N-CSRS 1 y88397nvcsrs.txt MORGAN STANLEY NY TAX-FREE INCOME 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: 811-04222 Morgan Stanley New York Tax-Free Income 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: December 31, 2003 Date of reporting period: June 30, 2003 Item 1. Report to Shareholders Welcome, Shareholder: In this report, you'll learn about how your investment in Morgan Stanley New York Tax-Free Income Fund performed during the semiannual period. The portfolio management team will provide an overview of the market climate, and discuss some of the factors that helped or hindered performance during the reporting period. In addition, this report includes the Fund's financial statements and a list of Fund investments, as well as other information. 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 the market values of securities owned by the Fund will decline and, therefore, the value of the Fund shares may be less than what you paid for them. Accordingly, you can lose money investing in this Fund. Fund Report For the six-month period ended June 30, 2003 TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2003
LEHMAN LIPPER NY BROTHERS MUNICIPAL MUNICIPAL DEBT BOND FUNDS CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2) 2.94% 2.57% 2.65% 2.85% 3.81% 3.32%
The performance of the Fund's four share classes varies because each has different expenses. The Fund's total return figures assume the reinvestment of all distributions, but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information. MARKET CONDITIONS The six-month period ended June 30, 2003, was a favorable time for the fixed-income markets. The U.S. economy continued to recover but at a slow pace. This led to investor concern that reaching the economy's full growth potential would be delayed. The Federal Reserve Board shared this concern and cut the federal funds rate in June. The reduction in the short-term borrowing rate was felt across the yield curve and drove yields down to levels not seen in decades. Several factors caused the rally in municipal bonds to lag Treasuries. First, states and municipalities sold a record amount of debt to meet cash flow needs and refinance higher cost issues. Municipal yields also adjusted to federal tax legislation, which included acceleration of scheduled tax bracket reductions and a lower tax on dividends. Finally, some credits were affected by potential budget deficits. These factors caused the municipal market to establish yield levels that attracted interest from crossover investors such as insurance companies and hedge funds seeking value relative to taxable bonds. Heavy underwriting volume by major New York issuers benefited from retail and institutional crossover demand for state exemption. PERFORMANCE ANALYSIS The Fund's conservative portfolio structure underperformed the Lehman Brothers Municipal Bond Index. The Lehman Brothers Municipal Bond Index is more heavily weighted toward short and intermediate term securities and does not include expenses. With rates at historically low levels, the market appeared to be anticipating a prolonged, weak economic recovery. This assessment seemed unduly pessimistic in light of monetary and fiscal policies seeking to stimulate growth. Since this stimulus should eventually result in stronger economic growth and higher interest rates, we maintained the Fund's lower-than-average duration. We sought to preserve shareholder value by maintaining a high-grade portfolio with nearly 80 percent of long-term holdings rated either double- or -triple "A". The portfolio is structured with an above average weighting of premium coupon bonds. These bonds are somewhat more defensive than current coupon (par) bonds in a rising-rate environment. The Fund benefited by offering securities with less favorable structure for sale to take advantage of demand for bonds with New York tax-exemption. Purchases at the sector level focused on high-grade revenue bonds backed by electric, transportation and water & sewer projects. The Fund has maintained a cautious stance toward the general obligation sector because a number of issuers under budgetary stress face potential credit rating downgrades. The Fund also benefited by our decision to avoid tobacco bonds. 2
LONG-TERM CREDIT ANALYSIS Aaa/AAA 48% Aa/AA 30 A/A 14 Baa/BBB 3 Ba/BB or Less 2 Not Rated 3
LONG-TERM SECTORS TRANSPORTATION 13% OTHER 12 HEALTHCARE 12 EDUCATION 11 GENERAL OBLIGATION 6
Subject to change daily. All percentages are as a percentage of long-term investments. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. INVESTMENT STRATEGY 1. THE FUND SEEKS TO PROVIDE A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL, NEW YORK STATE AND NEW YORK CITY INCOME TAX, CONSISTENT WITH THE PRESERVATION OF CAPITAL. THE FUND INVESTS PRINCIPALLY IN LONG-TERM, INVESTMENT GRADE NEW YORK MUNICIPAL OBLIGATIONS THAT ARE RATED WITHIN THE FOUR HIGHEST GRADES BY MOODY'S, STANDARD & POOR'S OR FITCH IBCA. 2. THE PORTFOLIO MANAGEMENT TEAM SEEKS TO DIVERSIFY CREDIT AND INTEREST-RATE RISK BY INVESTING IN A MIX OF SECTORS AND INDIVIDUAL ISSUES THAT HAVE A VARIETY OF COUPONS, MATURITIES, CALL FEATURES AND DURATIONS. 3 Call and Cost (Book) Yield Structure PERCENT OF BONDS CALLABLE -- WEIGHTED AVERAGE CALL PROTECTION: 7 YEARS (Based on Long-Term Portfolio) As of 6/30/03 [PERCENT OF BONDS CALLABLE BAR CHART] 2003 7 2004 5 2005 5 2006 11 2007 1 2008 6 2009 4 2010 10 2011 7 2012 17 2013+ 27
COST (BOOK) YIELD(a) -- WEIGHTED AVERAGE BOOK YIELD: 5.6% (Based on Long-Term Portfolio) As of 6/30/03 [COST (BOOK) YIELD BAR CHART] 2003 7.4 2004 5.8 2005 6.6 2006 6.5 2007 5.6 2008 5.3 2009 5.5 2010 5.6 2011 4.9 2012 4.9 2013+ 5.3
