UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07377
Morgan Stanley Capital Opportunities Trust
(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: November 30, 2004
Date of reporting period: May 31, 2004
Item 1 - Report to Shareholders
Welcome, Shareholder:
In this report, you'll learn about how your investment in Morgan Stanley Capital
Opportunities Trust 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.
FUND REPORT
For the Six-Month Period Ended May 31, 2004
TOTAL RETURN FOR THE SIX-MONTH PERIOD ENDED MAY 31, 2004
<Table>
<Caption>
S&P 400 LIPPER MULTI-
MID-CAP CAP GROWTH
CLASS A CLASS B CLASS C CLASS D INDEX(1) FUNDS INDEX(2)
8.74% 8.28% 8.33% 8.79% 5.47% 4.59%
</Table>
The performance of the Fund's four share classes varies because each has
different expenses. The Fund's total return figures assume the reinvestment of
all distributions, but do not reflect the deduction of any applicable sales
charges. Such costs would lower performance. Past performance is no guarantee of
future results. See Performance Summary for standardized performance
information.
MARKET CONDITIONS
The U.S. equity market entered the six-month period amid a strong rally fueled
by an outpouring of positive economic data during the fall and winter of 2003.
Investors gained confidence in equities as the University of Michigan's survey
of consumer sentiment and the Institute for Supply Management's manufacturing
activity index rose in the early part of the period. As a result, investors
shifted assets into high-beta, market sensitive sectors that have traditionally
rallied most strongly under similar economic conditions. Due to this influx of
assets, information technology and industrial stocks were the leading sectors in
the S&P 400 Mid-Cap Index early in the period. Lower-quality small-cap stocks
with large short-term growth potential led their larger peers as well.
Early in 2004, however, the rally stalled as geopolitical concerns rose and
economic data was mixed. Investor concern arose due to the U.S. occupation in
Iraq, terrorist activities in Madrid, disappointing new jobs creation reports
and hints from the Federal Open Market Committee that interest rates might be on
the rise. This change in investor sentiment prompted a shift in sector
leadership as investors took profits and took defensive positions against the
potential detrimental effects of rising interest rates. The S&P 400 Mid-Cap
Index's traditionally defensive sectors such as consumer staples and energy
rallied as a result and led their more economically sensitive counterparts.
PERFORMANCE ANALYSIS
For the six-month period ended May 31, 2004, Morgan Stanley Capital
Opportunities Trust outperformed both the S&P 400 Mid-Cap Index and the Lipper
Multi-Cap Growth Funds Index due to strong stock selection. The Fund's strategy
is to use fundamental, bottom-up analysis when building the portfolio; sector
weighting differences do occur, although they are a residual of this process and
generally do not reflect top-down views about those sectors. For example, during
this period the Fund received its strongest results from a large overweighted
position in consumer discretionary companies relative to the S&P 400 Mid-Cap
Index. However, this allocation was a result of market advantages of specific
companies (i.e. brand names and niche products) rather than a prediction on the
fundamentals of that sector as a whole. The three largest sectors and strongest
performers relative to the index in the portfolio were consumer discretionary,
technology and healthcare.
2
Several of the Fund's best performing holdings were stocks held in the consumer
discretionary sector: Station Casinos, Wynn Resorts and the lottery company
GTECH. Station Casinos benefited from a new Native American partnership and
increased earnings expectations. Wynn Resorts performed well as the legislative
environment improved, future growth prospects looked strong and a new Sands
property opened. GTECH added domestic and international multi-year contracts
thus improving its earnings stability. The Fund also received strong relative
performance from holdings in health care (such as equipment supplier Varian) and
information technology (such as Yahoo! and Qualcomm).
While the Fund outperformed the S&P 400 Mid-Cap Index and its Lipper peer group,
not all of its holdings performed well. Most notably, materials company Newmont
Mining was hurt by the drop in gold prices while commercial services company ITT
Educational Services has been the subject of a Department of Justice
investigation.
