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

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-10359

Morgan Stanley Mid-Cap Value Fund
(Exact name of registrant as specified in charter)

1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)

Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)

Registrant's telephone number, including area code: 212-762-4000

Date of fiscal year end: August 31, 2004

Date of reporting period: February 29, 2004

Item 1 - Report to Shareholders

Welcome, Shareholder:

In this report, you'll learn about how your investment in Morgan Stanley Mid-Cap
Value Fund performed during the semiannual period. We will provide an overview
of the market conditions, and discuss some of the factors that affected
performance during the reporting period. In addition, this report includes the
Fund's financial statements and a list of Fund investments.

This material must be preceded or accompanied by a prospectus for the fund being
offered. Market forecasts provided in this report may not necessarily come to
pass. There is no assurance that the Fund will achieve its investment objective.
The Fund is subject to market risk, which is the possibility that market values
of securities owned by the Fund will decline and, therefore, the value of the
Fund's shares may be less than what you paid for them. Accordingly, you can lose
money investing in this Fund.

MORGAN STANLEY MID-CAP VALUE FUND

For the Six-Month Period Ended February 29, 2004

TOTAL RETURN FOR THE SIX MONTHS ENDED FEBRUARY 29, 2004

<Table>
<Caption>
RUSSELL S&P LIPPER
MIDCAP MID-CAP MID-CAP
VALUE 400 CORE FUNDS
CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2) INDEX(3)

14.54% 14.13% 14.13% 14.68% 20.24% 16.58% 16.35%
</Table>

Past performance is no guarantee of future results and current performance may
be lower than or higher than the figures shown. For more up-to-date information,
including month-end performance figures, please visit morganstanley.com or speak
with your Financial Advisor. Investment returns and principal value will
fluctuate and fund shares, when redeemed, may be worth more or less than their
original cost.

The performance of the Fund's four share classes varies because each has
different expenses. The Fund's total return figures assume the reinvestment of
all distributions but do not reflect the deduction of any applicable sales
charges. Such costs would lower performance. See Performance Summary for
standardized performance information.

MARKET CONDITIONS

The U.S. equity market performed well in the six months ended February 29, 2004.
The market's gains were supported by improvements in the underlying strength of
the economy, with GDP growth topping 8 percent in the third quarter of 2003 and
4 percent in the fourth quarter. Corporate profits also showed improvement as
companies cleaned up their balance sheets and trimmed costs.
Returns were solid across all major sectors of the market, with financials
leading the pack. These companies benefited strongly from improving economic
expectations, low interest rates, increased merger-and-acquisition activity and
strong capital markets. Energy stocks also rose as increasing demand from both
emerging and developed economies ran up against limited capacity, driving energy
prices and energy company profits higher. The strong economic signals also
boosted the returns of cyclical sectors such as industrials and basic materials,
which investors bid up in anticipation of further economy strength. Even
telecommunications, which had lagged the rest of the market in recent years,
began to show signs of life, especially the larger companies that appeared
poised to benefit from number portability and improved balance sheets. The
biggest laggard during the period was health care, where pharmaceuticals
companies struggled with patent expirations and the regulatory environment.

PERFORMANCE ANALYSIS

Morgan Stanley Mid-Cap Value Fund underperformed its benchmark the Russell
Midcap Value Index. The Fund also underperformed the S&P Mid-Cap 400 Index and
the Lipper Mid-Cap Core Funds. The Fund's underperformance was driven by a
combination of poor stock selection and -- as a result of our bottom-up
process -- sector positioning. Several of the Fund's stocks that were
detrimental to performance were in the health care and the industrial sectors.
Stocks such as Tenet Healthcare, which is a health care service provider,
disappointed investors as they reduced their profit expectations and extended
the time frame for a company turnaround. Goodrich Corporation and Hubble
Corporation, which are considered industrial companies, failed to exceed their
growth targets as some of their peers did.
The Fund entered the period with sizable weightings in financials, industrials
and basic materials. This posture gave it significant exposure to some of the
best-performing sectors of the market. Its holdings in financials did
particularly well, with many regional bank stocks benefiting from their status
as potential takeover targets. We took the opportunities presented by rising
prices during the period to take profits on these positions in order to redeploy
the assets into companies with more attractive valuations.
The Fund had strong performance within the energy sector, including Valero
Energy. This company's role as a marketer and refiner of oil allowed it to
capitalize on high oil commodity prices, boosting its profit margins. The Fund
also benefited from positions in Transocean and Global Santa Fe, both of which
also gained strongly on high oil prices. Sprint PCS also produced strong results
for the Fund, as the company gained from ongoing consolidation in the U.S.
wireless market and its parent company's decision to fold the wireless stock
back into the larger Sprint enterprise.