(a) Cost or "book" yield is the annual income earned on a portfolio investment based on its original purchase price before the Fund's operating expenses. For example, the Fund is earning a book yield of 7.4% on 7% of the long-term portfolio that is callable in 2003. Portfolio structure is subject to change. 4 Performance Summary AVERAGE ANNUAL TOTAL RETURNS -- PERIOD ENDED JUNE 30, 2003
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++) (since 07/28/97) (since 04/25/85) (since 07/28/97) (since 07/28/97) SYMBOL NYFAX NYFBX NYFCX NYFDX 1 YEAR 8.55%(3) 7.60%(3) 7.88%(3) 8.33%(3) 3.94(4) 2.60(4) 6.88(4) 5 YEARS 5.47(3) 4.79(3) 4.82(3) 5.51(3) 4.55(4) 4.46(4) 4.82(4) 10 YEARS 4.86(3) 4.86(4) SINCE INCEPTION 5.53(3) 7.02(3) 4.91(3) 5.64(3) 4.76(4) 7.02(4) 4.91(4)
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 Lehman Brothers Municipal Bond Index tracks the performance of municipal bonds rated at least Baa or BBB by Moody's Investors Service, Inc. or Standard Poor's Corporation, respectively and with maturities of 2 years or greater. Indexes are unmanaged and their returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. (2) The Lipper New York Municipal Debt Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper New York Municipal Debt Funds classification. The Index is adjusted for capital gains distributions and income dividends. There are currently 30 funds represented in this 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. (3) Figure shown assumes reinvestment of all distributions and does not reflect the deduction of any sales charges. (4) Figure shown assumes reinvestment of all distributions and the deduction of the maximum applicable sales charge. See the Fund's current prospectus for complete details on fees and sales charges. * The maximum front-end sales charge for Class A is 4.25%. ** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The CDSC declines to 0% after six years. + The maximum CDSC for Class C is 1% for shares redeemed within one year of purchase. ++ Class D has no sales charge. 5 Morgan Stanley New York Tax-Free Income Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE --------------------------------------------------------------------------------------------------------- New York Tax-Exempt Municipal Bonds (95.5%) General Obligation (5.8%) $ 3,500 New York State, Ser 1995 B Refg........................... 5.70% 08/15/13 $ 3,798,655 4,550 Puerto Rico, Public Improvement Refg Ser 1987 A........... 3.00 07/01/06 4,553,686 -------- ------------ 8,050 8,352,341 -------- ------------ Educational Facilities Revenue (10.0%) 500 Hempstead Industrial Development Agency, Hofstra University Ser 1996 (MBIA).............................. 5.80 07/01/15 559,520 2,500 New York City Industrial Development Agency, Polytechnic University 2000......................................... 6.00 11/01/20 2,290,750 New York State Dormitory Authority, 3,000 City University Ser 1993 A.............................. 5.75 07/01/09 3,499,410 1,000 Nassau County BOCES Ser 2001 A (FSA).................... 5.25 08/15/21 1,071,600 1,000 New York University Ser 1998 A (MBIA)................... 5.75 07/01/15 1,210,220 3,000 State University Ser 1989 B............................. 0.00 05/15/05 2,897,370 2,000 State University 1993 Ser A............................. 5.25 05/15/15 2,297,720 500 University of Rochester Ser 1993 A...................... 5.625 07/01/12 511,610 -------- ------------ 13,500 14,338,200 -------- ------------ Electric Revenue (5.0%) Long Island Power Authority, 5,000 Ser 2000 A (FSA)........................................ 0.00 06/01/18 2,592,950 1,345 Ser 2003 C.............................................. 5.50 09/01/21 1,425,525 1,000 Ser 1998 A (FSA)........................................ 5.125 12/01/22 1,047,180 2,000 New York State Power Authority, Ser 2000 A................ 5.25 11/15/40 2,102,240 -------- ------------ 9,345 7,167,895 -------- ------------ Hospital Revenue (9.9%) 3,730 New York City Health & Hospital Corporation, Health 2003 Ser A (Ambac)........................................... 5.25 02/15/22 4,003,670 1,495 New York City Industrial Development Agency, Staten Island University Hospital Ser B............................... 6.375 07/01/31 1,572,815 4,000 New York State Dormitory Authority, Memorial Sloan-Kettering Cancer Center 2003 Ser I................ 5.00 07/01/23 4,195,840 4,155 New York State Medical Care Facilities Finance Agency, Hospital & Nursing Home - FHA Insured Mtge 1993 Ser B... 5.50 02/15/22 4,320,951 -------- ------------ 13,380 14,093,276 -------- ------------
See Notes to Financial Statements 6 Morgan Stanley New York Tax-Free Income Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE ----------------------------------------------------------------------------------------------------------- Industrial Development/Pollution Control Revenue (7.2%) New York City Industrial Development Agency, Airis JFK I LLC $ 1,000 Ser 2001A (AMT)......................................... 5.50% 07/01/28 $ 976,120 2,000 Brooklyn Navy Yard Cogeneration Partners LP Ser 1997 (AMT)................................................... 5.75 10/01/36 1,852,580 6,000 New York State Energy Research & Development Authority, Brooklyn Union Gas Co 1991 Ser D........................ 12.403(++) 07/01/26 7,456,920 -------- ------------ 9,000 10,285,620 -------- ------------ Mortgage Revenue - Multi-Family (7.4%) New York City Housing Development Corporation, 1,985 East Midtown Project - FHA Ins Sec 223.................. 6.50 11/15/18 2,088,035 2,025 Ruppert Project - FHA Ins Sec 223....................... 