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: 811-03870
Morgan Stanley U.S. Government Securities Trust
(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: December 31, 2003
Date of reporting period: June 30, 2003
Item 1. Report to Stockholders
Welcome, Shareholder:
In this report, you'll learn about how your investment in Morgan Stanley U.S. Government Securities Trust performed during the semiannual period. The portfolio management team will provide an overview of the market climate, and discuss some of the factors that helped or hindered performance during the reporting period. In addition, this report includes the Fund's financial statements and a list of Fund investments, as well as other information.
 | This material must be preceded or accompanied by a prospectus for the fund being offered. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that the Fund will achieve its investment objective. The Fund is subject to market risk. which is the possibility that the market values of securities owned by the Fund will decline and, therefore, the value of the Fund shares may be less than what you paid for them. Accordingly you can lose money investing in this Fund. |
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| Fund Report |
| For the six-month period ended June 30, 2003 |
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Total Return for the Six Months Ended June 30, 2003
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||
| Class A | | | | Class B | | | | Class C | | | | Class D | | | | Lehman U.S. Government Index1 | | | | Lipper General U.S. Government Funds Index2 | ||||||||||||
| 2.13% | | | | 2.06 | % | | | | 1.93 | % | | | | 2.20 | % | | | | 3.63 | % | | | | 2.53 | % | |||||||
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| The performance of the Fund's four share classes varies because each has different expenses. The total return figures shown assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. If sales charges were included, returns would be lower. Past performance is no guarantee of future results. See Performance Summary for standardized performance information. |
Market Conditions
The six-month period ended June 30, 2003 was a remarkable time for the fixed-income markets. During that period, the Federal Reserve Bank (the "Fed") cut the federal funds rate by 25 basis points to a scant 1 percent. Moreover, the Fed indicated in the announcement following its May 6 meeting that its policy focus had shifted to taking whatever steps it deemed necessary to restore the U.S. economy to a more solid growth trajectory and to attempt to avoid the possibility (however slim) of deflation. Benchmark U.S. Treasury rates fell to levels not seen in 45 years.
Prior to the beginning of the period, already slow growth showed even greater softness as geopolitical concerns took their toll. While the Fed's stance did raise expectations for a more meaningful turn in the economic cycle, economic data remained lackluster during the first six months of 2003. There was, however, some improvement in the data and in confidence after the war in Iraq drew to a close.
Falling interest rates had a substantial impact on GNMA and other mortgage-backed securities. Homeowners were aggressive in their efforts to capitalize on lower refinancing costs, and prepayments reached record levels. As a result, mortgage-backed securities, and especially higher-coupon mortgages, lagged the benchmark Treasury market.
Performance Analysis
The Fund underperformed its benchmark, the Lehman Brothers U.S. Government Index, due to its conservative portfolio structure. With rates at historically low levels, our analysis indicated that the Treasury yield curve appeared to be priced as if the U.S. economy would remain well below full employment level for five years, and somewhat below full employment for a decade. We believed this assessment to be unduly pessimistic in light of the potential for the economy's return to positive growth. Given that such a return would be likely to result in interest rates rising, we kept the Fund's interest-rate sensitivity below that of its benchmark, which caused it to lag as interest rates fell.
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Given our economic expectations, we also thought it prudent to shift the Fund's holdings in the mortgage sector into securities with higher coupons that are priced for faster prepayment speeds than our models suggest are likely to occur. This action was a drag on the Fund's relative returns during the period as market participants' expectations for even faster prepayments caused the prices of these securities to fall.
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| PORTFOLIO COMPOSITION | | |||||
| Short Term | | 32.78 | % | |||
| U.S. Treasuries | | 31.32 | ||||
| Mortgage-Backed Securities | | 29.07 | ||||
| U.S. Government Agencies | | 6.83 | ||||
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| Subject to change daily. All percentages are as a percentage of total investments. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. |
Investment Strategy
The Fund invests all of its assets in securities backed by the full faith and credit of the U.S. government. While the Fund's investments are obligations of the U.S. government, the U.S. government does not guarantee the value of the Fund's shares.