<Table>
<Caption>
TOP 10 HOLDINGS

Bausch & Lomb Inc. 3.5%
Goodrich Corp. 3.3
Watson Pharmaceuticals Inc. 3.2
AON Corp. 3.1
Valero Energy Corp. 2.9
Sovereign Bancorp Inc. 2.9
International Flavors & Fragrances 2.8
Chubb Corp. 2.7
Edison International 2.6
The BISYS Group Inc. 2.5
</Table>

<Table>
<Caption>
TOP 5 INDUSTRIES

Electric Utilities 7.3%
Property/Casualty Insurers 5.8
Medical Specialties 5.7
Insurance Brokers/Services 5.1
Advertising/Marketing Services 5.0
</Table>

Data as of February 29, 2004. Subject to change daily. All percentages are a
percentage of net assets. Provided for informational purposes only and should
not be deemed a recommendation to buy or sell the securities mentioned. Morgan
Stanley is a full-service securities firm engaged in securities trading and
brokerage activities, investment banking, research and analysis, financing and
financial advisory services.

INVESTMENT STRATEGY

THE FUND WILL NORMALLY INVEST AT LEAST 80% OF ITS ASSETS IN COMMON STOCKS OF
COMPANIES WITH A RECORD OF PAYING DIVIDENDS AND THE POTENTIAL FOR INCREASING
DIVIDENDS. THE FUND'S "INVESTMENT MANAGER," MORGAN STANLEY INVESTMENT ADVISORS
INC., INITIALLY EMPLOYS A QUANTITATIVE SCREENING PROCESS IN AN ATTEMPT TO
IDENTIFY A NUMBER OF COMMON STOCKS WHICH ARE UNDERVALUED AND WHICH HAVE A RECORD
OF PAYING DIVIDENDS. THE INVESTMENT MANAGER THEN APPLIES QUALITATIVE ANALYSIS TO
DETERMINE WHICH STOCKS IT BELIEVES HAVE THE POTENTIAL TO INCREASE DIVIDENDS AND,
FINALLY, TO DETERMINE WHETHER ANY OF THE STOCKS SHOULD BE ADDED TO OR SOLD FROM
THE FUND'S PORTFOLIO.

PROXY VOTING POLICIES AND PROCEDURES

A DESCRIPTION OF THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE VOTING
OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES IS AVAILABLE WITHOUT
CHARGE, UPON REQUEST, BY CALLING (800) 869-NEWS. THIS INFORMATION IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEBSITE AT
HTTP://WWW.SEC.GOV.

AVERAGE ANNUAL TOTAL RETURNS -- PERIOD ENDED FEBRUARY 29, 2004

<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++)
(since 10/29/01) (since 10/29/01) (since 10/29/01) (since 10/29/01)
SYMBOL MDFAX MDFBX MDFCX MDFDX

1 YEAR 54.19%(4) 53.09%(4) 53.09%(4) 54.58%(4)
46.10(5) 48.09(5) 52.09(5) --
SINCE INCEPTION 6.54(4) 5.75(4) 5.74(4) 6.80(4)
4.11(5) 4.54(5) 5.74(5) --
</Table>

Past performance is not predictive of future returns. Investment return and
principal value will fluctuate. When you sell fund shares, they may be worth
less than their original cost. The table does not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. Performance for Class A, Class B, Class C, and Class D shares will vary
due to differences in sales charges and expenses.

- --------------------------------------------------------------------------------
Notes on Performance

(1) The Russell Midcap Value Index measures the performance of those Russell
Midcap companies with lower price-to-book ratios and lower forecasted
growth values. The stocks are also members of the Russell 1000 Value Index.
Indexes are unmanaged and their returns do not include any sales charges or
fees. Such costs would lower performance. It is not possible to invest
directly in an index.

(2) The Standard & Poor's Mid-Cap 400 Index (S&P 400) is a market-value
weighted index, the performance of which is based on the performance of 400
domestic stocks chosen for market size, liquidity and industry group
representation. Indexes are unmanaged and their returns do not include any
sales charges or fees. Such costs would lower performance. It is not
possible to invest directly in an index.

