N-Q 1 file1.htm FORM N-Q

 
 

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)

Ronald E. Robison

522 Fifth Avenue, New York, New York 10036

(Name and address of agent for service)

Registrant’s telephone number, including area code: 212-296-6990

Date of fiscal year end: November 30, 2008

Date of reporting period: February 29, 2008

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 29, 2008 (unaudited)

 

NUMBER OF
SHARES

 

 

 

 

 

VALUE

 

 

 

Common Stocks (94.0%)

 

 

 

 

 

 

 

 

Air Freight/Couriers (4.5%)

 

 

 

 

 

 

252,347

 

C.H. Robinson Worldwide, Inc.

 

 

 

$

12,811,657

 

230,777

 

Expeditors International of Washington, Inc.

 

 

 

 

9,074,152

 

 

 

 

 

 

 

 

21,885,809

 

 

 

Apparel/Footwear Retail (3.1%)

 

 

 

 

 

 

191,207

 

Abercrombie & Fitch Co. (Class A)

 

 

 

 

14,824,279

 

 

 

Biotechnology (5.5%)

 

 

 

 

 

 

198,967

 

Illumina, Inc.*

 

 

 

 

14,407,200

 

182,443

 

Techne Corp.*

 

 

 

 

12,477,277

 

 

 

 

 

 

 

 

26,884,477

 

 

 

Casino/Gaming (3.3%)

 

 

 

 

 

 

160,140

 

Wynn Resorts, Ltd.*

 

 

 

 

16,126,098

 

 

 

Chemicals: Agricultural (8.4%)

 

 

 

 

 

 

352,288

 

Monsanto Co.

 

 

 

 

40,752,676

 

 

 

Chemicals: Major Diversified (2.1%)

 

 

 

 

 

 

481,152

 

Nalco Holding Co.*

 

 

 

 

10,392,883

 

 

 

Computer Processing Hardware (2.1%)

 

 

 

 

 

 

82,728

 

Apple Inc.*

 

 

 

 

10,342,655

 

 

 

Construction Materials (3.2%)

 

 

 

 

 

 

554,513

 

Cemex SAB de C.V. (Sponsored ADR) (Mexico)*

 

 

 

 

15,276,833

 

 

 

Finance Energy (1.4%)

 

 

 

 

 

 

359,727

 

Brookfield Infrastructure Partners LP

 

 

 

 

6,762,868

 

 

 

Finance/Rental/Leasing (2.3%)

 

 

 

 

 

 

59,800

 

Mastercard Inc.- Class A*

 

 

 

 

11,362,000

 

 

 

Financial Conglomerates (4.3%)

 

 

 

 

 

 

698,040

 

Brookfield Asset Management Inc. (Class A) (Canada)

 

 

 

 

20,696,886

 

 

 

Information Technology Services (1.1%)

 

 

 

 

 

 

89,275

 

VMware Inc - Class A*

 

 

 

 

5,237,764

 

 

 

Internet Retail (4.3%)

 

 

 

 

 

 

325,089

 

Amazon.com, Inc.*

 

 

 

 

20,958,488

 

 

 

Internet Software/Services (9.7%)

 

 

 

 

 

 

41,613

 

Baidu.com, Inc. (Sponsored ADR) (Cayman Islands)*

 

 

 

 

10,458,595

 

57,701

 

Google Inc. (Class A)*

 

 

 

 

27,187,557

 

1,528,000

 

Tencent Holdings Ltd. (Hong Kong) (a)

 

 

 

 

9,443,752

 

 

 

 

 

 

 

 

47,089,904

 

 

 

Investment Banks/Brokers (2.9%)

 

 

 

 

 

 

215,344

 

Greenhill & Co., Inc.

 

 

 

 

13,999,513

 

 

 

Investment Trusts/Mutual Funds (2.9%)

 

 

 

 

 

 

689,355

 

Aeroplan Income Fund (Canada) (Units) (a) **

 

 

 

 

14,182,818

 

 

 

Miscellaneous Commercial Services (3.9%)

 

 

 

 

 

 

191,513

 

Corporate Executive Board Co. (The)

 

 

 

 

7,777,343

 

263,442

 

Costar Group, Inc.*

 

 

 

 

10,938,112

 

 

 

 

 

 

 

18,715,455

 

 

 

Oil & Gas Production (10.3%)

 

 

 

 

 

 

286,121

 

Southwestern Energy Co.*

 

 

 

 

18,663,673

 

396,538

 

Ultra Petroleum Corp. (Canada)*

 

 

 

 

31,116,337

 

 

 

 

 

 

 

 

49,780,010

 

 

 


 

 

 

Other Consumer Services (3.7%)

 

 

 

 

 

 

677,858

 

eBay Inc.*

 

 

 

 

17,868,337

 

 

 

Personnel Services (1.3%)

 

 

 

 

 

 

244,116

 

Monster Worldwide Inc.*

 

 

 

 

6,491,044

 

 

 

Restaurants (2.3%)