3
<Table>
<Caption>
TOP 10 HOLDINGS
Station Casinos 3.6%
Wynn Resorts Ltd. 3.5
Ultra Petroleum Corp. 3.2
Newmont Mining Corp. Holding Co. 3.1
Royal Caribbean Cruises Ltd. 2.9
Univision Communications Inc. -- Class A 2.8
Berkshire Hathaway Inc. -- Class B 2.8
Yahoo! Inc. 2.1
eBay Inc. 2.1
Apogent Technologies Inc. 2.0
</Table>
<Table>
<Caption>
TOP FIVE INDUSTRIES
Casino/Gaming 10.5%
Medical Specialties 7.7
Other Consumer Services 6.3
Packaged Software 5.4
Biotechnology 5.0
</Table>
Data as of May 31, 2004. Subject to change daily. All percentages are as a
percentage of net assets. Provided for informational purposes only and should
not be deemed as 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 65% of its assets in a portfolio of
common stocks of companies with market capitalizations, at the time of purchase,
within the capitalization range of the companies comprising the Lipper Multi-Cap
Growth universe, which as of December 31, 2003 was approximately $29.9 million
to $311.1 billion. The Fund's "Investment Manager," Morgan Stanley Investment
Advisors Inc., invests the Fund's assets in companies that it believes exhibit
above-average earnings growth prospects and attractive stock market valuations.
In buying and selling securities for the Fund's portfolio, the Investment
Manager uses its proprietary research in pursuing a "bottom-up" investment
philosophy, which emphasizes individual company selection. Quantitative and
qualitative standards also will be used to screen companies to provide a list of
potential investment securities. The Investment Manager then subjects the list
of securities to a fundamental analysis using a variety of criteria.
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 (6397). This information is also
available on the Securities and Exchange Commission's website at
http://www.sec.gov.
4
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS -- PERIOD ENDED MAY 31, 2004
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++)
(since 07/28/97) (since 02/27/96) (since 07/28/97) (since 07/28/97)
SYMBOL CPOAX CPOBX CPOCX CPODX
1 YEAR 30.52%(3) 29.52%(3) 29.44%(3) 30.74%(3)
23.66(4) 24.52(4) 28.44(4) --
5 YEARS (11.19)(3) (11.83)(3) (11.87)(3) (11.04)(3)
(12.14)(4) (12.18)(4) (11.87)(4) --
SINCE INCEPTION 3.52(3) 3.34(3) 2.75(3) 3.72(3)
2.71(4) 3.34(4) 2.75(4) --
</Table>
Past performance is no guarantee of future results and current performance may
be lower 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 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.
* 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.
(1) The Standard and 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.
(2) The Lipper Multi-Cap Growth Funds Index is an equally weighted performance
index of the largest qualifying funds (based on net assets) in the Lipper
Multi-Cap Growth 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.
(3) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(4) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
5
Morgan Stanley Capital Opportunities Trust
PORTFOLIO OF INVESTMENTS - MAY 31, 2004 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Common Stocks (99.5%)
Advertising/Marketing
Services (1.5%)
148,500 Lamar Advertising Co.
(Class A)*.............. $ 6,069,195
------------
Air Freight/Couriers
(1.0%)
98,850 C.H. Robinson Worldwide,
Inc. .................. 4,110,183
------------
Apparel/Footwear (1.7%)
95,000 Carter's, Inc.*.......... 2,967,800
95,200 Coach, Inc.*............. 4,151,672
------------
7,119,472
------------
Apparel/Footwear Retail
(1.1%)
104,400 Chico's FAS, Inc.*....... 4,478,760
------------
Biotechnology (5.0%)
93,900 Amgen Inc.*.............. 5,136,330
134,030 Charles River
Laboratories
International, Inc.*.... 6,042,072
70,100 Gilead Sciences, Inc.*... 4,588,746
60,500 ImClone Systems, Inc.*... 4,477,000
------------
20,244,148
------------
Broadcasting (3.9%)
