UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-08861
Morgan Stanley Value Fund
(Exact name of registrant as specified in charter)
| 522 Fifth Avenue, New York, New York 10036 | ||
| (Address of principal executive offices) | (Zip code) |
Randy Takian
522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)
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: September 30, 2009
Date of reporting period: March 31, 2009
Item 1 — Report to Shareholders
| INVESTMENT MANAGEMENT | ![[MORGAN STANLEY LOGO]](https://capedge.com/proxy/N-CSRS/0000950123-09-012529/y01594msk50l1.gif) |
Welcome, Shareholder:
In this report, you’ll learn about how your investment in Morgan Stanley 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. Please see the prospectus for more complete information on investment risks.
Fund Report
For the six months ended March 31, 2009
Total Return for the 6 Months Ended March 31, 2009
| Russell | Lipper | |||||||||||||||||
| 1000® | S&P | Large-Cap | ||||||||||||||||
| Value | 500® | Value | ||||||||||||||||
| Class A | Class B | Class C | Class I | Index1 | Index2 | Funds Index3 | ||||||||||||
| –29.01% | –29.32% | –29.24% | –28.95% | –35.22% | –30.54% | –30.36% | ||||||||||||
The performance of the Fund’s four share classes varies because each has different expenses. The Fund’s total returns 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 and benchmark information.
Market Conditions
The six months ended March 31, 2009 spanned a very challenging period for stock markets. Despite the efforts of policymakers, the stability of the financial system seemed to be questionable for most of the period. All sectors of the market experienced panic selling and high volatility, leaving investors few places to seek refuge other than in high quality Treasury securities or cash.
The accelerating credit crisis had clearly spilled over into the broader economy. Without access to funding through the credit markets, companies were forced to reduce expenses, causing unemployment to rise significantly. Consumers tightened their spending habits, while the housing market remained depressed. The federal government and Federal Reserve (the “Fed”) attempted aggressive policy actions to contain the growing financial crisis, but investors remained unimpressed. The incoming presidential administration also failed to turn sentiment around until the very end of the period when the Treasury announced plans to buy “toxic” assets from banks’ balance sheets. The Fed also indicated its intention to purchase $3 billion in Treasury securities to help thaw the frozen credit markets. Although the market rallied on this news, investors kept their expectations low for the upcoming first quarter corporate earnings reporting.
Performance Analysis
All share classes of Morgan Stanley Value Fund outperformed the Russell 1000® Value Index (the “Index”), the S&P 500® Index and the Lipper Large-Cap Value Funds Index for the six months ended March 31, 2009, assuming no deduction of applicable sales charges.
The health care sector was the top contributor to relative performance during the period. Within the sector, the Fund held mainly large-cap pharmaceuticals stocks, which benefited from recent consolidation announcements. A slight underweight in the financials sector was also additive to relative performance, as the sector was among the weakest areas of the market during the period. The consumer discretionary sector further bolstered relative performance. Here, the Fund held predominantly media stocks and a few retailers.
Conversely, the basic materials sector was among the largest relative detractors during the period, driven by a position in a paper company. The Fund’s very limited exposure to the energy sector also held back relative gains, as the sector outperformed the Index during the period.
There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the Fund in the future.
2
| TOP 10 HOLDINGS as of 03/31/09 | ||||
| Chubb Corp. (The) | 5 | .2% | ||
| Comcast Corp. (Class A) | 4 | .2 | ||
| Viacom Inc. (Class B) | 3 | .8 | ||
| Bank of New York Mellon Corp. | 3 | .3 | ||
| Verizon Communications, Inc. | 3 | .1 | ||
| Bristol-Myers Squibb Co. | 3 | .0 | ||
| Wal-Mart Stores, Inc. | 2 | .8 | ||
| Schering-Plough Corp. | 2 | .7 | ||
| Cadbury PLC (ADR) | 2 | .6 | ||
| Time Warner Cable Inc. | 2 | .5 | ||
| TOP FIVE INDUSTRIES as of 03/31/09 | ||||
| Pharmaceuticals: Major | 12 | .6% | ||
| Property/Casualty Insurance | 8 | .7 | ||
| Media Conglomerates | 8 | .2 | ||
| Major Banks | 6 | .8 | ||
| Major Telecommunications | 5 | .0 | ||
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned above. Top 10 holdings and top five industries are as a percentage of net assets. 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 normally invests at least 65 percent of its assets in common stock that the Fund’s “Investment Adviser,” Morgan Stanley Investment Advisors Inc., believes is undervalued and currently is not being recognized within the marketplace. In deciding which securities to buy, hold or sell, the Investment Adviser begins with a universe of companies that have attributes that may qualify them as value companies. The Investment Adviser then screens these companies for liquidity and then relative value using an appropriate valuation measure for each sector or industry. The Investment Adviser evaluates the companies relative to competitive and market conditions within each industry. The Investment Adviser then conducts a fundamental analysis of each company to identify those companies believed to be attractively valued relative to other companies within the industry.
For More Information About Portfolio Holdings
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund’s second and fourth fiscal quarters. The semiannual reports and the annual reports are filed electronically with the Securities and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley also delivers the semiannual and annual reports to fund shareholders and makes these reports available on its public web site, www.morganstanley.com. Each Morgan Stanley fund also files a complete schedule of portfolio holdings with the SEC for the fund’s first and third fiscal quarters on Form N-Q. Morgan Stanley does not deliver the reports for the first and third fiscal
3
quarters to shareholders, nor are the reports posted to the Morgan Stanley public web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC’s web site, http://www.sec.gov. You may also review and copy them at the SEC’s public reference room in Washington, DC. Information on the operation of the SEC’s public reference room may be obtained by calling the SEC at (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC’s e-mail address (publicinfo@sec.gov) or by writing the public reference section of the SEC, Washington, DC 20549-0102.
Proxy Voting Policy and Procedures and Proxy Voting Record
You may obtain a copy of the Fund’s Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 869-NEWS or by visiting the Mutual Fund Center on our Web site at www.morganstanley.com. It is also available on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
You may obtain information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting the Mutual Fund Center on our Web site at www.morganstanley.com. This information is also available on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling (800) 869-NEWS, 8:00 a.m. to 8:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
4
Performance Summary
Average Annual Total Returns — Period Ended March 31, 2009
| Class A Shares | * | Class B Shares | ** | Class C Shares | † | Class I Shares | †† | |||||||||
| (since 11/25/98 | ) | (since 11/25/98 | ) | (since 11/25/98 | ) | (since 11/25/98 | ) | |||||||||
Symbol | VLUAX | VLUBX | VLUCX | VLUDX | ||||||||||||
1 Year | (35.20 | )%4 | (35.73 | )%4 | (35.68 | )%4 | (35.10 | )%4 | ||||||||
| (38.60 | ) 5 | (38.88 | ) 5 | (36.31 | ) 5 | — | ||||||||||
5 Years | (4.66 | ) 4 | (5.39 | ) 4 | (5.38 | ) 4 | (4.46 | ) 4 | ||||||||
| (5.69 | ) 5 | (5.71 | ) 5 | (5.38 | ) 5 | — | ||||||||||
10 Years | (0.25 | ) 4 | (0.85 | ) 4 | (0.98 | ) 4 | 0.00 | 4 | ||||||||
| (0.79 | ) 5 | (0.85 | ) 5 | (0.98 | ) 5 | — | ||||||||||
Since Inception | (0.62 | ) 4 | (1.20 | ) 4 | (1.35 | ) 4 | (0.38 | ) 4 | ||||||||
| (1.14 | ) 5 | (1.20 | ) 5 | (1.35 | ) 5 | — | ||||||||||
Gross Expense Ratios | 1.04 | 1.79 | 1.77 | 0.79 |
Performance data quoted represents past performance, which is no guarantee of future results and current performance may be lower or higher than the figures shown. For most recent month-end performance figures, please visit www.morganstanley.com/im or speak with your Financial Advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance for Class A, Class B, Class C, and Class I shares will vary due to differences in sales charges and expenses. See the Fund’s current prospectus for complete details on fees and sales charges. Expenses are as of the Fund’s fiscal year end.
