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: 811-08861

Morgan Stanley 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: September 30, 2005

Date of reporting period: March 31, 2005

Item 1 - Report to Shareholders

Welcome, Shareholder:

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

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

FUND REPORT

For the six-month period ended March 31, 2005

TOTAL RETURN FOR THE 6 MONTHS ENDED MARCH 31, 2005

<Table>
<Caption>
LIPPER
S&P 500/ MULTI-CAP
S&P 500 BARRA VALUE VALUE FUNDS
CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2) INDEX(3)

8.06% 7.66% 7.73% 8.19% 6.88% 7.27% 9.34%
</Table>

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
March 31, 2005. Many economic indicators were positive during the period, as the
economic growth continued and many companies showed improved earnings. The
Federal Open Market Committee raised the federal funds target rate a number of
times during that period, but at least initially, investors seemed to take the
increases in stride, and the stock market was largely unaffected. Although
investor concern over the possibility of a disputed U.S. presidential election
initially weighed on stocks in early fall, the market went on to rally later in
November and December as the election ended without incident and as the price of
crude oil fell temporarily from its October high. Stock performance was further
boosted during this time by a pick up in initial public offerings and several
high-profile mergers, as well as by a pick-up in consumer spending. Although the
successful election in Iraq and the upward revision of fourth-quarter gross
domestic product numbers supported the market in early 2005, the period ended on
a less-positive note as oil prices continued to rise in the final month and
rising interest rates finally began to weigh on market performance.

PERFORMANCE ANALYSIS

Morgan Stanley Value Fund outperformed both the S&P 500 Index and the S&P 500
Barra Value Index, and underperformed the Lipper Multi-Cap Value Funds Index for
the six months ended March 31, 2005, assuming no deduction of applicable sales
charges. Over this period, the Fund's positive performance was supported largely
by stock selection in a number of sectors, particularly within consumer
discretionary and consumer staples. Additionally, the portfolio's financial
stocks were well diversified and added to returns.

Relative to the S&P 500 Index, higher-than-benchmark weightings in utility
stocks also helped returns. Within the utility sector, select electric utility
stocks contributed particularly notable gains. During a period of rising oil
prices, a higher-than-benchmark weighting in energy stocks also proved helpful.
Moreover, within the sector, the fund's exposure was tilted toward oil services
and drilling companies, which performed especially well during the fourth
quarter of the fiscal year.

On the downside, very limited exposure to industrial stocks -- due to the
management team's valuation discipline -- detracted from relative returns. As
the economy began to improve, the industrial sector performed briskly. Stock
selection in materials further hurt performance. Within the materials sector,
the fund's holdings in paper-company stocks flagged, as did many companies
within the industry group. The Fund's overweighted position in telecommunication
services stocks relative to the S&P 500 Index also hindered returns for the
period.

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

GlaxoSmithKline PLC (ADR) (United Kingdom) 4.5%
International Paper Co. 4.3
Freddie Mac 3.8
Bristol-Myers Squibb Co. 3.5
Verizon Communications Inc. 3.1
SBC Communications Inc. 2.9
Bank of America Corp. 2.8
Halliburton Co. 2.8
Georgia-Pacific Corp. 2.6
Kimberly-Clark Corp. 2.4
</Table>

<Table>
<Caption>
TOP FIVE INDUSTRIES

Pharmaceuticals: Major 13.4%
Major Telecommunications 7.9
Major Banks 7.8
Repurchase Agreement 6.9
Pulp & Paper 6.9
</Table>

Data as of March 31, 2005. Subject to change daily. All percentages for top 10
holdings and top five industries are as a percentage of net assets. Data is
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 65 PERCENT OF ITS ASSETS IN COMMON STOCK THAT
THE FUND'S INVESTMENT MANAGER, MORGAN STANLEY INVESTMENT ADVISORS INC., BELIEVES
IS UNDERVALUED AND CURRENTLY IS NOT BEING RECOGNIZED WITHIN THE MARKET PLACE. IN
DECIDING WHICH SECURITIES TO BUY, HOLD OR SELL, THE INVESTMENT ADVISER BEGINS
WITH A UNIVERSE OF COMPANIES THAT HAVE ATTRIBUTES THAT MAY QUALIFY THEM AS VALUE
COMPANIES. THE INVESTMENT ADVISER THEN SCREENS THESE COMPANIES FOR LIQUIDITY AND
RELATIVE VALUE, USING AN APPROPRIATE VALUATION MEASURE FOR EACH SECTOR OR
INDUSTRY. THE INVESTMENT ADVISER EVALUATES THE COMPANIES RELATIVE TO THE
COMPETITIVE AND MARKET CONDITIONS WITHIN EACH INDUSTRY. THE INVESTMENT ADVISER
THEN CONDUCTS FUNDAMENTAL ANALYSIS OF EACH COMPANY TO IDENTIFY THOSE COMPANIES
BELIEVED TO BE ATTRACTIVELY VALUED RELATIVE TO OTHER COMPANIES WITHIN THE
INDUSTRY.

FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS

EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN
ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND
AND FOURTH FISCAL QUARTERS 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 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.

FUND PERFORMANCE

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

<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++)
(since 11/25/98) (since 11/25/98) (since 11/25/98) (since 11/25/98)
SYMBOL VLUAX VLUBX VLUCX VLUDX

1 YEAR 12.09%(4) 11.24%(4) 11.22%(4) 12.36%(4)
6.21(5) 6.24(5) 10.22(5) --
5 YEARS 6.70(4) 5.90(4) 5.93(4) 6.98(4)
5.56(5) 5.58(5) 5.93(5) --
SINCE INCEPTION 4.64(4) 3.85(4) 3.88(4) 4.93(4)
3.76(5) 3.85(5) 3.88(5) --
</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 Standard & Poor's 500 Index (S&P 500(R)) is a broad-based index, the
performance of which is based on the performance of 500 widely-held common
stocks chosen for market size, liquidity and industry group representation.
Indexes are unmanaged and their returns do not include any sales charges or
fees. Such costs would lower performance. It is not possible to invest
directly in an index.

(2) The S&P 500/ Barra Value Index is a market capitalization-weighted index of
the stocks in the S&P 500 Index having lower price-to-book ratios. Indexes
are unmanaged and their returns do not include any sales charges or fees.
Such costs would lower performance. It is not possible to invest directly
in an index.

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

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

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

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 10/01/04 - 03/31/05.

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 *
------------- ------------- ---------------
10/01/04 -
10/01/04 03/31/05 03/31/05
------------- ------------- ---------------

CLASS A
Actual (8.06% return)....................................... $1,000.00 $1,080.60 $4.82
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,020.29 $4.68
CLASS B
Actual (7.66% return)....................................... $1,000.00 $1,076.60 $8.75
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,016.50 $8.50
CLASS C
Actual (7.73% return)....................................... $1,000.00 $1,077.30 $8.60
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,016.65 $8.35
CLASS D
Actual (8.19% return)....................................... $1,000.00 $1,081.90 $3.58
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,021.49 $3.48
</Table>

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

* Expenses are equal to the Fund's annualized expense ratio of 0.93%, 1.69%,
1.66% and 0.69% respectively, multiplied by the average account value over
the period, multiplied by 182/365 (to reflect the one-half year period).

Morgan Stanley Value Fund
PORTFOLIO OF INVESTMENTS - MARCH 31, 2005 (UNAUDITED)

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

Common Stocks (92.9%)
Airlines (0.3%)
101,000 Southwest Airlines
Co. .................... $ 1,438,240
------------
Aluminum (2.0%)
305,600 Alcoa, Inc. ............. 9,287,184
------------
Apparel/Footwear (0.8%)
117,400 Jones Apparel Group,
Inc. ................... 3,931,726
------------
Beverages: Non-Alcoholic
(1.3%)
143,600 Coca-Cola Co. (The)...... 5,983,812
------------
Broadcasting (2.2%)
296,100 Clear Channel
Communications, Inc. ... 10,206,567
------------
Cable/Satellite TV (1.4%)
632,400 Liberty Media Corp.
(Class A)*.............. 6,557,988
------------
Chemicals: Major
Diversified (3.8%)
78,300 Dow Chemical Co. (The)... 3,903,255
212,700 Du Pont (E.I.) de Nemours
& Co. .................. 10,898,748
69,200 Rohm & Haas Co. ......... 3,321,600
------------
18,123,603
------------
Computer Communications
(0.3%)
81,200 Cisco Systems, Inc.*..... 1,452,668
------------
Computer Peripherals
(0.3%)
18,400 Lexmark International,
Inc. (Class A)*......... 1,471,448
------------
Computer Processing
Hardware (0.9%)
200,400 Hewlett-Packard Co. ..... 4,396,776
------------
</Table>

