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: 811-08471

Morgan Stanley Aggressive Equity 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: July 31, 2005

Date of reporting period: January 31, 2005

Item 1 - Report to Shareholders

Welcome, Shareholder:

In this report, you'll learn about how your investment in Morgan Stanley
Aggressive Equity 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.

FUND REPORT

For the six-month period ended January 31, 2005

TOTAL RETURN FOR THE 6 MONTHS ENDED JANUARY 31, 2005

<Table>
<Caption>
RUSSELL LIPPER
3000 MULTI-CAP
GROWTH GROWTH
CLASS A CLASS B CLASS C CLASS D INDEX(1) FUNDS INDEX(2)

11.99% 11.78% 11.76% 12.19% 6.60% 10.30%
</Table>

PERFORMANCE DATA QUOTED REPRESENT PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR THE MOST RECENT 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 returns assume the reinvestment of all
distributions but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. See Performance Summary for standardized
performance and benchmark information.

MARKET CONDITIONS

For much of the six months ended January 31, 2005, the market's momentum was
limited by investors' concern over the ongoing conflict in Iraq, terrorism fears
and uncertainty related to the presidential election. Volatile energy prices
also added to investors' apprehension over the six months. While the market was
hindered by these anxieties, manufacturing activity was strong and corporate
earnings were generally impressive over the period, and the Federal Open Market
Committee's interest rate increases were widely anticipated and implemented at a
measured pace. Although consumer confidence was weak over most of the period, it
staged a rebound in December as job prospects improved. Anxieties related to oil
prices and the election were greatly alleviated at the end of the period as oil
prices fell from their highs and the presidential election concluded without
incident. These events supported an equities rally at the end of 2004, though
this momentum ended in January and stocks fell in the final month of the period.

PERFORMANCE ANALYSIS

Morgan Stanley Aggressive Equity Fund outperformed the Russell 3000 Growth Index
and the Lipper Multi-Cap Growth Funds Index for the six months ended January 31,
2005, assuming no deduction of applicable sales charges. The Fund's
outperformance for the period was driven largely by its positions in the health
care, technology and financial services sectors. An underweighted position in
health care stocks relative to the Russell 3000 Growth Index and stock selection
within the sector were positive for performance, as the Fund made gains based on
its holdings of medical and dental instrument and supply companies while
minimizing its exposure to underperforming pharmaceuticals companies. Within the
technology sector, the Fund's exposure to a number of communication technology,
software and semiconductors companies was a positive driver of performance. An
underweighted position in the sector relative to the Russell 3000 Growth Index
was also beneficial during the period. Both stock selection in financial
services and an underweighted position in the sector relative to the Russell
3000 Growth Index further helped performance. Diversified financials, financial
information services and investment management companies were particular areas
of strength for the Fund within the sector.

While every sector contributed positively to the Fund's returns, stock selection
was not uniformly strong. The benefits of the Fund's overweighting in consumer
discretionary stocks relative to the Russell 3000 Growth Index were limited by
the underperformance of retailers and commercial services companies. Weakness in
the Fund's oil well equipment and service positions similarly hindered returns,
although their impact was more than offset by the overweighting relative to the
Russell 3000 Growth Index in the broader energy sector.

There is no guarantee that any sectors mentioned will continue to perform well
or be held by the Fund in the future.

<Table>
<Caption>
TOP 10 HOLDINGS

Station Casinos Inc. 4.4%
Ultra Petroleum Corp. (Canada) 4.1
Carnival Corp. 3.7
QUALCOMM Inc. 3.5
eBay Inc. 3.4
Corporate Executive Board Co. (The) 3.2
Yahoo! Inc. 3.2
Genentech, Inc. 2.9
Electronic Arts Inc. 2.9
International Game Technology 2.6
</Table>

<Table>
<Caption>
TOP FIVE INDUSTRIES

Casinos/Gaming 11.0%
Medical Specialties 7.8
Other Consumer Services 5.9
Internet Software/Services 4.7
Restaurants 4.4
</Table>

Data as of January 31, 2005. Subject to change daily. All percentages for top 10
holdings and top five industries are as a percentage of net assets. These data
are 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 NORMALLY INVESTS AT LEAST 80 PERCENT OF ITS ASSETS IN COMMON STOCKS AND
OTHER EQUITY SECURITIES OF U.S. OR FOREIGN COMPANIES THAT OFFER THE POTENTIAL
FOR SUPERIOR EARNINGS GROWTH IN THE OPINION OF THE FUND'S "INVESTMENT ADVISER,"
MORGAN STANLEY INVESTMENT ADVISORS INC. THE FUND'S OTHER EQUITY SECURITIES MAY
INCLUDE PREFERRED STOCK, DEPOSITARY RECEIPTS OR SECURITIES CONVERTIBLE INTO
COMMON STOCK.

