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

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-10359

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

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

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

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

Date of fiscal year end: August 31, 2006

Date of reporting period: February 28, 2006

Item 1 - Report to Shareholders

Welcome, Shareholder:

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

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

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

FUND REPORT

For the six months ended February 28, 2006

TOTAL RETURN FOR THE 6 MONTHS ENDED FEBRUARY 28, 2006

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

8.63% 8.21% 8.29% 8.72% 8.18% 6.67%
</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

The reporting period opened during a stock market downdraft spanning August
through October. High oil prices, rising inflation, the economic toll of the
Gulf Coast hurricanes' and the Federal Open Market Committee's (the "Fed's")
interest rate increases were among the most significant concerns shaping market
sentiment. A flattening yield curve (that is, the yields on short-term bonds
began to approach those of long-term bonds) was also troubling for some
investors, who viewed it as an indication of future economic deterioration.

However, in November, investors grew more optimistic, as the economy
demonstrated greater resiliency than many expected. Consumer confidence and
retail sales showed initial signs of distress following the hurricanes, but
rebounded fairly quickly. The strong merger-and-acquisition activity of 2005
retained its pace. Corporate profits continued to be healthy for the most part,
although earnings began to slow somewhat after several strong quarters. The
market rallied in January, but was more subdued in February as investors paused
to consider a below-expectations fourth quarter gross domestic product number,
earnings disappointments and the inversion of the yield curve.

For the period overall, all sectors but consumer discretionary generated
positive returns within the Fund's universe of mid cap stocks.

PERFORMANCE ANALYSIS

Morgan Stanley Mid-Cap Value Fund outperformed both the Russell Midcap(R) Value
Index and the Lipper Mid-Cap Value Funds Index for the six months ended February
28, 2006, assuming no deduction of applicable sales charges.

We note that on an absolute basis, with the exception of consumer staples, all
sectors in the Fund's portfolio added to gains. Relative to the Russell
benchmark, the Fund's financials holdings were the largest contributor to
results. The Fund held little exposure to interest-rate sensitive stocks such as
banks, which underperformed as interest rates continued to rise and the yield
curve flattened. Moreover, other areas within the financial sector performed
strongly, and the Fund was well positioned to benefit from that strength.
Holdings in diversified financial services companies -- particularly those with
investment banking operations, capital markets exposure and fixed income
trading -- and insurance companies were standouts. Elsewhere, consolidation news
in the utilities sector helped drive positive relative performance for the Fund.
Within industrials, both the Fund's overweight and good stock selection proved
advantageous, especially in the transportation and engineering and construction
industries.

In contrast, the Fund's technology exposure was the primary detractor from
relative performance. An underweight in semiconductors, picks in software and
services, and both an underweight and stock selection in hardware dampened
returns. In consumer staples, negative company-specific news hampered some of
the Fund's food and tobacco holdings. The Fund's telecommunication services
stocks were also comparatively weak, as some stocks represented in the index
(but not in the Fund) rebounded during the period.

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

Southwest Airlines Co. 3.4%
Applera Corp. - Applied Biosystems Group 3.2
International Flavors & Fragrances, Inc. 3.1
Manpower, Inc. 3.0
PMI Group, Inc. (The) 2.9
Conseco, Inc. 2.9
Lazard Ltd. (Class A) (Bermuda) 2.7
ACE Ltd. (Cayman Islands) 2.7
Warner Music Group Corp. 2.6
Watson Pharmaceuticals, Inc. 2.6
</Table>

<Table>
<Caption>
TOP FIVE INDUSTRIES

Investment Banks/Brokers 6.7%
Medical Specialties 5.2
Pharmaceuticals: Generic Drugs 5.2
Household/Personal Care 4.3
Investment Managers 3.7
</Table>

