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INVESTMENT MANAGEMENT

Welcome, Shareholder:

In this report, you’ll learn about how your investment in Morgan Stanley Special Growth 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 August 31, 2009

Total Return for the 6 Months ended August 31, 2009

Russell

Lipper

2000^®

Small-Cap

Growth

Class A

Class B

Class C

Class I

Index¹

Funds Index²

53.89%

53.28%

54.04%

46.29%

42.40%

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 market rallied strongly during the six-month period ended August 31, 2009. In March, the market bottomed as the worst appeared to be over. New stimulus packages and profitability at two large banks helped bolster investor confidence. Although unemployment continued to climb, other economic data appeared to stabilize or at least slow its rate of decline, and corporate earnings generally exceeded expectations for both the first and second quarters of 2009, helping to sustain the rally through the summer months. At the close of the period, while some believed the recession may be over or nearly over, unemployment remained high and credit for business and consumers was still tight.

In 2009, we have started to see some focus on company fundamentals and the Fund’s higher quality names have benefited. We continue to focus on quality, the nature and sustainability of competitive advantage and balance sheet strength.

Performance Analysis

All share classes of Morgan Stanley Special Growth Fund outperformed the Russell 2000^® Growth Index (the “Index”) and the Lipper Small-Cap Growth Funds Index for the six months ended August 31, 2009, assuming no deduction of applicable sales charges.

The Russell 2000^® Growth Index re-categorized many of the names we held into new sectors in August 2009. While we made very few changes to the positions we held, this re-categorization caused the Fund’s sector allocations relative to the Index’s to appear quite different from the Fund’s historical relative weightings.

These three sectors were the largest contributors to the Fund’s overall outperformance of the Index during the period:


	•	Stock selection and an overweight in consumer discretionary added the most to relative performance, led by a position in the home building industry.

	•	The producer durables sector also benefited relative results, driven by both stock selection and an underweight there. Within the sector, exposure to commercial services was advantageous.

	•	Finally, stock selection and an overweight in materials and processing boosted relative gains due to outperformance in the building materials industry.

Although the portfolio outperformed the Index during the period, there were areas that were detrimental to overall performance:


	•	Stock selection and an underweight in energy diminished relative performance, as a position in natural gas producers was unfavorable.

	•	Stock selection in financial services was another area of relative weakness, despite the benefit of an overweight in the sector. The sole detractor was a position in the securities brokerage and services group.

	•	An underweight in the technology sector very modestly detracted from relative performance, although stock selection somewhat offset the negative impact. Within the sector, a position in computer services software and systems was the chief laggard.

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.


TOP 10 HOLDINGS as of 08/31/09
Greenhill & Co., Inc.	4	.4%
Blue Nile Inc.	4	.3
Techne Corp.	4	.2
Marvel Entertainment, Inc.	3	.4
AthenaHealth Inc.	3	.1
Tessera Technologies, Inc.	3	.1
Ctrip.com International Ltd. (ADR) (Cayman Islands)	2	.9
Brookfield Infrastructure LP	2	.7
P.F. Chang’s China Bistro, Inc.	2	.6
Costar Group, Inc.	2	.6


TOP FIVE INDUSTRIES as of 08/31/09
Hotels, Restaurants & Leisure	12	.1%
Capital Markets	7	.5
Internet Software & Services	6	.9
Media	5	.8
Professional Services	5	.5

Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned above. Top 10 holdings and top five industries are as a percentage of net assets. 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 diversified portfolio of common stocks and other equity securities of small companies with market capitalizations, at the time of purchase, within the capitalization range of securities comprising the Russell 2000^® Growth Index (approximately $9 million to $3.2 billion as of May 31, 2009). The Fund’s “Investment Adviser,” Morgan Stanley Investment Advisers Inc., generally 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 an attractive risk/reward profile. The Fund may also use derivative instruments as discussed in the Fund’s prospectus. These derivative instruments will be counted toward the 65 percent policy discussed above to the extent they have economic characteristics similar to the securities included within that policy. 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) 869-NEWS, 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 August 31, 2009

Class A Shares

Class B Shares

Class C Shares

^†

Class I Shares

^††

(since 07/28/97

)

(since 08/02/93

)

(since 07/28/97

)

(since 07/28/97

)

Symbol

SMPAX

SMPBX

SMPCX

SMPDX

1 Year

–9.46

%³

–10.13

%³

–10.13

%³

–9.32

%³

–14.21

⁴

–14.62

⁴

–11.03

⁴

—

5 Years

4.11

3.33

3.36

4.36

3.00

⁴

2.98

⁴

3.36

⁴

—

10 Years

–3.77

–4.35

–4.48

–3.56

–4.29

⁴

–4.35

⁴

–4.48

⁴

—

Since Inception

0.59

3.86

–0.15

0.82

0.15

⁴

3.86

⁴

–0.15

⁴

—

Gross Expense Ratio

2.02

2.77

1.77

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/im 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 I shares will vary due to differences in sales charges and expenses. See the Fund’s current prospectus for complete details on fees and sales charges. Expenses are as of the Fund’s fiscal year end as outlined in the Fund’s current prospectus.


*		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 I has no sales charge.

(1)		The Russell 2000^® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000^® Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000^® Index is a subset of the Russell 3000^® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market capitalization and current index membership. 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 Small-Cap Growth Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Small-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 was in the Lipper Small-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 03/01/09 – 08/31/09.

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.


	Beginning		Ending		Expenses Paid
	Account Value		Account Value		During Period@
					03/01/09 –
	03/01/09		08/31/09		08/31/09
Class A
Actual (53.89% return)	$	1,000.00	$	1,538.90	$	14.46
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,013.81	$	11.47
Class B
Actual (53.28% return)	$	1,000.00	$	1,532.80	$	19.22
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,010.03	$	15.25
Class C
Actual (53.28% return)	$	1,000.00	$	1,532.80	$	19.22
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,010.03	$	15.25
Class I
Actual (54.04% return)	$	1,000.00	$	1,540.40	$	12.87
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,015.07	$	10.21


@		Expenses are equal to the Fund’s annualized expense ratios of 2.26%, 3.01%, 3.01% and 2.01% for Class A, Class B, Class C and Class I shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (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 (as defined herein) 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 (as defined herein) 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 advisory and administrative 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, Fees and Expenses of the Fund

The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as determined by Lipper, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund’s performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2008, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund’s performance was better than its peer group average for the one- and five-year periods, but below its peer group average for the three-year period. The Board discussed with the Adviser the level of the advisory and administration fees (together, the “management fee”) for this Fund relative to comparable funds advised by the Adviser and compared to its peers as determined by Lipper. In addition to the management fee, the Board also reviewed the Fund’s total expense ratio. The Board noted that the management fee was higher but close to the peer group average and the total expense

ratio was higher than the peer group average. After discussion, the Board concluded that the Fund’s total expense ratio, although higher than the peer group average, was acceptable as the management fee was competitive with its peer group average. The Board also concluded that the Fund’s performance was competitive with its peer group average.