6.50 11/15/18 2,130,393 5,850 New York State Housing Finance Agency, 1996 Ser A Refg (FSA)................................................... 6.10 11/01/15 6,307,821 -------- ------------ 9,860 10,526,249 -------- ------------ Nursing & Health Related Facilities Revenue (1.5%) 2,000 New York State Medical Care Facilities Finance Agency, -------- Mental Health Services 1993 Ser F Refg.................. 5.25 02/15/19 2,077,440 ------------ Public Facilities Revenue (9.8%) Empire State Development Corporation, 2,000 Personal Income Tax Ser 2002 A.......................... 5.375 03/15/19 2,200,420 1,750 Personal Income Tax Ser 2002 A.......................... 5.375 03/15/20 1,915,935 2,000 Personal Income Tax Ser 2002 C-1 (FGIC)................. 5.50 03/15/20 2,249,560 500 New York City Cultural Resources Trust, The New York Botanical Garden Ser 1996 (MBIA)........................ 5.75 07/01/16 554,135 1,035 New York City Industrial Development Agency, Royal Charter Properties - The New York & Presbyterian Hospital Parking Ser 2001 (FSA).................................. 5.25 12/15/32 1,112,584 New York State Dormitory Authority, 4,000 School Districts Ser 2002 E (MBIA)...................... 5.50 10/01/17 4,556,199 1,300 School Districts Ser 2002 C (MBIA)...................... 5.25 04/01/21 1,408,862 -------- ------------ 12,585 13,997,695 -------- ------------ Resource Recovery Revenue (0.4%) 500 Oneida-Herkimer Solid Waste Management Authority, Ser 1992.................................................... 6.65 04/01/05 511,940 -------- ------------ Transportation Facilities Revenue (12.5%) 400 Buffalo & Fort Erie Public Bridge Authority, Toll Bridge Ser 1995 (MBIA)......................................... 5.75 01/01/25 425,672 5,000 Metropolitan Transportation Authority, Dedicated Tax Fund Refg Ser 2002 A (FSA)................................... 5.25 11/15/24 5,371,050
See Notes to Financial Statements 7 Morgan Stanley New York Tax-Free Income Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE --------------------------------------------------------------------------------------------------------- New York State Thruway Authority, $ 500 Highway & Bridge Trust Fund Ser 2001 B (MBIA)........... 5.25% 04/01/17 $ 546,715 3,000 Local Highway & Bridge Service Contract Ser 2001........ 5.25 04/01/20 3,218,550 1,000 Port Authority of New York & New Jersey, Cons 121 Ser (MBIA).................................................. 5.125 10/15/30 1,038,290 3,000 Triborough Bridge & Tunnel Authority, Ser 2001 A.......... 5.00 01/01/32 3,107,160 Puerto Rico Highway & Transportation Authority, 2,000 Refg Ser X.............................................. 5.50 07/01/15 2,283,760 2,000 Ser 1998 A.............................................. 4.75 07/01/38 1,959,860 -------- ------------ 16,900 17,951,057 -------- ------------ Water & Sewer Revenue (7.6%) 3,000 New York City Municipal Water Finance Authority, 2001 Ser B....................................................... 5.125 06/15/31 3,127,260 3,010 New York State Environmental Facilities Corporation, Clean Water Ser 2003 C........................................ 5.00 07/15/23 3,168,717 4,000 Suffolk Country Industrial Development Agency, Southwest Sewer Ser 1994 (FGIC)................................... 6.00 02/01/08 4,648,720 -------- ------------ 10,010 10,944,697 -------- ------------ Other Revenue (11.4%) New York City Transitional Finance Authority, 2,000 2003 Ser D.............................................. 5.25 02/01/20 2,182,380 2,000 2001 Ser A.............................................. 5.375 02/15/22 2,341,360 2,000 2003 Ser A.............................................. 5.50# 11/01/26 2,304,120 3,500 Nassau County Interim Finance Authority, Ser 2001 A (Ambac)................................................. 4.75 11/15/21 3,618,685 5,000 New York Local Government Assistance Corporation, Ser 1993 C....................................................... 5.50 04/01/17 5,839,200 -------- ------------ 14,500 16,285,745 -------- ------------ Refunded (7.0%) 2,790 New York State Dormitory Authority, Suffolk County Judicial Ser 1986 (ETM)................................. 7.375 07/01/16 3,602,950 2,000 Triborough Bridge & Tunnel Authority, Refg Ser 1998 A (MBIA) (ETM)............................................ 4.75 01/01/24 2,130,280 4,000 Puerto Rico Infrastructure Financing Authority, 2000 Ser A (ETM)................................................... 5.375 10/01/24 4,343,200 -------- ------------ 8,790 10,076,430 -------- ------------ 128,420 Total New York Tax-Exempt Municipal Bonds (Cost $124,940,703)................ 136,608,585 -------- ------------
See Notes to Financial Statements 8 Morgan Stanley New York Tax-Free Income Fund PORTFOLIO OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) continued
PRINCIPAL AMOUNT IN COUPON MATURITY THOUSANDS RATE DATE VALUE --------------------------------------------------------------------------------------------------------- Short-Term New York Tax-Exempt Municipal Obligations (2.3%) $ 2,150 Jay Street Development Corporation, Courts Facility 2001 Ser A-2 (Demand 07/01/03)............................... 0.95*% 05/01/20 $ 2,150,000 1,200 New York City Industrial Development Agency, Lycee Francais De New York 2002 Ser B (Demand 07/01/03)....... 0.98* 06/01/32 1,200,000 -------- ------------ 3,350 Total Short-Term New York Tax-Exempt Municipal Obligations (Cost $3,350,000).................................................................. 3,350,000 -------- ------------ $131,770 Total Investments (Cost $128,290,703) (a)............................ 97.8% 139,958,585 ======== Other Assets in Excess of Liabilities................................ 2.2 3,081,029 ------ ------------ Net Assets........................................................... 100.0% $143,039,614 ====== ============
