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: 811-09769
Morgan Stanley Tax-Managed Growth 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: August 31, 2003
Date of reporting period: August 31, 2003
Item 1 - Report to Shareholders
Welcome, Shareholder:
In this report, you'll learn about how your investment in Morgan Stanley
Tax-Managed Growth Fund performed during the annual 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MORGAN STANLEY TAX-MANAGED GROWTH FUND
FUND REPORT
FOR THE YEAR ENDED AUGUST 31, 2003
- --------------------------------------------------------------------------------------
TOTAL RETURN FOR THE 12-MONTH PERIOD ENDED AUGUST 31, 2003
- --------------------------------------------------------------------------------------
Class A Class B Class C Class D S&P 500 Lipper Large
Index(1) Cap Growth
Funds Index(2)
- --------------------------------------------------------------------------------------
9.51% 8.51% 8.72% 9.64% 12.06% 11.03%
- --------------------------------------------------------------------------------------
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 the Performance Summary for standardized performance
information.
MARKET CONDITIONS
In the early stages of the 12-month period ended August 31, 2003, the
long-anticipated economic recovery appeared reluctant to surface. Despite
interest rates at historically low levels, corporate earnings failed to rebound
as quickly as had been expected. Throughout the fiscal year, the economic data
transmitted mixed signals regarding the economy's underlying strength. Investor
confidence continued to waver during the early part of the period, aggravated by
concerns about corporate governance and a perceived lack of balance-sheet
integrity. Although the weakness in equities was fairly broad based, technology
companies were hit especially hard as corporations trimmed their capital
spending on equipment. In addition, downward earnings revisions continued to
trouble the telecommunications sector. Investor sentiment was further dampened
by geopolitical tensions leading up to the war in Iraq.
While these negative forces held investors' attention during most of the first
three months of 2003, under the surface financial conditions were improving. An
accommodative fiscal and monetary policy signaled to many that the economy might
recover in the near future. Recognizing strong values among equities, investors
began to return to the market by the end of March. The surprisingly quick
resolution to the Iraq conflict triggered a strong market rally that by the end
of the period saw the S&P 500 Index appreciate more than 25 percent from its
mid-March lows. The defensive sectors and securities that had led during the
bear market fell behind the more cyclical sectors as investors' expectations for
the economy improved. As the market rallied, the best-performing groups were
information technology, financials, consumer discretionary issues and
telecommunications.
PERFORMANCE ANALYSIS
The Fund's underperformance of its benchmark can be attributed to an
overweighting in health care and stock selection in other sectors. Within the
consumer discretionary area, holdings in discount retailers plus travel and
leisure had a negative effect. Select issues among aerospace and defense
companies in the industrials sector also detracted from the Fund's relative
performance.
Positive factors for the Fund included its overweighted allocation to
information technology, which was among the leading sectors during this period.
Within the energy sector, stock selection contributed to performance,
particularly in the areas of energy drilling and service companies and
integrated oil services. An underweighting in financials also helped the Fund's
relative performance.
On September 30, 2003, at a special meeting of shareholders of Morgan Stanley
Tax-Managed Growth Fund, a proposal to have the Fund's assets acquired by Morgan
Stanley Growth Fund, pursuant to an Agreement and Plan of Reorganization, was
approved.
Accordingly, shareholders will receive corresponding shares of Morgan Stanley
Growth Fund equal to the value of their holdings in Morgan Stanley Tax-Managed
Growth Fund as of the valuation date. Each shareholder of Morgan Stanley
Tax-Managed Growth Fund will receive the same class of shares of Morgan Stanley
Growth Fund as is currently held by the shareholder in that Fund on the
valuation date. This transaction is considered a nontaxable event.
TOP 10 HOLDINGS
Microsoft Corp. 6.7%
General Electric Co. 4.2
Citigroup Inc. 3.7
Pfizer Inc. 3.7
Wal-Mart Stores, Inc. 3.5
Intel Corp. 3.4
Cisco Systems, Inc. 2.9
Johnson & Johnson 2.2
American International Group, Inc. 2.2
Amgen Inc. 2.2
TOP FIVE INDUSTRIES
Pharmaceuticals Major 10.2%
Packaged Software 9.7
Semiconductors 6.8
Industrial Conglomerates 6.2
Discount Stores 5.9
Data as of August 31, 2003. Subject to change daily. All percentages are as a
percentage of net assets. Provided for informational purposes only and should
not be deemed a recommendation to buy the securities mentioned. Morgan Stanley
is a full-service securities firm engaged in securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services.
ANNUAL HOUSEHOLDING NOTICE
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate
mailings to the same address. The Fund delivers a single copy of certain
shareholder documents, including shareholder reports, prospectuses and proxy
materials, to investors with the same last name who reside at the same address.
Your participation in this program will continue for an unlimited period of time
unless you instruct us otherwise. You can request multiple copies of these
documents by calling (800) 350-6414, 8:00 a.m. to 8:00 p.m. ET. Once our
Customer Service Center has received your instructions, we will begin sending
individual copies for each account within 30 days.
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.
FUND PERFORMANCE AUGUST 31, 2003
PERFORMANCE OF $10,000 INVESTMENT
Date Class A Class B Class C Class D S&P 500 Lipper
==================================================================================================================================
April 26, 2000 $9,475 $10,000 $10,000 $10,000 $10,000 $10,000
==================================================================================================================================
May 31, 2000 $8,982 $9,470 $9,470 $9,480 $9,739 $9,570
==================================================================================================================================
August 31, 2000 $9,911 $10,440 $10,440 $10,470 $10,432 $10,861
==================================================================================================================================
November 30, 2000 $7,968 $8,370 $8,370 $8,420 $9,064 $8,228
==================================================================================================================================
February 28, 2001 $7,192 $7,530 $7,530 $7,600 $8,571 $7,112
==================================================================================================================================
May 31, 2001 $7,116 $7,440 $7,440 $7,520 $8,710 $7,003
==================================================================================================================================
August 31, 2001 $6,320 $6,600 $6,600 $6,690 $7,888 $6,059
==================================================================================================================================
November 30, 2001 $6,633 $6,920 $6,920 $7,030 $7,957 $6,196
==================================================================================================================================
February 28, 2002 $6,225 $6,480 $6,480 $6,600 $7,757 $5,832
==================================================================================================================================
May 31, 2002 $5,874 $6,110 $6,100 $6,230 $7,505 $5,560
==================================================================================================================================
August 31, 2002 $4,984 $5,170 $5,160 $5,290 $6,470 $4,749
==================================================================================================================================
November 30, 2002 $5,126 $5,310 $5,300 $5,450 $6,644 $4,810
==================================================================================================================================
February 28, 2003 $4,576 $4,720 $4,720 $4,860 $5,998 $4,325
==================================================================================================================================
May 31, 2003 $5,183 $5,340 $5,340 $5,510 $6,901 $4,960
==================================================================================================================================
August 31, 2003 $5,458[+/+] $5,498[+/+] $5,610[+/+] $5,800[+/+] $7,250 $5,273
==================================================================================================================================
=====================================================================================
- ---- Class A --- Class B --- Class C --- Class D ---- S&P 500 (1) ----- Lipper (2)
=====================================================================================
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 graph 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.
AVERAGE ANNUAL TOTAL RETURNS-PERIOD ENDED AUGUST 31, 2003
---------------------------------------------------------
================= =================== ================== ===================
CLASS A SHARES* CLASS B SHARES ** CLASS C SHARES + CLASS D SHARES ++
04/26/00 04/26/00 04/26/00 04/26/00
Symbol TGXAX TGXBX TGXCX TGXDX
================= =================== ================== ===================
================= =================== ================== ===================
1 Year 9.51 %(3) 8.51 %(3) 8.72 %(3) 9.64 %(3)
================= =================== ================== ===================
3.76 (4) 3.51 (4) 7.72 (4)
================= =================== ================== ===================
================= =================== ================== ===================
Since Inception (15.20) (3) (15.87) (3) (15.87) (3) (15.03) (3)
================= =================== ================== ===================
(16.56) (4) (16.37) (4) (15.87) (4)
================= =================== ================== ===================
After-Tax Returns
=======================================
Distribution Distribution and Sale
================ ======================
CLASS B SHARES CLASS B SHARES
04/26/00 04/26/00
Symbol TGXBX TGXBX
================ ======================
================ ======================
1 Year - -
================ ======================
3.51 %(4)(5) 2.28 %(4)(6)
================ ======================
================ ======================
Since Inception - -
================ ======================
(16.37) (4)(5) (13.43) (4)(6)
================ ======================
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 Large-Cap Growth Funds Index is an equally weighted
performance index of the largest qualifying funds (based on net assets)
in the Lipper Large-Cap Growth 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 prospectus for
complete details on fees and sales charges.
