<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, 2005
Date of reporting period: April 30, 2005
Item 1 - Report to Shareholders
<Page>
WELCOME, SHAREHOLDER:
IN THIS REPORT, YOU'LL LEARN ABOUT HOW YOUR INVESTMENT IN MORGAN STANLEY
INTERNATIONAL FUND PERFORMED DURING THE SEMIANNUAL PERIOD. WE WILL PROVIDE AN
OVERVIEW OF THE MARKET CONDITIONS, AND DISCUSS SOME OF THE FACTORS THAT AFFECTED
PERFORMANCE DURING THE REPORTING PERIOD. IN ADDITION, THIS REPORT INCLUDES THE
FUND'S FINANCIAL STATEMENTS AND A LIST OF FUND INVESTMENTS.
THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING
OFFERED.
MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE
IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. THE FUND IS
SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES OF
SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE
FUND'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE
MONEY INVESTING IN THIS FUND. PLEASE SEE THE PROSPECTUS FOR MORE COMPLETE
INFORMATION ON INVESTMENT RISKS.
<Page>
FUND REPORT
For the six months ended April 30, 2005
TOTAL RETURN FOR THE SIX MONTHS ENDED APRIL 30, 2005
<Table>
<Caption>
MORGAN
STANLEY LIPPER
CAPITAL INTERNATIONAL
INTERNATIONAL LARGE-CAP
(MSCI) EAFE CORE FUNDS
CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2)
7.21% 6.91% 6.84% 7.39% 8.71% 7.95%
</Table>
THE PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS
DIFFERENT EXPENSES. THE FUND'S TOTAL RETURNS ASSUME THE REINVESTMENT OF ALL
DISTRIBUTIONS BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES.
SUCH COSTS WOULD LOWER PERFORMANCE. SEE PERFORMANCE SUMMARY FOR STANDARDIZED
PERFORMANCE AND BENCHMARK INFORMATION.
MARKET CONDITIONS
Overall, international markets performed well during the six months ended April
30, 2005. The MSCI EAFE Index, for example, gained 8.71 percent for the period.
Market volatility was not extreme. In the United States, the Federal Open Market
Committee continued to raise rates, though at a "measured" pace. Nonetheless,
the period was marked by unsettling undercurrents. Many concerns pre-occupied
investors, including the prospects of rising inflation, soaring oil prices, a
bursting real estate bubble, and declining corporate profits. Against this
backdrop, investors weighed the potential for a mid-cycle pause in economic
growth versus that of a more serious global slowdown.
Conditions in developed European equity markets were mixed for the period.
Although lower oil prices contributed to the strength of many markets at the end
of 2004, the return of high oil prices and growing concerns over economic
performance subsequently tempered the pace of European markets. Data over the
six months generally pointed to weakening economic conditions in Europe as
industrial production, consumer confidence and retail sales faltered
significantly.
All major stock markets across the Asia Pacific region posted positive returns
for the six month period. Although many investors grew cautious amid concerns
about oil prices, inflation, tightening global monetary conditions and
relatively weak economic data, those markets with domestic-driven economic
growth and relatively low valuations performed well.
Japan continued to display signs of recovery. Abating deflation, stabilizing
financials, and improving domestic demand trends counted among the positives.
Additionally, banks made notable strides in dealing with their problem loans.
However, the equity market did not do as well and lagged the European bourses.
PERFORMANCE ANALYSIS
Morgan Stanley International Fund underperformed the Morgan Stanley Capital
International EAFE Index and the Lipper International Large-Cap Core Funds Index
for the six months ended April 30, 2005, assuming no deduction of applicable
sales charges.
Among those factors enhancing performance, the Fund was overweighted in energy
stocks relative to the benchmark. Overweighted positions in Hong Kong and
Singapore also enhanced overall returns.
2
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In contrast, the Fund was underweighted in Switzerland and also in
pharmaceutical and health care stocks relative to the benchmark index. This
combination of underweightings detracted from performance. Our view was that
many of these drug companies did not offer compelling valuations or
fundamentals. The market, however, rewarded these stocks during the six-month
period. Underweighted positions in financial stocks also slowed the Fund's
relative pace.
We reduced the Fund's exposure to Europe, and re-deployed assets into Japan. Our
analysis indicated that the recent strength of European markets may not be
justified, given the weakening of various European economies and uncertainties
surrounding unification. This long-term view of the comparative merits of Europe
and Japan was out of step with the market's overall sentiment during the
six-month period, however, and the shift of assets hindered performance.
The Fund also invests in the stocks of emerging markets, representing roughly
five percent of the portfolio at the end of the reporting period, with an
emphasis on Asia. The Fund's emerging market holdings contributed mixed results
during the period. On the basis of equity performance, the Fund's overall
allocation dampened returns. However, the currencies in which many of these
stocks were priced appreciated versus the U.S. dollar. As a result, declines in
the stock prices themselves were largely offset by strengthening currencies.
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 PLC 2.5%
HSBC Holdings PLC 1.9
Total S.A. 1.5
Royal Dutch Petroleum Co. 1.5
GlaxoSmithKline PLC 1.4
Toyota Motor Corp. 1.3
Nestle S.A. (Registered Shares) 1.2
Novartis AG (Registered Shares) 1.1
Vodafone Group PLC 1.0
Shell Transport & Trading Co. PLC 0.9
</Table>
TOP FIVE COUNTRIES
<Table>
Japan 24.2%
United Kingdom 21.5
France 7.7
Switzerland 5.7
Germany 5.6
</Table>
DATA AS OF APRIL 30, 2005. 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.
3
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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 ADVISER," 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 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.
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 JUNE 30, 2004, IS AVAILABLE WITHOUT CHARGE, 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.
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>
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED APRIL 30, 2005
<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 12.21%(3) 11.33%(3) 11.26%(3) 12.38%(3)
6.32(4) 6.33(4) 10.26(4) --
5 YEARS (0.84)(3) (1.62)(3) (1.59)(3) (0.65)(3)
(1.91)(4) (1.99)(4) (1.59)(4) --
SINCE INCEPTION 1.25(3) 0.47(3) 0.49(3) 1.46(3)
0.32(4) 0.31(4) 0.49(4) --
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
morganstanley.com OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. THE TABLE DOES NOT REFLECT THE DEDUCTION OF
TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF
FUND SHARES. PERFORMANCE FOR CLASS A, CLASS B, CLASS C, AND CLASS D SHARES WILL
VARY DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
* THE MAXIMUM FRONT-END SALES CHARGE FOR CLASS A IS 5.25%.
** THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS B IS 5.0%.
THE CDSC DECLINES TO 0% AFTER SIX YEARS.
+ THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C IS 1.0% 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.
(3) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT
THE DEDUCTION OF ANY SALES CHARGES.
(4) FIGURE SHOWN ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND THE DEDUCTION OF
THE MAXIMUM APPLICABLE SALES CHARGE. SEE THE FUND'S CURRENT PROSPECTUS FOR
COMPLETE DETAILS ON FEES AND SALES CHARGES.
5
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EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments and redemption fees;
and (2) 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 11/01/04 - 04/30/05.
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 and do not reflect any transactional costs, such as sales
charges (loads) and redemption fees. 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. In addition, if these transactional costs
were included, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD *
------------- ------------- ---------------
11/01/04 -
11/01/04 04/30/05 04/30/05
------------- ------------- ---------------
CLASS A
Actual (7.21% return) $ 1,000.00 $ 1,072.10 $ 6.58
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,018.45 $ 6.41
CLASS B
Actual (6.91% return) $ 1,000.00 $ 1,069.10 $ 10.41
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,014.73 $ 10.14
CLASS C
Actual (6.84% return) $ 1,000.00 $ 1,068.40 $ 10.36
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,014.78 $ 10.09
CLASS D
Actual (7.39% return) $ 1,000.00 $ 1,073.90 $ 5.30
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,019.69 $ 5.16
</Table>
- ----------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.28%,
2.03%, 2.02% AND 1.03% RESPECTIVELY, MULTIPLIED BY THE AVERAGE ACCOUNT
VALUE OVER THE PERIOD, MULTIPLIED BY 181/365 (TO REFLECT THE ONE-HALF
YEAR PERIOD).
6
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INVESTMENT ADVISORY AGREEMENT APPROVAL
NATURE, EXTENT AND QUALITY OF SERVICES
The Board reviewed and considered the nature and extent of the investment
advisory services provided by the Investment Adviser under the Advisory
Agreement, including portfolio management, investment research and equity and
fixed income securities trading. The Board also reviewed and considered the
nature and extent of the non-advisory, administrative services provided by the
Fund's Administrator under the Administration Agreement, including accounting,
clerical, bookkeeping, compliance, business management and planning, and the
provision of supplies, office space and utilities at the Adviser's expense. (The
Investment Adviser and the Administrator together are referred to as the
"Adviser" and the Advisory and Administration Agreements together are referred
to as the "Management Agreement.") The Board also compared the nature of the
services provided by the Adviser with similar services provided by
non-affiliated advisers as reported to the Board by Lipper Inc. ("Lipper").
The Board reviewed and considered the qualifications of the portfolio managers,
the senior administrative managers and other key personnel of the Adviser who
provide the administrative and investment advisory services to the Fund. The
Board determined that the Adviser's portfolio managers and key personnel are
well qualified by education and/or training and experience to perform the
services in an efficient and professional manner. The Board concluded that the
nature and extent of the advisory and administrative services provided were
necessary and appropriate for the conduct of the business and investment
activities of the Fund. The Board also concluded that the overall quality of the
advisory and administrative services was satisfactory.
PERFORMANCE RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS
The Board reviewed the Fund's performance for one-, three- and five-year periods
ended November 30, 2004, as shown in reports provided by Lipper (the "Lipper
Reports"), compared to the performance of comparable funds selected by Lipper
(the "performance peer group"), and noted that the Fund's performance was better
than its performance peer group average for all three periods. The Board
concluded that the Fund's performance was satisfactory.
FEES RELATIVE TO OTHER FUNDS MANAGED BY THE ADVISER WITH COMPARABLE INVESTMENT
STRATEGIES
The Board reviewed the advisory and administrative fees (together, the
"management fee") paid by the Fund under the Management Agreement. The Board
noted that the rate was comparable to the management fee rates charged by the
Adviser to any other funds it manages with investment strategies comparable to
those of the Fund.
FEES AND EXPENSES RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS
The Board reviewed the management fee rate for the Fund and the total expense
ratio of the Fund. The Board noted that: (i) the Fund's management fee rate was
lower than the average management fee rate for funds,
7
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selected by Lipper (the "expense peer group"), managed by other advisers with
investment strategies comparable to those of the Fund, as shown in the Lipper
Report for this Fund, and (ii) the Fund's total expense ratio was also lower
than the average total expense ratio of the mutual funds included in the Fund's
expense peer group. The Board also noted that the Fund's management fee schedule
did not include any breakpoints and proposed that the Adviser incorporate one or
more breakpoints in the fee schedule. The Adviser agreed to implement a
breakpoint in the management fee schedule on assets above $1 billion effective
on May 1, 2005. The Board concluded that the Fund's management fee and total
expenses were competitive with those of the Fund's expense peer group.
BREAKPOINTS AND ECONOMIES OF SCALE
The Board reviewed the structure of the Fund's management fee schedule under the
Management Agreement and noted that it will include a breakpoint in the
Management Agreement that becomes effective on May 1, 2005. The Board also
reviewed the level of the Fund's anticipated new management fee and noted that
the fee, as a percentage of the Fund's net assets, would decrease as net assets
increase because of the new breakpoint. The Board concluded that the Fund's
management fee would reflect economies of scale as assets increase.
PROFITABILITY OF ADVISER AND AFFILIATES
The Board considered and reviewed information concerning the costs incurred and
profits realized by the Adviser and its affiliates during the last two years
from their relationship with the Fund and the Morgan Stanley Fund Complex and
reviewed with the Controller of the Adviser the cost allocation methodology used
to determine the Adviser's profitability. Based on their review of the
information they received, the Board concluded that the profits earned by the
Adviser and its affiliates were not excessive in light of the advisory,
administrative and other services provided to the Fund.
FALL-OUT BENEFITS
The Board considered so-called "fall-out benefits" derived by the Adviser and
its affiliates from their relationship with the Fund and the Fund Complex, such
as "float" benefits derived from handling of checks for purchases and
redemptions of Fund shares through a broker-dealer affiliate of the Adviser and
"soft dollar" benefits (discussed in the next section). The Board also
considered that a broker-dealer affiliate of the Adviser receives from the Fund
12b-1 fees for distribution and shareholder services. The Board also considered
that an affiliate of the Adviser, through a joint venture, receives revenue in
connection with trading done on behalf of the Fund through an electronic trading
system network ("ECN"). The Board concluded that the float benefits and the
above-referenced ECN-related revenue were relatively small and that the 12b-1
fees were competitive with those of other broker-dealer affiliates of investment
advisers of mutual funds.
8
<Page>
SOFT DOLLAR BENEFITS
The Board considered whether the Adviser realizes any benefits as a result of
brokerage transactions executed through "soft dollar" arrangements. Under such
arrangements, brokerage commissions paid by the Fund and/or other funds managed
by the Adviser would be used to pay for research that a securities broker
obtains from third parties, or to pay for both research and execution services
from securities brokers who effect transactions for the Fund. The Adviser
informed the Board that it does not use Fund commissions to pay for third party
research. It does use commissions to pay for research which is bundled with
execution services. The Board recognized that the receipt of such research from
brokers may reduce the Adviser's costs but concluded that the receipt of such
research strengthens the investment management resources of the Adviser, which
may ultimately benefit the Fund and other funds in the Fund Complex.
ADVISER FINANCIALLY SOUND AND FINANCIALLY CAPABLE OF MEETING THE FUND'S NEEDS
The Board considered whether the Adviser is financially sound and has the
resources necessary to perform its obligations under the Management Agreement.
The Board noted that the Adviser's operations remain profitable, although
increased expenses in recent years have reduced the Adviser's profitability. The
Board concluded that the Adviser has the financial resources necessary to
fulfill its obligations under the Management Agreement.
HISTORICAL RELATIONSHIP BETWEEN THE FUND AND THE ADVISER
The Board also reviewed and considered the historical relationship between the
Fund and the Adviser, including the organizational structure of the Adviser, the
policies and procedures formulated and adopted by the Adviser for managing the
Fund's operations and the Board's confidence in the competence and integrity of
the senior managers and key personnel of the Adviser. The Board concluded that
it is beneficial for the Fund to continue its relationship with the Adviser.
OTHER FACTORS AND CURRENT TRENDS
The Board considered the controls and procedures adopted and implemented by the
Adviser and monitored by the Fund's Chief Compliance Officer and concluded that
the conduct of business by the Adviser indicates a good faith effort on its part
to adhere to high ethical standards in the conduct of the Fund's business.
GENERAL CONCLUSION
After considering and weighing all of the above factors, the Board concluded it
would be in the best interest of the Fund and its shareholders to approve
renewal of the Management Agreement for another year.