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

Contract Drilling (0.7%)
75,600 GlobalSantaFe Corp.
(Cayman Islands)........ $ 2,800,224
14,600 Transocean Inc. (Cayman
Islands)*............... 751,316
------------
3,551,540
------------
Data Processing Services
(1.6%)
65,800 Affiliated Computer
Services, Inc. (Class
A)*..................... 3,503,192
52,700 First Data Corp. ........ 2,071,637
59,200 SunGard Data Systems
Inc.*................... 2,042,400
------------
7,617,229
------------
Department Stores (1.0%)
36,800 Federated Department
Stores, Inc. ........... 2,341,952
60,700 May Department Stores
Co. .................... 2,247,114
------------
4,589,066
------------
Discount Stores (1.1%)
102,000 Wal-Mart Stores, Inc. ... 5,111,220
------------
Drugstore Chains (0.9%)
78,300 CVS Corp. ............... 4,120,146
------------
Electric Utilities (3.9%)
101,100 American Electric Power
Co., Inc. .............. 3,443,466
63,700 Constellation Energy
Group, Inc. ............ 3,293,290
57,100 Dominion Resources,
Inc. ................... 4,249,953
121,000 FirstEnergy Corp. ....... 5,075,950
47,300 Public Service Enterprise
Group, Inc. ............ 2,572,647
------------
18,635,306
------------
Electronic Components
(0.5%)
116,700 Flextronics International
Ltd. (Singapore)*....... 1,405,068
32,600 Jabil Circuit, Inc.*..... 929,752
------------
2,334,820
------------
</Table>

See Notes to Financial Statements
7

Morgan Stanley Value Fund
PORTFOLIO OF INVESTMENTS - MARCH 31, 2005 (UNAUDITED) continued

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

Electronic Production
Equipment (0.1%)
14,400 Novellus Systems,
Inc.*................... $ 384,912
------------
Electronics/Appliances
(0.6%)
93,000 Eastman Kodak Co. ....... 3,027,150
------------
Finance/Rental/Leasing
(4.3%)
9,400 Capital One Financial
Corp. .................. 702,838
32,000 Fannie Mae............... 1,742,400
284,800 Freddie Mac.............. 17,999,360
------------
20,444,598
------------
Financial Conglomerates
(3.1%)
248,800 Citigroup, Inc. ......... 11,181,072
106,400 JP Morgan Chase & Co. ... 3,681,440
------------
14,862,512
------------
Food: Major Diversified
(3.2%)
191,300 Kraft Foods Inc. (Class
A)...................... 6,322,465
132,200 Unilever N.V. (NY
Registered Shares)
(Netherlands)........... 9,045,124
------------
15,367,589
------------
Household/Personal Care
(2.4%)
171,800 Kimberly-Clark Corp. .... 11,292,414
------------
Information Technology
Services (0.4%)
23,900 Amdocs Ltd.*............. 678,760
10,900 International Business
Machines Corp. ......... 996,042
------------
1,674,802
------------
Integrated Oil (2.6%)
25,400 ConocoPhillips........... 2,739,136
60,500 Petroleo Brasileiro S.A.
(ADR) (Brazil).......... 2,672,890
58,200 Total SA (ADR)
(France)................ 6,822,786
------------
12,234,812
------------
Internet Software/
Services (0.2%)
37,400 Check Point Software
Technologies Ltd.
(Israel)*............... 813,076
------------
</Table>

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

Investment Banks/Brokers
(1.0%)
20,700 Lehman Brothers Holdings
Inc. ................... $ 1,949,112
46,000 Merrill Lynch & Co.,
Inc. ................... 2,603,600
------------
4,552,712
------------
Life/Health Insurance
(1.7%)
67,100 Genworth Financial Inc.
(Class A)............... 1,846,592
58,300 MetLife, Inc. ........... 2,279,530
75,100 Torchmark Corp. ......... 3,920,220
------------
8,046,342
------------
Major Banks (7.8%)
300,800 Bank of America Corp. ... 13,265,280
123,500 Bank of New York Co.,
Inc. (The).............. 3,587,675
113,000 PNC Financial Services
Group................... 5,817,240
14,600 SunTrust Banks, Inc. .... 1,052,222
53,846 Wachovia Corp. .......... 2,741,300
172,800 Wells Fargo & Co. ....... 10,333,440
------------
36,797,157
------------
Major Telecommunications
(7.9%)
579,900 SBC Communications,
Inc. ................... 13,737,831
393,900 Sprint Corp. (Fon
Group).................. 8,961,225
416,000 Verizon Communications
Inc. ................... 14,768,000
------------
37,467,056
------------
Media Conglomerates
(3.4%)
291,700 Disney (Walt) Co.
(The)................... 8,380,541
325,300 Time Warner, Inc.*....... 5,709,015
64,900 Viacom Inc. (Class B)
(Non-Voting)............ 2,260,467
------------
16,350,023
------------
</Table>

8
See Notes to Financial Statements

Morgan Stanley Value Fund
PORTFOLIO OF INVESTMENTS - MARCH 31, 2005 (UNAUDITED) continued