(3) The Lipper Mid-Cap Core Funds Index is an equally weighted performance
index of the largest qualifying funds (based on net assets) in the Lipper
Mid-Cap Core Funds classification. The Index, which is adjusted for capital
gains distributions and income dividends, is unmanaged and should not be
considered an investment. There are currently 30 funds represented in this
Index.

(4) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.

(5) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.

* The maximum front-end sales charge for Class A is 5.25%.

** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The
CDSC declines to 0% after six years.

+ The maximum contingent deferred sales charge for Class C is 1% for shares
redeemed within one year of purchase.

++ Class D has no sales charge.

Morgan Stanley Mid-Cap Value Fund
PORTFOLIO OF INVESTMENTS - FEBRUARY 29, 2004 (UNAUDITED)

<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------

Common Stocks (95.8%)
Advertising/Marketing Services (5.0%)
495,550 Interpublic Group of Companies, Inc. (The)*................................. $ 8,399,572
278,690 Valassis Communications, Inc.*.............................................. 8,486,110
------------
16,885,682
------------
Aerospace & Defense (3.3%)
373,016 Goodrich Corp. ............................................................. 11,000,242
------------
Chemicals: Major Diversified (1.4%)
398,950 Hercules Inc.*.............................................................. 4,747,505
------------
Chemicals: Specialty (2.2%)
416,120 Lyondell Chemical Co. ...................................................... 7,411,097
------------
Containers/Packaging (2.0%)
104,020 Temple-Inland, Inc. ........................................................ 6,776,903
------------
Contract Drilling (4.0%)
272,477 GlobalSantaFe Corp. ........................................................ 8,038,072
186,880 Transocean Inc.*............................................................ 5,509,222
------------
13,547,294
------------
Data Processing Services (4.8%)
485,536 BISYS Group, Inc. (The)*.................................................... 8,569,710
463,500 Convergys Corp.*............................................................ 7,536,510
------------
16,106,220
------------
Electric Utilities (7.3%)
378,346 Edison International........................................................ 8,736,009
201,800 Pinnacle West Capital Corp. ................................................ 7,888,362
249,450 Wisconsin Energy Corp. ..................................................... 8,062,224
------------
24,686,595
------------
Electrical Products (2.4%)
207,010 Hubbell, Inc. (Class B)..................................................... 8,218,297
------------
Electronic Production Equipment (1.8%)
386,490 Cadence Design Systems, Inc.*............................................... 5,963,541
------------
</Table>

<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------

Finance/Rental/ Leasing (0.1%)
15,380 Nelnet, Inc. (Class A)*..................................................... $ 362,199
------------
Financial Conglomerates (2.2%)
343,100 Conseco Inc.*............................................................... 7,531,045
------------
Financial Publishing/ Services (2.1%)
272,380 Equifax, Inc. .............................................................. 7,139,080
------------
Food: Meat/Fish/Dairy (2.0%)
238,760 Hormel Foods Corp. ......................................................... 6,618,427
------------
Hospital/Nursing Management (0.7%)
191,420 Tenet Healthcare Corp.*..................................................... 2,300,868
------------
Hotels/Resorts/ Cruiselines (1.0%)
89,380 Starwood Hotels & Resorts Worldwide, Inc. .................................. 3,486,714
------------
Household/Personal Care (2.8%)
256,370 International Flavors & Fragrances, Inc. ................................... 9,380,578
------------
Information Technology Services (1.7%)
541,316 BearingPoint, Inc.*......................................................... 5,765,015
------------
Insurance Brokers/ Services (5.1%)
393,310 AON Corp. .................................................................. 10,316,521
199,020 Gallagher (Arthur J.) & Co. ................................................ 6,697,023
------------
17,013,544
------------
Investment Banks/ Brokers (1.2%)
109,980 Edwards (A.G.), Inc. ....................................................... 4,206,735
------------
Life/Health Insurance (1.9%)
428,320 UnumProvident Corp. ........................................................ 6,347,702
------------
</Table>

5
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
PORTFOLIO OF INVESTMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued

<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------

Medical Specialties (5.7%)
311,930 Applera Corp. -- Applied Biosystems Group................................... $ 7,112,004
201,120 Bausch & Lomb, Inc. ........................................................ 11,944,517
------------
19,056,521
------------
Miscellaneous Commercial Services (2.2%)
330,450 Sabre Holdings Corp. ....................................................... 7,497,911
------------
Multi-Line Insurance (0.7%)
154,900 Horace Mann Educators Corp. ................................................ 2,345,186
------------
Oil Refining/Marketing (2.9%)
162,109 Valero Energy Corp. ........................................................ 9,726,570
------------
Personnel Services (2.0%)
150,749 Manpower, Inc. ............................................................. 6,746,018
------------
Pharmaceuticals: Generic Drugs (3.2%)
236,130 Watson Pharmaceuticals, Inc.*............................................... 10,843,090
------------
Property -- Casualty Insurers (5.8%)
181,380 ACE Ltd. (Bermuda).......................................................... 8,154,845
102,600 Bristol West Holdings Inc.*................................................. 2,228,472
129,050 Chubb Corp. (The)........................................................... 9,159,969
------------
19,543,286
------------
Publishing: Books/ Magazines (2.1%)
224,010 Scholastic Corp.*........................................................... 7,179,521
------------
</Table>

<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------

Regional Banks (2.3%)
268,311 National Commerce Financial Corp. .......................................... $ 7,848,097
------------
Restaurants (4.2%)
310,790 Darden Restaurants, Inc. ................................................... 7,583,276
163,440 Wendy's International, Inc. ................................................ 6,647,105
------------
14,230,381
------------
Savings Banks (2.9%)
438,930 Sovereign Bancorp, Inc. .................................................... 9,722,300
------------
Services to the Health Industry (2.2%)
302,830 IMS Health Inc. ............................................................ 7,504,127
------------
Specialty Insurance (1.6%)
210,700 Assurant, Inc.*............................................................. 5,423,418
------------
Specialty Stores (1.7%)
330,360 Office Depot, Inc.*......................................................... 5,758,175
------------
Wireless Telecommunications (1.3%)
480,000 Sprint Corp. (PCS Group)*................................................... 4,320,000
------------
Total Common Stocks (Cost $288,219,330).................................... 323,239,884
------------
</Table>

6
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
PORTFOLIO OF INVESTMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued

<Table>
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------------------------------

Short-Term Investment (4.3%)
Repurchase Agreement
$ 14,485 Joint repurchase agreement account 1.03% due 03/01/04 (dated 02/27/04;
proceeds $14,486,243) (Cost $14,485,000) (a)............................... $ 14,485,000
------------
</Table>

<Table>

Total Investments
(Cost $302,704,330) (b).... 100.1% 337,724,884
Liabilities in Excess of
Other Assets............... (0.1) (322,653)
------------

Net Assets.................. 100.0% $337,402,231
============
</Table>

- ---------------------

<Table>

* Non-income producing security.
(a) Collateralized by federal agency and U.S. Treasury
obligations.
(b) The aggregate cost for federal income tax purposes
approximates the aggregate cost for book purposes.
The aggregate gross unrealized appreciation is
$35,991,225 and the aggregate gross unrealized
depreciation is $970,671, resulting in net
unrealized appreciation of $35,020,554.
</Table>

7
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
February 29, 2004 (unaudited)

<Table>

Assets:
Investments in securities, at value
(cost $302,704,330)........................................ $337,724,884
Receivable for:
Shares of beneficial interest sold...................... 1,673,621
Investments sold........................................ 725,596
Dividends............................................... 323,144
Prepaid expenses and other assets........................... 33,968
------------
Total Assets............................................ 340,481,213
------------
Liabilities:
Payable for:
Investments purchased................................... 2,506,838
Investment management fee............................... 217,293
Shares of beneficial interest redeemed.................. 212,405
Distribution fee........................................ 63,418
Accrued expenses and other payables......................... 79,028
------------
Total Liabilities....................................... 3,078,982
------------
Net Assets.............................................. $337,402,231
============
Composition of Net Assets:
Paid-in-capital............................................. $276,791,105
Net unrealized appreciation................................. 35,020,554
Net investment loss......................................... (333,200)
Accumulated undistributed net realized gain................. 25,923,772
------------
Net Assets.............................................. $337,402,231
============
Class A Shares:
Net Assets.................................................. $3,805,496
Shares Outstanding (unlimited authorized, $.01 par value)... 328,611
Net Asset Value Per Share............................... $11.58
============
Maximum Offering Price Per Share,
(net asset value plus 5.54% of net asset value)......... $12.22
============
Class B Shares:
Net Assets.................................................. $68,761,808
Shares Outstanding (unlimited authorized, $.01 par value)... 6,036,933
Net Asset Value Per Share............................... $11.39
============
Class C Shares:
Net Assets.................................................. $8,784,922
Shares Outstanding (unlimited authorized, $.01 par value)... 771,270
Net Asset Value Per Share............................... $11.39
============
Class D Shares:
Net Assets.................................................. $256,050,005
Shares Outstanding (unlimited authorized, $.01 par value)... 21,996,907
Net Asset Value Per Share............................... $11.64
============
</Table>