--------------------------------------------------- AMT Alternative Minimum Tax. ETM Escrowed to maturity. * Current coupon of variable rate demand obligation. # Step up security; will convert to 14% on November 1, 2011. ++ Current coupon rate for residual interest bond. This rate resets periodically as the auction rate on the related short-term security fluctuates. (a) The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $12,034,804 and the aggregate gross unrealized depreciation is $366,922, resulting in net unrealized appreciation of $11,667,882. Bond Insurance: --------------- Ambac Ambac Assurance Corporation. FHA Federal Housing Administration. FGIC Financial Guaranty Insurance Company. FSA Financial Security Assurance Inc. MBIA MBIA Insurance Corporation.
Futures Contracts Open at June 30, 2003:
NUMBER OF DESCRIPTION/DELIVERY UNDERLYING FACE UNREALIZED CONTRACTS LONG/SHORT MONTH AND YEAR AMOUNT AT VALUE APPRECIATION --------- ---------- ------------------------- ------------------------ -------------- 100 Short U.S. Treasury Notes 5 yr $(11,512,500) $12,344 September/2003 50 Short U.S. Treasury Notes 10 yr (5,871,875) 54,550 September/2003 ------- Total Unrealized Appreciation....................... $66,894 =======
See Notes to Financial Statements 9 Morgan Stanley New York Tax-Free Income Fund FINANCIAL STATEMENTS Statement of Assets and Liabilities June 30, 2003 (unaudited) Assets: Investments in securities, at value (cost $128,290,703)....................................... $139,958,585 Cash........................................................ 42,574 Receivable for: Interest................................................ 1,840,804 Shares of beneficial interest sold...................... 1,179,257 Investments sold........................................ 455,000 Prepaid expenses and other assets........................... 26,443 ------------ Total Assets............................................ 143,502,663 ------------ Liabilities: Payable for: Shares of beneficial interest redeemed.................. 114,616 Distribution fee........................................ 82,348 Dividends and distributions to shareholders............. 68,697 Investment management fee............................... 68,093 Accrued expenses............................................ 129,295 ------------ Total Liabilities....................................... 463,049 ------------ Net Assets.............................................. $143,039,614 ============ Composition of Net Assets: Paid-in-capital............................................. $130,404,274 Net unrealized appreciation................................. 11,734,776 Accumulated undistributed net investment income............. 135,615 Accumulated undistributed net realized gain................. 764,949 ------------ Net Assets.............................................. $143,039,614 ============ Class A Shares: Net Assets.................................................. $6,585,395 Shares Outstanding (unlimited authorized, $.01 par value)... 552,837 Net Asset Value Per Share............................... $11.91 ============ Maximum Offering Price Per Share, (net asset value plus 4.44% of net asset value)....... $12.44 ============ Class B Shares: Net Assets.................................................. $119,650,253 Shares Outstanding (unlimited authorized, $.01 par value)... 10,074,922 Net Asset Value Per Share............................... $11.88 ============ Class C Shares: Net Assets.................................................. $5,020,426 Shares Outstanding (unlimited authorized, $.01 par value)... 422,566 Net Asset Value Per Share............................... $11.88 ============ Class D Shares: Net Assets.................................................. $11,783,540 Shares Outstanding (unlimited authorized, $.01 par value)... 995,960 Net Asset Value Per Share............................... $11.83 ============
See Notes to Financial Statements 10 Morgan Stanley New York Tax-Free Income Fund FINANCIAL STATEMENTS continued Statement of Operations For the six months ended June 30, 2003 (unaudited) Net Investment Income: Interest Income............................................. $3,768,465 ---------- Expenses Distribution fee (Class A shares)........................... 5,100 Distribution fee (Class B shares)........................... 451,079 Distribution fee (Class C shares)........................... 16,042 Investment management fee................................... 389,809 Shareholder reports and notices............................. 33,925 Transfer agent fees and expenses............................ 30,180 Professional fees........................................... 25,082 Trustees' fees and expenses................................. 10,929 Registration fees........................................... 7,778 Custodian fees.............................................. 6,769 Other....................................................... 6,484 ---------- Total Expenses.......................................... 983,177 Less: expense offset........................................ (6,739) ---------- Net Expenses............................................ 976,438 ---------- Net Investment Income................................... 2,792,027 ---------- Net Realized and Unrealized Gain (Loss): Net Realized Gain/Loss on: Investments............................................. 1,157,824 Futures contracts....................................... (392,867) ---------- Net Realized Gain....................................... 764,957 ---------- Net Change in Unrealized Appreciation on: Investments............................................. 63,798 Futures contracts....................................... 66,894 ---------- Net Appreciation........................................ 130,692 ---------- Net Gain................................................ 895,649 ---------- Net Increase................................................ $3,687,676 ==========