5.) SEC standardized after-tax total return on distributions.
6.) SEC standardized after-tax total return on distributions and sale of fund
shares.
* 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.
[+/+] Closing value assuming a complete redemption on August 31, 2003.
MORGAN STANLEY TAX-MANAGED GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2003
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
COMMON STOCKS (96.5%)
Apparel/Footwear Retail (0.9%)
13,000 Abercrombie & Fitch Co. (Class A) * $ 395,720
12,600 TJX Companies, Inc. (The) 272,916
------------
668,636
------------
Beverages: Non-Alcoholic (1.3%)
23,475 Coca-Cola Co. (The) 1,021,632
------------
Biotechnology (3.3%)
23,095 Amgen Inc. * 1,521,960
3,975 Celgene Corp. * 152,998
6,325 Gilead Sciences, Inc. * 421,877
9,200 IDEC Pharmaceuticals Corp. * 319,700
------------
2,416,535
------------
Broadcasting (2.9%)
16,700 Citadel Broadcasting Corp. 368,736
25,850 Clear Channel Communications, Inc. * 1,166,352
13,225 Univision Communications Inc. (Class A) * 495,805
------------
2,030,893
------------
Cable/Satellite TV (1.3%)
16,975 Comcast Corp. (Class A) * 505,006
10,900 EchoStar Communications Corp. (Class A) * 402,210
------------
907,216
------------
Computer Communications (3.7%)
107,575 Cisco Systems, Inc. * 2,060,061
8,200 Emulex Corp. * 198,522
22,000 Juniper Networks, Inc. * 378,840
------------
2,637,423
------------
Computer Peripherals (0.4%)
20,175 EMC Corp. * 257,231
------------
Computer Processing Hardware (2.0%)
33,975 Dell Inc. 1,108,604
14,200 Hewlett-Packard Co. 282,864
------------
1,391,468
------------
SEE NOTES TO FINANCIAL STATEMENTS
MORGAN STANLEY TAX-MANAGED GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2003
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
Data Processing Services (0.7%)
12,550 First Data Corp. $ 481,920
--------------
Department Stores (0.5%)
5,525 Kohl's Corp. * 349,456
--------------
Discount Stores (5.9%)
9,475 Costco Wholesale Corp. * 304,053
15,800 Dollar Tree Stores, Inc. * 619,834
17,600 Target Corp. 714,560
42,175 Wal-Mart Stores, Inc. 2,495,495
--------------
4,133,942
--------------
Drugstore Chains (0.5%)
9,900 Walgreen Co. 322,443
--------------
Electrical Products (0.3%)
3,400 Emerson Electric Co. 189,584
--------------
Electronic Components (1.2%)
4,500 Amphenol Corp. (Class A) * 245,385
21,900 Flextronics International, Ltd. (Singapore) * 295,431
11,420 Jabil Circuit, Inc. * 321,473
--------------
862,289
--------------
Electronic Production Equipment (2.0%)
48,850 Applied Materials, Inc. * 1,055,160
8,950 Novellus Systems, Inc. * 357,642
--------------
1,412,802
--------------
Financial Conglomerates (5.7%)
21,000 American Express Co. 946,050
60,241 Citigroup Inc. 2,611,447
13,400 J.P. Morgan Chase & Co. 458,548
--------------
4,016,045
--------------
Food: Major Diversified (1.5%)
24,470 PepsiCo, Inc. 1,089,894
--------------
SEE NOTES TO FINANCIAL STATEMENTS
MORGAN STANLEY TAX-MANAGED GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2003
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
Home Improvement Chains (2.1%)
29,310 Home Depot, Inc. (The) $ 942,610
9,400 Lowe's Companies, Inc. 515,684
--------------
1,458,294
--------------
Hospital/Nursing Management (0.2%)
7,800 Health Management Associates, Inc. (Class A) 173,784
--------------
Household/Personal Care (2.8%)
10,450 Colgate-Palmolive Co. 577,676
16,425 Procter & Gamble Co. (The) 1,433,738
--------------
2,011,414
--------------
Industrial Conglomerates (6.2%)
10,000 3M Co. 1,424,700
99,400 General Electric Co. 2,939,258
--------------
4,363,958
--------------
Information Technology Services (1.4%)
10,700 International Business Machines Corp. 877,507
6,700 PeopleSoft, Inc. * 121,270
--------------
998,777
--------------
Integrated Oil (2.1%)
38,500 Exxon Mobil Corp. 1,451,450
--------------
Internet Retail (0.9%)
16,425 InterActiveCorp. * 607,889
--------------
Internet Software/Services (0.9%)
24,300 Siebel Systems, Inc. * 244,944
11,400 Yahoo! Inc. * 380,760
--------------
625,704
--------------
Investment Banks/Brokers (1.4%)
7,750 Goldman Sachs Group, Inc. (The) 685,798
25,800 Schwab (Charles) Corp. (The) 280,188
--------------
965,986
--------------
Life/Health Insurance (0.7%)
15,100 AFLAC, Inc. 483,351
--------------
SEE NOTES TO FINANCIAL STATEMENTS
MORGAN STANLEY TAX-MANAGED GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2003
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
Major Banks (2.1%)
22,650 Bank of New York Co., Inc. (The) $ 666,363
15,750 Wells Fargo & Co. 789,705
-------------
1,456,068
-------------
Managed Health Care (1.0%)
14,350 UnitedHealth Group Inc. 709,321
-------------
Media Conglomerates (1.3%)
20,570 Viacom, Inc. (Class B) (Non-Voting) 925,650
-------------
Medical Distributors (0.5%)
6,300 AmerisourceBergen Corp. 366,723
-------------
Medical Specialties (1.8%)
7,100 Boston Scientific Corp. * 426,710
10,250 Medtronic, Inc. 508,195
6,075 St. Jude Medical, Inc. * 316,325
-------------
1,251,230
-------------
Multi-Line Insurance (2.2%)
25,975 American International Group, Inc. 1,547,331
-------------
Oilfield Services/Equipment (2.2%)
11,725 Baker Hughes Inc. 392,319
12,500 BJ Services Co. * 467,125
17,180 Smith International, Inc. * 671,566
-------------
1,531,010
-------------
Other Consumer Services (1.2%)
12,400 eBay Inc. * 688,572
3,835 Weight Watchers International, Inc. * 166,247
-------------
854,819
-------------
Packaged Software (9.7%)
10,100 Adobe Systems Inc. 392,183
5,000 Mercury Interactive Corp. * 219,450
177,500 Microsoft Corp. 4,707,300
64,675 Oracle Corp. * 826,547
SEE NOTES TO FINANCIAL STATEMENTS
MORGAN STANLEY TAX-MANAGED GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2003
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------------
6,340 Symantec Corp. * $ 364,106
9,050 Veritas Software Corp. * 312,044
-------------
6,821,630
-------------
Pharmaceuticals: Major (10.2%)
14,800 Abbott Laboratories 596,440
31,775 Johnson & Johnson 1,575,405
11,900 Lilly (Eli) & Co. 791,707
14,850 Merck & Co., Inc. 747,252
87,210 Pfizer Inc. 2,609,323
21,225 Wyeth, Inc. 909,491
-------------
7,229,618
-------------
Publishing: Newspapers (0.4%)
3,750 Gannett Co., Inc. 294,075
-------------
Restaurants (0.9%)
11,300 McDonald's Corp. 253,346
13,775 Yum! Brands, Inc. * 408,429
-------------
661,775
-------------
Semiconductors (6.8%)
12,400 Analog Devices, Inc. * 508,400
7,000 Broadcom Corp. (Class A) * 192,360
84,575 Intel Corp. 2,420,537
10,700 Linear Technology Corp. 441,054
8,150 Maxim Integrated Products, Inc. 366,017
27,725 Texas Instruments Inc. 661,241
6,000 Xilinx, Inc. * 185,040
-------------
4,774,649
-------------
Specialty Stores (1.0%)
9,800 Bed Bath & Beyond Inc. * 421,708
6,450 Tiffany & Co. 251,034
-------------
672,742
-------------
Telecommunication Equipment (2.1%)
45,900 Nokia Corp. (ADR) (Finland) 747,711
12,900 QUALCOMM Inc. 532,512
4,400 UTStarcom, Inc. * 189,024
-------------
1,469,247
-------------
SEE NOTES TO FINANCIAL STATEMENTS
MORGAN STANLEY TAX-MANAGED GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 2003
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Wireless Telecommunications (0.3%)
22,200 AT&T Wireless Services Inc. * $ 191,364
--------------
TOTAL COMMON STOCKS
(Cost $64,716,986) 68,087,268
--------------
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------------
SHORT-TERM INVESTMENT (4.8%)
REPURCHASE AGREEMENT
$3,412 Joint repurchase agreement account 1.05% due 09/02/03 (dated 08/29/03;
proceeds $3,412,398) (a) (cost $3,412,000) 3,412,000
--------------
TOTAL INVESTMENTS (b)
(Cost $68,128,986) 101.3% 71,499,268
LIABILITIES IN EXCESS OF OTHER ASSETS (1.3) (911,111)
-------- --------------
NET ASSETS 100.0% $70,588,157
======== ==============
- -----------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by federal agency and U.S. Treasury obligations.