8
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL STATEMENTS continued

Statement of Operations
For the six months ended February 29, 2004 (unaudited)

<Table>

Net Investment Loss:
Income
Dividends................................................... $ 1,728,804
Interest.................................................... 47,944
------------
Total Income............................................ 1,776,748
------------
Expenses
Investment management fee................................... 1,210,397
Transfer agent fees and expenses............................ 366,597
Distribution fee (Class A shares)........................... 4,025
Distribution fee (Class B shares)........................... 311,161
Distribution fee (Class C shares)........................... 39,609
Registration fees........................................... 68,884
Shareholder reports and notices............................. 55,447
Professional fees........................................... 30,561
Custodian fees.............................................. 18,902
Other....................................................... 4,365
------------
Total Expenses.......................................... 2,109,948
------------
Net Investment Loss..................................... (333,200)
------------
Net Realized and Unrealized Gain (Loss):
Net realized gain........................................... 55,002,035
Net change in unrealized appreciation....................... (12,876,896)
------------
Net Gain................................................ 42,125,139
------------
Net Increase................................................ $ 41,791,939
============
</Table>

9
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL STATEMENTS continued

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
----------------- ---------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment loss......................................... $ (333,200) $ (873,726)
Net realized gain (loss).................................... 55,002,035 (15,371,350)
Net change in unrealized appreciation....................... (12,876,896) 70,528,599
------------ ------------
Net Increase............................................ 41,791,939 54,283,523

Net increase from transactions in shares of beneficial
interest.................................................. 19,342,166 63,479,985
------------ ------------
Net Increase............................................ 61,134,105 117,763,508
Net Assets:
Beginning of period......................................... 276,268,126 158,504,618
------------ ------------
End of Period
(Including a net investment loss of $333,200 and $0,
respectively)............................................... $337,402,231 $276,268,126
============ ============
</Table>

10
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED)

1. Organization and Accounting Policies

Morgan Stanley Mid-Cap Value Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is
above-average total return. The Fund seeks to achieve its objective by investing
primarily in a diversified portfolio of common stocks and other equity
securities of companies with market capitalizations in the range of companies
included in the Russell Midcap Value Index (prior to September 30, 2003, the S&P
Mid-Cap 400 Index). The Fund was organized as a Massachusetts business trust on
April 12, 2001 and commenced operations on October 29, 2001.

The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.

The following is a summary of significant accounting policies:

A. Valuation of Investments -- (1) an equity portfolio security listed or traded
on the New York Stock Exchange ("NYSE") or American Stock Exchange or other
exchange is valued at its latest sale price prior to the time when assets are
valued; if there were no sales that day, the security is valued at the mean
between the last reported bid and asked price; (2) an equity portfolio security
listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price;
if there were no sales that day, the security is valued at the mean between the
last reported bid and asked price; (3) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the mean
between the last reported bid and asked price. In cases where a security is
traded on more than one exchange, the security is valued on the exchange
designated as the primary market; (4) for equity securities traded on foreign
exchanges, the last reported sale price or the latest bid price may be used if
there were no sales on a particular day; (5) when market quotations are not
readily available or Morgan Stanley Investment Advisors Inc. (the "Investment
Manager") determines that the latest sale price, the bid price or the mean
between the last reported bid and asked price do not reflect a security's market
value, portfolio securities are valued at their fair value as determined in good
faith under procedures established by and under the general supervision of the
Fund's Trustees. Occasionally, developments affecting the closing prices of
securities and other assets may occur between the times at which valuations of
such securities are determined (that is, close of the foreign market on which
the securities trade) and the close of business on the NYSE. If developments
occur during such periods that are expected to materially affect the value of
such

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued

securities, such valuations may be adjusted to reflect the estimated fair value
of such securities as of the close of the NYSE, as determined in good faith by
the Fund's Trustees or by the Investment Manager using a pricing service and/or
procedures approved by the Trustees of the Fund; (6) certain portfolio
securities may be valued by an outside pricing service approved by the Fund's
Trustees; (7) short-term debt securities having a maturity date of more than
sixty days at time of purchase are valued on a mark-to-market basis until sixty
days prior to maturity and thereafter at amortized cost based on their value on
the 61st day. Short-term debt securities having a maturity date of sixty days or
less at the time of purchase are valued at amortized cost.

