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: 811-07377

Morgan Stanley Capital Opportunities Trust
(Exact name of registrant as specified in charter)

522 Fifth Avenue, New York, New York 10036
(Address of principal executive offices) (Zip code)

Ronald E. Robison
522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)

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

Date of fiscal year end: November 30, 2007

Date of reporting period: May 31, 2007

Item 1 - Report to Shareholders

Welcome, Shareholder:

In this report, you'll learn about how your investment in Morgan Stanley Capital
Opportunities Trust 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 May 31, 2007

TOTAL RETURN FOR THE 6 MONTHS ENDED MAY 31, 2007

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

11.64% 11.17% 11.22% 11.75% 10.10% 10.27%
</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 U.S. economy grew, albeit at a slower pace than in recent years, over the
six months ended May 31, 2007. The period opened with many domestic stocks on an
upward trajectory as investors continued to react positively to easing
geopolitical tensions in the Middle East and North Korea, and the Federal Open
Market Committee's (the "Fed") decision to pause its monetary tightening policy
and keep the target federal funds rate at 5.25 percent -- a decision that
remained in effect through the end of the reporting period. Moreover, retreating
oil and gasoline prices offered relief to consumers and, as a result, retail
sales surged in the latter half of the year. These factors helped carry
investors' enthusiasm for equities into 2007.

However, signs of a slowing economy became more apparent during this time. Oil
prices began creeping upwards in the early months of 2007, and the housing
market continued to demonstrate weakness as the subprime mortgage market (which
makes loans to less creditworthy borrowers) experienced mounting distress. At
the end of February, the U.S. equity market suffered an abrupt decline following
a significant market sell-off in China (precipitated on news of tightening
credit conditions in that country) and comments from former Fed Chairman Alan
Greenspan about the likelihood of the U.S. economy entering a recessionary state
in the near future. By March, however, these concerns abated and stocks again
entered positive territory. Even though evidence of a deceleration of the U.S.
economy continued to mount, solid corporate earnings reports, ongoing merger and
acquisition (M&A) activity and some key positive economic data helped to sustain
investors' interest for equities through the end of the period.

PERFORMANCE ANALYSIS

All share classes of Morgan Stanley Capital Opportunities Trust outperformed the
Russell 3000(R) Growth Index and the Lipper Multi-Cap Growth Funds Index for the
six months ended May 31, 2007, assuming no deduction of applicable sales
charges.

On a sector basis, the top contributing sectors to performance relative to the
Russell 3000 Growth Index were health care, multi-industry and utilities. The
health care sector provided the strongest relative returns to the portfolio,
predominately due to stock selection within the medical and dental instruments
and supplies segment. An underweight allocation also helped relative performance
as the broad health care sector experienced volatility over the period. The
multi-industry sector, which includes conglomerates, also produced robust
relative gains due to the Fund's position in an asset management firm not
represented in the Russell 3000 Growth Index. Stock selection in a

wireless communications company in the utilities sector had a favorable impact
on overall performance.

In contrast, the Fund's performance relative to the Russell 3000 Growth Index
was hampered by the financial services, consumer discretionary and producer
durables sectors. In the financial services sector, the Fund's investment within
the financial data processing services segment significantly detracted from
relative returns. Additionally, a large relative overweight in the consumer
discretionary sector turned out to be disadvantageous, and a relative
underweight allocation in the producer durables sector further hindered
performance.

Consumer discretionary represents the largest sector weight and largest
overweight in the portfolio, followed by financial services and multi-industry.
The financial services and multi-industry sectors were overweight versus the
Russell 3000 Growth Index.

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

Brookfield Asset Management Inc. (Class A)
(Canada) 6.1%
Google, Inc. (Class A) 6.0
Monsanto Co. 5.4
Sears Holdings Corp. 4.8
Amazon.com, Inc. 4.7
eBay, Inc. 4.7
Ultra Petroleum Corp. (Canada) 4.5
American Express Co. 4.4
Moody's Corp. 4.1
America Movil SAB de C.V. (Series L) (ADR)
(Mexico) 3.2
</Table>

<Table>
<Caption>
TOP FIVE INDUSTRIES

Financial Conglomerates 10.5%
Internet Software/Services 8.6
Discount Stores 7.5
Chemicals: Agricultural 5.4
Air Freight/Couriers 5.3
</Table>

Data as of May 31, 2007. 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 65 PERCENT OF ITS ASSETS IN A PORTFOLIO
OF COMMON STOCKS OF COMPANIES WITH MARKET CAPITALIZATIONS, AT THE TIME OF
PURCHASE, WITHIN THE CAPITALIZATION RANGE OF THE COMPANIES COMPRISING THE
RUSSELL 3000(R) GROWTH INDEX, WHICH AS OF DECEMBER 31, 2006 WAS BETWEEN $68
MILLION TO $464 BILLION. THE INVESTMENT ADVISER SEEKS TO INVEST IN HIGH QUALITY
COMPANIES IT BELIEVES HAVE SUSTAINABLE COMPETITIVE ADVANTAGES AND THE ABILITY TO
REDEPLOY CAPITAL AT HIGH RATES OF RETURN. THE INVESTMENT ADVISER TYPICALLY
FAVORS COMPANIES WITH RISING RETURNS ON INVESTED CAPITAL, ABOVE AVERAGE BUSINESS
VISIBILITY, STRONG FREE CASH FLOW GENERATION AND ATTRACTIVE RISK/REWARD. THE
INVESTMENT ADVISER GENERALLY CONSIDERS SELLING AN INVESTMENT WHEN IT DETERMINES
THE COMPANY NO LONGER SATISFIES ITS INVESTMENT CRITERIA.

