UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-08916
Morgan Stanley Information Fund
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)
Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-4000
Date of fiscal year end: March 31, 2004
Date of reporting period: September 30, 2003
Item 1 - Report to Shareholders
Welcome, Shareholder:
In this report, you'll learn about how your investment in Morgan Stanley
Information Fund performed during the semiannual period. We will provide an
overview of the market conditions, and discuss some of the factors that affected
performance during the reporting period. In addition, this report includes the
Fund's financial statements and a list of Fund investments.
This material must be preceded or accompanied by a prospectus for the fund being
offered. Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that the Fund will achieve its investment objective.
The Fund is subject to market risk, which is the possibility that market values
of securities owned by the Fund will decline and, therefore, the value of the
Fund shares may be less than what you paid for them. Accordingly you can lose
money investing in this Fund.
FUND REPORT
For the six-months ended September 30, 2003
TOTAL RETURN FOR THE SIX-MONTHS ENDED SEPTEMBER 30, 2003
<Table>
<Caption>
LIPPER
S&P SCIENCE AND
500 TECHNOLOGY
CLASS A CLASS B CLASS C CLASS D INDEX(1) FUNDS INDEX(2)
34.73% 34.28% 34.28% 34.96% 18.44% 35.16%
</Table>
The performance of the Fund's four share classes varies because each has
different expenses. The Fund's total return figures assume the reinvestment of
all distributions but do not reflect the deduction of any applicable sales
charges. Such costs would lower performance. Past performance is no guarantee of
future results. See Performance Summary for standardized performance
information.
MARKET CONDITIONS
The six-month period ended September 30, 2003, was one of sharp contrasts. As
the period began, the equity markets were reeling from investors' general lack
of risk appetite. Their indifference to stocks was driven by a combination of
concerns over the pending war in Iraq, the uncertain path of the economy and
lackluster spending by corporations.
Investor sentiment subsequently improved, based on expectations of a swift U.S.
victory in Iraq, encouraging economic data and corporate earnings reports that
exceeded expectations. These factors triggered a strong market rally. The
defensive sectors and securities that had led during the bear market fell behind
more-cyclical sectors as investors' expectations for the economy improved. The
rally in the equity markets continued into the third quarter, though September
saw the broad market decline amid concerns about third-quarter earnings and the
viability of the economic recovery.
After a two-and-a-half-year downward spiral, fundamentals in the technology
sector bottomed out in the second quarter of 2003. From that time through the
end of September, the sector experienced a gradual recovery in revenues and
business fundamentals. This recovery was fueled largely by a resurgence in
demand for personal computers (PCs) and handsets. PC sales benefited from an
uptick in corporate and consumer upgrades, which had been slow for the previous
few years.
PERFORMANCE ANALYSIS
The Fund's emphasis on the technology sector, which led the market during the
reporting period, resulted in considerable outperformance relative to the S&P
500 Index. Positive contributors for the Fund included its investments in the
areas of semiconductor capital equipment, semiconductors and contract
manufacturers. The upsurge in technology led to a sharp increase in revenues for
these companies, as PCs and handsets are responsible for 65 to 70 percent of
semiconductor demand. The Fund's management team increased its allocation to
these industries during the period based on our belief that they stand to gain
from any uptick in corporate spending on information technology (IT).
Computer services benefited from the continuing trend towards outsourcing and
accelerated spending by the federal government on IT. By updating its antiquated
IT architecture, the federal government is attempting to bring corporate
efficiencies and cost savings to the public sector. Outsourcing has also become
an increasing trend in the corporate world, as companies look to control costs
by outsourcing non-core functions.
2
Although software companies performed strongly, they lagged the broader
technology sector in the rally. We have seen signs of an uptick in this industry
as corporations have showed a renewed willingness to reinvest in their IT
infrastructure. Much of the performance in this sector has been garnered by
companies focused on strategic areas such as data security. Data security is
increasingly important as corporations and individual users rely more and more
on the Internet and networked environments.
<Table>
<Caption>
TOP 10 HOLDINGS
Microsoft 4.8%
Anteon International 4.1
Intel 3.8
Cisco Systems 3.7
Symantec 2.5
QUALCOMM 2.4
KLA TENCOR 1.9
Emulex 1.8
Celestica 1.8
Marvell Technology Group 1.8
</Table>
<Table>
<Caption>
LARGEST INDUSTRIES
Semiconductors 22.5%
Packaged Software 15.0
Information Technology Services 9.7
Computer Communications 8.0
Electronic Components 6.9
</Table>
Subject to change daily. All percentages are as a percentage of net assets.
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 advisor
services.
INVESTMENT STRATEGY
1. THE FUND INVESTS PRIMARILY IN SECURITIES OF COMPANIES LOCATED THROUGHOUT THE
WORLD THAT ARE ENGAGED IN THE COMMUNICATIONS AND INFORMATION INDUSTRY.
2. A COMPANY IS CONSIDERED TO BE IN THE COMMUNICATIONS AND INFORMATION INDUSTRY
IF IT DERIVES AT LEAST 35 PERCENT OF ITS REVENUES OR EARNINGS FROM, OR
DEVOTES AT LEAST 35 PERCENT OF ITS ASSETS TO
- DESIGNING, DEVELOPING, MANUFACTURING, PROVIDING OR ENABLING TELEPHONE OR
COMMUNICATIONS-RELATED PRODUCTS AND SERVICES
- THE CREATION, PACKAGING, DISTRIBUTION AND OWNERSHIP OF ENTERTAINMENT AND
INFORMATION PROGRAMMING.
