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: 811-10359

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

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

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

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

Date of fiscal year end: August 31, 2005

Date of reporting period: February 28, 2005

Item 1 - Report to Shareholders

Welcome, Shareholder:

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

This material must be preceded or accompanied by a prospectus for the fund being
offered.

Market forecasts provided in this report may not necessarily come to pass. There
is no assurance that the Fund will achieve its investment objective. The Fund is
subject to market risk, which is the possibility that market values of
securities owned by the Fund will decline and, therefore, the value of the
Fund's shares may be less than what you paid for them. Accordingly, you can lose
money investing in this Fund. Please see the prospectus for more complete
information on investment risks.

FUND REPORT

For the six-month period ended February 28, 2005

TOTAL RETURN FOR THE SIX MONTHS ENDED FEBRUARY 28, 2005

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

16.51% 15.99% 15.98% 16.68% 18.02% 15.48%
</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

U.S. equity market conditions were generally favorable over the six months ended
February 28, 2005. Many economic indicators were positive during the period, as
economic growth continued and many companies showed improved earnings. The labor
market also improved, though fewer jobs were created than some economists and
investors had expected. The Federal Open Market Committee raised the federal
funds target rate a number of times during that period, but these increases
apparently did not take many investors by surprise and the stock market was
largely unaffected. Although investor concern over the possibility of a disputed
U.S. presidential election weighed on stocks in late summer and early fall, the
market went on to rally later in the year when the price of crude oil fell
temporarily from its high and the election ended without incident. A pick-up in
consumer spending further helped to lift stocks as 2004 drew to a close,
although weaker-than-expected economic numbers contributed in part to the
slowing performance of equities as 2005 began. The period ended on a slightly
more positive note as a number of encouraging economic indicators supported
market gains in February, despite some concerns over inflation and the return of
rising oil prices.

While all sectors in the Russell Midcap Value Index saw positive returns for the
six months, some sectors outperformed others. Energy stocks were the
strongest-performing for the period, boosted by the rising price of oil, and
were followed by stocks in the materials sector. Financial stocks lagged other
sectors during a period when interest rates began to move higher and regional
banks were hurt by the flattening of the yield curve. For the six months, value
stocks generally outperformed growth stocks.

PERFORMANCE ANALYSIS

Morgan Stanley Mid-Cap Value Fund underperformed the Russell Midcap Value Index
for the six months ended February 28, 2005, assuming no deduction of applicable
sales charges. For the same period, the Fund outperformed the Lipper Mid-Cap
Core Funds Index. The Fund's performance was hurt over the period in large part
by stock selection in the technology sector. The Fund maintained an overweighted
position in software and software services stocks within the sector relative to
the Russell Midcap Value Index, which hurt performance as a number of these
companies suffered from

competition or a fall-off in new contracts. At the same time, the Fund suffered
from a lack of exposure to the hardware and equipment companies in the software
sector that performed particularly strongly. Stock selection in the healthcare
sector further hindered performance, as the Fund was hurt by not holding several
strong performers in the healthcare equipment and services industry. In
addition, the Fund maintained an overweighted position in pharmaceutical stocks
relative to the Russell Midcap Value Index that suffered over the period due to
a number of high-profile drug withdrawals by major companies in the industry and
investors' concerns over drug pipelines.

Other positions were more beneficial for the Fund and contributed to its
performance for the period. An underweighted position in financials relative to
the Russell Midcap Value Index helped the Fund due to the overall sector's
lagging returns. Stock selection in the sector also drove positive performance,
as the Fund limited its exposure to underperforming regional banks while making
gains from holdings in insurance companies that benefited from improved pricing
power and some consolidation within the industry. In the materials sector, stock
selection helped the Fund due to the strong performance of a number of chemicals
companies. An overweighted position in energy stocks also contributed positively
to performance as a result of the rising price of oil during the period. Within
the sector, the Fund benefited particularly from its exposure to refining and
marketing companies.