FOR MORE INFORMATION
ABOUT PORTFOLIO HOLDINGS

EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN
ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND
AND FOURTH FISCAL QUARTERS BY FILING THE SCHEDULE ELECTRONICALLY WITH THE
SECURITIES AND EXCHANGE COMMISSION (SEC). THE SEMIANNUAL REPORTS ARE FILED ON
FORM N-CSRS AND THE ANNUAL REPORTS ARE FILED ON FORM N-CSR. MORGAN STANLEY ALSO
DELIVERS THE SEMIANNUAL AND ANNUAL REPORTS TO FUND SHAREHOLDERS AND MAKES THESE
REPORTS AVAILABLE ON ITS PUBLIC WEB SITE, WWW.MORGANSTANLEY.COM. EACH MORGAN
STANLEY FUND ALSO FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC
FOR THE FUND'S FIRST AND THIRD FISCAL QUARTERS ON FORM N-Q. MORGAN STANLEY DOES
NOT DELIVER THE REPORTS FOR THE FIRST AND THIRD FISCAL QUARTERS TO SHAREHOLDERS,
NOR ARE THE REPORTS POSTED TO THE MORGAN STANLEY PUBLIC WEB SITE. YOU MAY,
HOWEVER, OBTAIN THE FORM N-Q FILINGS (AS WELL AS THE FORM N-CSR AND N-CSRS
FILINGS) BY ACCESSING THE SEC'S WEB SITE, HTTP://WWW.SEC.GOV. YOU MAY ALSO
REVIEW AND COPY THEM AT THE SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC.
INFORMATION ON THE OPERATION OF THE SEC'S PUBLIC REFERENCE ROOM MAY BE OBTAINED
BY CALLING THE

SEC AT (800) SEC-0330. YOU CAN ALSO REQUEST COPIES OF THESE MATERIALS, UPON
PAYMENT OF A DUPLICATING FEE, BY ELECTRONIC REQUEST AT THE SEC'S E-MAIL ADDRESS
(PUBLICINFO@SEC.GOV) OR BY WRITING THE PUBLIC REFERENCE SECTION OF THE SEC,
WASHINGTON, DC 20549-0102. YOU MAY OBTAIN COPIES OF A FUND'S FISCAL QUARTER
FILINGS BY CONTACTING MORGAN STANLEY CLIENT RELATIONS AT (800) 869-NEWS.

PROXY VOTING POLICIES AND PROCEDURES

A DESCRIPTION OF (1) THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE
VOTING OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES AND (2) HOW THE
FUND VOTED PROXIES RELATING TO PORTFOLIO SECURITIES DURING THE MOST RECENT
12-MONTH PERIOD ENDED JUNE 30, 2004, IS AVAILABLE WITHOUT CHARGE, UPON REQUEST,
BY CALLING (800) 869-NEWS OR BY VISITING THE MUTUAL FUND CENTER ON OUR WEB SITE
AT WWW.MORGANSTANLEY.COM. THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES
AND EXCHANGE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV.

HOUSEHOLDING NOTICE

TO REDUCE PRINTING AND MAILING COSTS, THE FUND ATTEMPTS TO ELIMINATE DUPLICATE
MAILINGS TO THE SAME ADDRESS. THE FUND DELIVERS A SINGLE COPY OF CERTAIN
SHAREHOLDER DOCUMENTS, INCLUDING SHAREHOLDER REPORTS, PROSPECTUSES AND PROXY
MATERIALS, TO INVESTORS WITH THE SAME LAST NAME WHO RESIDE AT THE SAME ADDRESS.
YOUR PARTICIPATION IN THIS PROGRAM WILL CONTINUE FOR AN UNLIMITED PERIOD OF TIME
UNLESS YOU INSTRUCT US OTHERWISE. YOU CAN REQUEST MULTIPLE COPIES OF THESE
DOCUMENTS BY CALLING (800) 350-6414, 8:00 A.M. TO 8:00 P.M., ET. ONCE OUR
CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING
INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS.

PERFORMANCE SUMMARY

AVERAGE ANNUAL TOTAL RETURNS -- PERIOD ENDED JANUARY 31, 2005

<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++)
(since 02/24/99) (since 02/24/99) (since 02/24/99) (since 02/24/99)
SYMBOL AEQAX AEQBX AEQCX AEQDX

1 YEAR 4.71%(3) 4.08%(3) 4.08%(3) 5.10%(3)
(0.79)(4) (0.92)(4) 3.08(4) --
5 YEARS (6.53)(3) (7.22)(3) (7.20)(3) (6.31)(3)
(7.53)(4) (7.55)(4) (7.20)(4) --
SINCE INCEPTION 1.06(3) 0.31(3) 0.33(3) 1.30(3)
0.15(4) 0.16(4) 0.33(4) --
</Table>

Performance data quoted represents past performance, which is no guarantee of
future results and current performance may be lower or higher than the figures
shown. For the most recent 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 1.0% for shares
redeemed within one year of purchase.

++ Class D has no sales charge.

(1) The Russell 3000 Growth Index measures the performance of those companies
in the Russell 3000 Index with higher price-to-book ratios and higher
forecasted growth values. 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.

EXPENSE EXAMPLE

As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments and redemption fees;
and (2) ongoing costs, including management fees; distribution and service
(12b-1) fees; and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 08/01/04 - 01/31/05.

ACTUAL EXPENSES

The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) and redemption fees. Therefore, the second line of the table is
useful in comparing ongoing costs, and will not help you determine the relative
total cost of owning different funds. In addition, if these transactional costs
were included, your costs would have been higher.