Special Meeting of Shareholders
On April 22, 2003, a special meeting of the Fund's shareholders was held for the purpose of approving amendments to the Fund's Investment Restrictions to enable the Fund to invest in financial futures contracts and related options thereon. The results were as follows:
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| For | | 231,094,786 | ||||
| Against | | 21,157,759 | ||||
| Abstain | | 23,707,283 | ||||
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3
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| Performance Summary |
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Average Annual Total Returns — Period Ended June 30, 2003
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| Class A Shares* (since 07/28/97) | | Class B Shares** (since 06/29/84) | | Class C Shares† (since 07/28/97) | | Class D Shares†† (since 07/28/97) | |||||||||||
| Symbol | | USGAX | | USGBX | | USGCX | | USGDX | ||||||||||
| 1 Year | | 8.22% | 3 | | 7.95 | % 3 | | 7.69% | 3 | | 8.42% | 3 | ||||||
| 3.62% | 4 | | 2.95 | % 4 | | 6.69% | 4 | | |||||||||
| 5 Years | | 6.72% | 3 | | 6.49 | % 3 | | 6.16% | 3 | | 6.90% | 3 | ||||||
| 5.80% | 4 | | 6.18 | % 4 | | 6.16% | 4 | | |||||||||
| 10 Years | | | 6.12 | % 3 | | | ||||||||||||
| | 6.12 | % 4 | | | |||||||||||||
| Since Inception | | 6.87% | 3 | | 7.73 | % 3 | | 6.44% | 3 | | 7.11% | 3 | ||||||
| 6.09% | 4 | | 7.73 | % 4 | | 6.44% | 4 | | |||||||||
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| Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. The 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. |
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Notes on Performance
| (1) | The Lehman Brothers U.S. Government Index is a broad-based measure of all U.S. government and Treasury securities. 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 General U.S. Government Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper General U.S. Government Funds classification. The Index is adjusted for capital gains distributions and income dividends. There are currently 30 funds represented in this 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. |
| (3) | Figure shown assumes reinvestment of all distributions and does not reflect the deduction of any sales charges. |
| (4) | Figure shown assumes reinvestment of all distributions and the deduction of the maximum applicable sales charge. See the Fund's current prospectus for complete details on fees and sales charges. |
| * | The maximum front-end sales charge for Class A is 4.25%. |
| ** | The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The CDSC declines to 0% after six years. |
| † | The maximum CDSC for Class C is 1% for shares redeemed within one year of purchase. |
| †† | Class D has no sales charge. |
4
Morgan Stanley U.S. Government Securities Trust
Portfolio of Investments
June 30, 2003 (unaudited)
| | | | | | | | | | | | | | |
| PRINCIPAL AMOUNT IN THOUSANDS | | DESCRIPTION AND MATURITY DATE | | COUPON RATE | | VALUE | ||||||||
| Mortgage-Backed Securities (31.3%) | |||||||||||||
| Government National Mortgage Assoc. I (30.8%) | |||||||||||||
| $ | 310,000 | | * | | 5.50 | % | | $ | 321,796,900 | |||||
| 100,000 | | * | | 6.00 | | 104,750,000 | ||||||||
| 65,503 | | 02/15/28–03/15/29 | | 6.00 | | 68,696,534 | ||||||||
| 371,982 | | 10/15/22–07/15/31 | | 6.50 | | 390,581,323 | ||||||||
| 289,614 | | 04/15/17–03/15/27 | | 7.00 | | 305,905,112 | ||||||||
| 120,681 | | 01/15/06–10/15/31 | | 7.50 | | 128,223,094 | ||||||||
| 38,379 | | 10/15/16–09/15/31 | | 8.00 | | 41,389,723 | ||||||||
| 48,897 | | 07/15/06–04/15/25 | | 8.50 | | 52,672,200 | ||||||||
| 37,244 | | 10/15/08–08/15/21 | | 9.00 | | 41,510,475 | ||||||||
| 23,373 | | 10/15/09–12/15/20 | | 9.50 | | 26,314,561 | ||||||||
| 28,143 | | 11/15/09–11/15/20 | | 10.00 | | 32,339,362 | ||||||||
| 111 | | 05/15/10–06/15/15 | | 12.50 | | 131,796 | ||||||||
| | | 1,514,311,080 | |||||||||||
| Government National Mortgage Assoc. II (0.5%) | |||||||||||||
| 10,721 | | 01/20/24–02/20/24 | | 6.50 | | 11,200,352 | ||||||||
| 12,886 | | 03/20/26–07/20/29 | | 7.00 | | 13,553,874 | ||||||||
| | | 24,754,226 | |||||||||||
| Government National Mortgage Assoc. GPM I (0.0%) | |||||||||||||
| 1,214 | | 08/15/13–07/15/15 | | 12.25 | | 1,435,232 | ||||||||
| Total Mortgage-Backed Securities (Cost $1,473,867,224) | | 1,540,500,538 | |||||||||||
| U.S. Government Obligations (33.7%) | |||||||||||||
| U.S. Treasury Bonds (17.9%) | |||||||||||||
| 151,500 | | 08/15/27 | | 6.375 | | 189,783,292 | ||||||||
| 174,500 | | 02/15/27 | | 6.625 | | 224,580,104 | ||||||||
| 236,000 | | 02/15/25 | | 7.625 | | 335,553,296 | ||||||||
| 87,225 | | 08/15/20 | | 8.75 | | 133,573,487 | ||||||||
| | | 883,490,179 | |||||||||||
| U.S. Treasury Notes (14.4%) | |||||||||||||
| 155,000 | | 11/15/06 | | 3.50 | | 163,385,810 | ||||||||
| 206,350 | | 02/15/05 | | 7.50 | | 227,242,938 | ||||||||
| 285,000 | | 11/15/04 | | 7.875 | | 311,039,595 | ||||||||
| 4,750 | | 02/15/15 | | 11.25 | | 8,094,295 | ||||||||
| | | 709,762,638 | |||||||||||
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See Notes to Financial Statements
5
Morgan Stanley U.S. Government Securities Trust
Portfolio of Investments June 30, 2003 (unaudited) continued
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| PRINCIPAL AMOUNT IN THOUSANDS | | DESCRIPTION AND MATURITY DATE | | COUPON RATE | | VALUE | ||||||||