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

INVESTMENT STRATEGY

THE FUND WILL NORMALLY INVEST AT LEAST 80% OF ITS ASSETS IN COMMON STOCK AND
OTHER EQUITY SECURITIES, INCLUDING DEPOSITARY RECEIPTS AND SECURITIES
CONVERTIBLE INTO COMMON STOCK, OF COMPANIES TRADED ON A U.S. SECURITIES EXCHANGE
WITH MARKET CAPITALIZATIONS THAT FALL WITHIN THE RANGE OF COMPANIES INCLUDED IN
THE RUSSELL MIDCAP VALUE INDEX. AS OF SEPTEMBER 30, 2004, THESE MARKET
CAPITALIZATIONS RANGE BETWEEN $525 MILLION AND $15.24 BILLION. IN PURSUING ITS
INVESTMENT OBJECTIVE, THE FUND'S "INVESTMENT ADVISER," MORGAN STANLEY INVESTMENT
ADVISORS INC., SEEKS ATTRACTIVELY VALUED COMPANIES EXPERIENCING A CHANGE THAT
THE INVESTMENT ADVISER BELIEVES COULD HAVE A POSITIVE IMPACT ON A COMPANY'S
OUTLOOK, SUCH AS A CHANGE IN MANAGEMENT, INDUSTRY DYNAMICS OR OPERATIONAL
EFFICIENCY. IN DETERMINING WHETHER SECURITIES SHOULD BE SOLD, THE INVESTMENT
ADVISER CONSIDERS A NUMBER OF FACTORS, INCLUDING APPRECIATION TO FAIR VALUE,
FUNDAMENTAL CHANGE IN THE COMPANY OR CHANGES IN ECONOMIC OR MARKET TRENDS. THE
INVESTMENT ADVISER MAY PURCHASE STOCKS THAT TYPICALLY DO NOT PAY DIVIDENDS.

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

<Table>
<Caption>
TOP 10 HOLDINGS

Lyondell Chemical Co. 3.8%
Hubbell, Inc. (Class B) 3.7
Valassis Communications, Inc. 3.5
Sovereign Bancorp, Inc. 3.2
Flour Corp. 3.1
Scholastic Corp. 2.8
Cooper Cameron Corp. 2.8
Applera Corp. -- Applied Biosystems Group 2.7
PMI Group, Inc. (The) 2.5
Constellation Energy Group, Inc. 2.5
</Table>

<Table>
<Caption>
TOP FIVE INDUSTRIES

Electric Utilities 6.6%
Medical Specialties 6.6
Specialty Stores 4.4
Chemicals: Specialty 3.8
Electrical Products 3.7
</Table>

Data as of February 28, 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.

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 FEBRUARY 28, 2005

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

1 YEAR 11.38%(3) 10.49%(3) 10.58%(3) 11.67%(3)
5.53(4) 5.49(4) 9.58(4) --
SINCE INCEPTION 7.97(3) 7.15(3) 7.17(3) 8.24(3)
6.24(4) 6.64(4) 7.17(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% for shares
redeemed within one year of purchase.

++ Class D has no sales charge.

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

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

(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 09/01/04 - 02/28/05.

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 *
------------- ------------- ---------------
09/01/04 -
09/01/04 02/28/05 02/28/05
------------- ------------- ---------------

CLASS A
Actual (16.51% return)...................................... $1,000.00 $1,165.10 $ 7.46
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,017.90 $ 6.95
CLASS B
Actual (15.99% return)...................................... $1,000.00 $1,159.90 $11.46
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,014.18 $10.69
CLASS C
Actual (15.98% return)...................................... $1,000.00 $1,159.80 $11.46
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,014.18 $10.69
CLASS D
Actual (16.68% return)...................................... $1,000.00 $1,166.80 $ 6.12
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,019.14 $ 5.71
</Table>

- ------------------
* Expenses are equal to the Fund's annualized expense ratio of 1.39%, 2.14%,
2.14% and 1.14% respectively, multiplied by the average account value over
the period, multiplied by 181/365 (to reflect the one-half year period).

