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

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-08471

Morgan Stanley Aggressive Equity Fund
(Exact name of registrant as specified in charter)

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

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

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

Date of fiscal year end: July 31, 2006

Date of reporting period: January 31, 2006

Item 1 - Report to Shareholders

Welcome, Shareholder:

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

THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING
OFFERED.

MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE
IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. THE FUND IS
SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES OF
SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE
FUND'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE
MONEY INVESTING IN THIS FUND. PLEASE SEE THE PROSPECTUS FOR MORE COMPLETE
INFORMATION ON INVESTMENT RISKS.

FUND REPORT

For the six months ended January 31, 2006

TOTAL RETURN FOR THE 6 MONTHS ENDED JANUARY 31, 2006

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

19.34% 18.84% 18.82% 19.40% 4.51% 10.45%
</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

During the six-month period ended January 31, 2006, the U.S. stock market
advanced. Returns were earned at an uneven pace, in terms of overall performance
and market leadership. As the period opened in August, mixed economic data and
additional increases in the federal funds rate stoked investor anxiety.
Consternation rose as the Gulf Coast hurricanes sent oil prices spiking and
heightened anxiety about the economy. However, as October wound to a close, the
stock market showed signs of renewed optimism. Falling oil prices,
better-than-expected economic data, the nomination of Ben S. Bernanke to head
the Federal Reserve (the "Fed"), and strengthening consumer trends lifted
investor sentiment. Stocks continued to advance through November, buoyed by
indications that the Fed might soon slow the pace of rate increases, encouraging
consumer confidence data, continued declines in oil prices, strong retail trends
(excluding the beleaguered auto industry), and acceptable housing data.

Stocks delivered more muted performance in December as cross currents buffeted
the market. Rising gold prices, the ongoing struggles of the auto industry, an
additional Fed tightening and trends in bond market yields rekindled concern.
Yet, the market found positive signals as well, including favorable
productivity, employment and consumer confidence data; consolidation activity in
the oil industry; corporate litigation developments; and notes from the Fed's
meeting minutes which more strongly suggested that its tightening cycle could be
nearer to an end.

Throughout these first five months of the reporting period, smaller
capitalization stocks found themselves outpaced by larger capitalization issues.
The tide turned in the new calendar year, however. Small cap stocks surged
overall, with the smallest issues leading the way. Although geopolitical risk,
oil prices and mixed corporate earnings weighed on investors, the "January
Effect" was still rather pronounced. (The "January Effect" is a historical trend
wherein the market rallies in the first month of the calendar year, particularly
in higher-volatility segments of the market such as small-cap stocks.)

PERFORMANCE ANALYSIS

Morgan Stanley Aggressive Equity Fund outperformed the Russell 3000(R) Growth
Index and the Lipper Multi-Cap Growth Funds Index for the six months ended
January 31, 2006, assuming no deduction of applicable sales charges.

The Fund outperformed the Russell 3000(R) Growth Index due to very strong stock
selection across multiple market sectors. In terms of sector level
contributions, the Fund's energy, consumer discretionary and utilities positions
were most beneficial. Within energy, a sector overweight helped, as did the
Fund's stake in the crude oil producer industry. Although the Fund's overweight
to the consumer discretionary sector tempered relative performance (as the
sector did not perform as strongly as others), stock selection within the
sector -- particularly in consumer electronics and commercial services
companies -- more than offset the negative impact of the overweight. Within
utilities, stock selection in wireless companies and gas distributors was
advantageous.

While the Fund's gains were driven by broad strength, not all decisions proved
advantageous to relative performance. For example, performance relative to the
Index was hindered by the Fund's avoidance of strong-performing health care
management services companies.

There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the Fund in
the future.

<Table>
<Caption>
TOP 10 HOLDINGS

Ultra Petroleum Corp. (Canada) 9.4%
Google, Inc. (Class A) 5.8
eBay, Inc. 5.0
Corporate Executive Board Co. (The) 4.4
Monsanto Co. 4.2
Costco Wholesale Corp. 3.9
Brookfield Asset Management Inc. (Class A)
(Canada) 3.8
America Movil S.A. de C.V. (Series L) (ADR)
(Mexico) 3.6
Getty Images, Inc. 3.5
Sears Holdings Corp. 2.9
</Table>

<Table>
<Caption>
TOP FIVE INDUSTRIES

Oil & Gas Production 11.1%
Internet Software/Services 8.6
Discount Stores 6.8
Other Consumer Services 6.6
Miscellaneous Commercial Services 6.0
</Table>

Data as of January 31, 2006. Subject to change daily. All percentages for top 10
holdings and top five industries are as a percentage of net assets. These data
are provided for informational purposes only and should not be deemed a
recommendation to buy or sell the securities mentioned. Morgan Stanley is a
full-service securities firm engaged in securities trading and brokerage
activities, investment banking, research and analysis, financing and financial
advisory services.