| U.S. Treasury Strips (1.4%) | |||||||||||||
| $ | 40,000 | | 08/15/10 | | 0.00 | % | | $ | 31,882,960 | |||||
| 45,000 | | 02/15/11 | | 0.00 | | 34,854,570 | ||||||||
| | | 66,737,530 | |||||||||||
| Total U.S. Government Obligations (Cost $1,580,482,370) | | 1,659,990,347 | |||||||||||
| U.S. Government Agencies (7.3%) | |||||||||||||
| Housing Urban Development Ser 99-A (0.8%) | |||||||||||||
| 18,800 | | 08/01/10 | | 6.06 | | 21,048,104 | ||||||||
| 15,290 | | 08/01/11 | | 6.16 | | 17,255,988 | ||||||||
| | | 38,304,092 | |||||||||||
| Resolution Funding Corp. Zero Coupon Strips (6.5%) | |||||||||||||
| 46,000 | | 07/15/03 | | 0.00 | | 45,976,402 | ||||||||
| 69,000 | | 10/15/03 | | 0.00 | | 68,765,262 | ||||||||
| 74,000 | | 10/15/08 | | 0.00 | | 64,014,662 | ||||||||
| 138,134 | | 01/15/12 | | 0.00 | | 100,540,556 | ||||||||
| 61,607 | | 04/15/12 | | 0.00 | | 44,134,207 | ||||||||
| | | 323,431,089 | |||||||||||
| Total U.S. Government Agencies (Cost $334,521,507) | | 361,735,181 | |||||||||||
| Short-Term Investments (a) (35.3%) | |||||||||||||
| U.S. Treasury Bills | |||||||||||||
| 102,100 | | 09/18/03 | | 0.79 | | 101,922,998 | ||||||||
| 3,200 | | 10/09/03 | | 0.795 | | 3,192,933 | ||||||||
| 200,000 | | 07/10/03 | | 0.89 | | 199,955,500 | ||||||||
| 80,600 | | 07/10/03 | | 0.90 | | 80,581,865 | ||||||||
| 100,000 | | 07/10/03 | | 0.92 | | 99,977,000 | ||||||||
| 277,000 | | 08/14/03 | | 1.015 | | 276,656,366 | ||||||||
| 8,000 | | 08/21/03 | | 1.035 | | 7,988,270 | ||||||||
| 39,200 | | 08/07/03 | | 1.075 | | 39,156,690 | ||||||||
| 35,000 | | 08/07/03 | | 1.085 | | 34,960,970 | ||||||||
| 169,600 | | 08/21/03–08/28/03 | | 1.095 | | 169,317,746 | ||||||||
| 74,000 | | 08/21/03 | | 1.10 | | 73,884,683 | ||||||||
| 43,900 | | 08/07/03 | | 1.135 | | 43,848,789 | ||||||||
| 1,300 | | 07/10/03 | | 1.145 | | 1,299,628 | ||||||||
| 1,500 | | 07/24/03 | | 1.15 | | 1,498,898 | ||||||||
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See Notes to Financial Statements
6
Morgan Stanley U.S. Government Securities Trust
Portfolio of Investments June 30, 2003 (unaudited) continued
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| PRINCIPAL AMOUNT IN THOUSANDS | | DESCRIPTION AND MATURITY DATE | | COUPON RATE | | VALUE | ||||||||
| $ | 144,300 | | 07/03/03–08/14/03 | | 1.155 | % | | $ | 144,164,525 | |||||
| 154,000 | | 07/24/03 | | 1.16 | | 153,885,869 | ||||||||
| 100,000 | | 10/09/03 | | 1.175 | | 99,673,611 | ||||||||
| 25,400 | | 07/17/03 | | 1.185 | | 25,386,623 | ||||||||
| 180,000 | | 07/17/03 | | 1.21 | | 179,903,200 | ||||||||
| Total Short-Term Investments (Cost $1,737,256,164) | | 1,737,256,164 | |||||||||||
| Total Investments (Cost $5,126,127,265) (b) (c) | | 107.6 | % | | 5,299,482,230 | ||||||||
| Liabilities in Excess of Other Assets | | (7.6 | ) | | (376,496,822 | ) | |||||||
| Net Assets | | 100.0 | % | | $ | 4,922,985,408 | |||||||
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| GPM | Graduated Payment Mortgage. |
| * | Securities purchased on a forward commitment basis with an approximate principal amount and no definite maturity date; the actual principal amount and maturity date will be determined upon settlement. |
| (a) | Purchased on a discount basis. The interest rates shown have been adjusted to reflect a money market equivalent yield. |
| (b) | Securities have been designated as collateral in an amount equal to $426,546,900 in connection with securities purchased on a forward commitment basis. |
| (c) | The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The gross and net unrealized appreciation is $173,354,965. |
See Notes to Financial Statements
7
Morgan Stanley U.S. Government Securities Trust
Financial Statements
Statement of Assets and Liabilities
June 30, 2003 (unaudited)
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| Assets: | ||||||
| Investments in securities, at value (cost $5,126,127,265) | | $ | 5,299,482,230 | |||
| Cash | | 1,629,265 | ||||
| Receivable for: | | |||||
| Interest | | 35,614,865 | ||||
| Investments sold | | 21,889,723 | ||||
| Shares of beneficial interest sold | | 4,911,682 | ||||
| Prepaid expenses and other assets | | 1,719,198 | ||||
| Total Assets | | 5,365,246,963 | ||||
| Liabilities: | | |||||
| Payable for: | | |||||
| Investments purchased | | 429,174,271 | ||||
| Shares of beneficial interest redeemed | | 6,011,510 | ||||
| Distribution fee | | 2,853,499 | ||||
| Dividends and distributions to shareholders | | 1,970,327 | ||||
| Investment management fee | | 1,844,471 | ||||
| Accrued expenses and other payables | | 407,477 | ||||
| Total Liabilities | | 442,261,555 | ||||
| Net Assets | | $ | 4,922,985,408 | |||
| Composition of Net Assets: | | |||||
| Paid-in-capital | | $ | 4,863,067,421 | |||
| Net unrealized appreciation | | 173,354,965 | ||||
| Dividends in excess of net investment income | | (28,093,312 | ) | |||
| Accumulated net realized loss | | (85,343,666 | ) | |||
| Net Assets | | $ | 4,922,985,408 | |||
| Class A Shares: | | |||||
| Net Assets | | $ | 270,070,156 | |||
| Shares Outstanding (unlimited authorized, $.01 par value) | | 28,630,256 | ||||
| Net Asset Value Per Share | | $ | 9.43 | |||
| Maximum Offering Price Per Share, (net asset value plus 4.44% of net asset value) | | $ | 9.85 | |||
