-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AUhSBIw5r70iIBxiNVmWYaXp6EYF31b/OZJRYk7Tc8fpf3B8UnQaseU4LkzqxAD+ MRRjFXkmPo0zhxSXXgTibQ== 0000950123-04-005486.txt : 20040430 0000950123-04-005486.hdr.sgml : 20040430 20040430135026 ACCESSION NUMBER: 0000950123-04-005486 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040229 FILED AS OF DATE: 20040430 EFFECTIVENESS DATE: 20040430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY MID CAP VALUE FUND CENTRAL INDEX KEY: 0001137876 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-10359 FILM NUMBER: 04768859 BUSINESS ADDRESS: STREET 1: C/O MORGAN STANLEY TRUST STREET 2: HARBORSIDE FINANCIAL CENTER, PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 MAIL ADDRESS: STREET 1: C/O MORGAN STANLEY TRUST STREET 2: HARBOSIDE FINANCIAL CENTER, PLAZA TWO CITY: JERSEY CITY STATE: NJ ZIP: 07311 N-CSRS 1 y95560nvcsrs.txt MORGAN STANLEY MID-CAP VALUE FUND UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-10359 Morgan Stanley Mid-Cap Value 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, 2004 Date of reporting period: February 29, 2004 Item 1 - Report to Shareholders Welcome, Shareholder: In this report, you'll learn about how your investment in Morgan Stanley Mid-Cap Value Fund performed during the semiannual period. We will provide an overview of the market conditions, and discuss some of the factors that affected performance during the reporting period. In addition, this report includes the Fund's financial statements and a list of Fund investments. This material must be preceded or accompanied by a prospectus for the fund being offered. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that the Fund will achieve its investment objective. The Fund is subject to market risk, which is the possibility that market values of securities owned by the Fund will decline and, therefore, the value of the Fund's shares may be less than what you paid for them. Accordingly, you can lose money investing in this Fund. MORGAN STANLEY MID-CAP VALUE FUND For the Six-Month Period Ended February 29, 2004 TOTAL RETURN FOR THE SIX MONTHS ENDED FEBRUARY 29, 2004
RUSSELL S&P LIPPER MIDCAP MID-CAP MID-CAP VALUE 400 CORE FUNDS CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2) INDEX(3) 14.54% 14.13% 14.13% 14.68% 20.24% 16.58% 16.35%
Past performance is no guarantee of future results and current performance may be lower than or higher than the figures shown. For more up-to-date information, including month-end performance figures, please visit morganstanley.com or speak with your Financial Advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. The 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. See Performance Summary for standardized performance information. MARKET CONDITIONS The U.S. equity market performed well in the six months ended February 29, 2004. The market's gains were supported by improvements in the underlying strength of the economy, with GDP growth topping 8 percent in the third quarter of 2003 and 4 percent in the fourth quarter. Corporate profits also showed improvement as companies cleaned up their balance sheets and trimmed costs. Returns were solid across all major sectors of the market, with financials leading the pack. These companies benefited strongly from improving economic expectations, low interest rates, increased merger-and-acquisition activity and strong capital markets. Energy stocks also rose as increasing demand from both emerging and developed economies ran up against limited capacity, driving energy prices and energy company profits higher. The strong economic signals also boosted the returns of cyclical sectors such as industrials and basic materials, which investors bid up in anticipation of further economy strength. Even telecommunications, which had lagged the rest of the market in recent years, began to show signs of life, especially the larger companies that appeared poised to benefit from number portability and improved balance sheets. The biggest laggard during the period was health care, where pharmaceuticals companies struggled with patent expirations and the regulatory environment. PERFORMANCE ANALYSIS Morgan Stanley Mid-Cap Value Fund underperformed its benchmark the Russell Midcap Value Index. The Fund also underperformed the S&P Mid-Cap 400 Index and the Lipper Mid-Cap Core Funds. The Fund's underperformance was driven by a combination of poor stock selection and -- as a result of our bottom-up process -- sector positioning. Several of the Fund's stocks that were detrimental to performance were in the health care and the industrial sectors. Stocks such as Tenet Healthcare, which is a health care service provider, disappointed investors as they reduced their profit expectations and extended the time frame for a company turnaround. Goodrich Corporation and Hubble Corporation, which are considered industrial companies, failed to exceed their growth targets as some of their peers did. The Fund entered the period with sizable weightings in financials, industrials and basic materials. This posture gave it significant exposure to some of the best-performing sectors of the market. Its holdings in financials did particularly well, with many regional bank stocks benefiting from their status as potential takeover targets. We took the opportunities presented by rising prices during the period to take profits on these positions in order to redeploy the assets into companies with more attractive valuations. The Fund had strong performance within the energy sector, including Valero Energy. This company's role as a marketer and refiner of oil allowed it to capitalize on high oil commodity prices, boosting its profit margins. The Fund also benefited from positions in Transocean and Global Santa Fe, both of which also gained strongly on high oil prices. Sprint PCS also produced strong results for the Fund, as the company gained from ongoing consolidation in the U.S. wireless market and its parent company's decision to fold the wireless stock back into the larger Sprint enterprise. 2