Data as of February 28, 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 WILL NORMALLY INVEST AT LEAST 80 PERCENT OF ITS ASSETS IN COMMON STOCK
AND OTHER EQUITY SECURITIES, INCLUDING DEPOSITARY RECEIPTS AND SECURITIES
CONVERTIBLE INTO COMMON STOCK, OF COMPANIES TRADED ON A U.S. SECURITIES EXCHANGE
WITH MARKET CAPITALIZATIONS THAT FALL WITHIN THE RANGE OF COMPANIES INCLUDED IN
THE RUSSELL MIDCAP(R) VALUE INDEX. AS OF SEPTEMBER 30, 2005, THESE MARKET
CAPITALIZATIONS RANGE BETWEEN $809 MILLION AND $17.33 BILLION. IN PURSUING ITS
INVESTMENT OBJECTIVE, THE FUND'S "INVESTMENT ADVISER," MORGAN STANLEY INVESTMENT
ADVISORS INC., SEEKS ATTRACTIVELY VALUED COMPANIES EXPERIENCING A CHANGE THAT
THE INVESTMENT ADVISER BELIEVES COULD HAVE A POSITIVE IMPACT ON A COMPANY'S
OUTLOOK, SUCH AS A CHANGE IN MANAGEMENT, INDUSTRY DYNAMICS OR OPERATIONAL
EFFICIENCY. IN DETERMINING WHETHER SECURITIES SHOULD BE SOLD, THE INVESTMENT
ADVISER CONSIDERS A NUMBER OF FACTORS, INCLUDING APPRECIATION TO FAIR VALUE,
FUNDAMENTAL CHANGE IN THE COMPANY OR CHANGES IN ECONOMIC OR MARKET TRENDS. THE
INVESTMENT ADVISER MAY PURCHASE STOCKS THAT TYPICALLY DO NOT PAY DIVIDENDS.

FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS

EACH MORGAN STANLEY FUND PROVIDES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS IN
ITS SEMIANNUAL AND ANNUAL REPORTS WITHIN 60 DAYS OF THE END OF THE FUND'S SECOND
AND FOURTH FISCAL QUARTERS BY FILING THE SCHEDULE ELECTRONICALLY WITH THE
SECURITIES AND EXCHANGE COMMISSION (SEC). THE SEMIANNUAL REPORTS ARE FILED ON
FORM N-CSRS AND THE ANNUAL REPORTS ARE FILED ON FORM N-CSR. MORGAN STANLEY ALSO
DELIVERS THE SEMIANNUAL AND ANNUAL REPORTS TO FUND SHAREHOLDERS AND MAKES THESE
REPORTS AVAILABLE ON ITS PUBLIC WEB SITE, WWW.MORGANSTANLEY.COM. EACH MORGAN
STANLEY

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 FEBRUARY 28, 2006

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

1 YEAR 15.20%(3) 14.36%(3) 14.54%(3) 15.41%(3)
9.15(4) 9.57(4) 13.58(4) --
SINCE INCEPTION 9.60(3) 8.77(3) 8.83(3) 9.85(3)
8.24(4) 8.42(4) 8.83(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 Midcap(R) Value Index measures the performance of those Russell
Midcap(R) Index companies with lower price-to-book ratios and lower
forecasted growth values. The stocks are also members of the Russell
1000(R) Value Index. Indexes are unmanaged and their returns do not include
any sales charges or fees. Such costs would lower performance. It is not
possible to invest directly in an index.

(2) The Lipper Mid-Cap Value Funds Index is an equally weighted performance
index of the largest qualifying funds (based on net assets) in the Lipper
Mid-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.

(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 09/01/05 - 02/28/06.

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 *
------------- ------------- ---------------
09/01/05 -
09/01/05 02/28/06 02/28/06
------------- ------------- ---------------

CLASS A
Actual (8.63% return)....................................... $1,000.00 $1,086.30 $ 7.14
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,017.95 $ 6.90
CLASS B
Actual (8.21% return)....................................... $1,000.00 $1,082.10 $11.05
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,014.18 $10.69
CLASS C
Actual (8.29% return)....................................... $1,000.00 $1,082.90 $10.90
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,014.33 $10.54
CLASS D
Actual (8.72% return)....................................... $1,000.00 $1,087.20 $ 5.90
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,019.14 $ 5.71
</Table>

- ------------------
* Expenses are equal to the Fund's annualized expense ratio of 1.38%, 2.14%,
2.10% and 1.14% for Class A, Class B, Class C and Class D shares,
respectively, multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half year period).