<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD*
------------- ------------- ---------------
08/01/04 -
08/01/04 01/31/05 01/31/05
------------- ------------- ---------------

CLASS A
Actual (11.99% return)...................................... $1,000.00 $1,119.90 $ 7.59
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,018.05 $ 7.22
CLASS B
Actual (11.78% return)...................................... $1,000.00 $1,117.80 $11.58
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,014.27 $11.02
CLASS C
Actual (11.76% return)...................................... $1,000.00 $1,117.60 $11.58
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,014.27 $11.02
CLASS D
Actual (12.19% return)...................................... $1,000.00 $1,121.90 $ 6.26
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,019.31 $ 5.96
</Table>

- ------------------
* Expenses are equal to the Fund's annualized expense ratio of 1.42%, 2.17%,
2.17% and 1.17% respectively, multiplied by the average account value over
the period, multiplied by 184/365 (to reflect the one-half year period).

Morgan Stanley Aggressive Equity Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2005 (UNAUDITED)

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

Common Stocks (99.0%)
Advertising/Marketing
Services (2.1%)
165,100 Lamar Advertising Co.
(Class A)*.............. $ 7,095,998
------------
Air Freight/Couriers
(1.5%)
98,100 C.H. Robinson Worldwide,
Inc. ................... 5,052,150
------------
Apparel/Footwear (1.2%)
76,000 Coach, Inc.*............. 4,263,600
------------
Apparel/Footwear Retail
(1.6%)
103,100 Chico's FAS, Inc.*....... 5,431,308
------------
Biotechnology (2.9%)
212,600 Genentech, Inc.*......... 10,143,146
------------
Broadcasting (1.0%)
127,300 Univision Communications
Inc. (Class A)*......... 3,476,563
------------
Casino/Gaming (11.0%)
149,800 GTECH Holdings Corp. .... 3,502,324
284,200 International Game
Technology.............. 8,895,460
40,008 Las Vegas Sands Corp.*... 1,736,347
85,600 Penn National Gaming,
Inc.*................... 5,614,504
247,800 Station Casinos, Inc. ... 15,239,700
46,250 Wynn Resorts, Ltd.*...... 3,032,150
------------
38,020,485
------------
Chemicals: Agricultural
(2.0%)
127,900 Monsanto Co. ............ 6,923,227
------------
Computer Processing
Hardware (2.0%)
168,600 Dell Inc.*............... 7,040,736
------------
</Table>

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

Construction Materials
(1.7%)
66,500 Rinker Group Ltd. (ADR)
(Australia)............. $ 5,752,250
------------
Discount Stores (1.1%)
39,100 Kmart Holding Corp.*..... 3,682,438
------------
Financial Conglomerates
(1.7%)
169,700 Brascan Corp. (Class A)
(Canada)................ 5,778,285
------------
Financial Publishing/
Services (1.2%)
49,400 Moody's Corp. ........... 4,138,732
------------
Gas Distributors (1.2%)
79,800 Questar Corp. ........... 4,053,840
------------
Hotels/Resorts/
Cruiselines (4.1%)
223,500 Carnival Corp.
(Panama)................ 12,873,600
24,700 Royal Caribbean Cruises
Ltd. (Liberia).......... 1,309,100
------------
14,182,700
------------
Insurance Brokers/
Services (1.1%)
79,800 ChoicePoint Inc.*........ 3,670,800
------------
Integrated Oil (1.0%)
107,500 Suncor Energy, Inc.
(Canada)................ 3,440,000
------------
Internet Software/
Services (4.7%)
27,300 Google Inc. (Class A)*... 5,340,699
309,000 Yahoo! Inc.*............. 10,879,890
------------
16,220,589
------------
Investment Banks/ Brokers
(1.3%)
150,575 Greenhill & Co., Inc. ... 4,466,055
------------
</Table>

See Notes to Financial Statements
7

Morgan Stanley Aggressive Equity Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2005 (UNAUDITED) continued

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

Investment Managers
(1.0%)
135,100 Calamos Asset Management
Inc. (Class A)*......... $ 3,412,626
------------
Managed Health Care
(2.6%)
99,200 UnitedHealth Group
Inc.*................... 8,818,880
------------
Medical Distributors
(1.7%)
124,700 Patterson Companies
Inc.*................... 5,808,526
------------
Medical Specialties
(7.8%)
91,100 Dade Behring Holdings
Inc.*................... 5,206,365
86,700 Fisher Scientific
International, Inc.*.... 5,475,105
128,200 INAMED Corp.*............ 8,871,440
113,184 Kinetic Concepts,
Inc.*................... 7,356,960
------------
26,909,870
------------
Miscellaneous Commercial
Services (3.1%)
170,400 Corporate Executive Board
Co. (The)............... 10,888,560
------------
Oil & Gas Production
(4.0%)
271,600 Ultra Petroleum Corp.
(Canada)*............... 13,995,548
------------
Other Consumer Services
(5.9%)
112,600 Apollo Group, Inc. (Class
A)*..................... 8,804,194
142,600 eBay Inc.*............... 11,621,900
------------
20,426,094
------------
Packaged Software (1.0%)
61,700 Adobe Systems, Inc.*..... 3,510,730
234 Computer Associates
International, Inc. .... 6,362
------------
3,517,092
------------
Precious Metals (2.0%)
171,900 Newmont Mining Corp. .... 7,149,321
------------
</Table>