TOP 10 HOLDINGS Bausch & Lomb Inc. 3.5% Goodrich Corp. 3.3 Watson Pharmaceuticals Inc. 3.2 AON Corp. 3.1 Valero Energy Corp. 2.9 Sovereign Bancorp Inc. 2.9 International Flavors & Fragrances 2.8 Chubb Corp. 2.7 Edison International 2.6 The BISYS Group Inc. 2.5
TOP 5 INDUSTRIES Electric Utilities 7.3% Property/Casualty Insurers 5.8 Medical Specialties 5.7 Insurance Brokers/Services 5.1 Advertising/Marketing Services 5.0
Data as of February 29, 2004. Subject to change daily. All percentages are a percentage of net assets. Provided for informational purposes only and should not be deemed a recommendation to buy or sell the securities mentioned. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. INVESTMENT STRATEGY THE FUND WILL NORMALLY INVEST AT LEAST 80% OF ITS ASSETS IN COMMON STOCKS OF COMPANIES WITH A RECORD OF PAYING DIVIDENDS AND THE POTENTIAL FOR INCREASING DIVIDENDS. THE FUND'S "INVESTMENT MANAGER," MORGAN STANLEY INVESTMENT ADVISORS INC., INITIALLY EMPLOYS A QUANTITATIVE SCREENING PROCESS IN AN ATTEMPT TO IDENTIFY A NUMBER OF COMMON STOCKS WHICH ARE UNDERVALUED AND WHICH HAVE A RECORD OF PAYING DIVIDENDS. THE INVESTMENT MANAGER THEN APPLIES QUALITATIVE ANALYSIS TO DETERMINE WHICH STOCKS IT BELIEVES HAVE THE POTENTIAL TO INCREASE DIVIDENDS AND, FINALLY, TO DETERMINE WHETHER ANY OF THE STOCKS SHOULD BE ADDED TO OR SOLD FROM THE FUND'S PORTFOLIO. 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. THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT HTTP://WWW.SEC.GOV. 3 AVERAGE ANNUAL TOTAL RETURNS -- PERIOD ENDED FEBRUARY 29, 2004
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++) (since 10/29/01) (since 10/29/01) (since 10/29/01) (since 10/29/01) SYMBOL MDFAX MDFBX MDFCX MDFDX 1 YEAR 54.19%(4) 53.09%(4) 53.09%(4) 54.58%(4) 46.10(5) 48.09(5) 52.09(5) -- SINCE INCEPTION 6.54(4) 5.75(4) 5.74(4) 6.80(4) 4.11(5) 4.54(5) 5.74(5) --
Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance for Class A, Class B, Class C, and Class D shares will vary due to differences in sales charges and expenses. - -------------------------------------------------------------------------------- Notes on Performance (1) The Russell Midcap Value Index measures the performance of those Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The stocks are also members of the Russell 1000 Value Index. Indexes are unmanaged and their returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. (2) The Standard & Poor's Mid-Cap 400 Index (S&P 400) is a market-value weighted index, the performance of which is based on the performance of 400 domestic 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. (3) The Lipper Mid-Cap Core Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Mid-Cap Core 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. (4) Figure shown assumes reinvestment of all distributions and does not reflect the deduction of any sales charges. (5) Figure shown assumes reinvestment of all distributions and the deduction of the maximum applicable sales charge. See the Fund's current prospectus for complete details on fees and sales charges. * The maximum front-end sales charge for Class A is 5.25%. ** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The CDSC declines to 0% after six years. + The maximum contingent deferred sales charge for Class C is 1% for shares redeemed within one year of purchase. ++ Class D has no sales charge. 4 Morgan Stanley Mid-Cap Value Fund PORTFOLIO OF INVESTMENTS - FEBRUARY 29, 2004 (UNAUDITED)
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------------------------------- Common Stocks (95.8%) Advertising/Marketing Services (5.0%) 495,550 Interpublic Group of Companies, Inc. (The)*................................. $ 8,399,572 278,690 Valassis Communications, Inc.*.............................................. 8,486,110 ------------ 16,885,682 ------------ Aerospace & Defense (3.3%) 373,016 Goodrich Corp. ............................................................. 11,000,242 ------------ Chemicals: Major Diversified (1.4%) 398,950 Hercules Inc.*.............................................................. 4,747,505 ------------ Chemicals: Specialty (2.2%) 416,120 Lyondell Chemical Co. ...................................................... 7,411,097 ------------ Containers/Packaging (2.0%) 104,020 Temple-Inland, Inc. ........................................................ 6,776,903 ------------ Contract Drilling (4.0%) 272,477 GlobalSantaFe Corp. ........................................................ 8,038,072 186,880 Transocean Inc.*............................................................ 5,509,222 ------------ 13,547,294 ------------ Data Processing Services (4.8%) 485,536 BISYS Group, Inc. (The)*.................................................... 8,569,710 463,500 Convergys Corp.*............................................................ 7,536,510 ------------ 16,106,220 ------------ Electric Utilities (7.3%) 378,346 Edison International........................................................ 8,736,009 201,800 Pinnacle West Capital Corp. ................................................ 7,888,362 249,450 Wisconsin Energy Corp. ..................................................... 8,062,224 ------------ 24,686,595 ------------ Electrical Products (2.4%) 207,010 Hubbell, Inc. (Class B)..................................................... 8,218,297 ------------ Electronic Production Equipment (1.8%) 386,490 Cadence Design Systems, Inc.*............................................... 5,963,541 ------------