9
<Page>
MORGAN STANLEY INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS - APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS (93.8%)
AUSTRALIA++ (3.9%)
ALUMINUM
72,580 Alumina Ltd. $ 325,759
--------------
BEVERAGES: ALCOHOLIC
61,573 Foster's Group Ltd. 246,996
21,483 Southcorp Ltd. 71,178
--------------
318,174
--------------
BEVERAGES: NON-ALCOHOLIC
15,483 Coca-Cola Amatil Ltd. 100,203
--------------
BIOTECHNOLOGY
2,905 CSL Ltd. 72,084
--------------
BUILDING PRODUCTS
60,569 CSR Ltd. 113,464
--------------
CASINO/GAMING
12,237 TABCORP Holdings Ltd. 148,685
--------------
CHEMICALS: MAJOR
DIVERSIFIED
17,919 Orica Ltd. 220,992
--------------
CONSTRUCTION MATERIALS
37,337 Boral Ltd. 169,385
29,855 James Hardie Industries NV 130,910
59,568 Rinker Group Ltd. 531,512
--------------
831,807
--------------
CONTAINERS/PACKAGING
56,358 Amcor Ltd. 286,747
--------------
ENGINEERING & CONSTRUCTION
7,273 Leighton Holdings Ltd. 56,342
--------------
FINANCIAL CONGLOMERATES
40,111 AMP Ltd. 211,931
6,303 Macquarie Bank Ltd. 226,417
16,632 Suncorp-Metway Ltd. 256,688
--------------
695,036
--------------
FOOD RETAIL
32,398 Coles Myer Ltd. 217,453
30,272 Woolworths Ltd. 362,853
--------------
580,306
--------------
GAS DISTRIBUTORS
14,025 Australian Gas Light
Co. Ltd. $ 157,493
159,126 Origin Energy Ltd. 871,524
--------------
1,029,017
--------------
HOSPITAL/NURSING
MANAGEMENT
27,157 Mayne Group Ltd. 74,430
--------------
INDUSTRIAL CONGLOMERATES
5,618 Ansell Ltd. 41,088
11,333 Wesfarmers Ltd. 319,487
--------------
360,575
--------------
INVESTMENT TRUSTS/
MUTUAL FUNDS
68,259 Macquarie Infrastructure
Group (Stapled
Securities)** 194,394
--------------
MAJOR BANKS
43,611 Australia and New Zealand
Banking Group Ltd. 736,888
36,037 Commonwealth
Bank of Australia 1,024,945
46,817 National Australia Bank Ltd. 1,068,100
50,964 Westpac Banking Corp. 775,452
--------------
3,605,385
--------------
MAJOR TELECOMMUNICATIONS
65,106 Telstra Corp., Ltd. 246,230
--------------
MEDICAL/NURSING SERVICES
4,137 Sonic Healthcare Ltd. 38,257
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
29,859 Brambles Industries Ltd. 183,464
--------------
MULTI-LINE INSURANCE
51,260 Insurance Australia
Group Ltd. 243,760
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
10
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
OIL & GAS PRODUCTION
119,185 Santos Ltd. $ 862,330
95,089 Woodside Petroleum Ltd. 1,746,822
--------------
2,609,152
--------------
OTHER METALS/MINERALS
224,411 BHP Billiton Ltd. 2,832,070
19,465 Rio Tinto Ltd. 631,317
72,981 WMC Resources Ltd. 451,980
--------------
3,915,367
--------------
OTHER TRANSPORTATION
28,101 Patrick Corp., Ltd. 119,433
17,097 Transurban Group 99,128
--------------
218,561
--------------
PRECIOUS METALS
20,787 Newcrest Mining Ltd. 240,952
--------------
PROPERTY - CASUALTY INSURERS
20,533 QBE Insurance Group Ltd. 240,187
--------------
PUBLISHING: NEWSPAPERS
30,261 John Fairfax Holdings Ltd. 89,959
--------------
PULP & PAPER
28,851 PaperlinX Ltd. 63,907
--------------
REAL ESTATE DEVELOPMENT
12,506 Lend Lease Corp., Ltd. 116,792
--------------
REAL ESTATE INVESTMENT
TRUSTS
1,272 Stockland (New) (Stapled
Securities)** * 5,725
--------------
STEEL
45,854 BlueScope Steel Ltd. 274,650
35,544 OneSteel Ltd. 61,131
--------------
335,781
--------------
TOTAL AUSTRALIA 17,561,494
--------------
AUSTRIA++ (0.8%)
BUILDING PRODUCTS
3,760 Wienerberger AG 158,920
--------------
CONSTRUCTION MATERIALS
1,538 RHI AG* $ 43,732
--------------
ELECTRIC UTILITIES
876 Oesterreichische
Elektrizitaetswirtschafts
AG (Verbund) (A Shares) 218,146
--------------
MAJOR BANKS
5,752 Bank Austria Creditanstalt 530,296
18,408 Erste Bank der
Oesterreichischen
Sparkassen AG 888,804
--------------
1,419,100
--------------
MAJOR TELECOMMUNICATIONS
19,214 Telekom Austria AG 369,043
--------------
OIL REFINING/MARKETING
1,983 OMV AG 609,565
--------------
OTHER TRANSPORTATION
1,083 Flughafen Wien AG 70,150
--------------
REAL ESTATE DEVELOPMENT
32,634 Immofinanz Immobilien
Anlagen AG* 296,289
--------------
STEEL
684 Boehler-Uddeholm AG 88,311
1,460 Voestalpine AG 98,712
--------------
187,023
--------------
TOTAL AUSTRIA 3,371,968
--------------
BELGIUM++ (1.1%)
CHEMICALS: SPECIALTY
3,487 Solvay S.A. 396,638
--------------
ELECTRIC UTILITIES
1,216 Electrabel S.A. 564,848
--------------
ELECTRONIC EQUIPMENT/
INSTRUMENTS
3,156 Agfa Gevaert NV 102,871
--------------
FINANCIAL CONGLOMERATES
67,652 Fortis 1,879,306
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
11
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
MAJOR BANKS
41,052 Dexia $ 944,585
5,663 KBC Group S.A. 447,859
--------------
1,392,444
--------------
MAJOR TELECOMMUNICATIONS
2,051 Belgacom S.A. 78,641
--------------
METAL FABRICATIONS
283 Bekaert NV 21,813
--------------
OTHER METALS/MINERALS
1,097 Cumerio* 14,800
1,097 Umicore 95,108
--------------
109,908
--------------
PHARMACEUTICALS: OTHER
4,723 UCB S.A. 229,685
--------------
TOTAL BELGIUM 4,776,154
--------------
BRAZIL (0.1%)
REGIONAL BANKS
5,300 Unibanco-Uniao de Bancos
Brasileiros S.A. (GDR)
(Units)+ 175,907
--------------
STEEL
5,207 Companhia Siderurgica
Nacional S.A. 113,731
--------------
TOBACCO
6,000 Souza Cruz S.A. 69,680
--------------
TOTAL BRAZIL 359,318
--------------
CAYMAN ISLANDS++ (0.0%)
MAJOR TELECOMMUNICATIONS
88,000 Hutchison
Telecommunications
International Ltd.* 83,668
--------------
CHINA++ (1.0%)
AIR FREIGHT/COURIERS
179,000 Sinotrans Limited 53,010
--------------
AIRLINES
118,000 China Southern Airlines
Co., Ltd.* $ 39,968
--------------
ALUMINUM
330,000 Aluminum Corp. of
China Ltd. 179,703
--------------
CHEMICALS: SPECIALTY
234,000 Sinopec Shanghai
Petrochemical Co. Ltd. 86,490
--------------
CONTRACT DRILLING
154,000 China Oilfield Services Ltd. 51,605
--------------
ELECTRIC UTILITIES
144,000 Huadian Power International
Corp., Ltd. 44,605
306,000 Huaneng Power
International, Inc. 233,188
--------------
277,793
--------------
ELECTRICAL PRODUCTS
15,000 BYD Company Ltd. 42,649
--------------
INTEGRATED OIL
1,678,000 China Petroleum &
Chemical Corp. 657,395
1,758,000 PetroChina Co., Ltd. 1,049,582
--------------
1,706,977
--------------
LIFE/HEALTH INSURANCE
744,000 China Life Insurance
Co., Ltd.* 493,843
--------------
MAJOR TELECOMMUNICATIONS
1,388,000 China Telecom Corp. Ltd. 472,601
--------------
MARINE SHIPPING
130,000 China Shipping Development
Co., Ltd. 115,073
--------------
MULTI-LINE INSURANCE
262,500 Ping An Insurance (Group)
Co. of China Ltd.* 402,135
--------------
OTHER METALS/MINERALS
116,000 Jiangxi Copper Co., Ltd. 55,892
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
12
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
OTHER TRANSPORTATION
134,000 Beijing Capital International
Airport Co., Ltd. $ 47,174
122,000 Jiangsu Expressway
Co., Ltd. 56,221
--------------
103,395
--------------
STEEL
90,000 Angang New Steel
Co., Ltd. 48,743
174,000 Maanshan Iron & Steel
Co., Ltd.* 60,078
--------------
108,821
--------------
TEXTILES
34,500 Weiqiao Textile Co., Ltd. 45,588
--------------
TOTAL CHINA 4,235,543
--------------
DENMARK++ (0.6%)
BIOTECHNOLOGY
3,450 Novozymes A/S
(B Shares) 167,603
--------------
ELECTRICAL PRODUCTS
7,600 Vestas Wind Systems A/S* 96,059
--------------
MAJOR BANKS
36,544 Danske Bank A/S 1,069,729
--------------
MAJOR TELECOMMUNICATIONS
1,900 TDC A/S 81,095
--------------
MARINE SHIPPING
55 A P Moller - Maersk A/S 485,625
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
1,100 ISS A/S 87,940
--------------
PHARMACEUTICALS: MAJOR
11,850 Novo Nordisk A/S
(Series B) 597,093
--------------
TELECOMMUNICATION
EQUIPMENT
15,500 GN Store Nord A/S 162,024
--------------
TRUCKING
1,000 DSV A/S* $ 76,211
--------------
TOTAL DENMARK 2,823,379
--------------
FINLAND++ (1.4%)
BUILDING PRODUCTS
1,648 Uponor Oyj 32,646
--------------
ENGINEERING & CONSTRUCTION
2,109 Kone Oyj (B Shares)* 159,893
--------------
FOOD RETAIL
16,110 Kesko Oyj (B Shares) 388,305
--------------
INDUSTRIAL MACHINERY
11,688 Metso Oyj 211,536
--------------
INFORMATION TECHNOLOGY
SERVICES
8,260 TietoEnator Oyj 249,632
--------------
MULTI-LINE INSURANCE
18,410 Sampo Oyj (A Shares) 256,565
--------------
OIL REFINING/MARKETING
21,853 Fortum Oyj 330,659
--------------
OTHER METALS/MINERALS
10,878 Outokumpu Oyj 152,632
--------------
PULP & PAPER
39,857 Stora Enso Oyj (Registered
Shares) 528,445
30,171 UPM-Kymmene Oyj 602,938
--------------
1,131,383
--------------
SPECIALTY STORES
5,463 Neste Oil Oyj* 121,976
--------------
TELECOMMUNICATION
EQUIPMENT
182,408 Nokia Oyj 2,913,305
--------------
TRUCKS/CONSTRUCTION/FARM
MACHINERY
2,618 Wartsila Oyj (B Shares) 69,173
--------------
TOTAL FINLAND 6,017,705
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
13
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
FRANCE++ (7.7%)
ADVERTISING/MARKETING
SERVICES
3,041 Publicis Groupe $ 86,972
--------------
AEROSPACE & DEFENSE
5,234 Thales S.A. 212,081
464 Zodiac S.A. 22,497
--------------
234,578
--------------
APPAREL/FOOTWEAR
322 Hermes International 61,311
7,935 LVMH Moet Hennessy Louis
Vuitton S.A. 560,429
--------------
621,740
--------------
AUTO PARTS: O.E.M.
4,022 Valeo S.A. 175,558
--------------
AUTOMOTIVE AFTERMARKET
3,443 Compagnie Generale des
Etablissements Michelin
(B Shares) 208,419
--------------
BROADCASTING
3,747 Societe Television
Francaise 1* 106,008
--------------
BUILDING PRODUCTS
13,109 Compagnie de
Saint-Gobain 739,287
--------------
CHEMICALS: SPECIALTY
7,077 Air Liquide S.A. 1,262,217
--------------
CONSTRUCTION MATERIALS
3,124 Imerys S.A. 222,936
9,635 Lafarge S.A. 875,719
--------------
1,098,655
--------------
DATA PROCESSING SERVICES
757 Atos Origin S.A.* 45,526
--------------
DEPARTMENT STORES
2,041 Pinault-Printemps-
Redoute S.A. 200,640
--------------
ELECTRIC UTILITIES
36,915 Suez S.A. $ 1,007,845
--------------
ELECTRICAL PRODUCTS
192,675 Alstom* 149,112
9,101 Schneider Electric S.A. 654,873
--------------
803,985
--------------
ELECTRONICS/APPLIANCES
7,911 Thomson 195,044
--------------
ENGINEERING & CONSTRUCTION
12,692 Bouygues S.A. 505,631
3,000 Vinci S.A. 450,472
--------------
956,103
--------------
FOOD DISTRIBUTORS
6,449 Sodexho Alliance S.A. 216,022
--------------
FOOD RETAIL
18,709 Carrefour S.A. 908,705
2,465 Casino Guichard
Perrachon S.A. 182,534
--------------
1,091,239
--------------
FOOD: MAJOR DIVERSIFIED
8,092 Groupe Danone 757,903
--------------
HOTELS/RESORTS/CRUISELINES
12,526 Accor S.A. 572,179
--------------
INFORMATION TECHNOLOGY
SERVICES
6,087 Cap Gemini S.A.* 189,529
--------------
INTEGRATED OIL
29,981 Total S.A. 6,649,550
--------------
INTERNET SOFTWARE/SERVICES
2,289 Business Objects S.A.* 59,277
--------------
LIFE/HEALTH INSURANCE
4,001 CNP Assurances 271,400
--------------
MAJOR BANKS
48,423 BNP Paribas S.A. 3,188,894
19,003 Societe Generale 1,893,451
--------------
5,082,345
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
14
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
MAJOR TELECOMMUNICATIONS
42,058 France Telecom S.A.* $ 1,230,453
--------------
MEDIA CONGLOMERATES
28,604 Vivendi Universal S.A.* 849,310
--------------
MEDICAL SPECIALTIES
1,745 Essilor International S.A. 124,559
--------------
MOTOR VEHICLES
3,921 PSA Peugeot Citroen 232,159
4,036 Renault S.A. 337,855
--------------
570,014
--------------
MULTI-LINE INSURANCE
80,387 Axa 1,980,546
--------------
OILFIELD SERVICES/EQUIPMENT
270 Technip S.A. 45,745
--------------
OTHER CONSUMER SPECIALTIES
3,632 Societe BIC S.A. 196,175
--------------
OTHER TRANSPORTATION
3,943 Autoroutes du Sud de
la France 203,886
--------------
PACKAGED SOFTWARE
2,132 Dassault Systemes S.A. 100,049
--------------
PHARMACEUTICALS: MAJOR
41,631 Sanofi-Aventis 3,684,298
--------------
PUBLISHING: BOOKS/MAGAZINES
4,577 Lagardere S.C.A. 330,808
--------------
REAL ESTATE DEVELOPMENT
2,321 Gecina S.A. 262,339
1,957 Klepierre 188,030
3,166 Unibail 390,543
--------------
840,912
--------------
REGIONAL BANKS
20,076 Credit Agricole S.A. 519,497
--------------
TELECOMMUNICATION
EQUIPMENT
48,348 Alcatel S.A.* 520,007
2,685 Safran S.A. 55,226
--------------
575,233
--------------
WATER UTILITIES
7,990 Veolia Environnement $ 301,067
--------------
TOTAL FRANCE 34,184,573
--------------
GERMANY++ (5.5%)
AIR FREIGHT/COURIERS
24,860 Deutsche Post AG
(Registered Shares) 581,730
--------------
AIRLINES
9,924 Deutsche Lufthansa AG
(Registered Shares)* 128,039
--------------
APPAREL/FOOTWEAR
1,513 Adidas-Salomon AG 234,370
502 Puma AG 115,468
--------------
349,838
--------------
AUTO PARTS: O.E.M.