| Class B Shares: | | |||||
| Net Assets | | $ | 4,189,232,907 | |||
| Shares Outstanding (unlimited authorized, $.01 par value) | | 443,160,918 | ||||
| Net Asset Value Per Share | | $ | 9.45 | |||
| Class C Shares: | | |||||
| Net Assets | | $ | 132,828,328 | |||
| Shares Outstanding (unlimited authorized, $.01 par value) | | 13,955,629 | ||||
| Net Asset Value Per Share | | $ | 9.52 | |||
| Class D Shares: | | |||||
| Net Assets | | $ | 330,854,017 | |||
| Shares Outstanding (unlimited authorized, $.01 par value) | | 35,043,269 | ||||
| Net Asset Value Per Share | | $ | 9.44 | |||
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See Notes to Financial Statements
8
Morgan Stanley U.S. Government Securities Trust
Financial Statements continued
Statement of Operations
For the six months ended June 30, 2003 (unaudited)
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| Net Investment Income: | | |||||
| Interest Income | | $ | 97,607,744 | |||
| Expenses | | |||||
| Distribution fee (Class A shares) | | 164,287 | ||||
| Distribution fee (Class B shares) | | 16,157,140 | ||||
| Distribution fee (Class C shares) | | 497,796 | ||||
| Investment management fee | | 10,888,922 | ||||
| Transfer agent fees and expenses | | 2,181,860 | ||||
| Custodian fees | | 382,638 | ||||
| Shareholder reports and notices | | 90,674 | ||||
| Registration fees | | 58,389 | ||||
| Professional fees | | 26,459 | ||||
| Trustees' fees and expenses | | 11,426 | ||||
| Other | | 178,648 | ||||
| Total Expenses | | 30,638,239 | ||||
| Less: distribution fee rebate (Class B shares) | | (10,140,640 | ) | |||
| Net Expenses | | 20,497,599 | ||||
| Net Investment Income | | 77,110,145 | ||||
| Net Realized and Unrealized Gain (Loss): | | |||||
| Net realized gain | | 39,781,494 | ||||
| Net change in unrealized appreciation | | (8,955,103 | ) | |||
| Net Gain | | 30,826,391 | ||||
| Net Increase | | $ | 107,936,536 | |||
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See Notes to Financial Statements
9
Morgan Stanley U.S. Government Securities Trust
Financial Statements continued
Statement of Changes in Net Assets
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| FOR THE SIX MONTHS ENDED JUNE 30, 2003 | | FOR THE YEAR ENDED DECEMBER 31, 2002 | |||||||
| (unaudited) | | ||||||||
| Increase (Decrease) in Net Assets: | ||||||||||
| Operations: | ||||||||||
| Net investment income | | $ | 77,110,145 | | $ | 201,556,647 | ||||
| Net realized gain | | 39,781,494 | | 112,542,103 | ||||||
| Net change in unrealized appreciation | | (8,955,103 | ) | | 126,519,788 | |||||
| Net Increase | | 107,936,536 | | 440,618,538 | ||||||
| Dividends to Shareholders from Net Investment Income: | ||||||||||
| Class A shares | | (4,967,188 | ) | | (8,662,841 | ) | ||||
| Class B shares | | (81,189,801 | ) | | (200,811,470 | ) | ||||
| Class C shares | | (2,176,955 | ) | | (4,001,567 | ) | ||||
| Class D shares | | (6,399,944 | ) | | (10,153,806 | ) | ||||
| Total Dividends | | (94,733,888 | ) | | (223,629,684 | ) | ||||
| Net increase (decrease) from transactions in shares of beneficial interest | | (205,608,960 | ) | | 547,928,025 | |||||
| Net Increase (Decrease) | | (192,406,312 | ) | | 764,916,879 | |||||
| Net Assets: | ||||||||||
| Beginning of period | | 5,115,391,720 | | 4,350,474,841 | ||||||
| End of Period (Including dividends in excess of net investment income of $28,093,312 and $10,469,569, respectively) | | $ | 4,922,985,408 | | $ | 5,115,391,720 | ||||
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See Notes to Financial Statements
10
Morgan Stanley U.S. Government Securities Trust
Notes to Financial Statements June 30, 2003 (unaudited)
1. Organization and Accounting Policies
Morgan Stanley U.S. Government Securities Trust (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 high current income consistent with safety of principal. The Fund seeks to achieve its objective by investing in obligations issued or guaranteed by the U.S. Government or its instrumentalities. The Fund was organized as a Massachusetts business trust on September 29, 1983 and commenced operations on June 29, 1984. On July 28, 1997, the Fund converted to a multiple class share structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D shares. The four classes are substantially the same except that most Class A shares are subject to a sales charge imposed at the time of purchase and some Class A shares, and most Class B shares and Class C shares are subject to a contingent deferred sales charge imposed on shares redeemed within one year, six years and one year, respectively. Class D shares are not subject to a sales charge. Additionally, Class A shares, Class B shares and Class C shares incur distribution expenses.
The following is a summary of significant accounting policies:
A. Valuation of Investments — (1) 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; (2) when market quotations are not readily available or Morgan Stanley Investment Advisors Inc. (the "Investment Manager") determines that the market quotations are not reflective of 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; (3) certain portfolio securities may be valued by an outside pricing service approved by the Fund's Trustees; and (4) 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. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily.