(b) The aggregate cost for federal income tax purposes is $75,958,068.
The aggregate gross unrealized appreciation is $6,030,598 and the
aggregate gross unrealized depreciation is $10,489,398, resulting
in net unrealized depreciation of $4,458,800.
SEE NOTES TO FINANCIAL STATEMENTS
MORGAN STANLEY TAX-MANAGED GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2003
ASSETS:
Investments in securities, at value
(cost $68,128,986) $ 71,499,268
Receivable for:
Investments sold 83,214
Dividends 67,295
Shares of beneficial interest sold 35,404
Prepaid expenses and other assets 20,152
----------------
TOTAL ASSETS 71,705,333
----------------
LIABILITIES:
Payable for:
Investments purchased 817,564
Shares of beneficial interest redeemed 109,113
Distribution fee 51,785
Investment management fee 50,305
Accrued expenses and other payables 88,409
----------------
TOTAL LIABILITIES 1,117,176
----------------
NET ASSETS $ 70,588,157
================
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 150,200,529
Net unrealized appreciation 3,370,282
Accumulated net realized loss (82,982,654)
----------------
NET ASSETS $ 70,588,157
================
CLASS A SHARES:
Net Assets $7,213,112
Shares Outstanding (unlimited authorized, $.01 par value) 1,253,944
NET ASSET VALUE PER SHARE $5.75
-----
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) $6.07
-----
CLASS B SHARES:
Net Assets $51,979,826
Shares Outstanding (unlimited authorized, $.01 par value) 9,267,244
NET ASSET VALUE PER SHARE $5.61
-----
CLASS C SHARES:
Net Assets $7,856,871
Shares Outstanding (unlimited authorized, $.01 par value) 1,402,260
NET ASSET VALUE PER SHARE $5.60
-----
CLASS D SHARES:
Net Assets $3,538,348
Shares Outstanding (unlimited authorized, $.01 par value) 610,320
NET ASSET VALUE PER SHARE $5.80
-----
See Notes to Financial Statements
MORGAN STANLEY TAX-MANAGED GROWTH FUND
Financial Statements, continued
STATEMENT OF OPERATIONS
For the year ended August 31, 2003
NET INVESTMENT LOSS:
INCOME:
Dividends $ 867,519
Interest 25,980
----------------
TOTAL INCOME 893,499
----------------
EXPENSES
Investment management fee 619,028
Distribution fee (Class A shares) 16,964
Distribution fee (Class B shares) 546,974
Distribution fee (Class C shares) 81,729
Transfer agent fees and expenses 116,642
Professional fees 101,957
Registration fees 40,878
Shareholder reports and notices 78,807
Trustees' fees and expenses 12,485
Other 7,355
----------------
TOTAL EXPENSES 1,622,819
----------------
NET INVESTMENT LOSS (729,320)
----------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain 42,881
Net change in unrealized depreciation 6,173,078
----------------
NET GAIN 6,215,959
----------------
NET INCREASE $ 5,486,639
================
See Notes to Financial Statements
MORGAN STANLEY TAX-MANAGED GROWTH FUND
Financial Statements, continued
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 2003 AUGUST 31, 2002
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss $(729,320) $(1,299,809)
Net realized gain/loss 42,881 (34,998,313)
Net change in unrealized depreciation 6,173,078 11,573,741
---------------- ---------------
NET INCREASE (DECREASE) 5,486,639 (24,724,381)
---------------- ---------------
Net decrease from transactions in shares of beneficial interest (16,829,486) (19,880,665)
---------------- ---------------
NET DECREASE (11,342,847) (44,605,046)
NET ASSETS:
Beginning of period 81,931,004 126,536,050
---------------- ---------------
End of Period $70,588,157 $81,931,004
================ ===============
See Notes to Financial Statements
MORGAN STANLEY TAX-MANAGED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS | August 31, 2003
1. Organization and Accounting Policies
Morgan Stanley Tax-Managed Growth 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
long-term growth of capital on an after-tax basis. The Fund seeks to achieve its
objective by investing primarily in common stocks of companies having stock
market values or capitalizations of at least $1 billion. The Fund was organized
as a Massachusetts business trust on December 27, 1999 and commenced operations
on April 26, 2000.
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) when market quotations are not readily available or Morgan
Stanley Investment Advisors Inc. (the "Investment Manager") and/or Morgan
Stanley Investment Management Inc. (the "Sub-Advisor"), an affiliate of 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; (6) certain portfolio securities may be valued by an
outside pricing service approved by the Fund's Trustees; and (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.
MORGAN STANLEY TAX-MANAGED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS | August 31, 2003 (continued)
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.
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 0.85% to the net assets of the Fund determined as of the close of
each business day.
Under a Sub-Advisory Agreement between the Sub-Advisor and the Investment
Manager, the Sub-Advisor provides the Fund with investment advice and portfolio
management relating to the Fund's investments in securities, subject to the
overall supervision of the Investment Manager. As compensation for its services
provided pursuant to the Sub-Advisory Agreement, the Investment Manager paid the
Sub-Advisor compensation of $247,611 for the year ended August 31, 2003.
3. Plan of Distribution
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager and Sub-Advisor. 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
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 $8,059,289
at August 31, 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
MORGAN STANLEY TAX-MANAGED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS | August 31, 2003 (continued)
reimbursed in the subsequent calendar year. For the year ended August 31, 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 year ended August 31, 2003,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $220,829 and $1,079, respectively
and received $1,219 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 year ended August 31, 2003 aggregated
$103,841,364, and $120,524,001, respectively.
For the year ended August 31, 2003, the Fund incurred brokerage commissions of
$273, with Morgan Stanley & Co., Inc., an affiliate of the Investment Manager
and Distributor, for portfolio transactions executed on behalf of the Fund.
Morgan Stanley Trust, an affiliate of the Investment Manager, Distributor and
Sub-Advisor, is the Fund's transfer agent. At August 31, 2003, the Fund had
transfer agent fees and expenses payable of approximately $600.
5. Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:
FOR THE YEAR FOR THE YEAR
ENDED ENDED
AUGUST 31, 2003 AUGUST 31, 2002
----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ------------ -------------
CLASS A SHARES
Sold................................. 72,956 $383,084 168,089 $1,066,051
Redeemed............................ (153,238) (797,687) (337,699) (2,175,941)
----------- ------------- ------------ -------------
Net decrease - Class A............. (80,282) (414,603) (169,610) (1,109,890)
----------- ------------- ------------ -------------
CLASS B SHARES
Sold................................. 835,435 4,211,545 1,740,641 11,217,507
Redeemed............................. (3,607,264) (18,383,119) (4,649,866) (28,638,577)
----------- ------------- ------------ -------------
Net decrease - Class B............. (2,771,829) (14,171,574) (2,909,225) (17,421,070)
----------- ------------- ------------ -------------
CLASS C SHARES
Sold................................. 197,306 1,008,705 254,887 1,686,226
Redeemed............................. (660,140) (3,362,585) (775,797) (4,825,525)
----------- ------------- ------------ -------------
Net decrease - Class C............... (462,834) (2,353,880) (520,910) (3,139,299)
----------- ------------- ------------ -------------
CLASS D SHARES
Sold................................. 209,929 1,098,835 407,295 2,576,910
Redeemed............................. (189,067) (988,264) (121,757) (787,316)
----------- ------------- ------------ -------------
Net increase - Class D............... 20,862 110,571 285,538 1,789,594
----------- ------------- ------------ -------------
Net decrease in Fund................. (3,294,083) $(16,829,486) (3,314,207) $(19,880,665)
=========== ============= ============ =============
MORGAN STANLEY TAX-MANAGED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS | August 31, 2003 (continued)
6. 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 August 31, 2003, the tax-basis components of accumulated losses were as
follows:
Net accumulated earnings -
Capital loss carryforward* ($71,339,842)
Post-October losses (3,813,730)
Net unrealized depreciation (4,458,800)
-------------
Total accumulated losses ($79,612,372)
=============
* As of August 31, 2003, the Fund had a net capital loss carryforward of
$71,339,842 of which $10,033,539 will expire on August 31, 2009, $36,801,337
will expire on August 31, 2010 and $24,504,966 will expire on August 31, 2011 to
offset future capital gains to the extent provided by regulations.
As of August 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) and capital loss deferrals on wash sales and permanent
book/tax differences attributable to a net operating loss and nondeductible
expenses. To reflect reclassifications arising from the permanent differences,
paid-in-capital was charged and net investment loss was credited $729,320.
7. Subsequent Event - Fund Merger
On October 6, 2003, the Fund was acquired by Morgan Stanley Growth Fund
("Growth") 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 the Fund on September 30, 2003. The acquisition was accomplished
by a tax-free exchange of 548,767 Class A shares of Growth at a net asset value
of $11.25 per share for 1,051,726 Class A shares of the Fund; 4,737,274 Class B
shares of Growth at a net asset value of $10.82 per share for 8,961,067 Class B
shares of the Fund; 727,742 Class C shares of Growth at a net asset value of
$10.67 per share for 1,359,896 Class C shares of the Fund; and 280,143 Class D
shares of Growth at a net asset value of $11.45 per share for 541,830 Class D
shares of the Fund. The net assets of Growth and the Fund immediately before the
acquisition were $645,940,274 and $68,397,350, respectively, including
unrealized appreciation of $4,195,785 for the Fund. Immediately after the
acquisition, the combined net assets of Growth amounted to $714,337,624.
MORGAN STANLEY TAX-MANAGED GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
FOR THE PERIOD
FOR THE YEAR YEAR ENDED AUGUST 31, APRIL 26, 2000*
---------------------------------------------- THROUGH
2003 2002 2001 AUGUST 31, 2000
---------- ---------- --------- ------------------
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period................. $5.26 $6.67 $10.46 $10.00
---------- ---------- --------- ------------------
Income (loss) from investment operations:
Net investment loss [+/+]......................... (0.02) (0.03) (0.04) (0.02)
Net realized and unrealized gain (loss)........... 0.51 (1.38) (3.75) 0.48
---------- ---------- --------- ------------------
Total income (loss) from investment operations....... 0.49 (1.41) (3.79) 0.46
---------- ---------- --------- ------------------
Net asset value, end of period....................... $5.75 $5.26 $6.67 $10.46
========== ========== ========= ==================
TOTAL RETURN +....................................... 9.51 % (21.14)% (36.23)% 4.60 %(1)
RATIOS TO AVERAGE NET NET ASSETS (3):
Expenses............................................. 1.59 % 1.37 % 1.35 % 1.46 %(2)
Net investment loss.................................. (0.36)% (0.49)% (0.55)% (0.46)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.............. $7,213 $7,016 $10,036 $18,695
Portfolio turnover rate ............................. 149 % 112 % 78 % 17 %(1)
- -------------------------------
* 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.
SEE NOTES TO FINANCIAL STATEMENTS
MORGAN STANLEY TAX-MANAGED GROWTH FUND
FINANCIAL HIGHLIGHTS continued
FOR THE PERIOD
FOR THE YEAR ENDED AUGUST 31, APRIL 26, 2000*
---------------------------------------------- THROUGH
2003 2002 2001 AUGUST 31, 2000
---------- ---------- ---------- -----------------
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period................ $5.16 $6.60 $10.44 $10.00
---------- ---------- ---------- -----------------
Income (loss) from investment operations:
Net investment loss [+/+]........................ (0.06) (0.08) (0.11) (0.04)
Net realized and unrealized gain (loss).......... 0.51 (1.36) (3.73) 0.48
---------- ---------- ---------- -----------------
Total income (loss) from investment operations...... 0.45 (1.44) (3.84) 0.44
---------- ---------- ---------- -----------------
Net asset value, end of period...................... $5.61 $5.16 $6.60 $10.44
========== ========== ========== =================
TOTAL RETURN +...................................... 8.51 % (21.67)% (36.78)% 4.40 % (1)
RATIOS TO AVERAGE NET NET ASSETS (3):
Expenses............................................ 2.34 % 2.12 % 2.15 % 2.21 % (2)
Net investment loss................................. (1.11)% (1.24)% (1.35)% (1.21)% (2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............. $51,980 $62,175 $98,710 $136,498
Portfolio turnover rate ............................ 149 % 112 % 78 % 17 % (1)
- -------------------------------
* 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.
SEE NOTES TO FINANCIAL STATEMENTS
MORGAN STANLEY TAX-MANAGED GROWTH FUND
FINANCIAL HIGHLIGHTS continued
FOR THE PERIOD
FOR THE YEAR ENDED AUGUST 31, APRIL 26, 2000*
----------------------------------------------- THROUGH
2003 2002 2001 AUGUST 31, 2000
------------ ----------- ----------- ------------------
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period.................. $5.16 $6.60 $10.44 $10.00
------------ ----------- ----------- ------------------
Income (loss) from investment operations:
Net investment loss [+/+].......................... (0.06) (0.08) (0.11) (0.04)
Net realized and unrealized gain (loss)............ 0.50 (1.36) (3.73) 0.48
------------ ----------- ----------- ------------------
Total income (loss) from investment operations........ 0.44 (1.44) (3.84) 0.44
------------ ----------- ----------- ------------------
Net asset value, end of period........................ $5.60 $5.16 $6.60 $10.44
============ =========== =========== ==================
TOTAL RETURN +........................................ 8.72 % (21.82)% (36.78)% 4.40 % (1)
RATIOS TO AVERAGE NET NET ASSETS (3):
Expenses.............................................. 2.34 % 2.12 % 2.15 % 2.21 % (2)
Net investment loss................................... (1.11)% (1.24)% (1.35)% (1.21)% (2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............... $7,857 $9,624 $15,756 $27,133
Portfolio turnover rate .............................. 149 % 112 % 78 % 17 % (1)
- -------------------------------
* 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.
SEE NOTES TO FINANCIAL STATEMENTS
MORGAN STANLEY TAX-MANAGED GROWTH FUND
FINANCIAL HIGHLIGHTS continued
FOR THE PERIOD
FOR THE YEAR ENDED AUGUST 31, APRIL 26, 2000*
------------------------------------------------- THROUGH
2003 2002 2001 AUGUST 31, 2000
------------ ----------- ----------- ------------------
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period................. $5.29 $6.69 $10.47 $10.00
------------ ----------- ----------- ------------------
Income (loss) from investment operations:
Net investment loss [+/+]......................... (0.01) (0.01) (0.03) (0.01)
Net realized and unrealized gain (loss)........... 0.52 (1.39) (3.75) 0.48
------------ ----------- ----------- ------------------
Total income (loss) from investment operations....... 0.51 (1.40) (3.78) 0.47
------------ ----------- ----------- ------------------
Net asset value, end of period....................... $5.80 $5.29 $6.69 $10.47
============ =========== =========== ==================
TOTAL RETURN +....................................... 9.64 % (20.93)% (36.10)% 4.70 % (1)
RATIOS TO AVERAGE NET NET ASSETS (3):
Expenses............................................. 1.34 % 1.12 % 1.15 % 1.21 % (2)
Net investment loss.................................. (0.11)% (0.24)% (0.35)% (0.21)% (2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.............. $3,538 $3,116 $2,034 $314
Portfolio turnover rate ............................. 149 % 112 % 78 % 17 % (1)
- -------------------------------
* 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.