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------------------------------- Finance/Rental/ Leasing (0.1%) 15,380 Nelnet, Inc. (Class A)*..................................................... $ 362,199 ------------ Financial Conglomerates (2.2%) 343,100 Conseco Inc.*............................................................... 7,531,045 ------------ Financial Publishing/ Services (2.1%) 272,380 Equifax, Inc. .............................................................. 7,139,080 ------------ Food: Meat/Fish/Dairy (2.0%) 238,760 Hormel Foods Corp. ......................................................... 6,618,427 ------------ Hospital/Nursing Management (0.7%) 191,420 Tenet Healthcare Corp.*..................................................... 2,300,868 ------------ Hotels/Resorts/ Cruiselines (1.0%) 89,380 Starwood Hotels & Resorts Worldwide, Inc. .................................. 3,486,714 ------------ Household/Personal Care (2.8%) 256,370 International Flavors & Fragrances, Inc. ................................... 9,380,578 ------------ Information Technology Services (1.7%) 541,316 BearingPoint, Inc.*......................................................... 5,765,015 ------------ Insurance Brokers/ Services (5.1%) 393,310 AON Corp. .................................................................. 10,316,521 199,020 Gallagher (Arthur J.) & Co. ................................................ 6,697,023 ------------ 17,013,544 ------------ Investment Banks/ Brokers (1.2%) 109,980 Edwards (A.G.), Inc. ....................................................... 4,206,735 ------------ Life/Health Insurance (1.9%) 428,320 UnumProvident Corp. ........................................................ 6,347,702 ------------
5 See Notes to Financial Statements Morgan Stanley Mid-Cap Value Fund PORTFOLIO OF INVESTMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------------------------------- Medical Specialties (5.7%) 311,930 Applera Corp. -- Applied Biosystems Group................................... $ 7,112,004 201,120 Bausch & Lomb, Inc. ........................................................ 11,944,517 ------------ 19,056,521 ------------ Miscellaneous Commercial Services (2.2%) 330,450 Sabre Holdings Corp. ....................................................... 7,497,911 ------------ Multi-Line Insurance (0.7%) 154,900 Horace Mann Educators Corp. ................................................ 2,345,186 ------------ Oil Refining/Marketing (2.9%) 162,109 Valero Energy Corp. ........................................................ 9,726,570 ------------ Personnel Services (2.0%) 150,749 Manpower, Inc. ............................................................. 6,746,018 ------------ Pharmaceuticals: Generic Drugs (3.2%) 236,130 Watson Pharmaceuticals, Inc.*............................................... 10,843,090 ------------ Property -- Casualty Insurers (5.8%) 181,380 ACE Ltd. (Bermuda).......................................................... 8,154,845 102,600 Bristol West Holdings Inc.*................................................. 2,228,472 129,050 Chubb Corp. (The)........................................................... 9,159,969 ------------ 19,543,286 ------------ Publishing: Books/ Magazines (2.1%) 224,010 Scholastic Corp.*........................................................... 7,179,521 ------------
NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------------------------------- Regional Banks (2.3%) 268,311 National Commerce Financial Corp. .......................................... $ 7,848,097 ------------ Restaurants (4.2%) 310,790 Darden Restaurants, Inc. ................................................... 7,583,276 163,440 Wendy's International, Inc. ................................................ 6,647,105 ------------ 14,230,381 ------------ Savings Banks (2.9%) 438,930 Sovereign Bancorp, Inc. .................................................... 9,722,300 ------------ Services to the Health Industry (2.2%) 302,830 IMS Health Inc. ............................................................ 7,504,127 ------------ Specialty Insurance (1.6%) 210,700 Assurant, Inc.*............................................................. 5,423,418 ------------ Specialty Stores (1.7%) 330,360 Office Depot, Inc.*......................................................... 5,758,175 ------------ Wireless Telecommunications (1.3%) 480,000 Sprint Corp. (PCS Group)*................................................... 4,320,000 ------------ Total Common Stocks (Cost $288,219,330).................................... 323,239,884 ------------
6 See Notes to Financial Statements Morgan Stanley Mid-Cap Value Fund PORTFOLIO OF INVESTMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued
PRINCIPAL AMOUNT IN THOUSANDS VALUE - ------------------------------------------------------------------------------------------------------- Short-Term Investment (4.3%) Repurchase Agreement $ 14,485 Joint repurchase agreement account 1.03% due 03/01/04 (dated 02/27/04; proceeds $14,486,243) (Cost $14,485,000) (a)............................... $ 14,485,000 ------------
Total Investments (Cost $302,704,330) (b).... 100.1% 337,724,884 Liabilities in Excess of Other Assets............... (0.1) (322,653) ------------ Net Assets.................. 100.0% $337,402,231 ============