INVESTMENT STRATEGY

THE FUND NORMALLY INVESTS AT LEAST 80 PERCENT OF ITS ASSETS IN COMMON STOCKS AND
OTHER EQUITY SECURITIES OF U.S. OR FOREIGN COMPANIES THAT OFFER THE POTENTIAL
FOR SUPERIOR EARNINGS GROWTH IN THE OPINION OF THE FUND'S "INVESTMENT ADVISER,"
MORGAN STANLEY INVESTMENT ADVISORS INC. THE FUND'S OTHER EQUITY SECURITIES MAY
INCLUDE PREFERRED STOCK, DEPOSITARY RECEIPTS OR SECURITIES CONVERTIBLE INTO
COMMON STOCK.

FOR MORE INFORMATION
ABOUT PORTFOLIO HOLDINGS

EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN
ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND
AND FOURTH FISCAL QUARTERS BY FILING THE SCHEDULE ELECTRONICALLY WITH THE
SECURITIES AND EXCHANGE COMMISSION (SEC). THE SEMIANNUAL REPORTS ARE FILED ON
FORM N-CSRS AND THE ANNUAL REPORTS ARE FILED ON FORM N-CSR. MORGAN STANLEY ALSO
DELIVERS THE SEMIANNUAL AND ANNUAL REPORTS TO FUND SHAREHOLDERS AND MAKES THESE
REPORTS AVAILABLE ON ITS PUBLIC WEB SITE, WWW.MORGANSTANLEY.COM. EACH MORGAN
STANLEY FUND ALSO FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC
FOR THE FUND'S FIRST AND THIRD FISCAL QUARTERS ON FORM N-Q. MORGAN STANLEY DOES
NOT DELIVER THE REPORTS FOR THE FIRST AND THIRD FISCAL QUARTERS TO SHAREHOLDERS,
NOR ARE THE REPORTS POSTED TO THE MORGAN STANLEY PUBLIC WEB SITE. YOU MAY,
HOWEVER, OBTAIN THE FORM N-Q FILINGS (AS WELL AS THE FORM N-CSR AND N-CSRS
FILINGS) BY ACCESSING THE SEC'S WEB SITE, HTTP://WWW.SEC.GOV. YOU MAY ALSO
REVIEW AND COPY THEM AT THE SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC.
INFORMATION ON THE OPERATION OF THE SEC'S PUBLIC REFERENCE ROOM MAY BE OBTAINED
BY CALLING THE SEC AT (800) SEC-0330. YOU CAN ALSO REQUEST COPIES OF THESE
MATERIALS, UPON PAYMENT OF A DUPLICATING FEE, BY ELECTRONIC REQUEST AT THE SEC'S
E-MAIL ADDRESS (PUBLICINFO@SEC.GOV) OR BY WRITING THE PUBLIC REFERENCE SECTION
OF THE SEC, WASHINGTON, DC 20549-0102.

PROXY VOTING POLICY AND PROCEDURES
AND PROXY VOTING RECORD

YOU MAY OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICY AND PROCEDURES WITHOUT
CHARGE, UPON REQUEST, BY CALLING TOLL FREE (800) 869-NEWS OR BY VISITING THE
MUTUAL FUND CENTER ON OUR WEB SITE AT WWW.MORGANSTANLEY.COM. IT IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.

YOU MAY OBTAIN INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO
PORTFOLIO SECURITIES DURING THE MOST RECENT TWELVE-MONTH PERIOD ENDED JUNE 30
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.

PERFORMANCE SUMMARY

AVERAGE ANNUAL TOTAL RETURNS -- PERIOD ENDED JANUARY 31, 2006

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

1 YEAR 34.80%(3) 33.63%(3) 33.59%(3) 35.02%(3)
27.72(4) 28.63(4) 32.59(4) --
5 YEARS 0.66(3) (0.11)(3) (0.09)(3) 0.89(3)
(0.42)(4) (0.51)(4) (0.09)(4) --
SINCE INCEPTION 5.35(3) 4.55(3) 4.56(3) 5.59(3)
4.53(4) 4.55(4) 4.56(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 most recent month-end performance figures, please visit
www.morganstanley.com or speak with your Financial Advisor. Investment returns
and principal value will fluctuate and fund shares, when redeemed, may be worth
more or less than their original cost. The table does not reflect the deduction
of taxes that a shareholder would pay on fund distributions or the redemption of
fund shares. Performance for Class A, Class B, Class C, and Class D shares will
vary due to differences in sales charges and expenses.

