N-Q 1 y03390nvq.htm N-Q nvq
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
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)
Randy Takian
522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)
Registrant’s telephone number, including area code: 212-296-6963
Date of fiscal year end: November 30, 2010
Date of reporting period: February 28, 2010
 
 
Item 1. Schedule of Investments.
The Fund’s schedule of investments as of the close of the reporting period prepared pursuant to Rule 12-12 of Regulation S-X is as follows:

 

 

Morgan Stanley Capital Opportunities Trust
Portfolio of Investments § February 28, 2010 (unaudited)
                 
NUMBER OF            
SHARES         VALUE  
 
       
Common Stocks (96.7%)
        
       
Air Freight & Logistics (2.3%)
        
  194,025    
Expeditors International of Washington, Inc.
   $ 7,076,092  
       
 
      
       
Capital Markets (3.5%)
        
  149,458    
Greenhill & Co., Inc.
     10,678,774  
       
 
      
       
Chemicals (3.8%)
        
  162,839    
Monsanto Co.
     11,504,575  
       
 
      
       
Computers & Peripherals (10.0%)
        
  102,207    
Apple, Inc. (a)
     20,913,596  
  315,145    
Teradata Corp. (a)
     9,608,771  
       
 
      
       
 
     30,522,367  
       
 
      
       
Distributors (3.9%)
        
  2,532,465    
Li & Fung Ltd. (Bermuda) (b)
     11,777,921  
       
 
      
       
Diversified Financial Services (7.0%)
        
  952,897    
BM&F BOVESPA SA (Brazil)
     6,206,238  
  283,234    
Leucadia National Corp. (a)
     6,723,975  
  281,140    
MSCI, Inc. (Class A) (a)
     8,428,577  
       
 
      
       
 
     21,358,790  
       
 
      
       
Health Care Technology (2.6%)
        
  214,279    
athenahealth, Inc. (a)
     7,894,038  
       
 
      
       
Hotels, Restaurants & Leisure (6.9%)
        
  318,684    
Ctrip.com International Ltd. (ADR) (Cayman Islands) (a)
     12,183,289  
  139,227    
Wynn Resorts Ltd.
     8,850,661  
       
 
      
       
 
     21,033,950  
       
 
      
       
Information Technology Services (5.8%)
        
  51,660    
Mastercard, Inc. (Class A)
     11,590,954  
  424,055    
Redecard SA (Brazil)
     6,166,708  
       
 
      
       
 
     17,757,662  
       
 
      
       
Internet & Catalog Retail (6.7%)
        
  173,423    
Amazon.com, Inc. (a)
     20,533,283  
       
 
      
       
Internet Software & Services (18.2%)
        
  27,800    
Baidu, Inc. (ADR) (Cayman Islands) (a)
     14,419,304  
  38,646    
Google, Inc. (Class A) (a)
     20,358,713  
  1,056,100    
Tencent Holdings Ltd. (Cayman Islands) (b)
     20,707,976  
       
 
      
       
 
     55,485,993  
       
 
      
       
Life Sciences Tools & Services (5.4%)
        
  228,281    
Illumina, Inc. (a)
     8,291,166  
  128,929    
Techne Corp.
     8,241,142  
       
 
      
       
 
     16,532,308  
       
 
      
       
Oil, Gas & Consumable Fuels (6.4%)
        
  160,887    
Range Resources Corp.
     8,142,491  
  252,028    
Ultra Petroleum Corp. (Canada) (a)
     11,525,241  
       
 
      
       
 
     19,667,732  
       
 
      
       
Professional Services (5.3%)
        
  186,168    
CoStar Group, Inc. (a)
     7,325,711  
  311,122    
Verisk Analytics, Inc. (Class A) (a)
     8,804,752  
       
 
      
       
 
     16,130,463  
       
 
      
       
Real Estate Management & Development (3.8%)
        
  493,288    
Brookfield Asset Management, Inc. (Class A) (Canada)
     11,676,127  
       
 
      
       
Semiconductors & Semiconductor Equipment (2.0%)
        
  330,731    
Tessera Technologies, Inc. (a)
     5,939,929  
       
 
      
       
Software (3.1%)
        
  140,733    
Salesforce.com, Inc. (a)
     9,562,807  
       
 
      
       
Total Common Stocks (Cost $249,166,921)
     295,132,811  
       
 
      
       
 
        
       
Convertible Preferred Stocks (0.6%)
        
       
Auto-Cars/Light Trucks
        
  580,266    
Better PLC, LLC (c)(d)
     1,740,798  
       
 
      