SEE NOTES TO FINANCIAL STATEMENTS
MORGAN STANLEY TAX-MANAGED GROWTH FUND
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Trustees of
Morgan Stanley Tax-Managed Growth Fund:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Tax-Managed Growth Fund (the "Fund"), including the portfolio of
investments, as of August 31, 2003, and the related statements of operations for
the year then ended and changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 2003, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Morgan
Stanley Tax-Managed Growth Fund as of August 31, 2003, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented, in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
October 21, 2003
MORGAN STANLEY TAX-MANAGED GROWTH FUND
TRUSTEE AND OFFICER INFORMATION
Independent Trustees:
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND ADDRESS OF HELD WITH TIME
INDEPENDENT TRUSTEE REGISTRANT SERVED*
- -------------------------------------- ------------- --------------
Michael Bozic (62) Trustee Since
c/o Mayer, Brown, Rowe & Maw LLP April 1994
Counsel to the Independent Directors
1675 Broadway
New York, NY
Edwin J. Garn (70) Trustee Since
c/o Summit Ventures LLC January 1993
1 Utah Center
201 S. Main Street
Salt Lake City, UT
Wayne E. Hedien (69) Trustee Since
c/o Mayer, Brown, Rowe & Maw LLP September
Counsel to the Independent Directors 1997
1675 Broadway
New York, NY
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
OVERSEEN
NAME, AGE AND ADDRESS OF PRINCIPAL OCCUPATION(S) BY
INDEPENDENT TRUSTEE DURING PAST 5 YEARS** TRUSTEE*** OTHER DIRECTORSHIPS HELD BY TRUSTEE
- -------------------------------------- ----------------------------------------- ------------ ------------------------------------
Michael Bozic (62) Retired; Director or Trustee of the 216 Director of Weirton Steel
c/o Mayer, Brown, Rowe & Maw LLP Retail Funds and TCW/DW Term Trust Corporation.
Counsel to the Independent Directors 2003 (since April 1994) and the
1675 Broadway Institutional Funds (since July 2003);
New York, NY formerly Vice Chairman of Kmart
Corporation (December 1998-October
2000), Chairman and Chief Executive
Officer of Levitz Furniture Corporation
(November 1995-November 1998)
and President and Chief Executive
Officer of Hills Department Stores
(May 1991-July 1995); formerly
variously Chairman, Chief Executive
Officer, President and Chief Operating
Officer (1987-1991) of the Sears
Merchandise Group of Sears, Roebuck
& Co.
Edwin J. Garn (70) Director or Trustee of the Retail Funds 216 Director of Franklin Covey (time
c/o Summit Ventures LLC and TCW/DW Term Trust 2003 (since management systems), BMW Bank
1 Utah Center January 1993) and the Institutional of North America, Inc. (industrial
201 S. Main Street Funds (since July 2003); member of loan corporation), United Space
Salt Lake City, UT the Utah Regional Advisory Board of Alliance (joint venture between
Pacific Corp.; formerly United States Lockheed Martin and the Boeing
Senator (R-Utah) (1974-1992) and Company) and Nuskin Asia Pacific
Chairman, Senate Banking Committee (multilevel marketing); member of
(1980-1986), Mayor of Salt Lake City, the board of various civic and
Utah (1971-1974), Astronaut, Space charitable organizations.
Shuttle Discovery (April 12-19, 1985),
and Vice Chairman, Huntsman
Corporation (chemical company).
Wayne E. Hedien (69) Retired; Director or Trustee of the 216 Director of The PMI Group Inc.
c/o Mayer, Brown, Rowe & Maw LLP Retail Funds and TCW/DW Term Trust (private mortgage insurance);
Counsel to the Independent Directors 2003; (Since September 1997) and Trustee and Vice Chairman of The
1675 Broadway the Institutional Funds (since July Field Museum of Natural History;
New York, NY 2003); formerly associated with the director of various other business
Allstate Companies (1966-1994), and charitable organizations.
most recently as Chairman of The
Allstate Corporation (March
1993-December 1994) and Chairman
and Chief Executive Officer of its
wholly-owned subsidiary, Allstate
Insurance Company (July
1989-December 1994).
1
MORGAN STANLEY TAX-MANAGED GROWTH FUND
TRUSTEE AND OFFICER INFORMATION CONTINUED
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND ADDRESS OF HELD WITH TIME
INDEPENDENT TRUSTEE REGISTRANT SERVED*
- --------------------------------------- ------------- ------------
Dr. Manuel H. Johnson (54) Trustee Since
c/o Johnson Smick International, Inc. July 1991
2099 Pennsylvania
Avenue, N.W.
Suite 950
Washington, D.C.
Joseph J. Kearns (61) Trustee Since
PMB754 July 2003
23852 Pacific Coast Highway
Malibu, CA
Michael E. Nugent (67) Trustee Since
c/o Triumph Capital, L.P. July 1991
445 Park Avenue
New York, NY
Fergus Reid (71) Trustee Since
85 Charles Colman Blvd. July 2003
Pawling, NY
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
OVERSEEN
NAME, AGE AND ADDRESS OF PRINCIPAL OCCUPATION(S) BY
INDEPENDENT TRUSTEE DURING PAST 5 YEARS** TRUSTEE***
- --------------------------------------- ----------------------------------------- ------------
Dr. Manuel H. Johnson (54) Chairman of the Audit Committee and 216
c/o Johnson Smick International, Inc. Director or Trustee of the Retail Funds
2099 Pennsylvania and TCW/DW Term Trust 2003 (since
Avenue, N.W. July 1991) and the Institutional Funds
Suite 950 (since July 2003); Senior Partner,
Washington, D.C. Johnson Smick International, Inc., a
consulting firm; Co-Chairman and a
founder of the Group of Seven Council
(G7C), an international economic
commission; formerly Vice Chairman
of the Board of Governors of the
Federal Reserve System and Assistant
Secretary of the U.S. Treasury.
Joseph J. Kearns (61) Deputy Chairman of the Audit 217
PMB754 Committee and Director or Trustee of
23852 Pacific Coast Highway the Retail Funds and TCW/DW Term
Malibu, CA Trust 2003 (since July 2003) and the
Institutional Funds (since August
1994); previously Chairman of the
Audit Committee of the Institutional
Funds (October 2001-July 2003);
President, Kearns & Associates LLC
(investment consulting); formerly CFO
of the J. Paul Getty Trust.
Michael E. Nugent (67) Chairman of the Insurance Committee 216
c/o Triumph Capital, L.P. and Director or Trustee of the Retail
445 Park Avenue Funds and TCW/DW Term Trust 2003
New York, NY (since July 1991) and the Institutional
Funds (since July 2001); General
Partner of Triumph Capital, L.P., a
private investment partnership;
formerly Vice President, Bankers Trust
Company and BT Capital Corporation
( 1984-1988).
Fergus Reid (71) Chairman of the Governance 217
85 Charles Colman Blvd. Committee and Director or Trustee of
Pawling, NY the Retail Funds and TCW/DW Term
Trust 2003 (since July 2003) and the
Institutional Funds (since June 1992);
Chairman of Lumelite Plastics
Corporation.
NAME, AGE AND ADDRESS OF
INDEPENDENT TRUSTEE OTHER DIRECTORSHIPS HELD BY TRUSTEE
- --------------------------------------- --------------------------------------
Dr. Manuel H. Johnson (54) Director of NVR, Inc. (home
c/o Johnson Smick International, Inc. construction); Chairman and Trustee
2099 Pennsylvania of the Financial Accounting
Avenue, N.W. Foundation (oversight organization
Suite 950 of the Financial Accounting
Washington, D.C. Standards Board); Director of RBS
Greenwich Capital Holdings (financial
holding company).