272,000 Radio One, Inc. (Class
D)*..................... 4,700,160
348,150 Univision Communications
Inc. (Class A)*......... 11,332,282
------------
16,032,442
------------
Casino/Gaming (10.5%)
132,335 GTECH Holdings Corp. .... 7,446,490
152,400 International Game
Technology.............. 5,989,320
321,200 Station Casinos, Inc. ... 14,845,864
373,790 Wynn Resorts, Ltd.*...... 14,428,294
------------
42,709,968
------------
</Table>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Computer Peripherals
(2.4%)
65,700 Lexmark International,
Inc. (Class A)*......... $ 6,196,824
176,700 Network Appliance,
Inc.*................... 3,498,660
------------
9,695,484
------------
Construction Materials
(1.0%)
72,900 Rinker Group Ltd. (ADR)
(Australia)............. 3,897,963
------------
Data Processing Services
(1.0%)
83,800 Global Payments Inc. .... 3,910,108
------------
Discount Stores (1.2%)
168,100 Dollar Tree Stores,
Inc.*................... 4,689,990
------------
Electronic Production
Equipment (0.9%)
74,400 KLA-Tencor Corp.*........ 3,584,592
------------
Electronics/ Appliances
(0.9%)
48,250 Harman International
Industries, Inc. ....... 3,866,755
------------
Financial Conglomerates
(1.2%)
118,700 Brascan Corp. (Class A)
(Canada)................ 4,689,837
------------
Hotels/Resorts/
Cruiselines (2.9%)
306,700 Royal Caribbean Cruises
Ltd. (Liberia).......... 11,998,104
------------
Internet Retail (1.0%)
131,500 InterActiveCorp*......... 4,110,690
------------
Internet Software/
Services (2.1%)
284,800 Yahoo! Inc.*............. 8,731,968
------------
</Table>
6
See Notes to Financial Statements
Morgan Stanley Capital Opportunities Trust
PORTFOLIO OF INVESTMENTS - MAY 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Investment Banks/ Brokers
(2.5%)
509,500 AmeriTrade Holding Corp.
(Class A)*.............. $ 6,057,955
200,400 Greenhill & Co., Inc.*... 4,068,120
------------
10,126,075
------------
Medical Distributors
(1.3%)
69,500 Patterson Dental Co.*.... 5,276,440
------------
Medical Specialties
(7.7%)
257,600 Apogent Technologies
Inc.*................... 8,299,872
149,000 Dade Behring Holdings,
Inc.*................... 6,652,850
137,100 INAMED Corp.*............ 8,164,305
84,200 Kinetic Concepts Inc.*... 4,083,700
48,650 Varian Medical Systems,
Inc.*................... 4,033,085
------------
31,233,812
------------
Medical/Nursing Services
(1.6%)
154,600 VCA Antech, Inc.*........ 6,647,800
------------
Miscellaneous Commercial
Services (1.6%)
41,150 Corporate Executive Board
Co. (The)............... 2,249,259
93,550 Iron Mountain Inc.*...... 4,141,459
------------
6,390,718
------------
Oil & Gas Production
(3.7%)
51,500 Evergreen Resources,
Inc.*................... 1,949,275
423,100 Ultra Petroleum Corp.
(Canada)*............... 12,968,015
------------
14,917,290
------------
Oilfield Services/
Equipment (1.9%)
86,700 BJ Services Co.*......... 3,631,863
82,100 Smith International,
Inc.*................... 4,099,253
------------
7,731,116
------------
</Table>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Other Consumer Services
(6.3%)
77,800 Apollo Group, Inc. (Class
A)*..................... $ 7,297,640
110,500 Career Education
Corp.*.................. 7,510,685
97,400 eBay Inc.*............... 8,649,120
50,800 ITT Educational Services,
Inc.*................... 2,078,228
------------
25,535,673
------------
Packaged Software (5.4%)
135,900 Adobe Systems, Inc. ..... 6,065,217
78,350 Mercury Interactive
Corp.*.................. 3,756,099
236,500 Red Hat, Inc.*........... 6,463,545
126,200 Symantec Corp.*.......... 5,779,960
------------
22,064,821
------------
Pharmaceuticals: Other
(1.0%)
62,900 Teva Pharmaceutical
Industries Ltd. (ADR)
(Israel)................ 4,162,093
------------
Precious Metals (3.1%)
320,500 Newmont Mining Corp. .... 12,727,055
------------
Property -- Casualty
Insurers (3.7%)
3,780 Berkshire Hathaway, Inc.