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

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

+ The maximum contingent deferred sales charge for Class C is 1.0% for shares
redeemed within one year of purchase.

++ Class D has no sales charge.

(1) The Russell 3000(R) Growth Index measures the performance of those
companies in the Russell 3000(R) Index with higher price-to-book ratios and
higher forecasted growth values. Indexes are unmanaged and their returns do
not include any sales charges or fees. Such costs would lower performance.
It is not possible to invest directly in an index.

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

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

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

EXPENSE EXAMPLE

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

The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 08/01/05 - 01/31/06.

ACTUAL EXPENSES

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

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

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

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

<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD *
------------- ------------- ---------------
08/01/05 -
08/01/05 01/31/06 01/31/06
------------- ------------- ---------------

CLASS A
Actual (19.34% return)...................................... $1,000.00 $1,193.40 $ 7.74
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,018.15 $ 7.12
CLASS B
Actual (18.84% return)...................................... $1,000.00 $1,188.40 $11.86
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,014.37 $10.92
CLASS C
Actual (18.82% return)...................................... $1,000.00 $1,188.20 $11.86
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,014.37 $10.92
CLASS D
Actual (19.40% return)...................................... $1,000.00 $1,194.00 $ 6.36
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,019.41 $ 5.85
</Table>

- ------------------
* Expenses are equal to the Fund's annualized expense ratio of 1.40%, 2.15%,
2.15% and 1.15% for Class A, Class B, Class C and Class D shares,
respectively, multiplied by the average account value over the period,
multiplied by 184/365 (to reflect the one-half year period).

Morgan Stanley Aggressive Equity Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2006 (UNAUDITED)

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

Common Stocks (99.7%)
Advertising/Marketing
Services (3.5%)
143,300 Getty Images, Inc.*...... $ 11,700,445
------------
Air Freight/Couriers
(3.8%)
157,500 C.H. Robinson Worldwide,
Inc. ................... 6,372,450
89,800 Expeditors International
of Washington, Inc. .... 6,603,892
------------
12,976,342
------------
Casino/Gaming (4.3%)
187,100 International Game
Technology.............. 6,694,438
116,700 Station Casinos, Inc. ... 7,801,395
------------
14,495,833
------------
Chemicals: Agricultural
(4.2%)
166,230 Monsanto Co. ............ 14,064,720
------------
Discount Stores (6.8%)
260,500 Costco Wholesale
Corp. .................. 12,996,345
81,600 Sears Holdings Corp.*.... 9,909,504
------------
22,905,849
------------
Electronic Production
Equipment (1.6%)
170,900 Tessera Technologies,
Inc.*................... 5,516,652
------------
Financial Conglomerates
(3.8%)
241,800 Brookfield Asset
Management Inc. (Class
A) (Canada)............. 12,950,808
------------
Gas Distributors (1.0%)
41,300 Questar Corp. ........... 3,365,124
------------
Home Building (3.1%)
145,500 Desarrolladora Homex S.A.
de C.V. (ADR)
(Mexico)*............... 5,050,305
6,754 NVR, Inc.*............... 5,364,364
------------
10,414,669
------------
</Table>

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

Hotels/Resorts/
Cruiselines (2.9%)
191,100 Carnival Corp.
(Panama)................ $ 9,891,336
------------
Internet Retail (1.8%)
132,600 Amazon.com, Inc.*........ 5,943,132
------------
Internet Software/
Services (8.6%)
45,400 Google, Inc. (Class
A)*..................... 19,669,550
272,900 Yahoo!, Inc.*............ 9,371,386
------------
29,040,936
------------
Investment Banks/Brokers
(4.7%)
17,255 Chicago Mercantile
Exchange Holdings,
Inc. ................... 7,303,179
152,499 Greenhill & Co., Inc. ... 8,719,893
------------
16,023,072
------------
Medical Specialties
(2.2%)
187,000 Dade Behring Holdings,
Inc. ................... 7,317,310
------------
Miscellaneous Commercial
Services (6.0%)
178,200 Corporate Executive Board
Co. (The)............... 14,993,748
122,187 Iron Mountain Inc.*...... 5,092,754
------------
20,086,502
------------
Motor Vehicles (1.3%)
83,700 Harley-Davidson, Inc. ... 4,480,461
------------
Oil & Gas Production
(11.1%)
138,486 Southwestern Energy
Co.*.................... 5,974,286
459,420 Ultra Petroleum Corp.
(Canada)*............... 31,603,502
------------
37,577,788
------------
Other Consumer Services
(6.6%)
390,600 eBay, Inc.*.............. 16,834,860
60,700 Strayer Education,
Inc. ................... 5,375,592
------------
22,210,452
------------
</Table>