Morgan Stanley Mid-Cap Value Fund
PORTFOLIO OF INVESTMENTS - FEBRUARY 28, 2005 (UNAUDITED)

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

Common Stocks (92.6%)
Advertising/Marketing
Services (3.5%)
318,020 Valassis Communications,
Inc.*................... $ 11,897,128
------------
Aerospace & Defense
(2.4%)
218,426 Goodrich Corp. .......... 8,088,315
------------
Airlines (2.5%)
619,320 Southwest Airlines
Co. .................... 8,577,582
------------
Auto Parts: O.E.M. (1.7%)
76,800 Magna International Inc.
(Class A) (Canada)...... 5,679,360
------------
Building Products (1.0%)
87,300 York International
Corp. .................. 3,375,891
------------
Chemicals: Specialty
(3.8%)
385,290 Lyondell Chemical Co. ... 13,042,066
------------
Containers/ Packaging
(1.4%)
89,700 Sealed Air Corp.*........ 4,688,619
------------
Contract Drilling (2.2%)
151,710 Transocean Inc. (Cayman
Islands)*............... 7,354,901
------------
Data Processing Services
(2.0%)
465,396 BISYS Group, Inc.
(The)*.................. 6,897,169
------------
Discount Stores (2.0%)
322,300 Dollar General Corp. .... 6,842,429
------------
Electric Utilities (6.6%)
166,900 Constellation Energy
Group, Inc. ............ 8,590,343
207,306 Edison International..... 6,733,299
208,050 Wisconsin Energy
Corp. .................. 7,223,496
------------
22,547,138
------------
</Table>

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

Electrical Products
(3.7%)
231,490 Hubbell, Inc. (Class
B)...................... $ 12,454,162
------------
Electronic Distributors
(2.1%)
176,500 Tech Data Corp.*......... 7,234,735
------------
Electronic Production
Equipment (1.1%)
269,690 Cadence Design Systems,
Inc.*................... 3,716,328
------------
Engineering &
Construction (3.1%)
168,540 Fluor Corp. ............. 10,575,885
------------
Financial Conglomerates
(2.0%)
370,160 Conseco Inc.*............ 7,003,427
------------
Food: Meat/Fish/ Dairy
(1.8%)
365,150 Tyson Foods, Inc. (Class
A)...................... 6,214,853
------------
Home Furnishings (2.2%)
336,790 Newell Rubbermaid,
Inc. ................... 7,507,049
------------
Hotels/Resorts/
Cruiselines (1.4%)
86,240 Starwood Hotels & Resorts
Worldwide, Inc. ........ 4,936,378
------------
Household/Personal Care
(0.9%)
70,240 International Flavors &
Fragrances, Inc. ....... 2,900,210
------------
Integrated Oil (1.8%)
60,040 Amerada Hess Corp. ...... 6,028,016
------------
Investment Banks/ Brokers
(2.2%)
175,420 Edwards (A.G.), Inc. .... 7,562,356
------------
</Table>

8
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
PORTFOLIO OF INVESTMENTS - FEBRUARY 28, 2005 (UNAUDITED) continued

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

Medical Specialties
(6.6%)
454,130 Applera Corp. - Applied
Biosystems Group........ $ 9,327,830
94,620 Bausch & Lomb, Inc. ..... 6,698,150
232,250 Pall Corp. .............. 6,287,008
------------
22,312,988
------------
Miscellaneous Commercial
Services (1.4%)
231,360 Sabre Holdings Corp.
(Class A)............... 4,877,069
------------
Multi-Line Insurance
(1.2%)
211,130 Horace Mann Educators
Corp. .................. 3,960,799
------------
Oil Refining/Marketing
(1.6%)
77,388 Valero Energy Corp. ..... 5,513,121
------------
Oilfield Services/
Equipment (2.8%)
164,000 Cooper Cameron Corp.*.... 9,461,160
------------
Personnel Services (2.2%)
170,439 Manpower, Inc. .......... 7,448,184
------------
Pharmaceuticals: Generic
Drugs (3.0%)
104,800 Mylan Laboratories,
Inc. ................... 1,844,480
260,190 Watson Pharmaceuticals,
Inc.*................... 8,258,431
------------
10,102,911
------------
Property - Casualty
Insurers (2.0%)
151,790 ACE Ltd. (Cayman
Islands)................ 6,748,583
------------
</Table>

