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: 811-06208 Morgan Stanley Multi-State Municipal Series 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: November 30, 2004 Date of reporting period: May 31, 2004 Item 1 - Report to Shareholders
Welcome, Shareholder:
In this report, you'll learn about how your investment in Morgan Stanley Multi-State Municipal Series Trust 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. |
Fund Report | |
For the six-month period ended May 31, 2004 | |
Total Return for the Six-Month Period Ended May 31, 2004
Multi-State Municipal Series: Arizona | Lehman Brothers Municipal Bond Index1 | Lipper Arizona Municipal Debt Funds Index2 | ||||||||||||
–1.83% | –0.22 | % | –0.32 | % | ||||||||||
Multi-State Municipal Series: Florida | Lehman Brothers Municipal Bond Index | Lipper Florida Municipal Debt Funds Index3 | ||||||||||||
–1.17% | –0.22 | % | –0.21 | % | ||||||||||
Multi-State Municipal Series: New Jersey | Lehman Brothers Municipal Bond Index | Lipper New Jersey Municipal Debt Funds Index4 | ||||||||||||
–0.66% | –0.22 | % | –0.66 | % | ||||||||||
Multi-State Municipal Series: Pennsylvania | Lehman Brothers Municipal Bond Index | Lipper Pennsylvania Municipal Debt Funds Index5 | ||||||||||||
–0.30% | –0.22 | % | –0.73 | % | ||||||||||
The Fund's total return figures assume the reinvestment of all distributions but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information. |
Market Conditions
The U.S. economy continued to show improvement during the six-month period ended May 31, 2004. On the positive side, retail sales fueled year-over-year gross domestic product growth of 5 percent through the March 2004 calendar quarter. Historically, higher output has led to higher interest rates; however, yields remained relatively low during the review period. A combination of low inflation and weak employment growth caused the Federal Open Market Committee (the "Fed") to maintain its accommodative monetary policy.
Through the first three months of the period under review, fears of a so-called jobless recovery supported a positive outlook for fixed-income investments. Then, surprising job growth in March and escalating oil prices led investors to anticipate that interest rates would rise sooner rather than later. While the Fed did not change its short-term lending rate at its April meeting, it did signal a prospective shift in policy. As a result, bond yields spiked in April and May.
The supply of new municipal bonds in calendar 2003 reached record levels as many municipalities took advantage of historically low interest rates to reduce expenditures by refinancing existing debt at lower yields. Some municipalities attempted to meet budget needs by issuing additional debt. Issuance slowed from this record pace in the first months of 2004.
Low interest rates in 2003 and early 2004 slowed demand for municipal bonds. Retail investors and mutual funds saw little advantage to selling bonds purchased at higher yields, only to reinvest the proceeds at historically low yields. However, insurance companies and hedge funds purchased municipal bonds based on their attractiveness relative to
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taxable securities. Additionally, investors stretched for yield by buying lower-rated bonds, and credit spreads tightened.
Performance Analysis
The Multi-State Municipal Series consists of four state portfolios: Arizona, Florida, New Jersey and Pennsylvania. Information on each of the State Series is summarized below.
Arizona
Morgan Stanley Multi-State Municipal Series Trust – Arizona Series underperformed its benchmark, the Lehman Brothers Municipal Bond Index, as well as the Lipper Arizona Municipal Debt Funds Index for the six months ended May 31, 2004. The primary driver of the Fund's underperformance was its higher interest-rate sensitivity, which caused it to lag the market and its peers when interest rates rose. Plans to liquidate the Fund were announced in April. At that time, the Fund officially assumed a "defensive" position, with short-term investments (including out of state money market holdings) comprising in excess of 20 percent of the portfolio.
Florida
Morgan Stanley Multi-State Municipal Series Trust – Florida Series underperformed its benchmark, the Lehman Brothers Municipal Bond Index, as well as the Lipper Florida Municipal Debt Funds Index for the six months ended May 31, 2004. The primary driver of the Fund's underperformance was its higher interest-rate sensitivity, which caused it to lag the market and its peers when interest rates rose. Plans to liquidate the Fund were announced in April. At that time, the Fund officially assumed a "defensive" position, with short-term investments (including out of state money market holdings) comprising in excess of 20 percent of the portfolio.
New Jersey
Morgan Stanley Multi-State Municipal Series Trust – New Jersey Series underperformed its primary benchmark, the Lehman Brothers Municipal Bond Index, and matched the return of the Lipper New Jersey Municipal Debt Funds Index for the six months ended May 31, 2004. The Fund entered the period with a defensive interest-rate posture, which caused it to lag during the first calendar quarter of 2004. Plans to liquidate the Fund were announced in April. At that time, the Fund officially assumed a "defensive" position, with short-term investments (including out of state money market holdings) comprising in excess of 20 percent of the portfolio.
Pennsylvania
Morgan Stanley Multi-State Municipal Series Trust – Pennsylvania Series underperformed its primary benchmark, the Lehman Brothers Municipal Bond Index, and outperformed the return of the Lipper Pennsylvania Municipal Debt Funds Index for the six months ended May 31, 2004. The Fund entered the period with a defensive interest-rate posture, which caused it to lag during the first calendar quarter of 2004. Plans to liquidate the Fund were announced in April. At that time, the Fund officially assumed a "defensive" position, with short-term investments (including out of state money market holdings) comprising in excess of 20 percent of the portfolio.
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Arizona
TOP SECTORS | ||||||
Education | 14.6 | % | ||||
Public Facilities | 14.1 | |||||
Hospital | 7.4 | |||||
Transportation | 7.3 | |||||
Electric | 7.2 | |||||
Florida
TOP SECTORS | ||||||
Public Facilities | 22.0 | % | ||||
Hospital | 14.5 | |||||
Electric | 9.5 | |||||
Transportation | 5.0 | |||||
Water & Sewer | 4.8 | |||||
Data as of May 31, 2004. Subject to change daily. All percentages for Top Sectors are as a percentage of net assets. Provided for informational purposes only and should not be deemed a recommendation to buy or sell the securities mentioned. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. |
Investment Strategy for Arizona Series
The Arizona Series will invest at least 80% of its assets in securities that pay interest normally exempt from federal and Arizona state income taxes. This policy is fundamental and may not be changed without shareholder approval. The Arizona Series' "Investment Manager," Morgan Stanley Investment Advisors Inc., generally invests in investment grade, Arizona municipal obligations and obligations of U.S. governmental territories such as Puerto Rico. The municipal obligations may only be rated investment grade by Moody's Investors Service or Standard & Poor's Corporation or Fitch Investors Services, LP or, if unrated, judged to be of comparable quality by the Investment Manager at the time of purchase. There are no maturity limitations on the Arizona Series' portfolio securities.
Investment Strategy for Florida Series
The Florida Series will invest at least 80% of its assets in securities that pay interest normally exempt from federal and the Florida state intangibles tax. (Florida presently does not impose an income tax on individuals.) This policy is fundamental and may not be changed without shareholder approval. The Florida Series' "Investment Manager," Morgan Stanley Investment Advisors Inc., generally invests in investment grade, Florida municipal obligations and obligations of U.S. governmental territories such as Puerto Rico. The municipal obligations may only be rated investment grade by Moody's Investors Service or Standard & Poor's Corporation or Fitch Investors Services, LP or, if unrated, judged to be of comparable quality by the Investment Manager at the time of purchase. There are no maturity limitations on the Florida Series' portfolio securities.
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New Jersey
TOP SECTORS | ||||||
Hospital | 19.2 | % | ||||
Transportation | 13.3 | |||||
Education | 7.7 | |||||
Housing | 6.9 | |||||
Public Facilities | 5.4 | |||||
Pennsylvania
TOP SECTORS | ||||||
Education | 18.5 | % | ||||
Hospital | 16.5 | |||||
Water & Sewer | 14.6 | |||||
Recreational Facilities | 9.0 | |||||
IDR/PCR* | 4.8 | |||||
* Industrial Development/Pollution Control Revenue. |
Data as of May 31, 2004. Subject to change daily. All percentages for Top Sectors are as a percentage of net assets. Provided for informational purposes only and should not be deemed a recommendation to buy or sell the securities mentioned. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. |
Investment Strategy for New Jersey
Series
The New Jersey Series will invest at least 80% of its assets in securities that pay interest normally exempt from federal and New Jersey state income taxes. This policy is fundamental and may not be changed without shareholder approval. The New Jersey Series' "Investment Manager," Morgan Stanley Investment Advisors Inc., generally invests in investment grade, New Jersey municipal obligations and obligations of U.S. governmental territories such as Puerto Rico. The municipal obligations may only be rated investment grade by Moody's Investors Service or Standard & Poor's Corporation or Fitch Investors Services, LP or, if unrated, judged to be of comparable quality by the Investment Manager at the time of purchase. There are no maturity limitations on the New Jersey Series' portfolio securities.
