenses are translated at the exchange rates
prevailing on the respective dates of such
42
<Page>
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.
1. 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.
Effective November 1, 2004, the annual rate will be reduced to 0.65% and will be
applied to all the net assets of the Fund.
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.
43
<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 -- up to 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
$20,632,566 at October 31, 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 year ended October 31, 2004, the distribution fee was accrued for Class
A shares and Class C shares at the annual rate of 0.24% and 0.98%, respectively.
The Distributor has informed the Fund that for the year ended October 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 $7,144, $481,868 and
$2,302 , respectively and received $56,556 in front-end sales charges from sales
of the Fund's Class A shares. The respective shareholders pay such charges which
are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended October 31, 2004 aggregated
$139,701,631 and $194,565,734, respectively.
Morgan Stanley Trust, an affiliate of the Investment Manager, Sub-Advisor and
Distributor, is the Fund's transfer agent. At October 31, 2004, the Fund had
transfer agent fees and expenses payable of approximately $2,200.
44
<Page>
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 YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ -------------
CLASS A SHARES
Sold 5,568,257 $ 48,803,046 33,698,871 $ 228,777,057
Reinvestment of dividends 88,825 753,234 83,954 552,418
Redeemed (4,442,745) (38,827,899) (32,511,231) (223,778,567)
------------ ------------- ------------ -------------
Net increase -- Class A 1,214,337 10,728,381 1,271,594 5,550,908
------------ ------------- ------------ -------------
CLASS B SHARES
Sold 2,029,109 17,561,668 2,174,402 14,869,053
Reinvestment of dividends 123,296 1,036,918 -- --
Redeemed (6,691,618) (57,927,196) (9,245,751) (62,480,968)
------------ ------------- ------------ -------------
Net decrease -- Class B (4,539,213) (39,328,610) (7,071,349) (47,611,915)
------------ ------------- ------------ -------------
CLASS C SHARES
Sold 284,158 2,452,466 1,380,301 9,030,658
Reinvestment of dividends 16,051 134,827 6,602 43,180
Redeemed (806,681) (6,943,031) (2,146,478) (14,221,194)
------------ ------------- ------------ -------------
Net decrease -- Class C (506,472) (4,355,738) (759,575) (5,147,356)
------------ ------------- ------------ -------------
CLASS D SHARES
Sold 3,339,028 29,357,682 11,129,166 73,840,652
Reinvestment of dividends 177,395 1,507,858 222,220 1,466,651
Redeemed (4,380,962) (38,686,246) (12,802,046) (85,154,583)
------------ ------------- ------------ -------------
Net decrease -- Class D (864,539) (7,820,706) (1,450,660) (9,847,280)
------------ ------------- ------------ -------------
Net decrease in Fund (4,695,887) $ (40,776,673) (8,009,990) $ (57,055,643)
============ ============= ============ =============
</Table>
45
<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 October 31, 2004, investments in securities of issuers in Japan represented
25.6% 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 October 31, 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.
46
<Page>
The tax character of distributions paid was as follows:
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
---------------- ----------------
Ordinary Income $ 3,858,453 $ 2,400,004
================ ================
</Table>
As of October 31, 2004, the tax-basis components of accumulated losses were as
follows:
<Table>
Undistributed ordinary income $ 3,207,377
Undistributed long-term gains --
----------------
Net accumulated earnings 3,207,377
Foreign tax credit pass-through 894,041
Capital loss carryforward* (171,982,273)
Temporary differences (938,387)
Net unrealized appreciation 37,702,845
----------------
Total accumulated losses $ (131,116,397)
================
</Table>
*During the year ended October 31, 2004, the Fund utilized $11,679,252 of its
net capital loss carryforward. As of October 31, 2004, the Fund had a net
capital loss carryforward of $171,982,273 of which $23,562,966 will expire on
October 31, 2009, $93,972,230 will expire on October 31, 2010 and $54,447,077
will expire on October 31, 2011 to offset future capital gains to the extent
provided by regulations.
As of October 31, 2004, the Fund had temporary book/tax differences primarily
attributable to the mark-to-market of open forward foreign currency exchange
contracts and passive foreign investment companies ("PFICs"), foreign tax credit
pass-through and capital loss deferrals on wash sales and permanent book/tax
differences attributable to foreign currency gains and tax adjustments on PFICs
sold by the Fund. To reflect reclassifications arising from the permanent
differences, accumulated net realized loss was charged and accumulated
undistributed net investment income was credited $1,231,248.
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
47
<Page>
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 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.