Economies of Scale

The Board considered the size and growth prospects of the Fund and how that relates to the Fund’s total expense ratio and particularly the Fund’s management fee rate, which includes breakpoints. In conjunction with its review of the Adviser’s profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and potential economies of scale of the Fund support its decision to approve the Management Agreement.

Profitability of the Adviser and Affiliates

The Board considered information concerning the costs incurred and profits realized by the Adviser and its 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. The Board has determined that its review of the analysis of the Adviser’s expenses and profitability supports its decision to approve the Management Agreement.

Other Benefits of the Relationship

The Board considered other benefits to the Adviser and its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, “float” benefits derived from handling of checks for purchases and sales, research received by the Adviser generated from commission dollars spent on funds’ portfolio trading and fees for distribution and/or shareholder servicing. The Board reviewed with the Adviser each of these arrangements and the reasonableness of its costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.

Resources of the Adviser and Historical Relationship Between the Fund and the Adviser

The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. 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 the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and 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. In reaching this conclusion the Board did not give particular weight to any single factor referenced above. The Board considered these factors over the course of numerous meetings, some of which were in executive session with only the Independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors differently in reaching their individual decisions to approve the Management Agreement.

Morgan Stanley Special Growth Fund

Portfolio of Investments - August 31, 2009 (unaudited)


NUMBER OF
SHARES			VALUE
		Common Stocks (94.5%)
		Biotechnology (1.5%)
	27,908	Alnylam Pharmaceuticals, Inc. (a)	$	622,906

		Capital Markets (7.5%)
	1,405	Capital Southwest Corp.		106,415
	54,692	GLG Partners, Inc.		216,033
	23,977	Greenhill & Co., Inc.		1,898,978
	64,742	Riskmetrics Group, Inc. (a)		1,007,386

				3,228,812

		Chemicals (2.7%)
	20,198	Intrepid Potash, Inc. (a)		474,451
	34,354	Rockwood Holdings, Inc. (a)		699,791

				1,174,242

		Communications Equipment (1.1%)
	34,014	Palm, Inc. (a)		453,407

		Construction Materials (4.7%)
	42,195	Eagle Materials, Inc.		1,110,994
	22,887	Texas Industries, Inc.		909,987

				2,020,981

		Distributors (0.5%)
	147,900	Integrated Distribution Services Group Ltd. (Bermuda) (c) (d)		219,600

		Diversified Consumer Services (1.2%)
	7,564	New Oriental Education & Technology Group (ADR) (Cayman Islands) (a)		534,397

		Diversified Financial Services (1.0%)
	6,627	Climate Exchange PLC (United Kingdom) (a) (c)		99,206
	9,697	Pico Holdings, Inc. (a)		321,261

				420,467

		Diversified Telecommunication Services (1.4%)
	61,231	Cogent Communications Group, Inc. (a)		590,879

		Electric Utilities (2.7%)
	76,907	Brookfield Infrastructure Partners LP (Bermuda)		1,165,910

		Health Care Technology (3.1%)
	33,120	AthenaHealth, Inc. (a)		1,332,418

		Hotels, Restaurants & Leisure (12.1%)
	31,641	Ambassadors Group, Inc.		499,295
	32,292	BJ’s Restaurants, Inc. (a)		553,808
	25,116	Ctrip.com International Ltd. (ADR) (Cayman Islands) (a)		1,229,177
	12,421	Gaylord Entertainment Co. (a)		252,395
	33,430	Lakes Entertainment, Inc. (a)		105,639
	44,449	Las Vegas Sands Corp. (a)		633,843
	193,192	Mandarin Oriental International Ltd. (Bermuda)		255,013
	35,454	P.F. Chang’s China Bistro, Inc. (a)		1,131,337
	14,978	Vail Resorts, Inc. (a)		496,071

				5,156,578

		Household Durables (2.7%)
	30,473	Gafisa SA (ADR) (Brazil)		893,163
	21,785	iRobot Corp. (a)		249,874

				1,143,037

		Information Technology Services (2.6%)
	35,496	Forrester Research, Inc. (a)		835,576
	73,548	Information Services Group, Inc. (a)		292,721

				1,128,297

		Insurance (2.1%)
	48,264	Greenlight Capital Re Ltd. (Class A) (Cayman Islands) (a)		883,231

		Internet & Catalog Retail (5.0%)
	33,288	Blue Nile, Inc. (a)		1,843,490
	87	DeNa Co., Ltd. (Japan) (c)		274,631

				2,118,121

See Notes to Financial Statements

Morgan Stanley Special Growth Fund

Portfolio of Investments - August 31, 2009 (unaudited) continued


NUMBER OF
SHARES			VALUE
		Internet Software & Services (6.9%)
	16,588	comScore, Inc. (a)	$	230,739
	32,455	GSI Commerce, Inc. (a)		562,770
	19,529	MercadoLibre, Inc. (a)		614,577
	16,363	OpenTable, Inc. (a)		452,110
	24,925	Rediff.Com India Ltd. (ADR) (India) (a)		71,784
	10,935	SINA Corp. (Cayman Islands) (a)		328,050
	16,557	VistaPrint NV (Bermuda) (a)		686,122

				2,946,152

		Leisure Equipment & Products (1.0%)
	36,500	ARUZE Corp. (Japan) (a) (c)		422,006

		Life Sciences Tools & Services (4.2%)
	29,077	Techne Corp.		1,793,179

		Machinery (0.9%)
	8,620	Middleby Corp. (a)		406,778

		Media (5.8%)
	34,624	CKX, Inc. (a)		218,477
	15,350	Interactive Data Corp.		356,274
	29,881	Marvel Entertainment, Inc. (a)		1,445,344
	10,208	Morningstar, Inc. (a)		452,214

				2,472,309

		Oil, Gas & Consumable Fuels (4.2%)
	13,787	Carrizo Oil & Gas, Inc. (a)		266,503
	24,792	Contango Oil & Gas Co. (a)		1,114,152
	40,011	GMX Resources, Inc. (a)		423,717

				1,804,372

		Pharmaceuticals (0.5%)
	11,638	XenoPort, Inc. (a)		212,161

		Professional Services (5.5%)
	34,605	Advisory Board Co. (The) (a)		914,610
	13,003	Corporate Executive Board Co. (The)		312,722
	29,721	CoStar Group, Inc. (a)		1,127,912

				2,355,244

		Real Estate Management & Development (2.0%)
	160,174	Brookfield Incorporacoes SA (Brazil)		641,648
	4,088	Consolidated-Tomoka Land Co.		142,835
	32,580	Market Leader, Inc. (a)		61,250

				845,733

		Semiconductors & Semiconductor Equipment (3.1%)
	52,499	Tessera Technologies, Inc. (a)		1,319,300

		Software (3.6%)
	15,253	Blackboard, Inc. (a)		524,856
	33,716	Longtop Financial Technologies Ltd. (ADR) (China) (a)		832,785
	12,921	NetSuite, Inc. (a)		177,147