(Class B)*.............. 11,234,160
7,725 White Mountains Insurance
Group Ltd. (Bermuda).... 3,959,063
------------
15,193,223
------------
Real Estate Investment
Trusts (1.0%)
136,200 Plum Creek Timber Co.,
Inc. ................... 4,265,784
------------
Recreational Products
(3.2%)
100,200 Electronic Arts Inc.*.... 5,093,166
261,300 WMS Industries Inc.*..... 8,021,910
------------
13,115,076
------------
</Table>
7
See Notes to Financial Statements
Morgan Stanley Capital Opportunities Trust
PORTFOLIO OF INVESTMENTS - MAY 31, 2004 (UNAUDITED) continued
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Restaurants (2.9%)
86,335 P.F. Chang's China
Bistro, Inc.*........... $ 3,907,522
205,650 Sonic Corp.*............. 4,561,317
201,400 The Steak n Shake Co.*... 3,542,626
------------
12,011,465
------------
Semiconductors (2.8%)
163,900 Altera Corp.*............ 3,751,671
102,400 Linear Technology
Corp. .................. 4,061,184
79,500 Marvell Technology Group
Ltd. (Bermuda)*......... 3,781,815
------------
11,594,670
------------
Services to the Health
Industry (1.4%)
121,100 Stericycle, Inc.*........ 5,574,233
------------
Specialty Stores (3.0%)
98,800 Guitar Center, Inc.*..... 4,238,520
144,700 PETsMART, Inc. .......... 4,498,723
124,300 Tuesday Morning Corp.*... 3,548,765
------------
12,286,008
------------
Specialty
Telecommunications (3.7%)
559,300 Crown Castle
International Corp.*.... 8,238,489
113,037 NTL, Inc.*............... 6,680,487
------------
14,918,976
------------
</Table>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------
Telecommunication
Equipment (2.4%)
358,400 Corning Inc.*............ $ 4,440,576
79,700 QUALCOMM Inc. ........... 5,345,479
------------
9,786,055
------------
Total Common Stocks
(Cost $359,110,844)...... 405,498,042
------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
Short-Term Investment (0.5%)
Repurchase Agreement
$ 1,988 Joint repurchase
agreement account 1.015%
due 06/01/04 (dated
05/28/04; proceeds
$1,988,224) (a) (Cost
$1,988,000)............. 1,988,000
------------
</Table>
<Table>
Total Investments
(Cost $361,098,844) (b)..... 100.0% 407,486,042
Liabilities in Excess of
Other Assets................ 0.0 (194,550)
----- ------------
Net Assets.................. 100.0% $407,291,492
===== ============
</Table>
- ---------------------------------------------------
<Table>
ADR American Depository Receipt.
* 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
$57,517,174 and the aggregate gross unrealized
depreciation is $11,129,976, resulting in net
unrealized appreciation of $46,387,198.
</Table>
8
See Notes to Financial Statements
Morgan Stanley Capital Opportunities Trust
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
May 31, 2004 (unaudited)
<Table>
Assets:
Investments in securities, at value
(cost $361,098,844)....................................... $ 407,486,042
Receivable for:
Shares of beneficial interest sold...................... 305,368
Investments sold........................................ 282,147
Dividends............................................... 166,520
Prepaid expenses and other assets........................... 149,204
--------------
Total Assets............................................ 408,389,281
--------------
Liabilities:
Payable for:
Shares of beneficial interest redeemed.................. 481,313
Investment management fee............................... 254,658
Distribution fee........................................ 250,129
Accrued expenses and other payables......................... 111,689
--------------
Total Liabilities....................................... 1,097,789
--------------
Net Assets.............................................. $ 407,291,492
==============
Composition of Net Assets:
Paid-in-capital............................................. $1,173,243,349
Net unrealized appreciation................................. 46,387,198
Net investment loss......................................... (3,466,156)
Accumulated net realized loss............................... (808,872,899)
--------------
Net Assets.............................................. $ 407,291,492
==============
Class A Shares:
Net Assets.................................................. $10,725,471
Shares Outstanding (unlimited authorized, $.01 par value)... 798,828
Net Asset Value Per Share............................... $13.43
==============
Maximum Offering Price Per Share,
(net asset value plus 5.54% of net asset value)....... $14.17
==============
Class B Shares:
Net Assets.................................................. $281,162,693
Shares Outstanding (unlimited authorized, $.01 par value)... 21,952,901
Net Asset Value Per Share............................... $12.81
==============
Class C Shares:
Net Assets.................................................. $15,871,811
Shares Outstanding (unlimited authorized, $.01 par value)... 1,244,939
Net Asset Value Per Share............................... $12.75
==============
Class D Shares:
Net Assets.................................................. $99,531,517
Shares Outstanding (unlimited authorized, $.01 par value)... 7,312,920
Net Asset Value Per Share............................... $13.61
