Morgan Stanley Institutional Fund N14 Registration statement for investment companies business combination

As filed with the U.S. Securities and Exchange Commission on October 8, 2014

Securities Act File No. 333-

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-14

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 x

Pre-Effective Amendment No. o

Post-Effective Amendment No. o

(Check appropriate box or boxes)

Morgan Stanley Institutional Fund, Inc.

(Exact Name of Registrant as Specified in Charter)

522 Fifth Avenue
New York, New York 10036

(Address of Principal Executive Offices: (Number, Street, City, State, Zip Code))

(212) 296-6969
(Area Code and Telephone Number)

Joseph C. Benedetti, Esq.
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036

(Name and Address of Agent for Service)

Copy to:

Carl Frischling, Esq.
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036

Stuart M. Strauss, Esq.
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036

Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement. It is proposed that this filing will become effective on November 7, 2014 pursuant to Rule 488.

No filing fee is required because an indefinite number of common shares of beneficial interest of Morgan Stanley Institutional Fund, Inc. have previously been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940.

MORGAN STANLEY GLOBAL INFRASTRUCTURE FUND

522 Fifth Avenue
New York, NY 10036
(800) 548-7786

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 27, 2015

To the Shareholders of Morgan Stanley Global Infrastructure Fund:

Notice is hereby given of a Special Meeting of Shareholders (the "Meeting") of Morgan Stanley Global Infrastructure Fund (the "Acquired Fund"), to be held in Conference Room 3G, 3rd Floor, 522 Fifth Avenue, New York, NY 10036, at 9:30 a.m., New York time, on February 27, 2015, and any adjournments or postponements thereof, for the following purposes:

1. To consider and vote upon a proposal to approve the actions and transactions described in that certain Agreement and Plan of Reorganization, dated September 17, 2014 (the "Reorganization Agreement"), between the Acquired Fund and Morgan Stanley Institutional Fund, Inc. (the "Company"), on behalf of the Select Global Infrastructure Portfolio (the "Acquiring Fund"), pursuant to which substantially all of the assets and liabilities of the Acquired Fund will be transferred to the Acquiring Fund in exchange for shares of the Acquiring Fund of the Class described in the accompanying Proxy Statement and Prospectus and pursuant to which the Acquired Fund will be liquidated and terminated (the "Reorganization"). As a result of this transaction, shareholders of the Acquired Fund will become shareholders of the Acquiring Fund receiving shares of the Acquiring Fund with a value equal to the aggregate net asset value of their shares of the Acquired Fund held immediately prior to the Reorganization; and

2. To act upon such other matters as may properly come before the Meeting.

Upon consummation of the Reorganization, it is anticipated that the Acquiring Fund will change its name to the Global Infrastructure Portfolio. No changes are anticipated with respect to the Acquiring Fund's investment objectives or strategies in connection with this name change.

The Reorganization is more fully described in the accompanying Proxy Statement and Prospectus and the Reorganization Agreement is attached as Exhibit A thereto. Shareholders of record of the Acquired Fund as of the close of business on December 11, 2014 are entitled to notice of, and to vote at, the Meeting, and any adjournments or postponements thereof. Please read the Proxy Statement and Prospectus carefully before telling us, through your Proxy or in person, how you wish your shares to be voted. Alternatively, if you are eligible to vote telephonically by touchtone telephone or electronically on the Internet (as discussed in the enclosed Proxy Statement and Prospectus), you may do so in lieu of attending the Meeting in person. The Board of Trustees of the Acquired Fund recommends that you vote in favor of the Reorganization. WE URGE YOU TO PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED PROXY OR RECORD YOUR VOTE ELECTRONICALLY VIA TELEPHONE OR THE INTERNET.

By Order of the Board of Trustees,

Mary E. Mullin
Secretary

[ ], 2014

You can help avoid the necessity and expense of sending follow-up letters to ensure a quorum by promptly returning the enclosed Proxy. If you are unable to be present in person, please fill in, sign and return the enclosed Proxy in order that the necessary quorum is represented at the Meeting. The enclosed envelope requires no postage if mailed in the United States. Shareholders will be able to vote telephonically by touchtone telephone or electronically on the Internet by following instructions on their proxy form.

MORGAN STANLEY INSTITUTIONAL FUND, INC.

SELECT GLOBAL INFRASTRUCTURE PORTFOLIO

522 Fifth Avenue
New York, NY 10036
(800) 548-7786

This Proxy Statement and Prospectus is being furnished to shareholders ("Shareholders") of Morgan Stanley Global Infrastructure Fund ("MS Global Infrastructure" or the "Acquired Fund") in connection with a Special Meeting of Shareholders (the "Meeting") to be held in Conference Room 3G, 3rd Floor, 522 Fifth Avenue, New York, NY 10036, at 9:30 a.m., New York time, on February 27, 2015, and any adjournments or postponements thereof, for the following purposes:

1. To consider and vote upon a proposal to approve the actions and transactions described in that certain Agreement and Plan of Reorganization, dated September 17, 2014 (the "Reorganization Agreement"), between the Acquired Fund and Morgan Stanley Institutional Fund, Inc. (the "Company"), on behalf of the Select Global Infrastructure Portfolio ("MSIF Global Infrastructure" or the "Acquiring Fund"), pursuant to which substantially all of the assets and the liabilities of the Acquired Fund will be transferred to the Acquiring Fund in exchange for shares of the Acquiring Fund of the Class described in the accompanying Proxy Statement and Prospectus and pursuant to which the Acquired Fund will be liquidated and terminated (the "Reorganization"). As a result of this transaction, shareholders of the Acquired Fund will become shareholders of the Acquiring Fund receiving shares of the Acquiring Fund with a value equal to the aggregate net asset value ("NAV") of their shares of the Acquired Fund held immediately prior to the Reorganization; and

2. To act upon such other matters as may properly come before the Meeting.

The terms and conditions of the transaction are more fully described in this Proxy Statement and Prospectus and in the Reorganization Agreement attached hereto as Exhibit A. The address and telephone number of the Acquired Fund are the same as those of the Acquiring Fund set forth above. This Proxy Statement also constitutes a Prospectus of the Acquiring Fund, filed by the Company with the Securities and Exchange Commission (the "Commission") as part of the Company's Registration Statement on Form N-14 (the "Registration Statement"). The Acquired Fund and Acquiring Fund are referred to collectively as the "Funds."

The Company is an open-end management investment company. The investment objective of the Acquiring Fund is to provide both capital appreciation and income.

This Proxy Statement and Prospectus sets forth concisely information about the Acquiring Fund that Shareholders of the Acquired Fund should know before voting on the Reorganization Agreement. A copy of the prospectus for the Acquiring Fund, dated April 30, 2014, as may be amended and supplemented from time to time, is attached as Exhibit B, which Prospectus forms a part of Post-Effective Amendment No. 124 to the Company's Registration Statement on Form N-1A (File Nos. 033-23166; 811-05624), and incorporated herein by reference (the "Acquiring Fund's Prospectus"). Also incorporated herein by reference are the prospectuses of the Acquired Fund (each an "Acquired Fund Prospectus"), each dated April 30, 2014, as may be amended and supplemented from time to time, which prospectuses form a part of Post-Effective Amendment No. 42 to the Acquired Fund's Registration Statement on Form N-1A (File Nos. 33-18983; 811-5415).

In addition, also enclosed and incorporated herein by reference is the Annual Report of the Acquiring Fund for the fiscal year ended December 31, 2013 and the Semi-Annual Report of the Acquiring Fund for the six-month period ended June 30, 2014 (File No. 811-05624). Also incorporated herein by reference is the Annual Report of the Acquired Fund for the fiscal year ended December 31, 2013 and the Semi-Annual Report of the Acquired Fund for the six-month period ended June 30, 2014 (File No. 811-5415). A Statement of Additional Information relating

to the Reorganization, described in this Proxy Statement and Prospectus, dated [ ], 2014, has been filed with the Commission and is also incorporated herein by reference. Such documents are available upon request and without charge by calling (800) 548-7786 with respect to each of the Acquired Fund and Acquiring Fund or by visiting the Commission's website at www.sec.gov.

Shareholders are advised to read and retain this Proxy Statement and Prospectus for future reference.

The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

This Proxy Statement and Prospectus is dated [ ], 2014.

TABLE OF CONTENTS
PROXY STATEMENT AND PROSPECTUS

Synopsis					1
General					1
The Reorganization					1
Fee Tables					2
Annual Fund Operating Expenses					5
Portfolio Turnover					5
Tax Consequences of the Reorganization					5
Comparison of Acquired Fund and Acquiring Fund					5
Principal Risk Factors					12
Voting Information					15
Record Date					15
Quorum					15
Voting Procedures					15
Expenses of Solicitation					16
Vote Required					16
Performance Information					16
The Reorganization					17
The Board's Considerations					17
The Reorganization Agreement					18
Tax Aspects of the Reorganization					19
Description of Shares					20
Capitalization Tables (unaudited)					21
Appraisal Rights					21
Comparison of Investment Objectives, Principal Policies and Restrictions					21
Investment Objectives and Policies					21
MS Global Infrastructure (Acquired Fund)					21
MSIF Global Infrastructure (Acquiring Fund)					22
Investment Restrictions					23
Additional Information About the Acquiring Fund and the Acquired Fund					24
General					24
Rights of Acquired Fund Shareholders and Acquiring Fund Shareholders					24
Financial Information					26
Shareholder Proposals					26
Management					26
Description of Shares and Shareholder Inquiries					26
Dividends, Distributions and Taxes					26
Purchases, Exchanges and Redemptions					27
Share Information					27
Financial Statements and Experts					29
Legal Matters					30
Available Information					30
Other Business					30
Exhibit A – Agreement and Plan of Reorganization					A-1
Exhibit B – Prospectus of the Acquiring Fund dated April 30, 2014, as it may be amended and supplemented from time to time					B-1
Exhibit C – Annual Report for the Acquiring Fund for the fiscal year ended December 31, 2013					C-1
Exhibit D – Semi-Annual Report for the Acquiring Fund for the period ended June 30, 2014					D-1

SYNOPSIS

The following is a synopsis of certain information contained in or incorporated by reference in this Proxy Statement and Prospectus. This synopsis is only a summary and is qualified in its entirety by the more detailed information contained or incorporated by reference in this Proxy Statement and Prospectus and the Reorganization Agreement. Shareholders should carefully review this Proxy Statement and Prospectus and the Reorganization Agreement in their entirety and, in particular, the Acquiring Fund's Prospectus, which is attached to this Proxy Statement and Prospectus as Exhibit B and incorporated herein by reference.

General

This Proxy Statement and Prospectus is being furnished to Shareholders of the Acquired Fund, an open-end management investment company, in connection with the solicitation by the Board of Trustees of the Acquired Fund (the "Board" or "Board of Trustees"), of proxies ("Proxies") to be used at the Meeting to consider the Reorganization. It is expected that the first mailing of this Proxy Statement and Prospectus will be made on or about January 5, 2015.

Pursuant to the Reorganization, Class A, Class B and Class Q Shareholders of the Acquired Fund will receive Class A shares of the Acquiring Fund, while Class I Shareholders of the Acquired Fund will receive Class I shares of the Acquiring Fund and Class L Shareholders of the Acquired Fund will receive Class L shares of the Acquiring Fund. The shares to be issued by the Acquiring Fund in connection with the Reorganization (the "Acquiring Fund Shares") will be issued at NAV without any sales charges. Any subsequent purchases of Class A shares of the Acquiring Fund after the Reorganization by the former Class A, Class B and Class Q Shareholders of the Acquired Fund will be subject to the initial sales charge schedule. See "Synopsis—Comparison of Acquired Fund and Acquiring Fund—Purchases, Exchanges and Redemptions" below. Further information relating to the Acquiring Fund is set forth herein and in the Acquiring Fund's Prospectus, attached to this Proxy Statement and Prospectus as Exhibit B and incorporated herein by reference.

The Acquired Fund is currently closed to new investors. Class A, Class L and Class I Shareholders of the Acquired Fund may purchase additional Class A, Class L and Class I Shares, respectively. The Class B and Class Q Shareholders of the Acquired Fund do not have the option of purchasing additional Class B and Class Q shares, respectively. However, the existing Class B and Class Q Shareholders may invest through dividend reinvestments.

The Board of Directors of the Company, on behalf of the Acquiring Fund (the "Board of Directors"), has authorized the issuance of the Acquiring Fund Shares to Shareholders of the Acquired Fund in connection with the Reorganization.

The information concerning the Acquired Fund contained herein has been supplied by the Acquired Fund. The information concerning the Acquiring Fund contained herein has been supplied by the Company.

The Reorganization

The Reorganization is being proposed because the Board has determined that the Reorganization is in the best interests of the Acquired Fund and its Shareholders. The Reorganization will allow Shareholders of the Acquired Fund to be invested in a fund that is managed according to similar investment objectives, strategies and restrictions and that is managed by the members of the same investment team. In addition, while Shareholders of the Acquired Fund will experience an increase in contractual management fees, the Reorganization is expected to result in the same or lower total operating expenses for Shareholders of the Acquired Fund and shareholders of the surviving combined fund (MSIF Global Infrastructure) (the "Combined Fund") as a result of economies of scale and proposed advisory fee waivers and/or expense reimbursements instituted by Morgan Stanley Investment Management Inc. ("MSIM" or the "Adviser"), the Acquiring Fund's and Acquired Fund's investment adviser. The proposed fee waivers and/or expense reimbursements will continue for at least two years from the date of the Reorganization or until such time as the Company's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. Moreover, the Reorganization will allow Shareholders of the Acquired Fund to be invested in a fund with the potential for broader distribution opportunities than the Acquired

Fund. There is no assurance that the proposed advisory fee waivers and/or expense reimbursements will continue and therefore the total expense ratios of the Combined Fund may be higher in the future. See "The Reorganization—The Board's Considerations."

The Reorganization Agreement provides for the transfer of substantially all the assets and the liabilities of the Acquired Fund to the Acquiring Fund in exchange for Acquiring Fund Shares. The aggregate NAV of the Acquiring Fund Shares issued in the exchange will equal the aggregate value of the net assets of the Acquired Fund received by the Acquiring Fund. On or after the closing date scheduled for the Reorganization (the "Closing Date"), the Acquired Fund will distribute the Acquiring Fund Shares received by the Acquired Fund to its Shareholders as of the Valuation Date (as defined below) in complete liquidation of the Acquired Fund and, without further notice, the outstanding shares of the Acquired Fund held by the Shareholders will then be redeemed and canceled as permitted by the organizational documents of the Acquired Fund and applicable law. The Acquired Fund thereafter will be deregistered as an investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). As a result of the Reorganization, each Shareholder will receive that number of full and fractional Acquiring Fund Shares equal in value to such Shareholder's pro rata interest in the net assets of the Acquired Fund transferred to the Acquiring Fund. Pursuant to the Reorganization, Class A, Class B and Class Q Shareholders of the Acquired Fund will receive Class A shares of the Acquiring Fund, while Class L Shareholders of the Acquired Fund will receive Class L of the Acquiring Fund and Class I Shareholders of the Acquired Fund will receive Class I shares of the Acquiring Fund. The Board has determined that the interests of the Shareholders will not be diluted as a result of the Reorganization. The "Valuation Date" is the business day immediately preceding the Closing Date and after the payment of any distributions or other amounts by Acquired Fund or at such time on such earlier or later date after such approval as may be mutually agreed upon in writing.

For the reasons set forth below under "The Reorganization—The Board's Considerations," the Board, including the Trustees who are not "interested persons" of the Acquired Fund ("Independent Board Members"), as that term is defined in the 1940 Act, has concluded that the Reorganization is advisable and in the best interests of the Acquired Fund and its Shareholders and recommends approval of the Reorganization.

Fee Tables

The following tables briefly describe the shareholder fees and annual Fund operating expenses that Shareholders of the Funds bear directly and indirectly from an investment in the Funds. Shareholder fees will not be charged on those Acquiring Fund Shares received in connection with the Reorganization. Each Fund pays expenses for management of its assets, distribution of its shares and other services, and those expenses are reflected in the NAV per share of each Fund. These expenses are deducted from each respective Fund's assets and are based on actual expenses incurred by each of the Acquiring Fund and Acquired Fund for its fiscal year ended December 31, 2013. The tables also set forth pro forma fees for the Combined Fund reflecting what the fee schedule would have been on December 31, 2013, if the Reorganization had been consummated twelve (12) months prior to that date.

The Class A shares of the Funds are subject to the same sales charges. For purchases of Class A shares of each Fund, you may qualify for a sales charge discount if the cumulative NAV of Class A shares of the Fund purchased in a single transaction, together with the NAV of all Class A shares of other Morgan Stanley Multi-Class Funds (as defined herein) held in related accounts, amounts to $25,000 or more. More information about this combined purchase discount and other discounts is available from your authorized financial intermediary and in the section of this Proxy Statement and Prospectus entitled "Synopsis—Comparison of Acquired Fund and Acquiring Fund—Purchases, Exchanges and Redemptions—Class A, Class B and Class Q Shares of Acquired Fund/Class A Shares of Acquiring Fund—Sales Charges."

Shareholder Fees
(fees paid directly from your investment)

MS Global Infrastructure (Acquired Fund)

Class A

Class B

Class Q

Class L

Class I

Maximum sales charge (load) imposed on
purchases (as a percentage of offering price)

5.25

None

Maximum deferred sales charge (load) (as a
percentage based on the lesser of the offering
price or NAV at redemption)

None(1)

5.00

%(2)

5.00

%(2)

None

MSIF Global Infrastructure (Acquiring Fund)

Class A†

Class L

Class I

Maximum sales charge (load) imposed on purchases
(as a percentage of offering price)

5.25

None

Maximum deferred sales charge (load) (as a percentage
based on the lesser of the offering price or
NAV at redemption)

None(1)

None

Pro Forma Combined Fund (MSIF Global Infrastructure)

Class A

Class L

Class I

Maximum sales charge (load) imposed on purchases
(as a percentage of offering price)

5.25

None

Maximum deferred sales charge (load) (as a percentage
based on the lesser of the offering price or
NAV at redemption)

None(1)

None

† Effective September 9, 2013, Class P shares of the Acquiring Fund were renamed Class A shares.

(1) Investments that are not subject to any sales charges at the time of purchase are subject to a contingent deferred sales charge ("CDSC") of 1.00% that will be imposed if you sell your shares within 18 months after the last day of the month of purchase, except for certain specific circumstances.

(2) The Class B and Class Q CDSC is scaled down to 1.00% during the sixth year, reaching zero thereafter.

Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)

MS Global Infrastructure (Acquired Fund)	Class A			Class B			Class Q			Class L			Class I
Advisory Fee		0.57	%		0.57	%		0.57	%		0.57	%		0.57	%
Distribution and/or Shareholder Service (12b-1) Fee‡		0.25	%		1.00	%		0.24	%		0.75	%		None
Other Expenses		0.31	%		0.37	%		0.30	%		0.36	%		0.30	%
Total Annual Fund Operating Expenses		1.13	%		1.94	%		1.11	%		1.68	%		0.87	%

MSIF Global Infrastructure (Acquiring Fund)	Class A†			Class L			Class I
Advisory Fee		0.85	%		0.85	%		0.85	%
Distribution and/or Shareholder Service (12b-1) Fee		0.25	%		0.75	%		None
Other Expenses		1.33	%		1.26	%		1.19	%
Total Annual Fund Operating Expenses*		2.43	%		2.86	%		2.04	%
Fee Waiver and/or Expense Reimbursement*		0.93	%		0.86	%		0.89	%
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement*		1.50	%		2.00	%		1.15	%

Pro Forma Combined Fund (MSIF Global Infrastructure)	Class A			Class L			Class I
Advisory Fee		0.85	%		0.85	%		0.85	%
Distribution and/or Shareholder Service (12b-1) Fee		0.25	%		0.75	%		None
Other Expenses		0.22	%		0.28	%		0.20	%
Total Annual Fund Operating Expenses^		1.32	%		1.88	%		1.05	%
Fee Waiver and/or Expense Reimbursement^		0.21	%		0.20	%		0.20	%
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement^		1.11	%		1.68	%		0.85	%

† Effective September 9, 2013, Class P shares of the Acquiring Fund were renamed Class A shares.

‡ The Board of Trustees approved an amendment to the Plan of Distribution reducing the distribution and shareholder services (12b-1) fee for the Fund's Class L shares from 1.00% to 0.75% of the average daily net assets of such Class, effective February 25, 2013. The Distribution and/or Shareholder Service (12b-1) Fee shown in the table above has been restated to reflect such change.

* MSIM has agreed to reduce its advisory fee and/or reimburse the Acquiring Fund so that Total Annual Fund Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.50% for Class A, 2.00% for Class L and 1.15% for Class I. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Company's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

^ MSIM has agreed to reduce its advisory fee and/or reimburse the Combined Fund so that Total Annual Fund Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.11% for Class A, 1.68% for Class L and 0.87% for Class I. The fee waivers and/or expense reimbursements will continue for at least two years from the date of the Reorganization or until such time as the Company's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

Example

To attempt to show the effect of these expenses on an investment over time, the hypothetical shown below has been created. The example assumes that an investor invests $10,000 in either the Acquired Fund or Acquiring Fund for the time periods indicated and that an investor then redeems all of his or her shares at the end of those periods. The example also assumes that the investment has a 5% return each year and that the operating expenses for each Fund remain the same (except for the 10 year amounts for Class B and Class Q Shares of the Acquired Fund which reflect the conversion to Class A Shares eight years after the end of the calendar month in which the shares were purchased). Although a Shareholder's actual costs may be higher or lower, the table below shows a Shareholder's costs at the end of each period based on these assumptions.

MS Global Infrastructure (Acquired Fund)	1 Year		3 Years		5 Years		10 Years
Class A	$	634	$	865	$	1,115	$	1,827
Class B	$	697	$	909	$	1,247	$	2,054
Class Q	$	613	$	653	$	812	$	1,352	^
Class L	$	171	$	530	$	913	$	1,987
Class I	$	89	$	278	$	482	$	1,073
MSIF Global Infrastructure (Acquiring Fund)
Class A†	$	670	$	974	$	1,300	$	2,222
Class L	$	203	$	627	$	1,078	$	2,327
Class I	$	117	$	365	$	633	$	1,398

Pro Forma Combined Fund (MSIF Global Infrastructure)	1 Year		3 Years		5 Years		10 Years
Class A	$	632	$	859	$	1,104	$	1,806
Class L	$	171	$	530	$	913	$	1,987
Class I	$	87	$	271	$	471	$	1,049

^ Does not reflect conversion to Class A shares eight years after the end of the calendar month in which shares were purchased. The conversion feature is currently suspended because the total annual operating expense ratio of Class Q is currently lower than that of Class A.

† Effective September 9, 2013, Class P shares of the Acquiring Fund were renamed Class A shares.

Annual Fund Operating Expenses

The purpose of the foregoing fee tables is to assist Shareholders in understanding the various costs and expenses that a Shareholder in each Fund will bear directly or indirectly. For a more complete description of these costs and expenses, see "Comparison of Acquired Fund and Acquiring Fund—Investment Advisory Fees," "—Distribution Plan and Shareholder Services Plan Fees," "—Other Significant Fees" and "—Purchases, Exchanges and Redemptions" below.

Portfolio Turnover

Each Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example, affect Fund performance. During the most recent fiscal year, the Acquiring Fund's portfolio turnover rate was 30% of the average value of its portfolio and the Acquired Fund's portfolio turnover rate was 25% of the average value of its portfolio.

Tax Consequences of the Reorganization

As a condition to the Reorganization, the Acquired Fund has requested an opinion of Dechert LLP to the effect that, based upon certain facts, assumptions and representations, the Reorganization will constitute a tax-free reorganization for federal income tax purposes, and no gain or loss will be recognized by the Acquired Fund, the Acquiring Fund or the Acquired Fund's Shareholders for federal income tax purposes as a result of the transactions included in the Reorganization. Receipt of such opinion is a condition to the Reorganization. For further information about the tax consequences of the Reorganization, see "The Reorganization—Tax Aspects of the Reorganization" below.

Comparison of Acquired Fund and Acquiring Fund

Investment Objectives and Principal Investment Policies. The investment objective and principal investment policies of the Acquired Fund are similar to those of the Acquiring Fund and are set forth below. The Acquired Fund is a diversified fund and the Acquiring Fund is a non-diversified fund. The principal differences between the principal investment policies of the Acquired Fund and the Acquiring Fund are more fully described under "Comparison of Investment Objectives, Principal Policies and Restrictions" below. The Acquired Fund's investment objective is a fundamental policy and may not be changed without shareholder approval of a majority of the Fund's outstanding voting securities, as defined in the 1940 Act. The Acquiring Fund's investment objective is non-fundamental and may be changed by the Company's Board of Directors without shareholder approval, but no change is currently anticipated.

MS Global Infrastructure (Acquired Fund)				MSIF Global Infrastructure (Acquiring Fund)
Investment Objective				Investment Objective
• seeks to provide both capital appreciation and current income				• seeks to provide both capital appreciation and income

MS Global Infrastructure (Acquired Fund)				MSIF Global Infrastructure (Acquiring Fund)
Principal Investment Policies				Principal Investment Policies
• normally invests at least 80% of its assets in equity securities issued by companies located throughout the world that are engaged in the infrastructure business				• normally invests at least 80% of its assets in equity securities issued by companies located throughout the world that are engaged in the infrastructure business
• equity investments may include convertible securities				• equity investments may include convertible securities
• investments may include securities of small and medium capitalization companies				• investments may include securities of small and medium capitalization companies
• may invest up to 100% of its net assets in foreign securities, which may include emerging market securities				• may invest up to 100% of its net assets in foreign securities, which may include emerging market securities
• under normal market conditions, invests at least 40% of its assets in the securities of issuers located outside of the United States				• under normal market conditions, invests at least 40% of its assets in the securities of issuers located outside of the United States
• has a fundamental policy (i.e., one that cannot be changed without shareholder approval) of investing 25% or more of its assets in the infrastructure industry				• has a fundamental policy (i.e., one that cannot be changed without shareholder approval) of investing 25% or more of its assets in the infrastructure industry
• value-driven approach to bottom-up security selection utilizes proprietary research models to identify infrastructure companies that offer the best value relative to their underlying assets and growth prospects. The top-down allocation provides diversified exposure to major economic infrastructure sectors and countries, with an overweighting to those sectors/countries that offer the best relative valuation				• value-driven approach to bottom-up security selection utilizes proprietary research models to identify infrastructure companies that offer the best value relative to their underlying assets and growth prospects. The top-down allocation provides exposure to major economic infrastructure sectors and countries, with an overweighting to those sectors/countries that offer the best relative valuation
• a diversified fund				• a non-diversified fund

Fund Management. The Acquiring Fund and Acquired Fund are both managed within MSIM's Global Infrastructure Securities team, and, if the Reorganization is approved, the Acquiring Fund is expected to continue to be managed within MSIM's Global Infrastructure Securities team. Current members of the team jointly and primarily responsible for the day-to-day management of the Acquiring Fund are Theodore R. Bigman and Matthew King.

Mr. Bigman has been associated with the Adviser in an investment management capacity since 1995. Mr. King has been associated with the Adviser in an investment management capacity since 2008.

Together, the team determines investment strategy, establishes asset-allocation frameworks and directs the implementation of investment strategy.

Additional information about the portfolio managers' compensation structure, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in the Funds is provided in each of the Company's and Acquired Fund's Statements of Additional Information.

Investment Advisory Fees. The Acquiring Fund and Acquired Fund currently obtain advisory services from MSIM. MSIM is a wholly-owned subsidiary of Morgan Stanley (NYSE: "MS") with its principal office located at 522 Fifth Avenue, New York, NY 10036. Morgan Stanley is a preeminent global financial services firm engaged in securities trading and brokerage activities, as well as providing investment banking, research and analysis, financing and financial advisory services.

The annual advisory fee (as a percentage of daily net assets) payable by the Funds is set forth below. The Acquiring Fund pays its advisory fee on a quarterly basis while the Acquired Fund pays its advisory fee on a monthly basis.

MS Global Infrastructure (Acquired Fund):				0.57% of the portion of daily net assets not exceeding $500 million; 0.47% of the portion of daily net assets exceeding $500 million but not exceeding $1 billion; 0.445% of the portion of daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.42% of the portion of daily net assets exceeding $1.5 billion but not exceeding $2.5 billion; 0.395% of the portion of daily net assets exceeding $2.5 billion but not exceeding $3.5 billion; 0.37% of the portion of daily net assets exceeding $3.5 billion but not exceeding $5 billion; and 0.345% of the portion of daily net assets exceeding $5 billion
MSIF Global Infrastructure (Acquiring Fund)*:				0.85% of daily net assets

MSIM has entered into sub-advisory agreements with Morgan Stanley Investment Management Limited ("MSIM Limited" or a "Sub-Adviser"), located at 25 Cabot Square, Canary Wharf, London, E14 4QA, England and Morgan Stanley Investment Management Company ("MSIM Company" or a "Sub-Adviser"), located at 23 Church Street, 16-01 Capital Square, Singapore 049481 with respect to each Fund. Both MSIM Limited and MSIM Company are wholly-owned subsidiaries of Morgan Stanley. MSIM Limited and MSIM Company provide each Fund with investment advisory services subject to the overall supervision of MSIM and each Fund's Trustees/Directors. MSIM pays each of MSIM Limited and MSIM Company on a monthly basis a portion of the net advisory fees MSIM receives from each Fund.

While contractual management fees are higher for the Acquiring Fund, the Combined Fund is expected to have lower (in the case of Class A, Class B and Class I Shareholders of the Acquired Fund) or the same (in the case of Class L and Class Q Shareholders of the Acquired Fund) total operating expenses as the Acquired Fund as a result of economies of scale and proposed advisory fee waivers and/or expense reimbursements instituted by MSIM. Specifically, MSIM has agreed to reduce its advisory fee and/or reimburse the Combined Fund so that Total Annual Fund Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.11% for Class A, 1.68% for Class L and 0.87% for Class I. The fee waivers and/or expense reimbursements will continue for at least two years from the date of the Reorganization or until such time as the Company's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

Comparison of Other Service Providers. The Acquired Fund and Acquiring Fund have the same transfer agent, custodian, distributor, administrator and independent registered public accounting firm. For each Fund, the transfer agent is Boston Financial Data Services, Inc., the custodian is State Street Bank and Trust Company, the distributor is Morgan Stanley Distribution, Inc., the administrator is MSIM and the independent registered public accounting firm is Ernst & Young LLP.

Distribution Plan and Shareholder Services Plan Fees.

Descriptions of the Plans. The Acquired Fund has adopted a plan of distribution with respect to each of its Class A shares, Class B shares, Class Q shares and Class L shares, pursuant to Rule 12b-1 under the 1940 Act (the

"MS Retail Plans"). Under the MS Retail Plans, the Acquired Fund pays distribution and/or shareholder services fees in connection with the sale and distribution of its shares and the provision of ongoing services to Shareholders of each such class and the maintenance of shareholder accounts. For a complete description of these arrangements with respect to the Acquired Fund, see the section of the applicable Acquired Fund Prospectus entitled "Shareholder Information—Share Class Arrangements" and the section of the applicable Acquired Fund statement of additional information entitled "Rule 12b-1 Plan."

The Company has adopted a shareholder services plan (the "MSIF Service Plan") with respect to Class A shares of the Acquiring Fund and a distribution and shareholder services plan (the "MSIF Distribution Plan" and, together with the MSIF Service Plan, the "MSIF Plans") with respect to Class L shares of the Acquiring Fund pursuant to Rule 12b-1 under the 1940 Act.

Class A, Class B and Class Q Shares of Acquired Fund/Class A Shares of Acquiring Fund. Under the MS Retail Plans, the Acquired Fund may pay up to 0.25%, 1.00% and 0.26% of its average daily net assets attributable to each of Class A shares, Class B shares and Class Q shares, respectively, for distribution-related expenses and for the provision of ongoing services to Shareholders. The Acquired Fund's distributor has agreed to permanently cap the 12b-1 fee for the Class Q shares at 0.24% of average daily net assets.

Under the MSIF Service Plan, the Acquiring Fund may pay a shareholder services fee of up to 0.25% of Class A shares' average daily net assets on an annualized basis. The "Distributor," Morgan Stanley Distribution, Inc., may compensate other parties for providing shareholder support services to investors who purchase Class A shares. For further information relating to shareholder services applicable to Class A shares of the Acquiring Fund, see the section entitled "Shareholder Information—Distribution of Portfolio Shares" in the Acquiring Fund's Prospectus attached hereto as Exhibit B.

Class L Shares of Acquired Fund/Class L Shares of Acquiring Fund. Under the MS Retail Plans, the Acquired Fund may pay up to 0.75% of its average daily net assets attributable to Class L shares for distribution-related expenses and for the provision of ongoing services to Shareholders.

Under the MSIF Distribution Plan, the Acquiring Fund may pay a shareholder services fee of up to 0.25% of the Class L shares' average daily net assets on an annualized basis and a distribution fee of 0.50% of the Class L shares' average daily net assets on an annualized basis. The Distributor may compensate other parties for providing shareholder support services to investors who purchase Class L shares. For further information relating to the shareholder services and distribution fees applicable to Class L shares of the Acquiring Fund, see the section entitled "Shareholder Information—Distribution of Portfolio Shares" in the Acquiring Fund's Prospectus attached hereto as Exhibit B.

Class I Shares of Acquired Fund/Class I Shares of Acquiring Fund. Class I shares of the Acquired Fund are not subject to the MS Retail Plans and Class I shares of the Acquiring Fund are not subject to the MSIF Plans.

Other Significant Fees. Each of the Acquiring Fund and Acquired Fund pay additional fees in connection with their operations, including legal, auditing, transfer agent and custodial fees. See "Synopsis—Fee Tables" above for the percentage of average net assets represented by such "Other Expenses."

Purchases, Exchanges and Redemptions. The Company's Board of Directors has authorized the issuance of the Acquiring Fund Shares in connection with the Reorganization.

Class A, Class B and Class Q Shares of Acquired Fund/Class A Shares of Acquiring Fund

Minimum Investments. The minimum initial investment amount for Class A shares of the Acquired Fund is $1,000 for regular accounts and individual retirement accounts; and $100 for purchase plans that allow you to transfer money automatically from your checking or savings account or from a Morgan Stanley Money Market Fund (as defined in the applicable Acquired Fund Prospectus) on a semi-monthly, monthly or quarterly basis ("EasyInvest^®") (provided a Shareholder's schedule of investments totals $1,000 in 12 months). The minimum subsequent investment amount for Class A shares of the Acquired Fund is $100 for all account types, except for an account opened through EasyInvest^®, which requires a Shareholder's schedule of investments to total $1,000 in

12 months. Class B and Class Q shares of the Acquired Fund are closed to new investments. The Class B and Class Q Shareholders of the Acquired Fund do not have the option of purchasing additional Class B and Class Q shares, respectively.

The minimum initial investment for Class A shares of the Acquiring Fund generally is $1,000. If the value of an investor's account falls below the minimum initial investment amount for Class A shares as a result of share redemptions or if such investor no longer meets one of the waiver criteria, the investor's account may be subject to involuntary redemption. Shareholders will be notified prior to any such redemption. For further information relating to the minimum investment amounts for Class A shares of the Acquiring Fund, please see the section entitled "Shareholder Information—Minimum Investment Amounts" in the Acquiring Fund's Prospectus attached hereto as Exhibit B.

Sales Charges. Class A shares of the Acquired Fund are subject to an initial sales charge of up to 5.25% calculated as a percentage of the offering price on a single transaction. For purchases of Class A shares of the Acquired Fund, you may benefit from a reduced sales charge if the cumulative NAV of Class A shares of the Acquired Fund purchased in a single transaction, together with the NAV of any Class A shares of the Acquired Fund and any other Morgan Stanley Multi-Class Fund (as defined below) (including shares of Morgan Stanley Money Market Funds (as defined in the applicable Acquired Fund Prospectuses) and Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust which you acquired in an exchange from Class A shares of the Acquired Fund or Class A shares of another Morgan Stanley Multi-Class Fund) held in related accounts, amounts to $25,000 or more. In addition, you will have the benefit of a reduced sales charge by combining your purchase of Class A shares of the Acquired Fund in a single transaction with your purchase of Class A shares of any other Morgan Stanley Multi-Class Fund for any related account. Investments of $1 million or more are not subject to an initial sales charge, but are generally subject to a CDSC of 1.00% on sales made within 18 months after the last day of the month of purchase. The CDSC will be assessed in the same manner as with Class B shares of the Acquired Fund (as discussed below). The CDSC on Class A shares of the Acquired Fund may be waived under certain circumstances.

Class B shares of the Acquired Fund are not subject to an initial sales charge but are subject to a CDSC. The CSDC decreases to 0% after six years as follows: Year 1—5.00%; Year 2—4.00%; Year 3—3.00%; Year 4—2.00%; Year 5—2.00%; Year 6—1.00%; Year 7 and thereafter—None. The CDSC is assessed on an amount equal to the lesser of the then market value of the Class B shares or the historical cost of the Class B shares (which is the amount actually paid for the Class B shares at the time of original purchase) being redeemed. The CDSC on Class B shares of the Acquired Fund may be waived under certain circumstances.

Class A shares of the Acquiring Fund are offered at NAV and are subject to an initial sales charge equal to a maximum of 5.25% calculated as a percentage of the offering price on a single transaction. You may benefit from a reduced sales charge if the cumulative NAV of Class A shares of the Acquiring Fund purchased in a single transaction, together with the NAV of any Class A shares of the Acquiring Fund and any other Morgan Stanley Multi-Class Fund (including shares of Morgan Stanley Money Market Funds and Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust which you acquired in an exchange from Class A shares of the Acquiring Fund or Class A shares of another Morgan Stanley Multi-Class Fund) held in related accounts, amounts to $25,000 or more. In addition, you will have the benefit of a reduced sales charge by combining your purchase of Class A shares of the Acquiring Fund in a single transaction with your purchase of Class A shares of any other Morgan Stanley Multi-Class Fund for any related account. Investments of $1 million or more are not subject to an initial sales charge, but are generally subject to a CDSC of 1.00% on sales made within 18 months after the last day of the month of purchase. The CDSC is assessed on an amount equal to the lesser of the then market value of the shares or the historical cost of the shares (which is the amount actually paid for the shares at the time of original purchase) being redeemed. The CDSC on Class A shares of the Acquiring Fund may be waived under certain circumstances. For further information relating to the initial sales charge and CDSC for Class A shares of the Acquiring Fund, please see the section entitled "Shareholder Information—How To Purchase Class A Shares" and "—How To Redeem Shares—Class A Shares" in the Acquiring Fund's Prospectus attached hereto as Exhibit B.

The initial sales charge applicable to Class A shares of the Acquiring Fund will be waived for Class A shares acquired in the Reorganization. Any subsequent purchases of Class A shares of the Acquiring Fund after the Reorganization by the former Class A, Class B and Class Q Shareholders of the Acquired Fund will be subject to the initial sales charge schedule. No CDSCs will be imposed on Class A, Class B or Class Q shares of the Acquired Fund that are exchanged for Class A shares of the Acquiring Fund in connection with the Reorganization.

Exchange Privileges. Class A shares and Class B shares of the Acquired Fund may be exchanged for shares of the same class, and Class Q shares of the Acquired Fund may be exchanged for Class A shares, of any other continuously offered Morgan Stanley Retail Fund (as defined in the applicable Acquired Fund Prospectus), if available, without the imposition of an exchange fee. Class A shares and Class B shares of the Acquired Fund may also be exchanged for the same class of shares, and Class Q shares of the Acquired Fund may be exchanged for Class A shares, of any portfolio of the Company or Morgan Stanley Institutional Fund Trust ("MSIFT" and, collectively with the Company and the Morgan Stanley Retail Funds, the "Morgan Stanley Multi-Class Funds"), if available, without the imposition of an exchange fee. Front-end sales charges (loads) are not imposed on exchanges of Class A shares of the Acquired Fund. Class B shares of the Acquired Fund may be exchanged for Class B shares of any Morgan Stanley Retail Fund even though Class B shares are closed to investors. In addition, Class A shares, Class B shares and Class Q shares of the Acquired Fund may be exchanged for shares of a Morgan Stanley Money Market Fund (as defined in the applicable Acquired Fund Prospectuses, and together with the Morgan Stanley Multi-Class Funds, the "Morgan Stanley Funds") or for Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, if available, without the imposition of an exchange fee. Class B shares of the Acquired Fund that are exchanged for shares of a Morgan Stanley Money Market Fund or Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust may be subsequently re-exchanged for Class B shares of the Acquired Fund or any other Morgan Stanley Retail Fund (even though Class B shares are closed to investors). Once you exchange out of Class Q shares of the Acquired Fund, you will not be able to re-exchange back into Class Q shares of the Acquired Fund.

Class A shares of the Acquiring Fund may be exchanged for shares of the same class of any Morgan Stanley Multi-Class Fund, if available, without the imposition of an exchange fee. In addition, Class A shares of the Acquiring Fund may be exchanged for shares of a Morgan Stanley Money Market Fund or for Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, if available, without the imposition of an exchange fee. Front-end sales charges (loads) are not imposed on exchanges of Class A shares of the Acquiring Fund.

There are special considerations when you exchange Class A shares of the Acquiring Fund that are subject to a CDSC. When determining the length of time you held the Class A shares, any period (starting at the end of the month) during which you held such shares will be counted. In addition, any period (starting at the end of the month) during which you held (i) Class A shares of other portfolios of the Company; (ii) Class A shares of a Morgan Stanley Multi-Class Fund; (iii) shares of a Morgan Stanley Money Market Fund or (iv) Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, any of which you acquired in an exchange from such Class A shares of the applicable portfolio, will also be counted; however, if you sell shares of (i) such other portfolio of the Company; (ii) the Morgan Stanley Multi-Class Fund; (iii) the Morgan Stanley Money Market Fund; or (iv) the Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, before the expiration of the CDSC "holding period," you will be charged the CDSC applicable to such shares.

Exchanges are effected based on the respective NAVs of the applicable Morgan Stanley Fund (subject to any applicable redemption fee). Upon consummation of the Reorganization, the foregoing exchange privileges will apply to Shareholders of the Combined Fund; however, your transaction will be treated the same as an initial purchase. You will be subject to the same minimum initial investment and account size as an initial purchase.

Each Fund provides telephone exchange privileges to its Shareholders. For greater details relating to exchange privileges applicable to the Acquiring Fund, see the section entitled "Shareholder Information—Exchange Privilege" in the Acquiring Fund's Prospectus attached hereto as Exhibit B. For greater details relating to exchange privileges applicable to the Acquired Fund, see the sections entitled "Shareholder Information—How to Exchange Shares" in the applicable Acquired Fund Prospectus, incorporated herein by reference.

Class L Shares of Acquired Fund/Class L Shares of Acquiring Fund

Minimum Investments. The minimum initial investment amount for Class L shares of the Acquired Fund is $1,000 for regular accounts and individual retirement accounts; and $100 for EasyInvest^® (provided a Shareholder's schedule of investments totals $1,000 in 12 months). The minimum subsequent investment amount for Class L shares of the Acquired Fund is $100 for all account types, except for an account opened through EasyInvest^®, which requires a Shareholder's schedule of investments to total $1,000 in 12 months.

The minimum initial investment for Class L shares of the Acquiring Fund generally is $1,000. If the value of an investor's account falls below the minimum initial investment amount for Class L shares as a result of share redemptions or if such investor no longer meets one of the waiver criteria, the investor's account may be subject to involuntary redemption. Shareholders will be notified prior to any such redemption. For further information relating to the minimum investment amounts for Class L shares of the Acquiring Fund, please see the section entitled "Shareholder Information—Minimum Investment Amounts" in the Acquiring Fund's Prospectus attached hereto as Exhibit B.

Sales Charges. Class L shares of each of the Acquired Fund and Acquiring Fund are offered at NAV with no initial sales charge or CDSC.

Exchange Privileges. Class L shares of the Acquired Fund and the Acquiring Fund may be exchanged for shares of the same class of any Morgan Stanley Multi-Class Fund, if available, or for shares of any Morgan Stanley Money Market Fund or for Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, if available, without the imposition of an exchange fee.

Each Fund provides telephone exchange privileges to its Shareholders. For greater details relating to exchange privileges applicable to the Acquiring Fund, see the section entitled "Shareholder Information—Exchange Privilege" in the Acquiring Fund's Prospectus attached hereto as Exhibit B. For greater details relating to exchange privileges applicable to the Acquired Fund, see the section entitled "Shareholder Information—How to Exchange Shares" in the applicable Acquired Fund Prospectus, incorporated herein by reference.

Class I Shares of Acquired Fund/Class I Shares of Acquiring Fund

Minimum Investments. Class I shares of the Acquired Fund are offered only to investors meeting an initial investment minimum of $5,000,000 and are available only to limited categories of investors.

The minimum initial investment for Class I shares of the Acquiring Fund generally is $5,000,000. If the value of an investor's account falls below the minimum initial investment amount for Class I shares as a result of share redemptions or if such investor no longer meets one of the waiver criteria, the investor's account may be subject to involuntary conversion (to another class of shares offered by the Acquired Fund (if an account meets the minimum investment amount for such class)) or involuntary redemption. Shareholders will be notified prior to any such conversion or redemption. For further information relating to minimum investment requirements for Class I shares of the Acquiring Fund, please see the section entitled "Shareholder Information—Minimum Investment Amounts" in the Acquiring Fund's Prospectus attached hereto as Exhibit B.

Sales Charges. Class I shares of each of the Acquired Fund and Acquiring Fund are not subject to either an initial sales charge or a CDSC.

Exchange Privileges. Class I shares of the Acquired Fund and the Acquiring Fund may be exchanged for shares of the same class of any Morgan Stanley Multi-Class Fund, if available, or for shares of a Morgan Stanley Money Market Fund or for Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, if available, without the imposition of an exchange fee.

Each Fund provides telephone exchange privileges to its Shareholders. For greater details relating to exchange privileges applicable to the Acquiring Fund, see the section entitled "Shareholder Information—Exchange Privilege" in the Acquiring Fund's Prospectus attached hereto as Exhibit B. For greater details relating to exchange privileges applicable to the Acquired Fund, see the section entitled "Shareholder Information—How to Exchange Shares" in the applicable Acquired Fund Prospectus, incorporated herein by reference.

Dividends. Each Fund declares dividends separately for each of its classes. The Acquiring Fund's policy is to distribute to shareholders substantially all of its net investment income, if any, in the form of an annual dividend and to distribute net realized capital gains, if any, at least annually. Normally, the Acquired Fund pays income dividends semi-annually and capital gains, if any, are usually distributed in June and December. Dividends and capital gains distributions are automatically reinvested in additional shares of the same class of shares of such Fund at NAV unless the shareholder instructs otherwise.

PRINCIPAL RISK FACTORS

The principal risks of investing in the Acquiring Fund are substantially similar to those of investing in the Acquired Fund. The value of an investment in each Fund is based on the market prices of the securities such Fund holds. These prices change daily due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries, companies or governments.

Infrastructure Industry. By concentrating its investments in the infrastructure industry, each Fund has greater exposure to the potential adverse economic, regulatory, political and other changes affecting companies operating within such industry. Companies within the infrastructure industry are subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction and improvement programs, high leverage, costs associated with compliance with and changes in environmental and other regulations, difficulty in raising capital in adequate amounts and on reasonable terms in periods of high inflation and unsettled capital markets or government budgetary constraints that impact publicly funded projects, the effects of economic slowdown or recession and surplus capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies and other factors. Additionally, companies within the infrastructure industry may be subject to regulation by various government authorities and may also be affected by government regulation of rates charged to customers, service interruption or legal challenges due to environmental, operational or other mishaps and the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards; technological innovations that may render existing plants, equipment or products obsolete, unforeseen delays, accidents, and cost overruns in infrastructure projects. Any market price movements, regulatory or technological changes, or economic conditions affecting infrastructure-related companies may have a significant impact on the Portfolio's performance. Other factors that may affect the operations of companies within the infrastructure industry include innovations in technology that could render the way in which a company delivers a product or service obsolete, significant changes to the number of ultimate end-users of a company's products, inexperience with and potential losses resulting from a developing deregulatory environment, increased susceptibility to terrorist attacks, risks of environmental damage due to a company's operations or an accident, and general changes in market sentiment towards infrastructure and utilities assets.

companies located in the affected areas and such extreme weather patterns, or the threat thereof, could adversely impact the prices of the securities in which the Funds invest. This volatility may create fluctuations in commodity prices and earnings of companies in the infrastructure industry.

Equity Securities. Each Fund may invest in equity securities. Equity securities may include common and preferred stocks, convertible securities and equity-linked securities, rights and warrants to purchase common stocks, depositary receipts, limited partnership interests and other specialty securities having equity features. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, prices of equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions.

In addition, at times, small and medium capitalization equity securities may underperform relative to the overall market. Investments in small and medium capitalization companies may involve greater risk than investments in larger, more established companies. The securities issued by small and medium capitalization companies may be less liquid and their prices subject to more abrupt or erratic price movements. In addition, small and medium capitalization companies may have more limited markets, financial resources and product lines, and may lack the depth of management of larger companies. MSIM's perception that a stock is under- or over-valued may not be accurate or may not be realized.

The Funds may invest in equity securities that are publicly-traded on securities exchanges or over-the-counter or in equity securities that are not publicly traded. Securities that are not publicly traded may be more difficult to sell and their value may fluctuate more dramatically than other securities.

Depositary receipts involve many of the same risks as those associated with direct investment in foreign securities. In addition, the underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts, are under no obligation to distribute shareholder communications to the holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities.

A convertible security is a bond, debenture, note, preferred stock, right, warrant or other security that may be converted into or exchanged for a prescribed amount of common stock or other security of the same or a different issuer or into cash within a particular period of time at a specified price or formula. A convertible security generally entitles the holder to receive interest paid or accrued on debt securities or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities generally have characteristics similar to both debt and equity securities. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities. Convertible securities ordinarily provide a stream of income with generally higher yields than those of common stock of the same or similar issuers. Convertible securities generally rank senior to common stock in a corporation's capital structure but are usually subordinated to comparable nonconvertible securities. Convertible securities generally do not participate directly in any dividend increases or decreases of the underlying securities although the market prices of convertible securities may be affected by any dividend changes or other changes in the underlying securities.

Foreign Securities. Each Fund may invest in foreign securities. Foreign issuers generally are subject to different accounting, auditing and financial reporting standards than U.S. issuers. There may be less information available to the public about foreign issuers. Securities of foreign issuers can be less liquid and experience greater price movements. In addition, the prices of such securities may be susceptible to influence by large traders, due to the limited size of many foreign securities markets. Moreover, investments in certain foreign markets, which have historically been considered stable, may become more volatile and subject to increased risk due to ongoing developments and changing conditions in such markets. Also, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions. In some foreign countries, there is also the risk of government expropriation, excessive taxation, political or social instability, the imposition of currency controls or diplomatic developments that could affect a Fund's investment. There also can be difficulty obtaining and enforcing judgments against issuers in foreign countries. Foreign stock exchanges,

broker-dealers and listed issuers may be subject to less government regulation and oversight. The cost of investing in foreign securities, including brokerage commissions and custodial expenses, can be higher than in the United States.

In connection with their investments in foreign securities, the Funds also may enter into contracts with banks, brokers or dealers to purchase or sell securities or foreign currencies at a future date. A foreign currency forward exchange contract is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the contract. Foreign currency forward exchange contracts may be used to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. In addition, the Funds may use cross currency hedging or proxy hedging with respect to currencies in which the Funds have or expect to have portfolio or currency exposure. Cross currency hedges involve the sale of one currency against the positive exposure to a different currency and may be used for hedging purposes or to establish an active exposure to the exchange rate between any two currencies.

Certain foreign markets may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments, the imposition of economic sanctions against a particular country or countries, organizations, entities and/or individuals, changes in international trading patterns, trade barriers, and other protectionist or retaliatory measures. Economic sanctions could, among other things, effectively restrict or eliminate a Fund's ability to purchase or sell securities or groups of securities for a substantial period of time, and may make a Fund's investments in such securities harder to value. International trade barriers or economic sanctions against foreign countries, organizations, entities and/or individuals, may adversely affect a Portfolio's foreign holdings or exposures. Investments in foreign markets may also be adversely affected by governmental actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets, or the imposition of punitive taxes. Governmental actions can have a significant effect on the economic conditions in foreign countries, which also may adversely affect the value and liquidity of a Fund's investments. For example, the governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain sectors or industries. In addition, a foreign government may limit or cause delay in the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. Any of these actions could severely affect security prices, impair the Portfolio's ability to purchase or sell foreign securities or transfer a Fund's assets back into the U.S., or otherwise adversely affect the Portfolio's operations. Certain foreign investments may become less liquid in response to market developments or adverse investor perceptions, or become illiquid after purchase by a Fund, particularly during periods of market turmoil. Certain foreign investments may become illiquid when, for instance, there are few, if any, interested buyers and sellers or when dealers are unwilling to make a market for certain securities. When a Fund holds illiquid investments, its portfolio may be harder to value.

Emerging Market Risks. Each Fund may invest in emerging market or developing countries, which are countries that major international financial institutions, such as the World Bank, generally consider to be less economically mature than developed nations, such as the United States or most nations in Western Europe. Emerging market or developing countries may be more likely to experience political turmoil or rapid changes in economic conditions than more developed countries, and the financial condition of issuers in emerging market or developing countries may be more precarious than in other countries. In addition, emerging market securities generally are less liquid and subject to wider price and currency fluctuations than securities issued in more developed countries. These characteristics result in greater risk of price volatility in emerging market or developing countries, which may be heightened by currency fluctuations relative to the U.S. dollar.

Liquidity Risk. Each Fund's investments in illiquid securities may entail greater risk than investments in publicly traded securities. These securities may be more difficult to sell, particularly in times of market turmoil. Additionally, the market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. Illiquid securities may be more difficult to value. If a Fund is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

Non-Diversified Status. The risks of investing in the Acquiring Fund may be intensified because the Acquiring Fund is non-diversified, which means that it may invest in securities of a limited number of issuers. As a result, the performance of a particular investment or a small group of investments may affect the Acquiring Fund's performance more than if the Acquiring Fund were diversified.

The foregoing discussion is a summary of the principal risk factors. For a more complete discussion of the risks of the Acquiring Fund, see "Details of the Portfolios—Select Global Infrastructure Portfolio—Risks," and "Additional Information About the Portfolios' Investment Strategies and Related Risks" in the Acquiring Fund's Prospectus attached hereto as Exhibit B. For a more complete discussion of the risks of the Acquired Fund, see "Fund Details—Additional Information about the Fund's Investment Objective, Strategies and Risks—Principal Risks" in the applicable Acquired Fund Prospectus, incorporated herein by reference.

VOTING INFORMATION

Record Date

The Board has fixed the close of business on December 11, 2014 as the record date (the "Record Date") for the determination of Shareholders of the Acquired Fund entitled to notice of, and to vote at, the Meeting. As of the Record Date, there were [ ] shares of the Acquired Fund issued and outstanding.

Quorum

Shareholders of record as of the close of business on the Record Date are entitled to one vote per share and a fractional vote for a fractional share on each matter submitted to a vote at the Meeting. Shareholders of each class of the Acquired Fund will vote together as a single class in connection with the Reorganization Agreement. The holders of a majority of the shares issued and outstanding and entitled to vote of the Acquired Fund, represented in person or by proxy, will constitute a quorum at the Meeting.

In the event that the necessary quorum to transact business or the vote required to approve or reject the Reorganization is not obtained at the Meeting, the persons named as Proxies may propose one or more adjournments of the Meeting to permit further solicitation of Proxies. Any such adjournment will require the affirmative vote of the holders of a majority of shares of the Acquired Fund present in person or by Proxy at the Meeting. Where an adjournment is proposed because the necessary quorum to transact business is not obtained at the Meeting, the persons named as Proxies will vote in favor of such adjournment provided that such persons named as Proxies determine that such adjournment and additional solicitation is reasonable and in the interests of Shareholders based on all relevant factors, including the nature of the proposal, the percentage of Shareholders present, the nature of the proposed solicitation activities and the nature of the reasons for the further solicitation. Where an adjournment is proposed because the vote required to approve or reject the Reorganization is not obtained at the Meeting, the persons named as Proxies will vote in favor of such adjournment those Proxies which they are entitled to vote in favor of the Reorganization and will vote against any such adjournment those Proxies required to be voted against the Reorganization. Abstentions will not be voted either for or against any such adjournment.

Voting Procedures

The enclosed form of Proxy for the Acquired Fund, if properly executed and returned, will be voted in accordance with the choice specified thereon. The Proxy will be voted in favor of the Reorganization unless a choice is indicated to vote against or to abstain from voting on the Reorganization. If a Shareholder executes and returns a Proxy but fails to indicate how the votes should be cast, the Proxy will be voted in favor of the Reorganization. The Board knows of no business, other than that set forth in the Notice of Special Meeting of Shareholders, to be presented for consideration at the Meeting. However, the Proxy confers discretionary authority upon the persons named therein to vote as they determine on other business, not currently contemplated, which may come before the Meeting.

Proxies from Shareholders may be revoked at any time prior to the voting thereof by: (i) delivering written notice of revocation to the Secretary of Morgan Stanley Global Infrastructure Fund, 522 Fifth Avenue, New York,

NY 10036; (ii) completing and returning a new Proxy (whether by mail or, as discussed below, by touchtone telephone or the Internet) (if returned and received in time to be voted); or (iii) attending the Meeting and voting in person. Attendance at the Meeting will not in and of itself revoke a Proxy; a Shareholder may attend the Meeting in person to revoke a previously provided Proxy and to authorize Proxies to vote their shares in accordance with their new instructions.

Shareholders will be able to vote their shares by touchtone telephone or by Internet by following the instructions on the Proxy Card or on the Voting Information Card accompanying this Proxy Statement and Prospectus. To vote by Internet or by telephone, Shareholders can access the website or call the toll-free number listed on the Proxy Card or noted in the enclosed voting instructions. To vote by touchtone telephone, Shareholders will need the number that appears on the Proxy Card. In certain instances, a proxy solicitor may call Shareholders to ask if they would be willing to have their votes recorded by telephone. The telephone voting procedure is designed to authenticate Shareholders' identities, to allow Shareholders to authorize the voting of their shares in accordance with their instructions and to confirm that their instructions have been recorded properly. No recommendation will be made as to how a Shareholder should vote on any proposal other than to refer to the recommendations of the Board. Shareholders voting by telephone in this manner will be asked for identifying information and will be given an opportunity to authorize Proxies to vote their shares in accordance with their instructions. To ensure that Shareholders' instructions have been recorded correctly they will receive a confirmation of their instructions in the mail. A special toll-free number set forth in the confirmation will be available in case the information contained in the confirmation is incorrect. Although a Shareholder's vote may be taken by telephone, each Shareholder will receive a copy of this Proxy Statement and Prospectus and may vote by mail using the enclosed Proxy Card or by touchtone telephone or the Internet as set forth above. The last proxy vote received in time to be voted, whether by Proxy Card, touchtone telephone or Internet, will be the vote that is counted and will revoke all previous votes by Shareholders.

Expenses of Solicitation

Proxies will be solicited primarily by mailing this Proxy Statement and Prospectus and its enclosures. In addition to the solicitation of Proxies by mail, employees of MSIM and its affiliates, without additional compensation, may solicit proxies in person or by telephone, facsimile or oral communication. The Acquired Fund may retain Computershare Fund Services, a professional proxy solicitation firm, to assist with any necessary solicitation of Proxies. The estimated cost of additional telephone solicitation by Computershare Fund Services is approximately $42,000. The expenses of the Reorganization, including the cost of printing, filing and proxy solicitation (including the aforementioned cost of additional telephone solicitation by Computershare Fund Services) and legal and accounting expenses, are expected to be approximately $315,500, all of which will be borne by MSIM.

Vote Required

Approval of the Reorganization by Shareholders requires the affirmative vote of the lesser of: (1) more than 50% of the outstanding shares of the Acquired Fund, or (2) 67% or more of the shares of the Acquired Fund represented at the Meeting if the holders of more than 50% of the outstanding shares of the Acquired Fund are present or represented by Proxy. Abstentions are not considered votes "FOR" the Reorganization at the Meeting. As a result, abstentions have the same effect as a vote against the Reorganization because approval of the Reorganization requires the affirmative vote of a percentage of the voting securities present or represented by proxy or a percentage of the outstanding voting securities.

If the Reorganization is not approved by Shareholders of the Acquired Fund, the Acquired Fund will continue in existence and the Board will consider alternative actions for such Fund.

PERFORMANCE INFORMATION

For a discussion of the Acquiring Fund's performance information, see "Portfolio Summary—Select Global Infrastructure Portfolio—Performance Information" in the Acquiring Fund's Prospectus attached hereto as Exhibit B.

THE REORGANIZATION

The Board's Considerations

The Board, including the Independent Board Members, unanimously declared advisable and approved the Reorganization on behalf of the Acquired Fund and determined to recommend that Shareholders of the Acquired Fund approve the Reorganization. In connection with the Board's review of the Reorganization, MSIM advised the Board about a variety of matters, including, but not limited to:

1. the similarities of the investment objectives, policies and risks of the Acquiring Fund as compared to the Acquired Fund;

2. the continuity of the portfolio management teams;

3. the asset base of the Acquiring Fund as compared to the Acquired Fund;

4. the current and future sales and asset growth potential of the Acquiring Fund as compared to the Acquired Fund;

5. the potential for broader distribution opportunities of the Acquiring Fund as compared to the Acquired Fund;

6. while Shareholders of the Acquired Fund will experience an increase in contractual management fees, the Reorganization is expected to result in the same or lower total operating expenses for Shareholders of the Acquired Fund and shareholders of the Combined Fund as a result of economies of scale and proposed advisory fee waivers and/or expense reimbursements instituted by MSIM for at least two years from the date of the Reorganization or until such time as the Company's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate;

7. the terms and conditions of the Reorganization, which would affect the price of shares to be issued in the Reorganization;

8. that there is not expected to be a significant amount of portfolio turnover as a result of the Reorganization;

9. the estimated expenses of the Reorganization, such as the expenses of this solicitation, including the cost of preparing and mailing this Proxy Statement and Prospectus, which will be approximately $315,500 , all of which will be borne by MSIM;

10. the tax-free nature of the Reorganization; and

11. that capital loss carry forwards would not be lost as a result of the Reorganization.

The Board noted that the current investments of the Acquired Fund may be held by the Acquiring Fund in accordance with the investment guidelines of the Acquiring Fund. The Board and MSIM discussed the overlap among Morgan Stanley Fund offerings, and the goal of finding a cost effective solution to streamline the Morgan Stanley fund offerings, reducing costs to shareholders and removing potential point of sale conflicts in the marketplace. The Board and MSIM also discussed the exchangeability among funds within the Morgan Stanley fund family, the expense caps on the Acquiring Fund and the waivers of sales charges and minimum investment amounts applicable to the Acquiring Fund for Shareholders of the Acquired Fund in connection with the Reorganization.

The Board noted that while the Acquiring Fund's advisory fee rate is higher than the Acquired Fund's advisory fee rate, the total annual operating expenses of the Combined Fund are projected to be the same (in the case of Class L and Class Q Shareholders of the Acquired Fund) or lower (in the case of Class A, Class B and Class I Shareholders of the Acquired Fund) than the total annual operating expenses of the Acquired Fund as a result of economies of scale and proposed advisory fee waivers and/or expense reimbursements instituted by MSIM. Specifically, in order to ensure that shareholders of the Combined Fund are not adversely affected by the Reorganization, MSIM has agreed to reduce its advisory fee and/or reimburse the Combined Fund, so that total annual operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary

expenses (including litigation), will not exceed 1.11% for Class A, 1.68% for Class L and 0.87% for Class I. The fee waivers and/or expense reimbursements will continue for at least two years from the date of the Reorganization or until such time as the Company's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

The Board discussed with MSIM the foreseeable short- and long-term effects of the Reorganization on the Acquired Fund and its Shareholders, including the possibility that the Acquiring Fund may experience increased redemptions in the period of time that follows the closing of the Reorganization and that if this were to occur, it would decrease the anticipated net asset size of the Combined Fund.

In its deliberations, the Board considered all information it received, as described above, as well as advice and analysis from its counsel. The Board considered the Reorganization and the impact of the Reorganization on the Acquired Fund and its Shareholders. The Board concluded, based on all of the information presented, that the Reorganization is advisable and in the best interest of the Acquired Fund's Shareholders and that shareholders will not be diluted as a result thereof, and decided to recommend that the Acquired Fund's Shareholders approve the Reorganization.

If Shareholders of the Acquired Fund do not approve the Reorganization, the Board will consider other courses of action for the Acquired Fund.

The Reorganization Agreement

The terms and conditions under which the Reorganization would be consummated, as summarized below, are set forth in the Reorganization Agreement. This summary is qualified in its entirety by reference to the Agreement and Plan of Reorganization, a copy of which is attached as Exhibit A to this Proxy Statement and Prospectus.

The Reorganization Agreement provides that (i) the Acquired Fund will transfer substantially all of its assets, including portfolio securities, cash, cash equivalents, securities, commodity and dividend interests, loans and other instruments and dividends or interest or other rights or receivables that are owned by Acquired Fund, and any deferred or prepaid expenses shown as an asset on Acquired Fund's books on the Valuation Date, to the Acquiring Fund on the Closing Date in exchange for the assumption by the Acquiring Fund of all stated liabilities of the Acquired Fund, including, without limitation, all expenses, costs, charges and reserves, as reflected on an unaudited statement of assets and liabilities of Acquired Fund prepared by the Treasurer of the Acquired Fund as of the Valuation Date in accordance with generally accepted accounting principles applied consistently with those of Acquired Fund's most recent audited financial statements, and the delivery of the Acquiring Fund Shares; (ii) such Acquiring Fund Shares would be distributed to Shareholders on the Closing Date or as soon as practicable thereafter; (iii) the Acquired Fund would be liquidated and terminated; and (iv) the issued and outstanding shares of the Acquired Fund would be canceled.

The number of Acquiring Fund Shares to be delivered to the Acquired Fund will be determined by dividing the aggregate NAV of each class of shares of the Acquired Fund, acquired by the Acquiring Fund, by the NAV per share of the corresponding class of shares of the Acquiring Fund; these values will be calculated as of the Valuation Date. As an illustration, assume that on the Valuation Date, Class I shares of the Acquired Fund had an aggregate NAV of $100,000. If the NAV per Class I share of the Acquiring Fund were $10 per share at the close of business on the Valuation Date, the number of Class I shares of the Acquiring Fund to be issued would be 10,000 ($100,000 ÷ $10). These 10,000 Class I shares of the Acquiring Fund would be distributed to the former Class I shareholders of the Acquired Fund. This example is given for illustration purposes only and does not bear any relationship to the dollar amounts or shares expected to be involved in the Reorganization.

On the Closing Date or as soon as practicable thereafter, the Acquired Fund will distribute pro rata to its Shareholders of record as of the close of business on the Valuation Date, the Acquiring Fund Shares it receives. The Acquiring Fund Shares will be distributed as follows: each of the Class I shares of the Acquiring Fund will be distributed to holders of the Class I shares of the Acquired Fund, each of the Class A shares of the Acquiring Fund will be distributed to holders of Class A, Class B and Class Q shares of the Acquired Fund and each of the Class L shares of the Acquiring Fund will be distributed to holders of Class L shares of the Acquired Fund. The Acquiring

Fund will cause its transfer agent to credit and confirm an appropriate number of the Acquiring Fund Shares to each Shareholder.

The consummation of the Reorganization is contingent upon the approval of the Reorganization by the Shareholders and the receipt of the other opinions and certificates set forth in Sections 6, 7 and 8 of the Reorganization Agreement and the occurrence of the events described in those Sections, certain of which may be waived by a Fund. The Reorganization Agreement may be amended in any mutually agreeable manner.

The Reorganization Agreement may be terminated and the Reorganization abandoned at any time, before or after approval by Shareholders, by mutual consent of the Company, on behalf of the Acquiring Fund, and the Acquired Fund. In addition, either party may terminate the Reorganization Agreement upon the occurrence of a material breach of the Reorganization Agreement by the other party or if, by September 17, 2015, any condition set forth in the Reorganization Agreement has not been fulfilled or waived by the party entitled to its benefits.

Under the Reorganization Agreement, within one year after the Closing Date, the Acquired Fund shall either pay or make provision for all of its liabilities to former Shareholders of the Acquired Fund that received Acquiring Fund Shares. The Acquired Fund shall be liquidated and terminated following the distribution of the Acquiring Fund Shares to Shareholders of record of the Acquired Fund.

The effect of the Reorganization is that Shareholders who vote their shares in favor of the Reorganization Agreement are electing to sell their shares of the Acquired Fund and reinvest the proceeds in the Acquiring Fund Shares at NAV and without recognition of taxable gain or loss for federal income tax purposes. See "Tax Aspects of the Reorganization" below. As noted in "Tax Aspects of the Reorganization," if the Acquired Fund recognizes net gain from the sale of securities prior to the Closing Date, such gain, to the extent not offset by capital loss carry-forwards, will be distributed to Shareholders prior to the Closing Date and will be taxable to Shareholders as capital gains.

Shareholders will continue to be able to redeem their shares of the Acquired Funds at NAV next determined after receipt of the redemption request until the close of business on the business day next preceding the Closing Date. Redemption requests received by the Acquired Fund thereafter will be treated as requests for redemption of shares of the Acquiring Fund.

Tax Aspects of the Reorganization

The following is a general summary of the material federal income tax consequences of the Reorganization and is based upon the current provisions of the Code, the existing U.S. Treasury Regulations thereunder, current administrative rulings of the Internal Revenue Service ("IRS") and published judicial decisions, all of which are subject to change. This discussion is limited to U.S. persons who hold shares of the Acquired Fund as capital assets for federal income tax purposes. This summary does not address all of the U.S. federal income tax consequences that may be relevant to a particular shareholder or to Shareholders who may be subject to special treatment under federal income tax laws.

Tax Consequences of the Reorganization to Shareholders. The Reorganization is intended to qualify for federal income tax purposes as a tax-free reorganization under Section 368(a)(1) of the Code.

As a condition to the Reorganization, the Acquired Fund and the Acquiring Fund have requested an opinion of Dechert LLP substantially to the effect that, based on certain assumptions, facts, the terms of the Reorganization Agreement and representations set forth in the Reorganization Agreement or otherwise provided by the Acquired Fund and the Acquiring Fund:

1. The transfer of substantially all of the assets of the Acquired Fund in exchange solely for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the liabilities of the Acquired Fund followed by the distribution by the Acquired Fund of the Acquiring Fund Shares to Shareholders in exchange for their Acquired Fund shares pursuant to and in accordance with the terms of the Reorganization Agreement will constitute a "reorganization" within the meaning of Section 368(a)(1) of the Code;

2. No gain or loss will be recognized by the Acquiring Fund upon the receipt of the assets of the Acquired Fund solely in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the liabilities of the Acquired Fund;

3. No gain or loss will be recognized by the Acquired Fund upon the transfer of substantially all of the assets of the Acquired Fund to the Acquiring Fund solely in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the liabilities or upon the distribution of the Acquiring Fund Shares to Shareholders in exchange for their Acquired Fund Shares, except that the Acquired Fund may be required to recognize gain or loss with respect to contracts described in Section 1256(b) of the Code or stock in a passive foreign investment company, as defined in Section 1297(a) of the Code;

4. No gain or loss will be recognized by Shareholders upon the exchange of the shares of the Acquired Fund solely for the Acquiring Fund Shares;

5. The aggregate tax basis for the Acquiring Fund Shares received by each Shareholder pursuant to the Reorganization will be the same as the aggregate tax basis for the Acquired Fund shares surrendered by each such Shareholder in exchange therefor;

6. The holding period of the Acquiring Fund Shares to be received by each Shareholder will include the period during which the Acquired Fund shares surrendered in exchange therefor were held (provided such shares in the Acquired Fund were held as capital assets on the date of the Reorganization);

7. The tax basis of the assets of the Acquired Fund acquired by the Acquiring Fund will be the same as the tax basis of such assets of the Acquired Fund immediately prior to the Reorganization; and

8. The holding period of the assets of the Acquired Fund in the hands of the Acquiring Fund will include the period during which those assets were held by the Acquired Fund (except where the investment activities of the Acquiring Fund have the effect of reducing or eliminating such period with respect to an asset).

Prior to the closing of the Reorganization, the Acquired Fund will distribute to its shareholders any undistributed income and gains to the extent required to avoid entity level tax or as otherwise deemed desirable. The advice of counsel is not binding on the IRS or the courts and neither the Acquired Fund nor the Acquiring Fund has sought a ruling with respect to the tax treatment of the Reorganization. The opinion of counsel, if delivered, will be based on the Code, regulations issued by the Treasury Department under the Code, court decisions, and administrative pronouncements issued by the IRS with respect to all of the foregoing, all as in effect on the date of the opinion, and all of which may be repealed, revoked or modified thereafter, possibly on a retroactive basis.

After the Reorganization, you will continue to be responsible for tracking the adjusted tax basis and holding period of your shares for federal income tax purposes.

Shareholders should consult their tax advisors regarding the effect, if any, of the proposed Reorganization in light of their individual circumstances. Because the foregoing discussion only relates to the federal income tax consequences of the proposed Reorganization, Shareholders should also consult their tax advisors as to state and local tax consequences, if any, of the proposed Reorganization.

Description of Shares

The Acquiring Fund Shares to be issued pursuant to the Reorganization Agreement will, when issued in exchange for the consideration therefor, be fully paid and non-assessable by the Acquiring Fund and transferable without restrictions and will have no preemptive rights. For greater details regarding the Acquiring Fund Shares, see "Shareholder Information" in the Acquiring Fund's Prospectus attached hereto as Exhibit B.

Capitalization Tables (unaudited)

The following tables set forth the capitalization of the Acquired Fund as of September 30, 2014 and the Acquiring Fund on a pro forma combined basis as if the Reorganization had occurred on that date:

MS Global Infrastructure (Acquired Fund)	Class A		Class B		Class Q		Class L		Class I		Total
Net Assets	$	92,570,563	$	1,301,705	$	268,688,924	$	7,091,497	$	4,082,850	$	373,735,539
Shares Outstanding		10,596,467		145,272		30,144,130		804,150		470,254		42,160,273
Net Asset Value Per Share	$	8.74	$	8.96	$	8.91	$	8.82	$	8.68		—

MSIF Global Infrastructure (Acquiring Fund)	Class A†		Class L		Class I		Total
Net Assets	$	20,676,409	$	1,025,458	$	39,167,492	$	60,869,359
Shares Outstanding		1,292,107		64,497		2,440,202		3,796,806
Net Asset Value Per Share	$	16.00	$	15.90	$	16.05		—
Pro Forma Combined Fund (MSIF Global Infrastructure)	Class A		Class L		Class I		Total
Net Assets	$	383,237,601	$	8,116,955	$	43,250,342	$	434,604,898
Shares Outstanding		23,952,181		510,503		2,694,585		27,157,269
Net Asset Value Per Share	$	16.00	$	15.90	$	16.05		—

† Effective September 9, 2013, Class P shares of the Acquiring Fund were renamed Class A shares.

Appraisal Rights

Shareholders will have no appraisal rights in connection with the Reorganization.

COMPARISON OF INVESTMENT OBJECTIVES, PRINCIPAL POLICIES AND RESTRICTIONS

Investment Objectives and Policies

The investment objectives of the Acquired Fund and the Acquiring Fund are set forth in the table below:

	MS Global Infrastructure (Acquired Fund)	MSIF Global Infrastructure (Acquiring Fund)
Investment Objective	• seeks to provide both capital appreciation and income	• seeks to provide both capital appreciation and income
	• the Acquired Fund's investment objective is a fundamental policy and may not be changed without shareholder approval of a majority of the Acquired Fund's outstanding voting securities, as defined in the 1940 Act	• the Acquiring Fund's investment objective is non-fundamental and may be changed by the Company's Board of Directors without shareholder approval, but no change is anticipated

MS Global Infrastructure (Acquired Fund)

The Fund normally invests at least 80% of its assets in equity securities issued by companies located throughout the world that are engaged in the infrastructure business. A company will be considered to be in the infrastructure business if it derives at least 50% of its revenues or earnings from, or devotes at least 50% of its assets to, infrastructure-related activities. Infrastructure refers to the systems and networks of energy, transportation, communication and other services required for the normal function of society. Companies in the infrastructure business may be involved in a variety of areas, including, but not limited to, (i) the transmission, distribution,

storage or transportation of electricity, oil and gas (and other bulk liquid products), water, and other natural resources used to produce energy, (ii) the construction and operation of renewable power facilities, (iii) the development, ownership, lease, concession, or management of highways, toll roads, tunnels, bridges, pipelines, airports, marine ports, refueling and related facilities, (iv) the provision of communications, including the development, lease, concession, or management of telephone, broadcast and mobile towers, fiber optic/copper cable, and satellite networks, (v) waste-water management and water purification/desalination and (vi) the construction or operation of essential public structures. The Fund's equity investments may include convertible securities. The Fund's investments may include securities of small and medium capitalization companies. The Fund may invest up to 100% of its net assets in foreign securities, which may include emerging market securities. Under normal market conditions, the Fund invests at least 40% of its assets in the securities of issuers located outside of the United States.

In selecting securities to buy, hold or sell for the Fund, the Adviser and/or Sub-Advisers actively manage the Fund using a combination of bottom-up and top-down methodologies. The value-driven approach to bottom-up security selection utilizes proprietary research models to identify infrastructure companies that offer the best value relative to their underlying assets and growth prospects. The top-down allocation provides diversified exposure to major economic infrastructure sectors and countries, with an overweighting to those sectors/countries that offer the best relative valuation. The Adviser and/or Sub-Advisers generally consider selling a portfolio holding when it determines that the holding is less attractive based on a number of factors, including changes in the holding's share price, earnings prospects relative to its peers and/or business prospects.

Common stock is a share ownership or equity interest in a corporation. It may or may not pay dividends, as some companies reinvest all of their profits back into their businesses, while others pay out some of their profits to shareholders as dividends. A depositary receipt is generally issued by a bank or financial institution and represents an ownership interest in the common stock or other equity securities of a foreign company.

In pursuing the Fund's investment objective, the Adviser and/or Sub-Advisers have considerable leeway in deciding which investments they buy, hold or sell on a day-to-day basis and which trading strategies they use. For example, the Adviser and/or Sub-Advisers in their discretion may determine to use some permitted trading strategies while not using others.

The remaining 20% of the Fund's assets may be invested in fixed-income securities, equity securities of companies not engaged in the infrastructure business, U.S. government securities issued or guaranteed as to principal and interest, by the U.S. Government or its agencies or instrumentalities, and asset-backed securities. The Fund may also invest in real estate investment trusts ("REITs") and foreign real estate companies. The Fund may invest up to 5% of its assets in fixed-income securities and convertible securities rated below investment grade (commonly known as "junk bonds").

MSIF Global Infrastructure (Acquiring Fund)

The Adviser and/or the Sub-Advisers seek to provide both capital appreciation and income by investing primarily in equity securities issued by companies located throughout the world that are engaged in the infrastructure business. Using internal proprietary research, the Adviser seeks to identify public infrastructure companies that are believed to offer the best value relative to their underlying assets and growth prospects.

networks, (v) waste-water management and water purification/desalination and (vi) the construction or operation of essential public structures. The Fund's equity investments may include convertible securities. The Fund's investments may include securities of small and medium capitalization companies. The Fund may invest up to 100% of its net assets in foreign securities, which may include emerging market securities. Under normal market conditions, the Fund invests at least 40% of its assets in the securities of issuers located outside of the United States.

The Adviser and/or Sub-Advisers shift the Fund's assets between the different types of companies in the infrastructure business described above based on relative valuation, underlying company fundamentals, and demographic and macroeconomic considerations. The Fund has a fundamental policy (i.e., one that cannot be changed without shareholder approval) of investing 25% or more of its assets in the infrastructure industry.

In selecting securities to buy, hold or sell for the Fund, the Adviser and/or Sub-Advisers actively manage the Fund using a combination of bottom-up and top-down methodologies. The value-driven approach to bottom-up security selection utilizes proprietary research models to identify infrastructure companies that offer the best value relative to their underlying assets and growth prospects. The top-down allocation provides exposure to major economic infrastructure sectors and countries, with an overweighting to those sectors/countries that offer the best relative valuation. The Adviser and/or Sub-Advisers generally consider selling a portfolio holding when it determines that the holding no longer satisfies its investment criteria.

The remaining 20% of the Fund's assets may be invested in fixed income securities, equity securities of companies not engaged in the infrastructure business, U.S. government securities issued, or guaranteed as to principal and interest, by the U.S. Government or its agencies or instrumentalities, and asset-backed securities. The Fund may also invest in REITs and convertible securities. The Fund may invest up to 5% of its assets in fixed income securities and convertible securities rated below investment grade (often referred to as "high yield securities" or "junk bonds").

Investment Restrictions

The investment restrictions adopted by the Acquired Fund and Acquiring Fund as fundamental policies are substantially similar. The Acquiring Fund's investment restrictions are summarized under the caption "Investment Limitations" in the Company's statement of additional information dated April 30, 2014, as it may be amended and supplemented from time to time, with respect to the Acquiring Fund. The Acquired Fund's investment restrictions are summarized under the caption "II. Description of the Fund and Its Investments and Risks—Fund Policies/Investment Restrictions" in each of the Acquired Fund's Statements of Additional Information, each dated April 30, 2014, as may be amended and supplemented from time to time.

A fundamental investment restriction cannot be changed without the vote of the majority of the outstanding voting securities of a Fund, which is defined by the 1940 Act as the lesser of (i) at least 67% of the voting securities of a fund or portfolio present at a meeting if the holders of more than 50% of the outstanding voting securities of a fund or portfolio are present or represented by proxy; or (ii) more than 50% of the outstanding voting securities of a fund or portfolio.

The differences in the investment restrictions adopted by the Funds as fundamental policies are discussed below:

1. The Acquired Fund may not invest in a manner inconsistent with its classification as a "diversified company" as provided by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the Commission under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief applicable to the Fund from the provisions of the 1940 Act, as amended from time to time. The Acquiring Fund in a non-diversified fund and therefore is not subject to this investment restriction.

2. The Acquiring Fund may not write or acquire options or interests in oil, gas or other mineral exploration or development programs. The Acquired Fund is not subject to this investment restriction.

The differences in the investment restrictions adopted by the Funds as non-fundamental policies are discussed below:

1. The Acquired Fund will not make short sales of securities, except short sales against the box. The Acquiring Fund will not purchase on margin or sell short except (i) that the Acquiring Fund may enter into option transactions and futures contracts as described in its Prospectus; and (ii) that the Acquiring Fund may purchase and sell options, futures contracts and related options thereon, forward contracts, swaps, caps, floors, collars and any other financial instruments, as described in its fundamental investment restrictions; and

2. The Acquired Fund will not invest its assets in the securities of any investment company except as may be permitted by (i) the 1940 Act, as amended from time to time; (ii) the rules and regulations promulgated by the Commission under the 1940 Act, as amended from time to time; or (iii) an exemption or other relief applicable to the Acquired Fund from the provisions of the 1940 Act, as amended from time to time. Each Fund, however, will not invest in other investment companies in reliance on Sections 12(d)(1)(F), 12(d)(1)(G) or 12(d)(1)(J) of the 1940 Act.

The following non-fundamental investment restrictions apply only to the Acquiring Fund:

1. The Acquiring Fund will not make loans except (i) by purchasing bonds, debentures or similar obligations (including repurchase agreements, subject to the limitations as described in the Acquiring Fund's Prospectus) that are publicly distributed; and (ii) by lending its portfolio securities to banks, brokers, dealers and other financial institutions so long as such loans are not inconsistent with the 1940 Act or the rules and regulations or interpretations of the Commission thereunder; and

2. The Acquiring Fund will not borrow money, except from banks for extraordinary or emergency purposes, and then only in amounts up to 10% of the value of the Acquiring Fund's total assets (including, in each case, the amount borrowed less liabilities (other than borrowings)), or purchase securities while borrowings exceed 5% of its total assets.

ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND AND THE ACQUIRED FUND

General

For a discussion of the organization and operation of the Acquiring Fund, see "Portfolio Summary—Select Global Infrastructure Portfolio," "Details of the Portfolios—Select Global Infrastructure Portfolio" and "Fund Management" in the Acquiring Fund's Prospectus attached hereto as Exhibit B. For a discussion of the organization and operation of the Company, see "General Information—Fund History" in the Company's statement of additional information relating to the Acquiring Fund.

For a discussion of the organization and operation of the Acquired Fund, see "Fund Summary" and "Fund Management" in the applicable Acquired Fund Prospectus and "Fund History" in the applicable Acquired Fund statement of additional information.

Rights of Acquired Fund Shareholders and Acquiring Fund Shareholders

The Acquiring Fund is organized as a separate portfolio of the Company, a Maryland corporation that is governed by its Charter, as amended, Amended and Restated By-Laws, as may be amended from time to time, and Maryland law. The Acquired Fund is organized as a Massachusetts business trust that is governed by its Declaration of Trust, as amended, Amended and Restated By-Laws, as may be amended, and Massachusetts law.

While Maryland corporate law contains many provisions specifically applicable to management investment companies and Massachusetts statutory trust law is specifically drafted to accommodate some of the unique corporate governance needs of management investment companies, certain statutory differences do exist and the Company's and Acquired Fund's organizational documents contain certain differences summarized below. Each Fund is also subject to federal securities laws, including the 1940 Act and the rules and regulations promulgated by the Commission thereunder.

Consistent with Maryland law, the Company's Board of Directors, on behalf of the Acquiring Fund, has authorized the issuance of a specific number of shares of stock, although the organizational documents authorize such Board of Directors to increase or decrease, from time to time, as it considers necessary, the aggregate number of shares of stock or of any class of stock which the Company has the authority to issue. Consistent with Massachusetts law, the Acquired Fund is authorized to issue an unlimited number of shares. The Acquiring Fund's and the Company's organizational documents allow the respective Board of Trustees/Directors to create one or more separate investment portfolios and to establish a separate series or classes of shares for each portfolio, and to further subdivide the shares of any series into one or more classes.

Neither the Charter, as amended, nor the Amended and Restated By-Laws of the Company contain specific provisions regarding the personal liability of shareholders. However, under the Maryland General Corporation Law, shareholders of a Maryland corporation generally will not be held personally liable for the acts or obligations of the corporation, except that a shareholder may be liable to the extent that (i) consideration for the shares has not been paid, (ii) the shareholder knowingly accepts a distribution in violation of the charter or Maryland law, or (iii) the shareholder receives assets of the corporation upon its liquidation and the corporation is unable to meet its debts and obligations, in which case the shareholder may be liable for such debts and obligations to the extent of the assets received in the distribution.

Under Massachusetts law, shareholders of a business trust may, under certain limited circumstances, be held personally liable as partners for the obligations of the Acquired Fund. However, the Declaration of Trust of the Acquired Fund contains an express disclaimer of shareholder liability for acts or obligations of the Acquired Fund, requires that notice of such Fund obligations include such disclaimer, and provides for indemnification out of the Fund's property for any shareholder held personally liable for the obligations of the Acquired Fund.

No Fund is required, and no Fund anticipates, holding annual meetings of its Shareholders. Each Fund has certain mechanics whereby shareholders can call a special meeting of their Fund. Shareholders generally have the right to approve investment advisory agreements, elect trustees/directors, change fundamental investment policies, ratify the selection of independent auditors and vote on other matters required by law or the organizational documents of the Company or Acquired Fund, as applicable, or deemed desirable by the Board of Directors or Board of Trustees, as applicable.

The business of the Acquiring Fund and the Acquired Fund is supervised by the respective Boards of the Acquired Fund and the Company. The responsibilities, powers and fiduciary duties of directors under Maryland law are generally similar in certain respects to those for trustees under Massachusetts law, although significant differences do exist and shareholders should refer to the provisions of the Company's and the Acquired Fund's applicable organizational documents and applicable law for a more thorough comparison. For the Acquiring Fund and the Acquired Fund, director/trustee vacancies generally may be filled by approval of a majority of the directors/trustees then in office subject to provisions of the 1940 Act. The term of a director/trustee lasts until the election of such person's successor, or until such person's earlier resignation, removal or death. In addition, the Acquired Fund's Declaration of Trust specifies that a Trustee's term will terminate in the event of the death, resignation, removal, bankruptcy, adjudicated incompetence or other incapacity to perform the duties of the office of a Trustee. Directors of the Company may be removed with or without cause by vote of a majority of the shares present in person or by proxy at a meeting, provided a quorum is present. Trustees of the Acquired Fund may be removed with or without cause by the action of the shareholders of record of not less than two-thirds of the shares outstanding or by the action of two-thirds of the remaining Trustees.

The foregoing is only a summary of certain differences between the Acquiring Fund and the Acquired Fund under applicable law and their organizational documents. It is not intended to be a complete list of differences and shareholders should refer to the provisions of each Fund's applicable organizational documents for a more thorough comparison. Such documents are filed as part of each Fund's registration statements with the Commission, and shareholders may obtain copies of such documents as described herein.

Financial Information

For certain financial information about each Fund, see "Financial Highlights" with respect to such Fund in its respective prospectus.

Shareholder Proposals

The Funds are not required and do not intend to hold regular shareholder meetings unless shareholder action is required in accordance with the 1940 Act. Shareholders who would like to submit proposals for consideration at future shareholder meetings of the Acquired Fund (in the event the Reorganization is not completed) or the Acquiring Fund should send written proposals to Mary E. Mullin, Secretary, 522 Fifth Avenue, New York, NY 10036. To be considered for presentation at a shareholders' meeting, rules promulgated by the Commission require that, among other things, a shareholder's proposal must be received at the offices of the applicable Fund within a reasonable time before a solicitation is made. Timely submission of a proposal does not necessarily mean that such proposal will be included in the proxy materials for a meeting.

Management

For information about the Board of Directors, MSIM and the Distributor of the Acquiring Fund, see "Fund Management" in the Acquiring Fund's Prospectus attached hereto as Exhibit B and "Management of the Fund" and "Investment Advisory and Other Services" in the Company's statement of additional information.

For information about the Board of Trustees, MSIM and the distributor of the Acquired Fund, see "Fund Management" in the applicable Acquired Fund Prospectus and "Management of the Fund" and "Investment Advisory and Other Services" in the applicable Acquired Fund statement of additional information.

Description of Shares and Shareholder Inquiries

For a description of the nature and most significant attributes of shares of the Acquiring Fund, and information regarding shareholder inquiries, see "General Information" in the Company's statement of additional information as well as "Shareholder Information" and "Where to Find Additional Information" in the Acquiring Fund's Prospectus attached hereto as Exhibit B.

For a description of the nature and most significant attributes of shares of the Acquired Fund, and information regarding Shareholder inquiries, see "Capital Stock and Other Securities" in the applicable Acquired Fund statement of additional information as well as "Shareholder Information—Additional Information" in the applicable Acquired Fund Prospectus.

Dividends, Distributions and Taxes

For a discussion of the Acquiring Fund's policies with respect to dividends, distributions and taxes, see "Shareholder Information—Dividends and Distributions" and "—Taxes" in the Acquiring Fund's Prospectus attached hereto as Exhibit B, "General Information" and "Taxes" in the Company's statement of additional information, and the discussions herein under "Synopsis—Comparison of the Acquired Fund and Acquiring Fund—Dividends," "Synopsis—Tax Consequences of the Reorganization" and "The Reorganization—Tax Aspects of the Reorganization."

For a discussion of the Acquired Fund's policies with respect to dividends, distributions and taxes, see "Shareholder Information—Distributions" and "—Tax Consequences" in the applicable Acquired Fund Prospectus, "Taxation of the Fund and Shareholders" in the applicable Acquired Fund statement of additional information, and the discussions herein under "Synopsis—Comparison of the Acquired Fund and Acquiring Fund—Dividends," "Synopsis—Tax Consequences of the Reorganization" and "The Reorganization—Tax Aspects of the Reorganization."

Purchases, Exchanges and Redemptions

For a discussion of how the Acquiring Fund's shares may be purchased, exchanged and redeemed, see "Shareholder Information—How To Purchase Class I and Class L Shares," "—How To Purchase Class A Shares" and "—How To Redeem Shares" in the Acquiring Fund's Prospectus, "Purchase and Redemption of Shares" in the Company's statement of additional information, and the discussion herein under "Synopsis—Comparison of Acquired Fund and Acquiring Fund—Purchases, Exchanges and Redemptions."

For a discussion of how the Acquired Fund's shares may be purchased, exchanged and redeemed, as applicable, see "Shareholder Information—How to Buy Shares," "—How to Exchange Shares" and "—How to Sell Shares" in the applicable Acquired Fund Prospectus and "Purchase, Redemption and Pricing of Shares" in the applicable Acquired Fund statement of additional information, and the discussion herein under "Synopsis—Comparison of Acquired Fund and Acquiring Fund—Purchases, Exchanges and Redemptions."

For a discussion of the Acquiring Fund's policies with respect to frequent purchases and redemptions, see 'Shareholder Information—Frequent Purchases and Redemptions of Shares" in the Acquiring Fund's Prospectus. For a discussion of the Acquired Fund's policies with respect to frequent purchases and redemptions, see "Shareholder Information—Frequent Purchases and Redemptions of Fund Shares" in the applicable Acquired Fund Prospectus.

SHARE INFORMATION

The following persons were known to own of record or beneficially 5% or more of the outstanding shares of a class of the Acquired Fund as of September 30, 2014:

Shareholder	Percentage of Outstanding Shares
Class A
Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		75.50	%
Class B
Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		61.35	%
First Clearing, LLC 2801 Market St. Saint Louis, MO 63103		16.53	%
Merrill Lynch Pierce Fenner & Smith 4800 Deer Lake Dr. E Jacksonville, FL 32246		5.51	%
Class Q
Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		76.76	%

Shareholder	Percentage of Outstanding Shares
Class L
Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		78.79	%
Class I
Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		47.99	%
National Financial Services 499 Washington Blvd., Fl. 5 Jersey City, NJ 07310		18.67	%
State Street Bank And Trust Co. 105 Rosemont Ave. Westwood, MA 02090		14.14	%
First Clearing, LLC 2801 Market St. Saint Louis, MO 63103		10.48	%
UBS WM USA 1000 Harbor Blvd., Fl. 5 Weehawken, NJ 07086		7.03	%

As of September 30, 2014, the trustees and officers of the Acquired Fund, as a group, owned less than 1% of the outstanding shares of the Acquired Fund.

The following persons were known to own of record or beneficially 5% or more of the outstanding shares of a class of the Acquiring Fund as of September 30, 2014:

Shareholder	Percentage of Outstanding Shares
Class I
Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		39.75	%
Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		25.94	%
Society of Composers Authors and Music Publishers of Canada 41 Valleybrook Dr. Toronto, ON M3B 2S6 Canada		14.97	%
Pershing LLC 1 Pershing Plaza, 14th Fl. Jersey City, NJ 07399		11.60	%

Shareholder	Percentage of Outstanding Shares
TD Ameritrade Inc. PO Box 2226 Omaha, NE 68103		6.77	%
Class A
National Financial Services 499 Washington Blvd., Fl. 4 Jersey City, NJ 07310		46.28	%
Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		25.17	%
Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		16.09	%
Trust Company of America PO Box 6503 Englewood, CO 80155		6.19	%
Class L
Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		63.69	%
Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		15.60	%
National Financial Services 499 Washington Blvd., Fl. 4 Jersey City, NJ 07310		13.97	%

As of September 30, 2014, the directors and officers of the Acquiring Fund, as a group, owned less than 1% of the outstanding shares of the Acquiring Fund.

FINANCIAL STATEMENTS AND EXPERTS

The financial statements of the Acquiring Fund and the Acquired Fund, each for the fiscal year ended December 31, 2013, that are incorporated by reference in the Statement of Additional Information relating to the Registration Statement on Form N-14 of which this Proxy Statement and Prospectus forms a part, have been audited by Ernst & Young LLP, the Acquiring Fund's and Acquired Fund's independent registered public accounting firm (except that the financial information for the Acquired Fund for the fiscal years ended prior to 2011 was audited by the Acquired Fund's previous independent registered public accounting firm). The financial statements for the Acquiring Fund and the Acquired Fund, each for the six-month period ended June 30, 2014, have not been audited and are also incorporated by reference in the Statement of Additional Information relating to the Registration Statement on Form N-14 of which this Proxy Statement and Prospectus forms a part. Each set of audited financial statements is incorporated herein by reference in reliance upon such reports given upon the authority of said independent registered public accounting firms as experts in accounting and auditing.

LEGAL MATTERS

Certain legal matters concerning the issuance of the Acquiring Fund Shares will be passed upon by Dechert LLP, New York, NY. Such firm will rely on Maryland counsel as to certain matters of Maryland law.

AVAILABLE INFORMATION

Additional information about each Fund is available, as applicable, in the following documents which are incorporated herein by reference: (i) the Acquiring Fund's Prospectus dated April 30, 2014, attached to this Proxy Statement and Prospectus as Exhibit B, which Prospectus forms a part of Post-Effective Amendment No. 125 to the Company's Registration Statement on Form N-1A (File Nos. 033-23166; 811-05624); (ii) the Acquired Fund's prospectuses each dated April 30, 2014, which prospectuses form a part of Post-Effective Amendment No. 42 to the Acquired Fund's Registration Statement on Form N-1A (File Nos. 33-18983; 811-5415); (iii) the Acquiring Fund's Annual Report for its fiscal year ended December 31, 2013; (iv) the Acquired Fund's Annual Report for its fiscal year ended December 31, 2013; (vii) the Acquiring Fund's Semi-Annual Report for the six-month period ended June 30, 2014; and (vi) the Acquired Fund's Semi-Annual Report for the six-month period ended June 30, 2014.

Each Fund is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith, files reports and other information with the Commission. Proxy materials, reports and other information about the Funds which are of public record can be viewed and copied at the Commission's Public Reference Room in Washington, D.C. Information about the Reference Room's operations may be obtained by calling the Commission at (202) 551-8090. Reports and other information about the Funds and the Company are available on the EDGAR Database on the Commission's Internet site (www.sec.gov) and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549-1520.

OTHER BUSINESS

Management of the Acquired Fund knows of no business other than the matters specified above which will be presented at the Meeting. Since matters not known at the time of the solicitation may come before the Meeting, the Proxy as solicited confers discretionary authority with respect to such matters as properly come before the Meeting, including any adjournment or adjournments thereof, and it is the intention of the persons named as attorneys-in-fact in the Proxy to vote this Proxy in accordance with their judgment on such matters.

By Order of the Board of Trustees,

Mary E. Mullin
Secretary

[ ], 2014

Exhibit A

AGREEMENT AND PLAN OF REORGANIZATION

THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of September 17, 2014, by and between MORGAN STANLEY INSTITUTIONAL FUND, INC. (the "Company"), a Maryland corporation, on behalf of the Select Global Infrastructure Portfolio ("Acquiring Fund"), and Morgan Stanley Global Infrastructure Fund, a Massachusetts business trust ("Acquired Fund").

This Agreement is intended to be and is adopted as a "plan of reorganization" and the transactions described in this Agreement are intended to be governed by Sections 368 and/or 351 of the Internal Revenue Code of 1986, as amended (the "Code"). The reorganization ("Reorganization") will consist of the transfer to Acquiring Fund of substantially all of the assets of Acquired Fund in exchange for (i) the assumption by Acquiring Fund of all stated liabilities of Acquired Fund and (ii) the issuance by Acquiring Fund of shares of common stock, par value $0.001 per share (the "Acquiring Fund Shares"), to be distributed, after the Closing Date hereinafter referred to, to the shareholders of Acquired Fund ("Acquired Fund Shareholders") in liquidation of Acquired Fund as provided herein, all upon the terms and conditions hereinafter set forth in this Agreement.

In consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:

1. The Reorganization and Liquidation of Acquired Fund

1.1. Subject to the terms and conditions herein set forth and on the basis of the representations and warranties contained herein, Acquired Fund agrees to transfer the Acquired Fund Assets (as defined in paragraph 1.2) to Acquiring Fund, and the Company, on behalf of Acquiring Fund, agrees in exchange therefor to assume all of Acquired Fund's stated liabilities on the Closing Date as set forth in paragraph 1.3 and to deliver to Acquired Fund the number of full and fractional Acquiring Fund Shares, determined in the manner set forth in paragraph 2.3. Such transactions shall take place at the closing provided for in paragraph 3.1 ("Closing").

1.2. (a) The "Acquired Fund Assets" shall consist of all property, including without limitation, all cash, cash equivalents, securities, commodity and dividend interests, loans and other instruments and dividends or interest or other rights or receivables that are owned by Acquired Fund, and any deferred or prepaid expenses shown as an asset on Acquired Fund's books on the Valuation Date (as defined in paragraph 2.1), prepared in accordance with generally accepted U.S. accounting principles ("GAAP") applied consistently with those of Acquired Fund's most recent audited financial statements.

(b) On or prior to the Valuation Date, Acquired Fund will provide Acquiring Fund with a list of all of Acquired Fund's assets to be transferred to Acquiring Fund and a list of the stated liabilities to be assumed by Acquiring Fund pursuant to this Agreement. Acquired Fund reserves the right to sell any of the securities on such list but will not, without the prior approval of the Company, on behalf of Acquiring Fund, acquire any additional securities other than securities of the type in which Acquiring Fund is permitted to invest and in amounts agreed to in writing by the Company, on behalf of Acquiring Fund. The Company, on behalf of Acquiring Fund, will, within a reasonable time prior to the Valuation Date, furnish Acquired Fund with a statement of Acquiring Fund's investment objective, policies and restrictions and a list of the securities, if any, on the list referred to in the first sentence of this paragraph that do not conform to Acquiring Fund's investment objective, policies and restrictions. In the event that Acquired Fund holds any investments that Acquiring Fund is not permitted to hold, Acquired Fund will dispose of such securities on or prior to the Valuation Date. In addition, if it is determined that the portfolios of Acquired Fund and Acquiring Fund, when aggregated, would contain investments exceeding certain percentage limitations imposed upon Acquiring Fund with respect to such investments, Acquired Fund if requested by the Company, on behalf of Acquiring Fund, will, on or prior to the Valuation Date, dispose of and/or reinvest a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date (as defined in paragraph 3.1).

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1.3. Acquired Fund will endeavor to discharge all of Acquired Fund's liabilities and obligations on or prior to the Valuation Date. The Company, on behalf of Acquiring Fund, will assume all stated liabilities, which includes, without limitation, all expenses, costs, charges and reserves reflected on an unaudited Statement of Assets and Liabilities of Acquired Fund prepared by the Treasurer of Acquired Fund as of the Valuation Date in accordance with GAAP applied consistently with those of Acquired Fund's most recent audited financial statements.

1.4. In order for Acquired Fund to comply with Section 852(a)(1) of the Code and to avoid having any investment company taxable income or net capital gain (as defined in Sections 852(b)(2) and 1222(11) of the Code, respectively) in the short taxable year ending with its dissolution, Acquired Fund will on or before the Valuation Date (a) declare a dividend in an amount large enough so that Acquired Fund will have declared dividends of substantially all of its investment company taxable income and net capital gain, if any, for such taxable year (determined without regard to any deduction for dividends paid) and (b) distribute such dividend.

1.5. On the Closing Date or as soon as practicable thereafter, Acquired Fund will distribute Acquiring Fund Shares received by Acquired Fund pursuant to paragraph 1.1 pro rata to the Acquired Fund Shareholders. The Acquiring Fund Shares will be distributed as follows: each of the Class I shares of Acquiring Fund will be distributed to holders of Class I shares of Acquired Fund, each of the Class A shares of Acquiring Fund will be distributed to holders of Class A, Class B and Class Q shares of Acquired Fund and each of the Class L shares of Acquiring Fund will be distributed to holders of Class L shares of Acquired Fund. Such distribution will be accomplished by an instruction, signed by Acquired Fund's Secretary, to transfer Acquiring Fund Shares then credited to Acquired Fund's account on the books of Acquiring Fund to open accounts on the books of Acquiring Fund in the names of the Acquired Fund Shareholders and representing the respective pro rata number of Acquiring Fund Shares due such Acquired Fund shareholders. All issued and outstanding shares of Acquired Fund simultaneously will be canceled on Acquired Fund's books.

1.6. Ownership of Acquiring Fund Shares will be shown on the books of Acquiring Fund's transfer agent. Acquiring Fund Shares will be issued in the manner described in Acquiring Fund's current Prospectus, as supplemented, and the Company's Statement of Additional Information.

1.7. Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name other than the registered holder of Acquiring Fund Shares on Acquired Fund's books as of the close of business on the Valuation Date shall, as a condition of such issuance and transfer, be paid by the person to whom Acquiring Fund Shares are to be issued and transferred.

1.8. Any reporting responsibility of Acquired Fund is and shall remain the responsibility of Acquired Fund up to and including the date on which Acquired Fund is liquidated and terminated pursuant to paragraph 1.9.

1.9. Within one year after the Closing Date, Acquired Fund shall pay or make provision for the payment of all Acquired Fund's liabilities and taxes. If and to the extent that any trust, escrow account, or other similar entity continues after the close of such one-year period in connection either with making provision for payment of liabilities or taxes or with distributions to shareholders of Acquired Fund, such entity shall either (i) qualify as a liquidating trust under Section 7701 of the Code (and applicable Treasury Regulations thereunder) or other entity which does not constitute a continuation of Acquired Fund for federal income tax purposes, or (ii) be subject to a waiver under Section 368(a)(2)(G)(ii) of the complete distribution requirement of Section 368(a)(2)(G)(i) of the Code. Acquired Fund shall be terminated following the making of all distributions pursuant to paragraph 1.5.

1.10. Copies of all books and records maintained on behalf of Acquired Fund in connection with its obligations under the Investment Company Act of 1940, as amended (the "1940 Act"), the Code, state blue sky laws or otherwise in connection with this Agreement will promptly be delivered after the Closing to officers of Acquiring Fund or their designee, and Acquiring Fund or its designee shall comply with applicable record retention requirements to which Acquired Fund is subject under the 1940 Act.

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2. Valuation

2.1. The value of the Acquired Fund Assets shall be the value of such assets computed as of the close of regular trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time) on the business day immediately preceding the Closing Date and after the payment of any distributions or other amounts by Acquired Fund or at such time on such earlier or later date as may be mutually agreed upon in writing (such time and date being hereinafter called the "Valuation Date"), all in accordance with the valuation procedures that have been duly adopted by the Company, as well as Acquiring Fund's then current Prospectus, as supplemented, and the Company's Statement of Additional Information, and customary procedures for determining the net asset value of a share of an open-end investment company that is registered under the 1940 Act.

2.2. The net asset value of an Acquiring Fund Share shall be determined by Acquiring Fund in the manner described in the Company's valuation procedures as well as Acquiring Fund's then current Prospectus, as supplemented, and the Company's Statement of Additional Information.

2.3. The number of Acquiring Fund Shares (including fractional shares, if any) to be issued hereunder shall be determined, with respect to each class, by dividing the aggregate net asset value of each class of Acquired Fund shares (determined in accordance with paragraph 2.1) by the net asset value per share of the corresponding class of shares of Acquiring Fund (determined in accordance with paragraph 2.2).

2.4. All computations of value shall be made by Boston Financial Data Services, Inc. ("BFDS") in accordance with its regular practice in pricing Acquiring Fund. The Company, on behalf of Acquiring Fund, shall cause BFDS to deliver a copy of Acquiring Fund's valuation report at the Closing.

3. Closing and Closing Date

3.1. The Closing shall take place on the Valuation Date or on the next business day following the Valuation Date (the "Closing Date"). The Closing shall be held as of 9:00 a.m. Eastern time, or at such other time as the parties may agree. The Closing shall be held in a location mutually agreeable to the parties hereto. All acts taking place at the Closing shall be deemed to take place simultaneously as of 9:00 a.m. Eastern time on the Closing Date unless otherwise provided.

3.2. Portfolio securities held by Acquired Fund and represented by a certificate or other written instrument shall be presented by it or on its behalf to State Street Bank and Trust Company (the "Custodian"), as custodian for Acquiring Fund, for examination no later than five business days preceding the Valuation Date. Such portfolio securities (together with any cash or other assets) shall be delivered by Acquired Fund to the Custodian for the account of Acquiring Fund on or before the Closing Date in conformity with applicable custody provisions under the 1940 Act and duly endorsed in proper form for transfer in such condition as to constitute good delivery thereof in accordance with the custom of brokers. The portfolio securities shall be accompanied by all necessary federal and state stock transfer stamps or a check for the appropriate purchase price of such stamps. Portfolio securities and instruments deposited with a securities depository (as defined in Rule 17f-4 under the 1940 Act) shall be delivered on or before the Closing Date by book-entry in accordance with customary practices of such depository and the Custodian. The cash delivered shall be in the form of a Federal Funds wire, payable to the order of "State Street Bank and Trust Company, Custodian for Morgan Stanley Institutional Fund, Inc."

3.3. In the event that on the Valuation Date, (a) the New York Stock Exchange shall be closed to trading or trading thereon shall be restricted or (b) trading or the reporting of trading on such Exchange or elsewhere shall be disrupted so that, in the judgment of both the Company, on behalf of Acquiring Fund, and Acquired Fund accurate appraisal of the value of the net assets of Acquiring Fund or the Acquired Fund Assets is impracticable, the Valuation Date shall be postponed until the first business day after the day when trading shall have been fully resumed without restriction or disruption and reporting shall have been restored.

3.4. If requested, Acquired Fund shall deliver to the Company, on behalf of Acquiring Fund, or its designee (a) at the Closing, a list, certified by Acquired Fund's Secretary, of the names, addresses and taxpayer identification numbers of the Acquired Fund Shareholders and the number and percentage ownership of outstanding Acquired Fund

A-3

shares owned by each such Acquired Fund Shareholder, all as of the Valuation Date, and (b) as soon as practicable after the Closing, all original documentation (including Internal Revenue Service forms, certificates, certifications and correspondence) relating to the Acquired Fund Shareholders' taxpayer identification numbers and their liability for or exemption from back-up withholding. The Company, on behalf of Acquiring Fund, shall issue and deliver to such Secretary a confirmation evidencing delivery of Acquiring Fund Shares to be credited on the Closing Date to Acquired Fund or provide evidence satisfactory to Acquired Fund that such Acquiring Fund Shares have been credited to Acquired Fund's account on the books of Acquiring Fund. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, share certificates, if any, receipts or other documents as such other party or its counsel may reasonably request.

4. Covenants of Acquiring Fund and Acquired Fund

4.1. Except as otherwise expressly provided herein, Acquired Fund and the Company, on behalf of Acquiring Fund, will operate in the ordinary course between the date hereof and the Closing Date, it being understood that such ordinary course of business will include customary dividends and other distributions.

4.2. The Company will prepare and file with the Securities and Exchange Commission ("Commission") a registration statement on Form N-14 under the Securities Act of 1933, as amended ("1933 Act"), relating to Acquiring Fund Shares ("Registration Statement"). Acquired Fund, will provide the Proxy Materials as described in paragraph 4.3 below for inclusion in the Registration Statement. The Company, on behalf of Acquiring Fund, and Acquired Fund agree that each of Acquired Fund and Acquiring Fund will further provide such other information and documents as are reasonably necessary for the preparation of the Registration Statement.

4.3. Acquired Fund will call a meeting of Acquired Fund Shareholders to consider and act upon this Agreement and to take all other action necessary to obtain approval of the transactions contemplated herein. Acquired Fund will prepare the notice of meeting, form of proxy and proxy statement (collectively, "Proxy Materials") to be used in connection with such meeting; provided that the Company, on behalf of Acquiring Fund, will furnish Acquired Fund with its currently effective prospectus for inclusion in the Proxy Materials and with such other information relating to Acquiring Fund as is reasonably necessary for the preparation of the Proxy Materials.

4.4. Acquired Fund will assist Acquiring Fund in obtaining such information as Acquiring Fund reasonably requests concerning the beneficial ownership of Acquired Fund shares.

4.5. Subject to the provisions of this Agreement, the Company, on behalf of Acquiring Fund, and Acquired Fund covenants that each respective Fund will take, or cause to be taken, all action, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement.

4.6. Acquired Fund, shall furnish or cause to be furnished to Acquiring Fund within 30 days after the Closing Date a statement of Acquired Fund's assets and liabilities as of the Closing Date, which statement shall be certified by Acquired Fund's Treasurer and shall be in accordance with GAAP applied consistently with those of Acquired Fund's most recent audited financial statements. As promptly as practicable, but in any case within 60 days after the Closing Date, Acquired Fund shall furnish Acquiring Fund, in such form as is reasonably satisfactory to Acquiring Fund, a statement certified by Acquired Fund's Treasurer of Acquired Fund's earnings and profits for federal income tax purposes that will be carried over to Acquiring Fund pursuant to Section 381 of the Code.

4.7. As soon after the Closing Date as is reasonably practicable, the Company (a) shall prepare and file all federal and other tax returns and reports of Acquired Fund required by law to be filed with respect to all periods ending on or before the Closing Date but not theretofore filed and (b) shall pay all federal and other taxes shown as due thereon and/or all federal and other taxes that were unpaid as of the Closing Date, including without limitation, all taxes for which the provision for payment was made as of the Closing Date (as represented in paragraph 5.2(k)).

4.8. The Company agrees to use all reasonable efforts to obtain the approvals and authorizations required by the 1933 Act and the 1940 Act and to make such filings required by the state Blue Sky and securities laws as it may deem appropriate in order to continue Acquiring Fund's operations after the Closing Date.

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5. Representations and Warranties

5.1. The Company, on behalf of Acquiring Fund, represents and warrants to Acquired Fund, as follows:

(a) Acquiring Fund is a series of the Company, a validly existing Maryland corporation with full power to carry on its business as presently conducted;

(b) The Company is a duly registered, open-end management investment company, and its registration with the Commission as an investment company under the 1940 Act and the registration of its shares under the 1933 Act are in full force and effect;

(c) All of the issued and outstanding shares of Acquiring Fund have been offered and sold in compliance in all material respects with applicable registration requirements of the 1933 Act and state securities laws. Shares of Acquiring Fund are registered in all jurisdictions in which they are required to be registered under state securities laws and other laws, and said registrations, including any periodic reports or supplemental filings, are complete and current, all fees required to be paid have been paid, and Acquiring Fund is not subject to any stop order and is fully qualified to sell its shares in each state in which its shares have been registered;

(d) The current Prospectus of Acquiring Fund and Statement of Additional Information of the Company conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the regulations thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

(e) The Company is not in, and the execution, delivery and performance of this Agreement will not result in a, material violation of any provision of its Articles of Incorporation or By-Laws, each as amended, or of any agreement, indenture, instrument, contract, lease or other undertaking to which Acquiring Fund is a party or by which it is bound;

(f) No litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to its knowledge, threatened against the Company, Acquiring Fund or any of their properties or assets which, if adversely determined, would materially and adversely affect Acquiring Fund's financial condition or the conduct of its business; and the Company knows of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects, or is reasonably likely to materially and adversely affect, its business or its ability to consummate the transactions herein contemplated;

(g) The Statement of Assets and Liabilities, Statement of Operations, Statements of Changes in Net Assets and Financial Highlights for its last completed fiscal year, audited by Ernst & Young LLP (copies of which will be furnished to Acquired Fund), fairly present, in all material respects, Acquiring Fund's financial condition as of such date in accordance with GAAP, and its results of such operations, changes in its net assets and financial highlights for such period, and as of such date there will be no known liabilities of Acquiring Fund (contingent or otherwise) not disclosed therein that would be required in accordance with GAAP to be disclosed therein;

(h) All issued and outstanding Acquiring Fund Shares are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable with no personal liability attaching to the ownership thereof. Acquiring Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of its shares;

(i) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Company, and this Agreement constitutes a valid and binding obligation of Acquiring Fund enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles. No other consents, authorizations or approvals are necessary in connection with Acquiring Fund's performance of this Agreement;

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(j) Acquiring Fund Shares to be issued and delivered to Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to the terms of this Agreement will at the Closing Date have been duly authorized and, when so issued and delivered, will be duly and validly issued Acquiring Fund Shares, and will be fully paid and non-assessable with no personal liability attaching to the ownership thereof;

(k) All material federal and other tax returns and reports of Acquiring Fund required by law to be filed on or before the Closing Date have been filed and are correct, and all federal and other taxes shown as due or required to be shown as due on said returns and reports have been paid or provision has been made for the payment thereof, and to the best of the Company's knowledge, no such return is currently under audit and no assessment has been asserted with respect to any such return;

(l) For each taxable year since its inception, Acquiring Fund has met the requirements of Subchapter M of the Code for qualification and treatment as a "regulated investment company" and neither the execution or delivery of nor the performance of the Company's obligations with respect to Acquiring Fund under this Agreement will adversely affect, and no other events are reasonably likely to occur which will adversely affect, the ability of Acquiring Fund to continue to meet the requirements of Subchapter M of the Code;

(m) Since December 31, 2013, there has been no change by the Company in accounting methods, principles, or practices, including those required by GAAP;

(n) The information furnished or to be furnished by the Company on behalf of Acquiring Fund for use in registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations applicable thereto; and

(o) The Proxy Materials to be included in the Registration Statement (only insofar as they relate to Acquiring Fund) will, on the effective date of the Registration Statement and on the Closing Date, not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which such statements were made, not materially misleading.

5.2. Acquired Fund represents and warrants to the Company, on behalf of Acquiring Fund as follows:

(a) Acquired Fund is a validly existing Massachusetts business trust with full power to carry on its business as presently conducted;

(b) Acquired Fund is a duly registered, open-end management investment company, and its registration with the Commission as an investment company under the 1940 Act and the registration of its shares under the 1933 Act are in full force and effect;

(c) All of the issued and outstanding shares of Acquired Fund have been offered and sold in compliance in all material respects with applicable requirements of the 1933 Act and state securities laws. Shares of Acquired Fund are registered in all jurisdictions in which they are required to be registered and said registrations, including any periodic reports or supplemental filings, are complete and current, all fees required to be paid have been paid, and Acquired Fund is not subject to any stop order and is fully qualified to sell its shares in each state in which its shares have been registered;

(d) The current Prospectuses, as supplemented, of Acquired Fund and Statements of Additional Information of Acquired Fund conform in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the regulations thereunder and do not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;

(e) Acquired Fund is not in, and the execution, delivery and performance of this Agreement will not result in a, material violation of any provision of its Declaration of Trust or By-Laws, as amended, or of any agreement, indenture, instrument, contract, lease or other undertaking to which Acquired Fund is a party or by which it is bound;

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(f) No litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to its knowledge, threatened against Acquired Fund or any of its properties or assets which, if adversely determined, would materially and adversely affect Acquired Fund's financial condition or the conduct of its business; and Acquired Fund knows of no facts that might form the basis for the institution of such proceedings and is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects, or is reasonably likely to materially and adversely affect, its business or its ability to consummate the transactions herein contemplated;

(g) The Statement of Assets and Liabilities, Statement of Operations, Statement of Changes in Net Assets and Financial Highlights of Acquired Fund for its last completed fiscal year, audited by Ernst & Young LLP (except that the financial information for Acquired Fund for the fiscal years ended prior to 2011 was audited by Acquired Fund's previous independent registered public accounting firm (copies of which have been or will be furnished to Acquiring Fund) fairly present, in all material respects, Acquired Fund's financial condition as of such date, and its results of operations, changes in its net assets and financial highlights for such period in accordance with GAAP, and as of such date there were no known liabilities of Acquired Fund (contingent or otherwise) not disclosed therein that would be required in accordance with GAAP to be disclosed therein;

(h) Acquired Fund has no material contracts or other commitments (other than this Agreement) that will be terminated with liability to it prior to the Closing Date;

(i) All issued and outstanding shares of Acquired Fund are, and at the Closing Date will be, duly and validly issued and outstanding, fully paid and non-assessable with no personal liability attaching to the ownership thereof. Acquired Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any of its shares, nor is there outstanding any security convertible to any of its shares. All such shares will, at the time of Closing, be held by the persons and in the amounts set forth in the list of Acquired Fund Shareholders submitted to Acquiring Fund pursuant to paragraph 3.4;

(j) The execution, delivery and performance of this Agreement will have been duly authorized prior to the Closing Date by all necessary action on the part of Acquired Fund, and subject to the approval of Acquired Fund Shareholders, this Agreement constitutes a valid and binding obligation of Acquired Fund, enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general equity principles. No other consents, authorizations or approvals are necessary in connection with Acquired Fund's performance of this Agreement;

(k) All material federal and other tax returns and reports of Acquired Fund required by law to be filed on or before the Closing Date shall have been filed and are correct and all federal and other taxes shown as due or required to be shown as due on said returns and reports have been paid or provision has been made for the payment thereof, and to the best of Acquired Fund's knowledge, no such return is currently under audit and no assessment has been asserted with respect to any such return;

(l) For each taxable year since its inception, Acquired Fund has met all the requirements of Subchapter M of the Code for qualification and treatment as a "regulated investment company" and neither the execution or delivery of nor the performance of Acquired Fund's obligations under this Agreement will adversely affect, and no other events are reasonably likely to occur which will adversely affect, the ability of Acquired Fund to continue to meet the requirements of Subchapter M of the Code for its final taxable year ending on the Closing Date;

(m) At the Closing Date, Acquired Fund will have good and valid title to the Acquired Fund Assets, subject to no liens (other than the obligation, if any, to pay the purchase price of portfolio securities purchased by Acquired Fund which have not settled prior to the Closing Date), security interests or other encumbrances, and full right, power and authority to assign, deliver and otherwise transfer such assets hereunder, and upon delivery and payment for such assets, the Company, on behalf of Acquiring Fund, will acquire good and marketable title thereto, subject to no restrictions on the full transfer thereof, including any restrictions as might arise under the 1933 Act;

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(n) On the effective date of the Registration Statement, at the time of the meeting of Acquired Fund Shareholders and on the Closing Date, the Proxy Materials (exclusive of the currently effective Acquiring Fund Prospectus contained therein) will (i) comply in all material respects with the provisions of the 1933 Act, the Securities Exchange Act of 1934, as amended ("1934 Act"), and the 1940 Act and the regulations thereunder and (ii) not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Any other information furnished by Acquired Fund for use in the Registration Statement or in any other manner that may be necessary in connection with the transactions contemplated hereby shall be accurate and complete and shall comply in all material respects with applicable federal securities and other laws and regulations thereunder;

(o) Acquired Fund will, on or prior to the Valuation Date, declare one or more dividends or other distributions to Acquired Fund Shareholders that, together with all previous dividends and other distributions to shareholders, shall have the effect of distributing to the shareholders all of its investment company taxable income and net capital gain, if any, through the Valuation Date (computed without regard to any deduction for dividends paid);

(p) Acquired Fund has maintained or has caused to be maintained on its behalf all books and accounts as required of a registered investment company in compliance with the requirements of Section 31 of the 1940 Act and the rules thereunder; and

(q) Acquired Fund is not acquiring Acquiring Fund Shares to be issued hereunder for the purpose of making any distribution thereof other than in accordance with the terms of this Agreement.