See Notes to Financial Statements 11 Morgan Stanley New York Tax-Free Income Fund FINANCIAL STATEMENTS continued Statement of Changes in Net Assets
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED JUNE 30, 2003 DECEMBER 31, 2002 ------------- ------------------ (unaudited) Increase (Decrease) in Net Assets: Operations: Net investment income....................................... $ 2,792,027 $ 5,569,509 Net realized gain........................................... 764,957 2,653,787 Net change in unrealized appreciation....................... 130,692 4,157,253 ------------ ------------ Net Increase............................................ 3,687,676 12,380,549 ------------ ------------ Dividends and Distributions to Shareholders from: Net investment income Class A shares.......................................... (117,993) (144,852) Class B shares.......................................... (2,311,431) (4,671,373) Class C shares.......................................... (81,632) (133,930) Class D shares.......................................... (269,992) (554,643) Net realized gain Class A shares.......................................... (116) (118,438) Class B shares.......................................... (1,046) (2,788,076) Class C shares.......................................... (53) (80,757) Class D shares.......................................... (103) (286,792) ------------ ------------ Total Dividends and Distributions....................... (2,782,366) (8,778,861) ------------ ------------ Net increase (decrease) from transactions in shares of beneficial interest....................................... (1,244,690) 5,331,906 ------------ ------------ Net Increase (Decrease)................................. (339,380) 8,933,594 Net Assets: Beginning of period......................................... 143,378,994 134,445,400 ------------ ------------ End of Period (Including accumulated undistributed net investment income of $135,615 and $124,636, respectively)..................... $143,039,614 $143,378,994 ============ ============
See Notes to Financial Statements 12 Morgan Stanley New York Tax-Free Income Fund NOTES TO FINANCIAL STATEMENTS - JUNE 30, 2003 (UNAUDITED) 1. Organization and Accounting Policies Morgan Stanley New York Tax-Free Income 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 to provide a high level of current income which is exempt from federal, New York State and New York City income tax, consistent with the preservation of capital. The Fund was organized as a Massachusetts business trust on January 17, 1985 and commenced operations on April 25, 1985. On July 28, 1997, the Fund converted to a multiple class share structure. The Fund offers Class A shares, Class B shares, Class C shares and Class D shares. The four classes are substantially the same except that most Class A shares are subject to a sales charge imposed at the time of purchase and some Class A shares, and most Class B shares and Class C shares are subject to a contingent deferred sales charge imposed on shares redeemed within one year, six years and one year, respectively. Class D shares are not subject to a sales charge. Additionally, Class A shares, Class B shares and Class C shares incur distribution expenses. The following is a summary of significant accounting policies: A. Valuation of Investments -- (1) portfolio securities are valued by an outside independent pricing service approved by the Trustees. The pricing service uses both a computerized grid matrix of tax-exempt securities and evaluations by its staff, in each case based on information concerning market transactions and quotations from dealers which reflect the bid side of the market each day. The portfolio securities are thus valued by reference to a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant; (2) futures are valued at the latest sale price on the commodities exchange on which they trade unless it is determined that such price does not reflect their market value, in which case they will be valued at their fair value as determined in good faith under procedures established by and under the supervision of the Trustees; and (3) short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost. B. Accounting for Investments -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are 13 Morgan Stanley New York Tax-Free Income Fund NOTES TO FINANCIAL STATEMENTS - JUNE 30, 2003 (UNAUDITED) continued determined by the identified cost method. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily. C. 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. D. Futures Contracts -- A futures contract is an agreement between two parties to buy and sell financial instruments or contracts based on financial indices at a set price on a future date. Upon entering into such a contract, the Fund is required to pledge to the broker cash, U.S. Government securities or other liquid portfolio securities equal to the minimum initial margin requirements of the applicable futures exchange. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments known as variation margin are recorded by the Fund as unrealized gains and losses. Upon closing of the contract, the Fund realizes a gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. 