Morgan Stanley Mid-Cap Value Fund
PORTFOLIO OF INVESTMENTS - FEBRUARY 28, 2006 (UNAUDITED)

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

Common Stocks (96.1%)
Advertising/Marketing
Services (2.0%)
457 Interpublic Group of
Companies, Inc.
(The)*.................. $ 4,734
233,900 Valassis Communications,
Inc.*................... 6,443,945
------------
6,448,679
------------
Aerospace & Defense
(2.2%)
172,646 Goodrich Corp. .......... 7,223,509
------------
Airlines (3.4%)
663,720 Southwest Airlines
Co. .................... 11,130,584
------------
Biotechnology (2.2%)
158,670 Chiron Corp.*............ 7,246,459
------------
Broadcasting (1.2%)
120,200 Univision Communications,
Inc. (Class A)*......... 4,020,690
------------
Chemicals: Specialty
(1.7%)
130,300 Albemarle Corp. ......... 5,531,235
------------
Containers/ Packaging
(2.2%)
125,540 Sealed Air Corp.*........ 7,140,715
------------
Data Processing Services
(0.8%)
181,696 BISYS Group, Inc.
(The)*.................. 2,563,731
------------
Discount Stores (1.3%)
244,510 Dollar General Corp. .... 4,259,364
------------
Electric Utilities (3.5%)
91,180 Constellation Energy
Group, Inc. ............ 5,355,913
146,690 Wisconsin Energy
Corp. .................. 5,995,220
------------
11,351,133
------------
Electronic Equipment/
Instruments (2.2%)
175,870 Diebold, Inc. ........... 7,034,800
------------
</Table>

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

Engineering &
Construction (2.2%)
83,970 Fluor Corp. ............. $ 7,246,611
------------
Financial Conglomerates
(2.9%)
382,360 Conseco, Inc.*........... 9,497,822
------------
Food: Meat/Fish/Dairy
(1.6%)
388,330 Tyson Foods, Inc. (Class
A)...................... 5,254,105
------------
Home Furnishings (1.9%)
255,480 Newell Rubbermaid,
Inc. ................... 6,353,788
------------
Hospital/Nursing
Management (1.2%)
501,300 Tenet Healthcare
Corp.*.................. 3,955,257
------------
Household/Personal Care
(4.3%)
137,450 Avon Products, Inc. ..... 3,965,432
289,970 International Flavors &
Fragrances, Inc. ....... 10,041,661
------------
14,007,093
------------
Insurance Brokers/
Services (2.2%)
237,000 Marsh & McLennan
Companies, Inc. ........ 7,325,670
------------
Integrated Oil (1.8%)
42,510 Amerada Hess Corp. ...... 5,879,558
------------
Investment Banks/Brokers
(6.7%)
128,790 Edwards (A.G.), Inc. .... 5,756,913
231,020 Lazard Ltd. (Class A)
(Bermuda)............... 8,889,650
440,330 Schwab (Charles) Corp.
(The)................... 7,137,749
------------
21,784,312
------------
</Table>

7
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
PORTFOLIO OF INVESTMENTS - FEBRUARY 28, 2006 (UNAUDITED) continued

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

Investment Managers
(3.7%)
295,060 Amvescap PLC (ADR)
(United Kingdom)........ $ 5,623,844
141,000 Investors Financial
Services Corp. ......... 6,360,510
------------
11,984,354
------------
Investment Trusts/Mutual
Funds (1.2%)
69,520 streetTRACKS Gold
Trust*.................. 3,892,425
------------
Medical Specialties
(5.2%)
367,820 Applera Corp. - Applied
Biosystems Group........ 10,398,271
94,930 Bausch & Lomb, Inc. ..... 6,570,105
------------
16,968,376
------------
Movies/Entertainment
(2.6%)
420,840 Warner Music Group
Corp. .................. 8,648,262
------------
Oilfield Services/
Equipment (1.7%)
140,250 Cooper Cameron Corp.*.... 5,680,125
------------
Packaged Software (2.0%)
171,720 Cognos, Inc. (Canada)*... 6,568,290
------------
Personnel Services (3.0%)
184,619 Manpower, Inc. .......... 9,902,963
------------
Pharmaceuticals: Generic
Drugs (5.2%)
365,130 Mylan Laboratories,
Inc. ................... 8,397,990
283,160 Watson Pharmaceuticals,
Inc.*................... 8,489,137
------------
16,887,127
------------
Property - Casualty
Insurers (2.7%)
157,670 ACE Ltd. (Cayman
Islands)................ 8,786,949
------------
Publishing: Books/
Magazines (0.8%)
86,383 Scholastic Corp.*........ 2,541,388
------------
</Table>