7
See Notes to Financial Statements

Morgan Stanley Aggressive Equity Fund
PORTFOLIO OF INVESTMENTS - JANUARY 31, 2006 (UNAUDITED) continued

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

Packaged Software (3.3%)
175,900 Red Hat, Inc.*........... $ 5,092,305
149,100 Salesforce.com Inc.*..... 6,120,555
------------
11,212,860
------------
Personnel Services (2.1%)
164,400 Monster Worldwide,
Inc.*................... 7,013,304
------------
Property -- Casualty
Insurers (2.9%)
3,284 Berkshire Hathaway, Inc.
(Class B)*.............. 9,628,688
------------
Recreational Products
(2.4%)
145,700 Electronic Arts, Inc.*... 7,952,306
------------
Restaurants (1.4%)
90,100 P.F. Chang's China
Bistro, Inc.*........... 4,618,526
------------
Semiconductors (1.7%)
84,500 Marvell Technology Group,
Ltd. (Bermuda)*......... 5,781,490
------------
Services to the Health
Industry (2.1%)
120,184 Stericycle, Inc.*........ 7,183,398
------------
Specialty
Telecommunications (2.9%)
308,116 Crown Castle
International Corp.*.... 9,745,709
------------
Wireless
Telecommunications (3.6%)
361,200 America Movil S.A. de
C.V. (Series L) (ADR)
(Mexico)................ 12,183,276
------------
Total Common Stocks
(Cost $251,502,437)...... 336,280,988
------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------

Short-Term Investment (1.0%)
Repurchase Agreement
$ 3,327 Joint repurchase
agreement account 4.445%
due 02/01/06 (dated
01/31/06; proceeds
$3,327,411) (a)
(Cost $3,327,000)....... $ 3,327,000
------------
</Table>

<Table>

Total Investments
(Cost $254,829,437) (b)..... 100.7% 339,607,988
Liabilities in Excess of
Other Assets................ (0.7) (2,266,509)
----- ------------
Net Assets.................. 100.0% $337,341,479
===== ============
</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
$85,242,690 and the aggregate gross unrealized
depreciation is $464,139, resulting in net
unrealized appreciation of $84,778,551.
</Table>

8
See Notes to Financial Statements

Morgan Stanley Aggressive Equity Fund
SUMMARY OF INVESTMENTS - JANUARY 31, 2006 (UNAUDITED)

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

Oil & Gas Production........................................ $ 37,577,788 11.1%
Internet Software/Services.................................. 29,040,936 8.6
Discount Stores............................................. 22,905,849 6.8
Other Consumer Services..................................... 22,210,452 6.6
Miscellaneous Commercial Services........................... 20,086,502 6.0
Investment Banks/Brokers.................................... 16,023,072 4.7
Casino/Gaming............................................... 14,495,833 4.3
Chemicals: Agricultural..................................... 14,064,720 4.2
Air Freight/Couriers........................................ 12,976,342 3.8
Financial Conglomerates..................................... 12,950,808 3.8
Wireless Telecommunications................................. 12,183,276 3.6
Advertising/Marketing Services.............................. 11,700,445 3.5
Packaged Software........................................... 11,212,860 3.3
Home Building............................................... 10,414,669 3.1
Hotels/Resorts/Cruiselines.................................. 9,891,336 2.9
Specialty Telecommunications................................ 9,745,709 2.9
Property -- Casualty Insurers............................... 9,628,688 2.9
Recreational Products....................................... 7,952,306 2.4
Medical Specialties......................................... 7,317,310 2.2
Services to the Health Industry............................. 7,183,398 2.1
Personnel Services.......................................... 7,013,304 2.1
Internet Retail............................................. 5,943,132 1.8
Semiconductors.............................................. 5,781,490 1.7
Electronic Production Equipment............................. 5,516,652 1.6
Restaurants................................................. 4,618,526 1.4
Motor Vehicles.............................................. 4,480,461 1.3
Gas Distributors............................................ 3,365,124 1.0
Repurchase Agreement........................................ 3,327,000 1.0
------------ -----
$339,607,988 100.7%
============ =====
</Table>

9
See Notes to Financial Statements

Morgan Stanley Aggressive Equity Fund
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
January 31, 2006 (unaudited)