| * | 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. Effective April 2005, Class B shares will generally convert to Class A shares approximately eight years after the end of the calendar month in which the shares were purchased. Performance for periods greater than eight years reflects this conversion. | |
| † | The maximum contingent deferred sales charge for Class C is 1.0% for shares redeemed within one year of purchase. | |
| †† | Class I has no sales charge. | |
| (1) | The Russell 1000® Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000® Index companies with lower price-to-book ratios and lower expected growth values. The Index is unmanaged and its 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 500® Index (S&P 500®) measures the performance of the large cap segment of the U.S. equities market, covering approximately 75% of the U.S. equities market. The Index includes 500 leading companies in leading industries of the U.S. economy. The Index is unmanaged and its 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 Large-Cap Value Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Large-Cap Value 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. The Fund was in the Lipper Large-Cap Value Funds classification as of the date of this report. | |
| (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. |
5
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees; and (2) ongoing costs, including advisory fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 10/01/08 – 03/31/09.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs, and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning | Ending | Expenses Paid | ||||||||||
| Account Value | Account Value | During Period@ | ||||||||||
| 10/01/08 – | ||||||||||||
| 10/01/08 | 03/31/09 | 03/31/09 | ||||||||||
Class A | ||||||||||||
| Actual (−29.01% return) | $ | 1,000.00 | $ | 709.90 | $ | 6.05 | ||||||
| Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,017.85 | $ | 7.14 | ||||||
Class B | ||||||||||||
| Actual (−29.32% return) | $ | 1,000.00 | $ | 706.80 | $ | 9.23 | ||||||
| Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,014.11 | $ | 10.90 | ||||||
Class C | ||||||||||||
| Actual (−29.24% return) | $ | 1,000.00 | $ | 707.60 | $ | 9.24 | ||||||
| Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,014.11 | $ | 10.90 | ||||||
Class I | ||||||||||||
| Actual (−28.95% return) | $ | 1,000.00 | $ | 710.50 | $ | 4.99 | ||||||
| Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,019.10 | $ | 5.89 | ||||||
| @ | Expenses are equal to the Fund’s annualized expense ratios of 1.42%, 2.17%, 2.17% and 1.17% for Class A, Class B, Class C and Class I shares, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
6
Morgan Stanley Value Fund
Portfolio of Investments - March 31, 2009 (unaudited)
| NUMBER OF | |||||||||||||
| SHARES | VALUE | ||||||||||||
| Common Stocks (96.7%) | |||||||||||||
Aluminum (1.0%) | |||||||||||||
| 123,400 | Alcoa, Inc. | $ | 905,756 | ||||||||||
Beverages: Non-Alcoholic (2.6%) | |||||||||||||
| 38,700 | Coca-Cola Co. (The) | 1,700,865 | |||||||||||
| 35,812 | Dr Pepper Snapple Group, Inc. (a) | 605,581 | |||||||||||
| 2,306,446 | |||||||||||||
Cable/Satellite TV (4.2%) | |||||||||||||
| 277,150 | Comcast Corp. (Class A) | 3,780,326 | |||||||||||
Catalog/Specialty Distribution (0.3%) | |||||||||||||
| 99,250 | Liberty Media Corp – Interactive (Series A) (a) | 287,825 | |||||||||||
Chemicals: Major Diversified (1.2%) | |||||||||||||
| 48,997 | Du Pont (E.I.) de Nemours & Co. | 1,094,103 | |||||||||||
Computer Communications (1.2%) | |||||||||||||
| 64,900 | Cisco Systems, Inc. (a) | 1,088,373 | |||||||||||
Computer Processing Hardware (2.7%) | |||||||||||||
| 159,100 | Dell Inc. (a) | 1,508,268 | |||||||||||
| 27,800 | Hewlett-Packard Co. | 891,268 | |||||||||||
| 2,399,536 | |||||||||||||
Data Processing Services (0.3%) | |||||||||||||
| 18,200 | Western Union Co. | 228,774 | |||||||||||
Department Stores (1.3%) | |||||||||||||
| 62,338 | Macy’s Inc. | 554,808 | |||||||||||
| 29,000 | J.C. Penney Co., Inc. | 582,030 | |||||||||||
| 1,136,838 | |||||||||||||
Discount Stores (3.1%) | |||||||||||||
| 9,900 | Target Corp. | 340,461 | |||||||||||
| 47,600 | Wal-Mart Stores, Inc. | 2,479,960 | |||||||||||
| 2,820,421 | |||||||||||||
Drugstore Chains (1.2%) | |||||||||||||
| 38,100 | CVS Caremark Corp. | 1,047,369 | |||||||||||
Electrical Products (0.5%) | |||||||||||||
| 14,900 | Emerson Electric Co. | 425,842 | |||||||||||
Electronic Components (0.2%) | |||||||||||||
| 59,000 | Flextronics International Ltd. (Singapore) (a) | 170,510 | |||||||||||
Electronic Production Equipment (0.9%) | |||||||||||||
| 16,300 | Cognex Corp. | 217,605 | |||||||||||
| 30,800 | KLA-Tencor Corp. | 616,000 | |||||||||||
| 833,605 | |||||||||||||
Financial Conglomerates (2.3%) | |||||||||||||
| 77,700 | JPMorgan Chase & Co. | 2,065,266 | |||||||||||
Food: Major Diversified (4.7%) | |||||||||||||
| 93,637 | Kraft Foods Inc. (Class A) | 2,087,169 | |||||||||||
| 57,300 | Sara Lee Corp. | 462,984 | |||||||||||
| 85,200 | Unilever N.V. (NY Registered Shares) (Netherlands) | 1,669,920 | |||||||||||
| 4,220,073 | |||||||||||||
Food: Specialty/Candy (2.6%) | |||||||||||||
| 77,716 | Cadbury PLC (ADR) (United Kingdom) | 2,354,795 | |||||||||||
Home Improvement Chains (1.8%) | |||||||||||||
| 36,200 | Home Depot, Inc. (The) | 852,872 | |||||||||||
| 40,900 | Lowe’s Companies, Inc. | 746,425 | |||||||||||
| 1,599,297 | |||||||||||||
Household/Personal Care (0.3%) | |||||||||||||
| 6,200 | Kimberly-Clark Corp. | 285,882 | |||||||||||
Industrial Conglomerates (1.0%) | |||||||||||||
| 88,100 | General Electric Co. | 890,691 | |||||||||||
See Notes to Financial Statements
7
Morgan Stanley Value Fund
Portfolio of Investments - March 31, 2009 (unaudited) continued
| NUMBER OF | |||||||||||||
| SHARES | VALUE | ||||||||||||
Information Technology Services (1.9%) | |||||||||||||
| 7,900 | Computer Sciences Corp. (a) | $ | 291,036 | ||||||||||
| 14,600 | International Business Machines Corp. | 1,414,594 | |||||||||||
| 1,705,630 | |||||||||||||
Integrated Oil (1.8%) | |||||||||||||
| 11,400 | BP PLC (ADR) (United Kingdom) | 457,140 | |||||||||||