 

 

 

 

 

 

608,783

 

Starbucks Corp.*

 

 

 

 

10,939,831

 

 

 

Specialty Telecommunications (2.3%)

 

 

 

 

 

 

578,946

 

Cogent Communications Group, Inc.*

 

 

 

 

11,277,868

 

 

 

Telecommunication Equipment (4.1%)

 

 

 

 

 

 

189,941

 

Research In Motion Ltd. (Canada)*

 

 

 

 

19,715,876

 

 

 

Wholesale Distributors (2.4%)

 

 

 

 

 

 

3,230,000

 

Li & Fung Ltd. (Hong Kong) (a)

 

 

 

 

11,591,050

 

 

 

Wireless Telecommunications (2.6%)

 

 

 

 

 

 

204,427

 

America Movil SAB de C.V. (Series L) (ADR) (Mexico)

 

 

 

 

12,359,656

 

 

 

Total Common Stocks

 

 

 

 

 

 

 

 

 (Cost $397,561,433)

 

 

 

 

455,515,078

 

NUMBER OF
SHARES (000)

 

 

 

 

 

 

 

 

 

 

Short-Term Investment (b) (6.2%)

 

 

 

 

 

 

 

 

Investment Company

 

 

 

 

 

 

30,088

 

Morgan Stanley Institutional Liquidity Money Market Portfolio

 

 

 

 

 

 

 

 

    - Institutional Class

 

 

 

 

 

 

 

 

    (Cost $30,088,132)

 

 

 

 

30,088,132

 

 

 

Total Investments

 

 

 

 

 

 

 

 

    (Cost $427,649,565) (c)

 

100.2

%

 

485,603,210

 

 

 

Liabilities in Excess of Other Assets

 

(0.2

)

 

(1,174,688

)

 

 

Net Assets

 

100.0

%

$

484,428,522

 
______________

ADR

American Depositary Receipt.

*

Non-income producing security.

**

Consists of one or more class of securities traded together as a unit; stocks with attached warrants.

(a)

Securities with total market value equal to $21,034,802 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 Directors.

(b)

The Fund invests in Morgan Stanley Institutional Liquidity 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 Money Market Portfolio - Institutional Class with respect to assets invested by the Fund in Morgan Stanley Institutional Liquidity Money Market Portfolio - Institutional Class.

(c)

The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes.

Notes to the Portfolio of Investments

FAS 157

The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”), effective December 1, 2007. In accordance with FAS 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. FAS 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 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 – 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.

The following is a summary of the inputs used as of February 29, 2008 in valuing the Fund’s investments carried at value:

 

 

 

 

 

 

Fair Value Measurements at February 29, 2008 Using

 

 

 

Total

 

Quoted Prices In
Active Market for
Identical Assets
(Level 1)

 

Significant
Other Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

Investments in Securities

 

$

485,250,174

 

$

464,215,372

 

$

21,034,802

 

—

 

Valuation of Investments — (1) an equity portfolio security listed or traded on the New York Stock Exchange (“NYSE”) or American Stock Exchange or other exchange is valued at its latest sale price prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (2) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) all other portfolio securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (4) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (5) when market quotations are not readily available including circumstances under which Morgan Stanley Investment Advisors Inc. (the “Investment Adviser”) determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security’s market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund’s Trustees. Occasionally, developments affecting the closing prices 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 (where fair value is estimated using recently executed transactions, market price quotations (where observable) and pricing models that may factor in, where appropriate, interest rates, bond or credit default swap spreads and volatility); (7) investments in open-end mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at net assets 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.

 

 


 

 

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.

 

 

2

 


SIGNATURES

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

 

Morgan Stanley Capital Opportunities Trust

 

 

 


/s/ Ronald E. Robison

 

 

Ronald E. Robison

 

 

 

Principal Executive Officer

 

 

 

April 17, 2008

 

 

 

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

 


/s/ Ronald E. Robison

 

 

Ronald E. Robison

 

 

 

Principal Executive Officer

 

 

 

April 17, 2008

 

 

 

 


/s/ Francis Smith

 

 

Francis Smith

 

 

 

Principal Financial Officer

 

 

 

April 17, 2008

 

 

 

 

 

3

 


Exhibit 3 A1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Ronald E. Robison, certify that:

1.

I have reviewed this report on Form N-Q of Morgan Stanley Capital Opportunities Trust;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Omitted;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and

 

(d)

Disclosed in this report any change 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; and

5.

The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 17, 2008

 

 

 


/s/ Ronald E. Robison

 

 

 

Ronald E. Robison

 

 

 

Principal Executive Officer

 

 

4

 


Exhibit 3 A2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Francis Smith, certify that:

1.

I have reviewed this report on Form N-Q of Morgan Stanley Capital Opportunities Trust;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have:

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)

Omitted;

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 17, 2008

 

 

 


/s/ Francis Smith

 

 

 

Francis Smith

 

 

 

Principal Financial Officer

 

 

5