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

Property -- Casualty
Insurers (2.0%)
1,207 Berkshire Hathaway, Inc.
(Class B)*.............. $ 3,613,891
5,875 White Mountains Insurance
Group, Ltd. (Bermuda)... 3,472,125
------------
7,086,016
------------
Real Estate Investment
Trusts (1.1%)
102,500 Plum Creek Timber Co.,
Inc. ................... 3,661,300
------------
Recreational Products
(3.8%)
153,800 Electronic Arts Inc.*.... 9,895,492
100,000 Shanda Interactive
Entertainment Ltd. (ADR)
(Cayman Islands)*....... 3,280,000
------------
13,175,492
------------
Restaurants (4.4%)
190,990 AFC Enterprises, Inc.*... 4,725,093
99,600 P.F. Chang's China
Bistro, Inc.*........... 5,536,764
158,400 Sonic Corp.*............. 5,043,456
------------
15,305,313
------------
Semiconductors (1.5%)
152,800 Marvell Technology Group
Ltd. (Bermuda)*......... 5,111,160
------------
Services to the Health
Industry (1.8%)
117,700 Stericycle, Inc.*........ 6,053,311
------------
Specialty Stores (3.3%)
62,700 Guitar Center, Inc.*..... 3,589,575
136,900 PETsMART, Inc. .......... 4,138,487
123,500 Tuesday Morning Corp.*... 3,548,155
------------
11,276,217
------------
Specialty
Telecommunications (1.4%)
302,116 Crown Castle
International Corp.*.... 4,954,702
------------
</Table>

See Notes to Financial Statements
8

Morgan Stanley Aggressive Equity Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2005 (UNAUDITED) continued

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

Telecommunication
Equipment (3.5%)
324,400 QUALCOMM Inc. ........... $ 12,080,656
------------
Wholesale Distributors
(1.1%)
128,200 SCP Pool Corp. .......... 3,810,104
------------
Wireless
Telecommunications (1.6%)
105,400 America Movil S.A. de
C.V. (Series L) (ADR)
(Mexico)................ 5,592,524
------------
Total Common Stocks
(Cost $306,209,000)...... 341,866,214
------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------

Short-Term Investment (0.5%)
Repurchase Agreement
$ 1,767 Joint repurchase
agreement account 2.485%
due 02/01/05 (dated
01/31/05; proceeds
$1,767,122) (a)
(Cost $1,767,000)....... $ 1,767,000
------------
</Table>

<Table>

Total Investments
(Cost $307,976,000) (b)..... 99.5% 343,633,214
Other Assets in Excess of
Liabilities................. 0.5 1,593,905
----- ------------
Net Assets.................. 100.0% $345,227,119
===== ============
</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
$39,987,874 and the aggregate gross unrealized
depreciation is $4,330,660, resulting in net
unrealized appreciation of $35,657,214.
</Table>

See Notes to Financial Statements
9

Morgan Stanley Aggressive Equity Fund
SUMMARY OF INVESTMENTS - JANUARY 31, 2005 (UNAUDITED)

<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ----------------------------------------------------------------------------------------

Casino/Gaming............................................... $ 38,020,485 11.0%
Medical Specialties......................................... 26,909,870 7.8
Other Consumer Services..................................... 20,426,094 5.9
Internet Software/Services.................................. 16,220,589 4.7
Restaurants................................................. 15,305,313 4.4
Hotels/Resorts/Cruiselines.................................. 14,182,700 4.1
Oil & Gas Production........................................ 13,995,548 4.0
Recreational Products....................................... 13,175,492 3.8
Telecommunication Equipment................................. 12,080,656 3.5
Specialty Stores............................................ 11,276,217 3.3
Miscellaneous Commercial Services........................... 10,888,560 3.1
Biotechnology............................................... 10,143,146 2.9
Managed Health Care......................................... 8,818,880 2.6
Precious Metals............................................. 7,149,321 2.0
Advertising/Marketing Services.............................. 7,095,998 2.1
Property -- Casualty Insurers............................... 7,086,016 2.0
Computer Processing Hardware................................ 7,040,736 2.0
Chemicals: Agricultural..................................... 6,923,227 2.0
Services to the Health Industry............................. 6,053,311 1.8
Medical Distributors........................................ 5,808,526 1.7
Financial Conglomerates..................................... 5,778,285 1.7
Construction Materials...................................... 5,752,250 1.7
Wireless Telecommunications................................. 5,592,524 1.6
Apparel/Footwear Retail..................................... 5,431,308 1.6
Semiconductors.............................................. 5,111,160 1.5
Air Freight/Couriers........................................ 5,052,150 1.5
Specialty Telecommunications................................ 4,954,702 1.4
Investment Banks/Brokers.................................... 4,466,055 1.3
Apparel/Footwear............................................ 4,263,600 1.2
Financial Publishing/Services............................... 4,138,732 1.2
Gas Distributors............................................ 4,053,840 1.2
Wholesale Distributors...................................... 3,810,104 1.1
Discount Stores............................................. 3,682,438 1.1
Insurance Brokers/Services.................................. 3,670,800 1.1
Real Estate Investment Trusts............................... 3,661,300 1.1
Packaged Software........................................... 3,517,092 1.0
Broadcasting................................................ 3,476,563 1.0
Integrated Oil.............................................. 3,440,000 1.0
Investment Managers......................................... 3,412,626 1.0
Repurchase Agreement........................................ 1,767,000 0.5
------------ ----
$343,633,214 99.5%
============ ====
</Table>