Joseph J. Kearns (61) Director of Electro Rent Corporation
PMB754 (equipment leasing), The Ford Family
23852 Pacific Coast Highway Foundation, and the UCLA
Malibu, CA Foundation.
Michael E. Nugent (67) Director of various business
c/o Triumph Capital, L.P. organizations.
445 Park Avenue
New York, NY
Fergus Reid (71) Trustee and Director of certain
85 Charles Colman Blvd. investment companies in the
Pawling, NY JPMorgan Funds complex managed
by JP Morgan Investment
Management Inc.
2
MORGAN STANLEY TAX-MANAGED GROWTH FUND
TRUSTEE AND OFFICER INFORMATION CONTINUED
Interested Trustees:
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND ADDRESS OF HELD WITH TIME
INDEPENDENT TRUSTEE REGISTRANT SERVED*
- ------------------------------ ------------- ------------
Charles A. Fiumefreddo (70) Chairman of Since
c/o Morgan Stanley Trust the Board July 1991
Harborside Financial Center, and Trustee
Plaza Two,
Jersey City, NJ
James F. Higgins (55) Trustee Since
c/o Morgan Stanley Trust June 2000
Harborside Financial Center,
Plaza Two,
Jersey City, NJ
Philip J. Purcell (60) Trustee Since
1585 Broadway April 1994
New York, NY
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
OVERSEEN
NAME, AGE AND ADDRESS OF PRINCIPAL OCCUPATION(S) BY
INDEPENDENT TRUSTEE DURING PAST 5 YEARS** TRUSTEE*** OTHER DIRECTORSHIPS HELD BY TRUSTEE
- ------------------------------ ----------------------------------------- ------------ ------------------------------------
Charles A. Fiumefreddo (70) Chairman and Director or Trustee of 216 None
c/o Morgan Stanley Trust the Retail Funds and TCW/DW Term
Harborside Financial Center, Trust 2003 (since July 1991) and the
Plaza Two, Institutional Funds (since July 2003);
Jersey City, NJ formerly Chief Executive Officer of the
Retail Funds and the TCW/DW Term
Trust 2003 (until September 2002).
James F. Higgins (55) Director or Trustee of the Retail Funds 216 Director of AXA Financial, Inc. and
c/o Morgan Stanley Trust and TCW/DW Term Trust 2003 (since The Equitable Life Assurance
Harborside Financial Center, June 2000) and the Institutional Funds Society of the United States
Plaza Two, (since July 2003); Senior Advisor of (financial services).
Jersey City, NJ Morgan Stanley (since August 2000);
Director of the Distributor and Dean
Witter Realty Inc.; previously President
and Chief Operating Officer of the
Private Client Group of Morgan Stanley
(May 1999-August 2000), and
President and Chief Operating Officer
of Individual Securities of Morgan
Stanley (February 1997-May 1999).
Philip J. Purcell (60) Director or Trustee of the Retail Funds 216 Director of American Airlines, Inc.
1585 Broadway and TCW/DW Term Trust 2003 (since and its parent company, AMR
New York, NY April 1994) and the Institutional Funds Corporation.
(since July 2003); Chairman of the
Board of Directors and Chief Executive
Officer of Morgan Stanley and Morgan
Stanley DW Inc.; Director of the
Distributor; Chairman of the Board of
Directors and Chief Executive Officer of
Novus Credit Services Inc.; Director
and/or officer of various Morgan
Stanley subsidiaries.
- ------------
* This is the earliest date the Trustee began serving the funds
advised by Morgan Stanley Investment Advisors Inc. (the
"Investment Manager") (the "Retail Funds").
** The dates referenced below indicating commencement of services as
Director/Trustee for the Retail Funds and the funds advised by
Morgan Stanley Investment Management Inc., Morgan Stanley
Investments LP and Morgan Stanley AIP GP LP (the "Institutional
Funds") reflect the earliest date the Director/Trustee began
serving the Retail or Institutional Funds as applicable.
*** The Fund Complex includes all open-end and closed-end funds
(including all of their portfolios) advised by the Investment
Manager and any funds that have an investment advisor that is an
affiliated person of the Investment Manager (including but not
limited to Morgan Stanley Investment Management Inc. and Morgan
Stanley Investments LP).
3
MORGAN STANLEY TAX-MANAGED GROWTH FUND
TRUSTEE AND OFFICER INFORMATION CONTINUED
Officers:
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND ADDRESS OF HELD WITH TIME
EXECUTIVE OFFICER REGISTRANT SERVED*
- ----------------------------- ------------------- ------------------
Mitchell M. Merin (50) President Since May 1999
1221 Avenue of the Americas
New York, NY
Ronald E. Robison (64) Executive Vice Since April 2003
1221 Avenue of the Americas President and
New York, NY Principal
Executive Officer
Barry Fink (48) Vice President Since
1221 Avenue of the Americas and General February 1997
New York, NY Counsel
Joseph J. McAlinden (60) Vice President Since July 1995
1221 Avenue of the Americas
New York, NY
Stefanie V. Chang (36) Vice President Since July 2003
1221 Avenue of the Americas
New York, NY
NAME, AGE AND ADDRESS OF
EXECUTIVE OFFICER PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS**
- ----------------------------- -----------------------------------------------------------------------------------------
Mitchell M. Merin (50) President and Chief Operating Officer of Morgan Stanley Investment Management Inc.;
1221 Avenue of the Americas President, Director and Chief Executive Officer of the Investment Manager and Morgan
New York, NY Stanley Services; Chairman, Chief Executive Officer and Director of the Distributor;
Chairman and Director of the Transfer Agent; Director of various Morgan Stanley
subsidiaries; President Morgan Stanley Investments LP (since February 2003);
President of the Institutional Funds (since July 2003) and President of the Retail Funds
and TCW/DW Term Trust 2003 (since May 1999); Trustee (since July 2003) and
President (since December 2002) of the Van Kampen Closed-End Funds; Trustee (since
May 1999) and President (since October 2002) of the Van Kampen Open-End Funds.
Ronald E. Robison (64) Chief Global Operations Officer and Managing Director of Morgan Stanley Investment
1221 Avenue of the Americas Management Inc.; Managing Director of Morgan Stanley & Co. Incorporated; Managing
New York, NY Director of Morgan Stanley; Managing Director, Chief Administrative Officer and Director
of the Investment Manager and Morgan Stanley Services; Chief Executive Officer and
Director of the Transfer Agent; Executive Vice President and Principal Executive Officer
of the Institutional Funds (since July 2003); and the TCW/DW Term Trust 2003 (since
April 2003); previously President of the Institutional Funds (March 2001-July 2003) and
Director of the Institutional Funds (March 2001-July 2003).
Barry Fink (48) General Counsel (since May 2000) and Managing Director (since December 2000) of
1221 Avenue of the Americas Morgan Stanley Investment Management; Managing Director (since December 2000),
New York, NY Secretary (since February 1997) and Director (since July 1998) of the Investment
Manager and Morgan Stanley Services; Assistant Secretary of Morgan Stanley DW;
Chief Legal Officer of Morgan Stanley Investments LP (since July 2002); Vice President
of the Institutional Funds (since July 2003); Vice President and Secretary of the
Distributor; previously Secretary of the Retail Funds (February 1997-July 2003);
previously Vice President and Assistant General Counsel of the Investment Manager and
Morgan Stanley Services (February 1997-December 2001).
Joseph J. McAlinden (60) Managing Director and Chief Investment Officer of the Investment Manager, Morgan
1221 Avenue of the Americas Stanley Investment Management Inc. and Morgan Stanley Investments LP; Director of
New York, NY the Transfer Agent, Chief Investment Officer of the Van Kampen Funds; Vice President
of the Institutional Funds (since July 2003) and the Retail Funds (since July 1995).