B. Accounting for Investments -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.

C. Repurchase Agreements -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
entities managed by the Investment Manager, may transfer uninvested cash
balances into one or more joint repurchase agreement accounts. These balances
are invested in one or more repurchase agreements and are collateralized by
cash, U.S. Treasury or federal agency obligations. The Fund may also invest
directly with institutions in repurchase agreements. The Fund's custodian
receives the collateral, which is marked-to-market daily to determine that the
value of the collateral does not decrease below the repurchase price plus
accrued interest.

D. Multiple Class Allocations -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.

E. Federal Income Tax Policy -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.

F. Dividends and Distributions to Shareholders -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.

G. Use of Estimates -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued

2. Investment Management Agreement

Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.80% to the net assets of the Fund determined as of the close of
each business day.

3. Plan of Distribution

Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- 1.0% of the average daily
net assets of Class B; and (iii) Class C -- up to 1.0% of the average daily net
assets of Class C.

In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts totaled $2,064,935
at February 29, 2004.

In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Financial Advisors or other selected
broker-dealer representatives may be reimbursed in the subsequent calendar year.
For the six months ended February 29, 2004, the distribution fee was accrued for
Class A shares and Class C shares at the annual rate of 0.25% and 1.0%,
respectively.

The Distributor has informed the Fund that for the six months ended February 29,
2004, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $86,580 and $567, respectively
and received $28,246 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense of
the Fund.

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued

4. Security Transactions and Transactions with Affiliates

The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended February 29, 2004 aggregated
$333,073,683 and $322,902,396, respectively.

For the six months ended February 29, 2004, the Fund incurred brokerage
commissions of $21,839 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager and Distributor, for portfolio transactions executed on
behalf of the Fund.

5. Federal Income Tax Status

The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for tax purposes are reported as distributions of paid-in-capital.

At August 31, 2003, the Fund had a net capital loss carryover of approximately
$15,087,079 of which $4,185 will expire on August 31, 2010 and $15,082,894 will
expire on August 31, 2011 to offset future capital gains to the extent provided
by regulations.

As of August 31, 2003, the Fund had temporary book/tax differences attributable
to post-October losses (capital losses incurred after October 31 within the
taxable year which are deemed to arise on the first business day of the Fund's
next taxable year) and capital loss deferrals on wash sales.

6. Legal Matters

The Investment Manager, certain affiliates of the Investment Manager, certain
officers of such affiliates and certain investment companies advised by the
Investment Manager or its affiliates, including the Fund, are named as
defendants in a number of similar class action complaints which were recently
consolidated. This consolidated action also names as defendants certain
individual Trustees and Directors of the Morgan Stanley funds. The consolidated
amended complaint generally alleges that defendants, including the Fund,
violated their statutory disclosure obligations and fiduciary duties by failing
properly to disclose (i) that the Investment Manager and certain affiliates of
the Investment Manager allegedly offered economic incentives to brokers and
others to recommend the funds advised by the Investment Manager or its
affiliates to investors rather than funds managed by other companies, and (ii)
that the funds advised by the Investment Manager or its affiliates,

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 (UNAUDITED) continued

including the Fund, allegedly paid excessive commissions to brokers in return
for their efforts to recommend these funds to investors. The complaint seeks,
among other things, unspecified compensatory damages, rescissionary damages,
fees and costs. The defendants intend to move to dismiss the action and
otherwise vigorously to defend it. While the Fund believes that it has
meritorious defenses, the ultimate outcome of this matter is not presently
determinable at this early stage of the litigation, and no provision has been
made in the Fund's financial statements for the effect, if any, of this matter.