See Notes to Financial Statements
10

Morgan Stanley Aggressive Equity Fund
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
January 31, 2005 (unaudited)

<Table>

Assets:
Investments in securities, at value
(cost $307,976,000)................ $343,633,214
Receivable for:
Investments sold................. 4,896,353
Dividends........................ 58,355
Shares of beneficial interest
sold........................... 29,800
Foreign withholding taxes
reclaimed...................... 7,977
Prepaid expenses and other assets.... 83,903
------------
Total Assets..................... 348,709,602
------------
Liabilities:
Payable for:
Investments purchased............ 2,214,795
Shares of beneficial interest
redeemed....................... 666,972
Distribution fee................. 288,182
Investment advisory fee.......... 200,419
Administration fee............... 23,930
Accrued expenses and other
payables........................... 88,185
------------
Total Liabilities................ 3,482,483
------------
Net Assets....................... $345,227,119
============
Composition of Net Assets:
Paid-in-capital...................... $733,950,526
Net unrealized appreciation.......... 35,659,679
Accumulated net investment loss...... (2,356,566)
Accumulated net realized loss........ (422,026,520)
------------
Net Assets....................... $345,227,119
============
Class A Shares:
Net Assets........................... $14,410,464
Shares Outstanding (unlimited
authorized, $.01 par value)........ 1,542,189
Net Asset Value Per Share........ $9.34
============
Maximum Offering Price Per Share,
(net asset value plus 5.54% of
net asset value)............... $9.86
============
Class B Shares:
Net Assets........................... $296,224,003
Shares Outstanding (unlimited
authorized, $.01 par value)........ 33,223,155
Net Asset Value Per Share........ $8.92
============
Class C Shares:
Net Assets........................... $32,719,497
Shares Outstanding (unlimited
authorized, $.01 par value)........ 3,665,355
Net Asset Value Per Share........ $8.93
============
Class D Shares:
Net Assets........................... $1,873,155
Shares Outstanding (unlimited
authorized, $.01 par value)........ 197,543
Net Asset Value Per Share........ $9.48
============
</Table>

Statement of Operations
For the six months ended January 31, 2005 (unaudited)

<Table>

Net Investment Loss:
Income
Dividends (net of $2,756 foreign
withholding tax)................... $ 1,463,111
Interest............................. 35,785
-------------
Total Income..................... 1,498,896
-------------
Expenses
Distribution fee (Class A shares).... 20,049
Distribution fee (Class B shares).... 1,552,904
Distribution fee (Class C shares).... 169,496
Investment advisory fee.............. 1,286,456
Transfer agent fees and expenses..... 602,923
Administration fee................... 73,245
Shareholder reports and notices...... 54,952
Professional fees.................... 28,635
Registration fees.................... 25,079
Custodian fees....................... 21,816
Trustees' fees and expenses.......... 1,685
Other................................ 18,007
-------------
Total Expenses................... 3,855,247
-------------
Net Investment Loss.............. (2,356,351)
-------------
Net Realized and Unrealized Gain
(Loss):
Net realized gain.................... 20,986,658
Net change in unrealized
appreciation/depreciation.......... 21,448,364
-------------
Net Gain......................... 42,435,022
-------------
Net Increase......................... $ 40,078,671
=============
</Table>

See Notes to Financial Statements
11

Morgan Stanley Aggressive Equity Fund
FINANCIAL STATEMENTS continued

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JANUARY 31, 2005 JULY 31, 2004
---------------- -------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment loss......................................... $ (2,356,351) $ (6,470,810)
Net realized gain........................................... 20,986,658 68,831,800
Net change in unrealized appreciation/depreciation.......... 21,448,364 (25,961,207)
------------ ------------
Net Increase............................................ 40,078,671 36,399,783

Net decrease from transactions in shares of beneficial
interest.................................................. (61,410,992) (118,954,439)
------------ ------------
Net Decrease............................................ (21,332,321) (82,554,656)
Net Assets:
Beginning of period......................................... 366,559,440 449,114,096
------------ ------------
End of Period
(Including accumulated net investment losses of $2,356,566
and $215, respectively)................................... $345,227,119 $366,559,440
============ ============
</Table>

See Notes to Financial Statements
12

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2005 (UNAUDITED)

1. Organization and Accounting Policies

Morgan Stanley Aggressive Equity 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
capital growth. The Fund was organized as a Massachusetts business trust on
October 29, 1997 and commenced operations on February 24, 1999.

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) futures are valued at the latest
price published by the commodities exchange on which they trade; (6) when market
quotations are not readily available or Morgan Stanley Investment Advisors Inc.
(the "Investment Adviser") determines that the latest sale price, the bid price
or the mean between the last reported bid and asked price do not reflect a
security's market value, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Fund's Trustees. Occasionally, developments affecting the
closing prices of securities and other assets may occur between the times at
which valuations of such securities are 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

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2005 (UNAUDITED) continued

Adviser using a pricing service and/or procedures approved by the Trustees of
the Fund; (7) certain portfolio securities may be valued by an outside pricing
service approved by the Fund's Trustees; and (8) short-term debt securities
having a maturity date of more than sixty days at time of purchase are valued on
a mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.