Stefanie V. Chang (36) Executive Director of Morgan Stanley & Co. and Morgan Stanley Investment
1221 Avenue of the Americas Management Inc. and Vice President of the Institutional Funds (since December 1997)
New York, NY and the Retail Funds (since July 2003); formerly practiced law with the New York law
firm of Rogers & Wells (now Clifford Chance LLP).
4
MORGAN STANLEY TAX-MANAGED GROWTH FUND
TRUSTEE AND OFFICER INFORMATION CONTINUED
TERM OF
OFFICE AND
POSITION(S) LENGTH OF
NAME, AGE AND ADDRESS OF HELD WITH TIME
EXECUTIVE OFFICER REGISTRANT SERVED*
- ------------------------------ ----------------- -----------------
Francis Smith (38) Treasurer and Treasurer since
c/o Morgan Stanley Trust Chief Financial July 2003 and
Harborside Financial Center, Officer Chief Financial
Plaza Two, Officer since
Jersey City, NJ September
2002
Thomas F. Caloia (57) Vice President Since July 2003
c/o Morgan Stanley Trust
Harborside Financial Center,
Plaza Two,
Jersey City, NJ
Mary E. Mullin (36) Secretary Since July 2003
1221 Avenue of the Americas
New York, NY
NAME, AGE AND ADDRESS OF
EXECUTIVE OFFICER PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS**
- ------------------------------ -----------------------------------------------------------------------------------------
Francis Smith (38) Executive Director of the Investment Manager and Morgan Stanley Services (since
c/o Morgan Stanley Trust December 2001); previously Vice President of the Retail Funds (September 2002-July
Harborside Financial Center, 2003); previously Vice President of the Investment Manager and Morgan Stanley
Plaza Two, Services (August 2000-November 2001) and Senior Manager at PricewaterhouseCoopers LLP
Jersey City, NJ (January 1998-August 2000).
Thomas F. Caloia (57) Executive Director (since December 2002) and Assistant Treasurer of the Investment
c/o Morgan Stanley Trust Manager, the Distributor and Morgan Stanley Services; previously Treasurer of the Retail
Harborside Financial Center, Funds (April 1989-July 2003); formerly First Vice President of the Investment Manager,
Plaza Two, the Distributor and Morgan Stanley Services.
Jersey City, NJ
Mary E. Mullin (36) Vice President of Morgan Stanley & Co. Incorporated and Morgan Stanley Investment
1221 Avenue of the Americas Management Inc.; Secretary of the Institutional Funds (since June 1999) and the Retail
New York, NY Funds (since July 2003); formerly practiced law with the New York law firms of
McDermott, Will & Emery and Skadden, Arps, Slate, Meagher & Flom LLP.
- ------------
* This is the earliest date the Officer began serving the Retail
Funds. Each Officer serves an indefinite term, until his or her
successor is elected.
** The dates referenced below indicating commencement of service as
an Officer for the Retail and Institutional Funds reflect the
earliest date the Officer began serving the Retail or
Institutional Funds as applicable.
5
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 J. McAlinden
Vice President
Stefanie V. Chang
Vice President
Francis 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
SUB-ADVISOR
Morgan Stanley Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
This report is submitted for the general information of the shareholders
of the Fund. For more detailed information about the Fund, its fees and
expenses and other pertinent information, please read its Prospectus.
The Fund's Statement of Additional Information contains additional
information about the Fund, including its trustees. It is available, without
charge, by calling (800) 869-NEWS.
This report is not authorized for distribution to prospective investors in
the Fund unless proceded 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.
(copyright) 2003 Morgan Stanley
[MORGAN STANLEY LOGO OMITTED]
[MORGAN STANLEY FUNDS LOGO OMITTED]
MORGAN STANLEY
TAX-MANAGED GROWTH
FUND
Annual Report
August 31, 2003
[MORGAN STANLEY LOGO OMITTED]
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 Tax-Managed Growth Fund
Ronald E. Robison
Principal Executive Officer
October 20, 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
October 20, 2003
Francis Smith
Principal Financial Officer
October 20, 2003
3
EXHIBIT 10 A
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS
ADOPTED JULY 31, 2003
I. This Code of Ethics (the "Code") for the investment companies within the
Morgan Stanley complex identified in Exhibit A (collectively, "Funds" and
each, a "Fund") applies to each Fund's Principal Executive Officer,
President, Principal Financial Officer and Treasurer (or persons performing
similar functions) ("Covered Officers" each of whom are set forth in
Exhibit B) for the purpose of promoting:
o honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships.
o full, fair, accurate, timely and understandable disclosure in reports
and documents that a company files with, or submits to, the Securities
and Exchange Commission ("SEC") and in other public communications
made by the Fund;
o compliance with applicable laws and governmental rules and
regulations;
o prompt internal reporting of violations of the Code to an appropriate
person or persons identified in the Code; and
o accountability for adherence to the Code.
Each Covered Officer should adhere to a high standard of business ethics
and should be sensitive to situations that may give rise to actual as well as
apparent conflicts of interest. Any question about the application of the Code
should be referred to the General Counsel or his/her designee (who is set forth
in Exhibit C).
II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF
INTEREST
4
OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private
interest interferes, or appears to interfere, with the interests of, or his
service to, the Fund. For example, a conflict of interest would arise if a
Covered Officer, or a member of his family, receives improper personal benefits
as a result of his position with the Fund.
Certain conflicts of interest arise out of the relationships between
Covered Officers and the Fund and already are subject to conflict of interest
provisions in the Investment Company Act of 1940 ("Investment Company Act") and
the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example,
Covered Officers may not individually engage in certain transactions (such as
the purchase or sale of securities or other property) with the Fund because of
their status as "affiliated persons" (as defined in the Investment Company Act)
of the Fund. The Fund's and its investment adviser's compliance programs and
procedures are designed to prevent, or identify and correct, violations of these
provisions. This Code does not, and is not intended to, repeat or replace these
programs and procedures, and such conflicts fall outside the parameters of this
Code, unless or until the General Counsel determines that any violation of such
programs and procedures is also a violation of this Code.
Although typically not presenting an opportunity for improper personal
benefit, conflicts may arise from, or as a result of, the contractual
relationship between the Fund and its investment adviser of which the Covered
Officers are also officers or employees. As a result, this Code recognizes that
the Covered Officers will, in the normal course of their duties (whether
formally for the Fund or for the investment adviser, or for both), be involved
in establishing policies and implementing decisions that will have different
effects on the Fund and its investment adviser. The participation of the Covered
Officers in such activities is inherent in the contractual relationship between
the Fund and the investment adviser and is consistent with the performance by
the Covered Officers of their duties as officers of the Fund. Thus, if performed
in conformity with the provisions of the Investment Company Act and the
Investment Advisers Act, such activities will be deemed to have been handled
ethically. In addition, it is recognized by the Funds' Boards of
Directors/Trustees ("Boards") that the Covered Officers may also be officers or
employees of one or more other investment companies covered by this or other
codes.
Other conflicts of interest are covered by the Code, even if such conflicts
of interest are not subject to provisions in the Investment Company Act and the
Investment Advisers Act. The following list provides examples of conflicts of
interest under the Code, but Covered Officers should keep in mind that these
examples are not exhaustive. The overarching principle is that the personal
interest of a Covered Officer should not be placed improperly before the
interest of the Fund.
Each Covered Officer must not:
o use his personal influence or personal relationships improperly to
influence investment decisions or financial reporting by the Fund
whereby the Covered Officer would benefit personally (directly or
indirectly) to the detriment of the Fund;
5
o cause the Fund to take action, or fail to take action, for the
individual personal benefit of the Covered Officer rather than the
benefit of the Fund; or
o use material non-public knowledge of portfolio transactions made or
contemplated for, or actions proposed to be taken by, the Fund to
trade personally or cause others to trade personally in contemplation
of the market effect of such transactions.
Each Covered Officer must, at the time of signing this Code, report to the
General Counsel all affiliations or significant business relationships outside
the Morgan Stanley complex and must update the report annually.
