N-Q 1 file1.htm FORM N-Q



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number: 811-07927

Morgan Stanley Financial Services Trust

(Exact name of registrant as specified in charter)

522 Fifth Avenue, New York, New York 10036
(Address of principal executive offices) (Zip code)

Ronald E. Robison
522 Fifth Avenue, New York, New York 10036

(Name and address of agent for service)

Registrant's telephone number, including area code: 212-296-6990

Date of fiscal year end: May 31, 2008

Date of reporting period: August 31, 2007

ITEM 1. SCHEDULE OF INVESTMENTS.

The Fund's schedule of investments as of the close of the reporting period
prepared pursuant to Rule 12-12 of Regulation S-X is as follows:





MORGAN STANLEY FINANCIAL SERVICES TRUST
PORTFOLIO OF INVESTMENTS AUGUST 31, 2007 (UNAUDITED)



NUMBER OF
SHARES VALUE
---------------- -------------

COMMON STOCKS (99.7%)
Data Processing Services (2.5%)
174,490 Western Union Co. $ 3,285,647
-------------
Finance/Rental/Leasing (17.6%)
291,382 Countrywide Financial Corp. (a) 5,783,933
148,400 Fannie Mae 9,736,524
113,200 Freddie Mac 6,974,252
-------------
22,494,709
-------------
Financial Conglomerates (24.3%)
186,356 American Express Co. 10,924,189
253,800 Citigroup, Inc. 11,898,144
154,264 JPMorgan Chase & Co. 6,867,833
26,100 UBS AG (Switzerland) 1,363,464
-------------
31,053,630
-------------
Financial Publishing/Services (7.9%)
39,186 Dun & Bradstreet Corp. 3,822,594
53,000 Moody's Corp. (a) 2,430,050
58,800 Morningstar, Inc. (a) * 3,793,776
-------------
10,046,420
-------------
Insurance Brokers/Services (4.1%)
197,200 Marsh & McLennan Companies, Inc. 5,255,380
-------------
Investment Banks/Brokers (21.3%)
62,500 Ameriprise Financial, Inc. 3,813,125
17,208 Deutsche Boerse AG (Germany) ** 1,901,281
150,000 Evercore Partners, Inc. (Class A) 3,142,500
26,416 FCStone Group Inc. (a) * 1,234,684
118,409 Greenhill & Co., Inc. (a) 6,855,881
8,695 IntercontinentalExchange Inc. (a) * 1,268,340
65,014 MF Global Ltd. (a) * 1,751,477
129,300 OptionXpress Holdings, Inc. (a) 3,041,136
232,500 TD AmeriTrade Holding Corp. (a) * 4,219,875
-------------
27,228,299
-------------
Investment Managers (9.3%)
219,300 Calamos Asset Management Inc. (Class A) (a) 5,092,146
134,976 Fortress Investment Group LLC (Class A) (a) 2,366,129
166,271 Janus Capital Group, Inc. (a) 4,421,146
-------------
11,879,421
-------------
Major Banks (3.2%)
99,717 Bank of New York Mellon Corp. 4,031,558
-------------










Multi-Line Insurance (2.2%)
32,400 Hartford Financial Services Group, Inc. (The) 2,880,684
-------------

Property - Casualty Insurers (5.5%)
453 Berkshire Hathaway Inc. (Class B) * 1,762,170
33,100 Transatlantic Holdings, Inc. 2,344,473
38,741 XL Capital Ltd. (Class A) (Cayman Islands) 2,952,064
-------------
7,058,707
-------------
Savings Banks (1.8%)
128,200 People's United Financial Inc. (a) 2,266,576
-------------

TOTAL COMMON STOCKS
(Cost $118,895,278) 127,481,031
-------------

PRINCIPAL
AMOUNT IN
THOUSANDS
----------------
SHORT-TERM INVESTMENTS (24.8%)

SECURITY PURCHASED FROM SECURITIES LENDING COLLATERAL (24.3%)
$31,089 The Bank of New York Institutional Cash Reserve Fund
(Cost $31,089,331) 31,089,331
-------------

NUMBER OF
SHARES (000)
--------------------
Investment Company (b) (0.5%)
709 Morgan Stanley Institutional Liquidity Money Market Portfolio -
Institutional Class (Cost $708,933) 708,933
-------------


TOTAL SHORT-TERM INVESTMENTS
(Cost $31,798,264) 31,798,264
-------------


TOTAL INVESTMENTS
(Cost $150,693,542) (c) 124.5% 159,279,295
LIABILITIES IN EXCESS OF OTHER ASSETS (24.5) (31,378,053)
------- -------------
NET ASSETS 100.0% $ 127,901,242
======= =============


____________________
* Non-income producing security.

** Security with total market value equal to $1,901,281 has been valued
at its fair value as determined in good faith under procedures
established by and under the gerneral supervision of the Fund's
Trustees.

(a) As of August 31, 2007 all or a portion of this security with a total
value of $30,554,145 was on loan and secured by collateral of
$31,089,331 which was received as cash and subsequently invested in
the Bank of New York Institutional Cash Reserve Fund as reported in
the portfolio of investments.

(b) The Fund invests in Morgan Stanley Institutional Liquidity Money
Market Portfolio - Institutional Class, an open-end management
investment company managed by the Investment Adviser. Investment
advisory fees paid by the Fund are reduced by an amount equal to the
advisory and administrative service fees paid by Morgan Stanley
Institutional Liquidity Money Market Portfolio - Institutional Class
with respect to assets invested by the Fund in Morgan Stanley
Institutional Liquidity Money Market Portfolio - Institutional
Class. Income distributions earned by the Fund totaled $12,143 for
the period ended August 31, 2007.

(c) The aggregate cost for federal income tax purposes approximates the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $17,041,902 and the aggregate gross unrealized
depreciation is $8,456,149, resulting in net unrealized appreciation
of $8,585,753.






ITEM 2. 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-Q
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.

(b) There were no changes in the Fund's internal control over financial
reporting that occurred during the registrant's fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Fund's
internal control over financial reporting.

ITEM 3. EXHIBITS.

(a) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto.


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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 Financial Services Trust

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
October 18, 2007


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
October 18, 2007

/s/ Francis Smith
Francis Smith
Principal Financial Officer
October 18, 2007


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EXHIBIT 3 A1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Ronald E. Robison, certify that:

1. I have reviewed this report on Form N-Q of Morgan Stanley Financial
Services Trust;

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 schedules of investments included in this
report fairly present in all material respects the investments of the
registrant as of the end of the fiscal quarter for which the report is
filed;

4. The registrant's other certifying officer(s) 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 second
fiscal quarter of the period covered by this 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):

(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 control over financial reporting.

Date: October 18, 2007
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer


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EXHIBIT 3 A2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Francis Smith, certify that:

1. I have reviewed this report on Form N-Q of Morgan Stanley Financial
Services Trust;

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 schedules of investments included in this
report fairly present in all material respects the investments of the
registrant as of the end of the fiscal quarter for which the report is
filed;

4. The registrant's other certifying officer(s) 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 quarter 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):

(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 control over financial reporting.





Date: October 18, 2007
/s/ Francis Smith
Francis Smith
Principal Financial Officer


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