==============
</Table>
9
See Notes to Financial Statements
Morgan Stanley Capital Opportunities Trust
FINANCIAL STATEMENTS continued
Statement of Operations
For the six months ended May 31, 2004 (unaudited)
<Table>
Net Investment Loss:
Income
Dividends (net of $7,367 foreign withholding tax)........... $ 614,419
Interest.................................................... 23,704
-----------
Total Income............................................ 638,123
-----------
Expenses
Investment management fee................................... 1,570,080
Distribution fee (Class A shares)........................... 12,054
Distribution fee (Class B shares)........................... 1,458,547
Distribution fee (Class C shares)........................... 80,364
Transfer agent fees and expenses............................ 806,436
Registration fees........................................... 118,108
Professional fees........................................... 35,214
Custodian fees.............................................. 21,495
Trustees' fees and expenses................................. 1,820
Other....................................................... 161
-----------
Total Expenses.......................................... 4,104,279
-----------
Net Investment Loss..................................... (3,466,156)
-----------
Net Realized and Unrealized Gain (Loss):
Net realized gain........................................... 45,124,855
Net change in unrealized appreciation....................... (7,697,917)
-----------
Net Gain................................................ 37,426,938
-----------
Net Increase................................................ $33,960,782
===========
</Table>
10
See Notes to Financial Statements
Morgan Stanley Capital Opportunities Trust
FINANCIAL STATEMENTS continued
Statement of Changes in Net Assets
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MAY 31, 2004 NOVEMBER 30, 2003
------------ -----------------
(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment loss......................................... $(3,466,156) $ (6,596,850)
Net realized gain........................................... 45,124,855 85,311,429
Net change in unrealized appreciation....................... (7,697,917) 18,046,836
------------ ------------
Net Increase............................................ 33,960,782 96,761,415
Net decrease from transactions in shares of beneficial
interest.................................................. (48,634,003) (76,904,069)
------------ ------------
Net Increase (Decrease)................................. (14,673,221) 19,857,346
Net Assets:
Beginning of period......................................... 421,964,713 402,107,367
------------ ------------
End of Period
(Including a net investment loss of
$3,466,156 and $0, respectively)............................ $407,291,492 $421,964,713
============ ============
</Table>
11
See Notes to Financial Statements
Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2004 (UNAUDITED)
1. Organization and Accounting Policies
Morgan Stanley Capital Opportunities Trust (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is to
seek long-term capital appreciation. The Fund was organized as a Massachusetts
business trust on October 17, 1995 and commenced operations on February 27,
1996. On July 28, 1997, the Fund converted to a multiple class share structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- (1) 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 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
12
Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2004 (UNAUDITED) continued
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.
13
Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 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 0.75% to the portion of daily net assets not exceeding $500
million; 0.725% to the portion of daily net assets exceeding $500 million but
not exceeding $2 billion; 0.70% to the portion of daily net assets exceeding $2
billion, but not exceeding $3 billion; and 0.675% to the portion of daily net
assets in excess of $3 billion.
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 -- up to 1.0% of the lesser
of: (a) the average daily aggregate gross sales of the Class B shares since the
inception of the Fund (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Class B
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the average daily net assets of
Class B; and (iii) Class C -- up to 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
$59,549,311 at May 31, 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
14
Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2004 (UNAUDITED) continued
six months ended May 31, 2004, the distribution fee was accrued for Class A
shares and Class C shares at the annual rate of 0.23% and 1.0%, respectively.
The Distributor has informed the Fund that for the six months ended May 31,
2004, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $4, $264,429 and
$747, respectively and received $15,350 in front-end sales charges from sales of
the Fund's Class A shares. The respective shareholders pay such charges which
are not an expense of the Fund.