2,689 Continental AG 197,988
--------------
CHEMICALS: MAJOR DIVERSIFIED
28,266 BASF AG 1,828,559
35,117 Bayer AG 1,151,623
3,081 Lanxess* 63,638
--------------
3,043,820
--------------
CHEMICALS: SPECIALTY
5,258 Linde AG 347,968
--------------
CONSTRUCTION MATERIALS
3,205 HeidelbergCement AG 185,444
--------------
DEPARTMENT STORES
593 KarstadtQuelle AG 5,720
5,916 Metro AG 312,296
--------------
318,016
--------------
ELECTRIC UTILITIES
28,538 E.ON AG 2,404,016
16,993 RWE AG 1,015,288
--------------
3,419,304
--------------
ELECTRONIC COMPONENTS
2,245 Epcos AG* 25,625
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
15
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
FINANCIAL CONGLOMERATES
8,394 Hypo Real Estate
Holding AG* $ 348,375
--------------
HOUSEHOLD/PERSONAL CARE
1,721 Beiersdorf AG 185,915
--------------
INDUSTRIAL CONGLOMERATES
4,653 MAN AG 195,666
32,788 Siemens AG (Registered
Shares) 2,402,124
16,120 ThyssenKrupp AG 296,462
--------------
2,894,252
--------------
INVESTMENT BANKS/BROKERS
9,677 Deutsche Boerse AG 731,426
--------------
MAJOR BANKS
36,991 Bayerische Hypo - und
Vereinsbank AG* 875,154
44,366 Commerzbank AG* 973,573
30,657 Deutsche Bank AG
(Registered Shares) 2,503,446
--------------
4,352,173
--------------
MAJOR TELECOMMUNICATIONS
94,181 Deutsche Telekom AG
(Registered Shares) 1,759,055
--------------
MEDICAL DISTRIBUTORS
1,657 Celesio AG* 131,223
--------------
MEDICAL/NURSING SERVICES
2,949 Fresenius Medical Care AG 236,615
--------------
MOTOR VEHICLES
18,445 DaimlerChrysler AG
(Registered Shares) 723,629
4,810 Volkswagen AG 200,178
--------------
923,807
--------------
MULTI-LINE INSURANCE
13,116 Allianz AG (Registered
Shares) 1,569,153
2,189 Muenchener Rueckver AG
(Registered Shares) 240,047
--------------
1,809,200
--------------
OTHER CONSUMER SERVICES
8,432 TUI AG $ 203,334
--------------
PACKAGED SOFTWARE
8,217 SAP AG 1,291,694
--------------
PHARMACEUTICALS: MAJOR
2,402 Merck KGaA 183,794
7,989 Schering AG 527,040
--------------
710,834
--------------
PHARMACEUTICALS: OTHER
4,101 Altana AG 256,469
--------------
SEMICONDUCTORS
13,778 Infineon Technologies AG* 114,861
--------------
SPECIALTY STORES
871 Douglas Holding AG 29,541
--------------
TOTAL GERMANY 24,576,546
--------------
GREECE++ (0.3%)
CASINO/GAMING
9,500 Greek Organization of
Football Prognostics S.A. 249,482
--------------
CONSTRUCTION MATERIALS
3,200 Titan Cement Co. 101,234
--------------
MAJOR BANKS
14,881 National Bank of
Greece S.A. 499,648
--------------
REGIONAL BANKS
9,840 Alpha Bank A.E.* 316,836
6,896 EFG Eurobank Ergasias 208,450
--------------
525,286
--------------
TOTAL GREECE 1,375,650
--------------
HONG KONG++ (2.1%)
AIRLINES
65,000 Cathay Pacific Airways Ltd. 124,091
--------------
APPAREL/FOOTWEAR
35,000 Yue Yuen Industrial
(Holdings) Ltd. 99,334
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
16
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
APPAREL/FOOTWEAR RETAIL
54,500 Esprit Holdings Ltd. $ 408,042
--------------
BROADCASTING
19,000 Television Broadcasts Ltd. 95,636
--------------
COAL
122,000 Yanzhou Coal Mining
Co., Ltd. 167,129
--------------
CONSTRUCTION MATERIALS
32,000 Cheung Kong Infrastructure
Holdings Ltd. 101,442
--------------
ELECTRIC UTILITIES
108,800 CLP Holdings Ltd. 617,972
144,000 Datang International Power
Generation Co., Ltd. 111,411
84,000 Hongkong Electric
Holdings Ltd. 384,504
--------------
1,113,887
--------------
ELECTRONIC PRODUCTION
EQUIPMENT
3,000 ASM Pacific
Technology Ltd. 12,251
--------------
ENGINEERING & CONSTRUCTION
40,000 Hopewell Holdings Ltd. 97,486
142,675 New World Development
Co., Ltd. 153,730
--------------
251,216
--------------
FINANCIAL CONGLOMERATES
76,000 Wharf (Holdings) Ltd. (The) 254,430
--------------
GAS DISTRIBUTORS
221,483 Hong Kong & China Gas
Co., Ltd. 454,037
--------------
HOTELS/RESORTS/CRUISELINES
68,642 Shangri-La Asia Ltd. 104,856
--------------
INDUSTRIAL CONGLOMERATES
126,900 Hutchison Whampoa Ltd. 1,138,296
56,000 Swire Pacific Ltd. (Class A) 468,830
--------------
1,607,126
--------------
INVESTMENT BANKS/BROKERS
67,000 Hong Kong Exchanges &
Clearing Ltd. $ 163,690
--------------
MAJOR BANKS
84,695 Bank of East Asia,
Ltd. (The) 248,891
223,500 BOC Hong Kong
(Holdings) Ltd. 424,467
46,000 Hang Seng Bank Ltd. 629,890
--------------
1,303,248
--------------
MAJOR TELECOMMUNICATIONS
222,611 PCCW Ltd. 132,080
--------------
MARINE SHIPPING
213,000 China Shipping Container
Lines Company Ltd. 99,467
--------------
MISCELLANEOUS MANUFACTURING
96,500 Johnson Electric
Holdings Ltd. 86,488
--------------
OIL REFINING/MARKETING
72,000 Sinopec Zhenhai Refining &
Chemical Co., Ltd. 80,469
--------------
OTHER TRANSPORTATION
144,000 Zhejiang Expressway
Co., Ltd. 100,344
--------------
PROPERTY - CASUALTY INSURERS
346,000 PICC Property & Casualty
Company Ltd.* 88,537
--------------
PUBLISHING: NEWSPAPERS
24,000 SCMP Group Ltd. 11,333
--------------
RAILROADS
84,972 MTR Corp., Ltd. 135,814
--------------
REAL ESTATE DEVELOPMENT
90,000 Cheung Kong
(Holdings) Ltd. 854,340
115,000 Hang Lung Properties Ltd. 177,092
45,000 Henderson Land
Development Co., Ltd. 209,830
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
17
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
41,443 Hysan Development
Co., Ltd. $ 86,264
32,500 Kerry Properties Ltd. 71,221
64,196 Sino Land Co., Ltd. 60,505
79,000 Sun Hung Kai
Properties Ltd. 758,931
--------------
2,218,183
--------------
TOOLS/HARDWARE
56,000 Techtronic Industries
Co., Ltd. 124,863
--------------
WHOLESALE DISTRIBUTORS
100,000 Li & Fung Ltd. 192,130
--------------
TOTAL HONG KONG 9,530,123
--------------
IRELAND++ (0.6%)
CONSTRUCTION MATERIALS
29,692 CRH PLC 736,250
--------------
FINANCIAL CONGLOMERATES
2,000 Irish Life & Permanent PLC 33,348
--------------
INDUSTRIAL CONGLOMERATES
1,450 DCC PLC 32,329
--------------
MAJOR BANKS
48,178 Allied Irish Banks PLC 978,072
56,372 Bank of Ireland 853,103
--------------
1,831,175
--------------
PHARMACEUTICALS: OTHER
16,100 Elan Corporation PLC* 87,614
--------------
PUBLISHING: NEWSPAPERS
11,500 Independent News &
Media PLC 36,391
--------------
WHOLESALE DISTRIBUTORS
11,350 Grafton Group
PLC (Units)*+ 128,864
--------------
TOTAL IRELAND 2,885,971
--------------
ITALY++ (2.3%)
AEROSPACE & DEFENSE
277,055 Finmeccanica SpA 257,234
--------------
APPAREL/FOOTWEAR
1,582 Benetton Group SpA $ 14,559
--------------
BROADCASTING
13,838 Mediaset SpA 179,887
--------------
COMMERCIAL PRINTING/FORMS
74,587 Seat Pagine Gialle SpA* 28,878
--------------
CONSTRUCTION MATERIALS
1,767 Italcementi SpA 28,756
--------------
CONSUMER SUNDRIES
5,609 Luxottica Group SpA 111,769
--------------
ELECTRIC UTILITIES
65,980 Enel SpA 625,808
--------------
FINANCIAL CONGLOMERATES
2,989 Banca Fideuram SpA 15,587
118,779 Pirelli & C. SpA 134,843
--------------
150,430
--------------
INTEGRATED OIL
129,271 Eni SpA 3,244,743
--------------
INVESTMENT BANKS/BROKERS
4,683 Mediobanca SpA 77,096
--------------
LIFE/HEALTH INSURANCE
5,636 Alleanza Assicurazioni SpA 66,948
8,121 Assicurazioni Generali SpA 249,787
2,246 Mediolanum SpA 14,595
--------------
331,330
--------------
MAJOR BANKS
127,353 Banca Intesa SpA 608,929
7,450 Banca Intesa SpA - RNC 32,227
5,524 Banca Monte dei Paschi di
Siena SpA 19,384
11,535 Banca Nazionale del
Lavoro SpA* 36,343
61,170 SanPaolo IMI SpA 906,008
158,005 UniCredito Italiano SpA 886,044
--------------
2,488,935
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
18
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
MAJOR TELECOMMUNICATIONS
344,805 Telecom Italia SpA $ 1,168,829
223,462 Telecom Italia SpA - RNC 629,546
--------------
1,798,375
--------------
MOTOR VEHICLES
12,845 Fiat SpA* 84,746
--------------
MULTI-LINE INSURANCE
2,833 Riunione Adriatica di
Sicurta SpA 61,685
--------------
OIL & GAS PIPELINES
11,337 Snam Rete Gas SpA 63,765
--------------
OTHER TRANSPORTATION
15,329 Autostrade SpA 404,558
--------------
REGIONAL BANKS
2,130 Banca Popolare di
Milano Scarl 20,235
12,764 Banco Popolare di Verona e
Novara Scarl 235,145
--------------
255,380
--------------
RESTAURANTS
7,738 Autogrill SpA* 108,851
--------------
SPECIALTY TELECOMMUNICATIONS
3,531 Tiscali SpA* 10,370
--------------
WIRELESS TELECOMMUNICATIONS
11,022 Telecom Italia Mobile
SpA (T.I.M.) 64,315
--------------
TOTAL ITALY 10,391,470
--------------
JAPAN++ (24.2%)
ADVERTISING/MARKETING
SERVICES
2,650 Asatsu - DK Inc. 82,561
--------------
AGRICULTURAL COMMODITIES/
MILLING
10,000 Nisshin Seifun Group Inc. 104,329
--------------
AIR FREIGHT/COURIERS
56,500 Nippon Express Co., Ltd. $ 274,276
18,035 Yamato Transport Co., Ltd. 238,493
--------------
512,769
--------------
AIRLINES
59,000 Japan Airlines Corp. 167,609
--------------
APPAREL/FOOTWEAR
11,546 Onward Kashiyama
Co., Ltd. 148,369
5,000 Wacoal Corp. 62,733
--------------
211,102
--------------
APPAREL/FOOTWEAR RETAIL
5,400 Fast Retailing Co., Ltd. 319,633
1,700 Shimamura Co., Ltd. 140,835
2,300 World Co., Ltd. 76,263
--------------
536,731
--------------
AUTO PARTS: O.E.M.