- --------------------- * Non-income producing security. (a) Collateralized by federal agency and U.S. Treasury obligations. (b) The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $35,991,225 and the aggregate gross unrealized depreciation is $970,671, resulting in net unrealized appreciation of $35,020,554.
7 See Notes to Financial Statements Morgan Stanley Mid-Cap Value Fund FINANCIAL STATEMENTS Statement of Assets and Liabilities February 29, 2004 (unaudited) Assets: Investments in securities, at value (cost $302,704,330)........................................ $337,724,884 Receivable for: Shares of beneficial interest sold...................... 1,673,621 Investments sold........................................ 725,596 Dividends............................................... 323,144 Prepaid expenses and other assets........................... 33,968 ------------ Total Assets............................................ 340,481,213 ------------ Liabilities: Payable for: Investments purchased................................... 2,506,838 Investment management fee............................... 217,293 Shares of beneficial interest redeemed.................. 212,405 Distribution fee........................................ 63,418 Accrued expenses and other payables......................... 79,028 ------------ Total Liabilities....................................... 3,078,982 ------------ Net Assets.............................................. $337,402,231 ============ Composition of Net Assets: Paid-in-capital............................................. $276,791,105 Net unrealized appreciation................................. 35,020,554 Net investment loss......................................... (333,200) Accumulated undistributed net realized gain................. 25,923,772 ------------ Net Assets.............................................. $337,402,231 ============ Class A Shares: Net Assets.................................................. $3,805,496 Shares Outstanding (unlimited authorized, $.01 par value)... 328,611 Net Asset Value Per Share............................... $11.58 ============ Maximum Offering Price Per Share, (net asset value plus 5.54% of net asset value)......... $12.22 ============ Class B Shares: Net Assets.................................................. $68,761,808 Shares Outstanding (unlimited authorized, $.01 par value)... 6,036,933 Net Asset Value Per Share............................... $11.39 ============ Class C Shares: Net Assets.................................................. $8,784,922 Shares Outstanding (unlimited authorized, $.01 par value)... 771,270 Net Asset Value Per Share............................... $11.39 ============ Class D Shares: Net Assets.................................................. $256,050,005 Shares Outstanding (unlimited authorized, $.01 par value)... 21,996,907 Net Asset Value Per Share............................... $11.64 ============
8 See Notes to Financial Statements Morgan Stanley Mid-Cap Value Fund FINANCIAL STATEMENTS continued Statement of Operations For the six months ended February 29, 2004 (unaudited) Net Investment Loss: Income Dividends................................................... $ 1,728,804 Interest.................................................... 47,944 ------------ Total Income............................................ 1,776,748 ------------ Expenses Investment management fee................................... 1,210,397 Transfer agent fees and expenses............................ 366,597 Distribution fee (Class A shares)........................... 4,025 Distribution fee (Class B shares)........................... 311,161 Distribution fee (Class C shares)........................... 39,609 Registration fees........................................... 68,884 Shareholder reports and notices............................. 55,447 Professional fees........................................... 30,561 Custodian fees.............................................. 18,902 Other....................................................... 4,365 ------------ Total Expenses.......................................... 2,109,948 ------------ Net Investment Loss..................................... (333,200) ------------ Net Realized and Unrealized Gain (Loss): Net realized gain........................................... 55,002,035 Net change in unrealized appreciation....................... (12,876,896) ------------ Net Gain................................................ 42,125,139 ------------ Net Increase................................................ $ 41,791,939 ============
9 See Notes to Financial Statements Morgan Stanley Mid-Cap Value Fund FINANCIAL STATEMENTS continued Statement of Changes in Net Assets
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 ----------------- --------------- (unaudited) Increase (Decrease) in Net Assets: Operations: Net investment loss......................................... $ (333,200) $ (873,726) Net realized gain (loss).................................... 55,002,035 (15,371,350) Net change in unrealized appreciation....................... (12,876,896) 70,528,599 ------------ ------------ Net Increase............................................ 41,791,939 54,283,523 Net increase from transactions in shares of beneficial interest.................................................. 19,342,166 63,479,985 ------------ ------------ Net Increase............................................ 61,134,105 117,763,508 Net Assets: Beginning of period......................................... 276,268,126 158,504,618 ------------ ------------ End of Period (Including a net investment loss of $333,200 and $0, respectively)............................................... $337,402,231 $276,268,126 ============ ============