48
<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 YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 8.03 $ 6.70 $ 7.77 $ 10.29 $ 10.57
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income++ 0.06 0.08 0.04 0.06 0.11
Net realized and unrealized gain (loss) 1.20 1.33 (1.03) (2.07) (0.39)
---------- ---------- ---------- ---------- ----------
Total income (loss) from investment
operations 1.26 1.41 (0.99) (2.01) (0.28)
---------- ---------- ---------- ---------- ----------
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 $ 9.19 $ 8.03 $ 6.70 $ 7.77 $ 10.29
========== ========== ========== ========== ==========
TOTAL RETURN+ 15.89% 21.31% (12.93)% (20.36)% (2.65)%
RATIOS TO AVERAGE NET ASSETS(1):
Expenses 1.57% 1.58% 1.56% 1.46%(2) 1.47%
Net investment income 0.67% 1.02% 0.54% 0.73% 0.95%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 83,766 $ 63,422 $ 44,373 $ 37,974 $ 46,535
Portfolio turnover rate 33% 43% 39% 37% 84%
</Table>
- ----------
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(2) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
49
<Page>
<Table>
<Caption>
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 7.93 $ 6.58 $ 7.62 $ 10.19 $ 10.55
---------- ---------- ---------- ---------- ----------
Income (loss) from investment
operations:
Net investment income (loss)++ (0.01) 0.01 (0.02) 0.00 0.02
Net realized and unrealized gain
(loss) 1.19 1.34 (1.02) (2.06) (0.38)
---------- ---------- ---------- ---------- ----------
Total income (loss) from investment
operations 1.18 1.35 (1.04) (2.06) (0.36)
---------- ---------- ---------- ---------- ----------
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 $ 9.06 $ 7.93 $ 6.58 $ 7.62 $ 10.19
========== ========== ========== ========== ==========
TOTAL RETURN+ 14.87% 20.52% (13.65)% (21.08)% (3.41)%
RATIOS TO AVERAGE NET ASSETS(1):
Expenses 2.33% 2.37% 2.32% 2.24%(2) 2.22%
Net investment income (loss) (0.09)% 0.23% (0.22)% (0.06)% 0.20%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 193,796 $ 205,544 $ 217,216 $ 340,158 $ 561,375
Portfolio turnover rate 33% 43% 39% 37% 84%
</Table>
- ----------
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(2) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
50
<Page>
<Table>
<Caption>
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 7.92 $ 6.59 $ 7.62 $ 10.19 $ 10.55
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss)++ (0.01) 0.01 (0.01) (0.01) 0.02
Net realized and unrealized gain (loss) 1.20 1.33 (1.02) (2.05) (0.38)
---------- ---------- ---------- ---------- ----------
Total income (loss) from investment
operations 1.19 1.34 (1.03) (2.06) (0.36)
---------- ---------- ---------- ---------- ----------
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 $ 9.06 $ 7.92 $ 6.59 $ 7.62 $ 10.19
========== ========== ========== ========== ==========
TOTAL RETURN+ 15.03% 20.40% (13.52)% (21.08)% (3.41)%
RATIOS TO AVERAGE NET ASSETS(1):
Expenses 2.31% 2.37% 2.18% 2.24%(2) 2.22%
Net investment income (loss) (0.07)% 0.23% (0.08)% (0.06)% 0.20%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 24,527 $ 25,471 $ 26,195 $ 39,079 $ 69,640
Portfolio turnover rate 33% 43% 39% 37% 84%
</Table>
- ----------
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(2) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
51
<Page>
<Table>
<Caption>
FOR THE YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 8.07 $ 6.73 $ 7.80 $ 10.32 $ 10.58
---------- ---------- ---------- ---------- ----------
Income (loss) from investment
operations:
Net investment income++ 0.08 0.08 0.06 0.08 0.15
Net realized and unrealized gain
(loss) 1.20 1.36 (1.04) (2.09) (0.41)
---------- ---------- ---------- ---------- ----------
Total income (loss) from investment
operations 1.28 1.44 (0.98) (2.01) (0.26)
---------- ---------- ---------- ---------- ----------
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 $ 9.24 $ 8.07 $ 6.73 $ 7.80 $ 10.32
========== ========== ========== ========== ==========
TOTAL RETURN+ 15.97% 21.68% (12.70)% (20.30)% (2.46)%
RATIOS TO AVERAGE NET ASSETS(1):
Expenses 1.33% 1.37% 1.32% 1.24%(2) 1.22%
Net investment income 0.91% 1.23% 0.78% 0.94% 1.20%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 143,890 $ 132,544 $ 120,329 $ 124,065 $ 98,465
Portfolio turnover rate 33% 43% 39% 37% 84%
</Table>
- ----------
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE
PERIOD.