Conflict of interest situations should always be approved by the General
Counsel and communicated to the relevant Fund or Fund's Board. Any activity or
relationship that would present such a conflict for a Covered Officer would
likely also present a conflict for the Covered Officer if an immediate member of
the Covered Officer's family living in the same household engages in such an
activity or has such a relationship. Examples of these include:
o service or significant business relationships as a director on the
board of any public or private company;
o accepting directly or indirectly, anything of value, including gifts
and gratuities in excess of $100 per year from any person or entity
with which the Fund has current or prospective business dealings, not
including occasional meals or tickets for theatre or sporting events
or other similar entertainment; provided it is business-related,
reasonable in cost, appropriate as to time and place, and not so
frequent as to raise any question of impropriety;
o any ownership interest in, or any consulting or employment
relationship with, any of the Fund's service providers, other than its
investment adviser, principal underwriter, or any affiliated person
thereof; and
o a direct or indirect financial interest in commissions, transaction
charges or spreads paid by the Fund for effecting portfolio
transactions or for selling or redeeming shares other than an interest
arising from the Covered Officer's employment, such as compensation or
equity ownership.
III. DISCLOSURE AND COMPLIANCE
o Each Covered Officer should familiarize himself/herself with the
disclosure and compliance requirements generally applicable to the
Funds;
o each Covered Officer must not knowingly misrepresent, or cause others
to misrepresent, facts about the Fund to others, whether within or
outside the
6
Fund, including to the Fund's Directors/Trustees and auditors, or to
governmental regulators and self-regulatory organizations;
o each Covered Officer should, to the extent appropriate within his area
of responsibility, consult with other officers and employees of the
Funds and their investment advisers with the goal of promoting full,
fair, accurate, timely and understandable disclosure in the reports
and documents the Funds file with, or submit to, the SEC and in other
public communications made by the Funds; and
o it is the responsibility of each Covered Officer to promote compliance
with the standards and restrictions imposed by applicable laws, rules
and regulations.
IV. REPORTING AND ACCOUNTABILITY
Each Covered Officer must:
o upon adoption of the Code (thereafter as applicable, upon becoming a
Covered Officer), affirm in writing to the Boards that he has
received, read and understands the Code;
o annually thereafter affirm to the Boards that he has complied with the
requirements of the Code;
o not retaliate against any other Covered Officer, other officer or any
employee of the Funds or their affiliated persons for reports of
potential violations that are made in good faith; and
o notify the General Counsel promptly if he/she knows or suspects of any
violation of this Code. Failure to do so is itself a violation of this
Code.
The General Counsel is responsible for applying this Code to specific
situations in which questions are presented under it and has the authority to
interpret this Code in any particular situation. However, any waivers(1) sought
by a Covered Officer must be considered by the Board of the relevant Fund or
Funds.
The Funds will follow these procedures in investigating and enforcing this
Code:
o the General Counsel will take all appropriate action to investigate
any potential violations reported to him;
- --------
(1) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of
a material departure from a provision of the code of ethics."
7
o if, after such investigation, the General Counsel believes that no
violation has occurred, the General Counsel is not required to take
any further action;
o any matter that the General Counsel believes is a violation will be
reported to the relevant Fund's Audit Committee;
o if the directors/trustees/managing general partners who are not
"interested persons" as defined by the Investment Company Act (the
"Independent Directors/Trustees/Managing General Partners") of the
relevant Fund concur that a violation has occurred, they will consider
appropriate action, which may include review of, and appropriate
modifications to, applicable policies and procedures; notification to
appropriate personnel of the investment adviser or its board; or a
recommendation to dismiss the Covered Officer or other appropriate
disciplinary actions;
o the Independent Directors/Trustees/Managing General Partners of the
relevant Fund will be responsible for granting waivers of this Code,
as appropriate; and
o any changes to or waivers of this Code will, to the extent required,
be disclosed as provided by SEC rules.
V. OTHER POLICIES AND PROCEDURES
This Code shall be the sole code of ethics adopted by the Funds for
purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and
forms applicable to registered investment companies thereunder. Insofar as other
policies or procedures of the Funds, the Funds' investment advisers, principal
underwriters, or other service providers govern or purport to govern the
behavior or activities of the Covered Officers who are subject to this Code,
they are superseded by this Code to the extent that they overlap or conflict
with the provisions of this Code unless any provision of this Code conflicts
with any applicable federal or state law, in which case the requirements of such
law will govern. The Funds' and their investment advisers' and principal
underwriters' codes of ethics under Rule 17j-1 under the Investment Company Act
and Morgan Stanley's Code of Ethics are separate requirements applying to the
Covered Officers and others, and are not part of this Code.
VI. AMENDMENTS
Any amendments to this Code, other than amendments to Exhibits A, B or C,
must be approved or ratified by a majority vote of the Board of each Fund,
including a majority of Independent Directors/Trustees/Managing General
Partners.
VII. CONFIDENTIALITY
8
All reports and records prepared or maintained pursuant to this Code will
be considered confidential and shall be maintained and protected accordingly.
Except as otherwise required by law or this Code, such matters shall not be
disclosed to anyone other than the Independent Directors/Trustees/Managing
General Partners of the relevant Fund or Funds and their counsel, the relevant
Fund or Funds and their counsel and the relevant investment adviser and its
counsel.
9
VIII. INTERNAL USE
The Code is intended solely for the internal use by the Funds and does not
constitute an admission, by or on behalf of any Fund, as to any fact,
circumstance, or legal conclusion
I have read and understand the terms of the above Code. I recognize the
responsibilities and obligations incurred by me as a result of my being subject
to the Code. I hereby agree to abide by the above Code.
- -------------------------
Date:
--------------------
10
EXHIBIT B
INSTITUTIONAL FUNDS
COVERED OFFICERS
Mitchell M. Merin - President
Ronald E. Robison - Executive Vice President and Principal Executive Officer
James W. Garrett - Chief Financial Officer and Treasurer
RETAIL FUNDS
COVERED OFFICERS
Mitchell M. Merin - President
Ronald E. Robison - Executive Vice President and Principal Executive Officer
Frank Smith - Chief Financial Officer and Treasurer
11
EXHIBIT C
GENERAL COUNSEL
Barry Fink
12
EXHIBIT 10 B1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
CERTIFICATIONS
I, Ronald E. Robison, certify that:
1. I have reviewed this report on Form N-CSR of Morgan Stanley
Tax-Managed Growth Fund;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations, changes in net assets, and cash flows (if the
financial statements are required to include a statement of cash
flows) of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment
Company Act of 1940) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this report (the "Evaluation Date"); and
c) presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
13
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize, and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated
in this report whether or not there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Date: October 20, 2003
Ronald E. Robison
Principal Executive Officer
14
EXHIBIT 10 B2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
CERTIFICATIONS
I, Francis Smith, certify that:
1. I have reviewed this report on Form N-CSR of Morgan Stanley
Tax-Managed Growth Fund;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations, changes in net assets, and cash flows (if the
financial statements are required to include a statement of cash
flows) of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment
Company Act of 1940) for the registrant and have:
(i) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
report is being prepared;
(ii) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this report (the "Evaluation Date"); and
(iii) presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
15
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize, and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated
in this report whether or not there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Date: October 20, 2003
Francis Smith
Principal Financial Officer
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SECTION 906 CERTIFICATION
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Morgan Stanley Tax-Managed Growth Fund
In connection with the Report on Form N-CSR (the "Report") of the
above-named issuer for the period ended August 31, 2003 that is accompanied by
this certification, the undersigned hereby certifies that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Issuer.
Date: October 20, 2003 Ronald E. Robison
Principal Executive Officer
A signed original of this written statement required by Section 906 has been
provided to Morgan Stanley Tax-Managed Growth Fund and will be retained by
Morgan Stanley Tax-Managed Growth Fund and furnished to the Securities and
Exchange Commission or its staff upon request.
17
SECTION 906 CERTIFICATION
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Morgan Stanley Tax-Managed Growth Fund
In connection with the Report on Form N-CSR (the "Report") of the
above-named issuer for the period ended August 31, 2003 that is accompanied by
this certification, the undersigned hereby certifies that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Issuer.
Date: October 20, 2003 Francis Smith
Principal Financial Officer
A signed original of this written statement required by Section 906 has been
provided to Morgan Stanley Tax-Managed Growth Fund and will be retained by
Morgan Stanley Tax-Managed Growth Fund and furnished to the Securities and
Exchange Commission or its staff upon request.
18