				1,534,788

		Specialty Retail (1.4%)
	26,652	Citi Trends, Inc. (a)		594,073

		Textiles, Apparel & Luxury Goods (1.8%)
	38,627	Lululemon Athletica, Inc. (Canada) (a)		774,858

		Transportation Infrastructure (1.7%)
	28,454	Grupo Aeroportuario del Pacifico SAB de CV (ADR) (Mexico)		744,641

		Total Common Stocks (Cost $50,735,215)		40,418,877

		Convertible Preferred Stock (2.0%)
		Biotechnology (2.0%)
	69,988	Ironwood Pharmaceuticals – 144A (a) (b) (c) (Cost $437,425)		839,856

		Non-Convertible Preferred Stocks (1.8%)
		Finance (1.1%)
	51,797	Ning Inc. Ser D (a) (c)		456,332

See Notes to Financial Statements

Morgan Stanley Special Growth Fund

Portfolio of Investments - August 31, 2009 (unaudited) continued


NUMBER OF
SHARES						VALUE
		Medical-Biomedical/Genetics (0.7%)
	46,575	Pacific Biosciences Ser E (a) (c)				$	326,025

		Total Non-Convertible Preferred Stocks (Cost $696,374)					782,357

NUMBER OF SHARES (000)

		Short-Term Investment (2.0%)
		Investment Company
	841	Morgan Stanley Institutional Liquidity Funds – Money Market Portfolio – Institutional Class (See Note 6) (Cost $840,899)					840,899

Total Investments (Cost $52,709,913) (e)			100.3		%		42,881,989
Liabilities in Excess of Other Assets			(0.3	)			(118,320	)

Net Assets			100.0		%	$	42,763,669




ADR		American Depositary Receipt
(a)		Non-income producing security.
(b)		Illiquid security.
(c)		Securities with a total market value equal to $2,637,656 have been valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund’s Trustees. Such fair value measurements may be level 2 measurements if observable inputs are available. See Note 2.
(d)		Security trades on a Hong Kong exchange.
(e)		The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $4,840,228 and the aggregate gross unrealized depreciation is $14,668,152, resulting in net unrealized depreciation of $9,827,924.

Forward Foreign Currency Contracts Open at August 31, 2009:


					UNREALIZED
CONTRACTS		IN EXCHANGE	DELIVERY		APPRECIATION
TO DELIVER		FOR	DATE		(DEPRECIATION)
$	2,166	JPY 201,951		09/01/2009	$	4
$	1,104	JPY 103,152		09/02/2009		5
$	10,348	JPY 959,810		09/03/2009		(33	)

		Net Unrealized Depreciation			$	(24	)


Currency Abbreviation:

JPY		Japanese Yen.

See Notes to Financial Statements

Morgan Stanley Special Growth Fund

Summary of Investments - August 31, 2009 (unaudited)


			PERCENT OF
			TOTAL
INDUSTRY	VALUE		INVESTMENTS
Hotels, Restaurants & Leisure	$	5,156,578		12.0	%
Capital Markets		3,228,812		7.5
Internet Software & Services		2,946,152		6.9
Media		2,472,309		5.8
Professional Services		2,355,244		5.5
Internet & Catalog Retail		2,118,121		4.9
Construction Materials		2,020,981		4.7
Oil, Gas & Consumable Fuels		1,804,372		4.2
Life Sciences Tools & Services		1,793,179		4.2
Software		1,534,788		3.6
Biotechnology		1,462,762		3.4
Health Care Technology		1,332,418		3.1
Semiconductors & Semiconductor Equipment		1,319,300		3.1
Chemicals		1,174,242		2.7
Electric Utilities		1,165,910		2.7
Household Durables		1,143,037		2.7
Information Technology Services		1,128,297		2.6
Insurance		883,231		2.1
Real Estate Management & Development		845,733		2.0
Investment Company		840,899		2.0
Textiles, Apparel & Luxury Goods		774,858		1.8
Transportation Infrastructure		744,641		1.7
Specialty Retail		594,073		1.4
Diversified Telecommunication Services		590,879		1.4
Diversified Consumer Services		534,397		1.2
Finance		456,332		1.1
Communications Equipment		453,407		1.0
Leisure Equipment & Products		422,006		1.0
Diversified Financial Services		420,467		1.0
Machinery		406,778		0.9
Medical-Biomedical/Genetics		326,025		0.8
Distributors		219,600		0.5
Pharmaceuticals		212,161		0.5

	$	42,881,989		100.0	%


		Does not include open forward foreign currency contracts with net unrealized depreciation of $24.

See Notes to Financial Statements

Morgan Stanley Special Growth Fund

Financial Statements

Statement of Assets and Liabilities

August 31, 2009 (unaudited)


Assets:
Investments in securities, at value (cost $51,869,014)	$	42,041,090
Investment in affiliate, at value (cost $840,899)		840,899
Unrealized appreciation on open forward foreign currency contracts		9
Receivable for:
Dividends		39,244
Shares of beneficial interest sold		5,062
Dividends from affiliate		187
Prepaid expenses and other assets		39,372

Total Assets		42,965,863

Liabilities:
Unrealized depreciation on open forward foreign currency contracts		33
Payable for:
Shares of beneficial interest redeemed		67,471
Investment advisory fee		33,317
Transfer agent fee		22,305
Distribution fee		15,139
Investments purchased		13,594
Administration fee		2,919
Accrued expenses and other payables		47,416

Total Liabilities		202,194

Net Assets	$	42,763,669

Composition of Net Assets:
Paid-in-capital	$	242,434,885
Net unrealized depreciation		(9,828,037	)
Accumulated net investment loss		(270,289	)
Accumulated net realized loss		(189,572,890	)

Net Assets	$	42,763,669

Class A Shares:
Net Assets		$33,150,297
Shares Outstanding (unlimited authorized, $.01 par value)		1,902,663
Net Asset Value Per Share		$17.42

Maximum Offering Price Per Share, (net asset value plus 5.54% of net asset value)		$18.39

Class B Shares:
Net Assets		$6,861,727
Shares Outstanding (unlimited authorized, $.01 par value)		432,001
Net Asset Value Per Share		$15.88

Class C Shares:
Net Assets		$2,477,599
Shares Outstanding (unlimited authorized, $.01 par value)		156,033
Net Asset Value Per Share		$15.88

Class I Shares:
Net Assets		$274,046
Shares Outstanding (unlimited authorized, $.01 par value)		15,308
Net Asset Value Per Share		$17.90

See Notes to Financial Statements

Morgan Stanley Special Growth Fund

Financial Statements continued

Statement of Operations

For the six months ended August 31, 2009 (unaudited)


Net Investment Loss:
Income
Dividends (net of $124 foreign withholding tax)	$	186,481
Dividends from affiliate		1,447