10 See Notes to Financial Statements Morgan Stanley Mid-Cap Value Fund NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED) 1. Organization and Accounting Policies Morgan Stanley Mid-Cap Value Fund (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund's investment objective is above-average total return. The Fund seeks to achieve its objective by investing primarily in a diversified portfolio of common stocks and other equity securities of companies with market capitalizations in the range of companies included in the Russell Midcap Value Index (prior to September 30, 2003, the S&P Mid-Cap 400 Index). The Fund was organized as a Massachusetts business trust on April 12, 2001 and commenced operations on October 29, 2001. The Fund offers Class A shares, Class B shares, Class C shares and Class D shares. The four classes are substantially the same except that most Class A shares are subject to a sales charge imposed at the time of purchase and some Class A shares, and most Class B shares and Class C shares are subject to a contingent deferred sales charge imposed on shares redeemed within one year, six years and one year, respectively. Class D shares are not subject to a sales charge. Additionally, Class A shares, Class B shares and Class C shares incur distribution expenses. The following is a summary of significant accounting policies: A. Valuation of Investments -- (1) an equity portfolio security listed or traded on the New York Stock Exchange ("NYSE") or American Stock Exchange or other exchange is valued at its latest sale price prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (2) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) all other portfolio securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (4) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (5) when market quotations are not readily available or Morgan Stanley Investment Advisors Inc. (the "Investment Manager") determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If developments occur during such periods that are expected to materially affect the value of such 11 Morgan Stanley Mid-Cap Value Fund NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Fund's Trustees or by the Investment Manager using a pricing service and/or procedures approved by the Trustees of the Fund; (6) certain portfolio securities may be valued by an outside pricing service approved by the Fund's Trustees; (7) short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. Accounting for Investments -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Dividend income and other distributions are recorded on the ex-dividend date. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily. C. Repurchase Agreements -- Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated entities managed by the Investment Manager, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements and are collateralized by cash, U.S. Treasury or federal agency obligations. The Fund may also invest directly with institutions in repurchase agreements. The Fund's custodian receives the collateral, which is marked-to-market daily to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest. D. Multiple Class Allocations -- Investment income, expenses (other than distribution fees), and realized and unrealized gains and losses are allocated to each class of shares based upon the relative net asset value on the date such items are recognized. Distribution fees are charged directly to the respective class. E. Federal Income Tax Policy -- It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. F. Dividends and Distributions to Shareholders -- Dividends and distributions to shareholders are recorded on the ex-dividend date. G. Use of Estimates -- The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. 12 Morgan Stanley Mid-Cap Value Fund NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued 2. Investment Management Agreement Pursuant to an Investment Management Agreement, the Fund pays the Investment Manager a management fee, accrued daily and payable monthly, by applying the annual rate of 0.80% to the net assets of the Fund determined as of the close of each business day. 3. Plan of Distribution Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan provides that the Fund will pay the Distributor a fee which is accrued daily and paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the 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 $2,064,935 at February 29, 2004. In the case of Class A shares and Class C shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily net assets of Class A or Class C, respectively, will not be reimbursed by the Fund through payments in any subsequent year, except that expenses representing a gross sales credit to Morgan Stanley Financial Advisors or other selected broker-dealer representatives may be reimbursed in the subsequent calendar year. For the six months ended February 29, 2004, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.25% and 1.0%, respectively. The Distributor has informed the Fund that for the six months ended February 29, 2004, it received contingent deferred sales charges from certain redemptions of the Fund's Class B shares and Class C shares of $86,580 and $567, respectively and received $28,246 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. 