Investment Strategy for Pennsylvania
Series
The Pennsylvania Series will invest at least 80% of its assets in securities that pay interest normally exempt from federal and Pennsylvania state income taxes. This policy is fundamental and may not be changed without shareholder approval. The Pennsylvania Series' "Investment Manager," Morgan Stanley Investment Advisors Inc., generally invests in investment grade, Pennsylvania municipal obligations and obligations of U.S. governmental territories such as Puerto Rico. The municipal obligations may only be rated investment grade by Moody's Investors Service or Standard & Poor's Corporation or Fitch Investors Services, LP or, if unrated, judged to be of comparable quality by the Investment Manager at the time of purchase. There are no maturity limitations on the Pennsylvania Series' portfolio securities.
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Performance Summary | |
Average Annual Total Returns — Period Ended May 31, 2004
Arizona (since 04/30/91) | Florida (since 01/15/91) | New Jersey (since 01/15/91) | Pennsylvania (since 01/15/91) | |||||||||||||||||||||||
Symbol | DWAZX | DWFLX | DWNJX | DWPAX | ||||||||||||||||||||||
1 Year | (1.42)% | 6 | (1.41)% | 6 | (0.70)% | 6 | 0.76% | 6 | ||||||||||||||||||
(5.36) | 7 | (5.35) | 7 | (4.67) | 7 | (3.27) | 7 | |||||||||||||||||||
5 Years | 4.38 | 6 | 4.54 | 6 | 4.37 | 6 | 4.85 | 6 | ||||||||||||||||||
3.53 | 7 | 3.69 | 7 | 3.53 | 7 | 4.00 | 7 | |||||||||||||||||||
10 Years | 5.25 | 6 | 5.48 | 6 | 5.52 | 6 | 5.67 | 6 | ||||||||||||||||||
4.82 | 7 | 5.05 | 7 | 5.09 | 7 | 5.24 | 7 | |||||||||||||||||||
Since Inception | 5.91 | 6 | 6.26 | 6 | 6.29 | 6 | 6.38 | 6 | ||||||||||||||||||
5.58 | 7 | 5.93 | 7 | 5.97 | 7 | 6.06 | 7 | |||||||||||||||||||
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 more up-to-date information, including month-end performance figures, please visit morganstanley.com or speak with your financial advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
(1) | The Lehman Brothers Municipal Bond Index tracks the performance of municipal bonds rated at least Baa or BBB by Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively, and with maturities of 2 years or greater. 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 Arizona Municipal Debt Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Arizona Municipal Debt 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) | The Lipper Florida Municipal Debt Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Florida Municipal Debt 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. |
(4) | The Lipper New Jersey Municipal Debt Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper New Jersey Municipal Debt 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. |
(5) | The Lipper Pennsylvania Municipal Debt Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Pennsylvania Municipal Debt 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. |
(6) | Figure shown assumes reinvestment of all distributions and does not reflect the deduction of any sales charges. |
(7) | Figure shown assumes reinvestment of all distributions and the deduction of the maximum applicable sales charge. See the Fund's current prospectus for complete details on fees and sales charges. |
6
Morgan Stanley Multi-State Municipal Series Trust
Portfolio Summary (1) May 31, 2004 (unaudited)
ARIZONA SERIES | FLORIDA SERIES | NEW JERSEY SERIES | PENNSYLVANIA SERIES | |||||||||||||||||||
Credit Ratings(2): | ||||||||||||||||||||||
Aaa or AAA | 76 | % | 78 | % | 68 | % | 49 | % | ||||||||||||||
Aa or AA | 12 | 15 | 8 | 7 | ||||||||||||||||||
A or A | — | — | 20 | 13 | ||||||||||||||||||
Baa or BBB | 12 | 7 | 4 | 31 | ||||||||||||||||||
Long-Term Portfolio Distribution by Call Date | ||||||||||||||||||||||
2004 | — | 13 | % | 21 | % | 11 | % | |||||||||||||||
2005 | — | — | 12 | 7 | ||||||||||||||||||
2006 | 11 | % | 7 | 8 | 7 | |||||||||||||||||
2007 | — | — | — | 6 | ||||||||||||||||||
2008 | — | — | 8 | — | ||||||||||||||||||
2009 | 12 | 7 | — | — | ||||||||||||||||||
2010 | 15 | — | 30 | 21 | ||||||||||||||||||
2011 | 12 | 57 | — | 21 | ||||||||||||||||||
2012 | 37 | 8 | 8 | 14 | ||||||||||||||||||
2013 | 13 | — | 9 | 13 | ||||||||||||||||||
2014+ | — | 8 | 4 | — | ||||||||||||||||||
Average Weighted: | ||||||||||||||||||||||
Maturity | 14 | Years | 13 | Years | 17 | Years | 17 | Years | ||||||||||||||
Call Protection | 7 | Years | 6 | Years | 4 | Years | 5 | Years | ||||||||||||||
Duration(3) | 4.9 | Years | 4.4 | Years | 4.7 | Years | 5.3 | Years | ||||||||||||||
Per Share Net Asset Value: | ||||||||||||||||||||||
November 30, 2003 | $ | 10.65 | $ | 10.71 | $ | 10.83 | $ | 10.97 | ||||||||||||||
May 31, 2004 | $ | 10.21 | $ | 10.32 | $ | 10.50 | $ | 10.66 | ||||||||||||||
Distributions(4) | $ | 0.25 | $ | 0.27 | $ | 0.27 | $ | 0.29 | ||||||||||||||
Total Return(5): | ||||||||||||||||||||||
6 months ended 05/31/04 | (1.83 | )% | (1.17 | )% | (0.66 | )% | (0.30 | )% | ||||||||||||||
12 months ended 05/31/04 | (1.42 | ) | (1.41 | ) | (0.70 | ) | 0.76 | |||||||||||||||
(1) | Portfolio characteristics, except duration, based on long-term portfolio. |
(2) | Represents Moody's or Standard & Poor's ratings of the credit quality of the long-term bonds owned by each Series. |
(3) | Duration includes long and short-term securities, cash, and hedge positions, if any. |
(4) | Includes all income dividends and capital gains distributions, if any, paid by each Series for the six months ended May 31, 2004. |
(5) | Total return figures represent the change in each Series' total value for the period measured, taking into account the change in NAV plus compounded, reinvested dividends and distributions and do not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. |
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Morgan Stanley Multi-State Municipal Series Trust — Arizona Series
Portfolio of Investments May 31, 2004 (unaudited)
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | |||||||||||||||
Arizona Tax-Exempt Municipal Bonds (58.8%) | ||||||||||||||||||
Educational Facilities Revenue (14.6%) | ||||||||||||||||||
Arizona Board of Regents, | ||||||||||||||||||
$ | 1,000 | Arizona State University Ser 2002 COPs (MBIA) | 5.375 | % | 07/01/19 | $ | 1,064,820 | |||||||||||
1,000 | University of Arizona Ser 2001 A COPs (Ambac) | 5.50 | 06/01/18 | 1,076,960 | ||||||||||||||
2,000 | 2,141,780 | |||||||||||||||||
Electric Revenue (7.2%) | ||||||||||||||||||
1,000 | Salt River Project Agricultural Improvement & Power District, | |||||||||||||||||
Refg 2002 Ser A | 5.25 | 01/01/19 | 1,052,550 | |||||||||||||||
Hospital Revenue (7.4%) | ||||||||||||||||||
1,000 | Pima County Industrial Development Authority, Carondelet Health Care Ser 1993 (MBIA) | 5.25 | 07/01/13 | 1,090,080 | ||||||||||||||
Industrial Development/Pollution Control Revenue (6.7%) | ||||||||||||||||||
1,000 | Greenlee County Industrial Development Authority, Phelps Dodge Corp Refg 1994 | 5.45 | 06/01/09 | 988,850 | ||||||||||||||
Mortgage Revenue – Single Family (1.5%) | ||||||||||||||||||
215 | Maricopa County Industrial Development Authority, Ser 2000-1C (AMT) | 6.25 | 12/01/30 | 217,847 | ||||||||||||||