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

Medical Distributors
(0.8%)
64,200 AmerisourceBergen
Corp. .................. $ 3,678,018
------------
Multi-Line Insurance
(0.8%)
43,000 American International
Group, Inc. ............ 2,382,630
18,300 Hartford Financial
Services Group, Inc.
(The)................... 1,254,648
------------
3,637,278
------------
Oilfield Services/
Equipment (3.1%)
302,400 Halliburton Co. ......... 13,078,800
25,100 Schlumberger Ltd.
(Netherlands
Antilles)............... 1,769,048
------------
14,847,848
------------
Packaged Software (0.3%)
61,900 Microsoft Corp. ......... 1,496,123
------------
Pharmaceuticals: Major
(13.4%)
657,200 Bristol-Myers Squibb
Co. .................... 16,732,312
467,900 GlaxoSmithKline PLC (ADR)
(United Kingdom)........ 21,485,968
234,200 Pfizer, Inc. ............ 6,152,434
115,400 Roche Holdings Ltd. (ADR)
(Switzerland)........... 6,243,140
63,600 Sanofi-Aventis (ADR)
(France)................ 2,692,824
270,100 Schering-Plough Corp. ... 4,902,315
123,500 Wyeth.................... 5,209,230
------------
63,418,223
------------
Property - Casualty
Insurers (2.2%)
200 Berkshire Hathaway, Inc.
(Class B)*.............. 571,200
101,800 Chubb Corp. (The)........ 8,069,686
46,025 St. Paul Travelers
Companies, Inc. (The)... 1,690,498
------------
10,331,384
------------
</Table>

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

Pulp & Paper (6.9%)
347,510 Georgia-Pacific Corp. ... $ 12,333,130
548,200 International Paper
Co. .................... 20,168,278
4,987 Neenah Paper Inc. ....... 167,663
------------
32,669,071
------------
Recreational Products
(0.6%)
131,700 Mattel, Inc. ............ 2,811,795
------------
Semiconductors (0.1%)
12,200 Intel Corp. ............. 283,406
------------
Specialty Insurance
(0.7%)
28,000 Ambac Financial Group,
Inc. ................... 2,093,000
40,300 Assurant, Inc. .......... 1,358,110
------------
3,451,110
------------
Telecommunication
Equipment (0.4%)
79,200 Nokia Corp. (ADR)
(Finland)............... 1,222,056
29,300 Telefonaktiebolaget LM
Ericsson (ADR)
(Sweden)*............... 826,260
------------
2,048,316
------------
Tobacco (1.9%)
137,200 Altria Group, Inc. ...... 8,971,508
------------
Total Common Stocks
(Cost $386,282,126)...... 439,768,574
------------
Preferred Stock (0.3%)
Integrated Oil (0.3%)
35,700 Petroleo Brasileiro S.A.
(ADR) (Brazil)
(Cost $1,498,572)....... 1,373,379
------------
</Table>

See Notes to Financial Statements
9

Morgan Stanley Value Fund
PORTFOLIO OF INVESTMENTS - MARCH 31, 2005 (UNAUDITED) continued

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

Short-Term Investment (6.9%)
Repurchase Agreement
$ 32,700 Joint repurchase
agreement account 2.845%
due 04/01/05 (dated
03/31/05; proceeds
$32,702,584) (a)
(Cost $32,700,000)...... $ 32,700,000
-------------
Total Investments
(Cost $420,480,698) (b)..... 100.1% 473,841,953
Liabilities in Excess of
Other Assets................ (0.1) (421,020)
----- ------------
Net Assets.................. 100.0% $473,420,933
===== ============
</Table>

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

<Table>

ADR American Depositary 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
$60,539,178 and the aggregate gross unrealized
depreciation is $7,177,923, resulting in net
unrealized appreciation of $53,361,255.
</Table>

10
See Notes to Financial Statements

Morgan Stanley Value Fund
SUMMARY OF INVESTMENTS - MARCH 31, 2005 (UNAUDITED)