6. Conditions Precedent to Obligations of Acquired Fund

The obligations of Acquired Fund to consummate the transactions provided for herein shall be subject, at its election, to the performance by the Company, on behalf of Acquiring Fund, of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions:

6.1. All representations and warranties of the Company made on behalf of Acquiring Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date;

6.2. The Company, on behalf of Acquiring Fund, shall have delivered to Acquired Fund a certificate of the Company's President and Treasurer, in a form reasonably satisfactory to Acquired Fund and dated as of the Closing Date, to the effect that the representations and warranties of the Company, on behalf of Acquiring Fund, made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as Acquired Fund, shall reasonably request;

6.3. Acquired Fund, shall have received a favorable opinion from Dechert LLP, counsel to Acquiring Fund, dated as of the Closing Date, to the effect that:

(a) The Company is validly existing as a corporation under the laws of the State of Maryland (Maryland counsel may be relied upon in delivering such opinion); (b) the Company has the requisite corporate power to own its properties and assets and to carry on its business as described in its charter (Maryland counsel may be relied upon in delivering such opinion); (c) the Company is a duly registered, open-end, management investment company, and its registration with the Commission as an investment company under the 1940 Act is in full force and effect; (d) this Agreement has been duly authorized, executed and delivered by the Company and, assuming that the Registration Statement complies with the 1933 Act, the 1934 Act and the 1940 Act and regulations thereunder and assuming due authorization, execution and delivery of this Agreement by Acquired Fund, is a valid and binding agreement of Acquiring Fund enforceable against Acquiring Fund in accordance with its terms; (e) the issuance of the Acquiring Fund Shares has been duly authorized by all necessary corporate action on the part of the Company, and when such Acquiring Fund Shares are issued and delivered by the Company as contemplated by the Registration Statement and this Agreement against payment of the consideration therein described, such Acquiring Fund Shares

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will be validly issued, fully paid and non-assessable, and the issuance of the Acquiring Fund Shares by the Company will not be subject to any preemptive or similar rights arising under the Company's charter or bylaws, or under the Maryland General Corporation Laws (Maryland counsel may be relied upon in delivering such opinion); (f) the execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, conflict with the Company's charter or bylaws, each as amended; and (g) to the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority of the United States or the State of New York is required for the consummation by Acquiring Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may be required under state securities laws; and

6.4. As of the Closing Date, there shall have been no material change in the investment objective, policies and restrictions of Acquiring Fund or any increase in the investment management fees or annual fees pursuant to Acquiring Fund's shareholder services plan from those described in Acquiring Fund's Prospectus dated April 30, 2014, as may be supplemented, and the Company's Statement of Additional Information dated April 30, 2014, as may be supplemented.

7. Conditions Precedent to Obligations of Acquiring Fund

The obligations of the Company, on behalf of Acquiring Fund, to complete the transactions provided for herein shall be subject, at its election, to the performance by Acquired Fund, of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following conditions:

7.1. All representations and warranties of Acquired Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date;

7.2. Acquired Fund shall have delivered to Acquiring Fund at the Closing a certificate of Acquired Fund's President and its Treasurer, in form and substance satisfactory to Acquiring Fund and dated as of the Closing Date, to the effect that the representations and warranties of Acquired Fund, made in this Agreement are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, and as to such other matters as the Company, on behalf of Acquiring Fund, shall reasonably request;

7.3. Acquired Fund shall have delivered to Acquiring Fund a statement of the Acquired Fund Assets and its liabilities, together with a list of Acquired Fund's portfolio securities and other assets showing the respective adjusted bases and holding periods thereof for income tax purposes, as of the Closing Date, certified by the Treasurer of Acquired Fund;

7.4. The Company, on behalf of Acquiring Fund, shall have received at the Closing a favorable opinion from Dechert LLP, counsel to Acquired Fund, dated as of the Closing Date to the effect that:

(a) Acquired Fund is a validly existing Massachusetts business trust, and has the power to own all of its properties and assets and to carry on its business as presently conducted; (b) Acquired Fund is a duly registered, open-end, management investment company under the 1940 Act, and its registration with the Commission as an investment company under the 1940 Act is in full force and effect; (c) this Agreement has been duly authorized, executed and delivered by Acquired Fund, and, assuming that the Registration Statement complies with the 1933 Act, the 1934 Act and the 1940 Act and the regulations thereunder and assuming due authorization, execution and delivery of this Agreement by the Company, on behalf of Acquiring Fund, is a valid and binding agreement of Acquired Fund enforceable against Acquired Fund in accordance with its terms; (d) the execution and delivery of this Agreement did not, and the consummation of the transactions contemplated hereby will not, conflict with Acquired Fund's Declaration of Trust or By-Laws, each as amended; and (e) to the knowledge of such counsel, no consent, approval, authorization or order of any court or governmental authority of the United States or The Commonwealth of Massachusetts or State of New York is required for the consummation by Acquired Fund of the transactions contemplated herein, except such as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such as may be required under state securities laws; and

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7.5. On the Closing Date, the Acquired Fund Assets shall include no assets that Acquiring Fund, by reason of limitations of the Company's Articles of Incorporation, as amended, or otherwise, may not properly acquire.

8. Further Conditions Precedent to Obligations of Acquiring Fund and Acquired Fund

The obligations of Acquired Fund and the Company, on behalf of Acquiring Fund, hereunder are each subject to the further conditions that on or before the Closing Date:

8.1. This Agreement and the transactions contemplated herein shall have been approved by the requisite vote of the holders of the outstanding shares of Acquired Fund in accordance with the provisions of Acquired Fund's Declaration of Trust, as amended, and certified copies of the resolutions evidencing such approval shall have been delivered to Acquiring Fund;

8.2. On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein;

8.3. All consents of other parties and all other consents, orders and permits of federal, state and local regulatory authorities (including those of the Commission and of state Blue Sky and securities authorities, including "no-action" positions of and exemptive orders from such federal and state authorities) deemed necessary by the Company, on behalf of Acquiring Fund, or Acquired Fund to permit consummation, in all material respects, of the transactions contemplated herein shall have been obtained, except where failure to obtain any such consent, order or permit would not involve risk of a material adverse effect on the assets or properties of Acquiring Fund or Acquired Fund;

8.4. The Registration Statement shall have become effective under the 1933 Act, no stop orders suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act;

8.5. Acquired Fund, shall have declared and paid a dividend or dividends and/or other distribution or distributions that, together with all previous such dividends or distributions, shall have the effect of distributing to the Acquired Fund Shareholders all of Acquired Fund's investment company taxable income (computed without regard to any deduction for dividends paid) and all of its net capital gain (after reduction for any capital loss carry-forward and computed without regard to any deduction for dividends paid) for all taxable years ending on or before the Closing Date; and

8.6. The parties shall have received the opinion of the law firm of Dechert LLP (based on certain facts, assumptions and representations), addressed to Acquiring Fund and Acquired Fund, which opinion may be relied upon by the shareholders of Acquired Fund, substantially to the effect that, for federal income tax purposes:

(a) The transfer of substantially all of Acquired Fund's assets in exchange solely for Acquiring Fund Shares and the assumption by Acquiring Fund of certain stated liabilities of Acquired Fund followed by the distribution by Acquired Fund of Acquiring Fund Shares to the Acquired Fund Shareholders in exchange for their Acquired Fund shares pursuant to and in accordance with the terms of the Reorganization Agreement will constitute a "reorganization" within the meaning of Section 368(a)(1) of the Code;

(b) No gain or loss will be recognized by Acquiring Fund upon the receipt of the assets of Acquired Fund solely in exchange for Acquiring Fund Shares and the assumption by Acquiring Fund of the stated liabilities of Acquired Fund;

(c) No gain or loss will be recognized by Acquired Fund upon the transfer of substantially all of the assets of Acquired Fund to Acquiring Fund in exchange solely for Acquiring Fund Shares and the assumption by Acquiring Fund of the stated liabilities or upon the distribution of Acquiring Fund Shares to the Acquired Fund Shareholders in exchange for their Acquired Fund shares, except that Acquired Fund may be required to recognize gain or loss with respect to contracts described in Section 1256(b) of the Code or stock in a passive foreign investment company, as defined in Section 1297(a) of the Code;

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(d) No gain or loss will be recognized by the Acquired Fund Shareholders upon the exchange of the Acquired Fund shares for Acquiring Fund Shares;

(e) The aggregate tax basis for Acquiring Fund Shares received by each Acquired Fund Shareholder pursuant to the reorganization will be the same as the aggregate tax basis of the Acquired Fund shares held by each such Acquired Fund Shareholder immediately prior to the Reorganization;

(f) The holding period of Acquiring Fund Shares to be received by each Acquired Fund Shareholder will include the period during which the Acquired Fund shares surrendered in exchange therefor were held (provided such Acquired Fund shares were held as capital assets on the date of the Reorganization);

(g) The tax basis of the assets of Acquired Fund acquired by Acquiring Fund will be the same as the tax basis of such assets to Acquired Fund in exchange therefor; and

(h) The holding period of the assets of Acquired Fund in the hands of Acquiring Fund will include the period during which those assets were held by Acquired Fund (except where the investment activities of Acquiring Fund have the effect of reducing or eliminating such periods with respect to an asset).

Notwithstanding anything herein to the contrary, neither the Company, on behalf of Acquiring Fund, nor Acquired Fund, may waive the conditions set forth in this paragraph 8.6.

9. Fees and Expenses

Morgan Stanley Investment Management Inc. shall bear all the expenses incurred in connection with the entering into, and carrying out of, the provisions of this Agreement, including printing, filing and proxy solicitation expenses and legal and accounting expenses.

10. Entire Agreement; Survival of Warranties

10.1. This Agreement constitutes the entire agreement between the parties.

10.2. The representations, warranties and covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall survive the consummation of the transactions contemplated herein, except that the representations, warranties and covenants of Acquired Fund hereunder shall not survive the dissolution and complete liquidation of Acquired Fund in accordance with paragraph 1.9.

11. Termination

11.1. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing:

(a) by the mutual written consent of Acquired Fund and the Company, on behalf of Acquiring Fund;

(b) by either the Company, on behalf of Acquiring Fund, or Acquired Fund, by notice to the other, without liability to the terminating party on account of such termination (providing the terminating party is not otherwise in material default or breach of this Agreement), if the Closing shall not have occurred on or before September 17, 2015; or

(c) by either the Company, on behalf of Acquiring Fund, or Acquired Fund, in writing without liability to the terminating party on account of such termination (provided the terminating party is not otherwise in material default or breach of this Agreement), if (i) the other party shall fail to perform in any material respect its agreements contained herein required to be performed on or prior to the Closing Date, (ii) the other party materially breaches any of its representations, warranties or covenants contained herein, (iii) the Acquired Fund Shareholders fail to approve this Agreement at any meeting called for such purpose at which a quorum was present or (iv) any other condition herein expressed to be precedent to the obligations of the terminating party has not been met and it reasonably appears that it will not or cannot be met.

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11.2. (a) Termination of this Agreement pursuant to paragraphs 11.1(a) or (b) shall terminate all obligations of the parties hereunder and there shall be no liability for damages on the part of the Company, Acquiring Fund or Acquired Fund, or the directors or officers of the Company, on behalf of Acquiring Fund, or the trustees or officers of Acquired Fund, to any other party or its directors, trustees or officers.

(b) Termination of this Agreement pursuant to paragraph 11.1(c) shall terminate all obligations of the parties hereunder and there shall be no liability for damages on the part of the Company, Acquiring Fund or Acquired Fund, or the directors or officers of the Company, on behalf of Acquiring Fund, or the trustees or officers of Acquired Fund, except that any party in breach of this Agreement shall, upon demand, reimburse the non-breaching party for all reasonable out-of-pocket fees and expenses incurred in connection with the transactions contemplated by this Agreement, including legal, accounting and filing fees.

12. Amendments

This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the parties.

13. Miscellaneous

13.1. The article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

13.2. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.

13.3. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

13.4. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies hereunder or by reason of this Agreement.

13.5. The directors of the Company and the shareholders of each series of the Company and the trustees of Acquired Fund and the shareholders of Acquired Fund shall not be liable for any obligations of the Company or Acquiring Fund or of Acquired Fund, as appropriate, under this Agreement, and the parties hereto agree that, in asserting any rights or claims against the other parties under this Agreement, it shall look only to the assets and property of Acquiring Fund or of Acquired Fund, as appropriate, in settlement of such rights or claims, and not to the assets or property of the other series of the Company or to the directors, trustees, officers or shareholders of the other parties.

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by a duly authorized officer.

MORGAN STANLEY INSTITUTIONAL FUND, INC., on behalf of Acquiring Fund
By: /s/ John H. Gernon Name: John H. Gernon Title: President and Principal Executive Officer
MORGAN STANLEY GLOBAL INFRASTRUCTURE FUND
By: /s/ John H. Gernon Name: John H. Gernon Title: President and Principal Executive Officer

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Prospectus Supplement

May 30, 2014

Morgan Stanley Institutional Fund, Inc.

Supplement dated May 30, 2014 to the Morgan Stanley Institutional Fund, Inc. Prospectus dated April 30, 2014

International Small Cap Portfolio

The benchmark index for the International Small Cap Portfolio (the "Portfolio") of Morgan Stanley Institutional Fund, Inc. has been changed to the Morgan Stanley Capital International (MSCI) All Country World ex USA Small Cap Index. The following change to the Portfolio's prospectus is made in order to reflect this change:

The first paragraph under the section of the Prospectus entitled "Portfolio Summary—International Small Cap Portfolio—Principal Investment Strategies" is hereby deleted and replaced with the following:

Under normal market conditions, the Adviser seeks to achieve the Portfolio's investment objective by investing primarily in established and emerging franchise companies on an international basis, with capitalizations within the range of companies included in the Morgan Stanley Capital International ("MSCI") All Country World ex USA Small Cap Index.

Please retain this supplement for future reference.

MSIGLINSPT-0514

Prospectus Supplement

July 25, 2014

Morgan Stanley Institutional Fund, Inc.

Supplement dated July 25, 2014 to the Morgan Stanley Institutional Fund, Inc. Prospectus dated April 30, 2014

Active International Allocation Portfolio

Asian Equity Portfolio

Emerging Markets Portfolio

Frontier Emerging Markets Portfolio

Global Franchise Portfolio

Global Quality Portfolio

International Equity Portfolio

International Small Cap Portfolio

Select Global Infrastructure Portfolio
(collectively, the "Portfolios")

The Board of Directors of Morgan Stanley Institutional Fund, Inc. (the "Fund") has approved (i) the offering of a commission, which will be paid by Morgan Stanley Distribution, Inc., as distributor of the Fund, to certain financial intermediaries as compensation on sales of Class A shares of the Portfolios of $1 million or more; and (ii) the imposition of a contingent deferred sales charge on Class A shares of the Portfolios in relation thereto. As a result, effective August 1, 2014, the following changes to the Prospectus are necessary:

With respect to each of the Active International Allocation, Asian Equity, Emerging Markets, Frontier Emerging Markets, International Equity and International Small Cap Portfolios, the following table replaces the "Shareholder Fees" table in each such Portfolio's section of the Prospectus entitled "Portfolio Summary—Fees and Expenses:"

	Class I			Class A†			Class L
Maximum sales charge (load) imposed on purchases (as a percentage of offering price		None			5.25	%		None
Maximum deferred sales charge (load) (as a percentage based on the lesser of the offering price or NAV at redemption)		None			None‡			None
Redemption Fee (as a percentage of the amount redeemed on redemptions made within 30 days of purchase)		2.00	%		2.00	%		2.00	%

† Effective September 9, 2013, Class P shares were renamed Class A shares.

‡ Investments that are not subject to any sales charges at the time of purchase are subject to a contingent deferred sales charge ("CDSC") of 1.00% that will be imposed if you sell your shares within 18 months after the last day of the month of purchase, except for certain specific circumstances. See "Shareholder Information—How to Redeem Shares—Class A Shares" for further information about the CDSC waiver categories.

With respect to each of the Global Franchise and Select Global Infrastructure Portfolios, the following table replaces the "Shareholder Fees" table in each such Portfolio's section of the Prospectus entitled "Portfolio Summary—Fees and Expenses:"

Class I

Class A†

Class L

Maximum sales charge (load) imposed on purchases (as a
percentage of offering price

None

5.25

None

Maximum deferred sales charge (load) (as a percentage
based on the lesser of the offering price or NAV at redemption)

None

None‡

None

† Effective September 9, 2013, Class P shares were renamed Class A shares.

With respect to the Global Quality Portfolio, the following table replaces the "Shareholder Fees" table in such Portfolio's section of the Prospectus entitled "Portfolio Summary—Fees and Expenses:"

Class I

Class A

Class L

Maximum sales charge (load) imposed on purchases (as a
percentage of offering price

None

5.25

None

Maximum deferred sales charge (load) (as a percentage
based on the lesser of the offering price or NAV at redemption)

None

None#

None

# Investments that are not subject to any sales charges at the time of purchase are subject to a contingent deferred sales charge ("CDSC") of 1.00% that will be imposed if you sell your shares within 18 months after the last day of the month of purchase, except for certain specific circumstances. See "Shareholder Information—How to Redeem Shares—Class A Shares" for further information about the CDSC waiver categories.

The following is hereby added as the penultimate sentence of the last paragraph in each Portfolio's section of the Prospectus entitled "Portfolio Summary—Purchase and Sale of Portfolio Shares:"

If you sell Class A shares, your net sale proceeds are reduced by the amount of any applicable CDSC.

The following is hereby added as the last sentence of the section of the Prospectus entitled "Shareholder Information—Minimum Investment Amounts:"

No CDSC will be imposed on any involuntary conversion or involuntary redemption.

The following is hereby added as the third paragraph of the section of the Prospectus entitled "Shareholder Information—How To Purchase Class A Shares:"

Investments of $1 million or more are not subject to an initial sales charge, but are generally subject to a CDSC of 1.00% on sales made within 18 months after the last day of the month of purchase. The CDSC is assessed on an amount equal to the lesser of the then market value of the shares or the historical cost of the shares (which is the amount actually paid for the shares at the time of original purchase) being redeemed. Accordingly, no sales charge is imposed on increases in NAV above the initial purchase price. In determining whether a CDSC applies to a redemption, it is assumed that the shares being redeemed first are any shares in the shareholder's account that are not subject to a CDSC, followed by shares held the longest in the shareholder's account.

The following is hereby added as the second paragraph of the section of the Prospectus entitled "Shareholder Information—How To Redeem Shares—Class A Shares:"

The CDSC on Class A shares will be waived in connection with sales of Class A shares for which no commission or transaction fee was paid by the Distributor or Financial Intermediary at the time of purchase of such shares. In addition, a CDSC, if otherwise applicable, will be waived in the case of:

• Sales of shares held at the time you die or become disabled (within the definition in Section 72(m)(7) of the Code, which relates to the ability to engage in gainful employment), if the shares are: (i) registered either in your individual name or in the names of you and your spouse as joint tenants with right of survivorship; (ii) registered in the name of a trust of which (a) you are the settlor and that is revocable by you (i.e., a "living trust") or (b) you and your spouse are the settlors and that is revocable by you or your spouse (i.e., a "joint living trust"); or (iii) held in a qualified corporate or self-employed retirement plan, IRA or 403(b) Custodial Account; provided

in each case that the sale is requested within one year after your death or initial determination of disability.

• Sales in connection with the following retirement plan "distributions": (i) lump-sum or other distributions from a qualified corporate or self-employed retirement plan following retirement (or, in the case of a "key employee" of a "top heavy" plan, following attainment of age 59 1/2); (ii) required minimum distributions and certain other distributions (such as those following attainment of age 59 1/2) from an IRA or 403(b) Custodial Account; or (iii) a tax-free return of an excess IRA contribution (a "distribution" does not include a direct transfer of IRA, 403(b) Custodial Account or retirement plan assets to a successor custodian or trustee).

The Distributor may require confirmation of your entitlement before granting a CDSC waiver. If you believe you are eligible for a CDSC waiver, please contact your Financial Intermediary or call toll-free 1-800-548-7786.

The following is hereby added as the fourth paragraph of the section of the Prospectus entitled "Shareholder Information—Exchange Privilege:"

There are special considerations when you exchange Class A shares of a Portfolio that are subject to a CDSC. When determining the length of time you held the Class A shares, any period (starting at the end of the month) during which you held such shares will be counted. In addition, any period (starting at the end of the month) during which you held (i) Class A shares of other portfolios of the Fund; (ii) Class A shares of a Morgan Stanley Multi-Class Fund; (iii) shares of a Morgan Stanley Money Market Fund or (iv) Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, any of which you acquired in an exchange from such Class A shares of the applicable Portfolio, will also be counted; however, if you sell shares of (i) such other portfolio of the Fund; (ii) the Morgan Stanley Multi-Class Fund; (iii) the Morgan Stanley Money Market Fund; or (iv) the Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, before the expiration of the CDSC "holding period," you will be charged the CDSC applicable to such shares.

Please retain this supplement for future reference.

MSIGLINSPT -7/14

Prospectus Supplement

September 17, 2014

Morgan Stanley Institutional Fund, Inc.

Supplement dated September 17, 2014 to the Morgan Stanley Institutional Fund, Inc. Prospectus dated April 30, 2014 of:

Global Quality Portfolio (Classes I, A and L Shares)

The Board of Directors of Morgan Stanley Institutional Fund, Inc. (the "Fund") has approved a decrease in the expense cap with respect to the Class I, Class A and Class L shares of the Global Quality Portfolio (the "Portfolio"), effective October 1, 2014. Accordingly, the following changes to the Prospectus will become effective on October 1, 2014.

The Portfolio's Annual Portfolio Operating Expenses table under the section of the Prospectus entitled "Portfolio Summary—Global Quality Portfolio—Fees and Expenses—Annual Portfolio Operating Expenses" is hereby deleted in its entirety and replaced with the following:

Annual Portfolio Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Class I			Class A			Class L
Advisory Fee		0.80	%		0.80	%		0.80	%
Distribution and/or Service (12b-1) Fee		None			0.25	%		0.75	%
Other Expenses‡		4.06	%		3.95	%		4.72	%
Total Annual Portfolio Operating Expenses*		4.86	%		5.00	%		6.27	%
Fee Waiver and/or Expense Reimbursement*		3.86	%		3.65	%		4.42	%
Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement*		1.00	%		1.35	%		1.85	%

The Portfolio's Example information under the section of the Prospectus entitled "Portfolio Summary—Global Quality Portfolio—Fees and Expenses—Example" is hereby deleted in its entirety and replaced with the following:

Example

The example below is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Portfolio, your investment has a 5% return each year and that the Portfolio's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year		3 Years
Class I	$	102	$	318
Class A	$	655	$	930
Class L	$	188	$	582

The footnotes following the Portfolio's Example information under the section of the Prospectus entitled "Portfolio Summary—Global Quality Portfolio—Fees and Expenses—Example" are hereby deleted in their entirety and replaced with the following:

‡ Other expenses have been estimated for the current fiscal year.

* The Portfolio's "Adviser," Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee and/or reimburse the Portfolio so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.00% for Class I, 1.35% for Class A and 1.85% for Class L. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

The information in the table under the section of the Prospectus entitled "Fund Management—Advisory Fees" which shows the maximum expense ratios for the Class I, Class A and Class L shares of the Portfolio is hereby deleted in its entirety and replaced with the following:

Portfolio				Expense Cap Class I				Expense Cap Class A†				Expense Cap Class L
Global Quality					1.00	%			1.35	%			1.85	%

† Effective September 9, 2013, Class P shares of each Portfolio (except the Global Quality Portfolio) were renamed Class A shares.

Please retain this supplement for future reference.

MSIGLINSPT 09/14

INVESTMENT MANAGEMENT

Morgan Stanley Institutional Fund, Inc.

Non U.S. and Global Portfolios

Active International Allocation Portfolio

Asian Equity Portfolio

Emerging Markets Portfolio

Frontier Emerging Markets Portfolio

Global Franchise Portfolio

Global Quality Portfolio

International Equity Portfolio

International Small Cap Portfolio

Select Global Infrastructure Portfolio

Prospectus

April 30, 2014

Portfolio				Ticker Symbol
Active International Allocation
Class I				MSACX
Class A				MSIBX
Class L				MSLLX
Asian Equity
Class I				MEQIX
Class A				MEQPX
Class L				MEQLX
Emerging Markets
Class I				MGEMX
Class A				MMKBX
Class L				MSELX
Frontier Emerging Markets
Class I				MFMIX
Class A				MFMPX
Class L				MFMLX
Global Franchise
Class I				MSFAX
Class A				MSFBX
Class L				MSFLX
Global Quality
Class I				MGQIX
Class A				MGQAX
Class L				MGQLX
International Equity
Class I				MSIQX
Class A				MIQBX
Class L				MSQLX
International Small Cap
Class I				MSISX
Class A				MSCPX
Class L				MSNLX
Select Global Infrastructure
Class I				MTIIX
Class A				MTIPX
Class L				MTILX

The Securities and Exchange Commission ("SEC") has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

FSVPRO-00

Table of Contents

	Page
Portfolio Summary
Active International Allocation Portfolio		1
Asian Equity Portfolio		5
Emerging Markets Portfolio		9
Frontier Emerging Markets Portfolio		13
Global Franchise Portfolio		18
Global Quality Portfolio		22
International Equity Portfolio		25
International Small Cap Portfolio		29
Select Global Infrastructure Portfolio		33
Details of the Portfolios
Active International Allocation Portfolio		37
Asian Equity Portfolio		39
Emerging Markets Portfolio		41
Frontier Emerging Markets Portfolio		43
Global Franchise Portfolio		47
Global Quality Portfolio		49
International Equity Portfolio		51
International Small Cap Portfolio		53
Select Global Infrastructure Portfolio		55
Additional Information about the Portfolios' Investment Strategies and Related Risks		58
Fund Management		64
Shareholder Information		67
Financial Highlights		75
Active International Allocation Portfolio		75
Asian Equity Portfolio		78
Emerging Markets Portfolio		81
Frontier Emerging Markets Portfolio		84
Global Franchise Portfolio		87
Global Quality Portfolio		90
International Equity Portfolio		93
International Small Cap Portfolio		96
Select Global Infrastructure Portfolio		99

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Active International Allocation Portfolio

Objective

The Active International Allocation Portfolio (the "Portfolio") seeks long-term capital appreciation by investing primarily, in accordance with country and sector weightings determined by the Adviser, Morgan Stanley Investment Management Inc., in equity securities of non-U.S. issuers which, in the aggregate, replicate broad market indices.

Fees and Expenses

The table below describes the fees and expenses that you may pay if you buy and hold shares of the Portfolio. For purchases of Class A shares, you may qualify for a sales charge discount if the cumulative net asset value ("NAV") of Class A shares of the Portfolio purchased in a single transaction, together with the NAV of all Class A shares of other portfolios of Morgan Stanley Institutional Fund, Inc. (the "Fund") or Class A shares of other Morgan Stanley Multi-Class Funds (as defined in the section of this Prospectus entitled "Shareholder Information—Exchange Privilege") held in Related Accounts (as defined in the section of this Prospectus entitled "Shareholder Information—How To Purchase Class A Shares"), amounts to $25,000 or more. More information about this combined purchase discount and other discounts is available from your authorized financial intermediary and in the section of this Prospectus entitled "Shareholder Information—How To Purchase Class A Shares."

Shareholder Fees (fees paid directly from your investment)

	Class I			Class A†			Class L
Maximum sales charge (load) imposed on purchases (as a percentage of offering price)		None			5.25	%		None
Redemption Fee (as a percentage of the amount redeemed on redemptions made within 30 days of purchase)		2.00	%		2.00	%		2.00	%

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

	Class I			Class A†			Class L
Advisory Fee		0.65	%		0.65	%		0.65	%
Distribution and/or Shareholder Service (12b-1) Fee		None			0.25	%		0.75	%
Other Expenses		0.34	%		0.35	%		0.36	%
Total Annual Portfolio Operating Expenses*		0.99	%		1.25	%		1.76	%
Fee Waiver and/or Expense Reimbursement*		0.09	%		0.00	%		0.01	%
Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement*		0.90	%		1.25	%		1.75	%

Example

The example below is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

	1 Year		3 Years		5 Years		10 Years
Class I	$	92	$	287	$	498	$	1,108
Class A†	$	646	$	901	$	1,175	$	1,957
Class L	$	178	$	551	$	949	$	2,062

† Effective September 9, 2013, Class P shares were renamed Class A shares.

* The Adviser has agreed to reduce its advisory fee and/or reimburse the Portfolio so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.90% for Class I, 1.25% for Class A and 1.75% for Class L. The fee waivers and/or expense reimbursements will continue for at least two years from the date of the applicable Reorganization (as defined in the section of this Prospectus entitled "Fund Management—Advisory Fees") or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in Total Annual Portfolio Operating Expenses or in the Example, affect Portfolio performance. During the most recent fiscal year, the Portfolio's portfolio turnover rate was 36% of the average value of its portfolio.

Principal Investment Strategies

The Adviser seeks to maintain a diversified portfolio of international equity securities based on a top-down approach that emphasizes region, country, sector and industry selection and weighting rather than individual stock selection. The Adviser seeks to capitalize on the significance of region, country, sector and industry selection in international equity portfolio returns by over and underweighting countries and/or sectors based primarily on three factors: (i) valuation; (ii) dynamics/fundamental change; and (iii) market momentum/technicals.

The Adviser's Active International Allocation team analyzes both the global economic environment and the economies of countries throughout the world, focusing mainly on the industrialized countries comprising the Morgan Stanley Capital International ("MSCI") Europe, Australasia, Far East Index (the "MSCI EAFE Index"). The Adviser—on an ongoing basis—establishes the proportion or weighting for each region, country, sector and/or industry (e.g., overweight, underweight or neutral) relative to the MSCI EAFE Index and within each

Active International Allocation Portfolio (Cont'd)

region, country, sector and/or industry, will try to broadly replicate, in the aggregate, the performance of a broad local market index by investing in "baskets" of common stocks and other equity securities. In most cases, the local MSCI index for that country will be one of the broad local market indices. The equity securities in which the Portfolio may invest include common stock, preferred stock, convertible securities, depositary receipts, rights and warrants.

The Portfolio may invest in emerging market or developing countries and, with regard to such investments, may make global, regional and sector allocations to emerging markets, as well as allocations to specific emerging market or developing countries. The Portfolio may also use derivative instruments as discussed below. These derivative instruments used by the Portfolio will be counted toward the Portfolio's exposure in the types of securities listed above to the extent they have economic characteristics similar to such securities. The Adviser generally considers selling a portfolio holding when it determines that the position no longer satisfies its investment criteria.

The Portfolio may, but it is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. The Portfolio's use of derivatives may involve the purchase and sale of derivative instruments such as futures, options, swaps, contracts for difference ("CFDs") and other related instruments and techniques. The Portfolio may utilize foreign currency forward exchange contracts, which are also derivatives, in connection with its investments in foreign securities. Derivative instruments used by the Portfolio will be counted toward the Portfolio's exposure in the types of securities listed above to the extent they have economic characteristics similar to such securities.

Principal Risks

There is no assurance that the Portfolio will achieve its investment objective and you can lose money investing in this Portfolio. The principal risks of investing in the Portfolio include:

• Equity Securities. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions. To the extent that the Portfolio invests in convertible securities, and the convertible security's investment value is greater than its conversion value, its price will be likely to increase when interest rates fall and decrease when interest rates rise. If the conversion value exceeds the investment value, the price of

the convertible security will tend to fluctuate directly with the price of the underlying equity security.

• Foreign and Emerging Market Securities. Investments in foreign markets entail special risks such as currency, political, economic and market risks. There also may be greater market volatility, less reliable financial information, higher transaction and custody costs, decreased market liquidity and less government and exchange regulation associated with investments in foreign markets. In addition, investments in certain foreign markets, which have historically been considered stable, may become more volatile and subject to increased risk due to ongoing developments and changing conditions in such markets. Moreover, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries. In addition, the Portfolio's investments in foreign issuers generally will be denominated in foreign currencies and therefore, to the extent unhedged, the value of the investment will fluctuate with the U.S. dollar exchange rates. To the extent hedged by the use of foreign currency forward exchange contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. There is additional risk that such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken and that foreign currency forward exchange contracts create exposure to currencies in which the Portfolio's securities are not denominated. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

• Liquidity. The Portfolio's investments in illiquid securities may entail greater risk than investments in publicly traded securities. These securities may be more difficult to sell, particularly in times of market turmoil. Additionally, the market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. Illiquid securities may be more difficult to value. If the Portfolio is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Active International Allocation Portfolio (Cont'd)

• Derivatives. A derivative instrument often has risks similar to its underlying asset and may have additional risks, including imperfect correlation between the value of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates and risks that the transactions may not be liquid. Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss.

Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.

Performance Information

The bar chart and table below provide some indication of the risks of investing in the Portfolio by showing changes in the Portfolio's Class I shares' performance from year-to-year and by showing how the Portfolio's average annual returns for the past one, five and 10 year periods and since inception compare with those of a broad measure of market performance, as well as an index that represents a group of similar mutual funds, over time. The performance of the other Classes, which is shown in the table below, will differ because the Classes have different ongoing fees. The Portfolio's returns in the table include the maximum applicable sales charge for Class A and assume you sold your shares at the end of each period (unless otherwise noted). The Portfolio's past performance, before and after taxes, is not necessarily an indication of how the Portfolio will perform in the future. Updated performance information is available online at www.morganstanley.com/im.

Annual Total Returns—Calendar Years

High Quarter				6/30/09					24.16	%
Low Quarter				9/30/11					–20.43	%

Average Annual Total Returns
(for the calendar periods ended December 31, 2013)

	Past One Year			Past Five Years			Past Ten Years			Since Inception
Class I (commenced operations on 1/17/92)
Return before Taxes		21.38	%		11.02	%		7.00	%		6.56	%
Return after Taxes on Distributions		20.37	%		10.62	%		6.40	%		5.18	%
Return after Taxes on Distributions and Sale of Portfolio Shares		12.50	%		8.86	%		5.74	%		4.95	%
Class A† (commenced operations on 1/2/96)
Return before Taxes		14.58	%		9.57	%		6.15	%		5.56	%
Class L (commenced operations on 6/14/12)
Return before Taxes		20.34	%		N/A			N/A			25.97	%
MSCI EAFE Index (reflects no deduction for fees, expenses or taxes)¹		22.78	%		12.44	%		6.91	%		6.12	%³
Lipper International Large-Cap Core Funds Index (reflects no deduction for taxes)²		20.67	%		11.74	%		6.37	%		7.11	%³

† Effective September 9, 2013, Class P shares were renamed Class A shares.

¹ The Morgan Stanley Capital International (MSCI) EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the international equity market performance of developed markets, excluding the United States and Canada. The term "free float" represents the portion of shares outstanding that are deemed to be available for purchase in the public equity markets by investors. The MSCI EAFE Index currently consists of 21 developed market country indices. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends. It is not possible to invest directly in an index.

² The Lipper International Large-Cap Core Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper International Large-Cap Core Funds classification. There are currently 30 funds represented in this Index.

³ Since Inception reflects the inception date of Class I.

Active International Allocation Portfolio (Cont'd)

returns for the Portfolio's other Classes will vary from Class I shares' returns. Actual after-tax returns depend on the investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Portfolio shares through tax deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns may be higher than before-tax returns due to an assumed benefit from capital losses that would have been realized had Portfolio shares been sold at the end of the relevant periods, as applicable.

Fund Management

Adviser. Morgan Stanley Investment Management Inc.

Portfolio Manager. The Portfolio is managed by members of the Active International Allocation team. Information about the member primarily responsible for the day-to-day management of the Portfolio is shown below:

Name				Title with Adviser				Date Began Managing Portfolio
Ann D. Thivierge				Managing Director				June 1995

Purchase and Sale of Portfolio Shares

The minimum initial investment generally is $5,000,000 for Class I shares and $1,000 for each of Class A and Class L shares of the Portfolio. The minimum initial investment may be waived for certain investments. For more information, please refer to the section of this Prospectus entitled "Shareholder Information—Minimum Investment Amounts."

P.O. Box 219804, Kansas City, MO 64121-9804), by telephone (1-800-548-7786) or by contacting an authorized third-party, such as a broker-dealer or other financial intermediary that has entered into a selling agreement with the Portfolio's "Distributor," Morgan Stanley Distribution, Inc. (each a "Financial Intermediary"). For more information, please refer to the sections of this Prospectus entitled "Shareholder Information—How To Purchase Class I and Class L Shares" and "—How To Redeem Shares—Class I and Class L Shares."

Class A shares of the Portfolio may be purchased or sold by contacting your Financial Intermediary. For more information, please refer to the sections of this Prospectus entitled "Shareholder Information—How To Purchase Class A Shares" and "—How To Redeem Shares—Class A Shares."

Tax Information

The Portfolio intends to make distributions that may be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account.

Payments to Broker-Dealers and Other Financial Intermediaries

If you purchase the Portfolio through a Financial Intermediary (such as a bank), the Adviser and/or the Distributor may pay the Financial Intermediary for the sale of Portfolio shares and related services. These payments, which may be significant in amount, may create a conflict of interest by influencing the Financial Intermediary and your salesperson to recommend the Portfolio over another investment. Ask your salesperson or visit your Financial Intermediary's web site for more information.

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Asian Equity Portfolio

Objective

The Asian Equity Portfolio (the "Portfolio") seeks long-term capital appreciation.

Fees and Expenses

Shareholder Fees (fees paid directly from your investment)

	Class I			Class A†			Class L
Maximum sales charge (load) imposed on purchases (as a percentage of offering price)		None			5.25	%		None
Redemption Fee (as a percentage of the amount redeemed on redemptions made within 30 days of purchase)		2.00	%		2.00	%		2.00	%

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

	Class I			Class A†			Class L
Advisory Fee		0.95	%		0.95	%		0.95	%
Distribution and/or Shareholder Service (12b-1) Fee		None			0.25	%		0.75	%
Other Expenses		3.33	%		3.48	%		3.89	%
Total Annual Portfolio Operating Expenses*		4.28	%		4.68	%		5.59	%
Fee Waiver and/or Expense Reimbursement*		2.83	%		2.88	%		3.29	%
Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement*		1.45	%		1.80	%		2.30	%

Example

The example below is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Portfolio, your investment has a 5% return each year and that the Portfolio's operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year		3 Years		5 Years		10 Years
Class I	$	148	$	459	$	792	$	1,735
Class A†	$	698	$	1,062	$	1,449	$	2,530
Class L	$	233	$	718	$	1,230	$	2,636

† Effective September 9, 2013, Class P shares were renamed Class A shares.

* The Portfolio's "Adviser," Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee and/or reimburse the Portfolio so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.45% for Class I, 1.80% for Class A and 2.30% for Class L. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

Portfolio Turnover

Principal Investment Strategies

The Adviser and/or the Portfolio's "Sub-Adviser," Morgan Stanley Investment Management Company ("MSIM Company"), seek to achieve the Portfolio's investment objective by investing primarily in equity securities of companies in the Asia-Pacific region, excluding Japan.

The Adviser and/or Sub-Adviser combine a top-down investment approach that focuses on country, sector and thematic allocation with a bottom-up approach for stock selection. The Adviser and/or Sub-Adviser allocate the Portfolio's assets among equity securities in markets within the Asia Pacific region, excluding Japan, based on relative economic, political and social fundamentals, stock valuations and investor sentiment. To manage risk, the Adviser and/or Sub-Adviser emphasize macroeconomic and fundamental research.

Under normal circumstances, at least 80% of the Portfolio's assets will be invested in equity securities of issuers located in the Asia-Pacific region. This policy may be changed without shareholder approval; however, you would be notified in writing of any changes. The Portfolio's equity investments may include convertible securities. The Adviser and/or Sub-Adviser generally consider selling an investment when they determine the company no longer satisfies its investment criteria.

Asian Equity Portfolio (Cont'd)

The Portfolio may, but it is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. The Portfolio's use of derivatives may involve the purchase and sale of derivative instruments such as futures, swaps, contracts for difference ("CFDs"), structured investments and other related instruments and techniques. The Portfolio may utilize foreign currency forward exchange contracts, which are also derivatives, in connection with its investments in foreign securities. Derivative instruments used by the Portfolio will be counted toward the Portfolio's 80% policy discussed above to the extent they have economic characteristics similar to the securities included within that policy.

Principal Risks

There is no assurance that the Portfolio will achieve its investment objective and you can lose money investing in this Portfolio. The principal risks of investing in the Portfolio include:

• Asia-Pacific Market. The small size of securities markets and the low trading volume in many countries in the Asia-Pacific region may lead to a lack of liquidity. The share prices of companies in the region tend to be volatile and there is a significant possibility of loss. Many of the countries in the region are developing, both politically and economically, and as a result companies in the region may be subject to risks like nationalization or other forms of government interference, and/or may be heavily reliant on only a few industries or commodities. Investments in the region may also be subject to currency risks, such as restrictions on the flow of money in and out of the country, extreme volatility relative to the U.S. dollar and devaluation, all of which could decrease the value of the Portfolio. In addition, because the Portfolio concentrates in a single region of the world, the Portfolio's performance may be more volatile than that of a fund that invests globally. Consequently, if Asian securities fall out of favor, it may cause the Portfolio to underperform funds that do not concentrate in a single region of the world.

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Asian Equity Portfolio (Cont'd)

Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.

Performance Information

The bar chart and table below provide some indication of the risks of investing in the Portfolio by showing changes in the Portfolio's Class I shares' performance from year-to-year and by showing how the Portfolio's average annual returns for the past one year period and since inception compare with those of a broad measure of market performance, as well as an index that represents a group of similar mutual funds, over time. The performance of the other Classes, which is shown in the table below, will differ because the Classes have different ongoing fees. The Portfolio's returns in the table include the maximum applicable sales charge for Class A and assume you sold your shares at the end of each period (unless otherwise noted). The Portfolio's past performance, before and after taxes, is not necessarily an indication of how the Portfolio will perform in the future. Updated performance information is available online at www.morganstanley.com/im.

Annual Total Returns—Calendar Years

High Quarter				3/31/12					13.70	%
Low Quarter				9/30/11					–21.18	%

Average Annual Total Returns
(for the calendar periods ended December 31, 2013)

	Past One Year			Since Inception
Class I (commenced operations on 12/28/10)
Return before Taxes		–0.05	%		1.65	%
Return after Taxes on Distributions		–0.01	%		1.64	%
Return after Taxes on Distributions and Sale of Portfolio Shares		0.32	%		1.40	%
Class A† (commenced operations on 12/28/10)
Return before Taxes		–5.35	%		–0.34	%
Class L (commenced operations on 12/28/10)
Return before Taxes		–0.56	%		0.95	%
MSCI All Country Asia Ex-Japan Index (reflects no deduction for fees, expenses or taxes)¹		3.07	%		2.11	%³
Lipper Pacific Region Ex-Japan Funds Index (reflects no deduction for taxes)²		4.53	%		3.15	%³

† Effective September 9, 2013, Class P shares were renamed Class A shares.

¹ The Morgan Stanley Capital International (MSCI) All Country Asia Ex-Japan Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of Asia, excluding Japan. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends. It is not possible to invest directly in an index.

² The Lipper Pacific Region Ex-Japan Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Pacific Region Ex-Japan Funds classification. There are currently 10 funds represented in this Index.

³ Since Inception reflects the inception date of the Portfolio.

The after-tax returns shown in the table above are calculated using the historical highest individual federal marginal income tax rates during the period shown and do not reflect the impact of state and local taxes. After-tax returns for the Portfolio's other Classes will vary from Class I shares' returns. Actual after-tax returns depend on the investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Portfolio shares through tax deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns may be higher than before-tax returns due to an assumed benefit from capital losses that would have been realized had Portfolio shares been sold at the end of the relevant periods, as applicable.

Fund Management

Adviser. Morgan Stanley Investment Management Inc.

Asian Equity Portfolio (Cont'd)

Sub-Adviser. Morgan Stanley Investment Management Company.

Portfolio Managers. The Portfolio is managed by members of the Asian Equity team. Information about the members primarily responsible for the day-to-day management of the Portfolio is shown below:

Name	Title with Adviser/ Sub-Adviser	Date Began Managing Portfolio
May Yu	Executive Director of the Adviser	August 2012
Munib Madni	Managing Director of MSIM Company	May 2012
Samuel Rhee	Managing Director of MSIM Company	May 2012

Purchase and Sale of Portfolio Shares

financial intermediary that has entered into a selling agreement with the Portfolio's "Distributor," Morgan Stanley Distribution, Inc. (each a "Financial Intermediary"). For more information, please refer to the sections of this Prospectus entitled "Shareholder Information—How To Purchase Class I and Class L Shares" and "—How To Redeem Shares—Class I and Class L Shares."

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Emerging Markets Portfolio

Objective

The Emerging Markets Portfolio (the "Portfolio") seeks long-term capital appreciation by investing primarily in growth-oriented equity securities of issuers in emerging market countries.

Fees and Expenses

Shareholder Fees (fees paid directly from your investment)

	Class I			Class A†			Class L
Maximum sales charge (load) imposed on purchases (as a percentage of offering price)		None			5.25	%		None
Redemption Fee (as a percentage of the amount redeemed on redemptions made within 30 days of purchase)		2.00	%		2.00	%		2.00	%

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

	Class I			Class A†			Class L
Advisory Fee		1.21	%		1.21	%		1.21	%
Distribution and/or Shareholder Service (12b-1) Fee		None			0.25	%		0.75	%
Other Expenses		0.30	%		0.32	%		0.58	%
Total Annual Portfolio Operating Expenses*		1.51	%		1.78	%		2.54	%
Fee Waiver and/or Expense Reimbursement*		0.26	%		0.18	%		0.44	%
Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement*		1.25	%		1.60	%		2.10	%

Example

The example below is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

	1 Year		3 Years		5 Years		10 Years
Class I	$	127	$	397	$	686	$	1,511
Class A†	$	679	$	1,003	$	1,350	$	2,325
Class L	$	213	$	658	$	1,129	$	2,431

† Effective September 9, 2013, Class P shares were renamed Class A shares.

* The Portfolio's "Adviser," Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee and/or reimburse the Portfolio so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.25% for Class I, 1.60% for Class A and 2.10% for Class L. The fee waivers and/or expense reimbursement will continue for at least one year or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

Portfolio Turnover

Principal Investment Strategies

The Adviser and the Portfolio's "Sub-Advisers," Morgan Stanley Investment Management Company ("MSIM Company") and Morgan Stanley Investment Management Limited ("MSIM Limited"), seek to maximize returns by investing primarily in growth-oriented equity securities in emerging markets.

The Adviser's and Sub-Advisers' investment approach combines top-down country allocation with bottom-up stock selection. The Adviser and Sub-Advisers allocate the Portfolio's assets among emerging markets based on relative economic, political and social fundamentals, stock valuations and investor sentiment. To manage risk, the Adviser and/or Sub-Advisers emphasize macroeconomic and fundamental research.

Under normal circumstances, at least 80% of the Portfolio's assets will be invested in equity securities of issuers located in emerging market countries. This policy may be changed without shareholder approval; however, you would be notified in writing of any changes. The Adviser and/or Sub-Advisers generally consider selling an

Emerging Markets Portfolio (Cont'd)

investment when they determine the company no longer satisfies their investment criteria.

The Portfolio may, but it is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. The Portfolio's use of derivatives may involve the purchase and sale of derivative instruments such as futures and other related instruments and techniques. The Portfolio may utilize foreign currency forward exchange contracts, which are also derivatives, in connection with its investments in foreign securities. Derivative instruments used by the Portfolio will be counted toward the Portfolio's 80% policy discussed above to the extent they have economic characteristics similar to the securities included within that policy.

Principal Risks

There is no assurance that the Portfolio will achieve its investment objective and you can lose money investing in this Portfolio. The principal risks of investing in the Portfolio include:

things, effectively restrict or eliminate the Portfolio's ability to purchase or sell securities or groups of securities for a substantial period of time, and may make the Portfolio's investments in such securities harder to value. Investments in foreign markets may also be adversely affected by governmental actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets, or the imposition of punitive taxes. The governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain sectors or industries. In addition, a foreign government may limit or cause delay in the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. Certain foreign investments may become less liquid in response to market developments or adverse investor perceptions, or become illiquid after purchase by the Portfolio, particularly during periods of market turmoil. When the Portfolio holds illiquid investments, its portfolio may be harder to value. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries. In addition, the Portfolio's investments in foreign issuers generally will be denominated in foreign currencies and therefore, to the extent unhedged, the value of the investment will fluctuate with the U.S. dollar exchange rates. To the extent hedged by the use of foreign currency forward exchange contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. There is additional risk that such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken and that foreign currency forward exchange contracts create exposure to currencies in which the Portfolio's securities are not denominated. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Emerging Markets Portfolio (Cont'd)

illiquid under adverse market or economic conditions. Illiquid securities may be more difficult to value. If the Portfolio is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.

Performance Information

Annual Total Returns—Calendar Years

High Quarter				6/30/09					35.03	%
Low Quarter				12/31/08					–29.79	%

Average Annual Total Returns
(for the calendar periods ended December 31, 2013)

	Past One Year			Past Five Years			Past Ten Years			Since Inception
Class I (commenced operations on 9/25/92)
Return before Taxes		–0.80	%		14.34	%		10.76	%		8.75	%
Return after Taxes on Distributions		–1.62	%		14.13	%		9.88	%		7.89	%
Return after Taxes on Distributions and Sale of Portfolio Shares		0.53	%		11.81	%		9.40	%		7.51	%
Class A† (commenced operations on 1/2/96)
Return before Taxes		–6.26	%		12.81	%		9.89	%		7.32	%
Class L (commenced operations on 4/27/12)
Return before Taxes		1.56	%		N/A			N/A			2.68	%
MSCI Emerging Markets Net Index (reflects no deduction for fees, expenses or taxes)¹		–2.60	%		14.79	%		11.17	%		8.35	%³
Lipper Emerging Markets Funds Index (reflects no deduction for taxes)²		–1.29	%		15.17	%		10.65	%		N/A

† Effective September 9, 2013, Class P shares were renamed Class A shares.

¹ The Morgan Stanley Capital International (MSCI) Emerging Markets Net Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance of emerging markets. The term "free float" represents the portion of shares outstanding that are deemed to be available for purchase in the public equity markets by investors. The MSCI Emerging Markets Net Index currently consists of 21 emerging market country indices. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends. It is not possible to invest directly in an index.

² The Lipper Emerging Markets Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Emerging Markets Funds classification. There are currently 30 funds represented in this Index.

³ Since Inception reflects the inception date of Class I.

Emerging Markets Portfolio (Cont'd)

who hold their Portfolio shares through tax deferred arrangements such as 401(k) plans or individual retirement accounts. After-tax returns may be higher than before-tax returns due to an assumed benefit from capital losses that would have been realized had Portfolio shares been sold at the end of the relevant periods, as applicable.

Fund Management

Adviser. Morgan Stanley Investment Management Inc.

Sub-Advisers. Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company.

Portfolio Managers. The Portfolio is managed by members of the Emerging Markets Equity team. Information about the members jointly and primarily responsible for the day-to-day management of the Portfolio is shown below:

Name	Title with Adviser/ Sub-Adviser(s)	Date Began Managing Portfolio
Gaite Ali	Managing Director of the Adviser	April 2013
Eric Carlson	Managing Director of the Adviser	September 1997
Paul Psaila	Managing Director of the Adviser	February 1994
Ruchir Sharma	Managing Director of the Adviser	April 2002
Ana Cristina Piedrahita	Executive Director of MSIM Limited	January 2002
Munib Madni	Managing Director of MSIM Company	May 2012
Samuel Rhee	Managing Director of MSIM Company	May 2012

Purchase and Sale of Portfolio Shares

Prospectus entitled "Shareholder Information—Minimum Investment Amounts."

Class I and Class L shares of the Portfolio may be purchased or sold on any day the New York Stock Exchange ("NYSE") is open for business directly from the Fund by mail (c/o Boston Financial Data Services, Inc., P.O. Box 219804, Kansas City, MO 64121-9804), by telephone (1-800-548-7786) or by contacting an authorized third-party, such as a broker-dealer or other financial intermediary that has entered into a selling agreement with the Portfolio's "Distributor," Morgan Stanley Distribution, Inc. (each a "Financial Intermediary"). For more information, please refer to the sections of this Prospectus entitled "Shareholder Information—How To Purchase Class I and Class L Shares" and "—How To Redeem Shares—Class I and Class L Shares."

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Frontier Emerging Markets Portfolio

Objective

The Frontier Emerging Markets Portfolio (the "Portfolio") seeks long-term capital appreciation.

Fees and Expenses

Shareholder Fees (fees paid directly from your investment)

	Class I			Class A†			Class L
Maximum sales charge (load) imposed on purchases (as a percentage of offering price)		None			5.25	%		None
Redemption Fee (as a percentage of the amount redeemed on redemptions made within 30 days of purchase)		2.00	%		2.00	%		2.00	%

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

	Class I			Class A†			Class L
Advisory Fee		1.25	%		1.25	%		1.25	%
Distribution and/or Shareholder Service (12b-1) Fee		None			0.25	%		0.75	%
Other Expenses		0.64	%		0.45	%		0.53	%
Total Annual Portfolio Operating Expenses*		1.89	%		1.95	%		2.53	%
Fee Waiver and/or Expense Reimbursement*		0.04	%		0.00	%		0.00	%
Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement*		1.85	%		1.95	%		2.53	%

Example

The example below is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Portfolio, your investment has a 5% return each year and that the Portfolio's operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year		3 Years		5 Years		10 Years
Class I	$	188	$	582	$	1,001	$	2,169
Class A†	$	713	$	1,105	$	1,522	$	2,680
Class L	$	256	$	788	$	1,345	$	2,866

† Effective September 9, 2013, Class P shares were renamed Class A shares.

* The Portfolio's "Adviser," Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee and/or reimburse the Portfolio so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.85% for Class I, 2.20% for Class A and 2.70% for Class L. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

Portfolio Turnover

Principal Investment Strategies

The Adviser seeks to maximize returns by investing primarily in growth-oriented equity securities in frontier emerging markets.

The Adviser's investment approach combines top-down country allocation with bottom-up stock selection. The Adviser allocates the Portfolio's assets among frontier emerging markets based on relative economic, political and social fundamentals, stock valuations and investor sentiment. To manage risk, the Adviser emphasizes macroeconomic and fundamental research.

Under normal circumstances, at least 80% of the Portfolio's assets will be invested in equity securities of companies operating in frontier emerging market countries. This policy may be changed without shareholder approval; however, you would be notified in writing of any changes.

The Portfolio may also invest in emerging market securities. The equity securities in which the Portfolio may primarily invest include common and preferred stocks, convertible securities, rights, warrants, depositary receipts, limited partnership interests and other specialty securities having equity features. The Portfolio may hold or have exposure to equity securities of companies of any size, including small and medium capitalization companies, and to companies in any industry or sector. The Portfolio has a fundamental policy (i.e., one that cannot

Frontier Emerging Markets Portfolio (Cont'd)

be changed without shareholder approval) of investing 25% or more of its assets in the banking industry. The Adviser generally considers selling a portfolio holding when it determines that the holding no longer satisfies its investment criteria.

The term "frontier emerging markets" refers to those emerging market countries outside the "mainstream" emerging markets, whose capital markets have traditionally been difficult for foreign investors to enter or are in early stages of capital market and/or economic development. Frontier emerging market countries in which the Portfolio currently may invest include Argentina, Bahrain, Bangladesh, Botswana, Bulgaria, Croatia, Ecuador, Egypt, Estonia, Georgia, Ghana, Jamaica, Jordan, Kazakhstan, Kenya, Kuwait, Laos, Latvia, Lebanon, Lithuania, Mauritius, Morocco, Namibia, Nigeria, Oman, Pakistan, Panama, Qatar, Romania, Saudi Arabia, Serbia, Slovenia, Sri Lanka, Trinidad & Tobago, Tunisia, Ukraine, United Arab Emirates and Vietnam. The countries that comprise frontier emerging markets may change from time to time. The Portfolio may invest in equity securities of companies operating in frontier emerging market countries that exist now and/or in the future.

For purposes of maintaining exposure of at least 80% of the Portfolio's assets to equity securities of companies operating in frontier emerging market countries, the Portfolio may also invest in American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and other types of depositary receipts with respect to companies operating in frontier emerging market countries, securities of other open- and closed-end investment companies, including exchange-traded funds ("ETFs"), and derivative instruments as described herein.

The Portfolio may, but it is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. The Portfolio's use of derivatives may involve the purchase and sale of derivative instruments such as futures, swaps, contracts for difference ("CFDs"), structured investments and other related instruments and techniques. The Portfolio may utilize foreign currency forward exchange contracts, which are also derivatives, in connection with its investments in foreign securities. Derivative instruments used by the Portfolio will be counted toward the Portfolio's 80% policy discussed above to the extent they have economic characteristics similar to the securities included within that policy.

Principal Risks

There is no assurance that the Portfolio will achieve its investment objective and you can lose money investing

in this Portfolio. The principal risks of investing in the Portfolio include:

• Small and Medium Capitalization Companies. Investments in small and medium capitalization companies may involve greater risk than investments in larger, more established companies. The securities issued by small and medium capitalization companies may be less liquid, and such companies may have more limited markets, financial resources and product lines, and may lack the depth of management of larger companies.

• Frontier Emerging Market Securities. Investing in the securities of issuers operating in frontier emerging markets involves a high degree of risk and special considerations not typically associated with investing in the securities of other foreign or U.S. issuers. In addition, the risks associated with investing in the securities of issuers operating in emerging market countries are magnified when investing in frontier emerging market countries. These types of investments could be affected by factors not usually associated with investments in U.S. issuers, including risks associated with expropriation and/or nationalization, political or social instability, pervasiveness of corruption and crime, armed conflict, the impact on the economy of civil war, religious or ethnic unrest and the withdrawal or non-renewal of any license enabling the Portfolio to trade in securities of a particular country, confiscatory taxation, restrictions on transfers of assets, lack of uniform accounting, auditing and financial reporting standards, less publicly available financial and other information, diplomatic development which could affect U.S. investments in those countries and potential difficulties in enforcing contractual obligations. These risks and special considerations make investments in companies operating in frontier emerging market countries highly speculative in nature and, accordingly, an investment in the Portfolio must be viewed as highly speculative in nature and may not be suitable for an investor who is not able to afford the loss of his or her entire

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Frontier Emerging Markets Portfolio (Cont'd)

investment. To the extent that the Portfolio invests a significant percentage of its assets in a single frontier emerging market country, the Portfolio will be subject to heightened risk associated with investing in frontier emerging market countries and additional risks associated with that particular country. A government of a frontier emerging market country may limit or cause delay in the convertibility or repatriation of its currency and therefore could adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. Certain foreign investments may become less liquid in response to market developments or adverse investor perceptions, or become illiquid after purchase by the Portfolio, particularly during periods of market turmoil. When the Portfolio holds illiquid investments, its portfolio may be harder to value. From time to time, certain of the companies in which the Portfolio expects to invest may operate in, or have dealings with, countries subject to sanctions or embargoes imposed by the U.S. Government and the United Nations and/or countries identified by the U.S. Government as state sponsors of terrorism. A company may suffer damage to its reputation if it is identified as such a company and, as an investor in such companies, the Portfolio will be indirectly subject to those risks. Economic sanctions could, among other things, effectively restrict or eliminate the Portfolio's ability to purchase or sell securities or groups of securities for a substantial period of time, and may make the Portfolio's investments in such securities harder to value. In addition, a substantial portion of the Portfolio's investments in foreign issuers may be denominated in foreign currencies and therefore, to the extent unhedged, the value of the investment will fluctuate with the U.S. dollar exchange rates. To the extent hedged by the use of foreign currency forward exchange contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. There is additional risk that such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken and that foreign currency forward exchange contracts create exposure to currencies in which the Portfolio's securities are not denominated. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

• Banking Industry. Investment opportunities in many frontier emerging markets may be concentrated in the banking industry. Based on the Portfolio's investment restriction regarding concentration, the Portfolio, at all times, will be required to invest 25% or more of its total assets in the securities of issuers in the banking industry. As a result, the Portfolio may have a high concentration of investments in the banking industry. The banking industry can be affected by global and local economic conditions, such as the levels and liquidity of the global and local financial and asset markets, the absolute and relative level and volatility of interest rates and equity prices, investor sentiment, inflation, and the availability and cost of credit. Adverse developments in these conditions can have a greater adverse effect on the banking industry of a frontier emerging market economy than on other industries of its economy. Because the Portfolio's investments will be concentrated in the banking industry, factors that have an adverse impact on this industry may have a disproportionate impact on the Portfolio's performance.

• Investment Company Securities. Subject to the limitations set forth in the Investment Company Act of 1940, as amended (the "1940 Act"), or as otherwise permitted by the SEC, the Portfolio may acquire shares in other investment companies, including foreign investment companies and ETFs, which may be managed by the Adviser or its affiliates. The market value of the shares of other investment companies may differ from the NAV of the Portfolio. The shares of closed-end investment companies frequently trade at a discount to their NAV. As a shareholder in an investment company, the Portfolio would bear its ratable share of that entity's expenses, including its investment advisory and administration fees. At the same time, the Portfolio would continue to pay its own advisory and administration fees and other expenses. As a result, the Portfolio and its shareholders, in effect, will be absorbing duplicate levels of fees with respect to investments in other investment companies.

Frontier Emerging Markets Portfolio (Cont'd)

Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corportion or any other government agency.

Performance Information

Pursuant to an agreement and plan of reorganization between the Fund, on behalf of the Portfolio, and Morgan Stanley Frontier Emerging Markets Fund, Inc. (the "Frontier Predecessor Fund"), on September 17, 2012 the Portfolio acquired all of the assets and liabilities of the Frontier Predecessor Fund in exchange for Class I shares of the Portfolio (the "Frontier Reorganization"). As a result of the Frontier Reorganization, the Portfolio is the accounting successor of the Frontier Predecessor Fund. The historical performance information shown below reflects, for the period prior to the Frontier Reorganization, the historical performance of the Frontier Predecessor Fund. The Frontier Predecessor Fund may have performed differently if it were an open-end fund since closed-end funds are generally not subject to the cash flow fluctuations of an open-end fund.

The bar chart and table on the follwing page provide some indication of the risks of investing in the Portfolio by showing changes in the Portfolio's Class I shares'* performance from year-to-year and by showing how the Portfolio's average annual returns for the past one and five year periods and since inception compare with those of a broad measure of market performance as well as an index that represents a group of similar mutual funds, over time. The performance of the other Classes, which is shown in the table below, will differ because the Classes have different ongoing fees. The Portfolio's returns in the table include the maximum applicable sales charge for Class A and assume you sold your shares at the end of each period (unless otherwise noted). The Portfolio's past performance, before and after taxes, is not necessarily an indication of how the Portfolio will perform in the future. Updated performance information is available online at www.morganstanley.com/im.

Annual Total Returns*—Calendar Years

*Performance shown for the Portfolio's Class I shares reflects the performance of the common shares of the Frontier Predecessor Fund for periods prior to September 17, 2012.

High Quarter				6/30/09					32.70	%
Low Quarter				3/31/09					–17.42	%

Average Annual Total Returns¹
(for the calendar periods ended December 31, 2013)

	Past One Year			Past Five Years			Since Inception
Class I (commenced operations on 8/25/08)¹
Return before Taxes		32.95	%		13.45	%		1.23	%
Return after Taxes on Distributions		32.88	%		13.22	%		1.04	%
Return after Taxes on Distributions and Sale of Portfolio Shares		18.79	%		10.87	%		1.00	%
Class A† (commenced operations on 9/14/12)
Return before Taxes		25.55	%		N/A			24.26	%
Class L (commenced operations on 9/14/12)
Return before Taxes		31.81	%		N/A			28.84	%
MSCI Frontier Markets Index (reflects no deduction for fees, expenses or taxes)²		25.89	%		9.00	%		–4.35	%⁴
Lipper Emerging Markets Funds Index (reflects no deduction for taxes)³		–1.29	%		15.17	%		3.23	%⁴

† Effective September 9, 2013, Class P shares were renamed Class A shares.

¹ Performance shown for the Portfolio's Class I shares reflects the performance of the common shares of the Frontier Predecessor Fund for periods prior to September 17, 2012.

² The Morgan Stanley Capital International (MSCI) Frontier Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of frontier markets. The MSCI Frontier Markets Index currently consists of 26 frontier market country indices. The performance of the Index is calculated in U.S. dollars and assumes reinvestment of net dividends. "Net dividends" reflects a reduction in dividends after taking into account withholding of taxes by certain foreign countries represented in the Index. It is not possible to invest directly in an index.

³ The Lipper Emerging Markets Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Emerging Markets Funds classification. There are currently 30 funds represented in this Index.

⁴ Since Inception reflects the inception date of Class I.

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Frontier Emerging Markets Portfolio (Cont'd)

Fund Management

Adviser. Morgan Stanley Investment Management Inc.

Portfolio Manager. The Portfolio is managed by members of the Emerging Markets Equity team. Information about the member primarily responsible for the day-to-day management of the Portfolio is shown below:

Name				Title with Adviser				Date Began Managing Portfolio*
Tim Drinkall				Managing Director				September 2012

* Mr. Drinkall served as the portfolio manager of the Frontier Predecessor Fund since it commenced operations in 2008.

Purchase and Sale of Portfolio Shares

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Global Franchise Portfolio

Objective

The Global Franchise Portfolio (the "Portfolio") seeks long-term capital appreciation.

Fees and Expenses

Shareholder Fees (fees paid directly from your investment)

Class I

Class A†

Class L

Maximum sales charge (load)
imposed on purchases (as a
percentage of offering price)

None

5.25

None

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

	Class I			Class A†			Class L
Advisory Fee		0.79	%		0.79	%		0.79	%
Distribution and/or Shareholder Service (12b-1) Fee		None			0.25	%		0.75	%
Other Expenses		0.16	%		0.16	%		0.16	%
Total Annual Portfolio Operating Expenses		0.95	%		1.20	%		1.70	%

Example

The example below is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

	1 Year		3 Years		5 Years		10 Years
Class I	$	97	$	303	$	525	$	1,166
Class A†	$	641	$	886	$	1,150	$	1,903
Class L	$	173	$	536	$	923	$	2,009

† Effective September 9, 2013, Class P shares were renamed Class A shares.

Portfolio Turnover

Principal Investment Strategies

The Sub-Advisers rely on their research capabilities, analytical resources and judgment to identify and monitor franchise businesses meeting their investment criteria. The Sub-Advisers believe that the number of issuers with strong business franchises meeting their criteria may be limited, and accordingly, the Portfolio may concentrate its holdings in a relatively small number of companies and may invest up to 25% of its assets in a single issuer. The Portfolio may also invest in the equity securities of any size company. The Portfolio's equity investments may include convertible securities.

The Sub-Advisers generally consider selling a portfolio holding when they determine that the holding no longer satisfies their investment criteria or that replacing the holding with another investment should improve the Portfolio's valuation and/or quality.

The Portfolio may utilize foreign currency forward exchange contracts, which are derivatives, in connection with its investments in foreign securities.

Principal Risks

There is no assurance that the Portfolio will achieve its investment objective and you can lose money investing in this Portfolio. The principal risks of investing in the Portfolio include:

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Global Franchise Portfolio (Cont'd)

to the fundamental condition of the issuer, including general market, economic and political conditions. To the extent that the Portfolio invests in convertible securities, and the convertible security's investment value is greater than its conversion value, its price will be likely to increase when interest rates fall and decrease when interest rates rise. If the conversion value exceeds the investment value, the price of the convertible security will tend to fluctuate directly with the price of the underlying equity security.

• Liquidity. The Portfolio's investments in illiquid securities may entail greater risk than investments in publicly traded securities. These securities may be more

difficult to sell, particularly in times of market turmoil. Additionally, the market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. Illiquid securities may be more difficult to value. If the Portfolio is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

• Small Capitalization Companies. Investments in small capitalization companies may involve greater risk than investments in larger, more established companies. The securities issued by small capitalization companies may be less liquid, and such companies may have more limited markets, financial resources and product lines, and may lack the depth of management of larger companies.

• Global Franchise Companies. Changes in the worldwide economy, consumer spending, competition, demographics and consumer preferences, government regulation and economic conditions may adversely affect global franchise companies and may negatively impact the Portfolio to a greater extent than if the Portfolio's assets were invested in a wider variety of companies.

• Non-Diversification. Because the Portfolio is non-diversified, it may be more susceptible to an adverse event affecting a portfolio investment than a diversified portfolio and a decline in the value of that instrument would cause the Portfolio's overall value to decline to a greater degree.

Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.

Performance Information

Global Franchise Portfolio (Cont'd)

Annual Total Returns—Calendar Years

High Quarter				6/30/09					18.11	%
Low Quarter				12/31/08					–13.37	%

Average Annual Total Returns
(for the calendar periods ended December 31, 2013)

	Past One Year			Past Five Years			Past Ten Years			Since Inception
Class I (commenced operations on 11/28/01)
Return before Taxes		19.71	%		17.45	%		10.43	%		11.93	%
Return after Taxes on Distributions		18.57	%		16.85	%		9.42	%		11.07	%
Return after Taxes on Distributions and Sale of Portfolio Shares		12.17	%		14.27	%		8.66	%		10.15	%
Class A† (commenced operations on 11/28/01)
Return before Taxes		13.15	%		15.88	%		9.55	%		11.14	%
Class L (commenced operations on 4/27/12)
Return before Taxes		18.78	%		N/A			N/A			11.69	%
MSCI World Index (reflects no deduction for fees, expenses or taxes)¹		26.68	%		15.02	%		6.98	%		6.45	%³
Lipper Global Large-Cap Growth Funds Index (reflects no deduction for taxes)²		23.51	%		15.80	%		7.07	%		5.83	%³

† Effective September 9, 2013, Class P shares were renamed Class A shares.

¹ The Morgan Stanley Capital International (MSCI) World Index is a free float-adjusted market capitalization weighted index that is designed to measure global equity market performance of developed markets. The term "free float" represents the portion of shares outstanding that are deemed to be available for purchase in the public equity markets by investors. The MSCI World Index currently consists of 23 developed market country indices. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends. It is not possible to invest directly in an index.

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

Funds classification. There are currently 10 funds represented in this Index.

³ Since Inception reflects the inception date of Class I.

Fund Management

Adviser. Morgan Stanley Investment Management Inc.

Sub-Advisers. Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company.

Portfolio Managers. The Portfolio is managed by members of the International Equity team. Information about the members jointly and primarily responsible for the day-to-day management of the Portfolio is shown below:

Name	Title with Sub-Adviser(s)	Date Began Managing Portfolio
William D. Lock	Managing Director of MSIM Limited	June 2009
Bruno Paulson	Managing Director of MSIM Limited	June 2009
Vladimir A. Demine	Executive Director of MSIM Limited	June 2009
Marcus Watson	Vice President of MSIM Limited	January 2013
Christian Derold	Managing Director of MSIM Company	June 2009
Peter J. Wright*	Managing Director of MSIM Company	June 2009

* Effective December 17, 2014, Mr. Wright will retire from Morgan Stanley Investment Management ("MSIM").

Purchase and Sale of Portfolio Shares

The Fund suspended offering Class I, Class A and Class L shares of the Portfolio to new investors, except as follows. The Fund will continue to offer Class I, Class A and Class L shares of the Portfolio (1) through certain retirement plan accounts, (2) to clients of certain registered investment advisors who currently offer shares of the Portfolio in their asset allocation programs, (3) to directors and trustees of the Morgan Stanley Funds,

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Global Franchise Portfolio (Cont'd)

(4) to Morgan Stanley affiliates and their employees and (5) to benefit plans sponsored by Morgan Stanley and its affiliates. The Fund will continue to offer Class I, Class A and Class L shares of the Portfolio to existing shareholders. The Fund may recommence offering Class I, Class A and Class L shares of the Portfolio to new investors in the future. Any such offerings of the Portfolio's Class I, Class A and Class L shares may be limited in amount and may commence and terminate without any prior notice.

the sections of this Prospectus entitled "Shareholder Information—How To Purchase Class I and Class L Shares" and "—How To Redeem Shares—Class I and Class L Shares."

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Global Quality Portfolio

Objective

The Global Quality Portfolio (the "Portfolio") seeks long-term capital appreciation.

Fees and Expenses

Shareholder Fees (fees paid directly from your investment)

Class I

Class A

Class L

Maximum sales charge
(load) imposed on
purchases (as a percentage
of offering price)

None

5.25

None

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

	Class I			Class A			Class L
Advisory Fee		0.80	%		0.80	%		0.80	%
Distribution and/or Shareholder Service (12b-1) Fee		None			0.25	%		0.75	%
Other Expenses‡		4.06	%		3.95	%		4.72	%
Total Annual Portfolio Operating Expenses*		4.86	%		5.00	%		6.27	%
Fee Waiver and/or Expense Reimbursement*		3.66	%		3.45	%		4.22	%
Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement*		1.20	%		1.55	%		2.05	%

Example

The example below is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Portfolio, your investment has a 5% return each year and that the Portfolio's operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year		3 Years
Class I	$	122	$	381
Class A	$	674	$	989
Class L	$	208	$	643

‡ Other expenses have been estimated for the current fiscal year.

* The Portfolio's "Adviser," Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee and/or reimburse the Portfolio so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.20% for Class I, 1.55% for Class A and 2.05% for Class L. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

Portfolio Turnover

The Portfolio pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Portfolio shares are held in a taxable account. These costs, which are not reflected in Total Annual Portfolio Operating Expenses or in the Example, affect Portfolio performance. During the period August 30, 2013 (commencement of operations) through December 31, 2013, the Portfolio's portfolio turnover rate was 8% of the average value of its Portfolio.

Principal Investment Strategies

The Portfolio's "Sub-Advisers," Morgan Stanley Investment Management Limited ("MSIM Limited") and Morgan Stanley Investment Management Company ("MSIM Company"), seek long-term capital appreciation by investing primarily in equity securities of high quality companies located throughout the world, including developed and emerging market countries. In seeking to identify high quality companies, the Sub-Advisers look for companies that they believe have the returns profile that can underpin compounding, that is, they are able to consistently compound shareholder wealth at attractive rates of return over the long-term. In the Sub-Advisers' view, such companies are typically businesses built on dominant market positions, underpinned by powerful, hard to replicate intangible assets and that can generate resilient high cross cycle returns on capital. In addition, the Sub-Advisers consider high quality companies to have some or all of the following characteristics: strong managements, resilient revenue streams, pricing power (high gross margins), typically low capital intensity and the opportunity for organic growth.

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Global Quality Portfolio (Cont'd)

The Sub-Advisers believe that the number of issuers with high quality businesses meeting their criteria may be limited, and accordingly, the Portfolio may concentrate its holdings in a relatively small number of companies. The Portfolio's equity investments may include convertible securities.

Principal Risks

There is no assurance that the Portfolio will achieve its investment objective and you can lose money investing in this Portfolio. The principal risks of investing in the Portfolio include:

• Equity Securities. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions. To the extent that the Portfolio invests in a convertible security, and the convertible security's investment value is greater than its conversion value, its price will be likely to increase when interest rates fall and decrease when interest rates rise. If the conversion value exceeds the investment value, the price of the convertible security will tend to fluctuate directly with the price of the underlying equity security.

and custody costs, decreased market liquidity and less government and exchange regulation associated with investments in foreign markets. In addition, investments in certain foreign markets, which have historically been considered stable, may become more volatile and subject to increased risk due to ongoing developments and changing conditions in such markets. Moreover, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries. In addition, the Portfolio's investments in foreign issuers generally will be denominated in foreign currencies and therefore, to the extent unhedged, the value of the investment will fluctuate with the U.S. dollar exchange rates. To the extent hedged by the use of foreign currency forward exchange contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. There is additional risk that such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken and that foreign currency forward exchange contracts create exposure to currencies in which the Portfolio's securities are not denominated. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

• Derivatives. A derivative instrument often has risks similar to its underlying asset and may have additional risks, including imperfect correlation between the

Global Quality Portfolio (Cont'd)

value of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates and risks that the transactions may not be liquid. Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss.

Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.

Performance Information

As of the date hereof, the Portfolio has not yet completed a full calendar year of investment operations. Upon the completion of a full calendar year of investment operations by the Portfolio, this section will include charts that show annual total returns, highest and lowest quarterly returns and average annual total returns (before and after taxes) compared to a benchmark index selected for the Portfolio. Performance information for the Portfolio will be available online at www.morganstanley.com/im.

Fund Management

Adviser. Morgan Stanley Investment Management Inc.

Sub-Advisers. Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company.

Name	Title with Sub-Adviser(s)	Date Began Managing Portfolio
William D. Lock	Managing Director of MSIM Limited	August 2013
Bruno Paulson	Managing Director of MSIM Limited	August 2013
Vladimir A. Demine	Executive Director of MSIM Limited	August 2013
Marcus Watson	Vice President of MSIM Limited	August 2013
Christian Derold	Managing Director of MSIM Company	August 2013
Peter J. Wright*	Managing Director of MSIM Company	August 2013

* Effective December 17, 2014, Mr. Wright will retire from Morgan Stanley Investment Management ("MSIM").

Purchase and Sale of Portfolio Shares

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

International Equity Portfolio

Objective

The International Equity Portfolio (the "Portfolio") seeks long-term capital appreciation by investing primarily in equity securities of non-U.S. issuers.

Fees and Expenses

Shareholder Fees (fees paid directly from your investment)

	Class I			Class A†			Class L
Maximum sales charge (load) imposed on purchases (as a percentage of offering price)		None			5.25	%		None
Redemption Fee (as a percentage of the amount redeemed on redemptions made within 30 days of purchase)		2.00	%		2.00	%		2.00	%

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

	Class I			Class A†			Class L
Advisory Fee		0.80	%		0.80	%		0.80	%
Distribution and/or Shareholder Service (12b-1) Fee		None			0.25	%		0.75	%
Other Expenses		0.19	%		0.20	%		0.23	%
Total Annual Portfolio Operating Expenses*		0.99	%		1.25	%		1.78	%
Fee Waiver and/or Expense Reimbursement*		0.04	%		0.00	%		0.00	%
Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement*		0.95	%		1.25	%		1.78	%

Example

The example below is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Portfolio, your investment has a 5% return each year and that the Portfolio's operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year		3 Years		5 Years		10 Years
Class I	$	97	$	303	$	525	$	1,166
Class A†	$	646	$	901	$	1,175	$	1,957
Class L	$	181	$	560	$	964	$	2,095

† Effective September 9, 2013, Class P shares were renamed Class A shares.

* The Portfolio's "Adviser," Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee and/or reimburse the Portfolio so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.95% for Class I, 1.30% for Class A and 1.80% for Class L. The fee waivers and/or expense reimbursements will continue for at least two years from the date of the applicable Reorganization (as defined in the section of this Prospectus entitled "Fund Management—Advisory Fees") or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

Portfolio Turnover

Principal Investment Strategies

The Portfolio's "Sub-Advisers," Morgan Stanley Investment Management Limited ("MSIM Limited") and Morgan Stanley Investment Management Company ("MSIM Company"), seek to maintain a diversified portfolio of equity securities of non-U.S. issuers based on individual stock selection. The Sub-Advisers emphasize a bottom-up approach to investing that seeks to identify securities of issuers they believe are undervalued. The Sub-Advisers focus on developed markets, but they may invest in emerging markets.

The Sub-Advisers select issuers from a universe comprised of approximately 1,000 companies in non-U.S. markets. In assessing investment opportunities, the Sub-Advisers focus on companies with dominant market positions and resiliency. The Sub-Advisers consider value criteria with an emphasis on cash flow-based metrics and seek to determine the intrinsic value of the company. Securities which appear undervalued according to these criteria are then subjected to in-depth fundamental analysis.

Under normal circumstances, at least 80% of the Portfolio's assets will be invested in equity securities. This

International Equity Portfolio (Cont'd)

policy may be changed without shareholder approval; however, you would be notified in writing of any changes. The Portfolio's equity investments may include convertible securities.

The Portfolio may, but it is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. The Portfolio's use of derivatives may involve the purchase and sale of derivative instruments such as futures, options, swaps, contracts for difference ("CFDs") and other related instruments and techniques. The Portfolio may utilize foreign currency forward exchange contracts, which are also derivatives, in connection with its investments in foreign securities. Derivative instruments used by the Portfolio will be counted toward the Portfolio's 80% policy discussed above to the extent they have economic characteristics similar to the securities included within that policy.

Principal Risks

There is no assurance that the Portfolio will achieve its investment objective and you can lose money investing in this Portfolio. The principal risks of investing in the Portfolio include:

in foreign markets. In addition, investments in certain foreign markets, which have historically been considered stable, may become more volatile and subject to increased risk due to ongoing developments and changing conditions in such markets. Moreover, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries. In addition, the Portfolio's investments in foreign issuers generally will be denominated in foreign currencies and therefore, to the extent unhedged, the value of the investment will fluctuate with the U.S. dollar exchange rates. To the extent hedged by the use of foreign currency forward exchange contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. There is additional risk that such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken and that foreign currency forward exchange contracts create exposure to currencies in which the Portfolio's securities are not denominated. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

International Equity Portfolio (Cont'd)

liquid. Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss.

Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.

Performance Information

Annual Total Returns—Calendar Years

High Quarter				6/30/09					18.41	%
Low Quarter				9/30/11					–17.04	%

Average Annual Total Returns
(for the calendar periods ended December 31, 2013)

	Past One Year			Past Five Years			Past Ten Years			Since Inception
Class I (commenced operations on 8/24/89)
Return before Taxes		20.39	%		11.39	%		7.02	%		9.43	%
Return after Taxes on Distributions		19.98	%		11.05	%		5.76	%		7.94	%
Return after Taxes on Distributions and Sale of Portfolio Shares		11.99	%		9.19	%		5.90	%		7.81	%
Class A† (commenced operations on 1/2/96)
Return before Taxes		13.79	%		9.92	%		6.19	%		8.32	%

	Past One Year			Past Five Years			Past Ten Years			Since Inception
Class L (commenced operations on 6/14/12)
Return before Taxes		19.49	%		N/A			N/A			23.84	%
MSCI EAFE Index (reflects no deduction for fees, expenses or taxes)¹		22.78	%		12.44	%		6.91	%		4.89	%³
Lipper International Large-Cap Core Funds Index (reflects no deduction for taxes)²		20.67	%		11.74	%		6.37	%		6.85	%³

† Effective September 9, 2013, Class P shares were renamed Class A shares.

³ Since Inception reflects the inception date of Class I.

Fund Management

Adviser. Morgan Stanley Investment Management Inc.

Sub-Advisers. Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company.

International Equity Portfolio (Cont'd)

Name	Title with Sub-Adviser(s)	Date Began Managing Portfolio
William D. Lock	Managing Director of MSIM Limited	May 1999
Bruno Paulson	Managing Director of MSIM Limited	June 2009
Vladimir A. Demine	Executive Director of MSIM Limited	June 2009
Marcus Watson	Vice President of MSIM Limited	January 2013
Christian Derold	Managing Director	January 2006
	of MSIM Company
Peter J. Wright*	Managing Director of MSIM Company	May 1999

* Effective December 17, 2014, Mr. Wright will retire from Morgan Stanley Investment Management ("MSIM").

Purchase and Sale of Portfolio Shares

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

International Small Cap Portfolio

Objective

The International Small Cap Portfolio (the "Portfolio") seeks long-term capital appreciation by investing primarily in equity securities of small non-U.S. companies.

Fees and Expenses

Shareholder Fees (fees paid directly from your investment)

	Class I			Class A†			Class L
Maximum sales charge (load) imposed on purchases (as a percentage of offering price)		None			5.25	%		None
Redemption Fee (as a percentage of the amount redeemed on redemptions made within 30 days of purchase)		2.00	%		2.00	%		2.00	%

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

	Class I			Class A†			Class L
Advisory Fee		0.95	%		0.95	%		0.95	%
Distribution and/or Shareholder Service (12b-1) Fee		None			0.25	%		0.75	%
Other Expenses		0.44	%		2.49	%		1.03	%
Total Annual Portfolio Operating Expenses*		1.39	%		3.69	%		2.73	%
Fee Waiver and/or Expense Reimbursement*		0.24	%		2.19	%		0.73	%
Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement*		1.15	%		1.50	%		2.00	%

Example

The example below is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Portfolio, your investment has a 5% return each year and that the Portfolio's operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year		3 Years		5 Years		10 Years
Class I	$	117	$	365	$	633	$	1,398
Class A†	$	670	$	974	$	1,300	$	2,222
Class L	$	203	$	627	$	1,078	$	2,327

† Effective September 9, 2013, Class P shares were renamed Class A shares.

* The Portfolio's "Adviser," Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee and/or reimburse the Portfolio so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.15% for Class I, 1.50% for Class A and 2.00% for Class L. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

Portfolio Turnover

Principal Investment Strategies

The Adviser emphasizes a bottom-up stock selection process, seeking attractive investments on an individual company basis. In selecting securities for investment, the Adviser seeks to invest in franchises with sustainable competitive advantages. The Adviser typically favors companies with one or more of the following: strong cash generation, attractive returns on capital, hard-to-replicate assets and a favorable risk/reward. The Adviser generally considers selling a portfolio holding when it determines that the holding no longer satisfies its investment criteria.

The Portfolio may invest in foreign securities, which may include emerging market securities. Under normal circumstances, at least 80% of the assets of the Portfolio will be invested in equity securities of non-U.S. small cap companies. This policy may be changed without shareholder approval; however, you would be notified in

International Small Cap Portfolio (Cont'd)

writing of any changes. The Portfolio's equity investments may include common and preferred stocks, convertible securities and equity-linked securities, rights and warrants to purchase common stocks, depositary receipts, exchange-traded funds ("ETFs"), limited partnership interests and other specialty securities having equity features. The Portfolio may invest in privately placed and restricted securities.

The Portfolio may utilize foreign currency forward exchange contracts, which are derivatives, in connection with its investments in foreign securities.

Principal Risks

There is no assurance that the Portfolio will achieve its investment objective and you can lose money investing in this Portfolio. The principal risks of investing in the Portfolio include:

in one country or region will affect the stability of economies and financial markets in other countries or regions. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries. In addition, the Portfolio's investments in foreign issuers generally will be denominated in foreign currencies and therefore, to the extent unhedged, the value of the investment will fluctuate with the U.S. dollar exchange rates. To the extent hedged by the use of foreign currency forward exchange contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. There is additional risk that such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken and that foreign currency forward exchange contracts create exposure to currencies in which the Portfolio's securities are not denominated. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

• Liquidity. The Portfolio's investments may also include privately placed securities, which are subject to resale restrictions. These securities will have the effect of increasing the level of Portfolio illiquidity to the extent the Portfolio may be unable to sell or transfer these securities due to restrictions on transfers or on the ability to find buyers interested in purchasing the securities. Additionally, the market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. The illiquidity of the market, as well as the lack of publicly available information regarding these securities, may also adversely affect the ability to arrive at a fair value for certain securities at certain times and could make it difficult for the Portfolio to sell certain securities. If the Portfolio is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.

Performance Information

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

International Small Cap Portfolio (Cont'd)

average annual returns for the past one, five and 10 year periods and since inception compare with those of a broad measure of market performance, as well as an average that represents a group of similar mutual funds, over time. The performance of the other Classes, which is shown in the table below, will differ because the Classes have different ongoing fees. The Portfolio's returns in the table include the maximum applicable sales charge for Class A and assume you sold your shares at the end of each period (unless otherwise noted). The Portfolio's past performance, before and after taxes, is not necessarily an indication of how the Portfolio will perform in the future. Updated performance information is available online at www.morganstanley.com/im.

Annual Total Returns—Calendar Years

High Quarter				6/30/09					25.75	%
Low Quarter				9/30/08					–20.74	%

Average Annual Total Returns
(for the calendar periods ended December 31, 2013)

Past
One Year

Past
Five Years

Past
Ten Years

Since
Inception

Class I (commenced operations on 12/15/92)

Return before Taxes	25.75	%	10.73	%	6.02	%	9.14	%
Return after Taxes on Distributions	23.74	%	10.40	%	4.64	%	7.77	%
Return after Taxes on Distributions and Sale of Portfolio Shares	16.88	%	8.76	%	5.52	%	7.90	%

Class A† (commenced operations on 10/21/08)

Return
before Taxes

18.74

9.26

N/A

9.23

Class L (commenced operations on 4/30/12)

Return before Taxes	24.72	%	N/A		N/A		11.66	%
MSCI EAFE Small Cap Total Return Index (reflects no deduction for fees, expenses or taxes)¹	29.30	%	18.50	%	9.48	%	6.66	%⁴
Lipper International Small/Mid-Cap Core Funds Index (reflects no deduction for taxes)²	26.97	%	18.17	%	10.21	%	N/A

				Past One Year				Past Five Years				Past Ten Years				Since Inception
Lipper International Small/Mid-Cap Growth Funds Index (reflects no deduction for taxes)³					27.72	%			20.91	%			11.23	%			N/A

† Effective September 9, 2013, Class P shares were renamed Class A shares.

¹ The Morgan Stanley Capital International (MSCI) EAFE Small Cap Total Return Index is an unmanaged, market value weighted average of the performance of over 900 securities of companies listed on the stock exchanges of countries in Europe, Australasia and the Far East, including price performance and income from dividend payments. The MSCI EAFE Small Cap Total Return Index commenced as of January 31, 2002. Returns, including periods prior to January 31, 2002, are calculated using the return data of the MSCI EAFE Small Cap Index through January 30, 2002 and the return data of the MSCI EAFE Small Cap Total Return Index since January 31, 2002. It is not possible to invest directly in an index.

² The Lipper International Small/Mid-Cap Core Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper International Small/Mid-Cap Core Funds classification. There are currently 10 funds represented in this Index. Effective March 15, 2014, the Portfolio was reclassified by Lipper and moved into the Lipper International Small/Mid-Cap Growth Funds classification from the Lipper International Small/Mid-Cap Core Funds classification.

³ The Lipper International Small/Mid-Cap Growth Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper International Small/Mid-Cap Growth Funds classification. There are currently 30 funds represented in this Index.

⁴ Since Inception reflects the inception date of Class I.

Fund Management

Adviser. Morgan Stanley Investment Management Inc.

International Small Cap Portfolio (Cont'd)

Portfolio Manager. The Portfolio is managed by members of the Growth team. Information about the member primarily responsible for the day-to-day management of the Portfolio is shown below:

Name				Title with Adviser				Date Began Managing Portfolio
Burak Alici				Managing Director				October 2012

Purchase and Sale of Portfolio Shares

more information, please refer to the sections of this Prospectus entitled "Shareholder Information—How To Purchase Class I and Class L Shares" and "—How To Redeem Shares—Class I and Class L Shares."

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Portfolio Summary

Morgan Stanley Institutional Fund, Inc. Prospectus

Select Global Infrastructure Portfolio

Objective

The Select Global Infrastructure Portfolio (the "Portfolio") seeks to provide both capital appreciation and income.

Fees and Expenses

Shareholder Fees (fees paid directly from your investment)

Class I

Class A†

Class L

Maximum sales charge
(load) imposed on
purchases (as a
percentage of
offering price)

None

5.25

None

Annual Portfolio Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)

	Class I			Class A†			Class L
Advisory Fee		0.85	%		0.85	%		0.85	%
Distribution and/or Shareholder Service (12b-1) Fee		None			0.25	%		0.75	%
Other Expenses		1.19	%		1.33	%		1.26	%
Total Annual Portfolio Operating Expenses*		2.04	%		2.43	%		2.86	%
Fee Waiver and/or Expense Reimbursement*		0.89	%		0.93	%		0.86	%
Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement*		1.15	%		1.50	%		2.00	%

Example

The example below is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Portfolio, your investment has a 5% return each year and that the Portfolio's operating expenses remain the same.

Although your actual costs may be higher or lower, based on these assumptions your costs would be:

	1 Year		3 Years		5 Years		10 Years
Class I	$	117	$	365	$	633	$	1,398
Class A†	$	670	$	974	$	1,300	$	2,222
Class L	$	203	$	627	$	1,078	$	2,327

† Effective September 9, 2013, Class P shares were renamed Class A shares.

* The Portfolio's "Adviser," Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee and/or reimburse the Portfolio so that Total Annual Portfolio Operating Expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.15% for Class I, 1.50% for Class A and 2.00% for Class L. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

Portfolio Turnover

Principal Investment Strategies

The Adviser and/or the Portfolio's "Sub-Advisers," Morgan Stanley Investment Management Limited ("MSIM Limited") and Morgan Stanley Investment Management Company ("MSIM Company") seek to provide both capital appreciation and income by investing primarily in equity securities issued by companies located throughout the world that are engaged in the infrastructure business. Using internal proprietary research, the Adviser seeks to identify public infrastructure companies that are believed to offer the best value relative to their underlying assets and growth prospects.

Select Global Infrastructure
Portfolio (Cont'd)

(iii) the development, ownership, lease, concession, or management of highways, toll roads, tunnels, bridges, pipelines, airports, marine ports, refueling and related facilities, (iv) the provision of communications, including the development, lease, concession, or management of telephone, broadcast and mobile towers, fiber optic/copper cable, and satellite networks, (v) waste-water management and water purification/desalination and (vi) the construction or operation of essential public structures. The Portfolio's equity investments may include convertible securities. The Portfolio's investments may include securities of small and medium capitalization companies. The Portfolio may invest up to 100% of its net assets in foreign securities, which may include emerging market securities. Under normal market conditions, the Portfolio invests at least 40% of its assets in the securities of issuers located outside of the United States.

The Portfolio's Adviser and/or Sub-Advisers shift the Portfolio's assets between the different types of companies in the infrastructure business described above based on relative valuation, underlying company fundamentals, and demographic and macroeconomic considerations. The Portfolio has a fundamental policy (i.e., one that cannot be changed without shareholder approval) of investing 25% or more of its assets in the infrastructure industry.

In selecting securities to buy, hold or sell for the Portfolio, the Adviser and/or Sub-Advisers actively manage the Portfolio using a combination of bottom-up and top-down methodologies. The value-driven approach to bottom-up security selection utilizes proprietary research models to identify infrastructure companies that offer the best value relative to their underlying assets and growth prospects. The top-down allocation provides exposure to major economic infrastructure sectors and countries, with an overweighting to those sectors/countries that offer the best relative valuation. The Adviser and/or Sub-Advisers generally consider selling a portfolio holding when it determines that the holding no longer satisfies its investment criteria.

Principal Risks

There is no assurance that the Portfolio will achieve its investment objective and you can lose money investing in this Portfolio. The principal risks of investing in the Portfolio include:

• Infrastructure Industry. By concentrating its investments in the infrastructure industry, the Portfolio has greater exposure to the potential adverse economic, regulatory, political and other changes affecting companies operating within such industry. Companies within the infrastructure industry are subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction and improvement programs, high leverage, costs associated with compliance with and changes in environmental and other regulations, difficulty in raising capital in adequate amounts and

on reasonable terms in periods of high inflation and unsettled capital markets or government budgetary constraints that impact publicly funded projects, the effects of economic slowdown or recession and surplus capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies and other factors.

Other factors that may affect the operations of companies within the infrastructure industry include innovations in technology that could render the way in which a company delivers a product or service obsolete, significant changes to the number of ultimate end-users of a company's products, inexperience with and potential losses resulting from a developing deregulatory environment, increased susceptibility to terrorist attacks, risks of environmental damage due to a company's operations or an accident, and general changes in market sentiment towards infrastructure and utilities assets. Companies operating in the infrastructure industry face operating risks, including the risk of fire, explosions, leaks, mining and drilling accidents or other catastrophic events. In addition, natural risks, such as earthquakes, floods, lightning, hurricanes, tsunamis and wind, are inherent risks in infrastructure company operations.

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

Select Global Infrastructure
Portfolio (Cont'd)

investments in certain foreign markets, which have historically been considered stable, may become more volatile and subject to increased risk due to ongoing developments and changing conditions in such markets. Moreover, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries. In addition, a substantial portion of the Portfolio's investments in foreign issuers may be denominated in foreign currencies and therefore, to the extent unhedged, the value of the investment will fluctuate with the U.S. dollar exchange rates.

Shares of the Portfolio are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.

Performance Information

The bar chart and table below provide some indication of the risks of investing in the Portfolio by showing changes in the Portfolio's Class I shares' performance from year-to-year and by showing how the Portfolio's average annual returns for the past one year period and since inception compare with those of a broad measure of market performance, as well as a comparative sector index, over time. The performance of the other Classes, which is shown in the table below, will differ because the Classes have different ongoing fees. The Portfolio's returns in the table include the maximum applicable sales charge for Class A and assume you sold your shares at the end of each period (unless otherwise noted). The Portfolio's past performance, before and after taxes, is not necessarily an indication of how the Portfolio will perform in the future. Updated performance information is available online at www.morganstanley.com/im.

Annual Total Returns—Calendar Years

High Quarter				12/31/11					11.15	%
Low Quarter				9/30/11					–6.54	%

Average Annual Total Returns
(for the calendar periods ended December 31, 2013)

	Past One Year			Since Inception
Class I (commenced operations on 9/20/10)
Return before Taxes		17.91	%		17.48	%
Return after Taxes on Distributions		16.08	%		16.38	%
Return after Taxes on Distributions and Sale of Portfolio Shares		11.43	%		13.98	%
Class A† (commenced operations on 9/20/10)
Return before Taxes		11.55	%		15.29	%
Class L (commenced operations on 9/20/10)
Return before Taxes		16.98	%		16.59	%
Dow Jones Brookfield Global Infrastructure Index^SM (reflects no deduction for fees, expenses or taxes)¹		15.89	%		15.89	%³
S&P Global BMI Index (reflects no deduction for fees, expenses or taxes)²		24.12	%		12.86	%³

† Effective September 9, 2013, Class P shares were renamed Class A shares.

¹ The Dow Jones Brookfield Global Infrastructure Index^SM is a float-adjusted market capitalization weighted index that measures the stock performance of companies that exhibit strong infrastructure characteristics. The Index intends to measure all sectors of the infrastructure market. It is not possible to invest directly in an index.

² The Standard & Poor's Global BMI Index (S&P Global BMI Index) is a broad market index designed to capture exposure to equities in all countries in the world that meet minimum size and liquidity requirements. As of the date of this Prospectus, there are approximately 11,000 index members representing 26 developed and 20 emerging market countries. It is not possible to invest directly in an index.

³ Since Inception reflects the inception date of the Portfolio.

Select Global Infrastructure
Portfolio (Cont'd)

arrangements such as 401(k) plans or individual retirement accounts. After-tax returns may be higher than before-tax returns due to an assumed benefit from capital losses that would have been realized had Portfolio shares been sold at the end of the relevant periods, as applicable.

Fund Management

Adviser. Morgan Stanley Investment Management Inc.

Sub-Advisers. Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company.

Portfolio Managers. The Portfolio is managed by members of the Global Infrastructure Securities team. Information about the members jointly and primarily responsible for the day-to-day management of the Portfolio is shown below:

Name	Title with Adviser	Date Began Managing Portfolio
Theodore R. Bigman	Managing Director	September 2010
Matthew King	Managing Director	September 2010

Purchase and Sale of Portfolio Shares

Tax Information

Payments to Broker-Dealers and Other Financial Intermediaries

Details of the Portfolios

Morgan Stanley Institutional Fund, Inc. Prospectus

Active International Allocation Portfolio

Objective

The Active International Allocation Portfolio (the "Portfolio") seeks long-term capital appreciation by investing primarily, in accordance with country and sector weightings determined by the Adviser, in equity securities of non-U.S. issuers which, in the aggregate, replicate broad market indices.

Approach

Process

The Adviser's Active International Allocation team analyzes both the global economic environment and the economies of countries throughout the world, focusing mainly on the industrialized countries comprising the MSCI EAFE Index. EAFE countries include Japan, most nations in Western Europe, Australia, New Zealand, Hong Kong and Singapore. The Adviser views each region, country, sector and industry as a unique investment opportunity and evaluates factors such as valuation, growth, inflation, interest rates, corporate earnings growth, liquidity and risk characteristics, investor sentiment and economic and currency outlook. The Adviser—on an ongoing basis—establishes the proportion or weighting for each region, country, sector and/or industry (e.g., overweight, underweight or neutral) relative to the MSCI EAFE Index for investment by the Portfolio. The Adviser invests the Portfolio's assets within each region, country, sector and/or industry based on its assigned weighting. Within each region, country, sector and/or industry, the Adviser will try to broadly replicate, in the aggregate, the performance of a broad local market index by investing in "baskets" of common stocks and other equity securities. In most cases, the local MSCI index for that country will be one of the broad local market indices. The equity securities in which the Portfolio may invest include common stock, preferred stock, convertible securities, depositary receipts, rights and warrants. The Portfolio may invest in emerging market or developing countries and, with regard to such investments, may make global, regional and sector allocations to emerging markets, as well as allocations to specific emerging market or developing countries. The Adviser generally considers selling a portfolio holding when it determines that the position no longer satisfies its investment criteria.

The Portfolio may, but it is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. Derivatives are financial instruments whose value is based on the value of an underlying asset, interest rate, index or financial instrument. The Portfolio's use of derivatives may involve the purchase and sale of derivative instruments such as futures, options, swaps, CFDs and other related instruments and techniques. The Portfolio may utilize foreign currency forward exchange contracts, which are also derivatives, in connection with its investments in foreign securities. Derivative instruments used by the Portfolio will be counted toward the Portfolio's exposure in the types of securities listed above to the extent they have economic characteristics similar to such securities.

Risks

The Portfolio's principal investment strategies are subject to the following principal risks:

Investing in the Portfolio may be appropriate for you if you are willing to accept the risks and uncertainties of investing in a portfolio of equity securities of issuers in foreign countries, including emerging market or developing countries. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, prices of equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions. In addition, at times the Portfolio's market sector, foreign equity securities, may underperform relative to other sectors or the overall market.

To the extent that the Portfolio invests in convertible securities, and the convertible security's investment value is greater than its conversion value, its price will be likely to increase when interest rates fall and decrease when interest rates rise. If the conversion value exceeds the investment value, the price of the convertible security will tend to fluctuate directly with the price of the underlying equity security.

Active International Allocation Portfolio (Cont'd)

to increased risk due to ongoing developments and changing conditions in such markets. Moreover, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions.

The Portfolio's investments in foreign issuers generally will be denominated in foreign currencies and therefore, to the extent unhedged, the value of the investment will fluctuate with the U.S. dollar exchange rates. To the extent hedged by the use of foreign currency forward exchange contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is additional risk to the extent that foreign currency forward exchange contracts create exposure to currencies in which the Portfolio's securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Portfolio than if it had not entered into such contracts. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the

counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

The Portfolio's investments in illiquid securities may entail greater risk than investments in publicly traded securities. These securities may be more difficult to sell, particularly in times of market turmoil. Additionally, the market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. Illiquid securities may be more difficult to value. If the Portfolio is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

A derivative instrument often has risks similar to its underlying asset and may have additional risks, including imperfect correlation between the value of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates, risks that the transactions may not be liquid and risks arising from margin requirements. Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss.

Please see "Additional Information about the Portfolios' Investment Strategies and Related Risks" for further information about these and other risks of investing in the Portfolio.

Morgan Stanley Institutional Fund, Inc. Prospectus

Details of the Portfolios

Asian Equity Portfolio

Objective

The Asian Equity Portfolio (the "Portfolio") seeks long-term capital appreciation.

The Portfolio's investment objective may be changed by the Fund's Board of Directors without shareholder approval, but no change is anticipated. If the Portfolio's investment objective changes, the Portfolio will notify shareholders and shareholders should consider whether the Portfolio remains an appropriate investment in light of the change.

Approach

The Adviser and/or Sub-Adviser seek to achieve the Portfolio's investment objective by investing primarily in equity securities of companies in the Asia-Pacific region, excluding Japan. The Adviser and/or Sub-Adviser combine a top-down investment approach that focuses on country, sector and thematic allocation with a bottom-up approach for stock selection. Investment selection criteria include attractive growth characteristics, reasonable valuations and company managements with strong shareholder value orientation.

Process

The Adviser's and/or Sub-Adviser's global strategists analyze the global economic environment, particularly its impact on markets within the Asia-Pacific region, and allocate the Portfolio's assets among countries in the Asia-Pacific region, excluding Japan, based on relative economic, political and social fundamentals, stock valuations and investor sentiment. The Adviser and/or Sub-Adviser invest in countries based on the work of country specialists who conduct extensive fundamental analysis of companies within these markets and seek to identify companies with strong earnings growth prospects. To manage risk, the Adviser and/or Sub-Adviser emphasize global macroeconomic and fundamental research. The Adviser and/or Sub-Adviser generally consider selling a portfolio holding when it determines that the holding no longer satisfies its investment criteria.

Under normal circumstances, at least 80% of the Portfolio's assets will be invested in equity securities of issuers located in Asia-Pacific region. This policy may be changed without shareholder approval; however, you would be notified in writing of any changes. The Portfolio's equity investments may include convertible securities.

The Adviser and/or Sub-Adviser consider an issuer to be located in the Asia-Pacific region if (i) its principal securities trading market is in the Asia-Pacific region, (ii) alone or on a consolidated basis it derives 50% or more of its annual revenue from goods produced, sales made or services performed in the Asia-Pacific region or (iii) it is organized under the laws of, or has a principal office in, the Asia-Pacific region. By applying this test, it is possible

that a particular issuer could be deemed to be from more than one region.

The Portfolio invests in established markets of the Asia-Pacific region, such as China, Hong Kong, India, Indonesia, Korea, Laos, Macau, Malaysia, Philippines, Singapore, Taiwan, Thailand, Australia and New Zealand, but additional opportunities are also sought, whenever regulations permit, in any of the emerging markets in the Asia-Pacific region.

The Portfolio may, but it is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. Derivatives are financial instruments whose value is based on the value of an underlying asset, interest rate, index or financial instrument. The Portfolio's use of derivatives may involve the purchase and sale of derivative instruments such as futures, swaps, CFDs, structured investments and other related instruments and techniques. The Portfolio may utilize foreign currency forward exchange contracts, which are also derivatives, in connection with its investments in foreign securities. Derivative instruments used by the Portfolio will be counted toward the Portfolio's 80% policy discussed above to the extent they have economic characteristics similar to the securities included within that policy.

Risks

The Portfolio's principal investment strategies are subject to the following principal risks:

The small size of securities markets and the low trading volume in many countries in the Asia-Pacific region may lead to a lack of liquidity. Also, some Asian economies and financial markets have been extremely volatile in recent years. Many of the countries in the region are developing, both politically and economically. They may have relatively unstable governments and economies based on only a few commodities or industries. The share prices of companies in the region tend to be volatile and there is a significant possibility of loss. Also, some companies in the region may have less established product markets or a small management group and they may be more vulnerable to political or economic conditions, like nationalization. In addition, some countries have restricted the flow of money in and out of the country.

Many of the currencies in the Asia-Pacific region have recently experienced extreme volatility relative to the U.S. dollar. For example, Thailand, Indonesia, the Philippines and South Korea have had currency crises and have sought help from the International Monetary Fund. Holding securities in currencies that are devalued (or in companies whose revenues are substantially in currencies that are devalued) will likely decrease the value of the Portfolio.

Asian Equity Portfolio (Cont'd)

The trading volume on some Asian stock exchanges is much lower than in the United States, and Asian securities of some companies are less liquid and more volatile than similar U.S. securities. In addition, brokerage commissions on regional stock exchanges are fixed and are generally higher than the negotiated commissions in the United States. Because the Portfolio concentrates in a single region of the world, the Portfolio's performance may be more volatile than that of a fund that invests globally. If Asian securities fall out of favor, it may cause the Portfolio to underperform funds that do not concentrate in a single region of the world.

Investing in the Portfolio may be appropriate for you if you are willing to accept the risks and uncertainties of investing in a portfolio of equity securities issued by companies located in the Asia-Pacific region, excluding Japan. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, prices of equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions.

Investing in the securities of foreign issuers, particularly those located in emerging market or developing countries, entails the risk that news and events unique to a country or region will affect those markets and their issuers. The value of the Portfolio's shares may vary widely in response to political and economic factors affecting companies in foreign countries. These same events will not necessarily have an effect on the U.S. economy or similar issuers located in the United States. In addition, investments in certain foreign markets, which have historically been considered stable, may become more volatile and subject to increased risk due to ongoing developments and changing conditions in such markets. Moreover, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions.

Please see "Additional Information about the Portfolios' Investment Strategies and Related Risks" for further information about these and other risks of investing in the Portfolio.

Morgan Stanley Institutional Fund, Inc. Prospectus

Details of the Portfolios

Emerging Markets Portfolio

Objective

The Emerging Markets Portfolio (the "Portfolio") seeks long-term capital appreciation by investing primarily in growth-oriented equity securities of issuers in emerging market countries.

Approach

The Adviser and Sub-Advisers seek to maximize returns by investing primarily in growth-oriented equity securities in emerging markets. The Adviser's and Sub-Advisers' investment approach combines top-down country allocation with bottom-up stock selection. Investment selection criteria include attractive growth characteristics, reasonable valuations and company managements with strong shareholder value orientation.

Process

The Adviser's and Sub-Advisers' global strategists analyze the global economic environment, particularly its impact on emerging markets, and allocate the Portfolio's assets among emerging markets based on relative economic, political and social fundamentals, stock valuations and investor sentiment. The Adviser and/or Sub-Advisers invest in countries based on the work of country specialists who conduct extensive fundamental analysis of companies within these markets and seeks to identify companies with strong earnings growth prospects. To manage risk, the Adviser and/or Sub-Advisers emphasize macroeconomic and fundamental research. The Adviser and/or Sub-Advisers generally consider selling a portfolio holding when they determines that the holding no longer satisfies its investment criteria.

The Adviser and/or Sub-Advisers consider an issuer to be located in an emerging market country if (i) its principal securities trading market is in an emerging market country, (ii) alone or on a consolidated basis it derives 50% or more of its annual revenue from goods produced, sales made or services performed in emerging market countries or (iii) it is organized under the laws of, or has a principal office in, an emerging market country. By applying this test, it is possible that a particular issuer could be deemed to be from more than one emerging market country.

Emerging market or developing countries are countries that major international financial institutions, such as the World Bank or the Portfolio's benchmark index, generally consider to be less economically mature than developed nations, such as the United States or most nations in Western Europe. Emerging market or developing countries can include every nation in the world except the

United States, Canada, Japan, Australia, New Zealand and most countries located in Western Europe.

The Portfolio may, but it is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. Derivatives are financial instruments whose value is based on the value of an underlying asset, interest rate, index or financial instrument. The Portfolio's use of derivatives may involve the purchase and sale of derivative instruments such as futures and other related instruments and techniques. The Portfolio may utilize foreign currency forward exchange contracts, which are also derivatives, in connection with its investments in foreign securities. Derivative instruments used by the Portfolio will be counted toward the Portfolio's 80% policy discussed above to the extent they have economic characteristics similar to the securities included within that policy.

Risks

The Portfolio's principal investment strategies are subject to the following principal risks:

Investing in the Portfolio may be appropriate for you if you are willing to accept the risks and uncertainties of investing in a portfolio of equity securities of issuers in emerging markets. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, prices of equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions.

Emerging Markets Portfolio (Cont'd)

Certain foreign markets may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments, the imposition of economic sanctions against a particular country or countries, organizations, entities and/or individuals, changes in international trading patterns, trade barriers, and other protectionist or retaliatory measures. Economic sanctions could, among other things, effectively restrict or eliminate the Portfolio's ability to purchase or sell securities or groups of securities for a substantial period of time, and may make the Portfolio's investments in such securities harder to value. International trade barriers or economic sanctions against foreign countries, organizations, entities and/or individuals, may adversely affect the Portfolio's foreign holdings or exposures. Investments in foreign markets may also be adversely affected by governmental actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets, or the imposition of punitive taxes. Governmental actions can have a significant effect on the economic conditions in foreign countries, which also may adversely affect the value and liquidity of the Portfolio's investments. For example, the governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain sectors or industries. In addition, a foreign government may limit or cause delay in the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. Any of these actions could severely affect security prices, impair the Portfolio's ability to purchase or sell foreign securities or transfer the Portfolio's assets back into the U.S., or otherwise adversely affect the Portfolio's operations. Certain foreign investments may become less liquid in response to market developments or adverse investor perceptions, or become illiquid after purchase by the Portfolio, particularly during periods of market turmoil. Certain foreign investments may become illiquid when, for instance, there are few, if any, interested buyers and sellers or when dealers are unwilling to make a market for certain securities. When the Portfolio holds illiquid investments, its portfolio may be harder to value.

exchange contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is additional risk to the extent that foreign currency forward exchange contracts create exposure to currencies in which the Portfolio's securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Portfolio than if it had not entered into such contracts. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

Please see "Additional Information about the Portfolios' Investment Strategies and Related Risks" for further information about these and other risks of investing in the Portfolio.

Morgan Stanley Institutional Fund, Inc. Prospectus

Details of the Portfolios

Frontier Emerging Markets Portfolio

Objective

The Frontier Emerging Markets Portfolio (the "Portfolio") seeks long-term capital appreciation.

Approach

The Adviser seeks to achieve the Portfolio's investment objective by investing primarily in growth-oriented equity securities in frontier emerging markets. The Adviser's investment approach combines top-down country allocation based on relative economic, political and social fundamentals, stock valuations and investor sentiment, with bottom-up fundamental analysis seeking to identify issuers with investor friendly management, effective use of free cash flows and strong earnings growth potential.

Process

The Adviser's global strategists analyze the global economic environment, particularly its impact on frontier emerging markets, and allocate the Portfolio's assets among frontier emerging markets based on relative economic, political and social fundamentals, market valuations and investor sentiment. The Adviser invests in countries based on the work of country specialists who conduct extensive fundamental analysis of companies within these markets and seek to identify companies with strong earnings growth prospects. To manage risk, the Adviser emphasizes macroeconomic and fundamental research. The Adviser generally considers selling a portfolio holding when it determines that the holding no longer satisfies its investment criteria.

The equity securities in which the Portfolio may primarily invest include common and preferred stocks, convertible securities, rights, warrants, depositary receipts, limited partnership interests and other specialty securities having equity features. The Portfolio may also invest in emerging market securities. The Portfolio may hold or have exposure to equity securities of companies of any size, including small and medium capitalization companies, and to companies in any industry or sector. The Portfolio has a fundamental policy (i.e., one that cannot be changed without shareholder approval) of investing 25% or more of its assets in the banking industry.

The Adviser considers a company to be operating in a frontier emerging market country if (i) the principal trading market for its securities is in a frontier emerging market country, (ii) alone or on a consolidated basis it derives 50% or more of its annual revenues from goods produced, sales made or services performed in a frontier emerging market country or countries or (iii) it is organized under the laws of, or has a principal office in, a frontier emerging market country. By applying this test, it is possible that a particular issuer could be deemed to be from more than one country. For example, a company that derives 50% or more of its annual revenues from services performed in a frontier emerging market country can be deemed to be operating in that country even though it was organized under the laws of another country and its principal trading market is also a different country. In addition, certain of the issuers that fall within categories (ii) and (iii) above may or may not have a principal trading market in a frontier emerging market country and, while exposing the Portfolio's assets to the economic benefits of investing in a frontier emerging market country, may not do so to the same extent as an issuer with a principal trading market in a frontier emerging market country.

For purposes of maintaining exposure of at least 80% of the Portfolio's assets to equity securities of companies operating in frontier emerging market countries, the Portfolio may also invest in ADRs, GDRs and other types of depositary receipts with respect to companies operating in frontier emerging market countries, securities of other open- and closed-end investment companies, including ETFs, and derivative instruments as described herein.

Frontier Emerging Markets Portfolio (Cont'd)

value is based on the value of an underlying asset, interest rate, index or financial instrument. The Portfolio's use of derivatives may involve the purchase and sale of derivative instruments such as futures, swaps, CFDs, structured investments and other related instruments and techniques. The Portfolio may utilize forward foreign currency exchange contracts, which are also derivatives, in connection with its investments in foreign securities. Derivative instruments used by the Portfolio will be counted toward the Portfolio's 80% policy discussed above to the extent they have economic characteristics similar to the securities included within that policy.

Risks

The Portfolio's principal investment strategies are subject to the following principal risks:

Investing in the Portfolio may be appropriate for you if you are willing to accept the risks and uncertainties of investing in a portfolio of equity securities of issuers in frontier emerging markets. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, prices of equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions.

In addition, at times, small and medium capitalization equity securities may underperform relative to the overall market. Investments in small and medium capitalization companies may involve greater risk than investments in larger, more established companies. The securities issued by small and medium capitalization companies may be less liquid and their prices subject to more abrupt or erratic price movements. In addition, small and medium capitalization companies may have more limited markets, financial resources and product lines, and may lack the depth of management of larger companies. The Adviser's perception that a stock is under- or over-valued may not be accurate or may not be realized.

Investing in the securities of issuers operating in frontier emerging markets involves a high degree of risk and special considerations not typically associated with investing in the securities of other foreign or U.S. issuers. In addition, the risks associated with investing in the securities

of issuers operating in emerging market countries are magnified when investing in frontier emerging market countries. These types of investments could be affected by factors not usually associated with investments in U.S. issuers, including risks associated with expropriation and/or nationalization, political or social instability, pervasiveness of corruption and crime, armed conflict, the impact on the economy of civil war, religious or ethnic unrest and the withdrawal or non-renewal of any license enabling the Portfolio to trade in securities of a particular country, confiscatory taxation, restrictions on transfers of assets, lack of uniform accounting, auditing and financial reporting standards, less publicly available financial and other information, diplomatic development which could affect U.S. investments in those countries and potential difficulties in enforcing contractual obligations. These risks and special considerations make investments in companies operating in frontier emerging market countries highly speculative in nature and, accordingly, an investment in the Portfolio's common shares must be viewed as highly speculative in nature and may not be suitable for an investor who is not able to afford the loss of his or her entire investment. To the extent that the Portfolio invests a significant percentage of its assets in a single frontier emerging market country, the Portfolio will be subject to heightened risk associated with investing in frontier emerging market countries and additional risks associated with that particular country.

