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: 811-09117
Morgan Stanley Real Estate 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: 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 Real
Estate 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 month period ended May 31, 2004
TOTAL RETURN FOR THE SIX MONTHS ENDED MAY 31, 2004
<Table>
<Caption>
LIPPER
REAL
NAREIT ESTATE
EQUITY FUNDS
CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2)
7.38% 6.93% 6.94% 7.50% 6.09% 5.73%
</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
Domestic equity markets performed well during the six months ended May 31, 2004
due to continued evidence that the economic recovery that began in 2003 would
continue. Low inflation rates, consumer spending, manufacturing activity and
gross domestic product growth all suggested that U.S. economic conditions were
improving. Interest rates remained at low levels as well, though Federal Reserve
Chairman Alan Greenspan hinted numerous times that rates would have to rise at
some point. As investors gauged the threat of interest rate increases and the
slower-than-expected new job creation data they sought defensive sectors that
had lagged the market through most of 2003.
In this environment, the real estate sector struggled early in the period due to
the "jobless" economic recovery. Apartment and office buildings were affected
most negatively by continued weakness in jobs growth; these properties were at
peak vacancy levels. In April and May of 2004, however, encouraging employment
data spurred an increase in demand for these segments of the market. Retail
properties performed well as consumer spending remained consistently high during
the period.
From a capital markets perspective, real estate properties ended the period near
historical peaks due to an ongoing influx of capital. Institutional investors
were the largest source of capital flows into the asset class, though other
investors have increased their exposure to real estate as well. Investors have
shown increased interest in REITs, especially in an environment when many
foresee unappealing returns from bonds and equities. The sector was also helped
by a relatively low level of equity issuance amid this high demand.
PERFORMANCE ANALYSIS
Morgan Stanley Real Estate Fund outperformed the NAREIT Equity Index and the
Lipper Real Estate Funds Index for the six-month period ended May 31, 2004. The
Fund received strong relative performance from its stock picking in hotel,
office and mall sectors. Hotels were favorable due to the Fund's focus on
companies with such exposure in major urban centers. These companies were
attractively valued and saw cash flow increases as business travel picked up.
The Fund's office holdings also contributed strong relative performance by
focusing on companies with office exposure in New York, District of Columbia and
Southern California areas while avoiding suburban areas and the Sun Belt. The
Fund's focus on urban office properties was due to expectations that they would
recover faster than less-developed areas.
While the Fund performed strongly, not all of its stock picks did as well as
expected. The Fund had an overweighting in apartments due to relative valuation
and our expectation that they would recover in tandem with the economy.
Unfortunately, these properties lagged and hindered performance. Additionally,
the Fund was underweighted relative to the NAREIT Equity Index in health care
REITs due to unattractive real estate values; these companies went on to perform
well for the period and hurt relative performance. The Fund was also hurt by its
lack of exposure to Plum Creek Lumber, a net-lease REIT which we chose not to
hold in the portfolio. The security gained sharply on rising commodity prices,
supporting our view that its stock price would be driven more by that factor
than by the underlying real estate fundamentals that are at the core of our
long-term approach.
2
<Table>
<Caption>
TOP 10 HOLDINGS
Simon Property Group, Inc. 8.2%
Brookfield Properties Corp. 6.2
Archstone-Smith Trust 5.6
AvalonBay Communities, Inc. 5.5
Starwood Hotels and Resorts World Wide Inc. 5.3
Boston Properties, Inc. 4.4
Equity Office Properties Trust 4.2
Rouse Company 4.2
Public Storage, Inc. 4.0
Prologis 3.7
</Table>
<Table>
<Caption>
PORTFOLIO COMPOSITION
Common Stocks 98.6%
Short-Term Investment 1.4
</Table>
Subject to change daily. All percentages for Top 10 Holdings are as a percentage
of net assets and Portfolio Composition is a percentage of total investments.
Provided for informational purposes only and should not be deemed as a
recommendation to buy or sell the securities mentioned. Morgan Stanley is a
full-service securities firm engaged in securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services.