PROXY VOTING POLICIES AND PROCEDURES
A DESCRIPTION OF THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE VOTING
OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES IS AVAILABLE WITHOUT
CHARGE, UPON REQUEST, BY CALLING (800) 869-NEWS (6397). THIS INFORMATION IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
3
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS -- PERIOD ENDED SEPTEMBER 30, 2003
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++)
Since 07/28/97 Since 11/28/95 Since 07/28/97 Since 07/28/97
SYMBOL IFOAX IFOBX IFOCX IFODX
1 YEAR 51.26%(3) 50.09%(3) 50.09%(3) 51.49%(3)
43.32(4) 45.09(4) 49.09(4) --
5 YEARS 1.03(3) 0.31(3) 0.32(3) 1.26(3)
(0.05)(4) 0.04(4) 0.32(4) --
SINCE INCEPTION 3.35(3) 3.80(3) 2.61(3) 3.57(3)
2.45(4) 3.80(4) 2.61(4) --
</Table>
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.
- --------------------------------------------------------------------------------
Notes on Performance
(1) The Standard and Poor's 500 Index (S&P 500(R)) is a broad-based index, the
performance of which is based on the performance of 500 widely-held common
stocks chosen for market size, liquidity and industry group representation.
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 Science & Technology Funds Index is an equally weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper Science & Technology Funds classification. The Index, which is
adjusted for capital gains distributions and income dividends, is unmanaged
and should not be considered an investment. There are currently 30 funds
represented in this Index.
(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 5.25%.
** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The
CDSC declines to 0% after six years.
+ The maximum contingent deferred sales charge for Class C is 1% for shares
redeemed within one year of purchase.
++ Class D has no sales charge.
4
Morgan Stanley Information Fund
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Common Stocks and Warrants (99.8%)
Advertising/Marketing
Services (1.5%)
600,000 Gemstar-TV Guide
International, Inc.*.... $ 2,838,000
150,000 Getty Images, Inc.*...... 5,274,000
------------
8,112,000
------------
Biotechnology (0.6%)
75,000 Celgene Corp.*........... 3,249,750
------------
Broadcasting (0.1%)
19,300 Citadel Broadcasting
Corp.*.................. 381,368
------------
Cable/Satellite TV (1.1%)
600,000 Charter Communications,
Inc. (Class A)*......... 2,472,000
100,000 Cox Communications, Inc.
(Class A)*.............. 3,162,000
------------
5,634,000
------------
Computer Communications
(8.0%)
500,000 3Com Corp.*.............. 2,950,000
450,000 Avaya Inc.*.............. 4,905,000
1,000,000 Cisco Systems, Inc.*..... 19,540,000
375,000 Emulex Corp.*............ 9,551,250
50,000 Juniper Networks,
Inc.*................... 746,000
200,000 NetScreen Technologies,
Inc.*................... 4,446,000
------------
42,138,250
------------
Computer Peripherals
(5.7%)
300,000 ATI Technologies Inc.
(Canada)*............... 4,455,000
200,000 EMC Corp.*............... 2,526,000
750,000 Maxtor Corp.*............ 9,127,500
300,000 Network Appliance,
Inc.*................... 6,159,000
150,000 Seagate Technology (ADR)
(Cayman Islands)........ 4,080,000
75,000 Zebra Technologies Corp.
(Class A)*.............. 3,867,750
------------
30,215,250
------------
</Table>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Computer Processing
Hardware (1.5%)
150,000 Dell Inc.*............... $ 5,008,500
165,000 Hewlett-Packard Co. ..... 3,194,400
------------
8,202,900
------------
Data Processing Services
(1.7%)
100,000 Computer Sciences
Corp.*.................. 3,757,000
200,000 SunGard Data Systems
Inc.*................... 5,262,000
------------
9,019,000
------------
Electrical Products
(0.3%)
100,000 American Power Conversion
Corp. .................. 1,714,000
------------
Electronic Components
(6.9%)
600,000 Celestica, Inc.*......... 9,516,000
600,000 Flextronics
International, Ltd.
(Singapore)*............ 8,508,000
347,900 MEMC Electronic
Materials, Inc.*........ 3,795,589
120,000 QLogic Corp.*............ 5,641,200
125,000 Samsung SDI Co., Ltd.
(GDR) (South Korea)..... 2,637,500
1,050,000 Solectron Corp.*......... 6,142,500
------------
36,240,789
------------
Electronic Distributors
(0.6%)
100,000 Tech Data Corp.*......... 3,085,000
------------
Electronic Equipment/
Instruments (2.8%)
75,200 Agilent Technologies,
Inc.*................... 1,662,672
276,000 AU Optronics Corp. (ADR)
(Taiwan)................ 3,521,760
400,000 Symbol Technologies,
Inc. ................... 4,780,000
900,000 Toshiba Corp. ........... 3,793,382
50,000 Unova, Inc.*............. 732,500
------------
14,490,314
------------
</Table>
5
See Notes to Financial Statements
Morgan Stanley Information Fund
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Electronic Production
Equipment (5.2%)
425,000 Amkor Technology,
Inc.*................... $ 6,039,250
250,000 Applied Materials,
Inc.*................... 4,535,000
195,000 ASML Holding NV
(Netherlands)*.......... 2,560,350
85,000 August Technology
Corp.*.................. 1,210,400
100,000 Brooks Automation
Inc.*................... 2,090,000
190,000 KLA-Tencor Corp.*........ 9,766,000
56,700 MKS Instruments, Inc.*... 1,228,122
------------
27,429,122
------------
Information Technology
Services (9.7%)
275,000 Accenture Ltd. (Class A)
(Bermuda)*.............. 6,143,500
200,000 Amdocs Ltd.*............. 3,760,000
700,000 Anteon International
Corp.*.................. 21,420,000
300,000 Documentum, Inc.*........ 6,393,000
70,000 Infosys Technologies Ltd.