13 Morgan Stanley Mid-Cap Value Fund NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued 4. Security Transactions and Transactions with Affiliates The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended February 29, 2004 aggregated $333,073,683 and $322,902,396, respectively. For the six months ended February 29, 2004, the Fund incurred brokerage commissions of $21,839 with Morgan Stanley & Co., Inc., an affiliate of the Investment Manager and Distributor, for portfolio transactions executed on behalf of the Fund. 5. Federal Income Tax Status The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital. At August 31, 2003, the Fund had a net capital loss carryover of approximately $15,087,079 of which $4,185 will expire on August 31, 2010 and $15,082,894 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. 6. Legal Matters The Investment Manager, certain affiliates of the Investment Manager, certain officers of such affiliates and certain investment companies advised by the Investment Manager or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. This consolidated action also names as defendants certain individual Trustees and Directors of the Morgan Stanley funds. The consolidated amended complaint generally alleges that defendants, including the Fund, violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Investment Manager and certain affiliates of the Investment Manager allegedly offered economic incentives to brokers and others to recommend the funds advised by the Investment Manager or its affiliates to investors rather than funds managed by other companies, and (ii) that the funds advised by the Investment Manager or its affiliates, 14 Morgan Stanley Mid-Cap Value Fund NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued including the Fund, allegedly paid excessive commissions to brokers in return for their efforts to recommend these funds to investors. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The defendants intend to move to dismiss the action and otherwise vigorously to defend it. While the Fund believes that it has meritorious defenses, the ultimate outcome of this matter is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of this matter. 7. Shares of Beneficial Interest Transactions in shares of beneficial interest were as follows:
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 ------------------------- ------------------------- (unaudited) SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ CLASS A SHARES Sold............................................. 107,539 $ 1,179,232 115,054 $ 961,173 Redeemed......................................... (92,681) (979,988) (173,866) (1,426,387) ---------- ------------ ---------- ------------ Net increase (decrease) - Class A................ 14,858 199,244 (58,812) (465,214) ---------- ------------ ---------- ------------ CLASS B SHARES Sold............................................. 1,202,760 12,715,299 1,366,029 11,463,631 Redeemed......................................... (857,721) (9,098,671) (2,293,090) (18,471,458) ---------- ------------ ---------- ------------ Net increase (decrease) - Class B................ 345,039 3,616,628 (927,061) (7,007,827) ---------- ------------ ---------- ------------ CLASS C SHARES Sold............................................. 125,947 1,332,169 227,668 1,891,523 Redeemed......................................... (79,727) (838,401) (282,157) (2,259,257) ---------- ------------ ---------- ------------ Net increase (decrease) - Class C................ 46,220 493,768 (54,489) (367,734) ---------- ------------ ---------- ------------ CLASS D SHARES Sold............................................. 3,593,296 38,770,822 13,696,927 111,374,767 Redeemed......................................... (2,187,387) (23,738,296) (4,701,478) (40,054,007) ---------- ------------ ---------- ------------ Net increase - Class D........................... 1,405,909 15,032,526 8,995,449 71,320,760 ---------- ------------ ---------- ------------ Net increase in Fund............................. 1,812,026 $ 19,342,166 7,955,087 $ 63,479,985 ========== ============ ========== ============
15 Morgan Stanley Mid-Cap Value Fund FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE PERIOD FOR THE SIX FOR THE YEAR OCTOBER 29, 2001* MONTHS ENDED ENDED THROUGH FEBRUARY 29, 2004 AUGUST 31, 2003 AUGUST 31, 2002 ----------------- --------------- ----------------- (unaudited) Class A Shares Selected Per Share Data: Net asset value, beginning of period....................... $10.11 $ 8.19 $ 10.00 ------ ------ ------- Income (loss) from investment operations: Net investment loss+++................................. (0.01) (0.03) (0.04) Net realized and unrealized gain (loss)................ 1.48 1.95 (1.76) ------ ------ ------- Total income (loss) from investment operations............. 1.47 1.92 (1.80) ------ ------ ------- Less dividends from net investment income.................. -- -- (0.01) ------ ------ ------- Net asset value, end of period............................. $11.58 $10.11 $ 8.19 ====== ====== ======= Total Return+.............................................. 14.54 %(1) 23.44 % (17.99)%(1) Ratios to Average Net Assets(3): Expenses................................................... 1.41 %(2) 1.47 % 1.45 %(2)(4) Net investment loss........................................ (0.24)%(2) (0.39)% (0.58)%(2)(4) Supplemental Data: Net assets, end of period, in thousands.................... $3,805 $3,173 $3,053 Portfolio turnover rate.................................... 110 %(1) 165 % 121 %(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. (4) If the Fund had borne all its expenses that were reimbursed or waived by the Investment Manager, the annualized expense and net investment loss ratios would have been 1.66% and (0.79)%, respectively.