Public Facilities Revenue (14.1%) | ||||||||||||||||||
1,000 | Phoenix Civic Improvement Corporation, Phoenix Municipal Courthouse Sr Lien Excise Tax Ser 1999 A | 5.25 | 07/01/24 | 1,018,460 | ||||||||||||||
1,000 | Phoenix Industrial Development Authority, Capital Mall LLC Ser 2000 (Ambac) | 5.375 | 09/15/22 | 1,046,890 | ||||||||||||||
2,000 | 2,065,350 | |||||||||||||||||
Transportation Facilities Revenue (7.3%) | ||||||||||||||||||
1,000 | Phoenix Civic Improvement Corporation, Sr Lien Airport Ser 2002 B (AMT) (FGIC) | 5.75 | 07/01/19 | 1,074,680 | ||||||||||||||
8,215 | Total Arizona Tax-Exempt Municipal Bonds (Cost $8,297,645) | 8,631,137 | ||||||||||||||||
Short-Term Tax-Exempt Municipal Obligations† (39.1%) | ||||||||||||||||||
700 | California Housing Finance Agency, Multifamily Ser 2000 B (Demand 06/01/04) | 1.00 | * | 02/01/31 | 700,000 | |||||||||||||
400 | California Pollution Control Financing Authority, Exxon Corp Ser 1989 (Demand 06/01/04) | 0.97 | * | 12/01/12 | 400,000 | |||||||||||||
700 | California Statewide Communities Development Authority, John Muir/Mt Diablo Health System Ser 1997 COPs (Ambac) (Demand 06/01/04) | 0.99 | * | 08/15/27 | 700,000 | |||||||||||||
500 | Irvine Ranch Water District, California, Conservation Ser 1989 (Demand 06/01/04) | 0.99 | * | 06/01/15 | 500,000 | |||||||||||||
See Notes to Financial Statements
8
Morgan Stanley Multi-State Municipal Series Trust — Arizona Series
Portfolio of Investments May 31, 2004 (unaudited) continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | |||||||||||||||
$ | 700 | Metropolitan Water District of Southern California, Water 2000 Ser B-3 (Demand 06/01/04) | 1.09* | % | 07/01/35 | $ | 700,000 | |||||||||||
700 | Newport Beach, California, Hoag Memorial Hospital Presbyterian 1992 Ser (Demand 06/01/04) | 1.00 | * | 10/01/22 | 700,000 | |||||||||||||
700 | Rancho Mirage, California, Eisenhower Medical Center 2001 Ser A (Demand 06/01/04) | 0.99 | * | 01/01/26 | 700,000 | |||||||||||||
650 | Clark County School District, Nevada, Ser 2001 B (FSA) (Demand 06/01/04) | 0.98 | * | 06/15/21 | 650,000 | |||||||||||||
700 | Reno, Nevada, St Mary's Regional Medical Center Ser 1998 B (MBIA) (Demand 06/01/04) | 1.06 | * | 05/15/23 | 700,000 | |||||||||||||
5,750 | Total Short-Term Tax-Exempt Municipal Obligations (Cost $5,750,000) | 5,750,000 | ||||||||||||||||
$ | 13,965 | Total Investments (Cost $14,047,645) (a) | 97.9 | % | 14,381,137 | |||||||||||||
Other Assets in Excess of Liabilities | 2.1 | 308,815 | ||||||||||||||||
Net Assets | 100.0 | % | $ | 14,689,952 | ||||||||||||||
AMT | Alternative Minimum Tax. |
COPs | Certificates of Participation. |
† | Non-Arizona exempt short-term obligations represent 39.1% of net assets. They are held to meet cash flow needs pending liquidation of the Series. |
* | Current coupon of variable rate demand obligation. |
(a) | The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $344,653 and the aggregate gross unrealized depreciation is $11,161, resulting in net unrealized appreciation of $333,492. |
Bond Insurance: |
Ambac | Ambac Assurance Corporation. |
FGIC | Financial Guaranty Insurance Company. |
FSA | Financial Security Assurance Inc. |
MBIA | Municipal Bond Investors Assurance Corporation. |
See Notes to Financial Statements
9
Morgan Stanley Multi-State Municipal Series Trust — Florida Series
Portfolio of Investments May 31, 2004 (unaudited)
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | |||||||||||||||
Florida Tax-Exempt Municipal Bonds (65.2%) | ||||||||||||||||||
Educational Facilities Revenue (4.7%) | ||||||||||||||||||
$ | 1,000 | Volusia County Educational Facilities Authority, Embry-Riddle Aeronautical University Ser 1996 A | 6.125 | % | 10/15/16 | $ | 1,034,370 | |||||||||||
Electric Revenue (9.5%) | ||||||||||||||||||
1,000 | Jacksonville Electric Authority, St. Johns Power Park Issue 2 Ser 17 | 5.00 | 10/01/18 | 1,023,680 | ||||||||||||||
1,000 | Orlando Utilities Commission, Water & Electric Refg Ser 2001 A | 5.25 | 10/01/19 | 1,050,560 | ||||||||||||||
2,000 | 2,074,240 | |||||||||||||||||
Hospital Revenue (14.5%) | ||||||||||||||||||
1,000 | Alachua County Health Facilities Authority, Shands Teaching Hospital & Clinics Ser 1996 A (MBIA) | 6.25 | 12/01/11 | 1,157,110 | ||||||||||||||
885 | Polk County Industrial Development Authority, Winter Haven Hospital 1985 Ser 2 (MBIA) | 6.25 | 09/01/15 | 901,080 | ||||||||||||||
1,000 | Tampa, Catholic Health East Ser 1998 A-1 (MBIA) | 5.50 | 11/15/14 | 1,113,270 | ||||||||||||||
2,885 | 3,171,460 | |||||||||||||||||
Public Facilities Revenue (22.0%) | ||||||||||||||||||
1,000 | Hillsborough County School District, Sales Tax Refg Ser 2002 (Ambac) | 5.375 | 10/01/20 | 1,062,350 | ||||||||||||||
1,500 | Jacksonville, Sales Tax Ser 2001 (Ambac) | 5.50 | 10/01/17 | 1,623,000 | ||||||||||||||
1,000 | Lake County School Board, Ser 2002 COPs (Ambac) | 5.375 | 07/01/18 | 1,063,280 | ||||||||||||||
1,000 | Tampa, Sales Tax Ser A 2001 (Ambac) | 5.375 | 10/01/21 | 1,057,740 | ||||||||||||||
4,500 | 4,806,370 | |||||||||||||||||
Recreational Facilities Revenue (4.7%) | ||||||||||||||||||
1,000 | Miami Sports & Exhibition Authority, Refg Ser 1992 A (FGIC) | 6.15 | 10/01/20 | 1,013,400 | ||||||||||||||
Transportation Facilities Revenue (5.0%) | ||||||||||||||||||
1,000 | Greater Orlando Aviation Authority, Ser 1997 (AMT) (FGIC) | 5.75 | 10/01/11 | 1,099,640 | ||||||||||||||
Water & Sewer Revenue (4.8%) | ||||||||||||||||||
1,000 | Florida Governmental Utility Authority, Golden Gate Ser 1999 (Ambac) | 5.25 | 07/01/18 | 1,054,980 | ||||||||||||||
13,385 | Total Florida Tax-Exempt Municipal Bonds (Cost $13,722,596) | 14,254,460 | ||||||||||||||||
Short-Term Tax-Exempt Municipal Obligations† (29.5%) | ||||||||||||||||||
1,000 | Metropolitan Water District of Southern California, Water 2000 Ser B-3 (Demand 06/01/04) | 1.09 | * | 07/01/35 | 1,000,000 | |||||||||||||
900 | Newport Beach, California, Hoag Memorial Hospital Presbyterian 1992 Ser (Demand 06/01/04) | 1.00 | * | 10/01/22 | 900,000 | |||||||||||||
600 | Collier County Health Facilities Authority, Florida, Cleveland Clinic Health System Ser 2003 C-1 (Demand 06/01/04) | 1.08 | * | 01/01/35 | 600,000 | |||||||||||||
See Notes to Financial Statements
10
Morgan Stanley Multi-State Municipal Series Trust — Florida Series
Portfolio of Investments May 31, 2004 (unaudited) continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | |||||||||||||||
$ | 900 | Orange County School Board, Florida, 2000 Ser B COPs (Ambac) (Demand 06/01/04) | 1.08* | % | 08/01/25 | $ | 900,000 | |||||||||||
1,050 | Sarasota County Public Hospital Board, Florida, Sarasota Memorial Hospital 2003 Ser A (Ambac) (Demand 06/01/04) | 1.10 | * | 07/01/37 | 1,050,000 | |||||||||||||
1,100 | University Athletic Association Inc, Florida, University of Florida Ser 1990 (Demand 06/01/04) | 1.10 | * | 02/01/20 | 1,100,000 | |||||||||||||
900 | Clark County School District, Nevada, Ser 2001 B (FSA) (Demand 06/01/04) | 0.98 | * | 06/15/21 | 900,000 | |||||||||||||
6,450 | Total Short-Term Tax-Exempt Municipal Obligations (Cost $6,450,000) | 6,450,000 | ||||||||||||||||