(ADR) (India)........... 4,765,040
20,000 International Business
Machines Corp. ......... 1,766,600
75,000 PeopleSoft, Inc.*........ 1,364,250
400,000 Unisys Corp.*............ 5,412,000
------------
51,024,390
------------
Internet Retail (2.5%)
100,000 Amazon.com, Inc.*........ 4,836,000
250,000 InterActiveCorp.*........ 8,262,500
------------
13,098,500
------------
Internet Software/
Services (5.3%)
400,000 BEA Systems, Inc.*....... 4,820,000
300,000 Check Point Software
Technologies Ltd.
(Israel)*............... 5,040,000
52 MicroStrategy Inc. (Class
A)*..................... 2,392
327 MicroStrategy Inc.
(Warrants)*............. 92
110,000 Netease.com Inc. (ADR)
(China)*................ 6,140,200
118,000 Packeteer, Inc.*......... 1,421,900
</Table>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
185,000 SINA Corp. (China)*...... $ 6,613,750
300,000 VeriSign, Inc.*.......... 4,041,000
------------
28,079,334
------------
Major Telecommunications
(1.0%)
150,000 China Telecom Corp., Ltd.
(ADR) (China)........... 3,826,500
180,000 City Telcom Ltd. (ADR)
(China)................. 1,258,200
------------
5,084,700
------------
Other Consumer Services
(0.7%)
130,000 Priceline.com Inc.*...... 3,768,700
------------
Packaged Software (15.0%)
150,000 Cognos, Inc. (ADR)
(Canada)*............... 4,653,000
125,000 Mercury Interactive
Corp.*.................. 5,676,250
350,000 Micromuse Inc.*.......... 2,863,000
900,000 Microsoft Corp. ......... 25,011,000
350,000 NetIQ Corp.*............. 4,179,000
100,000 Novell, Inc.*............ 533,000
600,000 Oracle Corp.*............ 6,732,000
290,000 Red Hat, Inc.*........... 2,929,000
225,000 SAP AG (ADR) (Germany)... 6,842,250
210,000 Symantec Corp.*.......... 13,234,200
200,000 Veritas Software
Corp.*.................. 6,280,000
------------
78,932,700
------------
Recreational Products
(0.3%)
400,000 Atari, Inc. ............. 1,636,000
------------
Semiconductors (22.5%)
750,000 Agere Systems Inc. (Class
A)*..................... 2,302,500
150,000 Altera Corp.*............ 2,835,000
225,000 Applied Micro Circuits
Corp.*.................. 1,095,750
225,000 Broadcom Corp. (Class
A)*..................... 5,989,500
300,000 Cypress Semiconductor
Corp.*.................. 5,304,000
300,000 GlobespanVirata, Inc.*... 2,166,000
732,000 Intel Corp. ............. 20,137,320
</Table>
6
See Notes to Financial Statements
Morgan Stanley Information Fund
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 2003 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
225,000 Linear Technology
Corp. .................. $ 8,057,250
250,000 Marvell Technology Group
Ltd. (Bermuda)*......... 9,437,500
225,000 Maxim Integrated
Products, Inc. ......... 8,887,500
700,000 Micrel, Inc.*............ 8,533,000
300,000 Microchip Technology
Inc. ................... 7,182,000
505,000 Micron Technology,
Inc.*................... 6,777,100
250,000 National Semiconductor
Corp.*.................. 8,072,500
150,000 PMC - Sierra, Inc.*...... 1,978,650
250,000 RF Micro Devices,
Inc.*................... 2,322,500
50,000 Silicon Laboratories
Inc.*................... 2,247,500
316,000 Taiwan Semiconductor
Manufacturing Co. Ltd.
(ADR) (Taiwan)*......... 3,422,280
700,000 Vitesse Semiconductor
Corp.*.................. 4,480,000
250,000 Xilinx, Inc.*............ 7,127,500
------------
118,355,350
------------
Telecommunication
Equipment (4.9%)
500,000 Corning Inc.*............ 4,710,000
2,173,913 Corvis Corp.*............ 2,467,826
434,783 Corvis Corp.
(Warrants)*............. 0
250,000 Nokia Corp. (ADR)
(Finland)............... 3,900,000
500,000 Nortel Networks Corp.
(Canada)*............... 2,050,000
300,000 QUALCOMM Inc. ........... 12,492,000
------------
25,619,826
------------
</Table>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Wireless
Telecommunications (1.9%)
500,000 AT&T Wireless Services
Inc.*................... $ 4,090,000
100,000 NII Holdings, Inc. (Class
B)*..................... 5,969,000
------------
10,059,000
------------
</Table>
<Table>
Total Investments
(Cost $421,004,893) (a)..... 99.8% 525,570,243
Other Assets in Excess of
Liabilities................. 0.2 848,141
----- ------------
Net Assets.................. 100.0% $526,418,384
===== ============
</Table>
- ---------------
<Table>
ADR American Depository Receipt.