16 See Notes to Financial Statements Morgan Stanley Mid-Cap Value Fund FINANCIAL HIGHLIGHTS continued
FOR THE PERIOD FOR THE SIX FOR THE YEAR OCTOBER 29, 2001* MONTHS ENDED ENDED THROUGH FEBRUARY 29, 2004 AUGUST 31, 2003 AUGUST 31, 2002 ----------------- --------------- ----------------- (unaudited) Class B Shares Selected Per Share Data: Net asset value, beginning of period....................... $ 9.98 $ 8.15 $10.00 ------ ------ ------ Income (loss) from investment operations: Net investment loss+++................................. (0.05) (0.09) (0.10) Net realized and unrealized gain (loss)................ 1.46 1.92 (1.75) ------ ------ ------ Total income (loss) from investment operations............. 1.41 1.83 (1.85) ------ ------ ------ Less dividends from net investment income.................. -- -- 0.00++ ------ ------ ------ Net asset value, end of period............................. $11.39 $ 9.98 $ 8.15 ====== ====== ====== Total Return+.............................................. 14.13 %(1) 22.45 % (18.47)%(1) Ratios to Average Net Assets(3): Expenses................................................... 2.16 %(2) 2.24 % 2.20 %(2)(4) Net investment loss........................................ (0.99)%(2) (1.16)% (1.33)%(2)(4) Supplemental Data: Net assets, end of period, in thousands.................... $68,762 $56,823 $53,948 Portfolio turnover rate.................................... 110 %(1) 165 % 121 %(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. ++ Less than $0.005 per share. (1) Not annualized. (2) Annualized. (3) Reflects overall Fund ratios for investment income and non-class specific expenses. (4) If the Fund had borne all its expenses that were reimbursed or waived by the Investment Manager, the annualized expense and net investment loss ratios would have been 2.41% and (1.54)%, respectively.
17 See Notes to Financial Statements Morgan Stanley Mid-Cap Value Fund FINANCIAL HIGHLIGHTS continued
FOR THE PERIOD FOR THE SIX FOR THE YEAR OCTOBER 29, 2001* MONTHS ENDED ENDED THROUGH FEBRUARY 29, 2004 AUGUST 31, 2003 AUGUST 31, 2002 ----------------- --------------- ----------------- (unaudited) Class C Shares Selected Per Share Data: Net asset value, beginning of period....................... $ 9.98 $ 8.15 $10.00 ------ ------ ------ Income (loss) from investment operations: Net investment loss+++................................. (0.05) (0.09) (0.10) Net realized and unrealized gain (loss)................ 1.46 1.92 (1.75) ------ ------ ------ Total income (loss) from investment operations............. 1.41 1.83 (1.85) ------ ------ ------ Less dividends from net investment income.................. -- -- 0.00++ ------ ------ ------ Net asset value, end of period............................. $11.39 $ 9.98 $ 8.15 ====== ====== ====== Total Return+.............................................. 14.13 %(1) 22.45 % (18.48)%(1) Ratios to Average Net Assets(3): Expenses................................................... 2.16 %(2) 2.24 % 2.20 %(2)(4) Net investment loss........................................ (0.99)%(2) (1.16)% (1.33)%(2)(4) Supplemental Data: Net assets, end of period, in thousands.................... $8,785 $7,238 $6,354 Portfolio turnover rate.................................... 110 %(1) 165 % 121 %(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. ++ Less than $0.005 per share. (1) Not annualized. (2) Annualized. (3) Reflects overall Fund ratios for investment income and non-class specific expenses. (4) If the Fund had borne all its expenses that were reimbursed or waived by the Investment Manager, the annualized expense and net investment loss ratios would have been 2.41% and (1.54)%, respectively.