The economies of individual frontier emerging market countries may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, currency depreciation, capital reinvestment, resource self-sufficiency and balance of payments position. Governments of many frontier emerging market countries have exercised and continue to exercise substantial influence over many aspects of the private sector. In some cases, the government owns or controls many companies, including some of the largest in the country. Accordingly, government actions could have a significant effect on economic conditions in a frontier emerging market country and on market conditions, prices and yields of securities in the Portfolio's portfolio. Moreover, the economies of frontier emerging market countries may be heavily dependent upon international trade and, accordingly, have been and may continue to be adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be adversely affected by economic conditions in the countries with which they trade. In addition, the inter-relatedness of the economies in frontier emerging market countries has deepened over the years, with the effect that economic difficulties in one country often spread throughout a region or even among all or most markets of frontier emerging market countries,

Details of the Portfolios

Morgan Stanley Institutional Fund, Inc. Prospectus

Frontier Emerging Markets Portfolio (Cont'd)

an effect that may vitiate any attempt by the Portfolio to reduce risk through geographic diversification of its portfolio investments.

The financial markets of frontier emerging market countries have, for the most part, substantially less volume than more developed markets, and securities of many companies are less liquid and their prices are more volatile than securities of comparable companies in more sizeable markets. There are also varying levels of government supervision and regulation of exchanges, financial institutions and issuers in various countries. In addition, the manner in which foreign investors may invest in securities in certain countries, as well as limitations on such investments, may affect the investment operations of the Portfolio.

Investments in securities of issuers operating in frontier emerging market countries may also be exposed to an extra degree of custodial ownership and/or market risk, especially where the securities purchased are not traded on an official exchange or where ownership records regarding the securities are maintained by an unregulated entity (or even the issuer itself). In some countries, market practice may require that payment shall be made prior to receipt of the security which is being purchased, or that delivery of a security must be made before payment is received. In such cases, default by a broker or bank through whom the relevant transaction is effected might result in a loss being suffered by the Portfolio. In addition, there is generally less governmental supervision and regulation of stock exchanges, brokers and listed issuers than in the United States. The Adviser will seek, where possible, to cause the Portfolio to use counterparties whose financial status is such that this risk is reduced. However, there can be no certainty that the Adviser will be successful in eliminating this risk for the Portfolio, particularly as counterparties operating in frontier emerging market countries frequently lack the substance or financial resources of those in developed countries. There may also be a danger that, because of uncertainties in the operation of settlement systems in individual markets, competing claims may arise in respect of securities held by or to be transferred to the Portfolio. Furthermore, compensation schemes may be non-existent or limited or inadequate to meet the Portfolio's claims in any of these events.

Investment in equity securities of issuers operating in certain frontier emerging market countries is restricted or controlled to varying degrees. These restrictions or controls may at times limit or preclude foreign investment in equity securities of issuers operating in certain frontier emerging market countries and increase the costs and expenses of the Portfolio. Certain frontier emerging market countries require governmental approval prior to investments by foreign persons, limit the amount of

investment by foreign persons in a particular issuer, limit the investment by foreign persons only to a specific class of securities of an issuer that may have less advantageous rights than the classes available for purchase by domiciliaries of the countries and/or impose additional taxes on foreign investors. Certain frontier emerging market countries may also restrict investment opportunities in issuers in industries deemed important to national interests.

A government of a frontier emerging market country may limit or cause delay in the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. Certain foreign investments may become less liquid in response to market developments or adverse investor perceptions, or become illiquid after purchase by the Portfolio, particularly during periods of market turmoil. When the Portfolio holds illiquid investments, its portfolio may be harder to value. In addition, frontier emerging market countries may require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if deterioration occurs in a frontier emerging market country's balance of payments, the country could impose temporary restrictions on foreign capital remittances. The Portfolio could be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation of capital, as well as by the application to the Portfolio of any restrictions on investments. Investing in local markets in frontier emerging market countries may require the Portfolio to adopt special procedures, seek local government approvals or take other actions, each of which may involve additional costs to the Portfolio.

Investment in frontier emerging market countries may entail purchasing securities issued by or on behalf of entities that are insolvent, bankrupt, in default or otherwise engaged in an attempt to reorganize or reschedule their obligations and in entities that have little or no proven credit rating or credit history. In any such case, the issuer's poor or deteriorating financial condition may increase the likelihood that the Portfolio will experience losses or diminution in available gains due to bankruptcy, insolvency or fraud. Certain foreign governments levy withholding or other taxes on dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion of foreign withholding taxes will reduce the income received from investments in such countries.

From time to time, certain of the companies in which the Portfolio expects to invest may operate in, or have dealings with, countries subject to sanctions or embargoes imposed by the U.S. Government and the United Nations and/or countries identified by the U.S. Government as state sponsors of terrorism. A company

Frontier Emerging Markets Portfolio (Cont'd)

may suffer damage to its reputation if it is identified as a company which operates in, or has dealings with, countries subject to sanctions or embargoes imposed by the U.S. Government and the United Nations and/or countries identified by the U.S. Government as state sponsors of terrorism. As an investor in such companies, the Portfolio will be indirectly subject to those risks. Economic sanctions could, among other things, effectively restrict or eliminate the Portfolio's ability to purchase or sell securities or groups of securities for a substantial period of time, and may make the Portfolio's investments in such securities harder to value.

A substantial portion of the Portfolio's investments in foreign issuers may be denominated in foreign currencies and therefore, to the extent unhedged, the value of the investment will fluctuate with the U.S. dollar exchange rates. To the extent hedged by the use of foreign currency forward exchange contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is additional risk to the extent that foreign currency forward exchange contracts create exposure to currencies in which the Portfolio's securities are not denominated. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

Investment opportunities in many frontier emerging markets may be concentrated in the banking industry. The banking industry can be affected by global and local economic conditions, such as the levels and liquidity of the global and local financial and asset markets, the absolute and relative level and volatility of interest rates and equity prices, investor sentiment, inflation, and the availability and cost of credit. Adverse developments in these conditions can have a greater adverse effect on the banking industry of a frontier emerging market economy than on other industries of its economy. Because the Portfolio's investments will be concentrated in the

banking industry, factors that have an adverse impact on this industry may have a disproportionate impact on the Portfolio's performance.

Subject to the limitations set forth in the 1940 Act or as otherwise permitted by the SEC, the Portfolio may acquire shares in other investment companies, including foreign investment companies and ETFs, which may be managed by the Adviser or its affiliates. The market value of the shares of other investment companies may differ from the NAV of the particular Portfolio. The shares of closed-end investment companies frequently trade at a discount to their NAV. As a shareholder in an investment company, the Portfolio would bear its ratable share of that entity's expenses, including its investment advisory and administration fees. At the same time, the Portfolio would continue to pay its own advisory and administration fees and other expenses. As a result, the Portfolio and its stockholders, in effect, will be absorbing duplicate levels of fees with respect to investments in other investment companies.

Please see "Additional Information about the Portfolio's Investment Strategies and Related Risks" for further information about these and other risks of investing in the Portfolio.

Morgan Stanley Institutional Fund, Inc. Prospectus

Details of the Portfolios

Global Franchise Portfolio

Objective

The Global Franchise Portfolio (the "Portfolio") seeks long-term capital appreciation.

Approach

The Portfolio's Sub-Advisers seek long-term capital appreciation by investing primarily in equity securities of issuers located throughout the world that they believe have, among other things, resilient business franchises and growth potential. The Sub-Advisers emphasize individual stock selection and seek to identify undervalued securities of issuers located throughout the world, including both developed and emerging market countries. Under normal market conditions, the Portfolio invests in securities of issuers from at least three different countries, which may include the United States.

Process

The Sub-Advisers seek to invest in companies that they believe have resilient business franchises, strong cash flows, modest capital requirements, capable managements and growth potential. Securities are selected on a global basis with a bias towards value. The franchise focus of the Portfolio is based on the Sub-Advisers' belief that the intangible assets underlying a strong business franchise (such as patents, copyrights, brand names, licenses or distribution methods) are difficult to create or to replicate and that carefully selected franchise companies can yield above-average potential for long-term capital appreciation.

The Sub-Advisers rely on their research capabilities, analytical resources and judgment to identify and monitor franchise businesses meeting their investment criteria. The Sub-Advisers believe that the number of issuers with strong business franchises meeting their criteria may be limited, and accordingly, the Portfolio may concentrate its holdings in a relatively small number of companies and may invest up to 25% of its assets in a single issuer. The Portfolio's equity investments may include convertible securities. The Sub-Advisers generally consider selling a portfolio holding when they determine that the holding no longer satisfies their investment criteria or that replacing the holding with another investment should improve the Portfolio's valuation and/or quality.

The Portfolio may utilize foreign currency forward exchange contracts, which are derivatives, in connection with its investments in foreign securities.

Risks

The Portfolio's principal investment strategies are subject to the following principal risks:

Investing in the Portfolio may be appropriate for you if you are willing to accept the risks and uncertainties of investing in a portfolio of equity securities of issuers throughout the world, including emerging market or

developing countries. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, prices of equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions.

Global Franchise Portfolio (Cont'd)

than if it had not entered into such contracts. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

The Portfolio may also invest in the equity securities of any size company. While the Sub-Advisers believe that smaller companies may provide greater growth potential than larger, more established firms, investing in the securities of smaller companies also involves greater risk and price volatility.

Changes in the worldwide economy, consumer spending, competition, demographics and consumer preferences, government regulation and economic conditions may adversely affect global franchise companies and may negatively impact the Portfolio to a greater extent than if the Portfolio's assets were invested in a wider variety of companies.

The risks of investing in the Portfolio may be intensified because the Portfolio is non-diversified, which means that it may invest in securities of a limited number of issuers. As a result, the performance of a particular investment or a small group of investments may affect the Portfolio's performance more than if the Portfolio were diversified.

Please see "Additional Information about the Portfolios' Investment Strategies and Related Risks" for further information about these and other risks of investing in the Portfolio.

Details of the Portfolios

Morgan Stanley Institutional Fund, Inc. Prospectus

Global Quality Portfolio

Objective

The Global Quality Portfolio (the "Portfolio") seeks long-term capital appreciation.

Approach

The Portfolio's Sub-Advisers seek long-term capital appreciation by investing primarily in equity securities of high quality companies located throughout the world, including developed and emerging market countries. In seeking to identify high quality companies, the Sub-Advisers look for companies that they believe have the returns profile that can underpin compounding, that is, they are able to consistently compound shareholder wealth at attractive rates of return over the long-term. In the Sub-Advisers' view, such companies are typically businesses built on dominant market positions, underpinned by powerful, hard to replicate intangible assets and that can generate resilient high cross cycle returns on capital.

Process

The Sub-Advisers seek to identify securities of issuers they believe are of high quality and attractively priced. The Sub-Advisers consider high quality companies to have some or all of the following characteristics: strong managements, resilient revenue streams, pricing power (high gross margins), typically low capital intensity and the opportunity for organic growth. The Sub-Advisers generally consider selling a portfolio holding when they determine that the holding no longer satisfies their investment criteria.

Risks

The Portfolio's principal investment strategies are subject to the following principal risks:

Investing in the Portfolio may be appropriate for you if you are willing to accept the risks and uncertainties of investing in a portfolio of equity securities of issuers located throughout the world, including developed and emerging market countries. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, prices of equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions.

In addition, at times, small and medium capitalization equity securities may underperform relative to the overall market. Investments in small and medium capitalization companies may involve greater risk than investments in larger, more established companies. The securities issued by small and medium capitalization companies may be less liquid and their prices subject to more abrupt or erratic price movements. In addition, small and medium capitalization companies may have more limited markets, financial resources and product lines, and may lack the depth of management of larger companies. The Sub-Advisers' perception that a stock is under- or over-valued may not be accurate or may not be realized.

To the extent that the Portfolio invests in a convertible security, and the convertible security's investment value is greater than its conversion value, its price will be likely to increase when interest rates fall and decrease when interest rates rise. If the conversion value exceeds the investment value, the price of the convertible security will tend to fluctuate directly with the price of the underlying equity security.

Global Quality Portfolio (Cont'd)

market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. Illiquid securities may be more difficult to value. If the Portfolio is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

Please see "Additional Information about the Portfolios' Investment Strategies and Related Risks" for further information about these and other risks of investing in the Portfolio.

Morgan Stanley Institutional Fund, Inc. Prospectus

Details of the Portfolios

International Equity Portfolio

Objective

The International Equity Portfolio (the "Portfolio") seeks long-term capital appreciation by investing primarily in equity securities of non-U.S. issuers.

Approach

The Portfolio's Sub-Advisers seek to maintain a diversified portfolio of equity securities of non-U.S. issuers based on individual stock selection. The Sub-Advisers emphasize a bottom-up approach to investing that seeks to identify securities of issuers they believe are undervalued. The Sub-Advisers focus on developed markets, but they may invest in emerging markets.

Process

The Sub-Advisers select issuers from a universe comprised of approximately 1,000 companies in non-U.S. markets. The investment process is value driven and based on individual stock selection. In assessing investment opportunities, the Sub-Advisers focus on companies with dominant market positions and resiliency. The Sub-Advisers consider value criteria with an emphasis on cash flow-based metrics and seek to determine the intrinsic value of the company. Securities which appear undervalued according to these criteria are then subjected to in-depth fundamental analysis. The Sub-Advisers conduct a thorough investigation of the issuer's balance sheet, cash flow and income statement and assesses the company's business franchise, including product competitiveness, market positioning and industry structure. Meetings with senior company management are integral to the investment process. The Sub-Advisers generally consider selling a portfolio holding when they determine that the holding has reached its fair value target.

Under normal circumstances, at least 80% of the Portfolio's assets will be invested in equity securities. This policy may be changed without shareholder approval; however, you would be notified in writing of any changes. The Portfolio's equity investments may include convertible securities.

The Portfolio may, but it is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. Derivatives are financial instruments whose value is based on the value of an underlying asset, interest rate, index or financial instrument. The Portfolio's use of derivatives may involve the purchase and sale of derivative instruments such as futures, options, swaps, CFDs and other related instruments and techniques. The Portfolio may utilize foreign currency forward exchange contracts, which are also derivatives, in connection with its investments in foreign securities. Derivative instruments used by the Portfolio will be counted toward the Portfolio's 80% policy discussed above to the extent they have economic characteristics similar to the securities included within that policy.

Risks

The Portfolio's principal investment strategies are subject to the following principal risks:

Investing in the Portfolio may be appropriate for you if you are willing to accept the risks and uncertainties of investing in a portfolio of equity securities of non-U.S. issuers. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, prices of equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions. In addition, at times the Portfolio's market sector, equity securities of foreign issuers, may underperform relative to other sectors or the overall market.

In addition, at times, small and medium capitalization equity securities may underperform relative to the overall market. Investments in small and medium capitalization companies may involve greater risk than investments in larger, more established companies. The securities issued by small and medium capitalization companies may be less liquid and their prices subject to more abrupt or erratic price movements. In addition, small and medium capitalization companies may have more limited markets, financial resources and product lines, and may lack the depth of management of larger companies. The Adviser's perception that a stock is under- or over-valued may not be accurate or may not be realized.

International Equity Portfolio (Cont'd)

Please see "Additional Information about the Portfolios' Investment Strategies and Related Risks" for further information about these and other risks of investing in the Portfolio.

Morgan Stanley Institutional Fund, Inc. Prospectus

Details of the Portfolios

International Small Cap Portfolio

Objective

The International Small Cap Portfolio (the "Portfolio") seeks long-term capital appreciation by investing primarily in equity securities of small non-U.S. companies.

Approach

Process

Fundamental research drives the investment process. The Adviser studies on an ongoing basis company developments, including business strategy and financial results. The Adviser generally considers selling a portfolio holding when it determines that the holding no longer satisfies its investment criteria.

The Portfolio's equity investments may include common and preferred stocks, convertible securities and equity-linked securities, rights and warrants to purchase common stocks, depositary receipts, ETFs, limited partnership interests and other specialty securities having equity features. The Portfolio may invest in privately placed and restricted securities.

The Portfolio may utilize forward foreign currency exchange contracts, which are derivatives, in connection with its investments in foreign securities. Derivative instruments used by the Portfolio will be counted toward the Portfolio's 80% policy discussed above to the extent they have economic characteristics similar to the securities included within that policy.

Risks

The Portfolio's principal investment strategies are subject to the following principal risks:

Investing in the Portfolio may be appropriate for you if you are willing to accept the risks and uncertainties of

investing in a portfolio of equity securities of small non-U.S. issuers. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, prices of equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions. In addition, at times the Portfolio's market sector, equity securities of smaller foreign issuers, may underperform relative to other sectors or the overall market.

The risk of investing in equity securities is intensified in the case of the small cap companies in which the Portfolio invests. Market prices for such companies' equity securities tend to be more volatile than those of larger, more established companies. Small cap companies may themselves be more vulnerable to economic or company specific problems.

International Small Cap Portfolio (Cont'd)

currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is additional risk to the extent that foreign currency forward exchange contracts create exposure to currencies in which the Portfolio's securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Portfolio than if it had not entered into such contracts. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

The Portfolio's investments may also include privately placed securities, which are subject to resale restrictions. These securities will have the effect of increasing the level

of Portfolio illiquidity to the extent the Portfolio may be unable to sell or transfer these securities due to restrictions on transfers or on the ability to find buyers interested in purchasing the securities. Additionally, the market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. The illiquidity of the market, as well as the lack of publicly available information regarding these securities, may also adversely affect the ability to arrive at a fair value for certain securities at certain times and could make it difficult for the Portfolio to sell certain securities. If the Portfolio is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

Please see "Additional Information about the Portfolios' Investment Strategies and Related Risks" for further information about these and other risks of investing in the Portfolio.

Morgan Stanley Institutional Fund, Inc. Prospectus

Details of the Portfolios

Select Global Infrastructure Portfolio

Objective

The Select Global Infrastructure Portfolio (the "Portfolio") seeks to provide both capital appreciation and income.

Process

The Portfolio normally invests at least 80% of its assets in equity securities issued by companies located throughout the world that are engaged in the infrastructure business. A company is considered to be in the infrastructure business if it derives at least 50% of its revenues or earnings from, or devotes at least 50% of its assets to, infrastructure-related activities. Infrastructure refers to the systems and networks of energy, transportation, communication and other services required for the normal function of society. Companies in the infrastructure business may be involved in a variety of areas, including, but not limited to, (i) the transmission, distribution, storage or transportation of electricity, oil and gas (and other bulk liquid products), water, and other natural resources used to produce energy, (ii) the construction and operation of renewable power facilities, (iii) the development, ownership, lease, concession, or management of highways, toll roads, tunnels, bridges, pipelines, airports, marine ports, refueling and related facilities, (iv) the provision of communications, including the development, lease, concession, or management of telephone, broadcast and mobile towers, fiber optic/copper cable, and satellite networks, (v) waste-water management and water purification/desalination and (vi) the construction or operation of essential public structures. The Portfolio's equity investments may include convertible securities. The Portfolio's investments may include securities of small and medium capitalization companies. The Portfolio may invest up to 100% of its net assets in foreign securities, which may include emerging market securities. Under normal market conditions, the Portfolio invests at least 40% of its assets in the securities of issuers located outside of the United States.

The Adviser and/or Sub-Advisers shift the Portfolio's assets between the different types of companies in the infrastructure business described above based on relative valuation, underlying company fundamentals, and demographic and macroeconomic considerations. The Portfolio has a fundamental policy (i.e., one that cannot be changed without shareholder approval) of investing 25% or more of its assets in the infrastructure industry.

The remaining 20% of the Portfolio's assets may be invested in fixed income securities, equity securities of companies not engaged in the infrastructure business, U.S. government securities issued, or guaranteed as to principal and interest, by the U.S. Government or its agencies or instrumentalities, and asset-backed securities. The Portfolio may also invest in real estate investment trusts ("REITs") and convertible securities. The Portfolio may invest up to 5% of its assets in fixed income securities and convertible securities rated below investment grade (often referred to as "high yield securities" or "junk bonds").

Risks

The Portfolio's principal investment strategies are subject to the following principal risks:

By concentrating its investments in the infrastructure industry, the Portfolio has greater exposure to the potential adverse economic, regulatory, political and other changes affecting companies operating within such industry. Companies within the infrastructure industry are subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction and improvement programs, high leverage, costs associated with compliance with and changes in environmental and other regulations, difficulty in raising capital in adequate amounts and on reasonable terms in periods of high inflation and unsettled capital markets or government budgetary constraints that impact publicly funded projects, the effects of economic slowdown or recession and surplus capacity, increased competition from other providers of services, uncertainties concerning the

Select Global Infrastructure Portfolio (Cont'd)

availability of fuel at reasonable prices, the effects of energy conservation policies and other factors. Additionally, companies within the infrastructure industry may be subject to regulation by various government authorities and may also be affected by government regulation of rates charged to customers, service interruption or legal challenges due to environmental, operational or other mishaps and the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards; technological innovations that may render existing plants, equipment or products obsolete, unforeseen delays, accidents, and cost overruns in infrastructure projects. Any market price movements, regulatory or technological changes, or economic conditions affecting infrastructure-related companies may have a significant impact on the Portfolio's performance. Other factors that may affect the operations of companies within the infrastructure industry include innovations in technology that could render the way in which a company delivers a product or service obsolete, significant changes to the number of ultimate end-users of a company's products, inexperience with and potential losses resulting from a developing deregulatory environment, increased susceptibility to terrorist attacks, risks of environmental damage due to a company's operations or an accident, and general changes in market sentiment towards infrastructure and utilities assets.

Companies operating in the infrastructure industry face operating risks, including the risk of fire, explosions, leaks, mining and drilling accidents or other catastrophic events. If any of these operating risks occur, it could cause substantial losses to the given infrastructure company. In addition, natural risks, such as earthquakes, floods, lightning, hurricanes, tsunamis and wind, are inherent risks in infrastructure company operations. For example, extreme weather patterns, such as Hurricane Ivan in 2004 and Hurricanes Katrina and Rita in 2005, the Tohuku earthquake and resulting tsunami in Japan in 2011, could result in substantial damage to the facilities of certain companies located in the affected areas and such extreme weather patterns, or the threat thereof, could adversely impact the prices of the securities in which the Portfolio invests. This volatility may create fluctuations in commodity prices and earnings of companies in the infrastructure industry.

Investing in the Portfolio may be appropriate for you if you are willing to accept the risks and uncertainties of investing in a portfolio of equity securities issued by companies located throughout the world that are engaged in the infrastructure business. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities will rise and fall in response to a number of different factors. In particular, prices of equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to

the fundamental condition of the issuer, including general market, economic and political conditions.

In addition, at times, small and medium capitalization equity securities may underperform relative to the overall market. Investments in small and medium capitalization companies may involve greater risk than investments in larger, more established companies. The securities issued by small and medium capitalization companies may be less liquid and their prices subject to more abrupt or erratic price movements. In addition, small and medium capitalization companies may have more limited markets, financial resources and product lines, and may lack the depth of management of larger companies. The Adviser's perception that a stock is under- or over-valued may not be accurate or may not be realized.

Details of the Portfolios

Morgan Stanley Institutional Fund, Inc. Prospectus

Select Global Infrastructure Portfolio (Cont'd)

security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

Portfolio's performance more than if the Portfolio were diversified.

Please see "Additional Information about the Portfolios' Investment Strategies and Related Risks" for further information about these and other risks of investing in the Portfolio.

This section discusses additional information relating to the Portfolios' investment strategies, other types of investments that the Portfolios may make and related risk factors. The Portfolios' investment practices and limitations are described in more detail in the Statement of Additional Information ("SAI"), which is incorporated by reference and legally is a part of this Prospectus. For details on how to obtain a copy of the SAI and other reports and information, see the back cover of this Prospectus.

Equity Securities

Equity securities may include common and preferred stocks, convertible securities and equity-linked securities, rights and warrants to purchase common stocks, depositary receipts, limited partnership interests and other specialty securities having equity features. The Portfolios may invest in equity securities that are publicly-traded on securities exchanges or over-the-counter ("OTC") or in equity securities that are not publicly traded. Securities that are not publicly traded may be more difficult to sell and their value may fluctuate more dramatically than other securities. The prices of convertible securities are affected by changes similar to those of equity and fixed income securities.

Fixed Income Securities

Certain Portfolios may invest in fixed income securities. Fixed income securities are securities that pay a fixed or a variable rate of interest until a stated maturity date. Fixed income securities include U.S. government securities, securities issued by federal or federally sponsored agencies and instrumentalities, corporate bonds and notes, asset-

backed securities, mortgage securities, securities rated below investment grade (commonly referred to as "junk bonds" or "high yield/high risk securities"), municipal bonds, loan participations and assignments, zero coupon bonds, convertible securities, Eurobonds, Brady Bonds, Yankee Bonds, repurchase agreements, commercial paper and cash equivalents.

Fixed income securities are subject to the risk of the issuer's inability to meet principal and interest payments on its obligations (i.e., credit risk) and are subject to price volatility resulting from, among other things, interest rate sensitivity, market perception of the creditworthiness of the issuer and general market liquidity (i.e., market risk). The historically low interest rate environment increases the risks associated with rising interest rates, including the potential for periods of volatility and increased redemptions. Certain Portfolios may face a heightened level of risk, especially since the Federal Reserve Board has begun tapering its quantitative easing program and may begin to raise rates. Securities with longer durations are likely to be more sensitive to changes in interest rates, generally making them more volatile than securities with shorter durations. Lower rated fixed income securities have greater volatility because there is less certainty that principal and interest payments will be made as scheduled. Fixed income securities may be called (i.e., redeemed by the issuer) prior to final maturity. If a callable security is called, the Portfolio may have to reinvest the proceeds at a lower rate of interest.

Price Volatility

The value of your investment in a Portfolio is based on the market prices of the securities the Portfolio holds. These prices change daily due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries, companies or governments. These price movements, sometimes called volatility, may be greater or less depending on the types of securities the Portfolio owns and the markets in which the securities trade. Over time, equity securities have generally shown gains superior to fixed income securities, although they have tended to be more volatile in the short term. Fixed income securities, regardless of credit quality, also experience price volatility, especially in response to interest rate changes. As a result of price volatility, there is a risk that you may lose money by investing in a Portfolio.

Foreign Investing

To the extent that a Portfolio invests in foreign issuers, there is the risk that news and events unique to a country or region will affect those markets and their issuers. These same events will not necessarily have an effect on the U.S. economy or similar issuers located in the United States. In addition, some of the Portfolios' securities, including underlying securities represented by depositary receipts, generally will be denominated in foreign currencies. As a

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Additional Information About the Portfolios' Investment
Strategies and Related Risks

result, changes in the value of a country's currency compared to the U.S. dollar may affect the value of a Portfolio's investments. These changes may happen separately from, and in response to, events that do not otherwise affect the value of the security in the issuer's home country. These risks may be intensified for a Portfolio's investments in securities of issuers located in emerging market or developing countries.

Foreign Securities

Foreign issuers generally are subject to different accounting, auditing and financial reporting standards than U.S. issuers. There may be less information available to the public about foreign issuers. Securities of foreign issuers can be less liquid and experience greater price movements. In addition, the prices of such securities may be susceptible to influence by large traders, due to the limited size of many foreign securities markets. Moreover, investments in certain foreign markets, which have historically been considered stable, may become more volatile and subject to increased risk due to ongoing developments and changing conditions in such markets. Also, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions. In some foreign countries, there is also the risk of government expropriation, excessive taxation, political or social instability, the imposition of currency controls or diplomatic developments that could affect a Portfolio's investment. There also can be difficulty obtaining and enforcing judgments against issuers in foreign countries. Foreign stock exchanges, broker-dealers and listed issuers may be subject to less government regulation and oversight. The cost of investing in foreign securities, including brokerage commissions and custodial expenses, can be higher than in the United States.

actions can have a significant effect on the economic conditions in foreign countries, which also may adversely affect the value and liquidity of a Portfolio's investments. For example, the governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain sectors or industries. In addition, a foreign government may limit or cause delay in the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. Any of these actions could severely affect security prices, impair the Portfolio's ability to purchase or sell foreign securities or transfer a Portfolio's assets back into the U.S., or otherwise adversely affect the Portfolio's operations. Certain foreign investments may become less liquid in response to market developments or adverse investor perceptions, or become illiquid after purchase by a Portfolio, particularly during periods of market turmoil. Certain foreign investments may become illiquid when, for instance, there are few, if any, interested buyers and sellers or when dealers are unwilling to make a market for certain securities. When a Portfolio holds illiquid investments, its portfolio may be harder to value.

Certain Portfolios may invest in debt obligations known as "sovereign debt," which are obligations of governmental issuers in emerging market or developing countries and industrialized countries. Certain emerging market or developing countries are among the largest debtors to commercial banks and foreign governments. The issuer or governmental authority that controls the repayment of sovereign debt may not be willing or able to repay the principal and/or pay interest when due in accordance with the terms of such obligations. Additional factors that may influence the ability or willingness to service debt include, but are not limited to, a country's cash flow situation, the availability of sufficient foreign exchange on the date a payment is due, the relative size of its debt service burden to the economy as a whole and its government's policy towards the International Monetary Fund, the World Bank and other multilateral agencies. A country whose exports are concentrated in a few commodities or whose economy depends on certain strategic imports could be vulnerable to fluctuations in international prices of these commodities or imports. If a foreign sovereign obligor cannot generate sufficient earnings from foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments, commercial banks and multilateral organizations, and inflows of foreign investment. The commitment on the part of these foreign governments, multilateral organizations and others to make such disbursements may be conditioned on the government's implementation of economic reforms and/or economic performance and the timely service of its obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result

in the cancellation of such third-parties' commitments to lend funds, which may further impair the foreign sovereign obligor's ability or willingness to timely service its debts. In addition, there is no legal process for collecting on a sovereign debt that a government does not pay or bankruptcy proceeding by which all or part of the sovereign debt that a government entity has not repaid may be collected.

In connection with their investments in foreign securities, the Portfolios also may enter into contracts with banks, brokers or dealers to purchase or sell securities or foreign currencies at a future date. A foreign currency forward exchange contract is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the contract. Foreign currency forward exchange contracts may be used to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. In addition, a Portfolio may use cross currency hedging or proxy hedging with respect to currencies in which the Portfolio has or expects to have portfolio or currency exposure. Cross currency hedges involve the sale of one currency against the positive exposure to a different currency and may be used for hedging purposes or to establish an active exposure to the exchange rate between any two currencies.

Emerging Market Securities

The Portfolios may invest in emerging market or developing countries, which are countries that major international financial institutions, such as the World Bank, generally consider to be less economically mature than developed nations, such as the United States or most nations in Western Europe. Emerging market or developing countries may be more likely to experience political turmoil or rapid changes in economic conditions than more developed countries, and the financial condition of issuers in emerging market or developing countries may be more precarious than in other countries. In addition, emerging market securities generally are less liquid and subject to wider price and currency fluctuations than securities issued in more developed countries. These characteristics result in greater risk of price volatility in emerging market or developing countries, which may be heightened by currency fluctuations relative to the U.S. dollar.

Foreign Currency

The Portfolios' investments in foreign securities may be denominated in foreign currencies. The value of foreign currencies may fluctuate relative to the value of the U.S. dollar. Since the Portfolios may invest in such non-U.S. dollar-denominated securities and therefore may convert the value of such securities into U.S. dollars, changes in currency exchange rates can increase or

decrease the U.S. dollar value of the Portfolios' assets. The Adviser and/or the Sub-Advisers may use derivatives to reduce this risk. The Adviser and/or the Sub-Advisers may in their discretion choose not to hedge against currency risk. In addition, certain market conditions may make it impossible or uneconomical to hedge against currency risk.

Real Estate Investment Trusts and Foreign Real Estate Companies

Investing in REITs and foreign real estate companies exposes investors to the risks of owning real estate directly, as well as to risks that relate specifically to the way in which REITs and foreign real estate companies are organized and operated. REITs and foreign real estate companies generally invest directly in real estate, in mortgages or in some combination of the two. Operating REITs and foreign real estate companies requires specialized management skills and a Portfolio indirectly bears management expenses along with the direct expenses of the Portfolio. Individual REITs and foreign real estate companies may own a limited number of properties and may concentrate in a particular region or property type. REITs may also be subject to heavy cash flow dependency, default by borrowers and self-liquidation. REITs also must satisfy specific requirements of the Internal Revenue Code of 1986, as amended (the "Code"), in order to qualify for tax-free pass-through income. The failure of a company to qualify as a REIT could have adverse consequences for a Portfolio, including significantly reducing the return to a Portfolio on its investment in such company. Foreign real estate companies may be subject to laws, rules and regulations governing those entities and their failure to comply with those laws, rules and regulations could negatively impact the performance of those entities. In addition, REITs and foreign real estate companies, like mutual funds, have expenses, including management and administration fees, that are paid by their shareholders. As a result, shareholders will absorb their proportionate share of duplicate levels of fees when a Portfolio invests in REITs and foreign real estate companies.

Asset-Backed Securities

Certain Portfolios may invest in asset-backed securities. Asset-backed securities apply the securitization techniques used to develop mortgage-backed securities to a broad range of other assets. Various types of assets, primarily automobile and credit card receivables and home equity loans, are pooled and securitized in pass-through structures similar to pass-through structures developed with respect to mortgage securitizations. Asset-backed securities have risk characteristics similar to mortgage-backed securities. Like mortgage-backed securities, they generally decrease in value as a result of interest rate increases, but may benefit less than other fixed income securities from declining interest rates, principally because of prepayments. Also, as in the case of mortgage-backed securities, prepayments generally

Additional Information About the Portfolios' Investment
Strategies and Related Risks

Morgan Stanley Institutional Fund, Inc. Prospectus

increase during a period of declining interest rates, although other factors, such as changes in credit use and payment patterns, may also influence prepayment rates. Asset-backed securities also involve the risk that various federal and state consumer laws and other legal and economic factors may result in the collateral backing the securities being insufficient to support payment on the securities.

Derivatives

Certain Portfolios may, but are not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. Derivatives are financial instruments whose value is based, in part, on the value of an underlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, also affect the value of derivative instruments. A derivative instrument often has risks similar to its underlying asset and may have additional risks, including imperfect correlation between the value of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates, risks that the transactions may not be liquid and risks arising from margin requirements. The use of derivatives involves risks that are different from, and possibly greater than, the risks associated with other portfolio investments. Derivatives may involve the use of highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments.

Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss. Leverage associated with derivative transactions may cause a Portfolio to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet earmarking or segregation requirements, pursuant to applicable SEC rules and regulations, or may cause a Portfolio to be more volatile than if the Portfolio had not been leveraged. Although the Adviser and/or Sub-Advisers seek to use derivatives to further a Portfolio's investment objectives, there is no assurance that the use of derivatives will achieve this result.

The derivative instruments and techniques that certain Portfolios may use include:

Futures. A futures contract is a standardized, exchange-traded agreement to buy or sell a specific quantity of an underlying asset, reference rate or index at a specific price at a specific future time. The value of a futures contract tends to increase and decrease in tandem with the value of the underlying instrument. Depending on the terms of the particular contract, futures contracts are settled through either physical delivery of the underlying

instrument on the settlement date or by payment of a cash settlement amount on the settlement date. A decision as to whether, when and how to use futures contracts involves the exercise of skill and judgment and even a well-conceived futures transaction may be unsuccessful because of market behavior or unexpected events. In addition to the derivatives risks discussed above, the prices of futures contracts can be highly volatile, using futures contracts can lower total return, and the potential loss from futures contracts can exceed a Portfolio's initial investment in such contracts. No assurance can be given that a liquid market will exist for any particular futures contract at any particular time. There is also the risk of loss by a Portfolio of margin deposits in the event of bankruptcy of a broker with whom a Portfolio has open positions in the futures contract.

Options. If a Portfolio buys an option, it buys a legal contract giving it the right to buy or sell a specific amount of the underlying instrument or futures contract on the underlying instrument at an agreed-upon price typically in exchange for a premium paid by the Portfolio. If a Portfolio sells an option, it sells to another person the right to buy from or sell to the Portfolio a specific amount of the underlying instrument or futures contract on the underlying instrument at an agreed-upon price typically in exchange for a premium received by the Portfolio. When options are purchased OTC, a Portfolio bears the risk that the counterparty that wrote the option will be unable or unwilling to perform its obligations under the option contract. Options may also be illiquid and a Portfolio may have difficulty closing out its position. A decision as to whether, when and how to use options involves the exercise of skill and judgment and even a well-conceived option transaction may be unsuccessful because of market behavior or unexpected events. The prices of options can be highly volatile and the use of options can lower total returns.

Swaps. A Portfolio may enter into OTC swap contracts or cleared swap transactions. An OTC swap contract is an agreement between two parties pursuant to which the parties exchange payments at specified dates on the basis of a specified notional amount, with the payments calculated by reference to specified securities, indices, reference rates, currencies or other instruments. Typically swap agreements provide that when the period payment dates for both parties are the same, the payments are made on a net basis (i.e., the two payment streams are netted out, with only the net amount paid by one party to the other). A Portfolio's obligations or rights under a swap contract entered into on a net basis will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each party. Cleared swap transactions held may reduce counterparty credit risk. In a cleared swap, a Portfolio's ultimate counterparty is a clearinghouse rather than a bank, dealer or other financial institution. OTC swap agreements are not entered into or

traded on exchanges and often there is no central clearing or guaranty function for swaps. These OTC swaps are often subject to credit risk or the risk of default or non-performance by the counterparty. Both OTC and cleared swaps could result in losses if interest rate, foreign currency exchange rates or other factors are not correctly anticipated by a Portfolio or if the reference index, security or investments do not perform as expected. The Frontier Emerging Markets Portfolio's use of swaps may include those based on the credit of an underlying security, commonly referred to as "credit default swaps." Where the Portfolio is the buyer of a credit default swap contract, it would typically be entitled to receive the par (or other agreed-upon) value of a referenced debt obligation from the counterparty to the contract only in the event of a default or similar event by a third-party on the debt obligation. If no default occurs, the Portfolio would have paid to the counterparty a periodic stream of payments over the term of the contract and received no benefit from the contract. When the Portfolio is the seller of a credit default swap contract, it typically receives the stream of payments but is obligated to pay an amount equal to the par (or other agreed-upon) value of a referenced debt obligation upon the default or similar event of the issuer of the referenced debt obligation. The Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulatory developments require the clearing and exchange-trading of certain standardized swap transactions. Mandatory exchange-trading and clearing is occurring on a phased-in basis.

CFDs. A CFD is a privately negotiated contract between two parties, buyer and seller, stipulating that the seller will pay to or receive from the buyer the difference between the nominal value of the underlying instrument at the opening of the contract and that instrument's value at the end of the contract. The underlying instrument may be a single security, stock basket or index. A CFD can be set up to take either a short or long position on the underlying instrument. The buyer and seller are typically both required to post margin, which is adjusted daily. The buyer will also pay to the seller a financing rate on the notional amount of the capital employed by the seller less the margin deposit. In addition to the general risks of derivatives, CFDs may be subject to liquidity risk and counterparty risk.

Structured Investments. Certain Portfolios also may invest a portion of their assets in structured investments. A structured investment is a derivative security designed to offer a return linked to a particular underlying security, currency, commodity or market. Structured investments may come in various forms including notes (such as exchange-traded notes), warrants and options to purchase securities. The Portfolios will typically use structured investments to gain exposure to a permitted underlying security, currency, commodity or market when direct access to a market is limited or inefficient from a tax or cost standpoint. There can be no assurance

that structured investments will trade at the same price or have the same value as the underlying security, currency, commodity or market. Investments in structured investments involve risks including issuer risk, counterparty risk and market risk. Holders of structured investments bear risks of the underlying investment and are subject to issuer or counterparty risk because a Portfolio is relying on the creditworthiness of such issuer or counterparty and has no rights with respect to the underlying investment. Certain structured investments may be thinly traded or have a limited trading market and may have the effect of increasing a Portfolio's illiquidity to the extent that the Portfolio, at a particular point in time, may be unable to find qualified buyers for these securities.

Exchange-Traded Funds

Certain Portfolios may invest in ETFs. ETFs seek to track the performance of various portions or segments of the equity and fixed income markets. Shares of ETFs have many of the same risks as direct investments in common stocks or bonds. In addition, the market value of ETF shares may differ from their NAV because the supply and demand in the market for ETF shares at any point in time is not always identical to the supply and demand in the market for the underlying securities. Also, ETFs that track particular indices typically will be unable to match the performance of the index exactly due to, among other things, the ETF's operating expenses and transaction costs. ETFs typically incur fees that are separate from those fees incurred directly by the Portfolio. Therefore, as a shareholder in an ETF, a Portfolio would bear its ratable share of that entity's expenses. At the same time, the Portfolio would continue to pay its own investment management fees and other expenses. As a result, a Portfolio and its shareholders, in effect, will be absorbing duplicate levels of fees with respect to investments in ETFs.

Initial Public Offerings

Certain Portfolios may purchase shares issued as part of, or a short period after, a company's initial public offering ("IPOs"), and may at times dispose of those shares shortly after their acquisition. A Portfolio's purchase of shares issued in IPOs exposes it to the risks associated with companies that have little operating history as public companies, including unseasoned trading, small number of shares available for trading and limited information about the issuer, as well as to the risks inherent in those sectors of the market where these new issuers operate. The market for IPO issuers may be volatile, and share prices of newly-public companies have fluctuated significantly over short periods of time. IPOs may produce high, double-digit returns. Such returns are highly unusual and may not be sustainable.

Private Placements and Restricted Securities

Certain Portfolios' investments may include privately placed securities, which are subject to resale restrictions. These securities could have the effect of increasing the level of Portfolio illiquidity to the extent a Portfolio may be

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Additional Information About the Portfolios' Investment
Strategies and Related Risks

unable to sell or transfer these securities due to restrictions on transfers or on the ability to find buyers interested in purchasing the securities. Additionally, the market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. The illiquidity of the market, as well as the lack of publicly available information regarding these securities, may also adversely affect the ability to arrive at a fair value for certain securities at certain times and could make it difficult for a Portfolio to sell certain securities. If the Portfolio is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

Investment Discretion

In pursuing the Portfolios' investment objectives, the Adviser and/or Sub-Advisers have considerable leeway in deciding which investments they buy, hold or sell on a day-to-day basis, and which trading stategies they use. For example, the Adviser and/or Sub-Advisers, in their discretion, may determine to use some permitted trading strategies while not using others. The success or failure of such decisions will affect the Portfolios' performance.

Temporary Defensive Investments

When the Adviser or Sub-Advisers believe that changes in market, economic, political or other conditions warrant, each Portfolio may invest without limit cash, cash equivalents or other fixed income securities for temporary defensive purposes that may be inconsistent with a Portfolio's principal investment strategies. If the Adviser or Sub-Advisers incorrectly predict the effects of these changes, such defensive investments may adversely affect a Portfolio's performance and the Portfolio may not achieve its investment objective.

Portfolio Turnover

Consistent with its investment policies, a Portfolio will purchase and sell securities without regard to the effect on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year) will cause a Portfolio to incur additional transaction costs and may result in taxable gains being passed through to shareholders. The Portfolios may engage in frequent trading of securities to achieve their investment objectives.

Adviser

Morgan Stanley Investment Management Inc., with principal offices at 522 Fifth Avenue, New York, NY 10036, conducts a worldwide portfolio management business and provides a broad range of portfolio management services to customers in the United States and abroad. Morgan Stanley (NYSE: "MS") is the direct parent of the Adviser and the indirect parent of the Distributor. Morgan Stanley is a preeminent global financial services firm engaged in securities trading and brokerage activities, as well as providing investment banking, research and analysis, financing and financial advisory services. As of March 31, 2014, the Adviser,

together with its affiliated asset management companies, had approximately $382 billion in assets under management or supervision.

A discussion regarding the Board of Directors' approval of the Investment Advisory and Sub-Advisory Agreements, as applicable, is available in each Portfolio's Semi-Annual Report to Shareholders for the period ended June 30, 2013.

Sub-Advisers

The Adviser has entered into Sub-Advisory Agreements with MSIM Limited, located at 25 Cabot Square, Canary Wharf, London, E14 4QA, England (with respect to the Emerging Markets, Global Franchise, Global Quality, International Equity and Select Global Infrastructure Portfolios) and MSIM Company, located at 23 Church Street, 16-01 Capital Square, Singapore 049481 (with respect to the Asian Equity, Emerging Markets, Global Franchise, Global Quality,

International Equity and Select Global Infrastructure Portfolios). The Sub-Advisers are wholly owned subsidiaries of Morgan Stanley. The Sub-Advisers provide the relevant Portfolios with investment advisory services subject to the overall supervision of the Adviser and the Fund's officers and Directors. The Adviser pays the Sub-Advisers on a monthly basis a portion of the net advisory fees the Adviser receives from the relevant Portfolios.

Advisory Fees

For the fiscal year ended December 31, 2013, the Adviser received from each Portfolio the advisory fee (net of fee waivers and/or affiliated rebates, if applicable) set forth in the table below.

Adviser's Rates of Compensation (as a percentage of average net assets) Portfolio
Active International Allocation					0.57%
Asian Equity					0.00%
Emerging Markets					0.95%
Frontier Emerging Markets					1.14%
Global Franchise					0.79%
Global Quality*					0.00%
International Equity					0.77%
International Small Cap					0.74%
Select Global Infrastructure					0.00%

* For the period August 30, 2013 (commencement of operations) through December 31, 2013.

Morgan Stanley Institutional Fund, Inc. Prospectus

Fund Management

Advisory Fees (Cont'd)

Pursuant to (i) an agreement and plan of reorganization between the Fund, on behalf of the Active International Allocation Portfolio, and Morgan Stanley International Fund (the "International Predecessor Fund"), and (ii) an agreement and plan of reorganization between the Fund, on behalf of the International Equity Portfolio, and Morgan Stanley International Value Equity Fund (the "International Value Equity Predecessor Fund"), on October 29, 2012, the Active International Allocation Portfolio and the International Equity Portfolio acquired substantially all of the assets and liabilities of the International Predecessor Fund and International Value Equity Predecessor Fund, respectively, in exchange for shares of the applicable Portfolio (each a "Reorganization").

The Adviser has agreed to reduce its advisory fee and/or reimburse the Portfolios, if necessary, if such fees would

cause the total annual operating expenses of each Portfolio to exceed the percentage of average daily net assets set forth in the table below. In determining the actual amount of fee waiver and/or expense reimbursement for a Portfolio, if any, the Adviser excludes from total annual operating expenses certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation). The fee waivers and/or expense reimbursements for a Portfolio (except for the Active International Allocation and International Equity Portfolios) will continue for at least one year (with respect to the Active International Allocation and International Equity Portfolios at least two years from the date of the applicable Reorganization) or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

Portfolio	Expense Cap Class I			Expense Cap Class A†			Expense Cap Class L
Active International Allocation		0.90	%		1.25	%		1.75	%
Asian Equity		1.45	%		1.80	%		2.30	%
Emerging Markets		1.25	%		1.60	%		2.10	%
Frontier Emerging Markets		1.85	%		2.20	%		2.70	%
Global Franchise		1.00	%		1.35	%		1.85	%
Global Quality		1.20	%		1.55	%		2.05	%
International Equity		0.95	%		1.30	%		1.80	%
International Small Cap		1.15	%		1.50	%		2.00	%
Select Global Infrastructure		1.15	%		1.50	%		2.00	%

† Effective September 9, 2013, Class P shares of each Portfolio (except the Global Quality Portfolio) were renamed Class A shares.

Portfolio Management

Active International Allocation Portfolio

The Portfolio is managed by members of the Active International Allocation team. The team consists of portfolio managers and analysts. The current member of the team primarily responsible for the day-to-day management of the Portfolio is Ann D. Thivierge.

Ms. Thivierge has been associated with the Adviser in an investment management capacity since 1986.

Asian Equity Portfolio

The Portfolio is managed by members of the Asian Equity team. The team consists of portfolio managers and analysts. The current members of the team primarily responsible for the day-to-day management of the Portfolio are May Yu, Munib Madni and Samuel Rhee.

Ms. Yu has been associated with the Adviser in an investment management capacity since June 2013. Prior to June 2013, Ms. Yu had been associated with MSIM Company in an investment management capacity since August 2012. Prior to August 2012, Ms. Yu was lead portfolio manager at China International Capital

Corporation from February 2011 to August 2012. From September 2006 to February 2011, Ms. Yu was associated with MSIM Company in an investment management capacity. Mr. Madni has been associated with MSIM Company in an investment management capacity since February 2005. Mr. Rhee has been associated with MSIM Company in an investment management capacity since July 2005.

Emerging Markets Portfolio

The Portfolio is managed by members of the Emerging Markets Equity team. The team consists of portfolio managers and analysts. The team works collaboratively when making portfolio decisions. Current members of the team jointly and primarily responsible for the day-to-day management of the Portfolio are Gaite Ali, Eric Carlson, Paul Psaila, Ruchir Sharma, Ana Cristina Piedrahita, Munib Madni and Samuel Rhee.

Ms. Ali has been associated with the Adviser in an investment management capacity since 2007. Mr. Carlson has been associated with the Adviser in an investment management capacity since 1997. Mr. Psaila has been

Portfolio Management (Cont'd)

associated with the Adviser in an investment management capacity since 1994. Mr. Sharma has been associated with the Adviser in an investment management capacity since 1996. Ms. Piedrahita has been associated with MSIM Limited or its affiliates in an investment management capacity since 2002. Mr. Madni has been associated with MSIM Company in an investment management capacity since February 2005. Mr. Rhee has been associated with MSIM Company in an investment management capacity since July 2005.

The Emerging Markets Equity team is comprised of dedicated portfolio managers/analysts that have extensive experience in analyzing emerging markets equity securities for investors. Mr. Sharma is the lead portfolio manager and is responsible for the overall portfolio performance and construction. Mr. Sharma focuses on country allocation, relying heavily on input from the regional co-portfolio manager teams who are responsible for stock selection for their respective regions. Portfolio managers generally specialize by region, with the exception of a few specialized groups focusing on specific sectors.

Frontier Emerging Markets Portfolio

The Portfolio is managed by members of the Emerging Markets Equity team. The team consists of portfolio managers and analysts. The member of the team primarily responsible for the day-to-day management of the Portfolio is Tim Drinkall.

Mr. Drinkall has been associated with the Adviser in an investment management capacity since 2007.

Global Franchise Portfolio, Global Quality Portfolio and International Equity Portfolio

Each Portfolio is managed by members of the International Equity team. The team consists of portfolio managers. Current members of the team jointly and primarily responsible for the day-to-day management of each Portfolio are Messrs. Lock, Paulson, Demine, Watson, Derold and Wright.

Mr. Lock has been associated with MSIM Limited in an investment management capacity since 1994. Mr. Paulson has been associated with MSIM Limited in an investment management capacity since June 2009. Prior to June 2009, Mr. Paulson was associated in an investment management capacity with Sanford Bernstein. Mr. Demine has been associated with MSIM Limited in an investment management capacity since May 2009. Prior to May 2009, Mr. Demine was associated in an investment management capacity with UBS Global Asset Management. Mr. Watson has been

associated with MSIM Limited in an investment management capacity since 2008. Mr. Derold has been associated with MSIM Company in an investment management capacity since 2006. Mr. Wright has been associated with MSIM Company or its affiliates in an investment management capacity since 1996.

Effective December 17, 2014, Peter J. Wright will retire from MSIM. Following Mr. Wright's retirement from MSIM, Messrs. Lock, Paulson, Demine, Watson and Derold will continue to be responsible for the day-to-day portfolio management of the Global Franchise Portfolio, Global Quality Portfolio and International Equity Portfolio.

Each member of the team has both global sector research responsibilities and makes investment management decisions for each Portfolio.

International Small Cap Portfolio

The Portfolio is managed by members of the Growth team. The team consists of portfolio managers and analysts. Burak Alici is the lead portfolio manager and is primarily responsible for the day-to-day management of the Portfolio. Mr. Alici has been associated with the Adviser in an investment management capacity since 2007. Prior to 2007, Mr. Alici managed a multi-strategy investment partnership in Istanbul for high net worth individuals from October 2002 to March 2005.

Select Global Infrastructure Portfolio

The Portfolio is managed by members of the Global Infrastructure Securities team. Current members of the team jointly and primarily responsible for the day-to-day management of the Portfolio are Theodore R. Bigman and Matthew King.

Mr. Bigman has been associated with the Adviser in an investment management capacity since 1995. Mr. King has been associated with the Adviser in an investment management capacity since 2008.

Together, the team determines investment strategy, establishes asset-allocation frameworks and directs the implementation of investment strategy.

Additional Information

The Portfolios' SAI provides additional information about the portfolio managers' compensation structure, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in the Portfolios.

The composition of each team may change from time to time.

Morgan Stanley Institutional Fund, Inc. Prospectus

Shareholder Information

Share Class Arrangements

This Prospectus offers Class I, Class A and Class L shares of each Portfolio. The Fund also offers Class IS shares of the Emerging Markets, Global Quality, International Equity and Select Global Infrastructure Portfolios through a separate prospectus. Neither Class I nor Class L shares are subject to a sales charge, and Class I shares are not subject to a distribution and/or shareholder service (12b-1) fee. Class I shares generally require investments in minimum amounts that are substantially higher than Class A and Class L shares.

The Fund suspended offering Class I, Class A and Class L shares of the Global Franchise Portfolio to new investors, except as follows. The Fund will continue to offer shares of the Global Franchise Portfolio (1) through certain retirement plan accounts, (2) to clients of certain registered investment advisors who currently offer shares of the Global Franchise Portfolio in their asset allocation programs, (3) to directors and trustees of the Morgan Stanley Funds, (4) to Morgan Stanley affiliates and their employees and (5) to benefit plans sponsored by Morgan Stanley and its affiliates. The Fund will continue to offer Class I, Class A and Class L shares of the Global Franchise Portfolio to existing shareholders. The Fund may recommence offering Class I, Class A and Class L shares of the Global Franchise Portfolio to new investors in the future. Any such offerings of the Global Franchise Portfolio's Class I, Class A and Class L shares may be limited in amount and may commence and terminate without any prior notice.

Minimum Investment Amounts

The minimum initial investment generally is $5,000,000 for Class I shares and $1,000 for each of Class A and Class L shares of a Portfolio. The minimum initial investment may be waived for the following categories: (1) sales through banks, broker-dealers and other financial institutions (including registered investment advisers and financial planners) purchasing shares on behalf of their clients in (i) discretionary and non-discretionary advisory programs, (ii) fund supermarkets, (iii) asset allocation programs, (iv) other programs in which the client pays an asset-based fee for advice or for executing transactions in Portfolio shares or for otherwise participating in the program or (v) certain other investment programs that do not charge an asset-based fee; (2) qualified state tuition plans described in Section 529 of the Code and donor-advised charitable gift funds (subject to all applicable terms and conditions); (3) defined contribution, defined benefit and other employer-sponsored employee benefit plans, whether or not qualified under the Code; (4) certain retirement and deferred compensation programs established by Morgan Stanley Investment Management or its affiliates for their employees or the Fund's Directors; (5) current or retired directors, officers and employees of Morgan Stanley and any of its subsidiaries, such persons' spouses, and children under the age of 21, and trust accounts for which any of such persons is a beneficiary; (6) current or retired Directors or Trustees of the Morgan Stanley Funds, such persons' spouses, and children under the age of 21, and trust accounts for which any of such persons is a beneficiary;

(7) certain other registered open-end investment companies whose shares are distributed by the Distributor; (8) with respect to holders of Class I and Class A shares, respectively, clients who owned such Portfolio shares as of December 31, 2007, as applicable; (9) investments made in connection with certain mergers and/or reorganizations as approved by the Adviser; (10) the reinvestment of dividends in additional Portfolio shares; or (11) certain other institutional investors based on assets under management or other considerations at the discretion of the Adviser. If the value of your account falls below the minimum initial investment amount for Class I shares, Class A shares or Class L shares as a result of share redemptions or you no longer meet one of the waiver criteria set forth above, your account may be subject to involuntary conversion or involuntary redemption, as applicable. You will be notified prior to any such conversions or redemptions.

Distribution of Portfolio Shares

Morgan Stanley Distribution, Inc. is the exclusive Distributor of Class I, Class A and Class L shares of each Portfolio. The Distributor receives no compensation from the Fund for distributing Class I shares of the Portfolios. The Fund has adopted a Shareholder Services Plan with respect to the Class A shares of each Portfolio and a Distribution and Shareholder Services Plan with respect to the Class L shares of each Portfolio (the "Plans") pursuant to Rule 12b-1 under the 1940 Act. Under the Plans, each Portfolio pays the Distributor a shareholder services fee of up to 0.25% of the average daily net assets of each of the Class A shares and Class L shares on an annualized basis and a distribution fee of up to 0.50% of the average daily net assets of the Class L shares on an annualized basis. The Distributor may compensate other parties for providing distribution-related and/or shareholder support services to investors who purchase Class A and Class L shares. Such fees relate solely to the Class A and Class L shares and will reduce the net investment income and total return of the Class A and Class L shares, respectively.

The Adviser and/or Distributor may pay compensation to certain authorized third-parties, such as brokers, dealers or other financial intermediaries that have entered into a selling agreement with the Distributor (each a "Financial Intermediary") in connection with the sale, distribution, marketing and retention of a Portfolio's shares and/or shareholder servicing. Such compensation may be significant in amount and the prospect of receiving any such additional compensation may provide affiliated or unaffiliated Financial Intermediaries with an incentive to favor sales of shares of the Portfolios over other investment options. Any such payments will not change the NAV or the price of a Portfolio's shares. For more information, please see the Portfolios' SAI.

About Net Asset Value

The NAV per share of a class of shares of a Portfolio is determined by dividing the total of the value of the Portfolio's investments and other assets attributable to the class, less any liabilities attributable to the class, by the

Shareholder Information (Cont'd)

total number of outstanding shares of that class of the Portfolio. In making this calculation, each Portfolio generally values securities at market price. If market prices are unavailable or may be unreliable because of events occurring after the close of trading, including circumstances under which the Adviser or Sub-Adviser determines that a security's market price is not accurate, fair value prices may be determined in good faith using methods approved by the Board of Directors.

In addition, with respect to securities that primarily are listed on foreign exchanges, when an event occurs after the close of such exchanges that is likely to have changed the value of the securities (e.g., a percentage change in value of one or more U.S. securities indices in excess of specified thresholds), such securities will be valued at their fair value, as determined under procedures established by the Fund's Board of Directors. Securities also may be fair valued in the event of a significant development affecting a country or region or an issuer-specific development which is likely to have changed the value of the security. In these cases, a Portfolio's NAV will reflect certain portfolio securities' fair value rather than their market price. To the extent a Portfolio invests in open-end management companies that are registered under the 1940 Act, the Portfolio's NAV is calculated based upon the NAV of such funds. The prospectuses for such funds explain the circumstances under which they will use fair value pricing and its effects.

Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that security. With respect to securities that are primarily listed on foreign exchanges, the values of a Portfolio's investment securities may change on days when you will not be able to purchase or sell your shares.

Pricing of Portfolio Shares

You may buy or sell (redeem) Class I, Class A and Class L shares of the Portfolios at the NAV next determined for the class after receipt of your order, plus any applicable sales charge. The Fund determines the NAV per share for the Portfolios as of the close of the NYSE (normally 4:00 p.m. Eastern Time) on each day that the NYSE is open for business (the "Pricing Time"). Shares will not be priced on days that the NYSE is closed. Trading of securities that are primarily listed on foreign exchanges may take place on weekends and other days when a Portfolio does not price its shares. Therefore, to the extent, if any, that a Portfolio invests in securities primarily listed on foreign exchanges, the value of the Portfolio's portfolio securities may change on days when you will not be able to purchase or sell your shares.

Portfolio Holdings

A description of the Fund's policies and procedures with respect to the disclosure of each Portfolio's securities is available in the Portfolios' SAI.

How To Purchase Class I and Class L Shares

You may purchase Class I and Class L shares of a Portfolio on each day that the Portfolios are open for

business by contacting your Financial Intermediary or directly from the Fund.

Purchasing Shares Through a Financial Intermediary

You may open a new account and purchase Class I and Class L shares of a Portfolio through a Financial Intermediary. The Financial Intermediary will assist you with the procedures to invest in Class I and Class L shares of a Portfolio. Investors purchasing or selling Class I and Class L shares through a Financial Intermediary, including Morgan Stanley Wealth Management, may be charged transaction-based or other fees by the Financial Intermediary for its services. If you are purchasing Class I or Class L shares through a Financial Intermediary, please consult your Financial Intermediary for more information regarding any such fees and for purchase instructions.

Purchasing Shares Directly From the Fund

Initial Purchase by Mail

You may open a new account, subject to acceptance by the Fund, and purchase Class I and Class L shares by completing and signing a New Account Application provided by Boston Financial Data Services, Inc. ("BFDS"), the Fund's transfer agent, which you can obtain by calling BFDS at 1-800-548-7786 and mailing it to Morgan Stanley Institutional Fund, Inc., c/o Boston Financial Data Services, Inc., P.O. Box 219804, Kansas City, MO 64121-9804 together with a check payable to Morgan Stanley Institutional Fund, Inc.

Please note that payments to investors who redeem Class I and Class L shares purchased by check will not be made until payment of the purchase has been collected, which may take up to 15 calendar days after purchase. You can avoid this delay by purchasing Class I and Class L shares by wire.

Initial Purchase by Wire

You may purchase Class I and Class L shares of each Portfolio by wiring Federal Funds (monies credited by a Federal Reserve Bank) to State Street Bank and Trust Company (the "Custodian"). You must forward a completed New Account Application to BFDS in advance of the wire by following the instructions under "Initial Purchase by Mail." You should instruct your bank to send a Federal Funds wire in a specified amount to the Custodian using the following wire instructions:

State Street Bank and Trust Company
One Lincoln Street
Boston, MA 02111-2101
ABA #011000028
DDA #00575373
Attn: Morgan Stanley Institutional Fund, Inc.
Subscription Account
Ref: (Portfolio Name, Account Number,
Account Name)

Additional Investments

You may purchase additional Class I and Class L shares for your account at any time by contacting your Financial Intermediary or by contacting the Fund

Morgan Stanley Institutional Fund, Inc. Prospectus

Shareholder Information

Shareholder Information (Cont'd)

directly. For additional purchases directly from the Fund, you should write a "letter of instruction" that includes your account name, account number, the Portfolio name and the class selected, signed by the account owner(s), to assure proper crediting to your account. The letter must be mailed along with a check in accordance with the instructions under "Initial Purchase by Mail." You may also purchase additional Class I and Class L shares by wire by following the instructions under "Initial Purchase by Wire."

How To Purchase Class A Shares

Class A shares of each Portfolio may be purchased by contacting your Financial Intermediary who will assist you

with the procedures to invest in Class A shares. Your Financial Intermediary, including Morgan Stanley Wealth Management, may charge transaction-based or other fees in connection with the purchase or sale of Class A shares. Please consult your Financial Intermediary for more information regarding any such fees and for purchase instructions.

Class A shares are subject to a sales charge equal to a maximum of 5.25% calculated as a percentage of the offering price on a single transaction as shown in the table below. As shown below, the sales charge is reduced for purchases of $25,000 and over.

	Front End Sales Charge
Amount of Single Transaction	Percentage of Public Offering Price			Approximate Percentage of Net Amount Invested
Less than $25,000		5.25	%		5.54	%
$25,000 but less than $50,000		4.75	%		4.99	%
$50,000 but less than $100,000		4.00	%		4.17	%
$100,000 but less than $250,000		3.00	%		3.09	%
$250,000 but less than $500,000		2.50	%		2.56	%
$500,000 but less than $1 million		2.00	%		2.04	%
$1 million and over		0.00	%		0.00	%

You may benefit from a reduced sales charge schedule (i.e., breakpoint discount) for purchases of Class A shares of a Portfolio, by combining, in a single transaction, your purchase with purchases of Class A shares of the Portfolio by the following related accounts ("Related Accounts"):

• A single account (including an individual, a joint account, a trust or fiduciary account).

• A family member account (limited to spouse, and children under the age of 21, but including trust accounts established solely for the benefit of a spouse, or children under the age of 21).

• An UGMA/UTMA account.

• Pension, profit sharing or other employee benefit plans of companies and their affiliates.

• Employer sponsored and individual retirement accounts (including IRAs, Roth IRAs, Keogh, 401(k), 403(b), 408(k) and 457(b) Plans).

• Tax-exempt organizations.

• Groups organized for a purpose other than to buy mutual fund shares.

In addition to investments of $1 million or more, purchases of Class A shares are not subject to a front-end sales charge if your account qualifies under one of the following categories:

• Sales through banks, broker-dealers and other financial institutions (including registered investment advisers and financial planners) purchasing shares on behalf of their clients in (i) discretionary and non-discretionary advisory programs, (ii) fund supermarkets, (iii) asset allocation programs, (iv) other programs in which the client pays an asset-based fee for advice or for executing transactions in Portfolio shares or for otherwise participating in the program or

(v) certain other investment programs that do not charge an asset-based fee.

• Qualified state tuition plans described in Section 529 of the Code and donor-advised charitable gift funds (subject to all applicable terms and conditions).

• Defined contribution, defined benefit and other employer-sponsored employee benefit plans, whether or not qualified under the Code.

• Certain retirement and deferred compensation programs established by Morgan Stanley Investment Management or its affiliates for their employees or the Fund's Directors.

• Current or retired Directors or Trustees of the Morgan Stanley Funds, such persons' spouses, and children under the age of 21, and trust accounts for which any of such persons is a beneficiary.

• Current or retired directors, officers and employees of Morgan Stanley and any of its subsidiaries, such persons' spouses, and children under the age of 21, and trust accounts for which any of such persons is a beneficiary.

• Certain other registered open-end investment companies whose shares are distributed by the Distributor.

• Investments made in connection with certain mergers and/or reorganizations as approved by the Adviser.

• The reinvestment of dividends from Class A shares of a Portfolio in additional Class A shares of the same Portfolio.

Combined Purchase Privilege

You will have the benefit of a reduced sales charge by combining your purchase of Class A shares of a Portfolio in a single transaction with your purchase of Class A shares of any other Morgan Stanley Multi-Class Fund (as defined herein) for any Related Account.

Shareholder Information (Cont'd)

Right of Accumulation

You may benefit from a reduced sales charge if the cumulative NAV of Class A shares of a Portfolio purchased in a single transaction, together with the NAV of any Class A shares of the Portfolio and any other Morgan Stanley Multi-Class Fund (including shares of Morgan Stanley Money Market Funds (as defined herein) and Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust which you acquired in an exchange from Class A shares of the Portfolio or Class A shares of another Morgan Stanley Multi-Class Fund) held in Related Accounts, amounts to $25,000 or more.

Notification

You must notify your Financial Intermediary at the time a purchase order is placed, that the purchase qualifies for a reduced sales charge under any of the privileges discussed above. The reduced sales charge will not be granted if: (i) notification is not furnished at the time of the order; or (ii) a review of the records of your Financial Intermediary or the Fund's transfer agent, BFDS, does not confirm your represented holdings.

In order to obtain a reduced sales charge for Class A shares of a Portfolio under any of the privileges discussed above, it may be necessary at the time of purchase for you to inform your Financial Intermediary of the existence of any Related Accounts in which there are holdings eligible to be aggregated to meet the sales load breakpoint and/or right of accumulation threshold. In order to verify your eligibility, you may be required to provide account statements and/or confirmations regarding your purchases and/or holdings of any Class A shares of a Portfolio or any other Morgan Stanley Multi-Class Fund (including shares of Morgan Stanley Money Market Funds and Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust which you acquired in an exchange from Class A shares of a Portfolio or any other Morgan Stanley Multi-Class Fund) held in all Related Accounts at your Financial Intermediary, in order to determine whether you have met the sales load breakpoint and/or right of accumulation threshold.

Letter of Intent

The above schedule of reduced sales charges for larger purchases also will be available to you if you enter into a written "Letter of Intent." A Letter of Intent provides for the purchase of Class A shares of a Portfolio and Class A shares of other Morgan Stanley Multi-Class Funds within a 13-month period. The initial purchase of Class A shares of a Portfolio under a Letter of Intent must be at least 5% of the stated investment goal. The Letter of Intent does not preclude a Portfolio (or any other Morgan Stanley Multi-Class Fund) from discontinuing sales of its shares. To determine the applicable sales charge reduction, you may also include (1) the cost of Class A shares of a Portfolio or any other Morgan Stanley Multi-Class Fund which were previously purchased at a price including a front-end sales charge during the 90-day period prior to the Distributor receiving the Letter of Intent and (2) the

historical cost of shares of any Morgan Stanley Money Market Fund or Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust which you acquired in an exchange from Class A shares of a Portfolio or any other Morgan Stanley Multi-Class Fund purchased during that period at a price including a front-end sales charge. You may also combine purchases and exchanges by any Related Accounts during such 90-day period. You should retain any records necessary to substantiate historical costs because the Fund, BFDS and your Financial Intermediary may not maintain this information. You can obtain a Letter of Intent by contacting your Financial Intermediary. If you do not achieve the stated investment goal within the 13-month period, you are required to pay the difference between the sales charges otherwise applicable and sales charges actually paid, which may be deducted from your investment. Shares acquired through reinvestment of distributions are not aggregated to achieve the stated investment goal.

Additional Investments

You may purchase additional Class A shares for your account at any time by contacting your Financial Intermediary.

General

Class I, Class A and Class L shares may, in the Fund's discretion, be purchased with investment securities (in lieu of or, in conjunction with, cash) acceptable to the Fund. The securities would be accepted by the Fund at their market value in return for Portfolio shares of equal value, taking into account any applicable sales charge.

To help the U.S. Government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. What this means to you: when you open an account, we will ask your name, address, date of birth and other information that will allow us to identify you. If we are unable to verify your identity, we reserve the right to restrict additional transactions and/or liquidate your account at the next calculated NAV after your account is closed (less any applicable sales/account charges and/or tax penalties) or take any other action required by law. In accordance with federal law requirements, the Fund has implemented an anti-money laundering compliance program, which includes the designation of an anti-money laundering compliance officer.

When you buy Portfolio shares, the shares will be purchased at the next share price calculated (plus any applicable sales charge) after we receive your purchase order. Your payment is due on the third business day after you place your purchase order. We reserve the right to reject any order for the purchase of Portfolio shares for any reason.

The Fund may suspend the offering of shares, or any class of shares, of the Portfolios or reject any purchase orders when we think it is in the best interest of the Portfolios.

Morgan Stanley Institutional Fund, Inc. Prospectus

Shareholder Information

Shareholder Information (Cont'd)

Certain patterns of past exchanges and/or purchase or sale transactions involving a Portfolio may result in the Fund rejecting, limiting or prohibiting, at its sole discretion, and without prior notice, additional purchases and/or exchanges and may result in a shareholder's account being closed. Determinations in this regard may be made based on the frequency or dollar amount of previous exchanges or purchase or sale transactions. See "Frequent Purchases and Redemptions of Shares."

How To Redeem Shares

Class I and Class L Shares

You may process a redemption request by contacting your Financial Intermediary. Otherwise, you may redeem Class I and Class L shares of a Portfolio by mail or, if authorized, by telephone, at no charge other than as described below. The value of shares redeemed may be more or less than the purchase price, depending on the NAV at the time of redemption. Class I and Class L shares of a Portfolio will be redeemed at the NAV next determined after we receive your redemption request in good order.

Redemptions by Letter

Requests should be addressed to Morgan Stanley Institutional Fund, Inc., c/o Boston Financial Data Services, Inc., P.O. Box 219804, Kansas City, MO 64121-9804.

To be in good order, redemption requests must include the following documentation:

(a) A letter of instruction, if required, or a stock assignment specifying the account name, the account number, the name of the Portfolio and the number of shares or dollar amount to be redeemed, signed by all registered owners of the shares in the exact names in which the shares are registered, and whether you wish to receive the redemption proceeds by check or by wire to the bank account we have on file for you;

(b) Any required signature guarantees if you are requesting payment to anyone other than the registered owner(s) or that payment be sent to any address other than the address of the registered owner(s) or pre-designated bank account; and

(c) Other supporting legal documents, if required, in the case of estates, trusts, guardianships, custodianship, corporations, pension and profit sharing plans and other organizations.

Redemptions by Telephone

You automatically have telephone redemption and exchange privileges unless you indicate otherwise by checking the applicable box on the New Account Application or calling BFDS to opt out of such privileges. You may request a redemption of Class I and Class L shares by calling the Fund at 1-800-548-7786 and requesting that the redemption proceeds be mailed or wired to you. You cannot redeem Class I and Class L shares by telephone if you hold share certificates for those shares. For your protection when calling the Fund, we

will employ reasonable procedures to confirm that instructions communicated over the telephone are genuine. These procedures may include requiring various forms of personal identification (such as name, mailing address, social security number or other tax identification number), tape-recording telephone communications and providing written confirmation of instructions communicated by telephone. If reasonable procedures are employed, none of Morgan Stanley, BFDS or the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. Telephone redemptions and exchanges may not be available if you cannot reach BFDS by telephone, whether because all telephone lines are busy or for any other reason; in such case, a shareholder would have to use the Fund's other redemption and exchange procedures described in this section. Telephone instructions will be accepted if received by BFDS between 9:00 a.m. and 4:00 p.m. Eastern time on any day the NYSE is open for business. During periods of drastic economic or market changes, it is possible that the telephone privileges may be difficult to implement, although this has not been the case with the Fund in the past. To opt out of telephone privileges, please contact BFDS at 1-800-548-7786.

Class A Shares

You may redeem Class A shares of a Portfolio by contacting your Financial Intermediary. The value of Class A shares redeemed may be more or less than the purchase price, depending on the NAV at the time of redemption. Class A shares of a Portfolio will be redeemed at the NAV next determined after we receive your redemption request in good order.

Redemption Proceeds

The Fund will ordinarily distribute redemption proceeds in cash within one business day of your redemption request, but it may take up to seven days. However, if you purchased Class I, Class A or Class L shares by check, the Fund will not distribute redemption proceeds until it has collected your purchase payment, which may take up to 15 calendar days.

If we determine that it is in the best interest of the Fund or Portfolio not to pay redemption proceeds in cash, we may distribute to you securities held by the Portfolio. If requested, we will pay a portion of your redemption(s) in cash (during any 90 day period) up to the lesser of $250,000 or 1% of the net assets of the Portfolio at the beginning of such period. If the Fund redeems your shares in-kind, you will bear any market risks associated with the securities paid as redemption proceeds. Such in-kind securities may be illiquid and difficult or impossible for a shareholder to sell at a time and at a price that a shareholder would like. Redemptions paid in such securities generally will give rise to income, gain or loss for income tax purposes in the same manner as redemptions paid in cash. In addition, you may incur brokerage costs and a further gain or loss for income tax purposes when you ultimately sell the securities.

Shareholder Information (Cont'd)

Redemption Fees

Class I, Class A and Class L shares of a Portfolio (except Global Franchise and Select Global Infrastructure Portfolios) redeemed within 30 days of purchase may be subject to a 2% redemption fee, payable to the Portfolio. The redemption fee is designed to protect a Portfolio and its remaining shareholders from the effects of short-term trading. The redemption fee is not imposed on redemptions made: (i) through systematic withdrawal/exchange plans, (ii) through asset allocation programs, including redemptions or exchanges that are initiated by the sponsor of a program as part of a periodic rebalancing, provided that such rebalancing occurs no more frequently than monthly, (iii) of shares received by reinvesting income dividends or capital gain distributions, (iv) through certain collective trust funds or other pooled vehicles, including funds of funds, (v) on behalf of advisory accounts where client allocations are solely at the discretion of the Morgan Stanley Investment Management investment team, and (vi) through certain types of retirement plan account transactions, including: redemptions pursuant to systematic withdrawal programs, minimum required distributions, loans or hardship withdrawals, return of excess contribution amounts, redemptions related to payment of plan or custodian fees, forfeiture of assets, and redemptions related to death, disability, or qualified domestic relations order. The redemption fee is based on, and deducted from, the redemption proceeds. Each time you redeem or exchange Class I, Class A and Class L shares, the shares held the longest will be redeemed or exchanged first.

The redemption fee may not be imposed on transactions that occur through certain omnibus accounts at Financial Intermediaries. Certain Financial Intermediaries may not have the ability to assess a redemption fee. Certain Financial Intermediaries may apply different methodologies than those described above in assessing redemption fees, may impose their own redemption fee that may differ from a Portfolio's redemption fee or may impose certain trading restrictions to deter market-timing and frequent trading. If you invest in a Portfolio through a Financial Intermediary, please read that Financial Intermediary's materials carefully to learn about any other restrictions or fees that may apply.

Exchange Privilege

You may exchange shares of any class of a Portfolio for the same class of shares of other portfolios of the Fund and portfolios of Morgan Stanley Institutional Fund Trust ("MSIFT"), if available, without the imposition of an exchange fee. In addition, you may exchange shares of any class of a Portfolio for the same class of shares of Morgan Stanley European Equity Fund Inc., Morgan Stanley Global Fixed Income Opportunities Fund, Morgan Stanley Global Infrastructure Fund, Morgan Stanley Limited Duration U.S. Government Trust, Morgan Stanley Mortgage Securities Trust, Morgan Stanley Multi Cap Growth Trust and Morgan Stanley U.S. Government Securities Trust (each, a "Morgan Stanley Retail Fund" and, together with the Fund and MSIFT, the "Morgan Stanley Multi-Class Funds"), if available, without the imposition of an

exchange fee. Front-end sales charges (loads) are not imposed on exchanges of Class A shares. In addition, you may exchange shares of any class of a Portfolio for shares of Morgan Stanley California Tax-Free Daily Income Trust, Morgan Stanley Liquid Asset Fund Inc., Morgan Stanley New York Municipal Money Market Trust, Morgan Stanley Tax-Free Daily Income Trust and Morgan Stanley U.S. Government Money Market Trust (each, a "Morgan Stanley Money Market Fund" and, together with the Morgan Stanley Multi-Class Funds, the "Morgan Stanley Funds") or for Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, if available, without the imposition of an exchange fee. Exchanges are effected based on the respective NAVs of the applicable Morgan Stanley Fund (subject to any applicable redemption fee). To obtain a prospectus for another Morgan Stanley Fund, contact your Financial Intermediary or call the Fund at 1-800-548-7786. If you purchased Portfolio shares through a Financial Intermediary, certain Morgan Stanley Funds may be unavailable for exchange. Contact your Financial Intermediary to determine which Morgan Stanley Funds are available for exchange.

The current prospectus for each Morgan Stanley Fund describes its investment objective(s), policies and investment minimums, and should be read before investment. Since exchanges are available only into continuously offered Morgan Stanley Funds, exchanges are not available into Morgan Stanley Funds or classes of Morgan Stanley Funds that are not currently being offered for purchase.

You can process your exchange by contacting your Financial Intermediary. With respect to exchanges of Class I and Class L shares, you may also send exchange requests to the Fund's transfer agent, BFDS, by mail to Morgan Stanley Institutional Fund, Inc., c/o Boston Financial Data Services, Inc., P.O. Box 219804, Kansas City, MO 64121-9804 or by calling 1-800-548-7786.

When you exchange for shares of another Morgan Stanley Fund, your transaction will be treated the same as an initial purchase. You will be subject to the same minimum initial investment and account size as an initial purchase. Your exchange price will be the price calculated at the next Pricing Time after the Morgan Stanley Fund receives your exchange order. The Morgan Stanley Fund, in its sole discretion, may waive the minimum initial investment amount in certain cases. An exchange of Class I, Class A or Class L shares of a Portfolio (except the Global Franchise and Select Global Infrastructure Portfolios) held for less than 30 days from the date of purchase will be subject to the 2% redemption fee described above. The Fund may terminate or revise the exchange privilege upon required notice or in certain cases without notice. The Fund reserves the right to reject an exchange order for any reason.

If you exchange shares of a Portfolio for shares of another Morgan Stanley Fund, there are important tax considerations. For tax purposes, the exchange out of a Portfolio is considered a sale of Portfolio shares and the exchange

Morgan Stanley Institutional Fund, Inc. Prospectus

Shareholder Information

Shareholder Information (Cont'd)

into the other fund is considered a purchase. As a result, you may realize a capital gain or loss. You should review the "Tax Considerations" section and consult your own tax professional about the tax consequences of an exchange.

Frequent Purchases and Redemptions of Shares

Frequent purchases and redemptions of shares by Portfolio shareholders are referred to as "market-timing" or "short-term trading" and may present risks for other shareholders of a Portfolio, which may include, among other things, diluting the value of a Portfolio's shares held by long-term shareholders, interfering with the efficient management of the Portfolio, increasing brokerage and administrative costs, incurring unwanted taxable gains and forcing the Portfolio to hold excess levels of cash.

In addition, a Portfolio is subject to the risk that market-timers and/or short-term traders may take advantage of time zone differences between the foreign markets on which a Portfolio's securities trade and the time the Portfolio's NAV is calculated ("time-zone arbitrage"). For example, a market-timer may purchase shares of a Portfolio based on events occurring after foreign market closing prices are established, but before the Portfolio's NAV calculation, that are likely to result in higher prices in foreign markets the following day. The market-timer would redeem the Portfolio's shares the next day when the Portfolio's share price would reflect the increased prices in foreign markets for a quick profit at the expense of long-term Portfolio shareholders.

Investments in other types of securities also may be susceptible to short-term trading strategies. These investments include securities that are, among other things, thinly traded, traded infrequently or relatively illiquid, which have the risk that the current market price for the securities may not accurately reflect current market values. A shareholder may seek to engage in short-term trading to take advantage of these pricing differences (referred to as "price arbitrage"). Investments in certain fixed income securities may be adversely affected by price arbitrage trading strategies.

The Fund discourages and does not accommodate frequent purchases and redemptions of Portfolio shares by Portfolio shareholders and the Fund's Board of Directors has adopted policies and procedures with respect to such frequent purchases and redemptions.

The Fund's policies with respect to purchases, redemptions and exchanges of Portfolio shares are described in the "Shareholder Information—How To Purchase Class I and Class L Shares," "Shareholder Information—How To Purchase Class A Shares," "Shareholder Information—General," "Shareholder Information—How To Redeem Shares" and "Shareholder Information—Exchange Privilege" sections of this Prospectus. Except as described in each of these sections, and with respect to trades that occur through omnibus accounts at Financial Intermediaries, as described below, the Fund's policies regarding frequent trading of Portfolio shares are applied uniformly to all shareholders.

With respect to trades that occur through omnibus accounts at Financial Intermediaries, such as investment advisers, broker-dealers, transfer agents and third-party administrators, the Fund (i) has requested assurance that such Financial Intermediaries currently selling Portfolio shares have in place internal policies and procedures reasonably designed to address market-timing concerns and has instructed such Financial Intermediaries to notify the Fund immediately if they are unable to comply with such policies and procedures and (ii) requires all prospective Financial Intermediaries to agree to cooperate in enforcing the Fund's policies (or, upon prior written approval only, a Financial Intermediary's own policies) with respect to frequent purchases, redemptions and exchanges of Portfolio shares.

With respect to trades that occur through omnibus accounts at Financial Intermediaries, to some extent, the Fund relies on the Financial Intermediary to monitor frequent short-term trading within a Portfolio by the Financial Intermediary's customers and to collect the Portfolio's redemption fee, as applicable, from its customers. However, the Fund has entered into agreements with Financial Intermediaries whereby Financial Intermediaries are required to provide certain customer identification and transaction information upon the Fund's request. The Fund may use this information to help identify and prevent market-timing activity in the Fund. There can be no assurance that the Fund will be able to identify or prevent all market-timing activities.

Dividends and Distributions

Each Portfolio's policy is to distribute to shareholders substantially all of its net investment income, if any, in the form of an annual dividend and to distribute net realized capital gains, if any, at least annually.

The Fund automatically reinvests all dividends and distributions in additional shares. However, you may elect to receive distributions in cash by giving written notice to the Fund or your Financial Intermediary or by checking the appropriate box in the Distribution Option section on the New Account Application.

Taxes

The dividends and distributions you receive from a Portfolio may be subject to federal, state and local taxation, depending on your tax situation. The tax treatment of dividends and distributions is the same whether or not you reinvest them. Dividends paid by a Portfolio that are attributable to "qualified dividends" received by the Portfolio may be taxed at reduced rates to individual shareholders (either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts), if certain requirements are met by the Portfolio and the shareholders. "Qualified dividends" include dividends distributed by certain foreign corporations (generally, corporations incorporated in a possession of the United States, some corporations eligible for treaty benefits under a treaty with the United States and corporations whose stock with respect to which such dividend is paid is readily tradable on an established

Shareholder Information (Cont'd)

securities market in the United States). Dividends paid by a Portfolio not attributable to "qualified dividends" received by a Portfolio, including distributions of short-term capital gains, will generally be taxed at normal tax rates applicable to ordinary income. The maximum individual rate applicable to long-term capital gains (including capital gain dividends received from the Portfolio) is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts. A Portfolio may be able to pass through to you a credit for foreign income taxes it pays. The Fund will tell you annually how to treat dividends and distributions.

If you redeem shares of a Portfolio, you may be subject to tax on any gains you earn based on your holding period for the shares and your marginal tax rate. An exchange of shares of a Portfolio for shares of another portfolio is treated for tax purposes as a sale of the original shares in the Portfolio, followed by the purchase of shares in the other portfolio. Conversions of shares between classes will not result in taxation.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from a Portfolio and net gains from redemptions or other taxable dispositions of Portfolio shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds certain threshold amounts.

Shareholders who are not citizens or residents of the United States and certain foreign entities will generally be subject to withholding of U.S. tax of 30% on distributions made by a Portfolio of investment income and short-term capital gains.

Due to recent legislation, the Portfolios (or their administrative agent) are required to report to the U.S. Internal Revenue Service and furnish to Portfolio shareholders the cost basis information for sale transactions of shares purchased on or after January 1, 2012. Shareholders may elect to have one of several cost basis methods applied to their account when calculating the cost basis of shares sold, including average cost, FIFO ("first-in, first-out") or some other specific identification method. Unless you instruct otherwise, each Portfolio will use average cost as its default cost basis method, and will treat sales as first coming from shares purchased prior to January 1, 2012. If average cost is used for the first sale of Portfolio shares covered by these new rules, the shareholder may only use an alternative cost basis method for shares purchased prospectively. Portfolio shareholders should consult with their tax advisors to determine the best cost basis method for their tax situation.

The Portfolios may be required to withhold U.S. federal income tax (currently, at a rate of 28%) ("backup withholding") from all taxable distributions payable to (1) any shareholder who fails to furnish the Portfolios with its correct taxpayer identification number or a certificate that the shareholder is exempt from backup withholding, and (2) any shareholder with respect to whom the IRS notifies a Portfolio that the shareholder has failed to properly report certain interest and dividend income to the IRS and to respond to notices to that effect. An individual's taxpayer identification number is his or her social security number. The 28% backup withholding tax is not an additional tax and may be credited against a taxpayer's regular federal income tax liability.

Because each investor's tax circumstances are unique and the tax laws may change, you should consult your tax advisor about your investment.

The Fund currently consists of the following portfolios:

U.S. Equity

Advantage Portfolio
Growth Portfolio
Insight Portfolio
Opportunity Portfolio
Small Company Growth Portfolio*
U.S. Real Estate Portfolio

Global and International Equity

Active International Allocation Portfolio
Asian Equity Portfolio
Emerging Markets Portfolio
Frontier Emerging Markets Portfolio
Global Advantage Portfolio
Global Discovery Portfolio
Global Franchise Portfolio*
Global Insight Portfolio
Global Opportunity Portfolio
Global Quality Portfolio
Global Real Estate Portfolio
International Advantage Portfolio

International Equity Portfolio
International Opportunity Portfolio
International Real Estate Portfolio*
International Small Cap Portfolio
Select Global Infrastructure Portfolio

Fixed Income

Emerging Markets Domestic Debt Portfolio

Emerging Markets External Debt Portfolio

Asset Allocation

Multi-Asset Portfolio

Total Emerging Markets Portfolio

* Class A and Class L shares of the Small Company Growth Portfolio are currently closed to new investors. Effective May 30, 2014, Class I shares of the Small Company Growth Portfolio will be closed to new investors, with certain exceptions. Class I, Class A and Class L shares of the Global Franchise Portfolio are currently closed to new investors, with certain exceptions. Class H shares of the International Real Estate Portfolio are currently closed to all investors.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

On September 17, 2012, the Frontier Emerging Markets Portfolio acquired all of the assets and liabilities of the Frontier Predecessor Fund in exchange for Class I shares of the Frontier Emerging Markets Portfolio. As a result of the Reorganization, the Class I shares of the Frontier Emerging Markets Portfolio adopted the financial and performance history of the Frontier Predecessor Fund.

The financial highlights tables that follow are intended to help you understand the financial performance of the Class I, Class A and Class L shares of each Portfolio for the past five years or since inception if less than five years. Certain information reflects financial results for a single Portfolio share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in each Portfolio (assuming reinvestment of all dividends and distributions).

The ratio of expenses to average net assets listed in the tables below for each class of shares of the Portfolios are based on the average net assets of such Portfolio for each of the periods listed in the tables. To the extent that a Portfolio's average net assets decrease over the Portfolio's next fiscal year, such expense ratios can be expected to increase, potentially significantly, because certain fixed costs will be spread over a smaller amount of assets.

The information below has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Ernst & Young LLP's reports, along with each Portfolio's financial statements, are incorporated by reference in the Portfolios' SAI. The Annual Reports to Shareholders and each Portfolio's financial statements and SAI are available at no cost from the Fund at the toll-free number noted on the back cover to this Prospectus.

Active International Allocation Portfolio

	Class I
	Year Ended December 31,
Selected Per Share Data and Ratios	2013			2012			2011			2010			2009
Net Asset Value, Beginning of Period	$	11.65		$	10.07		$	12.06		$	11.30		$	9.11
Income (Loss) from Investment Operations:
Net Investment Income†		0.22			0.23			0.27			0.20			0.21
Net Realized and Unrealized Gain (Loss)		2.25			1.51			(2.03	)		0.81			2.26
Total from Investment Operations		2.47			1.74			(1.76	)		1.01			2.47
Distributions from and/or in Excess of:
Net Investment Income		(0.37	)		(0.16	)		(0.23	)		(0.25	)		(0.28	)
Redemption Fees		0.00	‡		0.00	‡		0.00	‡		0.00	‡		0.00	‡
Net Asset Value, End of Period	$	13.75		$	11.65		$	10.07		$	12.06		$	11.30
Total Return++		21.38	%		17.30	%		(14.56	)%		8.95	%		27.26	%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	260,614		$	251,657		$	302,048		$	441,350		$	532,584
Ratio of Expenses to Average Net Assets ⁽¹⁾		0.83	%+		0.89	%+		0.84	%+††^		0.79	%+††		0.79	%+
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		0.88	%+		N/A			0.84	%+††^		0.79	%+††		0.79	%+
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		1.71	%+		2.12	%+		2.33	%+††		1.82	%+††		2.23	%+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.02	%		0.01	%		0.01	%††		0.01	%††		0.01	%
Portfolio Turnover Rate		36	%		27	%		26	%		19	%		33	%
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		0.99	%		0.98	%		0.95	%††		0.92	%+††		0.85	%+
Net Investment Income to Average Net Assets		1.55	%		2.03	%		2.22	%††		1.69	%+††		2.17	%+

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value as of the last business day of the period.

+ The Ratios of Expenses and Net Investment Income reflect the rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley affiliates during the period. The effect of the rebate on the ratios is disclosed in the above table as "Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets."

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

^ Effective July 1, 2011, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 0.90% for Class I shares. Prior to July 1, 2011, the maximum ratio was 0.80% for Class I shares.

Active International Allocation Portfolio

	Class A@
	Year Ended December 31,
Selected Per Share Data and Ratios	2013			2012			2011			2010			2009
Net Asset Value, Beginning of Period	$	11.89		$	10.27		$	12.28		$	11.50		$	9.27
Income (Loss) from Investment Operations:
Net Investment Income†		0.11			0.20			0.25			0.18			0.18
Net Realized and Unrealized Gain (Loss)		2.36			1.55			(2.07	)		0.81			2.31
Total from Investment Operations		2.47			1.75			(1.82	)		0.99			2.49
Distributions from and/or in Excess of:
Net Investment Income		(0.33	)		(0.13	)		(0.19	)		(0.21	)		(0.26	)
Redemption Fees		0.00	‡		0.00	‡		0.00	‡		0.00	‡		0.00	‡
Net Asset Value, End of Period	$	14.03		$	11.89		$	10.27		$	12.28		$	11.50
Total Return++		20.94	%		17.05	%		(14.75	)%		8.69	%		26.99	%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	90,599		$	8,608		$	10,387		$	14,477		$	16,479
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.09	%+^^		1.14	%+		1.09	%+††^		1.04	%+††		1.04	%+
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		1.21	%+^^		N/A			1.09	%+††^		1.04	%+††		1.04	%+
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		0.84	%+		1.80	%+		2.08	%+††		1.57	%+††		1.80	%+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.02	%		0.01	%		0.01	%††		0.01	%††		0.01	%
Portfolio Turnover Rate		36	%		27	%		26	%		19	%		33	%
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		1.25	%+		1.23	%		1.20	%††		1.17	%+††		1.10	%+
Net Investment Income to Average Net Assets		0.68	%+		1.71	%		1.97	%††		1.44	%+††		1.74	%+

@ Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value which does not reflect sales charges, if applicable, as of the last business day of the period.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.25% for Class A shares. Prior to September 16, 2013, the maximum ratio was 1.15% for Class A shares.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

^ Effective July 1, 2011, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.15% for Class A shares. Prior to July 1, 2011, the maximum ratio was 1.05% for Class A shares.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

Active International Allocation Portfolio

	Class L
Selected Per Share Data and Ratios	Year Ended December 31, 2013			Period from June 14, 2012^ to December 31, 2012
Net Asset Value, Beginning of Period	$	11.84		$	10.09
Income from Investment Operations:
Net Investment Income (Loss)†		0.12			(0.02	)
Net Realized and Unrealized Gain		2.27			1.91
Total from Investment Operations		2.39			1.89
Distributions from and/or in Excess of:
Net Investment Income		(0.26	)		(0.14	)
Redemption Fees		0.00	‡		0.00	‡
Net Asset Value, End of Period	$	13.97		$	11.84
Total Return++		20.34	%		18.80	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	10,345		$	10,246
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.61	%+^^		1.63	%+*
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		1.66	%+^^		N/A
Ratio of Net Investment Income (Loss) to Average Net Assets ⁽¹⁾		0.94	%+		(0.33	)%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.02	%		0.02	%*
Portfolio Turnover Rate		36	%		27	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		1.76	%		1.79	%*
Net Investment Income (Loss) to Average Net Assets		0.79	%		(0.49	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value as of the last business day of the period.

+ The Ratios of Expenses and Net Investment Income (Loss) reflect the rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley affiliates during the period. The effect of the rebate on the ratios is disclosed in the above table as "Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets."

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.75% for Class L shares. Prior to September 16, 2013, the maximum ratio was 1.65% for Class L shares.

# Not Annualized.

* Annualized.

Asian Equity Portfolio

	Class I
	Year Ended December 31,									Period from December 28, 2010^ to
Selected Per Share Data and Ratios	2013			2012			2011			December 31, 2010
Net Asset Value, Beginning of Period	$	10.40		$	8.47		$	10.19		$	10.00
Income (Loss) from Investment Operations:
Net Investment Income (Loss)†		0.05			0.04			0.00	‡		(0.00	)‡
Net Realized and Unrealized Gain (Loss)		(0.05	)		2.00			(1.72	)		0.19
Total from Investment Operations		—			2.04			(1.72	)		0.19
Distributions from and/or in Excess of:
Net Investment Income		(0.07	)		(0.11	)		—			—
Net Asset Value, End of Period	$	10.33		$	10.40		$	8.47		$	10.19
Total Return++		(0.05	)%		24.08	%		(16.88	)%		1.90	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	4,753		$	3,996		$	1,201		$	1,223
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.45	%+		1.45	%+††		1.45	%+††		1.45	%††*
Ratio of Net Investment Income (Loss) to Average Net Assets ⁽¹⁾		0.52	%+		0.39	%+††		0.01	%+††		(1.34	)%††*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.00	%††§		0.00	%††§		N/A
Portfolio Turnover Rate		114	%		80	%		38	%		0.00	%††#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		4.28	%		5.79	%††		11.86	%††		176.73	%††*
Net Investment Loss to Average Net Assets		(2.31	)%		(3.95	)%††		(10.40	)%††		(176.62	)%††*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

Asian Equity Portfolio

	Class A@
	Year Ended December 31,									Period from December 28, 2010^ to
Selected Per Share Data and Ratios	2013			2012			2011			December 31, 2010
Net Asset Value, Beginning of Period	$	10.37		$	8.45		$	10.19		$	10.00
Income (Loss) from Investment Operations:
Net Investment Income (Loss)†		0.01			0.01			(0.02	)		(0.00	)‡
Net Realized and Unrealized Gain (Loss)		(0.03	)		2.00			(1.72	)		0.19
Total from Investment Operations		(0.02	)		2.01			(1.74	)		0.19
Distributions from and/or in Excess of:
Net Investment Income		(0.04	)		(0.09	)		—			—
Net Asset Value, End of Period	$	10.31		$	10.37		$	8.45		$	10.19
Total Return++		(0.15	)%		23.76	%		(17.08	)%		1.90	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	1,302		$	1,201	††	$	84		$	102
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.73	%+^^		1.70	%+††		1.70	%+††		1.70	%††*
Ratio of Net Investment Income (Loss) to Average Net Assets ⁽¹⁾		0.09	%+		0.14	%+††		(0.24	)%+††		(1.59	)%††*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.00	%††§		0.00	%††§		N/A
Portfolio Turnover Rate		114	%		80	%		38	%		0.00	%††#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		4.68	%		6.04	%††		12.11	%††		176.98	%††*
Net Investment Loss to Average Net Assets		(2.86	)%		(4.20	)%††		(10.65	)%††		(176.87	)%††*

@ Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value which does not reflect sales charges, if applicable, as of the last business day of the period.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.80% for Class A Shares. Prior to September 16, 2013, the maximum ratio was 1.70% for Class A Shares.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

Asian Equity Portfolio

	Class L
	Year Ended December 31,									Period from December 28, 2010^ to
Selected Per Share Data and Ratios	2013			2012			2011			December 31, 2010
Net Asset Value, Beginning of Period	$	10.31		$	8.40		$	10.19		$	10.00
Income (Loss) from Investment Operations:
Net Investment Loss†		(0.04	)		(0.03	)		(0.07	)		(0.00	)‡
Net Realized and Unrealized Gain (Loss)		(0.03	)		1.98			(1.72	)		0.19
Total from Investment Operations		(0.07	)		1.95			(1.79	)		0.19
Distributions from and/or in Excess of:
Net Investment Income		(0.01	)		(0.04	)		—			—
Net Asset Value, End of Period	$	10.23		$	10.31		$	8.40		$	10.19
Total Return++		(0.56	)%		23.18	%		(17.57	)%		1.90	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	102		$	103		$	84		$	102
Ratio of Expenses to Average Net Assets ⁽¹⁾		2.22	%+^^		2.20	%+††		2.20	%+††		2.20	%††*
Ratio of Net Investment Loss to Average Net Assets ⁽¹⁾		(0.35	)%+		(0.36	)%+††		(0.74	)%+††		(2.09	)%††*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.00	%††§		0.00	%††§		N/A
Portfolio Turnover Rate		114	%		80	%		38	%		0.00	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		5.59	%		6.54	%††		12.61	%††		177.48	%††*
Net Investment Loss to Average Net Assets		(3.72	)%		(4.70	)%††		(11.15	)%††		(177.37	)%††*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value as of the last business day of the period.

+ The Ratios of Expenses and Net Investment Loss reflect the rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley affiliates during the period. The effect of the rebate on the ratios is disclosed in the above table as "Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets."

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 2.30% for Class L Shares. Prior to September 16, 2013, the maximum ratio was 2.20% for Class L Shares.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

Emerging Markets Portfolio

	Class I
	Year Ended December 31,
Selected Per Share Data and Ratios	2013			2012			2011			2010			2009
Net Asset Value, Beginning of Period	$	25.94		$	21.73		$	27.14		$	23.10		$	13.79
Income (Loss) from Investment Operations:
Net Investment Income†		0.20			0.19			0.22			0.10			0.10
Net Realized and Unrealized Gain (Loss)		(0.44	)		4.19			(5.22	)		4.15			9.49
Total from Investment Operations		(0.24	)		4.38			(5.00	)		4.25			9.59
Distributions from and/or in Excess of:
Net Investment Income		(0.20	)		(0.17	)		—			(0.21	)		(0.28	)
Net Realized Gain		(0.86	)		—			(0.41	)		—			—
Total Distributions		(1.06	)		(0.17	)		(0.41	)		(0.21	)		(0.28	)
Redemption Fees		0.00	‡		0.00	‡		0.00	‡		0.00	‡		0.00	‡
Net Asset Value, End of Period	$	24.64		$	25.94		$	21.73		$	27.14		$	23.10
Total Return++		(0.80	)%		20.19	%		(18.41	)%		18.49	%		69.54	%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	1,128,618		$	1,278,837		$	1,198,857		$	2,031,778		$	2,198,793
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.24	%+		1.28	%+^		1.48	%+††		1.47	%+††		1.40	%+
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		1.24	%+		N/A			N/A			1.47	%+††		1.40	%+
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		0.79	%+		0.80	%+^		0.86	%+††		0.40	%+††		0.56	%+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%		0.01	%		0.01	%††		0.01	%††		0.01	%
Portfolio Turnover Rate		49	%		47	%		60	%		59	%		64	%
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		1.51	%		1.49	%		N/A			N/A			N/A
Net Investment Income to Average Net Assets		0.52	%		0.59	%		N/A			N/A			N/A

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

^ Effective March 1, 2012, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.25% for Class I shares. Prior to March 1, 2012, the maximum ratio was 1.65% for Class I shares.

Emerging Markets Portfolio

	Class A@
	Year Ended December 31,
Selected Per Share Data and Ratios	2013			2012			2011			2010			2009
Net Asset Value, Beginning of Period	$	25.31		$	21.20		$	26.56		$	22.61		$	13.51
Income (Loss) from Investment Operations:
Net Investment Income†		0.12			0.14			0.15			0.04			0.06
Net Realized and Unrealized Gain (Loss)		(0.42	)		4.07			(5.10	)		4.06			9.28
Total from Investment Operations		(0.30	)		4.21			(4.95	)		4.10			9.34
Distributions from and/or in Excess of:
Net Investment Income		(0.13	)		(0.10	)		—			(0.15	)		(0.24	)
Net Realized Gain		(0.86	)		—			(0.41	)		—			—
Total Distributions		(0.99	)		(0.10	)		(0.41	)		(0.15	)		(0.24	)
Redemption Fees		0.00	‡		0.00	‡		0.00	‡		0.00	‡		0.00	‡
Net Asset Value, End of Period	$	24.02		$	25.31		$	21.20		$	26.56		$	22.61
Total Return++		(1.07	)%		19.87	%		(18.63	)%		18.20	%		69.11	%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	35,863		$	40,824		$	46,521		$	113,434		$	126,487
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.52	%+^^		1.53	%+^		1.73	%+††		1.72	%+††		1.65	%+
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		1.52	%+^^		N/A			N/A			1.72	%+††		1.65	%+
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		0.49	%+		0.61	%+^		0.61	%+††		0.15	%+††		0.32	%+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%		0.01	%		0.01	%††		0.01	%††		0.01	%
Portfolio Turnover Rate		49	%		47	%		60	%		59	%		64	%
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		1.78	%		1.74	%		N/A			N/A			N/A
Net Investment Income to Average Net Assets		0.23	%		0.40	%		N/A			N/A			N/A

@ Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value which does not reflect sales charges, if applicable, as of the last business day of the period.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.60% for Class A shares. Prior to September 16, 2013, the maximum ratio was 1.50% for Class A shares.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

^ Effective March 1, 2012, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.50% for Class A shares. Prior to March 1, 2012, the maximum ratio was 1.90% for Class A shares.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

Emerging Markets Portfolio

	Class L
Selected Per Share Data and Ratios	Year Ended December 31, 2013			Period from April 27, 2012^ to December 31, 2012
Net Asset Value, Beginning of Period	$	25.27		$	23.85
Income (Loss) from Investment Operations:
Net Investment Income (Loss)†		(0.05	)		0.04
Net Realized and Unrealized Gain (Loss)		(0.37	)		1.44
Total from Investment Operations		(0.42	)		1.48
Distributions from and/or in Excess of:
Net Investment Income		(0.08	)		(0.06	)
Net Realized Gain		(0.86	)		—
Total Distributions		(0.94	)		(0.06	)
Redemption Fees		0.00	‡		0.00	‡
Net Asset Value, End of Period	$	23.91		$	25.27
Total Return++		(1.56	)%		6.20	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	203		$	11
Ratio of Expenses to Average Net Assets ⁽¹⁾		2.03	%+^^		1.99	%+*
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		2.03	%+^^		N/A
Ratio of Net Investment Income (Loss) to Average Net Assets ⁽¹⁾		(0.18	)%+		0.27	%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%		0.01	%*
Portfolio Turnover Rate		49	%		47	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		2.54	%		2.28	%*
Net Investment Loss to Average Net Assets		(0.69	)%		(0.02	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value as of the last business day of the period.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 2.10% for Class L shares. Prior to September 16, 2013, the maximum ratio was 2.00% for Class L shares.

# Not Annualized.

* Annualized.

Frontier Emerging Markets Portfolio

	Class I
	Year Ended December 31,			Period from November 1, 2012 to December 31,			Year Ended October 31,
Selected Per Share Data and Ratios	2013			2012			2012			2011			2010			2009
Net Asset Value, Beginning of Period	$	14.24		$	14.00		$	12.75		$	15.26		$	13.19		$	11.79
Income (Loss) from Investment Operations:
Net Investment Income (Loss)†		0.09			(0.03	)		0.19			0.34			0.13			0.21
Net Realized and Unrealized Gain (Loss)		4.60			0.56			1.26			(2.65	)		2.06			1.18
Total from Investment Operations		4.69			0.53			1.45			(2.31	)		2.19			1.39
Distributions from and/or in Excess of:
Net Investment Income		(0.07	)		(0.30	)		(0.22	)		(0.20	)		(0.21	)		—
Anti-Dilutive Effect of Share Repurchase Program		—			—			—			—			0.09			0.01
Redemption Fees		0.00	‡		0.01			0.02			—			—			—
Net Asset Value, End of Period	$	18.86		$	14.24		$	14.00		$	12.75		$	15.26		$	13.19
Total Return++		32.95	%		3.94	%#		12.03	%		(15.35	)%		17.95	%		11.87	%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	239,378		$	51,415		$	58,729		$	84,962		$	101,662		$	93,038
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.77	%+		1.85	%+††*		2.38	%+		2.03	%+		2.13	%+		2.05	%+
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		N/A			N/A			2.38	%+		N/A			N/A			N/A
Ratio of Net Investment Income (Loss) to Average Net Assets ⁽¹⁾		0.54	%+		(1.23	)%+††*		1.47	%+		2.32	%+		1.00	%+		1.89	%+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets	��	0.01	%		0.00	%*§		0.01	%		0.00	%§		0.00	%§		0.01	%
Portfolio Turnover Rate		34	%		13	%#		59	%		60	%		42	%		54	%
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		1.89	%		3.31	%††*		2.47	%		N/A			N/A			N/A
Net Investment Income (Loss) to Average Net Assets		0.42	%		(2.69	)%††*		1.38	%		N/A			N/A			N/A

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

Frontier Emerging Markets Portfolio

	Class A@
Selected Per Share Data and Ratios	Year Ended December 31, 2013			Period from November 1, 2012 to December 31, 2012			Period from September 14 2012^ to October 31, 2012
Net Asset Value, Beginning of Period	$	14.20		$	13.97		$	13.76
Income (Loss) from Investment Operations:
Net Investment Loss†		(0.15	)		(0.03	)		(0.02	)
Net Realized and Unrealized Gain		4.79			0.56			0.23
Total from Investment Operations		4.64			0.53			0.21
Distributions from and/or in Excess of:
Net Investment Income		(0.06	)		(0.30	)		—
Redemption Fees		0.00	‡		—			—
Net Asset Value, End of Period	$	18.78		$	14.20		$	13.97
Total Return++		32.53	%		3.77	%#		1.67	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	23,762		$	10		$	10
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.95	%+^^		2.10	%+††*		2.10	%*+
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		N/A			N/A			2.09	%*+
Ratio of Net Investment Loss to Average Net Assets ⁽¹⁾		(0.81	)%+		(1.48	)%+††*		(0.88	)%*+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%		0.00	%*§		0.01	%*
Portfolio Turnover Rate		34	%		13	%#		59	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		N/A			3.56	%††*		2.92	%*
Net Investment Loss to Average Net Assets		N/A			(2.94	)%††*		(1.70	)%*

@ Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value which does not reflect sales charges, if applicable, as of the last business day of the period.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 2.20% for Class A shares. Prior to September 16, 2013, the maximum ratio was 2.10% for Class A shares.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

Frontier Emerging Markets Portfolio

	Class L
Selected Per Share Data and Ratios	Year Ended December 31, 2013			Period from November 1, 2012 to December 31, 2012			Period from September 14 2012^ to October 31, 2012
Net Asset Value, Beginning of Period	$	14.19		$	13.96		$	13.76
Income (Loss) from Investment Operations:
Net Investment Loss†		(0.16	)		(0.05	)		(0.02	)
Net Realized and Unrealized Gain		4.69			0.57			0.22
Total from Investment Operations		4.53			0.52			0.20
Distributions from and/or in Excess of:
Net Investment Income		(0.01	)		(0.29	)		—
Redemption Fees		0.00	‡		—			—
Net Asset Value, End of Period	$	18.71		$	14.19		$	13.96
Total Return++		31.81	%		3.71	%#		1.60	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	3,212		$	10		$	10
Ratio of Expenses to Average Net Assets ⁽¹⁾		2.53	%+^^		2.60	%+††*		2.60	%*+
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		N/A			N/A			2.59	%*+
Ratio of Net Investment Loss to Average Net Assets ⁽¹⁾		(0.92	)%+		(1.98	)%+††*		(1.37	)%*+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.00	%*§		0.01	%*
Portfolio Turnover Rate		34	%		13	%#		59	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		N/A			4.08	%††*		3.49	%*
Net Investment Loss to Average Net Assets		N/A			(3.46	)%††*		(2.26	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value as of the last business day of the period.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 2.70% for Class L shares. Prior to September 16, 2013, the maximum ratio was 2.60% for Class L shares.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

Global Franchise Portfolio

	Class I
	Year Ended December 31,
Selected Per Share Data and Ratios	2013			2012			2011			2010			2009
Net Asset Value, Beginning of Period	$	18.13		$	16.24		$	15.29		$	13.81		$	10.82
Income from Investment Operations:
Net Investment Income†		0.36			0.40			0.31			0.32			0.19
Net Realized and Unrealized Gain		3.17			2.11			1.11			1.62			2.98
Total from Investment Operations		3.53			2.51			1.42			1.94			3.17
Distributions from and/or in Excess of:
Net Investment Income		(0.35	)		(0.32	)		(0.30	)		(0.46	)		(0.18	)
Net Realized Gain		(0.54	)		(0.30	)		(0.17	)		—			—
Total Distributions		(0.89	)		(0.62	)		(0.47	)		(0.46	)		(0.18	)
Net Asset Value, End of Period	$	20.77		$	18.13		$	16.24		$	15.29		$	13.81
Total Return++		19.71	%		15.38	%		9.38	%		14.07	%		29.65	%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	570,261		$	404,762		$	211,677		$	89,666		$	111,852
Ratio of Expenses to Average Net Assets ⁽¹⁾		0.95	%+		0.98	%+		1.00	%+††		1.00	%+††		1.00	%+
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		N/A			N/A			N/A			1.00	%+††		1.00	%+
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		1.79	%+		2.21	%+		1.87	%+††		2.19	%+††		1.62	%+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.01	%		0.00	%††§		0.00	%††§		0.00	%§
Portfolio Turnover Rate		24	%		34	%		30	%		74	%		18	%
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		N/A			N/A			1.01	%††		1.08	%+††		1.01	%+
Net Investment Income to Average Net Assets		N/A			N/A			1.86	%††		2.11	%+††		1.61	%+

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

Global Franchise Portfolio

	Class A@
	Year Ended December 31,
Selected Per Share Data and Ratios	2013			2012			2011			2010			2009
Net Asset Value, Beginning of Period	$	17.86		$	16.01		$	15.10		$	13.65		$	10.71
Income from Investment Operations:
Net Investment Income†		0.28			0.35			0.26			0.28			0.11
Net Realized and Unrealized Gain		3.14			2.09			1.09			1.59			2.99
Total from Investment Operations		3.42			2.44			1.35			1.87			3.10
Distributions from and/or in Excess of:
Net Investment Income		(0.30	)		(0.29	)		(0.27	)		(0.42	)		(0.16	)
Net Realized Gain		(0.54	)		(0.30	)		(0.17	)		—			—
Total Distributions		(0.84	)		(0.59	)		(0.44	)		(0.42	)		(0.16	)
Net Asset Value, End of Period	$	20.44		$	17.86		$	16.01		$	15.10		$	13.65
Total Return++		19.42	%		15.14	%		8.98	%		13.83	%		29.24	%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	83,135		$	35,901		$	15,327		$	9,653		$	9,332
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.20	%+^		1.23	%+		1.25	%+††		1.25	%+††		1.25	%+
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		N/A			N/A			N/A			1.25	%+††		1.25	%+
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		1.42	%		1.99	%+		1.62	%+††		1.94	%+††		0.92	%+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.01	%		0.00	%††§		0.00	%††§		0.00	%§
Portfolio Turnover Rate		24	%		34	%		30	%		74	%		18	%
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		N/A			N/A			1.26	%††		1.33	%+††		1.26	%+
Net Investment Income to Average Net Assets		N/A			N/A			1.61	%††		1.86	%+††		0.91	%+

@ Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value which does not reflect sales charges, if applicable, as of the last business day of the period.

^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.35% for Class A shares. Prior to September 16, 2013, the maximum ratio was 1.25% for Class A shares.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

Global Franchise Portfolio

	Class L
Selected Per Share Data and Ratios	Year Ended December 31, 2013			Period from April 27, 2012^ to December 31, 2012
Net Asset Value, Beginning of Period	$	17.83		$	18.13
Income from Investment Operations:
Net Investment Income†		0.20			0.10
Net Realized and Unrealized Gain		3.11			0.16
Total from Investment Operations		3.31			0.26
Distributions from and/or in Excess of:
Net Investment Income		(0.21	)		(0.26	)
Net Realized Gain		(0.54	)		(0.30	)
Total Distributions		(0.75	)		(0.56	)
Net Asset Value, End of Period	$	20.39		$	17.83
Total Return++		18.78	%		1.36	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	9,112		$	4,525
Ratio of Expenses to Average Net Assets		1.70	%+^^		1.73	%+*
Ratio of Net Investment Income to Average Net Assets		1.03	%+		0.84	%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.01	%*
Portfolio Turnover Rate		24	%		34	%#

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value as of the last business day of the period.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.85% for Class L shares. Prior to September 16, 2013, the maximum ratio was 1.75% for Class L shares.

§ Amount is less than 0.005%.

* Annualized.

# Not Annualized.

Global Quality Portfolio

	Class I
Selected Per Share Data and Ratios	Period from August 30, 2013^ to December 31, 2013
Net Asset Value, Beginning of Period	$	10.00
Income (Loss) from Investment Operations:
Net Investment Loss†		(0.00	)‡
Net Realized and Unrealized Gain		1.28
Total from Investment Operations		1.28
Net Asset Value, End of Period	$	11.28
Total Return++		12.80	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	7,440
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.19	%+*
Ratio of Net Investment Loss to Average Net Assets ⁽¹⁾		(0.12	)%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%*
Portfolio Turnover Rate		8	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation
Expenses to Average Net Assets		4.86	%*
Net Investment Loss to Average Net Assets		(3.79	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value as of the last business day of the period.

# Not Annualized.

* Annualized.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

Global Quality Portfolio

	Class A
Selected Per Share Data and Ratios	Period from August 30, 2013^ to December 31, 2013
Net Asset Value, Beginning of Period	$	10.00
Income (Loss) from Investment Operations:
Net Investment Loss†		(0.02	)
Net Realized and Unrealized Gain		1.29
Total from Investment Operations		1.27
Net Asset Value, End of Period	$	11.27
Total Return++		12.70	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	1,612
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.54	%+*
Ratio of Net Investment Loss to Average Net Assets ⁽¹⁾		(0.45	)%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%*
Portfolio Turnover Rate		8	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation
Expenses to Average Net Assets		5.00	%*
Net Investment Loss to Average Net Assets		(3.91	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value which does not reflect sales charges, if applicable, as of the last business day of the period.

# Not Annualized.

* Annualized.

Global Quality Portfolio

	Class L
Selected Per Share Data and Ratios	Period from August 30, 2013^ to December 31, 2013
Net Asset Value, Beginning of Period	$	10.00
Income (Loss) from Investment Operations:
Net Investment Loss†		(0.03	)
Net Realized and Unrealized Gain		1.28
Total from Investment Operations		1.25
Net Asset Value, End of Period	$	11.25
Total Return++		12.50	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	962
Ratio of Expenses to Average Net Assets ⁽¹⁾		2.04	%+*
Ratio of Net Investment Loss to Average Net Assets ⁽¹⁾		(0.80	)%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%*
Portfolio Turnover Rate		8	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation
Expenses to Average Net Assets		6.27	%*
Net Investment Loss to Average Net Assets		(5.03	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value as of the last business day of the period.

# Not Annualized.

* Annualized.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

International Equity Portfolio

	Class I
	Year Ended December 31,
Selected Per Share Data and Ratios	2013			2012			2011			2010			2009
Net Asset Value, Beginning of Period	$	14.35		$	12.25		$	13.61		$	13.02		$	11.01
Income (Loss) from Investment Operations:
Net Investment Income†		0.32			0.31			0.32			0.26			0.27
Net Realized and Unrealized Gain (Loss)		2.59			2.09			(1.37	)		0.53			2.10
Total from Investment Operations		2.91			2.40			(1.05	)		0.79			2.37
Distributions from and/or in Excess of:
Net Investment Income		(0.28	)		(0.30	)		(0.31	)		(0.20	)		(0.36	)
Redemption Fees		0.00	‡		0.00	‡		0.00	‡		0.00	‡		0.00	‡
Net Asset Value, End of Period	$	16.98		$	14.35		$	12.25		$	13.61		$	13.02
Total Return++		20.39	%		19.60	%		(7.63	)%		6.08	%		21.56	%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	3,694,164		$	3,631,307		$	2,959,403		$	3,372,029		$	3,148,980
Ratio of Expenses to Average Net Assets ⁽¹⁾		0.94	%+		0.95	%+		0.95	%+††		0.95	%+††		0.94	%+
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		0.95	%+		N/A			0.95	%+††		0.95	%+††		0.94	%+
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		2.04	%+		2.31	%+		2.36	%+††		2.05	%+††		2.35	%+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.00	%§		0.00	%††§		0.00	%††§		0.01	%
Portfolio Turnover Rate		29	%		23	%		34	%		40	%		38	%
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		0.99	%		0.97	%		0.98	%††		0.98	%+††		0.95	%+
Net Investment Income to Average Net Assets		1.99	%		2.29	%		2.33	%††		2.02	%+††		2.34	%+

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

International Equity Portfolio

	Class A@
	Year Ended December 31,
Selected Per Share Data and Ratios	2013			2012			2011			2010			2009
Net Asset Value, Beginning of Period	$	14.18		$	12.11		$	13.45		$	12.87		$	10.90
Income (Loss) from Investment Operations:
Net Investment Income†		0.25			0.27			0.28			0.23			0.23
Net Realized and Unrealized Gain (Loss)		2.59			2.07			(1.34	)		0.51			2.07
Total from Investment Operations		2.84			2.34			(1.06	)		0.74			2.30
Distributions from and/or in Excess of:
Net Investment Income		(0.24	)		(0.27	)		(0.28	)		(0.16	)		(0.33	)
Redemption Fees		0.00	‡		0.00	‡		0.00	‡		0.00	‡		0.00	‡
Net Asset Value, End of Period	$	16.78		$	14.18		$	12.11		$	13.45		$	12.87
Total Return++		20.13	%		19.31	%		(7.83	)%		5.78	%		21.18	%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	1,508,564		$	1,012,956		$	916,002		$	928,966		$	1,131,919
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.22	%+^		1.20	%+		1.20	%+††		1.20	%+††		1.19	%+
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		1.22	%+^		N/A			1.20	%+††		1.20	%+††		1.19	%+
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		1.60	%+		2.06	%+		2.11	%+††		1.80	%+††		2.02	%+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.00	%§		0.00	%††§		0.00	%††§		0.01	%
Portfolio Turnover Rate		29	%		23	%		34	%		40	%		38	%
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		1.25	%		1.22	%		1.23	%††		1.23	%+††		1.20	%+
Net Investment Income to Average Net Assets		1.57	%		2.04	%		2.08	%††		1.77	%+††		2.01	%+

@ Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value which does not reflect sales charges, if applicable, as of the last business day of the period.