$ | 19,835 | Total Investments (Cost $20,172,596) (a) | 94.7 | % | 20,704,460 | |||||||||||||
Other Assets in Excess of Liabilities | 5.3 | 1,152,201 | ||||||||||||||||
Net Assets | 100.0 | % | $ | 21,856,661 | ||||||||||||||
AMT | Alternative Minimum Tax. |
COPs | Certificates of Participation. |
† | Non-Florida exempt short-term obligations represent 12.8% of net assets. They are held to meet cash flow needs pending liquidation of the Series. |
* | Current coupon of variable rate demand obligation. |
(a) | The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross and net unrealized appreciation is $531,864. |
Bond Insurance: |
Ambac | Ambac Assurance Corporation. |
FGIC | Financial Guaranty Insurance Company. |
FSA | Financial Security Assurance Inc. |
MBIA | Municipal Bond Investors Assurance Corporation. |
See Notes to Financial Statements
11
Morgan Stanley Multi-State Municipal Series Trust — New Jersey
Portfolio of Investments May 31, 2004 (unaudited)
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | |||||||||||||||
New Jersey Tax-Exempt Municipal Bonds (66.3%) | ||||||||||||||||||
Educational Facilities Revenue (7.7%) | ||||||||||||||||||
$ | 500 | Middlesex County Improvement Authority, George Street Student Housing 2004 Ser A | 5.00 | % | 08/15/35 | $ | 472,460 | |||||||||||
1,000 | University of Medicine & Dentistry, 1997 Ser A (MBIA) | 5.00 | 09/01/17 | 1,039,620 | ||||||||||||||
1,500 | 1,512,080 | |||||||||||||||||
Hospital Revenue (19.2%) | ||||||||||||||||||
New Jersey Health Care Facilities Financing Authority, | ||||||||||||||||||
1,000 | AHS Hospital Corp Ser 1997 A (Ambac) | 6.00 | 07/01/13 | 1,147,450 | ||||||||||||||
2,500 | Robert Wood Johnson University Hospital Ser 2000 | 5.75 | 07/01/25 | 2,599,275 | ||||||||||||||
3,500 | 3,746,725 | |||||||||||||||||
Industrial Development/Pollution Control Revenue (5.1%) | ||||||||||||||||||
1,000 | Salem County Pollution Control Financing Authority, E I du Pont de Nemours & Co 1992 Ser A (AMT) | 6.125 | 07/15/22 | 1,001,980 | ||||||||||||||
Mortgage Revenue – Single Family (6.9%) | ||||||||||||||||||
1,310 | New Jersey Housing & Mortgage Finance Agency, Home Buyer Ser 2000 CC (AMT) (MBIA) | 5.875 | 10/01/31 | 1,343,706 | ||||||||||||||
Nursing & Health Related Facilities Revenue (4.0%) | ||||||||||||||||||
790 | New Jersey Health Care Facilities Financing Authority, Spectrum for Living – FHA Insured Mortgage Refg Ser B | 6.50 | 02/01/22 | 792,702 | ||||||||||||||
Public Facilities Revenue (5.4%) | ||||||||||||||||||
1,000 | Essex County Improvement Authority, Ser 2002 (MBIA) | 5.25 | 10/01/19 | 1,049,850 | ||||||||||||||
Resource Recovery Revenue (4.7%) | ||||||||||||||||||
900 | Warren County Pollution Control Financing Authority, Warren Energy Resource Co Ltd Partnership Ser 1984 (MBIA) | 6.60 | 12/01/07 | 922,041 | ||||||||||||||
Transportation Facilities Revenue (13.3%) | ||||||||||||||||||
1,000 | Delaware River Port Authority, Ser 1995 (FGIC)# | 5.50 | 01/01/26 | 1,037,580 | ||||||||||||||
1,500 | Port Authority of New York & New Jersey, Cons 99th Ser (AMT) (FGIC)## | 5.75 | 05/01/15 | 1,554,810 | ||||||||||||||
2,500 | 2,592,390 | |||||||||||||||||
12,500 | Total New Jersey Tax-Exempt Municipal Bonds (Cost $12,399,838) | 12,961,474 | ||||||||||||||||
Short-Term Tax-Exempt Municipal Obligations† (26.9%) | ||||||||||||||||||
100 | Indiana Health Facility Financing Authority, Clarian Health Obligated Group Ser 2000 B (Demand 06/01/04) | 1.06 | * | 03/01/30 | 100,000 | |||||||||||||
900 | New Jersey Economic Development Authority, Exxon Corp Ser 1989 (Demand 06/01/04) | 1.01 | * | 04/01/22 | 900,000 | |||||||||||||
See Notes to Financial Statements
12
Morgan Stanley Multi-State Municipal Series Trust — New Jersey
Portfolio of Investments May 31, 2004 (unaudited) continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | |||||||||||||||
$ | 970 | New Jersey Educational Facilities Authority, Princeton University 2003 Ser F (Demand 06/01/04) | 0.97* | % | 07/01/23 | $ | 970,000 | |||||||||||
700 | Rutgers University, New Jersey, 2002 Ser A (Demand 06/01/04) | 1.04 | * | 05/01/18 | 700,000 | |||||||||||||
300 | Union County Industrial Pollution Control Finance Authority, New Jersey, Exxon Corp Ser 1994 (Demand 06/01/04) | 1.02 | * | 07/01/33 | 300,000 | |||||||||||||
900 | Port Authority of New York & New Jersey, Versatile Structure Ser 2 (Demand 06/01/04)## | 1.09 | * | 05/01/19 | 900,000 | |||||||||||||
795 | Lehigh County General Purpose Authority, Pennsylvania, Lehigh Valley Hospital Ser 1997 A (Ambac) (Demand 06/01/04) | 1.02 | * | 07/01/28 | 795,000 | |||||||||||||
600 | South Fork Municipal Authority, Pennsylvania, Conemaugh Health System 1998 Ser A (MBIA) (Demand 06/01/04) | 1.02 | * | 07/01/28 | 600,000 | |||||||||||||
5,265 | Total Short-Term Tax-Exempt Municipal Obligations (Cost $5,265,000) | 5,265,000 | ||||||||||||||||
$ | 17,765 | Total Investments (Cost $17,664,838) (a) | 93.2 | % | 18,226,474 | |||||||||||||
Other Assets in Excess of Liabilities | 6.8 | 1,328,650 | ||||||||||||||||
Net Assets | 100.0 | % | $ | 19,555,124 | ||||||||||||||
AMT | Alternative Minimum Tax. |
# | Joint exemption in New Jersey and Pennsylvania. |
## | Joint exemption in New York and New Jersey. |
† | Non-New Jersey exempt short-term obligations represent 7.1% of net assets. They are held to meet cash flow needs pending liquidation of the Series. |
* | Current coupon of variable rate demand obligation. |
(a) | The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $571,559 and the aggregate gross unrealized depreciation is $9,923, resulting in net unrealized appreciation of $561,636. |
Bond Insurance: |
Ambac | Ambac Assurance Corporation. |
FGIC | Financial Guaranty Insurance Company. |
MBIA | Municipal Bond Investors Assurance Corporation. |
See Notes to Financial Statements
13
Morgan Stanley Multi-State Municipal Series Trust — Pennsylvania Series
Portfolio of Investments May 31, 2004 (unaudited)
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | |||||||||||||||
Pennsylvania Tax-Exempt Municipal Bonds (68.0%) | ||||||||||||||||||
Educational Facilities Revenue (18.5%) | ||||||||||||||||||
$ | 1,000 | Allegheny County Higher Education Building Authority, Carnegie Mellon University Ser 2002 | 5.25 | % | 03/01/32 | $ | 1,008,730 | |||||||||||
1,000 | Delaware County Authority, Villanova University Ser 1995 (Ambac) | 5.80 | 08/01/25 | 1,053,200 | ||||||||||||||
Pennsylvania Higher Educational Facilities Authority, | ||||||||||||||||||
1,000 | Drexel University Ser 2003 | 5.50 | 05/01/18 | 1,051,890 | ||||||||||||||
1,000 | Thomas Jefferson University Ser 2002 | 5.375 | 01/01/25 | 1,017,840 | ||||||||||||||
4,000 | 4,131,660 | |||||||||||||||||
Hospital Revenue (16.5%) | ||||||||||||||||||
Lehigh County General Purpose Authority, | ||||||||||||||||||
1,000 | Lehigh Valley Health Ser B 2001 (FSA) | 5.00 | 07/01/31 | 978,890 | ||||||||||||||
1,000 | St Luke's Hospital of Bethlehem Ser 2003 | 5.25 | 08/15/23 | 958,470 | ||||||||||||||
1,750 | Philadelphia Hospitals & Higher Education Facilities Authority, Chestnut Hill Hospital Ser 1992 | 6.375 | 11/15/11 | 1,756,737 | ||||||||||||||
3,750 | 3,694,097 | |||||||||||||||||