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 Adviser, 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. Foreign Currency Translation and Forward Foreign Currency Contracts -- The
books and records of the Fund are maintained in U.S. dollars as follows: (1) the
foreign currency market value of investment securities, other assets and
liabilities and forward foreign currency contracts ("forward contracts") are
translated at the exchange rates prevailing at the end of the period; and (2)
purchases, sales, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. The resultant exchange
gains and losses are recorded as realized and unrealized gain/loss on foreign
exchange transactions. Pursuant to U.S. federal income tax regulations, certain
foreign exchange gains/losses included in realized and unrealized gain/loss are
included in or are a reduction of ordinary income for federal income tax
purposes. The Fund does not isolate that portion of the results of operations
arising as a result of changes in the foreign exchange rates from the changes in
the market prices of the securities. Forward contracts are

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2005 (UNAUDITED) continued

valued daily at the appropriate exchange rates. The resultant unrealized
exchange gains and losses are recorded as unrealized foreign currency gain or
loss. The Fund records realized gains or losses on delivery of the currency or
at the time the forward contract is extinguished (compensated) by entering into
a closing transaction prior to delivery.

F. Futures Contracts -- A futures contract is an agreement between two parties
to buy and sell financial instruments or contracts based on financial indices at
a set price on a future date. Upon entering into such a contract, the Fund is
required to pledge to the broker cash, U.S. Government securities or other
liquid portfolio securities equal to the minimum initial margin requirements of
the applicable futures exchange. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments known as
variation margin are recorded by the Fund as unrealized gains and losses. Upon
closing of the contract, the Fund realizes a gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed.

G. 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.

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

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

2. Investment Advisory/Administration and Sub-Advisory Agreements

Effective November 1, 2004, pursuant to an Investment Advisory Agreement, the
Fund pays the Investment Adviser an advisory fee, accrued daily and payable
monthly, by applying the following annual rates to the net assets of the Fund
determined as of the close of each business day: 0.67% to the portion of daily
net assets not exceeding $500 million; 0.645% to the portion of daily net assets
exceeding $500 million but not exceeding $2 billion; 0.62% to the portion of
daily net assets exceeding $2 billion but not exceeding $3 billion; and 0.595%
to the portion of daily net assets in excess of $3 billion.

Effective November 1, 2004, pursuant to an Administration Agreement with Morgan
Stanley Services Company Inc. (the "Administrator"), an affiliate of the
Investment Adviser, the Fund pays an

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2005 (UNAUDITED) continued

administration fee, accrued daily and payable monthly, by applying the annual
rate of 0.08% to the Fund's daily net assets.

Prior to November 1, 2004, the Fund retained the Investment Adviser to provide
administrative services and to manage the investment of the Fund's assets
pursuant to an investment management agreement pursuant to which the Fund paid
the Investment Adviser a monthly management fee accrued daily and payable
monthly, by applying the following annual rates to the net assets of the Fund
determined as of the close of each business day: 0.75% to the portion of daily
net assets not exceeding $2 billion; and 0.725% to the portion of daily net
assets exceeding $2 billion.

3. Plan of Distribution

Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Adviser. 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 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
$22,322,074 at January 31, 2005.

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 January 31, 2005, 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 January 31,
2005, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2005 (UNAUDITED) continued

shares and Class C shares of $2,000, $369,357 and $1,142, respectively and
received $6,766 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 January 31, 2005 aggregated
$256,007,791 and $320,675,633, respectively. Included in the aforementioned are
purchases and sales with other Morgan Stanley funds of $177,504 and $282,052,
respectively including a net realized gain of $50,928.

For the six months ended January 31, 2005, the Fund incurred brokerage
commissions of $14,889 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Adviser, Administrator and Distributor, for portfolio transactions
executed on behalf of the Fund.

At January 31, 2005, Morgan Stanley Fund of Funds -- Domestic Portfolio, an
affiliate of the Investment Adviser, Administrator and Distributor, held 70,187
Class D shares of beneficial interest of the Fund.

Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and
Distributor, is the Fund's transfer agent. At January 31, 2005, the Fund had
transfer agent fees and expenses payable of approximately $22,300.

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.

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

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2005 (UNAUDITED) continued

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 July 31, 2004, the Fund had a net capital loss carryforward of
$442,703,533 of which $321,646,810 will expire on July 31, 2010 and $121,056,723
will expire on July 31, 2011 to offset future capital gains to the extent
provided by regulations.

As of July 31, 2004, the Fund had temporary book/tax differences attributable to
post-October losses (foreign currency 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. Purposes of and Risks Relating to Certain Financial Instruments

The Fund may enter into forward contracts to facilitate settlement of foreign
currency denominated portfolio transactions or to manage foreign currency
exposure associated with foreign currency denominated securities.

To hedge against adverse interest rate, foreign currency and market risks, the
Fund may purchase and sell interest rate, currency and index futures ("futures
contracts").

Forward contracts and futures contracts involve elements of market risk in
excess of the amount reflected in the Statement of Assets and Liabilities. The
Fund bears the risk of an unfavorable change in the foreign exchange rates
underlying the forward contracts. Risks may also rise upon entering into these
contracts from the potential inability of the counterparties to meet the terms
of their contracts.