C. 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.
D. 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
11
Morgan Stanley U.S. Government Securities Trust
Notes to Financial Statements June 30, 2003 (unaudited) continued
taxable income to its shareholders. Accordingly, no federal income tax provision is required.
E. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date. 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 financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital.
F. Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.
2. Investment Management Agreement
Pursuant to an Investment Management Agreement with the Investment Manager, the Fund pays a management fee, accrued daily and payable monthly, by applying the following annual rates to the Fund's net assets determined at the close of each business day: 0.50% to the portion of daily net assets not exceeding $1 billion; 0.475% to the portion of daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.45% to the portion of daily net assets exceeding $1.5 billion but not exceeding $2 billion; 0.425% to the portion of daily net assets exceeding $2 billion but not exceeding $2.5 billion; 0.40% to the portion of daily net assets exceeding $2.5 billion but not exceeding $5 billion; 0.375% to the portion of daily net assets exceeding $5 billion but not exceeding $7.5 billion; 0.35% to the portion of daily net assets exceeding $7.5 billion but not exceeding $10 billion; 0.325% to the portion of daily net assets exceeding $10 billion but not exceeding $12.5 billion; and 0.30% to the portion of daily net assets exceeding $12.5 billion.
3. Plan of Distribution
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan provides that the Fund will pay the Distributor a fee which is accrued daily and paid monthly at the following annual rates: (i) Class A – up to 0.25% of the average daily net assets of Class A; (ii) Class B – 0.75% (0.65% on amounts over $10 billion) of the lesser of: (a) the average daily aggregate gross sales of the Class B shares since the inception of the Fund (not including reinvestment of dividend or capital gain distributions) less the average daily aggregate net asset value of
12
Morgan Stanley U.S. Government Securities Trust
Notes to Financial Statements June 30, 2003 (unaudited) continued
the Class B shares redeemed since the Fund's inception upon which a contingent deferred sales charge has been imposed or waived; or (b) the average daily net assets of Class B; and (iii) Class C – up to 0.75% of the average daily net assets of Class C.
In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by the Distributor but not yet recovered may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B shares. Although there is no legal obligation for the Fund to pay expenses incurred in excess of payments made to the Distributor under the Plan and the proceeds of contingent deferred sales charges paid by investors upon redemption of shares, if for any reason the Plan is terminated, the Trustees will consider at that time the manner in which to treat such expenses. The Distributor has advised the Fund that there were no excess expenses at June 30, 2003.
For the six months ended June 30, 2003, the Distributor rebated a portion of the distribution fees paid by the Fund on Class B shares in the amount of $10,140,640.
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 0.75% 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 June 30, 2003, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.13% and 0.75%, respectively.
The Distributor has informed the Fund that for the six months ended June 30, 2003, it received contingent deferred sales charges from certain redemptions of the Fund's Class A shares, Class B shares and Class C shares of $22,834, $2,453,830 and $67,445, respectively and received $662,172 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 costs of purchases and proceeds from sales/prepayments of portfolio securities, excluding short-term investments, for the six months ended June 30, 2003 were $3,085,246,869 and $3,546,596,288, respectively.
Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is the Fund's transfer agent. At June 30, 2003, the Fund had transfer agent fees and expenses payable of approximately $26,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering all independent Trustees of the Fund who will have served as independent Trustees for at least five years at the time of
13
Morgan Stanley U.S. Government Securities Trust
Notes to Financial Statements June 30, 2003 (unaudited) continued
retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the six months ended June 30, 2003 included in Trustees' fees and expenses in the Statement of Operations amounted to $3,632. At June 30, 2003, the Fund had an accrued pension liability of $59,391 which is included in accrued expenses in the Statement of Assets and Liabilities.
5. Federal Income Tax Status
At December 31, 2002, the Fund had a net capital loss carryover of approximately $125,125,000, which may be used to offset future capital gains to the extent provided by regulations, which is available through December 31 of the following years:
| | | | | | | | | | | | | | | | | | | |
| AMOUNT IN THOUSANDS | | ||||||||||||||||||
| 2003 | | 2004 | | 2005 | | 2006 | | 2007 | |||||||||||
| $63,667 | | $ | 49,153 | | $ | 3,006 | | $ | 2,711 | | $ | 6,588 | |||||||
| |||||||||||||||||||
At December 31, 2002, the Fund had temporary book/tax differences primarily attributable to book amortization of premiums on debt securities.