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

Pulp & Paper (0.4%)
44,400 MeadWestvaco Corp. ...... $ 1,235,208
------------
Real Estate Investment
Trusts (2.3%)
332,740 KKR Financial Corp. ..... 7,609,764
------------
Regional Banks (2.0%)
124,440 Northern Trust Corp. .... 6,560,477
------------
Restaurants (1.8%)
143,880 Outback Steakhouse,
Inc. ................... 6,015,623
------------
Savings Banks (2.3%)
573,420 Hudson City Bancorp,
Inc. ................... 7,402,852
------------
Semiconductors (0.9%)
76,000 Linear Technology
Corp. .................. 2,801,360
------------
Specialty Insurance
(2.9%)
221,470 PMI Group, Inc. (The).... 9,589,651
------------
Specialty Stores (1.9%)
176,890 Office Depot, Inc.*...... 6,311,435
------------
Specialty
Telecommunications (1.9%)
174,520 CenturyTel, Inc. ........ 6,279,230
------------
Tobacco (2.0%)
163,860 UST, Inc. ............... 6,370,877
------------
Tools/Hardware (2.1%)
172,830 Snap-On, Inc. ........... 6,726,544
------------
Total Common Stocks
(Cost $266,069,376)...... 314,018,395
------------
</Table>

8
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
PORTFOLIO OF INVESTMENTS - FEBRUARY 28, 2006 (UNAUDITED) continued

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

Short-Term Investment (3.0%)
Repurchase Agreement
$ 9,898 Joint repurchase
agreement account 4.555%
due 03/01/06 (dated
02/28/06; proceeds
$9,899,252) (a)
(Cost $9,898,000)....... $ 9,898,000
-------------
Total Investments
(Cost $275,967,376) (b)..... 99.1% 323,916,395
Other Assets in Excess of
Liabilities................. 0.9 2,779,901
----- ------------
Net Assets.................. 100.0% $326,696,296
===== ============
</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
$53,574,411 and the aggregate gross unrealized
depreciation is $5,625,392, resulting in net
unrealized appreciation of $47,949,019.
</Table>

9
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
SUMMARY OF INVESTMENTS - FEBRUARY 28, 2006 (UNAUDITED)

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

Investment
Banks/Brokers....... $ 21,784,312 6.7%
Medical Specialties... 16,968,376 5.2
Pharmaceuticals:
Generic Drugs....... 16,887,127 5.2
Household/Personal
Care................ 14,007,093 4.3
Investment Managers... 11,984,354 3.7
Electric Utilities.... 11,351,133 3.5
Airlines.............. 11,130,584 3.4
Personnel Services.... 9,902,963 3.0
Repurchase Agreement.. 9,898,000 3.0
Specialty Insurance... 9,589,651 2.9
Financial
Conglomerates....... 9,497,822 2.9
Property - Casualty
Insurers............ 8,786,949 2.7
Movies/Entertainment... 8,648,262 2.6
Real Estate Investment
Trusts.............. 7,609,764 2.3
Savings Banks......... 7,402,852 2.3
Insurance
Brokers/Services.... 7,325,670 2.2
Engineering &
Construction........ 7,246,611 2.2
Biotechnology......... 7,246,459 2.2
Aerospace & Defense... 7,223,509 2.2
Containers/Packaging... 7,140,715 2.2
Electronic
Equipment/Instruments.. 7,034,800 2.2
Tools/Hardware........ 6,726,544 2.1
</Table>

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

Packaged Software..... $ 6,568,290 2.0%
Regional Banks........ 6,560,477 2.0
Advertising/Marketing
Services............ 6,448,679 2.0
Tobacco............... 6,370,877 2.0
Home Furnishings...... 6,353,788 1.9
Specialty Stores...... 6,311,435 1.9
Specialty
Telecommunications... 6,279,230 1.9
Restaurants........... 6,015,623 1.8
Integrated Oil........ 5,879,558 1.8
Oilfield
Services/Equipment... 5,680,125 1.7
Chemicals:
Specialty........... 5,531,235 1.7
Food:
Meat/Fish/Dairy..... 5,254,105 1.6
Discount Stores....... 4,259,364 1.3
Broadcasting.......... 4,020,690 1.2
Hospital/Nursing
Management.......... 3,955,257 1.2
Investment
Trusts/Mutual
Funds............... 3,892,425 1.2
Semiconductors........ 2,801,360 0.9
Data Processing
Services............ 2,563,731 0.8
Publishing:
Books/Magazines..... 2,541,388 0.8
Pulp & Paper.......... 1,235,208 0.4
------------ ----
$323,916,395 99.1%
============ ====
</Table>