INVESTMENT STRATEGY
THE FUND WILL NORMALLY INVEST AT LEAST 80% OF ITS ASSETS IN INCOME PRODUCING
COMMON STOCKS AND OTHER EQUITY SECURITIES (WHICH MAY INCLUDE CONVERTIBLE
SECURITIES) OF COMPANIES THAT ARE PRINCIPALLY ENGAGED IN THE U.S. REAL ESTATE
INDUSTRY. A COMPANY IS CONSIDERED TO BE "PRINCIPALLY ENGAGED" IN THE U.S. REAL
ESTATE INDUSTRY IF (I) IT DERIVES AT LEAST 50% OF ITS REVENUES OR PROFITS FROM
THE OWNERSHIP, LEASING, CONSTRUCTION, MANAGEMENT, DEVELOPMENT, FINANCING OR SALE
OF RESIDENTIAL, COMMERCIAL OR INDUSTRIAL REAL ESTATE; OR (II) IT HAS AT LEAST
50% OF THE VALUE OF ITS ASSETS INVESTED IN U.S. RESIDENTIAL, COMMERCIAL OR
INDUSTRIAL REAL ESTATE. COMPANIES PRIMARILY ENGAGED IN THE REAL ESTATE INDUSTRY
MAY INCLUDE REAL ESTATE INVESTMENT TRUSTS KNOWN AS "REITS," WHICH POOL INVESTOR
FUNDS MOSTLY FOR INVESTMENT IN COMMERCIAL REAL ESTATE PROPERTIES. THEY ALSO MAY
INCLUDE, AMONG OTHER BUSINESSES, REAL ESTATE DEVELOPERS, BROKERS AND OPERATING
COMPANIES, AS WELL AS COMPANIES WHOSE PRODUCTS AND SERVICES ARE SIGNIFICANTLY
RELATED TO THE REAL ESTATE INDUSTRY, SUCH AS BUILDING SUPPLIERS AND MORTGAGE
LENDERS. IN DECIDING WHICH SECURITIES TO BUY, HOLD OR SELL, THE FUND'S
"INVESTMENT MANAGER," MORGAN STANLEY INVESTMENT ADVISORS INC., CONSIDERS MARKET,
ECONOMIC AND POLITICAL FACTORS.
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 WEBSITE AT
HTTP://WWW.SEC.GOV.
3
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS -- PERIOD ENDED MAY 31, 2004
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++)
(since 04/28/99) (since 04/28/99) (since 04/28/99) (since 04/28/99)
SYMBOL REFAX REFBX REFCX REFDX
1 YEAR 27.19%(3) 26.26%(3) 26.18%(3) 27.46%(3)
20.51(4) 21.26(4) 25.18(4) --
5 YEARS 12.55(3) 11.65(3) 11.65(3) 12.85(3)
11.34(4) 11.40(4) 11.65(4) --
SINCE INCEPTION 12.73(3) 11.84(3) 11.84(3) 13.02(3)
11.54(4) 11.72(4) 11.84(4) --
</Table>
Past performance 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.
Performance for Class A, Class B, Class C, and Class D shares will vary due to
differences in sales charges and expenses.
* The maximum front-end sales charge for Class A is 5.25%.
** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The
CDSC declines to 0% after six years.
+ The maximum contingent deferred sales charge for Class C is 1% for shares
redeemed within one year of purchase.
++ Class D has no sales charge.
(1) The NAREIT Equity Index measures the performance of real estate securities,
which will fluctuate with changes in the values of their underlying
properties. The Index is an unmanaged benchmark of real estate investment
trusts compiled by the National Association of Real Estate Investment
Trusts. 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 Real Estate Funds Index is an equally weighted performance index
of the largest qualifying funds (based on net assets) in the Lipper Real
Estate 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.