<Table>

Assets:
Investments in securities, at value (cost $254,829,437)..... $339,607,988
Cash........................................................ 970
Receivable for:
Investments sold........................................ 712,907
Shares of beneficial interest sold...................... 347,480
Dividends............................................... 30,150
Foreign withholding taxes reclaimed..................... 7,071
Interest................................................ 411
Prepaid expenses and other assets........................... 68,524
------------
Total Assets............................................ 340,775,501
------------
Liabilities:
Payable for:
Investments purchased................................... 2,400,846
Shares of beneficial interest redeemed.................. 487,514
Distribution fee........................................ 255,520
Investment advisory fee................................. 194,976
Transfer agent fee...................................... 27,876
Administration fee...................................... 23,281
Accrued expenses and other payables......................... 44,009
------------
Total Liabilities....................................... 3,434,022
------------
Net Assets.............................................. $337,341,479
============
Composition of Net Assets:
Paid-in-capital............................................. $630,134,281
Net unrealized appreciation................................. 84,780,502
Accumulated net investment loss............................. (2,264,173)
Accumulated net realized loss............................... (375,309,131)
------------
Net Assets.............................................. $337,341,479
============
Class A Shares:
Net Assets.................................................. $51,425,654
Shares Outstanding (unlimited authorized, $.01 par value)... 4,085,640
Net Asset Value Per Share............................... $12.59
============
Maximum Offering Price Per Share,
(net asset value plus 5.54% of net asset value)......... $13.29
============
Class B Shares:
Net Assets.................................................. $249,506,249
Shares Outstanding (unlimited authorized, $.01 par value)... 20,936,392
Net Asset Value Per Share............................... $11.92
============
Class C Shares:
Net Assets.................................................. $31,680,325
Shares Outstanding (unlimited authorized, $.01 par value)... 2,655,164
Net Asset Value Per Share............................... $11.93
============
Class D Shares:
Net Assets.................................................. $4,729,251
Shares Outstanding (unlimited authorized, $.01 par value)... 369,476
Net Asset Value Per Share............................... $12.80
============
</Table>

10
See Notes to Financial Statements

Morgan Stanley Aggressive Equity Fund
FINANCIAL STATEMENTS continued

Statement of Operations
For the six months ended January 31, 2006 (unaudited)

<Table>

Net Investment Loss:
Income
Dividends................................................... $ 918,705
Interest.................................................... 65,091
-----------
Total Income............................................ 983,796
-----------
Expenses
Distribution fee (Class A shares)........................... 55,549
Distribution fee (Class B shares)........................... 1,209,090
Distribution fee (Class C shares)........................... 151,250
Investment advisory fee..................................... 1,067,225
Transfer agent fees and expenses............................ 487,468
Administration fee.......................................... 127,430
Shareholder reports and notices............................. 65,430
Professional fees........................................... 34,919
Registration fees........................................... 24,091
Custodian fees.............................................. 12,935
Trustees' fees and expenses................................. 1,656
Other....................................................... 10,566
-----------
Total Expenses.......................................... 3,247,609
-----------
Net Investment Loss..................................... (2,263,813)
-----------
Net Realized and Unrealized Gain:
Net realized gain........................................... 20,426,681
Net change in unrealized appreciation....................... 36,703,610
-----------
Net Gain................................................ 57,130,291
-----------
Net Increase................................................ $54,866,478
===========
</Table>

11
See Notes to Financial Statements

Morgan Stanley Aggressive Equity Fund
FINANCIAL STATEMENTS continued

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JANUARY 31, 2006 JULY 31, 2005
---------------- -------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment loss......................................... $ (2,263,813) $ (4,878,748)
Net realized gain........................................... 20,426,681 47,277,366
Net change in unrealized appreciation....................... 36,703,610 33,865,577
------------ -------------
Net Increase............................................ 54,866,478 76,264,195

Net decrease from transactions in shares of beneficial
interest.................................................. (36,501,610) (123,847,024)
------------ -------------
Net Increase (Decrease)................................. 18,364,868 (47,582,829)
Net Assets:
Beginning of period......................................... 318,976,611 366,559,440
------------ -------------
End of Period
(Including accumulated net investment losses of
$2,264,173 and $360, respectively).......................... $337,341,479 $ 318,976,611
============ =============
</Table>

12
See Notes to Financial Statements

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2006 (UNAUDITED)

1. Organization and Accounting Policies

Morgan Stanley Aggressive Equity Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is
capital growth. The Fund was organized as a Massachusetts business trust on
October 29, 1997 and commenced operations on February 24, 1999.

The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within eighteen
months, 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.

Effective August 29, 2005, the Board of Trustees of the Fund approved the
implementation of a 2% redemption fee on Class A shares, Class B shares, Class C
shares, and Class D shares, which is paid directly to the Fund, for shares
redeemed within seven days of purchase. The redemption fee is designed to
protect the Fund and its remaining shareholders from the effects of short-term
trading.