7. Shares of Beneficial Interest

Transactions in shares of beneficial interest were as follows:

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
------------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------

CLASS A SHARES
Sold............................................. 107,539 $ 1,179,232 115,054 $ 961,173
Redeemed......................................... (92,681) (979,988) (173,866) (1,426,387)
---------- ------------ ---------- ------------
Net increase (decrease) - Class A................ 14,858 199,244 (58,812) (465,214)
---------- ------------ ---------- ------------
CLASS B SHARES
Sold............................................. 1,202,760 12,715,299 1,366,029 11,463,631
Redeemed......................................... (857,721) (9,098,671) (2,293,090) (18,471,458)
---------- ------------ ---------- ------------
Net increase (decrease) - Class B................ 345,039 3,616,628 (927,061) (7,007,827)
---------- ------------ ---------- ------------
CLASS C SHARES
Sold............................................. 125,947 1,332,169 227,668 1,891,523
Redeemed......................................... (79,727) (838,401) (282,157) (2,259,257)
---------- ------------ ---------- ------------
Net increase (decrease) - Class C................ 46,220 493,768 (54,489) (367,734)
---------- ------------ ---------- ------------
CLASS D SHARES
Sold............................................. 3,593,296 38,770,822 13,696,927 111,374,767
Redeemed......................................... (2,187,387) (23,738,296) (4,701,478) (40,054,007)
---------- ------------ ---------- ------------
Net increase - Class D........................... 1,405,909 15,032,526 8,995,449 71,320,760
---------- ------------ ---------- ------------
Net increase in Fund............................. 1,812,026 $ 19,342,166 7,955,087 $ 63,479,985
========== ============ ========== ============
</Table>

Morgan Stanley Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS

Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:

<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR OCTOBER 29, 2001*
MONTHS ENDED ENDED THROUGH
FEBRUARY 29, 2004 AUGUST 31, 2003 AUGUST 31, 2002
----------------- --------------- -----------------
(unaudited)

Class A Shares
Selected Per Share Data:

Net asset value, beginning of period....................... $10.11 $ 8.19 $ 10.00
------ ------ -------

Income (loss) from investment operations:
Net investment loss+++................................. (0.01) (0.03) (0.04)
Net realized and unrealized gain (loss)................ 1.48 1.95 (1.76)
------ ------ -------

Total income (loss) from investment operations............. 1.47 1.92 (1.80)
------ ------ -------

Less dividends from net investment income.................. -- -- (0.01)
------ ------ -------

Net asset value, end of period............................. $11.58 $10.11 $ 8.19
====== ====== =======

Total Return+.............................................. 14.54 %(1) 23.44 % (17.99)%(1)

Ratios to Average Net Assets(3):
Expenses................................................... 1.41 %(2) 1.47 % 1.45 %(2)(4)
Net investment loss........................................ (0.24)%(2) (0.39)% (0.58)%(2)(4)

Supplemental Data:
Net assets, end of period, in thousands.................... $3,805 $3,173 $3,053
Portfolio turnover rate.................................... 110 %(1) 165 % 121 %(1)
</Table>

- ---------------------

<Table>

* Commencement of operations.
+++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated
based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
(4) If the Fund had borne all its expenses that were reimbursed
or waived by the Investment Manager, the annualized expense
and net investment loss ratios would have been 1.66% and
(0.79)%, respectively.
</Table>

16
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS continued

Class B Shares
Selected Per Share Data:
Net asset value, beginning of period....................... $ 9.98 $ 8.15 $10.00
------ ------ ------
Income (loss) from investment operations:
Net investment loss+++................................. (0.05) (0.09) (0.10)
Net realized and unrealized gain (loss)................ 1.46 1.92 (1.75)
------ ------ ------
Total income (loss) from investment operations............. 1.41 1.83 (1.85)
------ ------ ------
Less dividends from net investment income.................. -- -- 0.00++
------ ------ ------
Net asset value, end of period............................. $11.39 $ 9.98 $ 8.15
====== ====== ======
Total Return+.............................................. 14.13 %(1) 22.45 % (18.47)%(1)
Ratios to Average Net Assets(3):
Expenses................................................... 2.16 %(2) 2.24 % 2.20 %(2)(4)
Net investment loss........................................ (0.99)%(2) (1.16)% (1.33)%(2)(4)
Supplemental Data:
Net assets, end of period, in thousands.................... $68,762 $56,823 $53,948
Portfolio turnover rate.................................... 110 %(1) 165 % 121 %(1)
</Table>