4
Morgan Stanley Real Estate Fund
PORTFOLIO OF INVESTMENTS - MAY 31, 2004 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Common Stocks (98.5%)
Hotels/Resorts/
Cruiselines (7.8%)
250,600 Hilton Hotels Corp. ..... $ 4,347,910
6,745 Interstate Hotels &
Resorts Inc.*........... 36,086
225,093 Starwood Hotels & Resorts
Worldwide, Inc. ........ 9,494,423
219,200 Wyndham International,
Inc. (Class A)*......... 195,088
------------
14,073,507
------------
Real Estate --Industrial/
Office (6.2%)
377,800 Brookfield Properties
Corp. (Canada).......... 11,205,548
------------
Real Estate -- Other
(0.6%)
166,300 Frontline Capital
Group*.................. 0
28,500 St. Joe Co. (The)........ 1,112,925
------------
1,112,925
------------
Real Estate -- Retail
(0.6%)
21,780 Forest City Enterprise,
Inc. (Class A).......... 1,100,761
------------
REIT -- Diversified
(3.0%)
100,300 Vornado Realty Trust..... 5,481,395
------------
REIT -- Healthcare (1.0%)
34,181 Nationwide Health
Properties, Inc. ....... 660,719
84,000 OMEGA Healthcare
Investors, Inc. ........ 804,720
4,300 Senior Housing Properties
Trust................... 70,004
11,600 Ventas, Inc. ............ 270,512
------------
1,805,955
------------
</Table>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
REIT -- Industrial/
Office (22.8%)
175,500 AMB Property Corp. ...... $ 5,800,275
214,800 Arden Realty, Inc. ...... 6,368,820
160,700 Boston Properties,
Inc. ................... 7,932,152
22,200 Catellus Development
Corp. .................. 542,346
281,885 Equity Office Properties
Trust................... 7,596,801
47,400 Mack-Cali Realty
Corp. .................. 1,894,104
207,610 ProLogis Trust........... 6,655,976
1,800 PS Business Parks, Inc.
(Class A)............... 69,660
108,600 Reckson Associates Realty
Corp. .................. 2,825,772
27,650 SL Green Realty Corp. ... 1,258,075
------------
40,943,981
------------
REIT -- Lodging/ Resorts
(3.4%)
478,100 Host Marriott Corp.*..... 5,861,506
25,400 MeriStar Hospitality
Corp.*.................. 161,290
------------
6,022,796
------------
REIT -- Residential
(20.0%)
20,400 Affordable Residential
Communities............. 326,400
160,300 Apartment Investment &
Management Co. (Class
A)...................... 4,629,464
344,807 Archstone-Smith Trust.... 10,016,643
183,000 Avalonbay Communities,
Inc. ................... 9,964,350
132,390 Equity Residential....... 3,897,562
63,000 Essex Property Trust,
Inc. ................... 4,129,650
39,500 Manufactured Home
Communities, Inc. ...... 1,226,475
60,650 Post Properties, Inc. ... 1,764,915
1,000 Summit Properties
Inc. ................... 23,170
------------
35,978,629
------------
</Table>
5
See Notes to Financial Statements
Morgan Stanley Real Estate Fund
PORTFOLIO OF INVESTMENTS - MAY 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
REIT -- Retail (26.3%)
6,200 Acadia Reality Trust..... $ 79,360
106,300 Burnham Pacific
Properties, Inc.*....... 34,016
11,250 Chelsea Property Group,
Inc. ................... 618,525
161,900 Federal Realty Investment
Trust................... 6,459,810
215,800 General Growth
Properties, Inc. ....... 6,340,204
6,700 Heritage Property
Investment Trust........ 180,498
10,800 Kimco Realty Corp. ...... 496,260
25,800 Macerich Co. (The)....... 1,167,450
2,300 Pan Pacific Retail
Properties, Inc. ....... 105,800
2,150 Price Legacy Corp. ...... 39,474
112,200 Regency Center Corp. .... 4,521,660
165,700 Rouse Co. (The).......... 7,564,205
285,600 Simon Property Group,
Inc. ................... 14,728,392
221,700 Taubman Centers, Inc. ... 4,943,910
------------
47,279,564
------------
REIT -- Specialty (0.4%)
23,400 Correctional Properties
Trust................... 659,880
------------
REIT -- Storage (6.4%)
158,200 Public Storage, Inc. .... 7,275,618
113,950 Shurgard Storage Centers,
Inc. (Class A).......... 4,273,125
------------
11,548,743
------------
Total Common Stocks
(Cost $133,654,779)...... 177,213,684
------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------
Short-Term Investment (1.4%)
Repurchase Agreement
$2,555 Joint repurchase
agreement account 1.02%
due 06/01/04 (dated
05/28/04; proceeds
$2,555,288)(a)
(Cost $2,555,000)....... $ 2,555,000
------------
</Table>
<Table>
Total Investments
(Cost $136,209,779)(b)...... 99.9% 179,768,684
Other Assets in Excess of
Liabilities................. 0.1 85,586
----- ------------
Net Assets.................. 100.0% $179,854,270
===== ============
</Table>
- ---------------------------------------------------
<Table>
REIT Real Estate Investment Trust.
* Non-income producing security.
(a) Collateralized by federal agency and U.S. Treasury
obligations.