(1) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(2) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
52
<Page>
MORGAN STANLEY INTERNATIONAL FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF
TRUSTEES OF MORGAN STANLEY INTERNATIONAL FUND:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley International Fund (the "Fund"), including the portfolio of investments,
as of October 31, 2004, and the related statements of operations for the year
then ended and changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 2004, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Morgan
Stanley International Fund as of October 31, 2004, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
NEW YORK, NEW YORK
DECEMBER 17, 2004
2004 FEDERAL TAX NOTICE (UNAUDITED)
Of the amounts paid by the Fund during the fiscal year ended October 31,
2004 that were reported to individuals as ordinary dividends, 100%
qualified for the lower income tax rate available to individuals under the
Jobs and Growth Tax Relief Reconciliation Act of 2003.
Additionally, the Fund had elected, pursuant to section 853 of the Internal
Revenue Code, to pass through foreign taxes of $0.02 per share to its
shareholders, of which 100% would be allowable as a credit. The Fund
generated net foreign source income of $0.08 per share with respect to this
election.
53
<Page>
MORGAN STANLEY INTERNATIONAL FUND
TRUSTEE AND OFFICER INFORMATION
INDEPENDENT TRUSTEES:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- --------------------------------------- ----------- ------------ ------------------------- ------------- ---------------------
Michael Bozic (63) Trustee Since Private Investor; 208 Director of Weirton
c/o Kramer Levin Naftalis & Frankel LLP April 1994 Director or Trustee of Steel Corporation.
Counsel to the Independent Trustees the Retail Funds (since
919 Third Avenue April 1994) and the
New York, NY Institutional Funds
(since July 2003);
formerly Vice Chairman of
Kmart Corporation
(December 1998-October
2000), Chairman and Chief
Executive Officer of
Levitz Furniture
Corporation (November
1995-November 1998) and
President and Chief
Executive Officer of
Hills Department Stores
(May 1991-July 1995);
formerly variously
Chairman, Chief Executive
Officer, President and
Chief Operating Officer
(1987-1991) of the Sears
Merchandise Group of
Sears, Roebuck & Co.
Edwin J. Garn (72) Trustee Since Managing Director of 208 Director of Franklin
c/o Summit Ventures LLC January 1993 Summit Ventures LLC; Covey (time
1 Utah Center Director or Trustee of management systems),
201 S. Main Street the Retail Funds (since BMW Bank of North
Salt Lake City, UT January 1993) and the America, Inc.
Institutional Funds (industrial loan
(since July 2003); member corporation), United
of the Utah Regional Space Alliance (joint
Advisory Board of Pacific venture between
Corp.; formerly United Lockheed Martin and
States Senator (R-Utah) the Boeing Company)
(1974-1992) and Chairman, and Nuskin Asia
Senate Banking Committee Pacific (multilevel
(1980-1986), Mayor of marketing); member of
Salt Lake City, Utah the board of various
(1971-1974), Astronaut, civic and charitable
Space Shuttle Discovery organizations.
(April 12-19, 1985), and
Vice Chairman, Huntsman
Corporation (chemical
company).
Wayne E. Hedien (70) Trustee Since Retired; Director or 208 Director of The PMI
c/o Kramer Levin Naftalis & Frankel LLP September Trustee of the Retail Group Inc. (private
Counsel to the Independent Trustees 1997 Funds (since September mortgage insurance);
919 Third Avenue 1997) and the Trustee and Vice
New York, NY Institutional Funds Chairman of The Field
(since July 2003); Museum of Natural
formerly associated with History; director of
the Allstate Companies various other
(1966-1994), most business and
recently as Chairman of charitable
The Allstate Corporation organizations.
(March 1993-December
1994) and Chairman and
Chief Executive Officer
of its wholly-owned
subsidiary, Allstate
Insurance Company (July
1989-December 1994).