- ---------------------

<Table>

* Commencement of operations.
+++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated
based on the net asset value as of the last business day of
the period.
++ Less than $0.005 per share.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
(4) If the Fund had borne all its expenses that were reimbursed
or waived by the Investment Manager, the annualized expense
and net investment loss ratios would have been 2.41% and
(1.54)%, respectively.
</Table>

17
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS continued

Class C Shares
Selected Per Share Data:
Net asset value, beginning of period....................... $ 9.98 $ 8.15 $10.00
------ ------ ------
Income (loss) from investment operations:
Net investment loss+++................................. (0.05) (0.09) (0.10)
Net realized and unrealized gain (loss)................ 1.46 1.92 (1.75)
------ ------ ------
Total income (loss) from investment operations............. 1.41 1.83 (1.85)
------ ------ ------
Less dividends from net investment income.................. -- -- 0.00++
------ ------ ------
Net asset value, end of period............................. $11.39 $ 9.98 $ 8.15
====== ====== ======
Total Return+.............................................. 14.13 %(1) 22.45 % (18.48)%(1)
Ratios to Average Net Assets(3):
Expenses................................................... 2.16 %(2) 2.24 % 2.20 %(2)(4)
Net investment loss........................................ (0.99)%(2) (1.16)% (1.33)%(2)(4)
Supplemental Data:
Net assets, end of period, in thousands.................... $8,785 $7,238 $6,354
Portfolio turnover rate.................................... 110 %(1) 165 % 121 %(1)
</Table>

- ---------------------

<Table>

* Commencement of operations.
+++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated
based on the net asset value as of the last business day of
the period.
++ Less than $0.005 per share.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
(4) If the Fund had borne all its expenses that were reimbursed
or waived by the Investment Manager, the annualized expense
and net investment loss ratios would have been 2.41% and
(1.54)%, respectively.
</Table>

18
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS continued

Class D Shares
Selected Per Share Data:

Net asset value, beginning of period....................... $10.15 $ 8.21 $10.00
------ ------ ------

Income (loss) from investment operations:
Net investment income (loss)+++........................ 0.00 (0.01) (0.04)
Net realized and unrealized gain (loss)................ 1.49 1.95 (1.73)
------ ------ ------

Total income (loss) from investment operations............. 1.49 1.94 (1.77)
------ ------ ------

Less dividends from net investment income.................. -- -- (0.02)
------ ------ ------

Net asset value, end of period............................. $11.64 $10.15 $ 8.21
====== ====== ======

Total Return+.............................................. 14.68%(1) 23.63 % (17.76)%(1)

Ratios to Average Net Assets(3):
Expenses................................................... 1.16%(2) 1.24 % 1.20 %(2)(4)
Net investment income (loss)............................... 0.01%(2) (0.16)% (0.33)%(2)(4)

Supplemental Data:
Net assets, end of period, in thousands.................... $256,050 $209,035 $95,150
Portfolio turnover rate.................................... 110%(1) 165 % 121 %(1)
</Table>

- ---------------------

<Table>

19
See Notes to Financial Statements

TRUSTEES

Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael E. Nugent
Philip J. Purcell
Fergus Reid

OFFICERS

Charles A. Fiumefreddo
Chairman of the Board

Mitchell M. Merin
President

Ronald E. Robison
Executive Vice President and Principal Executive Officer

Barry Fink
Vice President and General Counsel

Joseph J. McAlinden
Vice President

Stefanie V. Chang
Vice President

Francis J. Smith
Treasurer and Chief Financial Officer

Thomas F. Caloia
Vice President

Mary E. Mullin
Secretary

TRANSFER AGENT

Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT AUDITORS

Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281

INVESTMENT MANAGER

Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020

The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors and accordingly they do not
express an opinion thereon.

This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its fees and expenses and
other pertinent information, please read its Prospectus. The Fund's Statement of
Additional Information contains additional information about the Fund, including
its trustees. It is available, without charge, by calling (800) 869-NEWS.

This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective Prospectus. Read the
Prospectus carefully before investing.

Investments and services offered through Morgan Stanley DW Inc., member SIPC.
Morgan Stanley Distributors Inc., member NASD.

[MORGAN STANLEY LOGO]

MORGAN STANLEY FUNDS

Morgan Stanley
Mid-Cap Value
Fund

Semiannual Report
February 29, 2004

[MORGAN STANLEY LOGO]

39917RPT-RA04-00017P-A02/04

Item 2. Code of Ethics.