(b) The aggregate cost for federal income tax purposes
approximates the aggregate cost for book purposes.
The aggregate gross unrealized appreciation is
$47,377,607 and the aggregate gross unrealized
depreciation is $3,818,702, resulting in net
unrealized appreciation of $43,558,905.
</Table>
6
See Notes to Financial Statements
Morgan Stanley Real Estate Fund
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
May 31, 2004 (unaudited)
<Table>
Assets:
Investments in securities, at value
(cost $136,209,779)....................................... $179,768,684
Receivable for:
Investments sold........................................ 398,986
Dividends............................................... 90,292
Shares of beneficial interest sold...................... 66,423
Prepaid expenses and other assets........................... 90,170
------------
Total Assets............................................ 180,414,555
------------
Liabilities:
Payable for:
Shares of beneficial interest redeemed.................. 284,008
Investment management fee............................... 145,440
Distribution fee........................................ 92,559
Accrued expenses and other payables......................... 38,278
------------
Total Liabilities....................................... 560,285
------------
Net Assets.............................................. $179,854,270
============
Composition of Net Assets:
Paid-in-capital............................................. $130,850,569
Net unrealized appreciation................................. 43,558,905
Undistributed net investment income......................... 426,746
Accumulated undistributed net realized gain................. 5,018,050
------------
Net Assets.............................................. $179,854,270
============
Class A Shares:
Net Assets.................................................. $7,681,928
Shares Outstanding (unlimited authorized, $.01 par value)... 539,700
Net Asset Value Per Share............................... $14.23
============
Maximum Offering Price Per Share,
(net asset value plus 5.54% of net asset value)......... $15.02
============
Class B Shares:
Net Assets.................................................. $99,405,874
Shares Outstanding (unlimited authorized, $.01 par value)... 7,012,287
Net Asset Value Per Share............................... $14.18
============
Class C Shares:
Net Assets.................................................. $12,800,556
Shares Outstanding (unlimited authorized, $.01 par value)... 902,667
Net Asset Value Per Share............................... $14.18
============
Class D Shares:
Net Assets.................................................. $59,965,912
Shares Outstanding (unlimited authorized, $.01 par value)... 4,209,787
Net Asset Value Per Share............................... $14.24
============
</Table>
7
See Notes to Financial Statements
Morgan Stanley Real Estate Fund
FINANCIAL STATEMENTS continued
Statement of Operations
For the six months ended May 31, 2004 (unaudited)
<Table>
Net Investment Income:
Income
Dividends (net of $17,422 foreign withholding tax).......... $ 4,831,678
Interest.................................................... 19,336
-----------
Total Income............................................ 4,851,014
-----------
Expenses
Investment management fee................................... 951,693
Distribution fee (Class A shares)........................... 9,324
Distribution fee (Class B shares)........................... 541,790
Distribution fee (Class C shares)........................... 65,467
Transfer agent fees and expenses............................ 227,624
Shareholder reports and notices............................. 39,147
Professional fees........................................... 31,439
Registration fees........................................... 17,582
Custodian fees.............................................. 7,516
Trustees' fees and expenses................................. 2,975
Other....................................................... 4,122
-----------
Total Expenses.......................................... 1,898,679
-----------
Net Investment Income................................... 2,952,335
-----------
Net Realized and Unrealized Gain:
Net realized gain on investments............................ 4,984,213
Capital gain distributions received......................... 26,400
-----------
Net Realized Gain....................................... 5,010,613
-----------
Net change in unrealized appreciation....................... 4,621,710
-----------
Net Gain................................................ 9,632,323
-----------
Net Increase................................................ $12,584,658
===========
</Table>
8
See Notes to Financial Statements
Morgan Stanley Real Estate Fund
FINANCIAL STATEMENTS continued
Statement of Changes in Net Assets
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MAY 31, 2004 NOVEMBER 30, 2003
------------ -----------------
(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment income....................................... $ 2,952,335 $ 3,749,618
Net realized gain........................................... 5,010,613 3,619,379
Net change in unrealized appreciation....................... 4,621,710 40,547,114
------------ ------------
Net Increase............................................ 12,584,658 47,916,111
------------ ------------
Dividends and Distributions to Shareholders from:
Net investment income
Class A shares.......................................... (120,427) (175,671)
Class B shares.......................................... (1,257,318) (2,035,063)
Class C shares.......................................... (150,209) (211,573)
Class D shares.......................................... (997,635) (1,327,311)