10
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
February 28, 2006 (unaudited)

<Table>

Assets:
Investments in securities, at value
(cost $275,967,376)....................................... $323,916,395
Receivable for:
Investments sold........................................ 2,644,042
Shares of beneficial interest sold...................... 429,267
Dividends............................................... 291,783
Interest................................................ 1,252
Prepaid expenses and other assets........................... 81,097
------------
Total Assets............................................ 327,363,836
------------
Liabilities:
Payable for:
Shares of beneficial interest redeemed.................. 276,043
Investment advisory fee................................. 179,455
Investments purchased................................... 52,319
Distribution fee........................................ 50,318
Administration fee...................................... 19,939
Accrued expenses and other payables......................... 89,466
------------
Total Liabilities....................................... 667,540
------------
Net Assets.............................................. $326,696,296
============
Composition of Net Assets:
Paid-in-capital............................................. $267,298,809
Net unrealized appreciation................................. 47,949,019
Accumulated undistributed net investment income............. 223,128
Accumulated undistributed net realized gain................. 11,225,340
------------
Net Assets.............................................. $326,696,296
============
Class A Shares:
Net Assets.................................................. $14,115,631
Shares Outstanding (unlimited authorized, $.01 par value)... 1,237,814
Net Asset Value Per Share............................... $11.40
============
Maximum Offering Price Per Share,
(net asset value plus 5.54% of net asset value)......... $12.03
============
Class B Shares:
Net Assets.................................................. $53,334,067
Shares Outstanding (unlimited authorized, $.01 par value)... 4,869,808
Net Asset Value Per Share............................... $10.95
============
Class C Shares:
Net Assets.................................................. $8,621,549
Shares Outstanding (unlimited authorized, $.01 par value)... 785,259
Net Asset Value Per Share............................... $10.98
============
Class D Shares:
Net Assets.................................................. $250,625,049
Shares Outstanding (unlimited authorized, $.01 par value)... 21,709,335
Net Asset Value Per Share............................... $11.54
============
</Table>

11
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL STATEMENTS continued

Statement of Operations
For the six months ended February 28, 2006 (unaudited)

<Table>

Net Investment Income:
Income
Dividends................................................... $ 2,193,480
Interest.................................................... 200,543
-----------
Total Income............................................ 2,394,023
-----------
Expenses
Investment advisory fee..................................... 1,160,478
Transfer agent fees and expenses............................ 401,522
Distribution fee (Class A shares)........................... 14,598
Distribution fee (Class B shares)........................... 270,019
Distribution fee (Class C shares)........................... 39,825
Administration fee.......................................... 128,942
Professional fees........................................... 42,097
Registration fees........................................... 39,797
Shareholder reports and notices............................. 36,769
Custodian fees.............................................. 15,133
Trustees' fees and expenses................................. 4,417
Other....................................................... 14,544
-----------
Total Expenses.......................................... 2,168,141
-----------
Net Investment Income................................... 225,882
-----------
Net Realized and Unrealized Gain:
Net realized gain........................................... 16,499,978
Net change in unrealized appreciation....................... 10,108,625
-----------
Net Gain................................................ 26,608,603
-----------
Net Increase................................................ $26,834,485
===========
</Table>

12
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL STATEMENTS continued

Statement of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 2006 AUGUST 31, 2005
----------------- ---------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss)................................ $ 225,882 $ (162,715)
Net realized gain........................................... 16,499,978 47,534,536
Net change in unrealized appreciation....................... 10,108,625 21,939,073
------------ ------------
Net Increase............................................ 26,834,485 69,310,894
------------ ------------
Distributions to Shareholders from Net Realized Gain:
Class A shares.............................................. (2,049,097) (390,465)
Class B shares.............................................. (8,985,414) (6,115,073)
Class C shares.............................................. (1,375,828) (801,579)
Class D shares.............................................. (39,580,076) (23,336,428)
------------ ------------
Total Distributions..................................... (51,990,415) (30,643,545)
------------ ------------

Net increase (decrease) from transactions in shares of
beneficial interest....................................... 16,278,371 (12,116,105)
------------ ------------
Net Increase (Decrease)................................. (8,877,559) 26,551,244
Net Assets:
Beginning of period......................................... 335,573,855 309,022,611
------------ ------------
End of Period
(Including accumulated undistributed net investment income
of $223,128 and accumulated net investment loss of $2,754,
respectively)............................................... $326,696,296 $335,573,855
============ ============
</Table>

13
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2006 (UNAUDITED)

1. Organization and Accounting Policies

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

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

The Fund will assess 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) 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,

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2006 (UNAUDITED) continued

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 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.