GDR Global Depository Receipt.
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes
approximates the aggregate cost for book purposes.
The aggregate gross unrealized appreciation is
$112,486,230 and the aggregate gross unrealized
depreciation is $7,920,880, resulting in net
unrealized appreciation of $104,565,350.
</Table>
7
See Notes to Financial Statements
Morgan Stanley Information Fund
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
September 30, 2003 (unaudited)
<Table>
Assets:
Investments in securities, at value
(cost $421,004,893)....................................... $525,570,243
Receivable for:
Investments sold........................................ 8,338,551
Shares of beneficial interest sold...................... 469,139
Dividends............................................... 13,200
Prepaid expenses and other assets........................... 83,920
---------------
Total Assets............................................ 534,475,053
---------------
Liabilities:
Payable for:
Investments purchased................................... 6,575,846
Distribution fee........................................ 463,381
Shares of beneficial interest redeemed.................. 365,592
Investment management fee............................... 364,406
Payable to bank............................................. 148,135
Accrued expenses and other payables......................... 139,309
Contingencies (Note 8)...................................... --
---------------
Total Liabilities....................................... 8,056,669
---------------
Net Assets.............................................. $526,418,384
===============
Composition of Net Assets:
Paid-in-capital............................................. $2,661,983,726
Net unrealized appreciation................................. 104,565,350
Accumulated net investment loss............................. (3,421,571)
Accumulated net realized loss............................... (2,236,709,121)
---------------
Net Assets.............................................. $526,418,384
===============
Class A Shares:
Net Assets.................................................. $29,183,223
Shares Outstanding (unlimited authorized, $.01 par value)... 3,240,866
Net Asset Value Per Share............................... $9.00
===============
Maximum Offering Price Per Share,
(net asset value plus 5.54% of net asset value)....... $9.50
===============
Class B Shares:
Net Assets.................................................. $462,367,048
Shares Outstanding (unlimited authorized, $.01 par value)... 54,129,891
Net Asset Value Per Share............................... $8.54
===============
Class C Shares:
Net Assets.................................................. $30,268,667
Shares Outstanding (unlimited authorized, $.01 par value)... 3,544,490
Net Asset Value Per Share............................... $8.54
===============
Class D Shares:
Net Assets.................................................. $4,599,446
Shares Outstanding (unlimited authorized, $.01 par value)... 502,608
Net Asset Value Per Share............................... $9.15
===============
</Table>
8
See Notes to Financial Statements
Morgan Stanley Information Fund
FINANCIAL STATEMENTS continued
Statement of Operations
For the six months ended September 30, 2003 (unaudited)
<Table>
Net Investment Loss:
Income
Interest.................................................... $ 872,950
Dividends (net of $17,021 foreign withholding tax).......... 296,856
------------
Total Income............................................ 1,169,806
------------
Expenses
Distribution fee (Class A shares)........................... 31,951
Distribution fee (Class B shares)........................... 2,177,136
Distribution fee (Class C shares)........................... 137,963
Investment management fee................................... 1,849,929
Transfer agent fees and expenses............................ 1,480,848
Shareholder reports and notices............................. 80,498
Professional fees........................................... 34,284
Registration fees........................................... 28,643
Custodian fees.............................................. 18,221
Trustees' fees and expenses................................. 6,934
Other....................................................... 8,596
------------
Total Expenses.......................................... 5,855,003
------------
Net Investment Loss..................................... (4,685,197)
------------
Net Realized and Unrealized Gain:
Net Realized Gain on:
Investments............................................... 2,907,850
Futures contracts......................................... 1,283,628
------------
Net Realized Gain....................................... 4,191,478
------------
Net change in unrealized appreciation....................... 141,067,121
------------
Net Gain................................................ 145,258,599
------------
Net Increase................................................ $140,573,402
============
</Table>
9
See Notes to Financial Statements
Morgan Stanley Information Fund
FINANCIAL STATEMENTS continued
Statement of Changes in Net Assets
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 2003 MARCH 31, 2003
------------------ --------------
(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment loss......................................... $ (4,685,197) $ (8,032,349)
Net realized gain (loss).................................... 4,191,478 (428,851,595)
Net change in unrealized appreciation....................... 141,067,121 41,371,944
------------ --------------
Net Increase (Decrease)................................. 140,573,402 (395,512,000)
Net decrease from transactions in shares of beneficial
interest.................................................. (36,546,404) (209,250,137)
------------ --------------
Net Increase (Decrease)................................. 104,026,998 (604,762,137)
Net Assets:
Beginning of period......................................... 422,391,386 1,027,153,523
------------ --------------
End of Period
(Including an accumulated net investment loss of $3,421,571
and accumulated undistributed net investment income of
$1,263,626, respectively)................................... $526,418,384 $ 422,391,386
============ ==============
</Table>
10
See Notes to Financial Statements
Morgan Stanley Information Fund
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2003 (UNAUDITED)
1. Organization and Accounting Policies
Morgan Stanley Information Fund (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. The Fund's investment objective is long-term
capital appreciation. The Fund seeks to achieve its investment objective by
investing primarily in common stocks and securities convertible into common
stocks of domestic and foreign companies which are involved in the
communications and information industry. The Fund was organized as a
Massachusetts business trust on December 8, 1994 and commenced operations on
November 28, 1995. On July 28, 1997, the Fund converted to a multiple class
share structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- (1) an equity portfolio security listed or traded