The following is a summary of significant accounting policies:

A. Valuation of Investments -- (1) an equity portfolio security listed or traded
on the New York Stock Exchange ("NYSE") or American Stock Exchange or other
exchange is valued at its latest sale price prior to the time when assets are
valued; if there were no sales that day, the security is valued at the mean
between the last reported bid and asked price; (2) an equity portfolio security
listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price;
if there were no sales that day, the security is valued at the mean between the
last reported bid and asked price; (3) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the mean
between the last reported bid and asked price. In cases where a security is
traded on more than one exchange, the security is valued on the exchange
designated as the primary market; (4) for equity securities traded on foreign
exchanges, the last reported sale price or the latest bid price may be used if
there were no sales on a particular day; (5) futures are valued at the latest
price published by the commodities exchange on which they trade; (6) when market
quotations are not readily available or Morgan Stanley Investment Advisors Inc.
(the "Investment Adviser") determines that the latest sale price, the bid price
or the mean between the last reported bid and asked price do not reflect a
security's market value, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Fund's Trustees. Occasionally, developments affecting the
closing prices of securities and other

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2006 (UNAUDITED) continued

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

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

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

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

E. Foreign Currency Translation and Forward Foreign Currency Contracts -- The
books and records of the Fund are maintained in U.S. dollars as follows: (1) the
foreign currency market value of investment securities, other assets and
liabilities and forward foreign currency contracts ("forward contracts") are
translated at the exchange rates prevailing at the end of the period; and (2)
purchases, sales, income and expenses are translated at the exchange rates
prevailing on the respective dates of such transactions. The resultant exchange
gains and losses are recorded as

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2006 (UNAUDITED) continued

realized and unrealized gain/loss on foreign exchange transactions. Pursuant to
U.S. federal income tax regulations, certain foreign exchange gains/losses
included in realized and unrealized gain/loss are included in or are a reduction
of ordinary income for federal income tax purposes. The Fund does not isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the changes in the market prices of the securities.
Forward contracts are valued daily at the appropriate exchange rates. The
resultant unrealized exchange gains and losses are recorded as unrealized
foreign currency gain or loss. The Fund records realized gains or losses on
delivery of the currency or at the time the forward contract is extinguished
(compensated) by entering into a closing transaction prior to delivery.

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

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

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

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

2. Investment Advisory/ Administration Agreements

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

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2006 (UNAUDITED) continued

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.

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
$20,499,315 at January 31, 2006.

In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Financial Advisors or other selected
broker-dealer representatives may be reimbursed in the subsequent calendar year.
For the six months ended January 31, 2006, the distribution fee was accrued for
Class A shares and Class C shares at the annual rate of 0.25% and 1.0%,
respectively.

The Distributor has informed the Fund that for the six months ended January 31,
2006, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $182,556 and $1,241,
respectively and received $43,499 in front-end sales charges from sales of the
Fund's Class A shares. The respective shareholders pay such charges which are
not an expense of the Fund.

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2006 (UNAUDITED) continued

4. Security Transactions and Transactions with Affiliates

The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended January 31, 2006, aggregated
$66,554,547 and $103,391,014, respectively. Included in the aforementioned are
sales with other Morgan Stanley funds of $230,880, including a net realized gain
of $57,172.

For the six months ended January 31, 2006, the Fund incurred brokerage
commissions of $5,502 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Adviser, Administrator and Distributor, for portfolio transactions
executed on behalf of the Fund.

At January 31, 2006, Morgan Stanley Multi-Asset Class Fund, an affiliate of the
Investment Adviser, Administrator and Distributor held 163,237 Class D shares of
beneficial interest of the Fund.

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

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 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 July 31, 2005, the Fund had a net capital loss carryforward of
$395,735,804 of which $274,679,081 will expire on July 31, 2010 and $121,056,723
will expire on July 31, 2011 to offset future capital gains to the extent
provided by regulations.

As of July 31, 2005, the Fund had temporary book/tax differences attributable to
nondeductible expenses.

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2006 (UNAUDITED) continued

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
JANUARY 31, 2006 JULY 31, 2005
------------------------- ---------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------