18 See Notes to Financial Statements Morgan Stanley Mid-Cap Value Fund FINANCIAL HIGHLIGHTS continued
FOR THE PERIOD FOR THE SIX FOR THE YEAR OCTOBER 29, 2001* MONTHS ENDED ENDED THROUGH FEBRUARY 29, 2004 AUGUST 31, 2003 AUGUST 31, 2002 ----------------- --------------- ----------------- (unaudited) Class D Shares Selected Per Share Data: Net asset value, beginning of period....................... $10.15 $ 8.21 $10.00 ------ ------ ------ Income (loss) from investment operations: Net investment income (loss)+++........................ 0.00 (0.01) (0.04) Net realized and unrealized gain (loss)................ 1.49 1.95 (1.73) ------ ------ ------ Total income (loss) from investment operations............. 1.49 1.94 (1.77) ------ ------ ------ Less dividends from net investment income.................. -- -- (0.02) ------ ------ ------ Net asset value, end of period............................. $11.64 $10.15 $ 8.21 ====== ====== ====== Total Return+.............................................. 14.68%(1) 23.63 % (17.76)%(1) Ratios to Average Net Assets(3): Expenses................................................... 1.16%(2) 1.24 % 1.20 %(2)(4) Net investment income (loss)............................... 0.01%(2) (0.16)% (0.33)%(2)(4) Supplemental Data: Net assets, end of period, in thousands.................... $256,050 $209,035 $95,150 Portfolio turnover rate.................................... 110%(1) 165 % 121 %(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. (4) If the Fund had borne all its expenses that were reimbursed or waived by the Investment Manager, the annualized expense and net investment loss ratios would have been 1.41% and (0.54)%, respectively.
19 See Notes to Financial Statements TRUSTEES Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien James F. Higgins Dr. Manuel H. Johnson Joseph J. Kearns Michael E. Nugent 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 J. Smith Treasurer and Chief Financial Officer Thomas F. Caloia Vice President Mary E. Mullin Secretary TRANSFER AGENT Morgan Stanley Trust Harborside Financial Center, Plaza Two Jersey City, New Jersey 07311 INDEPENDENT AUDITORS Deloitte & Touche LLP Two World Financial Center New York, New York 10281 INVESTMENT MANAGER Morgan Stanley Investment Advisors Inc. 1221 Avenue of the Americas New York, New York 10020 The financial statements included herein have been taken from the records of the Fund without examination by the independent auditors and accordingly they do not express an opinion thereon. This report is submitted for the general information of shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its trustees. It is available, without charge, by calling (800) 869-NEWS. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing. Investments and services offered through Morgan Stanley DW Inc., member SIPC. Morgan Stanley Distributors Inc., member NASD. (c) 2004 Morgan Stanley [MORGAN STANLEY LOGO] MORGAN STANLEY FUNDS Morgan Stanley Mid-Cap Value Fund Semiannual Report February 29, 2004 [MORGAN STANLEY LOGO] 39917RPT-RA04-00017P-A02/04 Item 2. Code of Ethics. Not applicable for semiannual reports. Item 3. Audit Committee Financial Expert. Not applicable for semiannual reports. Item 4. Principal Accountant Fees and Services Not applicable for semiannual reports. Item 5. Audit Committee of Listed Registrants. Not applicable for semiannual reports. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable for semiannual reports. Item 8. [Reserved.] Item 9 - Controls and Procedures (a) The Fund's principal executive officer and principal financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Fund's internal controls or in other factors that could significantly affect the Fund's internal controls subsequent to the date of their evaluation. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10 Exhibits (a) Code of Ethics - Not applicable for semiannual reports. (b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Morgan Stanley Mid-Cap Value Fund /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer April 20, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer April 20, 2004 /s/ Francis Smith Francis Smith Principal Financial Officer April 20, 2004 3 EX-99.CERT 2 y95560exv99wcert.txt CERTIFICATIONS: PEO AND PFO 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 Mid-Cap Value 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-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; [b) Omitted.] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): 4 a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: April 20, 2004 /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer 5 EXHIBIT 10 B2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER CERTIFICATIONS I, Francis Smith, certify that: 6. I have reviewed this report on Form N-CSR of Morgan Stanley Mid-Cap Value Fund; 7. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 8. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 9. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: b) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; [b) Omitted.] e) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and f) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 10. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): c) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and 6 d) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: April 20, 2004 /s/ Francis Smith Francis Smith Principal Financial Officer 7 EX-99.906CERT 3 y95560exv99w906cert.txt 906 CERTIFICATIONS 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 Mid-Cap Value Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended February 29, 2004 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: April 20, 2004 /s/ Ronald E. Robison --------------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement required by Section 906 has been provided to Morgan Stanley Mid-Cap Value Fund and will be retained by Morgan Stanley Mid-Cap Value Fund and furnished to the Securities and Exchange Commission or its staff upon request. 8 SECTION 906 CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Morgan Stanley Mid-Cap Value Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended February 29, 2004 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: April 20, 2004 /s/ Francis Smith ---------------------- Francis Smith Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to Morgan Stanley Mid-Cap Value Fund and will be retained by Morgan Stanley Mid-Cap Value Fund and furnished to the Securities and Exchange Commission or its staff upon request. 9 -----END PRIVACY-ENHANCED MESSAGE-----