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

Publishing: Books/
Magazines (2.8%)
267,360 Scholastic Corp.*........ $ 9,485,933
------------
Real Estate Investment
Trusts (1.6%)
93,400 Macerich Co. (The)....... 5,343,414
------------
Regional Banks (2.2%)
180,150 Northern Trust Corp. .... 7,611,338
------------
Savings Banks (3.2%)
474,000 Sovereign Bancorp,
Inc. ................... 10,873,560
------------
Services to the Health
Industry (1.7%)
237,670 IMS Health Inc. ......... 5,787,264
------------
Specialty Insurance
(2.5%)
214,100 PMI Group, Inc. (The).... 8,617,525
------------
Specialty Stores (4.4%)
260,890 Linens 'N Things,
Inc.*................... 7,015,332
404,590 Office Depot, Inc.*...... 7,788,357
------------
14,803,689
------------
Specialty
Telecommunications (2.0%)
202,600 CenturyTel, Inc. ........ 6,815,464
------------
Total Common Stocks
(Cost $271,505,781)...... 314,886,999
------------
</Table>

9
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
PORTFOLIO OF INVESTMENTS - FEBRUARY 28, 2005 (UNAUDITED) continued

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

Short-Term Investment (7.3%)
Repurchase Agreement
$ 24,810 Joint repurchase
agreement account 2.62%
due 03/01/05 (dated
02/28/05; proceeds
$24,811,806) (a)
(Cost $24,810,000)...... $ 24,810,000
------------
</Table>

<Table>

Total Investments
(Cost $296,315,781) (b)..... 99.9% 339,696,999
Other Assets in Excess of
Liabilities................. 0.1 499,574
----- ------------
Net Assets.................. 100.0% $340,196,573
===== ============
</Table>

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

<Table>

* Non-income producing security.
(a) Collateralized by federal agency and U.S. Treasury
obligations.
(b) The aggregate cost for federal income tax purposes
approximates the aggregate cost for book purposes.
The aggregate gross unrealized appreciation is
$48,672,032 and the aggregate gross unrealized
depreciation is $5,290,814, resulting in net
unrealized appreciation of $43,381,218.
</Table>

10
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
SUMMARY OF INVESTMENTS - FEBRUARY 28, 2005 (UNAUDITED)

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

Repurchase Agreement........................................ $ 24,810,000 7.3%
Electric Utilities.......................................... 22,547,138 6.6
Medical Specialties......................................... 22,312,988 6.6
Specialty Stores............................................ 14,803,689 4.4
Chemicals: Specialty........................................ 13,042,066 3.8
Electrical Products......................................... 12,454,162 3.7
Advertising/Marketing Services.............................. 11,897,128 3.5
Savings Banks............................................... 10,873,560 3.2
Engineering & Construction.................................. 10,575,885 3.1
Pharmaceuticals: Generic Drugs.............................. 10,102,911 3.0
Publishing: Books/Magazines................................. 9,485,933 2.8
Oilfield Services/Equipment................................. 9,461,160 2.8
Specialty Insurance......................................... 8,617,525 2.5
Airlines.................................................... 8,577,582 2.5
Aerospace & Defense......................................... 8,088,315 2.4
Regional Banks.............................................. 7,611,338 2.2
Investment Banks/Brokers.................................... 7,562,356 2.2
Home Furnishings............................................ 7,507,049 2.2
Personnel Services.......................................... 7,448,184 2.2
Contract Drilling........................................... 7,354,901 2.2
Electronic Distributors..................................... 7,234,735 2.1
Financial Conglomerates..................................... 7,003,427 2.0
Data Processing Services.................................... 6,897,169 2.0
Discount Stores............................................. 6,842,429 2.0
Specialty Telecommunications................................ 6,815,464 2.0
Property-Casualty Insurers.................................. 6,748,583 2.0
Food: Meat/Fish/Dairy....................................... 6,214,853 1.8
Integrated Oil.............................................. 6,028,016 1.8
Services to the Health Industry............................. 5,787,264 1.7
Auto Parts: O.E.M. ......................................... 5,679,360 1.7
Oil Refining/Marketing...................................... 5,513,121 1.6
Real Estate Investment Trusts............................... 5,343,414 1.6
Hotels/Resorts/Cruiselines.................................. 4,936,378 1.4
Miscellaneous Commercial Services........................... 4,877,069 1.4
Containers/Packaging........................................ 4,688,619 1.4
Multi-Line Insurance........................................ 3,960,799 1.2
Electronic Production Equipment............................. 3,716,328 1.1
Building Products........................................... 3,375,891 1.0
Household/Personal Care..................................... 2,900,210 0.9
------------ ----
$339,696,999 99.9%
============ ====
</Table>