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. THE SEMIANNUAL REPORTS AND THE ANNUAL REPORTS ARE
FILED ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) ON FORM
N-CSRS AND FORM N-CSR, RESPECTIVELY. 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 MAY 31, 2007

<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++)
(since 07/28/97) (since 02/27/96) (since 07/28/97) (since 07/28/97)
SYMBOL CPOAX CPOBX CPOCX CPODX

1 YEAR 20.24%(3) 19.34%(3) 19.36%(3) 20.55%(3)
13.93(4) 14.34(4) 18.36(4) --
5 YEARS 12.32(3) 11.47(3) 11.48(3) 12.60(3)
11.11(4) 11.21(4) 11.48(4) --
10 YEARS -- 8.47(3) -- --
-- 8.47(4) -- --
SINCE INCEPTION 8.02(3) 7.23(3) 7.21(3) 8.24(3)
7.42(4) 7.23(4) 7.21(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. Effective April 2005, Class B shares
will generally convert to Class A shares approximately eight years after the
end of the calendar month in which the shares were purchased. Performance
for periods greater than eight years reflects this conversion (beginning
April 2005).

+ 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. The Index is unmanaged and its 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. The Fund is in the Lipper Multi-Cap Growth Funds
classification as of the date of this report.

(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 12/01/06 - 05/31/07.

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 *
------------- ------------- ---------------
12/01/06 -
12/01/06 05/31/07 05/31/07
------------- ------------- ---------------

CLASS A
Actual (11.64% return)...................................... $1,000.00 $1,116.40 $ 6.96
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,018.35 $ 6.64
CLASS B
Actual (11.17% return)...................................... $1,000.00 $1,111.70 $10.95
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,014.56 $10.45
CLASS C
Actual (11.22% return)...................................... $1,000.00 $1,112.20 $10.95
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,014.56 $10.45
CLASS D
Actual (11.75% return)...................................... $1,000.00 $1,117.50 $ 5.70
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,019.55 $ 5.44
</Table>

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

* Expenses are equal to the Fund's annualized expense ratios of 1.32%, 2.08%,
2.08% and 1.08% for Class A, Class B, Class C and Class D shares,
respectively, multiplied by the average account value over the period,
multiplied by 182/365 (to reflect the one-half year period).

INVESTMENT ADVISORY AGREEMENT APPROVAL

NATURE, EXTENT AND QUALITY OF SERVICES

The Board reviewed and considered the nature and extent of the investment
advisory services provided by the Investment Adviser under the Advisory
Agreement, including portfolio management, investment research and equity and
fixed income securities trading. The Board also reviewed and considered the
nature and extent of the non-advisory, administrative services provided by the
Fund's Administrator under the Administration Agreement, including accounting,
clerical, bookkeeping, compliance, business management and planning, and the
provision of supplies, office space and utilities at the Investment Adviser's
expense. (The Investment Adviser and the Administrator together are referred to
as the "Adviser" and the Advisory and Administration Agreements together are
referred to as the "Management Agreement.") The Board also compared the nature
of the services provided by the Adviser with similar services provided by
non-affiliated advisers as reported to the Board by Lipper Inc. ("Lipper").

The Board reviewed and considered the qualifications of the portfolio managers,
the senior administrative managers and other key personnel of the Adviser who
provide the administrative and investment advisory services to the Fund. The
Board determined that the Adviser's portfolio managers and key personnel are
well qualified by education and/or training and experience to perform the
services in an efficient and professional manner. The Board concluded that the
nature and extent of the advisory and administrative services provided were
necessary and appropriate for the conduct of the business and investment
activities of the Fund. The Board also concluded that the overall quality of the
advisory and administrative services was satisfactory.

PERFORMANCE RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS

On a regular basis, the Board reviews the performance of all funds in the Morgan
Stanley Fund Complex, including the Fund, compared to their peers, paying
specific attention to the underperforming funds. In addition, the Board
specifically reviewed the Fund's performance for the one-, three- and five-year
periods ended November 30, 2006, as shown in a report provided by Lipper (the
"Lipper Report"), compared to the performance of comparable funds selected by
Lipper (the "performance peer group"). The Board also discussed with the Adviser
the performance goals and the actual results achieved in managing the Fund. The
Board concluded that the Fund's performance was competitive with that of its
performance peer group.

FEES RELATIVE TO OTHER PROPRIETARY FUNDS MANAGED BY THE ADVISER WITH COMPARABLE
INVESTMENT STRATEGIES

The Board reviewed the advisory and administrative fee (together, the
"management fee") rate paid by the Fund under the Management Agreement. The
Board noted that the management fee rate was comparable to

the management fee rates charged by the Adviser to other proprietary funds it
manages with investment strategies comparable to those of the Fund.

FEES AND EXPENSES RELATIVE TO COMPARABLE FUNDS MANAGED BY OTHER ADVISERS

The Board reviewed the management fee rate and total expense ratio of the Fund
as compared to the average management fee rate and average total expense ratio
for funds, selected by Lipper (the "expense peer group"), managed by other
advisers with investment strategies comparable to those of the Fund, as shown in
the Lipper Report. The Board concluded that the Fund's management fee rate and
total expense ratio were competitive with those of its expense peer group.