14
Morgan Stanley U.S. Government Securities Trust
Notes to Financial Statements June 30, 2003 (unaudited) continued
6. Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:
| | | | | | | | | | | | | | | | | | | |
| FOR THE SIX MONTHS ENDED JUNE 30, 2003 | | FOR THE YEAR ENDED DECEMBER 31, 2002 | | |||||||||||||||
| (unaudited) | | |||||||||||||||||
| SHARES | | AMOUNT | | SHARES | | AMOUNT | ||||||||||||
| CLASS A SHARES | |||||||||||||||||||
| Sold | | 20,602,517 | | $ | 194,025,543 | | 37,278,528 | | $ | 343,201,691 | |||||||||
| Reinvestment of dividends | | 409,116 | | 3,846,963 | | 728,176 | | 6,688,504 | |||||||||||
| Redeemed | | (17,442,562 | ) | | (164,210,188 | ) | | (26,612,726 | ) | | (245,296,636 | ) | |||||||
| Net increase – Class A | | 3,569,071 | | 33,662,318 | | 11,393,978 | | 104,593,559 | |||||||||||
| CLASS B SHARES | |||||||||||||||||||
| Sold | | 28,091,715 | | 264,709,233 | | 115,853,848 | | 1,066,594,060 | |||||||||||
| Reinvestment of dividends | | 4,985,270 | | 46,967,759 | | 12,580,271 | | 115,384,334 | |||||||||||
| Redeemed | | (60,963,597 | ) | | (574,781,856 | ) | | (104,445,896 | ) | | (960,901,268 | ) | |||||||
| Net increase (decrease) – Class B | | (27,886,612 | ) | | (263,104,864 | ) | | 23,988,223 | | 221,077,126 | |||||||||
| CLASS C SHARES | |||||||||||||||||||
| Sold | | 3,171,875 | | 30,084,080 | | 14,187,046 | | 131,278,119 | |||||||||||
| Reinvestment of dividends | | 153,089 | | 1,452,178 | | 292,665 | | 2,712,560 | |||||||||||
| Redeemed | | (3,013,864 | ) | | (28,596,024 | ) | | (7,854,069 | ) | | (72,484,472 | ) | |||||||
| Net increase – Class C | | 311,100 | | 2,940,234 | | 6,625,642 | | 61,506,207 | |||||||||||
| CLASS D SHARES | |||||||||||||||||||
| Sold | | 12,858,978 | | 121,015,642 | | 30,513,611 | | 281,767,152 | |||||||||||
| Reinvestment of dividends | | 416,419 | | 3,919,101 | | 715,931 | | 6,585,942 | |||||||||||
| Redeemed | | (11,060,110 | ) | | (104,041,391 | ) | | (13,818,790 | ) | | (127,601,961 | ) | |||||||
| Net increase – Class D | | 2,215,287 | | 20,893,352 | | 17,410,752 | | 160,751,133 | |||||||||||
| Net increase (decrease) in Fund | | (21,791,154 | ) | | $ | (205,608,960 | ) | | 59,418,595 | | $ | 547,928,025 | |||||||
| |||||||||||||||||||
15
Morgan Stanley U.S. Government Securities Trust
Financial Highlights
Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FOR THE SIX MONTHS ENDED JUNE 30, 2003 | | FOR THE YEAR ENDED DECEMBER 31, | | |||||||||||||||||||||||
| 2002 | | 2001 | | 2000 | | 1999 | | 1998 | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Class A Shares | |||||||||||||||||||||||||||
| Selected Per Share Data: | |||||||||||||||||||||||||||
| Net asset value, beginning of period | | $ | 9.41 | | $ | 8.99 | | $ | 8.94 | | $ | 8.58 | | $ | 9.18 | | $ | 9.09 | |||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||||||
| Net investment income | | 0.15 | | 0.43 | | 0.51 | | 0.56 | | 0.58 | | 0.59 | |||||||||||||||
| Net realized and unrealized gain (loss) | | 0.05 | | 0.45 | | 0.07 | | 0.36 | | (0.60 | ) | | 0.09 | ||||||||||||||
| Total income (loss) from investment operations | | 0.20 | | 0.88 | | 0.58 | | 0.92 | | (0.02 | ) | | 0.68 | ||||||||||||||
| Less dividends from net investment income | | (0.18 | ) | | (0.46 | ) | | (0.53 | ) | | (0.56 | ) | | (0.58 | ) | | (0.59 | ) | |||||||||
| Net asset value, end of period | | $ | 9.43 | | $ | 9.41 | | $ | 8.99 | | $ | 8.94 | | $ | 8.58 | | $ | 9.18 | |||||||||
| Total Return† | | 2.13 | % (1) | | 10.07 | % | | 6.66 | % | | 11.18 | % | | (0.26 | )% | | 7.70 | % | |||||||||
| Ratios to Average Net Assets(3): | |||||||||||||||||||||||||||
| Expenses | | 0.68 | % (2) | | 0.75 | % | | 0.73 | % | | 0.77 | % | | 0.70 | % | | 0.76 | % | |||||||||
| Net investment income | | 3.21 | % (2) | | 4.50 | % | | 5.65 | % | | 5.81 | % | | 6.50 | % | | 6.45 | % | |||||||||
| Supplemental Data: | |||||||||||||||||||||||||||
| Net assets, end of period, in thousands | | $270,070 | | $235,787 | | $122,863 | | $99,750 | | $70,881 | | $58,538 | |||||||||||||||
| Portfolio turnover rate | | 83 | % (1) | | 85 | % | | 73 | % | | 19 | % | | 11 | % | | 14 | % | |||||||||
| |||||||||||||||||||||||||||
|
| † | Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. |
| (1) | Not annualized. |
| (2) | Annualized. |
| (3) | Reflects overall Fund ratios for investment income and non-class specific expenses. |
See Notes to Financial Statements
16
Morgan Stanley U.S. Government Securities Trust
Financial Highlights continued
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FOR THE SIX MONTHS ENDED JUNE 30, 2003 | | FOR THE YEAR ENDED DECEMBER 31, | | |||||||||||||||||||||||
| 2002 | | 2001 | | 2000 | | 1999 | | 1998 | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Class B Shares | |||||||||||||||||||||||||||
| Selected Per Share Data: | |||||||||||||||||||||||||||
| Net asset value, beginning of period | | $ | 9.43 | | $ | 9.00 | | $ | 8.95 | | $ | 8.59 | | $ | 9.20 | | $ | 9.10 | |||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||||||
| Net investment income | | 0.14 | | 0.40 | | 0.48 | | 0.57 | | 0.55 | | 0.54 | |||||||||||||||
| Net realized and unrealized gain (loss) | | 0.06 | | 0.46 | | 0.07 | | 0.36 | | (0.61 | ) | | 0.10 | ||||||||||||||