41,200 Denso Corporation 973,025
15,059 NGK Spark Plug Co., Ltd. 157,547
2,000 Sanden Corp. 9,441
2,900 Stanley Electric Co., Ltd. 47,081
800 Toyoda Gosei Co., Ltd. 14,607
6,550 Toyota Industries Corp. 181,909
--------------
1,383,610
--------------
AUTOMOTIVE AFTERMARKET
57,000 Bridgestone Corp. 1,094,293
--------------
BEVERAGES: ALCOHOLIC
25,800 Asahi Breweries, Ltd. 328,859
59,051 Kirin Brewery Co., Ltd. 575,331
14,000 Sapporo Holdings, Ltd. 65,403
9,000 Takara Holdings Inc. 57,748
--------------
1,027,341
--------------
BEVERAGES: NON-ALCOHOLIC
1,100 Coca-Cola West Japan
Co., Ltd. 25,248
1,500 ITO EN, Ltd. 73,615
--------------
98,863
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
19
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
BROADCASTING
27 Fuji Television Network, Inc. $ 56,886
7,300 Tokyo Broadcasting
System, Inc. 137,319
--------------
194,205
--------------
BUILDING PRODUCTS
13,462 JS Group Corp. 241,996
25,000 Nippon Sheet Glass
Company, Ltd. 102,184
30,500 Toto Ltd. 259,793
--------------
603,973
--------------
CHEMICALS: AGRICULTURAL
9,500 Nissan Chemical
Industries, Ltd. 82,519
--------------
CHEMICALS: MAJOR DIVERSIFIED
76,000 Asahi Kasei Corp. 367,038
18,000 Ishihara Sangyo
Kaisha, Ltd. 40,348
107,500 Mitsubishi Chemical Corp. 341,430
--------------
748,816
--------------
CHEMICALS: SPECIALTY
12,000 Daicel Chemical
Industries, Ltd. 64,547
45,588 Dainippon Ink &
Chemicals, Inc. 123,933
30,546 Denki Kagaku Kogyo
Kabushiki Kaisha 105,455
10,008 JSR Corp. 202,040
17,000 Kaneka Corp. 185,136
23,056 Kuraray Co., Ltd. 213,400
36,599 Mitsubishi Rayon Co., Ltd. 138,185
33,500 Mitsui Chemicals, Inc. 190,076
25,097 Shin-Etsu Chemical
Co., Ltd. 927,786
16,000 Showa Denko K.K. 40,672
11,000 Sumitomo Bakelite
Co., Ltd. 68,605
84,000 Sumitomo Chemical
Co., Ltd. 429,785
33,500 Tosoh Corp. $ 157,348
--------------
2,846,968
--------------
COMMERCIAL PRINTING/FORMS
28,000 Dai Nippon Printing
Co., Ltd. 449,640
28,000 Toppan Printing Co., Ltd. 306,071
--------------
755,711
--------------
COMPUTER PROCESSING
HARDWARE
111,000 Fujitsu Ltd. 612,186
--------------
CONSTRUCTION MATERIALS
13,000 Taiheiyo Cement Corp. 36,415
--------------
CONTAINERS/PACKAGING
12,417 Toyo Seikan Kaisha, Ltd. 228,643
--------------
DEPARTMENT STORES
19,000 Daimaru, Inc. (The) 166,077
6,000 Hankyu Department
Stores, Inc. 42,505
12,814 Isetan Co., Ltd. 153,767
26,107 Marui Co., Ltd. 335,548
26,716 Mitsukoshi, Ltd. 125,953
25,040 Takashimaya Co., Ltd. 223,271
--------------
1,047,121
--------------
ELECTRIC UTILITIES
10,700 Chubu Electric Power Co. 256,408
32,300 Kansai Electric Power
Co., Inc. (The) 649,378
6,200 Kyushu Electric Power
Co., Inc. 133,213
17,600 Tohoku Electric Power
Co., Inc. 339,627
48,200 Tokyo Electric Power
Co., Inc. 1,156,313
--------------
2,534,939
--------------
ELECTRICAL PRODUCTS
14,000 Fujikura Ltd. 60,756
37,500 Furukawa Electric
Co., Ltd.* 165,966
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
20
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
1,900 Mabuchi Motor Co., Ltd. $ 114,098
12,000 Matsushita Electric
Works, Ltd. 101,071
25,560 NGK Insulators, Ltd. 263,015
2,804 Nidec Corp. 328,907
37,000 Sumitomo Electric
Industries, Ltd. 386,741
1,000 Ushio Inc. 19,312
--------------
1,439,866
--------------
ELECTRONIC COMPONENTS
11,000 Alps Electric Co. Ltd. 172,679
17,500 Citizen Watch Co., Ltd. 159,741
2,000 Hirose Electric Co., Ltd. 204,104
6,500 Hoya Corp. 679,384
14,400 Murata Manufacturing
Co., Ltd. 716,144
5,000 Taiyo Yuden Co., Ltd. 51,825
7,652 TDK Corp. 535,590
--------------
2,519,467
--------------
ELECTRONIC EQUIPMENT/
INSTRUMENTS
50,904 Canon, Inc. 2,652,423
24,500 Casio Computer Co., Ltd. 335,782
1,947 Keyence Corp. 430,780
28,030 Konica Minolta
Holdings, Inc. 270,495
10,100 Kyocera Corp. 738,145
128,500 Matsushita Electric Industrial
Co., Ltd. 1,881,731
116,552 Mitsubishi Electric Corp. 617,415
101,500 NEC Corp. 559,694
37,000 OKi Electric Industry
Co., Ltd. 138,344
13,504 Omron Corp. 294,139
41,432 Ricoh Co., Ltd. 661,415
108,000 Sanyo Electric Co. Ltd. 311,541
6,200 Seiko Epson Corp. 215,217
179,026 Toshiba Corp. 733,437
14,000 Yokogawa Electric Corp. 182,604
--------------
10,023,162
--------------
ELECTRONIC PRODUCTION
EQUIPMENT
4,650 Advantest Corp. $ 327,836
11,400 Tokyo Electron Ltd. 588,663
--------------
916,499
--------------
ELECTRONICS/APPLIANCE
STORES
7,200 Yamada Denki Co., Ltd. 346,049
--------------
ELECTRONICS/APPLIANCES
27,000 Fuji Photo Film Co., Ltd. 893,651
19,000 Nikon Corp. 199,871
11,004 Pioneer Corp. 187,835
53,500 Sharp Corp. 836,447
45,296 Sony Corp. 1,669,597
--------------
3,787,401
--------------
ENGINEERING & CONSTRUCTION
11,546 JGC Corp. 118,391
70,000 Kajima Corp. 266,319
42,571 Obayashi Corp. 249,039
54,000 Shimizu Corporation 256,490
39,000 Taisei Corp. 136,870
--------------
1,027,109
--------------
FINANCE/RENTAL/LEASING
4,300 Acom Co., Ltd. 276,762
1,300 Aeon Credit Service
Co., Ltd. 85,829
2,550 Aiful Corp. 190,431
1,275 Aiful Corp. (Bonus
Shares) (WI)* 92,937
8,200 Credit Saison Co., Ltd. 280,476
4,800 Orix Corp. 653,944
5,300 Promise Co., Ltd. 343,206
3,830 Takefuji Corp. 242,297
--------------
2,165,882
--------------
FINANCIAL CONGLOMERATES
439 Mizuho Financial
Group, Inc. 2,064,276
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
21
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
FOOD RETAIL
27,603 Aeon Co., Ltd. $ 428,692
4,252 FamilyMart Co., Ltd. 132,071
19,507 Ito-Yokado Co., Ltd. 669,275
3,703 Lawson, Inc. 143,677
23,000 Seven - Eleven Japan
Co., Ltd. 647,348
--------------
2,021,063
--------------
FOOD: MEAT/FISH/DAIRY
13,000 Meiji Dairies Corp. 72,256
13,000 Nippon Meat Packers, Inc. 164,223
7,000 Yakult Honsha Co., Ltd. 138,789
--------------
375,268
--------------
FOOD: SPECIALTY/CANDY
42,000 Ajinomoto Co., Inc. 504,980
900 House Foods Corp. 12,853
8,500 Kikkoman Corp. 81,953
16,000 Meiji Seika Kaisha Ltd. 76,925
5,150 Nissin Food Products
Co., Ltd. 136,714
7,000 Yamazaki Baking Co., Ltd. 62,094
--------------
875,519
--------------
GAS DISTRIBUTORS
84,000 Osaka Gas Co., Ltd. 264,116
95,000 Tokyo Gas Co., Ltd. 380,604
--------------
644,720
--------------
HOME BUILDING
7,006 Daito Trust Construction
Co., Ltd. 280,530
37,000 Daiwa House Industry
Co., Ltd. 415,260
22,572 Sekisui Chemical Co., Ltd. 163,596
42,046 Sekisui House, Ltd. 444,669
--------------
1,304,055
--------------
HOUSEHOLD/PERSONAL CARE
34,000 Kao Corp. 781,365
23,000 Shiseido Company, Ltd. 292,774
2,700 Uni-Charm Corp. 120,691
--------------
1,194,830
--------------
INDUSTRIAL CONGLOMERATES
201,000 Hitachi, Ltd. $ 1,180,346
58,000 Kawasaki Heavy
Industries, Ltd. 112,285
--------------
1,292,631
--------------
INDUSTRIAL MACHINERY
18,053 Amada Co., Ltd. 111,936
9,400 Daikin Industries Ltd. 234,650
10,650 Fanuc Ltd. 629,838
63,530 Ishikawajima-Harima Heavy
Industries Co., Ltd.* 104,236
201,550 Mitsubishi Heavy
Industries, Ltd. 535,782
3,805 SMC Corporation 401,036
1,800 THK Co., Ltd. 33,731
--------------
2,051,209
--------------
INDUSTRIAL SPECIALTIES
70,500 Asahi Glass Company, Ltd. 781,193
12,400 Nitto Denko Corp. 676,951
--------------
1,458,144
--------------
INFORMATION TECHNOLOGY
SERVICES
5,900 CSK Corp. 225,796
2,700 Itochu Techno-Science
Corp. 86,812
40 Net One Systems Co., Ltd. 101,463
1,700 Nomura Research
Institute, Ltd. 161,966
104 NTT Data Corp. 320,458
15,800 Softbank Corp. 635,966
3,200 TIS Inc. 115,095
--------------
1,647,556
--------------
INTERNET SOFTWARE/SERVICES
124 Yahoo Japan Corp. 277,939
124 Yahoo Japan Corp. (Bonus
Shares) (WI)* 277,656
--------------
555,595
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
22
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
INVESTMENT BANKS/BROKERS
206,000 Daiwa Securities Group Inc. $ 1,304,035
71,000 Nikko Cordial Corp. 331,909
122,550 Nomura Holdings, Inc. 1,557,287
--------------
3,193,231
--------------
MAJOR BANKS
76,000 Bank of Yokohama
Ltd. (The) 434,460
45,000 Chiba Bank, Ltd. (The) 277,401
44,000 Joyo Bank, Ltd. (The) 220,060
228 Mitsubishi Tokyo Financial
Group, Inc. 1,978,895
52,123 Mitsui Trust Holdings,
Inc. 517,448
288,000 Resona Holdings, Inc.* 543,863
34,000 Shinsei Bank, Ltd. 184,459
36,000 Shizuoka Bank, Ltd. (The) 335,371
183 Sumitomo Mitsui Financial
Group, Inc. 1,182,152
77,081 Sumitomo Trust & Banking
Co., Ltd. (The) 482,217
228 UFJ Holdings, Inc.* 1,200,341
--------------
7,356,667
--------------
MAJOR TELECOMMUNICATIONS
414 Nippon Telegraph &
Telephone Corp. (NTT) 1,732,543
--------------
MARINE SHIPPING
3,000 Kamigumi Co. Ltd. 23,457
5,000 Kawasaki Kisen
Kaisha, Ltd. 32,630
8,000 Mitsui O.S.K. Lines, Ltd. 50,530
71,015 Nippon Yusen
Kabushiki Kaisha 420,032
--------------
526,649
--------------
MEDICAL SPECIALTIES
9,400 Olympus Corp. 190,520
12,850 Terumo Corp. 382,324
--------------
572,844
--------------
METAL FABRICATIONS
22,000 Minebea Co., Ltd. $ 87,495
113,000 Mitsubishi Materials Corp. 261,916
67,604 Mitsui Mining & Smelting
Co., Ltd. 290,776
44,553 NSK Ltd. 220,143
27,551 NTN Corp. 146,609
--------------
1,006,939
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
700 OBIC Co., Ltd. 126,892
9,485 Secom Co., Ltd. 380,128
2,500 USS Co. Ltd. 197,667
--------------
704,687
--------------
MISCELLANEOUS MANUFACTURING
23,527 Ebara Corp. 94,686
5,400 Kurita Water
Industries Ltd. 84,037
6,500 Takuma Co., Ltd. 52,594
--------------
231,317
--------------
MOTOR VEHICLES
57,109 Honda Motor Co., Ltd. 2,749,266
170,305 Nissan Motor Co., Ltd. 1,680,738
165,555 Toyota Motor Corp. 6,022,897
2,000 Yamaha Motor Co., Ltd. 35,106
--------------
10,488,007
--------------
MOVIES/ENTERTAINMENT
1,200 Namco Ltd. 16,076
3,600 Oriental Land Co. Ltd. 226,043
5,550 TOHO Co., Ltd. 87,779
--------------
329,898
--------------
OFFICE EQUIPMENT/SUPPLIES
5,200 Kokuyo Co., Ltd. 67,234
--------------
OIL & GAS PRODUCTION
11,000 Teikoku Oil Co., Ltd. 78,438
--------------
OIL REFINING/MARKETING
99,000 Nippon Oil Corp. 696,185
12,800 Showa Shell Sekiyu K.K. 128,699
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
23
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
8,000 TonenGeneral Sekiyu K.K. $ 85,427
--------------
910,311
--------------
OTHER CONSUMER SERVICES
3,754 Benesse Corp. 121,803
--------------
OTHER METALS/MINERALS
34,095 Dowa Mining Co., Ltd. 224,291
21,000 Nippon Mining
Holdings, Inc. 126,622
64,500 Sumitomo Metal Mining
Co., Ltd. 453,360
--------------
804,273
--------------
OTHER TRANSPORTATION
6,000 Mitsubishi Logistics Corp. 62,195
--------------
PACKAGED SOFTWARE
3,050 Oracle Corp. 133,095
7,200 Trend Micro Inc. 264,450
--------------
397,545
--------------
PERSONNEL SERVICES
2,100 Meitec Corp. 69,356
--------------
PHARMACEUTICALS: MAJOR
24,905 Sankyo Co., Ltd. 518,732
59,000 Takeda Pharmaceutical
Co., Ltd. 2,872,606
--------------
3,391,338
--------------
PHARMACEUTICALS: OTHER
28,600 Astellas Pharma Inc. 1,038,542
13,806 Chugai Pharmaceutical
Co., Ltd. 215,524
16,103 Daiichi Pharmaceutical
Co., Ltd. 373,418
16,203 Eisai Co., Ltd. 539,435
32 Kyowa Hakko Kogyo
Co., Ltd 237
20,181 Shionogi & Co., Ltd. 280,879
9,959 Taisho Pharmaceutical
Co., Ltd. 213,257
--------------
2,661,292
--------------
PROPERTY - CASUALTY INSURERS
106 Millea Holdings, Inc. $ 1,443,342
151,000 Mitsui Sumitomo Insurance
Co., Ltd. 1,373,830
55,000 Sompo Japan Insurance Inc. 533,980
--------------
3,351,152
--------------
PULP & PAPER
61 Nippon Paper Group, Inc. 262,699
69,000 Oji Paper Co. Ltd. 368,157
--------------
630,856
--------------
RAILROADS
88 Central Japan Railway Co. 723,910
211 East Japan Railway Co. 1,098,166
26,500 Keihin Electric Express
Railway Co., Ltd. 160,687
15,000 Keio Electric Railway
Co., Ltd. 84,797
103,550 Kintetsu Corp. 321,838
57,500 Tobu Railway Co., Ltd. 215,433
64,000 Tokyu Corp. 309,996
28 West Japan Railway Co. 103,809
--------------
3,018,636
--------------
REAL ESTATE DEVELOPMENT
95,000 Mitsubishi Estate Co., Ltd. 1,019,886
82,500 Mitsui Fudosan Co., Ltd. 920,490
31,500 Sumitomo Realty &
Development Co., Ltd. 359,339
--------------
2,299,715
--------------
REAL ESTATE INVESTMENT
TRUSTS
23 Japan Real Estate
Investments Corp. 189,462
22 Nippon Building Fund Inc. 197,070
--------------
386,532
--------------
RECREATIONAL PRODUCTS
6,900 Konami Corp. 148,174
6,808 Nintendo Co., Ltd. 776,420
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
24
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
6,450 Shimano, Inc. $ 213,863
7,900 Yamaha Corp. 117,051
--------------
1,255,508
--------------
REGIONAL BANKS
21,000 77 Bank, Ltd. (The) 142,566
34,000 Bank of Fukuoka, Ltd. (The) 206,165
61,000 Hokuhoku Financial
Group, Inc. 172,826
--------------
521,557
--------------
RESTAURANTS
8,807 Skylark Co., Ltd. 146,294
--------------
SEMICONDUCTORS
2,000 NEC Electronics Corp. 90,321
6,605 Rohm Co., Ltd. 622,912
--------------
713,233
--------------
SPECIALTY STORES
4,300 Shimachu Co., Ltd. 110,916
10,000 UNY Co., Ltd. 116,144
--------------
227,060
--------------
STEEL
30,800 JFE Holdings, Inc. 853,938