</Table>
54
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- --------------------------------------- ----------- ------------ ------------------------- ------------- ---------------------
Dr. Manuel H. Johnson (55) Trustee Since Senior Partner, Johnson 208 Director of NVR, Inc.
c/o Johnson Smick International, Inc. July 1991 Smick International, (home construction);
2099 Pennsylvania Avenue, N.W. Inc., a consulting firm; Chairman and Trustee
Suite 950 Chairman of the Audit of the Financial
Washington, D.C. Committee and Director or Accounting Foundation
Trustee of the Retail (oversight
Funds (since July 1991) organization of the
and the Institutional Financial Accounting
Funds (since July 2003); Standards Board);
Co-Chairman and a founder Director of RBS
of the Group of Seven Greenwich Capital
Council (G7C), an Holdings (financial
international economic holding company).
commission; formerly Vice
Chairman of the Board of
Governors of the Federal
Reserve System and
Assistant Secretary of
the U.S. Treasury.
Joseph J. Kearns (62) Trustee Since President, Kearns & 209 Director of Electro
PMB754 July 2003 Associates LLC Rent Corporation
23852 Pacific Coast Highway (investment consulting); (equipment leasing),
Malibu, CA Deputy Chairman of the The Ford Family
Audit Committee and Foundation, and the
Director or Trustee of UCLA Foundation.
the Retail Funds (since
July 2003) and the
Institutional Funds
(since August 1994);
previously Chairman of
the Audit Committee of
the Institutional Funds
(October 2001-July 2003);
formerly CFO of the J.
Paul Getty Trust.
Michael E. Nugent (68) Trustee Since General Partner of 208 Director of various
c/o Triumph Capital, L.P. July 1991 Triumph Capital, L.P., a business
445 Park Avenue private investment organizations.
New York, NY partnership; Chairman of
the Insurance Committee
and Director or Trustee
of the Retail Funds
(since July 1991) and the
Institutional Funds
(since July 2001);
formerly Vice President,
Bankers Trust Company and
BT Capital Corporation
(1984-1988).
Fergus Reid (72) Trustee Since Chairman of Lumelite 209 Trustee and Director
c/o Lumelite Plastics Corporation July 2003 Plastics Corporation; of certain investment
85 Charles Colman Blvd. Chairman of the companies in the
Pawling, NY Governance Committee and JPMorgan Funds
Director or Trustee of complex managed by
the Retail Funds (since J.P. Morgan
July 2003) and the Investment Management
Institutional Funds Inc.
(since June 1992).
</Table>
55
<Page>
INTERESTED TRUSTEES:
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS
INTERESTED TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE
- --------------------------------------- ----------- ------------ ------------------------- ------------- ---------------------
Charles A. Fiumefreddo (71) Chairman of Since Chairman and Director or 208 None
c/o Morgan Stanley Trust the Board July 1991 Trustee of the Retail
Harborside Financial Center, and Trustee Funds (since July 1991)
Plaza Two, and the Institutional
Jersey City, NJ Funds (since July 2003);
formerly Chief Executive
Officer of the Retail
Funds (until September
2002).
James F. Higgins (56) Trustee Since Director or Trustee of 208 Director of AXA
c/o Morgan Stanley Trust June 2000 the Retail Funds (since Financial, Inc. and
Harborside Financial Center, June 2000) and the The Equitable Life
Plaza Two, Institutional Funds Assurance Society of
Jersey City, NJ (since July 2003); Senior the United States
Advisor of Morgan Stanley (financial services).
(since August 2000);
Director of the
Distributor and Dean
Witter Realty Inc.;
previously President and
Chief Operating Officer
of the Private Client
Group of Morgan Stanley
(May 1999-August 2000),
and President and Chief
Operating Officer of
Individual Securities of
Morgan Stanley (February
1997-May 1999).
</Table>
- ----------
* This is the earliest date the Trustee began serving the funds advised by
Morgan Stanley Investment Advisors Inc. (the "Investment Manager ") (the
"Retail Funds ").
** The dates referenced below indicating commencement of services as
Director/Trustee for the Retail Funds and the funds advised by Morgan
Stanley Investment Management Inc. and Morgan Stanley AIP GP LP (the
"Institutional Funds") reflect the earliest date the Director/Trustee began
serving the Retail or Institutional Funds as applicable.
*** The Fund Complex includes all open-end and closed-end funds (including all
of their portfolios) advised by the Investment Manager and any funds that
have an investment advisor that is an affiliated person of the Investment
Manager (including but not limited to Morgan Stanley Investment Management
Inc.).