^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.30% for Class A shares. Prior to September 16, 2013, the maximum ratio was 1.20% for Class A shares.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

International Equity Portfolio

	Class L
Selected Per Share Data and Ratios	Year Ended December 31, 2013			Period from June 14, 2012^ to December 31, 2012
Net Asset Value, Beginning of Period	$	14.12		$	12.36
Income (Loss) from Investment Operations:
Net Investment Income (Loss)†		0.19			(0.07	)
Net Realized and Unrealized Gain		2.55			2.11
Total from Investment Operations		2.74			2.04
Distributions from and/or in Excess of:
Net Investment Income		(0.15	)		(0.28	)
Redemption Fees		0.00	‡		0.00	‡
Net Asset Value, End of Period	$	16.71		$	14.12
Total Return++		19.49	%		16.53	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	12,072		$	11,982
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.72	%+^^		1.70	%+*
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		1.73	%+^^		N/A
Ratio of Net Investment Income (Loss) to Average Net Assets ⁽¹⁾		1.24	%+		(0.91	)%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.00	%*§
Portfolio Turnover Rate		29	%		23	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		1.78	%		1.70	%*
Net Investment Income (Loss) to Average Net Assets		1.18	%		(0.91	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value as of the last business day of the period.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.80% for Class L shares. Prior to September 16, 2013, the maximum ratio was 1.70% for Class L shares.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

International Small Cap Portfolio

	Class I
	Year Ended December 31,
Selected Per Share Data and Ratios	2013			2012			2011			2010			2009
Net Asset Value, Beginning of Period	$	12.16		$	11.27		$	13.80		$	11.97		$	9.53
Income (Loss) from Investment Operations:
Net Investment Income†		0.32			0.24			0.18			0.11			0.14
Net Realized and Unrealized Gain (Loss)		2.65			0.86			(2.71	)		1.76			2.47
Total from Investment Operations		2.97			1.10			(2.53	)		1.87			2.61
Distributions from and/or in Excess of:
Net Investment Income		(1.15	)		(0.21	)		—			(0.04	)		(0.17	)
Redemption Fees		—			0.00	‡		0.00	‡		0.00	‡		0.00	‡
Net Asset Value, End of Period	$	13.98		$	12.16		$	11.27		$	13.80		$	11.97
Total Return++		25.75	%		9.90	%		(18.33	)%		15.72	%		27.45	%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	87,532		$	122,402		$	213,983		$	320,362		$	349,589
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.15	%+		1.15	%+		1.15	%+††		1.15	%+††		1.14	%+
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		N/A			1.15	%+		N/A			1.15	%+††		1.14	%+
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		2.46	%+		1.97	%+		1.33	%+††		0.87	%+††		1.31	%+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.00	%§		0.00	%††§		0.00	%††§		0.00	%§
Portfolio Turnover Rate		33	%		114	%		64	%		66	%		127	%
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		1.39	%		1.28	%		1.19	%††		1.18	%+††		N/A
Net Investment Income to Average Net Assets		2.22	%		1.84	%		1.29	%††		0.84	%+††		N/A

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

International Small Cap Portfolio

	Class A^
	Year Ended December 31,
Selected Per Share Data and Ratios	2013			2012			2011			2010			2009
Net Asset Value, Beginning of Period	$	12.28		$	11.19		$	13.74		$	11.95		$	9.53
Income (Loss) from Investment Operations:
Net Investment Income (Loss)†		(0.02	)		0.25			0.14			0.07			0.01
Net Realized and Unrealized Gain (Loss)		3.12			0.84			(2.69	)		1.76			2.57
Total from Investment Operations		3.10			1.09			(2.55	)		1.83			2.58
Distributions from and/or in Excess of:
Net Investment Income		(0.39	)		—			—			(0.04	)		(0.16	)
Redemption Fees		—			0.00	‡		0.00	‡		0.00	‡		0.00	‡
Net Asset Value, End of Period	$	14.99		$	12.28		$	11.19		$	13.74		$	11.95
Total Return++		25.32	%		9.74	%		(18.56	)%		15.41	%		27.14	%
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	90		$	1,034		$	82,170		$	101,074		$	63,326
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.41	%+^^		1.40	%+		1.40	%+††**		1.40	%+††**		1.37	%+**
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		N/A			1.40	%+		N/A			1.40	%+††**		1.37	%+**
Ratio of Net Investment Income (Loss) to Average Net Assets ⁽¹⁾		(0.14	)%+		2.05	%+		1.08	%+††		0.62	%+††		0.12	%+
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets§		0.00	%§		0.00	%§		0.00	%††§		0.00	%††§		0.00	%§
Portfolio Turnover Rate		33	%		114	%		64	%		66	%		127	%
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		3.69	%		1.47	%		1.44	%††		1.43	%+††		N/A
Net Investment Income (Loss) to Average Net Assets		(2.42	)%		1.98	%		1.04	%††		0.59	%+††		N/A

^ Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

++ Calculated based on the net asset value which does not reflect sales charges, if applicable, as of the last business day of the period.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.50% for Class A Shares. Prior to September 16, 2013, the maximum ratio was 1.40% for Class A Shares.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

** Ratios of Expenses to Average Net Assets for Class A may vary by more than the shareholder servicing fees due to fluctuations in daily net asset amounts.

§ Amount is less than 0.005%.

International Small Cap Portfolio

	Class L
Selected Per Share Data and Ratios	Year Ended December 31, 2013			Period from April 27, 2012^ to December 31, 2012
Net Asset Value, Beginning of Period	$	12.02		$	12.69
Income (Loss) from Investment Operations:
Net Investment Income†		0.29			0.10
Net Realized and Unrealized Gain (Loss)		2.54			(0.56	)
Total from Investment Operations		2.83			(0.46	)
Distributions from and/or in Excess of:
Net Investment Income		(1.04	)		(0.21	)
Net Asset Value, End of Period	$	13.81		$	12.02
Total Return++		24.72	%		(3.50	)%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	128		$	9
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.96	%+^^		1.90	%+*
Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses		N/A			1.89	%+*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		2.23	%+		1.36	%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.01	%*
Portfolio Turnover Rate		33	%		114	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		2.73	%		2.13	%*
Net Investment Income to Average Net Assets		1.46	%		1.13	%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value as of the last business day of the period.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 2.00% for Class L shares. Prior to September 16, 2013, the maximum ratio was 1.90% for Class L shares.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

Select Global Infrastructure Portfolio

	Class I
	Year Ended December 31,									Period from September 20, 2010^ to
Selected Per Share Data and Ratios	2013			2012			2011			December 31, 2010
Net Asset Value, Beginning of Period	$	12.91		$	11.50		$	10.40		$	10.00
Income from Investment Operations:
Net Investment Income†		0.26			0.27			0.23			0.08
Net Realized and Unrealized Gain		2.00			1.82			1.42			0.40
Total from Investment Operations		2.26			2.09			1.65			0.48
Distributions from and/or in Excess of:
Net Investment Income		(0.25	)		(0.26	)		(0.22	)		(0.08	)
Net Realized Gain		(0.66	)		(0.42	)		(0.33	)		—
Total Distributions		(0.91	)		(0.68	)		(0.55	)		(0.08	)
Net Asset Value, End of Period	$	14.26		$	12.91		$	11.50		$	10.40
Total Return++		17.91	%		18.21	%		15.95	%		4.94	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	26,428		$	15,707		$	12,589		$	10,086
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.12	%+		1.15	%+††		1.15	%+††		1.14	%+††*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		1.87	%+		2.18	%+††		2.09	%+††		2.71	%+††*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%		0.00	%††§		0.00	%††§		0.01	%††*
Portfolio Turnover Rate		30	%		33	%		51	%		6	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		2.04	%		2.39	%††		2.93	%††		3.61	%+††*
Net Investment Income to Average Net Assets		0.95	%		0.94	%††		0.31	%††		0.24	%+††*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

Select Global Infrastructure Portfolio

	Class A**
	Year Ended December 31,									Period from September 20, 2010^ to
Selected Per Share Data and Ratios	2013			2012			2011			December 31, 2010
Net Asset Value, Beginning of Period	$	12.90		$	11.50		$	10.40		$	10.00
Income from Investment Operations:
Net Investment Income†		0.26			0.24			0.21			0.07
Net Realized and Unrealized Gain		1.97			1.80			1.41			0.41
Total from Investment Operations		2.23			2.04			1.62			0.48
Distributions from and/or in Excess of:
Net Investment Income		(0.22	)		(0.22	)		(0.19	)		(0.08	)
Net Realized Gain		(0.66	)		(0.42	)		(0.33	)		—
Total Distributions		(0.88	)		(0.64	)		(0.52	)		(0.08	)
Net Asset Value, End of Period	$	14.25		$	12.90		$	11.50		$	10.40
Total Return++		17.69	%		17.85	%		15.67	%		4.86	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	3,706		$	129		$	115		$	104
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.37	%+^^		1.40	%+††		1.40	%+††		1.39	%+††*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		1.81	%+		1.93	%+††		1.84	%+††		2.46	%+††*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%		0.00	%††§		0.00	%††§		0.01	%††*
Portfolio Turnover Rate		30	%		33	%		51	%		6	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		2.43	%		2.64	%††		3.18	%††		3.86	%+††*
Net Investment Income (Loss) to Average Net Assets		0.75	%		0.69	%††		0.06	%††		(0.01	)%+††*

** Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value which does not reflect sales charges, if applicable, as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.50% for Class A shares. Prior to September 16, 2013, the maximum ratio was 1.40% for Class A shares.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

100

Morgan Stanley Institutional Fund, Inc. Prospectus

Financial Highlights

Select Global Infrastructure Portfolio

	Class L
	Year Ended December 31,									Period from September 20, 2010^ to
Selected Per Share Data and Ratios	2013			2012			2011			December 31, 2010
Net Asset Value, Beginning of Period	$	12.90		$	11.50		$	10.40		$	10.00
Income from Investment Operations:
Net Investment Income†		0.16			0.18			0.15			0.06
Net Realized and Unrealized Gain		1.98			1.80			1.42			0.40
Total from Investment Operations		2.14			1.98			1.57			0.46
Distributions from and/or in Excess of:
Net Investment Income		(0.16	)		(0.16	)		(0.14	)		(0.06	)
Net Realized Gain		(0.66	)		(0.42	)		(0.33	)		—
Total Distributions		(0.82	)		(0.58	)		(0.47	)		(0.06	)
Net Asset Value, End of Period	$	14.22		$	12.90		$	11.50		$	10.40
Total Return++		16.98	%		17.31	%		15.12	%		4.72	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	573		$	129		$	115		$	104
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.93	%+^^		1.90	%+††		1.90	%+††		1.89	%+††*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		1.16	%+		1.43	%+††		1.34	%+††		1.96	%+††*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.00	%††§		0.00	%††§		0.01	%††*
Portfolio Turnover Rate		30	%		33	%		51	%		6	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		2.86	%		3.14	%††		3.68	%††		4.36	%+††*
Net Investment Income (Loss) to Average Net Assets		0.23	%		0.19	%††		(0.44	)%††		(0.51	)%+††*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

101

Morgan Stanley Institutional Fund, Inc. Prospectus

Additional Information

Where to Find
Additional Information

In addition to this Prospectus, the Portfolios have a Statement of Additional Information, dated April 30, 2014, which contains additional, more detailed information about the Fund and the Portfolios. The Statement of Additional Information is incorporated by reference into this Prospectus and, therefore, legally forms a part of this Prospectus.

Shareholder Reports

The Portfolios publish Annual and Semi-Annual Reports to Shareholders ("Shareholder Reports") that contain additional information about the respective Portfolio's investments. In each Portfolio's Annual Report to Shareholders you will find a discussion of the market conditions and the investment strategies that significantly affected such Portfolio's performance during the last fiscal year. For additional Fund information, including information regarding the investments comprising each of the Portfolios, please call the toll-free number below.

You may obtain the Statement of Additional Information and Shareholder Reports without charge by contacting the Fund at the toll-free number below or on our internet site at: www.morganstanley.com/im. If you purchased shares through a Financial Intermediary, you may also obtain these documents, without charge, by contacting your Financial Intermediary.

Information about the Fund (including the Statement of Additional Information and Shareholder Reports) can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 551-8090. Shareholder Reports and other information about the Fund are available on the EDGAR Database on the SEC's Internet site at http://www.sec.gov, and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-1520.

Morgan Stanley Institutional Fund, Inc.
c/o Boston Financial Data Services, Inc.
P.O. Box 219804
Kansas City, MO 64121-9804

For Shareholder Inquiries,
call toll-free 1-800-548-7786.

Prices and Investment Results are available at www.morganstanley.com/im.

The Fund's Investment Company Act registration number is 811-05624.

MSIGLINPRO-0414

INVESTMENT MANAGEMENT

Morgan Stanley Institutional Fund, Inc.

Select Global Infrastructure Portfolio

Annual Report

December 31, 2013

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Table of Contents

Shareholders' Letter					2
Expense Example					3
Investment Overview					4
Portfolio of Investments					8
Statement of Assets and Liabilities					10
Statement of Operations					12
Statements of Changes in Net Assets					13
Financial Highlights					15
Notes to Financial Statements					19
Report of Independent Registered Public Accounting Firm					26
Federal Tax Notice					27
U.S. Privacy Policy					28
Director and Officer Information					31

This report is authorized for distribution only when preceded or accompanied by prospectuses of the Morgan Stanley Institutional Fund, Inc. To receive a prospectus and/or statement of additional information (SAI), which contains more complete information such as investment objectives, charges, expenses, policies for voting proxies, risk considerations, and describes in detail each of the Portfolio's investment policies to the prospective investor, please call toll free 1 (800) 548-7786. Please read the prospectuses carefully before you invest or send money.

Additionally, you can access portfolio information including performance, characteristics, and investment team commentary through Morgan Stanley Investment Management's website: www.morganstanley.com/im.

Market forecasts provided in this report may not necessarily come to pass. 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 Portfolio in the future. There is no assurance that a Portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that market values of securities owned by the Portfolio will decline and, therefore, the value of the Portfolio's shares may be less than what you paid for them. Accordingly, you can lose money investing in the Portfolio. Please see the prospectus for more complete information on investment risks.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Shareholders' Letter (unaudited)

Dear Shareholders,

We are pleased to provide this Annual report, in which you will learn how your investment in Select Global Infrastructure Portfolio (the "Portfolio") performed during the latest twelve-month period.

Morgan Stanley Investment Management is a client-centric, investor-led organization. Our global presence, intellectual capital, and breadth of products and services enable us to partner with investors to meet the evolving challenges of today's financial markets. We aim to deliver superior investment service and to empower our clients to make the informed decisions that help them reach their investment goals.

As always, we thank you for selecting Morgan Stanley Investment Management, and look forward to working with you in the months and years ahead.

Sincerely,

John H. Gernon
President and Principal Executive Officer

January 2014

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Expense Example (unaudited)

Select Global Infrastructure Portfolio

As a shareholder of the Portfolio, you incur two types of costs: (1) transactional costs; and (2) ongoing costs, including advisory fees, administration fees, distribution and shareholder services fees and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested at the beginning of the six-month period ended December 31, 2013 and held for the entire six-month period.

Actual Expenses

The table below provides information about actual account values and actual expenses. You may use the information in this table, 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 table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The table below provides information about hypothetical account values and hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio'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 costs of investing in the Portfolio 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). Therefore, the information for each class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning Account Value 7/1/13		Actual Ending Account Value 12/31/13		Hypothetical Ending Account Value			Actual Expenses Paid During Period			Hypothetical Expenses Paid During Period		Net Expense Ratio During Period***
Select Global Infrastructure Portfolio Class I	$	1,000.00	$	1,121.80	$	1,019.61	*	$	5.94	*	$	5.65		1.11	%
Select Global Infrastructure Portfolio Class A^		1,000.00		1,120.40		1,018.30	*		7.32	*		6.97		1.37
Select Global Infrastructure Portfolio Class L		1,000.00		1,117.00		1,015.38	*		10.41	*		9.91		1.95
Select Global Infrastructure Portfolio Class IS		1,000.00		1,096.00		1,011.52	**		3.29	**		3.15		1.07

* Expenses are calculated using each Portfolio Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the most recent one-half year period).

** Expenses are calculated using the Portfolio Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period, and multiplied by 107/365 (to reflect the actual days in the period).

*** Annualized.

^ Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Investment Overview (unaudited)

Select Global Infrastructure Portfolio

The Select Global Infrastructure Portfolio seeks to provide both capital appreciation and income.

Performance

For the year ended December 31, 2013, the Portfolio had a total return based on net asset value and reinvestment of distributions per share of 17.91%, net of fees, for Class I shares. The Portfolio's Class I shares outperformed against its benchmark, the Dow Jones Brookfield Global Infrastructure Index^SM (the "Index"), which returned 15.89%, and underperformed against its benchmark, the S&P Global BMI Index, a proxy for global equities, which returned 24.12%. Please keep in mind that high double-digit returns are highly unusual and cannot be sustained.

Factors Affecting Performance

• Infrastructure shares appreciated 15.89% during the period, as measured by the Index. Among the major infrastructure sectors, the gas midstream, toll roads, gas distribution utilities, and European regulated utilities outperformed the Index, while the pipeline companies, electricity transmission and distribution, and communications sectors underperformed the Index. Among sectors with more modest benchmark weightings, the diversified and airports sectors exhibited meaningful outperformance relative to the benchmark.

• For full-year 2013, the Portfolio realized meaningful outperformance from bottom-up stock selection, only partially offset by adverse top-down positioning. From a bottom-up perspective, stock selection was neutral or provided positive attribution in all sectors aside from toll roads. From a top-down perspective, the Portfolio benefited from underweights to the electricity transmission and distribution and gas distribution sectors, as well as an overweight to the airports sector, offset by relative weakness from an overweight to pipeline companies and an underweight to gas midstream and European regulated utilities. Cash held in the Portfolio detracted from relative performance.

• 2013 global equity performance reflected a more positive outlook toward economic growth and the belief that many economies have "turned a corner" — in particular the developed markets of the U.S. and Europe (and to a lesser extent Japan). This was partially offset by concerns over the impact of rising interest rates in the U.S. and their effect on U.S. equity valuations as well as the

spillover impact for emerging market economies, currencies, and equity markets. The equity securities of infrastructure companies were not entirely immune to these broad trends in 2013, and were generally visible in the strong performance of more gross domestic product (GDP) — leveraged transportation sectors such as rails, toll roads, and airports and the weakness in more stable sectors that were viewed by the market as "bond proxies" such as electricity transmission and distribution, communications, and pipeline companies. However, on a local currency basis, favorable returns were realized within all broad regions.

• Favorable performance for the European regulated utilities sector was the result of improved clarity and a more positive outlook for transmission company regulation in Spain (in particular on the electricity side) as well as the resolution of gas network regulation in Italy, which underscored the stability of regulation in the country despite ongoing uncertainty in Italian politics and the potential for political interference. Ongoing merger and acquisition (M&A) interest in U.K. utility assets, in particular in the water space, also provided an uplift for the sector.

• Underperformance for the electricity transmission and distribution sector was broadly attributable to concerns over valuation in the context of rising U.S. interest rates. Challenges to company returns on capital by customers and other stakeholders, as well as by adverse regulatory rulings, also had a modest negative impact on the sector.

• Within the gas distribution utilities sector, the potential for midstream asset (MLP) spin-offs as well as M&A speculation favorably impacted U.S.-based gas distribution utilities in 2013. Within Chinese gas distribution, ongoing support by the central government for natural gas (as a way to de-carbonize the environment), coupled with resilient company operating results despite a slowing Chinese economy, drove favorable results.

• Underperformance in pipeline companies broadly reflected a negative view on valuation in a rising interest rate environment, despite robust operating fundamentals, with company capital programs at record highs. Negative performance by a Canadian company weighed heavily on sector results, due to the general view that the northern leg of the

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Investment Overview (unaudited) (cont'd)

Select Global Infrastructure Portfolio

Keystone XL pipeline will not be approved by the Obama administration.

• The gas midstream sector's outperformance reflected ongoing rapid cash flow growth supported by sizable capital programs, as well as a number of spinoff and restructuring transactions which highlighted the value of general partner economics embedded within many c-corp energy infrastructure companies.

• In the communications sector, weakness in wireless tower companies reflected concerns over valuation in a rising interest rate environment, as well as concerns regarding a slowdown in lease up activity by the big four wireless carriers in the U.S.

• Outperformance of the toll roads, airports and ports sector in 2013 was largely the result of an improved outlook for traffic/container volumes associated with an improving global economy. However, it is important to note that for many of the transportation companies, in particular those in Europe, strong share price performance was associated with multiple expansion (i.e., the expectation of a recovery), as operating fundamentals and underlying cash flows still reflected little growth. For airports, despite lackluster traffic growth in general, strong retail performance and a moderation in the capital expenditures (capex) cycle helped returns.

• Modest underperformance was realized in the water sector in 2013 as relatively robust performance in the U.S. was offset by negative absolute performance in Brazil, where the regulatory outlook remained uncertain over the near term and share prices suffered alongside the broader Brazilian equity market.

Management Strategies

• Given recent strong performance and a narrowing gap between our view of intrinsic, private market infrastructure value and share prices in a number of infrastructure sectors, we begin 2014 with lower expected returns for the sector. However, we believe an allocation to global listed infrastructure securities can continue to provide investors with favorable risk-adjusted absolute returns and little overlap to the broader equity markets. Furthermore, we continue to be able to invest in companies that we believe trade at meaningful discounts to intrinsic value. Imbedded into our current view on valuation

is a belief that capex programs in certain sectors, most notably energy infrastructure and the wireless tower portion of the communications sector, could begin to moderate in the medium term (from record-high, industry-wide capital spending in the tens of billions of U.S. dollars). We would also reiterate that we view rising interest rates and the impact of the Federal Reserve "taper" — commonly cited as the most significant headwind for the sector — as more of a near-term, manageable risk, given that many infrastructure companies have various methods to adjust cash flows to accommodate higher debt costs, and we do not believe share prices reflected the low in cost of capital during the past period of low interest rates.

• In terms of opportunities for 2014, we would note the following:

1) Valuations in the fixed satellite services (FSS) portion of the communications sector look increasingly attractive (in spite of some near to medium-term operating headwinds), as do a number of companies in the energy infrastructure and utilities sectors, even though sector-wide valuations appear less compelling.

2) More opportunities may develop in the transportation-leveraged sectors, in particular in Europe, as the global economy recovers. While we maintain a more cautious view on continental Europe and a global recovery overall — and have reflected this view in our company-specific underwriting — we acknowledge that there is scope for upside as recent data points seem to indicate an upturn in economic activity in a number of regions.

3) We view a number of emerging markets infrastructure companies as increasingly attractive from a valuation standpoint, as country-level macro concerns are overwhelming stable company-level operating fundamentals in a number of cases. As a reminder, the Portfolio historically has and will continue to focus on developed market infrastructure companies which manage brownfield infrastructure assets, but we may look to invest a small portion of the Portfolio in greenfield infrastructure assets in emerging markets should the return prospects be appropriate relative to the level of risk.

• We remain committed to our core investment philosophy as an infrastructure value investor. As

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Investment Overview (unaudited) (cont'd)

Select Global Infrastructure Portfolio

value-oriented, bottom-up driven investors, our investment perspective is that over the medium- and long-term, the key factor in determining the performance of infrastructure securities will be underlying infrastructure asset values. Given the large and growing private infrastructure market, we believe that there are limits as to the level of premium or discount at which the public sector should trade relative to its underlying private infrastructure value. These limits can be viewed as the point at which the arbitrage opportunity between owning infrastructure in the private versus public markets becomes compelling. In aiming to achieve core infrastructure exposure in a cost-effective manner, we invest in equity securities of publicly listed infrastructure companies we believe offer the best value relative to their underlying infrastructure value and Net Asset Value growth prospects.

• Our research currently leads us to an overweighting in the Portfolio (amongst the largest sectors) to a group of companies in the pipeline, communications and toll road sectors, and an underweighting to companies in the gas distribution utilities, gas midstream, European regulated utilities, and electricity transmission and distribution sectors. Amongst the smaller sectors, we maintain an overweight to airports and have initiated an overweight to the water sector.

* Minimum Investment for Class I shares

** Commenced Operations on September 20, 2010.

In accordance with SEC regulations, Portfolio's performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class A⁺, L and IS shares will

vary from Class I shares and will be negatively impacted by additional fees assessed to those classes (if applicable).

Performance Compared to the Dow Jones Brookfield Global Infrastructure Index^SM⁽¹⁾ and the S&P Global BMI Index⁽²⁾

	Period Ended December 31, 2013 Total Returns⁽³⁾
				Average Annual
	One Year			Five Years		Ten Years		Since Inception⁽⁶⁾
Portfolio — Class I Shares w/o sales charges⁽⁴⁾		17.91	%		—		—		17.48	%
Dow Jones Brookfield Global Infrastructure Index^SM		15.89			—		—		15.89
S&P Global BMI Index		24.12			—		—		12.86
Portfolio — Class A⁺ Shares w/o sales charges⁽⁴⁾		17.69			—		—		17.19
Portfolio — Class A⁺ Shares with maximum 5.25% sales charges⁽⁴⁾		11.55			—		—		15.29
Dow Jones Brookfield Global Infrastructure Index^SM		15.89			—		—		15.89
S&P Global BMI Index		24.12			—		—		12.86
Portfolio — Class L Shares w/o sales charges⁽⁴⁾		16.98			—		—		16.59
Dow Jones Brookfield Global Infrastructure Index^SM		15.89			—		—		15.89
S&P Global BMI Index		24.12			—		—		12.86
Portfolio — Class IS Shares w/o sales charges⁽⁵⁾		—			—		—		9.60
Dow Jones Brookfield Global Infrastructure Index^SM		—			—		—		8.96
S&P Global BMI Index		—			—		—		8.25

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. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Returns for periods less than one year are not annualized. Performance of share classes will vary due to difference in sales charges and expenses.

⁺ Effective September 9, 2013, Class P shares were renamed Class A shares.

⁽¹⁾ The Dow Jones Brookfield Global Infrastructure Index^SM is a float-adjusted market capitalization weighted index that measures the stock performance of companies that exhibit strong infrastructure characteristics. The Index intends to measure all sectors of the infrastructure market. 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 Standard & Poor's Global BMI Index (S&P Global BMI Index) is a broad market index designed to capture exposure to equities in all countries in the world that meet minimum size and liquidity requirements. As of the date of this Report, there are approximately 11,000 index members representing 26 developed and 20 emerging market countries. 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.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Investment Overview (unaudited) (cont'd)

Select Global Infrastructure Portfolio

⁽³⁾Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and reimbursements, total returns would have been lower. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or expense reimbursements when it deems that such action is appropriate.

⁽⁴⁾ Commenced operations on September 20, 2010.

⁽⁵⁾ Commenced offering on September 13, 2013.

⁽⁶⁾ For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Index. Returns for periods less than one year are not annualized.

Portfolio Composition

Classification*	Percentage of Total Investments
Oil & Gas Storage & Transportation		45.2	%
Communications		14.8
Transmission & Distribution		13.2
Investment Company		6.0
Water		5.7
Toll Roads		5.4
Airports		5.0
Other**		4.7
Total Investments		100.0	%

* Percentages indicated are based upon total investment (excluding Securities held as Collateral on Loaned Securities) as of December 31, 2013.

** Industries and/or investment types representing less than 5% of total investments.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Portfolio of Investments

Select Global Infrastructure Portfolio

	Shares		Value (000)
Common Stocks (94.3%)
Australia (3.6%)
APA Group (a)		6,817	$	36
DUET Group (a)		45,208		81
Macquarie Atlas Roads Group		66,816		164
Spark Infrastructure Group		51,867		75
Sydney Airport		43,217		147
Transurban Group (a)		97,545		596
				1,099
Austria (1.1%)
Flughafen Wien AG		4,107		345
Brazil (2.1%)
CCR SA		7,800		59
Cia de Saneamento Basico do Estado de Sao Paulo ADR (a)		52,256		592
				651
Canada (13.2%)
Enbridge, Inc. (a)		35,001		1,529
TransCanada Corp. (a)		55,170		2,521
				4,050
China (4.1%)
Beijing Enterprises Holdings Ltd. (b)		47,500		471
China Gas Holdings Ltd. (b)		122,000		179
China Merchants Holdings International Co., Ltd. (b)		31,527		115
ENN Energy Holdings Ltd. (b)		22,000		163
Guangdong Investment Ltd. (b)		174,000		170
Jiangsu Expressway Co., Ltd. H Shares (b)		122,000		150
				1,248
France (3.6%)
Eutelsat Communications SA		18,721		584
SES SA		16,317		528
				1,112
Germany (2.2%)
Fraport AG Frankfurt Airport Services Worldwide		9,250		692
Italy (6.0%)
Atlantia SpA (a)		24,695		554
Snam SpA		176,799		989
Societa Iniziative Autostradali e Servizi SpA		5,176		52
Terna Rete Elettrica Nazionale SpA		49,843		249
				1,844
Japan (1.9%)
Tokyo Gas Co., Ltd.		119,000		585
Luxembourg (1.1%)
Intelsat SA (c)		14,700		331
Netherlands (1.5%)
Koninklijke Vopak N.V.		7,959		466
Spain (2.1%)
Abertis Infraestructuras SA (a)		7,440		165
Ferrovial SA		16,650		322
Red Electrica Corp., SA (a)		2,360		158
				645

	Shares		Value (000)
Switzerland (1.2%)
Flughafen Zuerich AG (Registered)		631	$	369
United Kingdom (7.1%)
National Grid PLC		118,644		1,548
Pennon Group PLC		14,630		160
Severn Trent PLC		11,450		323
United Utilities Group PLC		12,350		137
				2,168
United States (43.5%)
American Tower Corp. REIT		16,740		1,336
American Water Works Co., Inc.		12,880		544
Atmos Energy Corp.		4,130		188
CenterPoint Energy, Inc.		32,230		747
Cheniere Energy, Inc. (c)		7,720		333
Crown Castle International Corp. (c)		15,430		1,133
Enbridge Energy Management LLC (a)(c)		11,399		327
ITC Holdings Corp.		9,611		921
Kinder Morgan, Inc.		19,654		707
NiSource, Inc.		13,110		431
Northeast Utilities		11,480		487
Oneok, Inc.		15,110		939
PG&E Corp.		15,500		624
Plains GP Holdings LP, Class A (c)		13,588		364
SBA Communications Corp., Class A (c)		7,290		655
SemGroup Corp., Class A		3,320		217
Sempra Energy		12,430		1,116
Spectra Energy Corp.		30,930		1,102
Williams Cos., Inc. (The)		31,140		1,201
				13,372
Total Common Stocks (Cost $24,206)				28,977
Short-Term Investments (21.5%)
Securities held as Collateral on Loaned Securities (15.5%)
Investment Company (13.4%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (See Note G)		4,127,654		4,128
	Face Amount (000)
Repurchase Agreements (2.1%)
BNP Paribas Securities Corp., (0.01%, dated 12/31/13, due 1/2/14; proceeds $372; fully collateralized by various U.S. Government Obligations; 0.63% - 3.63% due 8/15/16 - 2/15/21; valued at $379)	$	372		372
Merrill Lynch & Co., Inc., (0.18%, dated 12/31/13, due 1/2/14; proceeds $265; fully collateralized by various Common Stocks and Exchange Traded Funds; valued at $287)		265		265
				637
Total Securities held as Collateral on Loaned Securities (Cost $4,765)				4,765

The accompanying notes are an integral part of the financial statements.
8

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Portfolio of Investments (cont'd)

Select Global Infrastructure Portfolio

	Shares		Value (000)
Investment Company (6.0%)
Morgan Stanley Institutional Liquidity Funds — Treasury Portfolio — Institutional Class (See Note G) (Cost $1,836)		1,836,442	$	1,836
Total Short-Term Investments (Cost $6,601)				6,601
Total Investments (115.8%) (Cost $30,807) Including $5,208 of Securities Loaned				35,578
Liabilities in Excess of Other Assets (-15.8%)				(4,861	)
Net Assets (100.0%)			$	30,717

(a) All or a portion of this security was on loan at December 31, 2013.

(b) Security trades on the Hong Kong exchange.

ADR American Depositary Receipt.

REIT Real Estate Investment Trust.

The accompanying notes are an integral part of the financial statements.
9

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Select Global Infrastructure Portfolio

Statement of Assets and Liabilities	December 31, 2013 (000)
Assets:
Investments in Securities of Unaffiliated Issuers, at Value⁽¹⁾ (Cost $24,843)	$	29,614
Investment in Security of Affiliated Issuer, at Value (Cost $5,964)		5,964
Total Investments in Securities, at Value (Cost $30,807)		35,578
Foreign Currency, at Value (Cost $13)		13
Cash		146
Receivable for Investments Sold		123
Dividends Receivable		96
Due from Adviser		22
Receivable for Portfolio Shares Sold		17
Tax Reclaim Receivable		5
Receivable from Affiliate		—	@
Other Assets		—	@
Total Assets		36,000
Liabilities:
Collateral on Securities Loaned, at Value		4,911
Payable for Portfolio Shares Redeemed		263
Payable for Investments Purchased		78
Payable for Custodian Fees		10
Payable for Professional Fees		8
Payable for Administration Fees		2
Payable for Transfer Agent Fees — Class I		—	@
Payable for Transfer Agent Fees — Class A*		—	@
Payable for Transfer Agent Fees — Class L		—	@
Payable for Shareholder Services Fees — Class A*		1
Payable for Distribution and Shareholder Services Fees — Class L		—	@
Payable for Sub Transfer Agency Fees		—	@
Payable for Sub Transfer Agency Fees — Class I		—	@
Payable for Sub Transfer Agency Fees — Class A*		—	@
Other Liabilities		10
Total Liabilities		5,283
Net Assets	$	30,717
Net Assets Consist Of:
Paid-in-Capital	$	25,554
Distributions in Excess of Net Investment Income		(1	)
Accumulated Net Realized Gain		392
Unrealized Appreciation (Depreciation) on:
Investments		4,771
Foreign Currency Translations		1
Net Assets	$	30,717

The accompanying notes are an integral part of the financial statements.
10

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Select Global Infrastructure Portfolio

Statement of Assets and Liabilities (cont'd)	December 31, 2013 (000)
CLASS I:
Net Assets	$	26,428
Shares Outstanding $0.001 par value shares of beneficial interest (500,000,000 shares authorized) (not in 000's)		1,853,467
Net Asset Value, Offering and Redemption Price Per Share	$	14.26
*CLASS A:**
Net Assets	$	3,706
Shares Outstanding $0.001 par value shares of beneficial interest (500,000,000 shares authorized) (not in 000's)		260,084
Net Asset Value, Redemption Price Per Share	$	14.25
Maximum Sales Load§§		5.25	%
Maximum Sales Charge	$	0.79
Maximum Offering Price Per Share	$	15.04
CLASS L:
Net Assets	$	573
Shares Outstanding $0.001 par value shares of beneficial interest (500,000,000 shares authorized) (not in 000's)		40,278
Net Asset Value, Offering and Redemption Price Per Share	$	14.22
CLASS IS:
Net Assets	$	10
Shares Outstanding $0.001 par value shares of beneficial interest (500,000,000 shares authorized) (not in 000's)		728
Net Asset Value, Offering and Redemption Price Per Share	$	14.26
⁽¹⁾ Including: Securities on Loan, at Value:	$	5,208

@ Amount is less than $500.

* Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

§§ Effective February 25, 2013, the Directors approved the imposition of a maximum initial sales charge of 5.25% on purchases of Class A shares of the Portfolio.

The accompanying notes are an integral part of the financial statements.
11

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Select Global Infrastructure Portfolio

Statement of Operations	Year Ended December 31, 2013 (000)
Investment Income:
Dividends from Securities of Unaffiliated Issuers (Net of $50 of Foreign Taxes Withheld)	$	707
Income from Securities Loaned — Net		9
Dividends from Securities of Affiliated Issuers (Note G)		—	@
Total Investment Income		716
Expenses:
Advisory Fees (Note B)		202
Professional Fees		106
Registration Fees		56
Custodian Fees (Note F)		48
Shareholder Reporting Fees		22
Administration Fees (Note C)		19
Transfer Agency Fees (Note E)		9
Transfer Agency Fees — Class I (Note E)		—	@
Transfer Agency Fees — Class A* (Note E)		—	@
Transfer Agency Fees — Class L (Note E)		—	@
Transfer Agency Fees — Class IS (Note E)		—	@
Shareholder Services Fees — Class A* (Note D)		7
Distribution and Shareholder Services Fees — Class L (Note D)		3
Pricing Fees		7
Directors' Fees and Expenses		1
Sub Transfer Agency Fees — Class I		—	@
Sub Transfer Agency Fees — Class A*		—	@
Sub Transfer Agency Fees		—	@
Other Expenses		16
Total Expenses		496
Waiver of Advisory Fees (Note B)		(202	)
Expenses Reimbursed by Adviser (Note B)		(14	)
Rebate from Morgan Stanley Affiliate (Note G)		(1	)
Reimbursement of Class Specific Expenses — Class L (Note B)		(—	@)
Reimbursement of Class Specific Expenses — Class IS (Note B)		(—	@)
Net Expenses		279
Net Investment Income		437
Realized Gain:
Investments Sold		1,595
Foreign Currency Transactions		4
Net Realized Gain		1,599
Change in Unrealized Appreciation (Depreciation):
Investments		1,898
Foreign Currency Translations		1
Net Change in Unrealized Appreciation (Depreciation)		1,899
Net Realized Gain and Change in Unrealized Appreciation (Depreciation)		3,498
Net Increase in Net Assets Resulting from Operations	$	3,935

@ Amount is less than $500.

* Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

The accompanying notes are an integral part of the financial statements.
12

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Select Global Infrastructure Portfolio

Statements of Changes in Net Assets	Year Ended December 31, 2013 (000)			Year Ended December 31, 2012 (000)
Increase (Decrease) in Net Assets:
Operations:
Net Investment Income	$	437		$	320
Net Realized Gain		1,599			728
Net Change in Unrealized Appreciation (Depreciation)		1,899			1,406
Net Increase in Net Assets Resulting from Operations		3,935			2,454
Distributions from and/or in Excess of:
Class I:
Net Investment Income		(455	)		(306	)
Net Realized Gain		(1,150	)		(498	)
*Class A:**
Net Investment Income		(55	)		(2	)
Net Realized Gain		(127	)		(4	)
Class H^:
Net Investment Income		(—	@)***		(22	)
Net Realized Gain		(31	)***		(31	)
Class L:
Net Investment Income		(6	)		(2	)
Net Realized Gain		(25	)		(4	)
Class IS:
Net Investment Income		(—	@)**		—
Net Realized Gain		(—	@)**		—
Total Distributions		(1,849	)		(869	)
Capital Share Transactions:⁽¹⁾
Class I:
Subscribed		11,506			2,575
Distributions Reinvested		706			150
Redeemed		(3,326	)		(1,185	)
*Class A:**
Subscribed		1,264			—
Distributions Reinvested		166			—
Conversion from Class H		3,280			—
Redeemed		(1,330	)		—
Class H^:
Subscribed		2,166	***		1,112
Distributions Reinvested		30	***		47
Conversion to Class A		(3,280	)		—
Redeemed		(191	)***		—
Class L:
Subscribed		389			—
Distributions Reinvested		23			—
Class IS:
Subscribed		10	**		—
Net Increase in Net Assets Resulting from Capital Share Transactions		11,413			2,699
Redemption Fees		—			—	@
Total Increase in Net Assets		13,499			4,284
Net Assets:
Beginning of Period		17,218			12,934
End of Period (Including Undistributed (Distributions in Excess of) Net Investment Income of $(1) and $1)	$	30,717		$	17,218

The accompanying notes are an integral part of the financial statements.
13

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Select Global Infrastructure Portfolio

Statements of Changes in Net Assets (cont'd)	Year Ended December 31, 2013 (000)			Year Ended December 31, 2012 (000)
(1) Capital Share Transactions:
Class I:
Shares Subscribed		820			209
Shares Issued on Distributions Reinvested		52			12
Shares Redeemed		(236	)		(99	)
Net Increase in Class I Shares Outstanding		636			122
*Class A:**
Shares Subscribed		89			—
Shares Issued on Distributions Reinvested		12			—
Conversion from Class H		242			—
Shares Redeemed		(93	)		—
Net Increase in Class A Shares Outstanding		250			—
Class H^:
Shares Subscribed		156	***		83
Shares Issued on Distributions Reinvested		2	***		4
Conversion to Class A		(242	)		—
Shares Redeemed		(13	)***		—
Net Increase (Decrease) in Class H Shares Outstanding		(97	)		87
Class L:
Shares Subscribed		28			—
Shares Issued on Distributions Reinvested		2			—
Net Increase in Class L Shares Outstanding		30			—
Class IS:
Shares Subscribed		1	**		—
Net Increase in Class IS Shares Outstanding		1			—

@ Amount is less than $500.

^ Effective September 9, 2013, Class H shares converted into Class A shares.

* Effective September 9, 2013, Class P shares were renamed Class A shares.

** For the period September 13, 2013 through December 31, 2013.

*** For the period January 1, 2013 through September 6, 2013.

The accompanying notes are an integral part of the financial statements.
14

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Financial Highlights

Select Global Infrastructure Portfolio

	Class I
	Year Ended December 31,									Period from September 20, 2010^ to
Selected Per Share Data and Ratios	2013			2012			2011			December 31, 2010
Net Asset Value, Beginning of Period	$	12.91		$	11.50		$	10.40		$	10.00
Income from Investment Operations:
Net Investment Income†		0.26			0.27			0.23			0.08
Net Realized and Unrealized Gain		2.00			1.82			1.42			0.40
Total from Investment Operations		2.26			2.09			1.65			0.48
Distributions from and/or in Excess of:
Net Investment Income		(0.25	)		(0.26	)		(0.22	)		(0.08	)
Net Realized Gain		(0.66	)		(0.42	)		(0.33	)		—
Total Distributions		(0.91	)		(0.68	)		(0.55	)		(0.08	)
Net Asset Value, End of Period	$	14.26		$	12.91		$	11.50		$	10.40
Total Return++		17.91	%		18.21	%		15.95	%		4.94	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	26,428		$	15,707		$	12,589		$	10,086
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.12	%+		1.15	%+††		1.15	%+††		1.14	%+††*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		1.87	%+		2.18	%+††		2.09	%+††		2.71	%+††*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%		0.00	%††§		0.00	%††§		0.01	%††*
Portfolio Turnover Rate		30	%		33	%		51	%		6	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		2.04	%		2.39	%††		2.93	%††		3.61	%+††*
Net Investment Income to Average Net Assets		0.95	%		0.94	%††		0.31	%††		0.24	%+††*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

The accompanying notes are an integral part of the financial statements.
15

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Financial Highlights

Select Global Infrastructure Portfolio

	Class A**
	Year Ended December 31,									Period from September 20, 2010^ to
Selected Per Share Data and Ratios	2013			2012			2011			December 31, 2010
Net Asset Value, Beginning of Period	$	12.90		$	11.50		$	10.40		$	10.00
Income from Investment Operations:
Net Investment Income†		0.26			0.24			0.21			0.07
Net Realized and Unrealized Gain		1.97			1.80			1.41			0.41
Total from Investment Operations		2.23			2.04			1.62			0.48
Distributions from and/or in Excess of:
Net Investment Income		(0.22	)		(0.22	)		(0.19	)		(0.08	)
Net Realized Gain		(0.66	)		(0.42	)		(0.33	)		—
Total Distributions		(0.88	)		(0.64	)		(0.52	)		(0.08	)
Net Asset Value, End of Period	$	14.25		$	12.90		$	11.50		$	10.40
Total Return++		17.69	%		17.85	%		15.67	%		4.86	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	3,706		$	129		$	115		$	104
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.37	%+^^		1.40	%+††		1.40	%+††		1.39	%+††*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		1.81	%+		1.93	%+††		1.84	%+††		2.46	%+††*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%		0.00	%††§		0.00	%††§		0.01	%††*
Portfolio Turnover Rate		30	%		33	%		51	%		6	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		2.43	%		2.64	%††		3.18	%††		3.86	%+††*
Net Investment Income (Loss) to Average Net Assets		0.75	%		0.69	%††		0.06	%††		(0.01	)%+††*

** Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value which does not reflect sales charges, if applicable, as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

The accompanying notes are an integral part of the financial statements.
16

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Financial Highlights

Select Global Infrastructure Portfolio

	Class L
	Year Ended December 31,									Period from September 20, 2010^ to
Selected Per Share Data and Ratios	2013			2012			2011			December 31, 2010
Net Asset Value, Beginning of Period	$	12.90		$	11.50		$	10.40		$	10.00
Income from Investment Operations:
Net Investment Income†		0.16			0.18			0.15			0.06
Net Realized and Unrealized Gain		1.98			1.80			1.42			0.40
Total from Investment Operations		2.14			1.98			1.57			0.46
Distributions from and/or in Excess of:
Net Investment Income		(0.16	)		(0.16	)		(0.14	)		(0.06	)
Net Realized Gain		(0.66	)		(0.42	)		(0.33	)		—
Total Distributions		(0.82	)		(0.58	)		(0.47	)		(0.06	)
Net Asset Value, End of Period	$	14.22		$	12.90		$	11.50		$	10.40
Total Return++		16.98	%		17.31	%		15.12	%		4.72	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	573		$	129		$	115		$	104
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.93	%+^^		1.90	%+††		1.90	%+††		1.89	%+††*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		1.16	%+		1.43	%+††		1.34	%+††		1.96	%+††*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§		0.00	%††§		0.00	%††§		0.01	%††*
Portfolio Turnover Rate		30	%		33	%		51	%		6	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		2.86	%		3.14	%††		3.68	%††		4.36	%+††*
Net Investment Income (Loss) to Average Net Assets		0.23	%		0.19	%††		(0.44	)%††		(0.51	)%+††*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

The accompanying notes are an integral part of the financial statements.
17

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Financial Highlights

Select Global Infrastructure Portfolio

	Class IS
Selected Per Share Data and Ratios	Period from September 13, 2013^ to December 31, 2013
Net Asset Value, Beginning of Period	$	13.73
Income from Investment Operations:
Net Investment Income†		0.09
Net Realized and Unrealized Gain		1.20
Total from Investment Operations		1.29
Distributions from and/or in Excess of:
Net Investment Income		(0.25	)
Net Realized Gain		(0.51	)
Total Distributions		(0.76	)
Net Asset Value, End of Period	$	14.26
Total Return++		9.60	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	10
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.07	%+^^*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		2.13	%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%*
Portfolio Turnover Rate		30	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation
Expenses to Average Net Assets		7.27	%*
Net Investment Loss to Average Net Assets		(4.07	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value as of the last business day of the period.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.08% for Class IS shares.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

The accompanying notes are an integral part of the financial statements.
18

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Notes to Financial Statements

Morgan Stanley Institutional Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Fund is comprised of twenty-seven separate, active, diversified and non-diversified portfolios (individually referred to as a "Portfolio", collectively as the "Portfolios").

The accompanying financial statements relate to the Select Global Infrastructure Portfolio. The Portfolio's adviser, Morgan Stanley Investment Management Inc. (the "Adviser") and sub-advisers, Morgan Stanley Investment Management Limited ("MSIM Limited") and Morgan Stanley Investment Management Company ("MSIM Company") (together, the "Sub-Advisers"), seek to provide both capital appreciation and income by investing primarily in equity securities issued by companies located throughout the world that are engaged in the infrastructure business. Using internal proprietary research, the Adviser seeks to identify public infrastructure companies that are believed to offer the best value relative to their underlying assets and growth prospects. The Portfolio offers four classes of shares — Class I, Class A, Class L and Class IS.

On September 16, 2013, the Portfolio commenced offering Class IS shares. Effective September 9, 2013, Class P and Class H shares were renamed Class A shares.

A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Fund in the preparation of its financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.

the last reported bid and asked prices are not reflective of 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 Board of Directors (the "Directors"). 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 of the New York Stock Exchange ("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 Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; (4) quotations of foreign portfolio securities, other assets and liabilities and forward contracts stated in foreign currency are translated into U.S. dollar equivalents at the prevailing market rates prior to the close of the NYSE; (5) investments in 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 (6) short-term debt securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, unless the Adviser determines such valuation does not reflect the securities' market value, in which case these securities will be valued at their fair market value determined by the Adviser.

Under procedures approved by the Directors, the Fund's Adviser has formed a Valuation Committee. The Valuation Committee provides administration and oversight of the Fund's valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Notes to Financial Statements (cont'd)

employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The Valuation Committee employs various methods for calibrating these valuation approaches including a regular review of valuation methodologies, key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

2. Fair Value Measurement: Financial Accounting Standards Board ("FASB") Accounting Standards Codification^TM ("ASC") 820, "Fair Value Measurements and Disclosures" ("ASC 820"), defines fair value as the value 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. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing 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 valuing 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. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances

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 a summary of the inputs used to value the Portfolio's investments as of December 31, 2013.

Investment Type	Level 1 Unadjusted quoted prices (000)		Level 2 Other significant observable inputs (000)		Level 3 Significant unobservable inputs (000)		Total (000)
Assets:
Common Stocks
Airports	$	1,553	$	—	$	—	$	1,553
Communications		4,567		—		—		4,567
Diversified		1,320		—		—		1,320
Oil & Gas Storage & Transportation		13,923		—		—		13,923
Ports		115		—		—		115
Toll Roads		1,681		—		—		1,681
Transmission & Distribution		4,062		—		—		4,062
Water		1,756		—		—		1,756
Total Common Stocks		28,977		—		—		28,977
Short-Term Investments
Investment Companies		5,964		—		—		5,964
Repurchase Agreements		—		637		—		637
Total Short-Term Investments		5,964		637		—		6,601
Total Assets	$	34,941	$	637	$	—	$	35,578

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes. The Portfolio recognizes transfers between the levels as of the end of the period. As of December 31, 2013, securities with a total value of approximately $9,665,000 transferred from Level 2 to Level 1. At December 31, 2012, the fair value of certain securities were adjusted due to developments which

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Notes to Financial Statements (cont'd)

occurred between the time of the close of the foreign markets on which they trade and the close of business on the NYSE which resulted in their Level 2 classification.

3. Foreign Currency Translation and Foreign Investments: The books and records of the Portfolio are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:

– investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;

– investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.

Although the net assets of the Portfolio are presented at the foreign exchange rates and market values at the close of the period, the Portfolio does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Portfolio does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. Federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. Federal income tax purposes.

Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Portfolio's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of unrealized appreciation (depreciation) on the Statement

of Assets and Liabilities. The change in unrealized currency gains (losses) on foreign currency translations for the period is reflected in the Statement of Operations.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

The net assets of the Portfolio include foreign denominated securities and currency. Changes in currency exchange rates will affect the U.S. dollar value and investment income from such securities.

Governmental approval for foreign investments may be required in advance of making an investment under certain circumstances in some countries, and the extent of foreign investments in domestic companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations of foreign investment limitations. As a result, an additional class of shares (identified as "Foreign" in the Portfolio of Investments) may be created and offered for investment. The "local" and "foreign shares" market values may differ. In the absence of trading of the foreign shares in such markets, the Portfolio values the foreign shares at the closing exchange price of the local shares.

4. Securities Lending: The Portfolio lends securities to qualified financial institutions, such as broker-dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Portfolio. The Portfolio would receive cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked-to-market daily, by State Street Bank and Trust Company ("State Street"), the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Notes to Financial Statements (cont'd)

earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is recorded as "Income from Securities Loaned-Net" in the Portfolio's Statement of Operations. Risks in securities lending transactions are that a borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.

The Portfolio has the right under the lending agreement to recover the securities from the borrower on demand.

The following table presents financial instruments that are subject to enforceable netting arrangements as of December 31, 2013.

Gross Amounts Not Offset in the Statement of Assets and Liabilities
Gross Asset Amounts Presented in Statement of Assets and Liabilities (000)			Financial Instrument (000)		Collateral Received (000)			Net Amount (not less than 0) (000)
$	5,208	^(a)		—	$	(5,208	)^(b)(c)	$	0

(a) Represents market value of loaned securities at period end.

(b) The Portfolio received cash collateral of approximately $4,911,000, of which approximately $4,765,000 was subsequently invested in Repurchase Agreements and Morgan Stanley Institutional Liquidity Funds as reported in the Portfolio of Investments. As of December 31, 2013 there was uninvested cash of approximately $146,000, which is not reflected in the Portfolio of Investments. In addition, the Portfolio received non-cash collateral of approximately $537,000 in the form of U.S. government obligations, which the Portfolio cannot sell or repledge, and accordingly are not reflected in the Portfolio of Investments.

5. Indemnifications: The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

6. Dividends and Distributions to Shareholders: Dividend income and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid semiannually. Net realized capital gains, if any, are distributed at least annually.

7. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains

and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date (except for certain foreign dividends which may be recorded as soon as the Portfolio is informed of such dividends) net of applicable withholding taxes. Interest income is recognized on the accrual basis except where collection is in doubt. Discounts are accreted and premiums are amortized over the life of the respective securities. Most expenses of the Fund can be directly attributed to a particular Portfolio. Expenses which cannot be directly attributed are apportioned among the Portfolios based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses — distribution, transfer agency and sub transfer agency fees) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.

The Portfolio owns shares of REITs which report information on the source of their distributions annually in the following calendar year. A portion of distributions received from REITs during the year is estimated to be a return of capital and is recorded as a reduction of their cost.

B. Advisory/Sub-Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Portfolio with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at an annual rate of 0.85% of the Portfolio's average net assets.

The Adviser has agreed to reduce its advisory fee and/or reimburse the Portfolio so that total annual portfolio operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.15% for Class I shares, 1.40% for Class A shares and 1.90% for Class L shares. Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratios of 1.50%, 2.00% and 1.08% for Class A, Class L and Class IS shares, respectively. The fee waivers and/or expense reimbursements will continue for at least one year or until such time that the Directors act to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. For the year ended December 31, 2013, approximately $202,000 of advisory fees were waived and approximately $14,000 of other expenses were reimbursed by the Adviser pursuant to this arrangement.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Notes to Financial Statements (cont'd)

The Adviser has entered into a Sub-Advisory Agreement with the Sub-Advisers, each a wholly-owned subsidiary of Morgan Stanley. The Sub-Advisers provide the Portfolio with advisory services subject to the overall supervision of the Adviser and the Fund's Officers and Directors. The Adviser pays the Sub-Advisers on a monthly basis a portion of the net advisory fees the Adviser receives from the Portfolio.

C. Administration Fees: The Adviser also serves as Administrator to the Fund and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Portfolio's average daily net assets. Under a Sub-Administration Agreement between the Administrator and 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 Portfolio.

D. Distribution and Shareholder Services Fees: Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"), a wholly-owned subsidiary of the Adviser, and an indirect subsidiary of Morgan Stanley, serves as the Fund's Distributor of Portfolio shares pursuant to a Distribution Agreement. The Fund has adopted a Shareholder Services Plan with respect to Class A shares pursuant to Rule 12b-1 under the Act. Under the Shareholder Services Plan, the Portfolio pays the Distributor a shareholder services fee, accrued daily and paid monthly, at an annual rate of 0.25% of the Portfolio's average daily net assets attributable to Class A shares.

The Fund has adopted a Distribution and Shareholder Services Plan with respect to Class L shares pursuant to Rule 12b-1 under the Act. Under the Distribution and Shareholder Services Plan, the Portfolio pays the Distributor a distribution fee, accrued daily and paid monthly, at an annual rate of 0.50% and a shareholder services fee, accrued daily and paid monthly, at an annual rate of 0.25% of the Portfolio's average daily net assets attributable to Class L shares.

The distribution and shareholder services fees are used to support the expenses associated with servicing and maintaining accounts. The Distributor may compensate other parties for providing shareholder support services to investors who purchase Class A and Class L shares.

E. Dividend Disbursing and Transfer Agent: The Fund's dividend disbursing and transfer agent was Morgan Stanley Services Company Inc. ("Morgan Stanley Services"). Pursuant to a Transfer Agency Agreement, the Fund paid Morgan Stanley Services a fee based on the number of classes, accounts and transactions relating to the Portfolios of the

Fund. Effective July 1, 2013, the Directors approved changing the transfer agent to Boston Financial Data Services, Inc.

F. Custodian Fees: State Street (the "Custodian") serves as Custodian for the Fund in accordance with a Custodian Agreement. The Custodian holds cash, securities, and other assets of the Fund as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.

G. Security Transactions and Transactions with Affiliates: For the year ended December 31, 2013, purchases and sales of investment securities for the Portfolio, other than long-term U.S. Government securities and short-term investments, were approximately $15,748,000 and $6,870,000, respectively. There were no purchases and sales of long-term U.S. Government securities for the year ended December 31, 2013.

The Portfolio invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds (the "Liquidity Funds"), an open-end management investment company managed by the Adviser, both directly, and as a portion of the securities held as collateral on loaned securities. Advisory fees paid by the Portfolio are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Portfolio due to its investment in the Liquidity Funds. For the year ended December 31, 2013, advisory fees paid were reduced by approximately $1,000 relating to the Portfolio's investment in the Liquidity Funds.

A summary of the Portfolio's transactions in shares of the Liquidity Funds during the year ended December 31, 2013 is as follows:

Value December 31, 2012 (000)				Purchases at Cost (000)				Sales (000)				Dividend Income (000)				Value December 31, 2013 (000)
$	590			$	20,889			$	15,515			$	—	@		$	5,964

@ Amount is less than $500.

From January 1, 2013 to June 30, 2013, the Portfolio incurred less than $500 in brokerage commissions with Citigroup, Inc., and its affiliated broker-dealers, which may be deemed affiliates of the Adviser, Sub-Advisers, Distributor and Administrator under Section 17 of the Act, for portfolio transactions executed on behalf of the Portfolio. Citigroup, Inc. and its affiliated broker-dealers ceased to be affiliates of the Portfolio pursuant to Section 17 of the Act as of July 1, 2013.

H. Federal Income Taxes: It is the Portfolio's intention to continue to qualify as a regulated investment company and

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Notes to Financial Statements (cont'd)

distribute all of its taxable and tax-exempt income. Accordingly, no provision for Federal income taxes is required in the financial statements.

The Portfolio may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.

FASB ASC 740-10, Income Taxes — Overall, 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. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Portfolio recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Portfolio files tax returns with the U.S. Internal Revenue Service, New York and various states. Each of the tax years in the four-year period ended December 31, 2013, remains subject to examination by taxing authorities.

The tax character of distributions paid may differ from the character of distributions shown in the Statements of Changes in Net Assets due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal years 2013 and 2012 was as follows:

2013 Distributions Paid From:				2012 Distributions Paid From:
Ordinary Income (000)		Long-Term Capital Gain (000)		Ordinary Income (000)		Long-Term Capital Gain (000)
$	573	$	1,276	$	332	$	537

The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.

Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.

Permanent differences, primarily due to differing treatments of gains (losses) related to foreign currency transactions and

distribution redesignations, resulted in the following reclassifications among the components of net assets at December 31, 2013:

Undistributed (Distributions in Excess of) Net Investment Income (Loss) (000)				Accumulated Undistributed Net Realized Gain (Loss) (000)				Paid-in-Capital (000)
$	77			$	(77	)		$	—

At December 31, 2013, the components of distributable earnings for the Portfolio on a tax basis were as follows:

Undistributed Ordinary Income (000)				Undistributed Long-Term Capital Gain (000)
$	—			$	438

At December 31, 2013, the aggregate cost for Federal income tax purposes is approximately $30,853,000. The aggregate gross unrealized appreciation is approximately $4,770,000 and the aggregate gross unrealized depreciation is approximately $44,000 resulting in net unrealized appreciation of approximately $4,726,000.

Capital losses and specified ordinary losses, including currency losses, incurred after October 31 but within the taxable year are deemed to arise on the first day of the Portfolio's next taxable year. For the year ended December 31, 2013, the Portfolio deferred to January 1, 2014 for U.S. Federal income tax purposes the following losses:

Post-October Currency and Specified Ordinary Losses (000)				Post-October Capital Losses (000)
$	1				—

I. Other (unaudited): At December 31, 2013, the Portfolio had otherwise unaffiliated record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Portfolio. The aggregate percentage of such owners was 19% for Class I shares.

J. Results of Special Shareholder Meeting (unaudited): On June 5, 2013 as adjourned to June 24, 2013 and July 17, 2013, a Joint Special Shareholder Meeting was held for Class H shareholders of the Portfolio to approve the Articles of Amendment to the Fund's Articles of Amendment and Restatement and a Plan of Reclassification for the Portfolio pursuant to which Class H shares would be reclassified as Class P shares. The results with respect to this proposal were as follows:

For				Against				Abstain
	92,743				0				0

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Notes to Financial Statements (cont'd)

K. Accounting Pronouncement: In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services — Investment Companies (Topic 946) — Amendments to the Scope, Measurement, and Disclosure Requirements ("ASU 2013-08") which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company's non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Investment Company Act of 1940 automatically meets ASU 2013-08's criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 to the Portfolio, management expects that the impact of the Portfolio's adoption will be limited to additional financial statement disclosures.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of
Morgan Stanley Institutional Fund, Inc. —
Select Global Infrastructure Portfolio

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Select Global Infrastructure Portfolio (one of the portfolios constituting Morgan Stanley Institutional Fund, Inc.) (the "Portfolio") as of December 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Portfolio's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2013, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Select Global Infrastructure Portfolio (one of the portfolios constituting Morgan Stanley Institutional Fund, Inc.) at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

Boston, Massachusetts

February 26, 2014

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Federal Tax Notice (unaudited)

For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Portfolio during its taxable year ended December 31, 2013. For corporate shareholders, 36.5% of the dividends qualified for the dividends received deduction.

The Portfolio designated and paid approximately $1,276,000 as a long-term capital gain distribution.

For Federal income tax purposes, the following information is furnished with respect to the Portfolio's earnings for its taxable year ended December 31, 2013. When distributed, certain earnings may be subject to a maximum tax rate of 15% as provided for the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Portfolio designated up to a maximum of $463,000 as taxable at this lower rate.

During the taxable year ended December 31, 2013 the Portfolio intends to pass through foreign tax credits of approximately $28,000 and has derived net income from sources within foreign countries amounting to approximately $464,000.

In January, the Portfolio provides tax information to shareholders for the preceding calendar year.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

U.S. Privacy Policy (unaudited)

AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY

This privacy notice describes the U.S. privacy policy of Morgan Stanley Distribution, Inc., and the Morgan Stanley family of mutual funds ("us", "our", "we").

We are required by federal law to provide you with notice of our U.S. privacy policy ("Policy"). This Policy applies to both our current and former clients unless we state otherwise and is intended for individual clients who purchase products or receive services from us for personal, family or household purposes. 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, or accounts subject to the Uniform Gifts to Minors Act.

This notice sets out our business practices to protect your privacy; how we collect and share personal information about you; and how you can limit our sharing or certain uses by others of this information. We may amend this Policy at any time, and will inform you of any changes to our 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 your information. We strive to safeguard the information our clients entrust to us. Protecting the confidentiality and security of client information is an important part of how we conduct our business.

This notice describes what personal information we collect about you, how we collect it, when we may share it with others, and how certain others may use it. It discusses the steps you may take to limit our sharing of certain information about you with our affiliated companies, including, but not limited to our affiliated banking businesses, brokerage firms and credit service affiliates. 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 as "personal information." We also use the term "affiliated company" in this notice. An affiliated company is a company in our family of companies and includes companies with the Morgan Stanley name. These affiliated companies are financial institutions such as broker-dealers, banks, investment advisers and credit card issuers. We refer to any company that is not an affiliated company as a nonaffiliated third party. For purposes of Section 5 of this notice, and your ability to limit certain uses of personal information by our affiliates, this notice applies to the use of personal information by our affiliated companies.

1. WHAT PERSONAL INFORMATION DO WE COLLECT FROM YOU?

We may collect the following types of information about you: (i) information provided by you, including information from applications and other forms we receive from you, (ii) information about your transactions with us or our affiliates, (iii) information about your transactions with nonaffiliated third parties, (iv) information from consumer reporting agencies, (v) information obtained from our websites, and (vi) information obtained from other sources. For example:

• We collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other 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.

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

2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?

We may disclose personal information we collect about you in each of the categories listed above to affiliated and nonaffiliated third parties.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

U.S. Privacy Policy (unaudited) (cont'd)

a. Information we disclose to affiliated companies.

We may disclose personal information that we collect about you to our affiliated companies to manage your account(s) effectively, to service and process your transactions, and 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. 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 may disclose personal information that we collect about you to nonaffiliated third parties to provide marketing services on our behalf or to other financial institutions with whom we have joint marketing agreements. We may also disclose all of the information we collect to other nonaffiliated third parties for our everyday business purposes, such as to process transactions, maintain account(s), respond to court orders and legal investigations, report to credit bureaus, offer our own products and services, protect against fraud, for institutional risk control, to perform services on our behalf, and as otherwise required or permitted by law.

When we share personal information about you with a nonaffiliated 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 permitted or 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 that comply with applicable law and regulations to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information by employees. 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 appropriate security standards with respect to such information.

4. HOW CAN YOU LIMIT OUR SHARING CERTAIN PERSONAL INFORMATION ABOUT YOU WITH OUR AFFILIATED COMPANIES FOR ELIGIBILITY DETERMINATION?

By following the opt-out procedures in Section 6 below, you may limit the extent to which we share with our affiliated companies, personal information that was collected to determine your eligibility for products and services such as your credit reports and other information that you have provided to us or that we may obtain from third parties ("eligibility information"). Eligibility information does not include your identification information or personal information pertaining to our transactions or experiences with you. Please note that, even if you direct us not to share eligibility information with our affiliated companies, we may still share your personal information, including eligibility information, with our affiliated companies under circumstances that are permitted under applicable law, such as to process transactions or to service your account.

5. HOW CAN YOU LIMIT THE USE OF CERTAIN PERSONAL INFORMATION ABOUT YOU BY OUR AFFILIATED COMPANIES FOR MARKETING?

By following the opt-out instructions in Section 6 below, you may limit our affiliated companies from marketing their products or services to you based on personal information we disclose to them. This information may include, for example, your income and account history with us. Please note that, even if you choose to limit our affiliated companies from using personal information about you that we may share with them for marketing their products and services to you, our affiliated companies may use your personal information that they obtain from us to market to you in circumstances permitted by law, such as if the affiliated party has its own relationship with you.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

U.S. Privacy Policy (unaudited) (cont'd)

6. HOW CAN YOU SEND US AN OPT-OUT INSTRUCTION?

If you wish to limit our sharing of eligibility information about you with our affiliated companies, or our affiliated companies' use of personal information for marketing purposes, as described in this notice, you may do so by:

• Calling us at (800) 548-7786
Monday–Friday between 8a.m. and 5p.m. (EST)

• Writing to us at the following address:

Boston Financial Data Services, Inc.
c/o Privacy Coordinator
P.O. Box 219804
Kansas City, Missouri 64121

If you choose to write to us, your request should include: your name, address, telephone number and account number(s) to which the opt-out applies and whether you are opting out with respect to sharing of eligibility information (Section 4 above), or information used for marketing (Section 5 above), or both. Written opt-out requests 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 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 understand that if you limit our sharing or our affiliated companies' use of personal information, you and any joint account holder(s) may not receive information about our affiliated companies' products and services, including products or services that could help you manage your financial resources and achieve your investment objectives.

If you have more than one account or relationship with us, please specify the accounts to which you would like us to apply your privacy choices. If you have accounts or relationships with our affiliates, you may receive multiple privacy policies from them, and will need to separately notify those companies of your privacy choices for those accounts or relationships.

7. WHAT IF AN AFFILIATED COMPANY BECOMES A NONAFFILIATED THIRD PARTY?

If, at any time in the future, an affiliated company becomes a nonaffiliated third party, further disclosures of personal information made to the former affiliated company will be limited to those described in Section 2(b) above relating to nonaffiliated third parties. If you elected under Section 6 to limit disclosures we make to affiliated companies, or use of personal information by affiliated companies, your election will not apply to use by any former affiliated company of your personal information in their possession once it becomes a nonaffiliated third party.

SPECIAL NOTICE TO RESIDENTS OF VERMONT

The following 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 nonaffiliated third parties, or eligibility information with affiliated companies, other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with nonaffiliated third parties or eligibility information with affiliated companies, unless you provide us with your written consent to share such information.

SPECIAL NOTICE TO RESIDENTS OF CALIFORNIA

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

In response to a California law, if your account has a California home address, your personal information will not be disclosed to nonaffiliated third parties except as permitted by applicable California law, and we will limit sharing such personal information with our affiliates to comply with California privacy laws that apply to us.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Director and Officer Information (unaudited)

Independent Director:

Name, Age and Address of
Independent Director

Position(s)
Held with
Registrant

Length of Time
Served*

Principal Occupation(s) During Past 5 Years

Number of
Portfolios in
Fund Complex
Overseen by
Independent
Director**

Other Directorships
Held by Independent
Director***

Frank L. Bowman (69)
c/o Kramer Levin Naftalis &
Frankel LLP
Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036

Director

Since
August
2006

President, Strategic Decisions, LLC (consulting) (since February 2009); Director or Trustee of various Morgan Stanley Funds (since August 2006); Chairperson of the Insurance Sub-Committee of the Compliance and Insurance Committee (since February 2007); served as President and Chief Executive Officer of the Nuclear Energy Institute (policy organization) (February 2005-November 2008); retired as Admiral, U.S. Navy after serving over 38 years on active duty including 8 years as Director of the Naval Nuclear Propulsion Program in the Department of the Navy and the U.S. Department of Energy (1996-2004); served as Chief of Naval Personnel (July 1994-September 1996); and on the Joint Staff as Director of Political Military Affairs (June 1992-July 1994); knighted as Honorary Knight Commander of the Most Excellent Order of the British Empire; awarded the Officier de l'Orde National du Mérite by the French Government; elected to the National Academy of Engineering (2009).

Director of BP p.l.c.; Director of Naval and Nuclear Technologies LLP; Director of the Armed Services YMCA of the USA and the U.S. Naval Submarine League; Director of the American Shipbuilding Suppliers Association; Member of the National Security Advisory Council of the Center for U.S. Global Engagement and a member of the CNA Military Advisory Board. Chairman, J Street Cup Golf Charity, Trustee Fairhaven United Methodist Church.

Michael Bozic (73)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036

Director

Since
April
1994

Private investor and a member of the advisory board of American Road Group LLC (retail) (since June 2000); Chairperson of the Compliance and Insurance Committee (since October 2006); Director or Trustee of various Morgan Stanley Funds (since April 1994); formerly, Chairperson of the Insurance Committee (July 2006-September 2006); Vice Chairman of Kmart Corporation (December 1998-October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co.

100

Trustee and member of the Hillsdale College Board of Trustees.

Kathleen A. Dennis (60)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036

Director

Since
August
2006

President, Cedarwood Associates (mutual fund and investment management consulting) (since July 2006); Chairperson of the Money Market and Alternatives Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, Senior Managing Director of Victory Capital Management (1993-2006).

Director of various non-profit organizations.

Dr. Manuel H. Johnson (65)
c/o Johnson Smick Group, Inc.
888 16th Street, N.W.
Suite 740
Washington, D.C. 20006

Director

Since
July
1991

Senior Partner, Johnson Smick International, Inc. (consulting firm); Chairperson of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since July 1991); Co-Chairman and a founder of the Group of Seven Council (G7C) (international economic commission); formerly, Chairperson of the Audit Committee (July 1991-September 2006), Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury.

101

Director of NVR, Inc. (home construction).

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Director and Officer Information (unaudited) (cont'd)

Independent Director: (cont'd)

Name, Age and Address of
Independent Director

Position(s)
Held with
Registrant

Length of Time
Served*

Principal Occupation(s) During Past 5 Years

Number of
Portfolios in
Fund Complex
Overseen by
Independent
Director**

Other Directorships
Held by Independent
Director***

Joseph J. Kearns (71)
c/o Kearns & Associates LLC
PMB754
22631 Pacific Coast Highway
Malibu, CA 90265

Director

Since
August
1994

President, Kearns & Associates LLC (investment consulting); Chairperson of the Audit Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 1994); formerly, Deputy Chairperson of the Audit Committee (July 2003-September 2006) and Chairperson of the Audit Committee of various Morgan Stanley Funds (since August 1994); CFO of the J. Paul Getty Trust.

101

Director of Electro Rent Corporation (equipment leasing) and The Ford Family Foundation.

Michael F. Klein (55)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036

Director

Since
August
2006

Managing Director, Aetos Capital, LLC (since March 2000) and Co-President, Aetos Alternatives Management, LLC (since January 2004); and Co-Chief Executive Officer of Aetos Capital LLC (since August 2013); Chairperson of the Fixed Income Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, Managing Director, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management, President, various Morgan Stanley Funds (June 1998-March 2000) and Principal, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management (August 1997-December 1999).

Director of certain investment funds managed or sponsored by Aetos Capital, LLC. Director of Sanitized AG and Sanitized Marketing AG (specialty chemicals).

Michael E. Nugent (77)
522 Fifth Avenue
New York, NY 10036

Chairperson of the Board and Director

Chairperson of the Boards since July 2006 and Director since July 1991

Chairperson of the Boards of various Morgan Stanley Funds (since July 2006); Chairperson of the Closed-End Fund Committee (since June 2012) and Director or Trustee of various Morgan Stanley Funds (since July 1991); formerly, Chairperson of the Insurance Committee (until July 2006); General Partner, Triumph Capital, L.P. (private investment partnership) (1988-2013)

100

None.

W. Allen Reed (66)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036

Director

Since
August
2006

Chairperson of the Equity Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, President and CEO of General Motors Asset Management; Chairman and Chief Executive Officer of the GM Trust Bank and Corporate Vice President of General Motors Corporation (August 1994-December 2005).

Director of Temple-Inland Industries (packaging and forest products); Director of Legg Mason, Inc. and Director of the Auburn University Foundation.

Fergus Reid (81)
c/o Joe Pietryka, Inc.
85 Charles Colman Blvd.
Pawling, NY 12564

Director

Since
June
1992

Chairman, Joe Pietryka, Inc.; Chairperson of the Governance Committee and Director or Trustee of various Morgan Stanley Funds (since June 1992).

101

Through December 31, 2012, Trustee and Director of certain Investment companies in the JP Morgan Fund Complex.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Director and Officer Information (unaudited) (cont'd)

Interested Director:

Name, Age and Address of
Interested Director

Position(s) Held
with Registrant

Length of
Time Served*

Principal Occupation(s) During Past 5 Years

Number of
Portfolios in
Fund Complex
Overseen by
Interested
Director**

Other Directorships
Held by Interested
Director***

James F. Higgins (66)
One New York Plaza
New York, NY 10004

Director

Since
June
2000

Director or Trustee of various Morgan Stanley Funds (since June 2000); Senior Advisor of Morgan Stanley (since August 2000).

Formerly, Director of AXA Financial, Inc. and AXA Equitable Life Insurance Company (2002-2011) and Director of AXA MONY Life Insurance Company and AXA MONY Life Insurance Company of America (2004-2011).

* Each Director serves an indefinite term, until his or her successor is elected.

** The Fund Complex includes (as of December 31, 2013) all open-end and closed-end funds (including all of their portfolios) advised by Morgan Stanley Investment Management Inc. (the "Adviser") and any funds that have an adviser that is an affiliated person of the Adviser (including, but not limited to, Morgan Stanley AIP GP LP).

*** This includes any directorships at public companies and registered investment companies held by the Director at any time during the past five years.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Director and Officer Information (unaudited) (cont'd)

Executive Officers:

Name, Age and Address of Executive Officer

Position(s) Held
with
Registrant

Length of
Time Served*

Principal Occupation(s) During Past 5 Years

John H. Gernon (50)
522 Fifth Avenue
New York, NY 10036

President and Principal Executive Officer—Equity, Fixed Income and AIP Funds

Since September 2013

President and Principal Executive Officer of the Equity and Fixed Income Funds and the Morgan Stanley AIP Funds (since September 2013) in the Fund Complex; Managing Director of the Adviser.

Stefanie V. Chang Yu (47)
522 Fifth Avenue
New York, NY 10036

Chief Compliance Officer

Since
January
2014

Managing Director of the Adviser and various entities affiliated with the Adviser; Chief Compliance Officer of various Morgan Stanley Funds and the Adviser (since January 2014). Formerly, Vice President of various Morgan Stanley Funds (December 1997-January 2014).

Joseph C. Benedetti (48)
522 Fifth Avenue
New York, NY 10036

Vice President

Since
January
2014

Managing Director of the Adviser and various entities affiliated with the Adviser; Vice President of various Morgan Stanley Funds (since January 2014).

Francis J. Smith (48)
522 Fifth Avenue
New York, NY 10036

Treasurer and Principal Financial Officer

Treasurer since July 2003 and Principal Financial Officer since September 2002

Executive Director of the Adviser and various entities affiliated with the Adviser; Treasurer and Principal Financial Officer of various Morgan Stanley Funds (since July 2003).

Mary E. Mullin (46)
522 Fifth Avenue
New York, NY 10036

Secretary

Since
June
1999

Executive Director of the Adviser and various entities affiliated with the Adviser; Secretary of various Morgan Stanley Funds (since June 1999).

* Each officer serves an indefinite term, until his or her successor is elected.

Morgan Stanley Institutional Fund, Inc.

Annual Report — December 31, 2013

Adviser and Administrator

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

Sub-Advisers

Morgan Stanley Investment Management Limited
25 Cabot Square, Canary Wharf
London, E14 4QA, England

Morgan Stanley Investment Management Company
23 Church Street
16-01 Capital Square 049481 Singapore

Distributor

Morgan Stanley Distribution, Inc.
522 Fifth Avenue
New York, New York 10036

Dividend Disbursing and Transfer Agent

Boston Financial Data Services, Inc.
2000 Crown Colony Drive
Quincy, Massachusetts 02169

Custodian

State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111

Legal Counsel

Dechert LLP
1095 Avenue of the Americas
New York, New York 10036

Counsel to the Independent Directors

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

Independent Registered Public Accounting Firm

Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116

Reporting to Shareholders

Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semi-annual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Morgan Stanley also delivers the semi-annual and annual reports to fund shareholders and makes these reports available on its public website, www.morganstanley.com/im. 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 website. 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 website, 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 toll free at 1 (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's email address (publicinfo@sec.gov) or by writing the Public Reference Room of the SEC, Washington, DC 20549-0102.

Proxy Voting Policies and Procedures and Proxy Voting Record

You may obtain a copy of the Fund's Proxy Voting Policy and Procedures and information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll free 1 (800) 548-7786 or by visiting our website at www.morganstanley.com/im. This information is also available on the SEC's website at www.sec.gov.

This report is authorized for distribution only when preceded or accompanied by a prospectus of the Morgan Stanley Institutional Fund, Inc. which describes in detail each Investment Portfolio's investment policies, risks, fees and expenses. Please read the prospectus carefully before you invest or send money. For additional information, including information regarding the investments comprising the Portfolio, please visit our website at www.morganstanley.com/im or call toll free 1 (800) 548-7786.

(This Page has been left blank intentionally.)

Printed in U.S.A.
This Report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.

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

IFISGIANN
809944 Exp 2.28.15

INVESTMENT MANAGEMENT

Morgan Stanley Institutional Fund, Inc.

Select Global Infrastructure Portfolio

Semi-Annual Report

June 30, 2014

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Table of Contents

Shareholders' Letter					2
Expense Example					3
Investment Advisory Agreement Approval					4
Portfolio of Investments					6
Statement of Assets and Liabilities					8
Statement of Operations					9
Statements of Changes in Net Assets					10
Financial Highlights					12
Notes to Financial Statements					16
U.S. Privacy Policy					22
Director and Officer Information					25

There is no assurance that a Portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that market values of securities owned by the Portfolio will decline and, therefore, the value of the Portfolio's shares may be less than what you paid for them. Accordingly, you can lose money investing in this Portfolio. Please see the prospectus for more complete information on investment risks.

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Shareholders' Letter (unaudited)

Dear Shareholders,

We are pleased to provide this Semi-Annual report, in which you will learn how your investment in Select Global Infrastructure Portfolio (the "Portfolio") performed during the latest six-month period.

As always, we thank you for selecting Morgan Stanley Investment Management, and look forward to working with you in the months and years ahead.

Sincerely,

John H. Gernon
President and Principal Executive Officer

July 2014

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Expense Example (unaudited)

Select Global Infrastructure Portfolio

This example is based on an investment of $1,000 invested at the beginning of the six-month period ended June 30, 2014 and held for the entire six-month period.

Actual Expenses

Hypothetical Example for Comparison Purposes

	Beginning Account Value 1/1/14		Actual Ending Account Value 6/30/14		Hypothetical Ending Account Value		Actual Expenses Paid During Period*		Hypothetical Expenses Paid During Period*		Net Expense Ratio During Period**
Select Global Infrastructure Portfolio Class I	$	1,000.00	$	1,145.20	$	1,019.44	$	5.74	$	5.41		1.08	%
Select Global Infrastructure Portfolio Class A		1,000.00		1,143.90		1,018.10		7.18		6.76		1.35
Select Global Infrastructure Portfolio Class L		1,000.00		1,140.60		1,014.93		10.56		9.94		1.99
Select Global Infrastructure Portfolio Class IS		1,000.00		1,145.90		1,019.49		5.69		5.36		1.07

* Expenses are calculated using each Portfolio Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period, and multiplied by 181/365 (to reflect the most recent one-half year period).

** Annualized.

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Investment Advisory Agreement Approval (unaudited)

Nature, Extent and Quality of Services

The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser (as defined herein) under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board reviewed similar information and factors regarding the Sub-Advisers (as defined herein), to the extent applicable. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Portfolio's Adviser under the administration agreement, including accounting, clerical, bookkeeping, compliance, business management and planning, and the provision of supplies, office space and utilities at the Adviser's expense. (The Adviser and Sub-Advisers together are referred to as the "Adviser" and the advisory, sub-advisory and administration agreements together are referred to as the "Management Agreement.") The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as reported to the Board by Lipper, Inc. ("Lipper").

The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the administrative and advisory services to the Portfolio. 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 Portfolio and supported its decision to approve the Management Agreement.

Performance, Fees and Expenses of the Portfolio

The Board reviewed the performance, fees and expenses of the Portfolio 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 Portfolio. 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, 2013, or since inception, 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 Portfolio's performance was better than its peer group average for the one- and three-year periods and the period since the end of September 2010, the month of the Portfolio's inception. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Portfolio relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as determined by Lipper. In addition to the management fee, the Board also reviewed the Portfolio's total expense ratio. The Board noted that the Portfolio's management fee and total expense ratio were lower than its peer group averages. After discussion, the Board concluded that the Portfolio's (i) performance was competitive with its peer group average; and (ii) management fee and total expense ratio were competitive with its peer group averages.

Economies of Scale

The Board considered the size and growth prospects of the Portfolio and how that relates to the Portfolio's total expense ratio and particularly the Portfolio's management fee rate, which does not include 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 Portfolio 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 Portfolio supports 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 Portfolio 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.

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Investment Advisory Agreement Approval (unaudited) (cont'd)

Other Benefits of the Relationship

The Board considered other benefits to the Adviser and its affiliates derived from their relationship with the Portfolio and other funds advised by the Adviser. These benefits may include, among other things, research received by the Adviser generated from commission dollars spent on funds' portfolio trading, and fees for trading, distribution and/or shareholder servicing. The Board reviewed with the Adviser each of these arrangements and the reasonableness of the Adviser's 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 Portfolio 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 Portfolio and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Portfolio'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 Portfolio 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 Portfolio'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 Portfolio 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 Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014 (unaudited)

Portfolio of Investments

Select Global Infrastructure Portfolio

	Shares		Value (000)
Common Stocks (94.9%)
Australia (6.5%)
DUET Group (a)		335,909	$	767
Macquarie Atlas Roads Group		91,375		282
Spark Infrastructure Group (a)		175,513		306
Sydney Airport		98,387		391
Transurban Group (a)		209,982		1,463
				3,209
Austria (1.2%)
Flughafen Wien AG		6,535		608
Brazil (1.4%)
CCR SA		13,700		112
Cia de Saneamento Basico do Estado de Sao Paulo ADR		56,191		602
				714
Canada (11.4%)
Enbridge, Inc. (a)		48,704		2,311
TransCanada Corp. (a)		69,704		3,327
				5,638
China (4.1%)
Beijing Enterprises Holdings Ltd. (b)		36,000		340
China Everbright International Ltd. (b)		135,000		193
China Gas Holdings Ltd. (b)		40,000		83
China Merchants Holdings International Co., Ltd. (b)		35,527		111
ENN Energy Holdings Ltd. (b)		42,000		302
Guangdong Investment Ltd. (b)		704,000		812
Jiangsu Expressway Co., Ltd. H Shares (b)		174,000		206
				2,047
France (4.0%)
Eutelsat Communications SA		35,101		1,220
SES SA		20,747		787
				2,007
Germany (1.4%)
Fraport AG Frankfurt Airport Services Worldwide		10,000		707
Italy (5.2%)
Atlantia SpA		47,155		1,344
Snam SpA		163,479		985
Terna Rete Elettrica Nazionale SpA (a)		46,573		246
				2,575
Japan (1.9%)
Tokyo Gas Co., Ltd.		163,000		952
Netherlands (0.7%)
Koninklijke Vopak N.V.		6,729		329
Spain (1.7%)
Ferrovial SA		24,450		545
Red Electrica Corp., SA (a)		3,150		288
				833
Switzerland (1.8%)
Flughafen Zuerich AG (Registered)		1,477		908

	Shares		Value (000)
United Kingdom (8.9%)
National Grid PLC		175,544	$	2,523
Pennon Group PLC		70,310		945
Severn Trent PLC		13,640		451
United Utilities Group PLC		31,862		481
				4,400
United States (44.7%)
American Tower Corp. REIT		23,860		2,147
American Water Works Co., Inc.		22,550		1,115
Atmos Energy Corp.		6,290		336
CenterPoint Energy, Inc.		9,724		248
Cheniere Energy, Inc. (c)		11,160		800
Crown Castle International Corp.		21,549		1,600
Enbridge Energy Management LLC (a)(c)		29,164		1,028
ITC Holdings Corp.		49,051		1,789
Kinder Morgan, Inc.		29,612		1,074
NiSource, Inc.		16,060		632
Northeast Utilities		19,750		934
Oneok, Inc.		13,570		924
PG&E Corp.		18,010		865
Plains GP Holdings LP, Class A		9,378		300
SBA Communications Corp., Class A (c)		6,579		673
SemGroup Corp., Class A		11,087		874
Sempra Energy		20,670		2,164
Spectra Energy Corp.		37,840		1,607
Union Pacific Corp.		4,900		489
Williams Cos., Inc. (The)		44,520		2,592
				22,191
Total Common Stocks (Cost $38,065)				47,118
Short-Term Investments (20.0%)
Securities held as Collateral on Loaned Securities (15.2%)
Investment Company (12.3%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (See Note G)		6,123,899		6,124
	Face Amount (000)
Repurchase Agreements (2.9%)
Barclays Capital, Inc., (0.08%, dated 6/30/14, due 7/1/14; proceeds $635; fully collateralized by various U.S. Government agency securities; 3.50% - 4.50% due 9/1/33 - 6/20/44; valued at $647)	$	635		635
BNP Paribas Securities Corp., (0.11%, dated 6/30/14, due 7/1/14; proceeds $796; fully collateralized by a U.S. Government agency security; 4.00% due 6/20/44; valued at $813)		796		796
				1,431
Total Securities held as Collateral on Loaned Securities (Cost $7,555)				7,555

The accompanying notes are an integral part of the financial statements.
6

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014 (unaudited)

Portfolio of Investments (cont'd)

Select Global Infrastructure Portfolio

	Shares		Value (000)
Investment Company (4.8%)
Morgan Stanley Institutional Liquidity Funds — Treasury Portfolio — Institutional Class (See Note G) (Cost $2,399)		2,399,026	$	2,399
Total Short-Term Investments (Cost $9,954)				9,954
Total Investments (114.9%) (Cost $48,019) Including $7,677 of Securities Loaned				57,072
Liabilities in Excess of Other Assets (-14.9%)				(7,415	)
Net Assets (100.0%)			$	49,657

(a) All or a portion of this security was on loan at June 30, 2014.

(b) Security trades on the Hong Kong exchange.

ADR American Depositary Receipt.

REIT Real Estate Investment Trust.

Portfolio Composition*

Classification	Percentage of Total Investments
Oil & Gas Storage & Transportation		42.3	%
Transmission & Distribution		14.0
Communications		13.0
Water		7.3
Toll Roads		6.9
Other**		6.0
Airports		5.3
Diversified		5.2
Total Investments		100.0	%

* Percentages indicated are based upon total investments (excluding Securities held as Collateral on Loaned Securities) as of June 30, 2014.

** Industries and/or investment types representing less than 5% of total investments.

The accompanying notes are an integral part of the financial statements.
7

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014 (unaudited)

Select Global Infrastructure Portfolio

Statement of Assets and Liabilities	June 30, 2014 (000)
Assets:
Investments in Securities of Unaffiliated Issuers, at Value⁽¹⁾ (Cost $39,496)	$	48,549
Investment in Security of Affiliated Issuer, at Value (Cost $8,523)		8,523
Total Investments in Securities, at Value (Cost $48,019)		57,072
Foreign Currency, at Value (Cost $61)		61
Cash		477
Dividends Receivable		259
Receivable for Portfolio Shares Sold		215
Receivable for Investments Sold		96
Tax Reclaim Receivable		6
Receivable from Affiliate		—	@
Other Assets		9
Total Assets		58,195
Liabilities:
Collateral on Securities Loaned, at Value		8,032
Payable for Investments Purchased		426
Payable for Advisory Fees		31
Payable for Professional Fees		25
Payable for Custodian Fees		6
Payable for Portfolio Shares Redeemed		6
Payable for Administration Fees		3
Payable for Shareholder Services Fees — Class A		2
Payable for Distribution and Shareholder Services Fees — Class L		—	@
Payable for Transfer Agent Fees — Class I		—	@
Payable for Transfer Agent Fees — Class A		—	@
Payable for Transfer Agent Fees — Class L		—	@
Other Liabilities		7
Total Liabilities		8,538
Net Assets	$	49,657
Net Assets Consist Of:
Paid-in-Capital	$	39,055
Accumulated Undistributed Net Investment Income		422
Accumulated Net Realized Gain		1,124
Unrealized Appreciation (Depreciation) on:
Investments		9,053
Foreign Currency Translations		3
Net Assets	$	49,657
CLASS I:
Net Assets	$	36,558
Shares Outstanding $0.001 par value shares of beneficial interest (500,000,000 shares authorized) (not in 000's)		2,237,807
Net Asset Value, Offering and Redemption Price Per Share	$	16.34
CLASS A:
Net Assets	$	12,321
Shares Outstanding $0.001 par value shares of beneficial interest (500,000,000 shares authorized) (not in 000's)		755,844
Net Asset Value, Redemption Price Per Share	$	16.30
Maximum Sales Load		5.25	%
Maximum Sales Charge	$	0.90
Maximum Offering Price Per Share	$	17.20
CLASS L:
Net Assets	$	766
Shares Outstanding $0.001 par value shares of beneficial interest (500,000,000 shares authorized) (not in 000's)		47,232
Net Asset Value, Offering and Redemption Price Per Share	$	16.22
CLASS IS:
Net Assets	$	12
Shares Outstanding $0.001 par value shares of beneficial interest (500,000,000 shares authorized) (not in 000's)		728
Net Asset Value, Offering and Redemption Price Per Share	$	16.34
⁽¹⁾ Including: Securities on Loan, at Value:	$	7,677

@ Amount is less than $500.

The accompanying notes are an integral part of the financial statements.
8

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014 (unaudited)

Select Global Infrastructure Portfolio

Statement of Operations	Six Months Ended June 30, 2014 (000)
Investment Income:
Dividends from Securities of Unaffiliated Issuers (Net of $63 of Foreign Taxes Withheld)	$	623
Income from Securities Loaned — Net		11
Dividends from Security of Affiliated Issuer (Note G)		—	@
Total Investment Income		634
Expenses:
Advisory Fees (Note B)		158
Professional Fees		52
Registration Fees		28
Custodian Fees (Note F)		26
Administration Fees (Note C)		15
Shareholder Reporting Fees		8
Shareholder Services Fees — Class A (Note D)		8
Distribution and Shareholder Services Fees — Class L (Note D)		2
Transfer Agency Fees (Note E)		—	@
Transfer Agency Fees — Class I (Note E)		1
Transfer Agency Fees — Class A (Note E)		1
Transfer Agency Fees — Class L (Note E)		1
Transfer Agency Fees — Class IS (Note E)		1
Pricing Fees		3
Directors' Fees and Expenses		1
Sub Transfer Agency Fees		—	@
Sub Transfer Agency Fees — Class I		—	@
Sub Transfer Agency Fees — Class A		—	@
Other Expenses		6
Total Expenses		311
Waiver of Advisory Fees (Note B)		(98	)
Reimbursement of Class Specific Expenses — Class L (Note B)		(—	@)
Reimbursement of Class Specific Expenses — Class IS (Note B)		(1	)
Rebate from Morgan Stanley Affiliate (Note G)		(1	)
Net Expenses		211
Net Investment Income		423
Realized Gain (Loss):
Investments Sold		738
Foreign Currency Transactions		(6	)
Net Realized Gain		732
Change in Unrealized Appreciation (Depreciation):
Investments		4,282
Foreign Currency Translations		2
Net Change in Unrealized Appreciation (Depreciation)		4,284
Net Realized Gain and Change in Unrealized Appreciation (Depreciation)		5,016
Net Increase in Net Assets Resulting from Operations	$	5,439

@ Amount is less than $500.

The accompanying notes are an integral part of the financial statements.
9

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Select Global Infrastructure Portfolio

Statements of Changes in Net Assets	Six Months Ended June 30, 2014 (unaudited) (000)			Year Ended December 31, 2013 (000)
Increase (Decrease) in Net Assets:
Operations:
Net Investment Income	$	423		$	437
Net Realized Gain		732			1,599
Net Change in Unrealized Appreciation (Depreciation)		4,284			1,899
Net Increase in Net Assets Resulting from Operations		5,439			3,935
Distributions from and/or in Excess of:
Class I:
Net Investment Income		—			(455	)
Net Realized Gain		—			(1,150	)
Class A:
Net Investment Income		—			(55	)
Net Realized Gain		—			(127	)
*Class H:**
Net Investment Income		—			(—	@)***
Net Realized Gain		—			(31	)***
Class L:
Net Investment Income		—			(6	)
Net Realized Gain		—			(25	)
Class IS:
Net Investment Income		—			(—	@)**
Net Realized Gain		—			(—	@)**
Total Distributions		—			(1,849	)
Capital Share Transactions:⁽¹⁾
Class I:
Subscribed		7,125			11,506
Distributions Reinvested		—			706
Redeemed		(1,320	)		(3,326	)
Class A:
Subscribed		9,100			1,264
Distributions Reinvested		—			166
Conversion from Class H		—			3,280
Redeemed		(1,513	)		(1,330	)
*Class H:**
Subscribed		—			2,166	***
Distributions Reinvested		—			30	***
Conversion to Class A		—			(3,280	)***
Redeemed		—			(191	)***
Class L:
Subscribed		147			389
Distributions Reinvested		—			23
Redeemed		(38	)		—
Class IS:
Subscribed		—			10	**
Net Increase in Net Assets Resulting from Capital Share Transactions		13,501			11,413
Total Increase in Net Assets		18,940			13,499
Net Assets:
Beginning of Period		30,717			17,218
End of Period (Including Accumulated Undistributed (Distributions in Excess of) Net Investment Income of $422 and $(1))	$	49,657		$	30,717

The accompanying notes are an integral part of the financial statements.
10

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Select Global Infrastructure Portfolio

Statements of Changes in Net Assets (cont'd)	Six Months Ended June 30, 2014 (unaudited) (000)			Year Ended December 31, 2013 (000)
(1) Capital Share Transactions:
Class I:
Shares Subscribed		475			820
Shares Issued on Distributions Reinvested		—			52
Shares Redeemed		(90	)		(236	)
Net Increase in Class I Shares Outstanding		385			636
Class A:
Shares Subscribed		598			89
Shares Issued on Distributions Reinvested		—			12
Conversion from Class H		—			242
Shares Redeemed		(102	)		(93	)
Net Increase in Class A Shares Outstanding		496			250
*Class H:**
Shares Subscribed		—			156	***
Shares Issued on Distributions Reinvested		—			2	***
Conversion to Class A		—			(242	)***
Shares Redeemed		—			(13	)***
Net Decrease in Class H Shares Outstanding		—			(97	)
Class L:
Shares Subscribed		10			28
Shares Issued on Distributions Reinvested		—			2
Shares Redeemed		(3	)		—
Net Increase in Class L Shares Outstanding		7			30
Class IS:
Shares Subscribed		—			1	**

@ Amount is less than $500.

* Effective September 9, 2013, Class H shares converted into Class A shares.

** For the period September 13, 2013 through December 31, 2013.

*** For the period January 1, 2013 through September 6, 2013.

The accompanying notes are an integral part of the financial statements.
11

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Financial Highlights

Select Global Infrastructure Portfolio

	Class I
	Six Months Ended June 30, 2014			Year Ended December 31,									Period from September 20, 2010^ to
Selected Per Share Data and Ratios	(unaudited)			2013			2012			2011			December 31, 2010
Net Asset Value, Beginning of Period	$	14.26		$	12.91		$	11.50		$	10.40		$	10.00
Income from Investment Operations:
Net Investment Income†		0.17			0.26			0.27			0.23			0.08
Net Realized and Unrealized Gain		1.91			2.00			1.82			1.42			0.40
Total from Investment Operations		2.08			2.26			2.09			1.65			0.48
Distributions from and/or in Excess of:
Net Investment Income		—			(0.25	)		(0.26	)		(0.22	)		(0.08	)
Net Realized Gain		—			(0.66	)		(0.42	)		(0.33	)		—
Total Distributions		—			(0.91	)		(0.68	)		(0.55	)		(0.08	)
Net Asset Value, End of Period	$	16.34		$	14.26		$	12.91		$	11.50		$	10.40
Total Return++		14.52	%#		17.91	%		18.21	%		15.95	%		4.94	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	36,558		$	26,428		$	15,707		$	12,589		$	10,086
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.08	%+*		1.12	%+		1.15	%+††		1.15	%+††		1.14	%+††*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		2.24	%+*		1.87	%+		2.18	%+††		2.09	%+††		2.71	%+††*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%*		0.01	%		0.00	%††§		0.00	%††§		0.01	%††*
Portfolio Turnover Rate		14	%#		30	%		33	%		51	%		6	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		1.61	%*		2.04	%		2.39	%††		2.93	%††		3.61	%+††*
Net Investment Income to Average Net Assets		1.71	%*		0.95	%		0.94	%††		0.31	%††		0.24	%+††*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

The accompanying notes are an integral part of the financial statements.
12

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Financial Highlights

Select Global Infrastructure Portfolio

	Class A
	Six Months Ended June 30, 2014			Year Ended December 31,									Period from September 20, 2010^ to
Selected Per Share Data and Ratios	(unaudited)			2013			2012			2011			December 31, 2010
Net Asset Value, Beginning of Period	$	14.25		$	12.90		$	11.50		$	10.40		$	10.00
Income from Investment Operations:
Net Investment Income†		0.18			0.26			0.24			0.21			0.07
Net Realized and Unrealized Gain		1.87			1.97			1.80			1.41			0.41
Total from Investment Operations		2.05			2.23			2.04			1.62			0.48
Distributions from and/or in Excess of:
Net Investment Income		—			(0.22	)		(0.22	)		(0.19	)		(0.08	)
Net Realized Gain		—			(0.66	)		(0.42	)		(0.33	)		—
Total Distributions		—			(0.88	)		(0.64	)		(0.52	)		(0.08	)
Net Asset Value, End of Period	$	16.30		$	14.25		$	12.90		$	11.50		$	10.40
Total Return++		14.39	%#		17.69	%		17.85	%		15.67	%		4.86	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	12,321		$	3,706		$	129		$	115		$	104
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.35	%+*		1.37	%+^^		1.40	%+††		1.40	%+††		1.39	%+††*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		2.45	%+*		1.81	%+		1.93	%+††		1.84	%+††		2.46	%+††*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%*		0.01	%		0.00	%††§		0.00	%††§		0.01	%††*
Portfolio Turnover Rate		14	%#		30	%		33	%		51	%		6	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		1.88	%*		2.43	%		2.64	%††		3.18	%††		3.86	%+††*
Net Investment Income (Loss) to Average Net Assets		1.92	%*		0.75	%		0.69	%††		0.06	%††		(0.01	)%+††*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value which does not reflect sales charges, if applicable, as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

The accompanying notes are an integral part of the financial statements.
13

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Financial Highlights

Select Global Infrastructure Portfolio

	Class L
	Six Months Ended June 30, 2014			Year Ended December 31,									Period from September 20, 2010^ to
Selected Per Share Data and Ratios	(unaudited)			2013			2012			2011			December 31, 2010
Net Asset Value, Beginning of Period	$	14.22		$	12.90		$	11.50		$	10.40		$	10.00
Income from Investment Operations:
Net Investment Income†		0.10			0.16			0.18			0.15			0.06
Net Realized and Unrealized Gain		1.90			1.98			1.80			1.42			0.40
Total from Investment Operations		2.00			2.14			1.98			1.57			0.46
Distributions from and/or in Excess of:
Net Investment Income		—			(0.16	)		(0.16	)		(0.14	)		(0.06	)
Net Realized Gain		—			(0.66	)		(0.42	)		(0.33	)		—
Total Distributions		—			(0.82	)		(0.58	)		(0.47	)		(0.06	)
Net Asset Value, End of Period	$	16.22		$	14.22		$	12.90		$	11.50		$	10.40
Total Return++		14.06	%#		16.98	%		17.31	%		15.12	%		4.72	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	766		$	573		$	129		$	115		$	104
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.99	%+*		1.93	%+^^		1.90	%+††		1.90	%+††		1.89	%+††*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		1.34	%+*		1.16	%+		1.43	%+††		1.34	%+††		1.96	%+††*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%*		0.00	%§		0.00	%††§		0.00	%††§		0.01	%††*
Portfolio Turnover Rate		14	%#		30	%		33	%		51	%		6	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		2.61	%*		2.86	%		3.14	%††		3.68	%††		4.36	%+††*
Net Investment Income (Loss) to Average Net Assets		0.72	%*		0.23	%		0.19	%††		(0.44	)%††		(0.51	)%+††*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value as of the last business day of the period.

†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

The accompanying notes are an integral part of the financial statements.
14

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Financial Highlights

Select Global Infrastructure Portfolio

	Class IS
Selected Per Share Data and Ratios	Six Months Ended June 30, 2014 (unaudited)			Period from September 13, 2013^ to December 31, 2013
Net Asset Value, Beginning of Period	$	14.26		$	13.73
Income from Investment Operations:
Net Investment Income†		0.16			0.09
Net Realized and Unrealized Gain		1.92			1.20
Total from Investment Operations		2.08			1.29
Distributions from and/or in Excess of:
Net Investment Income		—			(0.25	)
Net Realized Gain		—			(0.51	)
Total Distributions		—			(0.76	)
Net Asset Value, End of Period	$	16.34		$	14.26
Total Return++		14.59	%#		9.60	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	12		$	10
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.07	%+*		1.07	%+^^*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		2.14	%+*		2.13	%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.01	%*		0.01	%*
Portfolio Turnover Rate		14	%#		30	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation
Expenses to Average Net Assets		17.26	%*		7.27	%*
Net Investment Loss to Average Net Assets		(14.05	)%*		(4.07	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value as of the last business day of the period.

^^ Effective September 16, 2013, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.08% for Class IS shares.

# Not Annualized.

* Annualized.

The accompanying notes are an integral part of the financial statements.
15

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Notes to Financial Statements (unaudited)

Morgan Stanley Institutional Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Fund is comprised of twenty-six separate, active, diversified and non-diversified portfolios (individually referred to as a "Portfolio", collectively as the "Portfolios"). The Fund applies investment company accounting and reporting guidance.

faith under procedures established by and under the general supervision of the Fund's Board of Directors (the "Directors"). 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 of the New York Stock Exchange ("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 Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; (4) quotations of foreign portfolio securities, other assets and liabilities and forward contracts stated in foreign currency are translated into U.S. dollar equivalents at the prevailing market rates prior to the close of the NYSE; (5) investments in 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 (6) short-term debt securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, unless the Adviser determines such valuation does not reflect the securities' market value, in which case these securities will be valued at their fair market value determined by the Adviser.

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Notes to Financial Statements (unaudited) (cont'd)

information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The Valuation Committee employs various methods for calibrating these valuation approaches including a regular review of valuation methodologies, key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

• 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.)

The following is a summary of the inputs used to value the Portfolio's investments as of June 30, 2014.

Investment Type	Level 1 Unadjusted quoted prices (000)		Level 2 Other significant observable inputs (000)		Level 3 Significant unobservable inputs (000)		Total (000)
Assets:
Common Stocks
Airports	$	2,614	$	—	$	—	$	2,614
Communications		6,427		—		—		6,427
Diversified		2,565		—		—		2,565
Oil & Gas Storage & Transportation		20,960		—		—		20,960
Ports		600		—		—		600
Toll Roads		3,407		—		—		3,407
Transmission & Distribution		6,951		—		—		6,951
Water		3,594		—		—		3,594
Total Common Stocks		47,118		—		—		47,118
Short-Term Investments
Investment Company		8,523		—		—		8,523
Repurchase Agreements		—		1,431		—		1,431
Total Short-Term Investments		8,523		1,431		—		9,954
Total Assets	$	55,641	$	1,431	$	—	$	57,072

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes. The Portfolio recognizes transfers between the levels as of the end of the period. As of June 30, 2014, the Portfolio did not have any investments transfer between investment levels.

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Notes to Financial Statements (unaudited) (cont'd)

– investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;

– investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.

Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in an affiliated money market portfolio and repurchase agreements. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is recorded as "Income from Securities Loaned — Net" in the Portfolio's Statement of Operations. Risks in securities lending transactions are that a borrower may not provide additional

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Notes to Financial Statements (unaudited) (cont'd)

collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.

The Portfolio has the right under the lending agreement to recover the securities from the borrower on demand.

The following table presents financial instruments that are subject to enforceable netting arrangements as of June 30, 2014.

Gross Amounts Not Offset in the Statement of Assets and Liabilities
Gross Asset Amounts Presented in Statement of Assets and Liabilities (000)			Financial Instrument (000)		Collateral Received (000)			Net Amount (not less than $0) (000)
$	7,677	(a)	$	—	$	(7,677	)(b)(c)	$	0

(a) Represents market value of loaned securities at period end.

(b) The Portfolio received cash collateral of approximately $8,032,000, of which approximately $7,555,000 was subsequently invested in Repurchase Agreements and Morgan Stanley Institutional Liquidity Funds as reported in the Portfolio of Investments. As of June 30, 2014 there was uninvested cash of approximately $477,000, which is not reflected in the Portfolio of Investments.

7. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date (except for certain foreign dividends which may be recorded as soon as the Portfolio is informed of such dividends) net of applicable withholding taxes. Interest income is recognized on the accrual basis except where collection is in doubt. Discounts are accreted and premi-

ums are amortized over the life of the respective securities. Most expenses of the Fund can be directly attributed to a particular Portfolio. Expenses which cannot be directly attributed are apportioned among the Portfolios based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses — distribution, transfer agency and sub transfer agency fees) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.

The Adviser has agreed to reduce its advisory fee and/or reimburse the Portfolio so that total annual portfolio operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.15% for Class I shares, 1.50% for Class A shares, 2.00% for Class L shares and 1.08% for Class IS shares. The fee waivers and/or expense reimbursements will continue for at least one year or until such time that the Directors act to discontinue all or a portion of such waivers and/or reimbursements when they deem such action is appropriate. For the six months ended June 30, 2014, approximately $98,000 of advisory fees were waived and approximately $1,000 of other expenses were reimbursed by the Adviser pursuant to this arrangement.

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Notes to Financial Statements (unaudited) (cont'd)

certain administrative services to the Fund. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Portfolio.

E. Dividend Disbursing and Transfer Agent: The Fund's dividend disbursing and transfer agent is Boston Financial Data Services, Inc. ("BFDS"). Pursuant to a Transfer Agency Agreement, the Fund pays BFDS a fee based on the number of classes, accounts and transactions relating to the Portfolios of the Fund.

G. Security Transactions and Transactions with Affiliates: For the six months ended June 30, 2014, purchases and sales of investment securities for the Portfolio, other than long-term U.S. Government securities and short-term investments, were approximately $18,103,000 and $4,988,000, respectively. There were no purchases and sales of long-term U.S. Government securities for the six months ended June 30, 2014.

The Portfolio invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds (the "Liquidity Funds"), an open-end management investment company managed by the Adviser, both directly, and as a portion of the securities held as collateral on loaned securities. Advisory fees paid by the Portfolio are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Portfolio due to its investment in the Liquidity Funds. For the six months ended June 30, 2014, advisory fees paid were reduced by approximately $1,000 relating to the Portfolio's investment in the Liquidity Funds.

A summary of the Portfolio's transactions in shares of the Liquidity Funds during the six months ended June 30, 2014 is as follows:

Value December 31, 2013 (000)				Purchases at Cost (000)				Sales (000)				Dividend Income (000)				Value June 30, 2014 (000)
$	5,964			$	18,407			$	15,848			$	—	@		$	8,523

@ Amount is less than $500.

H. Federal Income Taxes: It is the Portfolio's intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for Federal income taxes is required in the financial statements.

FASB ASC 740-10, Income Taxes — Overall, sets forth a minimum threshold for financial statement recognition of the

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Notes to Financial Statements (unaudited) (cont'd)

benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Portfolio recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Portfolio files tax returns with the U.S. Internal Revenue Service, New York and various states. Each of the tax years in the four-year period ended December 31, 2013, remains subject to examination by taxing authorities.

2013 Distributions Paid From:				2012 Distributions Paid From:
Ordinary Income (000)		Long-Term Capital Gain (000)		Ordinary Income (000)		Long-Term Capital Gain (000)
$	573	$	1,276	$	332	$	537

Permanent differences, primarily due to differing treatments of gains (losses) related to foreign currency transactions and distribution redesignations, resulted in the following reclassifications among the components of net assets at December 31, 2013:

Undistributed (Distributions in Excess of) Net Investment Income (Loss) (000)				Accumulated Undistributed Net Realized Gain (Loss) (000)				Paid-in- Capital (000)
$	77			$	(77	)		$	—

At December 31, 2013, the components of distributable earnings for the Portfolio on a tax basis were as follows:

Undistributed Ordinary Income (000)				Undistributed Long-Term Capital Gain (000)
$	—			$	438

At June 30, 2014, the aggregate cost for Federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $9,122,000 and the aggregate gross unrealized depreciation is approximately $69,000 resulting in net unrealized appreciation of approximately $9,053,000.

Post-October Currency and Specified Ordinary Losses (000)				Post-October Capital Losses (000)
$	1			$	—

I. Other: At June 30, 2014, the Portfolio had otherwise unaffiliated record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Portfolio. The aggregate percentage of such owners was 16% and 56%, for Class I and Class A shares, respectively.

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

U.S. Privacy Policy (unaudited)

AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY

This privacy notice describes the U.S. privacy policy of Morgan Stanley Distribution, Inc., and the Morgan Stanley family of mutual funds ("us", "our", "we").

WE RESPECT YOUR PRIVACY

1. WHAT PERSONAL INFORMATION DO WE COLLECT FROM YOU?

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

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

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

2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?

We may disclose personal information we collect about you in each of the categories listed above to affiliated and nonaffiliated third parties.

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

U.S. Privacy Policy (unaudited) (cont'd)

a. Information We Disclose to Affiliated Companies.

b. Information We Disclose to Third Parties.

3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU?

4. HOW CAN YOU LIMIT OUR SHARING CERTAIN PERSONAL INFORMATION ABOUT YOU WITH OUR AFFILIATED COMPANIES FOR ELIGIBILITY DETERMINATION?

5. HOW CAN YOU LIMIT THE USE OF CERTAIN PERSONAL INFORMATION ABOUT YOU BY OUR AFFILIATED COMPANIES FOR MARKETING?

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

U.S. Privacy Policy (unaudited) (cont'd)

6. HOW CAN YOU SEND US AN OPT-OUT INSTRUCTION?

• Calling us at (800) 548-7786
Monday–Friday between 8a.m. and 5p.m. (EST)

• Writing to us at the following address:

Boston Financial Data Services, Inc.
c/o Privacy Coordinator
P.O. Box 219804
Kansas City, Missouri 64121

7. WHAT IF AN AFFILIATED COMPANY BECOMES A NONAFFILIATED THIRD PARTY?

SPECIAL NOTICE TO RESIDENTS OF VERMONT

SPECIAL NOTICE TO RESIDENTS OF CALIFORNIA

Morgan Stanley Institutional Fund, Inc.

Semi-Annual Report — June 30, 2014

Director and Officer Information (unaudited)

Directors

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 and Director

John H. Gernon
President and Principal Executive Officer

Stefanie V. Chang Yu
Chief Compliance Officer

Joseph C. Benedetti
Vice President

Mary E. Mullin
Secretary

Francis J. Smith
Treasurer and Principal Financial Officer

Adviser and Administrator

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

Sub-Advisers

Morgan Stanley Investment Management Limited
25 Cabot Square, Canary Wharf
London, E14 4QA, England

Morgan Stanley Investment Management Company
23 Church Street
16-01 Capital Square, Singapore 049481

Distributor

Morgan Stanley Distribution, Inc.
522 Fifth Avenue
New York, New York 10036

Dividend Disbursing and Transfer Agent

Boston Financial Data Services, Inc.
2000 Crown Colony Drive
Quincy, Massachusetts 02169

Custodian

State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111

Legal Counsel

Dechert LLP
1095 Avenue of the Americas
New York, New York 10036

Counsel to the Independent Directors

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

Independent Registered Public Accounting Firm

Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116

Reporting to Shareholders

Proxy Voting Policies and Procedures and Proxy Voting Record

Printed in U.S.A.
This Report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.

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

IFISGISAN
977656 EXP 08.31.15

September 18, 2014

Supplement

SUPPLEMENT DATED SEPTEMBER 18, 2014 TO THE PROSPECTUS OF
MORGAN STANLEY GLOBAL INFRASTRUCTURE FUND
Dated April 30, 2014

The Board of Trustees (the "Board") of Morgan Stanley Global Infrastructure Fund (the "Fund") approved an Agreement and Plan of Reorganization by and between the Fund and Morgan Stanley Institutional Fund, Inc., on behalf of its series Select Global Infrastructure Portfolio ("MSIF Select Global Infrastructure"), pursuant to which substantially all of the assets and liabilities of the Fund would be transferred to MSIF Select Global Infrastructure and shareholders of the Fund would become shareholders of MSIF Select Global Infrastructure, receiving shares of MSIF Select Global Infrastructure equal to the value of their holdings in the Fund (the "Reorganization"). Class A and Class B shareholders of the Fund would receive Class A shares of MSIF Select Global Infrastructure, Class L shareholders of the Fund would receive Class L shares of MSIF Select Global Infrastructure and Class I shareholders of the Fund would receive Class I shares of MSIF Select Global Infrastructure. The Reorganization is subject to the approval of shareholders of the Fund at a special meeting of shareholders scheduled to be held during the first quarter of 2015. A proxy statement formally detailing the proposal, the reasons for the Reorganization and information concerning MSIF Select Global Infrastructure is expected to be distributed to shareholders of the Fund during the first quarter of 2015.

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.

UTLSPT-0914

July 25, 2014

Supplement

SUPPLEMENT DATED JULY 25, 2014 TO THE PROSPECTUS OF
MORGAN STANLEY GLOBAL INFRASTRUCTURE FUND
Dated April 30, 2014

The Board of Trustees of Morgan Stanley Global Infrastructure Fund (the "Fund") has approved (i) the offering of a commission, which will be paid by Morgan Stanley Distribution, Inc., as distributor of the Fund, to certain financial intermediaries as compensation on sales of Class A shares of the Fund of $1 million or more; and (ii) the imposition of a contingent deferred sales charge on Class A shares of the Fund in relation thereto. As a result, effective August 1, 2014, the following changes to the Prospectus are necessary:

The following replaces the "Shareholder Fees" table in the section of the Prospectus entitled "Fund Summary—Fees and Expenses—Shareholder Fees:"

Class A

Class B

Class L

Class I

Maximum sales charge (load) imposed on purchases (as a percentage of
offering price)

5.25

None

Maximum deferred sales charge (load) (as a percentage based on the lesser
of the offering price or NAV at redemption)

None¹

5.00

%²

None

The reference to footnote 2 in the "Annual Fund Operating Expenses" table in the section of the Prospectus entitled "Fund Summary—Fees and Expenses—Annual Fund Operating Expenses" is hereby replaced with footnote 3.

The footnotes following the "Annual Fund Operating Expenses" table in the section of the Prospectus entitled "Fund Summary—Fees and Expenses—Annual Fund Operating Expenses" are hereby deleted and replaced with the following:

(2) The Class B CDSC is scaled down to 1.00% during the sixth year, reaching zero thereafter. See "Shareholder Information—Share Class Arrangements" for a complete discussion of the CDSC.

(3) The Board of Trustees approved an amendment to the Plan of Distribution reducing the distribution and shareholder services (12b-1) fee for the Fund's Class L shares from 1.00% to 0.75% of the average daily net assets of such Class, effective February 25, 2013. The Distribution and/or Shareholder Service (12b-1) Fee shown in the table above has been restated to reflect such change.

The penultimate sentence of the third paragraph in the section of the Prospectus entitled "Fund Summary—Purchase and Sale of Fund Shares" is hereby deleted and replaced with the following:

If you sell Class A or Class B shares, your net sale proceeds are reduced by the amount of any applicable CDSC.

The second sentence of the section of the Prospectus entitled "Shareholder Information—How to Sell Shares" is hereby deleted and replaced with the following:

If you sell Class A or Class B shares, your net sale proceeds are reduced by the amount of any applicable CDSC.

The following replaces the information in the chart comparing the sales charge and annual 12b-1 fee applicable to Class A shares in the section of the Prospectus entitled "Shareholder Information—Share Class Arrangements:"

Class				Sales Charge				Maximum Annual 12b-1 Fee
	A			Maximum 5.25% initial sales charge reduced for purchases of $25,000 or more; shares purchased without an initial sales charge are generally subject to a 1.00% CDSC if sold during the first 18 months					0.25	%

The first paragraph of the section of the Prospectus entitled "Shareholder Information—Share Class Arrangements—Class A Shares" is hereby deleted and replaced with the following:

Class A shares are sold at NAV plus an initial sales charge of up to 5.25% of the public offering price. The initial sales charge is reduced for purchases of $25,000 or more according to the schedule below. Investments of $1 million or more are not subject to an initial sales charge, but are generally subject to a CDSC of 1.00% on sales made within 18 months after the last day of the month of purchase. The CDSC will be assessed in the same manner and with the same CDSC waivers as with Class B shares. In addition, the CDSC on Class A shares will be waived in connection with sales of Class A shares for which no commission or transaction fee was paid by the Distributor or Financial Intermediary at the time of purchase of such shares. Class A shares are also subject to a distribution and shareholder services (12b-1) fee of up to 0.25% of the average daily net assets of the Class. The maximum annual 12b-1 fee payable by Class A shares is lower than the maximum annual 12b-1 fee payable by Class B or Class L shares.

The following is hereby added as the last paragraph of the section of the Prospectus entitled "Shareholder Information—Share Class Arrangements—Class A Shares:"

Exchanging Shares Subject to a CDSC. There are special considerations when you exchange Class A shares of the Fund that are subject to a CDSC. When determining the length of time you held the Class A shares, any period (starting at the end of the month) during which you held such shares will be counted. In addition, any period (starting at the end of the month) during which you held (i) Class A shares of a Morgan Stanley Multi-Class Fund; (ii) shares of a Morgan Stanley Money Market Fund or (iii) Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, any of which you acquired in an exchange from such Class A shares of the Fund, will also be counted; however, if you sell shares of (i) the Morgan Stanley Multi-Class Fund; (ii) the Morgan Stanley Money Market Fund; or (iii) the Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, before the expiration of the CDSC "holding period," you will be charged the CDSC applicable to such shares.

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.