BREAKPOINTS AND ECONOMIES OF SCALE

The Board reviewed the structure of the Fund's management fee schedule under the
Management Agreement and noted that it includes breakpoints. The Board also
reviewed the level of the Fund's management fee and noted that the fee, as a
percentage of the Fund's net assets, would decrease as net assets increase
because the management fee includes breakpoints. The Board concluded that the
Fund's management fee would reflect economies of scale as assets increase.

PROFITABILITY OF THE ADVISER AND AFFILIATES

The Board considered information concerning the costs incurred and profits
realized by the Adviser and affiliates during the last year from their
relationship with the Fund and during the last two years from their relationship
with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost
allocation methodology used to determine the profitability of the Adviser and
affiliates. Based on its review of the information it received, the Board
concluded that the profits earned by the Adviser and affiliates were not
excessive in light of the advisory, administrative and other services provided
to the Fund.

FALL-OUT BENEFITS

The Board considered so-called "fall-out benefits" derived by the Adviser and
affiliates from their relationship with the Fund and the Morgan Stanley Fund
Complex, such as sales charges on sales of Class A shares and "float" benefits
derived from handling of checks for purchases and sales of Fund shares, through
a broker-dealer affiliate of the Adviser and "soft dollar" benefits (discussed
in the next section). The Board also considered that a broker-dealer affiliate
of the Adviser receives from the Fund 12b-1 fees for distribution and
shareholder services. The Board also considered that an affiliate of the Adviser
sold a joint venture that owned an electronic trading system network ("ECN"),
which may be used by the Adviser for trading on behalf of the Fund. As part of
the sale of the joint venture, the affiliate receives a 10-year payout based on
the revenue stream from trading on the ECN. Although the affiliate disgorges the
portion of the payout that is comprised of

commissions received from trades executed by the Adviser on the ECN to a
charitable organization, the Board considered the fact that trades by the
Adviser would increase order flow, and, thus, result in a potential fall-out
benefit to the affiliate. The Board concluded that the float benefits were
relatively small, the sales charges and 12b-1 fees were competitive with those
of other broker-dealers, the affiliate disgorged revenues in connection with the
ECN-related revenue and the potential fall-out benefit from increased order flow
was relatively small.

SOFT DOLLAR BENEFITS

The Board considered whether the Adviser realizes any benefits as a result of
brokerage transactions executed through "soft dollar" arrangements. Under such
arrangements, brokerage commissions paid by the Fund and/or other funds managed
by the Adviser would be used to pay for research that a securities broker
obtains from third parties, or to pay for both research and execution services
from securities brokers who effect transactions for the Fund. The Board
recognized that the receipt of such research from brokers may reduce the
Adviser's costs but concluded that the receipt of such research strengthens the
investment management resources of the Adviser, which may ultimately benefit the
Fund and other funds in the Morgan Stanley Fund Complex.

ADVISER FINANCIALLY SOUND AND FINANCIALLY CAPABLE OF MEETING THE FUND'S NEEDS

The Board considered whether the Adviser is financially sound and has the
resources necessary to perform its obligations under the Management Agreement.
The Board concluded that the Adviser has the financial resources necessary to
fulfill its obligations under the Management Agreement.

HISTORICAL RELATIONSHIP BETWEEN THE FUND AND THE ADVISER

The Board also reviewed and considered the historical relationship between the
Fund and the Adviser, including the organizational structure of the Adviser, the
policies and procedures formulated and adopted by the Adviser for managing the
Fund's operations and the Board's confidence in the competence and integrity of
the senior managers and key personnel of the Adviser. The Board concluded that
it is beneficial for the Fund to continue its relationship with the Adviser.

OTHER FACTORS AND CURRENT TRENDS

The Board considered the controls and procedures adopted and implemented by the
Adviser and monitored by the Fund's Chief Compliance Officer and concluded that
the conduct of business by the Adviser indicates a good faith effort on its part
to adhere to high ethical standards in the conduct of the Fund's business.

GENERAL CONCLUSION

After considering and weighing all of the above factors, the Board concluded
that it would be in the best interest of the Fund and its shareholders to
approve renewal of the Management Agreement for another year.

Morgan Stanley Capital Opportunities Trust
PORTFOLIO OF INVESTMENTS - MAY 31, 2007 (UNAUDITED)

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

Common Stocks (96.4%)
Air Freight/Couriers
(5.3%)
321,066 C.H. Robinson Worldwide,
Inc. ................... $ 17,395,356
297,185 Expeditors International
of Washington, Inc. .... 12,975,097
------------
30,370,453
------------
Apparel/Footwear Retail
(2.9%)
199,521 Abercrombie & Fitch Co.
(Class A)............... 16,490,411
------------
Biotechnology (2.2%)
209,095 Techne Corp.*............ 12,480,881
------------
Broadcasting (3.0%)
595,271 Grupo Televisa S.A. - CPO
(ADR) (Mexico).......... 17,131,899
------------
Casino/Gaming (2.6%)
152,189 Wynn Resorts, Ltd. ...... 14,692,326
------------
Chemicals: Agricultural
(5.4%)
500,558 Monsanto Co. ............ 30,834,373
------------
Discount Stores (7.5%)
279,607 Costco Wholesale
Corp. .................. 15,789,407
151,449 Sears Holdings Corp.*.... 27,263,849
------------
43,053,256
------------
Financial Conglomerates
(10.5%)
386,205 American Express Co. .... 25,095,601
551,911 Brookfield Asset
Management Inc. (Class
A) (Canada)............. 34,941,485
------------
60,037,086
------------
Financial Publishing/
Services (4.1%)
333,052 Moody's Corp. ........... 23,197,072
------------
Hotels/Resorts/
Cruiselines (2.6%)
162,697 Accor S.A. (France)...... 15,127,664
------------
</Table>