Net realized gain
Class A shares.......................................... (66,126) (116,098)
Class B shares.......................................... (970,347) (1,865,703)
Class C shares.......................................... (111,152) (186,465)
Class D shares.......................................... (527,377) (749,540)
------------ ------------
Total Dividends and Distributions....................... (4,200,591) (6,667,424)
------------ ------------
Net increase (decrease) from transactions in shares of
beneficial interest....................................... (15,876,696) 1,574,307
------------ ------------
Net Increase (Decrease)................................. (7,492,629) 42,822,994
Net Assets:
Beginning of period......................................... 187,346,899 144,523,905
------------ ------------
End of Period
(Including undistributed net investment income of $426,746
and $0, respectively)....................................... $179,854,270 $187,346,899
============ ============
</Table>
9
See Notes to Financial Statements
Morgan Stanley Real Estate Fund
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2004 (UNAUDITED)
1. Organization and Accounting Policies
Morgan Stanley Real Estate Fund (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 Fund's investment objective is to provide
high current income and long-term capital appreciation. The Fund was organized
as a Massachusetts business trust on November 23, 1998 and commenced operations
on April 28, 1999.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- (1) an equity portfolio security listed or traded
on the New York Stock Exchange ("NYSE") or American Stock Exchange or other
exchange is valued at its latest sale price prior to the time when assets are
valued; if there were no sales that day, the security is valued at the mean
between the last reported bid and asked price; (2) an equity portfolio security
listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price;
if there were no sales that day, the security is valued at the mean between the
last reported bid and asked price; (3) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the mean
between the last reported bid and asked price. In cases where a security is
traded on more than one exchange, the security is valued on the exchange
designated as the primary market; (4) for equity securities traded on foreign
exchanges, the last reported sale price or the latest bid price may be used if
there were no sales on a particular day; (5) when market quotations are not
readily available or Morgan Stanley Investment Advisors Inc. (the "Investment
Manager") determines that the latest sale price, the bid price or the mean
between the last reported bid and asked price do not reflect a security's market
value, portfolio securities are valued at their fair value as determined in good
faith under procedures established by and under the general supervision of the
Fund's Trustees. Occasionally, developments affecting the closing prices of
securities and other assets may occur between the times at which valuations of
such securities are determined (that is, close of the foreign market on which
the securities trade) and the close of business on the NYSE. If developments
occur during such periods that are expected to materially affect the value of
such securities, such valuations may be adjusted to reflect the estimated fair
value of such securities as of the close of the NYSE, as determined in good
faith by the Fund's Trustees or by the Investment
10
Morgan Stanley Real Estate Fund
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2004 (UNAUDITED) continued
Manager using a pricing service and/or procedures approved by the Trustees of
the Fund; (6) certain portfolio securities may be valued by an outside pricing
service approved by the Fund's Trustees; (7) short-term debt securities having a
maturity date of more than sixty days at time of purchase are valued on a
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.
B. Accounting for Investments -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
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. 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.
F. Dividends and Distributions to Shareholders -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
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.
11
Morgan Stanley Real Estate Fund
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2004 (UNAUDITED) continued
2. Investment Management and Sub-Advisory Agreements
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 1.0% to the net assets of the Fund determined as of the close of
each business day.
Prior to February 27, 2004, under a Sub-Advisory Agreement between Morgan
Stanley Investment Management Inc. (the "Sub-Advisor") and the Investment
Manager, the Sub-Advisor provided the Fund with investment advice and portfolio
management relating to the Fund's investments. As compensation for its services
provided pursuant to the Sub-Advisory Agreement, the Investment Manager paid the
Sub-Advisor compensation of $185,533 for the period December 1, 2003 through
February 26, 2004.
3. Plan of Distribution
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- up to 1.0% of the average
daily net assets of Class B; and (iii) Class C -- up to 1.0% of the average
daily net assets of Class C.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts totaled $5,959,359
at May 31, 2004.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Financial Advisors or other selected
broker-dealer representatives may be reimbursed in the subsequent calendar year.
For the six months ended May 31, 2004, the distribution fee was accrued for
Class A shares and Class C shares at the annual rate of 0.23% and 1.0%,
respectively.