11
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
February 28, 2005 (unaudited)

<Table>

Assets:
Investments in securities, at value
(cost $296,315,781)................ $339,696,999
Receivable for:
Investments sold................. 3,187,393
Shares of beneficial interest
sold........................... 624,470
Dividends........................ 357,705
Prepaid expenses and other assets.... 10,345
------------
Total Assets..................... 343,876,912
------------
Liabilities:
Payable for:
Investments purchased............ 2,993,885
Shares of beneficial interest
redeemed....................... 346,102
Investment advisory fee.......... 186,630
Distribution fee................. 58,149
Administration fee............... 20,737
Accrued expenses and other
payables........................... 74,836
------------
Total Liabilities................ 3,680,339
------------
Net Assets....................... $340,196,573
============
Composition of Net Assets:
Paid-in-capital...................... $275,254,779
Net unrealized appreciation.......... 43,381,218
Accumulated undistributed net
investment income.................. 180,417
Accumulated undistributed net
realized gain...................... 21,380,159
------------
Net Assets....................... $340,196,573
============
Class A Shares:
Net Assets........................... $4,447,081
Shares Outstanding (unlimited
authorized, $.01 par value)........ 378,538
Net Asset Value Per Share........ $11.75
============
Maximum Offering Price Per Share,
(net asset value plus 5.54% of
net asset value)............... $12.40
============
Class B Shares:
Net Assets........................... $66,464,069
Shares Outstanding (unlimited
authorized, $.01 par value)........ 5,808,748
Net Asset Value Per Share........ $11.44
============
Class C Shares:
Net Assets........................... $8,592,376
Shares Outstanding (unlimited
authorized, $.01 par value)........ 750,281
Net Asset Value Per Share........ $11.45
============
Class D Shares:
Net Assets........................... $260,693,047
Shares Outstanding (unlimited
authorized, $.01 par value)........ 22,008,189
Net Asset Value Per Share........ $11.85
============
</Table>

Statement of Operations
For the six months ended February 28, 2005 (unaudited)

<Table>

Net Investment Income:
Income
Dividends (net of $9,160 foreign
withholding tax).................... $ 2,225,666
Interest.............................. 178,948
-----------
Total Income...................... 2,404,614
-----------
Expenses
Investment advisory fee............... 1,209,911
Transfer agent fees and expenses...... 426,709
Distribution fee (Class A shares)..... 5,171
Distribution fee (Class B shares)..... 317,377
Distribution fee (Class C shares)..... 41,863
Administration fee.................... 87,825
Shareholder reports and notices....... 44,228
Registration fees..................... 32,225
Professional fees..................... 28,971
Custodian fees........................ 12,074
Trustees' fees and expenses........... 1,873
Other................................. 13,549
-----------
Total Expenses.................... 2,221,776
-----------
Net Investment Income............. 182,838
-----------
Net Realized and Unrealized Gain:
Net realized gain..................... 22,036,536
Net change in unrealized
appreciation........................ 27,479,897
-----------
Net Gain.......................... 49,516,433
-----------
Net Increase.......................... $49,699,271
===========
</Table>