Total Income		187,928

Expenses
Investment advisory fee		177,536
Transfer agent fees and expenses		96,502
Distribution fee (Class A shares)		36,681
Distribution fee (Class B shares)		33,659
Distribution fee (Class C shares)		11,380
Professional fees		36,632
Shareholder reports and notices		25,112
Registration fees		23,611
Administration fee		15,438
Custodian fees		5,946
Trustees’ fees and expenses		691
Other		6,701

Total Expenses		469,889

Less: rebate from Morgan Stanley affiliated cash sweep (Note 6)		(759	)

Net Expenses		469,130

Net Investment Loss		(281,202	)

Realized and Unrealized Gain (Loss):
Realized Gain (Loss) on:
Investments		(850,977	)
Forward foreign currency contracts		(20	)
Foreign currency translation		696

Net Realized Loss		(850,301	)

Change in Unrealized Appreciation/Depreciation on:
Investments		16,791,189
Forward foreign currency contracts		(24	)
Foreign currency translation		(89	)

Net Change in Unrealized Appreciation/Depreciation		16,791,076

Net Gain		15,940,775

Net Increase	$	15,659,573

See Notes to Financial Statements

Morgan Stanley Special Growth Fund

Financial Statements continued

Statements of Changes in Net Assets


	FOR THE SIX			FOR THE YEAR
	MONTHS ENDED			ENDED
	AUGUST 31, 2009			FEBRUARY 28, 2009
	(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment loss	$	(281,202	)	$	(737,486	)
Net realized loss		(850,301	)		(2,576,300	)
Net change in unrealized appreciation/depreciation		16,791,076			(23,874,785	)

Net Increase (Decrease)		15,659,573			(27,188,571	)
Net decrease from transactions in shares of beneficial interest		(3,503,718	)		(15,790,743	)

Net Increase (Decrease)		12,155,855			(42,979,314	)
Net Assets:
Beginning of period		30,607,814			73,587,128

End of Period
(including accumulated net investment loss of $270,289 and accumulated undistributed net investment income of $10,913.)	$	42,763,669		$	30,607,814

See Notes to Financial Statements

Morgan Stanley Special Growth Fund

Notes to Financial Statements - August 31, 2009 (unaudited)

1. Organization and Accounting Policies

Morgan Stanley Special Growth Fund (the “Fund”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. The Fund’s investment objective is capital appreciation. The Fund was organized as a Massachusetts business trust on March 11, 1992 and commenced operations on August 2, 1993. 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 I 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 I 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 I shares, which is paid directly to the Fund, for shares redeemed or exchanged within thirty 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 ask 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 ask 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 ask 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 ask 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 Special Growth Fund

Notes to Financial Statements - August 31, 2009 (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; (7) investments in open-end mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value as of the close of each business day; and (8) short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost, which approximates market value.

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 and are included in interest income. Interest income is accrued daily as earned.

C. 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.

D. Foreign Currency Translation and Forward Foreign Currency Contracts — The books and records of the Fund are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities, other assets and liabilities and forward foreign currency contracts (“forward contracts”) are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the exchange rates prevailing on the respective dates of such transactions. The resultant exchange gains and losses are recorded as realized and unrealized gains/losses on forward foreign currency contracts and foreign currency translation. Pursuant to U.S. federal income tax regulations, certain foreign exchange gains/losses included in realized and unrealized gains/losses are included in or are a reduction of ordinary income for federal income tax purposes. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of the securities. Forward contracts are valued daily at the appropriate exchange rates. The resultant unrealized exchange gains and losses are recorded as unrealized foreign currency gains or losses. The Fund records realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (compensated) by entering into a closing transaction prior to delivery.

Morgan Stanley Special Growth Fund

Notes to Financial Statements - August 31, 2009 (unaudited) continued

E. Federal Income Tax Policy — It is the Fund’s policy to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required. The Fund files tax returns with the U.S. Internal Revenue Service, New York State and New York City. The Fund follows the provisions of the Financial Accounting Standards Board (“FASB”) Interpretation No. 48 Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. There are no unrecognized tax benefits in the accompanying financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in other expenses in the Statement of Operations. Each of the tax years in the four year period ended February 28, 2009, remains subject to examination by taxing authorities.

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 in the United States requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.

H. Subsequent Events — The Fund considers events or transactions that occur after the date of the Statement of Assets and Liabilities but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through October 23, 2009, the date of issuance of these financial statements.

2. Fair Valuation Measurements

The Fund adopted FASB Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”), effective March 1, 2008. In accordance with SFAS 157, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. SFAS 157 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure

Morgan Stanley Special Growth Fund

Notes to Financial Statements - August 31, 2009 (unaudited) continued

purposes. Various inputs are used in determining the value of the Fund’s investments. The inputs are summarized in the three broad levels listed below.


	•	Level 1 — unadjusted quoted prices in active markets for identical investments

	•	Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

	•	Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.

The following is the summary of the inputs used as of August 31, 2009 in valuing the Fund’s investments carried at value:


			FAIR VALUE MEASUREMENTS AT AUGUST 31, 2009 USING
			UNADJUSTED
			QUOTED PRICES IN		SIGNIFICANT		SIGNIFICANT
			ACTIVE MARKET FOR		OTHER OBSERVABLE		UNOBSERVABLE
			IDENTICAL INVESTMENTS		INPUTS		INPUTS
INVESTMENT TYPE	TOTAL		(LEVEL 1)		(LEVEL 2)		(LEVEL 3)
Assets:
Common Stocks
Biotechnology	$	1,462,762	$	622,906		—		$839,856
Capital Markets		3,228,812		3,228,812		—		—
Chemicals		1,174,242		1,174,242		—		—
Communications Equipment		453,407		453,407		—		—
Construction Materials		2,020,981		2,020,981		—		—
Distributors		219,600		—	$	219,600		—
Diversified Consumer Services		534,397		534,397		—		—
Diversified Financial Services		420,467		321,261		99,206		—
Diversified Telecommunication Services		590,879		590,879		—		—
Electric Utilities		1,165,910		1,165,910		—		—
Finance		456,332		—		—		456,332
Health Care Technology		1,332,418		1,332,418		—		—
Hotels, Restaurants & Leisure		5,156,578		5,156,578		—		—
Household Durables		1,143,037		1,143,037		—		—
Information Technology Services		1,128,297		1,128,297		—		—
Insurance		883,231		883,231		—		—
Internet & Catalog Retail		2,118,121		1,843,490		274,631		—
Internet Software & Services		2,946,152		2,946,152		—		—
Leisure Equipment & Products		422,006		—		422,006		—
Life Sciences Tools & Services		1,793,179		1,793,179		—		—
Machinery		406,778		406,778		—		—