12
Morgan Stanley Real Estate Fund
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2004 (UNAUDITED) continued
The Distributor has informed the Fund that for six months ended May 31, 2004, it
received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $19, $130,203 and
$3,321, respectively and received $49,893 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 May 31, 2004 aggregated
$10,393,075 and $23,717,186, respectively.
Morgan Stanley Trust, an affiliate of the Investment Manager, Sub-Advisor and
Distributor, is the Fund's transfer agent.
Effective April 1, 2004, the Fund began an unfunded Deferred Compensation Plan
(the "Compensation Plan"), which allows each independent Trustee to defer
payment of all, or a portion, of the fees he receives for serving on the Board
of Trustees. Each eligible Trustee generally may elect to have the deferred
amounts credited with a return equal to the total return on one or more of the
Morgan Stanley funds that are offered as investment options under the
Compensation Plan. Appreciation/depreciation and distributions received from
these investments are recorded with an offsetting increase/decrease in the
deferred compensation obligation and do not affect the net asset value of the
Fund.
5. 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 November 30, 2003, the Fund had temporary book/tax differences
attributable to capital loss deferrals on wash sales.
13
Morgan Stanley Real Estate Fund
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2004 (UNAUDITED) continued
6. Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MAY 31, 2004 NOVEMBER 30, 2003
------------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
CLASS A SHARES
Sold................................................. 183,883 $ 2,604,833 221,459 $ 2,653,238
Reinvestment of dividends and distributions.......... 11,728 164,454 24,014 263,633
Redeemed............................................. (199,220) (2,806,866) (306,839) (3,592,457)
---------- ------------ ---------- ------------
Net decrease - Class A............................... (3,609) (37,579) (61,366) (675,586)
---------- ------------ ---------- ------------
CLASS B SHARES
Sold................................................. 589,968 8,427,192 1,720,447 20,200,314
Reinvestment of dividends and distributions.......... 130,915 1,824,086 290,602 3,155,716
Redeemed............................................. (1,743,811) (24,239,658) (3,016,795) (34,686,436)
---------- ------------ ---------- ------------
Net decrease - Class B............................... (1,022,928) (13,988,380) (1,005,746) (11,330,406)
---------- ------------ ---------- ------------
CLASS C SHARES
Sold................................................. 149,345 2,110,434 231,244 2,720,208
Reinvestment of dividends and distributions.......... 16,190 226,036 31,673 345,975
Redeemed............................................. (176,251) (2,438,719) (214,676) (2,495,731)
---------- ------------ ---------- ------------
Net increase (decrease) - Class C.................... (10,716) (102,249) 48,241 570,452
---------- ------------ ---------- ------------
CLASS D SHARES
Sold................................................. 358,980 5,083,708 2,257,903 25,925,778
Reinvestment of dividends and distributions.......... 93,537 1,313,656 156,629 1,739,143
Redeemed............................................. (579,544) (8,145,852) (1,254,577) (14,655,074)
---------- ------------ ---------- ------------
Net increase (decrease) - Class D.................... (127,027) (1,748,488) 1,159,955 13,009,847
---------- ------------ ---------- ------------
Net increase (decrease) in Fund...................... (1,164,280) $(15,876,696) 141,084 $ 1,574,307
========== ============ ========== ============
</Table>
7. 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
14
Morgan Stanley Real Estate Fund
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2004 (UNAUDITED) continued
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.
15
Morgan Stanley Real Estate Fund
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED NOVEMBER 30, APRIL 28, 1999*
MONTHS ENDED -------------------------------------------------- THROUGH
MAY 31, 2004 2003 2002 2001 2000 NOVEMBER 30, 1999
------------ -------- -------- -------- -------- -----------------
(unaudited)
Class A Shares
Selected Per Share Data:
Net asset value,
beginning of period.... $13.58 $10.59 $11.39 $10.51 $ 8.63 $10.00
------ ------ ------ ------ ------ ------
Income (loss) from
investment
operations:
Net investment
income++............ 0.25 0.32 0.29 0.35 0.31 0.21
Net realized and
unrealized gain
(loss).............. 0.73 3.20 (0.17) 0.93 2.00 (1.38)
------ ------ ------ ------ ------ ------
Total income (loss) from
investment
operations............. 0.98 3.52 0.12 1.28 2.31 (1.17)
------ ------ ------ ------ ------ ------
Less dividends and
distributions from:
Net investment
income.............. (0.21) (0.32) (0.28) (0.35) (0.33) (0.20)
Net realized gain... (0.12) (0.21) (0.64) (0.05) (0.04) --
Paid-in-capital..... -- -- -- -- (0.06) --
------ ------ ------ ------ ------ ------
Total dividends and
distributions.......... (0.33) (0.53) (0.92) (0.40) (0.43) (0.20)
------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $14.23 $13.58 $10.59 $11.39 $10.51 $ 8.63
====== ====== ====== ====== ====== ======
Total Return+........... 7.38%(1) 34.61% 0.88% 12.38% 27.46% (11.88)%(1)
Ratios to Average Net
Assets(3):
Expenses................ 1.58%(2) 1.62% 1.63% 1.54% 1.71% 1.81%(2)
Net investment income... 3.52%(2) 2.77% 2.52% 3.19% 3.20% 3.59%(2)
Supplemental Data:
Net assets, end of
period, in thousands... $7,682 $7,378 $6,401 $7,860 $9,943 $5,634
Portfolio turnover
rate................... 6%(1) 23% 28% 40% 57% 27%(1)
</Table>
- ---------------------------------------------------
<Table>
* Commencement of operations.