159,000 Kobe Steel Ltd. 287,354
410,108 Nippon Steel Corp. 1,039,318
242,000 Sumitomo Metal
Industries, Ltd. 428,826
--------------
2,609,436
--------------
TELECOMMUNICATION
EQUIPMENT
4,000 Uniden Corp. 80,517
--------------
TEXTILES
6,571 Nisshinbo Industries, Inc. 51,418
53,608 Teijin Ltd. 242,781
75,000 Toray Industries, Inc. 334,687
--------------
628,886
--------------
TOBACCO
59 Japan Tobacco, Inc. 759,194
--------------
TRUCKS/CONSTRUCTION/
FARM MACHINERY
64,500 Komatsu Ltd. $ 455,174
87,000 Kubota Corp. 449,670
--------------
904,844
--------------
WHOLESALE DISTRIBUTORS
74,051 Itochu Corp. 365,931
73,550 Marubeni Corporation 239,977
67,000 Mitsubishi Corp. 917,115
30,000 Mitsui & Co., Ltd. 285,204
50,000 Sumitomo Corporation 423,026
--------------
2,231,253
--------------
WIRELESS TELECOMMUNICATIONS
541 NTT DoCoMo, Inc. 835,860
--------------
TOTAL JAPAN 107,928,105
--------------
LUXEMBOURG++ (0.1%)
STEEL
25,974 Arcelor 525,447
--------------
MALAYSIA++ (0.8%)
AGRICULTURAL COMMODITIES/
MILLING
60,000 IOI Corporation Berhad 144,686
31,400 Kuala Lumpur Kepong
Berhad 53,712
--------------
198,398
--------------
BUILDING PRODUCTS
6,600 O.Y.L. Industries Berhad 61,690
--------------
CABLE/SATELLITE TV
87,700 Astro All Asia
Networks PLC* 120,232
--------------
CASINO/GAMING
63,300 Berjaya Sports Toto
Berhad 67,050
30,400 Genting Berhad 147,345
53,400 Magnum Corporation
Berhad 29,121
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
25
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
22,100 Tanjong PLC $ 73,949
--------------
317,465
--------------
ELECTRIC UTILITIES
51,000 Malakoff Berhad 98,761
74,000 Tenaga Nasional Berhad 206,583
74,666 YTL Corp. Berhad 105,437
--------------
410,781
--------------
ENGINEERING & CONSTRUCTION
36,000 Gamuda Berhad 44,011
--------------
FINANCIAL CONGLOMERATES
119,000 AMMB Holdings Berhad 78,993
--------------
FOOD: MAJOR DIVERSIFIED
9,000 Nestle (Malaysia) Berhad 57,143
--------------
HOTELS/RESORTS/CRUISELINES
39,800 Resorts World Berhad 100,279
--------------
MAJOR BANKS
144,100 Malayan Banking Berhad 441,332
--------------
MAJOR TELECOMMUNICATIONS
72,000 Telekom Malaysia Berhad 183,238
--------------
MARINE SHIPPING
46,100 Malaysian International
Shipping Berhad 216,378
--------------
MOTOR VEHICLES
22,000 Proton Holdings Berhad 45,464
--------------
OIL & GAS PIPELINES
12,000 Petronas Gas Berhad 22,307
--------------
OTHER TRANSPORTATION
139,000 Plus Expressways Berhad 109,514
--------------
REAL ESTATE DEVELOPMENT
64,500 SP Setia Berhad 68,010
--------------
REGIONAL BANKS
114,000 Commerce Asset-Holdings
Berhad 134,532
60,600 Hong Leong Bank Berhad 81,441
84,000 Public Bank Berhad 152,696
112,000 RHB Capital Berhad 66,428
--------------
435,097
--------------
TOBACCO
13,400 British American
Tobacco Berhad $ 151,871
--------------
WHOLESALE DISTRIBUTORS
116,700 Sime Darby Berhad 181,391
--------------
WIRELESS
TELECOMMUNICATIONS
61,000 Maxis Communications
Berhad 155,085
--------------
TOTAL MALAYSIA 3,398,679
--------------
NETHERLANDS++ (4.7%)
AEROSPACE & DEFENSE
12,252 European Aeronautic
Defense and Space Co.* 348,549
--------------
AIR FREIGHT/COURIERS
31,573 TPG NV 858,237
--------------
BEVERAGES: ALCOHOLIC
31,110 Heineken NV 987,989
--------------
CHEMICALS: SPECIALTY
4,082 DSM NV 274,025
--------------
ELECTRONIC EQUIPMENT/
INSTRUMENTS
4,702 Oce NV 70,004
--------------
ELECTRONIC PRODUCTION
EQUIPMENT
24,266 ASML Holding NV* 350,526
--------------
FINANCIAL CONGLOMERATES
93,722 ING Groep NV (Share
Certificates) 2,568,218
--------------
FOOD: MAJOR DIVERSIFIED
30,276 Unilever NV (Share
Certificates) 1,949,956
--------------
INDUSTRIAL CONGLOMERATES
41,496 Koninklijke (Royal) Philips
Electronics NV 1,034,463
--------------
INDUSTRIAL SPECIALTIES
14,608 Akzo Nobel NV 599,459
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
26
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
INTEGRATED OIL
111,681 Royal Dutch Petroleum Co. $ 6,509,790
--------------
INVESTMENT BANKS/BROKERS
5,529 Euronext NV 182,006
--------------
LIFE/HEALTH INSURANCE
77,116 Aegon NV 966,858
--------------
MAJOR BANKS
87,002 ABN AMRO Holding NV 2,128,128
--------------
MAJOR TELECOMMUNICATIONS
65,694 Koninklijke (Royal) KPN NV 547,995
--------------
PERSONNEL SERVICES
10,370 Vedior NV 159,378
--------------
PUBLISHING: BOOKS/
MAGAZINES
19,235 Reed Elsevier NV 276,694
7,245 VNU NV 203,799
10,142 Wolters Kluwer NV (Share
Certificates) 180,434
--------------
660,927
--------------
REAL ESTATE DEVELOPMENT
3,292 Rodamco Europe NV 248,532
--------------
REAL ESTATE INVESTMENT TRUSTS
4,011 Corio NV 215,202
1,634 Wereldhave NV 160,845
--------------
376,047
--------------
SEMICONDUCTORS
12,758 STMicroelectronics NV 180,850
--------------
WHOLESALE DISTRIBUTORS
3,478 Hagemeyer NV* 7,860
--------------
TOTAL NETHERLANDS 21,009,797
--------------
NEW ZEALAND++ (0.0%)
FOREST PRODUCTS
47,022 Carter Holt Harvey Ltd. 63,886
--------------
MAJOR TELECOMMUNICATIONS
23,290 Telecom Corporation of
New Zealand Ltd. $ 103,174
--------------
TOTAL NEW ZEALAND 167,060
--------------
NORWAY++ (0.5%)
CHEMICALS: AGRICULTURAL
13,167 Yara International ASA* 175,267
--------------
FINANCIAL CONGLOMERATES
14,953 DnB NOR ASA 142,443
--------------
FOOD: SPECIALTY/CANDY
11,900 Orkla ASA 397,711
--------------
INDUSTRIAL CONGLOMERATES
8,467 Norsk Hydro ASA 665,998
--------------
INTEGRATED OIL
26,000 Statoil ASA 457,105
--------------
MAJOR TELECOMMUNICATIONS
8,200 Telenor ASA 68,387
--------------
MISCELLANEOUS MANUFACTURING
6,715 Tomra Systems ASA 24,583
--------------
PULP & PAPER
6,700 Norske Skogindustrier ASA 116,732
--------------
TELECOMMUNICATION
EQUIPMENT
1,300 Tandberg ASA 13,244
--------------
TOTAL NORWAY 2,061,470
--------------
PORTUGAL++ (0.2%)
CABLE/SATELLITE TV
1,244 PT Multimedia Servicos de
Telecomunicacoes e
Multimedia SGPS S.A. 29,456
--------------
ELECTRIC UTILITIES
43,649 Energias de Portugal, S.A. 117,986
--------------
MAJOR TELECOMMUNICATIONS
29,820 Portugal Telecom, SGPS,
S.A. (Registered Shares) 327,173
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
27
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
OTHER TRANSPORTATION
18,426 Brisa-Auto Estradas de
Portugal, S.A. $ 146,989
--------------
REGIONAL BANKS
102,901 Banco Comercial
Portugues, S.A. 276,083
--------------
TOTAL PORTUGAL 897,687
--------------
SINGAPORE++ (1.7%)
AEROSPACE & DEFENSE
139,334 Singapore Technologies
Engineering Ltd. 211,209
--------------
AIR FREIGHT/COURIERS
146,000 Singapore Post Ltd. 76,695
--------------
AIRLINES
54,000 Singapore Airlines Ltd. 369,512
--------------
COMPUTER PERIPHERALS
6,043 Creative Technology, Ltd. 52,113
--------------
ELECTRONIC COMPONENTS
23,696 Venture Corp., Ltd. 201,840
--------------
ELECTRONIC PRODUCTION
EQUIPMENT
109,000 St Assembly Test
Services Ltd. 66,255
--------------
FINANCIAL CONGLOMERATES
58,000 Keppel Corp., Ltd. 379,238
--------------
HOSPITAL/NURSING
MANAGEMENT
69,000 Parkway Holdings Ltd. 70,123
--------------
HOTELS/RESORTS/CRUISELINES
8,962 Overseas Union
Enterprise Ltd. 46,599
--------------
INDUSTRIAL CONGLOMERATES
19,000 Fraser & Neave Ltd. 180,086
--------------
INVESTMENT BANKS/BROKERS
85,479 Singapore Exchange Ltd. 97,156
--------------
MAJOR BANKS
116,393 DBS Group Holdings Ltd. $ 1,017,197
111,039 Oversea - Chinese Banking
Corp., Ltd. 910,585
--------------
1,927,782
--------------
MAJOR TELECOMMUNICATIONS
710,633 Singapore
Telecommunications 1,111,440
--------------
MARINE SHIPPING
52,000 Neptune Orient Lines Ltd. 108,270
--------------
OTHER TRANSPORTATION
189,068 ComfortDelgro Corp. Ltd. 201,418
--------------
PUBLISHING: NEWSPAPERS
165,329 Singapore Press
Holdings Ltd. 440,179
--------------
REAL ESTATE DEVELOPMENT
110,000 Capitaland Ltd. 171,465
62,455 City Developments Ltd. 263,531
40,000 Keppel Land Ltd. 61,658
17,000 Singapore Land Ltd. 61,383
43,925 United Overseas
Land, Ltd. 59,598
--------------
617,635
--------------
REAL ESTATE INVESTMENT
TRUSTS
83,000 Ascendas Real Estate
Investment Trust 100,396
71,700 Capitamall Trust 95,487
--------------
195,883
--------------
REGIONAL BANKS
123,489 United Overseas Bank, Ltd. 1,079,814
--------------
SEMICONDUCTORS
110,000 Chartered Semiconductor
Manufacturing Ltd.* 64,302
--------------
SPECIALTY STORES
12,000 Cycle & Carriage Ltd. 89,654
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
28
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
TRUCKS/CONSTRUCTION/
FARM MACHINERY
97,353 SembCorp Industries Ltd. $ 117,313
62,000 SembCorp Marine Ltd. 74,022
--------------
191,335
--------------
TOTAL SINGAPORE 7,778,538
--------------
SPAIN++ (3.7%)
APPAREL/FOOTWEAR RETAIL
8,857 Industria de Diseno
Textil, S.A. 262,639
--------------
CABLE/SATELLITE TV
2,320 Antena 3 Television, S.A. 46,429
--------------
ELECTRIC UTILITIES
40,068 Endesa S.A. 874,957
32,852 Iberdrola S.A. 856,124
8,476 Union Fenosa, S.A. 254,214
--------------
1,985,295
--------------
ENGINEERING & CONSTRUCTION
1,325 Acciona S.A. 113,986
11,567 ACS Actividades de
Construccion y
Servicios S.A. 281,973
9,046 Cintra Concesiones de
Infraestructuras de
Transporte S.A. 96,812
1,456 Fomento de Construcciones
y Contratas S.A. 78,653
2,955 Grupo Ferrovial, S.A. 168,375
--------------
739,799
--------------
GAS DISTRIBUTORS
72,107 Gas Natural SDG, S.A. 2,055,101
--------------
INFORMATION TECHNOLOGY
SERVICES
2,821 Indra Sistemas S.A. 48,791
--------------
INTEGRATED OIL
51,430 Repsol YPF, S.A. 1,306,413
--------------
MAJOR BANKS
133,951 Banco Bilbao Vizcaya
Argentaria, S.A. $ 2,073,769
187,614 Banco Santander Central
Hispano, S.A. 2,189,343
--------------
4,263,112
--------------
MAJOR TELECOMMUNICATIONS
226,335 Telefonica S.A. 3,846,549
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
33,396 Amadeus Global Travel
Distribution S.A.
(A Shares) 311,688
--------------
OTHER TRANSPORTATION
17,721 Abertis Infraestructuras,
S.A. 389,444
--------------
REAL ESTATE DEVELOPMENT
3,276 Sacyr Vallehermoso S.A. 55,111
--------------
REGIONAL BANKS
7,436 Banco Popular
Espanol S.A. 463,043
--------------
STEEL
10,545 Acerinox S.A. 157,014
--------------
TOBACCO
13,717 Altadis, S.A. 581,788
--------------
WATER UTILITIES
9,345 Sociedad General de Aguas
de Barcelona, S.A. 190,877
--------------
TOTAL SPAIN 16,703,093
--------------
SWEDEN++ (2.2%)
ADVERTISING/MARKETING
SERVICES
4,900 Eniro AB 55,710
--------------
APPAREL/FOOTWEAR RETAIL
14,600 Hennes & Mauritz AB
(B Shares) 503,868
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
29
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
BROADCASTING
1,500 Modern Times Group MTG
AB (B Shares)* $ 46,238
--------------
ELECTRONICS/APPLIANCES
9,400 Electrolux AB (Series B) 190,005
--------------
ENGINEERING & CONSTRUCTION
17,580 Skanska AB (B Shares) 211,603
--------------
HOUSEHOLD/PERSONAL CARE
12,086 Svenska Cellulosa AB
(B Shares) 420,742
--------------
INDUSTRIAL MACHINERY
950 Alfa Laval AB 13,296
15,100 Assa Abloy AB (B Shares) 195,453
5,520 Atlas Copco AB (A Shares) 250,947
3,669 Atlas Copco AB (B Shares) 152,274
9,309 Sandvik AB 364,828
--------------
976,798
--------------
INFORMATION TECHNOLOGY
SERVICES
15,675 WM-Data AB (B Shares) 39,769
--------------
LIFE/HEALTH INSURANCE
19,662 Skandia Forsakrings AB 92,433
--------------
MAJOR BANKS
25,500 Skandinaviska Enskilda
Banken AB 450,028
41,500 Svenska Handelsbanken
AB (A Shares) 933,321
--------------
1,383,349
--------------
MAJOR TELECOMMUNICATIONS
2,485 Tele2 AB (B Shares)* 78,728
63,548 TeliaSonera AB 332,462
--------------
411,190
--------------
MEDICAL SPECIALTIES
7,600 Getinge AB (B Shares) 109,047
--------------
METAL FABRICATIONS
3,127 SKF AB (B Shares)* 131,831
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
43,200 Securitas AB (B Shares) $ 693,906
--------------
PULP & PAPER
5,550 Holmen AB (B Shares) 147,726
--------------
REGIONAL BANKS
148,484 Nordea Bank AB 1,410,048
--------------
STEEL
1,600 SSAB Svenskt Stal AB
(Series A) 36,877
--------------
TELECOMMUNICATION
EQUIPMENT
566,552 Telefonaktiebolaget LM
Ericsson (B Shares) 1,680,123
--------------
TOBACCO
25,600 Swedish Match AB 302,113
--------------
TRUCKS/CONSTRUCTION/
FARM MACHINERY
4,600 Scania AB (B Shares) 178,331
4,757 Volvo AB (A Shares) 185,750
9,930 Volvo AB (B Shares) 402,826
--------------
766,907
--------------
TOTAL SWEDEN 9,610,283
--------------
SWITZERLAND++ (5.7%)
BIOTECHNOLOGY
490 Serono SA (B Shares) 311,990
--------------
BUILDING PRODUCTS
185 Geberit AG 123,996
391 Schindler Holding AG 142,875
--------------
266,871
--------------
CHEMICALS: AGRICULTURAL
6,507 Syngenta AG* 672,270
--------------
CHEMICALS: SPECIALTY
3,518 Ciba Specialty Chemicals
AG (Registered Shares) 219,979
11,799 Clariant AG (Registered
Shares)* 184,540
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
30
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
1,910 Lonza Group AG
(Registered Shares) $ 114,853
--------------
519,372
--------------
COMPUTER PERIPHERALS
1,251 Logitech International S.A.