Morgan Stanley Special Growth Fund

Notes to Financial Statements - August 31, 2009 (unaudited) continued


			FAIR VALUE MEASUREMENTS AT AUGUST 31, 2009 USING
			UNADJUSTED
			QUOTED PRICES IN		SIGNIFICANT		SIGNIFICANT
			ACTIVE MARKET FOR		OTHER OBSERVABLE		UNOBSERVABLE
			IDENTICAL INVESTMENTS		INPUTS		INPUTS
INVESTMENT TYPE	TOTAL		(LEVEL 1)		(LEVEL 2)		(LEVEL 3)
Media	$	2,472,309	$	2,472,309		—		—
Medical-Biomedical/Genetics		326,025		—		—		$326,025
Oil, Gas & Consumable Fuels		1,804,372		1,804,372		—		—
Pharmaceuticals		212,161		212,161		—		—
Professional Services		2,355,244		2,355,244		—		—
Real Estate Management & Development		845,733		845,733		—		—
Semiconductors & Semiconductor Equipment		1,319,300		1,319,300		—		—
Software		1,534,788		1,534,788		—		—
Specialty Retail		594,073		594,073		—		—
Textiles, Apparel & Luxury Goods		774,858		774,858		—		—
Transportation Infrastructure		744,641		744,641		—		—

Total Common Stocks		42,041,090		39,403,434		1,015,443		1,622,213

Short-Term Investments — Investment Company		840,899		840,899		—		—

Total	$	42,881,989	$	40,244,333	$	1,015,443		$1,622,213

Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:


	INVESTMENTS IN
	SECURITIES

Beginning Balance	$	1,359,920
Net purchases (sales)		—
Transfers in and/or out		—
Change in unrealized appreciation/depreciation		262,293
Realized gains (losses)		—

Ending Balance	$	1,622,213

Net change in unrealized appreciation/depreciation from investments still held as of August 31, 2009	$	262,293

On April 9, 2009, FASB issued Staff Position No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157, when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also requires additional disaggregation of the current SFAS 157 required disclosures. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009. The Fund has adopted the

Morgan Stanley Special Growth Fund

Notes to Financial Statements - August 31, 2009 (unaudited) continued

provisions of FSP 157-4 as of August 31, 2009 and it did not have a material impact on the Fund’s financial statements.

3. Derivative Financial Instruments

The Fund adopted FASB Standard No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS 161”), effective March 1, 2009. SFAS 161 is intended to improve financial reporting about derivative instruments by requiring enhanced disclosures to enable investors to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund’s financial position and results of operations.

A derivative financial instrument in very general terms refers to a security whose value is “derived” from the value of an underlying asset, reference rate or index.

The Fund may use derivative instruments for a variety of reasons, such as to attempt to protect the Fund against possible changes in the market value of its portfolio or to manage the Fund’s foreign currency exposure or to generate potential gain. All of the Fund’s portfolio holdings, including derivative instruments, are marked-to-market each day with the change in value reflected in unrealized appreciation/depreciation. Upon disposition, a realized gain or loss is recognized accordingly, except when taking delivery of a security underlying a contract. In these instances, the recognition of gain or loss is postponed until the disposal of the security underlying the contract. Risk may arise as a result of the potential inability of the counterparties to meet the terms of their contracts.

Summarized below is a specific type of derivative financial instrument used by the Fund.

Forward Foreign Currency Contracts The Fund may enter into forward contracts for many purposes, including to facilitate settlement of foreign currency denominated portfolio transactions or to manage foreign currency exposure associated with foreign currency denominated securities. Forward contracts involve elements of market risk in excess of the amount reflected in the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rates underlying the forward contracts. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

During the six months ended August 31, 2009, the cost of purchases and the proceeds from sales of forward foreign currency contracts were $90,316 and $131,238, respectively.

The following table sets forth the fair value of the Fund’s derivative contracts by primary risk exposure as of August 31, 2009.

Morgan Stanley Special Growth Fund

Notes to Financial Statements - August 31, 2009 (unaudited) continued

ASSET DERIVATIVES

LIABILITY DERIVATIVES

PRIMARY RISK EXPOSURE

BALANCE SHEET LOCATION

FAIR VALUE

BALANCE SHEET LOCATION

FAIR VALUE

Foreign Exchange Risk

Unrealized appreciation on open forward foreign currency contracts

Unrealized depreciation on open forward foreign currency contracts

(33

)

The following tables set forth by primary risk exposure the Fund’s realized gains (losses) and change in unrealized gains (losses) by type of derivative contract for the six months ended August 31, 2009 in accordance with SFAS 161.


AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVE CONTRACTS
PRIMARY RISK EXPOSURE	FORWARD FOREIGN CURRENCY

Foreign Exchange Risk	$	(20	)


CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON DERIVATIVES CONTRACTS
PRIMARY RISK EXPOSURE	FORWARD FOREIGN CURRENCY

Foreign Exchange Risk	$	(24	)

4. 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 following annual rates to the net assets of the Fund determined as of the close of each business day: 0.92% to the portion of the daily net assets not exceeding $1 billion; 0.85% to the portion of the daily net assets exceeding $1 billion but not exceeding $1.5 billion; and 0.80% to the portion of the daily net assets exceeding $1.5 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.

Under an agreement between the Administrator and State Street Bank and Trust Company (“State Street”), State Street provides certain administrative services to the Fund. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.

5. 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

Morgan Stanley Special Growth Fund

Notes to Financial Statements - August 31, 2009 (unaudited) continued

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 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 $22,460,562 at August 31, 2009.

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 August 31, 2009, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.25% and 1.0%, respectively.

The Distributor has informed the Fund that for the six months ended August 31, 2009, it received contingent deferred sales charges from certain redemptions of the Fund’s Class A shares, Class B shares and Class C shares of $84, $5,225 and $16, respectively and received $921 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.

6. Security Transactions and Transactions with Affiliates

The Fund invests in Morgan Stanley Institutional Liquidity Funds – Money Market Portfolio – Institutional Class, an open-end management investment company managed by an affiliate of the Investment Adviser. Investment advisory fees paid by the Fund are reduced by an amount equal to the advisory and administrative service fees paid by Morgan Stanley Institutional Liquidity Funds – Money Market Portfolio – Institutional Class with respect to assets invested by the Fund in Morgan Stanley Institutional Liquidity Funds – Money Market Portfolio – Institutional Class. For the six months ended August 31, 2009, advisory fees paid were reduced by $759 relating to the Fund’s investment in Morgan Stanley Institutional Liquidity Funds – Money Market Portfolio – Institutional Class. Income distributions earned by the Fund are recorded as “dividends from affiliate” in the Statement of Operations and totaled $1,447 for six months ended August 31, 2009. During the six months ended August 31, 2009, the cost of purchases and sales of investments in Morgan Stanley

Morgan Stanley Special Growth Fund

Notes to Financial Statements - August 31, 2009 (unaudited) continued

Institutional Liquidity Funds – Money Market Portfolio – Institutional Class aggregated $5,406,021 and $6,766,156, respectively.

The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended August 31, 2009 aggregated $5,132,002, and $7,418,258 respectively. Included in the aforementioned transactions are purchases and sales of $40,303 and $76,070, respectively, with other Morgan Stanley funds, including net realized gains of $9,546.

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 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.

7. 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. For the six months ended August 31, 2009, the Fund did not have an expense offset.