++ 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>
16
See Notes to Financial Statements
Morgan Stanley Real Estate Fund
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED NOVEMBER 30, APRIL 28, 1999*
MONTHS ENDED ---------------------------------------------------- THROUGH
MAY 31, 2004 2003 2002 2001 2000 NOVEMBER 30, 1999
------------ ----------- ----------- --------- --------- ------------------
(unaudited)
Class B Shares
Selected Per Share Data:
Net asset value,
beginning of period.... $13.53 $10.55 $11.36 $10.49 $ 8.62 $ 10.00
------ ------ ------ ------ ------ -------
Income (loss) from
investment operations:
Net investment
income++............ 0.19 0.24 0.20 0.27 0.24 0.16
Net realized and
unrealized gain
(loss).............. 0.74 3.19 (0.17) 0.92 1.99 (1.37)
------ ------ ------ ------ ------ -------
Total income (loss) from
investment
operations............. 0.93 3.43 0.03 1.19 2.23 (1.21)
------ ------ ------ ------ ------ -------
Less dividends and
distributions from:
Net investment
income.............. (0.16) (0.24) (0.20) (0.27) (0.27) (0.17)
Net realized gain... (0.12) (0.21) (0.64) (0.05) (0.04) --
Paid-in-capital..... -- -- -- -- (0.05) --
------ ------ ------ ------ ------ -------
Total dividends and
distributions.......... (0.28) (0.45) (0.84) (0.32) (0.36) (0.17)
------ ------ ------ ------ ------ -------
Net asset value, end of
period................. $14.18 $13.53 $10.55 $11.36 $10.49 $ 8.62
====== ====== ====== ====== ====== =======
Total Return+........... 6.93%(1) 33.64% 0.15% 11.41% 26.41% (12.27)%(1)
Ratios to Average Net
Assets(3):
Expenses................ 2.35%(2) 2.37% 2.38% 2.36% 2.46% 2.56 %(2)
Net investment income... 2.75%(2) 2.02% 1.77% 2.37% 2.45 2.84 %(2)
Supplemental Data:
Net assets, end of
period, in thousands... $99,406 $108,680 $95,343 $86,479 $75,101 $59,645
Portfolio turnover
rate................... 6%(1) 23% 28% 40% 57% 27 %(1)
</Table>
- ---------------------------------------------------
<Table>
* Commencement of operations.