12
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL STATEMENTS continued

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
----------------- ---------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss)................................ $ 182,838 $ (418,444)
Net realized gain........................................... 22,036,536 59,481,420
Net change in unrealized appreciation....................... 27,479,897 (31,996,129)
------------ ------------
Net Increase............................................ 49,699,271 27,066,847
------------ ------------
Distributions to Shareholders from Net Realized Gain:
Class A shares.............................................. (390,465) --
Class B shares.............................................. (6,115,073) --
Class C shares.............................................. (801,579) --
Class D shares.............................................. (23,336,428) --
------------ ------------
Total Distributions..................................... (30,643,545) --
------------ ------------

Net increase from transactions in shares of beneficial
interest.................................................. 12,118,236 5,687,638
------------ ------------
Net Increase............................................ 31,173,962 32,754,485
Net Assets:
Beginning of period......................................... 309,022,611 276,268,126
------------ ------------
End of Period
(Including accumulated undistributed net investment income
of $180,417 and a net investment loss of $2,421,
respectively)............................................... $340,196,573 $309,022,611
============ ============
</Table>

13
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2005 (UNAUDITED)

1. Organization and Accounting Policies

Morgan Stanley Mid-Cap Value Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is
above-average total return. The Fund was organized as a Massachusetts business
trust on April 12, 2001 and commenced operations on October 29, 2001.

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

The following is a summary of significant accounting policies:

A. Valuation of Investments -- (1) an equity portfolio security listed or traded
on the New York Stock Exchange ("NYSE") or American Stock Exchange or other
exchange is valued at its latest sale price prior to the time when assets are
valued; if there were no sales that day, the security is valued at the mean
between the last reported bid and asked price; (2) an equity portfolio security
listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price;
if there were no sales that day, the security is valued at the mean between the
last reported bid and asked price; (3) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the mean
between the last reported bid and asked price. In cases where a security is
traded on more than one exchange, the security is valued on the exchange
designated as the primary market; (4) for equity securities traded on foreign
exchanges, the last reported sale price or the latest bid price may be used if
there were no sales on a particular day; (5) when market quotations are not
readily available or Morgan Stanley Investment Advisors Inc. (the "Investment
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 Adviser using a pricing
service and/or procedures approved by the Trustees of the Fund; (6) certain

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2005 (UNAUDITED) continued

portfolio securities may be valued by an outside pricing service approved by the
Fund's Trustees; and (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 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. Federal Income Tax Policy -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.

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

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

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2005 (UNAUDITED) continued

2. Investment Advisory/Administration 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 at the close of each business day: 0.72% to the portion of daily net
assets not exceeding $1 billion; and 0.65% to the portion of daily net assets
exceeding $1 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 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 had 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 annual rate of 0.80% to the net assets of the Fund
determined at the close of each business day.

3. Plan of Distribution

Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Adviser and Administrator. The
Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act. The Plan provides that the Fund will pay the Distributor a fee
which is accrued daily and paid monthly at the following annual rates: (i) Class
A -- up to 0.25% of the average daily net assets of Class A; (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 $1,580,377
at February 28, 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,

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2005 (UNAUDITED) continued

respectively, will not be reimbursed by the Fund through payments in any
subsequent year, except that expenses representing a gross sales credit to
Morgan Stanley Financial Advisors or other selected broker-dealer
representatives may be reimbursed in the subsequent calendar year. For the six
months ended February 28, 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 February 28,
2005, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $78,053 and $865, respectively
and received $13,080 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 February 28, 2005 aggregated
$110,161,730 and $148,840,129, respectively.

For the six months ended February 28, 2005, the Fund incurred brokerage
commissions of $14,075 with Morgan Stanley & Co., an affiliate of the Investment
Adviser, Administrator and Distributor, for portfolio transactions executed on
behalf of the Fund.

Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and
Distributor, is the Fund's transfer agent.

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

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2005 (UNAUDITED) continued

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 August 31, 2004, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.