56
<Page>
OFFICERS:
<Table>
<Caption>
TERM OF
POSITION(S) OFFICE AND
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF
EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS**
- ---------------------------- --------------- --------------- ------------------------------------------------------------
Mitchell M. Merin (51) President Since May 1999 President and Chief Operating Officer of Morgan Stanley
1221 Avenue of the Americas Investment Management Inc.; President, Director and Chief
New York, NY Executive Officer of the Investment Manager and Morgan
Stanley Services; Chairman and Director of the Distributor;
Chairman and Director of the Transfer Agent; Director of
various Morgan Stanley subsidiaries; President of the
Institutional Funds (since July 2003) and President of the
Retail Funds (since May 1999); Trustee (since July 2003) and
President (since December 2002) of the Van Kampen Closed-End
Funds; Trustee (since May 1999) and President (since October
2002) of the Van Kampen Open-End Funds.
Ronald E. Robison (65) Executive Vice Since Principal Executive Officer-Office of the Funds (since
1221 Avenue of the Americas President and April 2003 November 2003); Managing Director of Morgan Stanley & Co.
New York, NY Principal Incorporated, Managing Director of Morgan Stanley; Managing
Executive Director, Chief Administrative Officer and Director of the
Officer Investment Manager and Morgan Stanley Services; Chief
Executive Officer and Director of the Transfer Agent;
Managing Director and Director of the Distributor; Executive
Vice President and Principal Executive Officer of the
Institutional Funds (since July 2003) and the Retail Funds
(since April 2003); Director of Morgan Stanley SICAV (since
May 2004); previously President and Director of the Retail
Funds (March 2001-July 2003) and Chief Global Operations
Officer and Managing Director of Morgan Stanley Investment
Management Inc.
Joseph J. McAlinden (61) Vice President Since July 1995 Managing Director and Chief Investment Officer of the
1221 Avenue of the Americas Investment Manager and Morgan Stanley Investment Management
New York, NY Inc., Director of the Transfer Agent, Chief Investment
Officer of the Van Kampen Funds; Vice President of the
Institutional Funds (since July 2003) and the Retail Funds
(since July 1995).
Barry Fink (49) Vice President Since General Counsel (since May 2000) and Managing Director
1221 Avenue of the Americas February 1997 (since December 2000) of Morgan Stanley Investment
New York, NY Management; Managing Director (since December 2000),
Secretary (since February 1997) and Director (since July
1998) of the Investment Manager and Morgan Stanley Services;
Vice President of the Retail Funds; Assistant Secretary of
Morgan Stanley DW; Vice President of the Institutional Funds
(since July 2003); Managing Director, Secretary and Director
of the Distributor; previously Secretary (February 1997-July
2003) and General Counsel (February 1997-April 2004) of the
Retail Funds; Vice President and Assistant General Counsel
of the Investment Manager and Morgan Stanley Services
(February 1997-December 2001).
Amy R. Doberman (42) Vice President Since July 2004 Managing Director and General Counsel, U.S. Investment
1221 Avenue of the Americas Management; Managing Director of Morgan Stanley Investment
New York, NY Management Inc. and the Investment Manager, Vice President
of the Institutional and Retail Funds (since July 2004);
previously, Managing Director and General Counsel -
Americas, UBS Global Asset Management (July 2000 - July 2004)
and General Counsel, Aeltus Investment Management, Inc.
(January 1997 - July 2000).
Carsten Otto (41) Chief Since October Executive Director and U.S. Director of Compliance for
1221 Avenue of the Americas Compliance 2004 Morgan Stanley Investment Management (since October 2004);
New York, NY 10020 Officer Executive Director of the Investment Adviser and Morgan
Stanley Investment Management Inc.; formerly Assistant
Secretary and Assistant General Counsel of the Morgan
Stanley Retail Funds.
</Table>
57
<Page>
<Table>
<Caption>
TERM OF
POSITION(S) OFFICE AND
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF
EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS**
- ---------------------------- --------------- --------------- ------------------------------------------------------------
Stefanie V. Chang (37) Vice President Since July 2003 Executive Director of Morgan Stanley & Co. Incorporated,
1221 Avenue of the Americas Morgan Stanley Investment Management Inc., and the
New York, NY Investment Manager; Vice President of the Institutional
Funds (since December 1997) and the Retail Funds (since July
2003); formerly practiced law with the New York law firm of
Rogers & Wells (now Clifford Chance US LLP).
Francis J. Smith (39) Treasurer and Treasurer since Executive Director of the Investment Manager and Morgan
c/o Morgan Stanley Trust Chief Financial July 2003 and Stanley Services (since December 2001); previously, Vice
Harborside Financial Center, Officer Chief Financial President of the Retail Funds (September 2002-July 2003),
Plaza Two, Officer since and Vice President of the Investment Manager and Morgan
Jersey City, NJ September 2002 Stanley Services (August 2000-November 2001) and Senior
Manager at PricewaterhouseCoopers LLP (January 1998-August
2000).