CLASS A SHARES
Sold............................................ 444,026 $ 5,247,561 231,806 $ 2,009,382
Conversion from Class B......................... 276,921 3,138,937 2,971,793 26,716,883
Redeemed........................................ (630,132) (7,015,956) (1,195,775) (11,026,653)
---------- ------------ ----------- -------------
Net increase - Class A.......................... 90,815 1,370,542 2,007,824 17,699,612
---------- ------------ ----------- -------------
CLASS B SHARES
Sold............................................ 566,560 6,261,483 607,812 5,372,272
Conversion to Class A........................... (292,001) (3,138,937) (3,122,042) (26,716,883)
Redeemed........................................ (3,744,007) (39,700,158) (12,433,367) (108,895,987)
---------- ------------ ----------- -------------
Net decrease - Class B.......................... (3,469,448) (36,577,612) (14,947,597) (130,240,598)
---------- ------------ ----------- -------------
CLASS C SHARES
Sold............................................ 111,662 1,239,133 113,688 1,001,636
Redeemed........................................ (483,395) (5,152,683) (1,304,111) (11,509,513)
---------- ------------ ----------- -------------
Net decrease - Class C.......................... (371,733) (3,913,550) (1,190,423) (10,507,877)
---------- ------------ ----------- -------------
CLASS D SHARES
Sold............................................ 239,503 2,998,500 9,562 90,754
Redeemed........................................ (32,145) (379,490) (94,938) (888,915)
---------- ------------ ----------- -------------
Net increase (decrease) - Class D............... 207,358 2,619,010 (85,376) (798,161)
---------- ------------ ----------- -------------
Net decrease in Fund............................ (3,543,008) $(36,501,610) (14,215,572) $(123,847,024)
========== ============ =========== =============
</Table>

7. Purposes of and Risks Relating to Certain Financial Instruments

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

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

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

Morgan Stanley Aggressive Equity Fund
NOTES TO FINANCIAL STATEMENTS - JANUARY 31, 2006 (UNAUDITED) continued

8. 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, filed in the United States District
Court Southern District of New York on April 16, 2004, 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 9, 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 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 Aggressive Equity Fund
FINANCIAL HIGHLIGHTS

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

<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED JULY 31,
MONTHS ENDED -----------------------------------------------------------
JANUARY 31, 2006 2005 2004 2003 2002 2001
---------------- ------- ------- ------- ------- -------
(unaudited)

Class A Shares
Selected Per Share Data:

Net asset value, beginning of period..... $10.55 $ 8.34 $7.71 $7.51 $9.62 $15.24
------ ------ ----- ----- ----- ------

Income (loss) from investment operations:
Net investment loss++................ (0.04) (0.08) (0.07) (0.02) (0.03) 0.00
Net realized and unrealized gain
(loss)............................... 2.08 2.29 0.70 0.22 (2.05) (3.90)
------ ------ ----- ----- ----- ------

Total income (loss) from investment
operations.............................. 2.04 2.21 0.63 0.20 (2.08) (3.90)
------ ------ ----- ----- ----- ------

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

Net asset value, end of period........... $12.59 $10.55 $8.34 $7.71 $7.51 $ 9.62
====== ====== ===== ===== ===== ======

Total Return+............................ 19.34 %(1) 26.50% 8.17% 2.66% (21.65)% (28.31)%

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

Net investment loss...................... (0.78)%(2) (0.75)% (0.77)% (0.32)% (0.39)% (0.03)%

Supplemental Data:
Net assets, end of period, in
thousands............................... $51,426 $42,146 $16,564 $18,340 $21,888 $39,662

Portfolio turnover rate.................. 21 %(1) 123% 219% 263% 325% 399%
</Table>

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

<Table>

++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated
based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</Table>

20
See Notes to Financial Statements

Morgan Stanley Aggressive Equity Fund
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED JULY 31,
MONTHS ENDED -------------------------------------------------------------
JANUARY 31, 2006 2005 2004 2003 2002 2001
---------------- --------- --------- --------- --------- ---------
(unaudited)

Class B Shares
Selected Per Share Data:

Net asset value, beginning of period.... $10.03 $ 7.98 $7.44 $7.31 $9.42 $15.08
------ ------ ----- ----- ----- ------

Income (loss) from investment
operations:
Net investment loss++............... (0.08) (0.13) (0.12) (0.08) (0.10) (0.10)
Net realized and unrealized gain
(loss).............................. 1.97 2.18 0.66 0.21 (1.98) (3.84)
------ ------ ----- ----- ----- ------

Total income (loss) from investment
operations............................. 1.89 2.05 0.54 0.13 (2.08) (3.94)
------ ------ ----- ----- ----- ------

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

Net asset value, end of period.......... $11.92 $10.03 $7.98 $7.44 $7.31 $ 9.42
====== ====== ===== ===== ===== ======

Total Return+........................... 18.84 %(1) 25.69% 7.26% 1.78% (22.11)% (28.93)%

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

Net investment loss..................... (1.53)%(2) (1.50)% (1.53)% (1.07)% (1.15)% (0.81)%

Supplemental Data:
Net assets, end of period, in
thousands.............................. $249,506 $244,708 $314,195 $387,751 $492,959 $881,115

Portfolio turnover rate................. 21 %(1) 123% 219% 263% 325% 399%
</Table>

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

<Table>

21
See Notes to Financial Statements

Morgan Stanley Aggressive Equity Fund
FINANCIAL HIGHLIGHTS continued

Class C Shares
Selected Per Share Data:

Net asset value, beginning of period...... $10.04 $ 7.99 $7.45 $7.32 $9.42 $15.08
------ ------ ----- ----- ----- ------

Income (loss) from investment operations:
Net investment loss++................. (0.08) (0.13) (0.12) (0.08) (0.09) (0.10)
Net realized and unrealized gain
(loss)................................ 1.97 2.18 0.66 0.21 (1.98) (3.84)
------ ------ ----- ----- ----- ------

Total income (loss) from investment
operations............................... 1.89 2.05 0.54 0.13 (2.07) (3.94)
------ ------ ----- ----- ----- ------

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

Net asset value, end of period............ $11.93 $10.04 $7.99 $7.45 $7.32 $ 9.42
====== ====== ===== ===== ===== ======

Total Return+............................. 18.82 %(1) 25.66% 7.25% 1.78% (22.00)% (28.93)%

Ratios to Average Net Assets(3):
Expenses.................................. 2.15 %(2) 2.16% 2.12% 2.15% 1.93% 1.94%

Net investment loss....................... (1.53)%(2) (1.49)% (1.52)% (1.07)% (1.03)% (0.81)%

Supplemental Data:
Net assets, end of period, in thousands... $31,680 $30,386 $33,710 $40,555 $49,639 $83,603

Portfolio turnover rate................... 21 %(1) 123% 219% 263% 325% 399%
</Table>

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

<Table>

22
See Notes to Financial Statements

Morgan Stanley Aggressive Equity Fund
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED JULY 31,
MONTHS ENDED --------------------------------------------------------
JANUARY 31, 2006 2005 2004 2003 2002 2001
---------------- ------ ------ ------ ------- -------
(unaudited)

Class D Shares
Selected Per Share Data:

Net asset value, beginning of period........ $10.72 $ 8.45 $7.80 $7.58 $ 9.68 $15.30
------ ------ ----- ----- ------ ------

Income (loss) from investment operations:
Net investment income (loss)++.......... (0.03) (0.05) (0.04) (0.01) (0.01) 0.02
Net realized and unrealized gain
(loss).................................. 2.11 2.32 0.69 0.23 (2.06) (3.92)
------ ------ ----- ----- ------ ------

Total income (loss) from investment
operations................................. 2.08 2.27 0.65 0.22 (2.07) (3.90)
------ ------ ----- ----- ------ ------

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

Net asset value, end of period.............. $12.80 $10.72 $8.45 $7.80 $ 7.58 $ 9.68
====== ====== ===== ===== ====== ======

Total Return+............................... 19.40 %(1) 26.86% 8.33% 2.90% (21.33)% (28.26)%

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

Net investment income (loss)................ (0.53)%(2) (0.50)% (0.53)% (0.07)% (0.15)% 0.19%

Supplemental Data:
Net assets, end of period, in thousands..... $4,729 $1,737 $2,091 $2,468 $2,622 $5,111

Portfolio turnover rate..................... 21 %(1) 123% 219% 263% 325% 399%
</Table>

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

<Table>

++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Calculated based on the net asset value as of the last
business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
</Table>

23
See Notes to Financial Statements

TRUSTEES

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

OFFICERS

Charles A. Fiumefreddo
Chairman of the Board

Ronald E. Robison
President and Principal Executive Officer

J. David Germany
Vice President

Dennis F. Shea
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 the shareholders of the
Fund. For more detailed information about the Fund, its fees and expenses and
other pertinent information, please read its Prospectus. The Fund's Statement of
Additional Information contains additional information about the Fund, including
its trustees. It is available, without charge, by calling (800) 869-NEWS.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective Prospectus. Read the
Prospectus carefully before investing.

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

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MORGAN STANLEY FUNDS

Morgan Stanley
Aggressive Equity Fund

Semiannual Report
January 31, 2006

[MORGAN STANLEY LOGO]

36052RPT-RA06-00217P-Y01/06

Item 2. Code of Ethics.

Not applicable for semiannual reports.

Item 3. Audit Committee Financial Expert.

Not applicable for semiannual reports.

Item 4. Principal Accountant Fees and Services

Not applicable for semiannual reports.

Item 5. Audit Committee of Listed Registrants.

Not applicable for semiannual reports.

Item 6.

Refer to Item 1.

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

Not applicable for semiannual reports.

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

Applicable only to reports filed by closed-end funds.

Item 9. Closed-End Fund Repurchases

Applicable to reports filed by closed-end funds.

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

Not applicable.

Item 11. Controls and Procedures

(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.

(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.

Item 12. Exhibits

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

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

Morgan Stanley Aggressive Equity Fund

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
March 23, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.

/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
March 23, 2006

/s/ Francis Smith
Francis Smith
Principal Financial Officer
March 23, 2006