Morgan Stanley Special Growth Fund

Notes to Financial Statements - August 31, 2009 (unaudited) continued

8. Shares of Beneficial Interest+++

Transactions in shares of beneficial interest were as follows:


	FOR THE SIX						FOR THE YEAR
	MONTHS ENDED						ENDED
	AUGUST 31, 2009						FEBRUARY 28, 2009
	(unaudited)
	SHARES			AMOUNT			SHARES			AMOUNT
CLASS A SHARES
Sold		68,634		$	1,038,209			272,127		$	4,726,537
Conversion from Class B		8,985			136,339			42,613			732,502
Redeemed		(182,621	)		(2,598,855	)		(516,531	)		(8,283,500	)

Net decrease – Class A		(105,002	)		(1,424,307	)		(201,791	)		(2,824,461	)

CLASS B SHARES
Sold		2,054			27,960			6,872			109,079
Conversion to Class A		(9,836	)		(136,339	)		(46,381	)		(732,502	)
Redeemed		(128,598	)		(1,713,587	)		(518,179	)		(8,181,675	)

Net decrease – Class B		(136,380	)		(1,821,966	)		(557,688	)		(8,805,098	)

CLASS C SHARES
Sold		2,237			25,502			4,048			57,212
Redeemed		(20,941	)		(278,527	)		(38,631	)		(574,539	)

Net decrease – Class C		(18,704	)		(253,025	)		(34,583	)		(517,327	)

CLASS I SHARES
Sold		632			9,931			4,119			76,287
Redeemed		(858	)		(14,351	)		(237,457	)		(3,720,144	)

Net decrease – Class I		(226	)		(4,420	)		(233,338	)		(3,643,857	)

Net decrease in Fund		(260,312	)	$	(3,503,718	)		(1,027,400	)	$	(15,790,743	)


+++		On August 25, 2005, the Fund suspended the offering of its shares to new investors, with certain exceptions. The Fund may recommence offering its shares to new investors at such time as the Investment Adviser determines that it would be consistent with prudent portfolio management.

9. 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.

Morgan Stanley Special Growth Fund

Notes to Financial Statements - August 31, 2009 (unaudited) continued

As of February 28, 2009, the Fund had temporary book/tax differences 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), capital loss deferrals on wash sales and tax adjustments on convertible preferred stock held by the Fund.

10. Accounting Pronouncements

In May 2009, FASB issued Statement of Financial Accounting Standards No. 165 Subsequent Events (“SFAS 165”), which is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009. The Fund has adopted the provisions of SFAS 165 as of August 31, 2009. Although the adoption of SFAS 165 did not materially impact its financial position, results of operations or changes in net assets, the Fund is now required to provide additional disclosures, which are included in Note 1.

In June 2009, FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162 (“SFAS 168”). SFAS 168 will become the source of authoritative U.S. Generally Accepted Accounting Principles recognized by the FASB to be applied by nongovernmental entities. Once in effect, all of the Codification’s content will carry the same level of authority, effectively superseding FASB Statement No. 162. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Fund does not anticipate that SFAS 168 will have a material impact on its financial statements.

Morgan Stanley Special Growth Fund

Financial Highlights

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


	FOR THE SIX
	MONTHS ENDED				FOR THE YEAR ENDED FEBRUARY 28,
	AUGUST 31, 2009				2009				2008⁽¹⁾				2007				2006				2005
	(unaudited)
Class A Shares
Selected Per Share Data:
Net asset value, beginning of period		$11.32				$19.91				$22.12				$21.21				$17.70				$15.21

Income (loss) from investment operations:
Net investment loss⁽²⁾		(0.10	)			(0.19	)			(0.23	)			(0.29	)			(0.22	)			(0.23	)
Net realized and unrealized gain (loss)		6.20				(8.40	)			(1.98	)			1.20				3.73				2.72

Total income (loss) from investment operations		6.10				(8.59	)			(2.21	)			0.91				3.51				2.49

Net asset value, end of period		$17.42				$11.32				$19.91				$22.12				$21.21				$17.70

Total Return⁽³⁾		53.89%⁽⁸	⁾			(43.14	)	%		(9.99	)	%		4.29		%		19.83		%		16.37		%
Ratios to Average Net Assets:⁽⁴⁾
Total expenses (before expense offset)		2.26%⁽⁵	⁾⁽⁹⁾			2.02%⁽⁵	⁾			1.79%⁽⁵	⁾			1.77%⁽⁷	⁾			1.77%⁽⁷	⁾			1.79		%
Net investment loss		(1.29	)	%⁽⁵⁾⁽⁹⁾		(1.11	)	%⁽⁵⁾		(1.01	)	%⁽⁵⁾		(1.37	)	%⁽⁷⁾		(1.09	)	%⁽⁷⁾		(1.47	)	%
Rebate from Morgan Stanley affiliate		0.00%⁽⁶	⁾⁽⁹⁾			0.00%⁽⁶	⁾			0.00%⁽⁶	⁾			—				—				—
Supplemental Data:
Net assets, end of period, in thousands		$33,150				$22,729				$43,992				$55,358				$63,336				$10,642
Portfolio turnover rate		14%⁽⁸	⁾			25		%		54		%		56		%		80		%		99		%


(1)		For the year ended February 29.
(2)		The per share amounts were computed using an average number of shares outstanding during the period.
(3)		Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.
(4)		Reflects overall Fund ratios for investment income and non-class specific expenses.
(5)		The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as “Rebate from Morgan Stanley affiliate.”
(6)		Amount is less than 0.005%.
(7)		If the Fund had borne all expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment loss ratios, before expense offset, would have been as follows:


	EXPENSE			NET INVESTMENT
PERIOD ENDED	RATIO			LOSS RATIO
February 28, 2007		1.78	%		(1.38	)%
February 28, 2006		1.81			(1.13	)


(8)		Not annualized.
(9)		Annualized.

See Notes to Financial Statements

Morgan Stanley Special Growth Fund

Financial Highlights continued


	FOR THE SIX
	MONTHS ENDED				FOR THE YEAR ENDED FEBRUARY 28,
	AUGUST 31, 2009				2009				2008⁽¹⁾				2007				2006				2005
	(unaudited)
Class B Shares
Selected Per Share Data:
Net asset value, beginning of period		$10.36				$18.36				$20.55				$19.85				$16.69				$14.46

Income (loss) from investment operations:
Net investment loss⁽²⁾		(0.14	)			(0.30	)			(0.37	)			(0.42	)			(0.33	)			(0.33	)
Net realized and unrealized gain (loss)		5.66				(7.70	)			(1.82	)			1.12				3.49				2.56

Total income (loss) from investment operations		5.52				(8.00	)			(2.19	)			0.70				3.16				2.23

Net asset value, end of period		$15.88				$10.36				$18.36				$20.55				$19.85				$16.69