UTLSPT-7/14

INVESTMENT MANAGEMENT

Morgan Stanley

Global Infrastructure

Fund

Prospectus

April 30, 2014

A mutual fund that seeks to provide both capital appreciation and current income.

Share Class				Ticker Symbol
Class A				UTLAX
Class B				UTLBX
Class L				UTLCX
Class I				UTLDX

Contents

Fund Summary

Investment Objective					1
Fees and Expenses					1
Portfolio Turnover					2
Principal Investment Strategies					2
Principal Risks					2
Past Performance					4
Fund Management					5
Purchase and Sale of Fund Shares					5
Tax Information					5
Payments to Broker-Dealers and Other Financial Intermediaries					5

Fund Details

Additional Information about the Fund's Investment Objective, Strategies and Risks					6
Portfolio Holdings					13
Fund Management					13

Shareholder Information

Pricing Fund Shares					15
How to Buy Shares					16
How to Exchange Shares					18
How to Sell Shares					21
Distributions					24
Frequent Purchases and Redemptions of Fund Shares					24
Tax Consequences					26
Share Class Arrangements					27
Additional Information					34
Financial Highlights					35

This Prospectus contains important information about the Fund. Please read it carefully and keep it for future reference.

Fund Summary

Investment Objective

Morgan Stanley Global Infrastructure Fund (the "Fund") seeks to provide both capital appreciation and current income.

Fees and Expenses

The table below describes the fees and expenses that you may pay if you buy and hold shares of the Fund. For purchases of Class A shares, you may qualify for a sales charge discount if the cumulative net asset value ("NAV") of Class A shares of the Fund purchased in a single transaction, together with the NAV of all Class A shares of other Morgan Stanley Multi-Class Funds (as defined in the section of this Prospectus entitled "Shareholder Information—How to Exchange Shares—Permissible Fund Exchanges") held in Related Accounts (as defined in the section of this Prospectus entitled "Shareholder Information—Share Class Arrangements"), amounts to $25,000 or more. More information about this combined purchase discount and other discounts is available from your financial intermediary and in the section of this Prospectus entitled "Shareholder Information—Share Class Arrangements" and in the section of the Fund's Statement of Additional Information ("SAI") entitled "Purchase, Redemption and Pricing of Shares."

Shareholder Fees (fees paid directly from your investment)

Class A

Class B

Class L

Class I

Maximum sales charge (load)
imposed on purchases (as a
percentage of offering price)

5.25

None

Maximum deferred sales charge
(load) (as a percentage based on
the lesser of the offering price or
NAV at redemption)

None

5.00

%¹

None

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Class A			Class B			Class L			Class I
Advisory Fee		0.57	%		0.57	%		0.57	%		0.57	%
Distribution and/or Shareholder Service (12b-1) Fee²		0.25	%		1.00	%		0.75	%		None
Other Expenses		0.31	%		0.37	%		0.36	%		0.30	%
Total Annual Fund Operating Expenses		1.13	%		1.94	%		1.68	%		0.87	%

Example

The example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund, your investment has a 5% return each year, and the Fund's operating expenses remain the same (except for the 10 year amounts for Class B shares which reflect the conversion to Class A shares eight years after the end of the calendar month in which the shares were purchased). Although your actual costs may be higher or lower, based on these assumptions your costs would be:

If You SOLD Your Shares:

	1 Year		3 Years		5 Years		10 Years
Class A	$	634	$	865	$	1,115	$	1,827
Class B	$	697	$	909	$	1,247	$	2,054
Class L	$	171	$	530	$	913	$	1,987
Class I	$	89	$	278	$	482	$	1,073

If You HELD Your Shares:

	1 Year		3 Years		5 Years		10 Years
Class A	$	634	$	865	$	1,115	$	1,827
Class B	$	197	$	609	$	1,047	$	2,054
Class L	$	171	$	530	$	913	$	1,987
Class I	$	89	$	278	$	482	$	1,073

(1) The Class B contingent deferred sales charge ("CDSC") is scaled down to 1.00% during the sixth year, reaching zero thereafter. See "Shareholder Information—Share Class Arrangements" for a complete discussion of the CDSC.

(2) The Board of Trustees approved an amendment to the Plan of Distribution reducing the distribution and shareholder services (12b-1) fee for the Fund's Class L shares from 1.00% to 0.75% of the average daily net assets of such Class, effective February 25, 2013. The Distribution and/or Shareholder Service (12b-1) Fee shown in the table above has been restated to reflect such change.

Portfolio Turnover

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 25% of the average value of its portfolio.

Principal Investment Strategies

tunnels, bridges, pipelines, airports, marine ports, refueling and related facilities, (iv) the provision of communications, including the development, lease, concession, or management of telephone, broadcast and mobile towers, fiber optic/copper cable, and satellite networks, (v) waste-water management and water purification/desalination and (vi) the construction or operation of essential public structures. The Fund's equity investments may include convertible securities. The Fund's investments may include securities of small and medium capitalization companies. The Fund may invest up to 100% of its net assets in foreign securities, which may include emerging market securities. Under normal market conditions, the Fund invests at least 40% of its assets in the securities of issuers located outside of the United States.

The Fund's "Adviser," Morgan Stanley Investment Management Inc., and/or "Sub-Advisers," Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company, will shift the Fund's assets between the different types of companies in the infrastructure business described above based on relative valuation, underlying company fundamentals, and demographic and macroeconomic considerations. The Fund has a fundamental policy (i.e., one that cannot be changed without shareholder approval) of investing 25% or more of its assets in the infrastructure industry.

Principal Risks

There is no assurance that the Fund will achieve its investment objective and you can lose money investing in this Fund. The principal risks of investing in the Fund include:

industry. Companies within the infrastructure industry are subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction and improvement programs, high leverage, costs associated with compliance with and changes in environmental and other regulations, difficulty in raising capital in adequate amounts and on reasonable terms in periods of high inflation and unsettled capital markets or government budgetary constraints that impact publicly funded projects, the effects of economic slowdown or recession and surplus capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies and other factors.

• Common Stock and Other Equity Securities. In general, prices of common stock and other equity securities are more volatile than those of fixed-income securities. The prices of common stock and other equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions. To the extent that the Fund invests in convertible securities, and the convertible security's investment value is greater than its conversion value, its price will be likely to increase when interest rates fall and decrease when interest rates rise. If the conversion value exceeds the investment value, the price of the convertible

security will tend to fluctuate directly with the price of the underlying equity security. The Fund's emphasis on industries may cause its performance to be more sensitive to developments affecting particular industries than a fund that places primary emphasis on individual companies.

• Small and Medium Capitalization Companies. Investments in small and medium capitalization companies may involve greater risks than investments in larger, more established companies. The securities issued by small and medium capitalization companies may be less liquid, and such companies may have more limited markets, financial resources and product lines, and may lack the depth of management of larger companies.

• Liquidity. The Fund's investments in illiquid securities may entail greater risk than investments in publicly traded securities. These securities may be more difficult to sell, particularly in times of market turmoil. Additionally, the market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. Illiquid securities may be more difficult to value. If the Fund is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

Shares of the Fund are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.

Past Performance

The bar chart and table below provide some indication of the risks of investing in the Fund by showing changes in the Fund's Class A shares' performance from year-to-year and by showing how the Fund's average annual returns for the one, five and 10 year periods compare with those of a broad measure of market performance and a comparative sector index over time. The performance of the other Classes, which is shown in the table below, will differ because the Classes have different ongoing fees. The performance information in the bar chart does not reflect the deduction of sales charges; if these amounts were reflected, returns would be less than shown. The Fund's returns in the table include the maximum applicable sales charge for each Class and assume you sold your shares at the end of each period (unless otherwise noted). The Fund's past performance (before and after taxes) is not necessarily an indication of how the Fund will perform in the future. Updated performance information is available online at www.morganstanley.com/im or by calling toll-free (800) 548-7786.

Annual Total Returns—Calendar Years

High Quarter				6/30/09					21.01	%
Low Quarter				9/30/08					–17.97	%

Average Annual Total Returns For Periods Ended
December 31, 2013

	Past 1 Year			Past 5 Years			Past 10 Years
Class A: Return Before Taxes		11.65	%		13.95	%		9.88	%
Return After Taxes on Distributions¹		8.34	%		12.63	%		7.85	%
Return After Taxes on Distributions and Sale of Fund Shares		9.24	%		11.41	%		8.18	%
Class B²: Return Before Taxes		11.74	%		14.06	%		10.07	%*
Class L: Return Before Taxes		17.04	%		14.42	%		9.71	%

	Past 1 Year			Past 5 Years			Past 10 Years
Class I: Return Before Taxes		18.08	%		15.47	%		10.76	%
Dow Jones Brookfield Global Infrastructure Index^SM (reflects no deduction for fees, expenses or taxes)³		15.89	%		18.22	%		13.16	%
S&P Global BMI Index (reflects no deduction for fees, expenses or taxes)⁴		24.12	%		16.30	%		8.23	%

* 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 December 31, 2006. Prior to December 31, 2006, the conversion feature was suspended because the annual total operating expense ratio of Class B was lower than that of Class A.

(1) These returns do not reflect any tax consequences from a sale of your shares at the end of each period, but they do reflect any applicable sales charges on such a sale.

(2) Class B shares commenced operations on April 29, 1988. On December 8, 2006, all then-existing Class B shares of the Fund (Pre-Conversion Class B) were converted into Class Q shares. Performance information for Class B prior to December 8, 2006 reflects the performance of the Pre-Conversion Class B shares.

(3) The Dow Jones Brookfield Global Infrastructure Index^SM is a float-adjusted market capitalization weighted index that measures the stock performance of companies that exhibit strong infrastructure characteristics. The Index intends to measure all sectors of the infrastructure market. The Index was first published in July 2008; however, back-tested hypothetical performance information is available for this Index and is reflected for this Index in the table for periods prior to July 2008. It is not possible to invest directly in an index.

(4) The Standard & Poor's Global BMI Index (S&P Global BMI Index) is a broad market index designed to capture exposure to equities in all countries in the world that meet minimum size and liquidity requirements. As of the date of this Prospectus, there are approximately 11,000 index members representing 26 developed and 20 emerging market countries. It is not possible to invest directly in an index.

returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns may be higher than before-tax returns due to foreign tax credits and/or an assumed benefit from capital losses that would have been realized had Fund shares been sold at the end of the relevant periods, as applicable.

Fund Management

Adviser. Morgan Stanley Investment Management Inc.

Sub-Advisers. Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company.

Portfolio Managers. The Fund is managed by members of the Global Infrastructure Securities team. Information about the members jointly and primarily responsible for the day-to-day management of the Fund is shown below:

Name	Title with Adviser	Date Began Managing Fund
Theodore R. Bigman	Managing Director	March 2010
Matthew King	Managing Director	March 2010

Purchase and Sale of Fund Shares

The Fund is currently closed to new investors. Class A, Class L and Class I shareholders of the Fund may purchase additional Class A, Class L and Class I shares, respectively. The Class B shareholders of the Fund do not have the option of purchasing additional Class B shares. However, the existing Class B shareholders may invest through dividend reinvestments.

The minimum initial investment generally is $5 million for Class I shares and $1,000 for each of Class A and Class L shares of the Fund. The minimum investment requirements may be waived for certain investments. For more information, please refer to the section of this Prospectus entitled "Shareholder Information—How to Buy Shares—Minimum Investment Amounts."

You can purchase or sell Fund shares by contacting your Morgan Stanley Financial Advisor or other authorized third-party, such as a broker, dealer or other financial intermediary

that has entered into a selling agreement with the Fund's "Distributor," Morgan Stanley Distribution, Inc. (each a "Financial Intermediary"). You can also purchase or sell Class I and Class L shares directly from the Fund by mail (c/o Boston Financial Data Services, Inc., P.O. Box 219804, Kansas City, MO 64121-9804) or by telephone ((800) 548-7786). In addition, you can sell Fund shares at any time by enrolling in a systematic withdrawal plan. Your shares will be sold at the next price calculated after we receive your order to redeem. If you sell Class B shares, your net sale proceeds are reduced by the amount of any applicable CDSC. For more information, please refer to the sections of this Prospectus entitled "Shareholder Information—How to Buy Shares" and "—How to Sell Shares."

To contact a Morgan Stanley Financial Advisor, call toll-free 1-866-MORGAN8 for the telephone number of the Morgan Stanley office nearest you or access our office locator at www.morganstanley.com.

Tax Information

The Fund intends to make distributions that may be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account.

Payments to Broker-Dealers and Other Financial Intermediaries

If you purchase Fund shares through a Financial Intermediary (such as a bank), the Adviser and/or the Distributor may pay the Financial Intermediary for the sale of Fund shares and related services. These payments, which may be significant in amount, may create a conflict of interest by influencing the Financial Intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your Financial Intermediary's web site for more information.

Fund Details

Additional Information about the Fund's Investment Objective, Strategies and Risks

Investment Objective

Morgan Stanley Global Infrastructure Fund seeks to provide both capital appreciation and current income.

Growth and Income

An investment objective having the goal of selecting securities with the potential to rise in price and pay out income.

Principal Investment Strategies

The Fund will normally invest at least 80% of its assets in equity securities issued by companies located throughout the world that are engaged in the infrastructure business. A company will be considered to be in the infrastructure business if it derives at least 50% of its revenues or earnings from, or devotes at least 50% of its assets to, infrastructure-related activities. Infrastructure refers to the systems and networks of energy, transportation, communication and other services required for the normal function of society. Companies in the infrastructure business may be involved in a variety of areas, including, but not limited to, (i) the transmission, distribution, storage or transportation of electricity, oil and gas (and other bulk liquid products), water, and other natural resources used to produce energy, (ii) the construction and operation of renewable power facilities, (iii) the development, ownership, lease, concession, or management of highways, toll roads, tunnels, bridges, pipelines, airports, marine ports, refueling and related facilities, (iv) the provision of communications, including the development, lease, concession, or management of telephone, broadcast and mobile towers, fiber optic/copper cable, and satellite networks, (v) waste-water management and water purification/desalination and (vi) the construction or operation of essential public structures. The Fund's equity investments may include convertible securities. The Fund's investments may include securities of small and medium capitalization companies. The Fund may invest up to 100% of its net assets in foreign securities, which may include emerging market securities. Under normal market conditions, the Fund invests at least 40% of its assets in the securities of issuers located outside of the United States.

Additional Investment Strategy Information

This section provides additional information relating to the Fund's investment strategies.

Other Investments. The remaining 20% of the Fund's assets may be invested in fixed-income securities, equity securities of companies not engaged in the infrastructure business, U.S. government securities issued or guaranteed as to principal and interest, by the U.S. Government or its agencies or instrumentalities, and asset-backed securities. The Fund may also invest in real estate investment trusts ("REITs") and foreign real estate companies. The Fund may invest up to 5% of its assets in fixed-income securities and convertible securities rated below investment grade (commonly known as "junk bonds").

Fixed-Income Securities. Fixed-income securities include debt securities such as bonds, notes or commercial paper. The issuer of a debt security borrows money from the investor who buys the security. Most debt securities pay either fixed or adjustable rates of interest at regular intervals until they mature, at which point investors get their principal back. The Fund's fixed-income investments may include zero coupon securities, which are purchased at a discount and generally accrue interest, but make no payment until maturity.

U.S. Government Securities. The U.S. government securities that the Fund may purchase include U.S. Treasury bills, notes and bonds, all of which are direct obligations of the U.S. Government. In addition, the Fund may purchase securities issued by agencies and instrumentalities of the U.S. Government which are backed by the full faith and credit of the United States. The Fund may also purchase securities issued by agencies and instrumentalities which are not backed by the full faith and credit of the United States, but whose issuing agency or instrumentality has the right to borrow, to meet its obligations, from the U.S. Treasury. Further, the Fund may purchase securities issued by agencies and instrumentalities which are backed solely by the credit of the issuing agency or instrumentality.

Asset-Backed Securities. The Fund may invest in asset-backed securities. Asset-backed securities represent an interest in a pool of assets, such as a pool of power generation assets or other infrastructure assets or infrastructure-related assets, that have been securitized in pass-through structures. These types of pass-through securities provide for monthly payments that are a "pass-through" of the monthly interest and principal payments made by the individual borrowers on the pooled receivables.

REITs and Foreign Real Estate Companies. The Fund may invest in REITs and foreign real estate companies, which are similar to entities organized and operated as REITs in the United States. REITs and foreign real estate companies pool investors' funds for investments primarily in real estate properties or real estate-related loans. They may also include, among other businesses, real estate developers, brokers and operating companies whose products and services are significantly related to the real estate industry such as building suppliers and mortgage lenders.

Defensive Investing. The Fund may take temporary "defensive" positions in attempting to respond to adverse market, economic, political or other conditions. The Fund may invest any amount of its assets in cash, cash equivalents or other fixed-income securities in a defensive posture that may be inconsistent with the Fund's principal investment strategies when the Adviser and/or the Sub-Advisers believe it is advisable to do so. Although taking a defensive posture is designed to protect the Fund from an anticipated market downturn, it could have the effect of reducing the benefit from any upswing in the market. When the Fund takes a defensive position, it may not achieve its investment objective.

***

The percentage limitations relating to the composition of the Fund's portfolio apply at the time the Fund acquires an investment. Subsequent percentage changes that result from market fluctuations will generally not require the Fund to sell any portfolio security. However, the Fund may be required to reduce its borrowings, if any, in response to fluctuations in the value of such holdings. Except for the Fund's policy to concentrate its assets in the infrastructure industry, the Fund may change its principal investment strategies without shareholder approval; however, you would be notified of any changes.

Principal Risks

There is no assurance that the Fund will achieve its investment objective. The Fund's share price and return will fluctuate with changes in the market value of the Fund's portfolio securities. When you sell Fund shares, they may be worth less than what you paid for them and, accordingly, you can lose money investing in this Fund.

Infrastructure Industry. By concentrating its investments in the infrastructure industry, the Fund has greater exposure to the potential adverse economic, regulatory, political and other changes affecting companies operating within such industry. Companies within the infrastructure industry are subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction and improvement programs, high leverage, costs associated with compliance with and changes in environmental and other regulations, difficulty in raising capital in adequate amounts and on reasonable terms in periods of high inflation and unsettled capital markets or government budgetary constraints that impact publicly funded projects, the effects of economic slowdown or recession and surplus capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies and other factors.

Additionally, companies within the infrastructure industry may be subject to regulation by various government authorities and may also be affected by government regulation of rates charged to customers, service interruption or legal challenges due to environmental, operational or other mishaps and the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards; technological innovations that may render existing plants, equipment or products obsolete, unforeseen delays, accidents, and cost overruns in infrastructure projects. Any market price movements, regulatory or technological changes, or economic conditions affecting infrastructure-related companies may have a significant impact on the Fund's performance. Other factors that may affect the operations of companies within the infrastructure industry include innovations in technology that could render the way in which a company delivers a product or service obsolete, significant changes to the number of ultimate end-users of a company's products, inexperience with and potential losses resulting from a developing deregulatory environment, increased susceptibility to terrorist attacks, risks of environmental damage due to a company's operations or an accident, and general changes in market sentiment towards infrastructure and utilities assets.

Companies operating in the infrastructure industry face operating risks, including the risk of fire, explosions, leaks, mining and drilling accidents or other catastrophic events. If any of these operating risks occur, it could cause substantial losses to the given infrastructure company. In addition, natural risks, such as earthquakes, floods, lightning, hurricanes, tsunamis and wind, are inherent risks in infrastructure company operations. For example, extreme weather patterns, such as Hurricane Ivan in 2004 and Hurricanes Katrina and Rita in 2005, the Tohuku earthquake and resulting tsunami in Japan in 2011, could result in substantial damage to the facilities of certain companies located in the affected areas and such extreme weather patterns, or the threat thereof, could adversely impact the prices of the securities in which the Fund invests. This volatility may create fluctuations in commodity prices and earnings of companies in the infrastructure industry.

Common Stock and Other Equity Securities. A principal risk of investing in the Fund is associated with its investments in common stock and other equity securities. In general, prices of common stock and other equity securities are more volatile than those of fixed-income securities. The prices of common stock and other equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions.

Investments in convertible securities subject the Fund to the risks associated with both fixed-income securities and common stocks. To the extent that a convertible security's investment value is greater than its conversion value, its price will be likely to increase when interest rates fall and decrease when interest rates rise, as with a fixed-income security. If the conversion value exceeds the investment value, the price of the convertible security will tend to fluctuate directly with the price of the underlying equity security. The Fund may invest up to 5% of its net assets in convertible securities rated below investment grade (commonly known as "junk bonds").

Small and Medium Capitalization Companies. The Fund's investments in small and medium capitalization companies carry more risk than investments in larger companies. While some of the Fund's holdings in these companies may be listed on a national securities exchange, such securities are more likely to be traded in the over-the-counter market. The low market liquidity of these securities may have an adverse impact on the Fund's ability to sell certain securities at favorable prices and may also make it difficult for the Fund to obtain market quotations based on actual trades for purposes of valuing the Fund's securities. Investing in lesser-known, small and medium capitalization

companies involves greater risk of volatility of the Fund's NAV than is customarily associated with larger, more established companies. Often small and medium capitalization companies and the industries in which they are focused are still evolving and, while this may offer better growth potential than larger, more established companies, it also may make them more sensitive to changing market conditions.

Foreign and Emerging Market Securities. The Fund's investments in foreign securities involve risks that are in addition to the risks associated with domestic securities. One additional risk is currency risk. While the price of Fund shares is quoted in U.S. dollars, the Fund may convert U.S. dollars to a foreign market's local currency to purchase a security in that market. If the value of that local currency falls relative to the U.S. dollar, the U.S. dollar value of the foreign security will decrease. This is true even if the foreign security's local price remains unchanged.

Foreign securities also have risks related to economic and political developments abroad, including expropriations, confiscatory taxation, exchange control regulation, limitations on the use or transfer of Fund assets and any effects of foreign social, economic or political instability. Foreign companies, in general, are not subject to the regulatory requirements of U.S. companies and, as such, there may be less publicly available information about these companies. Moreover, foreign accounting, auditing and financial reporting standards generally are different from those applicable to U.S. companies. Finally, in the event of a default of any foreign debt obligations, it may be more difficult for the Fund to obtain or enforce a judgment against the issuers of the securities.

Securities of foreign issuers may be less liquid than comparable securities of U.S. issuers and, as such, their price changes may be more volatile. In addition, the prices of such securities may be susceptible to influence by large traders, due to the limited size of many foreign securities markets. Moreover, investments in certain foreign markets, which have historically been considered stable, may become more volatile and subject to increased risk due to ongoing developments and changing conditions in such markets. Also, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions. Furthermore, foreign exchanges and broker-dealers are generally subject to less government and exchange scrutiny and regulation than their U.S. counterparts. In addition, differences in clearance and settlement procedures in foreign markets may cause delays in settlement of the Fund's trades effected in those markets and could result in losses to the Fund due to subsequent declines in the value of the securities subject to the trades.

The foreign securities in which the Fund may invest may be issued by issuers located in emerging market or developing countries. Compared to the United States and other developed countries, emerging market or developing countries may have relatively unstable governments, economies based on only a few industries and securities markets that trade a small number of securities. Securities issued by companies located in these countries tend to be especially volatile and may be less liquid than securities traded in developed countries. In the past, securities in these countries have been characterized by greater potential loss than securities of companies located in developed countries.

Certain foreign markets may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments, the imposition of economic sanctions against a particular country or countries, organizations, entities and/or individuals, changes in international trading patterns, trade barriers, and other protectionist or retaliatory measures. Economic sanctions could, among other things, effectively restrict or eliminate the Fund's ability to purchase or sell securities or groups of securities for a substantial period of time, and may make the Fund's investments in such securities harder to value. International trade barriers or economic sanctions against foreign countries, organizations, entities and/or individuals, may adversely affect the Fund's foreign holdings or exposures. Investments in foreign markets may also be adversely affected by governmental actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets, or the imposition of punitive taxes. Governmental actions can have a significant effect on the economic conditions in foreign countries, which also may adversely affect the value and liquidity of the Fund's investments. For example, the governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain sectors or industries. In addition, a foreign government may limit or cause delay in the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. Any of these actions could severely affect security prices, impair the Fund's ability to purchase or sell foreign securities or transfer the Fund's assets back into the U.S., or otherwise adversely affect the Fund's operations. Certain foreign investments may become less liquid in response to market developments or adverse investor perceptions, or become illiquid after purchase by the Fund, particularly during periods of market turmoil. Certain foreign investments may become illiquid when, for instance, there are few, if any, interested buyers and sellers or when dealers are unwilling to make a market for certain securities. When the Fund holds illiquid investments, its portfolio may be harder to value.

Liquidity. The Fund's investments in illiquid securities may entail greater risk than investments in publicly traded securities. These securities may be more difficult to sell, particularly in times of market turmoil. Additionally, the market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. Illiquid securities may be more difficult to value. If the Fund is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

Other Risks. The performance of the Fund also will depend on whether or not the Adviser and/or Sub-Advisers are successful in applying the Fund's investment strategies. The Fund is also subject to other risks from its permissible investments, including the risks associated with its investments in convertible securities (discussed above) and fixed-income securities, including U.S. government securities, asset-backed securities and REITs and foreign real estate companies. For more information about these risks, see the section of this Prospectus entitled "Additional Risk Information" below.

Additional Risk Information

This section provides additional information relating to the risks of investing in the Fund.

including the potential for periods of volatility and increased redemptions. The Fund may face a heightened level of risk, especially since the Federal Reserve Board has begun tapering its quantitative easing program and may begin to raise rates. The Fund is not limited as to the maturities of the securities in which it may invest. Securities with longer durations are likely to be more sensitive to changes in interest rates, generally making them more volatile than securities with shorter durations. Zero coupon securities (which are purchased at a discount and generally accrue interest, but make no payments until maturity) are typically subject to greater price fluctuations than comparable securities that pay current interest. The Fund may invest up to 5% of its net assets in fixed income securities rated below investment grade and these investments may have speculative characteristics. Lower rated fixed-income securities have greater volatility because there is less certainty that principal and interest payments will be made as scheduled.

U.S. Government Securities. U.S. government securities are subject to market and interest rate risk, as well as varying degrees of credit risk. Some U.S. government securities are issued or guaranteed by the U.S. Treasury and are supported by the full faith and credit of the United States (but not issued by the U.S. Treasury). These securities may have less credit risk than U.S. government securities not supported by the full faith and credit of the United States. With respect to U.S. government securities that are not backed by the full faith and credit of the United States, there is a risk that the U.S. Government will not provide financial support to such U.S. government agencies, instrumentalities or sponsored entities if it is not obligated to do so by law.

Asset-Backed Securities. Asset-backed securities involve the risk that various federal and state consumer laws and other legal, regulatory and economic factors may result in the collateral backing the securities being insufficient to support payment on the securities. Asset-backed securities generally decrease in value as a result of interest rate increases, but may benefit less than other fixed-income securities from declining interest rates, principally because of prepayments. Prepayments may increase during a period of declining interest rates although other factors, such as changes in power usage or alternative power generation, may also influence prepayment rates.

REITs and Foreign Real Estate Companies. REITs and foreign real estate companies generally derive their income from rents on the underlying properties or interest on the underlying loans, and their value is impacted by changes in the value of the underlying property or changes in interest rates affecting the underlying loans owned by the REITs and/or foreign real estate companies. REITs and foreign real estate companies are more susceptible to risks associated with the ownership of real estate and the real estate industry in general. These risks can include fluctuations in the value of underlying properties; defaults by borrowers or tenants; market saturation; changes in general and local economic conditions; decreases in market rates for rents; increases in competition, property taxes, capital expenditures or operating expenses; and other economic, political or regulatory occurrences affecting the real estate industry. In addition, REITs and foreign real estate companies depend upon specialized management skills, may not be diversified (which may increase the volatility of a REIT's and/or foreign real estate company's value), may have less trading volume and may be subject to more abrupt or erratic price movements than the overall securities market. Foreign real estate companies may be subject to laws, rules and regulations governing those entities and their failure to comply with those laws, rules and regulations could negatively impact the performance of those entities. Operating REITs and foreign real estate companies requires specialized management skills and the Fund indirectly bears REIT and foreign real estate company management expenses along with the direct expenses of the Fund. REITs may also be subject to heavy cash flow dependency, default by borrowers and self-liquidation. REITs are generally not taxed on income distributed to shareholders provided they comply with several requirements of the Internal Revenue Code of 1986, as amended (the "Code"). REITs are subject to the risk of failing to qualify for tax-free pass-through income under the Code.

Portfolio Holdings

A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Fund's SAI.

Morgan Stanley Investment Management Inc.

The Adviser, together with its affiliated asset management companies, had approximately $382 billion in assets under management or supervision as of March 31, 2014.

Fund Management

The Fund has retained the Adviser—Morgan Stanley Investment Management Inc.—to provide investment advisory services. The Adviser is a wholly-owned subsidiary of Morgan Stanley (NYSE: "MS"), a preeminent global financial services firm engaged in securities trading and brokerage activities, as well as providing investment banking, research and analysis, financing and financial advisory services. The Adviser's address is 522 Fifth Avenue, New York, NY 10036.

The Adviser has entered into sub-advisory agreements with the Sub-Advisers—Morgan Stanley Investment Management Limited ("MSIM Limited") and Morgan Stanley Investment Management Company ("MSIM Company"). The Sub-Advisers are wholly owned subsidiaries of Morgan Stanley. The Sub-Advisers provide the Fund with investment advisory services subject to the overall supervision of the Adviser and the Fund's Trustees. The Adviser pays compensation, if any, to the Sub-Advisers on a monthly basis. The compensation paid is a portion of the net advisory fees the Adviser receives from the Fund. MSIM Limited's address is 25 Cabot Square, Canary Wharf, London, E14 4QA, England and MSIM Company's address is 23 Church Street, 16-01 Capital Square, Singapore 049481.

The Fund is managed by members of the Global Infrastructure Securities team. Current members of the team jointly and primarily responsible for the day-to-day management of the Fund are Theodore R. Bigman and Matthew King.

Mr. Bigman has been associated with the Adviser in an investment management capacity since 1995. Mr. King has been associated with the Adviser in an investment management capacity since 2008.

Together the team determines the investment strategy, establishes asset-allocation frameworks and directs the implementation of investment strategy.

The Fund's SAI provides additional information about the portfolio managers' compensation structure, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in the Fund.

The composition of the team may change from time to time.

The Fund pays the Adviser a monthly advisory fee as full compensation for the services and facilities furnished to the Fund, and for Fund expenses assumed by the Adviser. The fee is based on the Fund's average daily net assets. For the fiscal year ended December 31, 2013, the Fund paid total investment

advisory compensation (net of affiliated rebates, if applicable) amounting to 0.57% of the Fund's average daily net assets.

A discussion regarding the Board of Trustees' approval of the investment advisory agreement and the sub-advisory agreements are available in the Fund's Semi-Annual Report to Shareholders for the period ended June 30, 2013.

Shareholder Information

Pricing Fund Shares

The price of Fund shares (excluding sales charges), called NAV, is based on the value of the Fund's portfolio securities. While the assets of each Class are invested in a single portfolio of securities, the NAV of each Class will differ because the Classes have different ongoing distribution fees.

The NAV per share of the Fund is determined once daily at the New York Stock Exchange ("NYSE") close (normally 4:00 p.m. Eastern time) on each day that the NYSE is open. Shares will not be priced on days that the NYSE is closed.

The value of the Fund's portfolio securities is based on the securities' market price when available. When a market price is not readily available, including circumstances under which the Adviser and/or the Sub-Advisers determine that a security's market price is not accurate, a portfolio security is valued at its fair value, as determined under procedures established by the Fund's Board of Trustees.

In these cases, the Fund's NAV will reflect certain portfolio securities' fair value rather than their market price. Fair value pricing involves subjective judgment and it is possible that the fair value determined for a security is materially different than the value that could be realized upon the sale of that security. With respect to securities that are primarily listed on foreign exchanges, the value of the Fund's portfolio securities may change on days when you will not be able to purchase or sell your shares.

To the extent the Fund invests in open-end management companies (other than exchange-traded funds) that are registered under the Investment Company Act of 1940, as amended ("Investment Company Act"), the Fund's NAV is calculated based upon the NAV of such funds. The prospectuses for such funds explain the circumstances under which they will use fair value pricing and its effects.

An exception to the Fund's general policy of using market prices concerns its short-term debt portfolio securities. Debt securities with remaining maturities of 60 days or less at the time of purchase are valued at amortized cost. However, if the cost does not reflect the securities' market value, these securities will be valued at their fair value.

How to Buy Shares

The Fund is currently closed to new investors. Class A, Class L and Class I shareholders of the Fund may purchase additional Class A, Class L and Class I shares, respectively. Class B shares of the Fund are closed to new investments. The Class B shareholders of the Fund do not have the option of purchasing additional Class B shares. However, the existing Class B shareholders may invest through dividend reinvestments.

Because every investor has different immediate financial needs and long-term investment goals, the Fund currently offers investors three Classes of shares: Classes A, L and I. Class I shares are only offered to a limited group of investors. Class Q shares (described in a separate prospectus) of the Fund are closed to new investments, except for dividend reinvestments. Each Class of shares offers a distinct structure of sales charges, distribution and service fees, and other features that are designed to address a variety of needs. Your Financial Intermediary can help you decide which Class may be most appropriate for you. When purchasing Fund shares, you must specify which Class of shares you wish to purchase.

EasyInvest^®

A purchase plan that allows you to transfer money automatically from your checking or savings account or from a Morgan Stanley Money Market Fund on a semi-monthly, monthly or quarterly basis. Contact your Morgan Stanley Financial Advisor for further information about this service.

Minimum Investment Amounts. The minimum investment amounts for Class A shares and Class L shares are as follows:

	Minimum Investment
Investment Options	Initial			Additional
Regular Account	$	1,000		$	100
Individual Retirement Account	$	1,000		$	100
EasyInvest^®(Automatically from your checking or savings account or Morgan Stanley Money Market Fund)	$	100	*	$	100	*

* Provided your schedule of investments totals $1,000 in 12 months.

The minimum investment amount generally is $5 million for Class I shares. To be eligible to purchase Class I shares, you must qualify under one of the investor categories specified in the "Shareholder Information—Share Class Arrangements" section of this Prospectus.

The minimum initial and additional investment may be waived for the following categories: (1) sales through banks, broker-dealers and other financial institutions (including registered investment advisers and financial planners) purchasing shares on behalf of their clients in (i) discretionary and non-discretionary advisory programs, (ii) fund supermarkets, (iii) asset allocation programs, (iv) other programs in which the client pays an asset-based fee for advice or for executing transactions in Fund shares or for otherwise participating in the program or (v) certain other investment programs that do not charge an asset-based fee; (2) qualified state tuition plans described in Section 529 of the Code and donor-advised charitable gift funds (subject to all applicable terms and conditions); (3) defined contribution, defined benefit and other employer-sponsored employee benefit plans, whether or not

qualified under the Code; (4) certain retirement and deferred compensation programs established by Morgan Stanley Investment Management or its affiliates for their employees or the Fund's Trustees; (5) current or retired directors, officers and employees of Morgan Stanley and any of its subsidiaries, such persons' spouses, and children under the age of 21, and trust accounts for which any of such persons is a beneficiary; (6) current or retired Directors or Trustees of the Morgan Stanley Funds, such persons' spouses, and children under the age of 21, and trust accounts for which any of such persons is a beneficiary; (7) certain other registered open-end investment companies whose shares are distributed by the Distributor; (8) investments made in connection with certain mergers and/or reorganizations as approved by the Adviser; (9) the reinvestment of dividends in additional Fund shares; or (10) certain other institutional investors based on assets under management or other considerations at the discretion of the Adviser.

Contacting a Morgan Stanley Financial Advisor

If you are new to the Morgan Stanley Funds and would like to contact a Morgan Stanley Financial Advisor, call toll-free 1-866-MORGAN8 for the telephone number of the Morgan Stanley office nearest you. You may also access our office locator on our Internet site at: www.morganstanley.com

Purchasing Shares Through a Financial Intermediary. You may open a new account and purchase Fund shares through your Financial Intermediary. Your Financial Intermediary will assist you with the procedures to invest in shares of the Fund. Your Financial Intermediary may charge transaction-based or other fees in connection with the purchase or sale of Fund shares. Please consult your Financial Intermediary for more information regarding any such fees and for purchase instructions.

Purchasing Class I and Class L Shares Directly From the Fund.

Initial Purchase by Mail. You may open a new account, subject to acceptance by the Fund, and purchase Class I and Class L shares by completing and signing a New Account Application provided by Boston Financial Data Services, Inc. (the "Transfer Agent"), which you can obtain by calling the Transfer Agent at (800) 548-7786 (our automated telephone system (which is generally accessible 24 hours a day, seven days a week)) and mailing it to Morgan Stanley Global Infrastructure Fund, c/o Boston Financial Data Services, Inc., P.O. Box 219804, Kansas City, MO 64121-9804 together with a check payable to Morgan Stanley Global Infrastructure Fund.

Initial Purchase by Wire. You may purchase Class I and Class L shares by wiring Federal Funds (monies credited by a Federal Reserve Bank) to State Street Bank and Trust Company (the "Custodian"). You must forward a completed New Account Application to the Transfer Agent in advance of the wire by following the instructions under "Initial Purchase by Mail." You should

instruct your bank to send a Federal Funds wire in a specified amount to the Custodian using the following wire instructions:

State Street Bank and Trust Company
One Lincoln Street
Boston, MA 02111-2101
ABA #011000028
DDA #99060238
Attn: Morgan Stanley Funds Subscription Account
Ref: (Fund Name, Account Number, Account Name)

Additional Investments. You may purchase additional Fund shares for your account at any time by contacting your Financial Intermediary, or, in the case of Class I and Class L shares, by contacting the Fund directly. For additional Class I and/or Class L share purchases directly from the Fund, you should write a "letter of instruction" that includes your account name, account number, the Fund name and the Class selected, signed by the account owner(s), to assure proper crediting to your account. The letter must be mailed along with a check in accordance with the instructions under "Initial Purchase by Mail." Instead of a letter you may mail a check along with the payment stub attached to the bottom portion of your account statement. You may also purchase additional Class I and Class L shares by wire by following the instructions under "Initial Purchase by Wire."

General. To help the U.S. Government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. What this means to you: when you open an account, we will ask your name, address, date of birth and other information that will allow us to identify you. If we are unable to verify your identity, we reserve the right to restrict additional transactions and/or liquidate your account at the next calculated NAV after your account is closed (less any applicable sales/account charges and/or tax penalties) or take any other action required by law. In accordance with federal law requirements, the Fund has implemented an anti-money laundering compliance program, which includes the designation of an anti-money laundering compliance officer.

When you buy Fund shares, the shares will be purchased at the next share price calculated (plus any applicable sales charge for Class A shares) after we receive your purchase order. Your payment is due on the third business day after you place your purchase order. We reserve the right to reject any order for the purchase of Fund shares for any reason.

How to Exchange Shares

Permissible Fund Exchanges. You may exchange shares of any Class of the Fund for the same Class of shares of Morgan Stanley European Equity Fund Inc., Morgan Stanley Global Fixed Income Opportunities Fund, Morgan Stanley Limited Duration U.S. Government Trust, Morgan Stanley Mortgage Securities Trust, Morgan Stanley Multi Cap Growth Trust and Morgan Stanley U.S. Government Securities Trust (each, a "Morgan Stanley Retail Fund"), if available, without the imposition of an exchange fee. You may also exchange shares of any Class of the Fund for the same Class of shares of any portfolio of Morgan Stanley Institutional Fund, Inc. ("MSIF") or Morgan Stanley Institutional Fund Trust ("MSIFT" and, collectively with MSIF and the Morgan Stanley Retail Funds, the "Morgan Stanley Multi-Class Funds"), if available, without the imposition of an exchange fee. Front-end sales charges (loads) are

not imposed on exchanges of Class A shares. Class B shares of the Fund may be exchanged for Class B shares of any Morgan Stanley Retail Fund even though Class B shares are closed to investors. In addition, you may exchange shares of any Class of the Fund for shares of Morgan Stanley California Tax-Free Daily Income Trust, Morgan Stanley Liquid Asset Fund Inc., Morgan Stanley New York Municipal Money Market Trust, Morgan Stanley Tax-Free Daily Income Trust and Morgan Stanley U.S. Government Money Market Trust (each, a "Morgan Stanley Money Market Fund" and, together with the Morgan Stanley Multi-Class Funds, the "Morgan Stanley Funds") or for Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, if available, without the imposition of an exchange fee. Class B shares of the Fund that are exchanged for shares of a Morgan Stanley Money Market Fund or Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust may be subsequently re-exchanged for Class B shares of the Fund or any other Morgan Stanley Retail Fund (even though Class B shares are closed to investors). If you purchased Fund shares through a Financial Intermediary, certain Morgan Stanley Funds may be unavailable for exchange. Contact your Financial Intermediary to determine which Morgan Stanley Funds are available for exchange.

Exchange Procedures. You can process an exchange by contacting your Financial Intermediary. You may also write the Transfer Agent or call toll-free (800) 548-7786 to place an exchange order.

Exchange requests received on a business day prior to the time shares of the funds involved in the request are priced will be processed on the date of receipt. "Processing" a request means that shares of the Fund which you are exchanging will be redeemed and shares of the Morgan Stanley Fund that you are purchasing will be purchased at the NAV per share next determined on the date of receipt. Exchange requests received on a business day after the time that shares of the funds involved in the request are priced will be processed on the next business day in the manner described herein.

The Fund may terminate or revise the exchange privilege upon required notice or in certain cases without notice. See "Limitations on Exchanges." The check writing privilege is not available for Morgan Stanley Money Market Fund shares you acquire in an exchange.

Telephone Exchanges. Morgan Stanley and its subsidiaries, the Transfer Agent, and the Fund employ procedures considered by them to be reasonable to confirm that instructions communicated by telephone are genuine. Such procedures may include requiring certain personal identification information prior to acting upon telephone instructions, tape-recording telephone communications and providing written confirmation of instructions communicated by telephone. If reasonable procedures are employed, none of Morgan Stanley, the Transfer Agent or the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. Telephone exchanges may not be available if you cannot reach the Transfer Agent by telephone, whether because all telephone lines are busy or for any other reason; in such case, a shareholder would have to use the Fund's other exchange procedures described in this section.

Industry and Financial Markets Association recommends that the securities markets close early, the Fund may close early and purchase orders received after such earlier closing times will be processed the following business day. During periods of drastic economic or market changes, it is possible that the telephone exchange procedures may be difficult to implement, although this has not been the case with the Fund in the past.

You automatically have the telephone exchange privilege unless you indicate otherwise by checking the applicable box on the New Account Application. You may also opt out of telephone privileges at any time by contacting the Transfer Agent at (800) 548-7786. If you hold share certificates, no exchanges may be processed until we have received all applicable share certificates.

Margin Accounts. If you have pledged your Fund shares in a margin account, contact your Financial Intermediary regarding restrictions on the exchange of such shares.

Tax Considerations of Exchanges. If you exchange shares of the Fund for shares of another Morgan Stanley Fund, there are important tax considerations. For tax purposes, the exchange out of the Fund is considered a sale of Fund shares—and the exchange into the other fund is considered a purchase. As a result, you may realize a capital gain or loss.

You should review the "Shareholder Information—Tax Consequences" section and consult your own tax professional about the tax consequences of an exchange.

Limitations on Exchanges. Certain patterns of past exchanges and/or purchase or sale transactions involving the Fund or other Morgan Stanley Funds may result in the Fund rejecting, limiting or prohibiting, at its sole discretion, and without prior notice, additional purchases and/or exchanges and may result in a shareholder's account being closed. Determinations in this regard may be based on the frequency or dollar amount of previous exchanges or purchase or sale transactions. The Fund reserves the right to reject an exchange request for any reason.

CDSC Calculations on Exchanges. See the "Shareholder Information—Share Class Arrangements" section of this Prospectus for a discussion of how applicable CDSCs are calculated for shares of one Morgan Stanley Fund that are exchanged for shares of another.

For further information regarding exchange privileges, you should contact your Financial Intermediary or call toll-free (800) 548-7786.

How to Sell Shares

You can sell some or all of your Fund shares at any time. If you sell Class B shares, your net sale proceeds are reduced by the amount of any applicable CDSC. Your shares will be sold at the next price calculated after we receive your order to sell as described below.

Options				Procedures
Contact Your Morgan Stanley Financial Advisor/Financial Intermediary				To sell your shares, simply call your Financial Intermediary. Payment will be sent to the address to which the account is registered or deposited in your brokerage account. Your Financial Intermediary may charge transaction-based or other fees in connection with the purchase or sale of the Fund's shares. Please contact your Financial Intermediary for more information regarding any such fees. Except for Class A shareholders that hold shares through a conversion from Class B shares, Class A shareholders transact in Fund shares solely through Financial Intermediaries and cannot sell shares directly with the Fund.
Contact the Fund By Telephone				You can also sell your Class I, Class B and/or Class L shares by telephone and have the proceeds sent to the address of record or wired to your bank account on record. You automatically have the telephone redemption privilege unless you indicate otherwise by checking the applicable box on the New Account Application. You may also opt out of telephone privileges at any time by contacting the Transfer Agent at (800) 548-7786. Before processing a telephone redemption, keep the following information in mind: n You can establish this option at the time you open the account by completing the New Account Application or subsequently by calling toll-free (800) 548-7786. n Call toll-free (800) 548-7786 to process a telephone redemption using our automated telephone system which is generally accessible 24 hours a day, seven days a week. n Your request must be received prior to market close, generally 4:00 p.m. Eastern time. n If your account has multiple owners, the Transfer Agent may rely on the instructions of any one owner. n Proceeds must be made payable to the name(s) and address in which the account is registered. You may redeem amounts of $50,000 or less daily if the proceeds are to be paid by check or by Automated Clearing House. n This privilege is not available if the address on your account has changed within 15 calendar days prior to your telephone redemption request. n Telephone redemption is available for most accounts other than accounts with shares represented by certificates. If you request to sell shares that were recently purchased by check, the proceeds of that sale may not be sent to you until it has been verified that the check has cleared, which may take up to 15 calendar days from the date of purchase.

Options				Procedures
Contact the Fund By Telephone (continued)				Morgan Stanley and its subsidiaries, the Transfer Agent and the Fund employ procedures considered by them to be reasonable to confirm that instructions communicated by telephone are genuine. Such procedures may include requiring certain personal identification information prior to acting upon telephone instructions, tape-recording telephone communications and providing written confirmation of instructions communicated by telephone. If reasonable procedures are employed, none of Morgan Stanley, the Transfer Agent or the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. Telephone redemptions may not be available if a shareholder cannot reach the Transfer Agent by telephone, whether because all telephone lines are busy or for any other reason; in such case, a shareholder would have to use the Fund's other redemption procedures described in this section.
Contact the Fund By Letter				You can also sell your Class I, Class B and/or Class L shares by writing a "letter of instruction" that includes: n the name on your account and account number; n the name of the Fund; n the dollar amount or the number of shares you wish to sell; n the Class of shares you wish to sell; n the signature of each owner as it appears on the account; and n whether you wish to receive the redemption proceeds by check or by wire to the bank account we have on file for you. If you are requesting payment to anyone other than the registered owner(s) or that payment be sent to any address other than the address of the registered owner(s) or pre-designated bank account, you will need a signature guarantee. You can obtain a signature guarantee from an eligible guarantor acceptable to the Transfer Agent. (You should contact the Transfer Agent toll-free at (800) 548-7786 for a determination as to whether a particular institution is an eligible guarantor.) A notary public cannot provide a signature guarantee. Additional documentation may be required for shares held by a corporation, partnership, trustee or executor. Mail the letter to Boston Financial Data Services, Inc. at P.O. Box 219804, Kansas City, MO 64121-9804. If you hold share certificates, you must return the certificates, along with the letter and any required additional documentation. A check or wire will be sent according to your instructions.

Options				Procedures
Systematic Withdrawal Plan				If your investment in all of the Morgan Stanley Funds has a total market value of at least $10,000, you may elect to withdraw amounts of $25 or more, or in any whole percentage of a fund's balance (provided the amount is at least $25), on a monthly, quarterly, semi-annual or annual basis, from any fund with a balance of at least $1,000. Each time you add a fund to the plan, you must meet the plan requirements. Amounts withdrawn are subject to any applicable CDSC. A CDSC may be waived under certain circumstances. See the Class B waiver categories listed in the "Shareholder Information—Share Class Arrangements" section of this Prospectus. To sign up for the systematic withdrawal plan, contact your Morgan Stanley Financial Advisor or call toll-free (800) 548-7786. You may terminate or suspend your plan at any time. Please remember that withdrawals from the plan are sales of shares, not Fund "distributions," and ultimately may exhaust your account balance. The Fund may terminate or revise the plan at any time.

Payment for Sold Shares. After we receive your complete instructions to sell as described above, a check will be mailed to you or a wire will be sent to your bank within seven days, although we will attempt to make payment within one business day. Payment may also be sent to your brokerage account.

Payment may be postponed or the right to sell your shares suspended under unusual circumstances. If you request to sell shares that were recently purchased by check, the proceeds of the sale may not be sent to you until it has been verified that the check has cleared, which may take up to 15 calendar days from the date of purchase.

Payments-in-Kind. If we determine that it is in the best interest of the Fund not to pay redemption proceeds in cash, we may pay you partly or entirely by distributing to you securities held by the Fund. If the Fund redeems your shares in-kind, you will bear any market risks associated with the securities paid as redemption proceeds. Such in-kind securities may be illiquid and difficult or impossible for a shareholder to sell at a time and at a price that a shareholder would like. Redemptions paid in such securities generally will give rise to income, gain or loss for income tax purposes in the same manner as redemptions paid in cash. In addition, you may incur brokerage costs and a further gain or loss for income tax purposes when you ultimately sell the securities.

Tax Considerations. Normally, your sale of Fund shares is subject to federal and state income tax. You should review the "Shareholder Information—Tax Consequences" section of this Prospectus and consult your own tax professional about the tax consequences of a sale.

Reinstatement Privilege. If you sell Fund shares and have not previously exercised the reinstatement privilege, you may, within 35 days after the date of sale, invest any portion of the proceeds in the same Class of Fund shares at their NAV and receive a pro rata credit for any CDSC paid in connection with the sale.

shareholder, have a value below $100, or in the case of an account opened through EasyInvest®, if after 12 months the shareholder has invested less than $1,000 in the account. However, before the Fund sells your shares in this manner, we will notify you and allow you 60 days to make an additional investment in an amount that will increase the value of your account to at least the required amount before the sale is processed. No CDSC will be imposed on any involuntary sale.

Margin Accounts. If you have pledged your Fund shares in a margin account, contact your Financial Intermediary regarding restrictions on the sale of such shares.

Targeted
Dividends

You may select to have your Fund distributions automatically invested in other Classes of Fund shares or Classes of another Morgan Stanley Fund that you own. Contact your Morgan Stanley Financial Advisor for further information about this service.

Distributions

The Fund passes substantially all of its earnings from income and capital gains along to its investors as "distributions." The Fund earns income from stocks and interest from fixed-income investments. These amounts are passed along to Fund shareholders as "income dividend distributions." The Fund realizes capital gains whenever it sells securities for a higher price than it paid for them. These amounts may be passed along as "capital gain distributions."

The Fund declares income dividends separately for each Class. Distributions paid on Class A and Class I shares usually will be higher than for Class B and Class L shares because distribution fees that Class B and Class L shares pay are usually higher. Normally, income dividends are distributed to shareholders semi-annually. Capital gains, if any, are usually distributed in June and December. The Fund, however, may retain and reinvest any long-term capital gains. The Fund may at times make payments from sources other than income or capital gains that represent a return of a portion of your investment. These payments would not be taxable to you as a shareholder, but would have the effect of reducing your basis in the Fund.

Distributions are reinvested automatically in additional shares of the same Class and automatically credited to your account, unless you request in writing that all distributions be paid in cash. If you elect the cash option, the Fund will mail a check to you no later than seven business days after the distribution is declared. However, if you purchase Fund shares through a Financial Intermediary within three business days prior to the record date for the distribution, the distribution will automatically be paid to you in cash, even if you did not request to receive all distributions in cash. No interest will accrue on uncashed checks. If you wish to change how your distributions are paid, your request should be received by the Transfer Agent at least five business days prior to the record date of the distributions.

Frequent Purchases and Redemptions of Fund Shares

interference with the efficient management of the Fund's portfolio, increased brokerage and administrative costs, incurring unwanted taxable gains and forcing the Fund to hold excess levels of cash.

In addition, the Fund is subject to the risk that market-timers and/or short-term traders may take advantage of time zone differences between the foreign markets on which the Fund's portfolio securities trade and the time the Fund's NAV is calculated ("time-zone arbitrage"). For example, a market-timer may purchase shares of the Fund based on events occurring after foreign market closing prices are established, but before the Fund's NAV calculation, that are likely to result in higher prices in foreign markets the following day. The market-timer would redeem the Fund's shares the next day when the Fund's share price would reflect the increased prices in foreign markets for a quick profit at the expense of long-term Fund shareholders.

Investments in other types of securities also may be susceptible to short-term trading strategies. These investments include securities that are, among other things, thinly traded, traded infrequently or relatively illiquid, which have the risk that the current market price for the securities may not accurately reflect current market values. A shareholder may seek to engage in short-term trading to take advantage of these pricing differences (referred to as "price arbitrage"). Investments in certain fixed-income securities, such as high yield bonds, may be adversely affected by price arbitrage trading strategies.

The Fund's policies with respect to valuing portfolio securities are described in "Shareholder Information—Pricing Fund Shares."

The Fund discourages and does not accommodate frequent purchases and redemptions of Fund shares by Fund shareholders and the Fund's Board of Trustees has adopted policies and procedures with respect to such frequent purchases and redemptions. The Fund's policies with respect to purchases, redemptions and exchanges of Fund shares are described in the "Shareholder Information—How to Buy Shares," "—How to Exchange Shares" and "—How to Sell Shares" sections of this Prospectus. Except as described in each of these sections, and with respect to trades that occur through omnibus accounts, at intermediaries, as described below, the Fund's policies regarding frequent trading of Fund shares are applied uniformly to all shareholders. With respect to trades that occur through omnibus accounts at intermediaries, such as investment managers, broker-dealers, transfer agents and third-party administrators, the Fund (i) requests assurance that such intermediaries currently selling Fund shares have in place internal policies and procedures reasonably designed to address market-timing concerns and has instructed such intermediaries to notify the Fund immediately if they are unable to comply with such policies and procedures and (ii) requires all prospective intermediaries to agree to cooperate in enforcing the Fund's policies (or, upon prior written approval only, an intermediary's own policies) with respect to frequent purchases, redemptions and exchanges of Fund shares.

Omnibus accounts generally do not identify customers' trading activity to the Fund on an individual ongoing basis. Therefore, with respect to trades that occur through omnibus accounts at Financial Intermediaries, to some extent, the Fund relies on the Financial Intermediary to monitor frequent short-term trading within the Fund by the Financial Intermediary's customers. However, the Fund or the Distributor has entered into agreements with Financial Intermediaries whereby Financial Intermediaries are required to provide certain customer identification and transaction information upon the Fund's request. The Fund may use this information to help identify and prevent market-timing activity in the Fund. There can be no assurance that the Fund will be able to identify or prevent all market-timing activities.

Tax Consequences

As with any investment, you should consider how your Fund investment will be taxed. The tax information in this Prospectus is provided as general information. You should consult your own tax professional about the tax consequences of an investment in the Fund.

Unless your investment in the Fund is through a tax-deferred retirement account, such as a 401(k) plan or IRA, you need to be aware of the possible tax consequences when:

n The Fund makes distributions; and

n You sell Fund shares, including an exchange to another Morgan Stanley Fund.

Taxes on Distributions. Your distributions are normally subject to federal and state income tax when they are paid, whether you take them in cash or reinvest them in Fund shares. A distribution also may be subject to local income tax. Any income dividend distributions and any short-term capital gain distributions are taxable to you as ordinary income. Any long-term capital gain distributions are taxable as long-term capital gains, no matter how long you have owned shares in the Fund.

If certain holding period requirements are met with respect to your shares, a portion of the income dividends you receive may be taxed at the same rate as long-term capital gains. However, even if income received in the form of income dividends is taxed at the same rates as long-term capital gains, such income will not be considered long-term capital gains for other federal income tax purposes. For example, you generally will not be permitted to offset income dividends with capital losses. Short-term capital gain distributions are taxed at ordinary income rates.

If more than 50% of the Fund's assets are invested in foreign securities at the end of any fiscal year, the Fund may elect to permit shareholders to take a credit (subject to certain limitations) or deduction on their federal income tax return for foreign taxes paid by the Fund. If the Fund makes such an election, the shareholders would also include the amount of such foreign taxes in their income.

You will be sent a statement (IRS Form 1099-DIV) by February of each year showing the taxable distributions paid to you in the previous year. The statement provides information on your dividends and any capital gains for tax purposes.

Taxes on Sales. Your sale of Fund shares normally is subject to federal and state income tax and may result in a taxable gain or loss to you. A sale also may be subject to local income tax. Your exchange of Fund shares for shares of another Morgan Stanley Fund is treated for tax purposes like a sale of your original shares and a purchase of your new shares. Thus, the exchange may, like a sale, result in a taxable gain or loss to you and will give you a new tax basis for your new shares.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds certain threshold amounts.

Shareholders who are not citizens or residents of the United States and certain foreign entities will generally be subject to withholding of U.S. tax of 30% on distributions made by the Fund of investment income and short-term capital gains.

With respect to taxable years of regulated investment companies beginning before January 1, 2014 (or a later date if extended by the U.S. Congress), dividends paid by the Fund to shareholders who are nonresident aliens or foreign entities that are derived from short-term capital gains and qualifying U.S. source net interest income (including income from original issue discount and market discount), if such dividends are reported by the Fund as "interest-related dividends" or "short-term capital gain dividends," will generally not be subject to U.S. withholding tax, provided that the income would not be subject to U.S. federal income tax if earned directly by the foreign shareholder. There can be no assurance that Congress will extend these provisions.

Due to recent legislation, the Fund (or its administrative agent) is required to report to the U.S. Internal Revenue Service ("IRS") and furnish to Fund shareholders the cost basis information for sale transactions of shares purchased on or after January 1, 2012. Shareholders may elect to have one of several cost basis methods applied to their account when calculating the cost basis of shares sold, including average cost, FIFO ("first-in, first-out") or some other specific identification method. Unless you instruct otherwise, the Fund will use average cost as its default cost basis method, and will treat sales as first coming from shares purchased prior to January 1, 2012. If average cost is used for the first sale of Fund shares covered by these new rules, the shareholder may only use an alternative cost basis method for shares purchased prospectively. Fund shareholders should consult with their tax advisors to determine the best cost basis method for their tax situation.

When you open your Fund account, you should provide your social security or tax identification number on your investment application. By providing this information, you will avoid being subject to federal backup withholding tax on taxable distributions and redemption proceeds at a rate of 28%. Any withheld amount would be sent to the IRS as an advance payment of your taxes due on your income.

Share Class Arrangements

The Fund offers several Classes of shares having different distribution arrangements designed to provide you with different purchase options according to your investment needs. Your Financial Intermediary can help you decide which Class may be appropriate for you.

The general public is offered two Classes: Class A shares and Class L shares, which differ principally in terms of sales charges and ongoing expenses. A third Class, Class B shares, is closed to new investments. The Class B shareholders of the Fund do not have the option of purchasing additional Class B shares. However, the existing Class B shareholders may invest through dividend reinvestments. A fourth Class, Class I shares, is offered only to a limited category of investors. A fifth Class, Class Q shares, is closed to new investments, except for dividend reinvestments. Shares that you acquire through reinvested distributions will not be subject to any front-end sales charge or CDSC.

Sales personnel may receive different compensation for selling each Class of shares. The sales charges applicable to each Class provide for the distribution financing of shares of that Class.

The chart below compares the sales charge and annual 12b-1 fee applicable to each Class offered under this Prospectus:

Class		Sales Charge	Maximum Annual 12b-1 Fee
	A	Maximum 5.25% initial sales charge reduced for purchases of $25,000 or more		0.25	%
	B	Maximum 5.00% CDSC during the first year decreasing to 0% after six years		1.00	%
	L	None		0.75	%
	I	None		None

While Class B and Class L shares do not have any front-end sales charges, their higher ongoing annual expenses (due to higher 12b-1 fees) mean that over time you could end up paying more for these shares than if you were to pay front-end sales charges for Class A shares.

Certain shareholders may be eligible for reduced sales charges (i.e., breakpoint discounts), CDSC waivers and eligibility minimums. Please see the information for each Class set forth below for specific eligibility requirements. You must notify your Financial Intermediary (or the Transfer Agent if you purchase shares directly through the Fund) at the time a purchase order (or in the case of Class B, a redemption order) is placed, that the purchase (or redemption) qualifies for a reduced sales charge (i.e., breakpoint discount), CDSC waiver or eligibility minimum. Similar notification must be made in writing when an order is placed by mail. The reduced sales charge, CDSC waiver or eligibility minimum will not be granted if: (i) notification is not furnished at the time of order; or (ii) a review of the records of your Financial Intermediary or the Transfer Agent does not confirm your represented holdings.

In order to obtain a reduced sales charge (i.e., breakpoint discount) or to meet an eligibility minimum, it may be necessary at the time of purchase for you to inform your Financial Intermediary (or the Transfer Agent if you purchase shares directly through the Fund) of the existence of other accounts in which there are holdings eligible to be aggregated to meet the sales load breakpoints or eligibility minimums. In order to verify your eligibility, you may be required to provide account statements and/or confirmations regarding shares of the Fund or other Morgan Stanley Funds held in all related accounts described below at your Financial Intermediary, as well as shares held by related parties, such as members of the same family or household, in order to determine whether you have met a sales load breakpoint or eligibility minimum. The Fund makes available, in a clear and prominent format, free of charge, on its web site, www.morganstanley.com, information regarding applicable sales loads, reduced sales charges (i.e., breakpoint discounts), sales load waivers and eligibility minimums. The web site includes hyperlinks that facilitate access to the information.

CLASS A SHARES Class A shares are sold at NAV plus an initial sales charge of up to 5.25% of the public offering price. The initial sales charge is reduced for purchases of $25,000 or more according to the schedule below. Investments of $1 million or more are not subject to an initial sales charge. Class A shares are also subject to a distribution and shareholder services (12b-1) fee of up to 0.25% of the average daily net assets of the Class. The maximum annual 12b-1 fee payable by Class A shares is lower than the maximum annual 12b-1 fee payable by Class B or Class L shares.

Front-End Sales Charge or FSC

An initial sales charge you pay when purchasing Class A shares that is based on a percentage of the offering price. The percentage declines based upon the dollar value of Class A shares you purchase. We offer three ways to reduce your Class A sales charges—the Combined Purchase Privilege, Right of Accumulation and Letter of Intent.

The offering price of Class A shares includes a sales charge (expressed as a percentage of the public offering price) on a single transaction as shown in the following table:

	Front-End Sales Charge
Amount of Single Transaction	Percentage of Public Offering Price			Approximate Percentage of Net Amount Invested
Less than $25,000		5.25	%		5.54	%
$25,000 but less than $50,000		4.75	%		4.99	%
$50,000 but less than $100,000		4.00	%		4.17	%
$100,000 but less than $250,000		3.00	%		3.09	%
$250,000 but less than $500,000		2.50	%		2.56	%
$500,000 but less than $1 million		2.00	%		2.04	%
$1 million and over		0.00	%		0.00	%

You may benefit from a reduced sales charge schedule (i.e., breakpoint discount) for purchases of Class A shares of the Fund, by combining, in a single transaction, your purchase with purchases of Class A shares of the Fund by the following related accounts ("Related Accounts"):

n A single account (including an individual, a joint account, a trust or fiduciary account).

n A family member account (limited to spouse, and children under the age of 21, but including trust accounts established solely for the benefit of a spouse, or children under the age of 21).

n An UGMA/UTMA account.

n Pension, profit sharing or other employee benefit plans of companies and their affiliates.

n Employer sponsored and individual retirement accounts (including IRAs, Roth IRAs, Keogh, 401(k), 403(b), 408(k) and 457(b) plans).

n Tax-exempt organizations.

n Groups organized for a purpose other than to buy mutual fund shares.

Combined Purchase Privilege. You will have the benefit of a reduced sales charge by combining your purchase of Class A shares of the Fund in a single transaction with your purchase of Class A shares of any other Morgan Stanley Multi-Class Fund for any Related Account.

Right of Accumulation. You may benefit from a reduced sales charge if the cumulative NAV of Class A shares of the Fund purchased in a single transaction, together with the NAV of any Class A shares of the Fund and any other Morgan Stanley Multi-Class Fund (including shares of Morgan Stanley Money Market Funds and Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust which you acquired in an exchange from Class A shares of the Fund or Class A shares of another Morgan Stanley Multi-Class Fund) held in Related Accounts, amounts to $25,000 or more.

Notification. You must notify your Financial Intermediary (or the Transfer Agent, if you purchase shares directly through the Fund) at the time a purchase order is placed, that the purchase qualifies for a reduced sales charge under any of the privileges discussed above. Similar notification must be

made in writing when an order is placed by mail. The reduced sales charge will not be granted if: (i) notification is not furnished at the time of the order; or (ii) a review of the records of your Financial Intermediary or the Transfer Agent does not confirm your represented holdings.

In order to obtain a reduced sales charge for Class A shares of the Fund under any of the privileges discussed above, it may be necessary at the time of purchase for you to inform your Financial Intermediary (or the Transfer Agent, if you purchase shares directly through the Fund) of the existence of other Related Accounts in which there are holdings eligible to be aggregated to meet the sales load breakpoint and/or right of accumulation threshold. In order to verify your eligibility, you may be required to provide account statements and/or confirmations regarding your purchases and/or holdings of any Class A shares of the Fund or any other Morgan Stanley Multi-Class Fund (including shares of Morgan Stanley Money Market Funds and Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust which you acquired in an exchange from Class A shares of the Fund or any other Morgan Stanley Multi-Class Fund) held in all Related Accounts at your Financial Intermediary, in order to determine whether you have met the sales load breakpoint and/or right of accumulation threshold.

Letter of Intent. The above schedule of reduced sales charges for larger purchases also will be available to you if you enter into a written "Letter of Intent." A Letter of Intent provides for the purchase of Class A shares of the Fund and Class A shares of other Morgan Stanley Multi-Class Funds within a 13-month period. The initial purchase of Class A shares of the Fund under a Letter of Intent must be at least 5% of the stated investment goal. The Letter of Intent does not preclude the Fund (or any other Morgan Stanley Multi-Class Fund) from discontinuing sales of its shares. To determine the applicable sales charge reduction, you may also include (1) the cost of Class A shares of the Fund or any other Morgan Stanley Multi-Class Fund which were previously purchased at a price including a front-end sales charge during the 90-day period prior to the Distributor receiving the Letter of Intent and (2) the historical cost of shares of any Morgan Stanley Money Market Fund or Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust which you acquired in an exchange from Class A shares of the Fund or any other Morgan Stanley Multi Class Fund purchased during that period at a price including a front-end sales charge. You may also combine purchases and exchanges by any Related Accounts during such 90-day period. You should retain any records necessary to substantiate historical costs because the Fund, the Transfer Agent and your Financial Intermediary may not maintain this information. You can obtain a Letter of Intent by contacting your Financial Intermediary or by calling toll-free (800) 548-7786. If you do not achieve the stated investment goal within the 13-month period, you are required to pay the difference between the sales charges otherwise applicable and sales charges actually paid, which may be deducted from your investment. Shares acquired through reinvestment of dividends and other distributions are not aggregated to achieve the stated investment goal.

Other Sales Charge Waivers. In addition to investments of $1 million or more, your purchase of Class A shares is not subject to a front-end sales charge if your account qualifies under one of the following categories:

n Sales through banks, broker-dealers and other financial institutions (including registered investment advisers and financial planners) purchasing shares on behalf of their clients in (i) discretionary and non-discretionary advisory programs, (ii) fund supermarkets, (iii) asset allocation programs, (iv) other programs in which the client pays an asset-based fee for advice or for executing transactions in Fund shares or for otherwise participating in the program or (v) certain other investment programs that do not charge an asset-based fee.

n Qualified state tuition plans described in Section 529 of the Code and donor-advised charitable gift funds (subject to all applicable terms and conditions).

n Defined contribution, defined benefit and other employer-sponsored employee benefit plans, whether or not qualified under the Code.

n Certain retirement and deferred compensation programs established by Morgan Stanley Investment Management or its affiliates for their employees or the Fund's Trustees.

n Current or retired Directors or Trustees of the Morgan Stanley Funds, such persons' spouses, and children under the age of 21, and trust accounts for which any of such persons is a beneficiary.

n Current or retired directors, officers and employees of Morgan Stanley and any of its subsidiaries, such persons' spouses, and children under the age of 21, and trust accounts for which any of such persons is a beneficiary.

n Certain other registered open-end investment companies whose shares are distributed by the Distributor.

n Investments made in connection with certain mergers and/or reorganizations as approved by the Adviser.

n The reinvestment of dividends from Class A shares in additional Class A shares of the Fund.

Contingent Deferred Sales Charge or CDSC

A fee you pay when you sell shares of certain Morgan Stanley Funds purchased without an initial sales charge. This fee declines the longer you hold your shares as set forth in the table.

CLASS B SHARES Class B shares of the Fund are closed to new investments. The Class B shareholders of the Fund do not have the option of purchasing additional Class B shares. However, the existing Class B shareholders may invest through dividend reinvestments.

Class B shares are not subject to an initial sales charge but are subject to a CDSC, as set forth in the table below. For the purpose of calculating the CDSC, shares are deemed to have been purchased on the last day of the month during which they were purchased.

Year Since Purchase Payment Made	CDSC as a Percentage of Amount Redeemed
First		5.0	%
Second		4.0	%
Third		3.0	%
Fourth		2.0	%
Fifth		2.0	%
Sixth		1.0	%
Seventh and thereafter		None

The CDSC is assessed on an amount equal to the lesser of the then market value of the shares or the historical cost of the shares (which is the amount actually paid for the shares at the time of original purchase) being redeemed. Accordingly, no sales charge is imposed on increases in NAV above the initial purchase price. In determining whether a CDSC applies to a redemption, it is assumed that the shares being redeemed first are any shares in the shareholder's Fund account that are not subject to a CDSC, followed by shares held the longest in the shareholder's account.

Financial Intermediaries may impose a limit on the dollar value of a Class B share purchase order that they will accept. You should discuss with your Financial Intermediary which share class is most appropriate for you, based on the size of your investment, your expected time horizon for holding the shares and other factors, bearing in mind the availability of reduced sales loads on Class A share purchases that qualify for such reduction under the combined purchase privilege or right of accumulation privilege available on Class A share purchases.

CDSC Waivers. A CDSC, if otherwise applicable, will be waived in the case of:

n Sales of shares held at the time you die or become disabled (within the definition in Section 72(m)(7) of the Code, which relates to the ability to engage in gainful employment), if the shares are: (i) registered either in your individual name or in the names of you and your spouse as joint tenants with right of survivorship; (ii) registered in the name of a trust of which (a) you are the settlor and that is revocable by you (i.e., a "living trust") or (b) you and your spouse are the settlors and that is revocable by you or your spouse (i.e., a "joint living trust"); or (iii) held in a qualified corporate or self-employed retirement plan, IRA or 403(b) Custodial Account; provided in each case that the sale is requested within one year after your death or initial determination of disability.

n Sales in connection with the following retirement plan "distributions": (i) lump-sum or other distributions from a qualified corporate or self-employed retirement plan following retirement (or, in the case of a "key employee" of a "top heavy" plan, following attainment of age 59 ¹/₂); (ii) required minimum distributions and certain other distributions (such as those following attainment of age 59 ¹/₂) from an IRA or 403(b) Custodial Account; or (iii) a tax-free return of an excess IRA contribution (a "distribution" does not include a direct transfer of IRA, 403(b) Custodial Account or retirement plan assets to a successor custodian or trustee).

n Sales of shares in connection with the systematic withdrawal plan of up to 12% annually of the value of each fund from which plan sales are made. The percentage is determined on the date you establish the systematic withdrawal plan and based on the next calculated share price. You may have this CDSC waiver applied in amounts up to 1% per month, 3% per quarter, 6% semi-annually or 12% annually. Shares with no CDSC will be sold first, followed by those with the lowest CDSC. As such, the waiver benefit will be reduced by the amount of your shares that are not subject to a CDSC. If you suspend your participation in the plan, you may later resume plan payments without requiring a new determination of the account value for the 12% CDSC waiver.

Distribution Fee. Class B shares are subject to an annual distribution and shareholder services (12b-1) fee of up to 1.00% of the average daily net assets of Class B shares. The maximum annual 12b-1 fee payable by Class B shares is higher than the maximum annual 12b-1 fee payable by Class A and Class L shares.

Conversion Feature. After eight years, Class B shares generally will convert automatically to Class A shares of the Fund with no initial sales charge. The eight-year period runs from the last day of the month in which the shares were purchased or, in the case of Class B shares acquired through an exchange, from the last day of the month in which the original Class B shares were purchased; the shares will convert to Class A shares based on their relative NAVs in the month following the eight-year period. At the same time, an equal proportion of Class B shares acquired through automatically reinvested distributions will convert to Class A shares on the same basis. This conversion will be suspended during any period in which the expense ratio of the Class B shares of the Fund is lower than the expense ratio of the Class A shares of the Fund.

Exchanging Shares Subject to a CDSC. There are special considerations when you exchange Fund shares that are subject to a CDSC. When determining the length of time you held the shares and the corresponding CDSC rate, any period (starting at the end of the month) during which you held such shares will be counted. In addition, any period (starting at the end of the month) during which you held (i) shares of a Morgan Stanley Money Market Fund or (ii) Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, which you acquired in an exchange from such shares of the Fund, will also be counted; however, if you sell shares of such Morgan Stanley Money Market Fund or the Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust before the expiration of the CDSC "holding period," you will be charged the applicable CDSC rate.

For example, if you held Class B shares of the Fund for one year, exchanged to Class B of another Morgan Stanley Multi-Class Fund for another year, then sold your shares, a CDSC rate of 4% would be imposed on the shares based on a two-year holding period—one year for each fund. Similarly, if you had exchanged Class B shares of the Fund for shares of a Morgan Stanley Money Market Fund or Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, then sold your shares, a CDSC rate of 4% would be imposed on the shares based on a two-year holding period—one year for each fund.

CLASS L SHARES Class L shares are sold at NAV with no initial sales charge. Financial Intermediaries may impose a limit on the dollar value of a Class L share purchase order that they will accept. For example, a Morgan Stanley Financial Advisor generally will not accept purchase orders for Class L shares that in the aggregate amount to $250,000 or more. You should discuss with your Financial Intermediary which share class is most appropriate for you based on the size of your investment, your expected time horizon for holding the shares and other factors, bearing in mind the availability of reduced sales loads on Class A share purchases that qualify for such reduction under the combined purchase privilege or right of accumulation privilege available on Class A share purchases.

Distribution Fee. Class L shares are subject to an annual distribution and shareholder services (12b-1) fee of up to 0.75% of the average daily net assets of that Class. The maximum annual 12b-1 fee payable by Class L shares is higher than the maximum annual 12b-1 fee payable by Class A shares. Unlike Class B shares, Class L shares have no conversion feature and, accordingly, an investor that purchases Class L shares may be subject to distribution and shareholder services (12b-1) fees applicable to Class L shares for as long as the investor owns such shares.

CLASS I SHARES Class I shares are offered without any sales charge on purchases or sales and without any distribution and shareholder services (12b-1) fee. Class I shares are offered only to investors meeting an initial investment minimum of $5 million and to the following categories:

n Qualified state tuition plans described in Section 529 of the Code and donor-advised charitable gift funds (subject to all applicable terms and conditions).

n Defined contribution, defined benefit and other employer-sponsored employee benefit plans, whether or not qualified under the Code.

n Certain other registered open-end investment companies whose shares are distributed by the Distributor.

n Investors who were shareholders of the Dean Witter Retirement Series on September 11, 1998 for additional purchases for their former Dean Witter Retirement Series accounts.

n Certain retirement and deferred compensation programs established by Morgan Stanley Investment Management or its affiliates for their employees or the Fund's Trustees.

n Current or retired Directors or Trustees of the Morgan Stanley Funds, such persons' spouses, and children under the age of 21, and trust accounts for which any of such persons is a beneficiary.

n Investments made in connection with certain mergers and/or reorganizations as approved by the Adviser.

n The reinvestment of dividends from Class I shares in additional Class I shares of the Fund.

Meeting Class I Eligibility Minimums. To meet the $5 million initial investment to qualify to purchase Class I shares you may combine: (1) purchases in a single transaction of Class I shares of the Fund and other Morgan Stanley Multi-Class Funds; and/or (2) previous purchases of Class A and Class I shares of Morgan Stanley Multi-Class Funds you currently own, along with shares of Morgan Stanley Funds you currently own that you acquired in exchange for those shares. Shareholders cannot combine purchases made by family members or a shareholder's other Related Accounts in a single transaction for purposes of meeting the $5 million initial investment minimum requirement to qualify to purchase Class I shares.

NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a cash payment representing an ordinary dividend or capital gain and you reinvest that amount in the applicable Class of shares by returning the check within 30 days of the payment date, the purchased shares would not be subject to an initial sales charge or CDSC.

PLAN OF DISTRIBUTION (RULE 12b-1 FEES) The Fund has adopted a Plan of Distribution in accordance with Rule 12b-1 under the Investment Company Act with respect to the Class A, Class B and Class L shares. (Class I shares are offered without any 12b-1 fee.) The Plan allows the Fund to pay distribution fees for the sale and distribution of these shares. It also allows the Fund to pay for services to shareholders of Class A, Class B and Class L shares. Because these fees are paid out of the Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and reduce your return in these Classes and may cost you more than paying other types of sales charges.

Additional Information

The Adviser and/or Distributor may pay compensation (out of their own funds and not as an expense of the Fund) to Morgan Stanley Smith Barney LLC or other Financial Intermediaries or service providers in connection with the sale, distribution, marketing or retention of Fund shares and/or shareholder servicing. Such compensation may be significant in amount and the prospect of receiving any such additional compensation may provide Morgan Stanley Smith Barney LLC or such other Financial Intermediary with an incentive to favor sales of shares of the Fund over other investment options. Any such payments will not change the NAV or the price of the Fund's shares. For more information, please see the Fund's SAI.

Financial Highlights

The financial highlights tables are intended to help you understand the Fund's financial performance for the periods indicated. Certain information reflects financial results for a single Fund share throughout each period. The total returns in the table represent the rate an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). The ratio of expenses to average net assets listed in the tables below for each class of shares of the Fund are based on the average net assets of the Fund for each of the periods listed in the tables. To the extent that the Fund's average net assets decrease over the Fund's next fiscal year, such expense ratios can be expected to increase, potentially significantly, because certain fixed costs will be spread over a smaller amount of assets.

This information for the years ended December 31, 2013, December 31, 2012 and December 31, 2011 has been audited by Ernst & Young LLP, an independent registered public accounting firm, whose report, along with the Fund's financial statements, is incorporated by reference in the SAI from the Fund's annual report, which is available upon request. The financial highlights for each of the years in the two-year period ended December 31, 2010 have been audited by another independent registered public accounting firm.

CLASS A SHARES

For the Year Ended December 31,	2013			2012			2011			2010^			2009^
Selected Per Share Data:
Net asset value, beginning of period	$	7.64		$	7.07		$	6.37		$	6.16		$	5.46
Income from investment operations:
Net investment income⁽¹⁾		0.16			0.17			0.15			0.15			0.17
Net realized and unrealized gain		1.16			1.12			0.88			0.27			0.74
Total income from investment operations		1.32			1.29			1.03			0.42			0.91
Less dividends and distributions from:
Net investment Income		(0.17	)		(0.17	)		(0.16	)		(0.21	)		(0.21	)
Net realized gain		(0.91	)		(0.55	)		(0.17	)		—			—
Total dividends and distributions		(1.08	)		(0.72	)		(0.33	)		(0.21	)		(0.21	)
Net asset value, end of period	$	7.88		$	7.64		$	7.07		$	6.37		$	6.16
Total Return⁽²⁾		17.78	%		18.45	%		16.27	%		6.84	%		16.97	%
Ratios to Average Net Assets:
Net expenses		1.13	%⁽³⁾		1.11	%⁽³⁾⁽⁴⁾		1.14	%⁽³⁾⁽⁴⁾		1.18	%⁽³⁾⁽⁴⁾		1.22	%⁽³⁾⁽⁴⁾
Net investment income		1.92	%⁽³⁾		2.28	%⁽³⁾⁽⁴⁾		2.24	%⁽³⁾⁽⁴⁾		2.44	%⁽³⁾⁽⁴⁾		3.08	%⁽³⁾⁽⁴⁾
Rebate from Morgan Stanley affiliate		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾
Supplemental Data:
Net assets, end of period, in thousands	$	88,821		$	88,330		$	86,249		$	89,082		$	102,344
Portfolio turnover rate		25	%		28	%		36	%		149	%		382	%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.

(3) 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."

(4) Reflects overall Fund ratios for investment income and non-class specific expenses.

(5) Amount is less than 0.005%.

Financial Highlights (Continued)

CLASS B SHARES

For the Year Ended December 31,	2013			2012			2011			2010^			2009^
Selected Per Share Data:
Net asset value, beginning of period	$	7.85		$	7.24		$	6.50		$	6.26		$	5.54
Income from investment operations:
Net investment income⁽¹⁾		0.09			0.12			0.10			0.10			0.13
Net realized and unrealized gain		1.19			1.14			0.90			0.28			0.75
Total income from investment operations		1.28			1.26			1.00			0.38			0.88
Less dividends and distributions from:
Net investment income		(0.08	)		(0.10	)		(0.09	)		(0.14	)		(0.16	)
Net realized gain		(0.91	)		(0.55	)		(0.17	)		—			—
Total dividends and distributions		(0.99	)		(0.65	)		(0.26	)		(0.14	)		(0.16	)
Net asset value, end of period	$	8.14		$	7.85		$	7.24		$	6.50		$	6.26
Total Return⁽²⁾		16.74	%		17.53	%		15.35	%		6.21	%		16.04	%
Ratios to Average Net Assets:
Net expenses		1.94	%⁽³⁾		1.86	%⁽³⁾⁽⁴⁾		1.89	%⁽³⁾⁽⁴⁾		1.93	%⁽³⁾⁽⁴⁾		1.97	%⁽³⁾⁽⁴⁾
Net investment income		1.05	%⁽³⁾		1.53	%⁽³⁾⁽⁴⁾		1.49	%⁽³⁾⁽⁴⁾		1.69	%⁽³⁾⁽⁴⁾		2.33	%⁽³⁾⁽⁴⁾
Rebate from Morgan Stanley affiliate		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾
Supplemental Data:
Net assets, end of period, in thousands	$	1,343		$	2,054		$	3,022		$	5,618		$	9,174
Portfolio turnover rate		25	%		28	%		36	%		149	%		382	%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) 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) Amount is less than 0.005%.

CLASS L SHARES

For the Year Ended December 31,	2013			2012			2011			2010^			2009^
Selected Per Share Data:
Net asset value, beginning of period	$	7.73		$	7.14		$	6.44		$	6.21		$	5.51
Income from investment operations:
Net investment income⁽¹⁾		0.11			0.12			0.12			0.10			0.13
Net realized and unrealized gain		1.17			1.13			0.87			0.28			0.75
Total income from investment operations		1.28			1.25			0.99			0.38			0.88
Less dividends and distributions from:
Net investment income		(0.12	)		(0.11	)		(0.12	)		(0.15	)		(0.18	)
Net realized gain		(0.91	)		(0.55	)		(0.17	)		—			—
Total dividends and distributions		(1.03	)		(0.66	)		(0.29	)		(0.15	)		(0.18	)
Net asset value, end of period	$	7.98		$	7.73		$	7.14		$	6.44		$	6.21
Total Return⁽²⁾		17.04	%		17.70	%		15.42	%		6.17	%		16.18	%
Ratios to Average Net Assets:
Net expenses		1.68	%⁽³⁾		1.85	%⁽³⁾⁽⁴⁾		1.68	%⁽³⁾⁽⁴⁾		1.93	%⁽³⁾⁽⁴⁾		1.97	%⁽³⁾⁽⁴⁾
Net investment income		1.36	%⁽³⁾		1.54	%⁽³⁾⁽⁴⁾		1.70	%⁽³⁾⁽⁴⁾		1.69	%⁽³⁾⁽⁴⁾		2.33	%⁽³⁾⁽⁴⁾
Rebate from Morgan Stanley affiliate		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾
Supplemental Data:
Net assets, end of period, in thousands	$	6,938		$	7,254		$	7,275		$	7,642		$	10,517
Portfolio turnover rate		25	%		28	%		36	%		149	%		382	%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. Effective February 25, 2013, Class C shares were renamed Class L shares, Class C shares held for less than one year were subject to 10% contingent deferred sales charge. The contingent deferred sales charge on Class L shares was eliminated effective February 25, 2013.

(4) Reflects overall Fund ratios for investment income and non-class specific expenses.

(5) Amount is less than 0.005%.

Financial Highlights (Continued)

CLASS I SHARES

For the Year Ended December 31,	2013			2012			2011			2010^			2009^
Selected Per Share Data:
Net asset value, beginning of period	$	7.59		$	7.02		$	6.34		$	6.12		$	5.43
Income from investment operations:
Net investment income⁽¹⁾		0.18			0.19			0.17			0.17			0.18
Net realized and unrealized gain		1.15			1.12			0.86			0.27			0.74
Total income from investment operations		1.33			1.31			1.03			0.44			0.92
Less dividends and distributions from:
Net investment income		(0.19	)		(0.19	)		(0.18	)		(0.22	)		(0.23	)
Net realized gain		(0.91	)		(0.55	)		(0.17	)		—			—
Total dividends and distributions		(1.10	)		(0.74	)		(0.35	)		(0.22	)		(0.23	)
Net asset value, end of period	$	7.82		$	7.59		$	7.02		$	6.34		$	6.12
Total Return⁽²⁾		18.08	%		18.88	%		16.33	%		7.33	%		17.14	%
Ratios to Average Net Assets:
Net expenses		0.87	%⁽³⁾		0.86	%⁽³⁾⁽⁴⁾		0.89	%⁽³⁾⁽⁴⁾		0.93	%⁽³⁾⁽⁴⁾		0.97	%⁽³⁾⁽⁴⁾
Net investment income		2.19	%⁽³⁾		2.53	%⁽³⁾⁽⁴⁾		2.49	%⁽³⁾⁽⁴⁾		2.69	%⁽³⁾⁽⁴⁾		3.33	%⁽³⁾⁽⁴⁾
Rebate from Morgan Stanley affiliate		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾
Supplemental Data:
Net assets, end of period, in thousands	$	2,642		$	2,245		$	2,108		$	3,963		$	2,950
Portfolio turnover rate		25	%		28	%		36	%		149	%		382	%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) 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) Amount is less than 0.005%.

Notes

Additional information about the Fund's investments is available in the Fund's Annual and Semi-Annual Reports to Shareholders. In the Fund's Annual Report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year.

The Fund's Statement of Additional Information also provides additional information about the Fund. The Statement of Additional Information is incorporated herein by reference (legally is part of this Prospectus). For a free copy of the Fund's Annual Report, Semi-Annual Report or Statement of Additional Information, to request other information about the Fund or to make shareholder inquiries, please call toll-free (800) 548-7786. Free copies of these documents are also available from our Internet site at: www.morganstanley.com/im.

You also may obtain information about the Fund by calling your Financial Intermediary or by visiting our Internet site.

Information about the Fund (including the Statement of Additional Information) can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 551-8090. Shareholder reports and other information about the Fund are available on the EDGAR Database on the SEC's Internet site at: http://www.sec.gov, and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-1520.

(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-5415)

Morgan Stanley Distribution, Inc., member FINRA.

INVESTMENT MANAGEMENT

Morgan Stanley

Global Infrastructure

Fund

Prospectus

April 30, 2014

UTLPRO

September 18, 2014

Supplement

SUPPLEMENT DATED SEPTEMBER 18, 2014 TO THE PROSPECTUS OF
MORGAN STANLEY GLOBAL INFRASTRUCTURE FUND
CLASS Q
Dated April 30, 2014

The Board of Trustees (the "Board") of Morgan Stanley Global Infrastructure Fund (the "Fund") approved an Agreement and Plan of Reorganization by and between the Fund and Morgan Stanley Institutional Fund, Inc., on behalf of its series Select Global Infrastructure Portfolio ("MSIF Select Global Infrastructure"), pursuant to which substantially all of the assets and liabilities of the Fund would be transferred to MSIF Select Global Infrastructure and shareholders of the Fund would become shareholders of MSIF Select Global Infrastructure, receiving shares of MSIF Select Global Infrastructure equal to the value of their holdings in the Fund (the "Reorganization"). Class Q shareholders of the Fund would receive Class A shares of MSIF Select Global Infrastructure. The Reorganization is subject to the approval of shareholders of the Fund at a special meeting of shareholders scheduled to be held during the first quarter of 2015. A proxy statement formally detailing the proposal, the reasons for the Reorganization and information concerning MSIF Select Global Infrastructure is expected to be distributed to shareholders of the Fund during the first quarter of 2015.

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.

UTLQSPT-0914

INVESTMENT MANAGEMENT

Morgan Stanley
Global Infrastructure
Fund

Prospectus Class Q

April 30, 2014

A mutual fund that seeks to provide both capital appreciation and current income.

Share Class				Ticker Symbol
Class Q				UTLQX

Contents

Fund Summary

Investment Objective					1
Fees and Expenses					1
Portfolio Turnover					1
Principal Investment Strategies					1
Principal Risks					2
Past Performance					3
Fund Management					4
Purchase and Sale of Fund Shares					4
Tax Information					5
Payments to Broker-Dealers and Other Financial Intermediaries					5

Fund Details

Additional Information about the Fund's Investment Objective, Strategies and Risks					6
Portfolio Holdings					13
Fund Management					13

Shareholder Information

Pricing Fund Shares					15
How to Exchange Class Q Shares					16
How to Sell Class Q Shares					18
Distributions					20
Frequent Purchases and Redemptions of Fund Shares					21
Tax Consequences					22
Share Class Arrangements					24
Additional Information					26
Financial Highlights					27

This Prospectus contains important information about the Fund. Please read it carefully and keep it for future reference.

Fund Summary

Investment Objective

Morgan Stanley Global Infrastructure Fund (the "Fund") seeks to provide both capital appreciation and current income.

Fees and Expenses

The table below describes the fees and expenses that you may pay if you hold Class Q shares of the Fund.

Shareholder Fees (fees paid directly from your investment)

	Class Q
Maximum sales charge (load) imposed on purchases (as a percentage of offering price)		None
Maximum deferred sales charge (load) (as a percentage based on the lesser of the offering price or net asset value at redemption)		5.00	%¹

Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)

	Class Q
Advisory Fee		0.57	%
Distribution and/or Shareholder Service (12b-1) Fee		0.24	%
Other Expenses		0.30	%
Total Annual Fund Operating Expenses		1.11	%

Example

The example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund, your investment has a 5% return each year, and the Fund's operating expenses remain the same (except for the 10 year amounts for Class Q shares which reflect the conversion to Class A shares eight years after the end of the calendar month in which the

shares were purchased). Although your actual costs may be higher or lower, based on these assumptions your costs would be:

If You SOLD Your Shares:

1 Year				3 Years				5 Years				10 Years
$	613			$	653			$	812			$	1,352	*

If You HELD Your Shares:

1 Year				3 Years				5 Years				10 Years
$	113			$	353			$	612			$	1,352	*

* Does not reflect conversion to Class A shares eight years after the end of the calendar month in which shares were purchased. The conversion feature is currently suspended because the total annual operating expense ratio of Class Q is currently lower than that of Class A. See "Conversion Feature" for Class Q shares in "Shareholder Information—Share Class Arrangements" for more information.

(1) The contingent deferred sales charge ("CDSC") is scaled down to 1.00% during the sixth year, reaching zero thereafter. See "Shareholder Information—Share Class Arrangements" for a complete discussion of the CDSC.

Portfolio Turnover

Principal Investment Strategies

50% of its revenues or earnings from, or devotes at least 50% of its assets to, infrastructure-related activities. Infrastructure refers to the systems and networks of energy, transportation, communication and other services required for the normal function of society. Companies in the infrastructure business may be involved in a variety of areas, including, but not limited to, (i) the transmission, distribution, storage or transportation of electricity, oil and gas (and other bulk liquid products), water, and other natural resources used to produce energy, (ii) the construction and operation of renewable power facilities, (iii) the development, ownership, lease, concession, or management of highways, toll roads, tunnels, bridges, pipelines, airports, marine ports, refueling and related facilities, (iv) the provision of communications, including the development, lease, concession, or management of telephone, broadcast and mobile towers, fiber optic/copper cable, and satellite networks, (v) waste-water management and water purification/desalination and (vi) the construction or operation of essential public structures. The Fund's equity investments may include convertible securities. The Fund's investments may include securities of small and medium capitalization companies. The Fund may invest up to 100% of its net assets in foreign securities, which may include emerging market securities. Under normal market conditions, the Fund invests at least 40% of its assets in the securities of issuers located outside of the United States.

and countries, with an overweighting to those sectors/countries that offer the best relative valuation.

Principal Risks

There is no assurance that the Fund will achieve its investment objective and you can lose money investing in this Fund. The principal risks of investing in the Fund include:

• Infrastructure Industry. By concentrating its investments in the infrastructure industry, the Fund has greater exposure to the potential adverse economic, regulatory, political and other changes affecting companies operating within such industry. Companies within the infrastructure industry are subject to a variety of factors that may adversely affect their business or operations, including high interest costs in connection with capital construction and improvement programs, high leverage, costs associated with compliance with and changes in environmental and other regulations, difficulty in raising capital in adequate amounts and on reasonable terms in periods of high inflation and unsettled capital markets or government budgetary constraints that impact publicly funded projects, the effects of economic slowdown or recession and surplus capacity, increased competition from other providers of services, uncertainties concerning the availability of fuel at reasonable prices, the effects of energy conservation policies and other factors.

• Common Stock and Other Equity Securities. In general, prices of common stock and other equity securities are more

volatile than those of fixed-income securities. The prices of common stock and other equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions. To the extent that the Fund invests in convertible securities, and the convertible security's investment value is greater than its conversion value, its price will be likely to increase when interest rates fall and decrease when interest rates rise. If the conversion value exceeds the investment value, the price of the convertible security will tend to fluctuate directly with the price of the underlying equity security. The Fund's emphasis on industries may cause its performance to be more sensitive to developments affecting particular industries than a fund that places primary emphasis on individual companies.

• Liquidity. The Fund's investments in illiquid securities may entail greater risk than investments in publicly traded securities.

These securities may be more difficult to sell, particularly in times of market turmoil. Additionally, the market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. Illiquid securities may be more difficult to value. If the Fund is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss.

Shares of the Fund are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.

Past Performance

The bar chart and table below provide some indication of the risks of investing in the Fund by showing changes in the Fund's Class Q shares' performance from year-to-year and by showing how the Fund's average annual returns for the one, five and 10 year periods compare with those of a broad measure of market performance and a comparative sector index over time. The Fund's returns in the table include the maximum applicable sales charge and assume you sold your shares at the end of each period (unless otherwise noted). The Fund's past performance (before and after taxes) is not necessarily an indication of how the Fund will perform in the future. Updated performance information is available online at www.morganstanley.com/im or by calling toll-free (800) 548-7786.

Annual Total Returns—Calendar Years

Upon the consumation of the merger of the Morgan Stanley Global Utilities Fund into the Fund (the "Merger"), all then-existing Class B shares of the Fund (the "Pre-Conversion Class B") were converted into Class Q shares. For periods prior to December 8, 2006, the chart reflects the historical performance of the Pre-Conversion Class B.

High Quarter				6/30/09					20.95	%
Low Quarter				9/30/08					–17.98	%

Average Annual Total Returns For Periods Ended
December 31, 2013

	Past 1 Year			Past 5 Years			Past 10 Years
Class Q¹: Return Before Taxes	��	12.76	%		14.97	%		10.50	%*
Return After Taxes on Distributions²		9.33	%		13.65	%		8.32	%*
Return After Taxes on Distributions and Sale of Fund Shares		9.97	%		12.27	%		8.57	%*
Dow Jones Brookfield Global Infrastructure Index^SM (reflects no deduction for fees, expenses or taxes)³		15.89	%		18.22	%		13.16	%
S&P Global BMI Index (reflects no deduction for fees, expenses or taxes)⁴		24.12	%		16.30	%		8.23	%

(1) Class B shares commenced operations on April 29, 1988. On December 8, 2006, all then-existing Class B shares of the Fund (Pre-Conversion Class B) were converted into Class Q shares. Performance information for Class Q shares prior to December 8, 2006 reflects the performance of the Pre-Conversion Class B shares.

(2) These returns do not reflect any tax consequences from a sale of your shares at the end of each period, but they do reflect any applicable sales charges on such a sale.

The after-tax returns shown in the table above are calculated using the historical highest individual federal marginal income tax rates during the period shown and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns may be higher than before-tax returns due to foreign tax credits and/or an assumed benefit from capital losses that would have been realized had Fund shares been sold at the end of the relevant periods, as applicable.

Fund Management

Adviser. Morgan Stanley Investment Management Inc.

Sub-Advisers. Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company.

Name	Title with Adviser	Date Began Managing Fund
Theodore R. Bigman	Managing Director	March 2010
Matthew King	Managing Director	March 2010

Purchase and Sale of Fund Shares

Class Q shares of the Fund are closed to new investments. The Class Q shareholders of the Fund do not have the option of purchasing additional Class Q shares. However, the existing Class Q shareholders may invest through dividend reinvestments.

You can sell Fund shares by contacting your Morgan Stanley Financial Advisor or other authorized third-party, such as a broker, dealer or other financial intermediary that has entered into a selling agreement with the Fund's "Distributor," Morgan Stanley Distribution, Inc. (each a "Financial Intermediary"). You can also sell Class Q shares directly to the Fund by mail (c/o Boston Financial Data Services, Inc., P.O. Box 219804, Kansas City, MO 64121-9804) or by telephone ((800) 548-7786). In addition, you can sell Fund shares at any time by enrolling

in a systematic withdrawal plan. Your shares will be sold at the next price calculated after we receive your order to redeem. If you sell Class Q shares, your net sale proceeds are reduced by the amount of any applicable CDSC. For more information, please refer to the section of this Prospectus entitled "Shareholder Information—How to Sell Shares."

To contact a Morgan Stanley Financial Advisor, call toll-free 1-866-MORGAN8 for the telephone number of the Morgan Stanley office nearest you or access our office locator at www.morganstanley.com.

Tax Information

Payments to Broker-Dealers and
Other Financial Intermediaries

If you purchased Fund shares through a Financial Intermediary (such as a bank), the Adviser and/or the Distributor may pay the Financial Intermediary for the sale of Fund shares and related services. These payments, which may be significant in amount, may create a conflict of interest by influencing the Financial Intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your Financial Intermediary's web site for more information.

Fund Details

Additional Information about the Fund's Investment Objective, Strategies and Risks

Investment Objective

Morgan Stanley Global Infrastructure Fund seeks to provide both capital appreciation and current income.

Growth and Income

An investment objective having the goal of selecting securities with the potential to rise in price and pay out income.

Principal Investment Strategies

The Fund will normally invest at least 80% of its assets in equity securities issued by companies located throughout the world that are engaged in the infrastructure business. A company will be considered to be in the infrastructure business if it derives at least 50% of its revenues or earnings from, or devotes at least 50% of its assets to, infrastructure-related activities. Infrastructure refers to the systems and networks of energy, transportation, communication and other services required for the normal function of society. Companies in the infrastructure industry may be involved in a variety of areas, including, but not limited to, (i) the transmission, distribution, storage or transportation of electricity, oil and gas (and other bulk liquid products), water, and other natural resources used to produce energy, (ii) the construction and operation of renewable power facilities, (iii) the development, ownership, lease, concession, or management of highways, toll roads, tunnels, bridges, pipelines, airports, marine ports, refueling and related facilities, (iv) the provision of communications, including the development, lease, concession, or management of telephone, broadcast and mobile towers, fiber optic/copper cable, and satellite networks, (v) waste-water management and water purification/desalination and (vi) the construction or operation of essential public structures. The Fund's equity investments may include convertible securities. The Fund's investments may include securities of small and medium capitalization companies. The Fund may invest up to 100% of its net assets in foreign securities, which may include emerging market securities. Under normal market conditions, the Fund invests at least 40% of its assets in the securities of issuers located outside of the United States.

Additional Investment Strategy Information

This section provides additional information relating to the Fund's investment strategies.

Other Investments. The remaining 20% of the Fund's assets may be invested in fixed-income securities, equity securities of companies not engaged in the infrastructure business, U.S. government securities issued or guaranteed as to principal and interest, by the U.S. Government or its agencies or instrumentalities, and asset-backed securities. The Fund may invest in real estate investment trusts ("REITs") and foreign real estate companies. The Fund may also invest up to 5% of its assets in fixed-income securities and convertible securities rated below investment grade (commonly known as "junk bonds").

***

The percentage limitations relating to the composition of the Fund's portfolio apply at the time the Fund acquires an investment. Subsequent percentage changes that result from market fluctuations will generally not require the Fund to sell any portfolio security. However, the Fund may be required to reduce its borrowing, if any, in response to fluctuations in the value of such holdings. Except for the Fund's policy to concentrate its assets in the infrastructure industry, the Fund may change its principal investment strategies without shareholder approval; however, you would be notified of any changes.

Principal Risks

authorities and may also be affected by government regulation of rates charged to customers, service interruption or legal challenges due to environmental, operational or other mishaps and the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards; technological innovations that may render existing plants, equipment or products obsolete, unforeseen delays, accidents, and cost overruns in infrastructure projects. Any market price movements, regulatory or technological changes, or economic conditions affecting infrastructure-related companies may have a significant impact on the Fund's performance. Other factors that may affect the operations of companies within the infrastructure industry include innovations in technology that could render the way in which a company delivers a product or service obsolete, significant changes to the number of ultimate end-users of a company's products, inexperience with and potential losses resulting from a developing deregulatory environment, increased susceptibility to terrorist attacks, risks of environmental damage due to a company's operations or an accident, and general changes in market sentiment towards infrastructure and utilities assets.

Companies operating in the infrastructure industry face operating risks, including the risk of fire, explosions, leaks, mining and drilling accidents or other catastrophic events. If any of these operating risks occur, it could cause substantial losses to the given infrastructure company. In addition, natural risks, such as earthquakes, floods, lightning, hurricanes, tsunamis and wind, are inherent risks in infrastructure company operations. For example, extreme weather patterns, such as Hurricane Ivan in 2004 and Hurricanes Katrina and Rita in 2005, the Tohuku earthquake and resulting tsunami in Japan in 2011, could result in substantial damage to the facilities of certain companies located in the affected areas and such extreme weather patterns, or the threat thereof, could adversely impact the prices of the securities in which the Fund invests. This volatility may create fluctuations in commodity prices and earnings of companies in the infrastructure industry.

Common Stock and Other Equity Securities. A principal risk of investing in the Fund is associated with its investments in common stock and other equity securities. In general, prices of common stock and other equity securities are more volatile than those of fixed-income securities. The prices of common stock and other equity securities fluctuate, and sometimes widely fluctuate, in response to activities specific to the issuer of the security as well as factors unrelated to the fundamental condition of the issuer of the security, including general market, economic and political conditions.

are focused are still evolving and, while this may offer better growth potential than larger, more established companies, it also may make them more sensitive to changing market conditions.

entities and/or individuals, changes in international trading patterns, trade barriers, and other protectionist or retaliatory measures. Economic sanctions could, among other things, effectively restrict or eliminate the Fund's ability to purchase or sell securities or groups of securities for a substantial period of time, and may make the Fund's investments in such securities harder to value. International trade barriers or economic sanctions against foreign countries, organizations, entities and/or individuals, may adversely affect the Fund's foreign holdings or exposures. Investments in foreign markets may also be adversely affected by governmental actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets, or the imposition of punitive taxes. Governmental actions can have a significant effect on the economic conditions in foreign countries, which also may adversely affect the value and liquidity of the Fund's investments. For example, the governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain sectors or industries. In addition, a foreign government may limit or cause delay in the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. Any of these actions could severely affect security prices, impair the Fund's ability to purchase or sell foreign securities or transfer the Fund's assets back into the U.S., or otherwise adversely affect the Fund's operations. Certain foreign investments may become less liquid in response to market developments or adverse investor perceptions, or become illiquid after purchase by the Fund, particularly during periods of market turmoil. Certain foreign investments may become illiquid when, for instance, there are few, if any, interested buyers and sellers or when dealers are unwilling to make a market for certain securities. When the Fund holds illiquid investments, its portfolio may be harder to value.

Additional Risk Information

This section provides additional information relating to the risks of investing in the Fund.

Fixed-Income Securities. Fixed-income securities are subject to the risk of the issuer's inability to meet principal and interest payments on its obligations (i.e., credit risk) and are subject to price volatility resulting from, among other things, interest rate sensitivity, market perception of the creditworthiness of the issuer and general market liquidity (i.e., market risk). The historically low interest rate environment increases the risks associated with rising interest rates, including the potential for periods of volatility and increased redemptions. The Fund may face a heightened level of risk, especially since the Federal Reserve Board has begun tapering its quantitative easing program and may begin to raise

rates. The Fund is not limited as to the maturities of the securities in which it may invest. Securities with longer durations are likely to be more sensitive to changes in interest rates, generally making them more volatile than securities with shorter durations. Zero coupon securities (which are purchased at a discount and generally accrue interest, but make no payments until maturity) are typically subject to greater price fluctuations than comparable securities that pay current interest. The Fund may invest up to 5% of its net assets in fixed income securities rated below investment grade and these investments may have speculative characteristics. Lower rated fixed-income securities have greater volatility because there is less certainty that principal and interest payments will be made as scheduled.

Portfolio Holdings

A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Fund's Statement of Additional Information ("SAI").

Morgan Stanley Investment Management Inc.

The Adviser, together with its affiliated asset management companies, had approximately $382 billion in assets under management or supervision as of March 31, 2014.

Fund Management

Mr. Bigman has been associated with the Adviser in an investment management capacity since 1995. Mr. King has been associated with the Adviser in an investment management capacity since 2008.

Together the team determines the investment strategy, establishes asset-allocation frameworks and directs the implementation of investment strategy.

The Fund's SAI provides additional information about the portfolio managers' compensation structure, other accounts managed by the portfolio managers and the portfolios managers' ownership of securities in the Fund.

The composition of the team may change from time to time.

advisory compensation (net of affiliated rebates, if applicable) amounting to 0.57% of the Fund's average daily net assets.

A discussion regarding the Board of Trustee's approval of the investment advisory agreement and the sub-advisory agreements are available in the Fund's Semi-Annual Report to Shareholders for the period ended June 30, 2013.

Shareholder Information

Pricing Fund Shares

The price of Fund shares (excluding sales charges), called NAV, is based on the value of the Fund's portfolio securities.

How to Exchange Class Q Shares

Permissible Fund Exchanges. You may exchange Class Q shares of the Fund for Class A shares of Morgan Stanley European Equity Fund Inc., Morgan Stanley Global Fixed Income Opportunities Fund, Morgan Stanley Limited Duration U.S. Government Trust ("MS Limited Duration"), Morgan Stanley Mortgage Securities Trust, Morgan Stanley Multi Cap Growth Trust and Morgan Stanley U.S. Government Securities Trust (each, a "Morgan Stanley Retail Fund"), if available, without payment of a sales charge or the imposition of an exchange fee. You may also exchange Class Q shares of the Fund for Class A shares of any portfolio of Morgan Stanley Institutional Fund, Inc. ("MSIF") or Morgan Stanley Institutional Fund Trust ("MSIFT" and, collectively with MSIF and the Morgan Stanley Retail Funds, the "Morgan Stanley Multi-Class Funds"), if available, without payment of a sales charge or the imposition of an exchange fee. In addition, you may exchange Class Q shares of the Fund for shares of Morgan Stanley California Tax-Free Daily Income Trust, Morgan Stanley Liquid Asset Fund Inc., Morgan Stanley New York Municipal Money Market Trust, Morgan Stanley Tax-Free Daily Income Trust and Morgan Stanley U.S. Government Money Market Trust (each, a "Morgan Stanley Money Market Fund" and, together with the Morgan Stanley Multi-Class Funds, the "Morgan Stanley Funds") or for Advisor Class shares of Morgan Stanley Limited Duration U.S. Government Trust, if available, without the imposition of an exchange fee. However, once you exchange out of Class Q shares of the Fund, you will not be able to re-exchange back into Class Q shares of the Fund. If you acquired Class Q shares through a Financial Intermediary, certain Morgan Stanley Funds may be unavailable for exchange. Contact your Financial Intermediary to determine which Morgan Stanley Funds are available for exchange.

The current prospectus for each Morgan Stanley Fund describes its investment objective(s), policies and investment minimums and should be read before investment. Since exchanges are available only into continuously offered Morgan Stanley Funds, exchanges are not available into Morgan Stanley Funds or classes of Morgan Stanley Funds that are not currently being offered for purchase.

Exchange Procedures. You can process an exchange by contacting your Financial Intermediary. You may also write the Transfer Agent or call toll-free (800) 548-7786 to place an exchange order.

Exchange requests received on a business day prior to the time shares of the funds involved in the request are priced will be processed on the date of receipt. "Processing" a request means that Class Q shares of the Fund which you are exchanging will be redeemed and shares of the Morgan Stanley Fund that you are purchasing will be purchased at the NAV per share next determined on the date of receipt. Exchange requests received on a business day after the time that shares of the funds involved in the request are priced will be processed on the next business day in the manner described herein.

Telephone instructions will be accepted if received by the Transfer Agent between 9:00 a.m. and 4:00 p.m. Eastern time on any day the NYSE is open for business. On any business day that the NYSE closes early, or when the Securities Industry and Financial Markets Association recommends that the securities markets close early, the Fund may close early and purchase orders received after such earlier closing times will be processed the following business day. During periods of drastic economic or market changes, it is possible that the telephone exchange procedures may be difficult to implement, although this has not been the case with the Fund in the past.

Margin Accounts. If you have pledged your Fund shares in a margin account, contact your Financial Intermediary regarding restrictions on the exchange of such shares.

You should review the "Shareholder Information—Tax Consequences" section and consult your own tax professional about the tax consequences of an exchange.

For further information regarding exchange privileges, you should contact your Financial Intermediary or call toll-free (800) 548-7786.

How to Sell Class Q Shares

You can sell some or all of your Fund shares at any time. If you sell Class Q shares, your net sale proceeds are reduced by the amount of any applicable CDSC. Your shares will be sold at the next price calculated after we receive your order to sell as described below.

Options				Procedures
Contact Your Morgan Stanley Financial Advisor/Financial Intermediary				To sell your shares, simply call your Financial Intermediary. Payment will be sent to the address to which the account is registered or deposited in your brokerage account. Your Financial Intermediary may charge transaction-based or other fees in connection with the sale of the Fund's shares. Please contact your Financial Intermediary for more information regarding any such fees.
Contact the Fund By Telephone				You can also sell your shares by telephone and have the proceeds sent to the address of record or wired to your bank account on record. You automatically have the telephone redemption privilege unless you indicate otherwise by checking the applicable box on the New Account Application. You may also opt out of telephone privileges at any time by contacting the Transfer Agent at (800) 548-7786. Before processing a telephone redemption, keep the following information in mind: n You can establish this option at the time you open the account by completing the New Account Application or subsequently by calling toll-free (800) 548-7786. n Call toll-free (800) 548-7786 to process a telephone redemption using our automated telephone system which is generally accessible 24 hours a day, seven days a week. n Your request must be received prior to market close, generally 4:00 p.m. Eastern time. n If your account has multiple owners, the Transfer Agent may rely on the instructions of any one owner. n Proceeds must be made payable to the name(s) and address in which the account is registered. n You may redeem amounts of $50,000 or less daily if the proceeds are to be paid by check or by Automated Clearing House. n This privilege is not available if the address on your account has changed within 15 calendar days prior to your telephone redemption request. n Telephone redemption is available for most accounts other than accounts with shares represented by certificates. If you request to sell shares that were recently purchased by check, the proceeds of that sale may not be sent to you until it has been verified that the check has cleared, which may take up to 15 calendar days from the date of purchase.

Options				Procedures
Contact the Fund By Telephone (continued)				Morgan Stanley and its subsidiaries, the Transfer Agent and the Fund employ procedures considered by them to be reasonable to confirm that instructions communicated by telephone are genuine. Such procedures may include requiring certain personal identification information prior to acting upon telephone instructions, tape-recording telephone communications and providing written confirmation of instructions communicated by telephone. If reasonable procedures are employed, none of Morgan Stanley, the Transfer Agent or the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. Telephone redemptions may not be available if a shareholder cannot reach the Transfer Agent by telephone, whether because all telephone lines are busy or for any other reason; in such case, a shareholder would have to use the Fund's other redemption procedures described in this section.
Contact the Fund By Letter				You can also sell your shares by writing a "letter of instruction" that includes: n the name on your account and account number; n the name of the Fund; n the dollar amount or the number of shares you wish to sell; n the signature of each owner as it appears on the account; and n whether you wish to receive the redemption proceeds by check or by wire to the bank account we have on file for you. If you are requesting payment to anyone other than the registered owner(s) or that payment be sent to any address other than the address of the registered owner(s) or pre-designated bank account, you will need a signature guarantee. You can obtain a signature guarantee from an eligible guarantor acceptable to the Transfer Agent. (You should contact the Transfer Agent toll-free at (800) 548-7786 for a determination as to whether a particular institution is an eligible guarantor.) A notary public cannot provide a signature guarantee. Additional documentation may be required for shares held by a corporation, partnership, trustee or executor. Mail the letter to Boston Financial Data Services, Inc. at P.O. Box 219804, Kansas City, MO 64121-9804. If you hold share certificates, you must return the certificates, along with the letter and any required additional documentation. A check or wire will be sent according to your instructions.
Systematic Withdrawal Plan				If your investment in all of the Morgan Stanley Funds has a total market value of at least $10,000, you may elect to withdraw amounts of $25 or more, or in any whole percentage of a fund's balance (provided the amount is at least $25), on a monthly, quarterly, semi-annual or annual basis, from any fund with a balance of at least $1,000. Each time you add a fund to the plan, you must meet the plan requirements. Amounts withdrawn are subject to any applicable CDSC. A CDSC may be waived under certain circumstances. See the Class Q waiver categories listed in the "Shareholder Information—Share Class Arrangements" section of this Prospectus. To sign up for the systematic withdrawal plan, contact your Morgan Stanley Financial Advisor or call toll-free (800) 548-7786. You may terminate or suspend your plan at any time. Please remember that withdrawals from the plan are sales of shares, not Fund "distributions," and ultimately may exhaust your account balance. The Fund may terminate or revise the plan at any time.

Reinstatement Privilege. If you sell Class Q shares, and have not previously exercised the reinstatement privilege, you may, within 35 days after the date of sale, invest any portion of the proceeds in Class A shares at their NAV.

Involuntary Sales. The Fund reserves the right, on 60 days' notice, to sell the shares of any shareholder (other than shares held in an individual retirement account ("IRA") or 403(b) Custodial Account) whose shares, due to sales by the shareholder, have a value below $100, or in the case of an account opened through EasyInvest®, if after 12 months the shareholder has invested less than $1,000 in the account.

Margin Accounts. If you have pledged your Fund shares in a margin account, contact your Financial Intermediary regarding restrictions on the sale of such shares.

Targeted
Dividends

Distributions

Normally, income dividends are distributed to shareholders semi-annually. Capital gains, if any, are usually distributed in June and December. The Fund, however, may retain and reinvest any long-term capital gains. The Fund may at times make payments from sources other than income or capital gains that represent a return of a portion of your investment. These payments would not be taxable to you as a shareholder, but would have the effect of reducing your basis in the Fund.

Class Q distributions are reinvested automatically in additional Class Q shares and automatically credited to your account, unless you request in writing that all distributions be paid in cash. If you elect the cash option, the Fund will mail a check to you no later than seven business days after the distribution is declared. No interest will accrue on uncashed checks. If you wish to change how your distributions are paid, your request should be received by the Transfer Agent at least five business days prior to the record date of the distributions.

Frequent Purchases and Redemptions of Fund Shares

Frequent purchases and redemptions of Fund shares by Fund shareholders are referred to as "market-timing" or "short-term trading" and may present risks for other shareholders of the Fund, which may include, among other things, dilution in the value of Fund shares held by long-term shareholders, interference with the efficient management of the Fund's portfolio, increased brokerage and administrative costs, incurring unwanted taxable gains and forcing the Fund to hold excess levels of cash.

Investments in other types of securities also may be susceptible to short-term trading strategies. These investments include securities that are, among other things, thinly traded, traded infrequently or relatively illiquid, which have the risk that the current market price for the securities may not accurately reflect current market values. A shareholder may seek to engage in short-term trading to take advantage of these pricing differences (referred to as "price arbitrage"). Investments in certain fixed-income securities, such as high yield bonds, may be adversely affected by price arbitrage trading strategies.

The Fund's policies with respect to valuing portfolio securities are described in "Shareholder Information—Pricing Fund Shares."

accounts at intermediaries, as described below, the Fund's policies regarding frequent trading of Fund shares are applied uniformly to all shareholders. With respect to trades that occur through omnibus accounts at intermediaries, such as investment managers, broker-dealers, transfer agents and third-party administrators, the Fund (i) requestes assurance that such intermediaries, currently selling Fund shares have in place internal policies and procedures reasonably designed to address market-timing concerns and has instructed such intermediaries to notify the Fund immediately if they are unable to comply with such policies and procedures and (ii) requires all prospective intermediaries to agree to cooperate in enforcing the Fund's policies (or, upon prior written approval only, an intermediary's own policies) with respect to frequent purchases, redemptions and exchanges of Fund shares.

Tax Consequences

Unless your investment in the Fund is through a tax-deferred retirement account, such as a 401(k) plan or IRA, you need to be aware of the possible tax consequences when:

n The Fund makes distributions; and

n You sell Fund shares, including an exchange to another Morgan Stanley Fund.

Shareholders who are not citizens or residents of the United States and certain foreign entities will generally be subject to withholding of U.S. tax of 30% on distributions made by the Fund of investment income and short-term capital gains.

Share Class Arrangements

This Prospectus relates to Class Q shares of the Fund only. The Fund also currently offers other Classes of shares (Classes A, L and I) through a separate prospectus. The Fund's Class B shares are closed to new investors; however, existing Class B shareholders may invest through dividend reinvestments. Class Q shares are subject to different expenses and therefore returns may differ. The chart below shows the sales charge and maximum annual 12b-1 fee applicable to Class Q:

Class				Sales Charge				Maximum Annual 12b-1 Fee
	Q			Maximum 5.00% CDSC during the first year decreasing to 0% after six years					0.24	%⁽¹⁾

(1) The Fund has adopted a Rule 12b-1 Distribution Plan pursuant to which it reimburses the Distributor for distribution-related expenses (including personal services to shareholders) incurred on behalf of Class Q shares in an amount each month up to an annual rate of 0.26% of the average daily net assets of Class Q. However, the Distributor has agreed to permanently cap the 12b-1 fee for the Class Q shares at 0.24% of the average daily net assets of Class Q.

CLASS Q SHARES Class Q shares are closed to new investments. However, the existing Class Q shareholders may invest through dividend reinvestments. Class Q shareholders of the Fund do not have the option of purchasing additional Class Q shares.

Class Q shareholders are subject to a contingent deferred sales charge, or CDSC, as set forth in the table below. For the purpose of calculating the CDSC, Class Q shares are deemed to have been purchased on the last day of the month during which the Pre-Conversion Class B shares were purchased.

Contingent Deferred Sales Charge or CDSC

A fee you pay when you sell shares of certain Morgan Stanley Funds purchased without an initial sales charge. This fee declines the longer you hold your shares as set forth in the table.

Year Since Purchase Payment Made	CDSC as a Percentage of Amount Redeemed
First		5.0	%
Second		4.0	%
Third		3.0	%
Fourth		2.0	%
Fifth		2.0	%
Sixth		1.0	%
Seventh and thereafter		None

CDSC Waivers. A CDSC, if otherwise applicable, will be waived in the case of:

The Fund's Distributor may require confirmation of your entitlement before granting a CDSC waiver. If you believe you are eligible for a CDSC waiver, please contact your Financial Intermediary or call toll-free (800) 548-7786.