on the New York or American Stock Exchange or other exchange is valued at its
latest sale price prior to the time when assets are valued; if there were no
sales that day, the security is valued at the mean between the last reported bid
and asked price; (2) an equity portfolio security listed or traded on the Nasdaq
is valued at the Nasdaq Official Closing Price; if there were no sales that day,
the security is valued at the mean between the last reported bid and asked
price; (3) all other equity portfolio securities for which over-the-counter
market quotations are readily available are valued at the mean between the last
reported bid and asked price. In cases where a security is traded on more than
one exchange, the security is valued on the exchange designated as the primary
market; (4) for equity securities traded on foreign exchanges, the last reported
sale price or the latest bid price may be used if there were no sales on a
particular day; (5) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the last reported bid
price; (6) when market quotations are not readily available or Morgan Stanley
Investment Advisors Inc. (the "Investment Manager") determines that the latest
sale price, the bid price or the mean between the last reported bid and asked
price do not reflect a security's market value, portfolio securities are valued
at their fair value as determined in good faith under procedures established by
and under the general supervision of the Fund's Trustees; (7) certain portfolio
securities may be valued by an outside pricing service approved by the Fund's
Trustees; and (8) short-term debt securities having a maturity date of more than
sixty days at time of purchase are valued on a mark-to-market basis until sixty
days prior to maturity and thereafter at amortized cost based on their value on
the 61st day. Short-
11
Morgan Stanley Information Fund
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2003 (UNAUDITED) continued
term debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. Accounting for Investments -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.
C. Repurchase Agreements -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
entities managed by the Investment Manager, may transfer uninvested cash
balances into one or more joint repurchase agreement accounts. These balances
are invested in one or more repurchase agreements and are collateralized by
cash, U.S. Treasury or federal agency obligations. The Fund may also invest
directly with institutions in repurchase agreements. The Fund's custodian
receives the collateral, which is marked-to-market daily to determine that the
value of the collateral does not decrease below the repurchase price plus
accrued interest.
D. Multiple Class Allocations -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
E. Foreign Currency Translation and Forward Foreign Currency Contracts -- The
books and records of the Fund are maintained in U.S. dollars as follows: (1) the
foreign currency market value of investment securities, other assets and
liabilities and forward foreign currency contracts ("forward contracts") are
translated at the exchange rates prevailing at the end of the period; and (2)
purchases, sales, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. The resultant exchange
gains and losses are recorded as realized and unrealized gain/loss on foreign
exchange transactions. Pursuant to U.S. Federal income tax regulations, certain
foreign exchange gains/losses included in realized and unrealized gain/loss are
included in or are a reduction of ordinary income for federal income tax
purposes. The Fund does not isolate that portion of the results of operations
arising as a result of changes in the foreign exchange rates from the changes in
the market prices of the securities. Forward contracts are valued daily at the
appropriate exchange rates. The resultant unrealized exchange gains and losses
are recorded as unrealized foreign currency gain or loss. The Fund records
realized gains or losses on delivery of the currency or at the time the forward
contract is extinguished (compensated) by entering into a closing transaction
prior to delivery.
12
Morgan Stanley Information Fund
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2003 (UNAUDITED) continued
F. Federal Income Tax Policy -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
G. Dividends and Distributions to Shareholders -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
H. Use of Estimates -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
2. Investment Management Agreement
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined as of the close
of each business day: 0.75% to the portion of daily net assets not exceeding
$500 million; 0.725% to the portion of daily net assets exceeding $500 million
but not exceeding $3 billion; and 0.70% to the portion of daily net assets in
excess of $3 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 -- 1.0% of the lesser of: (a)
the average daily aggregate gross sales of the Class B shares since the
inception of the Fund (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Class B
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the average daily net assets of
Class B; and (iii) Class C -- up to 1.0% of the average daily net assets of
Class C.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for
13
Morgan Stanley Information Fund
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2003 (UNAUDITED) continued
any reason the Plan is terminated, the Trustees will consider at that time the
manner in which to treat such expenses. The Distributor has advised the Fund
that such excess amounts totaled $48,894,783 at September 30, 2003.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Financial Advisors or other selected
broker-dealer representatives may be reimbursed in the subsequent calendar year.
For the six months ended September 30, 2003, the distribution fee was accrued
for Class A shares and Class C shares at the annual rate of 0.25% and 1.0%,
respectively.
The Distributor has informed the Fund that for the six months ended September
30, 2003, it received contingent deferred sales charges from certain redemptions
of the Fund's Class B shares and Class C shares of $397,916 and $1,428,
respectively and received $12,837 in front-end sales charges from sales of the
Fund's Class A shares. The respective shareholders pay such charges which are
not an expense of the Fund.
4. Security Transactions and Transactions with Affiliates
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended September 30, 2003 aggregated
$300,263,333 and $322,438,086, respectively. Included in the aforementioned
transactions are sales of $3,496,800, with other Morgan Stanley funds, including
a realized loss of $93,324.
For the six months ended September 30, 2003, the Fund incurred brokerage
commissions of $148,568 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager and Distributor, for portfolio transactions executed on
behalf of the Fund. At September 30, 2003, the Fund's payable for investments
purchased included unsettled trades with Morgan Stanley & Co., Inc. of
$3,801,690.