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

Pharmaceuticals: Major...................................... $ 63,418,223 13.4%
Major Telecommunications.................................... 37,467,056 7.9
Major Banks................................................. 36,797,157 7.8
Repurchase Agreement........................................ 32,700,000 6.9
Pulp & Paper................................................ 32,669,071 6.9
Finance/Rental/Leasing...................................... 20,444,598 4.3
Electric Utilities.......................................... 18,635,306 3.9
Chemicals: Major Diversified................................ 18,123,603 3.8
Media Conglomerates......................................... 16,350,023 3.4
Food: Major Diversified..................................... 15,367,589 3.2
Financial Conglomerates..................................... 14,862,512 3.1
Oilfield Services/Equipment................................. 14,847,848 3.1
Integrated Oil.............................................. 13,608,191 2.9
Household/Personal Care..................................... 11,292,414 2.4
Property - Casualty Insurers................................ 10,331,384 2.2
Broadcasting................................................ 10,206,567 2.2
Aluminum.................................................... 9,287,184 2.0
Tobacco..................................................... 8,971,508 1.9
Life/Health Insurance....................................... 8,046,342 1.7
Data Processing Services.................................... 7,617,229 1.6
Cable/Satellite TV.......................................... 6,557,988 1.4
Beverages: Non-Alcoholic.................................... 5,983,812 1.3
Discount Stores............................................. 5,111,220 1.1
Department Stores........................................... 4,589,066 1.0
Investment Banks/Brokers.................................... 4,552,712 1.0
Computer Processing Hardware................................ 4,396,776 0.9
Drugstore Chains............................................ 4,120,146 0.9
Apparel/Footwear............................................ 3,931,726 0.8
Medical Distributors........................................ 3,678,018 0.8
Multi-Line Insurance........................................ 3,637,278 0.8
Contract Drilling........................................... 3,551,540 0.7
Specialty Insurance......................................... 3,451,110 0.7
Electronics/Appliances...................................... 3,027,150 0.6
Recreational Products....................................... 2,811,795 0.6
Electronic Components....................................... 2,334,820 0.5
Telecommunication Equipment................................. 2,048,316 0.4
Information Technology Services............................. 1,674,802 0.4
Packaged Software........................................... 1,496,123 0.3
Computer Peripherals........................................ 1,471,448 0.3
Computer Communications..................................... 1,452,668 0.3
Airlines.................................................... 1,438,240 0.3
Internet Software/Services.................................. 813,076 0.2
Electronic Production Equipment............................. 384,912 0.1
Semiconductors.............................................. 283,406 0.1
------------ -----
$473,841,953 100.1%
============ =====
</Table>

See Notes to Financial Statements
11

Morgan Stanley Value Fund
FINANCIAL STATEMENTS

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

<Table>

Assets:
Investments in securities, at value
(cost $420,480,698)................ $473,841,953
Cash................................. 61,103
Receivable for:
Dividends........................ 913,662
Shares of beneficial interest
sold........................... 509,263
Prepaid expenses and other assets.... 59,195
------------
Total Assets..................... 475,385,176
------------
Liabilities:
Payable for:
Investments purchased............ 912,192
Shares of beneficial interest
redeemed....................... 471,003
Distribution fee................. 324,037
Investment advisory fee.......... 170,868
Administration fee............... 32,546
Accrued expenses and other
payables........................... 53,597
------------
Total Liabilities................ 1,964,243
------------
Net Assets....................... $473,420,933
============
Composition of Net Assets:
Paid-in-capital...................... $464,723,531
Net unrealized appreciation.......... 53,361,255
Accumulated undistributed net
investment income.................. 1,314,329
Accumulated net realized loss........ (45,978,182)
------------
Net Assets....................... $473,420,933
============
Class A Shares:
Net Assets........................... $17,405,932
Shares Outstanding (unlimited
authorized, $.01 par value)........ 1,331,747
Net Asset Value Per Share........ $13.07
============
Maximum Offering Price Per Share,
(net asset value plus 5.54% of
net asset value)................. $13.79
============
Class B Shares:
Net Assets........................... $343,505,053
Shares Outstanding (unlimited
authorized, $.01 par value)........ 27,148,346
Net Asset Value Per Share........ $12.65
============
Class C Shares:
Net Assets........................... $28,176,278
Shares Outstanding (unlimited
authorized, $.01 par value)........ 2,226,079
Net Asset Value Per Share........ $12.66
============
Class D Shares:
Net Assets........................... $84,333,670
Shares Outstanding (unlimited
authorized, $.01 par value)........ 6,374,870
Net Asset Value Per Share........ $13.23
============
</Table>

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

<Table>

Net Investment Income:
Income
Dividends (net of $56,197 foreign
withholding tax).................... $ 5,414,098
Interest.............................. 411,261
-----------
Total Income...................... 5,825,359
-----------
Expenses
Distribution fee (Class A shares)..... 20,374
Distribution fee (Class B shares)..... 1,734,679
Distribution fee (Class C shares)..... 135,123
Investment advisory fee............... 1,017,390
Transfer agent fees and expenses...... 343,000
Administration fee.................... 157,675
Shareholder reports and notices....... 41,130
Professional fees..................... 27,780
Custodian fees........................ 13,665
Registration fees..................... 13,300
Trustees' fees and expenses........... 2,874
Other................................. 15,770
-----------
Total Expenses.................... 3,522,760
-----------
Net Investment Income............. 2,302,599
-----------
Net Realized and Unrealized Gain:
Net realized gain..................... 30,993,762
Net change in unrealized
appreciation........................ 1,288,489
-----------
Net Gain.......................... 32,282,251
-----------
Net Increase.......................... $34,584,850
===========
</Table>