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

Internet Retail (4.7%)
388,967 Amazon.com, Inc.*........ $ 26,893,178
------------
Internet Software/
Services (8.6%)
69,172 Google, Inc. (Class
A)*..................... 34,430,363
512,063 Yahoo!, Inc.*............ 14,696,208
------------
49,126,571
------------
Investment Banks/ Brokers
(2.5%)
195,489 Greenhill & Co., Inc. ... 14,075,208
------------
Investment Trusts/Mutual
Funds (2.9%)
838,962 Aeroplan Income Fund
(Canada)**.............. 16,297,682
------------
Medical Specialties
(3.0%)
317,475 Dade Behring Holdings,
Inc. ................... 17,099,203
------------
Miscellaneous Commercial
Services (2.7%)
235,367 Corporate Executive Board
Co. (The)............... 15,654,259
------------
Oil & Gas Production
(4.5%)
422,162 Ultra Petroleum Corp.
(Canada)*............... 25,912,304
------------
Other Consumer Services
(4.7%)
820,367 eBay, Inc.*.............. 26,711,150
------------
Personnel Services (2.6%)
311,822 Monster Worldwide,
Inc.*................... 14,721,117
------------
Property - Casualty
Insurers (2.7%)
4,192 Berkshire Hathaway Inc.
(Class B)*.............. 15,196,000
------------
</Table>

10
See Notes to Financial Statements

Morgan Stanley Capital Opportunities Trust
PORTFOLIO OF INVESTMENTS - MAY 31, 2007 (UNAUDITED) continued

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

Restaurants (2.0%)
280,758 Wendy's International,
Inc. ................... $ 11,266,819
------------
Specialty
Telecommunications (2.0%)
304,459 Crown Castle
International Corp.*.... 11,210,180
------------
Steel (2.4%)
205,324 Nucor Corp. ............. 13,867,583
------------
Wholesale Distributors
(1.8%)
3,122,000 Li & Fung Ltd. (Hong
Kong)*.................. 10,475,168
------------
Wireless
Telecommunications (3.2%)
303,468 America Movil SAB de C.V.
(Series L) (ADR)
(Mexico)................ 18,374,987
------------
Total Common Stocks
(Cost $418,606,632)...... 550,296,830
------------
<Caption>
PRINCIPAL
AMOUNT IN
- -----------

Short-Term Investment (0.3%)
Repurchase Agreement
$ 1,532 Joint repurchase
agreement account 5.29%
due 06/01/07 (dated
05/31/07; proceeds
$1,532,225) (a)
(Cost $1,532,000)....... $ 1,532,000
------------
Total Investments
(Cost $420,138,632) (b)..... 96.7% 551,828,830
Other Assets in Excess of
Liabilities................. 3.3 18,805,630
----- ------------
Net Assets.................. 100.0% $570,634,460
===== ============
</Table>

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

<Table>

ADR American Depositary Receipt.
CPO Certeficado de Participacion Ordinaria.
* Non-income producing security.
** Consist of one or more class of securities traded
together as a unit; stocks with attached warrants.
(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
$146,307,595 and the aggregate gross unrealized
depreciation is $14,617,397, resulting in net
unrealized appreciation of $131,690,198.
</Table>

FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT MAY 31, 2007:

<Table>
<Caption>
IN
CONTRACTS EXCHANGE DELIVERY UNREALIZED
TO DELIVER FOR DATE DEPRECIATION
- -----------------------------------------------------------------

EUR 156,799 $210,236 06/04/07 $(721)
HKD 2,590,949 $331,748 06/04/07 (60)
-----
Total Unrealized Depreciation.............. $(781)
=====
</Table>

<Table>

Currency Abbreviations:
- -----------------------
EUR Euro.
HKD Hong Kong Dollar.
</Table>

11
See Notes to Financial Statements

Morgan Stanley Capital Opportunities Trust
SUMMARY OF INVESTMENTS - MAY 31, 2007 (UNAUDITED)

<Table>
<Caption>
PERCENT OF
TOTAL
INDUSTRY VALUE INVESTMENTS
- ------------------------------------------------------

Financial
Conglomerates........... $ 60,037,086 10.9%
Internet
Software/Services....... 49,126,571 8.9
Discount Stores.......... 43,053,256 7.8
Chemicals:
Agricultural............ 30,834,373 5.6
Air Freight/Couriers..... 30,370,453 5.5
Internet Retail.......... 26,893,178 4.9
Other Consumer
Services................ 26,711,150 4.8
Oil & Gas Production..... 25,912,304 4.7
Financial
Publishing/Services..... 23,197,072 4.2
Wireless
Telecommunications...... 18,374,987 3.3
Broadcasting............. 17,131,899 3.1
Medical Specialties...... 17,099,203 3.1
Apparel/Footwear
Retail.................. 16,490,411 3.0
Investment Trusts/Mutual
Funds................... 16,297,682 3.0
Miscellaneous Commercial
Services................ 15,654,259 2.8
</Table>

<Table>
<Caption>
PERCENT OF
TOTAL
INDUSTRY VALUE INVESTMENTS
- ------------------------------------------------------

Property - Casualty
Insurers................ 15,196,000 2.8
Hotels/Resorts/Cruiselines.. 15,127,664 2.7
Personnel Services....... 14,721,117 2.7
Casino/Gaming............ 14,692,326 2.7
Investment
Banks/Brokers........... 14,075,208 2.5
Steel.................... 13,867,583 2.5
Biotechnology............ 12,480,881 2.3
Restaurants.............. 11,266,819 2.0
Specialty
Telecommunications...... 11,210,180 2.0
Wholesale Distributors... 10,475,168 1.9
Repurchase Agreement..... 1,532,000 0.3
------------- -----
$ 551,828,830* 100.0%
============= =====
</Table>

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

* Does not include open forward foreign currency contracts with total unrealized
depreciation of $781.