Industrial Development/Pollution Control Revenue (4.8%) | ||||||||||||||||||
1,000 | Carbon County Industrial Development Authority, Panther Creek | |||||||||||||||||
Partners Refg 2000 Ser (AMT) | 6.65 | 05/01/10 | 1,071,920 | |||||||||||||||
Recreational Facilities Revenue (9.0%) | ||||||||||||||||||
Philadelphia Industrial Development Authority, | ||||||||||||||||||
1,000 | Stadium Ser B 2001 (FSA) | 5.50 | 10/01/17 | 1,073,950 | ||||||||||||||
1,000 | The Franklin Institute Ser 1998 | 5.20 | 06/15/26 | 943,760 | ||||||||||||||
2,000 | 2,017,710 | |||||||||||||||||
Transportation Facilities Revenue (4.6%) | ||||||||||||||||||
1,000 | Delaware River Port Authority, Ser 1995 (FGIC)# | 5.50 | 01/01/26 | 1,037,580 | ||||||||||||||
Water & Sewer Revenue (14.6%) | ||||||||||||||||||
1,000 | Allegheny County Sanitary Authority, Sewer Ser 2000 (MBIA) | 5.50 | 12/01/24 | 1,050,360 | ||||||||||||||
1,000 | Pennsylvania Finance Authority, Penn Hills Ser A 2000 (FGIC) | 5.50 | 12/01/22 | 1,063,580 | ||||||||||||||
1,000 | Philadelphia, Water & Wastewater Ser 1995 (MBIA) | 6.25 | 08/01/11 | 1,162,150 | ||||||||||||||
3,000 | 3,276,090 | |||||||||||||||||
14,750 | Total Pennsylvania Tax-Exempt Municipal Bonds (Cost $14,661,244) | 15,229,057 | ||||||||||||||||
See Notes to Financial Statements
14
Morgan Stanley Multi-State Municipal Series Trust — Pennsylvania Series
Portfolio of Investments May 31, 2004 (unaudited) continued
PRINCIPAL AMOUNT IN THOUSANDS | COUPON RATE | MATURITY DATE | VALUE | |||||||||||||||
Short-Term Tax-Exempt Municipal Obligations† (31.2%) | ||||||||||||||||||
$ | 700 | Union County Industrial Pollution Control Finance Authority, New Jersey, Exxon Corp Ser 1994 (Demand 06/01/04) | 1.02* | % | 07/01/33 | $ | 700,000 | |||||||||||
800 | Cuyahoga County, Ohio, University Hospital of Cleveland Ser 1985 (Demand 06/01/04) | 1.02 | * | 01/01/16 | 800,000 | |||||||||||||
1,000 | Delaware County Industrial Development Authority, Pennsylvania, United Parcel Service of America Inc Ser 1985 (Demand 06/01/04) | 0.98 | * | 12/01/15 | 1,000,000 | |||||||||||||
700 | Geisinger Authority, Pennsylvania, Geisinger Health System Ser 2000 (Demand 06/01/04) | 1.08 | * | 11/15/32 | 700,000 | |||||||||||||
1,000 | Lehigh County General Purpose Authority, Pennsylvania, Lehigh Valley Hospital Ser 1997 A (Ambac) (Demand 06/01/04) | 1.02 | * | 07/01/28 | 1,000,000 | |||||||||||||
700 | Philadelphia Hospitals & Higher Education Facilities Authority, Children's Hospital of Philadelphia Ser 2002 C (MBIA) (Demand 06/01/04) | 1.08 | * | 07/01/31 | 700,000 | |||||||||||||
1,090 | South Fork Municipal Authority, Pennsylvania, Conemaugh Health System 1998 Ser A (MBIA) (Demand 06/01/04) | 1.02 | * | 07/01/28 | 1,090,000 | |||||||||||||
1,000 | Loudoun County Industrial Development Authority, Virginia, Howard Hughes Medical Institute Ser 2003 C | 1.06 | * | 02/15/38 | 1,000,000 | |||||||||||||
6,990 | Total Short-Term Tax-Exempt Municipal Obligations (Cost $6,990,000) | 6,990,000 | ||||||||||||||||
$ | 21,740 | Total Investments (Cost $21,651,244) (a) | 99.2 | % | 22,219,057 | |||||||||||||
Other Assets in Excess of Liabilities | 0.8 | 176,257 | ||||||||||||||||
Net Assets | 100.0 | % | $ | 22,395,314 | ||||||||||||||
AMT | Alternative Minimum Tax. |
# | Joint exemption in Pennsylvania and New Jersey. |
† | Non-Pennsylvania exempt obligations represent 11.2% of net assets. They are held to meet cash flow needs pending liquidation of the Series. |
* | Current coupon of variable rate demand obligation. |
(a) | The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $616,780 and the aggregate gross unrealized depreciation is $48,967, resulting in net unrealized appreciation of $567,813. |
Bond Insurance: |
Ambac | Ambac Assurance Corporation. |
FGIC | Financial Guaranty Insurance Company. |
FSA | Financial Security Assurance Inc. |
MBIA | Municipal Bond Investors Assurance Corporation. |
See Notes to Financial Statements
15
Morgan Stanley Multi-State Municipal Series Trust
Financial Statements
Statement of Assets and Liabilities
May 31, 2004 (unaudited)
ARIZONA | FLORIDA | NEW JERSEY | PENNSYLVANIA | |||||||||||||||
Assets: | ||||||||||||||||||
Investments in securities, at value* | $ | 14,381,137 | $ | 20,704,460 | $ | 18,226,474 | $ | 22,219,057 | ||||||||||
Cash | 78,477 | 56,368 | 62,927 | 14,720 | ||||||||||||||
Receivable for: | ||||||||||||||||||
Investments sold | 130,000 | 1,060,958 | 1,072,349 | — | ||||||||||||||
Interest | 193,782 | 173,591 | 232,302 | 244,212 | ||||||||||||||
Prepaid expenses and other assets | 7,502 | 10,631 | 10,256 | 9,392 | ||||||||||||||
Total Assets | 14,790,898 | 22,006,008 | 19,604,308 | 22,487,381 | ||||||||||||||
Liabilities: | ||||||||||||||||||
Payable for: | ||||||||||||||||||
Shares of beneficial interest redeemed | 71,941 | 110,879 | 11,812 | 54,838 | ||||||||||||||
Investment management fee | 5,283 | 7,821 | 6,779 | 7,648 | ||||||||||||||
Dividends to shareholders | 2,125 | 3,764 | 3,724 | 4,135 | ||||||||||||||
Accrued expenses and other payables | 21,597 | 26,883 | 26,869 | 25,446 | ||||||||||||||
Total Liabilities | 100,946 | 149,347 | 49,184 | 92,067 | ||||||||||||||
Net Assets | $ | 14,689,952 | $ | 21,856,661 | $ | 19,555,124 | $ | 22,395,314 | ||||||||||
Composition of Net Assets: | ||||||||||||||||||
Paid-in-capital | $ | 14,063,304 | $ | 20,781,542 | $ | 18,794,379 | $ | 21,613,240 | ||||||||||
Accumulated undistributed net investment income | 3,346 | 5,704 | 16,478 | 7,367 | ||||||||||||||
Accumulated undistributed net realized gain | 289,810 | 537,551 | 182,631 | 206,894 | ||||||||||||||
Net unrealized appreciation | 333,492 | 531,864 | 561,636 | 567,813 | ||||||||||||||
Net Assets | $ | 14,689,952 | $ | 21,856,661 | $ | 19,555,124 | $ | 22,395,314 | ||||||||||
*Cost | $ | 14,047,645 | $ | 20,172,596 | $ | 17,664,838 | $ | 21,651,244 | ||||||||||
Shares of Beneficial Interest Outstanding | 1,438,201 | 2,117,637 | 1,862,976 | 2,101,435 | ||||||||||||||
Net Asset Value Per Share, (unlimited authorized shares of $.01 par value) | $10.21 | $10.32 | $10.50 | $10.66 | ||||||||||||||
Maximum Offering Price Per Share, (net asset value plus 4.17% of net asset value) | $10.64 | $10.75 | $10.94 | $11.10 | ||||||||||||||
See Notes to Financial Statements
16
Morgan Stanley Multi-State Municipal Series Trust
Financial Statements continued
Statement of Operations
For the six months ended May 31, 2004 (unaudited)
ARIZONA | FLORIDA | NEW JERSEY | PENNSYLVANIA | |||||||||||||||
Net Investment Income: | ||||||||||||||||||
Interest Income | $ | 586,751 | $ | 810,570 | $ | 772,458 | $ | 772,727 | ||||||||||
Expenses | ||||||||||||||||||
Investment management fee | 45,900 | 61,237 | 55,541 | 56,676 | ||||||||||||||
Distribution fee | 16,850 | 21,910 | 20,898 | 20,348 | ||||||||||||||
Professional fees | 14,317 | 13,001 | 12,187 | 10,423 | ||||||||||||||
Transfer agent fees and expenses | 5,637 | 7,333 | 8,700 | 6,967 | ||||||||||||||
Shareholder reports and notices | 4,957 | 7,274 | 11,961 | 8,027 | ||||||||||||||
Registration fees | 4,882 | 3,661 | 2,960 | 3,015 | ||||||||||||||
Custodian fees | 1,558 | 1,623 | 1,469 | 1,450 | ||||||||||||||
Trustees' fees and expenses | 807 | 1,045 | 1,001 | 949 | ||||||||||||||