4. Security Transactions and Transactions with Affiliates
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended May 31, 2004 aggregated
$324,330,872 and $374,978,734, respectively. Included in the aforementioned
transactions are purchases of $4,780,688, with other Morgan Stanley funds.
For the six months ended May 31, 2004, the Fund incurred brokerage commission of
$71,910 with Morgan Stanley & Co., Inc., an affiliate of the Investment Manager
and Distributor, for portfolio transactions executed on behalf of the Fund.
Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is
the Fund's transfer agent. At May 31, 2004, the Fund had transfer agent fees and
expenses payable of approximately $31,600.
Effective April 1, 2004, the Fund began 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 receives for serving on the Board of
Trustees. Each eligible Trustee generally may elect to have the deferred amounts
credited with a 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.
15
Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2004 (UNAUDITED) continued
5. Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MAY 31, 2004 NOVEMBER 30, 2003
-------------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ---------- ------------
CLASS A SHARES
Sold................................................ 111,412 $ 1,451,281 187,975 $ 1,969,298
Redeemed............................................ (189,136) (2,428,987) (291,699) (2,898,758)
----------- ------------ ---------- ------------
Net decrease - Class A.............................. (77,724) (977,706) (103,724) (929,460)
----------- ------------ ---------- ------------
CLASS B SHARES
Sold................................................ 729,219 9,035,891 2,132,262 21,456,939
Redeemed............................................ (3,864,706) (47,919,855) (8,864,787) (84,839,462)
----------- ------------ ---------- ------------
Net decrease - Class B.............................. (3,135,487) (38,883,964) (6,732,525) (63,382,523)
----------- ------------ ---------- ------------
CLASS C SHARES
Sold................................................ 78,958 977,101 171,671 1,689,068
Redeemed............................................ (198,981) (2,446,978) (413,261) (3,918,422)
----------- ------------ ---------- ------------
Net decrease - Class C.............................. (120,023) (1,469,877) (241,590) (2,229,354)
----------- ------------ ---------- ------------
CLASS D SHARES
Sold................................................ 523,615 6,899,445 1,817,242 18,365,069
Redeemed............................................ (1,076,113) (14,201,901) (2,839,186) (28,727,801)
----------- ------------ ---------- ------------
Net decrease - Class D.............................. (552,498) (7,302,456) (1,021,944) (10,362,732)
----------- ------------ ---------- ------------
Net decrease in Fund................................ (3,885,732) $(48,634,003) (8,099,783) $(76,904,069)
=========== ============ ========== ============
</Table>
6. 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 November 30, 2003, the Fund had net capital loss carryforward of
$853,148,376 of which $56,588,477 will expire on November 30, 2008, $413,253,404
will expire on November 30, 2009 and $383,306,495 will expire on October 31,
2010 to offset future capital gains to the extent provided by regulations.
16
Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2004 (UNAUDITED) continued
As of November 30, 2003, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
7. 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, 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 have moved 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.
17
Morgan Stanley Capital Opportunities Trust
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED NOVEMBER 30,
MONTHS ENDED ----------------------------------------------
MAY 31, 2004 2003 2002 2001 2000 1999
------------ ------- ------ ------- ------- -------
(unaudited)
Class A Shares
Selected Per Share Data:
Net asset value, beginning of period............. $12.35 $ 9.53 $15.97 $ 26.86 $33.83 $15.60
------ ------ ------ ------- ------ ------
Income (loss) from investment operations:
Net investment loss++........................ (0.07) (0.12) (0.16) (0.20) (0.33) (0.34)
Net realized and unrealized gain (loss)...... 1.15 2.94 (6.28) (10.69) (5.76) 18.57
------ ------ ------ ------- ------ ------
Total income (loss) from investment operations... 1.08 2.82 (6.44) (10.89) (6.09) 18.23
------ ------ ------ ------- ------ ------
Less distributions from:
Net realized gain............................ -- -- -- -- (0.77) --
Paid-in-capital.............................. -- -- -- -- (0.11) --
------ ------ ------ ------- ------ ------
Total distributions.............................. -- -- -- -- (0.88) --
------ ------ ------ ------- ------ ------
Net asset value, end of period................... $13.43 $12.35 $ 9.53 $ 15.97 $26.86 $33.83(4)
====== ====== ====== ======= ====== ======
Total Return+.................................... 8.74 %(1) 29.59% (40.33)% (40.54)% (18.72)% 116.89%
Ratios to Average Net Assets(3):
Expenses......................................... 1.45 %(2) 1.52% 1.43% 1.13% 1.11% 1.23%
Net investment loss.............................. (1.15)%(2) (1.22)% (1.26)% (1.02)% (0.82)% (0.93)%
Supplemental Data:
Net assets, end of period, in thousands.......... $10,725 $10,826 $9,339 $21,509 $48,068 $19,934
Portfolio turnover rate.......................... 78 %(1) 179% 94% 25% 17% 51%
</Table>
- ---------------------------------------------------
<Table>
++ 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) Includes the effect of a capital gain distribution of
$0.004.