6. Shares of Beneficial Interest

Transactions in shares of beneficial interest were as follows:

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
------------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------

CLASS A SHARES
Sold.............................................. 60,233 $ 707,583 191,872 $ 2,117,784
Reinvestment of distributions..................... 32,132 369,835 -- --
Redeemed.......................................... (63,933) (749,590) (155,519) (1,682,332)
---------- ------------ ---------- ------------
Net increase - Class A............................ 28,432 327,828 36,353 435,452
---------- ------------ ---------- ------------
CLASS B SHARES
Sold.............................................. 513,528 5,900,860 1,704,312 18,264,020
Reinvestment of distributions..................... 490,316 5,506,245 -- --
Redeemed.......................................... (815,467) (9,260,286) (1,775,835) (19,169,149)
---------- ------------ ---------- ------------
Net increase (decrease) - Class B................. 188,377 2,146,819 (71,523) (905,129)
---------- ------------ ---------- ------------
CLASS C SHARES
Sold.............................................. 37,219 423,606 199,107 2,139,241
Reinvestment of distributions..................... 67,478 758,458 -- --
Redeemed.......................................... (102,049) (1,153,960) (176,524) (1,908,368)
---------- ------------ ---------- ------------
Net increase - Class C............................ 2,648 28,104 22,583 230,873
---------- ------------ ---------- ------------
CLASS D SHARES
Sold.............................................. 1,867,721 21,806,423 6,072,743 66,771,159
Reinvestment of distributions..................... 1,660,516 19,261,986 -- --
Redeemed.......................................... (2,698,180) (31,452,924) (5,485,609) (60,844,717)
---------- ------------ ---------- ------------
Net increase - Class D............................ 830,057 9,615,485 587,134 5,926,442
---------- ------------ ---------- ------------
Net increase in Fund.............................. 1,049,514 $ 12,118,236 574,547 $ 5,687,638
========== ============ ========== ============
</Table>

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

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2005 (UNAUDITED) continued

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, 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.

Morgan Stanley Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS

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

<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR OCTOBER 29, 2001*
MONTHS ENDED ENDED ENDED THROUGH
FEBRUARY 28, 2005 AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2002
----------------- --------------- --------------- -----------------
(unaudited)

Class A Shares
Selected Per Share Data:
Net asset value, beginning of period..... $11.08 $10.11 $ 8.19 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss++................ 0.00 (0.02) (0.03) (0.04)
Net realized and unrealized gain
(loss)............................... 1.79 0.99 1.95 (1.76)
------ ------ ------ ------
Total income (loss) from investment
operations.............................. 1.79 0.97 1.92 (1.80)
------ ------ ------ ------
Less dividends and distributions from:
Net investment income................ -- -- -- (0.01)
Net realized gain.................... (1.12) -- -- --
------ ------ ------ ------
Total dividends and distributions........ (1.12) -- -- (0.01)
------ ------ ------ ------
Net asset value, end of period........... $11.75 $11.08 $10.11 $ 8.19
====== ====== ====== ======
Total Return+............................ 16.51%(1) 9.50 % 23.44 % (17.99)%(1)
Ratios to Average Net Assets(3):
Expenses................................. 1.39%(2) 1.40 % 1.47 % 1.45 %(2)(4)
Net investment income (loss)............. 0.09%(2) (0.14)% (0.39)% (0.58)%(2)(4)
Supplemental Data:
Net assets, end of period, in
thousands............................... $4,447 $3,878 $3,173 $3,053
Portfolio turnover rate.................. 35%(1) 151 % 165 % 121 %(1)
</Table>