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2006 (UNAUDITED) continued

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

Pursuant to an Investment Advisory Agreement with the Investment Adviser, the
Fund pays an advisory fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined at the close of
each business day: 0.72% to the portion of the daily net assets not exceeding $1
billion; and 0.65% to the portion of the daily net assets exceeding $1 billion.

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 $1,079,416
at February 28, 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

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2006 (UNAUDITED) continued

selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended February 28, 2006, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.24%
and 0.96%, respectively.

The Distributor has informed the Fund that for the six months ended February 28,
2006, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $76,452 and $110, respectively,
and received $47,712 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense of
the Fund.

4. Security Transactions and Transactions with Affiliates

The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended February 28, 2006 aggregated
$81,300,036 and $112,134,933, respectively. Included in the aforementioned
transactions are sales of $290,773 with other Morgan Stanley funds, including a
realized gain of $143,373.

For the six months ended February 28, 2006, the Fund incurred brokerage
commissions of $9,430 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.

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

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2006 (UNAUDITED) continued

differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for tax purposes are
reported as distributions of paid-in-capital.

As of August 31, 2005, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.

6. Shares of Beneficial Interest

Transactions in shares of beneficial interest were as follows:

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
FEBRUARY 28, 2006 AUGUST 31, 2005
------------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------

CLASS A SHARES
Sold.............................................. 246,058 $ 2,938,889 136,417 $ 1,614,623
Conversion from Class B........................... 68,941 799,551 634,473 7,169,678
Reinvestment of distributions..................... 167,733 1,846,739 32,132 369,835
Redeemed.......................................... (188,258) (2,190,343) (209,788) (2,468,177)
---------- ------------ ---------- ------------
Net increase - Class A............................ 294,474 3,394,836 593,234 6,685,959
---------- ------------ ---------- ------------
CLASS B SHARES
Sold.............................................. 229,431 2,690,663 828,198 9,500,223
Conversion to Class A............................. (71,612) (799,551) (652,534) (7,169,678)
Reinvestment of distributions..................... 760,394 8,052,576 490,316 5,506,245
Redeemed.......................................... (712,565) (8,282,458) (1,622,191) (18,509,069)
---------- ------------ ---------- ------------
Net increase (decrease) - Class B................. 205,648 1,661,230 (956,211) (10,672,279)
---------- ------------ ---------- ------------
CLASS C SHARES
Sold.............................................. 49,752 565,996 84,157 964,800
Reinvestment of distributions..................... 123,179 1,306,931 67,479 758,458
Redeemed.......................................... (70,142) (802,684) (216,798) (2,481,142)
---------- ------------ ---------- ------------
Net increase (decrease) - Class C................. 102,789 1,070,243 (65,162) (757,884)
---------- ------------ ---------- ------------
CLASS D SHARES
Sold.............................................. 1,339,516 16,106,086 3,454,456 40,597,791
Reinvestment of distributions..................... 2,982,017 33,219,666 1,660,516 19,261,986
Redeemed.......................................... (3,214,873) (39,173,690) (5,690,429) (67,231,678)
---------- ------------ ---------- ------------
Net increase (decrease) - Class D................. 1,106,660 10,152,062 (575,457) (7,371,901)
---------- ------------ ---------- ------------
Net increase (decrease) in Fund................... 1,709,571 $ 16,278,371 (1,003,596) $(12,116,105)
========== ============ ========== ============
</Table>

7. Legal Matters

The Investment Adviser, certain affiliates of the Investment Adviser, certain
officers of such affiliates and certain investment companies advised by the
Investment Adviser or its affiliates, including the Fund, are named as
defendants in a consolidated class action. This consolidated action also names

Morgan Stanley Mid-Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2006 (UNAUDITED) continued

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, which motion defendants opposed. While the Fund and Adviser
believe that each has meritorious defenses, the ultimate outcome of this matter
is not presently determinable and no provision has been made in the Fund's
financial statements for the effect, if any, of this matter.