| Total income (loss) from investment operations | | 0.20 | | 0.86 | | 0.55 | | 0.93 | | (0.06 | ) | | 0.64 | ||||||||||||||
| Less dividends from net investment income | | (0.18 | ) | | (0.43 | ) | | (0.50 | ) | | (0.57 | ) | | (0.55 | ) | | (0.54 | ) | |||||||||
| Net asset value, end of period | | $ | 9.45 | | $ | 9.43 | | $ | 9.00 | | $ | 8.95 | | $ | 8.59 | | $ | 9.20 | |||||||||
| Total Return† | | 2.06 | % (1) | | 9.91 | % | | 6.29 | % | | 11.23 | % | | (0.65 | )% | | 7.27 | % | |||||||||
| Ratios to Average Net Assets(3): | |||||||||||||||||||||||||||
| Expenses | | 0.83 | % (2)(4) | | 1.00 | % (4) | | 1.07 | % (4) | | 0.72 | % (4) | | 1.02 | %(4) | | 1.27 | % | |||||||||
| Net investment income | | 3.06 | % (2)(4) | | 4.25 | % (4) | | 5.30 | % (4) | | 5.86 | % (4) | | 6.18 | %(4) | | 5.94 | % | |||||||||
| Supplemental Data: | |||||||||||||||||||||||||||
| Net assets, end of period, in millions | | $4,189 | | $4,441 | | $4,025 | | $3,745 | | $4,145 | | $4,996 | |||||||||||||||
| Portfolio turnover rate | | 83 | % (1) | | 85 | % | | 73 | % | | 19 | % | | 11 | % | | 14 | % | |||||||||
| |||||||||||||||||||||||||||
|
| † | 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) | If the Distributor had not rebated a portion of its fees to the Fund, the expense and net investment income ratios would have been as follows: |
| | | | | | | | | | |
| PERIOD ENDING | | EXPENSE RATIO | | NET INVESTMENT INCOME RATIO | ||||||
| June 30, 2003 | | 1.30 | % | | 2.59 | % | ||||
| December 31, 2002 | | 1.29 | | 3.96 | ||||||
| December 31, 2001 | | 1.29 | | 5.08 | ||||||
| December 31, 2000 | | 1.29 | | 5.29 | ||||||
| December 31, 1999 | | 1.29 | | 5.91 | ||||||
| ||||||||||
See Notes to Financial Statements
17
Morgan Stanley U.S. Government Securities Trust
Financial Highlights continued
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FOR THE SIX MONTHS ENDED JUNE 30, 2003 | | FOR THE YEAR ENDED DECEMBER 31, | | |||||||||||||||||||||||
| 2002 | | 2001 | | 2000 | | 1999 | | 1998 | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Class C Shares | |||||||||||||||||||||||||||
| Selected Per Share Data: | |||||||||||||||||||||||||||
| Net asset value, beginning of period | | $ | 9.49 | | $ | 9.07 | | $ | 9.02 | | $ | 8.65 | | $ | 9.26 | | $ | 9.17 | |||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||||||
| Net investment income | | 0.12 | | 0.38 | | 0.46 | | 0.52 | | 0.53 | | 0.55 | |||||||||||||||
| Net realized and unrealized gain (loss) | | 0.07 | | 0.45 | | 0.07 | | 0.37 | | (0.61 | ) | | 0.09 | ||||||||||||||
| Total income (loss) from investment operations | | 0.19 | | 0.83 | | 0.53 | | 0.89 | | (0.08 | ) | | 0.64 | ||||||||||||||
| Less dividends from net investment income | | (0.16 | ) | | (0.41 | ) | | (0.48 | ) | | (0.52 | ) | | (0.53 | ) | | (0.55 | ) | |||||||||
| Net asset value, end of period | | $ | 9.52 | | $ | 9.49 | | $ | 9.07 | | $ | 9.02 | | $ | 8.65 | | $ | 9.26 | |||||||||
| Total Return† | | 1.93 | % (1) | | 9.42 | % | | 6.03 | % | | 10.70 | % | | (0.90 | )% | | 7.14 | % | |||||||||
| Ratios to Average Net Assets(3): | |||||||||||||||||||||||||||
| Expenses | | 1.30 | % (2) | | 1.29 | % | | 1.29 | % | | 1.29 | % | | 1.29 | % | | 1.27 | % | |||||||||
| Net investment income | | 2.59 | % (2) | | 3.96 | % | | 5.08 | % | | 5.29 | % | | 5.91 | % | | 5.94 | % | |||||||||
| Supplemental Data: | |||||||||||||||||||||||||||
| Net assets, end of period, in thousands | | $132,828 | | $129,515 | | $63,646 | | $27,445 | | $22,004 | | $17,087 | |||||||||||||||
| Portfolio turnover rate | | 83 | % (1) | | 85 | % | | 73 | % | | 19 | % | | 11 | % | | 14 | % | |||||||||
| |||||||||||||||||||||||||||
|
| † | Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. |
| (1) | Not annualized. |
| (2) | Annualized. |
| (3) | Reflects overall Fund ratios for investment income and non-class specific expenses. |
See Notes to Financial Statements
18
Morgan Stanley U.S. Government Securities Trust
Financial Highlights continued
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| FOR THE SIX MONTHS ENDED JUNE 30, 2003 | | FOR THE YEAR ENDED DECEMBER 31, | | |||||||||||||||||||||||
| 2002 | | 2001 | | 2000 | | 1999 | | 1998 | ||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Class D Shares | |||||||||||||||||||||||||||
| Selected Per Share Data: | |||||||||||||||||||||||||||
| Net asset value, beginning of period | | $ | 9.42 | | $ | 8.99 | | $ | 8.95 | | $ | 8.58 | | $ | 9.18 | | $ | 9.11 | |||||||||
| Income (loss) from investment operations: | |||||||||||||||||||||||||||
| Net investment income | | 0.15 | | 0.45 | | 0.53 | | 0.58 | | 0.59 | | 0.61 | |||||||||||||||
| Net realized and unrealized gain (loss) | | 0.06 | | 0.46 | | 0.06 | | 0.37 | | (0.60 | ) | | 0.07 | ||||||||||||||
| Total income (loss) from investment operations | | 0.21 | | 0.91 | | 0.59 | | 0.95 | | (0.01 | ) | | 0.68 | ||||||||||||||
| Less dividends from net investment income | | (0.19 | ) | | (0.48 | ) | | (0.55 | ) | | (0.58 | ) | | (0.59 | ) | | (0.61 | ) | |||||||||
| Net asset value, end of period | | $ | 9.44 | | $ | 9.42 | | $ | 8.99 | | $ | 8.95 | | $ | 8.58 | | $ | 9.18 | |||||||||
| Total Return† | | 2.20 | % (1) | | 10.41 | % | | 6.85 | % | | 11.43 | % | | (0.10 | )% | | 7.72 | % | |||||||||