Other | 2,748 | 3,043 | 2,594 | 3,064 | ||||||||||||||
Total Expenses | 97,656 | 120,127 | 117,311 | 110,919 | ||||||||||||||
Less: expense offset | (1,458 | ) | (1,478 | ) | (1,359 | ) | (1,332 | ) | ||||||||||
Net Expenses | 96,198 | 118,649 | 115,952 | 109,587 | ||||||||||||||
Net Investment Income | 490,553 | 691,921 | 656,506 | 663,140 | ||||||||||||||
Net Realized and Unrealized Gain (Loss): | ||||||||||||||||||
Net Realized Gain (Loss) on: | ||||||||||||||||||
Investments | 372,792 | 588,119 | 238,525 | 229,208 | ||||||||||||||
Futures contracts | (38,369 | ) | (37,540 | ) | (19,653 | ) | 53,600 | |||||||||||
Net Realized Gain | 334,423 | 550,579 | 218,872 | 282,808 | ||||||||||||||
Net Change in Unrealized Appreciation on: | ||||||||||||||||||
Investments | (1,230,276 | ) | (1,629,356 | ) | (1,018,547 | ) | (992,593 | ) | ||||||||||
Futures contracts | (44,610 | ) | (13,026 | ) | (36,238 | ) | (75,914 | ) | ||||||||||
Net Depreciation | (1,274,886 | ) | (1,642,382 | ) | (1,054,785 | ) | (1,068,507 | ) | ||||||||||
Net Loss | (940,463 | ) | (1,091,803 | ) | (835,913 | ) | (785,699 | ) | ||||||||||
Net Decrease | $ | (449,910 | ) | $ | (399,882 | ) | $ | (179,407 | ) | $ | (122,559 | ) | ||||||
See Notes to Financial Statements
17
Morgan Stanley Multi-State Municipal Series Trust
Financial Statements continued
Statement of Changes in Net Assets
ARIZONA | FLORIDA | ||||||||||||||||||
FOR THE SIX MONTHS ENDED MAY 31, 2004 | FOR THE YEAR ENDED NOVEMBER 30, 2003 | FOR THE SIX MONTHS ENDED MAY 31, 2004 | FOR THE YEAR ENDED NOVEMBER 30, 2003 | ||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||||
Increase (Decrease) in Net Assets: | |||||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income | $ | 490,553 | $ | 1,160,147 | $ | 691,921 | $ | 1,598,181 | |||||||||||
Net realized gain | 334,423 | 98,034 | 550,579 | 190,771 | |||||||||||||||
Net change in unrealized appreciation | (1,274,886 | ) | 783,241 | (1,642,382 | ) | 753,466 | |||||||||||||
Net Increase (Decrease) | (449,910 | ) | 2,041,422 | (399,882 | ) | 2,542,418 | |||||||||||||
Dividends and Distributions to Shareholders from: | |||||||||||||||||||
Net investment income | (493,371 | ) | (1,157,632 | ) | (694,841 | ) | (1,646,267 | ) | |||||||||||
Net realized gain | (142,678 | ) | (326,845 | ) | (203,812 | ) | (694,053 | ) | |||||||||||
Total Dividends and Distributions | (636,049 | ) | (1,484,477 | ) | (898,653 | ) | (2,340,320 | ) | |||||||||||
Transactions in Shares of Beneficial Interest: | |||||||||||||||||||
Net proceeds from sales | 320,933 | 1,553,695 | 1,627,299 | 5,769,541 | |||||||||||||||
Reinvestment of dividends and distributions | 299,668 | 711,758 | 345,641 | 895,502 | |||||||||||||||
Cost of shares redeemed | (13,353,441 | ) | (4,560,482 | ) | (16,440,256 | ) | (9,871,228 | ) | |||||||||||
Net Decrease | (12,732,840 | ) | (2,295,029 | ) | (14,467,316 | ) | (3,206,185 | ) | |||||||||||
Total Decrease | (13,818,799 | ) | (1,738,084 | ) | (15,765,851 | ) | (3,004,087 | ) | |||||||||||
Net Assets: | |||||||||||||||||||
Beginning of period | 28,508,751 | 30,246,835 | 37,622,512 | 40,626,599 | |||||||||||||||
End of Period | $ | 14,689,952 | $ | 28,508,751 | $ | 21,856,661 | $ | 37,622,512 | |||||||||||
Accumulated Undistributed Net Investment Income | $ | 3,346 | $ | 6,164 | $ | 5,704 | $ | 8,624 | |||||||||||
Shares Issued and Redeemed: | |||||||||||||||||||
Sold | 29,904 | 147,557 | 151,172 | 540,451 | |||||||||||||||
Reinvestment of dividends and distributions | 28,324 | 67,531 | 32,445 | 84,004 | |||||||||||||||
Redeemed | (1,296,743 | ) | (434,360 | ) | (1,578,416 | ) | (927,084 | ) | |||||||||||
Net Decrease | (1,238,515 | ) | (219,272 | ) | (1,394,799 | ) | (302,629 | ) | |||||||||||
See Notes to Financial Statements
18
Morgan Stanley Multi-State Municipal Series Trust
Financial Statements continued
Statement of Changes in Net Assets continued
NEW JERSEY | PENNSYLVANIA | ||||||||||||||||||
FOR THE SIX MONTHS ENDED MAY 31, 2004 | FOR THE YEAR ENDED NOVEMBER 30, 2003 | FOR THE SIX MONTHS ENDED MAY 31, 2004 | FOR THE YEAR ENDED NOVEMBER 30, 2003 | ||||||||||||||||
(unaudited) | (unaudited) | ||||||||||||||||||
Increase (Decrease) in Net Assets: | |||||||||||||||||||
Operations: | |||||||||||||||||||
Net investment income | $ | 656,506 | $ | 1,554,317 | $ | 663,140 | $ | 1,479,235 | |||||||||||
Net realized gain | 218,872 | 118,048 | 282,808 | 131,293 | |||||||||||||||
Net change in unrealized appreciation | (1,054,785 | ) | 419,841 | (1,068,507 | ) | 782,835 | |||||||||||||
Net Increase (Decrease) | (179,407 | ) | 2,092,206 | (122,559 | ) | 2,393,363 | |||||||||||||
Dividends and Distributions to Shareholders from: | |||||||||||||||||||
Net investment income | (658,341 | ) | (1,548,827 | ) | (664,624 | ) | (1,476,093 | ) | |||||||||||
Net realized gain | (154,720 | ) | (318,394 | ) | (207,254 | ) | (254,759 | ) | |||||||||||
Total Dividends and Distributions | (813,061 | ) | (1,867,221 | ) | (871,878 | ) | (1,730,852 | ) | |||||||||||
Transactions in Shares of Beneficial Interest: | |||||||||||||||||||
Net proceeds from sales | 707,433 | 2,976,567 | 669,072 | 2,742,433 | |||||||||||||||
Reinvestment of dividends and distributions | 449,592 | 1,007,456 | 474,507 | 894,815 | |||||||||||||||
Cost of shares redeemed | (14,980,119 | ) | (5,722,256 | ) | (11,991,436 | ) | (3,084,028 | ) | |||||||||||
Net Increase (Decrease) | (13,823,094 | ) | (1,738,233 | ) | (10,847,857 | ) | 553,220 | ||||||||||||
Total Increase (Decrease) | (14,815,562 | ) | (1,513,248 | ) | (11,842,294 | ) | 1,215,731 | ||||||||||||
Net Assets: | |||||||||||||||||||
Beginning of period | 34,370,686 | 35,883,934 | 34,237,608 | 33,021,877 | |||||||||||||||
End of Period | $ | 19,555,124 | $ | 34,370,686 | $ | 22,395,314 | $ | 34,237,608 | |||||||||||
Accumulated Undistributed Net Investment Income | $ | 16,478 | $ | 18,313 | $ | 7,367 | $ | 8,851 | |||||||||||
Shares Issued and Redeemed: | |||||||||||||||||||
Sold | 65,351 | 274,830 | 61,278 | 252,305 | |||||||||||||||
Reinvestment of dividends and distributions | 41,771 | 93,226 | 43,577 | 82,375 | |||||||||||||||
Redeemed | (1,416,696 | ) | (532,208 | ) | (1,123,452 | ) | (284,397 | ) | |||||||||||
Net Increase (Decrease) | (1,309,574 | ) | (164,152 | ) | (1,018,597 | ) | 50,283 | ||||||||||||
See Notes to Financial Statements
19
Morgan Stanley Multi-State Municipal Series Trust
Notes to Financial Statements May 31, 2004 (unaudited)
1. Organization and Accounting Policies
Morgan Stanley Multi-State Municipal Series Trust (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a non-diversified, open-end management investment company. The investment objective of each Series is to provide a high level of current income exempt from both Federal and the designated state income taxes consistent with preservation of capital.
The Fund, organized on October 29, 1990, as a Massachusetts business trust, is comprised of four separate Series (the "Series"): the Arizona Series, the Florida Series, the New Jersey Series, and the Pennsylvania Series. Each of the Series commenced operations on January 15, 1991, with the exception of the Arizona Series which commenced operations on April 30, 1991.