12
See Notes to Financial Statements

Morgan Stanley Capital Opportunities Trust
FINANCIAL STATEMENTS

Statement of Assets and Liabilities
May 31, 2007 (unaudited)

<Table>

Assets:
Investments in securities, at value
(cost $420,138,632)....................................... $551,828,830
Cash........................................................ 529
Receivable for:
Investments sold........................................ 19,768,317
Dividends............................................... 618,417
Shares of beneficial interest sold...................... 72,911
Interest................................................ 225
Prepaid expenses and other assets........................... 71,124
--------------
Total Assets............................................ 572,360,353
--------------
Liabilities:
Unrealized depreciation on open forward foreign currency
contracts................................................. 781
Payable for:
Shares of beneficial interest redeemed.................. 889,072
Investment advisory fee................................. 321,201
Distribution fee........................................ 254,766
Administration fee...................................... 38,522
Transfer agent fee...................................... 10,071
Accrued expenses and other payables......................... 211,480
--------------
Total Liabilities....................................... 1,725,893
--------------
Net Assets.............................................. $570,634,460
==============
Composition of Net Assets:
Paid-in-capital............................................. $1,404,776,480
Net unrealized appreciation................................. 131,687,275
Accumulated net investment loss............................. (1,919,986)
Accumulated net realized loss............................... (963,909,309)
--------------
Net Assets.............................................. $570,634,460
==============
Class A Shares:
Net Assets.................................................. $263,356,206
Shares Outstanding (unlimited authorized, $.01 par value)... 11,639,812
Net Asset Value Per Share............................... $22.63
==============
Maximum Offering Price Per Share,
(net asset value plus 5.54% of net asset value)......... $23.88
==============
Class B Shares:
Net Assets.................................................. $190,543,488
Shares Outstanding (unlimited authorized, $.01 par value)... 9,030,060
Net Asset Value Per Share............................... $21.10
==============
Class C Shares:
Net Assets.................................................. $41,182,035
Shares Outstanding (unlimited authorized, $.01 par value)... 1,959,397
Net Asset Value Per Share............................... $21.02
==============
Class D Shares:
Net Assets.................................................. $75,552,731
Shares Outstanding (unlimited authorized, $.01 par value)... 3,269,665
Net Asset Value Per Share............................... $23.11
==============
</Table>

13
See Notes to Financial Statements

Morgan Stanley Capital Opportunities Trust
FINANCIAL STATEMENTS continued

Statement of Operations
For the six months ended May 31, 2007 (unaudited)

<Table>

Net Investment Loss:
Income
Dividends (net of $298,886 foreign withholding tax)......... $ 2,434,055
Interest.................................................... 268,187
-----------
Total Income............................................ 2,702,242
-----------
Expenses
Investment advisory fee..................................... 1,858,204
Distribution fee (Class A shares)........................... 250,503
Distribution fee (Class B shares)........................... 1,160,414
Distribution fee (Class C shares)........................... 199,029
Transfer agent fees and expenses............................ 660,363
Administration fee.......................................... 222,865
Shareholder reports and notices............................. 175,495
Professional fees........................................... 42,852
Custodian fees.............................................. 17,053
Registration fees........................................... 16,424
Trustees' fees and expenses................................. 3,956
Other....................................................... 18,366
-----------
Total Expenses.......................................... 4,625,524

Less: expense offset........................................ (4,723)
-----------
Net Expenses............................................ 4,620,801
-----------
Net Investment Loss..................................... (1,918,559)
-----------
Net Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss) on:
Investments................................................. 70,744,692
Foreign exchange transactions............................... (74,128)
-----------
Net Realized Gain....................................... 70,670,564
-----------
Net Change in Unrealized Appreciation/Depreciation on:
Investments................................................. (8,316,718)
Translation of forward foreign currency contracts, other
assets and liabilities denominated in foreign
currencies................................................ (2,923)
-----------
Net Depreciation........................................ (8,319,641)
-----------
Net Gain................................................ 62,350,923
-----------
Net Increase................................................ $60,432,364
===========
</Table>

14
See Notes to Financial Statements

Morgan Stanley Capital Opportunities Trust
FINANCIAL STATEMENTS continued

Statements of Changes in Net Assets

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MAY 31, 2007 NOVEMBER 30, 2006
------------ -----------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment loss......................................... $(1,918,559) $ (3,908,885)
Net realized gain........................................... 70,670,564 37,219,062
Net change in unrealized appreciation....................... (8,319,641) (7,559,657)
------------ ------------
Net Increase............................................ 60,432,364 25,750,520

Net increase (decrease) from transactions in shares of
beneficial interest....................................... 187,362,869 (74,339,543)
------------ ------------
Net Increase (Decrease)................................. 247,795,233 (48,589,023)
Net Assets:
Beginning of period......................................... 322,839,227 371,428,250
------------ ------------
End of Period
(Including accumulated net investment losses of $1,919,986
and $848, respectively)..................................... $570,634,460 $322,839,227
============ ============
</Table>

15
See Notes to Financial Statements

Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2007 (UNAUDITED)

1. Organization and Accounting Policies

Morgan Stanley Capital Opportunities Trust (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 to
seek long-term capital appreciation. The Fund was organized as a Massachusetts
business trust on October 17, 1995 and commenced operations on February 27,
1996. On July 28, 1997, the Fund converted to a multiple class share structure.