Morgan Stanley Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS

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

<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED AUGUST 31, OCTOBER 29, 2001*
MONTHS ENDED -------------------------------------- THROUGH
FEBRUARY 28, 2006 2005 2004 2003 AUGUST 31, 2002
----------------- -------- -------- -------- -----------------
(unaudited)

Class A Shares
Selected Per Share Data:

Net asset value, beginning of
period............................... $12.46 $11.08 $10.11 $ 8.19 $10.00
------ ------ ------ ------ ------

Income (loss) from investment
operations:
Net investment income (loss)++.... 0.01 (0.02) (0.02) (0.03) (0.04)
Net realized and unrealized gain
(loss)............................ 0.99 2.52 0.99 1.95 (1.76)
------ ------ ------ ------ ------

Total income (loss) from investment
operations........................... 1.00 2.50 0.97 1.92 (1.80)
------ ------ ------ ------ ------

Less dividends and distributions from:
Net investment income............. -- -- -- -- (0.01)
Net realized gain................. (2.06) (1.12) -- -- --
------ ------ ------ ------ ------

Total dividends and distributions..... (2.06) (1.12) -- -- (0.01)
------ ------ ------ ------ ------

Net asset value, end of period........ $11.40 $12.46 $11.08 $10.11 $ 8.19
====== ====== ====== ====== ======

Total Return+......................... 8.63 %(1) 23.55% 9.50% 23.44% (17.99)%(1)

Ratios to Average Net Assets(3):
Expenses.............................. 1.38 %(2) 1.40% 1.40% 1.47% 1.45 %(2)(4)

Net investment income (loss).......... 0.11 %(2) (0.08)% (0.14)% (0.39)% (0.58)%(2)(4)

Supplemental Data:
Net assets, end of period, in
thousands............................ $14,116 $11,757 $3,878 $3,173 $3,053

Portfolio turnover rate............... 26 %(1) 72% 151% 165% 121 %(1)
</Table>

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

<Table>

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

20
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED AUGUST 31, OCTOBER 29, 2001*
MONTHS ENDED -------------------------------------------- THROUGH
FEBRUARY 28, 2006 2005 2004 2003 AUGUST 31, 2002
----------------- -------- -------- -------- -----------------
(unaudited)

Class B Shares
Selected Per Share Data:

Net asset value, beginning of
period............................. $12.09 $10.85 $ 9.98 $ 8.15 $10.00
------ ------ ------ ------ ------

Income (loss) from investment
operations:
Net investment loss++........... (0.04) (0.09) (0.10) (0.09) (0.10)
Net realized and unrealized gain
(loss).......................... 0.96 2.45 0.97 1.92 (1.75)
------ ------ ------ ------ ------

Total income (loss) from investment
operations......................... 0.92 2.36 0.87 1.83 (1.85)
------ ------ ------ ------ ------

Less dividends and distributions
from:
Net investment income........... -- -- -- -- 0.00++
Net realized gain............... (2.06) (1.12) -- -- --
------ ------ ------ ------ ------

Total dividends and distributions... (2.06) (1.12) -- -- 0.00
------ ------ ------ ------ ------

Net asset value, end of period...... $10.95 $12.09 $10.85 $ 9.98 $ 8.15
====== ====== ====== ====== ======

Total Return+....................... 8.21 %(1) 22.58% 8.72% 22.45% (18.47)%(1)

Ratios to Average Net Assets (3):
Expenses............................ 2.14 %(2) 2.16% 2.16% 2.24% 2.20 %(2)(4)

Net investment loss................. (0.65)%(2) (0.84)% (0.90)% (1.16)% (1.33)%(2)(4)

Supplemental Data:
Net assets, end of period, in
thousands.......................... $53,334 $56,389 $60,987 $56,823 $53,948

Portfolio turnover rate............. 26 %(1) 72% 151% 165% 121 %(1)
</Table>

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

<Table>

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

21
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED AUGUST 31, OCTOBER 29, 2001*
MONTHS ENDED ------------------------------------ THROUGH
FEBRUARY 28, 2006 2005 2004 2003 AUGUST 31, 2002
----------------- -------- -------- -------- -----------------
(unaudited)