7. Legal Matters
The Investment Adviser, certain affiliates of the Investment Adviser, certain
officers of such affiliates and certain investment companies advised by the
Investment Adviser or its affiliates, including the Fund, are named as
defendants in a consolidated class action. 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 Adviser
and certain affiliates of the Investment Adviser allegedly offered economic
incentives to brokers and others to recommend the funds advised by the
Investment Adviser or its affiliates to investors rather than funds managed by
other companies, and (ii) that the funds advised by the Investment Adviser 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,

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2005 (UNAUDITED) continued

among other things, unspecified compensatory damages, rescissionary damages,
fees and costs. The defendants have moved to dismiss the action and intend to
otherwise vigorously defend it. On March 10, 2005, Plaintiffs sought leave to
supplement their complaint to assert claims on behalf of other investors. While
the Fund and Adviser believe that each 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.

8. Shares of Beneficial Interest

Transactions in shares of beneficial interest were as follows:

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JANUARY 31, 2005 JULY 31, 2004
------------------------- ---------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------

CLASS A SHARES
Sold............................................ 183,478 $ 1,537,262 220,437 $ 1,847,474
Redeemed........................................ (628,290) (5,603,331) (611,642) (5,246,780)
---------- ------------ ----------- -------------
Net decrease -- Class A......................... (444,812) (4,066,069) (391,205) (3,399,306)
---------- ------------ ----------- -------------
CLASS B SHARES
Sold............................................ 357,314 3,089,403 1,388,713 11,363,567
Redeemed........................................ (6,487,596) (55,250,194) (14,138,172) (116,228,250)
---------- ------------ ----------- -------------
Net decrease -- Class B......................... (6,130,282) (52,160,791) (12,749,459) (104,864,683)
---------- ------------ ----------- -------------
CLASS C SHARES
Sold............................................ 66,941 576,000 226,518 1,868,007
Redeemed........................................ (618,906) (5,298,799) (1,452,268) (11,955,602)
---------- ------------ ----------- -------------
Net decrease -- Class C......................... (551,965) (4,722,799) (1,225,750) (10,087,595)
---------- ------------ ----------- -------------
CLASS D SHARES
Sold............................................ 2,548 23,062 110,174 951,405
Redeemed........................................ (52,499) (484,395) (179,248) (1,554,260)
---------- ------------ ----------- -------------
Net decrease -- Class D......................... (49,951) (461,333) (69,074) (602,855)
---------- ------------ ----------- -------------
Net decrease in Fund............................ (7,177,010) $(61,410,992) (14,435,488) $(118,954,439)
========== ============ =========== =============
</Table>

Morgan Stanley Aggressive Equity Fund
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 JULY 31,
MONTHS ENDED ---------------------------------------------------------
JANUARY 31, 2005 2004 2003 2002 2001 2000
---------------- --------- --------- --------- --------- ---------
(unaudited)

Class A Shares

Selected Per Share Data:

Net asset value, beginning of period.... $8.34 $7.71 $7.51 $9.62 $15.24 $10.87
----- ----- ----- ----- ------ ------

Income (loss) from investment
operations:
Net investment loss++............... (0.03) (0.07) (0.02) (0.03) 0.00 (0.08)
Net realized and unrealized gain
(loss).............................. 1.03 0.70 0.22 (2.05) (3.90) 4.45
----- ----- ----- ----- ------ ------

Total income (loss) from investment
operations............................. 1.00 0.63 0.20 (2.08) (3.90) 4.37
----- ----- ----- ----- ------ ------

Less distributions from net realized
gains.................................. -- -- -- (0.03) (1.72) --
----- ----- ----- ----- ------ ------

Net asset value, end of period.......... $9.34 $8.34 $7.71 $7.51 $ 9.62 $15.24
===== ===== ===== ===== ====== ======

Total Return+........................... 11.99%(1) 8.17% 2.66% (21.65)% (28.31)% 40.20%

Ratios to Average Net Assets(3):
Expenses................................ 1.42%(2) 1.37% 1.40% 1.29% 1.16% 1.18%

Net investment loss..................... (0.59)%(2) (0.77)% (0.32)% (0.39)% (0.03)% (0.55)%

Supplemental Data:
Net assets, end of period, in
thousands.............................. $14,410 $16,564 $18,340 $21,888 $39,662 $67,267

Portfolio turnover rate................. 72%(1) 219% 263% 325% 399% 432%
</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.
</Table>

20
See Notes to Financial Statements

Morgan Stanley Aggressive Equity Fund
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED JULY 31,
MONTHS ENDED -----------------------------------------------------------
JANUARY 31, 2005 2004 2003 2002 2001 2000
---------------- --------- --------- --------- --------- -----------
(unaudited)

Class B Shares

Selected Per Share Data:

Net asset value, beginning of period... $7.98 $7.44 $7.31 $9.42 $15.08 $10.84
----- ----- ----- ----- ------ ------

Income (loss) from investment
operations:
Net investment loss++.............. (0.06) (0.12) (0.08) (0.10) (0.10) (0.19)
Net realized and unrealized gain
(loss)............................. 1.00 0.66 0.21 (1.98) (3.84) 4.43
----- ----- ----- ----- ------ ------

Total income (loss) from investment
operations............................ 0.94 0.54 0.13 (2.08) (3.94) 4.24
----- ----- ----- ----- ------ ------

Less distributions from net realized
gains................................. -- -- -- (0.03) (1.72) --
----- ----- ----- ----- ------ ------