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, subject to certain exceptions.
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 including circumstances under which 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

Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2007 (UNAUDITED) continued

of securities and other assets may occur between the times at which valuations
of such securities are determined (that is, close of the foreign market on which
the securities trade) and the close of business on the NYSE. If developments
occur during such periods that are expected to materially affect the value of
such securities, such valuations may be adjusted to reflect the estimated fair
value of such securities as of the close of the NYSE, as determined in good
faith by the Fund's Trustees or by the Investment Adviser using a pricing
service and/or procedures approved by the Trustees of the Fund; (6) certain
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 procedures adopted by the Fund's
Trustees, the Fund, along with other affiliated entities managed by the
Investment Adviser, may transfer uninvested cash balances into one or more joint
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.

Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2007 (UNAUDITED) continued

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

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

2. Investment Advisory/Administration Agreements

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 of 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.

Effective December 11, 2006, the Investment Adviser has agreed to cap the total
operating expenses for Class A, Class B, Class C and Class D shares for a period
of one year at 1.39%, 2.15%, 2.15% and 1.15%, respectively.

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 shares; (ii) Class
B -- up to 1.0% of the lesser of: (a) the average daily aggregate gross sales of
the Class B shares since the inception of the Fund (not including reinvestment
of dividend or capital gain distributions) less the average daily aggregate net
asset value of the Class B shares redeemed since the Fund's inception upon which
a contingent deferred sales charge has been imposed or waived; or (b) the
average daily net assets of Class B shares; and (iii) Class C -- up to 1.0% of
the average daily net assets of Class C shares.

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

Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2007 (UNAUDITED) continued

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 $77,007,530 at May 31, 2007.

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 and other authorized
financial representatives at the time of sale may be reimbursed in the
subsequent calendar year. For the six months ended May 31, 2007, the
distribution fee was accrued for Class A shares and Class C shares at the annual
rate of 0.24% and 1.0%, respectively.

The Distributor has informed the Fund that for the six months ended May 31,
2007, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $388, $127,615
and $3,371, respectively and received $30,907 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 May 31, 2007 aggregated $128,431,837
and $230,752,607, respectively. Included in the aforementioned transactions are
purchases and sales of $13,790,157 and $1,621,525, respectively, with other
Morgan Stanley funds, including realized gains of $65,344.

For the six months ended May 31, 2007, the Fund incurred brokerage commission of
$1,522 with Morgan Stanley & Co., Inc., an affiliate of the Investment Adviser,
Administrator and Distributor, for portfolio transactions executed on behalf of
the Fund. At May 31, 2007, the Fund's receivable for investments sold included
unsettled trades with Morgan Stanley & Co., Inc. of $402,692.

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 or she receives for serving on the Board of Trustees. Each eligible
Trustee generally may elect to have the deferred amounts

Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2007 (UNAUDITED) continued

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. Expense Offset

The expense offset represents a reduction of the fees and expenses for interest
earned on cash balances maintained by the Fund with the transfer agent.

6. 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 November 30, 2006, the Fund had a net capital loss carryforward of
$687,754,185 of which $303,721,504 will expire on November 30, 2009 and
$384,032,681 will expire on November 30, 2010 to offset future capital gains to
the extent provided by regulations.

As of November 30, 2006, the Fund had temporary book/tax differences primarily
attributable to post-October losses (capital losses incurred after October 31
within the taxable year which are deemed to arise on the first business day of
the Fund's next taxable year) and capital loss deferrals on wash sales.

Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2007 (UNAUDITED) continued

7. Shares of Beneficial Interest

Transactions in shares of beneficial interest were as follows:

<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MAY 31, 2007 NOVEMBER 30, 2006
------------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------

CLASS A SHARES
Sold............................................. 291,868 $ 6,110,109 698,959 $ 13,487,104
Conversion from Class B.......................... 3,886,281 82,902,467 1,321,853 25,316,322
Shares issued in connection with the acquisition
of Morgan Stanley Aggressive Equity Fund....... 2,393,489 48,642,459 -- --
Redeemed......................................... (1,678,495) (35,232,923) (1,811,031) (34,531,310)
---------- ------------ ---------- ------------
Net increase - Class A........................... 4,893,143 102,422,112 209,781 4,272,116
---------- ------------ ---------- ------------
CLASS B SHARES
Sold............................................. 134,221 2,619,829 754,043 13,691,114
Conversion to Class A............................ (4,159,345) (82,902,467) (1,406,849) (25,316,322)
Shares issued in connection with the acquisition
of Morgan Stanley Aggressive Equity Fund....... 10,109,027 192,368,664 -- --
Redeemed......................................... (2,151,169) (42,106,400) (2,446,319) (43,955,939)
---------- ------------ ---------- ------------
Net increase (decrease) - Class B................ 3,932,734 69,979,626 (3,099,125) (55,581,147)
---------- ------------ ---------- ------------
CLASS C SHARES
Sold............................................. 41,391 810,954 243,284 4,398,725
Shares issued in connection with the acquisition
of Morgan Stanley Aggressive Equity Fund....... 1,457,606 27,630,711 -- --
Redeemed......................................... (345,487) (6,736,303) (288,854) (5,145,748)
---------- ------------ ---------- ------------
Net increase (decrease) - Class C................ 1,153,510 21,705,362 (45,570) (747,023)
---------- ------------ ---------- ------------
CLASS D SHARES
Sold............................................. 136,230 2,923,954 611,185 11,960,884
Shares issued in connection with the acquisition
of Morgan Stanley Aggressive Equity Fund....... 149,300 3,096,859 -- --
Redeemed......................................... (598,584) (12,765,044) (1,800,870) (34,244,373)
---------- ------------ ---------- ------------
Net decrease - Class D........................... (313,054) (6,744,231) (1,189,685) (22,283,489)
---------- ------------ ---------- ------------
Net increase (decrease) in Fund.................. 9,666,333 $187,362,869 (4,124,599) $(74,339,543)
========== ============ ========== ============
</Table>

8. Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes -- an
interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting
for income taxes by prescribing the minimum recognition threshold a tax position
must meet before being recognized in the financial statements. FIN 48 is
effective for fiscal years

Morgan Stanley Capital Opportunities Trust
NOTES TO FINANCIAL STATEMENTS - MAY 31, 2007 (UNAUDITED) continued

beginning after December 15, 2006 and is to be applied to all open tax years as
of the effective date. The impact to the Fund's financial statements, if any, is
currently being assessed.

In addition, in September 2006, Statement of Financial Accounting Standards No.
157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal
years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.

9. Fund Merger

On December 11, 2006, the Fund acquired all the net assets of Morgan Stanley
Aggressive Equity Fund ("Aggressive Equity") based on the respective valuations
as of the close of business on December 8, 2006 pursuant to a Plan of
Reorganization approved by the shareholders of Aggressive Equity on November 30,
2006. The acquisition was accomplished by a tax-free exchange of 2,393,489 Class
A shares of the Fund at a net asset value of $20.33 per share for 3,754,601
Class A shares of Aggressive Equity; 10,109,027 Class B shares of the Fund at a
net asset value of $19.03 per share for 15,781,361 Class B shares of Aggressive
Equity; 1,457,606 Class C shares of the Fund at a net asset value of $18.95 per
share for 2,264,069 Class C shares of Aggressive Equity; and 149,300 Class D
shares of the Fund at a net asset value of $20.74 per share for 234,582 Class D
shares of Aggressive Equity. The net assets of the Fund and Aggressive Equity
immediately before the acquisition were $322,602,363 and $271,738,693,
respectively, including unrealized appreciation of $61,283,247 for Aggressive
Equity. Immediately after the acquisition, the combined net assets of the Fund
amounted to $594,341,056.

Morgan Stanley Capital Opportunities Trust
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 NOVEMBER 30,
MONTHS ENDED ------------------------------------------------
MAY 31, 2007 2006 2005 2004 2003 2002
------------ -------- -------- ------- ------- ------
(unaudited)

Class A Shares
Selected Per Share Data:

Net asset value, beginning of period........... $20.27 $18.66 $14.76 $12.35 $ 9.53 $15.97
------ ------ ------ ------ ------ ------

Income (loss) from investment operations:
Net investment loss++...................... (0.03) (0.17) (0.17) (0.12) (0.12) (0.16)
Net realized and unrealized gain (loss).... 2.39 1.78 4.07 2.53 2.94 (6.28)
------ ------ ------ ------ ------ ------

Total income (loss) from investment
operations.................................... 2.36 1.61 3.90 2.41 2.82 (6.44)
------ ------ ------ ------ ------ ------

Net asset value, end of period................. $22.63 $20.27 $18.66 $14.76 $12.35 $ 9.53
====== ====== ====== ====== ====== ======

Total Return+.................................. 11.64 %(1) 8.63% 26.42% 19.51% 29.59% (40.33)%

Ratios to Average Net Assets(3):
Total expenses (before expense offset)......... 1.32 %(2) 1.55% 1.48% 1.47% 1.52% 1.43%
Net investment loss............................ (0.35)%(2) (0.88)% (1.03)% (0.93)% (1.22)% (1.26)%

Supplemental Data:
Net assets, end of period, in thousands........ $263,356 $136,788 $121,998 $11,290 $10,826 $9,339
Portfolio turnover rate........................ 25 %(1) 57% 88% 120% 179% 94%
</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>

23
See Notes to Financial Statements

Morgan Stanley Capital Opportunities Trust
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED NOVEMBER 30,
MONTHS ENDED ---------------------------------------------------
MAY 31, 2007 2006 2005 2004 2003 2002
------------ ------- -------- -------- -------- --------
(unaudited)

Class B Shares
Selected Per Share Data:

Net asset value, beginning of period........ $18.98 $17.57 $14.02 $11.83 $ 9.19 $15.53
------ ------ ------ ------ ------ ------

Income (loss) from investment operations:
Net investment loss++................... (0.11) (0.29) (0.26) (0.21) (0.19) (0.25)
Net realized and unrealized gain
(loss).................................. 2.23 1.70 3.81 2.40 2.83 (6.09)
------ ------ ------ ------ ------ ------

Total income (loss) from investment
operations................................. 2.12 1.41 3.55 2.19 2.64 (6.34)
------ ------ ------ ------ ------ ------