The following is a summary of significant accounting policies:
A. Valuation of Investments — (1) portfolio securities are valued by an outside independent pricing service approved by the Trustees. The pricing service uses both a computerized grid matrix of tax-exempt securities and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the mean between the last reported bid and asked price. The portfolio securities are thus valued by reference to a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant; (2) futures are valued at the latest sale price on the commodities exchange on which they trade unless it is determined that such price does not reflect their market value, in which case they will be valued at their fair value as determined in good faith under procedures established by and under the supervision of the Trustees; and (3) 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. 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
20
Morgan Stanley Multi-State Municipal Series Trust
Notes to Financial Statements May 31, 2004 (unaudited) continued
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.
D. Federal Income Tax Policy — It is the Fund's policy to comply individually for each Series with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable and nontaxable 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.
F. Expenses — Direct expenses are charged to the respective Series and general corporate expenses are allocated on the basis of relative net assets or equally among the Series.
G. 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, each Series of the Fund pays Morgan Stanley Investment Advisors Inc. (the "Investment Manager"), a management fee, accrued daily and payable monthly, by applying the annual rate of 0.35% to the daily net assets of each Series determined as of the close of each business day.
3. Plan of Distribution
Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager, is the distributor of the Fund's shares and, in accordance with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act, provides certain services in connection with the promotion of sales of Fund shares.
Reimbursements for these expenses will be made in monthly payments by the Fund to the Distributor, which will in no event exceed an amount equal to a payment at the annual rate of 0.15% of the Fund's average daily net assets during the month. Expenses incurred by the Distributor pursuant to the Plan in any fiscal year will not be reimbursed by the Fund through payments accrued in any subsequent fiscal year. For the six months ended May 31, 2004, the distribution fees were accrued at the following annual rates:
ARIZONA | FLORIDA | NEW JERSEY | PENNSYLVANIA | |||||||||||||||
Annual Rate | 0.13 | % | 0.13 | % | 0.13 | % | 0.13 | % | ||||||||||
21
Morgan Stanley Multi-State Municipal Series Trust
Notes to Financial Statements May 31, 2004 (unaudited) continued
The Distributor has informed the Fund that for the six months ended May 31, 2004 it received commissions from the sale of the Fund's shares of beneficial interest as follows:
ARIZONA | FLORIDA | NEW JERSEY | PENNSYLVANIA | |||||||||||||||
Commissions | $ | 4,590 | $ | 27,181 | $ | 22,597 | $ | 21,984 | ||||||||||
Such commissions are deducted from the proceeds of the sale of the Fund's shares and are not an expense of the Fund.
4. Security Transactions and Transactions with Affiliates
The cost of purchases and proceeds from the sales of portfolio securities, excluding short-term investments, for the six months ended May 31, 2004 were as follows:
ARIZONA | FLORIDA | NEW JERSEY | PENNSYLVANIA | |||||||||||||||
Purchases | $ | 1,634,115 | $ | 523,110 | $ | 2,996,350 | $ | 1,096,630 | ||||||||||
Sales | $ | 19,218,664 | $ | 21,191,718 | $ | 22,756,305 | $ | 17,058,553 | ||||||||||
Included in the aforementioned transactions of the Florida Series, New Jersey Series, and Pennsylvania Series are sales with other Morgan Stanley funds of $3,772,165, $2,149,950 and $2,619,225, respectively, including net realized gains of $295,021, $165,187 and $31,717, respectively.
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 retirement. Benefits under this plan are based on factors which include years of service and compensation. Aggregate pension costs for the six months ended May 31, 2004 included in Trustees' fees and expenses in the Statement of Operations and the accrued pension liability included in accrued expenses in the Statement of Assets and Liabilities for each of the respective Series were as follows:
ARIZONA | FLORIDA | NEW JERSEY | PENNSYLVANIA | |||||||||||||||
Aggregate Pension Costs | $ | 635 | $ | 818 | $ | 781 | $ | 742 | ||||||||||
Accrued Pension Liability | $ | 10,900 | $ | 13,981 | $ | 13,471 | $ | 12,549 | ||||||||||
On December 2, 2003, the Trustees voted to close the plan to new participants and eliminate the future benefits growth due to increases to compensation after July 31, 2003.
Effective April 1, 2004, the Fund began an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Trustee to defer payment of all, or a portion, of the fees he receives for serving on the Board of Trustees. Each eligible Trustee generally may elect to have the deferred amounts
22
Morgan Stanley Multi-State Municipal Series Trust
Notes to Financial Statements May 31, 2004 (unaudited) continued
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.
Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is the Fund's transfer agent. At May 31, 2004, each of the Series had transfer agent fees and expenses payable as follows:
ARIZONA | FLORIDA | NEW JERSEY | PENNSYLVANIA | |||||||||||||||
Transfer Agent Fees and Expenses Payable | $ | 1,570 | $ | 499 | $ | 476 | $ | 338 | ||||||||||
5. Expense Offset
The expense offset represents a reduction of the custodian fees for earnings on cash balances maintained by the Fund.
6. Risks Relating to Certain Financial Instruments
The Fund may invest a portion of its assets in residual interest bonds, which are inverse floating rate municipal obligations. The prices of these securities are subject to greater market fluctuations during periods of changing prevailing interest rates than are comparable fixed rate obligations.
To hedge against adverse interest rate changes, the Fund may invest in financial futures contracts or municipal bond index futures contracts ("futures contracts").
These futures contracts involve elements of market risk in excess of the amount reflected in the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the value of the underlying securities. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
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.
At November 30, 2003, each Series had temporary book/tax differences primarily attributable to book amortization on debt securities, mark-to-market of open futures contracts and dividend payable.
23
Morgan Stanley Multi-State Municipal Series Trust
Notes to Financial Statements May 31, 2004 (unaudited) continued
8. Legal Matters
The Investment Manager, certain affiliates of the Investment Manager, certain officers of such affiliates and certain investment companies advised by the Investment Manager or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. This consolidated action also names as defendants certain individual Trustees and Directors of the Morgan Stanley funds. The consolidated amended complaint generally alleges that defendants, including the Fund, violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Investment Manager and certain affiliates of the Investment Manager allegedly offered economic incentives to brokers and others to recommend the funds advised by the Investment Manager or its affiliates to investors rather than funds managed by other companies, and (ii) that the funds advised by the Investment Manager or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their efforts to recommend these funds to investors. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The defendants have moved to dismiss the action and otherwise vigorously to defend it. While the Fund believes that it has meritorious defenses, the ultimate outcome of this matter is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of this matter.
9. Fund Liquidation
On April 22, 2004, the Board of Trustees of each Series recommended the liquidation of each Series. The liquidation is subject to the approval of each Series' shareholders at a meeting scheduled to be held on or about August 16, 2004. If approved, the liquidation will occur as soon as is reasonable and practicable.
Effective April 30, 2004, each Series ceased offering its shares and ceased accruing its distribution fee.