At September 30, 2003, Morgan Stanley Fund of Funds -- Domestic Portfolio, an
affiliate of the Investment Manager and Distributor, held 122,262 Class D shares
of beneficial interest of the Fund.
Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is
the Fund's transfer agent. At September 30, 2003, the Fund had transfer agent
fees and expenses payable of approximately $45,400.
14
Morgan Stanley Information Fund
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2003 (UNAUDITED) continued
5. Federal Income Tax Status
The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for tax purposes are reported as distributions of paid-in-capital.
As of March 31, 2003, the Fund had a net capital loss carryforward of
$2,121,867,815 of which $253,526,632 will expire on March 31, 2009,
$1,275,591,838 will expire on March 31, 2010 and $592,749,345 will expire on
March 31, 2011 to offset future capital gains to the extent provided by
regulations.
As of March 31, 2003, the Fund had temporary book/tax differences attributable
to post-October losses (capital losses incurred after October 31 within the
taxable year which are deemed to arise on the first business day of the Fund's
next taxable year), capital loss deferrals on wash sales and book amortization
of discounts on debt securities.
6. Purposes of and Risks Relating to Certain Financial Instruments
The Fund may enter into forward contracts to facilitate settlement of foreign
currency denominated portfolio transactions or to manage foreign currency
exposure associated with foreign currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
At September 30, 2003, there were no outstanding forward contracts.
15
Morgan Stanley Information Fund
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2003 (UNAUDITED) continued
7. Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 2003 MARCH 31, 2003
------------------------- ---------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------
CLASS A SHARES
Sold............................................... 936,943 $ 7,858,286 1,406,685 $ 10,481,031
Redeemed........................................... (756,458) (6,267,165) (1,546,053) (11,358,871)
---------- ------------ ----------- -------------
Net increase (decrease) - Class A.................. 180,485 1,591,121 (139,368) (877,840)
---------- ------------ ----------- -------------
CLASS B SHARES
Sold............................................... 1,832,726 14,543,216 3,167,122 23,583,416
Redeemed........................................... (6,450,813) (49,734,545) (28,455,606) (212,108,258)
---------- ------------ ----------- -------------
Net decrease - Class B............................. (4,618,087) (35,191,329) (25,288,484) (188,524,842)
---------- ------------ ----------- -------------
CLASS C SHARES
Sold............................................... 315,695 2,530,160 424,496 3,102,414
Redeemed........................................... (413,672) (3,188,226) (1,591,964) (11,922,576)
---------- ------------ ----------- -------------
Net decrease - Class C............................. (97,977) (658,066) (1,167,468) (8,820,162)
---------- ------------ ----------- -------------
CLASS D SHARES
Sold............................................... 108,475 918,403 755,644 5,958,248
Redeemed........................................... (393,397) (3,206,533) (2,379,057) (16,985,541)
---------- ------------ ----------- -------------
Net decrease - Class D............................. (284,922) (2,288,130) (1,623,413) (11,027,293)
---------- ------------ ----------- -------------
Net decrease in Fund............................... (4,820,501) $(36,546,404) (28,218,733) $(209,250,137)
========== ============ =========== =============
</Table>
8. Litigation
Beginning October 25, 2002, purported class action complaints were filed in the
United States District Court for the Southern District of New York against
Morgan Stanley, the Fund, Morgan Stanley Investment Advisors Inc., and certain
subsidiaries of Morgan Stanley alleging violations of federal securities laws in
connection with the underwriting and management of the Fund. Plaintiffs allege
in these cases that Morgan Stanley analysts issued overly optimistic stock
recommendations to obtain investment banking business, and that the desire to
obtain investment banking business influenced decision made by the Fund Manager.
On August 29, 2003, the Court entered an Order approving the parties'
stipulation to stay the case pending the decision of the U.S. Circuit Court of
Appeals for the Second Circuit in an appeal from the dismissal of a similar case
brought against another party by the same plaintiffs' law firm.
The Fund and Morgan Stanley believe these lawsuits have no merit. The ultimate
outcome of these matters is not presently determinable and no provision has been
made in the Fund's financial statements for the effect, if any, of such matters.
16
Morgan Stanley Information Fund
NOTES TO FINANCIAL STATEMENTS - SEPTEMBER 30, 2003 (UNAUDITED) continued
9. Acquisition of Morgan Stanley Technology Fund
On October 6, 2003, the Fund acquired all the net assets of Technology Fund
based on the respective valuations as of the close of business on October 3,
2003 pursuant to a Plan of Reorganization approved by the shareholders of
Technology Fund on September 30, 2003. The acquisition was accomplished by a
tax-free exchange of 2,031,354 Class A shares of the Fund at a net asset value
of $9.58 per share for 7,513,659 Class A shares of Technology Fund; 23,335,652
Class B shares of the Fund at a net asset value of $9.08 per share for
83,750,085 Class B shares of Technology Fund; 3,616,872 Class C shares of the
Fund at a net asset value of $9.08 per share for 13,032,221 Class C shares of
Technology Fund; and 908,132 Class D shares of the Fund at a net asset value of
$9.73 per share for 3,398,510 Class D shares of Technology Fund. The net assets
of the Fund and Technology Fund immediately before the acquisition were
$560,412,309 and $272,963,163, respectively, including unrealized appreciation
of $26,322,101 for Technology Fund. Immediately after the acquisition, the
combined net assets of the Fund amounted to $833,375,472.