Total Return⁽³⁾		53.28%⁽⁸	⁾			(43.57	)	%		(10.66	)	%		3.53		%		18.93		%		15.42		%
Ratios to Average Net Assets:⁽⁴⁾
Total expenses (before expense offset)		3.01%⁽⁵	⁾⁽⁹⁾			2.77%⁽⁵	⁾			2.54%⁽⁵	⁾			2.53%⁽⁷	⁾			2.53%⁽⁷	⁾			2.54		%
Net investment loss		(2.04	)	%⁽⁵⁾⁽⁹⁾		(1.86	)	%⁽⁵⁾		(1.76	)	%⁽⁵⁾		(2.13	)	%⁽⁷⁾		(1.85	)	%⁽⁷⁾		(2.22	)	%
Rebate from Morgan Stanley affiliate		0.00%⁽⁶	⁾⁽⁹⁾			0.00%⁽⁶	⁾			0.00%⁽⁶	⁾			—				—				—
Supplemental Data:
Net assets, end of period, in thousands		$6,862				$5,888				$20,675				$39,042				$58,099				$126,659
Portfolio turnover rate		14%⁽⁸	⁾			25		%		54		%		56		%		80		%		99		%


(1)		For the year ended February 29.
(2)		The per share amounts were computed using an average number of shares outstanding during the period.
(3)		Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.
(4)		Reflects overall Fund ratios for investment income and non-class specific expenses.
(5)		The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as “Rebate from Morgan Stanley affiliate.”
(6)		Amount is less than 0.005%.
(7)		If the Fund had borne all expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment loss ratios, before expense offset, would have been as follows:


	EXPENSE			NET INVESTMENT
PERIOD ENDED	RATIO			LOSS RATIO
February 28, 2007		2.54	%		(2.14	)%
February 28, 2006		2.57			(1.89	)


(8)		Not annualized.
(9)		Annualized.

See Notes to Financial Statements

Morgan Stanley Special Growth Fund

Financial Highlights continued


	FOR THE SIX
	MONTHS ENDED				FOR THE YEAR ENDED FEBRUARY 28,
	AUGUST 31, 2009				2009				2008⁽¹⁾				2007				2006				2005
	(unaudited)
Class C Shares
Selected Per Share Data:
Net asset value, beginning of period		$10.36				$18.35				$20.54				$19.84				$16.68				$14.43

Income (loss) from investment operations:
Net investment loss⁽²⁾		(0.14	)			(0.29	)			(0.37	)			(0.42	)			(0.32	)			(0.32	)
Net realized and unrealized gain (loss)		5.66				(7.70	)			(1.82	)			1.12				3.48				2.57

Total income (loss) from investment operations		5.52				(7.99	)			(2.19	)			0.70				3.16				2.25

Net asset value, end of period		$15.88				$10.36				$18.35				$20.54				$19.84				$16.68

Total Return⁽³⁾		53.28%⁽⁸	⁾			(43.54	)	%		(10.66	)	%		3.53		%		19.09		%		15.37		%
Ratios to Average Net Assets:⁽⁴⁾
Total expenses (before expense offset)		3.01%⁽⁵	⁾⁽⁹⁾			2.77%⁽⁵	⁾			2.54%⁽⁵	⁾			2.53%⁽⁷	⁾			2.49%⁽⁷	⁾			2.46		%
Net investment loss		(2.04	)	%⁽⁵⁾⁽⁹⁾		(1.86	)	%⁽⁵⁾		(1.76	)	%⁽⁵⁾		(2.13	)	%⁽⁷⁾		(1.81	)	%⁽⁷⁾		(2.14	)	%
Rebate from Morgan Stanley affiliate		0.00%⁽⁶	⁾⁽⁹⁾			0.00%⁽⁶	⁾			0.00%⁽⁶	⁾			—				—				—
Supplemental Data:
Net assets, end of period, in thousands		$2,478				$1,810				$3,842				$5,365				$7,540				$7,399
Portfolio turnover rate		14%⁽⁸	⁾			25		%		54		%		56		%		80		%		99		%


(1)		For the year ended February 29.
(2)		The per share amounts were computed using an average number of shares outstanding during the period.
(3)		Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.
(4)		Reflects overall Fund ratios for investment income and non-class specific expenses.
(5)		The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as “Rebate from Morgan Stanley affiliate.”
(6)		Amount is less than 0.005%.
(7)		If the Fund had borne all expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment loss ratios, before expense offset, would have been as follows:


	EXPENSE			NET INVESTMENT
PERIOD ENDED	RATIO			LOSS RATIO
February 28, 2007		2.54	%		(2.14	)%
February 28, 2006		2.53			(1.85	)


(8)		Not annualized.
(9)		Annualized.

See Notes to Financial Statements

Morgan Stanley Special Growth Fund

Financial Highlights continued


	FOR THE SIX
	MONTHS ENDED				FOR THE YEAR ENDED FEBRUARY 28,
	AUGUST 31, 2009				2009				2008⁽¹⁾				2007				2006				2005
	(unaudited)
Class I Shares
Selected Per Share Data:
Net asset value, beginning of period		$11.62				$20.40				$22.61				$21.62				$17.99				$15.43

Income (loss) from investment operations:
Net investment loss⁽²⁾		(0.08	)			(0.15	)			(0.18	)			(0.24	)			(0.18	)			(0.20	)
Net realized and unrealized gain (loss)		6.36				(8.63	)			(2.03	)			1.23				3.81				2.76

Total income (loss) from investment operations		6.28				(8.78	)			(2.21	)			0.99				3.63				2.56

Net asset value, end of period		$17.90				$11.62				$20.40				$22.61				$21.62				$17.99

Total Return⁽³⁾		54.04%⁽⁸	⁾			(43.04	)	%		(9.77	)	%		4.58		%		20.18		%		16.59		%
Ratios to Average Net Assets:⁽⁴⁾
Total expenses (before expense offset)		2.01%⁽⁵	⁾⁽⁹⁾			1.77%⁽⁵	⁾			1.54%⁽⁵	⁾			1.53%⁽⁷	⁾			1.53%⁽⁷	⁾			1.54		%
Net investment loss		(1.04	)	%⁽⁵⁾⁽⁹⁾		(0.86	)	%⁽⁵⁾		(0.76	)	%⁽⁵⁾		(1.13	)	%⁽⁷⁾		(0.85	)	%⁽⁷⁾		(1.22	)	%
Rebate from Morgan Stanley affiliate		0.00%⁽⁶	⁾⁽⁹⁾			0.00%⁽⁶	⁾			0.00%⁽⁶	⁾			—				—				—
Supplemental Data:
Net assets, end of period, in thousands		$274				$181				$5,078				$7,377				$11,228				$48,418
Portfolio turnover rate		14%⁽⁸	⁾			25		%		54		%		56		%		80		%		99		%


(1)		For the year ended February 29.
(2)		The per share amounts were computed using an average number of shares outstanding during the period.
(3)		Calculated based on the net asset value as of the last business day of the period.
(4)		Reflects overall Fund ratios for investment income and non-class specific expenses.
(5)		The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as “Rebate from Morgan Stanley affiliate.”
(6)		Amount is less than 0.005%.
(7)		If the Fund had borne all expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment loss ratios, before expense offset, would have been as follows:


	EXPENSE			NET INVESTMENT
PERIOD ENDED	RATIO			LOSS RATIO
February 28, 2007		1.54	%		(1.14	)%
February 28, 2006		1.57			(0.89	)


(8)		Not annualized.
(9)		Annualized.