Thomas F. Caloia (58) Vice President Since July 2003 Executive Director (since December 2002) and Assistant
c/o Morgan Stanley Trust Treasurer of the Investment Manager, the Distributor and
Harborside Financial Center, Morgan Stanley Services; previously Treasurer of the Retail
Plaza Two, Funds (April 1989-July 2003); formerly First Vice President
Jersey City, NJ of the Investment Manager, the Distributor and Morgan
Stanley Services.
Mary E. Mullin (37) Secretary Since July 2003 Executive Director of Morgan Stanley & Co. Incorporated,
1221 Avenue of the Americas Morgan Stanley Investment Management Inc. and the Investment
New York, NY Manager; Secretary of the Institutional Funds (since June
1999) and the Retail Funds (since July 2003); formerly
practiced law with the New York law firms of McDermott, Will
& Emery and Skadden, Arps, Slate, Meagher & Flom LLP.
</Table>
- ----------
* This is the earliest date the Officer began serving the Retail Funds. Each
Officer serves an indefinite term, until his or her successor is elected.
** The dates referenced below indicating commencement of service as an Officer
for the Retail and Institutional Funds reflect the earliest date the Officer
began serving the Retail or Institutional Funds as applicable.
58
<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
Joseph J. McAlinden
VICE PRESIDENT
Barry Fink
VICE PRESIDENT
Amy R. Doberman
VICE PRESIDENT
Carsten Otto
CHIEF COMPLIANCE OFFICER
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
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
ANNUAL REPORT
OCTOBER 31, 2004
[MORGAN STANLEY LOGO]
36075RPT-RA04-00910P-Y10/04
<Page>
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies
to its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Fund or a
third party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Fund has amended its Code of Ethics during the period covered
by the shareholder report presented in Item 1 hereto to delete from the
end of the following paragraph on page 2 of the Code the phrase "to the
detriment of the Fund":
"Each Covered Officer must not use his personal influence or personal
relationship improperly to influence investment decisions or financial
reporting by the Fund whereby the Covered Officer would benefit
personally (directly or indirectly)."
(d) Not applicable.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Trustees has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: Dr. Manuel H. Johnson and Joseph J. Kearns. Under
applicable securities laws, a person who is determined to be an audit committee
financial expert will not be deemed an "expert" for any purpose, including
without limitation for the purposes of Section 11 of the Securities Act of 1933,
as a result of being designated or identified as an audit committee financial
expert. The designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations, or
liabilities that are greater than the duties, obligations, and liabilities
imposed on such person as a member of the audit committee and Board of Trustees
in the absence of such designation or identification.
<Page>
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2004
<Table>
<Caption>
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 31,217 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ 452 (2) $ 5,067,400 (2)
TAX FEES $ 6,084 (3) $ 545,053 (4)
ALL OTHER FEES $ - $ -
TOTAL NON-AUDIT FEES $ 6,536 $ 5,612,453
TOTAL $ 37,753 $ 5,612,453
</Table>
2003
<Table>
<Caption>
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 29,499 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ 684 (2) $ 1,086,576 (2)
TAX FEES $ 5,936 (3) $ 252,500 (4)
ALL OTHER FEES $ - $ - (5)
TOTAL NON-AUDIT FEES $ 6,620 $ 1,339,076
TOTAL $ 36,119 $ 1,339,076
</Table>
N/A- Not applicable, as not required by Item 4.
(1) Covered Entities include the Adviser (excluding sub-advisors) and
any entity controlling, controlled by or under common control
with the Adviser that provides ongoing services to the
Registrant.
(2) Audit-Related Fees represent assurance and related services
provided that are reasonably related to the performance of the
audit of the financial statements of the Covered Entities' and
funds advised by the Adviser or its affiliates, specifically data
verification and agreed-upon procedures related to asset
securitizations and agreed-upon procedures engagements.
(3) Tax Fees represent tax compliance, tax planning and tax advice
services provided in connection with the preparation and review
of the Registrant's tax returns.
(4) Tax Fees represent tax compliance, tax planning and tax advice
services provided in connection with the review of Covered
Entities' tax returns.
(5) All other fees represent project management for future business
applications and improving business and operational processes.