17
Morgan Stanley Information Fund
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED MARCH 31,
MONTHS ENDED -----------------------------------------------
SEPTEMBER 30, 2003 2003 2002 2001 2000 1999
------------------ ------- ------- ------- -------- ------
(unaudited)
Class A Shares
Selected Per Share Data:
Net asset value, beginning of period........ $ 6.68 $11.29 $14.69 $41.20 $19.23 $14.02
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss++................... (0.05) (0.05) 0.00 (0.08) (0.27) (0.11)
Net realized and unrealized gain
(loss).................................. 2.37 (4.56) (3.40) (21.28) 26.41 7.04
------ ------ ------ ------ ------ ------
Total income (loss) from investment
operations................................. 2.32 (4.61) (3.40) (21.36) 26.14 6.93
------ ------ ------ ------ ------ ------
Less distributions from:
Net realized gain....................... -- -- -- (5.14) (4.17) (1.72)
Paid-in-capital......................... -- -- -- (0.01) -- --
------ ------ ------ ------ ------ ------
Total distributions......................... -- -- -- (5.15) (4.17) (1.72)
------ ------ ------ ------ ------ ------
Net asset value, end of period.............. $ 9.00 $ 6.68 $11.29 $14.69 $41.20 $19.23
====== ====== ====== ====== ====== ======
Total Return+............................... 34.73 %(1) (40.83)% (23.15)% (58.71)% 155.88% 54.33%
Ratios to Average Net Assets(3):
Expenses.................................... 1.67 %(2) 1.55% 1.32% 1.07% 1.13% 1.24%
Net investment loss......................... (1.20)%(2) (0.60)% 0.00% (0.26)% (0.82)% (0.74)%
Supplemental Data:
Net assets, end of period, in thousands..... $29,183 $20,434 $36,129 $48,873 $128,325 $5,253
Portfolio turnover rate..................... 63 %(1) 92% 144% 213% 282% 419%
</Table>
- ---------------------
<Table>
++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated
based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</Table>
18
See Notes to Financial Statements
Morgan Stanley Information Fund
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED MARCH 31,
MONTHS ENDED --------------------------------------------------------
SEPTEMBER 30, 2003 2003 2002 2001 2000 1999
------------------ -------- -------- ---------- ---------- --------
(unaudited)
Class B Shares
Selected Per Share Data:
Net asset value, beginning of
period........................... $ 6.36 $10.84 $14.22 $40.37 $18.99 $13.94
------ ------ ------ ------ ------ ------
Income (loss) from investment
operations:
Net investment loss++......... (0.08) (0.11) (0.10) (0.29) (0.37) (0.22)
Net realized and unrealized
gain (loss)................... 2.26 (4.37) (3.28) (20.71) 25.92 6.99
------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations............ 2.18 (4.48) (3.38) (21.00) 25.55 6.77
------ ------ ------ ------ ------ ------
Less distributions from:
Net realized gain............. -- -- -- (5.14) (4.17) (1.72)
Paid-in-capital............... -- -- -- (0.01) -- --
------ ------ ------ ------ ------ ------
Total distributions............... -- -- -- (5.15) (4.17) (1.72)
------ ------ ------ ------ ------ ------
Net asset value, end of period.... $ 8.54 $ 6.36 $10.84 $14.22 $40.37 $18.99
====== ====== ====== ====== ====== ======
Total Return+..................... 34.28 %(1) (41.38)% (23.70)% (59.07)% 154.62% 53.44%
Ratios to Average Net Assets(3):
Expenses.......................... 2.42 %(2) 2.40% 2.10% 1.84% 1.58% 1.95%
Net investment loss............... (1.95)%(2) (1.45)% (0.78)% (1.02)% (1.27)% (1.45)%
Supplemental Data:
Net assets, end of period, in
thousands........................ $462,367 $373,470 $911,276 $1,540,834 $3,799,844 $580,994
Portfolio turnover rate........... 63 %(1) 92% 144% 213% 282% 419%
</Table>
- ---------------------
<Table>
++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated
based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</Table>
19
See Notes to Financial Statements
Morgan Stanley Information Fund
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED MARCH 31,
MONTHS ENDED --------------------------------------------------
SEPTEMBER 30, 2003 2003 2002 2001 2000 1999
------------------ -------- ------- -------- -------- -------
(unaudited)
Class C Shares
Selected Per Share Data:
Net asset value, beginning of period.... $ 6.36 $10.84 $14.17 $40.26 $18.98 $13.94
------ ------ ------ ------ ------ ------
Income (loss) from investment
operations:
Net investment loss++............... (0.07) (0.11) (0.07) (0.30) (0.49) (0.24)
Net realized and unrealized gain
(loss).............................. 2.25 (4.37) (3.26) (20.64) 25.94 7.00
------ ------ ------ ------ ------ ------
Total income (loss) from investment
operations............................. 2.18 (4.48) (3.33) (20.94) 25.45 6.76
------ ------ ------ ------ ------ ------
Less distributions from:
Net realized gain................... -- -- -- (5.14) (4.17) (1.72)
Paid-in-capital..................... -- -- -- (0.01) -- --
------ ------ ------ ------ ------ ------
Total distributions..................... -- -- -- (5.15) (4.17) (1.72)
------ ------ ------ ------ ------ ------
Net asset value, end of period.......... $ 8.54 $ 6.36 $10.84 $14.17 $40.26 $18.98
====== ====== ====== ====== ====== ======
Total Return+........................... 34.28 %(1) (41.33)% (23.50)% (59.08)% 154.10% 53.36%
Ratios to Average Net Assets(3):
Expenses................................ 2.42 %(2) 2.40% 1.88% 1.89% 1.89% 2.01%
Net investment loss..................... (1.95)%(2) (1.45)% (0.56)% (1.07)% (1.58)% (1.51)%
Supplemental Data:
Net assets, end of period, in