       
Total Convertible Preferred Stocks (Cost $1,740,798)
   $ 1,740,798  
       
 
      

 

 

Morgan Stanley Capital Opportunities Trust
Portfolio of Investments § February 28, 2010 (unaudited) continued
                         
NUMBER OF                      
SHARES (000)                      
       
Short-Term Investment (e) (3.5%)
                
       
Investment Company
                
  10,751    
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional
Class (Cost $10,750,947)
     10,750,947  
       
 
              
       
Total Investments (Cost $261,658,666) (f)
     100.8 %     307,624,556  
       
Liabilities in Excess of Other Assets
     (0.8 )     (2,300,974 )
       
 
            
       
Net Assets
     100.0 %   $ 305,323,582  
       
 
            
 
ADR   American Depositary Receipt.
 
(a)   Non-income producing security.
 
(b)   Security trades on the Hong Kong exchange.
 
(c)   Illiquid security. Resale is restricted to qualified institutional investors.
 
(d)   Securities with a total market value equal to $1,740,798 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.
 
(e)   The Fund invests in Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio - Institutional Class, an open-end management investment company managed by 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.
 
(f)   The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes.

 

 

Morgan Stanley Capital Opportunities Trust
Notes to the Portfolio of Investments § February 28, 2010 (unaudited)
Fair Valuation Measurements
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. GAAP utilizes 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 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 February 28, 2010 in valuing the Fund’s investments carried at fair value:
                                 
    FAIR VALUE MEASUREMENTS AT FEBRUARY 28, 2010 USING  
            UNADJUSTED              
            QUOTED PRICES IN              
            ACTIVE MARKET     OTHER        
            FOR     SIGNIFICANT     SIGNIFICANT  
            IDENTICAL     OBSERVABLE     UNOBSERVABLE  
            INVESTMENTS     INPUTS     INPUTS  
    TOTAL     (LEVEL 1)     (LEVEL 2)     (LEVEL 3)  
INVESTMENT TYPE
                                
Common Stocks
                                
Air Freight & Logistics
   $ 7,076,092     $ 7,076,092       —       —  
Capital Markets
     10,678,774       10,678,774       —       —  
Chemicals
     11,504,575       11,504,575       —       —  
Computers & Peripherals
     30,522,367       30,522,367       —       —  
Distributors
     11,777,921       11,777,921       —       —  
Diversified Financial Services
     21,358,790       21,358,790       —       —  
Health Care Technology
     7,894,038       7,894,038       —       —  
Hotels, Restaurants & Leisure
     21,033,950       21,033,950       —       —  
Information Technology Services
     17,757,662       17,757,662       —       —  
Internet & Catalog Retail
     20,533,283       20,533,283       —       —  
Internet Software & Services
     55,485,993       55,485,993       —       —  
Life Sciences Tools & Services
     16,532,308       16,532,308       —       —  
Oil, Gas & Consumable Fuels
     19,667,732       19,667,732       —       —  
Professional Services
     16,130,463       16,130,463       —       —  
Real Estate Management & Development
     11,676,127       11,676,127       —       —  
Semiconductors & Semiconductor Equipment
     5,939,929       5,939,929       —       —  
Software
     9,562,807       9,562,807       —       —  
 
                        
Total Common Stocks
     295,132,811       295,132,811       —       —  
 
                        
Convertible Preferred Stock
     1,740,798       —       —     $ 1,740,798  
Short-Term Investment — Investment Company
     10,750,947       10,750,947       —       —  
 
                        
Total
   $ 307,624,556     $ 305,883,758       —     $ 1,740,798  
 
                        

 

 

Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
         
    INVESTMENTS  
    IN SECURITIES  
Beginning Balance
     —  
Net purchases (sales)
   $ 1,740,798  
Amortization of discount
     —  
Transfers in
     —  
Transfers out
     —  
Change in unrealized appreciation/depreciation
     —  
Realized gains (losses)
     —  
 
      
Ending Balance
   $ 1,740,798  
 
      
 
        
Net change in unrealized appreciation/depreciation from investments still held as of February 28, 2010
   $ —  
 
      
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, 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.

 

 

Item 2. 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-Q 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 Fund’s internal control over financial reporting that occurred during the registrant’s fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.
Item 3. Exhibits.
(a) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto.

 

 

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/ Randy Takian
Randy Takian
Principal Executive Officer
April 15, 2010
     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/ Randy Takian
Randy Takian
Principal Executive Officer
April 15, 2010
/s/ Francis Smith
Francis Smith
Principal Financial Officer
April 15, 2010