<Page>
(e)(1) The audit committee's pre-approval policies and procedures are as
follows:
APPENDIX A
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS
AS ADOPTED AND AMENDED JULY 23, 2004,(1)
1. STATEMENT OF PRINCIPLES
The Audit Committee of the Board is required to review and, in its sole
discretion, pre-approve all Covered Services to be provided by the Independent
Auditors to the Fund and Covered Entities in order to assure that services
performed by the Independent Auditors do not impair the auditor's independence
from the Fund.
The SEC has issued rules specifying the types of services that an independent
auditor may not provide to its audit client, as well as the audit committee's
administration of the engagement of the independent auditor. The SEC's rules
establish two different approaches to pre-approving services, which the SEC
considers to be equally valid. Proposed services either: may be pre-approved
without consideration of specific case-by-case services by the Audit Committee
("GENERAL PRE-APPROVAL"); or require the specific pre-approval of the Audit
Committee or its delegate ("SPECIFIC PRE-APPROVAL"). The Audit Committee
believes that the combination of these two approaches in this Policy will result
in an effective and efficient procedure to pre-approve services performed by the
Independent Auditors. As set forth in this Policy, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee (or by any member of the Audit Committee to which pre-approval
authority has been delegated) if it is to be provided by the Independent
Auditors. Any proposed services exceeding pre-approved cost levels or budgeted
amounts will also require specific pre-approval by the Audit Committee.
The appendices to this Policy describe the Audit, Audit-related, Tax and All
Other services that have the general pre-approval of the Audit Committee. The
term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers and provides a different period and states
otherwise. The Audit Committee will annually review and pre-approve the services
that may be provided by the Independent Auditors without obtaining specific
pre-approval from the Audit Committee. The Audit Committee will add to or
subtract from the list of general pre-approved services from time to time, based
on subsequent determinations.
- ----------
(1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and
Procedures (the "POLICY"), adopted as of the date above, supersedes and
replaces all prior versions that may have been adopted from time to time.
<Page>
The purpose of this Policy is to set forth the policy and procedures by which
the Audit Committee intends to fulfill its responsibilities. It does not
delegate the Audit Committee's responsibilities to pre-approve services
performed by the Independent Auditors to management.
The Fund's Independent Auditors have reviewed this Policy and believes that
implementation of the Policy will not adversely affect the Independent Auditors'
independence.
2. DELEGATION
As provided in the Act and the SEC's rules, the Audit Committee may delegate
either type of pre-approval authority to one or more of its members. The member
to whom such authority is delegated must report, for informational purposes
only, any pre-approval decisions to the Audit Committee at its next scheduled
meeting.
3. AUDIT SERVICES
The annual Audit services engagement terms and fees are subject to the specific
pre-approval of the Audit Committee. Audit services include the annual financial
statement audit and other procedures required to be performed by the Independent
Auditors to be able to form an opinion on the Fund's financial statements. These
other procedures include information systems and procedural reviews and testing
performed in order to understand and place reliance on the systems of internal
control, and consultations relating to the audit. The Audit Committee will
approve, if necessary, any changes in terms, conditions and fees resulting from
changes in audit scope, Fund structure or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the Independent Auditors reasonably
can provide. Other Audit services may include statutory audits and services
associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4,
etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix B.1. All
other Audit services not listed in Appendix B.1 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
4. AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are reasonably
related to the performance of the audit or review of the Fund's financial
statements and, to the extent they are Covered Services, the Covered Entities or
that are traditionally performed by the Independent Auditors. Because the Audit
Committee believes that the provision of Audit-related services does not impair
the independence of the auditor and is consistent with the SEC's rules on
auditor independence, the Audit Committee may grant general pre-approval to
Audit-related services. Audit-related services include, among others, accounting
consultations related to accounting, financial reporting or disclosure matters
<Page>
not classified as "Audit services"; assistance with understanding and
implementing new accounting and financial reporting guidance from rulemaking
authorities; agreed-upon or expanded audit procedures related to accounting
and/or billing records required to respond to or comply with financial,
accounting or regulatory reporting matters; and assistance with internal control
reporting requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services in Appendix B.2.
All other Audit-related services not listed in Appendix B.2 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
5. TAX SERVICES
The Audit Committee believes that the Independent Auditors can provide Tax
services to the Fund and, to the extent they are Covered Services, the Covered
Entities, such as tax compliance, tax planning and tax advice without impairing
the auditor's independence, and the SEC has stated that the Independent Auditors
may provide such services.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved the
Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be
specifically pre-approved by the Audit Committee (or by any member of the Audit
Committee to which pre-approval has been delegated).