thousands.............................. $30,269 $23,150 $52,145 $87,942 $205,073 $11,890
Portfolio turnover rate................. 63 %(1) 92% 144% 213% 282% 419%
</Table>
- ---------------------
<Table>
++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated
based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</Table>
20
See Notes to Financial Statements
Morgan Stanley Information Fund
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED MARCH 31,
MONTHS ENDED ----------------------------------------------
SEPTEMBER 30, 2003 2003 2002 2001 2000 1999
------------------ ------- ------- ------- ------- ------
(unaudited)
Class D Shares
Selected Per Share Data:
Net asset value, beginning of period......... $ 6.78 $ 11.45 $14.86 $41.57 $19.33 $14.03
------ ------- ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)++........... (0.04) (0.04) 0.02 (0.01) (0.18) (0.08)
Net realized and unrealized gain
(loss)................................... 2.41 (4.63) (3.43) (21.55) 26.59 7.10
------ ------- ------ ------ ------ ------
Total income (loss) from investment
operations.................................. 2.37 (4.67) (3.41) (21.56) 26.41 7.02
------ ------- ------ ------ ------ ------
Less distributions from:
Net realized gain........................ -- -- -- (5.14) (4.17) (1.72)
Paid-in-capital.......................... -- -- -- (0.01) -- --
------ ------- ------ ------ ------ ------
Total distributions.......................... -- -- -- (5.15) (4.17) (1.72)
------ ------- ------ ------ ------ ------
Net asset value, end of period............... $ 9.15 $ 6.78 $11.45 $14.86 $41.57 $19.33
====== ======= ====== ====== ====== ======
Total Return+................................ 34.96 %(1) (40.79)% (22.95)% (58.66)% 156.56% 54.96%
Ratios to Average Net Assets(3):
Expenses..................................... 1.42 %(2) 1.40% 1.10% 0.89% 0.89% 1.01%
Net investment income (loss)................. (0.95)%(2) (0.45)% 0.22% (0.07)% (0.58)% (0.51)%
Supplemental Data:
Net assets, end of period, in thousands...... $4,599 $5,337 $27,603 $21,638 $17,994 $2,440
Portfolio turnover rate...................... 63 %(1) 92% 144% 213% 282% 419%
</Table>
- ---------------------
<Table>
++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Calculated based on the net asset value as of the last
business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</Table>
21
See Notes to Financial Statements
(This Page Intentionally Left Blank)
(This Page Intentionally Left Blank)
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael E. Nugent
Philip J. Purcell
Fergus Reid
OFFICERS
Charles A. Fiumefreddo
Chairman of the Board
Mitchell M. Merin
President
Ronald E. Robison
Executive Vice President and Principal Executive Officer
Barry Fink
Vice President and General Counsel
Joseph McAlinden
Vice President
Stefanie V. Chang
Vice President
Francis J. Smith
Treasurer and Chief Financial Officer
Thomas F. Caloia
Vice President
Mary E. Mullin
Secretary
TRANSFER AGENT
Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020
The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors and accordingly they do not
express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its fees and expenses and
other pertinent information, please read its Prospectus. The Fund's Statement of
Additional Information contains additional information about the Fund, including
its trustees. It is available, without charge, by calling (800) 869-NEWS.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective Prospectus. Read the
Prospectus carefully before investing.
Investments and services offered through Morgan Stanley DW Inc., member SIPC.
Morgan Stanley Distributors Inc., member NASD.
(c) 2003 Morgan Stanley
[MORGAN STANLEY LOGO]
[MORGAN STANLEY FUNDS LOGO]
Morgan Stanley
Information Fund
Semiannual Report
September 30, 2003
[MORGAN STANLEY LOGO]
37929RPT-00-12704J03-OP-10/03
Item 2. Code of Ethics.
(a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies
to its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Fund or a third
party.
(b) No information need be disclosed pursuant to this paragraph.
(c) The Fund has amended its Code of Ethics during the period covered by the
shareholder report presented in Item 1 hereto
(d) The Fund has granted a waiver or an implicit waiver from a provision of its
Code of Ethics.
(e) Not applicable.
(f)
(1) The Fund's Code of Ethics is attached hereto as Exhibit A.
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The Fund's Board of Trustees has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: Dr. Manuel H. Johnson and Joseph J. Kearns. Under
applicable securities laws, a person who is determined to be an audit committee
financial expert will not be deemed an "expert" for any purpose, including
without limitation for the purposes of Section 11 of the Securities Act of 1933,
as a result of being designated or identified as an audit committee financial
expert. The designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations, or
liabilities that are greater than the duties, obligations, and liabilities
imposed on such person as a member of the audit committee and Board of Trustees
in the absence of such designation or identification.
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.
2
Item 10 Exhibits
(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.
Items 4 - 8 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 Information Fund
Ronald E. Robison
Principal Executive Officer
November 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
November 19, 2003
Francis Smith
Principal Financial Officer
November 19, 2003
3