24
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25
Morgan Stanley Multi-State Municipal Series Trust
Financial Highlights
Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
YEAR ENDED NOVEMBER 30 | NET ASSET VALUE BEGINNING OF PERIOD | NET INVESTMENT INCOME | NET REALIZED AND UNREALIZED GAIN (LOSS) | TOTAL FROM INVESTMENT OPERATIONS | DIVIDENDS TO SHAREHOLDERS | DISTRIBUTIONS TO SHAREHOLDERS | TOTAL DIVIDENDS AND DISTRIBUTIONS | |||||||||||||||||||||||
ARIZONA SERIES | ||||||||||||||||||||||||||||||
1999 | $ | 10.81 | $ | 0.49 | $ | (0.75 | ) | $ | (0.26 | ) | $ | (0.49 | ) | $ | (0.16 | ) | $ | (0.65 | ) | |||||||||||
2000 | 9.90 | 0.49 | 0.22 | 0.71 | (0.49 | ) | — | (0.49 | ) | |||||||||||||||||||||
2001 | 10.12 | 0.47 | 0.21 | 0.68 | (0.47 | ) | — | (0.47 | ) | |||||||||||||||||||||
2002 | 10.33 | 0.44 | 0.13 | 0.57 | (0.44 | ) | (0.02 | ) | (0.46 | ) | ||||||||||||||||||||
2003 | 10.44 | 0.41 | 0.32 | 0.73 | (0.41 | ) | (0.11 | ) | (0.52 | ) | ||||||||||||||||||||
2004* | 10.65 | 0.20 | (0.39 | ) | (0.19 | ) | (0.20 | ) | (0.05 | ) | (0.25 | ) | ||||||||||||||||||
FLORIDA SERIES | ||||||||||||||||||||||||||||||
1999 | 11.25 | 0.50 | (0.78 | ) | (0.28 | ) | (0.50 | ) | (0.37 | ) | (0.87 | ) | ||||||||||||||||||
2000 | 10.10 | 0.50 | 0.25 | 0.75 | (0.50 | ) | — | (0.50 | ) | |||||||||||||||||||||
2001 | 10.35 | 0.50 | 0.24 | 0.74 | (0.50 | ) | — | (0.50 | ) | |||||||||||||||||||||
2002 | 10.59 | 0.47 | 0.09 | 0.56 | (0.47 | ) | (0.03 | ) | (0.50 | ) | ||||||||||||||||||||
2003 | 10.65 | 0.45 | 0.26 | 0.71 | (0.46 | ) | (0.19 | ) | (0.65 | ) | ||||||||||||||||||||
2004* | 10.71 | 0.21 | (0.33 | ) | (0.12 | ) | (0.21 | ) | (0.06 | ) | (0.27 | ) | ||||||||||||||||||
NEW JERSEY SERIES | ||||||||||||||||||||||||||||||
1999 | 11.15 | 0.51 | (0.77 | ) | (0.26 | ) | (0.51 | ) | (0.16 | ) | (0.67 | ) | ||||||||||||||||||
2000 | 10.22 | 0.50 | 0.22 | 0.72 | (0.50 | ) | — | (0.50 | ) | |||||||||||||||||||||
2001 | 10.44 | 0.50 | 0.23 | 0.73 | (0.50 | ) | — | (0.50 | ) | |||||||||||||||||||||
2002 | 10.67 | 0.49 | 0.08 | 0.57 | (0.49 | ) | — | (0.49 | ) | |||||||||||||||||||||
2003 | 10.75 | 0.47 | 0.18 | 0.65 | (0.47 | ) | (0.10 | ) | (0.57 | ) | ||||||||||||||||||||
2004* | 10.83 | 0.22 | (0.28 | ) | (0.06 | ) | (0.22 | ) | (0.05 | ) | (0.27 | ) | ||||||||||||||||||
PENNSYLVANIA SERIES | ||||||||||||||||||||||||||||||
1999 | 11.15 | 0.52 | (0.84 | ) | (0.32 | ) | (0.52 | ) | (0.12 | ) | (0.64 | ) | ||||||||||||||||||
2000 | 10.19 | 0.52 | 0.27 | 0.79 | (0.52 | ) | — | (0.52 | ) | |||||||||||||||||||||
2001 | 10.46 | 0.54 | 0.30 | 0.84 | (0.54) | ‡ | — | (0.54 | ) | |||||||||||||||||||||
2002 | 10.76 | 0.51 | 0.00 | 0.51 | (0.51 | ) | — | (0.51 | ) | |||||||||||||||||||||
2003 | 10.76 | 0.47 | 0.29 | 0.76 | (0.47 | ) | (0.08 | ) | (0.55 | ) | ||||||||||||||||||||
2004* | 10.97 | 0.22 | (0.24 | ) | (0.02 | ) | (0.22 | ) | (0.07 | ) | (0.29 | ) | ||||||||||||||||||
* | For the six months ended May 31, 2004 (unaudited). |
† | Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. |
‡ | Includes capital gain distribution of $0.0029. |
(1) | Does not reflect the effect of expense offset of 0.01%. |
(2) | Annualized. |
(3) | Not annualized. |
See Notes to Financial Statements
26
RATIOS TO AVERAGE NET ASSETS | ||||||||||||||||||||||
NET ASSET VALUE END OF PERIOD | TOTAL RETURN† | NET ASSETS END OF PERIOD (000'S) | EXPENSES (BEFORE EXPENSE OFFSET) | NET INVESTMENT INCOME | PORTFOLIO TURNOVER RATE | |||||||||||||||||
$9.90 | (2.53 | )% | $ | 36,867 | 0.66 | %(1) | 4.72 | % | 13 | % | ||||||||||||
10.12 | 7.42 | 32,329 | 0.67 | (1) | 4.93 | 10 | ||||||||||||||||
10.33 | 6.82 | 31,722 | 0.71 | (1) | 4.54 | 30 | ||||||||||||||||
10.44 | 5.64 | 30,247 | 0.70 | (1) | 4.23 | 29 | ||||||||||||||||
10.65 | 7.23 | 28,509 | 0.73 | (1) | 3.94 | 12 | ||||||||||||||||
10.21 | (1.83 | ) (3) | 14,690 | 0.74 | (1)(2) | 3.74 | (2) | 7 | (3) | |||||||||||||
10.10 | (2.70 | ) | 53,555 | 0.64 | (1) | 4.69 | 13 | |||||||||||||||
10.35 | 7.70 | 47,951 | 0.63 | (1) | 4.95 | 4 | ||||||||||||||||
10.59 | 7.23 | 44,211 | 0.65 | (1) | 4.69 | 16 | ||||||||||||||||
10.65 | 5.44 | 40,627 | 0.66 | (1) | 4.45 | 22 | ||||||||||||||||
10.71 | 6.84 | 37,623 | 0.68 | (1) | 4.17 | 8 | ||||||||||||||||
10.32 | (1.17 | ) ( | 21,857 | 0.69 | (1)(2) | 3.95 | (2) | 2 | (3) | |||||||||||||
10.22 | (2.44 | ) | 38,566 | 0.69 | 4.73 | 10 | ||||||||||||||||
10.44 | 7.32 | 36,306 | 0.69 | (1) | 4.90 | 20 | ||||||||||||||||
10.67 | 7.07 | 36,757 | 0.69 | 4.65 | 9 | |||||||||||||||||
10.75 | 5.41 | 35,884 | 0.70 | (1) | 4.55 | 14 | ||||||||||||||||
10.83 | 6.10 | 34,371 | 0.71 | (1) | 4.32 | 25 | ||||||||||||||||
10.50 | (0.66 | ) ( | 19,555 | 0.74 | (1)(2) | 4.14 | (2) | 10 | (3) | |||||||||||||
10.19 | (3.02 | ) | 49,059 | 0.64 | (1) | 4.83 | 6 | |||||||||||||||
10.46 | 8.03 | 52,041 | 0.64 | (1) | 5.07 | 6 | ||||||||||||||||
10.76 | 8.19 | 35,514 | 0.68 | (1) | 5.05 | 11 | ||||||||||||||||
10.76 | 4.83 | 33,022 | 0.71 | (1) | 4.74 | 21 | ||||||||||||||||
10.97 | 7.27 | 34,238 | 0.68 | (1) | 4.34 | 27 | ||||||||||||||||
10.66 | (0.30 | ) ( | 22,395 | 0.69 | (1)(2) | 4.10 | (2) | 4 | (3) | |||||||||||||
27
Trustees Michael Bozic Officers Charles A. Fiumefreddo Mitchell M. Merin Ronald E. Robison Barry Fink Joseph J. McAlinden Stefanie V. Chang Francis J. Smith Thomas F. Caloia Mary E. Mullin Transfer Agent Morgan Stanley Trust Independent Registered Public Accounting Firm 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. © 2004 Morgan Stanley 37926RPT-RA04-00355P-Y05/04 | MORGAN STANLEY FUNDS | |
Morgan Stanley Multi-State Municipal Series Trust Semiannual Report May 31, 2004 | ||
Item 2. Code of Ethics. Not applicable for semiannual reports. Item 3. Audit Committee Financial Expert. Not applicable for semiannual reports. Item 4. Principal Accountant Fees and Services Not applicable for semiannual reports. Item 5. Audit Committee of Listed Registrants. Not applicable for semiannual reports. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable for semiannual reports. Item 8. [Reserved.] Item 9 - Controls and Procedures (a) The Fund's principal executive officer and principal financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Fund's internal controls or in other factors that could significantly affect the Fund's internal controls subsequent to the date of their evaluation. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10 Exhibits (a) Code of Ethics - Not applicable for semiannual reports. (b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT. 2 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 Multi-State Municipal Series Trust /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer July 20, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer July 20, 2004 /s/ Francis Smith Francis Smith Principal Financial Officer July 20, 2004 3 EXHIBIT 10 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 Multi-State Municipal Series 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-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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) Omitted.] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change 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; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): 4 a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; 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 over financial reporting. Date: July 20, 2004 /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer 5 EXHIBIT 10 B2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER CERTIFICATIONS I, Francis Smith, certify that: 6. I have reviewed this report on Form N-CSR of Morgan Stanley Multi-State Municipal Series Trust; 7. 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; 8. 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; 9. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: b) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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) Omitted.] e) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and f) disclosed in this report any change 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; and 10. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): c) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and 6 d) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: July 20, 2004 /s/ Francis Smith Francis Smith Principal Financial Officer 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 Multi-State Municipal Series Trust In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended May 31, 2004 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: July 20, 2004 /s/ Ronald E. Robison --------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement required by Section 906 has been provided to Morgan Stanley Multi-State Municipal Series Trust and will be retained by Morgan Stanley Multi-State Municipal Series Trust and furnished to the Securities and Exchange Commission or its staff upon request. 8 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 Multi-State Municipal Series Trust In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended May 31, 2004 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: July 20, 2004 /s/ Francis Smith ------------------- Francis Smith Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to Morgan Stanley Multi-State Municipal Series Trust and will be retained by Morgan Stanley Multi-State Municipal Series Trust and furnished to the Securities and Exchange Commission or its staff upon request. 9