| 10,400 | ConocoPhillips | 407,264 | |||||||||||
| 15,900 | Total S.A. (ADR) (France) | 780,054 | |||||||||||
| 1,644,458 | |||||||||||||
Internet Software/Services (0.5%) | |||||||||||||
| 33,100 | Yahoo! Inc. (a) | 424,011 | |||||||||||
Investment Banks/Brokers (0.6%) | |||||||||||||
| 4,900 | Goldman Sachs Group, Inc. (The) | 519,498 | |||||||||||
Life/Health Insurance (1.8%) | |||||||||||||
| 10,700 | AFLAC, Inc. | 207,152 | |||||||||||
| 36,500 | MetLife, Inc. | 831,105 | |||||||||||
| 22,900 | Torchmark Corp. | 600,667 | |||||||||||
| 1,638,924 | |||||||||||||
Major Banks (6.8%) | |||||||||||||
| 142,085 | Bank of America Corp. | 969,020 | |||||||||||
| 105,679 | Bank of New York Mellon Corp. | 2,985,432 | |||||||||||
| 8,500 | Barclays PLC (ADR) (United Kingdom) | 72,250 | |||||||||||
| 24,300 | PNC Financial Services Group, Inc. | 711,747 | |||||||||||
| 31,300 | U.S. Bancorp | 457,293 | |||||||||||
| 64,500 | Wells Fargo & Co. | 918,480 | |||||||||||
| 6,114,222 | |||||||||||||
Major Telecommunications (5.0%) | |||||||||||||
| 67,500 | AT&T Inc. | 1,701,000 | |||||||||||
| 91,700 | Verizon Communications, Inc. | 2,769,340 | |||||||||||
| 4,470,340 | |||||||||||||
Managed Health Care (1.1%) | |||||||||||||
| 21,400 | UnitedHealth Group Inc. | 447,902 | |||||||||||
| 13,300 | WellPoint Inc. (a) | 505,001 | |||||||||||
| 952,903 | |||||||||||||
Media Conglomerates (8.2%) | |||||||||||||
| 141,900 | News Corp. (Class B) | 1,092,630 | |||||||||||
| 28,757 | Time Warner Cable | 713,183 | |||||||||||
| 114,567 | Time Warner Cable Inc. | 2,211,135 | |||||||||||
| 193,800 | Viacom Inc. (Class B) (a) | 3,368,244 | |||||||||||
| 7,385,192 | |||||||||||||
Medical Distributors (1.9%) | |||||||||||||
| 55,200 | Cardinal Health, Inc. | 1,737,696 | |||||||||||
Medical Specialties (1.2%) | |||||||||||||
| 129,700 | Boston Scientific Corp. (a) | 1,031,115 | |||||||||||
Movies/Entertainment (1.3%) | |||||||||||||
| 59,000 | Liberty Media Corp. – Entertainment (Series A) (a) | 1,177,050 | |||||||||||
Oilfield Services/Equipment (1.1%) | |||||||||||||
| 64,900 | Halliburton Co. | 1,004,003 | |||||||||||
Other Consumer Services (2.2%) | |||||||||||||
| 156,600 | eBay Inc. (a) | 1,966,896 | |||||||||||
Packaged Software (0.7%) | |||||||||||||
| 32,000 | Microsoft Corp. | 587,840 | |||||||||||
Pharmaceuticals: Major (12.6%) | |||||||||||||
| 14,800 | Abbott Laboratories | 705,960 | |||||||||||
| 124,800 | Bristol-Myers Squibb Co. | 2,735,616 | |||||||||||
| 12,300 | GlaxoSmithKline PLC (ADR) (United Kingdom) | 382,161 | |||||||||||
| 34,100 | Eli Lilly & Co. | 1,139,281 | |||||||||||
| 128,700 | Pfizer, Inc. | 1,752,894 | |||||||||||
| 18,200 | Roche Holdings Ltd. (ADR) (Switzerland) | 625,807 | |||||||||||
| 102,200 | Schering-Plough Corp. | 2,406,810 | |||||||||||
| 35,500 | Wyeth | 1,527,920 | |||||||||||
| 11,276,449 | |||||||||||||
See Notes to Financial Statements
8
Morgan Stanley Value Fund
Portfolio of Investments - March 31, 2009 (unaudited) continued
| NUMBER OF | |||||||||||||
| SHARES | VALUE | ||||||||||||
Property – Casualty Insurers (8.7%) | |||||||||||||
| 400 | Berkshire Hathaway Inc. (Class B) (a) | $ | 1,128,000 | ||||||||||
| 109,580 | Chubb Corp. (The) | 4,637,426 | |||||||||||
| 51,125 | Travelers Companies, Inc. (The) | 2,077,720 | |||||||||||
| 7,843,146 | |||||||||||||
Pulp & Paper (2.4%) | |||||||||||||
| 306,547 | International Paper Co. | 2,158,091 | |||||||||||
Semiconductors (1.3%) | |||||||||||||
| 74,600 | Intel Corp. | 1,122,730 | |||||||||||
Telecommunication Equipment (0.5%) | |||||||||||||
| 59,100 | Telefonaktiebolaget LM Ericsson (ADR) (Sweden) | 478,119 | |||||||||||
Tobacco (1.7%) | |||||||||||||
| 44,900 | Altria Group, Inc. | 719,298 | |||||||||||
| 23,200 | Philip Morris International Inc. | 825,455 | |||||||||||
| 1,544,753 | |||||||||||||
Total Common Stocks (Cost $127,682,735) | 86,724,794 | ||||||||||||
| NUMBER OF | |||||||||||||
| SHARES (000) | |||||||||||||
| Short-Term Investment (b) (3.5%) | |||||||||||||
| Investment Company | |||||||||||||
| 3,191 | Morgan Stanley Institutional Liquidity Funds – Government Portfolio – Institutional Class (Cost $3,190,700) | 3,190,700 | |||||||||||
| Total Investments (Cost $130,873,435) (c) | 100.2 | % | 89,915,494 | ||||||||||
| Liabilities in Excess of Other Assets | (0.2 | ) | (198,379 | ) | |||||||||
| Net Assets | 100.0 | % | $ | 89,717,115 | |||||||||
ADR | American Depositary Receipt | |
(a) | Non-income producing security. | |
(b) | See Note 4 to the financial statements regarding investments in Morgan Stanley Institutional Liquidity Funds – Government Portfolio – Institutional Class. | |
(c) | The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $5,098,394 and the aggregate gross unrealized depreciation is $46,056,335, resulting in net unrealized depreciation of $40,957,941. | |
See Notes to Financial Statements
9
Morgan Stanley Value Fund
Summary of Investments - March 31, 2009 (unaudited)
| PERCENT OF | ||||||||
| TOTAL | ||||||||
| INDUSTRY | VALUE | INVESTMENTS | ||||||
| Pharmaceuticals: Major | $ | 11,276,449 | 12.5 | % | ||||
| Property – Casualty Insurers | 7,843,146 | 8.7 | ||||||
| Media Conglomerates | 7,385,192 | 8.2 | ||||||
| Major Banks | 6,114,222 | 6.8 | ||||||
| Major Telecommunications | 4,470,340 | 5.0 | ||||||
| Food: Major Diversified | 4,220,073 | 4.7 | ||||||
| Cable/Satellite TV | 3,780,326 | 4.2 | ||||||
| Investment Company | 3,190,700 | 3.5 | ||||||
| Discount Stores | 2,820,421 | 3.1 | ||||||
| Computer Processing Hardware | 2,399,536 | 2.7 | ||||||
| Food: Specialty/Candy | 2,354,795 | 2.6 | ||||||
| Beverages: Non-Alcoholic | 2,306,446 | 2.6 | ||||||
| Pulp & Paper | 2,158,091 | 2.4 | ||||||
| Financial Conglomerates | 2,065,266 | 2.3 | ||||||
| Other Consumer Services | 1,966,896 | 2.2 | ||||||
| Medical Distributors | 1,737,696 | 1.9 | ||||||
| Information Technology Services | 1,705,630 | 1.9 | ||||||
| Integrated Oil | 1,644,458 | 1.8 | ||||||
| Life/Health Insurance | 1,638,924 | 1.8 | ||||||
| Home Improvement Chains | 1,599,297 | 1.8 | ||||||
| Tobacco | 1,544,753 | 1.7 | ||||||
| Movies/Entertainment | 1,177,050 | 1.3 | ||||||
| Department Stores | 1,136,838 | 1.3 | ||||||
| Semiconductors | 1,122,730 | 1.3 | ||||||