See Notes to Financial Statements
12

Morgan Stanley Value Fund
FINANCIAL STATEMENTS continued

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 2005 SEPTEMBER 30, 2004
-------------- ------------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment income....................................... $ 2,302,599 $ 2,031,686
Net realized gain........................................... 30,993,762 56,923,951
Net change in unrealized appreciation....................... 1,288,489 21,457,254
------------ ------------
Net Increase............................................ 34,584,850 80,412,891
------------ ------------
Dividends to Shareholders from Net Investment Income:
Class A shares.............................................. (191,856) (106,507)
Class B shares.............................................. (1,523,708) --
Class C shares.............................................. (143,595) (5,176)
Class D shares.............................................. (1,040,865) (513,324)
------------ ------------
Total Dividends......................................... (2,900,024) (625,007)
------------ ------------

Net decrease from transactions in shares of beneficial
interest.................................................. (4,177,270) (18,603,388)
------------ ------------
Net Increase............................................ 27,507,556 61,184,496
Net Assets:
Beginning of period......................................... 445,913,377 384,728,881
------------ ------------
End of Period
(Including accumulated undistributed net investment income
of $1,314,329 and $1,911,754, respectively)................. $473,420,933 $445,913,377
============ ============
</Table>

See Notes to Financial Statements
13

Morgan Stanley Value Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2005 (UNAUDITED)

1. Organization and Accounting Policies

Morgan Stanley Value Fund (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. The Fund's investment objective is total return.
The Fund was organized as a Massachusetts business trust on June 9, 1998 and
commenced operations on November 25, 1998.

The Fund offers Class A shares, Class B shares, Class C shares and Class 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 Value Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 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.

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

Morgan Stanley Value Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2005 (UNAUDITED) continued

annual rates to the net assets of the Fund determined as of the close of each
business day: 0.42% to the portion of daily net assets not exceeding $1 billion;
0.37% to the portion of daily net assets exceeding $1 billion but not exceeding
$2 billion; 0.32% to the portion of daily net assets exceeding $2 billion but
not exceeding $3 billion; and 0.27% to the portion of daily net assets exceeding
$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 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 following annual rates to the net assets of the Fund
determined as of the close of each business day: 0.50% to the portion of daily
net assets not exceeding $1 billion; 0.45% to the portion of daily net assets
exceeding $1 billion but not exceeding $2 billion; 0.40% to the portion of daily
net assets exceeding $2 billion but not exceeding $3 billion; and 0.35% to the
portion of daily net assets exceeding $3 billion.

3. Plan of Distribution

Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager 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 $8,353,844
at March 31, 2005.

Morgan Stanley Value Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2005 (UNAUDITED) continued

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 March 31, 2005, the distribution fee was accrued for
Class A shares and Class C shares at the annual rate of 0.24% and 0.97%,
respectively.

The Distributor has informed the Fund that for the six months ended March 31,
2005, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $289,649 and $1,599,
respectively and received $22,114 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 March 31, 2005, aggregated
$96,768,256 and $104,784,013, respectively. Included in the aforementioned
transactions are purchases of $410,856 with other Morgan Stanley funds.

For the six months ended March 31, 2005, the Fund incurred brokerage commissions
of $3,574 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. At March 31, 2005, the Fund had
transfer agent fees and expenses payable of approximately $13,000.

The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan")
which allows each independent Trustee to defer payment of all, or a portion, of
the fees he 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

Morgan Stanley Value Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2005 (UNAUDITED) continued

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

As of September 30, 2004, the Fund had a net capital loss carryforward of
$74,026,379 which will expire on September 30, 2011 to offset future capital
gains to the extent provided by regulations.