</Table>
18
See Notes to Financial Statements
Morgan Stanley Capital Opportunities Trust
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED NOVEMBER 30,
MONTHS ENDED --------------------------------------------------------
MAY 31, 2004 2003 2002 2001 2000 1999
------------ -------- -------- -------- ---------- ----------
(unaudited)
Class B Shares
Selected Per Share Data:
Net asset value, beginning of period....... $ 11.83 $ 9.19 $ 15.53 $ 26.35 $ 33.36 $ 15.46
------- ------- -------- -------- --------- ---------
Income (loss) from investment operations:
Net investment loss++.................. (0.12) (0.19) (0.25) (0.37) (0.51) (0.42)
Net realized and unrealized gain
(loss)................................. 1.10 2.83 (6.09) (10.45) (5.62) 18.32
------- ------- -------- -------- --------- ---------
Total income (loss) from investment
operations................................ 0.98 2.64 (6.34) (10.82) (6.13) 17.90
------- ------- -------- -------- --------- ---------
Less distributions from:
Net realized gain...................... -- -- -- -- (0.77) --
Paid-in-capital........................ -- -- -- -- (0.11) --
------- ------- -------- -------- --------- ---------
Total distributions........................ -- -- -- -- (0.88) --
------- ------- -------- -------- --------- ---------
Net asset value, end of period............. $ 12.81 $ 11.83 $ 9.19 $ 15.53 $ 26.35 $ 33.36(4)
======= ======= ======== ======== ========= =========
Total Return+.............................. 8.28 %(1) 28.73% (40.82)% (41.06)% (19.12)% 115.82%
Ratios to Average Net Assets(3):
Expenses................................... 2.22 %(2) 2.29% 2.20% 2.02% 1.58% 1.74%
Net investment loss........................ (1.92)%(2) (1.99)% (2.03)% (1.91)% (1.29)% (1.44)%
Supplemental Data:
Net assets, end of period, in thousands.... $281,163 $296,711 $292,533 $705,388 $1,413,820 $1,315,930
Portfolio turnover rate.................... 78 %(1) 179% 94% 25% 17% 51%
</Table>
- ---------------------------------------------------
<Table>
++ 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) Includes the effect of a capital gain distribution of
$0.004.
</Table>
19
See Notes to Financial Statements
Morgan Stanley Capital Opportunities Trust
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED NOVEMBER 30,
MONTHS ENDED ---------------------------------------------------
MAY 31, 2004 2003 2002 2001 2000 1999
------------ ------- ------- ------- ------- -------
(unaudited)
Class C Shares
Selected Per Share Data:
Net asset value, beginning of period........ $11.77 $ 9.15 $15.43 $26.19 $33.24 $15.45
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss++................... (0.12) (0.19) (0.22) (0.37) (0.62) (0.52)
Net realized and unrealized gain
(loss).................................. 1.10 2.81 (6.06) (10.39) (5.55) 18.31
------ ------ ------ ------ ------ ------
Total income (loss) from investment
operations................................. 0.98 2.62 (6.28) (10.76) (6.17) 17.79
------ ------ ------ ------ ------ ------
Less distributions from:
Net realized gain....................... -- -- -- -- (0.77) --
Paid-in-capital......................... -- -- -- -- (0.11) --
------ ------ ------ ------ ------ ------
Total distributions......................... -- -- -- -- (0.88) --
------ ------ ------ ------ ------ ------
Net asset value, end of period.............. $12.75 $11.77 $ 9.15 $15.43 $26.19 $33.24(4)
====== ====== ====== ====== ====== ======
Total Return+............................... 8.33 %(1) 28.63% (40.70)% (41.08)% (19.31)% 115.18%
Ratios to Average Net Assets(3):
Expenses.................................... 2.22 %(2) 2.29% 1.98% 2.02% 1.86% 1.99%
Net investment loss......................... (1.92)%(2) (1.99)% (1.81)% (1.91)% (1.56)% (1.69)%
Supplemental Data:
Net assets, end of period, in thousands..... $15,872 $16,069 $14,701 $32,016 $61,822 $34,898
Portfolio turnover rate..................... 78 %(1) 179% 94% 25% 17% 51%
</Table>
- ---------------------------------------------------
<Table>
++ 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) Includes the effect of a capital gain distribution of
$0.004.