| Chemicals: Major Diversified | 1,094,103 | 1.2 | ||||||
| Computer Communications | 1,088,373 | 1.2 | ||||||
| Drugstore Chains | 1,047,369 | 1.2 | ||||||
| Medical Specialties | 1,031,115 | 1.1 | ||||||
| Oilfield Services/Equipment | 1,004,003 | 1.1 | ||||||
| Managed Health Care | 952,903 | 1.1 | ||||||
| Aluminum | 905,756 | 1.0 | ||||||
| Industrial Conglomerates | 890,691 | 1.0 | ||||||
| Electronic Production Equipment | 833,605 | 0.9 | ||||||
| Packaged Software | 587,840 | 0.7 | ||||||
| Investment Banks/Brokers | 519,498 | 0.6 | ||||||
| Telecommunication Equipment | 478,119 | 0.5 | ||||||
| Electrical Products | 425,842 | 0.5 | ||||||
| Internet Software/Services | 424,011 | 0.5 | ||||||
| Catalog/Specialty Distribution | 287,825 | 0.3 | ||||||
| Household/Personal Care | 285,882 | 0.3 | ||||||
| Data Processing Services | 228,774 | 0.3 | ||||||
| Electronic Components | 170,510 | 0.2 | ||||||
| $ | 89,915,494 | 100.0 | % | |||||
See Notes to Financial Statements
10
Morgan Stanley Value Fund
Financial Statements
Statement of Assets and Liabilities
March 31, 2009 (unaudited)
Assets: | ||||
| Investments in securities, at value (cost $127,682,735) | $ | 86,724,794 | ||
| Investment in affiliate, at value (cost $3,190,700) | 3,190,700 | |||
| Receivable for: | ||||
| Dividends | 223,617 | |||
| Shares of beneficial interest sold | 11,533 | |||
| Dividends from affiliate | 418 | |||
| Prepaid expenses and other assets | 37,267 | |||
Total Assets | 90,188,329 | |||
Liabilities: | ||||
| Payable for: | ||||
| Shares of beneficial interest redeemed | 217,381 | |||
| Distribution fee | 42,460 | |||
| Transfer agent fee | 30,982 | |||
| Investment advisory fee | 30,170 | |||
| Administration fee | 5,881 | |||
| Accrued expenses and other payables | 144,340 | |||
Total Liabilities | 471,214 | |||
Net Assets | $ | 89,717,115 | ||
Composition of Net Assets: | ||||
| Paid-in-capital | $ | 146,508,087 | ||
| Net unrealized depreciation | (40,957,941 | ) | ||
| Accumulated undistributed net investment income | 667,173 | |||
| Accumulated net realized loss | (16,500,204 | ) | ||
Net Assets | $89,717,115 | |||
Class A Shares: | ||||
| Net Assets | $51,129,950 | |||
Shares Outstanding (unlimited authorized, $.01 par value) | 6,830,155 | |||
Net Asset Value Per Share | $7.49 | |||
Maximum Offering Price Per Share, (net asset value plus 5.54% of net asset value) | $7.91 | |||
Class B Shares: | ||||
| Net Assets | $30,883,525 | |||
Shares Outstanding (unlimited authorized, $.01 par value) | 4,230,720 | |||
Net Asset Value Per Share | $7.30 | |||
Class C Shares: | ||||
| Net Assets | $7,347,894 | |||
Shares Outstanding (unlimited authorized, $.01 par value) | 1,012,725 | |||
Net Asset Value Per Share | $7.26 | |||
Class I Shares: | ||||
| Net Assets | $355,746 | |||
Shares Outstanding (unlimited authorized, $.01 par value) | 46,858 | |||
Net Asset Value Per Share | $7.59 | |||
See Notes to Financial Statements
11
Morgan Stanley Value Fund
Financial Statements continued
Statement of Operations
For the six months ended March 31, 2009 (unaudited)
Net Investment Income: | ||||
Income | ||||
| Dividends (net of $15,069 foreign withholding tax) | $ | 1,798,162 | ||
| Dividends from affiliate | 11,747 | |||
Total Income | 1,809,909 | |||
Expenses | ||||
| Investment advisory fee | 216,484 | |||
| Distribution fee (Class A shares) | 66,602 | |||
| Distribution fee (Class B shares) | 198,600 | |||
| Distribution fee (Class C shares) | 40,907 | |||
| Transfer agent fees and expenses | 164,187 | |||
| Registration fees | 112,590 | |||
| Professional fees | 50,662 | |||
| Administration fee | 41,235 | |||
| Shareholder reports and notices | 11,847 | |||
| Custodian fees | 7,343 | |||
| Other | 427 | |||
Total Expenses | 910,884 | |||
| Less: rebate from Morgan Stanley affiliated cash sweep (Note 4) | (2,215 | ) | ||
Net Expenses | 908,669 | |||
Net Investment Income | 901,240 | |||
Realized and Unrealized Loss: | ||||
| Net Realized Loss | (9,792,791 | ) | ||
| Net Change in Unrealized Appreciation/Depreciation | (36,010,064 | ) | ||
Net Loss | (45,802,855 | ) | ||
Net Decrease | $ | (44,901,615 | ) | |
See Notes to Financial Statements
12
Morgan Stanley Value Fund
Financial Statements continued
Statements of Changes in Net Assets
| FOR THE SIX | FOR THE YEAR | |||||||
| MONTHS ENDED | ENDED | |||||||
| MARCH 31, 2009 | SEPTEMBER 30, 2008 | |||||||
| (unaudited) | ||||||||
Increase (Decrease) in Net Assets: | ||||||||
Operations: | ||||||||
| Net investment income | $ | 901,240 | $ | 2,913,156 | ||||
| Net realized loss | (9,792,791 | ) | (4,563,682 | ) | ||||
| Net change in unrealized appreciation/depreciation | (36,010,064 | ) | (53,467,548 | ) | ||||
Net Decrease | (44,901,615 | ) | (55,118,074 | ) | ||||
Dividends and Distributions to Shareholders from: | ||||||||
| Net investment income | ||||||||
| Class A shares | (1,711,298 | ) | (1,911,650 | ) | ||||
| Class B shares | (794,113 | ) | (1,085,341 | ) | ||||
| Class C shares | (182,885 | ) | (193,069 | ) | ||||
| Class I shares | (31,709 | ) | (209,950 | ) | ||||
| Net realized gain | ||||||||
| Class A shares | — | (7,782,375 | ) | |||||
| Class B shares | — | (9,189,965 | ) | |||||
| Class C shares | — | (1,428,605 | ) | |||||
| Class I shares | — | (751,729 | ) | |||||
Total Dividends and Distributions | (2,720,005 | ) | (22,552,684 | ) | ||||
| Net decrease from transactions in shares of beneficial interest | (18,216,553 | ) | (40,447,994 | ) | ||||
Net Decrease | (65,838,173 | ) | (118,118,752 | ) | ||||
Net Assets: | ||||||||
| Beginning of period | 155,555,288 | 273,674,040 | ||||||
End of Period | ||||||||
(Including accumulated undistributed net investment income of $667,173 and $2,485,938, respectively) | $ | 89,717,115 | $ | 155,555,288 | ||||
See Notes to Financial Statements
13
Morgan Stanley Value Fund
Notes to Financial Statements - March 31, 2009 (unaudited)
1. Organization and Accounting Policies
Morgan Stanley 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 total return. The Fund was organized as a Massachusetts business trust on June 9, 1998 and commenced operations on November 25, 1998.