Distribution Fee. Class Q shares are subject to an annual distribution and shareholder services (12b-1) fee of up to 0.26% of the average daily net assets of Class Q shares. This fee is higher than the maximum annual 12b-1 fee payable by Class A shares. However, the Distributor has agreed to permanently cap the 12b-1 fee for the Class Q shares at 0.24% of the average daily net assets of Class Q.

Conversion Feature. After eight years, Class Q shares generally will convert automatically to Class A shares of the Fund with no initial sales charge. The eight-year period runs from the last day of the month in which the Class Q or Pre-Conversion Class B shares were purchased; the shares will convert to Class A shares based on their relative NAVs in the month following the eight-year period. At the same time, an equal proportion of Class Q shares acquired through automatically reinvested distributions will convert to Class A shares on the same basis. This conversion will be suspended during any period in which the expense ratio of the Class Q shares of the Fund is lower than the expense ratio of the Class A shares of the Fund.

Class A shares are subject to a distribution and shareholder services (12b-1) fee of up to 0.25% of the average daily net assets of the Class. For more information on Class A shares, please refer to the Fund's Prospectus relating to the Class A shares dated April 30, 2014.

Exchanging Shares Subject to a CDSC. There are special considerations when you exchange fund shares that are subject to a CDSC. When determining the length of time you held the shares and the corresponding CDSC rate, any period (starting at the end of the month) during which you held shares of a fund that charges a CDSC will be counted. In addition, any period (starting at the end of the month) during which you held shares of (i) a Morgan Stanley Money Market Fund or (ii) MS Limited Duration, received in exchange for Fund shares, will also be counted; however, if you sell shares of such Morgan Stanley Money Market Fund or MS Limited Duration before the expiration of the CDSC "holding period," you will be charged the applicable CDSC rate.

For example, if you held Class Q shares (or Pre-Conversion Class B shares) of the Fund for one year, exchanged to Class B of another Morgan Stanley Multi-Class Fund for another year, then sold your shares, a CDSC rate of 4% would be imposed on the shares based on a two-year holding period—one year for each fund. Similarly, if you had exchanged the shares of the Fund for a Morgan Stanley Money Market Fund or MS Limited Duration, then sold your shares, a CDSC rate of 4% would be imposed on the shares based on a two-year holding period—one year for each fund.

NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a cash payment representing an ordinary dividend or capital gain and you reinvest that amount in the shares by returning the check within 30 days of the payment date, the purchased shares would not be subject to an initial sales charge or CDSC.

PLAN OF DISTRIBUTION (RULE 12b-1 FEES) The Fund has adopted a Plan of Distribution in accordance with Rule 12b-1 under the Investment Company Act. The Plan allows the Fund to pay distribution fees for the sale and distribution of these shares. It also allows the Fund to pay for services to shareholders. Because these fees are paid out of the Fund's assets on an ongoing basis, over time these fees will increase the cost of your investment and reduce your return and may cost you more than paying other types of sales charges.

Additional Information

Financial Highlights

The financial highlights table is intended to help you understand the Fund's financial performance for the periods indicated. Certain information reflects financial results for a single Fund share throughout each period. The total returns in the table represent the rate an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). The ratio of expenses to average net assets listed in the table below is based on the average net assets of the Fund for each of the periods listed in the table. To the extent that the Fund's average net assets decrease over the Fund's next fiscal year, such expense ratios can be expected to increase, potentially significantly, because certain fixed costs will be spread over a smaller amount of assets.

CLASS Q SHARES

For the Year Ended December 31,	2013			2012			2011			2010^			2009^
Selected Per Share Data:
Net asset value, beginning of period	$	7.77		$	7.18		$	6.47		$	6.25		$	5.53
Income from investment operations:
Net investment income⁽¹⁾		0.16			0.18			0.16			0.15			0.17
Net realized and unrealized gain		1.18			1.13			0.88			0.28			0.76
Total income from investment operations		1.34			1.31			1.04			0.43			0.93
Less dividends and distributions from:
Net investment income		(0.17	)		(0.17	)		(0.16	)		(0.21	)		(0.21	)
Net realized gain		(0.91	)		(0.55	)		(0.17	)		—			—
Total dividends and distributions		(1.08	)		(0.72	)		(0.33	)		(0.21	)		(0.21	)
Net asset value, end of period	$	8.03		$	7.77		$	7.18		$	6.47		$	6.25
Total Return⁽²⁾		17.76	%		18.45	%		16.18	%		6.91	%		17.12	%
Ratios to Average Net Assets:
Net expenses		1.11	%⁽³⁾		1.10	%⁽³⁾⁽⁴⁾		1.13	%⁽³⁾⁽⁴⁾		1.17	%⁽³⁾⁽⁴⁾		1.21	%⁽³⁾⁽⁴⁾
Net investment income		1.93	%⁽³⁾		2.29	%⁽³⁾⁽⁴⁾		2.25	%⁽³⁾⁽⁴⁾		2.45	%⁽³⁾⁽⁴⁾		3.09	%⁽³⁾⁽⁴⁾
Rebate from Morgan Stanley affiliate		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾
Supplemental Data:
Net assets, end of period, in thousands	$	259,179		$	257,387		$	253,096		$	260,051		$	299,176
Portfolio turnover rate		25	%		28	%		36	%		149	%		382	%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) 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) Amount is less than 0.005%.

Notes

You also may obtain information about the Fund by calling your Financial Intermediary or by visiting our Internet site.

Information about the Fund (including the Statement of Additional Information) can be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 551-8090. Shareholder reports and other information about the Fund are available on the EDGAR Database on the SEC's Internet site at: http://www.sec.gov, and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-1520.

(THE FUND'S INVESTMENT COMPANY ACT FILE NO. IS 811-5415)

Morgan Stanley Distribution, Inc., member FINRA.

INVESTMENT MANAGEMENT

Morgan Stanley Global Infrastructure Fund

Prospectus Class Q

April 30, 2014

UTLPROQ

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

John H. Gernon
President and Principal Executive Officer

Stefanie V. Chang Yu
Chief Compliance Officer

Joseph C. Benedetti
Vice President

Francis J. Smith
Treasurer and Principal Financial Officer

Mary E. Mullin
Secretary

Transfer Agent

Boston Financial Data Services, Inc.
2000 Crown Colony Drive
Quincy, Massachusetts 02169

Custodian

State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111

Independent Registered Public Accounting Firm

Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116

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

Adviser

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

Sub-Advisers

Morgan Stanley Investment Management Limited
25 Cabot Square, Canary Wharf
London, E14 4QA England

Morgan Stanley Investment Management Company
23 Church Street
16-01 Capital Square 049481 Singapore

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) 548-7786.

This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Please read the Prospectus carefully before investing.

Morgan Stanley Distribution, Inc., member FINRA.

UTLFANN
807341 EXP 2.28.15

INVESTMENT MANAGEMENT

Morgan Stanley Global Infrastructure Fund

Annual Report

December 31, 2013

Morgan Stanley Global Infrastructure Fund

Table of Contents

Welcome Shareholder					3
Fund Report					4
Performance Summary					10
Expense Example					12
Portfolio of Investments					14
Statement of Assets and Liabilities					17
Statement of Operations					18
Statements of Changes in Net Assets					19
Notes to Financial Statements					20
Financial Highlights					32
Report of Independent Registered Public Accounting Firm					37
Results of Special Shareholder Meeting					38
U.S. Privacy Policy					39
Trustee and Officer Information					44

Welcome Shareholder,

We are pleased to provide this annual report, in which you will learn how your investment in Morgan Stanley Global Infrastructure Fund performed during the latest twelve-month period. It includes an overview of the market conditions and discusses some of the factors that affected performance during the reporting period. In addition, the report contains financial statements and a list of portfolio holdings.

As always, we thank you for selecting Morgan Stanley Investment Management, and look forward to working with you in the months and years ahead.

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 (unaudited)

For the year ended December 31, 2013

Total Return for the 12 Months Ended December 31, 2013
Class A			Class B			Class L (formerly Class C)			Class I			Class Q			Dow Jones Brookfield Global Infrastructure Index^SM1			S&P Global BMI Index²
	17.78	%		16.74	%		17.04	%		18.08	%		17.76	%		15.89	%		24.12	%

The performance of the Fund's five 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

Infrastructure shares appreciated 15.89 percent during the period, as measured by the Dow Jones Brookfield Global Infrastructure Index^SM (the "Index"). Among the major infrastructure sectors, the gas midstream, toll roads, gas distribution utilities, and European regulated utilities outperformed the Index, while the pipeline companies, electricity transmission and distribution, and communications sectors underperformed the Index. Among sectors with more modest benchmark weightings, the diversified and airports sectors exhibited meaningful outperformance relative to the benchmark.

2013 global equity performance reflected a more positive outlook toward economic growth and the belief that many economies have "turned a corner" — in particular the developed markets of the U.S. and Europe (and to a lesser extent Japan). This was partially offset by concerns over the impact of rising interest rates in

the U.S. and their effect on U.S. equity valuations as well as the spillover impact for emerging market economies, currencies, and equity markets. The equity securities of infrastructure companies were not entirely immune to these broad trends in 2013, and were generally visible in the strong performance of more gross domestic product (GDP)-leveraged transportation sectors such as rails, toll roads, and airports and the weakness in more stable sectors that were viewed by the market as "bond proxies" such as electricity transmission and distribution, communications, and pipeline companies. However, on a local currency basis, favorable returns were realized within all broad regions.

Looking at individual sectors, favorable performance for the European regulated utilities sector was the result of improved clarity and a more positive outlook for transmission company regulation in Spain (in particular on the electricity side) as well as the resolution of gas network regulation in Italy, which underscored the stability of regulation in the country despite ongoing uncertainty in Italian politics and the potential for political interference. Ongoing merger and acquisition (M&A) interest in U.K. utility assets, in particular in the water space, also provided an uplift for the sector.

Underperformance for the electricity transmission and distribution sector was broadly attributable to concerns over valuation in the context of rising U.S. interest rates. Challenges to company returns on capital by customers and other stakeholders, as well as by adverse regulatory rulings, also had a modest negative impact on the sector.

Within the gas distribution utilities sector, the potential for midstream asset (MLP) spin-offs as well as M&A speculation favorably impacted U.S.-based gas distribution utilities in 2013. Within Chinese gas distribution, ongoing support by the central government for natural gas (as a way to de-carbonize the environment), coupled with resilient company operating results despite a slowing Chinese economy, drove favorable results.

Underperformance in pipeline companies broadly reflected a negative view on valuation in a rising interest rate environment, despite robust operating fundamentals, with company capital programs at record highs. Negative performance by a Canadian company weighed heavily on sector results, due to the general view that the northern leg of the Keystone XL pipeline will not be approved by the Obama administration.

The gas midstream sector's outperformance reflected ongoing rapid cash flow growth supported by sizable capital programs, as well as a number of spinoff and restructuring transactions, which highlighted the value of general partner economics embedded within many c-corp energy infrastructure companies.

In the communications sector, weakness in wireless tower companies reflected concerns over valuation in a rising interest rate environment, as well as concerns regarding a slowdown in lease up activity by the big four wireless carriers in the U.S.

Outperformance of the toll roads, airports and ports sector in 2013 was largely the result of an improved outlook for traffic/container volumes associated with an improving global economy. However, it is important to note that for many of the transportation companies, in particular those in Europe, strong share price performance was associated with multiple expansion (i.e., the expectation of a recovery), as operating fundamentals and underlying cash flows still reflect little growth. For airports, despite lackluster traffic growth in general, strong retail performance and a moderation in the capital expenditures (capex) cycle helped returns.

Modest underperformance was realized in the water sector in 2013 as relatively robust performance in the U.S. was offset by negative absolute performance in Brazil, where the regulatory outlook remains uncertain over the near term and share prices suffered alongside the broader Brazilian equity market.

Performance Analysis

All share classes of Morgan Stanley Global Infrastructure Fund outperformed the Dow Jones Brookfield Global Infrastructure Index^SM (the "Index") and underperformed the S&P Global BMI Index for the 12 months ended December 31, 2013, assuming no deduction of applicable sales charges.

For full-year 2013, the Fund realized meaningful outperformance from bottom-up stock selection, only partially offset by adverse top-down positioning. From a bottom-up perspective, stock selection was neutral or provided positive attribution in all sectors aside from the

toll roads and diversified sectors. From a top-down perspective, the Fund benefited from underweights to the electricity transmission and distribution and gas distribution sectors, as well as an overweight to the airports sector, offset by relative weakness from an overweight to pipeline companies and an underweight to gas midstream and European regulated utilities. Cash held in the portfolio detracted from relative performance.

Given recent strong performance and a narrowing gap between our view of intrinsic, private market infrastructure value and share prices in a number of infrastructure sectors, we begin 2014 with lower expected returns for the sector. However, we believe an allocation to global listed infrastructure securities can continue to provide investors with favorable risk-adjusted absolute returns and little overlap to the broader equity markets. Furthermore, we continue to be able to invest in companies that trade at what we believe are meaningful discounts to intrinsic value. Imbedded into our current view on valuation is a belief that capex programs in certain sectors, most notably energy infrastructure and the wireless tower portion of the communications sector, will begin to moderate in the medium term (from record-high, industry-wide capital spending in the tens of billions of U.S. dollars). We would also reiterate that we view rising interest rates and the impact of the Federal Reserve "taper" — commonly cited as the most significant headwind for the sector — as more of a near-term, manageable risk, given that many infrastructure companies have various methods to adjust cash flows to accommodate higher debt costs, and we do not believe share prices

reflected the low in cost of capital during the past period of low interest rates.

In terms of opportunities for 2014, we would note three themes in particular: First, valuations in the fixed satellite services (FSS) portion of the communications sector look increasingly attractive (in spite of some near to medium-term operating headwinds), as do a number of companies in the energy infrastructure and utilities sectors, even though sector-wide valuations appear less compelling. Second, more opportunities may develop in the transportation-leveraged sectors, in particular in Europe, as the global economy recovers. While we maintain a more cautious view on continental Europe and a global recovery overall — and have reflected this view in our company-specific underwriting — we acknowledge that there is scope for upside as recent data points seem to indicate an upturn in economic activity in a number of regions. The third theme we are considering is that we view a number of emerging markets infrastructure companies as increasingly attractive from a valuation standpoint, as country-level macro concerns are overwhelming stable company-level operating fundamentals in a number of cases. As a reminder, the Fund historically has and will continue to focus on developed market infrastructure companies which manage brownfield infrastructure assets, but we may look to invest a small portion of the Fund in greenfield infrastructure assets in emerging markets should the return prospects be appropriate relative to the level of risk.

We remain committed to our core investment philosophy as an infrastructure value investor. As value-oriented, bottom-up driven investors, our investment perspective is that over the medium- and long-term, the key factor in determining the performance of infrastructure securities will be underlying infrastructure asset values. Given the large and growing private infrastructure market, we believe that there are limits as to the level of premium or discount at which the public sector should trade relative to its underlying private infrastructure value. These limits can be viewed as the point at which the arbitrage opportunity between owning infrastructure in the private versus public markets becomes compelling. In aiming to achieve core infrastructure exposure in a cost-effective manner, we invest in equity securities of publicly listed infrastructure companies we believe offer the best value relative to their underlying infrastructure value and Net Asset Value growth prospects.

Our research currently leads us to an overweighting in the Fund (amongst the largest sectors) to a group of companies in the pipeline, communications and toll road sectors, and an underweighting to companies in the gas distribution utilities, gas midstream, European regulated utilities, and electricity transmission and distribution sectors. Amongst the smaller sectors, we maintain an overweight to airports and have initiated an overweight to the water sector.

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 12/31/13
TransCanada Corp.	8.6	%
National Grid PLC	5.1
Enbridge, Inc.	4.8
American Tower Corp., REIT	4.3
Williams Cos., Inc. (The)	3.9
Sempra Energy	3.5
Crown Castle International Corp.	3.5
Snam SpA	3.4
Spectra Energy Corp.	3.2
ITC Holdings Corp.	3.0
TOP FIVE COUNTRIES as of 12/31/13
United States	43.9	%
Canada	13.4
United Kingdom	7.1
Italy	6.5
China	4.0

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 countries 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 80 percent of its assets in equity securities issued by companies located throughout the world that are engaged in the infrastructure business. A company will be considered to be in the infrastructure business if it derives at least 50 percent of its revenues or earnings from, or devotes at least 50 percent of its assets to, infrastructure-related activities. Infrastructure refers to the systems and networks of energy, transportation, communication and other services required for the normal function of society. Companies in the infrastructure business may be involved in a variety of areas, including, but not limited to, (i) the transmission, distribution, storage or transportation of electricity, oil and gas (and other bulk liquid products), water, and other natural resources used to produce energy, (ii) the construction and operation of renewable power facilities, (iii) the development, ownership, lease, concession, or management of highways, toll roads, tunnels, bridges, pipelines, airports, marine ports, refueling and related facilities, (iv) the provision of communications, including the development, lease, concession, or management of telephone, broadcast and mobile towers, fiber optic/copper cable, and satellite networks, (v) waste-water management and water purification/desalination and (vi) the construction or operation of essential public structures. The Fund's equity investments may include convertible securities. The Fund's investments may include securities of small and medium capitalization companies. The Fund may invest up to 100 percent of its net assets in foreign securities, which may include emerging market securities. Under normal market conditions, the Fund invests at least 40 percent of its assets in the securities of issuers located outside of the United States.

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 20549-1520.

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) 548-7786 or by visiting the Mutual Fund

Center on our web site at www.morganstanley.com. It is also available on the SEC'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 SEC'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) 548-7786, 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 (unaudited)

Performance of $10,000 Investment—Class A^‡‡
Over 10 Years

‡‡ The Fund previously disclosed the performance of Class B shares. However, Class B shares are closed to new investments. The graph now shows Class A shares which remain open to new investments.

Average Annual Total Returns—Period Ended December 31, 2013 (unaudited)

Symbol

Class A Shares*
(since 07/28/97)
UTLAX

Class B Shares**
(since 04/29/88)
UTLBX

Class L Shares^†(since 07/28/97)
UTLCX

Class I Shares^††(since 07/28/97)
UTLDX

Class Q Shares^†††(since 04/29/88)
UTLQX

1 Year

17.78
11.65⁴

%³

16.74
11.74⁴

%³

17.04
17.04⁴

%³

18.08
—

%³

17.76
12.76⁴

%³

5 Years

15.18³13.95⁴

14.30³14.06⁴

14.42³14.42⁴

15.47³—

15.20³14.97⁴

10 Years

10.48³9.88⁴

10.07³10.07⁴

9.71³9.71⁴

10.76³—

10.50³10.50⁴

Since Inception

7.81³7.46⁴

8.62³8.62⁴

7.03³7.03⁴

8.08³—

8.63³8.63⁴

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 graph and table do 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 L, Class I, and Class Q shares will vary due to differences in sales charges and expenses. See the Fund's current prospectus for complete details on fees and sale charges.

* 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 December 31, 2006. Prior to December 31, 2006, the conversion feature was suspended because the annual total operating expense ratio of Class B was lower than that of Class A.

† Effective February 25, 2013, Class C shares were renamed Class L shares. Class C shares held for less than one year were subject to a 1.0% CDSC. The CDSC on Class L shares was eliminated effective February 25, 2013.

†† Class I has no sales charge.

††† The maximum contingent deferred sales charge (CDSC) for Class Q is 5.0%. The CDSC declines to 0% after six years. For periods greater than eight years, returns do not reflect conversion to Class A shares eight years after the end of the calendar month in which shares were purchased. The conversion feature is currently suspended because the total annual operating expense ratio of Class Q is currently lower than that of Class A. See "Conversion Feature" for Class Q shares in "Share Class Arrangements" of the Prospectus for more information.

Class B commenced operations on April 29, 1988. On December 8, 2006, all then-existing Class B shares of the Fund (Pre-Conversion Class B) were converted into Class Q shares. Because the Pre-Conversion Class B shares were subject to the same level of fees and expenses applied to Class B shares, historical performance information prior to conversion date has been restated for Class Q shares to reflect this information. Performance information for Class B shares prior to December 8, 2006 reflects the performance of the Pre-Conversion Class B shares.

(1) The Dow Jones Brookfield Global Infrastructure Index^SM is a float-adjusted market capitalization weighted index that measures the stock performance of companies that exhibit strong infrastructure characteristics. The Index intends to measure all sectors of the infrastructure market. The Index was first published in July 2008; however, back-tested hypothetical performance information is available for this Index since December 31, 2002. Returns are calculated using the return data of the S&P Global BMI Index through December 31, 2002 and the return data of the Dow Jones Brookfield Global Infrastructure Index^SM for periods thereafter. 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 Standard & Poor's Global BMI Index (S&P Global BMI Index) is a broad market index designed to capture exposure to equities in all countries in the world that meet minimum size and liquidity requirements. As of the date of this Report, there are approximately 11,000 index members representing 26 developed and 20 emerging market countries. 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.

(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.

‡ Ending value assuming a complete redemption on December 31, 2013.

Expense Example (unaudited)

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including advisory fees, administration fees, distribution and shareholder services (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.

This example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 07/01/13 – 12/31/13.

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). 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.

Expense Example (unaudited) continued

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	07/01/13		12/31/13		07/01/13 – 12/31/13
Class A
Actual (11.96% return)	$	1,000.00	$	1,119.60	$	6.20
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,019.36	$	5.90
Class B
Actual (11.53% return)	$	1,000.00	$	1,115.30	$	10.98
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,014.82	$	10.46
Class L@@
Actual (11.59% return)	$	1,000.00	$	1,115.90	$	8.96
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,016.74	$	8.54
Class I
Actual (12.20% return)	$	1,000.00	$	1,122.00	$	4.81
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.67	$	4.58
Class Q
Actual (12.03% return)	$	1,000.00	$	1,120.30	$	6.09
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,019.46	$	5.80

@ Expenses are equal to the Fund's annualized expense ratios of 1.16%, 2.06%, 1.68%, 0.90% and 1.14% for Class A, Class B, Class L, Class I and Class Q shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). If the Fund had borne all of its expense, the annual expense ratios would have been 1.17%, 2.06%, 1.69%, 0.90% and 1.14% for Class A, Class B, Class L, Class I and Class Q shares, respectively.

@@ Effective February 25, 2013, Class C shares were renamed Class L shares.

Morgan Stanley Global Infrastructure Fund

Portfolio of Investments n December 31, 2013

NUMBER OF SHARES			VALUE
		Common Stocks (95.2%)
		Australia (3.7%)
		Airports
	320,135	Sydney Airport	$	1,086,225
		Diversified
	863,071	DUET Group		1,541,273
		Oil & Gas Storage & Transportation
	163,122	APA Group		873,910
		Toll Roads
	367,731	Macquarie Atlas Roads Group		902,954
	1,243,541	Transurban Group		7,594,849
				8,497,803
		Transmission & Distribution
	796,144	Spark Infrastructure Group		1,155,175
		Total Australia		13,154,386
		Austria (1.1%)
		Airports
	44,791	Flughafen Wien AG		3,758,756
		Brazil (2.1%)
		Oil & Gas Storage & Transportation
	94,100	CCR SA		708,766
		Water
	615,000	Cia de Saneamento Basico do Estado de Sao Paulo ADR (a)		6,974,100
		Total Brazil		7,682,866
		Canada (13.4%)
		Oil & Gas Storage & Transportation
	396,857	Enbridge, Inc.		17,338,794
	673,183	TransCanada Corp. (a)		30,761,405
		Total Canada		48,100,199

NUMBER OF SHARES			VALUE
		China (4.0%)
		Diversified
	222,000	Guangdong Investment Ltd. (b)	$	217,010
		Oil & Gas Storage & Transportation
	534,500	Beijing Enterprises Holdings Ltd. (b)		5,300,678
	1,606,000	China Gas Holdings Ltd. (b)		2,361,064
	280,000	ENN Energy Holdings Ltd. (b)		2,070,851
				9,732,593
		Ports
	735,912	China Merchants Holdings International Co., Ltd. (b)		2,685,776
		Toll Roads
	1,508,322	Jiangsu Expressway Co., Ltd., H Shares (b)		1,853,721
		Total China		14,489,100
		France (3.9%)
		Communications
	226,920	Eutelsat Communications SA		7,075,417
	212,274	SES SA		6,871,353
		Total France		13,946,770
		Germany (1.9%)
		Airports
	91,080	Fraport AG Frankfurt Airport Services Worldwide		6,814,996
		Italy (6.5%)
		Oil & Gas Storage & Transportation
	2,195,453	Snam SpA		12,280,472
		Toll Roads
	266,578	Atlantia SpA (a)		5,981,386
	125,874	Societa Iniziative Autostradali e Servizi SpA		1,249,384
				7,230,770

See Notes to Financial Statements
14

Morgan Stanley Global Infrastructure Fund

Portfolio of Investments n December 31, 2013 continued

NUMBER OF SHARES			VALUE
		Transmission & Distribution
	756,618	Terna Rete Elettrica Nazionale SpA	$	3,780,472
		Total Italy		23,291,714
		Japan (1.3%)
		Oil & Gas Storage & Transportation
	956,000	Tokyo Gas Co., Ltd.		4,702,383
		Luxembourg (1.1%)
		Communications
	173,726	Intelsat SA ADR (c)		3,915,784
		Netherlands (1.5%)
		Oil & Gas Storage & Transportation
	94,488	Koninklijke Vopak N.V. (a)		5,527,051
		Spain (2.4%)
		Diversified
	201,463	Ferrovial SA		3,898,150
		Toll Roads
	111,527	Abertis Infraestructuras SA (a)		2,477,856
		Transmission & Distribution
	31,380	Red Electrica Corp., SA (a)		2,093,718
		Total Spain		8,469,724
		Switzerland (1.3%)
		Airports
	8,228	Flughafen Zuerich AG (Registered)		4,810,159
		United Kingdom (7.1%)
		Transmission & Distribution
	1,393,345	National Grid PLC		18,181,599
		Water
	116,900	Pennon Group PLC		1,274,728
	143,540	Severn Trent PLC		4,052,701
	165,210	United Utilities Group PLC		1,837,086
				7,164,515
		Total United Kingdom		25,346,114

NUMBER OF SHARES			VALUE
		United States (43.9%)
		Communications
	191,270	American Tower Corp. REIT	$	15,267,172
	169,910	Crown Castle International Corp. (c)		12,476,491
	90,860	SBA Communications Corp., Class A (c)		8,162,862
				35,906,525
		Diversified
	458,250	CenterPoint Energy, Inc.		10,622,235
		Oil & Gas Storage & Transportation
	28,490	Atmos Energy Corp.		1,294,016
	80,960	Cheniere Energy, Inc. (c)		3,490,995
	176,389	Enbridge Energy Management LLC (c)		5,058,836
	259,550	Kinder Morgan, Inc.		9,343,800
	157,844	NiSource, Inc.		5,189,911
	167,190	ONEOK, Inc.		10,395,874
	113,617	Plains GP Holdings LP, Class A (c)		3,041,527
	28,200	SemGroup Corp., Class A		1,839,486
	141,450	Sempra Energy		12,696,552
	322,103	Spectra Energy Corp.		11,473,309
	366,070	Williams Cos., Inc. (The)		14,119,320
				77,943,626
		Transmission & Distribution
	111,263	ITC Holdings Corp.		10,661,221
	162,355	Northeast Utilities		6,882,228
	235,070	PG&E Corp.		9,468,620
				27,012,069
		Water
	144,510	American Water Works Co., Inc.		6,106,993
		Total United States		157,591,448
		Total Common Stocks (Cost $247,201,921)		341,601,450

See Notes to Financial Statements
15

Morgan Stanley Global Infrastructure Fund

Portfolio of Investments n December 31, 2013 continued

NUMBER OF SHARES (000)			VALUE
		Short-Term Investments (15.7%)
		Securities held as Collateral on Loaned Securities (11.5%)
		Investment Company (10.0%)
	35,779	Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (See Note 5) (Cost $35,779,377)	$	35,779,377
PRINCIPAL AMOUNT (000)
		Repurchase Agreements (1.5%)
$	3,223	BNP Paribas Securities Corp. (0.01%, dated 12/31/13, due 01/02/14; proceeds $3,222,711; fully collateralized by various U.S. Government Obligations; 0.63% - 3.63% due 08/15/16 - 02/15/21; valued at $3,287,167)		3,222,710
	2,302	Merrill Lynch & Co., Inc. (0.18%, dated 12/31/13, due 01/02/14; proceeds $2,301,959; fully collateralized by various Common Stocks and Exchange Traded Funds; valued at $2,487,461)		2,301,936
		Total Repurchase Agreements (Cost $5,524,646)		5,524,646
		Total Securities held as Collateral on Loaned Securities (Cost $41,304,023)		41,304,023

NUMBER OF SHARES (000)					VALUE
		Investment Company (4.2%)
	15,259	Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class (See Note 5) (Cost $15,259,378)			$	15,259,378
		Total Short-Term Investments (Cost $56,563,401)				56,563,401
Total Investments (Cost $303,765,322)			110.9	%		398,164,851
Liabilities in Excess of Other Assets			(10.9	)		(39,242,687	)
Net Assets			100.0	%	$	358,922,164

ADR American Depositary Receipt.

REIT Real Estate Investment Trust.

(a) All or a portion of this security was on loan at December 31, 2013.

(b) Security trades on the Hong Kong exchange.

(c) Non-income producing security.

Summary of Investments

INDUSTRY	VALUE			PERCENT OF TOTAL INVESTMENTS
Oil & Gas Storage & Transportation	$	159,869,000			44.8	%
Communications		53,769,079			15.1
Transmission & Distribution		52,223,033			14.6
Water		20,245,608			5.7
Toll Roads		20,060,150			5.6
Airports		16,470,136			4.6
Diversified		16,278,668			4.6
Investment Company		15,259,378			4.3
Ports		2,685,776			0.7
	$	356,860,828	**		100.0	%

** Does not reflect the value of securities held as collateral on loaned securities.

See Notes to Financial Statements
16

Morgan Stanley Global Infrastructure Fund

Financial Statements

Statement of Assets and Liabilities December 31, 2013

Assets:
Investments in securities, at value (cost $252,726,567) (including $44,031,741 for securities loaned)	$	347,126,096
Investment in affiliate, at value (cost $51,038,755)		51,038,755
Total investments in securities, at value (cost $303,765,322)		398,164,851
Cash (including foreign currency valued at $122,748 with a cost of $122,156)		1,385,062
Receivable for:
Investments sold		2,402,142
Dividends		1,231,773
Foreign withholding taxes reclaimed		142,833
Shares of beneficial interest sold		887
Dividends from affiliate		428
Prepaid expenses and other assets		36,513
Total Assets		403,364,489
Liabilities:
Collateral on securities loaned, at value		42,566,337
Payable for:
Shares of beneficial interest redeemed		706,032
Investments purchased		543,507
Transfer agent fee		223,540
Advisory fee		175,122
Distribution fee		78,852
Administration fee		24,893
Accrued expenses and other payables		124,042
Total Liabilities		44,442,325
Net Assets	$	358,922,164
Composition of Net Assets:
Paid-in-capital	$	257,285,346
Net unrealized appreciation		94,419,074
Accumulated undistributed net investment income		147,133
Accumulated undistributed net realized gain		7,070,611
Net Assets	$	358,922,164
Class A Shares:
Net Assets	$	88,820,546
Shares Outstanding (unlimited shares authorized, $0.01 par value)		11,272,481
Net Asset Value Per Share	$	7.88
Maximum Offering Price Per Share, (net asset value plus 5.54% of net asset value)	$	8.32
Class B Shares:
Net Assets	$	1,342,753
Shares Outstanding (unlimited shares authorized, $0.01 par value)		164,893
Net Asset Value Per Share	$	8.14
Class L Shares@@:
Net Assets	$	6,937,892
Shares Outstanding (unlimited shares authorized, $0.01 par value)		868,958
Net Asset Value Per Share	$	7.98
Class I Shares:
Net Assets	$	2,642,447
Shares Outstanding (unlimited shares authorized, $0.01 par value)		338,016
Net Asset Value Per Share	$	7.82
Class Q Shares:
Net Assets	$	259,178,526
Shares Outstanding (unlimited shares authorized, $0.01 par value)		32,262,632
Net Asset Value Per Share	$	8.03

@@ Effective February 25, 2013, Class C shares were renamed Class L shares.

See Notes to Financial Statements
17

Morgan Stanley Global Infrastructure Fund

Financial Statements continued

Statement of Operations For the year ended December 31, 2013

Net Investment Income: Income
Dividends (net of $654,496 foreign withholding tax)	$	10,852,671
Income from securities loaned - net		155,568
Dividends from affiliate (Note 5)		2,057
Interest		196
Total Income		11,010,492
Expenses
Advisory fee (Note 3)		2,059,769
Distribution fee (Class A shares) (Note 4)		224,187
Distribution fee (Class B shares) (Note 4)		16,713
Distribution fee (Class L shares) (Note 4)@@		55,789
Distribution fee (Class Q shares) (Note 4)		625,075
Administration fee (Note 3)		289,090
Transfer agent fees and expenses		243,003
Transfer agent fees and expenses (Class A shares)		6,015
Transfer agent fees and expenses (Class B shares)		838
Transfer agent fees and expenses (Class L shares)@@		835
Transfer agent fees and expenses (Class I shares)		463
Transfer agent fees and expenses (Class Q shares)		14,932
Shareholder reports and notices		207,589
Professional fees		115,461
Sub Transfer agent fees and expenses (Class A Share)		24,412
Sub transfer agent fees and expenses (Class B shares)		763
Sub transfer agent fees and expenses (Class L shares)@@		2,352
Sub transfer agent fees and expenses (Class I shares)		161
Sub transfer agent fees and expenses (Class Q shares)		53,553
Custodian fees		68,912
Registration fees		49,556
Trustees' fees and expenses		8,863
Other		30,117
Total Expenses		4,098,448
Less: rebate from Morgan Stanley affiliated cash sweep (Note 5)		(9,373	)
Net Expenses		4,089,075
Net Investment Income		6,921,417
Realized and Unrealized Gain (Loss): Realized Gain (Loss) on:
Investments		39,913,545
Foreign currency translation		965
Net Realized Gain		39,914,510
Change in Unrealized Appreciation (Depreciation) on:
Investments		12,254,663
Foreign currency translation		8,804
Net Change in Unrealized Appreciation (Depreciation)		12,263,467
Net Gain		52,177,977
Net Increase	$	59,099,394

@@ Effective February 25, 2013, Class C shares were renamed Class L shares.

See Notes to Financial Statements
18

Morgan Stanley Global Infrastructure Fund

Financial Statements continued

Statements of Changes in Net Assets

	FOR THE YEAR ENDED DECEMBER 31, 2013			FOR THE YEAR ENDED DECEMBER 31, 2012
Increase (Decrease) in Net Assets: Operations:
Net investment income	$	6,921,417		$	8,034,936
Net realized gain		39,914,510			27,703,298
Net change in unrealized appreciation (depreciation)		12,263,467			24,230,030
Net Increase		59,099,394			59,968,264
Dividends and Distributions to Shareholders from:
Net investment income
Class A shares		(1,772,429	)		(1,887,753	)
Class B shares		(13,522	)		(25,630	)
Class L shares@@		(97,700	)		(100,765	)
Class I shares		(57,839	)		(53,856	)
Class Q shares		(5,126,405	)		(5,432,004	)
Net realized gain
Class A shares		(9,439,032	)		(5,966,803	)
Class B shares		(149,796	)		(146,089	)
Class L shares@@		(731,517	)		(485,107	)
Class I shares		(269,124	)		(163,891	)
Class Q shares		(27,045,390	)		(17,156,211	)
Total Dividends and Distributions		(44,702,754	)		(31,418,109	)
Net decrease from transactions in shares of beneficial interest		(12,745,222	)		(23,029,152	)
Net Increase		1,651,418			5,521,003
Net Assets:
Beginning of period		357,270,746			351,749,743
End of Period (Including accumulated undistributed net investment income of $147,133 and $292,954, respectively)	$	358,922,164		$	357,270,746

@@ Effective February 25, 2013, Class C shares were renamed Class L shares.

See Notes to Financial Statements
19

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements n December 31, 2013

1. Organization and Accounting Policies

Morgan Stanley Global Infrastructure 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 to seek to provide both capital appreciation and current income. The Fund was organized as a Massachusetts business trust on December 8, 1987 and commenced operations on April 29, 1988. On July 28, 1997, the Fund converted to a multiple class share structure.

The Fund offers Class A shares, Class B shares, Class L shares and Class I shares. The Fund's Class Q shares are closed to new investments (except dividend reinvestments). The five classes are substantially the same except, 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 Q shares are subject to a contingent deferred sales charge imposed on shares redeemed within eighteen months, six years and six years, respectively. Class L shares and Class I shares are not subject to a sales charge. Additionally, Class A shares, Class B shares, Class L shares and Class Q shares incur distribution expenses.

On February 25, 2013, Class C shares were renamed Class L shares.

The following is a summary of significant accounting policies:

A. Valuation of Investments — (1) An equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), if there were no sales on a given day, the security is valued at the mean between the last reported bid and asked prices; (2) all other equity portfolio securities for which over-the-counter market quotations are readily available are valued at its latest reported sales 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; (3) quotations of foreign portfolio securities, other assets and liabilities and forward contracts stated in foreign currency are translated into U.S. dollar equivalents at the prevailing market rates prior to the close of the New York Stock Exchange ("NYSE"); (4) when market quotations are not readily available, including circumstances under which Morgan Stanley Investment Management Inc. (the "Adviser") or Morgan Stanley Investment Management Limited or Morgan Stanley Investment Management Company (each, a "Sub-Adviser"), each a wholly owned subsidiary of Morgan Stanley, determines that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of 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 Board of Trustees (the "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

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements n December 31, 2013 continued

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 Trustees or by the Adviser using a pricing service and/or procedures approved by the Trustees; (5) certain portfolio securities may be valued by an outside pricing service approved by the Trustees; (6) investments in 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 (7) short-term debt securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, unless the Adviser determines such valuation does not reflect the securities' market value, in which case these securities will be valued at their fair market value determined by the Adviser.

Under procedures approved by the Trustees, the Fund's Adviser has formed a Valuation Committee. The Valuation Committee provides administration and oversight of the Fund's valuation policies and procedures, which are reviewed at least annually by the Trustees. These procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available. Under these procedures, the Valuation Committee convenes on a regular and ad hoc basis to review such securities and considers a number of factors, including valuation methodologies and significant unobservable valuation inputs, when arriving at fair value. The Valuation Committee may employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The Valuation Committee employs various methods for calibrating these valuation approaches including a regular review of valuation methodologies, key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

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 except for certain dividends on foreign securities which are recorded as soon as the Fund is informed after 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.

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements n December 31, 2013 continued

C. Multiple Class Allocations — Investment income, realized and unrealized gain (loss), and non-class specific expenses are allocated daily based upon the proportion of net assets of each class. Class specific expenses are borne by the respective share classes and include Distribution, Transfer Agent fees and Sub Transfer Agent fees.

D. Securities Lending — The Fund may lend securities to qualified financial institutions, such as broker-dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Fund. The Fund receives cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked-to-market daily, by State Street Bank and Trust Company ("State Street"), the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.

Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in high-quality short-term investments. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent.

The Fund has the right under the lending agreement to recover the securities from the borrower on demand.

The following table presents financial instruments that are subject to enforceable netting arrangements as of December 31, 2013.

GROSS AMOUNT NOT OFFSET IN THE STATEMENT OF ASSETS AND LIABILITIES
GROSS ASSET AMOUNT PRESENTED IN STATEMENT OF ASSETS AND LIABILITIES			FINANCIAL INSTRUMENT		COLLATERAL RECEIVED			NET AMOUNT (NOT LESS THAN 0)
$	44,031,741	⁽¹⁾	$	—	$	(44,031,741	)⁽²⁾⁽³⁾	$	0

⁽¹⁾ Represents market value of loaned securities at period end.

⁽²⁾ The Fund received cash collateral of $42,566,337, of which $41,304,023 was subsequently invested in Repurchase Agreements and Morgan Stanley Institutional Liquidity Funds as reported in the Portfolio of Investments. As of December 31, 2013 there was uninvested cash of $1,262,314, which is not reflected in the Portfolio of Investments.In addition, the Fund received non-cash collateral of $3,529,627 in the form of U.S. government obligations, which the Fund cannot sell or repledge, and accordingly are not reflected in the Portfolio of Investments.

⁽³⁾The actual collateral received is greater than the amount shown here due to overcollateralization.

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements n December 31, 2013 continued

E. Foreign Currency Translation and Foreign Investments — The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:

— investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;

— investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.

Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, 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 fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. Federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. Federal income tax purposes.

Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of unrealized appreciation (depreciation) on the Statement of Assets and Liabilities. The change in unrealized currency gains (losses) on foreign currency translations for the period is reflected in the Statement of Operations.

F. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividend from net investment income, if any, are declared and paid semiannually. Net realized capital gains, if any, are distributed at least annually.

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

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements n December 31, 2013 continued

H. Indemnifications — The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

2. Fair Valuation Measurements

Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures ("ASC 820"), defines fair value as the value 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. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing 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 valuing 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. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements n December 31, 2013 continued

The following is a summary of the inputs used to value the Fund's investments as of December 31, 2013.

INVESTMENT TYPE	LEVEL 1 UNADJUSTED QUOTED PRICES		LEVEL 2 OTHER SIGNIFICANT OBSERVABLE INPUTS		LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS		TOTAL
Assets:
Common Stocks
Airports	$	16,470,136	$	—	$	—	$	16,470,136
Communications		53,769,079		—		—		53,769,079
Diversified		16,278,668		—		—		16,278,668
Oil & Gas Storage & Transportation		159,869,000		—		—		159,869,000
Ports		2,685,776		—		—		2,685,776
Toll Roads		20,060,150		—		—		20,060,150
Transmission & Distribution		52,223,033		—		—		52,223,033
Water		20,245,608		—		—		20,245,608
Total Common Stocks		341,601,450		—		—		341,601,450
Short-Term Investments
Investment Company		51,038,755		—		—		51,038,755
Repurchase Agreements		—		5,524,646		—		5,524,646
Total Short-Term Investments		51,038,755		5,524,646		—		56,563,401
Total Assets	$	392,640,205	$	5,524,646	$	—	$	398,164,851

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes. The Fund recognizes transfers between the levels as of the end of the period. As of December 31, 2013, securities with a total value of $115,811,766 transferred from Level 2 to Level 1. At December 31, 2012, the fair market value of certain securities were adjusted due to developments which occurred between the time of the close of the foreign markets on which they trade and the close of business on the NYSE which resulted in their Level 2 classification.

3. Advisory/Administration and Sub-Advisory Agreements

Pursuant to an Investment Advisory Agreement, the Fund pays the Adviser an advisory fee, accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined at the close of each business day: 0.57% to the portion of the daily net assets not exceeding $500 million; 0.47% to the portion of the daily net assets exceeding $500 million but not exceeding $1 billion; 0.445% to the portion of the daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.42% to the portion of the daily net assets exceeding $1.5 billion but not

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements n December 31, 2013 continued

exceeding $2.5 billion; 0.395% to the portion of the daily net assets exceeding $2.5 billion but not exceeding $3.5 billion; 0.37% to the portion of the daily net assets exceeding $3.5 billion but not exceeding $5 billion; and 0.345% to the portion of the daily net assets exceeding $5 billion. For the year ended December 31, 2013, the advisory fee rate (net of rebate) was equivalent to an annual effective rate of 0.57% of the Fund's daily net assets.

Under the Sub-Advisory Agreement between the Adviser and the Sub-Advisers, the Sub-Advisers provide the Fund with advisory services, subject to the overall supervision of the Adviser and the Fund's Officers and Trustees. The Adviser pays the Sub-Advisers on a monthly basis a portion of the net advisory fees the Adviser receives from the Fund.

Pursuant to an Administration Agreement with Morgan Stanley Services Company Inc. (the "Administrator"), an affiliate of the Adviser and Sub-Advisers, 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 a Sub-Administration Agreement between the Administrator and 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.

4. Plan of Distribution

Shares of the Fund are distributed by Morgan Stanley Distribution, Inc. (the "Distributor"), an affiliate of the Adviser, Administrator and Sub-Advisers. 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 1.00% of the average daily net assets of Class B shares; (iii) Class L — up to 0.75% of the average daily net assets of Class L shares; and (iv) Class Q — up to 0.26% of the average daily net assets of Class Q shares.

The Distributor has agreed to permanently cap the 12b-1 fee for the Class Q shares at 0.24% of the average daily net assets of Class Q. For the year ended December 31, 2013, the distribution fee was accrued for Class Q shares at the annual rate of 0.24%.

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements n December 31, 2013 continued

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 $5,179,281 and $10,005, for Class B shares and Class Q shares, respectively, at December 31, 2013. For the year ended December 31, 2013, the distribution fee was accrued for Class B at an annual rate of 1.00%.

The Trustees approved an amendment to the Plan of Distribution reducing the distribution and shareholder services (12b-1) fee for the Fund's Class L shares from 1.00% to 0.75% of the average daily net assets of such Class, effective February 25, 2013.

In the case of Class A shares and Class L shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25% or 0.75% of the average daily net assets of Class A shares or Class L shares, 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 year ended December 31, 2013, the distribution fee was accrued for Class A shares and Class L shares at the annual rate of 0.25% and 0.79%, respectively.

The Distributor has informed the Fund that for the year ended December 31, 2013, it received contingent deferred sales charges from certain redemptions of the Fund's Class B shares and Class Q shares of $514 and $28,982, respectively, and received $4,814 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.

5. Security Transactions and Transactions with Affiliates

The cost of purchases and proceeds from sales of investment securities, excluding short-term investments, for the year ended December 31, 2013, aggregated $88,246,204 and $152,785,158, respectively.

The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds (the "Liquidity Funds"), an open-end management investment company managed by the Adviser, both directly, and as a portion of the securities held as collateral on loaned securities. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the year ended December 31, 2013, advisory fees paid were reduced by $9,373 relating to the Fund's investment in the Liquidity Funds.

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements n December 31, 2013 continued

A summary of the Fund's transactions in shares of the Liquidity Funds during the year ended December 31, 2013 is as follows:

VALUE DECEMBER 31, 2012				PURCHASES AT COST				SALES				DIVIDEND INCOME				VALUE DECEMBER 31, 2013
$	3,179,165			$	116,904,119			$	69,044,529			$	2,057			$	51,038,755

From January 1, 2013 to June 30, 2013, the Fund incurred brokerage commissions of $663 with Citigroup, Inc., and its affiliated broker-dealers, which may be deemed affiliates of the Adviser, Sub-Advisers, Administrator and Distributor under Section 17 of the Act, for portfolio transactions executed on behalf of the Fund. Citigroup, Inc. and its affiliated broker-dealers ceased to be affiliates of the Fund pursuant to Section 17 of the Act as of July 1, 2013.

Morgan Stanley Services Company Inc., an affiliate of the Adviser, Sub-Advisers, Administrator and Distributor, was the Fund's transfer agent. Effective July 1, 2013, the Trustees approved changing the transfer agent to Boston Financial Data Services, Inc.

The Fund has an unfunded noncontributory defined benefit pension plan covering certain independent Trustees of the Fund who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on factors which include years of service and compensation. The Trustees voted to close the plan to new participants and eliminate the future benefits growth due to increases to compensation after July 31, 2003. At December 31, 2013, the Fund had an accrued pension liability of $60,109, which is included in "Accrued expenses and other payables" in the Statement of Assets and Liabilities.

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.

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements n December 31, 2013 continued

6. Shares of Beneficial Interest

Transactions in shares of beneficial interest were as follows:

	FOR THE YEAR ENDED DECEMBER 31, 2013							FOR THE YEAR ENDED DECEMBER 31, 2012
	SHARES			AMOUNT				SHARES			AMOUNT
CLASS A SHARES
Sold		122,641		$	985,888				138,464		$	1,039,131
Conversion from Class B		81,920			667,576				114,371			862,045
Reinvestment of dividends and distributions		1,400,800			10,851,652				1,000,412			7,579,556
Redeemed		(1,895,882	)		(15,427,420	)			(1,891,092	)		(14,256,866	)
Net decrease — Class A		(290,521	)		(2,922,304	)			(637,845	)		(4,776,134	)
CLASS B SHARES
Sold		3,589			30,320		��		25,738			204,873
Conversion to Class A		(79,979	)		(667,576	)			(112,017	)		(862,045	)
Reinvestment of dividends and distributions		19,280			153,955				20,633			160,080
Redeemed		(39,705	)		(326,992	)			(90,281	)		(689,023	)
Net decrease — Class B		(96,815	)		(810,293	)			(155,927	)		(1,186,115	)
CLASS L SHARES@@
Sold		17,679			144,495				12,817			97,268
Reinvestment of dividends and distributions		104,763			821,322				74,978			573,852
Redeemed		(192,344	)		(1,576,756	)			(167,288	)		(1,265,158	)
Net decrease — Class L		(69,902	)		(610,939	)			(79,493	)		(594,038	)
CLASS I SHARES
Sold		61,006			498,596				164,602			1,197,770
Reinvestment of dividends and distributions		42,420			326,197				28,953			217,303
Redeemed		(61,340	)		(503,780	)			(197,769	)		(1,543,889	)
Net increase (decrease) — Class I		42,086			321,013				(4,214	)		(128,816	)
CLASS Q SHARES
Reinvestment of distributions		3,969,850			31,335,686				2,828,468			21,792,285
Redeemed		(4,833,938	)		(40,058,385	)			(4,956,800	)		(38,136,334	)
Net decrease — Class Q		(864,088	)		(8,722,699	)			(2,128,332	)		(16,344,049	)
Net decrease in Fund		(1,279,240	)	$	(12,745,222	)			(3,005,811	)	$	(23,029,152	)

@@ Effective February 25, 2013, Class C shares were renamed Class L shares.

Effective February 25, 2013, the Trustees approved the suspension of the continuous offering of Class B shares to new and existing shareholders.

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements n December 31, 2013 continued

7. Federal Income Tax Status

It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for Federal income taxes is required in the financial statements.

The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.

FASB ASC 740-10, Income Taxes — Overall, 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. Management has concluded there are no significant uncertain tax positions that would require recognition in the 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. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Generally, each of the tax years in the four-year period ended December 31, 2013, remains subject to examination by taxing authorities.

2013 Distributions Paid From:				2012 Distributions Paid From:
ORDINARY INCOME		LONG-TERM CAPITAL GAIN		ORDINARY INCOME		LONG-TERM CAPITAL GAIN
$	8,391,910	$	36,310,844	$	7,500,008	$	23,918,101

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements n December 31, 2013 continued

Permanent differences, primarily due to differing treatments of gains (losses) related to foreign currency transactions, resulted in the following reclassifications among the components of net assets at December 31, 2013:

ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME				ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN				PAID-IN-CAPITAL
$	657			$	(657	)		$	—

At December 31, 2013, the components of distributable earnings for the Fund on a tax basis were as follows:

UNDISTRIBUTED ORDINARY INCOME				UNDISTRIBUTED LONG-TERM CAPITAL GAIN
$	939,853			$	8,852,109

At December 31, 2013, the aggregate cost for Federal income tax purposes is $306,068,683. The aggregate gross unrealized appreciation is $92,421,563 and the aggregate gross unrealized depreciation is $325,395 resulting in net unrealized appreciation of $92,096,168.

8. Risks Relating to Certain Financial Statements

9. Accounting Pronouncement

In June 2013, FASB issued Accounting Standards Update 2013-08 Financial Services — Investment Companies (Topic 946) — Amendments to the Scope, Measurement, and Disclosure Requirements ("ASU 2013-08") which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. ASU 2013-08 sets forth a methodology for determining whether an entity should be characterized as an investment company and prescribes fair value accounting for an investment company's non-controlling ownership interest in another investment company. FASB has determined that a fund registered under the Act automatically meets ASU 2013-08's criteria for an investment company. Although still evaluating the potential impacts of ASU 2013-08 to the Fund, management expects that the impact of the Fund's adoption will be limited to additional financial statement disclosures.

Morgan Stanley Global Infrastructure Fund

Financial Highlights

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

	FOR THE YEAR ENDED DECEMBER 31,
	2013			2012			2011			2010^			2009^
Class A Shares
Selected Per Share Data:
Net asset value, beginning of period	$	7.64		$	7.07		$	6.37		$	6.16		$	5.46
Income from investment operations:
Net investment income⁽¹⁾		0.16			0.17			0.15			0.15			0.17
Net realized and unrealized gain		1.16			1.12			0.88			0.27			0.74
Total income from investment operations		1.32			1.29			1.03			0.42			0.91
Less dividends and distributions from:
Net investment Income		(0.17	)		(0.17	)		(0.16	)		(0.21	)		(0.21	)
Net realized gain		(0.91	)		(0.55	)		(0.17	)		—			—
Total dividends and distributions		(1.08	)		(0.72	)		(0.33	)		(0.21	)		(0.21	)
Net asset value, end of period	$	7.88		$	7.64		$	7.07		$	6.37		$	6.16
Total Return⁽²⁾		17.78	%		18.45	%		16.27	%		6.84	%		16.97	%
Ratios to Average Net Assets:
Net expenses		1.13	%⁽³⁾		1.11	%⁽³⁾⁽⁴⁾		1.14	%⁽³⁾⁽⁴⁾		1.18	%⁽³⁾⁽⁴⁾		1.22	%⁽³⁾⁽⁴⁾
Net investment income		1.92	%⁽³⁾		2.28	%⁽³⁾⁽⁴⁾		2.24	%⁽³⁾⁽⁴⁾		2.44	%⁽³⁾⁽⁴⁾		3.08	%⁽³⁾⁽⁴⁾
Rebate from Morgan Stanley affiliate		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾
Supplemental Data:
Net assets, end of period, in thousands	$	88,821		$	88,330		$	86,249		$	89,082		$	102,344
Portfolio turnover rate		25	%		28	%		36	%		149	%		382	%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) 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) Amount is less than 0.005%.

See Notes to Financial Statements
32

Morgan Stanley Global Infrastructure Fund

Financial Highlights continued

	FOR THE YEAR ENDED DECEMBER 31,
	2013			2012			2011			2010^			2009^
Class B Shares
Selected Per Share Data:
Net asset value, beginning of period	$	7.85		$	7.24		$	6.50		$	6.26		$	5.54
Income from investment operations:
Net investment income⁽¹⁾		0.09			0.12			0.10			0.10			0.13
Net realized and unrealized gain		1.19			1.14			0.90			0.28			0.75
Total income from investment operations		1.28			1.26			1.00			0.38			0.88
Less dividends and distributions from:
Net investment income		(0.08	)		(0.10	)		(0.09	)		(0.14	)		(0.16	)
Net realized gain		(0.91	)		(0.55	)		(0.17	)		—			—
Total dividends and distributions		(0.99	)		(0.65	)		(0.26	)		(0.14	)		(0.16	)
Net asset value, end of period	$	8.14		$	7.85		$	7.24		$	6.50		$	6.26
Total Return⁽²⁾		16.74	%		17.53	%		15.35	%		6.21	%		16.04	%
Ratios to Average Net Assets:
Net expenses		1.94	%⁽³⁾		1.86	%⁽³⁾⁽⁴⁾		1.89	%⁽³⁾⁽⁴⁾		1.93	%⁽³⁾⁽⁴⁾		1.97	%⁽³⁾⁽⁴⁾
Net investment income		1.05	%⁽³⁾		1.53	%⁽³⁾⁽⁴⁾		1.49	%⁽³⁾⁽⁴⁾		1.69	%⁽³⁾⁽⁴⁾		2.33	%⁽³⁾⁽⁴⁾
Rebate from Morgan Stanley affiliate		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾
Supplemental Data:
Net assets, end of period, in thousands	$	1,343		$	2,054		$	3,022		$	5,618		$	9,174
Portfolio turnover rate		25	%		28	%		36	%		149	%		382	%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) 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) Amount is less than 0.005%.

See Notes to Financial Statements
33

Morgan Stanley Global Infrastructure Fund

Financial Highlights continued

	FOR THE YEAR ENDED DECEMBER 31,
	2013			2012			2011			2010^			2009^
Class L Shares
Selected Per Share Data:
Net asset value, beginning of period	$	7.73		$	7.14		$	6.44		$	6.21		$	5.51
Income from investment operations:
Net investment income⁽¹⁾		0.11			0.12			0.12			0.10			0.13
Net realized and unrealized gain		1.17			1.13			0.87			0.28			0.75
Total income from investment operations		1.28			1.25			0.99			0.38			0.88
Less dividends and distributions from:
Net investment income		(0.12	)		(0.11	)		(0.12	)		(0.15	)		(0.18	)
Net realized gain		(0.91	)		(0.55	)		(0.17	)		—			—
Total dividends and distributions		(1.03	)		(0.66	)		(0.29	)		(0.15	)		(0.18	)
Net asset value, end of period	$	7.98		$	7.73		$	7.14		$	6.44		$	6.21
Total Return⁽²⁾		17.04	%		17.70	%		15.42	%		6.17	%		16.18	%
Ratios to Average Net Assets:
Net expenses		1.68	%⁽³⁾		1.85	%⁽³⁾⁽⁴⁾		1.68	%⁽³⁾⁽⁴⁾		1.93	%⁽³⁾⁽⁴⁾		1.97	%⁽³⁾⁽⁴⁾
Net investment income		1.36	%⁽³⁾		1.54	%⁽³⁾⁽⁴⁾		1.70	%⁽³⁾⁽⁴⁾		1.69	%⁽³⁾⁽⁴⁾		2.33	%⁽³⁾⁽⁴⁾
Rebate from Morgan Stanley affiliate		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾
Supplemental Data:
Net assets, end of period, in thousands	$	6,938		$	7,254		$	7,275		$	7,642		$	10,517
Portfolio turnover rate		25	%		28	%		36	%		149	%		382	%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(4) Reflects overall Fund ratios for investment income and non-class specific expenses.

(5) Amount is less than 0.005%.

See Notes to Financial Statements
34

Morgan Stanley Global Infrastructure Fund

Financial Highlights continued

	FOR THE YEAR ENDED DECEMBER 31,
	2013			2012			2011			2010^			2009^
Class I Shares
Selected Per Share Data:
Net asset value, beginning of period	$	7.59		$	7.02		$	6.34		$	6.12		$	5.43
Income from investment operations:
Net investment income⁽¹⁾		0.18			0.19			0.17			0.17			0.18
Net realized and unrealized gain		1.15			1.12			0.86			0.27			0.74
Total income from investment operations		1.33			1.31			1.03			0.44			0.92
Less dividends and distributions from:
Net investment income		(0.19	)		(0.19	)		(0.18	)		(0.22	)		(0.23	)
Net realized gain		(0.91	)		(0.55	)		(0.17	)		—			—
Total dividends and distributions		(1.10	)		(0.74	)		(0.35	)		(0.22	)		(0.23	)
Net asset value, end of period	$	7.82		$	7.59		$	7.02		$	6.34		$	6.12
Total Return⁽²⁾		18.08	%		18.88	%		16.33	%		7.33	%		17.14	%
Ratios to Average Net Assets:
Net expenses		0.87	%⁽³⁾		0.86	%⁽³⁾⁽⁴⁾		0.89	%⁽³⁾⁽⁴⁾		0.93	%⁽³⁾⁽⁴⁾		0.97	%⁽³⁾⁽⁴⁾
Net investment income		2.19	%⁽³⁾		2.53	%⁽³⁾⁽⁴⁾		2.49	%⁽³⁾⁽⁴⁾		2.69	%⁽³⁾⁽⁴⁾		3.33	%⁽³⁾⁽⁴⁾
Rebate from Morgan Stanley affiliate		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾
Supplemental Data:
Net assets, end of period, in thousands	$	2,642		$	2,245		$	2,108		$	3,963		$	2,950
Portfolio turnover rate		25	%		28	%		36	%		149	%		382	%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) 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) Amount is less than 0.005%.

See Notes to Financial Statements
35

Morgan Stanley Global Infrastructure Fund

Financial Highlights continued

	FOR THE YEAR ENDED DECEMBER 31,
	2013			2012			2011			2010^			2009^
Class Q Shares
Selected Per Share Data:
Net asset value, beginning of period	$	7.77		$	7.18		$	6.47		$	6.25		$	5.53
Income from investment operations:
Net investment income⁽¹⁾		0.16			0.18			0.16			0.15			0.17
Net realized and unrealized gain		1.18			1.13			0.88			0.28			0.76
Total income from investment operations		1.34			1.31			1.04			0.43			0.93
Less dividends and distributions from:
Net investment income		(0.17	)		(0.17	)		(0.16	)		(0.21	)		(0.21	)
Net realized gain		(0.91	)		(0.55	)		(0.17	)		—			—
Total dividends and distributions		(1.08	)		(0.72	)		(0.33	)		(0.21	)		(0.21	)
Net asset value, end of period	$	8.03		$	7.77		$	7.18		$	6.47		$	6.25
Total Return⁽²⁾		17.76	%		18.45	%		16.18	%		6.91	%		17.12	%
Ratios to Average Net Assets:
Net expenses		1.11	%⁽³⁾		1.10	%⁽³⁾⁽⁴⁾		1.13	%⁽³⁾⁽⁴⁾		1.17	%⁽³⁾⁽⁴⁾		1.21	%⁽³⁾⁽⁴⁾
Net investment income		1.93	%⁽³⁾		2.29	%⁽³⁾⁽⁴⁾		2.25	%⁽³⁾⁽⁴⁾		2.45	%⁽³⁾⁽⁴⁾		3.09	%⁽³⁾⁽⁴⁾
Rebate from Morgan Stanley affiliate		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾		0.00	%⁽⁵⁾
Supplemental Data:
Net assets, end of period, in thousands	$	259,179		$	257,387		$	253,096		$	260,051		$	299,176
Portfolio turnover rate		25	%		28	%		36	%		149	%		382	%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) 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) Amount is less than 0.005%.

See Notes to Financial Statements
36

Morgan Stanley Global Infrastructure Fund

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees of
Morgan Stanley Global Infrastructure Fund:

We have audited the accompanying statement of assets and liabilities of Morgan Stanley Global Infrastructure Fund (the "Fund"), including the portfolio of investments, as of December 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the two years ended December 31, 2010 were audited by another independent registered public accounting firm whose report, dated February 25, 2011, expressed an unqualified opinion on those financial highlights.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2013, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Morgan Stanley Global Infrastructure Fund at December 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Boston, Massachusetts
February 26, 2014

Morgan Stanley Global Infrastructure Fund

Results of Special Shareholder Meeting (unaudited)

On May 31, 2013 then subsequently adjourned to June 7, 2013, a Special Meeting of Shareholders of the Fund was held in order to vote to change the Fund's fundamental investment restriction regarding industry concentration. The voting results were as follows:

Number of Shares
For		Against		Abstain
	19,458,225		1,108,981		2,238,580

Morgan Stanley Global Infrastructure Fund

U.S. Privacy Policy (unaudited)

An Important Notice Concerning Our U.S. Privacy Policy

This privacy notice describes the U.S. privacy policy of Morgan Stanley Distribution, Inc., and the Morgan Stanley family of mutual funds ("us", "our", "we").

We Respect Your Privacy

Morgan Stanley Global Infrastructure Fund

U.S. Privacy Policy (unaudited) continued

1. What Personal Information Do We Collect From You?

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

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

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

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

We may disclose personal information we collect about you in each of the categories listed above to affiliated and nonaffiliated third parties.

a. Information We Disclose to Affiliated Companies. We may disclose personal information that we collect about you to our affiliated companies to manage your account(s) effectively, to service and process your transactions, and 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. 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 may disclose personal information that we collect about you to nonaffiliated third parties to provide marketing services on our behalf or to other financial institutions with whom we have joint marketing agreements. We may also disclose all of the information we collect to other nonaffiliated third parties for our everyday business purposes, such as to process transactions, maintain account(s), respond to court orders and legal investigations, report to credit bureaus, offer our own products and services, protect against fraud, for institutional risk control, to perform services on our behalf, and as otherwise required or permitted by law.

Morgan Stanley Global Infrastructure Fund

U.S. Privacy Policy (unaudited) continued

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

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

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

Morgan Stanley Global Infrastructure Fund

U.S. Privacy Policy (unaudited) continued

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

• Calling us at (800) 548-7786
Monday–Friday between 8a.m. and 5p.m. (EST)

• Writing to us at the following address:
Boston Financial Data Services, Inc.
c/o Privacy Coordinator
P.O. Box 219804
Kansas City, Missouri 64121

7. What if an affiliated company becomes a nonaffiliated third party?

Morgan Stanley Global Infrastructure Fund

U.S. Privacy Policy (unaudited) continued

your election will not apply to use by any former affiliated company of your personal information in their possession once it becomes a nonaffiliated third party.

Special Notice to Residents of Vermont
The following 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.

Special Notice to Residents of California
The following section supplements our Policy with respect to our individual clients who have a California address and supersedes anything to the contrary in the above Policy with respect to those clients only.

Morgan Stanley Global Infrastructure Fund

Trustee and Officer Information (unaudited)

Independent Trustees:

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Length of
Time Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Independent
Trustee**

Other Directorships
Held by Independent Trustee***

Frank L. Bowman (69)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since August 2006

Director of BP p.l.c.; Director of Naval and Nuclear Technologies LLP; Director of the Armed Services YMCA of the USA and the U.S. Naval Submarine League; Director of the American Shipbuilding Suppliers Association; Member of the National Security Advisory Council of the Center for U.S. Global Engagement and a member of the CNA Military Advisory Board; Chairman of the Charity J Street Cup Golf; Trustee of Fairhaven United Methodist Church.

Morgan Stanley Global Infrastructure Fund

Trustee and Officer Information (unaudited) continued

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Length of
Time Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Independent
Trustee**

Other Directorships
Held by Independent Trustee***

Michael Bozic (73)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since April 1994

Private investor and a member of the advisory board of American Road Group LLC( retail) (since June 2000); Chairperson of the Compliance and Insurance Committee (since October 2006); Director or Trustee of various Morgan Stanley Funds (since April 1994); formerly, Chairperson of the Insurance Committee (July 2006-September 2006); Vice Chairman of Kmart Corporation (December 1998-October 2000); Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co.

100

Trustee and member of the Hillsdale College Board of Trustees

Kathleen A. Dennis (60)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since August 2006

Director of various non-profit organizations.

Morgan Stanley Global Infrastructure Fund

Trustee and Officer Information (unaudited) continued

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Length of
Time Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Independent
Trustee**

Other Directorships
Held by Independent Trustee***

Dr. Manuel H. Johnson (65)
c/o Johnson Smick
International, Inc.
220 I Street, NE
Suite 200
Washington, D.C. 20002

Trustee

Since July 1991

Senior Partner, Johnson Smick International, Inc. (consulting firm); Chairperson of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since July 1991); Co-Chairman and a founder of the Group of Seven Council (G7C) (international economic commission); formerly, Chairperson of the Audit Committee (July 1991-September 2006); Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury.

100

Director of NVR, Inc. (home construction).

Joseph J. Kearns (71)
c/o Kearns & Associates LLC PMB754
22631 Pacific Coast Highway
Malibu, CA 90265

Trustee

Since August 1994

101

Director of Electro Rent Corporation (equipment leasing) and The Ford Family Foundation.

Morgan Stanley Global Infrastructure Fund

Trustee and Officer Information (unaudited) continued

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Length of
Time Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Independent
Trustee**

Other Directorships
Held by Independent Trustee***

Michael F. Klein (55)
c/o Kramer Levin Naftalis &
Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since August 2006

Managing Director, Aetos Capital, LLC (since March 2000) and Co-President, Aetos Alternatives Management, LLC (since January 2004) and Co-Chief Executive Officer of Aetos Capital LLC (since August 2013); Chairperson of the Fixed Income Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, Managing Director, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management, President, various Morgan Stanley Funds (June 1998-March 2000) and Principal, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management (August 1997-December 1999).

Director of certain investment funds managed or sponsored by Aetos Capital, LLC. Director of Sanitized AG and Sanitized Marketing AG (specialty
chemicals).

Michael E. Nugent (77)
522 Fifth Avenue
New York, NY 10036

Chairperson of the Board and Trustee

Chairperson of the Boards since July 2006 and Trustee since July 1991

Chairperson of the Boards of various Morgan Stanley Funds (since July 2006); Chairperson of the Closed-End Fund Committee (since June 2012) and Director or Trustee of various Morgan Stanley Funds (since July 1991); formerly, Chairperson of the Insurance Committee (until July 2006), General Partner, Triumph Capital, L.P. (private investment partnership) (1988-2013).

100

None.

W. Allen Reed (66)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since August 2006

Director of Temple-Inland Industries (packaging and forest products); Director of Legg Mason, Inc. and Director of the Auburn University Foundation.

Morgan Stanley Global Infrastructure Fund

Trustee and Officer Information (unaudited) continued

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Length of
Time Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Independent
Trustee**

Other Directorships
Held by Independent Trustee***

Fergus Reid (81)
c/o Joe Pietryka, Inc.
85 Charles Colman Blvd.
Pawling, NY 12564

Trustee

Since June 1992

Chairman, Joe Pietryka, Inc.; Chairperson of the Governance Committee and Director or Trustee of various Morgan Stanley Funds (since June 1992).

101

Through December 31, 2012, Trustee and Director of certain investment companies in the JPMorgan Fund Complex.

Interested Trustee:

Name, Age and Address of
Interested Trustee

Position(s)
Held with
Registrant

Length of
Time Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Interested
Trustee**

Other Directorships
Held by Interested Trustee***

James F. Higgins (66)
One New York Plaza,
New York, NY 10004

Trustee

Since June 2000

Director or Trustee of various Morgan Stanley Funds (since June 2000); Senior Advisor of Morgan Stanley (since August 2000).

Formerly, Director of AXA Financial, Inc. and AXA Equitable Life Insurance Company (2002-2011) and Director of AXA MONY Life Insurance Company and AXA Mony Life Insurance Company of America (2004-2011).

* Each Trustee serves an indefinite term, until his or her successor is elected.

*** This includes any directorships at public companies and registered investment companies held by the Trustee at any time during the past five years.

Morgan Stanley Global Infrastructure Fund

Trustee and Officer Information (unaudited) continued

Executive Officers:

Name, Age and Address of
Executive Officer

Position(s)
Held with
Registrant

Length of
Time Served*

Principal Occupation(s) During Past 5 Years

John H. Gernon (50)
522 Fifth Avenue
New York, NY 10036

President and Principal Executive Officer – Equity, Fixed Income and AIP Funds

Since September 2013

President and Principal Executive Officer of the Equity and Fixed Income Funds and the Morgan Stanley AIP Funds (since September 2013) in the Fund Complex, Managing Director of the Adviser.

Stefanie V. Chang Yu (47)
522 Fifth Avenue
New York, NY 10036

Chief Compliance Officer

Since January 2014

Managing Director of the Adviser and various entities affiliated with the Adviser; Chief Compliance Officer of various Morgan Stanley Funds and the Adviser (since January 2014); formerly, Vice President of various Morgan Stanley Funds (December 1997-January 2014).

Joseph C. Benedetti (48)
522 Fifth Avenue
New York, NY 10036

Vice President

Since January 2014

Managing Director of the Adviser and various entities affiliated with the Adviser; Vice President of various Morgan Stanley Funds (since January 2014); formerly, Assistant Secretary of various Morgan Stanley Funds (October 2004-January 2014).

Francis J. Smith (48)
522 Fifth Avenue
New York, NY 10036

Treasurer and Principal Financial Officer

Treasurer since July 2003 and Principal Financial Officer since September 2002

Executive Director of the Adviser and various entities affiliated with the Adviser; Treasurer and Principal Financial Officer of various Morgan Stanley Funds (since July 2003).

Mary E. Mullin (46)
522 Fifth Avenue
New York, NY 10036

Secretary

Since June 1999

Executive Director of the Adviser and various entities affiliated with the Adviser; Secretary of various Morgan Stanley Funds (since June 1999).

* Each officer serves an indefinite term, until his or her successor is elected.

2013 Federal Tax Notice (unaudited)
For Federal income tax purposes, the following information is furnished with respect to the distributions paid by the Fund during its taxable year ended December 31, 2013. For corporate shareholders, 42.42% of the dividends qualified for the dividends received deduction. The Fund designated and paid $36,310,844 as a long-term capital gain distribution.
For Federal income tax purposes, the following information is furnished with respect to the Fund's earnings for its taxable year ended December 31, 2013. When distributed, certain earnings may be subject to a maximum tax rate of 15% as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund designated up to a maximum of $8,095,356 as taxable at this lower rate. The Fund intends to pass through foreign tax credits of $394,576, and has derived income from sources within foreign countries amounting to $7,575,239.
In January, the Fund provides tax information to shareholders for the preceding calendar year.

(This page has been left blank intentionally.)

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

John H. Gernon

President and Principal Executive Officer

Stefanie V. Chang Yu

Chief Compliance Officer

Joseph C. Benedetti

Vice President

Francis J. Smith

Treasurer and Principal Financial Officer

Mary E. Mullin

Secretary

Transfer Agent

Boston Financial Data Services, Inc.

2000 Crown Colony Drive

Quincy, Massachusetts 02169

Custodian

State Street Bank and Trust Company

One Lincoln Street

Boston, Massachusetts 02111

Independent Registered Public Accounting Firm

Ernst & Young LLP

200 Clarendon Street

Boston, Massachusetts 02116

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

Adviser

Morgan Stanley Investment Management Inc.

522 Fifth Avenue

New York, New York 10036

Sub-Advisers

Morgan Stanley Investment Management Limited

25 Cabot Square, Canary Wharf

London, E14 4QA, England

Morgan Stanley Investment Management Company

23 Church Street

16-01 Capital Square, Singapore 049481

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) 548-7786.

This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Please read the Prospectus carefully before investing.

Morgan Stanley Distribution, Inc., member FINRA.

Morgan Stanley Global Infrastructure Fund

Table of Contents

Welcome Shareholder	3
Fund Report	4
Performance Summary	7
Expense Example	8
Investment Advisory Agreement Approval	9
Portfolio of Investments	11
Statement of Assets and Liabilities	14
Statement of Operations	16
Statements of Changes in Net Assets	17
Notes to Financial Statements	18
Financial Highlights	25
U.S. Privacy Policy	30

Welcome Shareholder,

We are pleased to provide this semiannual report, in which you will learn how your investment in Morgan Stanley Global Infrastructure Fund performed during the latest six-month period. It includes an overview of the market conditions and discusses some of the factors that affected performance during the reporting period. In addition, the report contains financial statements and a list of portfolio holdings.

Morgan Stanley Investment Management is a client-centric, investor-led organization. Our global presence, intellectual capital, and breadth of products and services enable us to partner with investors to meet the evolving challenges of today’s financial markets. We aim to deliver superior investment service and to empower our clients to make the informed decisions that help them reach their investment goals.

As always, we thank you for selecting Morgan Stanley Investment Management, and look forward to working with you in the months and years ahead.

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 (unaudited)

For the six months ended June 30, 2014

Total Return for the 6 Months Ended June 30, 2014

Class A		Class B		Class L		Class I		Class Q		Dow Jones Brookfield Global Infrastructure Index(1)		S&P Global BMI Index(2)
15.02	%	14.42	%	14.71	%	15.14	%	15.12	%	16.37	%	6.64	%

The performance of the Fund’s five 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

Infrastructure securities appreciated 16.37 percent during the period, as measured by the Dow Jones Brookfield Global Infrastructure Index (the “Index”). Among the major infrastructure sectors, gas midstream, toll roads, and European regulated utilities outperformed the Index, while pipeline companies, communications, gas distribution utilities, and electricity transmission & distribution underperformed the Index. All Index sectors with more modest weightings also underperformed the Index during the first half of 2014.

The strong first half performance in infrastructure reflected a number of favorable developments, in particular, (1) lower interest rates globally, as sovereign rates almost universally declined across all geographies in the first half of 2014; (2) improved operating fundamentals within the transportation sector, which was most apparent during the second quarter and provided tangible evidence of an ongoing (and in some cases, accelerating) recovery in the global economy; and (3) resurgent merger and acquisition (M&A) and restructuring activity, most notably in utilities and energy infrastructure. Furthermore, a number of significant new capital project announcements in energy infrastructure provided justification for some of the strong outperformance in the gas midstream sector. In general, we view the improved operational trends in transportation and M&A/restructuring activities as favorable for infrastructure valuations, but we view perceived lower cost of capital through lower interest rates as a more near-term phenomenon and unlikely to persist over the medium to long term as economic growth continues to recover. At some point, the global experiment in extraordinary monetary policy accommodation must come to an end. While the timing of a rise in interest rates is uncertain, we continue to underwrite companies at a cost of capital above what current sovereign rate levels would imply today.

Performance Analysis

All share classes of Morgan Stanley Global Infrastructure Fund underperformed the Dow Jones Brookfield Global Infrastructure Index (the “Index”) and outperformed the S&P Global BMI Index for the six months ended June 30, 2014, assuming no deduction of applicable sales charges.

For the first half of 2014, the Fund realized outperformance from bottom-up stock selection, but this was more than offset by adverse top-down positioning. From a bottom-up perspective, stock selection was favorable in the pipeline companies, gas distribution utilities, diversified, electricity transmission & distribution, toll roads, and gas midstream sectors, and the positive impact was only partially offset by adverse selection in airports, communications, and European regulated utilities. From a top-down perspective, the Fund was predominantly negatively impacted by an underweight to gas midstream and an overweight to pipeline companies, only partially offset by an underweight to gas distribution utilities. Cash held in the portfolio was also a meaningful negative detractor, given the strong upward move in the Index during the first half.

Looking forward, from a thematic perspective, we are most constructive on out-of-favor names priced at attractive levels across a number of sectors. We do not currently see one sector within infrastructure as being broadly mispriced relative to others at the sector level. In many instances, our preferred names within the portfolio are companies with lower near-term growth opportunities but solid medium- to long-term fundamentals. In our opinion, the market has placed too much focus on the concept of “dividend yield plus growth” over the near term, with some investors capitalizing near-term growth rates into perpetuity. This has created implied internal rates of return/cost of capital for several names in the sector well below what a private-market, long-term investor would be willing to accept. Rather than buying growth at any price, we are more comfortable adding to positions in out-of-favor names or simply waiting until better opportunities present themselves.

Despite a more cautious view on valuation within the infrastructure universe following the strong year-to-date and multi-year run, we remain very positive on the operating fundamentals in several sectors, most notably energy infrastructure. We also are encouraged by ongoing improvements in transportation as the global economy gradually improves.

We remain committed to our core investment philosophy as an infrastructure value investor. As value-oriented, bottom-up driven investors, our investment perspective is that over the medium and long term, the key factor in determining the performance of infrastructure securities will be underlying infrastructure asset values. Given the large and growing private infrastructure market, we believe that there are limits as to the level of premium or discount at which the public sector should trade relative to its underlying private infrastructure value. These limits can be viewed as the point at which the arbitrage opportunity between owning infrastructure in the private versus public markets becomes compelling. In aiming to achieve core infrastructure exposure in a cost effective manner, we invest in equity securities of publicly listed infrastructure companies we believe offer the best value relative to their underlying infrastructure value and Net Asset Value growth prospects.

Our research currently leads us to an overweighting in the Fund (amongst the largest sectors) to a group of companies in the pipeline, communications, and toll road sectors, and an underweighting to companies in the gas distribution utilities, gas midstream, European regulated utilities, and electricity transmission & distribution sectors. Amongst the smaller sectors, we maintain overweights to water and airports. In addition, we currently have out-of-benchmark exposure to railroads.

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 06/30/14

TransCanada Corp.	7.2	%
Williams Cos., Inc. (The)	5.2
National Grid PLC	5.0
Enbridge, Inc.	4.9
American Tower Corp. REIT	4.6
Sempra Energy	4.3
ITC Holdings Corp.	4.0
Spectra Energy Corp.	3.6
Crown Castle International Corp.	3.3
Transurban Group	3.2

TOP FIVE COUNTRIES as of 06/30/14

United States	46.5	%
Canada	12.0
United Kingdom	8.8
Australia	6.6
Italy	5.5

Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.

Investment Strategy

The Fund will normally invest at least 80 percent of its assets in equity securities issued by companies located throughout the world that are engaged in the infrastructure business. A company will be considered to be in the infrastructure business if it derives at least 50 percent of its revenues or earnings from, or devotes at least 50 percent of its assets to, infrastructure-related activities. Infrastructure refers to the systems and networks of energy, transportation, communication and other services required for the normal function of society. Companies in the infrastructure business may be involved in a variety of areas, including, but not limited to, (i) the transmission, distribution, storage or transportation of electricity, oil and gas (and other bulk liquid products), water, and other natural resources used to produce energy, (ii) the construction and operation of renewable power facilities, (iii) the development, ownership, lease, concession, or management of highways, toll roads, tunnels, bridges, pipelines, airports, marine ports, refueling and related facilities, (iv) the provision of communications, including the development, lease, concession, or management of telephone, broadcast and mobile towers, fiber optic/copper cable, and satellite networks, (v) waste-water management and water purification/desalination and (vi) the construction or operation of essential public structures. The Fund’s equity investments may include convertible securities. The Fund’s investments may include securities of small and medium capitalization companies. The Fund may invest up to 100 percent of its net assets in foreign securities, which may include emerging market securities. Under normal market conditions, the Fund invests at least 40 percent of its assets in the securities of issuers located outside of the United States.

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 20549-1520.

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) 548-7786 or by visiting the Mutual Fund Center on our web site at www.morganstanley.com. It is also available on the SEC’s web site at http://www.sec.gov.

Householding Notice

Performance Summary (unaudited)

Average Annual Total Returns — Period Ended June 30, 2014

	Class A Shares* (since 07/28/97)		Class B Shares (since 04/29/88)**		Class L Shares† (since 07/28/97)		Class I Shares†† (since 07/28/97)		Class Q Shares††† (since 04/29/88)
Symbol	UTLAX		UTLBX		UTLCX		UTLDX		UTLQX
1 Year	28.78	%(3)	27.61	%(3)	28.01	%(3)	29.19	%(3)	28.97	%(3)
	22.09	(4)	22.61	(4)	—		—		23.97	(4)
5 Years	18.25	(3)	17.31	(3)	17.50	(3)	18.58	(3)	18.30	(3)
	16.99	(4)	17.10	(4)	—		—		18.09	(4)
10 Years	11.72	(3)	11.26	(3)	10.94	(3)	12.00	(3)	11.75	(3)
	11.12	(4)	11.26	(4)	—		—		11.75	(4)
Since Inception	8.47	(3)	9.04	(3)	7.69	(3)	8.73	(3)	9.04	(3)
	8.13	(4)	9.04	(4)	—		—		9.04	(4)
Gross Expense Ratio	1.13		1.94		1.68		0.87		1.11

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 L, Class I and Class Q 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 each 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%.

† Class L has no sales charge.

†† Class I has no sales charge.

††† The maximum contingent deferred sales charge (CDSC) for Class Q is 5.0%. The CDSC declines to 0% after six years. For periods greater than eight years, returns do not reflect conversion to Class A shares eight years after the end of the calendar month in which shares were purchased. The conversion feature is currently suspended because the total annual operating expense ratio of Class Q is currently lower than that of Class A. See “Conversion Feature” for Class Q shares in “Share Class Arrangements” of the Prospectus for more information. Class B commenced operations on April 29, 1988. On December 8, 2006, all then-existing Class B shares of the Fund (Pre-Conversion Class B) were converted into Class Q shares. Because the Pre-Conversion Class B shares were subject to the same level of fees and expenses applied to Class B shares, historical performance information prior to conversion date has been restated for Class Q shares to reflect this information. Performance information for Class B shares prior to December 8, 2006 reflects the performance of the Pre-Conversion Class B shares.

(1) The Dow Jones Brookfield Global Infrastructure IndexSM is a float-adjusted market capitalization weighted index that measures the stock performance of companies that exhibit strong infrastructure characteristics. The index intends to measure all sectors of the infrastructure market. The Index was first published in July 2008, however, back-tested hypothetical performance information is available for this Index since December 31, 2002. Returns are calculated using the return data of the S&P Global BMI Index through December 31, 2002 and the return data of the Dow Jones Brookfield Global Infrastructure IndexSM for periods thereafter. 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 Standard & Poor’s Global BMI Index (S&P Global BMI Index) is a broad market index designed to capture exposure to equities in all countries in the world that meet minimum size and liquidity requirements. As of the date of this Report, there are approximately 11,000 index members representing 26 developed and 20 emerging market countries. 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.

(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 (unaudited)

This example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 01/01/14 — 06/30/14.

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). 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 Account Value		Ending Account Value		Expenses Paid During Period@
	01/01/14		06/30/14		01/01/14 – 06/30/14
Class A
Actual (15.02% return)	$	1,000.00	$	1,150.20	$	6.24
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,018.99	$	5.86
Class B
Actual (14.42% return)	$	1,000.00	$	1,144.20	$	12.02
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,013.59	$	11.28
Class L
Actual (14.71% return)	$	1,000.00	$	1,147.10	$	9.16
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,016.27	$	8.60
Class I
Actual (15.14% return)	$	1,000.00	$	1,151.40	$	4.75
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.38	$	4.46
Class Q
Actual (15.12% return)	$	1,000.00	$	1,151.20	$	6.08
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,019.14	$	5.71

@ Expenses are equal to the Fund’s annualized expense ratios of 1.17%, 2.26%, 1.72%, 0.89%, and 1.14% for Class A, Class B, Class L, Class I, and Class Q shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).

Investment Advisory Agreement Approval (unaudited)

Nature, Extent and Quality of Services

The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser (as defined herein) under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board reviewed similar information and factors regarding the Sub-Advisers (as defined herein), to the extent applicable. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Fund’s Adviser under the administration agreement, including accounting, clerical, bookkeeping, compliance, business management and planning, and the provision of supplies, office space and utilities at the Adviser’s expense. (The Adviser and Sub-Advisers together are referred to as the “Adviser” and the advisory, sub-advisory and administration agreements together are referred to as the “Management Agreement.”) The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as reported to the Board by Lipper, Inc. (“Lipper”).

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

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, 2013, or since inception, 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-, three- and five-year periods. 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 and/or other accounts advised by the Adviser and/or 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 Fund’s management fee and total expense ratio were lower than its peer group averages. After discussion, the Board concluded that the Fund’s (i) performance was competitive with its peer group average; and (ii) management fee and total expense ratio were competitive with its peer group averages.

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 supports 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, research received by the Adviser generated from commission dollars spent on funds’ portfolio trading, and fees for trading, distribution and/or shareholder servicing. The Board reviewed with the Adviser each of these arrangements and the reasonableness of the Adviser’s 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 Global Infrastructure Fund

Portfolio of Investments · June 30, 2014 (unaudited)

NUMBER OF SHARES		VALUE
	Common Stocks (99.2%)
	Australia (6.6%)
	Airports
591,985	Sydney Airport	$	2,355,655

	Diversified
2,945,640	DUET Group (a)	6,721,768

	Toll Roads
434,402	Macquarie Atlas Roads Group	1,339,455
1,770,812	Transurban Group (a)	12,339,723
		13,679,178
	Transmission & Distribution
1,619,707	Spark Infrastructure Group	2,825,509
	Total Australia	25,582,110

	Austria (1.4%)
	Airports
56,226	Flughafen Wien AG	5,235,339

	Brazil (1.8%)
	Toll Roads
144,400	CCR SA	1,176,375

	Water
543,798	Cia de Saneamento Basico do Estado de Sao Paulo ADR	5,829,514
	Total Brazil	7,005,889

	Canada (12.0%)
	Oil & Gas Storage & Transportation
398,545	Enbridge, Inc.	18,910,392
580,290	TransCanada Corp. (a)	27,697,080
	Total Canada	46,607,472

	China (4.2%)
	Diversified
836,000	China Everbright International Ltd. (b)	1,195,149
3,750,000	Guangdong Investment Ltd. (b)	4,325,583
		5,520,732

	Oil & Gas Storage & Transportation
319,500	Beijing Enterprises Holdings Ltd. (b)	3,023,757
828,000	China Gas Holdings Ltd. (b)	1,717,878
332,000	ENN Energy Holdings Ltd. (b)	2,385,993
		7,127,628
	Ports
611,912	China Merchants Holdings International Co., Ltd. (b)	1,910,646

	Toll Roads
1,508,322	Jiangsu Expressway Co., Ltd., H Shares (b)	1,784,593
	Total China	16,343,599

	France (4.4%)
	Communications
294,900	Eutelsat Communications SA	10,246,594
176,544	SES SA	6,696,246
	Total France	16,942,840

	Germany (1.5%)
	Airports
82,370	Fraport AG Frankfurt Airport Services Worldwide	5,819,926

	Italy (5.5%)
	Oil & Gas Storage & Transportation
1,400,563	Snam SpA	8,438,282

	Toll Roads
382,528	Atlantia SpA	10,905,426

	Transmission & Distribution
402,498	Terna Rete Elettrica Nazionale SpA	2,122,994
	Total Italy	21,466,702

	Japan (1.7%)
	Oil & Gas Storage & Transportation
1,100,000	Tokyo Gas Co., Ltd.	6,428,113

	Netherlands (1.0%)
	Oil & Gas Storage & Transportation
75,568	Koninklijke Vopak N.V. (a)	3,694,068

	Spain (1.8%)
	Diversified
208,703	Ferrovial SA	4,648,164

See Notes to Financial Statements

NUMBER OF SHARES			VALUE
		Transmission & Distribution
26,270		Red Electrica Corp., SA	$	2,402,898
		Total Spain	7,051,062

		Switzerland (2.0%)
		Airports
12,586		Flughafen Zuerich AG (Registered)	7,734,968

		United Kingdom (8.8%)
		Transmission & Distribution
1,349,285		National Grid PLC	19,396,995

		Water
525,650		Pennon Group PLC	7,061,839
109,160		Severn Trent PLC	3,609,293
270,070		United Utilities Group PLC	4,076,584
			14,747,716
		Total United Kingdom	34,144,711

		United States (46.5%)
		Communications
198,130		American Tower Corp. REIT	17,827,737
172,376		Crown Castle International Corp.	12,800,642
59,411		SBA Communications Corp., Class A (c)	6,077,745
			36,706,124
		Diversified
80,150		CenterPoint Energy, Inc.	2,047,031

		Oil & Gas Storage & Transportation
32,050		Atmos Energy Corp.	1,711,470
91,400		Cheniere Energy, Inc. (c)	6,553,380
263,909		Enbridge Energy Management LLC (a)(c)	9,302,792
220,256		Kinder Morgan, Inc.	7,986,483
130,404		NiSource, Inc.	5,130,093
117,080		ONEOK, Inc.	7,970,806
73,047		Plains GP Holdings LP, Class A	2,336,774
88,319		SemGroup Corp., Class A	6,963,953
160,540		Sempra Energy	16,810,143
326,953		Spectra Energy Corp.	13,888,964
346,080		Williams Cos., Inc. (The)	20,145,317
			98,800,175
		Ports
37,740		Union Pacific Corp.	3,764,565

		Transmission & Distribution
427,358		ITC Holdings Corp.	15,590,020
162,355		Northeast Utilities	7,674,521
140,306		PG&E Corp.	6,737,494
			30,002,035
		Water
179,020		American Water Works Co., Inc.	8,852,539
		Total United States	180,172,469
		Total Common Stocks (Cost $257,775,671)	384,229,268

NUMBER OF SHARES (000)
		Short-Term Investments (7.2%)
		Securities held as Collateral on Loaned Securities (7.2%)
		Investment Company (5.9%)
22,780		Morgan Stanley Institutional Liquidity Funds – Money Market Portfolio – Institutional Class (See Note 6) (Cost $22,780,156)	22,780,156

PRINCIPAL AMOUNT (000)
		Repurchase Agreements (1.3%)
$	2,361	Barclays Capital, Inc. (0.08%, dated 06/30/14, due 07/01/14; proceeds $2,360,602; fully collateralized by various U.S. Government agency securities; 3.50% –4.50% due 09/01/33 –06/20/44; valued at $2,407,809)	2,360,597

See Notes to Financial Statements

PRINCIPAL AMOUNT (000)					Value
$	2,962	BNP Paribas Securities Corp. (0.11%, dated 06/30/14, due 07/01/14; proceeds $2,962,327; fully collateralized by a U.S. Government agency security; 4.00% due 06/20/44; valued at $3,023,094)			$	2,962,318

		Total Repurchase Agreements (Cost $5,322,915)			5,322,915

Total Short-Term Investments (Cost $28,103,071)					28,103,071

Total Investments (Cost $285,878,742)			106.4	%	412,332,339
Liabilities in Excess of Other Assets			(6.4	)	(24,983,274		)
Net Assets			100.0	%	$	387,349,065

ADR American Depositary Receipt.

REIT Real Estate Investment Trust.

(a) All or a portion of this security was on loan at June 30, 2014.

(b) Security trades on the Hong Kong exchange.

(c) Non-income producing security.

Summary of Investments

INDUSTRY	VALUE			PERCENT OF TOTAL INVESTMENTS
Oil & Gas Storage & Transportation	$	171,095,738		44.5	%
Transmission & Distribution	56,750,431			14.8
Communications	53,648,964			14.0
Water	29,429,769			7.6
Toll Roads	27,545,572			7.2
Airports	21,145,888			5.5
Diversified	18,937,695			4.9
Ports	5,675,211			1.5
	$	384,229,268	*	100.0	%

* Does not reflect the value of securities held as collateral on loaned securities.

See Notes to Financial Statements

Morgan Stanley Global Infrastructure Fund

Financial Statements

Statement of Assets and Liabilities June 30, 2014 (unaudited)

Assets:
Investments in securities, at value (cost $263,098,586) (Including $54,225,861 for securities loaned)	$	389,552,183
Investment in affiliate, at value (cost $22,780,156)	22,780,156
Total investments in securities, at value (cost $285,878,742)	412,332,339
Cash (including foreign currency valued at $433,441 with a cost of $429,022)	1,947,711
Receivable for:
Dividends	2,088,363
Investments sold	1,918,489
Foreign withholding taxes reclaimed	33,899
Shares of beneficial interest sold	1,309
Dividends from affiliate	47
Prepaid expenses and other assets	69,437
Total Assets	418,391,594

Liabilities:
Collateral on securities loaned, at value	29,877,159
Payable for:
Shares of beneficial interest redeemed	519,532
Advisory fee	184,054
Transfer agent fee	139,004
Distribution fee	81,703
Administration fee	25,864
Accrued expenses and other payables	215,213
Total Liabilities	31,042,529
Net Assets	$	387,349,065

Composition of Net Assets:
Paid-in-capital	$	243,827,242
Net unrealized appreciation	126,477,151
Accumulated undistributed net investment income	3,610,240
Accumulated undistributed net realized gain	13,434,432
Net Assets	$	387,349,065

Class A Shares:
Net Assets	$	95,693,502
Shares Outstanding (unlimited shares authorized, $0.01 par value)	10,840,501
Net Asset Value Per Share	$	8.83

Maximum Offering Price Per Share, (net asset value plus 5.54% of net asset value)	$	9.32

Class B Shares:
Net Assets	$	1,342,843
Shares Outstanding (unlimited shares authorized, $0.01 par value)	147,887
Net Asset Value Per Share	$	9.08

See Notes to Financial Statements

Morgan Stanley Global Infrastructure Fund

Financial Statements continued

Class L Shares:
Net Assets	$	7,397,028
Shares Outstanding (unlimited shares authorized, $0.01 par value)	828,977
Net Asset Value Per Share	$	8.92

Class I Shares:
Net Assets	$	3,461,605
Shares Outstanding (unlimited shares authorized, $0.01 par value)	394,768
Net Asset Value Per Share	$	8.77

Class Q Shares:
Net Assets	$	279,454,087
Shares Outstanding (unlimited shares authorized, $0.01 par value)	31,029,899
Net Asset Value Per Share	$	9.01

See Notes to Financial Statements

Morgan Stanley Global Infrastructure Fund

Financial Statements continued

Statement of Operations For the six months ended June 30, 2014 (unaudited)

Net Investment Income:
Income
Dividends (net of $531,830 foreign withholding tax)	$	5,860,916
Income from securities loaned – net	103,866
Interest	10,968
Dividends from affiliate (Note 6)	738
Total Income	5,976,488

Expenses
Advisory fee (Note 3)	1,032,633
Distribution fee (Class A shares) (Note 4)	111,774
Distribution fee (Class B shares) (Note 4	6,502
Distribution fee (Class L shares) (Note 4)	26,161
Distribution fee (Class Q shares) (Note 4)	314,025
Administration fee (Note 3)	144,931
Sub transfer agent fees and expenses (Class A share)	40,537
Sub transfer agent fees and expenses (Class B shares)	1,267
Sub transfer agent fees and expenses (Class L shares)	3,906
Sub transfer agent fees and expenses (Class I shares)	268
Sub transfer agent fees and expenses (Class Q shares)	88,927
Shareholder reports and notices	130,086
Professional fees	54,844
Transfer agent fees and expenses	12,446
Transfer agent fees and expenses (Class A shares)	10,208
Transfer agent fees and expenses (Class B shares)	1,628
Transfer agent fees and expenses (Class L shares)	1,519
Transfer agent fees and expenses (Class I shares)	911
Transfer agent fees and expenses (Class Q shares)	26,069
Registration fees	37,336
Custodian fees	33,464
Trustees’ fees and expenses	6,739
Other	12,621
Total Expenses	2,098,802
Less: rebate from Morgan Stanley affiliated cash sweep (Note 6)	(3,439		)
Net Expenses	2,095,363
Net Investment Income	3,881,125

Realized and Unrealized Gain (Loss):
Realized Gain on:
Investments	15,736,245
Foreign currency translation	1,838
Net Realized Gain	15,738,083

Change in Unrealized Appreciation (Depreciation) on:
Investments	32,054,068
Foreign currency translation	4,009
Net Change in Unrealized Appreciation (Depreciation)	32,058,077
Net Gain	47,796,160
Net Increase	$	51,677,285

See Notes to Financial Statements

Morgan Stanley Global Infrastructure Fund

Financial Statements continued

Statements of Changes in Net Assets

	FOR THE SIX MONTHS ENDED JUNE 30, 2014			FOR THE YEAR ENDED DECEMBER 31, 2013
	(unaudited)
Increase (Decrease) in Net Assets:

Operations:
Net investment income	$	3,881,125		$	6,921,417
Net realized gain	15,738,083			39,914,510
Net change in unrealized appreciation (depreciation)	32,058,077			12,263,467

Net Increase	51,677,285			59,099,394


Dividends and Distributions to Shareholders from:
Net investment income
Class A shares	(104,602		)	(1,772,429		)
Class B shares	(1,442		)	(13,522		)
Class L shares	(7,995		)	(97,700		)
Class I shares	(3,798		)	(57,839		)
Class Q shares	(300,181		)	(5,126,405		)
Net realized gain
Class A shares	(2,345,751		)	(9,439,032		)
Class B shares	(32,335		)	(149,796		)
Class L shares	(179,290		)	(731,517		)
Class I shares	(85,183		)	(269,124		)
Class Q shares	(6,731,703		)	(27,045,390		)

Total Dividends and Distributions	(9,792,280		)	(44,702,754		)

Net decrease from transactions in shares of beneficial interest	(13,458,104		)	(12,745,222		)

Net Increase	28,426,901			1,651,418

Net Assets:
Beginning of period	358,922,164			357,270,746

End of Period
(Including accumulated undistributed net investment income of $3,610,240 and $147,133, respectively)	$	387,349,065		$	358,922,164

See Notes to Financial Statements

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements · June 30, 2014 (unaudited)

1. Organization and Accounting Policies

Morgan Stanley Global Infrastructure 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 applies investment company accounting and reporting guidance. The Fund’s investment objective is to seek to provide both capital appreciation and current income. The Fund was organized as a Massachusetts business trust on December 8, 1987 and commenced operations on April 29, 1988. On July 28, 1997, the Fund converted to a multiple class share structure.

The Fund offers Class A shares, Class B shares, Class L shares and Class I shares. The Fund’s Class Q shares are closed to new investments (except dividend reinvestments). The five classes are substantially the same except, most Class A shares are subject to a sales charge imposed at the time of purchase and most Class B shares and Class Q shares are subject to a contingent deferred sales charge imposed on shares redeemed within six years. Class L shares and Class I shares are not subject to a sales charge. Additionally, Class A shares, Class B shares, Class L shares and Class Q shares incur distribution expenses.

The following is a summary of significant accounting policies:

A. Valuation of Investments — (1) An equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), if there were no sales on a given day, the security is valued at the mean between the last reported bid and asked prices; (2) all other equity portfolio securities for which over-the-counter [“OTC”] market quotations are readily available are valued at its latest reported sales 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; (3) quotations of foreign portfolio securities, other assets and liabilities and forward contracts stated in foreign currency are translated into U.S. dollar equivalents at the prevailing market rates prior to the close of the New York Stock Exchange (“NYSE”); (4) when market quotations are not readily available, including circumstances under which Morgan Stanley Investment Management Inc. (the “Adviser”) or Morgan Stanley Investment Management Limited or Morgan Stanley Investment Management Company (each, a “Sub-Adviser”), each a wholly owned subsidiary of Morgan Stanley, determines that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of 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 Board of Trustees (the “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 Trustees or by the Adviser using a pricing service and/or procedures approved by the Trustees; (5) certain portfolio securities may be valued by an outside pricing service approved by the Trustees; (6) investments in 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 (7) short-term debt securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, unless the Adviser determines such valuation does not reflect the securities’ market value, in which case these securities will be valued at their fair market value determined by the Adviser.

Under procedures approved by the Trustees, the Fund’s Adviser has formed a Valuation Committee. The Valuation Committee provides administration and oversight of the Fund’s valuation policies and procedures, which are reviewed at least annually by the Trustees. These procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements · June 30, 2014 (unaudited) continued

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 except for certain dividends on foreign securities which are recorded as soon as the Fund is informed after 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, realized and unrealized gain (loss), and non-class specific expenses are allocated daily based upon the proportion of net assets of each class. Class specific expenses are borne by the respective share classes and include Distribution, Transfer Agent and Sub Transfer Agent fees.

D. Securities Lending — The Fund may lend securities to qualified financial institutions, such as broker-dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Fund. The Fund receives cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked-to-market daily, by State Street Bank and Trust Company (“State Street”), the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.

Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in an affiliated money market portfolio and repurchase agreements. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is recorded as “Income from Securities Loaned-Net” in the Fund’s Statement of Operations.

The Fund has the right under the lending agreement to recover the securities from the borrower on demand.

The following table presents financial instruments that are subject to enforceable netting arrangements as of June 30, 2014.

GROSS AMOUNTS NOT OFFSET IN THE STATEMENT OF ASSETS AND LIABILITIES
GROSS ASSET AMOUNT PRESENTED IN STATEMENT OF ASSETS AND LIABILITIES			FINANCIAL INSTRUMENT		COLLATERAL RECEIVED			NET AMOUNT (NOT LESS THAN $0)
$	54,225,861	(a)	$	—	$	(54,225,861	)(b)(c)	$	0

(a) Represents market value of loaned securities at period end.

(b) The Fund received cash collateral of $29,877,159, of which $28,103,071 was subsequently invested in Repurchase Agreements and Morgan Stanley Institutional Liquidity Funds as reported in the Portfolio of Investments. As of June 30, 2014 there was uninvested cash of $1,774,088, which is not reflected in the Portfolio of Investments. In addition, the Fund received non-cash collateral of $26,746,450 in the form of U.S. Government obligations, which the Fund cannot sell or repledge, and accordingly are not reflected in the Portfolio of Investments.

(c) The actual collateral received is greater than the amount shown here due to overcollateralization.

E. Foreign Currency Translation and Foreign Investments — The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:

· investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;

· investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.

Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of unrealized appreciation (depreciation) on the Statement of Assets and Liabilities. The change in unrealized currency gains (losses) on foreign currency translations for the period is reflected in the Statement of Operations.

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements · June 30, 2014 (unaudited) continued

F. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid semiannually. Net realized capital gains, if any, are distributed at least annually.

G. Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.

H. Indemnifications — The Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

2. Fair Valuation Measurements

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value as the value 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. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing 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 valuing 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. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer’s financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances

The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2014.

INVESTMENT TYPE	LEVEL 1 UNADJUSTED QUOTED PRICES		LEVEL 2 OTHER SIGNIFICANT OBSERVABLE INPUTS		LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS		TOTAL
Assets:
Common Stocks
Airports	$	21,145,888	$	—	$	—	$	21,145,888
Communications	53,648,964		—		—		53,648,964
Diversified	18,937,695		—		—		18,937,695
Oil & Gas Storage & Transportation	171,095,738		—		—		171,095,738
Ports	5,675,211		—		—		5,675,211
Toll Roads	27,545,572		—		—		27,545,572
Transmission & Distribution	56,750,431		—		—		56,750,431
Water	29,429,769		—		—		29,429,769
Total Common Stocks	384,229,268		—		—		384,229,268
Short-Term Investments
Investment Company	22,780,156		—		—		22,780,156
Repurchase Agreements	—		5,322,915		—		5,322,915
Total Short-Term Investments	22,780,156		5,322,915		—		28,103,071
Total Assets	$	407,009,424	$	5,322,915	$	—	$	412,332,339

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements · June 30, 2014 (unaudited) continued

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. The Fund recognizes transfers between the levels as of the end of the period. As of June 30, 2014, the Fund did not have any investments transfer between investment levels.

3. Advisory/Administration and Sub-Advisory Agreements

Pursuant to an Investment Advisory Agreement, the Fund pays the Adviser an advisory fee, accrued daily and paid monthly, by applying the following annual rates to the net assets of the Fund determined at the close of each business day: 0.57% to the portion of the daily net assets not exceeding $500 million; 0.47% to the portion of the daily net assets exceeding $500 million but not exceeding $1 billion; 0.445% to the portion of the daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.42% to the portion of the daily net assets exceeding $1.5 billion but not exceeding $2.5 billion; 0.395% to the portion of the daily net assets exceeding $2.5 billion but not exceeding $3.5 billion; 0.37% to the portion of the daily net assets exceeding $3.5 billion but not exceeding $5 billion; and 0.345% to the portion of the daily net assets exceeding $5 billion. For the six months ended June 30, 2014, the advisory fee rate (net of rebate) was equivalent to an annual effective rate of 0.57% of the Fund’s daily net assets.

Under the Sub-Advisory Agreement between the Adviser and the Sub-Advisers, the Sub-Advisers provide the Fund with advisory services, subject to the overall supervision of the Adviser and the Fund’s Officers and Trustees. The Adviser pays the Sub-Advisers on a monthly basis a portion of the net advisory fees the Adviser receives from the Fund.

Morgan Stanley Services Company Inc. was the Fund’s Administrator. Effective January 1, 2014, the Adviser also serves as the Administrator to the Fund and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund’s daily net assets.

4. Plan of Distribution

Shares of the Fund are distributed by Morgan Stanley Distribution, Inc. (the “Distributor”), an affiliate of the Adviser/Administrator and Sub-Advisers. 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 1.00% of the average daily net assets of Class B shares; (iii) Class L — up to 0.75% of the average daily net assets of Class L shares; and (iv) Class Q — up to 0.26% of the average daily net assets of Class Q shares.

The Distributor has agreed to permanently cap the 12b-1 fee for the Class Q shares at 0.24% of the average daily net assets of Class Q. For the six months ended June 30, 2014, the distribution fee was accrued for Class Q shares at the annual rate of 0.24%.

In the case of Class B shares and Class Q 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 and Class Q 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 $5,174,324 and $10,847, for Class B shares and Class Q shares, respectively, at June 30, 2014. For the six months ended June 30, 2014, the distribution fee was accrued for Class B at an annual rate of 1.00%.

In the case of Class A shares and Class L shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25% or 0.75% of the average daily net assets of Class A shares or Class L shares, respectively, will not be reimbursed by the Fund through payments in any subsequent year, except that expenses representing a gross sales commission credited to Financial Intermediaries at the time of sale may be reimbursed in the subsequent calendar year. For the six months ended June 30, 2014, the distribution fee was accrued for Class A shares and Class L shares at the annual rate of 0.25% and 0.75%, respectively.

The Distributor has informed the Fund that for the six months ended June 30, 2014, it received contingent deferred sales charges from certain redemptions of the Fund’s Class B shares and Class Q shares of $76 and $4,821, respectively, and received $1,849 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.

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements · June 30, 2014 (unaudited) continued

5. Dividend Disbursing and Transfer Agent

The Fund’s dividend disbursing and transfer agent is Boston Financial Data Services, Inc. (“BFDS”). Pursuant to a Transfer Agency Agreement, the Fund pays BFDS a fee based on the number of classes, accounts and transactions relating to the Fund.

6. Security Transactions and Transactions with Affiliates

The cost of purchases and proceeds from sales of investment securities, excluding short-term investments, for the six months ended June 30, 2014, aggregated $63,889,711 and $69,136,013, respectively.

The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds (the “Liquidity Funds”), an open-end management investment company managed by the Adviser, both directly, and as a portion of the securities held as collateral on loaned securities. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended June 30, 2014, advisory fees paid were reduced by $3,439 relating to the Fund’s investment in the Liquidity Funds.

A summary of the Fund’s transactions in shares of the Liquidity Funds during the six months ended June 30, 2014 is as follows:

VALUE DECEMBER 31, 2013		PURCHASES AT COST		SALES		DIVIDEND INCOME		VALUE JUNE 30, 2014
$	51,038,755	$	58,596,623	$	86,855,222	$	738	$	22,780,156

For the six months ended June 30, 2014, the Fund incurred brokerage commissions of $2,585 with Morgan Stanley & Co., LLC, an affiliate of the Adviser/Administrator, Sub-Advisers and Distributor, for portfolio transactions executed on behalf of the Fund.

The Fund has an unfunded noncontributory defined benefit pension plan covering certain independent Trustees of the Fund who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on factors which include years of service and compensation. The Trustees voted to close the plan to new participants and eliminate the future benefits growth due to increases to compensation after July 31, 2003. Aggregate pension costs for the six months ended June 30, 2014, included in “Trustees’ fees and expenses” in the Statement of Operations amounted to $2,069. At June 30, 2014, the Fund had an accrued pension liability of $58,158, which is included in “Accrued expenses and other payables” in the Statement of Assets and Liabilities.

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.

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements · June 30, 2014 (unaudited) continued

7. Shares of Beneficial Interest

Transactions in shares of beneficial interest were as follows:

	FOR THE SIX MONTHS ENDED JUNE 30, 2014					FOR THE YEAR ENDED DECEMBER 31, 2013
	(unaudited)
	SHARES		AMOUNT			SHARES		AMOUNT
CLASS A SHARES
Sold	44,421		$	372,869		122,641		$	985,888
Conversion from Class B	16,500		133,034			81,920		667,576
Reinvestment of dividends and distributions	272,982		2,380,405			1,400,800		10,851,652
Redeemed	(765,883	)	(6,309,333		)	(1,895,882	)	(15,427,420		)
Net decrease — Class A	(431,980	)	(3,423,025		)	(290,521	)	(2,922,304		)

CLASS B SHARES
Sold	3,034		25,889			3,589		30,320
Conversion to Class A	(15,996	)	(133,034		)	(79,979	)	(667,576		)
Reinvestment of dividends and distributions	3,535		31,710			19,280		153,955
Redeemed	(7,579	)	(65,726		)	(39,705	)	(326,992		)
Net decrease — Class B	(17,006	)	(141,161		)	(96,815	)	(810,293		)

CLASS L SHARES
Sold	6,827		56,302			17,679		144,495
Reinvestment of dividends and distributions	21,099		185,881			104,763		821,322
Redeemed	(67,907	)	(569,545		)	(192,344	)	(1,576,756		)
Net decrease — Class L	(39,981	)	(327,362		)	(69,902	)	(610,939		)

CLASS I SHARES
Sold	70,587		584,674			61,006		498,596
Reinvestment of dividends and distributions	10,275		88,981			42,420		326,197
Redeemed	(24,110	)	(199,759		)	(61,340	)	(503,780		)
Net increase — Class I	56,752		473,896			42,086		321,013

CLASS Q SHARES
Reinvestment of distributions	772,323		6,865,951			3,969,850		31,335,686
Redeemed	(2,005,056	)	(16,906,403		)	(4,833,938	)	(40,058,385		)
Net decrease — Class Q	(1,232,733	)	(10,040,452		)	(864,088	)	(8,722,699		)
Net decrease in Fund	(1,664,948	)	$	(13,458,104	)	(1,279,240	)	$	(12,745,222	)

The Trustees approved, effective February 25, 2013, the suspension of the continuous offering of Class B shares to new and existing shareholders.

8. Federal Income Tax Status

It is the Fund’s intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for Federal income taxes is required in the financial statements.

FASB ASC 740-10, Income Taxes — Overall, 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. Management has concluded there are no significant uncertain tax positions that would require recognition in the 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. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Each of the tax years in the four-year period ended December 31, 2013, remains subject to examination by taxing authorities.

Morgan Stanley Global Infrastructure Fund

Notes to Financial Statements · June 30, 2014 (unaudited) continued

2013 DISTRIBUTIONS PAID FROM:				2012 DISTRIBUTIONS PAID FROM:
ORDINARY INCOME		LONG-TERM CAPITAL GAIN		ORDINARY INCOME		LONG-TERM CAPITAL GAIN
$	8,391,910	$	36,310,844	$	7,500,008	$	23,918,101

ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME		ACCUMULATED UNDISTRIBUTED NET REALIZED GAIN			PAID-IN-CAPITAL
$	657	$	(657	)	$	—

At December 31, 2013, the components of distributable earnings for the Fund on a tax basis were as follows:

UNDISTRIBUTED ORDINARY INCOME		UNDISTRIBUTED LONG-TERM CAPITAL GAIN
$	939,853	$	8,852,109

At June 30, 2014, the aggregate cost for Federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $127,302,110 and the aggregate gross unrealized depreciation is $848,513 resulting in net unrealized appreciation of $126,453,597.

9. Risks Relating to Certain Financial Instruments

Morgan Stanley Global Infrastructure 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 DECEMBER 31,
	JUNE 30, 2014			2013			2012			2011			2010^			2009^
	(unaudited)
Class A Shares
Selected Per Share Data:

Net asset value, beginning of period	$	7.88		$	7.64		$	7.07		$	6.37		$	6.16		$	5.46

Income from investment operations:
Net investment income(1)	0.09			0.16			0.17			0.15			0.15			0.17
Net realized and unrealized gain	1.09			1.16			1.12			0.88			0.27			0.74

Total income from investment operations	1.18			1.32			1.29			1.03			0.42			0.91

Less dividends and distributions from:
Net investment Income	(0.01		)	(0.17		)	(0.17		)	(0.16		)	(0.21		)	(0.21		)
Net realized gain	(0.22		)	(0.91		)	(0.55		)	(0.17		)	—			—

Total dividends and distributions	(0.23		)	(1.08		)	(0.72		)	(0.33		)	(0.21		)	(0.21		)

Net asset value, end of period	$	8.83		$	7.88		$	7.64		$	7.07		$	6.37		$	6.16

Total Return(2)	15.02		%(6)	17.78		%	18.45		%	16.27		%	6.84		%	16.97		%

Ratios to Average Net Assets:
Net expenses	1.17		%(3)(4)(7)	1.13		%(3)	1.11		%(3)(4)	1.14		%(3)(4)	1.18		%(3)(4)	1.22		%(3)(4)
Net investment income	2.13		%(3)(4)(7)	1.92		%(3)	2.28		%(3)(4)	2.24		%(3)(4)	2.44		%(3)(4)	3.08		%(3)(4)
Rebate from Morgan Stanley affiliate	0.00		%(5)(7)	0.00		%(5)	0.00		%(5)	0.00		%(5)	0.00		%(5)	0.00		%(5)

Supplemental Data:
Net assets, end of period, in thousands	$	95,694		$	88,821		$	88,330		$	86,249		$	89,082		$	102,344
Portfolio turnover rate	18		%(6)	25		%	28		%	36		%	149		%	382		%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.

(3) 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.”

(4) Reflects overall Fund ratios for investment income and non-class specific expenses.

(5) Amount is less than 0.005%.

(6) Not annualized.

(7) Annualized.

See Notes to Financial Statements

Morgan Stanley Global Infrastructure Fund

Financial Highlights continued

	FOR THE SIX MONTHS ENDED			FOR THE YEAR ENDED DECEMBER 31,
	JUNE 30, 2014			2013			2012			2011			2010^			2009^
	(unaudited)
Class B Shares
Selected Per Share Data:

Net asset value, beginning of period	$	8.14		$	7.85		$	7.24		$	6.50		$	6.26		$	5.54

Income from investment operations:
Net investment income(1)	0.04			0.09			0.12			0.10			0.10			0.13
Net realized and unrealized gain	1.13			1.19			1.14			0.90			0.28			0.75

Total income from investment operations	1.17			1.28			1.26			1.00			0.38			0.88

Less dividends and distributions from:
Net investment income	(0.01		)	(0.08		)	(0.10		)	(0.09		)	(0.14		)	(0.16		)
Net realized gain	(0.22		)	(0.91		)	(0.55		)	(0.17		)	—			—

Total dividends and distributions	(0.23		)	(0.99		)	(0.65		)	(0.26		)	(0.14		)	(0.16		)

Net asset value, end of period	$	9.08		$	8.14		$	7.85		$	7.24		$	6.50		$	6.26

Total Return(2)	14.42		%(6)	16.74		%	17.53		%	15.35		%	6.21		%	16.04		%

Ratios to Average Net Assets:
Net expenses	2.26		%(3)(4)(7)	1.94		%(3)	1.86		%(3)(4)	1.89		%(3)(4)	1.93		%(3)(4)	1.97		%(3)(4)
Net investment income	1.04		%(3)(4)(7)	1.05		%(3)	1.53		%(3)(4)	1.49		%(3)(4)	1.69		%(3)(4)	2.33		%(3)(4)
Rebate from Morgan Stanley affiliate	0.00		%(5)(7)	0.00		%(5)	0.00		%(5)	0.00		%(5)	0.00		%(5)	0.00		%(5)

Supplemental Data:
Net assets, end of period, in thousands	$	1,343		$	1,343		$	2,054		$	3,022		$	5,618		$	9,174
Portfolio turnover rate	18		%(6)	25		%	28		%	36		%	149		%	382		%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) 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) Amount is less than 0.005%.

(6) Not annualized.

(7) Annualized.

See Notes to Financial Statements

Morgan Stanley Global Infrastructure Fund

Financial Highlights continued

	FOR THE SIX MONTHS ENDED			FOR THE YEAR ENDED DECEMBER 31,
	JUNE 30, 2014			2013			2012			2011			2010^			2009^
	(unaudited)
Class L Shares
Selected Per Share Data:

Net asset value, beginning of period	$	7.98		$	7.73		$	7.14		$	6.44		$	6.21		$	5.51

Income from investment operations:
Net investment income(1)	0.07			0.11			0.12			0.12			0.10			0.13
Net realized and unrealized gain	1.10			1.17			1.13			0.87			0.28			0.75

Total income from investment operations	1.17			1.28			1.25			0.99			0.38			0.88

Less dividends and distributions from:
Net investment income	(0.01		)	(0.12		)	(0.11		)	(0.12		)	(0.15		)	(0.18		)
Net realized gain	(0.22		)	(0.91		)	(0.55		)	(0.17		)	—			—

Total dividends and distributions	(0.23		)	(1.03		)	(0.66		)	(0.29		)	(0.15		)	(0.18		)

Net asset value, end of period	$	8.92		$	7.98		$	7.73		$	7.14		$	6.44		$	6.21

Total Return(2)	14.71		%(6)	17.04		%	17.70		%	15.42		%	6.17		%	16.18		%

Ratios to Average Net Assets:
Net expenses	1.72		%(3)(4)(7)	1.68		%(3)	1.85		%(3)(4)	1.68		%(3)(4)	1.93		%(3)(4)	1.97		%(3)(4)
Net investment income	1.58		%(3)(4)(7)	1.36		%(3)	1.54		%(3)(4)	1.70		%(3)(4)	1.69		%(3)(4)	2.33		%(3)(4)
Rebate from Morgan Stanley affiliate	0.00		%(5)(7)	0.00		%(5)	0.00		%(5)	0.00		%(5)	0.00		%(5)	0.00		%(5)

Supplemental Data:
Net assets, end of period, in thousands	$	7,397		$	6,938		$	7,254		$	7,275		$	7,642		$	10,517
Portfolio turnover rate	18		%(6)	25		%	28		%	36		%	149		%	382		%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. Effective February 25, 2013, Class C shares were renamed Class L shares. Class C shares held for less than one year were subject to 1.0% contingent deferred sales charge. The contingent deferred sales charge on Class L shares was eliminated effective February 25, 2013.

(4) Reflects overall Fund ratios for investment income and non-class specific expenses.

(5) Amount is less than 0.005%.

(6) Not annualized.

(7) Annualized.