++ 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>
17
See Notes to Financial Statements
Morgan Stanley Real Estate Fund
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED NOVEMBER 30, APRIL 28, 1999*
MONTHS ENDED -------------------------------------------------- THROUGH
MAY 31, 2004 2003 2002 2001 2000 NOVEMBER 30, 1999
------------ -------- -------- -------- -------- -----------------
(unaudited)
Class C Shares
Selected Per Share Data:
Net asset value, beginning of
period........................ $13.53 $10.55 $11.36 $10.50 $ 8.62 $10.00
------ ------ ------ ------ ------ ------
Income (loss) from investment
operations:
Net investment income++.... 0.19 0.23 0.20 0.27 0.26 0.16
Net realized and unrealized
gain (loss)................ 0.74 3.20 (0.17) 0.91 1.98 (1.38)
------ ------ ------ ------ ------ ------
Total income (loss) from
investment
operations.................... 0.93 3.43 0.03 1.18 2.24 (1.22)
------ ------ ------ ------ ------ ------
Less dividends and
distributions from:
Net investment income...... (0.16) (0.24) (0.20) (0.27) (0.27) (0.16)
Net realized gain.......... (0.12) (0.21) (0.64) (0.05) (0.04) --
Paid-in-capital............ -- -- -- -- (0.05) --
------ ------ ------ ------ ------ ------
Total dividends and
distributions................. (0.28) (0.45) (0.84) (0.32) (0.36) (0.16)
------ ------ ------ ------ ------ ------
Net asset value, end of
period........................ $14.18 $13.53 $10.55 $11.36 $10.50 $ 8.62
====== ====== ====== ====== ====== ======
Total Return+ 6.94%(1) 33.54% 0.15% 11.39% 26.50% (12.29)%(1)
Ratios to Average Net
Assets(3):
Expenses....................... 2.35%(2) 2.37% 2.38% 2.36% 2.46% 2.56 %(2)
Net investment income.......... 2.75%(2) 2.02% 1.77% 2.37% 2.45% 2.84 %(2)
Supplemental Data:
Net assets, end of period,
in thousands.................. $12,801 $12,359 $9,129 $7,504 $6,759 $7,698
Portfolio turnover rate........ 6%(1) 23% 28% 40% 57% 27 %(1)
</Table>
- ---------------------------------------------------
<Table>
* Commencement of operations.
++ 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 Real Estate Fund
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED NOVEMBER 30, APRIL 28, 1999*
MONTHS ENDED -------------------------------------------------- THROUGH
MAY 31, 2004 2003 2002 2001 2000 NOVEMBER 30, 1999
------------ -------- -------- -------- -------- -----------------
(unaudited)
Class D Shares
Selected Per Share Data:
Net asset value, beginning of
period........................ $13.59 $10.59 $11.40 $10.53 $ 8.64 $ 10.00
------ ------ ------ ------ ------ -------
Income (loss) from investment
operations:
Net investment income++.... 0.26 0.34 0.30 0.37 0.27 0.15
Net realized and unrealized
gain (loss)................ 0.74 3.22 (0.16) 0.93 2.08 (1.30)
------ ------ ------ ------ ------ -------
Total income (loss) from
investment operations......... 1.00 3.56 0.14 1.30 2.35 (1.15)
------ ------ ------ ------ ------ -------
Less dividends and
distributions from:
Net investment income...... (0.23) (0.35) (0.31) (0.38) (0.36) (0.21)
Net realized gain.......... (0.12) (0.21) (0.64) (0.05) (0.04) --
Paid-in-capital............ -- -- -- -- (0.06) --
------ ------ ------ ------ ------ -------
Total dividends and
distributions................. (0.35) (0.56) (0.95) (0.43) (0.46) (0.21)
------ ------ ------ ------ ------ -------
Net asset value, end of
period........................ $14.24 $13.59 $10.59 $11.40 $10.53 $ 8.64
====== ====== ====== ====== ====== =======
Total Return+.................. 7.50%(1) 34.92% 1.14% 12.58% 27.88% (11.69)%(1)
Ratios to Average Net
Assets(3):
Expenses....................... 1.35%(2) 1.37% 1.38% 1.36% 1.46% 1.56 %(2)
Net investment income.......... 3.75%(2) 3.02% 2.77% 3.37% 3.45% 3.84 %(2)
Supplemental Data:
Net assets, end of period, in
thousands..................... $59,966 $58,930 $33,652 $14,349 $5,193 $26
Portfolio turnover rate........ 6%(1) 23% 28% 40% 57% 27 %(1)
</Table>
- ---------------------------------------------------
<Table>
* Commencement of operations.
++ 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>
19
See Notes to Financial Statements
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael E. Nugent
Fergus Reid
OFFICERS
Charles A. Fiumefreddo
Chairman of the Board
Mitchell M. Merin
President
Ronald E. Robison
Executive Vice President and Principal Executive Officer
Barry Fink
Vice President
Joseph J. 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 REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020
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) 2004 Morgan Stanley
[MORGAN STANLEY LOGO]
MORGAN STANLEY FUNDS
Morgan Stanley
Real Estate Fund
Semiannual Report
May 31, 2004
[MORGAN STANLEY LOGO]
36068RPT-RA04-00341P-Y05/04
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 Real Estate Fund
/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