The Fund offers Class A shares, Class B shares, Class C shares and Class I 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 eighteen months, six years and one year, respectively. Class I shares are not subject to a sales charge. Additionally, Class A shares, Class B shares and Class C shares incur distribution expenses.
For the period October 1, 2008 to January 20, 2009, the Fund assessed a 2% redemption fee, on Class A shares, Class B shares, Class C shares, and Class I shares, which was paid directly to the Fund, for shares redeemed or exchanged within seven days of purchase, subject to certain exceptions. The redemption fee was designed to protect the Fund and its remaining shareholders from the effects of short-term trading. The Board of Trustees has approved the elimination of redemption fees, effective January 21, 2009.
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 including circumstances under which Morgan Stanley Investment Advisors Inc. (the “Investment Adviser”) 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
14
Morgan Stanley Value Fund
Notes to Financial Statements - March 31, 2009 (unaudited) continued
determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Fund’s Trustees or by the Investment Adviser 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) investments in open-end mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value as of the close of each business day; and (8) 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, which approximates market value.
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 and are included in interest income. 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. Federal Income Tax Policy — It is the Fund’s policy to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required. The Fund files tax returns with the U.S. Internal Revenue Service, New York State and New York City. The Fund follows the provisions of the Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”) Accounting for Uncertainty in Income Taxes. FIN 48 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. There are no unrecognized tax benefits in the accompanying financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in other expenses in the Statement of Operations. Each of the tax years in the four year period ended September 30, 2008, remains subject to examination by taxing authorities.
E. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date.
15
Morgan Stanley Value Fund
Notes to Financial Statements - March 31, 2009 (unaudited) continued
F. Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.
2. Investment Advisory/Administration Agreements
Pursuant to an Investment Advisory Agreement, the Fund pays the Investment Adviser an advisory fee, accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined as of the close of each business day: 0.42% to the portion of the daily net assets not exceeding $1 billion; 0.37% to the portion of the daily net assets exceeding $1 billion but not exceeding $2 billion; 0.32% to the portion of the daily net assets exceeding $2 billion but exceeding $3 billion; and 0.27% to the portion of the daily net assets exceeding $3 billion.
Pursuant to an Administration Agreement with Morgan Stanley Services Company Inc. (the “Administrator”), an affiliate of the Investment Adviser, the Fund pays an administration fee, accrued daily and payable monthly, by applying the annual rate of 0.08% to the Fund’s daily net assets.
Under an agreement between the Administrator and State Street Bank and Trust Company (“State Street”), State Street provides certain administrative services to the Fund. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
3. Plan of Distribution
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the “Distributor”), an affiliate of the Investment Adviser and Administrator. 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 shares; (ii) Class B — up to 1.0% of the average daily net assets of Class B shares; and (iii) Class C — up to 1.0% of the average daily net assets of Class C shares.
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 $2,704,974 at March 31, 2009.
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
16
Morgan Stanley Value Fund
Notes to Financial Statements - March 31, 2009 (unaudited) continued
reimbursed by the Fund through payments in any subsequent year, except that expenses representing a gross sales credit to Morgan Stanley Financial Advisors and other authorized financial representatives at the time of sale may be reimbursed in the subsequent calendar year. For the six months ended March 31, 2009, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.25% and 0.98%, respectively.
The Distributor has informed the Fund that for the six months ended March 31, 2009, it received contingent deferred sales charges from certain redemptions of the Fund’s Class A shares, Class B shares and Class C shares of $412, $33,204 and $316, respectively and received $2,463 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 Fund invests in Morgan Stanley Institutional Liquidity Funds — Government Portfolio — Institutional Class, an open-end management investment company managed by an affiliate of 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 Funds — Government Portfolio — Institutional Class with respect to assets invested by the Fund in Morgan Stanley Institutional Liquidity Funds — Government Portfolio — Institutional Class. For the six months ended March 31, 2009, advisory fees paid were reduced by $2,215 relating to the Fund’s investment in Morgan Stanley Institutional Liquidity Funds — Government Portfolio — Institutional Class. Income distributions earned by the Fund are recorded as “dividends from affiliate” in the Statement of Operations and totaled $11,747 for the six months ended March 31, 2009. During the six months ended March 31, 2009, cost of purchases and sales of investments in Morgan Stanley Institutional Liquidity Funds — Government Portfolio — Institutional Class aggregated $24,846,660 and $23,854,794, respectively.
The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended March 31, 2009, aggregated $18,463,694 and $33,848,539, respectively. Included in the aforementioned transactions are purchases in the amount of $28,939 with other Morgan Stanley funds.