See Notes to Financial Statements

Morgan Stanley Global Infrastructure Fund

Financial Highlights continued

	FOR THE SIX MONTHS ENDED			FOR THE YEAR ENDED DECEMBER 31,
	JUNE 30, 2014			2013			2012			2011			2010^			2009^
	(unaudited)
Class I Shares
Selected Per Share Data:

Net asset value, beginning of period	$	7.82		$	7.59		$	7.02		$	6.34		$	6.12		$	5.43

Income from investment operations:
Net investment income(1)	0.10			0.18			0.19			0.17			0.17			0.18
Net realized and unrealized gain	1.08			1.15			1.12			0.86			0.27			0.74

Total income from investment operations	1.18			1.33			1.31			1.03			0.44			0.92

Less dividends and distributions from:
Net investment income	(0.01		)	(0.19		)	(0.19		)	(0.18		)	(0.22		)	(0.23		)
Net realized gain	(0.22		)	(0.91		)	(0.55		)	(0.17		)	—			—

Total dividends and distributions	(0.23		)	(1.10		)	(0.74		)	(0.35		)	(0.22		)	(0.23		)

Net asset value, end of period	$	8.77		$	7.82		$	7.59		$	7.02		$	6.34		$	6.12

Total Return(2)	15.14		%(6)	18.08		%	18.88		%	16.33		%	7.33		%	17.14		%

Ratios to Average Net Assets:
Net expenses	0.89		%(3)(4)(7)	0.87		%(3)	0.86		%(3)(4)	0.89		%(3)(4)	0.93		%(3)(4)	0.97		%(3)(4)
Net investment income	2.41		%(3)(4)(7)	2.19		%(3)	2.53		%(3)(4)	2.49		%(3)(4)	2.69		%(3)(4)	3.33		%(3)(4)
Rebate from Morgan Stanley affiliate	0.00		%(5)(7)	0.00		%(5)	0.00		%(5)	0.00		%(5)	0.00		%(5)	0.00		%(5)

Supplemental Data:
Net assets, end of period, in thousands	$	3,462		$	2,642		$	2,245		$	2,108		$	3,963		$	2,950
Portfolio turnover rate	18		%(6)	25		%	28		%	36		%	149		%	382		%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) 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) Amount is less than 0.005%.

(6) Not annualized.

(7) Annualized.

See Notes to Financial Statements

Morgan Stanley Global Infrastructure Fund

Financial Highlights continued

	FOR THE SIX MONTHS ENDED			FOR THE YEAR ENDED DECEMBER 31,
	JUNE 30, 2014			2013			2012			2011			2010^			2009^
	(unaudited)
Class Q Shares
Selected Per Share Data:

Net asset value, beginning of period	$	8.03		$	7.77		$	7.18		$	6.47		$	6.25		$	5.53

Income from investment operations:
Net investment income(1)	0.09			0.16			0.18			0.16			0.15			0.17
Net realized and unrealized gain	1.12			1.18			1.13			0.88			0.28			0.76

Total income from investment operations	1.21			1.34			1.31			1.04			0.43			0.93

Less dividends and distributions from:
Net investment income	(0.01		)	(0.17		)	(0.17		)	(0.16		)	(0.21		)	(0.21		)
Net realized gain	(0.22		)	(0.91		)	(0.55		)	(0.17		)	—			—

Total dividends and distributions	(0.23		)	(1.08		)	(0.72		)	(0.33		)	(0.21		)	(0.21		)

Net asset value, end of period	$	9.01		$	8.03		$	7.77		$	7.18		$	6.47		$	6.25

Total Return(2)	15.12		%(6)	17.76		%	18.45		%	16.18		%	6.91		%	17.12		%

Ratios to Average Net Assets:
Net expenses	1.14		%(3)(4)(7)	1.11		%(3)	1.10		%(3)(4)	1.13		%(3)(4)	1.17		%(3)(4)	1.21		%(3)(4)
Net investment income	2.16		%(3)(4)(7)	1.93		%(3)	2.29		%(3)(4)	2.25		%(3)(4)	2.45		%(3)(4)	3.09		%(3)(4)
Rebate from Morgan Stanley affiliate	0.00		%(5)(7)	0.00		%(5)	0.00		%(5)	0.00		%(5)	0.00		%(5)	0.00		%(5)

Supplemental Data:
Net assets, end of period, in thousands	$	279,454		$	259,179		$	257,387		$	253,096		$	260,051		$	299,176
Portfolio turnover rate	18		%(6)	25		%	28		%	36		%	149		%	382		%

^ Beginning with the year ended December 31, 2011, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

(1) The per share amounts were computed using an average number of shares outstanding during the period.

(2) 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) Amount is less than 0.005%.

(6) Not annualized.

(7) Annualized.

See Notes to Financial Statements

Morgan Stanley Global Infrastructure Fund

U.S. Privacy Policy (unaudited)

An Important Notice Concerning Our U.S. Privacy Policy

This privacy notice describes the U.S. privacy policy of Morgan Stanley Distribution, Inc., and the Morgan Stanley family of mutual funds (“us”, “our”, “we”).

We are required by federal law to provide you with notice of our U.S. privacy policy (“Policy”). This Policy applies to both our current and former clients unless we state otherwise and is intended for individual clients who purchase products or receive services from us for personal, family or household purposes. 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, or accounts subject to the Uniform Gifts to Minors Act.

We Respect Your Privacy

This notice describes what personal information we collect about you, how we collect it, when we may share it with others, and how certain others may use it. It discusses the steps you may take to limit our sharing of certain information about you with our affiliated companies, including, but not limited to our affiliated banking businesses, brokerage firms and credit service affiliates. 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 as “personal information.” We also use the term “affiliated company” in this notice. An affiliated company is a company in our family of companies and includes companies with the Morgan Stanley name. These affiliated companies are financial institutions such as broker-dealers, banks, investment advisers and credit card issuers. We refer to any company that is not an affiliated company as a nonaffiliated third party. For purposes of Section 5 of this notice, and your ability to limit certain uses of personal information by our affiliates, this notice applies to the use of personal information by our affiliated companies.

1. What Personal Information Do We Collect From You?

· We collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other 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.

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

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

We may disclose personal information we collect about you in each of the categories listed above to affiliated and nonaffiliated third parties.

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

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

By following the opt-out procedures in Section 6 below, you may limit the extent to which we share with our affiliated companies, personal information that was collected to determine your eligibility for products and services such as your credit reports and other information that you have provided to us or that we may obtain from third parties (“eligibility information”). Eligibility information does not include your identification information or personal information pertaining to our transactions or experiences with you. Please note that, even if you direct us not to share eligibility information with our affiliated companies, we may still share your personal information, including eligibility information, with our affiliated companies under circumstances that are permitted under applicable law, such as to process transactions or to service your account.

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

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

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

· Calling us at (800) 548-7786

Monday-Friday between 8 a.m. and 5 p.m. (EST)

· Writing to us at the following address:

Boston Financial Data Services, Inc.

c/o Privacy Coordinator

P.O. Box 219804

Kansas City, Missouri 64121

Please understand that if you limit our sharing or our affiliated companies’ use of personal information, you and any joint account holder(s) may not receive information about our affiliated companies’ products and services, including products or services that could help you manage your financial resources and achieve your investment objectives.

7. What if an affiliated company becomes a nonaffiliated third party?

Special Notice to Residents of Vermont

Special Notice to Residents of California

MORGAN STANLEY INSTITUTIONAL FUND, INC.
SELECT GLOBAL INFRASTRUCTURE PORTFOLIO
PART B

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information (the “SAI”) relates to the shares of common stock (“shares”) of the Select Global Infrastructure Portfolio (the “Acquiring Fund”), a series of Morgan Stanley Institutional Fund, Inc. (the “Company”), to be issued pursuant to an Agreement and Plan of Reorganization, dated September 17, 2014, between the Company, on behalf of the Acquiring Fund, and Morgan Stanley Global Infrastructure Fund (the “Acquired Fund”), in connection with the acquisition by the Acquiring Fund of substantially all of the assets and the liabilities of the Acquired Fund (the “Reorganization”).

Upon consummation of the Reorganization, it is anticipated that the Acquiring Fund will change its name to the Global Infrastructure Portfolio. No changes are anticipated with respect to the Acquiring Fund’s investment objectives or strategies in connection with this name change.

This SAI does not constitute a prospectus. This SAI does not include all information that a shareholder should consider before voting on the proposals contained in the Proxy Statement and Prospectus, and, therefore, should be read in conjunction with the related Proxy Statement and Prospectus, dated [ ], 2014. A copy of the Proxy Statement and Prospectus may be obtained upon request and without charge by calling (800) 548-7786 (toll-free). Please retain this document for future reference.

The date of this SAI is [ ], 2014.

Table of Contents

	Page
Introduction	B-2
Additional Information About the Acquiring Fund	B-2
Financial Statements	B-3

B-1

INTRODUCTION

This SAI is intended to supplement the information provided in the Proxy Statement and Prospectus dated [ ], 2014 (the “Proxy Statement and Prospectus”). The Proxy Statement and Prospectus has been sent to the Acquired Fund’s Shareholders in connection with the solicitation of proxies by the Board of Trustees of the Acquired Fund to be voted at the Special Meetings of Shareholders of the Acquired Funds to be held on February 27, 2015. Each of (i) the Company’s Statement of Additional Information, dated April 30, 2014, as it may be amended and supplemented from time to time (the “Company’s Statement of Additional Information”) and (ii) the Acquired Fund’s Statements of Additional Information, each dated April 30, 2014, as may be amended and supplemented from time to time, accompany and are incorporated by reference in this SAI.

ADDITIONAL INFORMATION ABOUT THE ACQUIRING FUND

Fund History

For additional information about the Acquiring Fund’s history, see “General Information—Fund History” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

Investment Objectives and Policies

For additional information about the Acquiring Fund’s investment objectives and policies, see “Investment Policies and Strategies” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

Fund Holdings

For additional information about the Acquiring Fund’s policies and procedures with respect to the disclosure of its portfolio securities to any person, see “Disclosure of Fund Holdings” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

Management

For additional information about the Board of Directors, officers and management personnel of the Acquiring Fund, see “Management of the Fund” and “Investment Advisory and Other Services” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

Investment Advisory and Other Services

For additional information about the Acquiring Fund’s investment adviser, the Acquiring Fund’s independent registered public accounting firm and other services provided to the Acquiring Fund, see “Investment Advisory and Other Services” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

Codes of Ethics

For additional information about the Codes of Ethics adopted by the Acquiring Fund, the Acquiring Fund’s investment adviser and the Acquiring Fund’s distributor, see “Management of the Fund—Code of Ethics” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

Proxy Voting Policies

For additional information about the voting of proxies held by the Acquiring Fund, see “Investment Advisory and Other Services—Proxy Voting Policy and Proxy Voting Record” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

B-2

Fund Managers

For additional information about the portfolio managers primarily responsible for the day-to-day management of the Acquiring Fund, their compensation structure and their holdings in the Acquiring Fund, see “Investment Advisory and Other Services—Portfolio Managers” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

Fund Transactions and Brokerage

For additional information about brokerage allocation practices, see “Brokerage Practices” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

Description of Fund Shares

For additional information about the voting rights and other characteristics of the shares of the Acquiring Fund, see “General Information—Description of Shares and Voting Rights” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

Purchase, Redemption and Pricing of Shares

For additional information about the purchase and redemption of the Acquiring Fund’s shares and the determination of net asset value (“NAV”), see “Purchase and Redemption of Shares” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

Dividends, Distributions and Tax Status

For additional information about the Acquiring Fund’s policies regarding dividends and distributions and tax matters affecting the Acquiring Fund and its Shareholders, see “General Information—Dividends and Capital Gains Distributions” and “Taxes” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

Distribution of Shares

For additional information about the Acquiring Fund’s distributor and the distribution agreement between the Acquiring Fund and its distributor, see “Investment Advisory and Other Services” and “Distribution and Shareholder Services Plans” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

Performance Data

For additional information about the Acquiring Fund’s performance, see “Performance Information” in the Company’s Statement of Additional Information relating to the Acquiring Fund.

FINANCIAL STATEMENTS

1. The most recent audited financial statements of the Acquiring Fund and Acquired Fund, each for the fiscal year ended December 31, 2013, have been audited by Ernst & Young LLP, an independent registered public accounting firm (except that the financial information for the Acquired Fund for the fiscal years ended prior to 2011 was audited by the Acquired Fund’s previous independent registered public accounting firm). Ernst & Young LLP’s reports, along with the Funds’ audited financial statements, are included in each respective Fund’s Annual Report to Shareholders for the fiscal year ended December 31, 2013, each of which accompanies this SAI and is incorporated herein by reference. The Acquiring Fund’s and Acquired Fund’s most recent financial statements (unaudited) are set forth in each Fund’s Semi-Annual Report for the six-month period ended June 30, 2014, each of which accompanies this SAI and is incorporated herein by reference. In addition, a copy of the Acquiring Fund’s Annual Report for the fiscal year ended December 31, 2013 and the Acquiring Fund’s Semi-Annual Report for the six-month period ended June 30, 2014 accompany the Proxy Statement and Prospectus.

2. Shown below are Financial Statements for the Acquired Fund and Acquiring Fund and Pro Forma Financial Statements for the Combined Fund as of June 30, 2014, as though the Reorganization occurred as of that date. These financial statements set forth

B-3

the unaudited pro forma condensed Statement of Assets and Liabilities as of June 30, 2014, the unaudited pro forma condensed Statement of Operations for the twelve month period ended June 30, 2014 and the unaudited pro forma condensed Portfolio of Investments as of June 30, 2014. These statements have been derived from the books and records utilized in calculating the daily NAVs for each Fund.

B-4

Portfolio of Investments As of June 30, 2014 (unaudited)

	MS Global Infrastructure	MSIF Global Infrastructure	MSIF Global Infrastructure Combined Pro-Forma	MS Global Infrastructure		MSIF Global Infrastructure		MSIF Global Infrastructure Combined Pro-Forma
	Shares	Shares	Shares	Value (000)		Value (000)		Value (000)
Common Stocks (98.7%)
Australia (6.6%)
DUET Group (a)	2,945,640	335,909	3,281,549	$	6,722	$	767	$	7,489
Macquarie Atlas Roads Group	434,402	91,375	525,777	1,339		282		1,621
Spark Infrastructure Group (a)	1,619,707	175,513	1,795,220	2,825		306		3,131
Sydney Airport	591,985	98,387	690,372	2,356		391		2,747
Transurban Group (a)	1,770,812	209,982	1,980,794	12,340		1,463		13,803
				25,582		3,209		28,791
Austria (1.3%)
Flughafen Wien AG	56,226	6,535	62,761	5,235		608		5,843
Brazil (1.8%)
CCR SA	144,400	13,700	158,100	1,176		112		1,288
Cia de Saneamento Basico do Estado de Sao Paulo ADR	543,798	56,191	599,989	5,830		602		6,432
				7,006		714		7,720
Canada (12.0%)
Enbridge, Inc. (a)	398,545	48,704	447,249	18,910		2,311		21,221
TransCanada Corp. (a)	580,290	69,704	649,994	27,697		3,327		31,024
				46,607		5,638		52,245
China (4.2%)
Beijing Enterprises Holdings Ltd. (b)	319,500	36,000	355,500	3,024		340		3,364
China Everbright International Ltd. (b)	836,000	135,000	971,000	1,195		193		1,388
China Gas Holdings Ltd. (b)	828,000	40,000	868,000	1,718		83		1,801
China Merchants Holdings International Co., Ltd. (b)	611,912	35,527	647,439	1,911		111		2,022
ENN Energy Holdings Ltd. (b)	332,000	42,000	374,000	2,386		302		2,688
Guangdong Investment Ltd. (b)	3,750,000	704,000	4,454,000	4,326		812		5,138
Jiangsu Expressway Co., Ltd. (b)	1,508,322	174,000	1,682,322	1,785		206		1,991
				16,345		2,047		18,392
France (4.3%)
Eutelsat Communications SA	294,900	35,101	330,001	10,247		1,220		11,467
SES SA	176,544	20,747	197,291	6,696		787		7,483
				16,943		2,007		18,950
Germany (1.5%)
Fraport AG Frankfurt Airport Services Worldwide	82,370	10,000	92,370	5,820		707		6,527
Italy (5.5%)
Atlantia SpA	382,528	47,155	429,683	10,905		1,344		12,249
Snam SpA	1,400,563	163,479	1,564,042	8,438		985		9,423
Terna Rete Elettrica Nazionale SpA (a)	402,498	46,573	449,071	2,123		246		2,369
				21,466		2,575		24,041
Japan (1.7%)
Tokyo Gas Co., Ltd.	1,100,000	163,000	1,263,000	$	6,428	$	952	$	7,380
Netherlands (0.9%)
Koninklijke Vopak N.V. (a)	75,568	6,729	82,297	3,694		329		4,023
Spain (1.8%)
Ferrovial SA	208,703	24,450	233,153	4,648		545		5,193
Red Electrica Corp., SA (a)	26,270	3,150	29,420	2,403		288		2,691
				7,051		833		7,884
Switzerland (2.0%)
Flughafen Zuerich AG (Registered)	12,586	1,477	14,063	7,735		908		8,643
United Kingdom (8.8%)
National Grid PLC	1,349,285	175,544	1,524,829	19,397		2,523		21,920
Pennon Group PLC	525,650	70,310	595,960	7,062		945		8,007
Severn Trent PLC	109,160	13,640	122,800	3,609		451		4,060
United Utilities Group PLC	270,070	31,862	301,932	4,077		481		4,558
				34,145		4,400		38,545
United States (46.3%)
American Tower Corp. REIT	198,130	23,860	221,990	17,828		2,147		19,975
American Water Works Co., Inc.	179,020	22,550	201,570	8,853		1,115		9,968
Atmos Energy Corp.	32,050	6,290	38,340	1,711		336		2,047
CenterPoint Energy, Inc.	80,150	9,724	89,874	2,047		248		2,295
Cheniere Energy, Inc. (c)	91,400	11,160	102,560	6,553		800		7,353
Crown Castle International Corp.	172,376	21,549	193,925	12,801		1,600		14,401
Enbridge Energy Management LLC (a)(c)	263,909	29,164	293,073	9,303		1,028		10,331
ITC Holdings Corp.	427,358	49,051	476,409	15,590		1,789		17,379
Kinder Morgan, Inc.	220,256	29,612	249,868	7,986		1,074		9,060
NiSource, Inc.	130,404	16,060	146,464	5,130		632		5,762
Northeast Utilities	162,355	19,750	182,105	7,674		934		8,608
ONEOK, Inc.	117,080	13,570	130,650	7,971		924		8,895
PG&E Corp.	140,306	18,010	158,316	6,737		865		7,602
Plains GP Holdings LP, Class A	73,047	9,378	82,425	2,337		300		2,637
SBA Communications Corp. Class A (c)	59,411	6,579	65,990	6,078		673		6,751
SemGroup Corp. Class A	88,319	11,087	99,406	6,964		874		7,838
Sempra Energy	160,540	20,670	181,210	16,810		2,164		18,974
Spectra Energy Corp.	326,953	37,840	364,793	13,889		1,607		15,496
Union Pacific Corp.	37,740	4,900	42,640	3,765		489		4,254
Williams Cos., Inc. (The)	346,080	44,520	390,600	20,145		2,592		22,737
				180,172		22,191		202,363
Total Common Stocks (Cost $295,841)				384,229		47,118		431,347
Short-Term Investments (8.7%)
Securities held as Collateral on Loaned Securities (8.1%)
Investment Company (6.6%)
Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (Cost $28,904)	22,780,156	6,123,899	28,904,055	22,780		6,124		28,904

	Face Amount (000)		Face Amount (000)		Face Amount (000)
Repurchase Agreements (1.5%)
Barclays Capital, Inc., (0.08%, dated 6/30/14, due 7/1/14; proceeds $2,996; fully collateralized by various U.S. Government agency securities; 3.50% - 4.50% due 9/1/33 - 6/20/44; valued at $3,055)	$	2,361	$	635	$	2,996	$	2,361		$	635		$	2,996
BNP Paribas Securities Corp., (0.11%, dated 6/30/14, due 7/1/14; proceeds $3,758; fully collateralized by a U.S. Government agency security; 4.00% due 6/20/44; valued at $3,836)	2,962		796		3,758		2,962			796			3,758
Total Repurchase Agreements (Cost $6,754)							5,323			1,431			6,754
Total Securities held as Collateral on Loaned Securities (Cost $35,658)							28,103			7,555			35,658

	Shares		Shares		Shares
Investment Company (0.6%)
Morgan Stanley Institutional Liquidity Funds — Treasury Portfolio —Institutional Class (Cost $2,399)	—		2,399,026		2,399,026		—			2,399			2,399
Total Short-Term Investments (Cost $38,057)							28,103			9,954			38,057

Total Investments (107.4%) (Cost $333,898)							412,332			57,072			469,404
Liabilities in Excess of Other Assets (7.4%)							(24,983		)	(7,415		)	(32,398		)
Net Assets (100.0%)							$	387,349		$	49,657		$	437,006

ADR American Depositary Receipt.

REIT Real Estate Investment Trust.

(a) All or a portion of this security was on loan at June 30, 2014.

(b) Security trades on the Hong Kong exchange.

As of June 30, 2014, the gross unrealized appreciation (depreciation) of investments based on the aggregate cost of investments for federal income tax purposes was as follows:

	MS Global Infrastructure			MSIF Global Infrastructure			MSIF Global Infrastructure Combined Pro-Forma
Aggregate gross unrealized appreciation	$	127,302,000		$	9,122,000		$	136,424,000
Aggregate gross unrealized depreciation	(849,000		)	(69,000		)	(918,000		)
Net unrealized appreciation (depreciation)	$	126,453,000		$	9,053,000		$	135,506,000

Federal income tax cost of investments	$	285,879,000		$	48,019,000		$	333,898,000

Fair Valuation Measurements

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification TM(“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), defines fair value as the value 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. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing 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 valuing 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.)

The following is a summary of the inputs used to value each Fund’s investments as of June 30, 2014.

Funds	MS Global Infrastructure		MSIF Global Infrastructure		MSIF Global Infrastructure Combined Pro-Forma
Investments in Securities (Level 1) (000)	$	407,009	$	55,641	$	462,650
Investments in Securities (Level 2) (000)	5,323		1,431		6,754
Investments in Securities (Level 3) (000)	—		—		—
Total for Investments in Securities	$	412,332	$	57,072	$	469,404

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. The Funds recognize transfers between the levels as of the end of the period. As of June 30, 2014, the Funds did not have any investments transfer between investment levels.

1. Security Valuation: (1) An equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), if there were no sales on a given day, the security is valued at the mean between the last reported bid and asked prices; (2) all other equity portfolio securities for which over-the-counter (“OTC”) market quotations are readily available are valued at its latest reported sales 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; (3) when market quotations are not readily available, including circumstances under which Morgan Stanley Investment Management Inc. (the “Adviser”) or Morgan Stanley Investment Management Limited (“MSIM Limited”) and Morgan Stanley Investment Management Company (“MSIM Company”) (together, the “Sub-Advisers”) determine that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of 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 Board of Directors (the “Directors”). 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 of the New York Stock Exchange (“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 Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; (4) quotations of foreign portfolio securities, other assets and liabilities and forward contracts stated in foreign currency are translated into U.S. dollar equivalents at the prevailing market rates prior to the close of the NYSE; (5) investments in 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 (6) short-term debt securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, unless the Adviser determines such valuation does not reflect the securities’ market value, in which case these securities will be valued at their fair market value determined by the Adviser.

Under procedures approved by the Directors, the Fund’s Adviser has formed a Valuation Committee. The Valuation Committee provides administration and oversight of the Fund’s valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

PRO-FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS

FOR THE TWELVE MONTH PERIOD ENDED June 30, 2014 (Unaudited)

	MS Global Infrastructure (000)			MSIF Global Infrastructure (000)			Adjustments (000)			MSIF Global Infrastructure Combined Pro-Forma (000)

Investment Income:
Dividends from Securities of Unaffiliated Issuers +	$	10,328		$	948		$	—		$	11,276
Dividends from Security of Affiliate Issuer		2		—		@		—			2
Income from Securities Loaned - Net		224			20		—				244
Interest		11			—			—			11
Total Investment Income	10,565			968			—			11,533
+ Net of foreign withholding taxes		833			87			—			920

Expenses
Advisory fees	2,055			269			1,101		(a)	3,425
Sub Transfer Agency Fees	—			—		@	(—@		)(b)	—
Sub Transfer Agency Fees (Class A shares)	65			—		@	186		(c)	251
Sub Transfer Agency Fees (Class B shares)	2			—			(2		)(d)	—
Sub Transfer Agency Fees (Class L shares)	6			—			2		(e)	8
Sub Transfer Agency Fees (Class I shares)	—		@	—		@	1		(e)	1
Sub Transfer Agency Fees (Class Q shares)	143			—			(143		)(f)	—
Administration Fees	288			25			9		(g)	322
Shareholder Services Fees (Class A shares)	223			15			666		(c)	904
Distribution Fee (Class B shares)	15			—			(15		)(d)	—
Distribution and Shareholder Services Fees (Class P shares)	—			(—@		)	—		@(h)	—
Distribution and Shareholder Services Fees (Class H shares)	—			(2		)	2		(i)	—
Distribution and Shareholder Services Fees (Class L shares)	52			4			—			56
Distribution Fee (Class Q shares)	625			—			(625		)(f)	—
Professional Fees	120			112			(127		)(j)	105
Shareholder Reporting Fees	294			24			(187		)(k)	131
Custodian Fees	65			51			(53		)(l)	63
Registration Fees	53			65			(58		)(m)	60
Trustees’ Fees and Expenses	7			—			(7		)(n)	—
Directors’ Fees and Expenses	—			2			14		(n)	16
Transfer Agency Fees	75			3			(78		)(b)	—
Transfer Agency Fees - Class I	1			1			2		(e)	4
Transfer Agency Fees - Class A	16			1			63		(c)	80
Transfer Agency Fees - Class B	3			—			(3		)(d)	—
Transfer Agency Fees - Class L	3			1			(1		)(o)	3
Transfer Agency Fees - Class Q	41			—			(41		)(f)	—
Transfer Agency Fees - Class IS	—			1			1		(e)	2

Pricing Fees	$	9		$	7		$	(9	)(p)	$	7
Other	17			13			(11		)(q)	19
Total Expenses	4,178			592			687			5,457
Rebate from Morgan Stanley Affiliate	(10		)	(2		)	—			(12		)
Waiver of Advisory Fees	—			(212		)	(552		)(r)	(764		)
Expenses Reimbursed by Adviser	—			(14		)	14		(s)	—
Reimbursement of Class Specific Expenses- Class A	—			—			(259		)(t)	(259		)
Reimbursement of Class Specific Expenses- Class L	—			(—@		)	(4		)(t)	(4		)
Reimbursement of Class Specific Expenses- Class IS	—			(1		)	(1		)(t)	(2		)
Net Expenses	4,168			363			(115		)	4,416
Net Investment Income	6,397			605			115			7,117

Realized Gain (Loss)
Investments Sold	36,488			1,835			—			38,323
Foreign Currency Transactions	22			(4		)	—			18
Net Realized Gain	36,510			1,831			—			38,341

Change in Unrealized Appreciation (Depreciation)
Investments	49,125			6,072			—			55,197
Foreign Currency Translations	42			4			—			46
Net Change in Unrealized Appreciation (Depreciation)	49,167			6,076			—			55,243
Net Realized Gain and Change in Unrealized Appreciation (Depreciation)	85,677			7,907			—			93,584
Net Increase in Net Assets Resulting from Operations	$	92,074		$	8,512		$	115		$	100,701

@ Amount is less than $500.

(a) — Reflects an increase in contractual rate between MS Global Infrastructure and MSIF Global Infrastructure.

(b) — Reflects a decrease from a composite level expense to a class level expense.

(c) — Reflects an increase due to the Reorganization of MS Global Infrastructure Class A, MS Global Infrastructure Class B, and MS Global Infrastructure Class Q into MSIF Global Infrastructure Class A.

(d) — Reflects the Reorganization of MS Global Infrastructure Class B into MSIF Global Infrastructure Class A.

(e) — Reflects an increase due to an overall increase in fees.

(f) — Reflects the Reorganization of MS Global Infrastructure Class Q into MSIF Global Infrastructure Class A.

(g) — Reflects an increase in assets.

(h) — Reflects the renaming of MSIF Global Infrastructure Class P as MSIF Global Infrastructure Class A, effective September 9, 2013.

(i) — Reflects the converting of MSIF Global Infrastructure Class H into MSIF Global Infrastructure Class A, effective September 9, 2013.

(j) — Reflects a decrease in Audit and Legal fees.

(k) — Reflects a decrease related to one time expenses paid in prior year in MS Global Infrastructure.

(l) — Reflects the elimination of MS Global Infrastructure’s transaction based fees.

(m) — Reflects the elimination of MS Global Infrastructure’s registration fees.

(n) — Reflects the elimination of MS Global Infrastructure’s Trustees’ fees into Directors’ fees in MSIF Global Infrastructure.

(o) — Reflects a decrease due to an overall decrease in fees.

(p) — Reflects a decrease due to identical securities held across the two funds.

(q) — Reflects the elimination of miscellaneous invoices for NASDAQ, ITG, Insurance and Lipper for MS Global Infrastructure.

(r) — Reflects the amount of waived advisory fees.

(s) — Reflects the elimination of reimbursed expenses.

(t) — Reflects a waiver of class specific expenses due to the Reorganization.

Pro-Forma Combined Condensed Statement of Assets and Liabilities

As of June 30, 2014 (Unaudited)

	MS Global Infrastructure (000)			MSIF Global Infrastructure (000)			Adjustments (000)			MSIF Global Infrastructure Combined Pro-Forma (000)

Assets:
Investments in Securities of Unaffiliated Issuers, at value (1) (Cost $302,595)	$	389,552		$	48,549		$	—		$	438,101
Investment in Security of Affiliated Issuer, at value (Cost $31,303)	22,780			8,523			—			31,303
Total investments in Securities, at value (Cost $333,898)	412,332			57,072			—			469,404
Cash	1,515			477			—			1,992
Foreign Currency (Cost $490)	433			61			—			494
Receivable for Investments Sold	1,919			96			—			2,015
Tax Reclaim Receivable	34			6			—			40
Dividends Receivable	2,088			259			—			2,347
Receivable for Portfolio Shares Sold	1			215			—			216
Receivable from Affiliate	—		@	—		@	—			—		@
Other Assets	70			9			—			79
Total Assets	418,392			58,195			—			476,587

Liabilities:
Collateral on Securities Loaned, at Value	$	29,877		$	8,032		—			$	37,909
Payable for Investments Purchased	—			426			—			426
Payable for Advisory Fees	184			31			—			215
Payable for Portfolio Shares Redeemed	520			6			—			526
Payable for Administration Fees	26			3			—			29
Distribution fee	82			—			—			82
Distribution and Shareholder Services Fees — Class L	—			—		@	—			—		@
Transfer Agent Fees - Class I	—			—		@	—			—		@
Transfer Agent Fees - Class A	—			—		@	—			—		@
Transfer Agent Fees - Class L	—			—		@	—			—		@
Payable for Shareholder Services Fees - Class A	—			2			—			2
Payable for Custodian Fees	—			6			—			6
Payable for Professional Fees	—			25			—			25
Payable for Transfer Agent Fees	139			—			—			139
Other Liabilities	215			7			—			222
Total Liabilities	31,043			8,538			—			39,581
Net Assets	$	387,349		$	49,657		$	—		$	437,006

Net Assets Consist of:
Paid-in-Capital	$	243,827		$	39,055		$	—		$	282,882
Accumulated Undistributed Net Investment Income	3,610			422			—			4,032
Accumulated Net Realized Gain	13,434			1,124			—			14,558
Unrealized Appreciation (Depreciation) on:
Investments	126,453			9,053			—			135,506
Foreign Currency Translations	25			3			—			28
Net Assets	$	387,349		$	49,657		$	—		$	437,006

CLASS I:
Net Assets	$	3,462		$	36,558		$	—		$	40,020
Shares Outstanding (not in 000’s)	394,768			2,237,807			(182,919		)(a)	2,449,656
Net Asset Value, Offering and Redemption Price Per Share	$	8.77		$	16.34		$	—		$	16.34

CLASS L:
Net Assets	$	7,397		$	766		$	—		$	8,163
Shares Outstanding (not in 000’s)	828,977			47,232			(372,933		)(a)	503,276
Net Asset Value, Offering and Redemption Price Per Share	$	8.92		$	16.22		$	—		$	16.22

CLASS A:
Net Assets	$	95,693		$	12,321		$	280,797	(b)	$	388,811
Shares Outstanding (not in 000’s)	10,840,501			755,844			12,257,072		(a)	23,853,417
Net Asset Value, Redemption Price Per Share	$	8.83		$	16.30		$	—		$	16.30
Maximum Sales Load	5.25		%	5.25		%	—			5.25		%
Maximum Sales Charge	$	0.49		$	0.90		$	—		$	0.90
Maximum Offering Price Per Share	$	9.32		$	17.20		$	—		$	17.20

CLASS B:
Net Assets	$	1,343		$	—		$	(1,343	)(b)	$	—
Shares Outstanding (not in 000’s)	147,887			—			(147,887		)(a)	—
Net Asset Value, Offering and Redemption Price Per Share	$	9.08		$	—		$	—		$	—

CLASS Q:
Net Assets	$	279,454		$	—		$	(279,454	)(b)	$	—
Shares Outstanding (not in 000’s)	31,029,899			—			(31,029,899		)(a)	—
Net Asset Value, Offering and Redemption Price Per Share	$	9.01		$	—		$	—		$	—

CLASS IS:
Net Assets	$	—		$	12		$	—		$	12
Shares Outstanding (not in 000’s)	—			728			—			728
Net Asset Value, Offering and Redemption Price Per Share	$	—		$	16.34		$	—		$	16.34

(1) Including:
Securities on Loan, at Value:	$	54,226	$	7,677	$	—	$	61,903

@ Amount is less than $500.

(a) — Reflects the adjustment to the shares outstanding due to the Reorganization.

(b) — Reflects the adjustment to net assets due to the Reorganization.

Statement of Additional Information Supplement

May 13, 2014

Morgan Stanley Institutional Fund, Inc.

Supplement dated May 13, 2014 to the Morgan Stanley Institutional Fund, Inc. Statement of Additional Information dated April 30, 2014

Emerging Markets Domestic Debt Portfolio

Emerging Markets External Debt Portfolio

Total Emerging Markets Portfolio

The section of the Statement of Additional Information entitled "Investment Advisory and Other Services—Portfolio Managers—Other Accounts Managed by Portfolio Managers as of December 31, 2013 (unless otherwise indicated)—Emerging Markets Domestic Debt" is hereby deleted and replaced with the following:

Other Registered
Investment Companies

Other Pooled
Investment Vehicles

Other Accounts

Portfolio and
Portfolio Managers

Number of
Accounts

Total Assets
in the Accounts

Number of
Accounts

Total Assets
in the Accounts

Number of
Accounts

Total Assets
in the Accounts

Emerging Markets External Debt

Eric J. Baurmeister

$2.1 billion

$1.9 billion

9⁽⁶⁾

$5.0 billion⁽⁶⁾

⁽⁶⁾ Of these other accounts, one account with a total of approximately $259.4 million in assets had performance-based fees.

Other Registered
Investment Companies

Other Pooled
Investment Vehicles

Other Accounts

Portfolio and
Portfolio Managers

Number of
Accounts

Total Assets
in the Accounts

Number of
Accounts

Total Assets
in the Accounts

Number of
Accounts

Total Assets
in the Accounts

Emerging Markets External Debt

Eric J. Baurmeister

$2.1 billion

$1.9 billion

9⁽⁶⁾

$5.0 billion⁽⁶⁾

⁽⁶⁾ Of these other accounts, one account with a total of approximately $259.4 million in assets had performance-based fees.

The section of the Statement of Additional Information entitled "Investment Advisory and Other Services—Portfolio Managers—Other Accounts Managed by Portfolio Managers as of December 31, 2013 (unless otherwise indicated)—Total Emerging Markets" is hereby deleted and replaced with the following:

Other Registered
Investment Companies

Other Pooled
Investment Vehicles

Other Accounts

Portfolio and
Portfolio Managers

Number of
Accounts

Total Assets
in the Accounts

Number of
Accounts

Total Assets
in the Accounts

Number of
Accounts

Total Assets
in the Accounts

Total Emerging Markets

Eric J. Baurmeister

$2.1 billion

$1.9 billion

9⁽⁶⁾

$5.0 billion⁽⁶⁾

Jitania Kandhari

Cyril Moullé-Berteaux

$781.7 million

$4.8 billion

9⁽³⁾

$5.1 billion⁽³⁾

Sergei Parmenov

$4.7 billion

Paul C. Psaila

$2.5 billion

$2.8 billion

15⁽³⁾

$6.0 billion⁽³⁾

⁽³⁾ Of these other accounts, three accounts with a total of approximately $2.1 billion in assets had performance-based fees.

⁽⁶⁾ Of these other accounts, one account with a total of approximately $259.4 million in assets had performance-based fees.

The section of the Statement of Additional Information entitled "Investment Advisory and Other Services—Portfolio Managers—Securities Ownership of Portfolio Managers—Emerging Markets Domestic Debt" is hereby deleted and replaced with the following:

Portfolio and Portfolio Managers				Portfolio Holdings
Emerging Markets Domestic Debt
Eric J. Baurmeister				$100,001-$500,000

The section of the Statement of Additional Information entitled "Investment Advisory and Other Services—Portfolio Managers—Securities Ownership of Portfolio Managers—Emerging Markets External Debt" is hereby deleted and replaced with the following:

Portfolio and Portfolio Managers				Portfolio Holdings
Emerging Markets External Debt
Eric J. Baurmeister				$100,001-$500,000

The section of the Statement of Additional Information entitled "Investment Advisory and Other Services—Portfolio Managers—Securities Ownership of Portfolio Managers—Total Emerging Markets" is hereby deleted and replaced with the following:

Portfolio and Portfolio Managers				Portfolio Holdings
Total Emerging Markets
Eric J. Baurmeister				None
Jitania Kandhari				None
Cyril Moullé-Berteaux				None
Sergei Parmenov				None
Paul C. Psaila				None

Please retain this supplement for future reference.

Statement of Additional Information Supplement

July 25, 2014

Morgan Stanley Institutional Fund, Inc.

Supplement dated July 25, 2014 to the Morgan Stanley Institutional Fund, Inc. (the "Fund") Statement of Additional Information dated April 30, 2014

The following is hereby added to the end of the section of the Fund's Statement of Additional Information ("SAI") entitled "Investment Policies and Strategies":

Special Risks Related to Cyber Security. The Fund and its service providers are susceptible to cyber security risks that include, among other things, theft, unauthorized monitoring, release, misuse, loss, destruction or corruption of confidential and highly restricted data; denial of service attacks; unauthorized access to relevant systems, compromises to networks or devices that the Fund and its service providers use to service the Fund's operations; or operational disruption or failures in the physical infrastructure or operating systems that support the Fund and its service providers. Cyber attacks against or security breakdowns of the Fund or its service providers may adversely impact the Fund and its shareholders, potentially resulting in, among other things, financial losses; the inability of Fund shareholders to transact business and the Fund to process transactions; inability to calculate the Fund's NAV; violations of applicable privacy and other laws; regulatory fines, penalties, reputational damage, reimbursement or other compensation costs; and/or additional compliance costs. The Fund may incur additional costs for cyber security risk management and remediation purposes. In addition, cyber security risks may also impact issuers of securities in which the Fund invests, which may cause the Fund's investment in such issuers to lose value. There can be no assurance that the Fund or its service providers will not suffer losses relating to cyber attacks or other information security breaches in the future.

***

The following information hereby replaces in its entirety the biographical information for Mr. John Gernon contained in the Fund's SAI:

Name, Age and Address of
Executive Officer

Position(s)
Held with
Registrant

Length of
Time Served*

Principal Occupation(s) During Past 5 Years

John H. Gernon (50)
522 Fifth Avenue
New York, NY 10036

President and Principal Executive Officer

Since September 2013

President and Principal Executive Officer of the Equity and Fixed Income Funds and the Morgan Stanley AIP Funds (since September 2013) and the Liquidity Funds and various money market funds (since May 2014) in the Fund Complex; Managing Director of the Adviser; Head of Product (since 2006) and Global Portfolio Analysis and Reporting (since 2012) for MSIM's Long Only business.

* This is the earliest date the officer began serving the Morgan Stanley Funds. Each officer serves a one-year term, until his or her successor is chosen and qualifies.

***

The Board of Directors of the Fund has approved (i) the offering of a commission, which will be paid by Morgan Stanley Distribution, Inc., as distributor of the Fund, to certain financial intermediaries as compensation on sales of Class A shares of the Portfolios of $1 million or more; and (ii) the imposition of a contingent deferred sales charge on Class A shares of the Portfolio in relation thereto. As a result, effective August 1, 2014, the following changes to the SAI are necessary:

The section of the Fund's SAI entitled "Distribution and Shareholder Services Plans—Revenue Sharing" is hereby deleted and replaced with the following:

Intermediary for, among other things, promoting the sale and distribution of Portfolio shares, providing access to various programs, mutual fund platforms or preferred or recommended mutual fund lists that may be offered by an Intermediary, granting the Distributor access to an Intermediary's financial advisors and consultants, providing assistance in the ongoing education and training of an Intermediary's financial personnel, furnishing marketing support, maintaining share balances and/or for sub-accounting, recordkeeping, administrative, shareholder, or transaction processing services. Such payments are in addition to any shareholder servicing fees and/or transfer agency fees that may be payable by the Portfolios. The additional payments are generally based on current assets, but may also be based on other measures as determined from time to time by the Adviser and/or the Distributor (e.g., gross sales or number of accounts). The amount of these payments may be different for different Intermediaries.

With respect to Morgan Stanley Smith Barney LLC, these payments currently include the following amounts, which are paid in accordance with the applicable compensation structure:

(1) an ongoing annual fee in an amount up to $750,000 in consideration of the Distributor's participation at various Morgan Stanley Smith Barney LLC events, including seminars, conferences and meetings as determined by Morgan Stanley Smith Barney LLC;

(2) on Class A, Class H and Class L shares of the Portfolios held in Morgan Stanley Smith Barney LLC brokerage accounts, an ongoing annual fee, payable quarterly, in an amount up to 0.16% of the total average daily NAV of such shares for the applicable quarterly period;

(3) on Class I shares of the Portfolios held in Morgan Stanley Smith Barney LLC brokerage accounts, an ongoing annual fee, payable quarterly, in an amount up to 35% of the advisory fee the Adviser receives from each Portfolio based on the total average daily NAV of such shares for the applicable quarterly period;

(4) on Class A and Class I shares of the Portfolios held in taxable accounts through any fee-based advisory program offered by Morgan Stanley Smith Barney LLC, an ongoing annual fee, payable quarterly, in an amount up to 0.12% of the total average daily NAV of such shares for the applicable quarterly period; and

(5) on purchases of $1 million or more of Class A shares (for which no initial sales charge was paid), Morgan Stanley Smith Barney LLC may, at the discretion of the Distributor, receive a gross sales credit of up to 1.00% (with respect to the U.S. Equity, Global and International Equity and Asset Allocation Portfolios) or 0.50% (with respect to the Fixed Income Portfolios) of the amount sold, as applicable.*

With respect to other Intermediaries, these payments currently include the following amounts, which are paid in accordance with the applicable compensation structure for each Intermediary:

(1) on Class A, Class H, Class I and Class L shares of the Portfolio held in Intermediary brokerage and/or advisory program accounts, an ongoing annual fee, payable quarterly, in an amount up to 0.15% of the total average daily NAV of such shares for the applicable quarterly period;

(2) an ongoing annual fee in an amount up to 0.08% on sales of Class A, Class I and Class L shares of the Portfolio through a Financial Intermediary's brokerage accounts; and

(3) on purchases of $1 million or more of Class A shares (for which no initial sales charge was paid), Intermediaries may, at the discretion of the Distributor, receive a gross sales credit of up to 1.00% (with respect to the U.S. Equity, Global and International Equity and Asset Allocation Portfolios) or 0.50% (with respect to the Fixed Income Portfolios) of the amount sold, as applicable.*

The prospect of receiving, or the receipt of, additional compensation as described above by Morgan Stanley Smith Barney LLC other Intermediaries may provide Morgan Stanley Smith Barney LLC or other Intermediaries and their financial advisors and other salespersons with an incentive to favor sales of shares of the Portfolios over other investment options with respect to which Morgan Stanley Smith Barney LLC or other Intermediaries do not receive additional compensation (or receives lower levels of additional compensation). These payment arrangements, however, will not change the price that an investor pays for shares of the Portfolios or the amount that the Portfolios receive to invest on behalf of an investor. Investors may wish to take such payment arrangements into account when considering and evaluating any recommendations relating to Portfolio shares and should review carefully any disclosure provided by Morgan Stanley Smith Barney LLC and other Intermediaries as to their compensation.

Purchases of Class A shares for which no initial sales charge is paid are subject to a contingent deferred sales charge ("CDSC") of 1% if the redemption of such shares occurs within 18 months after purchase. The full amount of such CDSC will be retained by the Distributor.

* Commissions or transaction fees paid when Morgan Stanley Smith Barney LLC or other Intermediaries initiate and are responsible for purchases of $1 million or more are computed on a percentage of the dollar value of such shares sold as follows: (i) with respect to the U.S. Equity, Global and International Equity and Asset Allocation Portfolios: 1.00% on sales of $1 million to $4 million, plus 0.50% on sales over $4 million to $15 million, plus 0.25% on the excess over $15 million; and (ii) with respect to the Fixed Income Portfolios: 0.50% on sales of $1 million to $4 million, 0.25% on sales over $4 million to $15 million, and 0.15% on the excess over $15 million.

Please retain this supplement for future reference.

Statement of Additional Information Supplement

September 17, 2014

Morgan Stanley Institutional Fund, Inc.

Supplement dated September 17, 2014 to the Morgan Stanley Institutional Fund, Inc. Statement of Additional Information dated April 30, 2014

Global Quality Portfolio (Classes I, A and L Shares)

The Board of Directors of Morgan Stanley Institutional Fund, Inc. (the "Fund") has approved a decrease in the expense cap with respect to the Class I, Class A and Class L shares of the Global Quality Portfolio (the "Portfolio"), effective October 1, 2014. Accordingly, the following changes to the Statement of Additional Information will become effective on October 1, 2014.

The information in the table under the section of the Statement of Additional Information entitled "Investment Advisory and Other Services—Adviser" which shows the contractual advisory fee and the maximum expense ratios for the Portfolio is hereby deleted in its entirety and replaced with the following:

Portfolio				Contractual Rate of Advisory Fees				Expense Cap Class I				Expense Cap Class A†				Expense Cap Class H				Expense Cap Class L
Global Quality Portfolio				0.80% of the portion of the daily net assets not exceeding $500 million; 0.75% of the portion of the daily net assets exceeding $500 million but not exceeding $1 billion; 0.70% of the portion of the daily net assets exceeding $1 billion.					1.00	%			1.35	%			N/A				1.85	%

† Effective September 9, 2013, Class P shares of each Portfolio (except the Global Quality Portfolio) and Class H shares of each of the Global Insight and Insight Portfolios were renamed Class A shares.

Please retain this supplement for future reference.

MORGAN STANLEY INSTITUTIONAL FUND, INC.

522 Fifth Ave.
New York, NY 10036

STATEMENT OF ADDITIONAL INFORMATION
April 30, 2014

Morgan Stanley Institutional Fund, Inc. (the "Fund") is an open-end management investment company consisting of 27 portfolios offering a variety of investment alternatives, all of which are included in this Statement of Additional Information ("SAI") (each a "Portfolio" and collectively the "Portfolios"). Each Portfolio offers Class I, Class A and Class L shares. Certain Portfolios also offer Class IS shares through a separate SAI. Following is a list of the 27 Portfolios included in this SAI:

Share Class and Ticker Symbol

Class I

Class A

Class H

Class L

GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS:

Active International Allocation Portfolio

MSACX

MSIBX

—

MSLLX

Asian Equity Portfolio

MEQIX

MEQPX

—

MEQLX

Emerging Markets Portfolio

MGEMX

MMKBX

—

MSELX

Frontier Emerging Markets Portfolio

MFMIX

MFMPX

—

MFMLX

Global Advantage Portfolio

MIGIX

MIGPX

—

MIGLX

Global Discovery Portfolio

MLDIX

MGDPX

—

MGDLX

Global Franchise Portfolio*

MSFAX

MSFBX

—

MSFLX

Global Insight Portfolio

MBPIX

MBPHX

—

MBPLX

Global Opportunity Portfolio

MGGIX

MGGPX

—

MGGLX

Global Quality Portfolio

MGQIX

MGQAX

—

MGQLX

Global Real Estate Portfolio

MRLAX

MRLBX

—

MGRLX

International Advantage Portfolio

MFAIX

MFAPX

—

MSALX

International Equity Portfolio

MSIQX

MIQBX

—

MSQLX

International Opportunity Portfolio

MIOIX

MIOPX

—

MIOLX

International Real Estate Portfolio

MSUAX

IERBX

MSTHX**

MSOLX

International Small Cap Portfolio

MSISX

MSCPX

—

MSNLX

Select Global Infrastructure Portfolio

MTIIX

MTIPX

—

MTILX

U.S. EQUITY PORTFOLIOS:

Advantage Portfolio

MPAIX

MAPPX

—

MAPLX

Growth Portfolio

MSEQX

MSEGX

—

MSHLX

Insight Portfolio

MFPIX

MFPHX

—

MFPLX

Opportunity Portfolio

MGEIX

MEGPX

—

MGELX

Small Company Growth Portfolio***

MSSGX

MSSMX

—

MSSLX

U.S. Real Estate Portfolio

MSUSX

MUSDX

—

MSULX

FIXED INCOME PORTFOLIOS:

Emerging Markets Domestic Debt Portfolio

MSIEX

IEDBX

—

MEDLX

Emerging Markets External Debt Portfolio

MEAIX

MEAPX

—

MEALX

ASSET ALLOCATION PORTFOLIOS:

Multi-Asset Portfolio

MMPIX

MMPPX

—

MMPLX

Total Emerging Markets Portfolio****

MTEIX

MTEPX

—

MTELX

* The Portfolio's Class I, Class A and Class L shares are currently closed to new investors with certain exceptions.

** The Portfolio's Class H shares are currently closed to all investors.

*** The Portfolio's Class A and Class L shares are currently closed to new investors. Effective May 30, 2014, the Portfolio's Class I shares will be closed to new investors with certain exceptions.

**** The Board of Directors approved a Plan of Liquidation with respect to the Portfolio. The liquidation is expected to occur on or about May 30, 2014. The Portfolio will suspend the offering of its shares to new investors at the close of business on May 28, 2014.

This SAI is not a prospectus, but should be read in conjunction with the Portfolios' prospectuses, each dated April 30, 2014, as may be supplemented from time to time. To obtain any of these prospectuses, please call the Fund toll-free at 1-800-548-7786.

The Portfolios' most recent Annual Reports to Shareholders are separate documents supplied with this SAI and include the Portfolios' audited financial statements, including notes thereto, and the reports of the Fund's independent registered public accounting firm, which are incorporated by reference into this SAI.

Certain Portfolios are "non-diversified" and, as such, such Portfolios' investments are not required to meet certain diversification requirements under federal securities law. Compared with "diversified" funds or portfolios, each such Portfolio may invest a greater percentage of its assets in the securities of an individual corporation or governmental entity. Thus, the Portfolio's assets may be focused in fewer securities than other funds. A decline in the value of those investments would cause the Portfolio's overall value to decline to a greater degree. The Emerging Markets Domestic Debt, Emerging Markets External Debt, Global Discovery, Global Franchise, Global Quality, International Real Estate, Multi-Asset, Select Global Infrastructure, Total Emerging Markets and U.S. Real Estate Portfolios are non-diversified portfolios.

Table of Contents	Page
Investment Policies and Strategies		2
Investment Limitations		42
Disclosure of Portfolio Holdings		45
Purchase and Redemption of Shares		48
Account Policies and Features		49
Management of the Fund		50
Investment Advisory and Other Services		63
Distribution and Shareholder Services Plans		75
Brokerage Practices		78
General Information		82
Taxes		83
Control Persons and Principal Holders of Securities		89
Performance Information		108
Financial Statements		114
Appendix A Morgan Stanley Investment Management Proxy Voting Policy and Procedures		A-1
Appendix B Description of Ratings		B-1

INVESTMENT POLICIES AND STRATEGIES

This SAI provides additional information about the investment policies and operations of the Fund and its Portfolios. Morgan Stanley Investment Management Inc. (the "Adviser") acts as investment adviser to each Portfolio. Under the supervision of the Adviser, Morgan Stanley Investment Management Limited ("MSIM Limited") acts as investment sub-adviser to the Emerging Markets, Global Franchise, Global Quality, Global Real Estate, International Equity, International Real Estate and Select Global Infrastructure Portfolios; Morgan Stanley Investment Management Company ("MSIM Company") acts as investment sub-adviser to the Asian Equity, Emerging Markets, Global Franchise, Global Quality, Global Real Estate, International Equity, International Real Estate and Select Global Infrastructure Portfolios (MSIM Limited and MSIM Company are each referred to herein individually as the "Sub-Adviser" and together as the "Sub-Advisers"). References to the Adviser, when used in connection with its activities as investment adviser, include any Sub-Adviser acting under its supervision.

The following tables summarize the permissible strategies and investments for each Portfolio. These tables should be used in conjunction with the investment summaries for each Portfolio contained in the Prospectus in order to provide a more complete description of such Portfolio's investment policies. More details about each investment and related risks are provided in the discussion following the tables. The Total Emerging Markets Portfolio is a "fund of funds" in that it seeks to achieve its investment objective by investing primarily in funds advised by the Adviser or its affiliates (the "Underlying Funds"). References to the investments and risks of the Total Emerging Markets Portfolio, unless otherwise indicated, should be understood as references to the investments and risks of the related Underlying Funds.

GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS

Active International Allocation

Asian Equity

Emerging Markets

Frontier Emerging Markets

Global Advantage

Global Discovery

Global Franchise

Global Insight

Global Opportunity

Global Quality

Global Real Estate

International Advantage

International Equity

International Opportunity

International Real Estate

International Small Cap

Select Global Infrastructure

Equity Securities:

Common Stocks

Depositary Receipts

Preferred Stocks

Rights

Warrants

IPOs

Convertible Securities

Limited Partnership and
Limited Liability
Company Interests

Investment Company Securities

Exchange-Traded Funds

Real Estate Investing

—REITs

—Foreign Real Estate
Companies

—Specialized Ownership
Vehicles

Fixed Income Securities:

Investment Grade Securities

High Yield Securities

U.S. Government Securities

Agencies

Corporates

Money Market Instruments

Cash Equivalents

Mortgage Related Securities

Repurchase Agreements

Municipals

Asset-Backed Securities

GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS

Active International Allocation

Asian Equity

Emerging Markets

Frontier Emerging Markets

Global Advantage

Global Discovery

Global Franchise

Global Insight

Global Opportunity

Global Quality

Global Real Estate

International Advantage

International Equity

International Opportunity

International Real Estate

International Small Cap

Select Global Infrastructure

Loan Participations and
Assignments

Temporary Investments

Zero Coupons, Pay-In-Kind
Securities or Deferred
Payment Securities

Floaters

Inverse Floaters

Eurodollar and Yankee Dollar
Obligations

Foreign Investment:

Foreign Equity Securities

Foreign Government Fixed
Income Securities

Foreign Corporate Fixed
Income Securities

Emerging Market Securities

Foreign Currency Transactions

Brady Bonds

Investment Funds

Other Securities and
Investment Strategies:

Loans of Portfolio Securities

Non-Publicly Traded Securities,
Private Placements and
Restricted Securities

When-Issued and Delayed
Delivery Securities

Borrowing for Investment
Purposes

Temporary Borrowing

Reverse Repurchase
Agreements

Short Sales

GLOBAL AND INTERNATIONAL EQUITY PORTFOLIOS

Active International Allocation

Asian Equity

Emerging Markets

Frontier Emerging Markets

Global Advantage

Global Discovery

Global Franchise

Global Insight

Global Opportunity

Global Quality

Global Real Estate

International Advantage

International Equity

International Opportunity

International Real Estate

International Small Cap

Select Global Infrastructure

Derivatives:

Forwards

Futures Contracts

Options

Swaps

Contracts for Difference

Structured Investments

Combined Transactions

* This Portfolio may invest in certain U.S. Government Securities, Agencies and Corporates as described under Money Market Instruments and Temporary Investments.

U.S. EQUITY PORTFOLIOS

Advantage

Growth

Insight

Opportunity

Small Company Growth

U.S. Real Estate

Equity Securities:

Common Stocks

Depositary Receipts

Preferred Stocks

Rights

Warrants

IPOs

Convertible Securities

Limited Partnership and Limited Liability Company Interests

Investment Company Securities

Exchange-Traded Funds

Real Estate Investing

—REITs

—Foreign Real Estate Companies

—Specialized Ownership Vehicles

Fixed Income Securities:

Investment Grade Securities

High Yield Securities

U.S. Government Securities

Agencies

Corporates

Money Market Instruments

Cash Equivalents

Mortgage Related Securities

Repurchase Agreements

Municipals

Asset-Backed Securities

Loan Participations and Assignments

Temporary Investments

U.S. EQUITY PORTFOLIOS

Advantage

Growth

Insight

Opportunity

Small Company Growth

U.S. Real Estate

Zero Coupons, Pay-In-Kind Securities or Deferred
Payment Securities

Floaters

Inverse Floaters

Eurodollar and Yankee Dollar Obligations

Foreign Investment:

Foreign Equity Securities

Foreign Government Fixed Income Securities

Foreign Corporate Fixed Income Securities

Emerging Market Securities

Foreign Currency Transactions

Brady Bonds

Investment Funds

Other Securities and Investment Strategies:

Loans of Portfolio Securities

Non-Publicly Traded Securities, Private Placements
and Restricted Securities

When-Issued and Delayed Delivery Securities

Borrowing for Investment Purposes

Temporary Borrowing

Reverse Repurchase Agreements

Short Sales

Derivatives:

Forwards

Futures Contracts

Options

Swaps

Contracts for Difference

Structured Investments

Combined Transactions

FIXED INCOME PORTFOLIOS

	Emerging Markets Domestic Debt		Emerging Markets External Debt
Equity Securities:
Common Stocks		a		a
Depositary Receipts		a		a
Preferred Stocks		a		a
Rights		a		a
Warrants		a		a
IPOs		a		a
Convertible Securities		a		a
Limited Partnership and Limited Liability Company Interests
Investment Company Securities		a		a
Exchange-Traded Funds		a		a
Real Estate Investing
—REITs
—Foreign Real Estate Companies
—Specialized Ownership Vehicles
Fixed Income Securities:
Investment Grade Securities		a		a
High Yield Securities		a		a
U.S. Government Securities		a		a
Agencies		a		a
Corporates		a		a
Money Market Instruments		a		a
Cash Equivalents		a		a
Mortgage Related Securities		a		a
Repurchase Agreements		a		a
Municipals		a		a
Asset-Backed Securities		a		a
Loan Participations and Assignments		a		a
Temporary Investments		a		a
Zero Coupons, Pay-In-Kind Securities or Deferred Payment Securities		a		a
Floaters		a		a

FIXED INCOME PORTFOLIOS

	Emerging Markets Domestic Debt		Emerging Markets External Debt
Inverse Floaters		a		a
Eurodollar and Yankee Dollar Obligations		a		a
Foreign Investment:
Foreign Equity Securities		a		a
Foreign Government Fixed Income Securities		a		a
Foreign Corporate Fixed Income Securities		a		a
Emerging Market Securities		a		a
Foreign Currency Transactions		a		a
Brady Bonds		a		a
Investment Funds		a		a
Other Securities and Investment Strategies:
Loans of Portfolio Securities		a		a
Non-Publicly Traded Securities, Private Placements and Restricted Securities		a		a
When-Issued and Delayed Delivery Securities		a		a
Borrowing for Investment Purposes		a		a
Temporary Borrowing		a		a
Reverse Repurchase Agreements		a		a
Short Sales		a		a
Derivatives:
Forwards		a		a
Futures Contracts		a		a
Options		a		a
Swaps		a		a
Contracts for Difference				a
Structured Investments		a		a
Combined Transactions		a		a

ASSET ALLOCATION PORTFOLIOS

	Multi-Asset		Total Emerging Markets
Equity Securities:
Common Stocks		a		a
Depositary Receipts		a		a
Preferred Stocks		a		a
Rights		a		a
Warrants		a		a
IPOs		a		a
Convertible Securities		a		a
Limited Partnership and Limited Liability Company Interests		a		a
Investment Company Securities		a		a
Exchange-Traded Funds		a		a
Real Estate Investing		a		a
—REITs		a		a
—Foreign Real Estate Companies		a		a
—Specialized Ownership Vehicles		a		a
Fixed Income Securities:
Investment Grade Securities		a		a
High Yield Securities		a		a
U.S. Government Securities		a		a
Agencies		a		a
Corporates		a		a
Money Market Instruments		a		a
Cash Equivalents		a		a
Mortgage Related Securities		a		a
Repurchase Agreements		a		a
Municipals		a		a
Asset-Backed Securities		a		a
Loan Participations and Assignments		a		a
Temporary Investments		a		a
Zero Coupons, Pay-In-Kind Securities or Deferred Payment Securities		a		a
Floaters		a

ASSET ALLOCATION PORTFOLIOS

	Multi-Asset		Total Emerging Markets
Inverse Floaters		a
Eurodollar and Yankee Dollar Obligations		a		a
Foreign Investment:
Foreign Equity Securities		a		a
Foreign Government Fixed Income Securities		a		a
Foreign Corporate Fixed Income Securities		a		a
Emerging Market Securities		a		a
Foreign Currency Transactions		a		a
Brady Bonds		a		a
Investment Funds		a		a
Other Securities and Investment Strategies:
Loans of Portfolio Securities		a		a
Non-Publicly Traded Securities, Private Placements and Restricted Securities		a		a
When-Issued and Delayed Delivery Securities		a		a
Borrowing for Investment Purposes
Temporary Borrowing		a		a
Reverse Repurchase Agreements		a
Short Sales		a		a
Derivatives:
Forwards		a		a
Futures Contracts		a		a
Options		a		a
Swaps		a		a
Contracts for Difference		a		a
Structured Investments		a		a
Combined Transactions		a		a

EQUITY SECURITIES

Equity securities generally represent an ownership interest in an issuer, or may be convertible into or represent a right to acquire an ownership interest in an issuer. While there are many types of equity securities, prices of all equity securities will fluctuate. Economic, political and other events may affect the prices of broad equity markets. For example, changes in inflation or consumer demand may affect the prices of equity securities generally in the United States. Similar events also may affect the prices of particular equity securities. For example, news about the success or failure of a new product may affect the price of a particular issuer's equity securities.

Common Stocks. Common stocks are equity securities representing an ownership interest in a corporation, entitling the stockholder to voting rights and receipt of dividends paid based on proportionate ownership.

Depositary Receipts. Depositary Receipts represent an ownership interest in securities of foreign companies (an "underlying issuer") that are deposited with a depositary. Depositary Receipts are not necessarily denominated in the same currency as the underlying securities. Depositary Receipts include American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and other types of depositary receipts (which, together with ADRs and GDRs, are hereinafter collectively referred to as "Depositary Receipts"). ADRs are dollar-denominated Depositary Receipts typically issued by a U.S. financial institution which evidence an ownership interest in a security or pool of securities issued by a foreign issuer. ADRs are listed and traded in the United States. ADRs also include American depositary shares. GDRs and other types of Depositary Receipts are typically issued by foreign banks or trust companies, although they also may be issued by U.S. financial institutions, and evidence ownership interests in a security or pool of securities issued by either a foreign or a U.S. corporation. Generally, depositary receipts in registered form are designed for use in the U.S. securities market and depositary receipts in bearer form are designed for use in securities markets outside the United States.

Depositary Receipts may be "sponsored" or "unsponsored." Sponsored Depositary Receipts are established jointly by a depositary and the underlying issuer, whereas unsponsored Depositary Receipts may be established by a depositary without participation by the underlying issuer. Holders of unsponsored Depositary Receipts generally bear all the costs associated with establishing unsponsored Depositary Receipts. In addition, the issuers of the securities underlying unsponsored Depository Receipts are not obligated to disclose material information in the United States and, therefore, there may be less information available regarding such issuers and there may not be a correlation between such information and the market value of the Depositary Receipts. For purposes of a Portfolio's investment policies, a Portfolio's investments in Depositary Receipts will be deemed to be an investment in the underlying securities, except that ADRs may be deemed to be issued by a U.S. issuer.

Preferred Stocks. Preferred stocks are securities that evidence ownership in a corporation which pay a fixed or variable stream of dividends. Preferred stocks have a preference over common stocks in the event of the liquidation of an issuer and usually do not carry voting rights. Preferred stocks have many of the characteristics of both equity securities and fixed income securities.

Rights. Rights represent the right, but not the obligation, for a fixed period of time to purchase additional shares of an issuer's common stock at the time of a new issuance, usually at a price below the initial offering price of the common stock and before the common stock is offered to the general public. Rights are usually freely transferable. The risk of investing in a right is that the right may expire prior to the market value of the common stock exceeding the price fixed by the right.

Warrants. Warrants give holders the right, but not the obligation, to buy common stock of an issuer at a given price, usually higher than the market price at the time of issuance, during a specified period. Warrants are usually freely transferable. The risk of investing in a warrant is that the warrant may expire prior to the market value of the common stock exceeding the price fixed by the warrant.

IPOs. The Portfolios may purchase equity securities issued as part of, or a short period after, a company's initial public offering ("IPOs"), and may at times dispose of those securities shortly after their acquisition. A Portfolio's purchase of securities issued in IPOs exposes it to the risks associated with companies that have little operating history as public companies, as well as to the risks inherent in those sectors of the market where these issuers operate. The market for IPO issuers has been volatile, and share prices of newly-public companies have fluctuated significantly over short periods of time.

Convertible Securities. A convertible security is a bond, debenture, note, preferred stock, right, warrant or other security that may be converted into or exchanged for a prescribed amount of common stock or other security of the same or a different issuer or into cash within a particular period of time at a specified price or formula. A convertible security generally entitles the holder to receive interest paid or accrued on debt securities or the

dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities generally have characteristics similar to both debt and equity securities. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities. Convertible securities ordinarily provide a stream of income with generally higher yields than those of common stock of the same or similar issuers. Convertible securities generally rank senior to common stock in a corporation's capital structure but are usually subordinated to comparable nonconvertible securities. Convertible securities generally do not participate directly in any dividend increases or decreases of the underlying securities although the market prices of convertible securities may be affected by any dividend changes or other changes in the underlying securities. Certain of the convertible securities in which a Portfolio may invest are rated below investment grade or are unrated. The prices of such securities are likely to be more sensitive to adverse economic changes than higher-rated securities, resulting in increased volatility of market prices of these securities during periods of economic uncertainty, or adverse individual corporate developments. In addition, during an economic downturn or substantial period of rising interest rates, lower rated issuers may experience financial stress.

Limited Partnership and Limited Liability Company Interests. A limited partnership interest entitles a Portfolio to participate in the investment return of the partnership's assets as defined by the agreement among the partners. As a limited partner, a Portfolio generally is not permitted to participate in the management of the partnership. However, unlike a general partner whose liability is not limited, a limited partner's liability generally is limited to the amount of its commitment to the partnership. A Portfolio may invest in limited liability company interests to the same extent it invests in limited partnership interests. Limited liability company interests have similar characteristics as limited partnership interests.

Investment Company Securities. Investment company securities are securities of other open-end, closed-end and unregistered investment companies, including foreign investment companies, hedge funds and exchange-traded funds. A Portfolio may invest in investment company securities as may be permitted by (i) the Investment Company Act of 1940, as amended from time to time (the "1940 Act"); (ii) the rules and regulations promulgated by the United States Securities and Exchange Commission (the "SEC") under the 1940 Act, as amended from time to time; or (iii) an exemption or other relief applicable to the Portfolio from provisions of the 1940 Act, as amended from time to time. The 1940 Act generally prohibits an investment company from acquiring more than 3% of the outstanding voting shares of an investment company and limits such investments to no more than 5% of a Portfolio's total assets in any one investment company, and no more than 10% in any combination of investment companies. A Portfolio may invest in investment company securities of investment companies managed by the Adviser or its affiliates to the extent permitted under the 1940 Act or as otherwise authorized by the SEC. To the extent a Portfolio invests a portion of its assets in investment company securities, those assets will be subject to the risks of the purchased investment company's portfolio securities, and a shareholder in any such Portfolio will bear not only his proportionate share of the expenses of the Portfolio, but also, indirectly the expenses of the purchased investment company.

To the extent permitted by applicable law, each Portfolio may invest all or some of its short term cash investments in any money market fund advised or managed by the Adviser or its affiliates. In connection with any such investments, each Portfolio, to the extent permitted by the 1940 Act, will pay its share of all expenses (other than advisory and administrative fees) of a money market fund in which it invests which may result in the Portfolio bearing some additional expenses.

Exchange-Traded Funds ("ETFs"). The Portfolios may invest in ETFs. Investments in ETFs are subject to a variety of risks, including risks of a direct investment in the underlying securities that the ETF holds. For example, the general level of stock prices may decline, thereby adversely affecting the value of the underlying investments of the ETF and, consequently, the value of the ETF. In addition, the market value of the ETF shares may differ from their net asset value ("NAV") because the supply and demand in the market for ETF shares at any point is not always identical to the supply and demand in the market for the underlying securities. Also, ETFs that track particular indices typically will be unable to match the performance of the index exactly due to, among other things, the ETF's operating expenses and transaction costs. ETFs typically incur fees that are separate from those fees incurred directly by the Portfolios. Therefore, as a shareholder in an ETF (as with other investment companies), a Portfolio would bear its ratable share of that entity's expenses. At the same time, the Portfolio would continue to pay its own investment management fees and other expenses. As a result, a Portfolio and its shareholders, in effect, will be absorbing duplicate levels of fees with respect to investments in ETFs.

Real Estate Investing. Investments in securities of issuers engaged in the real estate industry entail special risks and considerations. In particular, securities of such issuers may be subject to risks associated with the direct

ownership of real estate. These risks include the cyclical nature of real estate values, risks related to general and local economic conditions, overbuilding and increased competition, increases in property taxes and operating expenses, demographic trends and variations in rental income, changes in zoning laws, casualty or condemnation losses, environmental risks, regulatory limitations on rents, changes in neighborhood values, changes in the appeal of properties to tenants, increases in interest rates and other real estate capital market influences. Generally, increases in interest rates will increase the costs of obtaining financing, which could directly and indirectly decrease the value of a Portfolio's investments.

Real Estate Investment Trusts ("REITs") and Foreign Real Estate Companies. Certain Portfolios may invest in REITs and/or foreign real estate companies, which are similar to entities organized and operated as REITs in the United States. REITs and foreign real estate companies pool investors' funds for investment primarily in real estate properties or real estate-related loans. REITs and foreign real estate companies generally derive their income from rents on the underlying properties or interest on the underlying loans, and their value is impacted by changes in the value of the underlying property or changes in interest rates affecting the underlying loans owned by the REITs and/or foreign real estate companies. REITs and foreign real estate companies are more susceptible to risks associated with the ownership of real estate and the real estate industry in general. These risks can include fluctuations in the value of underlying properties; defaults by borrowers or tenants; market saturation; changes in general and local economic conditions; decreases in market rates for rents; increases in competition, property taxes, capital expenditures or operating expenses; and other economic, political or regulatory occurrences affecting the real estate industry. In addition, REITs and foreign real estate companies depend upon specialized management skills, may not be diversified (which may increase the volatility of a REIT's and/or foreign real estate company's value), may have less trading volume and may be subject to more abrupt or erratic price movements than the overall securities market. Foreign real estate companies may be subject to laws, rules and regulations governing those entities and their failure to comply with those laws, rules and regulations could negatively impact the performance of those entities. Operating REITs and foreign real estate companies requires specialized management skills and a Portfolio indirectly bears REIT and foreign real estate company management expenses along with the direct expenses of the Portfolio. REITs are generally not taxed on income distributed to shareholders provided they comply with several requirements of the Internal Revenue Code of 1986, as amended (the "Code"). REITs are subject to the risk of failing to qualify for tax-free pass-through income under the Code.

Specialized Ownership Vehicles. Specialized ownership vehicles pool investors' funds for investment primarily in income-producing real estate or real estate-related loans or interests. Such specialized ownership vehicles in which the Portfolios may invest include property unit trusts, foreign real estate companies, REITs and other similar specialized investment vehicles. Investments in such specialized ownership vehicles may have favorable or unfavorable legal, regulatory or tax implications for a Portfolio and, to the extent such vehicles are structured similarly to investment funds, a shareholder in the Portfolio will bear not only his proportionate share of the expenses of the Portfolio, but also, indirectly the expenses of the specialized ownership vehicle.

FIXED INCOME SECURITIES

Fixed income securities generally represent an issuer's obligation to repay to the investor (or lender) the amount borrowed plus interest over a specified time period. A typical fixed income security specifies a fixed date when the amount borrowed (principal) is due in full, known as the maturity date, and specifies dates when periodic interest (coupon) payments will be made over the life of the security.

Fixed income securities come in many varieties and may differ in the way that interest is calculated, the amount and frequency of payments, the type of collateral, if any, and the presence of special features (e.g., conversion rights). Prices of fixed income securities fluctuate and, in particular, are subject to several key risks including, but not limited to, interest rate risk, credit risk, prepayment risk and spread risk.

Interest rate risk arises due to general changes in the level of market rates after the purchase of a fixed income security. Generally, the values of fixed income securities vary inversely with changes in interest rates. During periods of falling interest rates, the values of most outstanding fixed income securities generally rise and during periods of rising interest rates, the values of most fixed income securities generally decline. The historically low interest rate environment increases the risk associated with rising interest rates. Thus, the Fund currently faces a heightened level of risk, especially since the Federal Reserve Board has begun tapering its quantitative easing program and may begin to raise rates. While fixed income securities with longer final maturities often have higher yields than those with shorter maturities, they usually possess greater price sensitivity to changes in interest rates and other factors. Traditionally, the remaining term to maturity has been used as a barometer of a fixed income security's sensitivity to interest rate changes. This measure, however, considers only the time until the final principal payment and takes

no account of the pattern or amount of principal or interest payments prior to maturity. Duration combines consideration of yield, coupon, interest and principal payments, final maturity and call (prepayment) features. Duration measures the likely percentage change in a fixed income security's price for a small parallel shift in the general level of interest rates; it is also an estimate of the weighted average life of the remaining cash flows of a fixed income security. In almost all cases, the duration of a fixed income security is shorter than its term to maturity.

Credit risk, also known as default risk, represents the possibility that an issuer may be unable to meet scheduled interest and principal payment obligations. It is most often associated with corporate bonds, although it can be present in other fixed income securities as well (note that the market generally assumes that obligations of the U.S. Treasury are free from credit risk). Credit ratings and quantitative models attempt to measure the degree of credit risk in fixed income securities, and provide insight as to whether prevailing yield spreads afford sufficient compensation for such risk. Other things being equal, fixed income securities with high degrees of credit risk should trade in the market at lower prices (and higher yields) than fixed income securities with low degrees of credit risk.

Prepayment risk, also known as call risk, arises due to the issuer's ability to prepay all or most of the fixed income security prior to the stated final maturity date. Prepayments generally rise in response to a decline in interest rates as debtors take advantage of the opportunity to refinance their obligations. This risk is often associated with mortgage securities where the underlying mortgage loans can be refinanced, although it can also be present in corporate or other types of bonds with call provisions. When a prepayment occurs, a Portfolio may be forced to reinvest in lower yielding fixed income securities. Quantitative models are designed to help assess the degree of prepayment risk, and provide insight as to whether prevailing yield spreads afford sufficient compensation for such risk.

Spread risk is the potential for the value of a Portfolio's assets to fall due to the widening of spreads. Fixed income securities generally compensate for greater credit risk by paying interest at a higher rate. The difference (or "spread") between the yield of a security and the yield of a benchmark, such as a U.S. Treasury security with a comparable maturity, measures the additional interest paid for credit risk. As the spread on a security widens (or increases), the price (or value) of the security falls. Spread widening may occur, among other reasons, as a result of market concerns over the stability of the market, excess supply, general credit concerns in other markets, security- or market-specific credit concerns or general reductions in risk tolerance.

Economic, political and other events also may affect the prices of broad fixed income markets, although the risks associated with such events are transmitted to the market via changes in the prevailing levels of interest rates, credit risk, prepayment risk or spread risk.

Investment Grade Securities. Investment grade securities are fixed income securities rated by one or more of the rating agencies in one of the four highest rating categories at the time of purchase (e.g., AAA, AA, A or BBB by Standard & Poor's Rating Group, a division of The McGraw-Hill Companies, Inc. ("S&P"), or Fitch Ratings ("Fitch"), or Aaa, Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's")) or determined to be of equivalent quality by the Adviser. Securities rated BBB or Baa represent the lowest of four levels of investment grade securities and are regarded as borderline between definitely sound obligations and those in which the speculative element begins to predominate. Ratings assigned to fixed income securities represent only the opinion of the rating agency assigning the rating and are not dispositive of the credit risk associated with the purchase of a particular fixed income security. Moreover, market risk also will affect the prices of even the highest rated fixed income securities so that their prices may rise or fall even if the issuer's capacity to repay its obligations remains unchanged.

High Yield Securities. High yield securities are generally considered to include fixed income securities rated below the four highest rating categories at the time of purchase (e.g., Ba through C by Moody's, or BB through D by S&P or Fitch) and unrated fixed income securities considered by the Adviser to be of equivalent quality. High yield securities are not considered investment grade and are commonly referred to as "junk bonds" or high yield, high risk securities. Investment grade securities that a Portfolio holds may be downgraded to below investment grade by the rating agencies. If a Portfolio holds a security that is downgraded, the Portfolio may choose to retain the security.

While high yield securities offer higher yields, they also normally carry a high degree of credit risk and are considered speculative by the major credit rating agencies. High yield securities may be issued as a consequence of corporate restructuring or similar events. High yield securities are often issued by smaller, less creditworthy issuers, or by highly leveraged (indebted) issuers, that are generally less able than more established or less leveraged issuers to make scheduled payments of interest and principal. In comparison to investment grade securities, the price movement of these securities is influenced less by changes in interest rates and more by the

financial and business position of the issuer. The values of high yield securities are more volatile and may react with greater sensitivity to market changes.

U.S. Government Securities. U.S. government securities refers to a variety of fixed income securities issued or guaranteed by the U.S. Government and various instrumentalities and agencies. The U.S. government securities that certain Portfolios may purchase include U.S. Treasury bills, notes and bonds, all of which are direct obligations of the U.S. Government. In addition, certain Portfolios may purchase securities issued by agencies and instrumentalities of the U.S. Government which are backed by the full faith and credit of the United States. Among the agencies and instrumentalities issuing these obligations are the Government National Mortgage Association ("Ginnie Mae") and the Federal Housing Administration ("FHA"). Certain of the Portfolios may also purchase securities issued by agencies and instrumentalities which are not backed by the full faith and credit of the United States, but whose issuing agency or instrumentality has the right to borrow, to meet its obligations, from the U.S. Treasury. Among these agencies and instrumentalities are the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac") and the Federal Home Loan Banks. Further, certain Portfolios may purchase securities issued by agencies and instrumentalities which are backed solely by the credit of the issuing agency or instrumentality. Among these agencies and instrumentalities is the Federal Farm Credit System.

Agencies. Agencies refer to fixed income securities issued or guaranteed by federal agencies and U.S. government sponsored instrumentalities. They may or may not be backed by the full faith and credit of the United States. If they are not backed by the full faith and credit of the United States, the investor must look principally to the agency or instrumentality issuing or guaranteeing the obligation for ultimate repayment, and may not be able to assert a claim against the United States itself in the event the agency or instrumentality does not meet its commitment. Agencies which are backed by the full faith and credit of the United States include the Export-Import Bank, Farmers Home Administration, Federal Financing Bank and others. Certain debt issued by Resolution Funding Corporation has both its principal and interest backed by the full faith and credit of the U.S. Treasury in that its principal is backed by U.S. Treasury zero coupon issues, while the U.S. Treasury is explicitly required to advance funds sufficient to pay interest on it, if needed. Certain agencies and instrumentalities, such as Ginnie Mae, are, in effect, backed by the full faith and credit of the United States through provisions in their charters that they may make "indefinite and unlimited" drawings on the Treasury, if needed to service its debt. Debt from certain other agencies and instrumentalities, including the Federal Home Loan Banks, Fannie Mae and Freddie Mac are not guaranteed by the United States, but those institutions are protected by the discretionary authority of the U.S. Treasury to purchase certain amounts of their securities to assist them in meeting their debt obligations. Finally, other agencies and instrumentalities, such as the Farm Credit System, are federally chartered institutions under U.S. Government supervision, but their debt securities are backed only by the credit worthiness of those institutions, not the U.S. Government. Some of the U.S. government agencies that issue or guarantee securities include the Export-Import Bank of the United States, Farmers Home Administration, FHA, Maritime Administration, Small Business Administration and The Tennessee Valley Authority ("TVA").

In September 2008, the U.S. Treasury Department announced that the U.S. Government would be taking over Fannie Mae and Freddie Mac and placing the companies into a conservatorship. In addition, the U.S. Treasury announced additional steps that it intended to take with respect to the debt and mortgage-backed securities ("MBS") issued by Fannie Mae and Freddie Mac in order to support the conservatorship. Fannie Mae and Freddie Mac are continuing to operate as going concerns while in conservatorship and each remains liable for all of its respective obligations, including its guaranty obligations, associated with its mortgage-backed securities. No assurance can be given that these initiatives will be successful. The maximum potential liability of the issuers of some U.S. government securities held by a Portfolio may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.

An instrumentality of the U.S. Government is a government agency organized under federal charter with government supervision. Instrumentalities issuing or guaranteeing securities include, among others, Federal Home Loan Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate Credit Banks and Fannie Mae.

Corporates. Corporates are fixed income securities issued by private businesses. Holders, as creditors, have a prior legal claim over holders of equity securities of the issuer as to both income and assets for the principal and interest due the holder.

Money Market Instruments. Money market instruments are high quality short-term fixed income securities. Money market instruments may include obligations of governments, government agencies, banks, corporations and

special purpose entities and repurchase agreements relating to these obligations. Certain money market instruments may be denominated in a foreign currency.

Cash Equivalents. Cash equivalents are short-term fixed income securities comprising:

(1) Time deposits, certificates of deposit (including marketable variable rate certificates of deposit) and bankers' acceptances issued by a commercial bank or savings and loan association. Time deposits are non-negotiable deposits maintained in a banking institution for a specified period of time at a stated interest rate. Certificates of deposit are negotiable short-term obligations issued by commercial banks or savings and loan associations against funds deposited in the issuing institution. Variable rate certificates of deposit are certificates of deposit on which the interest rate is periodically adjusted prior to their stated maturity based upon a specified market rate. A bankers' acceptance is a time draft drawn on a commercial bank by a borrower, usually in connection with an international commercial transaction (to finance the import, export, transfer or storage of goods).

Each Portfolio may invest in obligations of U.S. banks, foreign branches of U.S. banks (Eurodollars) and U.S. branches of foreign banks (Yankee dollars). Eurodollar and Yankee dollar investments will involve some of the same risks of investing in international securities that are discussed in various foreign investing sections of this SAI.

A Portfolio will not invest in any security issued by a commercial bank unless (i) the bank has total assets of at least $1 billion, or the equivalent in other currencies or, in the case of domestic banks which do not have total assets of at least $1 billion, the aggregate investment made in any one such bank is limited to $250,000 principal amount per certificate and the principal amount of such investment is insured in full by the Federal Deposit Insurance Corporation ("FDIC"), (ii) in the case of U.S. banks, it is a member of the FDIC and (iii) in the case of foreign branches of U.S. banks, the security is deemed by the Adviser to be of an investment quality comparable with other debt securities which the Portfolio may purchase;

(2) Each Portfolio may invest in commercial paper (see below) rated at time of purchase by one or more nationally recognized statistical rating organizations ("NRSROs") in one of their two highest categories (e.g., A-l or A-2 by S&P or Prime 1 or Prime 2 by Moody's) or, if not rated, issued by a corporation having an outstanding unsecured debt issue rated high-grade by an NRSRO (e.g., A or better by Moody's, S&P or Fitch);

(3) Short-term corporate obligations rated high-grade at the time of purchase by an NRSRO (e.g., A or better by Moody's, S&P or Fitch);

(4) U.S. government obligations, including bills, notes, bonds and other debt securities issued by the U.S. Treasury. These are direct obligations of the U.S. Government and differ mainly in interest rates, maturities and dates of issue;

(5) Government agency securities issued or guaranteed by U.S. government sponsored instrumentalities and Federal agencies. These include securities issued by the Federal Home Loan Banks, Federal Land Bank, Farmers Home Administration, Farm Credit Banks, Federal Intermediate Credit Bank, Fannie Mae, Federal Financing Bank, TVA and others; and

(6) Repurchase agreements collateralized by the securities listed above.

Commercial Paper. Commercial paper refers to short-term fixed income securities with maturities ranging from 1 to 270 days. They are primarily issued by corporations needing to finance large amounts of receivables, but may be issued by banks and other borrowers. Commercial paper is issued either directly or through broker-dealers, and may be discounted or interest bearing. Commercial paper is unsecured, but is almost always backed by bank lines of credit. Virtually all commercial paper is rated by Moody's or S&P.

Commercial paper rated A-1 by S&P has the following characteristics: (1) liquidity ratios are adequate to meet cash requirements; (2) long-term senior debt is rated "A" or better; (3) the issuer has access to at least two additional channels of borrowing; (4) basic earnings and cash flow have an upward trend with allowance made for unusual circumstances; (5) typically, the issuer's industry is well established and the issuer has a strong position within the industry; and (6) the reliability and quality of management are unquestioned. Relative strength or weakness of the above factors determine whether the issuer's commercial paper is A-1, A-2 or A-3.

The rating Prime-1 is the highest commercial paper rating assigned by Moody's. Among the factors considered by Moody's in assigning ratings are the following: (1) evaluation of the management of the issuer; (2) economic evaluation of the issuer's industry or industries and the appraisal of speculative-type risks which may be inherent in certain areas; (3) evaluation of the issuer's products in relation to competition and customer acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over a period of ten years;

(7) financial strength of a parent company and the relationships that exist with the issuer; and (8) recognition by the management of obligations which may be present or may arise as a result of public interest questions and preparations to meet such obligations.

Mortgage Related Securities. Mortgage related securities are securities that, directly or indirectly, represent a participation in, or are secured by and payable from, mortgage loans on real property. Mortgage related securities include collateralized mortgage obligations and mortgage-backed securities issued or guaranteed by agencies and instrumentalities of the U.S. Government or by private sector entities.

Mortgage-Backed Securities. With MBS, many mortgagees' obligations to make monthly payments to their lending institution are pooled together and passed through to investors. The pools are assembled by various governmental, government-related and private organizations. A Portfolio may invest in securities issued or guaranteed by Ginnie Mae, Freddie Mac or Fannie Mae, private issuers and other government agencies. MBS issued by non-agency issuers, whether or not such securities are subject to guarantees, may entail greater risk, since private issuers may not be able to meet their obligations under the policies. If there is no guarantee provided by the issuer, a Portfolio will purchase only MBS that, at the time of purchase, are rated investment grade by one or more NRSROs or, if unrated, are deemed by the Adviser to be of comparable quality.

MBS are issued or guaranteed by private sector originators of or investors in mortgage loans and structured similarly to governmental pass-through securities. Because private pass-throughs typically lack a guarantee by an entity having the credit status of a governmental agency or instrumentality, however, they are generally structured with one or more of the types of credit enhancement described below. Fannie Mae and Freddie Mac obligations are not backed by the full faith and credit of the U.S. Government as Ginnie Mae certificates are. Freddie Mac securities are supported by Freddie Mac's right to borrow from the U.S. Treasury. Each of Ginnie Mae, Fannie Mae and Freddie Mac guarantees timely distributions of interest to certificate holders. Each of Ginnie Mae and Fannie Mae also guarantees timely distributions of scheduled principal. Although Freddie Mac has in the past guaranteed only the ultimate collection of principal of the underlying mortgage loan, Freddie Mac now issues MBS (Freddie Mac Gold PCS) that also guarantee timely payment of monthly principal reductions. Resolution Funding Corporation ("REFCORP") obligations are backed, as to principal payments, by zero coupon U.S. Treasury bonds and, as to interest payments, ultimately by the U.S. Treasury.

There are two methods of trading MBS. A specified pool transaction is a trade in which the pool number of the security to be delivered on the settlement date is known at the time the trade is made. This is in contrast with the typical MBS transaction, called a TBA ("To Be Announced") transaction, in which the type of MBS to be delivered is specified at the time of trade but the actual pool numbers of the securities that will be delivered are not known at the time of the trade. The pool numbers of the pools to be delivered at settlement are announced shortly before settlement takes place. The terms of the TBA trade may be made more specific if desired. Generally, agency pass-through MBS are traded on a TBA basis. Investments in TBAs may give rise to a form of leverage and may cause a Portfolio's portfolio turnover rate to appear higher. Leverage may cause a Portfolio to be more volatile than if the Portfolio had not been leveraged.

Like fixed income securities in general, MBS will generally decline in price when interest rates rise. Rising interest rates also tend to discourage refinancings of home mortgages, with the result that the average life of MBS held by a Portfolio may be lengthened. As average life extends, price volatility generally increases. This extension of average life causes the market price of the MBS to decrease further when interest rates rise than if their average lives were fixed. However, when interest rates fall, mortgages may not enjoy as large a gain in market value due to prepayment risk because additional mortgage prepayments must be reinvested at lower interest rates. Faster prepayment will shorten the average life and slower prepayments will lengthen it. However, it is possible to determine what the range of the average life movement could be and to calculate the effect that it will have on the price of the MBS. In selecting MBS, the Adviser looks for those that offer a higher yield to compensate for any variation in average maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Portfolio may fail to fully recoup its initial investment in these securities, even if the security is in one of the highest rating categories. A Portfolio may invest, without limit, in MBS issued by private issuers when the Adviser deems that the quality of the investment, the quality of the issuer, and market conditions warrant such investments. A Portfolio will purchase securities issued by private issuers that are rated investment grade at the time of purchase by Moody's, Fitch or S&P or are deemed by the Adviser to be of comparable investment quality.

Fannie Mae Certificates. Fannie Mae is a federally chartered and privately owned corporation organized and existing under the Federal National Mortgage Association Charter Act of 1938. Each Fannie Mae certificate represents a pro rata interest in one or more pools of mortgage loans insured by the FHA under the Housing Act,

or Title V of the Housing Act of 1949 ("FHA Loans"), or guaranteed by the Department of Veteran Affairs under the Servicemen's Readjustment Act of 1944, as amended ("VA Loans") or conventional mortgage loans (i.e., mortgage loans that are not insured or guaranteed by any governmental agency) of the following types: (i) fixed rate level payment mortgage loans; (ii) fixed rate growing equity mortgage loans; (iii) fixed rate graduated payment mortgage loans; (iv) variable rate California mortgage loans; (v) other adjustable rate mortgage loans; and (vi) fixed rate and adjustable mortgage loans secured by multi-family projects.

Freddie Mac Certificates. Freddie Mac is a corporate instrumentality of the United States created pursuant to the Emergency Home Finance Act of 1970, as amended (the "FHLMC Act"). Freddie Mac certificates represent a pro rata interest in a group of mortgage loans (a "Freddie Mac Certificate group") purchased by Freddie Mac. The mortgage loans underlying the Freddie Mac Certificates consist of fixed rate or adjustable rate mortgage loans with original terms to maturity of between ten and thirty years, substantially all of which are secured by first liens on one-to-four-family residential properties or multi-family projects. Each mortgage loan must meet the applicable standards set forth in the FHLMC Act. A Freddie Mac Certificate group may include whole loans, participation interests in whole loans and undivided interests in whole loans and participations comprising another Freddie Mac Certificate group.

In September 2008, the U.S. Treasury Department announced that the government would be taking over Fannie Mae and Freddie Mac and placing the companies into a conservatorship. In addition, the U.S. Treasury announced three additional steps that it intended to take with respect to the debt and MBS issued by Fannie Mae and Freddie Mac in order to support the conservatorship. Fannie Mae and Freddie Mac are continuing to operate as going concerns while in conservatorship and each remains liable for all of its respective obligations, including its guaranty obligations, associated with its MBS. No assurance can be given that these initiatives will be successful. The maximum potential liability of the issuers of some U.S. government securities held by a Portfolio may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.

Ginnie Mae Certificates. Ginnie Mae is a wholly-owned corporate instrumentality of the United States within the Department of Housing and Urban Development. The National Housing Act of 1934, as amended (the "Housing Act"), authorizes Ginnie Mae to guarantee the timely payment of the principal and interest on certificates that are based on and backed by a pool of FHA Loans, VA Loans or by pools of other eligible mortgage loans. The Housing Act provides that the full faith and credit of the United States is pledged to the payment of all amounts that may be required to be paid under any guaranty. In order to meet its obligations under such guaranty, Ginnie Mae is authorized to borrow from the U.S. Treasury with no limitations as to amount.

Each Ginnie Mae certificate represents a pro rata interest in one or more of the following types of mortgage loans: (i) fixed rate level payment mortgage loans; (ii) fixed rate graduated payment mortgage loans; (iii) fixed rate growing equity mortgage loans; (iv) fixed rate mortgage loans secured by manufactured (mobile) homes; (v) mortgage loans on multi-family residential properties under construction; (vi) mortgage loans on completed multi-family projects; (vii) fixed rate mortgage loans as to which escrowed funds are used to reduce the borrower's monthly payments during the early years of the mortgage loans ("buydown" mortgage loans); (viii) mortgage loans that provide for adjustments in payments based on periodic changes in interest rates or in other payment terms of the mortgage loans; and (ix) mortgage-backed serial notes. All of these mortgage loans will be FHA Loans or VA loans and, except as otherwise specified above, will be fully-amortizing loans secured by first liens on one to four-family housing units.

Collateralized Mortgage Obligations. Certain Portfolios may invest in collateralized mortgage obligations ("CMOs"), which are mortgage-backed securities that are collateralized by mortgage loans or mortgage pass-through securities, and multi-class pass-through securities, which are equity interests in a trust composed of mortgage loans or other mortgage-backed securities. Unless the context indicates otherwise, the discussion of CMOs below also applies to multi-class pass through securities.

CMOs may be issued by governmental or government-related entities or by private entities, such as banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market traders. CMOs are issued in multiple classes, often referred to as "tranches," with each tranche having a specific fixed or floating coupon rate and stated maturity or final distribution date. Under the traditional CMO structure, the cash flows generated by the mortgages or mortgage pass-through securities in the collateral pool are used to first pay interest and then pay principal to the holders of the CMOs. Subject to the various provisions of individual CMO issues, the cash flow generated by the underlying collateral (to the extent it exceeds the amount required to pay the stated interest) is used to retire the bonds.

The principal and interest on the underlying collateral may be allocated among the several tranches of a CMO in innumerable ways including "interest only" and "inverse interest only" tranches. In a common CMO structure, the tranches are retired sequentially in the order of their respective stated maturities or final distribution dates (as opposed to the pro-rata return of principal found in traditional pass-through obligations). The fastest-pay tranches would initially receive all principal payments. When those tranches are retired, the next tranches in the sequence receive all of the principal payments until they are retired. The sequential retirement of bond groups continues until the last tranche is retired. Accordingly, the CMO structure allows the issuer to use cash flows of long maturity, monthly-pay collateral to formulate securities with short, intermediate, and long final maturities and expected average lives and risk characteristics.

The primary risk of CMOs is the uncertainty of the timing of cash flows that results from the rate of prepayments on the underlying mortgages serving as collateral and from the structure of the particular CMO transaction (that is, the priority of the individual tranches). An increase or decrease in prepayment rates (resulting from a decrease or increase in mortgage interest rates) may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates and will affect the yield and price of CMOs. In addition, if the collateral securing CMOs or any third-party guarantees are insufficient to make payments, a Portfolio could sustain a loss. The prices of certain CMOs, depending on their structure and the rate of prepayments, can be volatile. Some CMOs may also not be as liquid as other types of mortgage securities. As a result, it may be difficult or impossible to sell the securities at an advantageous time or price.

Privately issued CMOs are arrangements in which the underlying mortgages are held by the issuer, which then issues debt collateralized by the underlying mortgage assets. Such securities may be backed by mortgage insurance, letters of credit, or other credit enhancing features. Although payment of the principal of, and interest on, the underlying collateral securing privately issued CMOs may be guaranteed by the U.S. Government or its agencies and instrumentalities, these CMOs represent obligations solely of the private issuer and are not insured or guaranteed by the U.S. Government, its agencies and instrumentalities or any other person or entity. Privately issued CMOs are subject to prepayment risk due to the possibility that prepayments on the underlying assets will alter the cash flow. Yields on privately issued CMOs have been historically higher than the yields on CMOs backed by mortgages guaranteed by U.S. government agencies and instrumentalities. The risk of loss due to default on privately issued CMOs, however, is historically higher since the U.S. Government has not guaranteed them.

New types of CMO tranches have evolved. These include floating rate CMOs, planned amortization classes, accrual bonds and CMO residuals. These newer structures affect the amount and timing of principal and interest received by each tranche from the underlying collateral. For example, an inverse interest-only class CMO entitles holders to receive no payments of principal and to receive interest at a rate that will vary inversely with a specified index or a multiple thereof. Under certain of these newer structures, given classes of CMOs have priority over others with respect to the receipt of prepayments on the mortgages. Therefore, depending on the type of CMOs in which a Portfolio invests, the investment may be subject to a greater or lesser risk of prepayment than other types of mortgage-backed securities.

CMOs may include real estate investment conduits ("REMICs"). REMICs, which were authorized under the Tax Reform Act of 1986, are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. A REMIC is a CMO that qualifies for special tax treatment under the Code and invests in certain mortgages principally secured by interests in real property.

A Portfolio may invest in, among others, parallel pay CMOs and Planned Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide payments of principal on each payment date to more than one tranche. These simultaneous payments are taken into account in calculating the stated maturity date or final distribution date of each tranche which, as with other CMO structures, must be retired by its stated maturity date or final distribution date but may be retired earlier. PAC Bonds are a form of parallel pay CMO, with the required principal payment on such securities having the highest priority after interest has been paid to all classes. PAC Bonds generally require payments of a specified amount of principal on each payment date.

Stripped Mortgage-Backed Securities. Certain Portfolios may invest in stripped mortgage-backed securities ("SMBS"). A SMBS is a derivative multi-class mortgage security. SMBS usually are structured with two classes that receive different proportions of the interest and principal distribution on a pool of mortgage assets. In the most extreme case, one class will receive all of the interest (the interest-only or "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on such security's yield to maturity. If the

underlying mortgage assets experience greater than anticipated prepayments of principal, a Portfolio may fail to fully recoup its initial investment in these securities. Conversely, if the underlying mortgage assets experience less than anticipated prepayments of principal, the yield of POs could be materially adversely affected. The market values of IOs and POs are subject to greater risk of fluctuation in response to changes in market rates of interest than many other types of government securities. To the extent a Portfolio invests in IOs and POs, this increases the risk of fluctuations in the NAV of a Portfolio.

Credit Enhancement. Mortgage related securities are often backed by a pool of assets representing the obligations of a number of parties. To lessen the effect of failure by obligors on underlying assets to make payments, these securities may have various types of credit support. Credit support falls into two primary categories: (i) liquidity protection, and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection generally refers to the provision of advances, typically by the entity administering the pool of assets, to ensure that the pass-through of payments due on the underlying pool occurs in a timely fashion. Protection against losses resulting from ultimate default enhances the likelihood of ultimate payment of the obligations on at least a portion of the assets in the pool. Such protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third-parties (referred to herein as "third-party credit support"), through various means of structuring the transaction or through a combination of such approaches.

The ratings of mortgage related securities for which third-party credit enhancement provides liquidity protection or protection against losses from default are generally dependent upon the continued creditworthiness of the provider of the credit enhancement. The ratings of such securities could decline in the event of deterioration in the creditworthiness of the credit enhancement provider even in cases where the delinquency and loss experience on the underlying pool of assets is better than expected.

Examples of credit support arising out of the structure of the transaction include "senior-subordinated securities" (multiple class securities with one or more classes subordinate to other classes as to the payment of principal and interest thereon, with defaults on the underlying assets being borne first by the holders of the most subordinated class), creation of "reserve funds" (where cash or investments, sometimes funded from a portion of the payments on the underlying assets, are held in reserve against future losses) and "over-collateralization" (where the scheduled payments on, or the principal amount of, the underlying assets exceed those required to make payment of the securities and pay any servicing or other fees). The degree of credit support provided for each security is generally based on historical information with respect to the level of credit risk associated with the underlying assets. Delinquency or loss in excess of that which is anticipated could adversely affect the return on an investment in such a security.

Repurchase Agreements. Repurchase agreements are transactions in which a Portfolio purchases a security or basket of securities and simultaneously commits to resell that security or basket to the seller (a bank, broker or dealer) at a mutually agreed-upon date and price. The resale price reflects the purchase price plus an agreed-upon market rate of interest which is unrelated to the coupon rate or date of maturity of the purchased security. The term of these agreements is usually from overnight to one week, and never exceeds one year. Repurchase agreements with a term of over seven days are considered illiquid.

In these transactions, the Portfolio receives securities that have a market value at least equal to the purchase price (including accrued interest) of the repurchase agreement, and this value is maintained during the term of the agreement. These securities are held by the Fund's custodian or an approved third-party for the benefit of the Portfolio until repurchased. Repurchase agreements permit a Portfolio to remain fully invested while retaining overnight flexibility to pursue investments of a longer-term nature. If the seller defaults and the value of the repurchased securities declines, the Portfolio might incur a loss. If bankruptcy proceedings are commenced with respect to the seller, the Portfolio's realization upon the collateral may be delayed.

While repurchase agreements involve certain risks not associated with direct investments in debt securities, the Portfolios follow procedures approved by the Directors that are designed to minimize such risks. These procedures include effecting repurchase transactions only with large, well-capitalized and well-established financial institutions whose financial condition will be continually monitored by the Adviser. In addition, as described above, the value of the collateral underlying the repurchase agreement will be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, the Portfolios will seek to liquidate such collateral. However, the exercising of the Portfolio's right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, the Portfolio could suffer a loss.

Pursuant to an order issued by the SEC, the Portfolios may pool their daily uninvested cash balances in order to invest in repurchase agreements on a joint basis with other investment companies advised by the Adviser. By entering into repurchase agreements on a joint basis, the Portfolios expect to incur lower transaction costs and potentially obtain higher rates of interest on such repurchase agreements. Each Portfolio's participation in the income from jointly purchased repurchase agreements will be based on that Portfolio's percentage share in the total repurchase agreement.

Municipals. Municipal securities are fixed income securities issued by local, state and regional governments that provide interest income which is exempt from federal income taxes. Municipals include both municipal bonds (those securities with maturities of five years or more) and municipal notes (those with maturities of less than five years). Municipal bonds are issued for a wide variety of reasons: to construct public facilities, such as airports, highways, bridges, schools, hospitals, mass transportation, streets, water and sewer works; to obtain funds for operating expenses; to refund outstanding municipal obligations; and to loan funds to various public institutions and facilities. Certain industrial development bonds are also considered municipal bonds if their interest is exempt from federal income tax. Industrial development bonds are issued by, or on behalf of, public authorities to obtain funds for various privately-operated manufacturing facilities, housing, sports arenas, convention centers, airports, mass transportation systems and water, gas or sewage works. Industrial development bonds are ordinarily dependent on the credit quality of a private user, not the public issuer.

The two principal classifications of municipal bonds are "general obligation" and "revenue" or "special tax" bonds. General obligation bonds are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue or special tax bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other tax, but not from general tax revenues.

Industrial revenue bonds in most cases are revenue bonds and generally do not have the pledge of the credit of the issuer. The payment of the principal and interest on such industrial revenue bonds is dependent solely on the ability of the user of the facilities financed by the bonds to meet its financial obligations and the pledge, if any, of real and personal property so financed as security for such payment. Short-term municipal obligations issued by states, cities, municipalities or municipal agencies, include tax anticipation notes, revenue anticipation notes, bond anticipation notes, construction loan notes and short-term discount notes.

Municipal notes are issued to meet the short-term funding requirements of local, regional and state governments. Municipal notes include bond anticipation notes, revenue anticipation notes and tax and revenue anticipation notes. These are short-term debt obligations issued by state and local governments to aid cash flows while waiting for taxes or revenue to be collected, at which time the debt is retired. Other types of municipal notes in which the Portfolio may invest are construction loan notes, short-term discount notes, tax-exempt commercial paper, demand notes and similar instruments.

Municipal bonds generally include debt obligations issued by states and their political subdivisions, and duly constituted authorities and corporations, to obtain funds to construct, repair or improve various public facilities such as airports, bridges, highways, hospitals, housing, schools, streets and water and sewer works. Municipal bonds may also be issued to refinance outstanding obligations as well as to obtain funds for general operating expenses and for loans to other public institutions and facilities.

Note obligations with demand or put options may have a stated maturity in excess of one year, but permit any holder to demand payment of principal plus accrued interest upon a specified number of days' notice. Frequently, such obligations are secured by letters of credit or other credit support arrangements provided by banks. The issuer of such notes normally has a corresponding right, after a given period, to repay at its discretion the outstanding principal of the note plus accrued interest upon a specific number of days' notice to the bondholders. The interest rate on a demand note may be based upon a known lending rate, such as the prime lending rate, and be adjusted when such rate changes, or the interest rate on a demand note may be a market rate that is adjusted at specified intervals. Each note purchased by the Portfolios will meet the quality criteria set out in the Prospectus for the Portfolios.

The yields of municipal bonds depend on, among other things, general money market conditions, conditions in the municipal bond market, the size of a particular offering, the maturity of the obligation, and the rating of the issue. The ratings of Moody's and S&P represent their opinions of the quality of the municipal bonds rated by them. It should be emphasized that such ratings are general and are not absolute standards of quality. Consequently, municipal bonds with the same maturity, coupon and rating may have different yields, while municipal bonds of

the same maturity and coupon, but with different ratings, may have the same yield. It will be the responsibility of the Adviser to appraise independently the fundamental quality of the bonds held by the Portfolios.

Municipal bonds are sometimes purchased on a "when-issued" or "delayed-delivery" basis, which means the Portfolio has committed to purchase certain specified securities at an agreed-upon price when they are issued. The period between commitment date and issuance date can be a month or more. It is possible that the securities will never be issued and the commitment canceled.

From time to time proposals have been introduced before state and local legislatures to restrict or eliminate the federal income tax exemption for interest on municipal bonds. Similar proposals may be introduced in the future. If any such proposal were enacted, it might restrict or eliminate the ability of the Portfolios to achieve their investment objectives. In that event, the Fund's Directors and officers would reevaluate investment objectives and policies and consider recommending to shareholders changes in such objectives and policies.

Similarly, from time to time proposals have been introduced before state and local legislatures to restrict or eliminate the state and local income tax exemption for interest on municipal bonds. Similar proposals may be introduced in the future. If any such proposal were enacted, it might restrict or eliminate the ability of a Portfolio to achieve its investment objective. In that event, the Fund's Directors and officers would reevaluate investment objectives and policies and consider recommending to shareholders changes in such investment objectives and policies.

The Portfolios eligible to purchase municipal bonds may also purchase bonds the income on which is subject to the alternative minimum tax ("AMT bonds"). AMT bonds are tax-exempt private activity bonds issued after August 7, 1986, the proceeds of which are directed, at least in part, to private, for-profit organizations. While the income from AMT bonds is exempt from regular federal income tax, it is a tax preference item in the calculation of the alternative minimum tax. The alternative minimum tax is a special separate tax that applies to some taxpayers who have certain adjustments to income or tax preference items.

Build America Bonds are taxable municipal securities on which the issuer receives federal support of the interest paid. Assuming certain specified conditions are satisfied, issuers of Build America Bonds may either (i) receive reimbursement from the U.S. Treasury with respect to a portion of its interest payments on the bonds ("direct pay" Build America Bonds) or (ii) provide tax credits to investors in the bonds ("tax credit" Build America Bonds). Unlike most other municipal securities, interest received on Build America Bonds is subject to federal and state income tax. Issuance of Build America Bonds ceased on December 31, 2010. The number of Build America Bonds available in the market is limited, which may negatively affect the value of the Build America Bonds.

Lease Obligations. Included within the revenue bonds category, as noted above, are participations in lease obligations or installment purchase contracts (hereinafter collectively called "lease obligations") of municipalities. State and local governments, agencies or authorities issue lease obligations to acquire equipment and facilities. Lease obligations may have risks not normally associated with general obligation or other revenue bonds. Leases, and installment purchase or conditional sale contracts (which may provide for title to the leased asset to pass eventually to the issuer), have developed as a means for governmental issuers to acquire property and equipment without the necessity of complying with the constitutional and statutory requirements generally applicable for the issuance of debt. Certain lease obligations contain "non-appropriation" clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on an annual or other periodic basis. Consequently, continued lease payments on those lease obligations containing "non-appropriation" clauses are dependent on future legislative actions. If such legislative actions do not occur, the holders of the lease obligation may experience difficulty in exercising their rights, including disposition of the property.

In addition, lease obligations represent a relatively new type of financing that has not yet developed the depth of marketability associated with more conventional municipal obligations, and, as a result, certain of such lease obligations may be considered illiquid securities. To determine whether or not a Portfolio will consider such securities to be illiquid (and subject to each Portfolio's limitation on investing in illiquid securities), the Fund's Board of Directors has established guidelines to be utilized by the Portfolios in determining the liquidity of a lease obligation. The factors to be considered in making the determination include (i) the frequency of trades and quoted prices for the obligation; (ii) the number of dealers willing to purchase or sell the security and the number of other potential purchasers; (iii) the willingness of dealers to undertake to make a market in the security; and (iv) the nature of the marketplace trades, including the time needed to dispose of the security, the method of soliciting offers, and the mechanics of the transfer.

Asset-Backed Securities. Certain Portfolios may invest in asset-backed securities. Asset-backed securities utilize the securitization techniques used to develop mortgage-backed securities. These techniques are also applied to a broad range of other assets. Various types of assets, primarily automobile and credit card receivables and home equity loans, are being securitized in pass-through structures similar to the mortgage pass-through structures. These types of securities are known as asset-backed securities. A Portfolio may invest in any type of asset-backed security. Asset-backed securities have risk characteristics similar to mortgage-backed securities. Like mortgage-backed securities, they generally decrease in value as a result of interest rate increases, but may benefit less than other fixed income securities from declining interest rates, principally because of prepayments. Also, as in the case of mortgage-backed securities, prepayments generally increase during a period of declining interest rates although other factors, such as changes in credit use and payment patterns, may also influence prepayment rates. Asset-backed securities also involve the risk that various federal and state consumer laws and other legal, regulatory and economic factors may result in the collateral backing the securities being insufficient to support payment on the securities.

Loan Participations and Assignments. Loan participations are interests in loans or other direct debt instruments ("Loans") relating to amounts owed by a corporate, governmental or other borrower to another party. Loans may represent amounts owed to lenders or lending syndicates, to suppliers of goods or services (trade claims or other receivables), or to other parties ("Lenders") and may be fixed rate or floating rate. Loans also may be arranged through private negotiations between an issuer of sovereign debt obligations and Lenders.

A Portfolio's investments in Loans may be in the form of a participation in Loans ("Participations") and assignments of all or a portion of Loans ("Assignments") from third-parties. In the case of a Participation, a Portfolio will have the right to receive payments of principal, interest and any fees to which it is entitled only from the Lender selling the Participation and only upon receipt by the Lender of the payments from the borrower. In the event of an insolvency of the Lender selling a Participation, a Portfolio may be treated as a general creditor of the Lender and may not benefit from any set-off between the Lender and the borrower. Certain Participations may be structured in a manner designed to avoid purchasers of Participations being subject to the credit risk of the Lender with respect to the Participation. Even under such a structure, in the event of a Lender's insolvency, the Lender's servicing of the Participation may be delayed and the assignability of the Participation may be impaired. A Portfolio will acquire Participations only if the Lender interpositioned between a Portfolio and the borrower is determined by the Adviser to be creditworthy.

When a Portfolio purchases Assignments from Lenders it will acquire direct rights against the borrower on the Loan. However, because Assignments are arranged through private negotiations between potential assignees and potential assignors, the rights and obligations acquired by a Portfolio as the purchaser of an Assignment may differ from, and be more limited than, those held by the assigning Lender. Because there is no liquid market for Loan Participations and Assignments, it is likely that such securities could be sold only to a limited number of institutional investors. The lack of a liquid secondary market may have an adverse impact on the value of such securities and a Portfolio's ability to dispose of particular Assignments or Participations when necessary to meet a Portfolio's liquidity needs or in response to a specific economic event, such as a deterioration in the creditworthiness of the borrower. The lack of a liquid secondary market for Loan Participations and Assignments also may make it more difficult for a Portfolio to assign a value to these securities for purposes of valuing a Portfolio's securities and calculating its NAV.

Loan Participations and Assignments involve a risk of loss in case of default or insolvency of the borrower. In addition, they may offer less legal protection to a Portfolio in the event of fraud or misrepresentation and may involve a risk of insolvency of the Lender. Certain Loan Participations and Assignments may also include standby financing commitments that obligate the investing Portfolio to supply additional cash to the borrower on demand. Participations involving emerging market country issuers may relate to Loans as to which there has been or currently exists an event of default or other failure to make payment when due, and may represent amounts owed to Lenders that are themselves subject to political and economic risks, including the risk of currency devaluation, expropriation, or failure. Such Loan Participations and Assignments present additional risk of default or loss.

Temporary Investments. When the Adviser believes that changes in market, economic, political or other conditions make it advisable, each Portfolio may invest up to 100% of its assets in cash, cash equivalents and other fixed income securities for temporary defensive purposes. These temporary investments may consist of obligations of the U.S. or foreign governments, their agencies and instrumentalities; money market instruments; and instruments issued by international development agencies.

Zero Coupons, Pay-In-Kind Securities or Deferred Payment Securities. Zero coupon, pay-in-kind and deferred payment securities are all types of fixed income securities on which the holder does not receive periodic cash

payments of interest or principal. Generally, these securities are subject to greater price volatility and lesser liquidity in the event of adverse market conditions than comparably rated securities paying cash interest at regular intervals. Although a Portfolio will not receive cash periodic coupon payments on these securities, the Portfolio may be deemed to have received interest income, or "phantom income" during the life of the obligation. The Portfolio may have to pay taxes on this phantom income, although it has not received any cash payment.

Zero Coupons. Zero coupons are fixed income securities that do not make regular interest payments. Instead, zero coupons are sold at a discount from their face value. The difference between a zero coupon's issue or purchase price and its face value represents the imputed interest an investor will earn if the obligation is held until maturity. For tax purposes, a portion of this imputed interest is deemed as income received by zero coupon bondholders each year. Each Portfolio intends to pass along such interest as a component of the Portfolio's distributions of net investment income.

Zero coupons may offer investors the opportunity to earn a higher yield than that available on ordinary interest-paying obligations of similar credit quality and maturity. However, zero coupon prices may also exhibit greater price volatility than ordinary fixed income securities because of the manner in which their principal and interest are returned to the investor.

Pay-In-Kind Securities. Pay-in-kind securities are securities that have interest payable by delivery of additional securities. Upon maturity, the holder is entitled to receive the aggregate par value of the securities.

Deferred Payment Securities. Deferred payment securities are securities that remain zero coupons until a predetermined date, at which time the stated coupon rate becomes effective and interest becomes payable at regular intervals.

Floaters. Floaters are fixed income securities with a rate of interest that varies with changes in specified market rates or indices, such as the prime rate, or at specified intervals. Certain floating or variable rate obligations may carry a demand feature that permits the holder to tender them back to the issuer of the underlying instrument, or to a third-party, at par value prior to maturity. When the demand feature of certain floating or variable rate obligations represents an obligation of a foreign entity, the demand feature will be subject to certain risks discussed under "Foreign Investment."

Inverse Floaters. Inverse floating rate obligations are obligations which pay interest at rates that vary inversely with changes in market rates of interest. Because the interest rate paid to holders of such obligations is generally determined by subtracting a variable or floating rate from a predetermined amount, the interest rate paid to holders of such obligations will decrease as such variable or floating rate increases and increase as such variable or floating rate decreases.

Like most other fixed income securities, the value of inverse floaters will decrease as interest rates increase. They are more volatile, however, than most other fixed income securities because the coupon rate on an inverse floater typically changes at a multiple of the change in the relevant index rate. Thus, any rise in the index rate (as a consequence of an increase in interest rates) causes a correspondingly greater drop in the coupon rate of an inverse floater while a drop in the index rate causes a correspondingly greater increase in the coupon of an inverse floater. Some inverse floaters may also increase or decrease substantially because of changes in the rate of prepayments.

Eurodollar and Yankee Dollar Obligations. Eurodollar and Yankee dollar obligations are fixed income securities that include time deposits, which are non-negotiable deposits maintained in a bank for a specified period of time at a stated interest rate. The Eurodollar obligations may include bonds issued and denominated in euros (the new currency implemented on January 1, 1999 by the countries participating in the EMU). Eurodollar obligations may be issued by government and corporate issuers in Europe. Yankee bank obligations, which include time deposits and certificates of deposit, are U.S. dollar-denominated obligations issued in the U.S. capital markets by foreign banks. Eurodollar bank obligations, which include time deposits and certificates of deposit, are U.S. dollar-denominated obligations issued outside the U.S. capital markets by foreign branches of U.S. banks and by foreign banks. The Portfolios may consider Yankee dollar obligations to be domestic securities for purposes of their investment policies.

Eurodollar and Yankee dollar obligations are subject to the same risks as domestic issues, notably credit risk, market risk and liquidity risk. However, Eurodollar (and to a limited extent, Yankee dollar) obligations are also subject to certain sovereign risks. One such risk is the possibility that a sovereign country might prevent capital

from flowing across its borders. Other risks include adverse political and economic developments; the extent and quality of government regulations of financial markets and institutions; the imposition of foreign withholding taxes; and the expropriation or nationalization of foreign issuers.

FOREIGN INVESTMENT

Investing in foreign securities involves certain special considerations which are not typically associated with investments in the securities of U.S. issuers. Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards and may have policies that are not comparable to those of domestic issuers. As a result, there may be less information available about foreign issuers than about domestic issuers. Securities of some foreign issuers may be less liquid and more volatile than securities of comparable domestic issuers. There is generally less government supervision and regulation of stock exchanges, brokers and listed issuers than in the United States. In addition, with respect to certain foreign countries, there is a possibility of expropriation or confiscatory taxation, political and social instability, or diplomatic developments which could affect U.S. investments in those countries. The costs of investing in foreign countries frequently are higher than the costs of investing in the United States. Although the Adviser endeavors to achieve the most favorable execution costs in portfolio transactions, fixed commissions on many foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. In addition, investments in certain foreign markets which have historically been considered stable may become more volatile and subject to increased risk due to ongoing developments and changing conditions in such markets. Moreover, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions.

Investments in securities of foreign issuers may be denominated in foreign currencies. Accordingly, the value of a Portfolio's assets, as measured in U.S. dollars, may be affected favorably or unfavorably by changes in currency exchange rates and in exchange control regulations. A Portfolio may incur costs in connection with conversions between various currencies.

Certain foreign markets may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments, the imposition of economic sanctions against a particular country or countries, organizations, entities and/or individuals, changes in international trading patterns, trade barriers, and other protectionist or retaliatory measures. Economic sanctions could, among other things, effectively restrict or eliminate a Portfolio's ability to purchase or sell securities or groups of securities for a substantial period of time, and may make a Portfolio's investments in such securities harder to value. International trade barriers or economic sanctions against foreign countries, organizations, entities and/or individuals, may adversely affect a Portfolio's foreign holdings or exposures. Investments in foreign markets may also be adversely affected by governmental actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets, or the imposition of punitive taxes. Governmental actions can have a significant effect on the economic conditions in foreign countries, which also may adversely affect the value and liquidity of a Portfolio's investments. For example, the governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain sectors or industries. In addition, a foreign government may limit or cause delay in the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. Any of these actions could severely affect security prices, impair a Portfolio's ability to purchase or sell foreign securities or transfer a Portfolio's assets back into the U.S., or otherwise adversely affect a Portfolio's operations. Certain foreign investments may become less liquid in response to market developments or adverse investor perceptions, or become illiquid after purchase by a Portfolio, particularly during periods of market turmoil. Certain foreign investments may become illiquid when, for instance, there are few, if any, interested buyers and sellers or when dealers are unwilling to make a market for certain securities. When a Portfolio holds illiquid investments, its portfolio may be harder to value.