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

<Table>

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

20
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS continued

Class B Shares
Selected Per Share Data:
Net asset value, beginning of period..... $10.85 $ 9.98 $ 8.15 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss++................ (0.04) (0.10) (0.09) (0.10)
Net realized and unrealized gain
(loss)............................... 1.75 0.97 1.92 (1.75)
------ ------ ------ ------
Total income (loss) from investment
operations.............................. 1.71 0.87 1.83 (1.85)
------ ------ ------ ------
Less dividends and distributions from:
Net investment income................ -- -- -- 0.00++
Net realized gain.................... (1.12) -- -- --
------ ------ ------ ------
Total dividends and distributions........ (1.12) -- -- 0.00
------ ------ ------ ------
Net asset value, end of period........... $11.44 $10.85 $ 9.98 $ 8.15
====== ====== ====== ======
Total Return+............................ 15.99 %(1) 8.72 % 22.45 % (18.47)%(1)
Ratios to Average Net Assets(3):
Expenses................................. 2.14 %(2) 2.16 % 2.24 % 2.20 %(2)(4)
Net investment loss...................... (0.66)%(2) (0.90)% (1.16)% (1.33)%(2)(4)
Supplemental Data:
Net assets, end of period, in
thousands............................... $66,464 $60,987 $56,823 $53,948
Portfolio turnover rate.................. 35 %(1) 151 % 165 % 121 %(1)
</Table>

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

<Table>

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

21
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS continued

Class C Shares
Selected Per Share Data:
Net asset value, beginning of period..... $10.86 $ 9.98 $ 8.15 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss++................ (0.04) (0.09) (0.09) (0.10)
Net realized and unrealized gain
(loss)............................... 1.75 0.97 1.92 (1.75)
------ ------ ------ ------
Total income (loss) from investment
operations.............................. 1.71 0.88 1.83 (1.85)
------ ------ ------ ------
Less dividends and distributions from:
Net investment income................ -- -- -- 0.00++
Net realized gain.................... (1.12) -- -- --
------ ------ ------ ------
Total dividends and distributions........ (1.12) -- -- 0.00
------ ------ ------ ------
Net asset value, end of period........... $11.45 $10.86 $ 9.98 $ 8.15
====== ====== ====== ======
Total Return+............................ 15.98 %(1) 8.82 % 22.45 % (18.48)%(1)
Ratios to Average Net Assets(3):
Expenses................................. 2.14 %(2) 2.08 % 2.24 % 2.20 %(2)(4)
Net investment loss...................... (0.66)%(2) (0.82)% (1.16)% (1.33)%(2)(4)
Supplemental Data:
Net assets, end of period, in
thousands............................... $8,592 $8,119 $7,238 $6,354
Portfolio turnover rate.................. 35 %(1) 151 % 165 % 121 %(1)
</Table>

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

<Table>

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

22
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS continued

Class D Shares
Selected Per Share Data:
Net asset value, beginning of period..... $11.15 $10.15 $ 8.21 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)++....... 0.02 0.01 (0.01) (0.04)
Net realized and unrealized gain
(loss)............................... 1.80 0.99 1.95 (1.73)
------ ------ ------ ------
Total income (loss) from investment
operations.............................. 1.82 1.00 1.94 (1.77)
------ ------ ------ ------
Less dividends and distributions from:
Net investment income................ -- -- -- (0.02)
Net realized gain.................... (1.12) -- -- --
------ ------ ------ ------
Total dividends and distributions........ (1.12) -- -- (0.02)
------ ------ ------ ------
Net asset value, end of period........... $11.85 $11.15 $10.15 $ 8.21
====== ====== ====== ======
Total Return+............................ 16.68%(1) 9.75% 23.63 % (17.76)%(1)
Ratios to Average Net Assets(3):
Expenses................................. 1.14%(2) 1.16% 1.24 % 1.20 %(2)(4)
Net investment income (loss)............. 0.34%(2) 0.10% (0.16)% (0.33)%(2)(4)
Supplemental Data:
Net assets, end of period, in
thousands............................... $260,693 $236,039 $209,035 $95,150
Portfolio turnover rate.................. 35%(1) 151% 165 % 121 %(1)
</Table>

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

<Table>

* Commencement of operations.
++ 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) If the Fund had borne all its expenses that were reimbursed
or waived by the Investment Adviser, the annualized expense
and net investment loss ratios would have been 1.41% and
(0.54)%, respectively.
</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.

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MORGAN STANLEY FUNDS

Morgan Stanley
Mid-Cap Value Fund

Semiannual Report
February 28, 2005

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39917RPT-RA05-00296P-Y02/05

Item 2. Code of Ethics.