For the six months ended March 31, 2009, the Fund incurred brokerage commissions of $815 with Morgan Stanley & Co., an affiliate of the Investment Adviser, Administrator and Distributor, for portfolio transactions executed on behalf of the Fund.
Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and Distributor, is the Fund’s transfer agent.
The Fund has an unfunded Deferred Compensation Plan (the “Compensation Plan”) which allows each independent Trustee to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Trustees. Each eligible Trustee generally may elect to have the deferred amounts credited with a
17
Morgan Stanley Value Fund
Notes to Financial Statements - March 31, 2009 (unaudited) continued
return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund.
5. Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:
| FOR THE SIX | FOR THE YEAR | |||||||||||||||
| MONTHS ENDED | ENDED | |||||||||||||||
| MARCH 31, 2009 | SEPTEMBER 30, 2008 | |||||||||||||||
| (unaudited) | ||||||||||||||||
| SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
| CLASS A SHARES | ||||||||||||||||
| Sold | 1,021,038 | $ | 8,001,834 | 707,454 | $ | 8,584,241 | ||||||||||
| Conversion from Class B | 114,891 | 838,400 | 634,226 | 8,402,820 | ||||||||||||
| Reinvestment of dividends and distributions | 216,566 | 1,684,881 | 650,898 | 8,669,969 | ||||||||||||
| Redeemed | (1,409,727 | ) | (10,846,915 | ) | (2,137,006 | ) | (26,821,851 | ) | ||||||||
| Net decrease – Class A | (57,232 | ) | (321,800 | ) | (144,428 | ) | (1,164,821 | ) | ||||||||
| CLASS B SHARES | ||||||||||||||||
| Sold | 68,192 | 537,040 | 129,196 | 1,630,422 | ||||||||||||
| Conversion to Class A | (111,962 | ) | (838,400 | ) | (654,592 | ) | (8,402,820 | ) | ||||||||
| Reinvestment of dividends and distributions | 102,078 | 776,812 | 725,496 | 9,387,918 | ||||||||||||
| Redeemed | (1,754,819 | ) | (13,126,137 | ) | (3,070,529 | ) | (37,413,591 | ) | ||||||||
| Net decrease – Class B | (1,696,511 | ) | (12,650,685 | ) | (2,870,429 | ) | (34,798,071 | ) | ||||||||
| CLASS C SHARES | ||||||||||||||||
| Sold | 36,708 | 284,673 | 38,608 | 472,566 | ||||||||||||
| Reinvestment of dividends and distributions | 23,647 | 178,768 | 118,332 | 1,526,485 | ||||||||||||
| Redeemed | (195,361 | ) | (1,454,560 | ) | (338,113 | ) | (4,159,027 | ) | ||||||||
| Net decrease – Class C | (135,006 | ) | (991,119 | ) | (181,173 | ) | (2,159,976 | ) | ||||||||
| CLASS I SHARES | ||||||||||||||||
| Sold | 410 | 3,610 | 8,864 | 111,739 | ||||||||||||
| Reinvestment of dividends and distributions | 1,984 | 15,652 | 55,418 | 748,692 | ||||||||||||
| Redeemed | (502,769 | ) | (4,272,211 | ) | (243,271 | ) | (3,185,557 | ) | ||||||||
| Net decrease – Class I | (500,375 | ) | (4,252,949 | ) | (178,989 | ) | (2,325,126 | ) | ||||||||
| Net decrease in Fund | (2,389,124 | ) | $ | (18,216,553 | ) | (3,375,019 | ) | $ | (40,447,994 | ) | ||||||
18
Morgan Stanley Value Fund
Notes to Financial Statements - March 31, 2009 (unaudited) continued
6. Expense Offset
The expense offset represents a reduction of the fees and expenses for interest earned on cash balances maintained by the Fund with the transfer agent.
7. Federal Income Tax Status
The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These “book/tax” differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital.
As of September 30, 2008, the Fund had temporary book/tax differences primarily 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.
8. Fair Valuation Measurements
The Fund adopted FASB statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”), effective October 1, 2008. In accordance with SFAS 157, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. SFAS 157 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund’s investments. The inputs are summarized in the three broad levels listed below.
| • | Level 1 — quoted prices in active markets for identical investments. | |
| • | Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risks, etc.) | |
| • | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
19
Morgan Stanley Value Fund
Notes to Financial Statements - March 31, 2009 (unaudited) continued
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used as of March 31, 2009 in valuing the Fund’s investments carried at value:
| FAIR VALUE MEASUREMENTS AT MARCH 31, 2009 USING | ||||||||||||||||
| QUOTED PRICES IN | SIGNIFICANT | SIGNIFICANT | ||||||||||||||
| ACTIVE MARKET FOR | OTHER OBSERVABLE | UNOBSERVABLE | ||||||||||||||
| IDENTICAL ASSETS | INPUTS | INPUTS | ||||||||||||||
| TOTAL | (LEVEL 1) | (LEVEL 2) | (LEVEL 3) | |||||||||||||
| Investments in Securities | 0 | 0 | 0 | 0 | ||||||||||||
9. Accounting Pronouncements
On March 19, 2008, FASB released Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. The application of SFAS 161 is required for fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. At this time, management is evaluating the implications of SFAS 161 and its impact on the Fund’s financial statements has not been determined.
On April 9, 2009, FASB issued Staff Position No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157, when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also requires additional disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. At this time, management is evaluating the implications of FSP 157-4 and the impact it will have on the Fund’s financial statements.