(Registered Shares)* 71,845
--------------
CONSTRUCTION MATERIALS
8,985 Holcim Ltd. (Registered
Shares) 545,473
--------------
ELECTRONIC EQUIPMENT/
INSTRUMENTS
329 Kudelski S.A. - Bearer* 10,809
--------------
FINANCIAL CONGLOMERATES
49,540 UBS AG (Registered
Shares) 3,967,187
--------------
FOOD: MAJOR DIVERSIFIED
19,725 Nestle S.A. (Registered
Shares) 5,173,530
--------------
HOUSEHOLD/PERSONAL CARE
399 Givaudan S.A. (Registered
Shares) 250,761
--------------
INDUSTRIAL CONGLOMERATES
78,670 ABB Ltd.* 487,956
--------------
MAJOR BANKS
35,965 Credit Suisse Group 1,512,116
--------------
MAJOR TELECOMMUNICATIONS
847 Swisscom AG (Registered
Shares) 291,946
--------------
MEDICAL SPECIALTIES
1,220 Nobel Biocare Holding AG 260,637
550 Straumann AG (Registered
Shares) 118,566
2,590 Synthes, Inc. 293,355
--------------
672,558
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
281 SGS S.A. 189,861
--------------
MULTI-LINE INSURANCE
2,415 Zurich Financial Services
AG* $ 407,421
--------------
OTHER CONSUMER SPECIALTIES
17,123 Compagnie Financiere
Richemont AG (Series A)
(Units)+ 509,517
1,099 Swatch Group AG
(B Shares) 140,534
2,258 Swatch Group AG
(Registered Shares) 59,171
--------------
709,222
--------------
PERSONNEL SERVICES
3,741 Adecco S.A. (Registered
Shares) 180,524
--------------
PHARMACEUTICALS: MAJOR
103,068 Novartis AG (Registered
Shares) 5,009,559
31,380 Roche Holding AG 3,791,740
--------------
8,801,299
--------------
PROPERTY - CASUALTY INSURERS
3,341 Swiss Re (Registered
Shares) 221,266
--------------
SPECIALTY STORES
82 Valora Holding AG 17,850
--------------
TOTAL SWITZERLAND 25,282,127
--------------
THAILAND++ (1.1%)
AGRICULTURAL COMMODITIES/
MILLING
561,072 Charoen Pokphand Foods
PCL (Alien Shares) 61,994
--------------
BROADCASTING
225,000 BEC World PCL
(Alien Shares) 78,687
--------------
CONSTRUCTION MATERIALS
25,100 Siam City Cement PCL
(Alien Shares) 176,832
42,694 Siam Cement PCL (The)* 244,892
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
31
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
77,200 Siam Cement PCL (The )
(Alien Shares) $ 466,328
--------------
888,052
--------------
ELECTRIC UTILITIES
43,076 Electricity Generating PCL
(Alien Shares) 85,729
--------------
ELECTRONIC COMPONENTS
79,600 Delta Electronics PCL
(Alien Shares) 35,705
48,280 Hana Microelectronics PCL
(Alien Shares) 23,859
--------------
59,564
--------------
FINANCE/RENTAL/LEASING
160,800 National Finance PCL (Alien
Shares) 53,790
96,500 TISCO Finance PCL (Alien
Shares) 57,603
--------------
111,393
--------------
HOME BUILDING
438,533 Land & Houses PCL* 78,665
327,808 Land & Houses PCL (Alien
Shares) 61,297
--------------
139,962
--------------
MAJOR BANKS
142,500 Kasikornbank PCL* 194,095
213,422 Kasikornbank PCL (Alien
Shares) 301,725
--------------
495,820
--------------
OIL & GAS PRODUCTION
25,839 PTT Exploration &
Production PCL (Alien
Shares) 227,876
--------------
OIL REFINING/MARKETING
186,600 PTT PCL (Alien Shares) 945,768
--------------
REGIONAL BANKS
88,500 Bangkok Bank PCL* 222,752
170,200 Bangkok Bank PCL
(Alien Shares) 462,970
126,200 Siam Commercial Bank
PCL (Alien Shares) $ 151,114
--------------
836,836
--------------
STEEL
1,060,000 Sahaviriya Steel Industries
PCL (Alien Shares) 55,337
--------------
TELECOMMUNICATION
EQUIPMENT
290,100 Shin Corp. PCL (Alien
Shares) 275,691
--------------
WIRELESS TELECOMMUNICATIONS
223,800 Advanced Info Service PCL
(Alien Shares) 538,799
--------------
TOTAL THAILAND 4,801,508
--------------
UNITED KINGDOM++ (21.5%)
ADVERTISING/MARKETING
SERVICES
34,438 Aegis Group PLC 63,344
30,676 WPP Group PLC 333,693
19,898 Yell Group PLC 152,622
--------------
549,659
--------------
AEROSPACE & DEFENSE
140,514 BAE Systems PLC 685,789
4,652 Cobham PLC 114,938
21,756 Meggitt Holdings, PLC 107,057
81,019 Rolls-Royce Group PLC* 367,548
4,743,200 Rolls-Royce Group PLC
(Class B)* 9,268
--------------
1,284,600
--------------
AIR FREIGHT/COURIERS
19,337 Exel PLC 304,696
--------------
AIRLINES
28,648 British Airways PLC* 130,679
--------------
AUTO PARTS: O.E.M.
20,979 GKN PLC 92,438
--------------
BEVERAGES: ALCOHOLIC
166,956 Diageo PLC 2,470,518
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
32
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
BROADCASTING
120,216 ITV PLC $ 278,180
--------------
CABLE/SATELLITE TV
34,821 British Sky Broadcasting
Group PLC 360,223
--------------
CASINO/GAMING
106,962 Hilton Group PLC 558,650
27,402 William Hill PLC 282,013
--------------
840,663
--------------
CATALOG/SPECIALTY
DISTRIBUTION
29,150 GUS PLC 464,357
--------------
CHEMICALS: MAJOR DIVERSIFIED
64,278 Imperial Chemical
Industries PLC 310,098
14,671 Johnson Matthey PLC 256,700
--------------
566,798
--------------
CHEMICALS: SPECIALTY
28,903 BOC Group PLC 535,339
--------------
COMMERCIAL PRINTING/FORMS
35,528 De La Rue PLC 250,920
--------------
CONSTRUCTION MATERIALS
24,228 BPB PLC 210,834
40,001 Hanson PLC 369,264
--------------
580,098
--------------
CONTAINERS/PACKAGING
26,861 Rexam PLC 236,057
--------------
DEPARTMENT STORES
51,013 Marks & Spencer
Group PLC 329,146
8,016 Next PLC 227,018
--------------
556,164
--------------
DRUGSTORE CHAINS
30,080 Boots Group PLC 345,610
--------------
ELECTRIC UTILITIES
173,055 National Grid Transco PLC 1,702,059
41,522 Scottish & Southern
Energy PLC $ 744,795
97,765 Scottish Power PLC 790,688
--------------
3,237,542
--------------
ELECTRONIC EQUIPMENT/
INSTRUMENTS
59,525 Invensys PLC* 14,615
--------------
ELECTRONICS/APPLIANCE STORES
58,907 Dixons Group PLC 160,351
7,934 Kesa Electricals PLC 40,276
--------------
200,627
--------------
ENGINEERING & CONSTRUCTION
10,546 AMEC PLC 65,217
22,775 Balfour Beatty PLC 132,700
--------------
197,917
--------------
FINANCIAL CONGLOMERATES
226,968 Lloyds TSB Group PLC 1,948,241
--------------
FINANCIAL PUBLISHING/SERVICES
46,445 Reuters Group PLC 341,862
--------------
FOOD RETAIL
53,416 Sainsbury (J) PLC 288,268
303,225 Tesco PLC 1,788,674
--------------
2,076,942
--------------
FOOD: MAJOR DIVERSIFIED
147,629 Unilever PLC 1,404,476
--------------
FOOD: SPECIALTY/CANDY
100,114 Cadbury Schweppes PLC 1,006,185
35,138 Tate & Lyle PLC 312,013
--------------
1,318,198
--------------
GAS DISTRIBUTORS
102,369 Centrica PLC 434,051
--------------
HOME BUILDING
7,671 Barratt Developments PLC 87,249
3,439 Bellway PLC 50,249
3,603 Berkeley Group Holdings
PLC (The) 53,024
8,634 Persimmon PLC 111,702
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
33
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
18,763 Taylor Woodrow PLC $ 102,844
12,544 Wimpey (George), PLC 93,642
--------------
498,710
--------------
HOME IMPROVEMENT CHAINS
35,611 Kingfisher PLC 167,763
--------------
HOTELS/RESORTS/CRUISELINES
11,492 Carnival PLC 592,964
42,644 InterContinental Hotels
Group PLC 506,468
--------------
1,099,432
--------------
HOUSEHOLD/PERSONAL CARE
51,252 Reckitt Benckiser PLC 1,663,281
--------------
INDUSTRIAL CONGLOMERATES
23,810 Smiths Group PLC 390,216
40,460 Tomkins PLC 190,156
--------------
580,372
--------------
INDUSTRIAL MACHINERY
8,278 Fki PLC 14,739
--------------
INDUSTRIAL SPECIALTIES
76,673 Pilkington PLC 158,571
--------------
INFORMATION TECHNOLOGY
SERVICES
38,188 LogicaCMG PLC 119,742
25,500 Misys PLC 99,087
--------------
218,829
--------------
INTEGRATED OIL
170,276 BG Group PLC 1,315,593
1,090,238 BP PLC 11,100,141
462,609 Shell Transport & Trading
Co. PLC 4,140,904
--------------
16,556,638
--------------
LIFE/HEALTH INSURANCE
78,742 Friends Provident PLC 241,889
68,087 Prudential PLC 613,718
--------------
855,607
--------------
MAJOR BANKS
265,515 Barclays PLC 2,733,422
132,897 HBOS PLC $ 1,963,144
533,902 HSBC Holdings PLC 8,530,274
118,318 Royal Bank of Scotland
Group PLC 3,568,111
--------------
16,794,951
--------------
MAJOR TELECOMMUNICATIONS
269,141 BT Group PLC 1,027,957
60,818 Cable & Wireless PLC 139,387
--------------
1,167,344
--------------
MARINE SHIPPING
14,210 Associated British Ports
Holdings PLC 125,202
43,671 Peninsular & Oriental
Steam Navigation
Co. (The) 224,034
--------------
349,236
--------------
MEDICAL SPECIALTIES
29,884 Smith & Nephew PLC 307,508
--------------
MISCELLANEOUS COMMERCIAL
SERVICES
24,128 BBA Group PLC 128,020
64,147 Brambles Industries PLC 357,691
5,488 Davis Service Group
PLC (The) 45,044
29,284 Group 4 Securicor PLC* 73,616
170,364 Hays PLC 425,052
193,028 Rentokil Initial PLC 578,967
48,638 Serco Group PLC 221,974
--------------
1,830,364
--------------
MISCELLANEOUS MANUFACTURING
18,159 IMI PLC 138,194
--------------
MOTOR VEHICLES
2,453 TI Automotive Ltd.* 0
--------------
MOVIES/ENTERTAINMENT
25,828 EMI Group PLC 117,475
39,247 Rank Group PLC 194,670
--------------
312,145
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
34
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
MULTI-LINE INSURANCE
102,866 Aviva PLC $ 1,160,506
251,633 Legal & General
Group PLC 502,726
104,161 Royal & Sun Alliance
Insurance Group PLC 150,618
--------------
1,813,850
--------------
OTHER METALS/MINERALS
77,328 Anglo American PLC 1,722,480
134,385 BHP Billiton PLC 1,637,148
58,309 Rio Tinto PLC 1,757,673
--------------
5,117,301
--------------
OTHER TRANSPORTATION
7,128 Arriva PLC 68,915
54,380 BAA PLC 602,197
18,131 FirstGroup PLC 110,379
27,544 Stagecoach Group PLC 54,433
--------------
835,924
--------------
PACKAGED SOFTWARE
57,936 Sage Group (The) PLC 216,802
--------------
PERSONNEL SERVICES
70,900 Capita Group PLC 509,856
--------------
PHARMACEUTICALS: MAJOR
72,697 AstraZeneca PLC 3,186,098
255,712 GlaxoSmithKline PLC 6,433,342
--------------
9,619,440
--------------
PUBLISHING: BOOKS/
MAGAZINES
8,195 EMAP PLC 124,655
25,056 Pearson PLC 304,434
39,546 Reed Elsevier PLC 386,567
--------------
815,656
--------------
PUBLISHING: NEWSPAPERS
9,804 Daily Mail and General
Trust 125,009
10,787 United Business Media PLC 102,276
--------------
227,285
--------------
PULP & PAPER
20,993 Bunzl PLC $ 204,772
--------------
RAILROADS
6,822 National Express
Group PLC 109,703
--------------
REAL ESTATE DEVELOPMENT
36,732 British Land Company PLC 574,730
20,142 Hammerson PLC 327,835
32,872 Land Securities Group PLC 836,552
17,759 Liberty International PLC 320,366
28,465 Slough Estates PLC 261,087
--------------
2,320,570
--------------
RESTAURANTS
138,618 Compass Group PLC 619,864
23,616 Enterprise Inns PLC 328,705
35,301 Mitchells & Butlers PLC 201,981
16,896 Punch Taverns PLC 204,181
20,109 Whitbread PLC 326,797
--------------
1,681,528
--------------
SEMICONDUCTORS
45,515 ARM Holdings PLC 83,664
--------------
SPECIALTY STORES
9,191 MFI Furniture Group PLC 17,854
47,369 Signet Group PLC 91,668
--------------
109,522
--------------
STEEL
201,843 Corus Group PLC* 168,237
--------------
TOBACCO
72,440 British American
Tobacco PLC 1,355,204
30,600 Imperial Tobacco
Group PLC 875,088
--------------
2,230,292
--------------
WATER UTILITIES
28,442 Kelda Group PLC 343,177
24,794 Severn Trent PLC 459,430
--------------
802,607
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
35
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
WHOLESALE DISTRIBUTORS
24,166 Electrocomponents PLC $ 106,226
25,263 Wolseley PLC 507,855
--------------
614,081
--------------
WIRELESS TELECOMMUNICATIONS
1,792,156 Vodafone Group PLC 4,675,616
--------------
TOTAL UNITED KINGDOM 95,891,860
--------------
TOTAL COMMON STOCKS
(COST $354,880,642) 418,229,216
--------------
PREFERRED STOCKS (1.2%)
BRAZIL (1.1%)
AEROSPACE & DEFENSE
22,844 Empresa Brasileira de
Aeronautica S.A. 163,607
--------------
BEVERAGES: ALCOHOLIC
1,123,375 Companhia de Bebidas das
Americas 307,553
--------------
CONTAINERS/PACKAGING
41,000 Klabin SA 62,135
--------------
ELECTRIC UTILITIES
7,544,007 Centrais Electricas
Brasileiras S.A. (Class B) 98,656
6,648,000 Companhia Energetica de
Minas Gerais 186,478
--------------
285,134
--------------
FOOD RETAIL
1,000 Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar (Sponsored ADR) 20,100
--------------
FOOD: MEAT/FISH/DAIRY
33,000 Sadia S.A. 52,753
--------------
INTEGRATED OIL
37,000 Petroleo Brasileiro S.A. 1,360,095
--------------
MAJOR TELECOMMUNICATIONS
15,878,000 Brasil Telecom
Participacoes S.A. 102,722
--------------
OTHER METALS/MINERALS
37,552 Companhia Vale do Rio
Doce (Class A) $ 879,643
--------------
PULP & PAPER
29,976 Aracruz Celulose S.A.