</Table>
20
See Notes to Financial Statements
Morgan Stanley Capital Opportunities Trust
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED NOVEMBER 30,
MONTHS ENDED ----------------------------------------------
MAY 31, 2004 2003 2002 2001 2000 1999
------------ ------- ------- ------- ------- ------
(unaudited)
Class D Shares
Selected Per Share Data:
Net asset value, beginning of period............. $12.51 $ 9.62 $16.10 $27.04 $33.97 $15.66
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss++........................ (0.06) (0.10) (0.12) (0.18) (0.24) (0.21)
Net realized and unrealized gain (loss)...... 1.16 2.99 (6.36) (10.76) (5.81) 18.52
------ ------ ------ ------ ------ ------
Total income (loss) from investment operations... 1.10 2.89 (6.48) (10.94) (6.05) 18.31
------ ------ ------ ------ ------ ------
Less distributions from:
Net realized gain............................ -- -- -- -- (0.77) --
Paid-in-capital.............................. -- -- -- -- (0.11) --
------ ------ ------ ------ ------ ------
Total distributions.............................. -- -- -- -- (0.88) --
------ ------ ------ ------ ------ ------
Net asset value, end of period................... $13.61 $12.51 $ 9.62 $16.10 $27.04 $33.97(4)
====== ====== ====== ====== ====== ======
Total Return+.................................... 8.79 %(1) 30.04% (40.25)% (40.46)% (18.52)% 116.96%
Ratios to Average Net Assets(3):
Expenses......................................... 1.22 %(2) 1.29% 1.20% 1.02% 0.86% 0.99%
Net investment loss.............................. (0.92)%(2) (0.99)% (1.03)% (0.91)% (0.57)% (0.69)%
Supplemental Data:
Net assets, end of period, in thousands.......... $99,532 $98,359 $85,534 $94,203 $23,815 $4,384
Portfolio turnover rate.......................... 78 %(1) 179% 94% 25% 17% 51%
</Table>
- ---------------------------------------------------
<Table>
++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ 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) Includes the effect of a capital gain distribution of
$0.004.
</Table>
21
See Notes to Financial Statements
(This Page Intentionally Left Blank)
(This Page Intentionally Left Blank)
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael E. Nugent
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
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 REGISTERED PUBLIC ACCOUNTING FIRM
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 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.
Investments and services offered through Morgan Stanley DW Inc., member SIPC.
(c) 2004 Morgan Stanley
[MORGAN STANLEY LOGO]
MORGAN STANLEY FUNDS
Morgan Stanley
Capital Opportunities
Trust
Semiannual Report
May 31, 2004
[MORGAN STANLEY LOGO]
38568RPT-RA04-00335P-Y05/04
Item 2. Code of Ethics.
Not applicable for semiannual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semiannual reports.
Item 4. Principal Accountant Fees and Services
Not applicable for semiannual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semiannual reports.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semiannual reports.
Item 8. [Reserved.]
Item 9 - Controls and Procedures
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10 Exhibits
(a) Code of Ethics - Not applicable for semiannual reports.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Capital Opportunities Trust
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
July 20, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
July 20, 2004
/s/ Francis Smith
Francis Smith
Principal Financial Officer
July 20, 2004
3