As of September 30, 2004, the Fund had temporary book/tax differences
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
MARCH 31, 2005 SEPTEMBER 30, 2004
------------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------

CLASS A SHARES
Sold.............................................. 124,029 $ 1,588,999 463,137 $ 5,372,372
Reinvestments of dividends........................ 12,722 166,404 8,236 89,692
Redeemed.......................................... (164,244) (2,109,329) (396,966) (4,578,115)
---------- ------------ ---------- ------------
Net increase (decrease) - Class A................. (27,493) (353,926) 74,407 883,949
---------- ------------ ---------- ------------
CLASS B SHARES
Sold.............................................. 2,684,340 33,402,203 5,584,521 62,644,087
Reinvestments of dividends........................ 107,344 1,363,267 -- --
Redeemed.......................................... (3,952,439) (49,255,607) (8,535,235) (95,120,593)
---------- ------------ ---------- ------------
Net decrease - Class B............................ (1,160,755) (14,490,137) (2,950,714) (32,476,506)
---------- ------------ ---------- ------------
CLASS C SHARES
Sold.............................................. 225,548 2,809,766 509,388 5,728,376
Reinvestments of dividends........................ 10,474 133,024 469 4,955
Redeemed.......................................... (235,876) (2,940,756) (547,626) (6,131,795)
---------- ------------ ---------- ------------
Net increase (decrease) - Class C................. 146 2,034 (37,769) (398,464)
---------- ------------ ---------- ------------
CLASS D SHARES
Sold.............................................. 1,288,539 16,841,104 2,348,837 27,254,020
Reinvestments of dividends........................ 55,309 731,733 32,991 363,234
Redeemed.......................................... (528,449) (6,908,078) (1,241,104) (14,229,621)
---------- ------------ ---------- ------------
Net increase - Class D............................ 815,399 10,664,759 1,140,724 13,387,633
---------- ------------ ---------- ------------
Net decrease in Fund.............................. (372,703) $ (4,177,270) (1,773,352) $(18,603,388)
========== ============ ========== ============
</Table>

Morgan Stanley Value Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2005 (UNAUDITED) continued

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, 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 Value 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 SEPTEMBER 30,
MONTHS ENDED ----------------------------------------------------------------
MARCH 31, 2005 2004 2003 2002 2001 2000
-------------- -------- -------- -------- -------- --------
(unaudited)

Class A Shares
Selected Per Share Data:

Net asset value,
beginning of period.... $12.23 $10.10 $ 7.86 $ 10.74 $10.33 $ 9.30
------ ------ ------ ------- ------ ------

Income (loss) from
investment operations:
Net investment
income++............ 0.10 0.12 0.07 0.04 0.06 0.05
Net realized and
unrealized gain
(loss).............. 0.89 2.10 2.17 (2.92) 0.35 0.98
------ ------ ------ ------- ------ ------

Total income (loss) from
investment
operations............. 0.99 2.22 2.24 (2.88) 0.41 1.03
------ ------ ------ ------- ------ ------

Less dividends from net
investment income...... (0.15) (0.09) -- -- -- --
------ ------ ------ ------- ------ ------

Net asset value, end of
period................. $13.07 $12.23 $10.10 $ 7.86 $10.74 $10.33
====== ====== ====== ======= ====== ======

Total Return+........... 8.06%(2) 22.06% 28.50% (26.82)% 3.97% 11.08%

Ratios to Average Net
Assets(1):
Expenses................ 0.93%(3) 1.28% 1.53% 1.42% 1.45% 1.58%
Net investment income... 1.55%(3) 1.06% 0.78% 0.36% 0.50% 0.51%

Supplemental Data:
Net assets, end of
period, in thousands... $17,406 $16,621 $12,972 $11,396 $26,350 $7,335

Portfolio turnover
rate................... 22%(2) 83% 61% 56% 45% 158%
</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) Reflects overall Fund ratios for investment income and
non-class specific expenses.
(2) Not annualized.
(3) Annualized.
</Table>

See Notes to Financial Statements
20

Morgan Stanley Value Fund
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED SEPTEMBER 30,
MONTHS ENDED ---------------------------------------------------------------------
MARCH 31, 2005 2004 2003 2002 2001 2000
-------------- --------- --------- --------- --------- ---------
(unaudited)

Class B Shares
Selected Per Share Data:

Net asset value,
beginning of period.... $11.80 $ 9.74 $7.64 $10.52 $10.20 $ 9.25
------ ------ ----- ------ ------ ------

Income (loss) from
investment operations:
Net investment
income (loss)++..... 0.05 0.03 0.00 (0.04) (0.03) (0.02)
Net realized and
unrealized gain
(loss).............. 0.85 2.03 2.10 (2.84) 0.35 0.97
------ ------ ----- ------ ------ ------

Total income (loss) from
investment
operations............. 0.90 2.06 2.10 (2.88) 0.32 0.95
------ ------ ----- ------ ------ ------

Less dividends from net
investment income...... (0.05) -- -- -- -- --
------ ------ ----- ------ ------ ------

Net asset value, end of
period................. $12.65 $11.80 $9.74 $ 7.64 $10.52 $10.20
====== ====== ===== ====== ====== ======