Class C Shares
Selected Per Share Data:

Net asset value, beginning of period.... $12.11 $10.86 $ 9.98 $ 8.15 $10.00
------ ------ ------ ------ ------

Income (loss) from investment
operations:
Net investment loss++............... (0.04) (0.08) (0.09) (0.09) (0.10)
Net realized and unrealized gain
(loss).............................. 0.97 2.45 0.97 1.92 (1.75)
------ ------ ------ ------ ------

Total income (loss) from investment
operations............................. 0.93 2.37 0.88 1.83 (1.85)
------ ------ ------ ------ ------

Less dividends and distributions from:
Net investment income............... -- -- -- -- 0.00++
Net realized gain................... (2.06) (1.12) -- -- --
------ ------ ------ ------ ------

Total dividends and distributions....... (2.06) (1.12) -- -- 0.00
------ ------ ------ ------ ------

Net asset value, end of period.......... $10.98 $12.11 $10.86 $ 9.98 $ 8.15
====== ====== ====== ====== ======

Total Return+........................... 8.29 %(1) 22.66% 8.82% 22.45% (18.48)%(1)

Ratios to Average Net Assets(3):
Expenses................................ 2.10 %(2) 2.04% 2.08% 2.24% 2.20 %(2)(4)

Net investment loss..................... (0.61)%(2) (0.72)% (0.82)% (1.16)% (1.33)%(2)(4)

Supplemental Data:
Net assets, end of period, in
thousands.............................. $8,622 $8,268 $8,119 $7,238 $6,354

Portfolio turnover rate................. 26 %(1) 72% 151% 165% 121 %(1)
</Table>

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

<Table>

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

22
See Notes to Financial Statements

Morgan Stanley Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR ENDED AUGUST 31, OCTOBER 29, 2001*
MONTHS ENDED ----------------------------------- THROUGH
FEBRUARY 28, 2006 2005 2004 2003 AUGUST 31, 2002
----------------- --------- --------- --------- -----------------
(unaudited)

Class D Shares
Selected Per Share Data:

Net asset value, beginning of period..... $ 12.58 $ 11.15 $ 10.15 $ 8.21 $ 10.00
------- ------- -------- -------- -------

Income (loss) from investment operations:
Net investment income (loss)++....... 0.02 0.02 0.01 (0.01) (0.04)
Net realized and unrealized gain
(loss)............................... 1.00 2.53 0.99 1.95 (1.73)
------- ------- -------- -------- -------

Total income (loss) from investment
operations.............................. 1.02 2.55 1.00 1.94 (1.77)
------- ------- -------- -------- -------

Less dividends and distributions from:
Net investment income................ -- -- -- -- (0.02)
Net realized gain.................... (2.06) (1.12) -- -- --
------- ------- -------- -------- -------

Total dividends and distributions........ (2.06) (1.12) -- -- (0.02)
------- ------- -------- -------- -------

Net asset value, end of period........... $ 11.54 $ 12.58 $ 11.15 $ 10.15 $ 8.21
======= ======= ======== ======== =======

Total Return+............................ 8.72 %(1) 23.87 % 9.75 % 23.63 % (17.76)%(1)

Ratios to Average Net Assets(3):
Expenses................................. 1.14 %(2) 1.16 % 1.16 % 1.24 % 1.20 %(2)(4)

Net investment income (loss)............. 0.35 %(2) 0.16 % 0.10 % (0.16)% (0.33)%(2)(4)

Supplemental Data:
Net assets, end of period, in
thousands............................... $250,625 $259,160 $236,039 $209,035 $95,150

Portfolio turnover rate.................. 26 %(1) 72 % 151 % 165 % 121 %(1)
</Table>

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

<Table>

* Commencement of operations.
++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Calculated based on the net asset value as of the last
business day of the month.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and
non-class specific expenses.
(4) If the Fund had borne all its expenses that were reimbursed
or waived by the Investment Adviser, the annualized expense
and net investment loss ratios would have been 1.41% and
(0.54)%, respectively.
</Table>

23
See Notes to Financial Statements

TRUSTEES

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

OFFICERS

Charles A. Fiumefreddo
Chairman of the Board

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 Yu
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
Mid-Cap Value Fund

Semiannual Report
February 28, 2006

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39917RPT-RA06-00316P-Y02/06

Item 2. Code of Ethics.