Net asset value, end of period.............. $21.10 $18.98 $17.57 $14.02 $11.83 $ 9.19
====== ====== ====== ====== ====== ======

Total Return+............................... 11.17 %(1) 7.84% 25.53% 18.51% 28.73% (40.82)%

Ratios to Average Net Assets(3):
Total expenses (before expense offset)...... 2.08 %(2) 2.30% 2.23% 2.24% 2.29% 2.20%
Net investment loss......................... (1.11)%(2) (1.63)% (1.78)% (1.70)% (1.99)% (2.03)%

Supplemental Data:
Net assets, end of period, in thousands..... $190,543 $96,737 $143,995 $270,955 $296,711 $292,533
Portfolio turnover rate..................... 25 %(1) 57% 88% 120% 179% 94%
</Table>

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

<Table>

24
See Notes to Financial Statements

Morgan Stanley Capital Opportunities Trust
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE SIX FOR THE YEAR ENDED NOVEMBER 30,
MONTHS ENDED -----------------------------------------------
MAY 31, 2007 2006 2005 2004 2003 2002
------------ ------- ------- ------- ------- -------
(unaudited)

Class C Shares
Selected Per Share Data:

Net asset value, beginning of period............ $18.90 $17.51 $13.96 $11.77 $ 9.15 $15.43
------ ------ ------ ------ ------ ------

Income (loss) from investment operations:
Net investment loss++....................... (0.11) (0.29) (0.26) (0.21) (0.19) (0.22)
Net realized and unrealized gain (loss)..... 2.23 1.68 3.81 2.40 2.81 (6.06)
------ ------ ------ ------ ------ ------

Total income (loss) from investment
operations..................................... 2.12 1.39 3.55 2.19 2.62 (6.28)
------ ------ ------ ------ ------ ------

Net asset value, end of period.................. $21.02 $18.90 $17.51 $13.96 $11.77 $ 9.15
====== ====== ====== ====== ====== ======

Total Return+................................... 11.22 %(1) 7.82% 25.57% 18.61% 28.63% (40.70)%

Ratios to Average Net Assets(3):
Total expenses (before expense offset).......... 2.08 %(2) 2.30% 2.19% 2.23% 2.29% 1.98%
Net investment loss............................. (1.11)%(2) (1.63)% (1.74)% (1.69)% (1.99)% (1.81)%

Supplemental Data:
Net assets, end of period, in thousands......... $41,182 $15,230 $14,909 $15,837 $16,069 $14,701
Portfolio turnover rate......................... 25 %(1) 57% 88% 120% 179% 94%
</Table>

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

<Table>

25
See Notes to Financial Statements

Morgan Stanley Capital Opportunities Trust
FINANCIAL HIGHLIGHTS continued

Class D Shares
Selected Per Share Data:

Net asset value, beginning of period............ $20.68 $18.97 $14.98 $12.51 $ 9.62 $16.10
------ ------ ------ ------ ------ ------

Income (loss) from investment operations:
Net investment loss++....................... (0.01) (0.12) (0.12) (0.09) (0.10) (0.12)
Net realized and unrealized gain (loss)..... 2.44 1.83 4.11 2.56 2.99 (6.36)
------ ------ ------ ------ ------ ------

Total income (loss) from investment
operations..................................... 2.43 1.71 3.99 2.47 2.89 (6.48)
------ ------ ------ ------ ------ ------

Net asset value, end of period.................. $23.11 $20.68 $18.97 $14.98 $12.51 $ 9.62
====== ====== ====== ====== ====== ======

Total Return+................................... 11.75 %(1) 8.96% 26.70% 19.74% 30.04% (40.25)%

Ratios to Average Net Assets(3):
Total expenses (before expense offset).......... 1.08 %(2) 1.30% 1.23% 1.24% 1.29% 1.20%
Net investment loss............................. (0.11)%(2) (0.63)% (0.78)% (0.70)% (0.99)% (1.03)%

Supplemental Data:
Net assets, end of period, in thousands......... $75,553 $74,084 $90,526 $90,844 $98,359 $85,534
Portfolio turnover rate......................... 25 %(1) 57% 88% 120% 179% 94%
</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>

26
See Notes to Financial Statements

(This Page Intentionally Left Blank)

TRUSTEES

Frank L. Bowman
Michael Bozic
Kathleen A. Dennis
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Michael E. Nugent
W. Allen Reed
Fergus Reid

OFFICERS

Michael E. Nugent
Chairperson of the Board

Ronald E. Robison
President and Principal Executive Officer

J. David Germany
Vice President

Dennis F. Shea
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

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

LEGAL COUNSEL

Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019

COUNSEL TO THE INDEPENDENT TRUSTEES

Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036

INVESTMENT ADVISER

Morgan Stanley Investment Advisors Inc.
522 Fifth Avenue
New York, New York 10036

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.

Morgan Stanley Distributors Inc., member NASD

[MORGAN STANLEY LOGO]

MORGAN STANLEY FUNDS

Morgan Stanley
Capital Opportunities Trust

Semiannual Report
May 31, 2007

[MORGAN STANLEY LOGO]

CPOSAN-IU07-02196P-Y05/07

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 second fiscal quarter of the period covered
by this 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 Capital Opportunities
Trust

/s/ Ronald E. Robison
- -------------------------------------
Ronald E. Robison
Principal Executive Officer
July 19, 2007

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
July 19, 2007

/s/ Francis Smith
- -------------------------------------
Francis Smith
Principal Financial Officer
July 19, 2007