Total Return+........... 7.66%(2) 21.15% 27.49% (27.38)% 3.14% 10.27%

Ratios to Average Net
Assets(1):
Expenses................ 1.69%(3) 2.03% 2.28% 2.18% 2.21% 2.34%
Net investment income
(loss)................. 0.79%(3) 0.31% 0.03% (0.40)% (0.26)% (0.25)%

Supplemental Data:
Net assets, end of
period, in thousands... $343,505 $334,125 $304,486 $321,210 $470,659 $115,873

Portfolio turnover
rate................... 22%(2) 83% 61% 56% 45% 158%
</Table>

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

<Table>

See Notes to Financial Statements
21

Morgan Stanley Value Fund
FINANCIAL HIGHLIGHTS continued

Class C Shares
Selected Per Share Data:

Net asset value,
beginning of period.... $11.81 $ 9.75 $7.64 $10.52 $10.20 $ 9.26
------ ------ ----- ------ ------ ------

Income (loss) from
investment operations:
Net investment
income (loss)++..... 0.05 0.04 0.01 (0.04) (0.03) (0.02)
Net realized and
unrealized gain
(loss).............. 0.86 2.02 2.10 (2.84) 0.35 0.96
------ ------ ----- ------ ------ ------

Total income (loss) from
investment
operations............. 0.91 2.06 2.11 (2.88) 0.32 0.94
------ ------ ----- ------ ------ ------

Less dividends from net
investment income...... (0.06) -- -- -- -- --
------ ------ ----- ------ ------ ------

Net asset value, end of
period................. $12.66 $11.81* $9.75 $ 7.64 $10.52 $10.20
====== ====== ===== ====== ====== ======

Total Return+........... 7.73%(2) 21.15% 27.62% (27.38)% 3.14% 10.15%

Ratios to Average Net
Assets(1):
Expenses................ 1.66%(3) 2.00% 2.21% 2.18% 2.21% 2.34%
Net investment income
(loss)................. 0.82%(3) 0.34% 0.10% (0.40)% (0.26)% (0.25)%

Supplemental Data:
Net assets, end of
period, in thousands... $28,176 $26,297 $22,068 $21,688 $28,097 $6,349

Portfolio turnover
rate................... 22%(2) 83% 61% 56% 45% 158%
</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.
* Includes the effect of dividends from net investment income
of $0.002 per share.
(1) Reflects overall Fund ratios for investment income and
non-class specific expenses.
(2) Not annualized.
(3) Annualized.
</Table>

See Notes to Financial Statements
22

Morgan Stanley Value Fund
FINANCIAL HIGHLIGHTS continued

Class D Shares
Selected Per Share Data:

Net asset value,
beginning of period.... $12.39 $10.23 $ 7.94 $10.83 $10.39 $ 9.32
------ ------ ------ ------ ------ ------

Income (loss) from
investment operations:
Net investment
income++............ 0.12 0.16 0.09 0.06 0.09 0.07
Net realized and
unrealized gain
(loss).............. 0.89 2.12 2.20 (2.95) 0.35 1.00
------ ------ ------ ------ ------ ------

Total income (loss) from
investment
operations............. 1.01 2.28 2.29 (2.89) 0.44 1.07
------ ------ ------ ------ ------ ------

Less dividends from net
investment income...... (0.17) (0.12) -- -- -- --
------ ------ ------ ------ ------ ------

Net asset value, end of
period................. $13.23 $12.39 $10.23 $ 7.94 $10.83 $10.39
====== ====== ====== ====== ====== ======

Total Return+........... 8.19%(2) 22.42% 28.84% (26.69)% 4.23% 11.48%

Ratios to Average Net
Assets(1):
Expenses................ 0.69%(3) 1.03% 1.28% 1.18% 1.21% 1.34%
Net investment income... 1.79%(3) 1.31% 1.03% 0.60% 0.74% 0.75%

Supplemental Data:
Net assets, end of
period, in thousands... $84,334 $68,870 $45,204 $25,424 $13,944 $4,156

Portfolio turnover
rate................... 22%(2) 83% 61% 56% 45% 158%
</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) Reflects overall Fund ratios for investment income and
non-class specific expenses.
(2) Not annualized.
(3) Annualized.
</Table>

See Notes to Financial Statements
23

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
Value Fund

Semiannual Report
March 31, 2005

[MORGAN STANLEY LOGO]

36045RPT-RA05-00392P-Y03/05

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 Value Fund

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
May 19, 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
May 19, 2005

/s/ Francis Smith
Francis Smith
Principal Financial Officer
May 19, 2005