See Notes to Financial Statements

Morgan Stanley Special Growth Fund

An Important Notice Concerning Our U.S. Privacy Policy (unaudited)

We are required by federal law to provide you with a copy of our privacy policy (“Policy”) annually.

This Policy applies to current and former individual clients of Morgan Stanley Distributors Inc., as well as current and former individual investors in Morgan Stanley mutual funds and related companies.

This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, 529 Educational Savings Accounts, accounts subject to the Uniform Gifts to Minors Act, or similar accounts. We may amend this Policy at any time, and will inform you of any changes to this Policy as required by law.

We Respect Your Privacy

We appreciate that you have provided us with your personal financial information and understand your concerns about safeguarding such information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what nonpublic personal information we collect about you, how we collect it, when we may share it with others, and how others may use it. It discusses the steps you may take to limit our sharing of information about you with affiliated Morgan Stanley companies (“affiliated companies”). It also discloses how you may limit our affiliates’ use of shared information for marketing purposes. Throughout this Policy, we refer to the nonpublic information that personally identifies you or your accounts as “personal information.”


1.	What Personal Information Do We Collect About You?

To better serve you and manage our business, it is important that we collect and maintain accurate information about you. We obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our websites and from third parties and other sources.

For example:


•	We collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through application forms you submit to us.

•	We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources.

•	We may obtain information about your creditworthiness and credit history from consumer reporting agencies.

Morgan Stanley Special Growth Fund

An Important Notice Concerning Our U.S. Privacy Policy (unaudited) continued


•	We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements.

•	If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer’s operating system and Web browser, your use of our Web sites and your product and service preferences, through the use of “cookies.” “Cookies” recognize your computer each time you return to one of our sites, and help to improve our sites’ content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies.


2.	When Do We Disclose Personal Information We Collect About You?

To provide you with the products and services you request, to better serve you, to manage our business and as otherwise required or permitted by law, we may disclose personal information we collect about you to other affiliated companies and to non-affiliated third parties.

A. Information We Disclose to Our Affiliated Companies. In order to manage your account(s) effectively, including servicing and processing your transactions, to let you know about products and services offered by us and affiliated companies, to manage our business, and as otherwise required or permitted by law, we may disclose personal information about you to other affiliated companies. Offers for products and services from affiliated companies are developed under conditions designed to safeguard your personal information.

B. Information We Disclose to Third Parties. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide marketing services on our behalf, to perform joint marketing agreements with other financial institutions, and as otherwise required or permitted by law. For example, some instances where we may disclose information about you to third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with a non-affiliated third party, they are required to limit their use of personal information about you to the particular purpose for which it was shared and they are not allowed to share personal information about you with others except to fulfill that limited purpose or as may be required by law.


3.	How Do We Protect The Security and Confidentiality Of Personal Information We Collect About You?

We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information about you, and we require them to adhere to confidentiality standards with respect to such information.

Morgan Stanley Special Growth Fund

An Important Notice Concerning Our U.S. Privacy Policy (unaudited) continued


4.	How Can You Limit Our Sharing Of Certain Personal Information About You With Our Affiliated Companies For Eligibility Determination?

We respect your privacy and offer you choices as to whether we share with our affiliated companies personal information that was collected to determine your eligibility for products and services such as credit reports and other information that you have provided to us or that we may obtain from third parties (“eligibility information”). Please note that, even if you direct us not to share certain eligibility information with our affiliated companies, we may still share your personal information, including eligibility information, with those companies under circumstances that are permitted under applicable law, such as to process transactions or to service your account. We may also share certain other types of personal information with affiliated companies — such as your name, address, telephone number, e-mail address and account number(s), and information about your transactions and experiences with us.


5.	How Can You Limit the Use of Certain Personal Information About You by our Affiliated Companies For Marketing?

You may limit our affiliated companies from using certain personal information about you that we may share with them for marketing their products or services to you. This information includes our transactions and other experiences with you such as your assets and account history. Please note that, even if you choose to limit our affiliated companies from using certain personal information about you that we may share with them for marketing their products and services to you, we may still share such personal information about you with them, including our transactions and experiences with you, for other purposes as permitted under applicable law.


6.	How Can You Send Us an Opt-Out Instruction?

If you wish to limit our sharing of certain personal information about you with our affiliated companies for “eligibility purposes” and for our affiliated companies’ use in marketing products and services to you as described in this notice, you may do so by:


•	Calling us at (800) 869-6397 Monday-Friday between 8a.m. and 8p.m. (EST)

•	Writing to us at the following address: Morgan Stanley Privacy Department Harborside Financial Center, Plaza Two, 3rd Floor Jersey City, NJ 07311

If you choose to write to us, your written request should include: your name, address, telephone number and account number(s) to which the opt-out applies and should not be sent with any other correspondence. In order to process your request, we require that the request be provided by you directly and not through a third party. Once you have informed us about your privacy preferences, your opt-out preference will remain in

Morgan Stanley Special Growth Fund

An Important Notice Concerning Our U.S. Privacy Policy (unaudited) continued

effect with respect to this Policy (as it may be amended) until you notify us otherwise. If you are a joint account owner, we will accept instructions from any one of you and apply those instructions to the entire account. Please allow approximately 30 days from our receipt of your opt-out for your instructions to become effective.

Please understand that if you opt-out, you and any joint account holders may not receive certain Morgan Stanley or our affiliated companies’ products and services that could help you manage your financial resources and achieve your investment objectives.

If you have more than one account with us or our affiliates, you may receive multiple privacy policies from us, and would need to follow the directions stated in each particular policy for each account you have with us.

Special Notice To Residents Of Vermont

This section supplements our Policy with respect to our individual clients who have a Vermont address and supersedes anything to the contrary in the above Policy with respect to those clients only.

The State of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with affiliated companies and non-affiliated third parties other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with non-affiliated third parties or other affiliated companies unless you provide us with your written consent to share such information (“opt-in”).

If you wish to receive offers for investment products and services offered by or through other affiliated companies, please notify us in writing at the following address:

Morgan Stanley Privacy Department
Harborside Financial Center, Plaza Two, 3rd Floor
Jersey City, NJ 07311

Your authorization should include: your name, address, telephone number and account number(s) to which the opt-in applies and should not be sent with any other correspondence. In order to process your authorization, we require that the authorization be provided by you directly and not through a third-party.

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

Randy Takian

President and Principal Executive Officer

Kevin Klingert

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

Dechert LLP

1095 Avenue of the Americas

New York, New York 10036

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 FINRA.

INVESTMENT MANAGEMENT

Morgan Stanley

Special Growth Fund

Semiannual
Report

August 31, 2009

SMPSAN

IU09-04592P-Y08/09

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.


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