Net asset value, end of period......... $8.92 $7.98 $7.44 $7.31 $ 9.42 $15.08
===== ===== ===== ===== ====== ======

Total Return+.......................... 11.78%(1) 7.26% 1.78% (22.11)% (28.93)% 39.11%

Ratios to Average Net Assets(3):
Expenses............................... 2.17%(2) 2.13% 2.15% 2.05% 1.94% 1.93%

Net investment loss.................... (1.34)%(2) (1.53)% (1.07)% (1.15)% (0.81)% (1.30)%

Supplemental Data:
Net assets, end of period, in
thousands............................. $296,224 $314,195 $387,751 $492,959 $881,115 $1,364,482

Portfolio turnover rate................ 72%(1) 219% 263% 325% 399% 432%
</Table>

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

<Table>

21
See Notes to Financial Statements

Morgan Stanley Aggressive Equity Fund
FINANCIAL HIGHLIGHTS continued

Class C Shares

Selected Per Share Data:

Net asset value, beginning of period... $7.99 $7.45 $7.32 $9.42 $15.08 $10.84
----- ----- ----- ----- ------ ------

Income (loss) from investment
operations:
Net investment loss++.............. (0.06) (0.12) (0.08) (0.09) (0.10) (0.19)
Net realized and unrealized gain
(loss)............................. 1.00 0.66 0.21 (1.98) (3.84) 4.43
----- ----- ----- ----- ------ ------

Total income (loss) from investment
operations............................ 0.94 0.54 0.13 (2.07) (3.94) 4.24
----- ----- ----- ----- ------ ------

Less distributions from net realized
gains................................. -- -- -- (0.03) (1.72) --
----- ----- ----- ----- ------ ------

Net asset value, end of period......... $8.93 $7.99 $7.45 $7.32 $ 9.42 $15.08
===== ===== ===== ===== ====== ======

Total Return+.......................... 11.76%(1) 7.25% 1.78% (22.00)% (28.93)% 39.11%

Ratios to Average Net assets(3):
Expenses............................... 2.17%(2) 2.12% 2.15% 1.93% 1.94% 1.93%

Net investment loss.................... (1.34)%(2) (1.52)% (1.07)% (1.03)% (0.81)% (1.30)%

Supplemental Data:
Net assets, end of period, in
thousands............................. $32,719 $33,710 $40,555 $49,639 $83,603 $127,180

Portfolio turnover rate................ 72%(1) 219% 263% 325% 399% 432%
</Table>

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

<Table>

22
See Notes to Financial Statements

Morgan Stanley Aggressive Equity Fund
FINANCIAL HIGHLIGHTS continued

Class D Shares

Selected Per Share Data:

Net asset value, beginning of period... $8.45 $7.80 $7.58 $9.68 $15.30 $10.89
----- ----- ----- ----- ------ ------

Income (loss) from investment
operations:
Net investment income (loss)++..... (0.02) (0.04) (0.01) (0.01) 0.02 (0.06)
Net realized and unrealized gain
(loss)............................. 1.05 0.69 0.23 (2.06) (3.92) 4.47
----- ----- ----- ----- ------ ------

Total income (loss) from investment
operations............................ 1.03 0.65 0.22 (2.07) (3.90) 4.41
----- ----- ----- ----- ------ ------

Less distributions from net realized
gains................................ -- -- -- (0.03) (1.72) --
----- ----- ----- ----- ------ ------

Net asset value, end of period......... $9.48 $8.45 $7.80 $7.58 $ 9.68 $15.30
===== ===== ===== ===== ====== ======

Total Return+.......................... 12.19%(1) 8.33% 2.90% (21.33)% (28.26)% 40.50%

Ratios to Average Net Assets(3):
Expenses............................... 1.17%(2) 1.13% 1.15% 1.05% 0.94% 0.93%

Net investment income (loss)........... (0.34)%(2) (0.53)% (0.07)% (0.15)% 0.19% (0.30)%

Supplemental Data:
Net assets, end of period, in
thousands............................. $1,873 $2,091 $2,468 $2,622 $5,111 $4,581

Portfolio turnover rate................ 72%(1) 219% 263% 325% 399% 432%
</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.
</Table>

23
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
Fergus Reid

OFFICERS

Charles A. Fiumefreddo
Chairman of the Board

Mitchell M. Merin
President

Ronald E. Robison
Executive Vice President and Principal Executive Officer

Joseph J. McAlinden
Vice President

Barry Fink
Vice President

Amy R. Doberman
Vice President

Carsten Otto
Chief Compliance Officer

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 ADVISER

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
Aggressive Equity Fund

Semiannual Report
January 31, 2005

[MORGAN STANLEY LOGO]

36052RPT-RA05-00190P-Y01/05

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.

Refer to Item 1.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.

Not applicable for semiannual reports.

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Applicable only to reports filed by closed-end funds.

Item 9. Closed-End Fund Repurchases

Applicable to reports filed by closed-end funds.

Item 10. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 11. Controls and Procedures

(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported

within the time periods specified in the Securities and Exchange Commission's
rules and forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report.

(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the 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 12. Exhibits

(a) Code of Ethics - Not applicable for semiannual reports.

(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.

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 Aggressive Equity Fund

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
March 22, 2005

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
March 22, 2005

/s/ Francis Smith
Francis Smith
Principal Financial Officer
March 22, 2005