(B Shares) 92,517
5,535 Votorantim Celulose e
Papel S.A. 60,776
--------------
153,293
--------------
REGIONAL BANKS
12,000 Banco Bradesco S.A. 369,271
2,867 Banco Itau Holding
Financeira SA 492,345
--------------
861,616
--------------
SPECIALTY
TELECOMMUNICATIONS
8,278,844 Embratel
Participacoes S.A.* 13,660
19,113 Tele Norte Leste
Participacoes S.A. 282,091
--------------
295,751
--------------
STEEL
111,000 Caemi Mineracao e
Metalurgia S.A. 85,646
971,000 Companhia Siderurgica de
Tubarao 48,219
15,000 Gerdau S.A. 147,492
7,000 Usinas Siderurgicas de Minas
Gerais S.A. (Class A) 140,679
--------------
422,036
--------------
WIRELESS TELECOMMUNICATIONS
16,270,680 Tele Centro Oeste Celular
Participacoes S.A. 57,235
28,556,000 Telesp Celular
Participacoes S.A.* 60,903
--------------
118,138
--------------
TOTAL BRAZIL 5,084,576
--------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
36
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
GERMANY++(0.1%)
BROADCASTING
1,963 ProSiebenSat.1 Media AG $ 33,698
--------------
HOUSEHOLD/PERSONAL CARE
1,974 Henkel KGaA - Vorzug 170,301
--------------
MOTOR VEHICLES
150 Porsche AG 97,028
2,455 Volkswagen AG 77,238
--------------
174,266
--------------
TOTAL GERMANY 378,265
--------------
TOTAL PREFERRED STOCKS
(COST $3,992,359) 5,462,841
--------------
CONVERTIBLE PREFERRED
STOCKS (0.0%)
59,939 Siam Commercial Bank
PCL (Alien Shares)
(COST $62,143) 71,392
--------------
RIGHTS (0.0%)
AUSTRIA (0.0%)
REAL ESTATE DEVELOPMENT
32,634 Immofinanz Immobilien
Anlagan AG* 2,237
--------------
BRAZIL (0.0%)
SPECIALTY
TELECOMMUNICATIONS
197 Tele Norte Leste
Participacoes S.A.* 140
--------------
SWEDEN (0.0%)
STEEL
1,600 SSAB Svenskt Stal* 0
--------------
TOTAL RIGHTS
(COST $0) 2,377
--------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (3.1%)
REPURCHASE AGREEMENT
$ 13,852 Joint repurchase agreement
account 2.95% due
05/02/05 (dated
04/29/05; proceeds
$13,855,405) (a)
(COST $13,852,000) $ 13,852,000
--------------
TOTAL INVESTMENTS
(COST $372,787,144) (b) (c) 98.1% 437,617,826
OTHER ASSETS IN EXCESS OF
LIABILITIES 1.9 8,663,603
----- --------------
NET ASSETS 100.0% $ 446,281,429
===== ==============
</Table>
- ----------
ADR AMERICAN DEPOSITARY RECEIPT.
GDR GLOBAL DEPOSITARY 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.
++ SECURITIES WITH TOTAL MARKET VALUE EQUAL TO $418,312,356 HAVE BEEN
VALUED AT THEIR FAIR VALUE AS DETERMINED IN GOOD FAITH UNDER
PROCEDURES ESTABLISHED BY AND UNDER THE GENERAL SUPERVISION OF THE
FUND'S TRUSTEES.
(a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS.
(b) SECURITIES HAVE BEEN DESIGNATED AS COLLATERAL IN AN AMOUNT EQUAL TO
$110,011,669, 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 APPROXIMATES THE
AGGREGATE COST FOR BOOK PURPOSES. THE AGGREGATE GROSS UNREALIZED
APPRECIATION IS $81,487,236, AND THE AGGREGATE GROSS UNREALIZED
DEPRECIATION IS $16,656,554 RESULTING IN NET UNREALIZED APPRECIATION
OF $64,830,682.
SEE NOTES TO FINANCIAL STATEMENTS
37
<Page>
FUTURES CONTRACTS OPEN AT APRIL 30, 2005:
<Table>
<Caption>
UNREALIZED
NUMBER OF DESCRIPTION, DELIVERY UNDERLYING FACE APPRECIATION
CONTRACTS LONG/SHORT MONTH, AND YEAR AMOUNT AT VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------
30 Short EURX CAC40 10
EURO Future
June/2005 $ (1,481,008) $ 43,092
21 Long EURX DAX
Index Future
June/2005 2,841,252 (85,515)
43 Short EURX STOXX
50 Future
June/2005 (1,608,191) 70,662
90 Long HANG SENG
Index Future
May/2005 7,927,150 53,511
73 Long TOPIX
Index Future
June/2005 7,811,243 (450,553)
190 Long MSCI Taiwan
Index Future
May/2005 4,569,500 19,000
--------------
Net unrealized depreciation $ (349,803)
==============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
38
<Page>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT APRIL 30, 2005:
<Table>
<Caption>
UNREALIZED
CONTRACTS IN EXCHANGE DELIVERY APPRECIATION
TO DELIVER FOR DATE (DEPRECIATION)
- --------------------------------------------------------------------------------
$ 4,469,618 TWD 139,832,000 5/23/2005 $ 10,971
EUR 546,000 $ 734,763 6/16/2005 31,613
$ 7,295,667 EUR 5,444,650 6/16/2005 (283,939)
EUR 45,085,543 $ 60,455,204 6/16/2005 2,393,141
$ 21,346,859 EUR 15,913,509 6/16/2005 (853,123)
$ 13,546,917 EUR 10,091,414 6/16/2005 (550,991)
EUR 7,170,664 $ 9,615,287 6/16/2005 380,762
EUR 1,192,790 $ 1,599,824 6/16/2005 63,725
$ 14,644,538 EUR 10,916,133 6/16/2005 (586,524)
$ 16,729,542 EUR 12,479,704 6/16/2005 (657,930)
EUR 300,000 $ 396,957 6/16/2005 10,611
EUR 770,175 $ 995,459 6/16/2005 3,612
$ 5,705,657 JPY 592,310,000 6/16/2005 (38,053)
$ 3,351,624 JPY 348,552,135 6/16/2005 (16,452)
JPY 67,370,000 $ 638,397 6/16/2005 (6,243)
--------------
Net unrealized depreciation $ (98,820)
==============
</Table>
CURRENCY ABBREVIATIONS:
GBP British Pound.
DKK Danish Krone.
EUR Euro.
JPY Japanese Yen.
TWD New Taiwan Dollar.
SEK Swedish Krona.
CHF Swiss Franc.
SEE NOTES TO FINANCIAL STATEMENTS
39
<Page>
MORGAN STANLEY INTERNATIONAL FUND
SUMMARY OF INVESTMENTS - APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- --------------------------------------------------------------------------------
Major Banks $ 59,347,439 13.3%
Integrated Oil 37,791,311 8.5
Pharmaceuticals: Major 26,804,302 6.0
Major Telecommunications 16,144,942 3.6
Electric Utilities 15,885,037 3.6
Financial Conglomerates 14,509,521 3.3
Repurchased Agreement 13,852,000 3.1
Motor Vehicles 12,286,304 2.8
Other Metals/Minerals 11,035,016 2.5
Electronic Equipment/Instruments 10,221,461 2.3
Food: Major Diversified 9,343,008 2.1
Industrial Conglomerates 9,135,788 2.1
Real Estate Development 9,083,986 2.0
Regional Banks 7,431,556 1.7
Multi-Line Insurance 6,975,162 1.6
Wireless Telecommunications 6,387,813 1.4
Chemicals: Specialty 6,269,017 1.4
Food Retail 6,177,955 1.4
Telecommunication Equipment 5,700,137 1.3
Construction Materials 5,177,358 1.2
Beverages: Alcoholic 5,111,575 1.2
Steel 4,719,740 1.1
Gas Distributors 4,616,926 1.0
Chemicals: Major Diversified 4,580,426 1.0
Investment Banks/Brokers 4,444,605 1.0
Electronics/Appliances 4,172,450 0.9
Tobacco 4,094,938 0.9
Miscellaneous Commercial Services 4,001,910 0.9
Property - Casualty Insurers 3,901,142 0.9
Household/Personal Care 3,885,830 0.9
Engineering & Construction 3,643,993 0.8
Wholesale Distributors 3,355,579 0.8
Railroads 3,264,153 0.7
Industrial Machinery 3,254,282 0.7
Pharmaceuticals: Other 3,235,060 0.7
Life/Health Insurance 3,011,471 0.7
Oil & Gas Production 2,915,466 0.7
Oil Refining/Marketing $ 2,876,772 0.6%
Other Transportation 2,846,378 0.6
Electronic Components 2,806,496 0.6
Food: Specialty/Candy 2,591,428 0.6
Aerospace & Defense 2,499,777 0.6
Pulp & Paper 2,448,669 0.6
Information Technology Services 2,394,106 0.5
Air Freight/Couriers 2,387,137 0.5
Electrical Products 2,382,559 0.5
Finance/Rental/Leasing 2,277,275 0.5
Industrial Specialties 2,216,174 0.5
Department Stores 2,121,941 0.5
Packaged Software 2,006,090 0.5
Building Products 1,976,851 0.4
Home Building 1,942,727 0.4
Restaurants 1,936,673 0.4
Trucks/Construction/Farm Machinery 1,932,259 0.4
Hotels/Resorts/Cruiselines 1,923,345 0.4
Marine Shipping 1,900,698 0.4
Auto Parts: O.E.M. 1,849,594 0.4
Publishing: Books/Magazines 1,807,391 0.4
Medical Specialties 1,786,516 0.4
Apparel/Footwear Retail 1,711,280 0.4
Casino/Gaming 1,556,295 0.4
Electronic Production Equipment 1,345,531 0.3
Automotive Aftermarket 1,302,712 0.3
Apparel/Footwear 1,296,573 0.3
Water Utilities 1,294,551 0.3
Recreational Products 1,255,508 0.3
Metal Fabrications 1,160,583 0.3
Semiconductors 1,156,910 0.3
Commercial Printing/Forms 1,035,509 0.2
Broadcasting 1,012,539 0.2
Real Estate Investment Trusts 964,187 0.2
Airlines 959,898 0.2
Chemicals: Agricultural 930,056 0.2
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
40
<Page>
<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- --------------------------------------------------------------------------------
Personnel Services $ 919,114 0.2%
Other Consumer Specialties 905,397 0.2
Media Conglomerates 849,310 0.2
Containers/Packaging 813,582 0.2
Publishing: Newspapers 805,147 0.2
Advertising/Marketing Services 774,902 0.2
Textiles 674,474 0.2
Movies/Entertainment 642,043 0.1
Internet Software/Services 614,872 0.1
Computer Processing Hardware 612,186 0.1
Specialty Stores 595,603 0.1
Cable/Satellite TV 556,340 0.1
Biotechnology 551,677 0.1
Electronics/Appliance Stores 546,676 0.1
Aluminum 505,462 0.1
Miscellaneous Manufacturing 480,582 0.1
Catalog/Specialty Distribution 464,357 0.1
Food: Meat/Fish/Dairy 428,021 0.1
Agricultural Commodities/Milling 364,721 0.1
Drugstore Chains 345,610 0.1
Financial Publishing/Services 341,862 0.1
Other Consumer Services 325,137 0.1
Specialty Telecommunications 306,261 0.1
Medical/Nursing Services 274,872 0.1
Precious Metals 240,952 0.1
Food Distributors 216,022 0.1
Beverages: Non-Alcoholic 199,066 0.1
Investment Trusts/Mutual Funds 194,394 0.0
Home Improvement Chains 167,763 0.0
Coal 167,129 0.0
Hospital/Nursing Management 144,553 0.0
Medical Distributors $ 131,223 0.0%
Tools/Hardware 124,863 0.0
Computer Peripherals 123,958 0.0
Consumer Sundries 111,769 0.0
Oil & Gas Pipelines 86,072 0.0
Trucking 76,211 0.0
Office Equipment/Supplies 67,234 0.0
Forest Products 63,886 0.0
Contract Drilling 51,605 0.0
Oilfield Services/Equipment 45,745 0.0
Data Processing Services 45,526 0.0
-------------- -------
$ 437,617,826* 98.1%
============== =======
</Table>
- ----------
* DOES NOT INCLUDE OPEN LONG AND SHORT FUTURES CONTRACTS WITH UNDERLYING FACE
AMOUNTS OF $23,149,145 AND $3,089,199, RESPECTIVELY, AND NET UNREALIZED
DEPRECIATION OF $463,557 AND UNREALIZED APPRECIATION OF $113,754,
RESPECTIVELY. ALSO OPEN FORWARD FOREIGN CURRENCY CONTRACTS WITH NET
UNREALIZED DEPRECIATION OF $98,820.
SEE NOTES TO FINANCIAL STATEMENTS
41
<Page>
MORGAN STANLEY INTERNATIONAL FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2005 (UNAUDITED)
<Table>
ASSETS:
Investments in securities, at value (cost $372,787,144) $ 437,617,826
Cash (including $2,334,612 in foreign currency at value with cost of $2,337,080 and $5,075,282 in segregation) 7,410,237
Unrealized appreciation on open forward foreign currency contracts 2,894,435
Receivable for:
Investments sold 2,425,629
Dividends 1,852,204
Foreign withholding taxes reclaimed 411,826
Shares of beneficial interest sold 335,252
Prepaid expenses and other assets 123,247
---------------
TOTAL ASSETS 453,070,656
---------------
LIABILITIES:
Unrealized depreciation on open forward foreign currency contracts 2,993,255
Payable for:
Investments purchased 1,977,991
Shares of beneficial interest redeemed 435,072
Variation margin 429,748
Compensated forward foreign currency contracts 307,420
Investment advisory fee 243,297
Distribution fee 195,816
Administration fee 29,944
Accrued expenses and other payables 176,684
---------------
TOTAL LIABILITIES 6,789,227
---------------
NET ASSETS $ 446,281,429
===============
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 549,181,612
Net unrealized appreciation 64,388,426
Accumulated undistributed net investment income 467,801
Accumulated net realized loss (167,756,410)
---------------
NET ASSETS $ 446,281,429
===============
CLASS A SHARES:
Net Assets $ 107,301,329
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 11,005,103
NET ASSET VALUE PER SHARE $ 9.75
===============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 10.29
===============
CLASS B SHARES:
Net Assets $ 173,881,950
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 18,023,474
NET ASSET VALUE PER SHARE $ 9.65
===============
CLASS C SHARES:
Net Assets $ 23,374,556
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 2,424,431
NET ASSET VALUE PER SHARE $ 9.64
===============
CLASS D SHARES:
Net Assets $ 141,723,594
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 14,469,777
NET ASSET VALUE PER SHARE $ 9.79
===============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
42
<Page>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2005 (UNAUDITED)
<Table>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $512,397 foreign withholding tax) $ 5,753,437
Interest 297,348
---------------
TOTAL INCOME 6,050,785
---------------
EXPENSES
Investment advisory fee 1,509,011
Distribution fee (Class A shares) 113,034
Distribution fee (Class B shares) 997,638
Distribution fee (Class C shares) 123,746
Transfer agent fees and expenses 405,574
Administration fee 185,724
Custodian fees 102,535
Shareholder reports and notices 74,446
Professional fees 31,785
Registration fees 28,114
Trustees' fees and expenses 2,920
Other 55,250
---------------
TOTAL EXPENSES 3,629,777
---------------
NET INVESTMENT INCOME 2,421,008
---------------
NET REALIZED AND UNREALIZED GAIN:
NET REALIZED GAIN ON:
Investments 10,420,347
Futures contracts 2,382,989
Foreign exchange transactions 1,288,811
---------------
NET REALIZED GAIN 14,092,147
---------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments 17,414,836
Futures contracts (493,783)
Translation of forward foreign currency contracts and other assets and liabilities denominated in foreign
currencies (1,217,950)
---------------
NET APPRECIATION 15,703,103
---------------
NET GAIN 29,795,250
---------------
NET INCREASE $ 32,216,258
===============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
43
<Page>
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 2005 OCTOBER 31, 2004
-------------- ----------------
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 2,421,008 $ 1,584,158
Net realized gain 14,092,147 15,527,795
Net change in unrealized appreciation 15,703,103 46,522,794
-------------- ----------------
NET INCREASE 32,216,258 63,634,747
-------------- ----------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares (1,047,932) (765,430)
Class B shares (769,484) (1,153,468)
Class C shares (106,040) (145,401)
Class D shares (2,076,588) (1,794,154)
-------------- ----------------
TOTAL DIVIDENDS (4,000,044) (3,858,453)
-------------- ----------------
Net decrease from transactions in shares of beneficial interest (27,914,284) (40,776,673)
-------------- ----------------
NET INCREASE 301,930 18,999,621
NET ASSETS:
Beginning of period 445,979,499 426,979,878
-------------- ----------------
END OF PERIOD
(INCLUDING ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME OF $467,801
AND $2,046,837, RESPECTIVELY) $ 446,281,429 $ 445,979,499
============== ================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
44
<Page>
MORGAN STANLEY INTERNATIONAL FUND
NOTES TO FINANCIAL STATEMENTS - APRIL 30, 2005 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley International Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is
long-term capital growth. The Fund was organized as a Massachusetts business
trust on October 23, 1998 and commenced operations June 28, 1999.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or traded
on the New York Stock Exchange ("NYSE") or American Stock Exchange or other
exchange is valued at its latest sale price prior to the time when assets are
valued; if there were no sales that day, the security is valued at the mean
between the last reported bid and asked price; (2) an equity portfolio security
listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price;
if there were no sales that day, the security is valued at the mean between the
last reported bid and asked price; (3) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the mean
between the last reported bid and asked price. In cases where a security is
traded on more than one exchange, the security is valued on the exchange
designated as the primary market; (4) for equity securities traded on foreign
exchanges, the last reported sale price or the latest bid price may be used if
there were no sales on a particular day; (5) futures are valued at the latest
price published by the commodities exchange on which they trade; (6) when market
quotations are not readily available or Morgan Stanley Investment Advisors Inc.