20
Morgan Stanley Value Fund
Financial Highlights
Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
| FOR THE SIX | ||||||||||||||||||||||||
| MONTHS ENDED | FOR THE YEAR ENDED SEPTEMBER 30, | |||||||||||||||||||||||
| MARCH 31, 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
Class A Shares | ||||||||||||||||||||||||
Selected Per Share Data: | ||||||||||||||||||||||||
| Net asset value, beginning of period | $10.90 | $15.59 | $14.85 | $13.27 | $12.23 | $10.10 | ||||||||||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.08 | 0.23 | 0.25 | 0.23 | 0.19 | 0.12 | ||||||||||||||||||
| Net realized and unrealized gain (loss) | (3.23 | ) | (3.51 | ) | 1.27 | 1.63 | 1.00 | 2.10 | ||||||||||||||||
| Total income (loss) from investment operations | (3.15 | ) | (3.28 | ) | 1.52 | 1.86 | 1.19 | 2.22 | ||||||||||||||||
| Less dividends and distributions from: | ||||||||||||||||||||||||
| Net investment income | (0.26 | ) | (0.28 | ) | (0.25 | ) | (0.28 | ) | (0.15 | ) | (0.09 | ) | ||||||||||||
| Net realized gain | — | (1.13 | ) | (0.53 | ) | — | — | — | ||||||||||||||||
| Total dividends and distributions | (0.26 | ) | (1.41 | ) | (0.78 | ) | (0.28 | ) | (0.15 | ) | (0.09 | ) | ||||||||||||
| Net asset value, end of period | $7.49 | $10.90 | $15.59 | $14.85 | $13.27 | $12.23 | ||||||||||||||||||
Total Return(2) | (29.01 | )%(6) | (22.69 | )% | 10.43 | % | 14.20 | % | 9.71 | % | 22.06 | % | ||||||||||||
Ratios To Average Net Assets(3) : | ||||||||||||||||||||||||
| Total expenses (before expense offset) | 1.42 | %(4)(7) | 1.04 | %(4) | 0.99 | %(4) | 1.00 | %(5) | 0.97 | % | 1.28 | % | ||||||||||||
| Net investment income | 2.09 | %(4)(7) | 1.78 | %(4) | 1.62 | %(4) | 1.69 | %(5) | 1.50 | % | 1.06 | % | ||||||||||||
Supplemental Data: | ||||||||||||||||||||||||
| Net assets, end of period, in thousands | $51,130 | $75,052 | $109,643 | $77,032 | $73,559 | $16,621 | ||||||||||||||||||
| Portfolio turnover rate | 17 | %(6) | 10 | % | 15 | % | 13 | % | 31 | % | 83 | % | ||||||||||||
| (1) | The per share amounts were computed using an average number of shares outstanding during the period. | |
| (2) | Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. | |
| (3) | Reflects overall Fund ratios for investment income and non-class specific expenses. | |
| (4) | Reflects rebate of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Funds – Government Portfolio – Institutional Class during the period. The rebate had an effect of less than 0.005%. | |
| (5) | If the Fund had borne all expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios would have been 1.01% and 1.68%, respectively. | |
| (6) | Not annualized. | |
| (7) | Annualized. |
See Notes to Financial Statements
21
Morgan Stanley Value Fund
Financial Highlights continued
| FOR THE SIX | ||||||||||||||||||||||||
| MONTHS ENDED | FOR THE YEAR ENDED SEPTEMBER 30, | |||||||||||||||||||||||
| MARCH 31, 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
Class B Shares | ||||||||||||||||||||||||
Selected Per Share Data: | ||||||||||||||||||||||||
| Net asset value, beginning of period | $10.53 | $15.07 | $14.34 | $12.79 | $11.80 | $9.74 | ||||||||||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.05 | 0.13 | 0.13 | 0.12 | 0.09 | 0.03 | ||||||||||||||||||
| Net realized and unrealized gain (loss) | (3.13 | ) | (3.41 | ) | 1.23 | 1.58 | 0.95 | 2.03 | ||||||||||||||||
| Total income (loss) from investment operations | (3.08 | ) | (3.28 | ) | 1.36 | 1.70 | 1.04 | 2.06 | ||||||||||||||||
| Less dividends and distributions from: | ||||||||||||||||||||||||
| Net investment income | (0.15 | ) | (0.13 | ) | (0.10 | ) | (0.15 | ) | (0.05 | ) | — | |||||||||||||
| Net realized gain | — | (1.13 | ) | (0.53 | ) | — | — | — | ||||||||||||||||
| Total dividends and distributions | (0.15 | ) | (1.26 | ) | (0.63 | ) | (0.15 | ) | (0.05 | ) | — | |||||||||||||
| Net asset value, end of period | $7.30 | $10.53 | $15.07 | $14.34 | $12.79 | $11.80 | ||||||||||||||||||
Total Return(2) | (29.32 | )%(6) | (23.30 | )% | 9.67 | % | 13.37 | % | 8.85 | % | 21.15 | % | ||||||||||||
Ratios To Average Net Assets(3) : | ||||||||||||||||||||||||
| Total expenses (before expense offset) | 2.17 | %(4)(7) | 1.79 | %(4) | 1.75 | %(4) | 1.75 | %(5) | 1.72 | % | 2.03 | % | ||||||||||||
| Net investment income | 1.34 | %(4)(7) | 1.03 | %(4) | 0.86 | %(4) | 0.94 | %(5) | 0.75 | % | 0.31 | % | ||||||||||||
Supplemental Data: | ||||||||||||||||||||||||
| Net assets, end of period, in thousands | $30,884 | $62,401 | $132,555 | $195,893 | $249,346 | $334,125 | ||||||||||||||||||
| Portfolio turnover rate | 17 | %(6) | 10 | % | 15 | % | 13 | % | 31 | % | 83 | % | ||||||||||||
| (1) | The per share amounts were computed using an average number of shares outstanding during the period. | |
| (2) | Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. | |
| (3) | Reflects overall Fund ratios for investment income and non-class specific expenses. | |
| (4) | Reflects rebate of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Funds – Government Portfolio – Institutional Class during the period. The rebate had an effect of less than 0.005%. | |
| (5) | If the Fund had borne all expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios would have been 1.76% and 0.93%, respectively. | |
| (6) | Not annualized. | |
| (7) | Annualized. |
See Notes to Financial Statements
22
Morgan Stanley Value Fund
Financial Highlights continued
| FOR THE SIX | ||||||||||||||||||||||||
| MONTHS ENDED | FOR THE YEAR ENDED SEPTEMBER 30, | |||||||||||||||||||||||
| MARCH 31, 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
Class C Shares | ||||||||||||||||||||||||
Selected Per Share Data: | ||||||||||||||||||||||||
| Net asset value, beginning of period | $10.49 | $15.04 | $14.34 | $12.80 | $11.81 | $9.75 | ||||||||||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.05 | 0.13 | 0.13 | 0.13 | 0.10 | 0.04 | ||||||||||||||||||
| Net realized and unrealized gain (loss) | (3.11 | ) | (3.40 | ) | 1.23 | 1.57 | 0.95 | 2.02 | ||||||||||||||||
| Total income (loss) from investment operations | (3.06 | ) | (3.27 | ) | 1.36 | 1.70 | 1.05 | 2.06 | ||||||||||||||||
| Less dividends and distributions from: | ||||||||||||||||||||||||
| Net investment income | (0.17 | ) | (0.15 | ) | (0.13 | ) | (0.16 | ) | (0.06 | ) | — | |||||||||||||
| Net realized gain | — | (1.13 | ) | (0.53 | ) | — | — | — | ||||||||||||||||
| Total dividends and distributions | (0.17 | ) | (1.28 | ) | (0.66 | ) | (0.16 | ) | (0.06 | ) | — | |||||||||||||
| Net asset value, end of period | $7.26 | $10.49 | $15.04 | $14.34 | $12.80 | $11.81 | * | |||||||||||||||||
Total Return(2) | (29.24 | )%(6) | (23.32 | )% | 9.67 | % | 13.38 | % | 8.93 | % | 21.15 | % | ||||||||||||
Ratios To Average Net Assets(3): | ||||||||||||||||||||||||
| Total expenses (before expense offset) | 2.17 | %(4)(7) | 1.77 | %(4) | 1.73 | %(4) | 1.72 | %(5) | 1.71 | % | 2.00 | % | ||||||||||||
| Net investment income | 1.34 | %(4)(7) | 1.05 | %(4) | 0.88 | %(4) | 0.97 | %(5) | 0.76 | % | 0.34 | % | ||||||||||||
Supplemental Data: | ||||||||||||||||||||||||
| Net assets, end of period, in thousands | $7,348 | $12,042 | $19,984 | $21,859 | $24,526 | $26,297 | ||||||||||||||||||
| Portfolio turnover rate | 17 | %(6) | 10 | % | 15 | % | 13 | % | 31 | % | 83 | % | ||||||||||||
| (1) | The per share amounts were computed using an average number of shares outstanding during the period. | |
| (2) | Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. | |
| (3) | Reflects overall Fund ratios for investment income and non-class specific expenses. | |
| (4) | Reflects rebate of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Funds – Government Portfolio – Institutional Class during the period. The rebate had an effect of less than 0.005%. | |