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 and nontaxable 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. 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 financial reporting purposes but not for tax purposes are reported as dividends in excess of net investment income or distributions in excess of net realized capital gains. To the extent they exceed net investment income and net realized capital gains for tax purposes, they are reported as distributions of paid-in-capital. 14 Morgan Stanley New York Tax-Free Income Fund NOTES TO FINANCIAL STATEMENTS - JUNE 30, 2003 (UNAUDITED) continued G. Use of Estimates -- The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. 2. Investment Management Agreement Pursuant to an Investment Management Agreement with Morgan Stanley Investment Advisors Inc. (the "Investment Manager") the Fund pays the Investment Manager a management fee, accrued daily and payable monthly, by applying the following annual rates to the Fund's net assets determined as of the close of each business day: 0.55% to the portion of daily net assets not exceeding $500 million and 0.525% to the portion of daily net assets exceeding $500 million. 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 - 0.75% of the lesser of: (a) the average daily aggregate gross sales of the Class B shares since the inception of the Fund (not including reinvestment of dividend or capital gain distributions) less the average daily aggregate net asset value of the Class B shares redeemed since the Fund's inception upon which a contingent deferred sales charge has been imposed or waived; or (b) the average daily net assets of Class B; and (iii) Class C -- up to 0.75% 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 $1,233,637 at June 30, 2003. In the case of Class A shares and Class C shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25% or 0.75% of the average daily net assets of Class A or Class C, 15 Morgan Stanley New York Tax-Free Income Fund NOTES TO FINANCIAL STATEMENTS - JUNE 30, 2003 (UNAUDITED) continued 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 June 30, 2003, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.19% and 0.75%, respectively. The Distributor has informed the Fund that for the six months ended June 30, 2003, it received contingent deferred sales charges from certain redemptions of the Fund's Class B shares and Class C shares of $38,816 and $557, respectively and received $59,383 in front-end sales charges from sales of the Fund's Class A shares. The respective shareholders pay such charges which are not an expense of the Fund. 4. Security Transactions and Transactions with Affiliates The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended June 30, 2003 aggregated $19,338,065 and $20,960,741, respectively. Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is the Fund's transfer agent. At June 30, 2003, the Fund had transfer agent fees and expenses payable of approximately $1,500. The Fund has an unfunded noncontributory defined benefit pension plan covering all independent Trustees of the Fund who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on years of service and compensation during the last five years of service. Aggregate pension costs for the six months ended June 30, 2003 included in Trustees' fees and expenses in the Statement of Operations amounted to $3,585. At June 30, 2003, the Fund had an accrued pension liability of $58,102 which is included in accrued expenses in the Statement of Assets and Liabilities. 5. Federal Income Tax Status As of December 31, 2002, the Fund had temporary book/tax differences primarily attributable to book amortization of discounts on debt securities. 6. Expense Offset The expense offset represents a reduction of the custodian fees for earnings on cash balances maintained by the Fund. 16 Morgan Stanley New York Tax-Free Income Fund NOTES TO FINANCIAL STATEMENTS - JUNE 30, 2003 (UNAUDITED) continued 7. Risks Relating to Certain Financial Instruments The Fund may invest a portion of its assets in residual interest bonds, which are inverse floating rate municipal obligations. The prices of these securities are subject to greater market fluctuations during periods of changing prevailing interest rates than are comparable fixed rate obligations. At June 30, 2003, the Fund held positions in residual interest bonds having a total value of $7,456,920, which represents 5.2% of the Fund's net assets. To hedge against adverse interest rate changes, the Fund may invest in financial futures contracts or municipal index futures contracts ("futures contracts"). These futures contracts involve elements of market risk in excess of the amount reflected in the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the value of the underlying securities. At June 30, 2003, the Fund had outstanding futures contracts. 17 Morgan Stanley New York Tax-Free Income Fund NOTES TO FINANCIAL STATEMENTS - JUNE 30, 2003 (UNAUDITED) continued 8. Shares of Beneficial Interest Transactions in shares of beneficial interest were as follows:
FOR THE SIX FOR THE YEAR MONTHS ENDED ENDED JUNE 30, 2003 DECEMBER 31, 2002 ------------------------- ------------------------- (unaudited) SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ CLASS A SHARES Sold.............................................. 4,056,279 $ 48,509,218 1,709,367 $ 20,244,891 Reinvestment of dividends and distributions....... 5,183 61,489 16,605 195,757 Redeemed.......................................... (3,950,599) (47,252,818) (1,552,899) (18,352,037) ---------- ------------ ---------- ------------ Net increase - Class A............................ 110,863 1,317,889 173,073 2,088,611 ---------- ------------ ---------- ------------ CLASS B SHARES Sold.............................................. 393,947 4,640,877 1,286,421 15,165,415 Reinvestment of dividends and distributions....... 104,951 1,240,468 375,930 4,430,966 Redeemed.......................................... (769,806) (9,102,977) (1,549,204) (18,257,685) ---------- ------------ ---------- ------------ Net increase (decrease) - Class B................. (270,908) (3,221,632) 113,147 1,338,696 ---------- ------------ ---------- ------------ CLASS C SHARES Sold.............................................. 271,451 3,224,383 266,760 3,187,296 Reinvestment of dividends and distributions....... 3,012 35,646 8,899 104,676 Redeemed.......................................... (150,573) (1,788,305) (287,332) (3,394,507) ---------- ------------ ---------- ------------ Net increase (decrease) - Class C................. 123,890 1,471,724 (11,673) (102,535) ---------- ------------ ---------- ------------ CLASS D SHARES Sold.............................................. 63,844 751,268 985,512 11,602,457 Reinvestment of dividends and distributions....... 12,209 143,789 42,450 498,825 Redeemed.......................................... (146,036) (1,707,728) (859,274) (10,094,148) ---------- ------------ ---------- ------------ Net increase (decrease) - Class D................. (69,983) (812,671) 168,688 2,007,134 ---------- ------------ ---------- ------------ Net increase (decrease) in Fund................... (106,138) $ (1,244,690) 443,235 $ 5,331,906 ========== ============ ========== ============
18 Morgan Stanley New York Tax Free Income Fund FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31, MONTHS ENDED ---------------------------------------------------------------------------- JUNE 30, 2003 2002 2001 2000 1999 1998 ------------- -------- -------- -------- -------- -------- (unaudited) Class A Shares Selected Per Share Data: Net asset value, beginning of period.................. $11.82 $11.47 $11.56 $10.89 $11.90 $12.16 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income... 0.26 0.52 0.53 0.53 0.53 0.55 Net realized and unrealized gain (loss).................. 0.09 0.62 (0.06) 0.66 (1.00) 0.13 ------ ------ ------ ------ ------ ------ Total income (loss) from investment operations...... 0.35 1.14 0.47 1.19 (0.47) 0.68 ------ ------ ------ ------ ------ ------ Less dividends and distribution from: Net investment income... (0.26) (0.52) (0.53) (0.52) (0.52) (0.55) Net realized gain....... (0.00)++ (0.27) (0.03) -- (0.02) (0.39) ------ ------ ------ ------ ------ ------ Total dividends and distributions.............. (0.26) (0.79) (0.56) (0.52) (0.54) (0.94) ------ ------ ------ ------ ------ ------ Net asset value, end of period..................... $11.91 $11.82 $11.47 $11.56 $10.89 $11.90 ====== ====== ====== ====== ====== ====== Total Return+............... 2.94%(1) 10.18% 4.08% 11.29% (4.03)% 5.68% Ratios to Average Net Assets(4): Expenses (before expense offset).................... 0.91%(2)(3) 0.92%(3) 0.94%(3) 0.96%(3) 0.89% 0.93%(3) Net investment income....... 4.41%(2) 4.44% 4.50% 4.78% 4.58% 4.50% Supplemental Data: Net assets, end of period, in thousands............... $6,585 $5,226 $3,084 $661 $408 $393 Portfolio turnover rate..... 14%(1) 21% 11% 21% 3% 24%
--------------------- + 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) Does not reflect the effect of expense offset of 0.01%. (4) Reflects overall fund ratios for investment income and non class specific expenses.
See Notes to Financial Statements 19 Morgan Stanley New York Tax Free Income Fund FINANCIAL HIGHLIGHTS continued
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31, MONTHS ENDED --------------------------------------------------------------------- JUNE 30, 2003 2002 2001 2000 1999 1998 ------------- --------- --------- --------- --------- --------- (unaudited) Class B Shares Selected Per Share Data: Net asset value, beginning of period.... $11.80 $11.48 $11.60 $10.91 $11.92 $12.16 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income.............. 0.23 0.46 0.47 0.47 0.46 0.49 Net realized and unrealized gain (loss).............. 0.08 0.59 (0.10) 0.69 (0.99) 0.15 ------ ------ ------ ------ ------ ------ Total income (loss) from investment operations.. 0.31 1.05 0.37 1.16 (0.53) 0.64 ------ ------ ------ ------ ------ ------ Less dividends and distributions from: Net investment income.............. (0.23) (0.46) (0.46) (0.47) (0.46) (0.49) Net realized gain... (0.00)++ (0.27) (0.03) -- (0.02) (0.39) ------ ------ ------ ------ ------ ------ Total dividends and distributions.......... (0.23) (0.73) (0.49) (0.47) (0.48) (0.88) ------ ------ ------ ------ ------ ------ Net asset value, end of period................. $11.88 $11.80 $11.48 $11.60 $10.91 $11.92 ====== ====== ====== ====== ====== ====== Total Return+........... 2.57%(1) 9.32% 3.26% 10.90% (4.58)% 5.32% Ratios to Average Net Assets(4): Expenses (before expense offset)................ 1.47%(2)(3) 1.46%(3) 1.46%(3) 1.47%(3) 1.48% 1.44%(3) Net investment income... 3.85%(2) 3.90% 3.99% 4.27% 3.99% 3.99% Supplemental Data: Net assets, end of period, in thousands... $119,650 $122,099 $117,519 $121,867 $124,774 $162,659 Portfolio turnover rate................... 14%(1) 21% 11% 21% 3% 24%
--------------------- + 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) Does not reflect the effect of expense offset of 0.01%. (4) Reflects overall fund ratios for investment income and non class specific expenses.