(the "Investment Adviser") ,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 Adviser
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
45
<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 Adviser, 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
46
<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.
I. USE OF ESTIMATES -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
2. INVESTMENT ADVISORY/ADMINISTRATION AGREEMENTS
Pursuant to an Investment Advisory Agreement, the Fund pays the Investment
Adviser an advisory fee, accrued daily and payable monthly, by applying the
annual rate of 0.65% to the net assets of the Fund determined as of the close of
each business day.
Pursuant to an Administration Agreement with Morgan Stanley Services Company
Inc. ("the Administrator"), an affiliate of the Investment Adviser, the Fund
pays an administration fee, accrued daily and payable monthly, by applying the
annual rate of 0.08% to the Fund's daily net assets.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Adviser and Administrator. 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.
47
<Page>
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
$19,926,147 at April 30, 2005.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Financial Advisors or other selected
broker-dealer representatives may be reimbursed in the subsequent calendar year.
For the six months ended April 30, 2005, the distribution fee was accrued for
Class A shares and Class C shares at the annual rate of 0.25% and 0.99%,
respectively.
The Distributor has informed the Fund that for the six months ended April 30,
2005, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $191,246 and $1,347,
respectively and received $27,295 in front-end sales charges from sales of the
Fund's Class A shares. The respective shareholders pay such charges which are
not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended April 30, 2005 aggregated
$45,349,664 and $73,291,811, respectively.
Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and
Distributor, is the Fund's transfer agent.
The Fund has 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.
48
<Page>
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 2005 OCTOBER 31, 2004
------------------------------ ------------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
CLASS A SHARES
Sold 3,530,069 $ 34,815,960 5,568,257 $ 48,803,046
Reinvestment of dividends 104,282 1,035,517 88,825 753,234
Redeemed (1,739,427) (17,219,472) (4,442,745) (38,827,899)
------------- ------------- ------------- -------------
Net increase -- Class A 1,894,924 18,632,005 1,214,337 10,728,381
------------- ------------- ------------- -------------
CLASS B SHARES
Sold 1,156,938 11,328,955 2,029,109 17,561,668
Reinvestment of dividends 69,959 689,091 123,296 1,036,918
Redeemed (4,592,758) (44,886,898) (6,691,618) (57,927,196)
------------- ------------- ------------- -------------
Net decrease -- Class B (3,365,861) (32,868,852) (4,539,213) (39,328,610)
------------- ------------- ------------- -------------
CLASS C SHARES
Sold 139,885 1,362,801 284,158 2,452,466
Reinvestment of dividends 9,863 97,057 16,051 134,827
Redeemed (433,224) (4,230,706) (806,681) (6,943,031)
------------- ------------- ------------- -------------
Net decrease -- Class C (283,476) (2,770,848) (506,472) (4,355,738)
------------- ------------- ------------- -------------
CLASS D SHARES
Sold 1,008,995 10,051,692 3,339,028 29,357,682
Reinvestment of dividends 177,714 1,770,033 177,395 1,507,858
Redeemed (2,284,992) (22,728,314) (4,380,962) (38,686,246)
------------- ------------- ------------- -------------
Net decrease -- Class D (1,098,283) (10,906,589) (864,539) (7,820,706)
------------- ------------- ------------- -------------
Net decrease in Fund (2,852,696) $ (27,914,284) (4,695,887) $ (40,776,673)
============= ============= ============= =============
</Table>
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
49
<Page>
the underlying securities. Risks may also arise upon entering into these
contracts from the potential inability of the counterparties to meet the terms
of their contracts.
At April 30, 2005, the Fund's cash balance consisted principally of interest
bearing deposits with J.P. Morgan Chase, the Fund's custodian.
7. FEDERAL INCOME TAX STATUS
The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for tax purposes are reported as distributions of paid-in-capital.
As of October 31, 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.
8. LEGAL MATTERS
The Investment Adviser, certain affiliates of the Investment Adviser, certain
officers of such affiliates and certain investment companies advised by the
Investment Adviser or its affiliates, including the Fund, are named as
defendants in a consolidated class action. This consolidated action also names
as defendants certain individual Trustees and Directors of the Morgan Stanley
funds. The consolidated amended complaint generally alleges that defendants,
including the Fund, violated their statutory disclosure obligations and
fiduciary duties by failing properly to disclose (i) that the Investment Adviser
and certain affiliates of the Investment Adviser allegedly offered economic
incentives to brokers and others to recommend the funds advised by the
Investment Adviser or its affiliates to investors rather than funds managed by
other companies, and (ii) that the funds advised by the Investment Adviser 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. On March 10, 2005,
Plaintiffs sought leave to supplement their complaint to assert claims on behalf
of other investors. While the Fund and Adviser believe that each 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.
50
<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 SIX FOR THE YEAR ENDED OCTOBER 31,
MONTHS ENDED -------------------------------------------------------------------
APRIL 30, 2005 2004 2003 2002 2001 2000
-------------- ----------- ----------- ---------- ---------- ----------
(UNAUDITED)
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 9.19 $ 8.03 $ 6.70 $ 7.77 $ 10.29 $ 10.57
-------------- ----------- ----------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income++ 0.07 0.06 0.08 0.04 0.06 0.11
Net realized and unrealized gain (loss) 0.61 1.20 1.33 (1.03) (2.07) (0.39)
-------------- ----------- ----------- ---------- ---------- ----------
Total income (loss) from investment
operations 0.68 1.26 1.41 (0.99) (2.01) (0.28)
-------------- ----------- ----------- ---------- ---------- ----------
Less dividends and distributions from:
Net investment income (0.12) (0.10) (0.08) (0.08) - -
Net realized gain - - - - (0.51) -
-------------- ----------- ----------- ---------- ---------- ----------
Total dividends and distributions (0.12) (0.10) (0.08) (0.08) (0.51) -
-------------- ----------- ----------- ---------- ---------- ----------
Net asset value, end of period $ 9.75 $ 9.19 $ 8.03 $ 6.70 $ 7.77 $ 10.29
============== =========== =========== ========== ========== ==========
TOTAL RETURN+ 7.21%(1) 15.89% 21.31% (12.93)% (20.36)% (2.65)%
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 1.28%(2) 1.57% 1.58% 1.56% 1.46%(4) 1.47%
Net investment income 1.33%(2) 0.67% 1.02% 0.54% 0.73% 0.95%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 107,301 $ 83,766 $ 63,422 $ 44,373 $ 37,974 $ 46,535
Portfolio turnover rate 10%(1) 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) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
51
<Page>
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31,
MONTHS ENDED -------------------------------------------------------------------
APRIL 30, 2005 2004 2003 2002 2001 2000
-------------- ----------- ----------- ---------- ---------- ----------
(UNAUDITED)
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 9.06 $ 7.93 $ 6.58 $ 7.62 $ 10.19 $ 10.55
-------------- ----------- ----------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss)++ 0.03 (0.01) 0.01 (0.02) 0.00 0.02
Net realized and unrealized gain (loss) 0.60 1.19 1.34 (1.02) (2.06) (0.38)
-------------- ----------- ----------- ---------- ---------- ----------
Total income (loss) from investment
operations 0.63 1.18 1.35 (1.04) (2.06) (0.36)
-------------- ----------- ----------- ---------- ---------- ----------
Less dividends and distributions from:
Net investment income (0.04) (0.05) - - - -
Net realized gain - - - - (0.51) -
-------------- ----------- ----------- ---------- ---------- ----------
Total dividends and distributions (0.04) (0.05) - - (0.51) -
-------------- ----------- ----------- ---------- ---------- ----------
Net asset value, end of period $ 9.65 $ 9.06 $ 7.93 $ 6.58 $ 7.62 $ 10.19
============== =========== =========== ========== ========== ==========
TOTAL RETURN+ 6.91%(1) 14.87% 20.52% (13.65)% (21.08)% (3.41)%
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 2.03%(2) 2.33% 2.37% 2.32% 2.24%(4) 2.22%
Net investment income (loss) 0.58%(2) (0.09)% 0.23% (0.22)% (0.06)% 0.20%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 173,882 $ 193,796 $ 205,544 $ 217,216 $ 340,158 $ 561,375
Portfolio turnover rate 10%(1) 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) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
52
<Page>
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31,
MONTHS ENDED -------------------------------------------------------------------
APRIL 30, 2005 2004 2003 2002 2001 2000
-------------- ----------- ----------- ---------- ---------- ----------
(UNAUDITED)
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 9.06 $ 7.92 $ 6.59 $ 7.62 $ 10.19 $ 10.55
-------------- ----------- ----------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income (loss)++ 0.03 (0.01) 0.01 (0.01) (0.01) 0.02
Net realized and unrealized gain (loss) 0.59 1.20 1.33 (1.02) (2.05) (0.38)
-------------- ----------- ----------- ---------- ---------- ----------
Total income (loss) from investment
operations 0.62 1.19 1.34 (1.03) (2.06) (0.36)
-------------- ----------- ----------- ---------- ---------- ----------
Less dividends and distributions from:
Net investment income (0.04) (0.05) (0.01) - - -
Net realized gain - - - - (0.51) -
-------------- ----------- ----------- ---------- ---------- ----------
Total dividends and distributions (0.04) (0.05) (0.01) - (0.51) -
-------------- ----------- ----------- ---------- ---------- ----------
Net asset value, end of period $ 9.64 $ 9.06 $ 7.92 $ 6.59 $ 7.62 $ 10.19
============== =========== =========== ========== ========== ==========
TOTAL RETURN+ 6.84%(1) 15.03% 20.40% (13.52)% (21.08)% (3.41)%
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 2.02%(2) 2.31% 2.37% 2.18% 2.24%(4) 2.22%
Net investment income (loss) 0.59%(2) (0.07)% 0.23% (0.08)% (0.06)% 0.20%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 23,375 $ 24,527 $ 25,471 $ 26,195 $ 39,079 $ 69,640
Portfolio turnover rate 10%(1) 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) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
53
<Page>
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED OCTOBER 31,
MONTHS ENDED -------------------------------------------------------------------
APRIL 30, 2005 2004 2003 2002 2001 2000
-------------- ----------- ----------- ---------- ---------- ----------
(UNAUDITED)
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 9.24 $ 8.07 $ 6.73 $ 7.80 $ 10.32 $ 10.58
-------------- ----------- ----------- ---------- ---------- ----------
Income (loss) from investment operations:
Net investment income++ 0.08 0.08 0.08 0.06 0.08 0.15
Net realized and unrealized gain (loss) 0.61 1.20 1.36 (1.04) (2.09) (0.41)
-------------- ----------- ----------- ---------- ---------- ----------
Total income (loss) from investment
operations 0.69 1.28 1.44 (0.98) (2.01) (0.26)
-------------- ----------- ----------- ---------- ---------- ----------
Less dividends and distributions from:
Net investment income (0.14) (0.11) (0.10) (0.09) - -
Net realized gain - - - - (0.51) -
-------------- ----------- ----------- ---------- ---------- ----------
Total dividends and distributions (0.14) (0.11) (0.10) (0.09) (0.51) -
-------------- ----------- ----------- ---------- ---------- ----------
Net asset value, end of period $ 9.79 $ 9.24 $ 8.07 $ 6.73 $ 7.80 $ 10.32
============== =========== =========== ========== ========== ==========
TOTAL RETURN+ 7.39%(1) 15.97% 21.68% (12.70)% (20.30)% (2.46)%
RATIOS TO AVERAGE NET ASSETS(3):
Expenses 1.03%(2) 1.33% 1.37% 1.32 % 1.24%(4) 1.22%
Net investment income 1.58%(2) 0.91% 1.23% 0.78 % 0.94% 1.20%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 141,724 $ 143,890 $ 132,544 $ 120,329 $ 124,065 $ 98,465
Portfolio turnover rate 10%(1) 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) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC
EXPENSES.
(4) DOES NOT REFLECT THE EFFECT OF EXPENSE OFFSET OF 0.01%.
SEE NOTES TO FINANCIAL STATEMENTS
54
<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 ADVISER
Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020
The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors and accordingly they do not
express an opinion thereon.
This report is submitted for the general information of the shareholders of the
Fund. For more detailed information about the Fund, its fees and expenses and
other pertinent information, please read its Prospectus. The Fund's Statement of
Additional Information contains additional information about the Fund, including
its trustees. It is available, without charge, by calling (800) 869-NEWS.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective Prospectus. Read the
Prospectus carefully before investing.
Investments and services offered through Morgan Stanley DW Inc., member SIPC.
Morgan Stanley Distributors Inc., member NASD.
(C) 2005 Morgan Stanley
[MORGAN STANLEY LOGO]
36075RPT-RA05-OO446P-Y04/05
[GRAPHIC]
MORGAN STANLEY FUNDS
MORGAN STANLEY
INTERNATIONAL FUND
SEMIANNUAL REPORT
APRIL 30, 2005
[MORGAN STANLEY LOGO]
<Page>
Item 2. Code of Ethics.
Not applicable for semiannual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semiannual reports.
Item 4. Principal Accountant Fees and Services
Not applicable for semiannual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semiannual reports.
Item 6.
Refer to Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semiannual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Applicable only to reports filed by closed-end funds.
Item 9. Closed-End Fund Repurchases
Applicable to reports filed by closed-end funds.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
<Page>
Item 11. 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 12. Exhibits
(a) Code of Ethics - Not applicable for semiannual reports.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley International Fund
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
June 16, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
June 16, 2005
/s/ Francis Smith
Francis Smith
Principal Financial Officer
June 16, 2005