| (5) | If the Fund had borne all expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios would have been 1.73% and 0.96%, respectively. | |
| (6) | Not annualized. | |
| (7) | Annualized. |
See Notes to Financial Statements
23
Morgan Stanley Value Fund
Financial Highlights continued
| FOR THE SIX | ||||||||||||||||||||||||
| MONTHS ENDED | FOR THE YEAR ENDED SEPTEMBER 30, | |||||||||||||||||||||||
| MARCH 31, 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | |||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
Class I Shares | ||||||||||||||||||||||||
Selected Per Share Data: | ||||||||||||||||||||||||
| Net asset value, beginning of period | $11.07 | $15.82 | $15.05 | $13.44 | $12.39 | $10.23 | ||||||||||||||||||
| Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income(1) | 0.10 | 0.26 | 0.29 | 0.29 | 0.23 | 0.16 | ||||||||||||||||||
| Net realized and unrealized gain (loss) | (3.29 | ) | (3.56 | ) | 1.29 | 1.63 | 0.99 | 2.12 | ||||||||||||||||
| �� | ||||||||||||||||||||||||
| Total income (loss) from investment operations | (3.19 | ) | (3.30 | ) | 1.58 | 1.92 | 1.22 | 2.28 | ||||||||||||||||
| Less dividends and distributions from: | ||||||||||||||||||||||||
| Net investment income | (0.29 | ) | (0.32 | ) | (0.28 | ) | (0.31 | ) | (0.17 | ) | (0.12 | ) | ||||||||||||
| Net realized gain | — | (1.13 | ) | (0.53 | ) | — | — | — | ||||||||||||||||
| Total dividends and distributions | (0.29 | ) | (1.45 | ) | (0.81 | ) | (0.31 | ) | (0.17 | ) | (0.12 | ) | ||||||||||||
| Net asset value, end of period | $7.59 | $11.07 | $15.82 | $15.05 | $13.44 | $12.39 | ||||||||||||||||||
Total Return(2) | (28.95 | )%(6) | (22.59 | )% | 10.78 | % | 14.47 | % | 9.91 | % | 22.42 | % | ||||||||||||
Ratios to Average Net Assets(3): | ||||||||||||||||||||||||
| Total expenses (before expense offset) | 1.17 | %(4)(7) | 0.79 | %(4) | 0.75 | %(4) | 0.75 | %(5) | 0.72 | % | 1.03 | % | ||||||||||||
| Net investment income | 2.34 | %(4)(7) | 2.03 | %(4) | 1.86 | %(4) | 1.94 | %(5) | 1.75 | % | 1.31 | % | ||||||||||||
Supplemental Data: | ||||||||||||||||||||||||
| Net assets, end of period, in thousands | $356 | $6,060 | $11,492 | $11,739 | $75,832 | $68,870 | ||||||||||||||||||
| Portfolio turnover rate | 17 | %(6) | 10 | % | 15 | % | 13 | % | 31 | % | 83 | % | ||||||||||||
| (1) | The per share amounts were computed using an average number of shares outstanding during the period. | |
| (2) | Calculated based on the net asset value as of the last business day of the period. | |
| (3) | Reflects overall Fund ratios for investment income and non-class specific expenses. | |
| (4) | Reflects rebate of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Funds – Government Portfolio – Institutional Class during the period. The rebate had an effect of less than 0.005%. | |
| (5) | If the Fund had borne all expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios would have been 0.76% and 1.93%, respectively. | |
| (6) | Not annualized. | |
| (7) | Annualized. |
See Notes to Financial Statements
24
Morgan Stanley Value Fund
An Important Notice Concerning Our U.S. Privacy Policy (unaudited)
We are required by federal law to provide you with a copy of our Privacy Policy annually.
The following Policy applies to current and former individual investors in Morgan Stanley Advisor funds. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law.
We Respect Your Privacy
We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as “personal information.”
| 1. | What Personal Information Do We Collect About You? |
To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources.
For example:
| • | We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us. |
| • | We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources. |
| • | We may obtain information about your creditworthiness and credit history from consumer reporting agencies. |
| • | We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements. |
| • | If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer’s operating system and Web browser, your use of our Web sites and your product and service preferences, through the use of “cookies.” “Cookies” recognize your computer each time your return to one of our sites, and help to improve our sites’ content and personalize your experience on our sites by, for example, suggesting |
25
Morgan Stanley Value Fund
An Important Notice Concerning Our U.S. Privacy Policy (unaudited) continued
| offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies. |
| 2. | When Do We Disclose Personal Information We Collect About You? |
To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law.
A. Information We Disclose to Our Affiliated Companies. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law.
B. Information We Disclose to Third Parties. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to nonaffiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose.
| 3. | How Do We Protect the Security and Confidentiality of Personal Information We Collect About You? |
We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information.
26
(This Page Intentionally Left Blank)
Tru-stees
Michael Bozic
Kathleen A. Dennis
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Michael E. Nugent
W. Allen Reed
Fergus Reid
Officers
Chairperson of the Board
Randy Takian
President and Principal Executive Officer
Kevin Klingert
Vice President
Carsten Otto
Chief Compliance Officer
Stefanie V. Chang Yu
Vice President
Francis J. Smith
Treasurer and Chief Financial Officer
Mary E. Mullin
Secretary
Transfer Agent
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311
Independent Registered Public Accounting Firm
Two World Financial Center
New York, New York 10281
Legal Counsel
31 West 52nd Street
New York, New York 10019
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, New York 10036
Investment Adviser
522 Fifth Avenue
New York, New York 10036
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 the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund’s Statement of Additional Information contains additional information about the Fund, including its trustees. It is available, without charge, by calling (800) 869-NEWS.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
Morgan Stanley Distributors Inc., member FINRA.
![[MORGAN STANLEY LOGO]](https://capedge.com/proxy/N-CSRS/0000950123-09-012529/y01594mostkol1.gif)
INVESTMENT MANAGEMENT
Morgan Stanley
Value Fund
Semiannual
Report
March 31, 2009
Report
March 31, 2009
VLUSAN
IU09-02268P-Y03/09
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.
(a) Refer to Item 1.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable for semiannual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Applicable only to reports filed by closed-end funds.
Item 9. Closed-End Fund Repurchases
Applicable to reports filed by closed-end funds.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. 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.
(b) There were no changes 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.
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.
Item 12. 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 Value Fund
/s/ Randy Takian
Randy Takian
Principal Executive Officer
May 21, 2009
Randy Takian
Principal Executive Officer
May 21, 2009
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/ Randy Takian
Randy Takian
Principal Executive Officer
May 21, 2009
Randy Takian
Principal Executive Officer
May 21, 2009
/s/ Francis Smith
Francis Smith
Principal Financial Officer
May 21, 2009
Francis Smith
Principal Financial Officer
May 21, 2009
3