| Ratios to Average Net Assets(3): | |||||||||||||||||||||||||||
| Expenses | | 0.55 | % (2) | | 0.54 | % | | 0.54 | % | | 0.54 | % | | 0.54 | % | | 0.52 | % | |||||||||
| Net investment income | | 3.34 | % (2) | | 4.71 | % | | 5.83 | % | | 6.04 | % | | 6.66 | % | | 6.69 | % | |||||||||
| Supplemental Data: | |||||||||||||||||||||||||||
| Net assets, end of period, in thousands | | $330,854 | | $309,109 | | $138,669 | | $93,446 | | $30,315 | | $20,392 | |||||||||||||||
| Portfolio turnover rate | | 83 | % (1) | | 85 | % | | 73 | % | | 19 | % | | 11 | % | | 14 | % | |||||||||
| |||||||||||||||||||||||||||
|
| † | 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. |
19
| | |
Trustees Michael Bozic Officers Charles A. Fiumefreddo Mitchell M. Merin Ronald E. Robison Barry Fink Joseph J. McAlinden Stefanie V. Chang Francis Smith Thomas F. Caloia Mary E. Mullin Transfer Agent Morgan Stanley Trust Independent Auditors Deloitte & Touche LLP Investment Manager Morgan Stanley Investment Advisors Inc. 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. © 2003 Morgan Stanley  37965RPT-11730G03-AP-7/03 | | INTERMEDIATE GOVERNMENT |
Morgan Stanley U.S. Government Securities Trust Semiannual Report June 30, 2003 | ||
 |
Item 9 - Controls and Procedures
The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.
Item 10b Exhibits
A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.
Items 2 - 8 and Item 10a are not applicable
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 U.S. Government Securities Trust
Ronald E. Robison
Principal Executive Officer
August 19, 2003
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.
Ronald E. Robison
Principal Executive Officer
August 19, 2003
Francis Smith
Principal Financial Officer
August 19, 2003
2
EXHIBIT B1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
CERTIFICATIONS
I, Ronald E. Robison, certify that:
1. I have reviewed this report on Form N-CSR of Morgan Stanley U.S.
Government Securities Trust,
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations, changes in
net assets, and cash flows (if the financial statements are required
to include a statement of cash flows) of the registrant as of, and
for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Rule 30a-2(c) under the Investment Company Act of 1940) for
the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this report (the "Evaluation Date"); and
c) presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
3
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize, and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: August 19, 2003
Ronald E. Robison
Principal Executive Officer
4
EXHIBIT B2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
CERTIFICATIONS
I, Francis Smith, certify that:
1. I have reviewed this report on Form N-CSR of Morgan Stanley U.S.
Government Securities Trust;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations, changes in
net assets, and cash flows (if the financial statements are required
to include a statement of cash flows) of the registrant as of, and
for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Rule 30a-2(c) under the Investment Company Act of 1940) for
the registrant and have:
(i) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(ii) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this report (the "Evaluation Date"); and
(iii) presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
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a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize, and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: August 19, 2003
Francis Smith
Principal Financial Officer
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SECTION 906 CERTIFICATION
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Morgan Stanley U.S. Government Securities Trust
In connection with the Report on Form N-CSR (the "Report") of the
above-named issuer for the period ended June 30, 2003 that is accompanied by
this certification, the undersigned hereby certifies that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Issuer.
Date: August 19, 2003 Ronald E. Robison
Principal Executive Officer
A signed original of this written statement required by Section 906 has been
provided to Morgan Stanley U.S. Government Securities Trust will be retained by
Morgan Stanley U.S. Government Securities Trust and furnished to the Securities
and Exchange Commission or its staff upon request.
7
SECTION 906 CERTIFICATION
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Morgan Stanley U.S. Government Securities Trust
In connection with the Report on Form N-CSR (the "Report") of the
above-named issuer for the period ended June 30, 2003 that is accompanied by
this certification, the undersigned hereby certifies that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Issuer.
Date: August 19, 2003 Francis Smith
Principal Financial Officer
A signed original of this written statement required by Section 906 has been
provided to Morgan Stanley U.S. Government Securities Trust and will be retained
by Morgan Stanley U.S. Government Securities Trust and furnished to the
Securities and Exchange Commission or its staff upon request.
8