6. ALL OTHER SERVICES
The Audit Committee believes, based on the SEC's rules prohibiting the
Independent Auditors from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix B.4.
Permissible All Other services not listed in Appendix B.4 must be specifically
pre-approved by the Audit Committee (or by any member of the Audit Committee to
which pre-approval has been delegated).
7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS
Pre-approval fee levels or budgeted amounts for all services to be provided by
the Independent Auditors will be established annually by the Audit Committee.
Any proposed services exceeding these levels or amounts will require specific
pre-approval by the Audit Committee. The Audit Committee is mindful of the
overall relationship of fees for audit and non-audit services in determining
whether to pre-approve any such services.
8. PROCEDURES
All requests or applications for services to be provided by the Independent
Auditors that do not require specific approval by the Audit Committee will be
submitted to the Fund's Chief Financial Officer and must include a detailed
description of the services to be
<Page>
rendered. The Fund's Chief Financial Officer will determine whether such
services are included within the list of services that have received the general
pre-approval of the Audit Committee. The Audit Committee will be informed on a
timely basis of any such services rendered by the Independent Auditors. Requests
or applications to provide services that require specific approval by the Audit
Committee will be submitted to the Audit Committee by both the Independent
Auditors and the Fund's Chief Financial Officer, and must include a joint
statement as to whether, in their view, the request or application is consistent
with the SEC's rules on auditor independence.
The Audit Committee has designated the Fund's Chief Financial Officer to monitor
the performance of all services provided by the Independent Auditors and to
determine whether such services are in compliance with this Policy. The Fund's
Chief Financial Officer will report to the Audit Committee on a periodic basis
on the results of its monitoring. Both the Fund's Chief Financial Officer and
management will immediately report to the chairman of the Audit Committee any
breach of this Policy that comes to the attention of the Fund's Chief Financial
Officer or any member of management.
9. ADDITIONAL REQUIREMENTS
The Audit Committee has determined to take additional measures on an annual
basis to meet its responsibility to oversee the work of the Independent Auditors
and to assure the auditor's independence from the Fund, such as reviewing a
formal written statement from the Independent Auditors delineating all
relationships between the Independent Auditors and the Fund, consistent with
Independence Standards Board No. 1, and discussing with the Independent Auditors
its methods and procedures for ensuring independence.
10. COVERED ENTITIES
Covered Entities include the Fund's investment adviser(s) and any entity
controlling, controlled by or under common control with the Fund's investment
adviser(s) that provides ongoing services to the Fund(s). Beginning with
non-audit service contracts entered into on or after May 6, 2003, the Fund's
audit committee must pre-approve non-audit services provided not only to the
Fund but also to the Covered Entities if the engagements relate directly to the
operations and financial reporting of the Fund. This list of Covered Entities
would include:
MORGAN STANLEY RETAIL FUNDS
Morgan Stanley Investment Advisors Inc.
Morgan Stanley & Co. Incorporated
Morgan Stanley DW Inc.
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Van Kampen Asset Management
Morgan Stanley Services Company, Inc.
Morgan Stanley Distributors Inc.
Morgan Stanley Trust FSB
<Page>
MORGAN STANLEY INSTITUTIONAL FUNDS
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Advisors Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Morgan Stanley & Co. Incorporated
Morgan Stanley Distribution, Inc.
Morgan Stanley AIP GP LP
Morgan Stanley Alternative Investment Partners LP
(e)(2) Beginning with non-audit service contracts entered into on or after May
6, 2003, the audit committee also is required to pre-approve services to Covered
Entities to the extent that the services are determined to have a direct impact
on the operations or financial reporting of the Registrant. 100% of such
services were pre-approved by the audit committee pursuant to the Audit
Committee's pre-approval policies and procedures (attached hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Trustees has considered whether the
provision of services other than audit services performed by the auditors to
the Registrant and Covered Entities is compatible with maintaining the
auditors' independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Fund has a separately-designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Exchange Act whose members
are: Michael Bozic, Edwin J. Garn, Wayne E. Hedien, Manuel H. Johnson,
Joseph J. Kearns, Michael Nugent and Fergus Reid.
(b) Not applicable.
Item 6. Schedule of Investments
Refer to Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Applicable only to annual reports filed by closed-end funds.
<Page>
Item 8. Closed-End Fund Repurchases
Applicable to reports filed by closed-end funds.
Item 9. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 10 - 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.
(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 11 Exhibits
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.
<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
December 14, 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
December 14, 2004
/s/ Francis Smith
Francis Smith
Principal Financial Officer
December 14, 2004