See Notes to Financial Statements 20 Morgan Stanley New York Tax Free Income Fund FINANCIAL HIGHLIGHTS continued
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31, MONTHS ENDED ---------------------------------------------------------------- JUNE 30, 2003 2002 2001 2000 1999 1998 ------------- -------- -------- -------- -------- -------- (unaudited) Class C Shares Selected Per Share Data: Net asset value, beginning of period.... $11.79 $11.46 $11.57 $10.89 $11.90 $12.14 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income............... 0.23 0.46 0.47 0.47 0.46 0.48 Net realized and unrealized gain (loss).............................. 0.08 0.60 (0.09) 0.68 (0.99) 0.15 ------ ------ ------ ------ ------ ------ Total income (loss) from investment operations............................. 0.31 1.06 0.38 1.15 (0.53) 0.63 ------ ------ ------ ------ ------ ------ Less dividends and distribution from: Net investment income............... (0.22) (0.46) (0.46) (0.47) (0.46) (0.48) Net realized gain................... (0.00)++ (0.27) (0.03) -- (0.02) (0.39) ------ ------ ------ ------ ------ ------ Total dividends and distributions....... (0.22) (0.73) (0.49) (0.47) (0.48) (0.87) ------ ------ ------ ------ ------ ------ Net asset value, end of period.......... $11.88 $11.79 $11.46 $11.57 $10.89 $11.90 ====== ====== ====== ====== ====== ====== Total Return+........................... 2.65%(1) 9.41% 3.33% 10.81% (4.60)% 5.30% Ratios to Average Net Assets(4): Expenses (before expense offset)........ 1.47%(2)(3) 1.46%(3) 1.46%(3) 1.47%(3) 1.48% 1.44%(3) Net investment income................... 3.85%(2) 3.90% 3.99% 4.27% 3.99% 3.99% Supplemental Data: Net assets, end of period, in thousands.............................. $5,020 $3,521 $3,557 $1,318 $840 $765 Portfolio turnover rate................. 14%(1) 21% 11% 21% 3% 24%
--------------------- + 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) Does not reflect the effect of expense offset of 0.01%. (4) Reflects overall fund ratios for investment income and non class specific expenses.
See Notes to Financial Statements 21 Morgan Stanley New York Tax Free Income Fund FINANCIAL HIGHLIGHTS continued
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31, MONTHS ENDED ---------------------------------------------------------------- JUNE 30, 2003 2002 2001 2000 1999 1998 ------------- -------- -------- -------- -------- -------- (unaudited) Class D Shares Selected Per Share Data: Net asset value, beginning of period.... $11.76 $11.46 $11.58 $10.90 $11.91 $12.15 ------ ------ ------ ------ ------ ------ Income (loss) from investment operations: Net investment income.............. 0.27 0.55 0.56 0.55 0.55 0.58 Net realized and unrealized gain (loss).............. 0.07 0.56 (0.10) 0.68 (1.00) 0.15 ------ ------ ------ ------ ------ ------ Total income (loss) investment operations............. 0.34 1.11 0.46 1.23 (0.45) 0.73 ------ ------ ------ ------ ------ ------ Less dividends and distribution from: Net investment income.............. (0.27) (0.54) (0.55) (0.55) (0.54) (0.58) Net realized gain... (0.00)++ (0.27) (0.03) -- (0.02) (0.39) ------ ------ ------ ------ ------ ------ Total dividends and distributions.......... (0.27) (0.81) (0.58) (0.55) (0.56) (0.97) ------ ------ ------ ------ ------ ------ Net asset value, end of period................. $11.83 $11.76 $11.46 $11.58 $10.90 $11.91 ====== ====== ====== ====== ====== ====== Total Return+........... 2.85%(1) 9.96% 4.04% 11.64% (3.87)% 6.12% Ratios to Average Net Assets(4): Expenses (before expense offset)................ 0.72%(2)(3) 0.71%(3) 0.71%(3) 0.72%(3) 0.73% 0.69%(3) Net investment income... 4.60%(2) 4.65% 4.74% 5.02% 4.74% 4.74% Supplemental Data: Net assets, end of period, in thousands... $11,784 $12,533 $10,285 $10,475 $116 $82 Portfolio turnover rate................... 14%(1) 21% 11% 21% 3% 24%
--------------------- + 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) Does not reflect the effect of expense offset of 0.01%. (4) Reflects overall fund ratios for investment income and non class specific expenses.
See Notes to Financial Statements 22 (This Page Intentionally Left Blank) TRUSTEES Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien James F. Higgins Dr. Manuel H. Johnson Joseph J. Kearns Michael E. Nugent Philip J. Purcell Fergus Reid OFFICERS Charles A. Fiumefreddo Chairman of the Board Mitchell M. Merin President Ronald E. Robison Executive Vice President and Principal Executive Officer Barry Fink Vice President and General Counsel Joseph 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 The financial statements included herein have been taken from the records of the Fund without examination by the independent auditors and accordingly they do not express an opinion thereon. This report is submitted for the general information of shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its trustees. It is available, without charge, by calling (800) 869-NEWS. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the prospectus carefully before investing. Investments and services offered through Morgan Stanley DW Inc., member SIPC. Morgan Stanley Distributors Inc., member NASD. (c) 2003 Morgan Stanley [MORGAN STANLEY LOGO] MUNICIPAL NEW YORK LONG Morgan Stanley New York Tax-Free Income Fund Semiannual Report June 30, 2003 [MORGAN STANLEY LOGO] 37935RPT-11786G03-AP-7/03 Item 9 - Controls and Procedures 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. Item 10b Exhibits 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 2 - 8 and Item 10a 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 New York Tax-Free Income Fund Ronald E. Robison Principal Executive Officer August 19, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Ronald E. Robison Principal Executive Officer August 19, 2003 Francis Smith Principal Financial Officer August 19, 2003 2