Certain foreign governments may levy withholding or other taxes on dividend and interest income. Although in some countries a portion of these taxes may be recoverable, the non-recovered portion of foreign withholding taxes will reduce the income received from investments in such countries. The Portfolios may be able to pass through to its shareholders a credit for U.S. tax purposes with respect to any such foreign taxes.

The Adviser and/or Sub-Advisers may consider an issuer to be from a particular country (including the United States) or geographic region if (i) its principal securities trading market is in that country or geographic region; (ii) alone or on a consolidated basis it derives 50% or more of its annual revenue from goods produced, sales made or services performed in that country or geographic region; or (iii) it is organized under the laws of, or has a

principal office in, that country or geographic region. By applying these tests, it is possible that a particular issuer could be deemed to be from more than one country or geographic region.

Foreign Equity Securities. Foreign equity securities are equity securities of a non-U.S. issuer.

Foreign Government Fixed Income Securities. Foreign government fixed income securities are fixed income securities issued by a government other than the U.S. Government or government-related issuer in a country other than the United States.

Foreign Corporate Fixed Income Securities. Foreign corporate fixed income securities are fixed income securities issued by a private issuer in a country other than the United States.

Emerging Market Securities. Certain Portfolios may invest in emerging market securities. An emerging market security is one issued by a foreign government or private issuer that has one or more of the following characteristics: (i) its principal securities trading market is in an emerging market or developing country, (ii) alone or on a consolidated basis it derives 50% or more of its annual revenue from goods produced, sales made or services performed in emerging markets or (iii) it is organized under the laws of, or has a principal office in, an emerging market or developing country. Based on these criteria it is possible for a security to be considered issued by an issuer in more than one country. Therefore, it is possible for the securities of any issuer that has one or more of these characteristics in connection with any emerging market or developing country not to be considered an emerging market security if it has one or more of these characteristics in connection with a developed country.

Emerging market describes any country which is generally considered to be an emerging or developing country by major organizations in the international financial community, such as the International Bank for Reconstruction and Development (more commonly known as the World Bank) and the International Finance Corporation or the Portfolio's benchmark index.

The economies of individual emerging market or developing countries may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation or deflation, currency depreciation, capital reinvestment, resource self-sufficiency and balance of payments position. Further, the economies of developing countries generally are heavily dependent upon international trade and, accordingly, have been, and may continue to be, adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures. These economies also have been, and may continue to be, adversely affected by economic conditions in the countries with which they trade.

Prior governmental approval for foreign investments may be required under certain circumstances in some emerging market or developing countries, and the extent of foreign investment in certain fixed income securities and domestic companies may be subject to limitation in other emerging market or developing countries. Foreign ownership limitations also may be imposed by the charters of individual companies in emerging market or developing countries to prevent, among other concerns, violation of foreign investment limitations. Repatriation of investment income, capital and the proceeds of sales by foreign investors may require governmental registration and/or approval in some emerging countries. A Portfolio could be adversely affected by delays in, or a refusal to grant, any required governmental registration or approval for such repatriation. Any investment subject to such repatriation controls will be considered illiquid if it appears reasonably likely that this process will take more than seven days.

Investment in emerging market or developing countries may entail purchasing securities issued by or on behalf of entities that are insolvent, bankrupt, in default or otherwise engaged in an attempt to reorganize or reschedule their obligations and in entities that have little or no proven credit rating or credit history. In any such case, the issuer's poor or deteriorating financial condition may increase the likelihood that the Portfolio will experience losses or diminution in available gains due to bankruptcy, insolvency or fraud. Emerging market or developing countries also pose the risk of nationalization, expropriation or confiscatory taxation, political changes, government regulation, social instability or diplomatic developments (including war) that could adversely affect the economies of such countries or the value of a Portfolio's investments in those countries. In addition, it may be difficult to obtain and enforce a judgment in a court outside the United States.

A Portfolio may also be exposed to an extra degree of custodial and/or market risk, especially where the securities purchased are not traded on an official exchange or where ownership records regarding the securities are maintained by an unregulated entity (or even the issuer itself).

Foreign Currency Transactions. The U.S. dollar value of the assets of the Portfolios, to the extent they invest in securities denominated in foreign currencies, may be affected favorably or unfavorably by changes in foreign currency exchange rates and exchange control regulations, and the Portfolios may incur costs in connection with conversions between various currencies. The Portfolios may conduct their foreign currency exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency exchange market. The Portfolios also may manage their foreign currency transactions by entering into foreign currency forward exchange contracts to purchase or sell foreign currencies or by using other instruments and techniques described under "Derivatives" below.

Under normal circumstances, consideration of the prospect for changes in the values of currency will be incorporated into the long-term investment decisions made with regard to overall diversification strategies. However, the Adviser believes that it is important to have the flexibility to use such derivative products when it determines that it is in the best interests of a Portfolio. It may not be practicable to hedge foreign currency risk in all markets, particularly emerging markets.

Foreign Currency Warrants. Certain Portfolios may invest in foreign currency warrants, which entitle the holder to receive from the issuer an amount of cash (generally, for warrants issued in the United States, in U.S. dollars) which is calculated pursuant to a predetermined formula and based on the exchange rate between a specified foreign currency and the U.S. dollar as of the exercise date of the warrant. Foreign currency warrants generally are exercisable upon their issuance and expire as of a specified date and time.

Foreign currency warrants have been issued in connection with U.S. dollar-denominated debt offerings by major corporate issuers in an attempt to reduce the foreign currency exchange risk which, from the point of view of prospective purchasers of the securities, is inherent in the international fixed income marketplace. Foreign currency warrants may attempt to reduce the foreign exchange risk assumed by purchasers of a security by, for example, providing for a supplemental payment in the event that the U.S. dollar depreciates against the value of a major foreign currency such as the Japanese Yen. The formula used to determine the amount payable upon exercise of a foreign currency warrant may make the warrant worthless unless the applicable foreign currency exchange rate moves in a particular direction (e.g., unless the U.S. dollar appreciates or depreciates against the particular foreign currency to which the warrant is linked or indexed). Foreign currency warrants are severable from the debt obligations with which they may be offered, and may be listed on exchanges.

Foreign currency warrants may be exercisable only in certain minimum amounts, and an investor wishing to exercise warrants who possesses less than the minimum number required for exercise may be required either to sell the warrants or to purchase additional warrants, thereby incurring additional transaction costs. In the case of any exercise of warrants, there may be a delay between the time a holder of warrants gives instructions to exercise and the time the exchange rate relating to exercise is determined, during which time the exchange rate could change significantly, thereby affecting both the market and cash settlement values of the warrants being exercised. The expiration date of the warrants may be accelerated if the warrants should be delisted from an exchange or if their trading should be suspended permanently, which would result in the loss of any remaining "time value" of the warrants (i.e., the difference between the current market value and the exercise value of the warrants), and, in the case where the warrants were "out-of-the-money," in a total loss of the purchase price of the warrants.

Foreign currency warrants are generally unsecured obligations of their issuers and are not standardized foreign currency options issued by the Options Clearing Corporation ("OCC"). Unlike foreign currency options issued by the OCC, the terms of foreign exchange warrants generally will not be amended in the event of governmental or regulatory actions affecting exchange rates or in the event of the imposition of other regulatory controls affecting the international currency markets. The initial public offering price of foreign currency warrants is generally considerably in excess of the price that a commercial user of foreign currencies might pay in the interbank market for a comparable option involving significantly larger amounts of foreign currencies. Foreign currency warrants are subject to complex political or economic factors.

Principal Exchange Rate Linked Securities. Principal exchange rate linked securities are debt obligations the principal on which is payable at maturity in an amount that may vary based on the exchange rate between the U.S. dollar and a particular foreign currency at or about that time. The return on "standard" principal exchange rate linked securities is enhanced if the foreign currency to which the security is linked appreciates against the U.S. dollar, and is adversely affected by increases in the foreign exchange value of the U.S. dollar; "reverse" principal exchange rate linked securities are like the "standard" securities, except that their return is enhanced by increases in the value of the U.S. dollar and adversely impacted by increases in the value of foreign currency. Interest payments on the securities are generally made in U.S. dollars at rates that reflect the degree of foreign currency

risk assumed or given up by the purchaser of the notes (i.e., at relatively higher interest rates if the purchaser has assumed some foreign currency risk).

Brady Bonds. Brady Bonds are fixed income securities that are created through the exchange of existing commercial bank loans to foreign entities for new obligations in connection with debt restructuring under a plan introduced by Nicholas F. Brady when he was the U.S. Secretary of the Treasury. They may be collateralized or uncollateralized and issued in various currencies (although most are U.S. dollar-denominated) and they are actively traded in the over-the-counter ("OTC") secondary market. A Portfolio will invest in Brady Bonds only if they are consistent with the Portfolio's quality specifications. Dollar-denominated, collateralized Brady Bonds may be fixed rate par bonds or floating rate discount bonds. Interest payments on Brady Bonds generally are collateralized by cash or securities in an amount that, in the case of fixed rate bonds, is equal to at least one year of rolling interest payments or, in the case of floating rate bonds, initially is equal to at least one year's rolling interest payments based on the applicable interest rate at that time and is adjusted at regular intervals thereafter. Certain Brady Bonds are entitled to "value recovery payments" in certain circumstances, which in effect constitute supplemental interest payments but generally are not collateralized.

Brady Bonds are often viewed as having three or four valuation components: (i) the collateralized repayment of principal at final maturity; (ii) the collateralized interest payments; (iii) the uncollateralized interest payments; and (iv) any uncollateralized repayment of principal at maturity (these uncollateralized amounts constitute the "residual risk"). In the event of a default with respect to collateralized Brady Bonds as a result of which the payment obligations of the issuer are accelerated, the U.S. Treasury zero coupon obligations held as collateral for the payment of principal will not be distributed to investors, nor will such obligations be sold and the proceeds distributed. The collateral will be held by the collateral agent to the scheduled maturity of the defaulted Brady Bonds, which will continue to be outstanding, at which time the face amount of the collateral will equal the principal payments due on the Brady Bonds in the normal course. However, Brady Bonds should be viewed as speculative in light of the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds.

Investment Funds. Some emerging market countries have laws and regulations that currently preclude direct investment or make it undesirable to invest directly in the securities of their companies. However, indirect investment in the securities of companies listed and traded on the stock exchanges in these countries is permitted by certain emerging market countries through investment funds that have been specifically authorized. A Portfolio may invest in these investment funds subject to the provisions of the 1940 Act, as applicable, and other applicable laws.

OTHER SECURITIES AND INVESTMENT STRATEGIES

Loans of Portfolio Securities. Each Portfolio may lend its portfolio securities to brokers, dealers, banks and other institutional investors. By lending its portfolio securities, a Portfolio attempts to increase its net investment income through the receipt of interest on the cash collateral with respect to the loan or fees received from the borrower in connection with the loan. Any gain or loss in the market price of the securities loaned that might occur during the term of the loan would be for the account of the Portfolio. The Portfolios employ an agent to implement the securities lending program and the agent receives a fee from the Portfolios for its services. A Portfolio will not lend more than 33¹/₃% of the value of its total assets.

Each Portfolio may lend its portfolio securities so long as the terms, structure and the aggregate amount of such loans are not inconsistent with the 1940 Act or the rules and regulations or interpretations of the SEC thereunder, which currently require that (i) the borrower pledge and maintain with the Portfolio collateral consisting of liquid, unencumbered assets having a value not less than 100% of the value of the securities loaned; (ii) the borrower add to such collateral whenever the price of the securities loaned rises (i.e., the borrower "marks-to-market" on a daily basis); (iii) the loan be made subject to termination by the Portfolio at any time; and (iv) the Portfolio receives a reasonable return on the loan (which may include the Portfolio investing any cash collateral in interest bearing short-term investments), any distributions on the loaned securities and any increase in their market value. In addition, voting rights may pass with the loaned securities, but the Portfolio will retain the right to call any security in anticipation of a vote that the Adviser deems material to the security on loan.

be considered in making decisions with respect to the lending of securities, subject to review by the Fund's Board of Directors. Each Portfolio loaning securities also bears the risk that the reinvestment of collateral will result in a principal loss. Finally, there is the risk that the price of the securities will increase while they are on loan and the collateral will not be adequate to cover their value.

Non-Publicly Traded Securities, Private Placements and Restricted Securities. The Portfolios may invest in securities that are neither listed on a stock exchange nor traded OTC, including privately placed and restricted securities. Such unlisted securities may involve a higher degree of business and financial risk that can result in substantial losses. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by the Portfolio or less than what may be considered the fair value of such securities. Furthermore, companies whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements which might be applicable if their securities were publicly traded. The illiquidity of the market, as well as the lack of publicly available information regarding these securities, may also adversely affect the ability of the Fund's Portfolios to arrive at a fair value for certain securities at certain times and could make it difficult for the Portfolios to sell certain securities. If such securities are required to be registered under the securities laws of one or more jurisdictions before being sold, a Portfolio may be required to bear the expenses of registration.

As a general matter, a Portfolio may not invest more than 15% of its net assets, determined at the time of investment, in illiquid securities, such as securities for which there is not a readily available secondary market or securities that are restricted from sale to the public without registration. However, certain Restricted Securities can be offered and sold to qualified institutional buyers under Rule 144A under the Securities Act of 1933, as amended (the "1933 Act") ("Rule 144A Securities"), and may be deemed to be liquid under guidelines adopted by the Fund's Board of Directors. The Portfolios may invest without limit in liquid Rule 144A Securities. Rule 144A Securities may become illiquid if qualified institutional buyers are not interested in acquiring the securities.

The Portfolios may purchase equity securities in a private placement that are issued by issuers who have outstanding, publicly-traded equity securities of the same class ("private investments in public equity" or "PIPES"). Shares in PIPES generally are not registered with the SEC until after a certain time period from the date the private sale is completed. This restricted period can last many months. Until the public registration process is completed, PIPES are restricted as to resale and the Portfolios cannot freely trade the securities. Generally, such restrictions cause the PIPES to be illiquid during this time. PIPES may contain provisions that the issuer will pay specified financial penalties to the holder if the issuer does not publicly register the restricted equity securities within a specified period of time, but there is no assurance that the restricted equity securities will be publicly registered, or that the registration will remain in effect.

When-Issued and Delayed Delivery Securities. From time to time, the Portfolios may purchase securities on a when-issued or delayed delivery basis or may purchase or sell securities on a forward commitment basis. When these transactions are negotiated, the price is fixed at the time of the commitment, but delivery and payment can take place a month or more after the date of commitment. The Portfolios may sell the securities before the settlement date, if it is deemed advisable. The securities so purchased or sold are subject to market fluctuation and no interest or dividends accrue to the purchaser prior to the settlement date.

At the time a Portfolio makes the commitment to purchase or sell securities on a when-issued, delayed delivery or forward commitment basis, it will record the transaction and thereafter reflect the value, each day, of such security purchased, or if a sale, the proceeds to be received, in determining its NAV. At the time of delivery of the securities, their value may be more or less than the purchase or sale price. An increase in the percentage of a Portfolio's assets committed to the purchase of securities on a when-issued, delayed delivery or forward commitment basis may increase the volatility of its NAV. Each Portfolio will also earmark cash or segregate liquid assets or establish a segregated account on the Portfolio's books in which it will continually maintain cash or cash equivalents or other liquid portfolio securities equal in value to commitments to purchase securities on a when-issued, delayed delivery or forward commitment basis.

Borrowing for Investment Purposes. Borrowing for investment purposes creates leverage which is a speculative characteristic. Portfolios authorized to borrow will do so only when the Adviser believes that borrowing will benefit the Portfolio after taking into account considerations such as the costs of borrowing and the likely investment returns on securities purchased with borrowed funds. Borrowing by a Portfolio will create the opportunity for increased net income but, at the same time, will involve special risk considerations. Leverage that results from borrowing will

magnify declines as well as increases in a Portfolio's NAV per share and net yield. Each Portfolio that engages in borrowing expects that all of its borrowing will be made on a secured basis. The Portfolio will either segregate the assets securing the borrowing for the benefit of the lenders or arrangements will be made with a suitable sub-custodian. If assets used to secure the borrowing decrease in value, a Portfolio may be required to pledge additional collateral to the lender in the form of cash or securities to avoid liquidation of those assets.

Temporary Borrowing. Each Portfolio is permitted to borrow from banks in an amount up to 10% of its total assets for extraordinary or emergency purposes, except that the Emerging Markets Domestic Debt and Emerging Markets External Debt Portfolios may borrow in accordance with fundamental investment limitation number (5) below. For example, the Portfolios may borrow for temporary defensive purposes or to meet shareholder redemptions when the Adviser believes that it would not be in the best interests of a Portfolio to liquidate portfolio holdings. Each Portfolio (other than the Emerging Markets Domestic Debt and Emerging Markets External Debt Portfolios) will not purchase additional securities while temporary borrowings exceed 5% of its total assets.

The Board of Directors of the Fund has approved procedures whereby the Portfolios together with other investment companies advised by the Adviser or its affiliates may enter into a joint line of credit arrangement with a bank. Each Portfolio would be liable only for its own temporary borrowings under the joint line of credit arrangements.

Reverse Repurchase Agreements. Under a reverse repurchase agreement, a Portfolio sells a security and promises to repurchase that security at an agreed-upon future date and price. The price paid to repurchase the security reflects interest accrued during the term of the agreement. The Portfolio will earmark cash or segregate liquid assets or establish a segregated account holding cash and other liquid assets in an amount not less than the purchase obligations of the agreement. Reverse repurchase agreements may be viewed as a speculative form of borrowing called leveraging. A Portfolio may invest in reverse repurchase agreements if (i) interest earned from leveraging exceeds the interest expense of the original reverse repurchase transaction and (ii) proceeds from the transaction are not invested for longer than the term of the reverse repurchase agreement.

The use of leverage may cause a Portfolio to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet earmarking requirements. Leverage, including borrowing, may cause a Portfolio to be more volatile than if the Portfolio had not been leveraged. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of the Portfolio's portfolio securities. All forms of borrowing (including reverse repurchase agreements) are limited in the aggregate and may not exceed 33¹/₃% of a Portfolio's total assets, except as permitted by law.

Short Sales. A short sale is a transaction in which a Portfolio sells securities that it owns or has the right to acquire at no added cost (i.e., "against the box") or does not own (but has borrowed) in anticipation of a decline in the market price of the securities. To deliver the securities to the buyer, the Portfolio arranges through a broker to borrow the securities and, in so doing, the Portfolio becomes obligated to replace the securities borrowed at their market price at the time of replacement. When selling short, the Portfolio intends to replace the securities at a lower price and therefore, profit from the difference between the cost to replace the securities and the proceeds received from the sale of the securities. When the Portfolio makes a short sale, the proceeds it receives from the sale will be held on behalf of a broker until the Portfolio replaces the borrowed securities. The Portfolio may have to pay a premium to borrow the securities and must pay any dividends or interest payable on the securities until they are replaced.

The Portfolio's obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker that consists of cash or other liquid securities. In addition, the Portfolio will earmark cash or segregate liquid assets or place in a segregated account an amount of cash or other liquid assets equal to the difference, if any, between (i) the current market value of the securities sold at the time they were sold short, and (ii) any cash or other liquid securities deposited as collateral with the broker in connection with the short sale. This amount will be adjusted daily to reflect changes in the value of the securities sold short. A Portfolio also can cover its obligations by owning another security (such as a call option) giving it the right to obtain the same kind and amount of the security it sold short. Short sales by the Portfolio involve certain risks and special considerations. If the Adviser incorrectly predicts that the price of the borrowed security will decline, the Portfolio will have to replace the securities with securities with a greater value than the amount received from the sale. As a result, losses from short sales differ from losses that could be incurred from a purchase of a security, because losses from short sales may be unlimited, whereas losses from purchases can equal only the total amount invested.

DERIVATIVES

Certain Portfolios may, but are not required to, use various derivatives and related investment strategies as described below. Derivatives may be used for a variety of purposes including hedging, risk management, portfolio management or to earn income. Any or all of the investment techniques described herein may be used at any time and there is no particular strategy that dictates the use of one technique rather than another, as the use of any derivative by a Portfolio is a function of numerous variables, including market conditions. A Portfolio complies with applicable regulatory requirements when using derivatives, including the earmarking of cash or the segregation of liquid assets when mandated by the SEC rules or SEC staff positions. Although the Adviser seeks to use derivatives to further a Portfolio's investment objective, no assurance can be given that the use of derivatives will achieve this result.

General Risks of Derivatives. Derivatives utilized by a Portfolio may involve the purchase and sale of derivative instruments. A derivative is a financial instrument the value of which depends upon (or derives from) the value of another asset, security, interest rate or index. Derivatives may relate to a wide variety of underlying instruments, including equity and debt securities, indices, interest rates, currencies and other assets. Certain derivative instruments which a Portfolio may use and the risks of those instruments are described in further detail below. A Portfolio may in the future also utilize derivatives techniques, instruments and strategies that may be newly developed or permitted as a result of regulatory changes, consistent with a Portfolio's investment objective and policies. Such newly developed techniques, instruments and strategies may involve risks different than or in addition to those described herein. No assurance can be given that any derivatives strategy employed by a Portfolio will be successful.

The risks associated with the use of derivatives are different from, and possibly greater than, the risks associated with investing directly in the instruments underlying such derivatives. Derivatives are highly specialized instruments that require investment techniques and risk analyses different from other portfolio investments. The use of derivative instruments requires an understanding not only of the underlying instrument but also of the derivative itself. Certain risk factors generally applicable to derivative transactions are described below.

• Derivatives are subject to the risk that the market value of the derivative itself or the market value of underlying instruments will change in a way adverse to a Portfolio's interests. A Portfolio bears the risk that the Adviser may incorrectly forecast future market trends and other financial or economic factors or the value of the underlying security, index, interest rate or currency when establishing a derivatives position for a Portfolio.

• Derivatives may be subject to pricing risk, which exists when a derivative becomes extraordinarily expensive (or inexpensive) relative to historical prices or corresponding instruments. Under such market conditions, it may not be economically feasible to initiate a transaction or liquidate a position at an advantageous time or price.

• Many derivatives are complex and often valued subjectively. Improper valuations can result in increased payment requirements to counterparties or a loss of value to a Portfolio.

• Using derivatives as a hedge against a portfolio investment subjects a Portfolio to the risk that the derivative will have imperfect correlation with the portfolio investment, which could result in a Portfolio incurring substantial losses. This correlation risk may be greater in the case of derivatives based on an index or other basket of securities, as the portfolio securities being hedged may not duplicate the components of the underlying index or the basket may not be of exactly the same type of obligation as those underlying the derivative. The use of derivatives for "cross hedging" purposes (using a derivative based on one instrument as a hedge on a different instrument) may also involve greater correlation risks.

• While using derivatives for hedging purposes can reduce a Portfolio's risk of loss, it may also limit a Portfolio's opportunity for gains or result in losses by offsetting or limiting a Portfolio's ability to participate in favorable price movements in portfolio investments.

• Derivatives transactions for non-hedging purposes involve greater risks and may result in losses which would not be offset by increases in the value of portfolio securities or declines in the cost of securities to be acquired. In the event that a Portfolio enters into a derivatives transaction as an alternative to purchasing or selling the underlying instrument or in order to obtain desired exposure to an index or market, a Portfolio will be exposed to the same risks as are incurred in purchasing or selling the underlying instruments directly as well as additional risks associated with derivatives transactions.

• The use of certain derivatives transactions, including OTC derivatives, involves the risk of loss resulting from the insolvency or bankruptcy of the counterparty to the contract or the failure by the counterparty to make required payments or otherwise comply with the terms of the contract. In the event of default by a counterparty, a Portfolio may have contractual remedies pursuant to the agreements related to the transaction.

• Liquidity risk exists when a particular derivative is difficult to purchase or sell. If a derivative transaction is particularly large or if the relevant market is illiquid, a Portfolio may be unable to initiate a transaction or liquidate a position at an advantageous time or price.

• While some derivatives are cleared through a regulated, central clearinghouse, many derivatives transactions are not entered into or traded on exchanges or in markets regulated by the U.S. Commodity Futures Trading Commission ("CFTC") or the SEC. Instead, such bilateral OTC derivatives are entered into directly by a Portfolio and a counterparty and may be traded only through financial institutions acting as market makers. OTC derivatives transactions can only be entered into with a willing counterparty that is approved by the Adviser in accordance with guidelines established by the Board. Where no such counterparty is available, a Portfolio will be unable to enter into a desired OTC transaction. There also may be greater risk that no liquid secondary market in the trading of OTC derivatives will exist, in which case a Portfolio may be required to hold such instruments until exercise, expiration or maturity. Many of the protections afforded to participants in the cleared derivatives markets are not available to participants in bilateral OTC derivatives transactions. Bilateral OTC derivatives transactions are not subject to the guarantee of a clearinghouse and, as a result, a Portfolio would bear greater risk of default by the counterparties to such transactions.

• A Portfolio may be required to make physical delivery of portfolio securities underlying a derivative in order to close out a derivatives position or to sell portfolio securities at a time or price at which it may be disadvantageous to do so in order to obtain cash to close out or to maintain a derivatives position.

• As a result of the structure of certain derivatives, adverse changes in, among other things, interest rates, volatility or the value of the underlying instrument can result in losses substantially greater than the amount invested in the derivative itself. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment.

• Certain derivatives may be considered illiquid and therefore subject to a Portfolio's limitation on investments in illiquid securities.

• Derivatives transactions conducted outside the United States may not be conducted in the same manner as those entered into on U.S. exchanges, and may be subject to different margin, exercise, settlement or expiration procedures. Brokerage commissions, clearing costs and other transaction costs may be higher on foreign exchanges. Many of the risks of OTC derivatives transactions are also applicable to derivatives transactions conducted outside the United States. Derivatives transactions conducted outside the United States are subject to the risk of governmental action affecting the trading in, or the prices of, foreign securities, currencies and other instruments. The value of such positions could be adversely affected by foreign political and economic factors; lesser availability of data on which to make trading decisions; delays on a Portfolio's ability to act upon economic events occurring in foreign markets; and less liquidity than U.S. markets.

• Currency derivatives are subject to additional risks. Currency derivatives transactions may be negatively affected by government exchange controls, blockages and manipulations. Currency exchange rates may be influenced by factors extrinsic to a country's economy. There is no systematic reporting of last sale information with respect to foreign currencies. As a result, the available information on which trading in currency derivatives will be based may not be as complete as comparable data for other transactions. Events could occur in the foreign currency market which will not be reflected in currency derivatives until the following day, making it more difficult for a Portfolio to respond to such events in a timely manner.

Regulatory Matters. As described herein, a Portfolio may be required to cover its potential economic exposure to certain derivatives transactions by holding an offsetting financial position and/or earmarking cash or segregating liquid assets equal in value to a Portfolio's potential economic exposure under the transaction. A Portfolio will cover such transactions as described herein or in such other manner in accordance with applicable laws and regulations. Assets used to cover derivatives transactions cannot be sold while the derivatives position is open, unless they are replaced by other appropriate assets. Earmarked cash or segregated liquid assets and assets held in margin accounts are not otherwise available to a Portfolio for investment purposes. If a large portion of a

Portfolio's assets are used to cover derivatives transactions or are otherwise earmarked or segregated, it could affect portfolio management or a Portfolio's ability to meet redemption requests or other current obligations. With respect to derivatives which are cash-settled (i.e., have no physical delivery requirement), a Portfolio is permitted to earmark cash or segregate liquid assets in an amount equal to a Portfolio's daily marked-to-market net obligations (i.e., a Portfolio's daily net liability) under the derivative, if any, rather than the derivative's full notional amount or the market value of the instrument underlying the derivative, as applicable. By segregating assets equal to only its net obligations under cash-settled derivatives, a Portfolio will have the ability to employ leverage to a greater extent than if a Portfolio were required to segregate assets equal to the full notional amount of the derivative or the market value of the underlying instrument, as applicable.

Regulatory developments affecting the exchange-traded and OTC derivatives markets may impair a Portfolio's ability to manage or hedge its investment portfolio through the use of derivatives. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and the rules promulgated thereunder may limit the ability of a Portfolio to enter into one or more exchange-traded or OTC derivatives transactions.

A Portfolio's use of derivatives may also be limited by the requirements of the Code for qualification as a regulated investment company for U.S. federal income tax purposes.

The Fund, on behalf of each Portfolio, has filed a notice of eligibility with the National Futures Association ("NFA") claiming an exclusion from the definition of the term "commodity pool operator" ("CPO") pursuant to CFTC Regulation 4.5, as promulgated under the Commodity Exchange Act, as amended ("CEA"), with respect to each Portfolio's operations. Therefore, neither the Portfolios nor the Adviser (with respect to the Portfolios) is subject to registration or regulation as a CPO under the CEA. If a Portfolio becomes subject to these requirements, as well as related NFA rules, the Portfolio may incur additional compliance and other expenses.

With respect to investments in swap transactions, commodity futures, commodity options or certain other commodity interests used for purposes other than bona fide hedging purposes, an investment company must meet one of the following tests under the amended regulations in order for its investment adviser to claim an exemption from being considered a CPO. First, the aggregate initial margin and premiums required to establish an investment company's positions in such investments may not exceed five percent (5%) of the liquidation value of the investment company's portfolio (after accounting for unrealized profits and unrealized losses on any such investments). Alternatively, the aggregate net notional value of such instruments, determined at the time of the most recent position established, may not exceed one hundred percent (100%) of the liquidation value of the investment company's portfolio (after accounting for unrealized profits and unrealized losses on any such positions). In addition to meeting one of the foregoing trading limitations, the investment company may not market itself as a commodity pool or otherwise as a vehicle for trading in the commodity futures, commodity options or swaps and derivatives markets.

Forwards. A foreign currency forward exchange contract is a negotiated agreement between two parties to exchange specified amounts of two or more currencies at a specified future time at a specified rate. The rate specified by the foreign currency forward exchange contract can be higher or lower than the spot rate between the currencies that are the subject of the contract. Currency futures are similar to foreign currency forward exchange contracts, except that they are traded on an exchange and standardized as to contract size and delivery date. Most currency futures call for payment or delivery in U.S. dollars. Unanticipated changes in currency prices may result in losses to a Portfolio and poorer overall performance for a Portfolio than if it had not entered into foreign currency forward exchange contracts. Certain Portfolios may enter into foreign currency forward exchange contracts under various circumstances. The typical use of a foreign currency forward exchange contract is to "lock in" the price of a security in U.S. dollars or some other foreign currency, which a Portfolio is holding in its portfolio. By entering into a foreign currency forward exchange contract for the purchase or sale, for a fixed amount of dollars or other currency, of the amount of foreign currency involved in the underlying security transactions, a Portfolio may be able to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar or other currency which is being used for the security purchase and the foreign currency in which the security is denominated during the period between the date on which the security is purchased or sold and the date on which payment is made or received. The Adviser also may from time to time utilize foreign currency forward exchange contracts for other purposes. For example, they may be used to hedge a foreign security held in the portfolio against a decline in value of the applicable foreign currency. They also may be used to lock in the current exchange rate of the currency in which those securities anticipated to be purchased are denominated. At times, a Portfolio may enter into "cross-currency" hedging transactions involving currencies other than those in which securities are held or proposed to be purchased are denominated.

A Portfolio will not enter into foreign currency forward exchange contracts or maintain a net exposure to these contracts where the consummation of the contracts would obligate a Portfolio to deliver an amount of foreign currency in excess of the value of a Portfolio's portfolio securities.

When required by law, a Portfolio will earmark cash or segregate U.S. government securities or other appropriate liquid portfolio securities in an amount equal to the value of a Portfolio's total assets committed to the consummation of foreign currency forward exchange contracts entered into under the circumstances set forth above. If the value of the securities so earmarked declines, additional cash or securities will be segregated or earmarked on a daily basis so that the value of such securities will equal the amount of a Portfolio's commitments with respect to such contracts.

A Portfolio may be limited in its ability to enter into hedging transactions involving foreign currency forward exchange contracts by the Code requirements relating to qualification as a regulated investment company.

Foreign currency forward exchange contracts may limit gains on portfolio securities that could otherwise be realized had they not been utilized and could result in losses. The contracts also may increase a Portfolio's volatility and may involve a significant amount of risk relative to the investment of cash.

Futures Contracts. A futures contract is a standardized agreement to buy or sell a specific quantity of an underlying asset, reference rate or index at a specific price at a specific future time (the "settlement date"). Futures contracts may be based on, among other things, a specified equity security (securities futures), a specified debt security or reference rate (interest rate futures), the value of a specified securities index (index futures) or the value of a foreign currency (currency futures). The value of a futures contract tends to increase and decrease in tandem with the value of the underlying instrument. The buyer of a futures contract agrees to purchase the underlying instrument on the settlement date and is said to be "long" the contract. The seller of a futures contract agrees to sell the underlying instrument on the settlement date and is said to be "short" the contract. Futures contracts call for settlement only on the expiration date and cannot be "exercised" at any other time during their term.

Depending on the terms of the particular contract, futures contracts are settled through either physical delivery of the underlying instrument on the settlement date (such as in the case of securities futures based on a specified debt security) or by payment of a cash settlement amount on the settlement date (such as in the case of futures contracts relating to broad-based securities indices). In the case of cash settled futures contracts, the settlement amount is equal to the difference between the reference instrument's price on the last trading day of the contract and the reference instrument's price at the time the contract was entered into. Most futures contracts, particularly futures contracts requiring physical delivery, are not held until the settlement date, but instead are offset before the settlement date through the establishment of an opposite and equal futures position (buying a contract that had been sold, or selling a contract that had been purchased). All futures transactions are effected through a clearinghouse associated with the exchange on which the futures are traded.

The buyer and seller of a futures contract are not required to deliver or pay for the underlying commodity unless the contract is held until the settlement date. However, both the buyer and seller are required to deposit "initial margin" with a futures commission merchant when the futures contract is entered into. Initial margin deposits are typically calculated as a percentage of the contract's market value. If the value of either party's position declines, the party will be required to make additional "variation margin" payments to settle the change in value on a daily basis. The process is known as "marking-to-market." Upon the closing of a futures position through the establishment of an offsetting position, a final determination of variation margin will be made and additional cash will be paid by or released to a Portfolio.

In addition, a Portfolio may be required to earmark cash or segregate liquid assets or maintain earmarked cash or segregated liquid assets in order to cover futures transactions. A Portfolio will earmark cash or segregate liquid assets in an amount equal to the difference between the market value of a futures contract entered into by a Portfolio and the aggregate value of the initial and variation margin payments made by a Portfolio with respect to such contract or as otherwise permitted by SEC rules or SEC staff positions. See "Regulatory Matters" above.

Additional Risks of Futures Transactions. The risks associated with futures contract transactions are different from, and possibly greater than, the risks associated with investing directly in the underlying instruments. Futures are highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments. The use of futures requires an understanding not only of the underlying

instrument but also of the futures contract itself. Futures may be subject to the risk factors generally applicable to derivatives transactions described herein, and may also be subject to certain additional risk factors, including:

• The risk of loss in buying and selling futures contracts can be substantial. Small price movements in the commodity underlying a futures position may result in immediate and substantial loss (or gain) to a Portfolio.

• Buying and selling futures contracts may result in losses in excess of the amount invested in the position in the form of initial margin. In the event of adverse price movements in the underlying commodity, security, index, currency or instrument, a Portfolio would be required to make daily cash payments to maintain its required margin. A Portfolio may be required to sell portfolio securities, or make or take delivery of the underlying securities in order to meet daily margin requirements at a time when it may be disadvantageous to do so. A Portfolio could lose margin payments deposited with a futures commission merchant if the futures commission merchant breaches its agreement with a Portfolio, becomes insolvent or declares bankruptcy.

• Most exchanges limit the amount of fluctuation permitted in futures contract prices during any single trading day. Once the daily limit has been reached in a particular futures contract, no trades may be made on that day at prices beyond that limit. If futures contract prices were to move to the daily limit for several trading days with little or no trading, a Portfolio could be prevented from prompt liquidation of a futures position and subject to substantial losses. The daily limit governs only price movements during a single trading day and therefore does not limit a Portfolio's potential losses.

• Index futures based upon a narrower index of securities may present greater risks than futures based on broad market indices, as narrower indices are more susceptible to rapid and extreme fluctuations as a result of changes in value of a small number of securities.

Options. An option is a contract that gives the holder of the option the right, but not the obligation, to buy from (in the case of a call option) or sell to (in the case of a put option) the seller of the option (the "option writer") the underlying security at a specified fixed price (the "exercise price") on or prior to a specified date for American options or only at expiration for European options (the "expiration date"). The buyer of the option pays to the option writer the option premium, which is the purchase price of the option.

Exchange-traded options are issued by a regulated intermediary such as the Options Clearing Corporation ("OCC"), which guarantees the performance of the obligations of the parties to such options. OTC options are purchased from or sold to counterparties through direct bilateral agreement between the Portfolios and their counterparties. Certain options, such as options on individual securities, are settled through physical delivery of the underlying security, whereas other options, such as index options, may be settled in cash in an amount based on the difference between the value of the underlying instrument and the strike price, which is then multiplied by a specified multiplier.

Writing Options. Certain Portfolios may write call and put options. As the writer of a call option, a Portfolio receives the premium from the purchaser of the option and has the obligation, upon exercise of the option, to deliver the underlying security upon payment of the exercise price. If the option expires without being exercised a Portfolio is not required to deliver the underlying security and retains the premium received.

Certain Portfolios may only write call options that are "covered." A call option on a security is covered if (a) a Portfolio owns the security underlying the call or has an absolute and immediate right to acquire that security without additional cash consideration (or, if additional cash consideration is required, such amount is maintained by a Portfolio in earmarked cash or segregated liquid assets) upon conversion or exchange of other securities held by a Portfolio; or (b) a Portfolio has purchased a call on the underlying security, the exercise price of which is (i) equal to or less than the exercise price of the call written, or (ii) greater than the exercise price of the call written, provided the difference is maintained by a Portfolio in earmarked cash or segregated liquid assets.

Selling call options involves the risk that a Portfolio may be required to sell the underlying security at a disadvantageous price, below the market price of such security, at the time the option is exercised. As the writer of a covered call option, a Portfolio forgoes, during the option's life, the opportunity to profit from increases in the market value of the underlying security covering the option above the sum of the premium and the exercise price but retains the risk of loss should the price of the underlying security decline.

Certain Portfolios may write put options. As the writer of a put option, a Portfolio receives the premium from the purchaser of the option and has the obligation, upon exercise of the option, to pay the exercise price and receive

delivery of the underlying security. If the option expires without being exercised, a Portfolio is not required to receive the underlying security in exchange for the exercise price and retains the option premium.

A Portfolio may only write put options that are "covered." A put option on a security is covered if (a) a Portfolio earmarks cash or segregates liquid assets equal to the exercise price; or (b) a Portfolio has purchased a put on the same security as the put written, the exercise price of which is (i) equal to or greater than the exercise price of the put written, or (ii) less than the exercise price of the put written, provided the difference is maintained by a Portfolio in earmarked cash or segregated liquid assets.

Selling put options involves the risk that a Portfolio may be required to buy the underlying security at a disadvantageous price, above the market price of such security, at the time the option is exercised. While a Portfolio's potential gain in writing a covered put option is limited to the premium received plus the interest earned on the liquid assets covering the put option, a Portfolio's risk of loss is equal to the entire value of the underlying security, offset only by the amount of the premium received.

A Portfolio may close out an options position which it has written through a closing purchase transaction. A Portfolio could execute a closing purchase transaction with respect to a written call option by purchasing a call option on the same underlying security which has the same exercise price and expiration date as the call option written by a Portfolio. A Portfolio could execute a closing purchase transaction with respect to a put option written by purchasing a put option on the same underlying security and having the same exercise price and expiration date as the put option written by a Portfolio. A closing purchase transaction may or may not result in a profit to a Portfolio. A Portfolio can close out its position as an option writer only if a liquid market exists for options on the same underlying security which have the same exercise date as the option written by a Portfolio. There is no assurance that such a market will exist with respect to any particular option.

The writer of an American option generally has no control over the time when the option is exercised and the option writer is required to deliver or acquire the underlying security. Once an option writer has received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the option. Thus, the use of options may require a Portfolio to buy or sell portfolio securities at inopportune times or for prices other than the current market values of such securities, which may limit the amount of appreciation a Portfolio can realize on an investment, or may cause a Portfolio to hold a security that it might otherwise sell.

Purchasing Options. Certain Portfolios may purchase call and put options. As the buyer of a call option, a Portfolio pays the premium to the option writer and has the right to purchase the underlying security from the option writer at the exercise price. If the market price of the underlying security rises above the exercise price, a Portfolio could exercise the option and acquire the underlying security at a below market price, which could result in a gain to a Portfolio, minus the premium paid. As the buyer of a put option, a Portfolio pays the premium to the option writer and has the right to sell the underlying security to the option writer at the exercise price. If the market price of the underlying security declines below the exercise price, a Portfolio could exercise the option and sell the underlying security at an above market price, which could result in a gain to a Portfolio, minus the premium paid. A Portfolio may buy call and put options whether or not it holds the underlying securities.

As a buyer of a call or put option, a Portfolio may sell put or call options that it has purchased at any time prior to such option's expiration date through a closing sale transaction. The principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price of the underlying security in relation to the exercise price of the option, the volatility of the underlying security, the underlying security's dividend policy, and the time remaining until the expiration date. A closing sale transaction may or may not result in a profit to a Portfolio. A Portfolio's ability to initiate a closing sale transaction is dependent upon the liquidity of the options market and there is no assurance that such a market will exist with respect to any particular option. If a Portfolio does not exercise or sell an option prior to its expiration date, the option expires and becomes worthless.

OTC Options. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size and strike price, the terms of OTC options generally are established through negotiation between the parties to the options contract. This type of arrangement allows the purchaser and writer greater flexibility to tailor the option to their needs. OTC options are available for a greater variety of securities or baskets of securities, and in a wider range of expiration dates and exercise prices, than exchange-traded options. However, unlike exchange-traded options, which are issued and guaranteed by a regulated intermediary, such as the OCC, OTC options are entered into directly with the counterparty. Unless the counterparties provide for it, there is no central clearing or guaranty function for an OTC option. Therefore, OTC options are subject to the risk of default or non-performance by the counterparty. Accordingly, the Adviser must assess the creditworthiness of the counterparty to determine the likelihood that the terms of the option will be

satisfied. There can be no assurance that a continuous liquid secondary market will exist for any particular OTC option at any specific time. As a result, a Portfolio may be unable to enter into closing sale transactions with respect to OTC options.

Index Options. Call and put options on indices operate similarly to options on securities. Rather than the right to buy or sell a single security at a specified price, options on an index give the holder the right to receive, upon exercise of the option, an amount of cash determined by reference to the difference between the value of the underlying index and the strike price. The underlying index may be a broad-based index or a narrower market index. Unlike many options on securities, all settlements are in cash. The settlement amount, which the writer of an index option must pay to the holder of the option upon exercise, is generally equal to the difference between the strike price of the option and the value of the underlying index, multiplied by a specified multiplier. The multiplier determines the size of the investment position the option represents. Gain or loss to a Portfolio on index options transactions will depend, in part, on price movements of the underlying index generally or in a particular segment of the index rather than price movements of individual components of the index. As with other options, a Portfolio may close out its position in index options through closing purchase transactions and closing sale transactions provided that a liquid secondary market exists for such options.

Index options written by a Portfolio will generally be covered in a manner similar to the covering of other types of options, by holding an offsetting financial position and/or earmarking cash or segregating liquid assets. A Portfolio may cover call options written on an index by owning securities or other assets whose price changes, in the opinion of the Adviser, are expected to correlate to those of the underlying index.

Foreign Currency Options. Options on foreign currencies operate similarly to options on securities. Rather than the right to buy or sell a single security at a specified price, options on foreign currencies give the holder the right to buy or sell foreign currency for a fixed amount in U.S. dollars or other base currencies. Options on foreign currencies are traded primarily in the OTC market, but may also be traded on U.S. and foreign exchanges. The value of a foreign currency option is dependent upon the value of the underlying foreign currency relative to the U.S. dollar or other base currency. The price of the option may vary with changes, among other things, in the value of either or both currencies and has no relationship to the investment merits of a foreign security. Options on foreign currencies are affected by all of those factors which influence foreign exchange rates and foreign investment generally. As with other options, a Portfolio may close out its position in foreign currency options through closing purchase transactions and closing sale transactions provided that a liquid market exists for such options.

Foreign currency options written by a Portfolio will generally be covered in a manner similar to the covering of other types of options, by holding an offsetting financial position and/or earmarking cash or segregating liquid assets.

Options on Futures Contracts. Options on futures contracts are similar to options on securities except that options on futures contracts give the purchasers the right, in return for the premium paid, to assume a position in a futures contract (a long position in the case of a call option and a short position in the case of a put option) at a specified exercise price at any time prior to the expiration of the option. Upon exercise of the option, the parties will be subject to all of the risks associated with futures transactions and subject to margin requirements. As the writer of options on futures contracts, a Portfolio would also be subject to initial and variation margin requirements on the option position.

Options on futures contracts written by a Portfolio will generally be covered in a manner similar to the covering of other types of options, by holding an offsetting financial position and/or earmarking cash or segregating liquid assets. A Portfolio may cover an option on a futures contract by purchasing or selling the underlying futures contract. In such instances the exercise of the option will serve to close out a Portfolio's futures position.

Additional Risks of Options Transactions. The risks associated with options transactions are different from, and possibly greater than, the risks associated with investing directly in the underlying instruments. Options are highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments. The use of options requires an understanding not only of the underlying instrument but also of the option itself. Options may be subject to the risk factors generally applicable to derivatives transactions described herein, and may also be subject to certain additional risk factors, including:

• The exercise of options written or purchased by a Portfolio could cause a Portfolio to sell portfolio securities, thus increasing a Portfolio's portfolio turnover.

• A Portfolio pays brokerage commissions each time it writes or purchases an option or buys or sells an underlying security in connection with the exercise of an option. Such brokerage commissions could be higher relative to the commissions for direct purchases of sales of the underlying securities.

• A Portfolio's options transactions may be limited by limitations on options positions established by the SEC, the CFTC or the exchanges on which such options are traded.

• The hours of trading for exchange-listed options may not coincide with the hours during which the underlying securities are traded. To the extent that the options markets close before the markets for the underlying securities, significant price and rate movements can take place in the underlying securities that cannot be reflected in the options markets.

• Index options based upon a narrow index of securities or other assets may present greater risks than options based on broad market indices, as narrower indices are more susceptible to rapid and extreme fluctuations as a result of changes in the values of a smaller number of securities or other assets.

• A Portfolio is subject to the risk of market movements between the time that an option is exercised and the time of performance thereunder, which could increase the extent of any losses suffered by a Portfolio in connection with options transactions.

Swaps. An OTC swap contract is an agreement between two parties pursuant to which the parties exchange payments at specified dates on the basis of a specified notional amount, with the payments calculated by reference to specified securities, indices, reference rates, currencies or other instruments. Most swap agreements provide that when the period payment dates for both parties are the same, the payments are made on a net basis (i.e., the two payment streams are netted out, with only the net amount paid by one party to the other). A Portfolio's obligations or rights under a swap contract entered into on a net basis will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each counterparty. Many swap agreements are not entered into or traded on exchanges and often there is no central clearing or guaranty function for swaps. These OTC swaps are often subject to the risk of default or non-performance by the counterparty. Accordingly, the Adviser must assess the creditworthiness of the counterparty to determine the likelihood that the terms of the swap will be satisfied.

Swap agreements allow for a wide variety of transactions. For example, fixed rate payments may be exchanged for floating rate payments, U.S. dollar-denominated payments may be exchanged for payments denominated in foreign currencies, and payments tied to the price of one security, index, reference rate, currency or other instrument may be exchanged for payments tied to the price of a different security, index, reference rate, currency or other instrument. Swap contracts are typically individually negotiated and structured to provide exposure to a variety of particular types of investments or market factors. Swap contracts can take many different forms and are known by a variety of names. To the extent consistent with a Portfolio's investment objectives and policies, a Portfolio is not limited to any particular form or variety of swap contract. A Portfolio may utilize swaps to increase or decrease its exposure to the underlying instrument, reference rate, foreign currency, market index or other asset. Certain Portfolios may also enter into related derivative instruments including caps, floors and collars.

A Portfolio may be required to cover swap transactions. Obligations under swap agreements entered into on a net basis are generally accrued daily and any accrued but unpaid amounts owed by a Portfolio to the swap counterparty will be covered by earmarking cash or segregating liquid assets. If a Portfolio enters into a swap agreement on other than a net basis, a Portfolio will earmark cash or segregate liquid assets with a value equal to the full notional amount of a Portfolio's accrued obligations under the agreement.

The Dodd-Frank Act and related regulatory developments require the eventual clearing and exchange-trading of many standardized OTC derivative instruments that the CFTC and SEC recently defined as "swaps" and "security based swaps," respectively. Mandatory exchange-trading and clearing is occurring on a phased-in basis based on the type of market participant and CFTC approval of contracts for central clearing and exchange trading. In a cleared swap, a Portfolio's ultimate counterparty is a central clearinghouse rather than a brokerage firm, bank or other financial institution. A Portfolio initially will enter into cleared swaps through an executing broker. Such transactions will then be submitted for clearing and, if cleared, will be held at regulated futures commission merchants ("FCMs") that are members of the clearinghouse that serves as the central counterparty. When a Portfolio enters into a cleared swap, it must deliver to the central counterparty (via an FCM) an amount referred to as "initial margin." Initial margin requirements are determined by the central counterparty, but an FCM may require additional initial margin above the amount required by the central counterparty. During the term of the swap agreement, a "variation margin" amount may also be required to be paid by a Portfolio or may be received by a Portfolio in accordance with margin controls set for such accounts, depending upon changes in the price of the underlying reference asset subject to the swap agreement. At the conclusion of the term of the swap agreement, if a Portfolio has a loss equal to or greater than the margin amount, the margin amount is paid to the FCM along with any loss that is greater than such margin amount. If a Portfolio has a loss of less than the margin amount, the excess

margin is returned to the Portfolio. If a Portfolio has a gain, the full margin amount and the amount of the gain is paid to the Portfolio.

Central clearing is designed to reduce counterparty credit risk compared to uncleared swaps because central clearing interposes the central clearinghouse as the counterparty to each participant's swap, but it does not eliminate those risks completely. There is also a risk of loss by a Portfolio of the initial and variation margin deposits in the event of bankruptcy of the FCM with which the Portfolio has an open position in a swap contract. The assets of a Portfolio may not be fully protected in the event of the bankruptcy of the FCM or central counterparty because the Portfolio might be limited to recovering only a pro rata share of all available funds and margin segregated on behalf of an FCM's or central counterparty's customers or clearing members. If the FCM does not provide accurate reporting, a Portfolio is also subject to the risk that the FCM could use the Portfolio's assets, which are held in an omnibus account with assets belonging to the FCM's other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty. Certain swaps have begun trading on exchanges called swap execution facilities. Exchange-trading is expected to increase liquidity of swaps trading.

In addition, with respect to cleared swaps, a Portfolio may not be able to obtain as favorable terms as it would be able to negotiate for an uncleared swap. In addition, an FCM may unilaterally impose position limits or additional margin requirements for certain types of swaps in which a Portfolio may invest. Central counterparties and FCMs generally can require termination of existing cleared swap transactions at any time, and can also require increases in margin above the margin that is required at the initiation of the swap agreement. Margin requirements for cleared swaps vary on a number of factors, and the margin required under the rules of the clearinghouse and FCM may be in excess of the collateral required to be posted by a Portfolio to support its obligations under a similar uncleared swap. However, regulators are expected to adopt rules imposing certain margin requirements, including minimums, on uncleared swaps in the near future, which could change this comparison.

A Portfolio is also subject to the risk that, after entering into a cleared swap with an executing broker, no FCM or central counterparty is willing or able to clear the transaction. In such an event, the central counterparty would void the trade. Before a Portfolio can enter into a new trade, market conditions may become less favorable to the Portfolio.

The Adviser will continue to monitor developments regarding trading and execution of cleared swaps on exchanges, particularly to the extent regulatory changes affect a Portfolio's ability to enter into swap agreements and the costs and risks associated with such investments.

Interest Rate Swaps, Caps, Floors and Collars. Interest rate swaps consist of an agreement between two parties to exchange their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments). Interest rate swaps are generally entered into on a net basis. Interest rate swaps do not involve the delivery of securities, other underlying assets, or principal. Accordingly, the risk of market loss with respect to interest rate and total rate of return swaps is typically limited to the net amount of interest payments that a Portfolio is contractually obligated to make.

Certain Portfolios may also buy or sell interest rate caps, floors and collars. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified interest rate index exceeds a predetermined level, to receive payments of interest on a specified notional amount from the party selling the interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified interest rate falls below a predetermined level, to receive payments of interest on a specified notional amount from the party selling the interest rate floor. A collar is a combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates. Caps, floors and collars may be less liquid than other types of derivatives. If a Portfolio sells caps, floors and collars, it will earmark cash or segregate liquid assets with a value equal to the full amount, accrued daily, of a Portfolio's net obligations with respect to the caps, floors or collars.

Index Swaps. An index swap consists of an agreement between two parties in which a party typically exchanges a cash flow based on a notional amount of a reference index for a cash flow based on a different index or on another specified instrument or reference rate. Index swaps are generally entered into on a net basis.

Inflation Swaps. Inflation swap agreements are contracts in which one party typically agrees to pay the cumulative percentage increase in a price index, such as the Consumer Price Index, over the term of the swap (with some lag on the referenced inflation index), and the other party pays a compounded fixed rate. Inflation swap agreements may be used to protect the NAV of a Portfolio against an unexpected change in the rate of inflation measured by an inflation index. The value of inflation swap agreements is expected to change in response to

changes in real interest rates. Real interest rates are tied to the relationship between nominal interest rates and the rate of inflation.

Currency Swaps. A currency swap consists of an agreement between two parties to exchange cash flows on a notional amount of two or more currencies based on the relative value differential among them, such as exchanging a right to receive a payment in foreign currency for the right to receive U.S. dollars. Currency swap agreements may be entered into on a net basis or may involve the delivery of the entire principal value of one designated currency in exchange for the entire principal value of another designated currency. In such cases, the entire principal value of a currency swap is subject to the risk that the counterparty will default on its contractual delivery obligations.

Credit Default Swaps. A credit default swap consists of an agreement between two parties in which the "buyer" typically agrees to pay to the "seller" a periodic stream of payments over the term of the contract and the seller agrees to pay the buyer the par (or other agreed-upon) value of a referenced debt obligation upon the occurrence of a credit event with respect to the issuer of that referenced debt obligation. Generally, a credit event means bankruptcy, failure to pay, obligation acceleration or modified restructuring. A Portfolio may be either the buyer or seller in a credit default swap. Where a Portfolio is the buyer of a credit default swap contract, it would typically be entitled to receive the par (or other agreed-upon) value of a referenced debt obligation from the counterparty to the contract only in the event of a default or similar event by the issuer of the debt obligation. If no default occurs, a Portfolio would have paid to the counterparty a periodic stream of payments over the term of the contract and received no benefit from the contract. A Portfolio will generally earmark cash or segregate liquid assets to cover any potential obligation under a credit default swap sold by a Portfolio. The use of credit default swaps could result in losses to a Portfolio if the Adviser fails to correctly evaluate the creditworthiness of the issuer of the referenced debt obligation.

Swaptions. An option on a swap agreement, also called a "swaption," is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for a premium. A receiver swaption gives the owner the right to receive the return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the return of a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties.

General Risks of Swaps. The risks associated with swap transactions are different from, and possibly greater than, the risks associated with investing directly in the underlying instruments. Swaps are highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments. The use of swaps requires an understanding not only of the underlying instrument but also of the swap contract itself. Swap transactions may be subject to the risk factors generally applicable to derivatives transactions described above, and may also be subject to certain additional risk factors, including:

• OTC swap agreements are not traded on exchanges and may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell.

• In addition to the risk of default by the counterparty, if the creditworthiness of a counterparty to a swap agreement declines, the value of the swap agreement would be likely to decline, potentially resulting in losses.

• The swaps market is subject to extensive regulation under the Dodd-Frank Act and certain CFTC and SEC rules promulgated thereunder. It is possible that further developments in the swaps market, including new and additional governmental regulation, could result in higher Portfolio costs and expenses and could adversely affect a Portfolio's ability to utilize swaps, terminate existing swap agreements or realize amounts to be received under such agreements.

Contracts for Difference ("CFDs"). Certain Portfolios may purchase CFDs. A CFD is a privately negotiated contract between two parties, buyer and seller, stipulating that the seller will pay to or receive from the buyer the difference between the nominal value of the underlying instrument at the opening of the contract and that instrument's value at the end of the contract. The underlying instrument may be a single security, stock basket or index. A CFD can be set up to take either a short or long position on the underlying instrument. The buyer and seller are typically both required to post margin, which is adjusted daily. The buyer will also pay to the seller a financing rate on the notional amount of the capital employed by the seller less the margin deposit. A CFD is usually terminated at the buyer's initiative. The seller of the CFD will simply match the exposure of the underlying instrument in the open market and the parties will exchange whatever payment is due.

As is the case with owning any financial instrument, there is the risk of loss associated with buying a CFD. For example, if a Portfolio buys a long CFD and the underlying security is worth less at the end of the contract, the Portfolio would be required to make a payment to the seller and would suffer a loss. Also, there may be liquidity

risk if the underlying instrument is illiquid because the liquidity of a CFD is based on the liquidity of the underlying instrument. A further risk is that adverse movements in the underlying security will require the buyer to post additional margin. CFDs also carry counterparty risk, i.e., the risk that the counterparty to the CFD transaction may be unable or unwilling to make payments or to otherwise honor its financial obligations under the terms of the contract. If the counterparty were to do so, the value of the contract, and of a Portfolio's shares, may be reduced. A Portfolio will not enter into a CFD transaction that is inconsistent with its investment objective, policies and strategies.

Structured Investments. Certain Portfolios also may invest a portion of their assets in structured investments. A structured investment is a derivative security designed to offer a return linked to a particular underlying security, currency, commodity or market, for which the amount of principal repayment and/or interest payments is based on the change in value of such underlying security, currency, commodity or market, including, among others, currency exchange rates, interest rates (such as the prime lending rate or LIBOR), referenced bonds and stock indices or other financial references. Structured investments may come in various forms, including notes, warrants and options to purchase securities, and may be listed and traded on an exchange or otherwise traded in the OTC market.

The Portfolios will typically use structured investments to gain exposure to a permitted underlying security, currency, commodity or market when direct access to such security, currency, commodity or market is limited or inefficient from a tax, cost or regulatory standpoint. Investments in structured investments involve risks including issuer risk, counterparty risk and market risk. Holders of structured investments bear risks of the underlying investment and are subject to issuer or counterparty risk because the Portfolios are relying on the creditworthiness of such issuer or counterparty and has no rights with respect to the underlying investment. Certain structured investments may be thinly traded or have a limited trading market and may have the effect of increasing a Portfolio's illiquidity to the extent that the Portfolio, at a particular point in time, may be unable to find qualified buyers for these investments.

A structured investment may be linked either positively or negatively to an underlying security, currency, commodity, index or market and a change in interest rates, principal amount, volatility, currency values or other factors, depending on the structured investment's design, may result in a gain or loss that is a multiple of the movement of such interest rates, principal amount, volatility, currency values or other factors. Application of a multiplier is comparable to the use of financial leverage, a speculative technique. Leverage magnifies the potential for gain and the risk of loss. As a result, a relatively small decline in the value of the referenced factor could result in a relatively large loss in the value of a structured investment.

Other types of structured investments include interests in entities organized and operated for the purpose of restructuring the investment characteristics of underlying investment interests or securities. This type of securitization or restructuring usually involves the deposit or purchase of an underlying security by a U.S. or foreign entity, such as a corporation or trust of specified instruments, and the issuance by that entity of one or more classes of securities backed by, or representing an interest in, the underlying instruments. The cash flow or rate of return on the underlying investments may be apportioned among the newly issued securities to create different investment characteristics, such as varying maturities, credit quality, payment priorities and interest rate provisions. Structured investments which are subordinated, for example, in payment priority often offer higher returns, but may result in increased risks compared to other investments.

Combined Transactions. Combined transactions involve entering into multiple derivatives transactions (such as multiple options transactions, including purchasing and writing options in combination with each other; multiple futures transactions; and combinations of options, futures, forward and swap transactions) instead of a single derivatives transaction in order to customize the risk and return characteristics of the overall position. Combined transactions typically contain elements of risk that are present in each of the component transactions. A Portfolio may enter into a combined transaction instead of a single derivatives transaction when, in the opinion of the Adviser, it is in the best interest of the Portfolio to do so. Because combined transactions involve multiple transactions, they may result in higher transaction costs and may be more difficult to close out.

INVESTMENT LIMITATIONS

Fundamental Limitations

Each Portfolio has adopted the following restrictions, which are fundamental policies and may not be changed without the approval of the lesser of: (i) at least 67% of the voting securities of the Portfolio present at a meeting if the holders of more than 50% of the outstanding voting securities of the Portfolio are present or represented by proxy;

or (ii) more than 50% of the outstanding voting securities of the Portfolio. Each Portfolio (except for the Global Franchise, International Real Estate and Small Company Growth Portfolios) will not:

(1) purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments; provided that this restriction shall not prohibit the Portfolio from purchasing or selling options, futures contracts and related options thereon, forward contracts, swaps, caps, floors, collars and any other financial instruments or from investing in securities or other instruments backed by physical commodities or as otherwise permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief applicable to the Portfolio from the provisions of the 1940 Act, as amended from time to time;

(2) purchase or sell real estate, although it may purchase and sell securities of companies that deal in real estate and may purchase and sell securities that are secured by interests in real estate;

(3) make loans of money or property to any person, except (a) to the extent that securities or interests in which the Portfolio may invest are considered to be loans, (b) through the loan of portfolio securities, (c) by engaging in repurchase agreements or (d) as may otherwise be permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief applicable to the Fund from the provisions of the 1940 Act, as amended from time to time;

(4) except with respect to the Emerging Markets Domestic Debt, Emerging Markets External Debt, Global Discovery, Global Quality, Multi-Asset, Select Global Infrastructure, Total Emerging Markets and U.S. Real Estate Portfolios, invest in a manner inconsistent with its classification as a "diversified company" as provided by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief applicable to the Portfolio from the provisions of the 1940 Act, as amended from time to time;

(5) borrow money, except the Portfolio may borrow money to the extent permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief applicable to the Portfolio from the provisions of the 1940 Act, as amended from time to time;

(6) issue senior securities, except the Portfolio may issue senior securities to the extent permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief applicable to the Portfolio from the provisions of the 1940 Act, as amended from time to time;

(7) underwrite securities issued by others, except to the extent that the Portfolio may be considered an underwriter within the meaning of the 1933 Act in the disposition of restricted securities;

(8) except with respect to the Global Quality and Select Global Infrastructure Portfolios, acquire any securities of companies within one industry if, as a result of such acquisition, more than 25% of the value of the Portfolio's total assets would be invested in securities of companies within such industry; provided, however, that there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, except that the U.S. Real Estate Portfolio will invest more than 25% of its total assets in the U.S. real estate industry, as described in its Prospectus, that the Global Real Estate Portfolio will invest more than 25% of its total assets in the real estate industry, as described in its Prospectus, that the Frontier Emerging Markets Portfolio will invest more than 25% of its total assets in the banking industry and that the Total Emerging Markets Portfolio will invest more than 25% of its total assets in the investment company industry;

(9) with respect to the Global Quality and Select Global Infrastructure Portfolios only, acquire any securities of companies within one industry if, as a result of such acquisition, 25% or more of the value of the Portfolio's total assets would be invested in securities of companies within such industry; provided, however, that there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, except that the Select Global Infrastructure Portfolio will invest 25% or more of its total assets in the infrastructure industry; and

(10) except with respect to the Global Real Estate Portfolio, write or acquire options or interests in oil, gas or other mineral exploration or development programs.

Each of the Global Franchise, International Real Estate and Small Company Growth Portfolios will not:

(1) purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (except this shall not prevent the Portfolio from purchasing or selling options or futures contracts or from investing in securities or other instruments backed by physical commodities);

(2) purchase or sell real estate, although it may purchase and sell securities of companies that deal in real estate and may purchase and sell securities that are secured by interests in real estate;

(3) lend any security or make any other loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties, but this limitation does not apply to purchases of debt securities or repurchase agreements;

(4) except with respect to the Global Franchise Portfolio and the International Real Estate Portfolio, with respect to 75% of its total assets (i) purchase more than 10% of any class of the outstanding voting securities of any issuer and (ii) purchase securities of an issuer (except obligations of the U.S. Government and its agencies and instrumentalities) if as a result more than 5% of the Portfolio's total assets, at market value, would be invested in the securities of such issuer;

(5) issue senior securities and will not borrow, except from banks and as a temporary measure for extraordinary or emergency purposes and then, in no event, in excess of 33 1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings);

(6) underwrite securities issued by others, except to the extent that the Portfolio may be considered an underwriter within the meaning of the 1933 Act in the disposition of restricted securities;

(7) except with respect to the International Real Estate Portfolio, acquire any securities of companies within one industry if, as a result of such acquisition, more than 25% of the value of the Portfolio's total assets would be invested in securities of companies within such industry; provided, however, that there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities;

(8) with respect to the International Real Estate Portfolio only, acquire any securities of companies within one industry if, as a result of such acquisition, 25% or more of the value of the Portfolio's total assets would be invested in securities of companies within such industry; provided, however, that there shall be no limitation on the purchase of obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, except that the International Real Estate Portfolio will invest 25% or more of its total assets in the real estate industry; and

(9) write or acquire options or interests in oil, gas or other mineral exploration or development programs.

Non-Fundamental Limitations

In addition, each Portfolio of the Fund has adopted the following non-fundamental investment limitations, which may be changed by the Board without shareholder approval. Each Portfolio will not:

(1) purchase on margin or sell short except (i) that the Emerging Markets Domestic Debt and the Emerging Markets External Debt Portfolios may sell securities short without limitation but consistent with applicable legal requirements as stated in their Prospectuses; (ii) that each Portfolio may enter into option transactions and futures contracts as described in its Prospectus; and (iii) as specified above in fundamental investment limitation number (1) above;

(2) except with respect to the Global Real Estate Portfolio, make loans except (i) by purchasing bonds, debentures or similar obligations (including repurchase agreements, subject to the limitations as described in the respective Prospectuses) that are publicly distributed; and (ii) by lending its portfolio securities to banks, brokers, dealers and other financial institutions so long as such loans are not inconsistent with the 1940 Act or the rules and regulations or interpretations of the SEC thereunder;

(3) borrow money, except from banks for extraordinary or emergency purposes, and then only in amounts up to 10% of the value of the Portfolio's total assets (including, in each case, the amount borrowed less liabilities (other than borrowings)), or purchase securities while borrowings exceed 5% of its total assets, except that (i) the Emerging Markets Domestic Debt and Emerging Markets External Debt Portfolios may borrow in accordance with fundamental investment limitation number (5) above and (ii) the Emerging Markets Domestic Debt and Emerging Markets External Debt Portfolios may purchase securities while borrowings exceed 5% of their total assets, provided that the sole purpose of such borrowings is to honor redemption requests; and

(4) except with respect to the Total Emerging Markets Portfolio, invest in other investment companies in reliance on Sections 12(d)(1)(F), 12(d)(1)(G) or 12(d)(1)(J) of the 1940 Act.

With respect to its Fundamental Investment Restriction 8, the Total Emerging Markets Portfolio's concentration of its investments in the investment company industry refers to its investments in the Underlying Funds.

Although the Total Emerging Markets Portfolio is classified as a non-diversified fund, certain Underlying Funds are diversified and, accordingly, such Underlying Funds are required to meet certain diversification requirements under federal securities law. Notwithstanding the foregoing investment restrictions, the Underlying Funds in which the Total Emerging Markets Portfolio may invest have adopted certain investment restrictions which may be more or less restrictive than those listed above, which may permit the Total Emerging Markets Portfolio to engage in investment strategies indirectly that are prohibited under the investment restrictions listed above. The investment restrictions of an Underlying Fund are located in the statement of additional information for that Underlying Fund.

Whether diversified or non-diversified, each Portfolio will satisfy the diversification requirements for tax treatment as a regulated investment company ("RIC"). As a result, each Portfolio will diversify its holdings so that, at the close of each quarter of its taxable year or within 30 days thereafter, (i) at least 50% of the market value of the Portfolio's total assets is represented by cash (including cash items and receivables), U.S. government securities, securities of other RICs and other securities, with such other securities limited, in respect of any one issuer, for purposes of this calculation to an amount not greater than 5% of the value of the Portfolio's total assets and 10% of the outstanding voting securities of such issuer; and (ii) not more than 25% of the value of its total assets is invested in the securities of any one issuer (other than U.S. government securities or securities of other RICs) or of one or more "qualified" publicly traded partnerships. Prior to the close of each quarter (or within 30 days thereafter), the Portfolio's holdings may be less diversified and are not required to satisfy any diversification test.

The percentage limitations contained in these fundamental and non-fundamental limitations apply at the time of purchase of securities. A later change in percentage resulting from changes in the value of the Portfolio's assets or in total or net assets of the Portfolio will not be considered a violation of the restriction and the sale of securities will not be required. The foregoing does not apply to borrowings. Future portfolios of the Fund may adopt different limitations.

The investment policies, limitations or practices of the Portfolios may not apply during periods of unusual or adverse market, economic, political or other conditions. Such market, economic, political or other conditions may include periods of abnormal or heightened market volatility, strained credit and/or liquidity conditions or increased governmental intervention in the markets or industries. During such periods, a Portfolio may not invest according to its principal investment strategies or in the manner in which its name may suggest, and may be subject to different and/or heightened risks. It is possible that such unusual or adverse conditions may continue for extended periods of time.

DISCLOSURE OF PORTFOLIO HOLDINGS

The Fund's Board of Directors and the Adviser have adopted policies and procedures regarding disclosure of portfolio holdings (the "Policy"). Pursuant to the Policy, the Adviser may disclose information concerning Fund portfolio holdings only if such disclosure is consistent with the antifraud provisions of the federal securities laws and the Fund's and the Adviser's fiduciary duties to Fund shareholders. In no instance may the Adviser, Sub-Advisers or the Fund receive compensation or any other consideration in connection with the disclosure of information about the portfolio securities of the Fund. Consideration includes any agreement to maintain assets in the Fund or in other investment companies or accounts managed by the Adviser or by any affiliated person of the Adviser. Non-public information concerning portfolio holdings may be divulged to third-parties only when the Fund has a legitimate business purpose for doing so and the recipients of the information are subject to a duty of confidentiality. Under no circumstances shall current or prospective Fund shareholders receive non-public portfolio holdings information, except as described below.

The Fund makes available on its public website the following portfolio holdings information:

• complete portfolio holdings information monthly, at least 15 calendar days after the end of each month (except with respect to the Global Franchise and Global Quality Portfolios); and

• top 10 holdings monthly, at least 15 calendar days after the end of each month.

With respect to the Global Franchise and Global Quality Portfolios, complete holdings will be available on a quarterly basis 15 calendar days after the quarter-end to current shareholders who call (800) 548-7786 or email client service at msimcs@morganstanley.com.

The Fund provides a complete schedule of portfolio holdings for the second and fourth fiscal quarters in its semiannual and annual reports, and for the first and third fiscal quarters in its filings with the SEC on Form N-Q.

All other portfolio holdings information that has not been disseminated in a manner making it available to investors generally as described above is non-public information for purposes of the Policy.

The Fund may make selective disclosure of non-public portfolio holdings information pursuant to certain exemptions set forth in the Policy. Third-parties eligible for exemptions under the Policy and therefore eligible to receive such disclosures currently include fund rating agencies, information exchange subscribers, consultants and analysts, portfolio analytics providers and service providers, provided that the third-party expressly agrees to maintain the disclosed information in confidence and not to trade portfolio securities or related derivative securities based on the non-public information. Non-public portfolio holdings information may not be disclosed to a third-party pursuant to an exemption unless and until the third-party recipient has entered into a non-disclosure agreement with the Fund and the arrangement has been reviewed and approved as set forth in the Policy and discussed below. In addition, persons who owe a duty of trust or confidence to the Fund or the Adviser may receive non-public portfolio holdings information without entering into a non-disclosure agreement. Currently, these persons include (i) the Fund's independent registered public accounting firm (as of the Fund's fiscal year end and on an as-needed basis), (ii) counsel to the Fund (on an as needed basis), (iii) counsel to the independent Directors (on an as-needed basis) and (iv) members of the Board of Directors (on an as-needed basis). Subject to the terms and conditions of any agreement between the Adviser or the Fund and the third-party recipient, if these conditions for disclosure are satisfied, there shall be no restriction on the frequency with which Fund non-public portfolio holdings information is released, and no lag period shall apply (unless otherwise indicated below).

The Adviser and/or Sub-Adviser may provide interest lists to broker-dealers who execute securities transactions for the Fund without entering into a non-disclosure agreement with the broker-dealers, provided that the interest list satisfies all of the following criteria: (1) the interest list must contain only the CUSIP numbers and/or ticker symbols of securities held in all registered management investment companies advised by the Adviser and Sub-Advisers or any affiliate of the Adviser or Sub-Advisers (the "MSIM Funds") on an aggregate, rather than a fund-by-fund basis; (2) the interest list must not contain information about the number or value of shares owned by a specified MSIM Fund; (3) the interest list may identify the investment strategy, but not the particular MSIM Funds, to which the list relates; and (4) the interest list may not identify the portfolio manager or team members responsible for managing the MSIM Funds.

Fund shareholders may elect in some circumstances to redeem their shares of the Fund in exchange for their pro rata share of the securities held by the Fund. Under such circumstances, Fund shareholders may receive a complete listing of the holdings of the Fund up to seven calendar days prior to making the redemption request provided that they represent in writing that they agree not to disclose or trade on the basis of the portfolio holdings information.

The Fund may discuss or otherwise disclose performance attribution analyses (i.e., mention the effects of having a particular security in the portfolio(s)) where such discussion is not contemporaneously made public, provided that the particular holding has been disclosed publicly or the information that includes such holding(s) has been made available to shareholders requesting such information. Additionally, any discussion of the analyses may not be more current than the date the holding was disclosed publicly or the information that includes such holding(s) has been made available to shareholders requesting such information.

The Fund may disclose portfolio holdings to transition managers, provided that the Fund has entered into a non-disclosure or confidentiality agreement with the party requesting that the information be provided to the transition manager and the party to the non-disclosure agreement has, in turn, entered into a non-disclosure or confidentiality agreement with the transition manager.

The Adviser, the Sub-Advisers, the Fund and/or certain Portfolios currently have entered into ongoing arrangements with the following parties:

Name

Information Disclosed

Frequency⁽¹⁾

Lag Time

Service Providers

RiskMetrics Group
(proxy voting agent)^(*)

Complete portfolio holdings

Daily basis

⁽²

⁾

State Street Bank and
Trust Company^(*)

Complete portfolio holdings

As needed

⁽²

⁾

Blackrock Financial
Management Inc.^(*)(4)

Complete portfolio holdings

Daily basis

⁽²

⁾

KPMG LLP^(*)(5)

Information regarding the
Portfolio's holdings in

Monthly basis

Approximately five to
eight business days after

KPMG LLP's top

month end

audit clients

R.V. Kuhns &
Associates, Inc.^(*)(5)

Information regarding the
Portfolio's holdings in

Monthly basis

Approximately five to
eight business days after

KPMG LLP's top

month end

audit clients

Fund Rating Agencies

Lipper^(*)

Top ten and complete
portfolio holdings

Monthly basis

Approximately six business
days after month end

Consultants and Analysts

Citigroup^(*)

Complete portfolio holdings

Quarterly basis⁽³⁾

At least one day after
quarter end

Credit Suisse First Boston^(*)

Top ten and complete
portfolio holdings

Monthly and
quarterly basis,
respectively

Approximately 10-12 days
after month/quarter end

Evaluation Associates^(*)

Top ten and complete
portfolio holdings

Monthly and
quarterly basis,
respectively⁽³⁾

Approximately 10-12 days
after month/quarter end

Mercer Investment
Consulting^(*)(6)

Complete portfolio
holdings

As needed

⁽²

⁾

Merrill Lynch^(*)

Top ten and complete
portfolio holdings

Monthly and quarterly
basis, respectively⁽³⁾

Approximately 10-12 days
after month/quarter end

Portfolio Analytics Providers

FactSet Research
Systems, Inc.^(*)

Complete portfolio
holdings

Daily basis

One day

^(*) This entity has agreed to maintain Fund non-public portfolio holdings information in confidence and not to trade portfolio securities based on the non-public portfolio holdings information.

⁽¹⁾ Dissemination of portfolio holdings information to entities listed above may occur less frequently than indicated (or not at all).

⁽²⁾ Information will typically be provided on a real time basis or as soon thereafter as possible.

⁽³⁾ This information will also be provided upon request from time to time.

⁽⁴⁾ With respect to the Emerging Markets Domestic Debt, Emerging Markets External Debt, Multi-Asset and Total Emerging Markets Portfolios, only.

⁽⁵⁾ With respect to the Emerging Markets and Global Real Estate Portfolios, only.

⁽⁶⁾ With respect to the Emerging Markets, Growth, International Equity, Small Company Growth and U.S. Real Estate Portfolios, only.

All disclosures of non-public portfolio holdings information made to third-parties pursuant to the exemptions set forth in the Policy must be reviewed by Morgan Stanley Investment Management's ("MSIM") Legal and Compliance Division and approved by the Head of the Long-Only Business of MSIM. Disclosures made to third-parties in connection with (i) broker-dealer interest lists; (ii) shareholder in-kind distributions; (iii) attribution analyses; or (iv) transition managers are pre-approved for purposes of the Policy. In addition, the following categories of third-parties that may receive non-public portfolio holdings information are also pre-approved provided that they enter into non-disclosure agreements (as discussed above): (i) fund rating agencies; (ii) information exchange subscribers; (iii) consultants and analysts (including defined benefit and defined contribution plan sponsors, and variable annuity providers); (iv) portfolio analytics providers; and (v) service providers.

The Adviser and/or Sub-Advisers shall report quarterly to the Board of Directors (or a designated committee thereof) at the next regularly scheduled meeting: (i) any material information concerning all parties receiving non-public portfolio holdings information pursuant to an exemption; and (ii) any new non-disclosure agreements entered into during the reporting period. Procedures to monitor the use of such non-public portfolio holdings information may include requiring annual certifications that the recipients have utilized such information only pursuant to the terms of the agreement between the recipient and the Adviser and, for those recipients receiving information electronically, acceptance of the information will constitute reaffirmation that the third-party expressly agrees to maintain the disclosed information in confidence and not to trade portfolio securities based on the non-public information.

PURCHASE AND REDEMPTION OF SHARES

Information concerning how Portfolio shares are offered to the public (and how they are redeemed or exchanged) is provided in the applicable Portfolio's Prospectus. Each Portfolio reserves the right in its sole discretion (i) to suspend the offering of its shares; (ii) to reject purchase orders when in the judgment of management such rejection is in the best interest of the Fund; and (iii) to reduce or waive the minimum for initial investments for certain categories of investments.

The NAV per share of each Portfolio is calculated on days that the New York Stock Exchange ("NYSE") is open for business. NAV per share is determined as of the close of trading of the NYSE (normally 4:00 p.m. Eastern Time) (for each Portfolio, the "Pricing Time"). Certain Portfolios may, however, elect to remain open and price their shares on days when the NYSE is closed but the primary securities markets on which the Portfolios' securities trade remain open.

Additional Purchase Information

You may purchase Class I and Class L shares directly from the Fund by Federal Funds wire or by check; however, on days that the NYSE is open but the custodian bank is closed, you may only purchase shares by check. Investors may also invest in the Portfolios by purchasing Class I, Class A, Class H and/or Class L shares through certain third-parties, such as brokers, dealers or other financial intermediaries that have entered into a selling agreement with the Distributor (each a "Financial Intermediary"). Some Financial Intermediaries may charge an additional service or transaction fee (see also "Investment Through Financial Intermediaries"). If a purchase is canceled due to nonpayment or because your check does not clear, you will be responsible for any loss the Fund or its agents incur. If you are already a shareholder, the Fund may redeem shares from your account(s) to reimburse the Fund or its agents for any loss. In addition, you may be prohibited or restricted from making future investments in the Fund.

Federal Funds Wire. When a purchase order is received prior to the Pricing Time and Federal Funds are received prior to the regular close of the Federal Funds Wire Control Center ("FFWCC") (normally 6:00 p.m. Eastern Time), the purchase will be executed at the NAV computed on the date of receipt. Purchases for which an order is received after the Pricing Time or for which Federal Funds are received after the regular close of the FFWCC will be executed at the NAV next determined. Certain institutional investors and financial institutions have entered into agreements with the Fund pursuant to which they may place orders prior to the Pricing Time, but make payment in Federal Funds for those shares the following business day.

Check. An account may be opened and you may purchase Class I and Class L shares by completing and signing a New Account Application and mailing it, together with a check payable to "Morgan Stanley Institutional Fund, Inc. — [Portfolio name]" to:

Morgan Stanley Institutional Fund, Inc.
c/o Boston Financial Data Services, Inc.
P.O. Box 219804
Kansas City, MO 64121-9804

A purchase of shares by check ordinarily will be credited to your account at the NAV per share of each of the Portfolios determined on the day of receipt.

Investment Through Financial Intermediaries. Certain Financial Intermediaries have made arrangements with the Fund so that an investor may purchase or redeem Class I, Class A, Class H and Class L shares at the NAV per share next determined after the Financial Intermediary receives the share order. In other instances, the Fund has also authorized such Financial Intermediaries to designate other intermediaries to receive purchase and redemption orders on the Fund's behalf at the share price next determined after such designees receive the share order. Under these arrangements, the Fund will be deemed to have received a purchase or redemption order when the Financial Intermediary or, if applicable, a Financial Intermediary's authorized designee, receives the share order from an investor.

Conversion to a New Share Class

If the value of an account containing shares of a Portfolio falls below the investment minimum for the class of shares held by the account because of shareholder redemption(s) or the failure to meet one of the waiver criteria set forth in the applicable Portfolio's Prospectus and, if the account value remains below such investment minimum, the shares in such account may, at the Adviser's discretion, convert to another class of shares offered by the Portfolio, if an account meets the minimum investment amount for such class, and will be subject to the shareholder services fee and other features applicable to such shares. Conversion to another class of shares will result in holding a share class with higher fees. The Fund will not convert to another class of shares based solely upon changes in the market that reduce the NAV of shares. Under current tax law, conversion between share classes is not a taxable event to the shareholder. Shareholders will be notified prior to any such conversion.

Involuntary Redemption of Shares

If your account has been converted to a new share class and the value of an account falls below the investment minimum for that class because of shareholder redemption(s) or you no longer meet one of the waiver criteria set forth in the applicable Portfolio's Prospectus, and if the account value remains below such investment minimum, the shares in such account may be subject to redemption by the Fund. The Fund will not redeem shares based solely upon changes in the market that reduce the NAV of shares. If shares are redeemed, redemption proceeds will be promptly paid to the shareholder. Shareholders will be notified prior to any such redemption.

Suspension of Redemptions

The Fund may suspend the right of redemption or postpone the date of payment (i) during any period that the NYSE is closed, or trading on the NYSE is restricted as determined by the SEC; (ii) during any period when an emergency exists as determined by the SEC as a result of which it is not practicable for a Portfolio to dispose of securities it owns, or fairly to determine the value of its assets; and (iii) for such other periods as the SEC may permit.

Further Redemption Information

To protect your account and the Fund from fraud, signature guarantees are required for certain redemptions. Signature guarantees enable the Fund to verify the identity of the person who has authorized a redemption from your account. Signature guarantees are required in connection with: (i) all redemptions, regardless of the amount involved, when the proceeds are to be paid to someone other than the registered owner(s) and/or registered address; and (ii) share transfer requests. An "eligible guarantor institution" may include a bank, a trust company, a credit union or savings and loan association, a member firm of a domestic stock exchange, or a foreign branch of any of the foregoing. Notaries public are not acceptable guarantors. The signature guarantees must appear either: (i) on the written request for redemption; (ii) on a separate instrument for assignment ("stock power") which should specify the total number of shares to be redeemed; or (iii) on all stock certificates tendered for redemption and, if shares held by the Fund are also being redeemed, on the letter or stock power.

ACCOUNT POLICIES AND FEATURES

Transfer of Shares

Shareholders may transfer shares of a Portfolio to another person by making a written request to the Fund. The request should clearly identify the account and number of shares to be transferred, and include the signature of all registered owners and all stock certificates, if any, which are subject to the transfer. It may not be possible to transfer shares purchased through a Financial Intermediary. The signature on the letter of request, the stock certificate or any stock power must be guaranteed in the same manner as described in the applicable Portfolio's Prospectus. As in the case of redemptions, the written request must be received in good order before any transfer can be made. Transferring shares may affect the eligibility of an account for a given class of a Portfolio's shares and may result in involuntary conversion or redemption of such shares. Under certain circumstances, the person who receives the transfer may be required to complete a New Account Application.

Valuation of Shares

NAV per share is determined by dividing the total market value of each Portfolio's investments and other assets, less the total market value of all liabilities, by the total number of outstanding shares of that Portfolio. The NAV for each class of shares offered by the Fund may differ due to class-specific expenses paid by each class, including the shareholder servicing fees charged to Class A shares, Class H shares and Class L shares.

In the calculation of a Portfolio's NAV: (1) an equity portfolio security listed or traded on an exchange is valued at its latest reported sale price (or at the exchange official closing price if such exchange reports an official closing price), and if there were no sales on a given day, the security is valued at the mean between the last reported bid and asked prices; and (2) all other equity portfolio securities for which OTC 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. When market quotations are not readily available, including circumstances under which it is determined by the Adviser that the closing price, last sales price or the mean between the last reported bid and asked price are not reflective of 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 Board. For valuation purposes, quotations of foreign portfolio securities, other assets and liabilities and forward contracts stated in foreign currency are translated into U.S. dollar equivalents at the prevailing market rates prior to the close of the NYSE.

Short-term debt securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, unless the Adviser or Sub-Advisers determine such valuation does not reflect the securities' market value, in which case these securities will be valued at their fair market value as determined by the Adviser or Sub-Advisers.

Certain of a Portfolio's securities may be valued by an outside pricing service approved by the Board. The pricing service may utilize a matrix system or other model incorporating attributes such as security quality, maturity and coupon as the evaluation model parameters, and/or research evaluations by its staff, including review of broker-dealer market price quotations in determining what it believes is the fair valuation of the portfolio securities valued by such pricing service.

Listed options are valued at the last reported sales price on the exchange on which they are listed (or at the exchange official closing price if such exchange reports an official closing price). If an official closing price or last reported sale price is unavailable, the listed option should be fair valued at the mean between its latest bid and ask prices. If an exchange closing price or bid and asked prices are not available from the exchange, then the quotes from one or more brokers or dealers may be used. Unlisted options and swaps are valued by an outside pricing service approved by the Board or quotes from a broker or dealer. Unlisted options and swaps cleared on a clearinghouse or exchange may be valued using the closing price provided by the clearinghouse or exchange. Futures are valued at the settlement price on the exchange on which they trade or, if a settlement price is unavailable, then at the last sale price on the exchange.

If the Adviser determines that the valuation received from the outside pricing service or broker or dealer is not reflective of the security's market value, such security is valued at its fair value as determined in good faith under procedures established by and under the general supervision of the Board.

Generally, trading in foreign securities, as well as corporate bonds, U.S. government securities and money market instruments, is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the NAV of the Portfolio's shares are determined as of such times. Foreign currency exchange rates are also generally determined prior to the close of the NYSE. Occasionally, events which may affect the values of such securities and such exchange rates may occur between the times at which they are determined and the close of the NYSE. If events that may affect the value of such securities occur during such period, then these securities may be valued at their fair value as determined in good faith under procedures established by and under the supervision of the Board.

Although the legal rights of Class I, Class A, Class H and Class L shares will be identical, the different expenses borne by each class will result in different NAVs and dividends for the class. Dividends will differ by approximately the amount of the class specific expenses (distribution, transfer agency and sub transfer agency fees). The NAV of Class A, Class H and Class L shares will generally be lower than the NAV of Class I shares as a result of the shareholder services fees charged to Class A and Class H shares and the distribution and shareholder services fees charged to Class L shares and certain other class-specific expenses of Class A, Class H and Class L shares.

MANAGEMENT OF THE FUND

General

The Directors oversee the Fund's affairs under the laws governing corporations in the State of Maryland. The Directors have approved contracts under which certain companies provide essential management, administrative and shareholder services to the Fund.

Directors and Officers

The Board of the Fund consists of 10 Directors. These same individuals also serve as directors or trustees for certain of the funds advised by the Adviser and Morgan Stanley AIP GP LP. Nine Directors have no affiliation or business connection with the Adviser or any of its affiliated persons and do not own any stock or other securities issued by the Adviser's parent company, Morgan Stanley. These Directors are the "non-interested" or "Independent" Directors of the Fund. The other Director (the "Interested Director") is affiliated with the Adviser.

Board Structure and Oversight Function

The Board's leadership structure features an Independent Director serving as Chairperson and the Board Committees described below. The Chairperson participates in the preparation of the agenda for meetings of the Board and the preparation of information to be presented to the Board with respect to matters to be acted upon by the Board. The Chairperson also presides at all meetings of the Board and is involved in discussions regarding matters pertaining to the oversight of the management of the Fund between meetings.

The Board of Directors operates using a system of committees to facilitate the timely and efficient consideration of all matters of importance to the Directors, the Fund and Fund stockholders, and to facilitate compliance with legal and regulatory requirements and oversight of the Fund's activities and associated risks. The Board of Directors has established five standing committees: (1) Audit Committee, (2) Governance Committee, (3) Compliance and Insurance Committee, (4) Investment Committee and (5) Closed-End Fund Committee. The Audit Committee, the Governance Committee and the Closed-End Fund Committee are comprised exclusively of Independent Directors. Each committee charter governs the scope of the committee's responsibilities with respect to the oversight of the Fund. The responsibilities of each committee, including their oversight responsibilities, are described further under the caption "Independent Directors and the Committees."

The Portfolios are subject to a number of risks, including investment, compliance, operational and valuation risk, among others. The Board of Directors oversees these risks as part of its broader oversight of the Fund's affairs through various Board and committee activities. The Board has adopted, and periodically reviews, policies and procedures designed to address various risks to the Portfolios. In addition, appropriate personnel, including but not limited to the Fund's Chief Compliance Officer, members of the Fund's administration and accounting teams, representatives from the Fund's independent registered public accounting firm, the Fund's Treasurer, portfolio management personnel and independent valuation and brokerage evaluation service providers, make regular reports regarding the Fund's activities and related risks to the Board of Directors and the committees, as appropriate. These reports include, among others, quarterly performance reports, quarterly derivatives activity and risk reports and discussions with members of the risk teams relating to each asset class. The Board's committee structure allows separate committees to focus on different aspects of risk and the potential impact of these risks on some or all of the funds in the complex and then report back to the full Board. In between regular meetings, Fund officers also communicate with the Directors regarding material exceptions and items relevant to the Board's risk oversight function. The Board recognizes that it is not possible to identify all of the risks that may affect the Portfolios, and that it is not possible to develop processes and controls to eliminate all of the risks that may affect the Portfolios. Moreover, the Board recognizes that it may be necessary for the Portfolios to bear certain risks (such as investment risk) to achieve their respective investment objectives.

As needed between meetings of the Board, the Board or a specific committee receives and reviews reports relating to the Fund and engages in discussions with appropriate parties relating to the Fund's operations and related risks.

Directors

The Fund seeks as Directors individuals of distinction and experience in business and finance, government service or academia. In determining that a particular Director was and continues to be qualified to serve as Director, the Board has considered a variety of criteria, none of which, in isolation, was controlling. Based on a review of the experience, qualifications, attributes or skills of each Director, including those enumerated in the table below, the Board has determined that each of the Directors is qualified to serve as a Director of the Fund. In addition, the Board believes that, collectively, the Directors have balanced and diverse experience, qualifications, attributes and skills that allow the Board to operate effectively in governing the Fund and protecting the interests of shareholders. Information about the Fund's Governance Committee and Board of Directors nomination process is provided below under the caption "Independent Directors and the Committees."

The Directors of the Fund, their ages, addresses, positions held, length of time served, their principal business occupations during the past five years, the number of portfolios in the Fund Complex (defined below) overseen by

each Independent Director (as of December 31, 2013) and other directorships, if any, held by the Directors, are shown below. The Fund Complex includes all open-end and closed-end funds (including all of their portfolios) advised by the Adviser and any registered funds that have an adviser that is an affiliate of the Adviser (including, but not limited to, Morgan Stanley AIP GP LP) (the "Morgan Stanley AIP Funds") (collectively, the "Morgan Stanley Funds").

Independent Directors:

Name, Age and Address of
Independent Director

Position(s)
Held with
Registrant

Length of
Time
Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios in
Fund
Complex
Overseen by
Independent
Director

Other
Directorships
Held by
Independent
Director**

Frank L. Bowman (69)
c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036

Director

Since August 2006

President, Strategic Decisions, LLC (consulting) (since February 2009); Director or Trustee of various Morgan Stanley Funds (since August 2006); Chairperson of the Insurance Sub-Committee of the Compliance and Insurance Committee (since February 2007); served as President and Chief Executive Officer of the Nuclear Energy Institute (policy organization) (February 2005-November 2008); retired as Admiral, U.S. Navy after serving over 38 years on active duty including 8 years as Director of the Naval Nuclear Propulsion Program in the Department of the Navy and the U.S. Department of Energy (1996-2004); served as Chief of Naval Personnel (July 1994-September 1996) and on the Joint Staff as Director of Political Military Affairs (June 1992-July 1994); knighted as Honorary Knight Commander of the Most Excellent Order of the British Empire; awarded the Officier de l'Orde National du Mérite by the French Government; elected to the National Academy of Engineering (2009).

Director of BP p.l.c.; Director of Naval and Nuclear Technologies LLP; Director of the Armed Services YMCA of the USA and the U.S. Naval Submarine League; Director of the American Shipbuilding Suppliers Association; Member of the National Security Advisory Council of the Center for U. S. Global Engagement and a member of the CNA Military Advisory Board; Chairman of the charity J Street Cup Golf; Trustee of Fairhaven United Methodist Church.

* This is the earliest date the Director began serving the Morgan Stanley Funds. Each Director serves an indefinite term, until his or her successor is elected.

** This includes any directorships at public companies and registered investment companies held by the Director at any time during the past five years.

Name, Age and Address of
Independent Director

Position(s)
Held with
Registrant

Length of
Time
Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios in
Fund
Complex
Overseen by
Independent
Director

Other
Directorships
Held by
Independent
Director**

Michael Bozic (73)
c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036

Director

Since April 1994

Private investor and a member of the advisory board of American Road Group LLC (retail) (since June 2000); Chairperson of the Compliance and Insurance Committee (since October 2006); Director or Trustee of various Morgan Stanley Funds (since April 1994); formerly, Chairperson of the Insurance Committee (July 2006-September 2006); Vice Chairman of Kmart Corporation (December 1998-October 2000); Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co.

100

Trustee and member of the Hillsdale College Board of Trustees.

Kathleen A. Dennis (60)
c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036

Director

Since August 2006

Director of various non-profit organizations.

Dr. Manuel H. Johnson (65)
c/o Johnson Smick
International, Inc.
220 I Street, NE
Suite 200
Washington, D.C. 20002

Director

Since July 1991

100

Director of NVR, Inc. (home construction).

* This is the earliest date the Director began serving the Morgan Stanley Funds. Each Director serves an indefinite term, until his or her successor is elected.

** This includes any directorships at public companies and registered investment companies held by the Director at any time during the past five years.

Name, Age and Address of
Independent Director

Position(s)
Held with
Registrant

Length of
Time
Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios in
Fund
Complex
Overseen by
Independent
Director

Other
Directorships
Held by
Independent
Director**

Joseph J. Kearns (71)
c/o Kearns & Associates LLC
23823 Malibu Road
S-50-440
Malibu, CA 90265

Director

Since August
1994

101

Director of Electro Rent Corporation (equipment leasing). Prior to December 31, 2013, Director of The Ford Family Foundation.

Michael F. Klein (55)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036

Director

Since August
2006

Managing Director, Aetos Capital, LLC (since March 2000); Co-President, Aetos Alternatives Management, LLC (since January 2004) and Co-Chief Executive Officer of Aetos Capital LLC (since August 2013); Chairperson of the Fixed Income Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since August 2006); formerly, Managing Director, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management, President, various Morgan Stanley Funds (June 1998-March 2000) and Principal, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management (August 1997-December 1999).

Director of certain investment funds managed or sponsored by Aetos Capital, LLC; Director of Sanitized AG and Sanitized Marketing AG (specialty chemicals).

Michael E. Nugent (77)
522 Fifth Avenue
New York, NY 10036

Chairperson of the Board and Director

Chairperson of the Boards since July 2006 and Director since July 1991

100

None.

W. Allen Reed (67)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Directors
1177 Avenue of the Americas
New York, NY 10036

Director

Since August
2006

Director of Temple-Inland Industries (packaging and forest products); Director of Legg Mason, Inc. and Director of the Auburn University Foundation.

* This is the earliest date the Director began serving the Morgan Stanley Funds. Each Director serves an indefinite term, until his or her successor is elected.

** This includes any directorships at public companies and registered investment companies held by the Director at any time during the past five years.

Name, Age and Address of
Independent Director

Position(s)
Held with
Registrant

Length of
Time
Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios in
Fund
Complex
Overseen by
Independent
Director

Other
Directorships
Held by
Independent
Director**

Fergus Reid (81)
c/o Joe Pietryka, Inc.
85 Charles Colman Blvd. Pawling, NY 12564

Director

Since June 1992

Chairman, Joe Pietryka, Inc.; Chairperson of the Governance Committee and Director or Trustee of various Morgan Stanley Funds (since June 1992).

101

Through December 31, 2012, Trustee and Director of certain investment companies in the JP Morgan Fund complex managed by JP Morgan Investment Management Inc.

Interested Director:

Name, Age and Address of
Interested Director

Position(s)
Held with
Registrant

Length of
Time
Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios in
Fund
Complex
Overseen by
Interested
Director

Other
Directorships
Held by
Interested
Director**

James F. Higgins (66)
One New York Plaza
New York, NY 10004

Director

Since
June 2000

Director or Trustee of various Morgan Stanley Funds (since June 2000); Senior Advisor of Morgan Stanley (since August 2000).

* This is the earliest date the Director began serving the Morgan Stanley Funds. Each Director serves an indefinite term, until his or her successor is elected.

** This includes any directorships at public companies and registered investment companies held by the Director at any time during the past five years.

The executive officers of the Fund, their ages, addresses, positions held, length of time served and their principal business occupations during the past five years are shown below.

Executive Officers:

Name, Age and Address of
Executive Officer

Position(s)
Held with
Registrant

Length of
Time Served*

Principal Occupation(s)
During Past 5 Years

John H. Gernon (50)
522 Fifth Avenue
New York, NY 10036

President and Principal Executive Officer

Since September 2013

President and Principal Executive Officer of the Equity and Fixed Income Funds and the Morgan Stanley AIP Funds (since September 2013) in the Fund Complex; Managing Director of the Adviser; Head of Product (since 2006) and Global Portfolio Analysis and Reporting (since 2012) for MSIM's Long Only business.

Stefanie V. Chang Yu (47)
522 Fifth Avenue
New York, NY 10036

Chief Compliance Officer

Since January 2014

Joseph C. Benedetti (48)
522 Fifth Avenue
New York, NY 10036

Vice President

Since January 2014

Managing Director of the Adviser and various entities affiliated with the Adviser; Vice President of various Morgan Stanley Funds(since January 2014). Formerly, Assistant Secretary of various Morgan Stanley Funds (October 2004-January 2014).

Francis J. Smith (48)
522 Fifth Avenue
New York, NY 10036

Treasurer and Principal Financial Officer

Treasurer since July 2003 and Principal Financial Officer since September 2002

Executive Director of the Adviser and various entities affiliated with the Adviser; Treasurer (since July 2003) and Principal Financial Officer of various Morgan Stanley Funds (since September 2002).

Mary E. Mullin (47)
522 Fifth Avenue
New York, NY 10036

Secretary

Since June 1999

Executive Director of the Adviser and various entities affiliated with the Adviser; Secretary of various Morgan Stanley Funds (since June 1999).

* This is the earliest date the officer began serving the Morgan Stanley Funds. Each officer serves a one-year term, until his or her successor is chosen and qualifies.

In addition, the following individuals who are officers of the Adviser or its affiliates serve as assistant secretaries of the Fund: Joanne Antico, Daniel E. Burton and Edward J. Meehan.

For each Director, the dollar range of equity securities beneficially owned by the Director in the Fund and in the Family of Investment Companies (Family of Investment Companies includes all of the registered investment companies advised by the Adviser and Morgan Stanley AIP GP LP) for the calendar year ended December 31, 2013 is set forth in the table below.

Name of Director	Dollar Range of Equity Securities in the Fund (As of December 31, 2013)	Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Director in Family of Investment Companies (As of December 31, 2013)
Independent:
Frank L. Bowman⁽¹⁾	⁽²⁾	over $100,000
Michael Bozic	None	over $100,000
Kathleen A. Dennis	⁽³⁾	over $100,000
Manuel H. Johnson	None	over $100,000
Joseph J. Kearns⁽¹⁾	⁽⁴⁾	over $100,000
Michael F. Klein	⁽⁵⁾	over $100,000

Name of Director	Dollar Range of Equity Securities in the Fund (As of December 31, 2013)	Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Director in Family of Investment Companies (As of December 31, 2013)
Michael E. Nugent	⁽⁶⁾	over $100,000
W. Allen Reed⁽¹⁾	⁽⁷⁾	over $100,000
Fergus Reid⁽¹⁾	⁽⁸⁾	over $100,000
Interested:
James F. Higgins	None	$1-$10,000

¹ Includes the total amount of compensation deferred by the Director at his election pursuant to a deferred compensation plan. Such deferred compensation is placed in a deferral account and deemed to be invested in one or more of the Morgan Stanley Funds (or portfolio thereof) that are offered as investment options under the plan.

² Growth Portfolio ($10,001-$50,000) and Small Company Growth Portfolio ($50,001-$100,000).

³ Small Company Growth Portfolio (over $100,000).

⁴ Emerging Markets Portfolio (over $100,000) and U.S. Real Estate Portfolio (over $100,000).

⁵ Emerging Markets Portfolio ($50,001-$100,000); Global Real Estate Portfolio ($50,001-$100,000); International Equity Portfolio ($50,001-$100,000) and Small Company Growth Portfolio ($50,001-$100,000).

⁶ Global Franchise Portfolio (over $100,000).

⁷ Emerging Markets Portfolio (over $100,000); Growth Portfolio (over $100,000); International Equity Portfolio ($10,001-$50,000); Small Company Growth Portfolio (over $100,000) and U.S. Real Estate Portfolio (over $100,000).

⁸ Growth Portfolio (over $100,000); International Equity Portfolio (over $100,000); U.S. Real Estate Portfolio (over $100,000).

As to each Independent Director and his or her immediate family members, no person owned beneficially or of record securities of an investment adviser or principal underwriter of the Fund, or a person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with an investment adviser or principal underwriter of the Fund.

As of December 31, 2013, the Directors and officers of the Fund, as a group, owned less than 1% of the outstanding common stock of each Portfolio.

Independent Directors and the Committees

Law and regulation establish both general guidelines and specific duties for the Independent Directors. The Board has five committees: (1) Audit Committee, (2) Governance Committee, (3) Compliance and Insurance Committee, (4) Investment Committee and (5) Closed-End Fund Committee.

The Independent Directors are charged with recommending to the full Board approval of management, advisory and administration contracts, Rule 12b-1 plans and distribution and underwriting agreements; continually reviewing fund performance; checking on the pricing of portfolio securities, brokerage commissions, transfer agent costs and performance and trading among funds in the same complex; and approving fidelity bond and related insurance coverage and allocations, as well as other matters that arise from time to time. The Independent Directors are required to select and nominate individuals to fill any Independent Director vacancy on the board of any fund that has a Rule 12b-1 plan of distribution.

The Board of Directors has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The Audit Committee is charged with recommending to the full Board the engagement or discharge of the Fund's independent registered public accounting firm; directing investigations into matters within the scope of the independent registered public accounting firm's duties, including the power to retain outside specialists; reviewing with the independent registered public accounting firm the audit plan and results of the auditing engagement; approving professional services provided by the independent registered public accounting firm and other accounting firms prior to the performance of the services; reviewing the independence of the independent registered public account firm; considering the range of audit and non-audit fees; reviewing the adequacy of the Fund's system of internal controls; and reviewing the valuation process. The Fund has adopted a formal, written Audit Committee Charter.

The members of the Audit Committee of the Fund are Joseph J. Kearns, Michael F. Klein, Michael E. Nugent and W. Allen Reed. None of the members of the Fund's Audit Committee is an "interested person," as defined under the 1940 Act, of the Fund (with such disinterested Directors being "Independent Directors" or individually, an "Independent Director"). Each Independent Director is also "independent" from the Fund under the listing standards of the NYSE. The Chairperson of the Audit Committee of the Fund is Joseph J. Kearns.

The Board of Directors of the Fund also has a Governance Committee. The Governance Committee identifies individuals qualified to serve as Independent Directors on the Fund's Board and on committees of the Board and recommends such qualified individuals for nomination by the Fund's Independent Directors as candidates for election as Independent Directors, advises the Fund's Board with respect to Board composition, procedures and committees, develops and recommends to the Fund's Board a set of corporate governance principles applicable to the Fund, monitors and makes recommendations on corporate governance matters and policies and procedures of the Fund's Board of Directors and any Board committees and oversees periodic evaluations of the Fund's Board and its committees. The members of the Governance Committee of the Fund are Kathleen A. Dennis and Fergus Reid, each of whom is an Independent Director. The Chairperson of the Governance Committee is Fergus Reid.

The Fund does not have a separate nominating committee. While the Fund's Governance Committee recommends qualified candidates for nominations as Independent Directors, the Board of Directors of the Fund believes that the task of nominating prospective Independent Directors is important enough to require the participation of all current Independent Directors, rather than a separate committee consisting of only certain Independent Directors. Accordingly, each Independent Director (Frank L. Bowman, Michael Bozic, Kathleen A. Dennis, Manuel H. Johnson, Joseph J. Kearns, Michael F. Klein, Michael E. Nugent, W. Allen Reed and Fergus Reid) participates in the election and nomination of candidates for election as Independent Directors for the Fund. Persons recommended by the Fund's Governance Committee as candidates for nomination as Independent Directors shall possess such experience, qualifications, attributes, skills and diversity so as to enhance the Board's ability to manage and direct the affairs and business of the Fund, including, when applicable, to enhance the ability of committees of the Board to fulfill their duties and/or to satisfy any independence requirements imposed by law, regulation or any listing requirements of the NYSE. While the Independent Directors of the Fund expect to be able to continue to identify from their own resources an ample number of qualified candidates for the Fund's Board as they deem appropriate, they will consider nominations from shareholders to the Board. Nominations from shareholders should be in writing and sent to the Independent Directors as described below under the caption "Shareholder Communications."

The Board formed the Compliance and Insurance Committee to address insurance coverage and oversee the compliance function for the Fund and the Board. The Compliance and Insurance Committee consists of Frank L. Bowman, Michael Bozic, James F. Higgins and Manuel H. Johnson. Frank L. Bowman, Michael Bozic and Manuel H. Johnson are Independent Directors. The Chairperson of the Compliance and Insurance Committee is Michael Bozic. The Compliance and Insurance Committee has an Insurance Sub-Committee to review and monitor the insurance coverage maintained by the Fund. The Chairperson of the Insurance Sub-Committee is Frank L. Bowman.

The Investment Committee oversees the portfolio investment process for and reviews the performance of the Fund. The Investment Committee also recommends to the Board to approve or renew the Fund's Investment Advisory, Sub-Advisory and Administration Agreements. The members of the Investment Committee are Frank L. Bowman, Michael Bozic, Kathleen A. Dennis, James F. Higgins, Manuel H. Johnson, Joseph J. Kearns, Michael F. Klein, Michael E. Nugent, W. Allen Reed and Fergus Reid. The Chairperson of the Investment Committee is Manuel H. Johnson.

The Investment Committee has three Sub-Committees, each with its own Chairperson. Each Sub-Committee focuses on the funds' primary areas of investment, namely equities, fixed income and alternatives. The Sub-Committees and their members are as follows:

(1) Equity—W. Allen Reed (Chairperson), Frank L. Bowman and Michael E. Nugent.

(2) Fixed Income—Michael F. Klein (Chairperson), Michael Bozic and Fergus Reid.

(3) Money Market and Alternatives—Kathleen A. Dennis (Chairperson), James F. Higgins and Joseph J. Kearns.

The Board formed the Closed-End Fund Committee to consider a range of issues unique to closed-end funds. The Closed-End Fund Committee consists of Michael E. Nugent, W. Allen Reed and Fergus Reid, each of whom is an Independent Trustee. The Chairperson of the Closed-End Fund Committee is Michael E. Nugent.

During the Fund's fiscal year ended December 31, 2013, the Board of Directors held the following meetings:

Board of Directors		7
Committee/Sub-Committee:	Number of meetings:
Audit Committee		4
Governance Committee		4
Compliance and Insurance Committee		4
Insurance Sub-Committee		1
Investment Committee		5
Equity Sub-Committee		5
Fixed Income Sub-Committee		5
Money Market and Alternatives Sub-Committee		5
Closed-End Fund Committee		4

Experience, Qualifications and Attributes. The Board has concluded, based on each Director's experience, qualifications and attributes that each Board member should serve as a Director. Following is a brief summary of the information that led to and/or supports this conclusion.

Mr. Bowman has experience in a variety of business and financial matters through his prior service as a Director or Trustee for various other funds in the Fund Complex, where he serves as Chairperson of the Insurance Sub-Committee of the Compliance and Insurance Committee, and as a Director of BP p.l.c. and Naval and Nuclear Technologies LLP. Mr. Bowman also serves as a Director for the Armed Services YMCA of the USA, the U.S. Naval Submarine League, the American Shipbuilding Suppliers Association and as Chairman of the charity J Street Cup Golf. Mr. Bowman serves as a Trustee of the Fairhaven United Methodist Church. Mr. Bowman is also a member of the National Security Advisory Council of the Center for U.S. Global Engagement and a member of the CNA Military Advisory Board. Mr. Bowman retired as an Admiral in the U.S. Navy after serving over 38 years on active duty including eight years as Director of the Naval Nuclear Propulsion Program in the Department of the Navy and the U.S. Department of Energy (1996-2004). Additionally, Mr. Bowman served as the U.S. Navy's Chief of Naval Personnel (1994-1996) where he was responsible for the planning and programming of all manpower, personnel, training and education resources for the U.S. Navy, and on the Joint Staff as Director of Political Military Affairs (1992-1994). In addition, Mr. Bowman served as President and Chief Executive Officer of the Nuclear Energy Institute. Mr. Bowman has received such distinctions as a knighthood as Honorary Knight Commander of the Most Excellent Order of the British Empire and the Officier de l'Orde National du Mérite from the French Government, and was elected to the National Academy of Engineering (2009). He is President of the consulting firm Strategic Decisions, LLC.

With over 20 years of experience on the boards and in senior management of such companies as Kmart Corporation, Levitz Furniture Corporation, Hills Department Stores and Sears Merchandise Group of Sears, Roebuck & Co., where Mr. Bozic also served as Chief Executive Officer of the Merchandise Group, and with nearly 20 years of experience as a Director or Trustee of certain other funds in the Fund Complex, Mr. Bozic has experience with a variety of financial, management, regulatory and operational issues as well as experience with marketing and distribution. Mr. Bozic has served as the Chairperson of the Compliance and Insurance Committee since 2006.

Ms. Dennis has over 25 years of business experience in the financial services industry and related fields including serving as a Director or Trustee of various other funds in the Fund Complex, where she serves as Chairperson of the Money Market and Alternatives Sub-Committee of the Investment Committee. Ms. Dennis possesses a strong understanding of the regulatory framework under which investment companies must operate based on her years of service to this Board and her position as Senior Managing Director of Victory Capital Management.

In addition to his tenure as a Director or Trustee of various other funds in the Fund Complex, where he formerly served as Chairperson of the Audit Committee, Dr. Johnson has also served as an officer or a board member of numerous companies for over 20 years. These positions included Co-Chairman and a founder of the Group of Seven Council, Director of NVR, Inc., Director of Evergreen Energy and Director of Greenwich Capital Holdings. He also has served as Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury. In addition, Dr. Johnson also served as Chairman of the Financial Accounting Foundation, which oversees the Financial Accounting Standards Board, for seven years.

Mr. Kearns gained extensive experience regarding accounting through his experience on the Audit Committees of the boards of other funds in the Funds Complex, including serving as either Chairperson or Deputy Chairperson of the Audit Committee for nearly 20 years, and through his position as Chief Financial Officer of the J. Paul Getty Trust. He also has experience in financial, accounting, investment and regulatory matters through his position as President and founder of Kearns & Associates LLC, a financial consulting company. Mr. Kearns also serves as a Director of Electro Rent Corporation and previously served as Director of The Ford Family Foundation. The Board has determined that Mr. Kearns is an "audit committee financial expert" as defined by the SEC.

Through his prior positions as a Managing Director of Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management and as President and a Trustee of Morgan Stanley Institutional Funds, Mr. Klein has experience in the management and operation of registered investment companies, enabling him to provide management input and investment guidance to the Board. Mr. Klein also has extensive experience in the investment management industry based on his current positions as Managing Director and Co-Chief Executive Officer of Aetos Capital, LLC, Co-President of Aetos Alternatives Management, LLC and as a Director of certain investment funds managed or sponsored by Aetos Capital, LLC. In addition, he also has experience as a member of the board of other funds in the Fund Complex.

Mr. Nugent has extensive experience with financial, accounting, investment and regulatory matters through his over 20 years of service on the boards of various funds in the Fund Complex, including time as the Chairperson of the Insurance Committee, Chairperson of the Closed-End Fund Committee and Chairperson of the Morgan Stanley Funds. Mr. Nugent also has experience as a former General Partner in Triumph Capital, L.P.

Mr. Reed has experience on investment company boards and is experienced with financial, accounting, investment and regulatory matters through his prior service as a Director of iShares Inc. and his service as Trustee or Director of other funds in the Fund Complex. Mr. Reed also gained substantial experience in the financial services industry through his position as a Director of Legg Mason, Inc. and prior position as President and CEO of General Motors Asset Management.

Mr. Reid has served on a number of mutual fund boards, including as a Trustee or Director of certain investment companies in the JP Morgan Funds complex and as a Trustee or Director of other funds in the Fund Complex. Therefore, Mr. Reid is experienced with financial, accounting, investment and regulatory matters, enabling him to provide management input and investment guidance to the Board.

Mr. Higgins has over 30 years of experience in the financial services industry. Mr. Higgins has substantial mutual fund experience and is experienced with financial, accounting, investment and regulatory matters due to his experience on the boards of other funds in the Fund Complex. Mr. Higgins also previously served on the boards of other companies in the financial services industry, including AXA Financial, Inc. and AXA Equitable Life Insurance Company.

The Directors' principal occupations during the past five years or more are shown in the above tables.

Advantages of Having the Same Individuals as Directors for the Morgan Stanley Funds

The Independent Directors and the Fund's management believe that having the same Independent Directors for each of the Morgan Stanley Funds avoids the duplication of effort that would arise from having different groups of individuals serving as Independent Directors for each of the funds or even of sub-groups of funds. They believe that having the same individuals serve as Independent Directors of all the Morgan Stanley Funds tends to increase their knowledge and expertise regarding matters which affect the Fund Complex generally and enhances their ability to negotiate on behalf of each fund with the fund's service providers. This arrangement also precludes the possibility of separate groups of Independent Directors arriving at conflicting decisions regarding operations and management of the funds and avoids the cost and confusion that would likely ensue. Finally, having the same Independent Directors serve on all fund boards enhances the ability of each fund to obtain, at modest cost to each separate fund, the services of Independent Directors of the caliber, experience and business acumen of the individuals who serve as Independent Directors of the Morgan Stanley Funds.

Shareholder Communications

Shareholders may send communications to the Fund's Board of Directors. Shareholders should send communications intended for the Fund's Board by addressing the communications directly to the Board (or individual Board members) and/or otherwise clearly indicating in the salutation that the communication is for the Board (or individual Board members) and by sending the communication to either the Fund's office or directly to such Board member(s) at the address specified for each Director previously noted. Other shareholder communications received by the Fund not directly addressed and sent to the Board will be reviewed and generally responded to by management, and will be forwarded to the Board only at management's discretion based on the matters contained therein.

Compensation

Effective January 1, 2014, each Director (except for the Chairperson of the Boards) receives an annual retainer fee of $230,000 ($220,000 prior to January 1, 2014) for serving as a Director of the Morgan Stanley Funds.

The Chairperson of the Audit Committee receives an additional annual retainer fee of $78,750 and the Investment Committee Chairperson receives an additional annual retainer fee of $63,000. Other Committee and Sub-Committee Chairpersons (except for the Chairperson of the Closed-End Fund Committee) receive an additional annual retainer fee of $31,500. The aggregate compensation paid to each Director is paid by the Morgan Stanley Funds, and is allocated on a pro rata basis among each of the operational funds/portfolios of the Morgan Stanley Funds based on the relative net assets of each of the funds/portfolios. Michael E. Nugent receives a total annual retainer fee of $460,000 ($440,000 prior to January 1, 2014) for his services as Chairperson of the Boards of the Morgan Stanley Funds and for administrative services provided to each Board.

The Fund also reimburses such Directors for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. Directors of the Fund who are employed by the Adviser receive no compensation or expense reimbursement from the Fund for their services as a Director.

Effective April 1, 2004, the Fund began a Deferred Compensation Plan (the "DC Plan"), which allows each Director to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Directors throughout the year. Each eligible Director 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 (or portfolios thereof) that are offered as investment options under the DC Plan. At the Director's election, distributions are either in one lump sum payment, or in the form of equal annual installments over a period of five years. The rights of an eligible Director and the beneficiaries to the amounts held under the DC Plan are unsecured and such amounts are subject to the claims of the creditors of the Fund.

Prior to April 1, 2004, the Fund maintained a similar Deferred Compensation Plan (the "Prior DC Plan"), which also allowed each Independent Director to defer payment of all, or a portion, of the fees he or she received for serving on the Board of Directors throughout the year. Generally, the DC Plan amends and supersedes the Prior DC Plan and all amounts payable under the Prior DC Plan are now subject to the terms of the DC Plan (except for amounts paid during the calendar year 2004, which remain subject to the terms of the Prior DC Plan).

The following table shows aggregate compensation payable to each of the Fund's Directors from the Fund for the fiscal year ended December 31, 2013 and the aggregate compensation payable to each of the Fund's Directors by the Fund Complex (which includes all of the Morgan Stanley Funds) for the calendar year ended December 31, 2013.

	Compensation⁽¹⁾
Name of Independent Director:	Aggregate Compensation From the Fund⁽²⁾		Total Compensation From Fund and Fund Complex Paid to Directors⁽³⁾
Frank L. Bowman	$	27,285	$	251,500
Michael Bozic		26,794		251,500
Kathleen A. Dennis		27,285		251,500
Manuel H. Johnson		30,165		283,000
Joseph J. Kearns⁽³⁾		31,848		339,000
Michael F. Klein		27,285		251,500
Michael E. Nugent		46,966		440,000
W. Allen Reed⁽²⁾⁽³⁾		20,486		188,625
Fergus Reid⁽³⁾		26,794		281,750
Name of Interested Director:
James F. Higgins		23,499		220,000

(1) Includes all amounts paid for serving as director/trustee of the funds, as well as serving as Chairperson of the Boards or a Chairperson of a Committee or Sub-Committee.

(2) The amounts shown in this column represent the aggregate compensation before deferral with respect to the Fund's fiscal year. The following Director deferred compensation from the Fund during the fiscal year ended December 31, 2013: Mr. Reed, $20,486.

(3) The amounts shown in this column represent the aggregate compensation paid by all of the funds in the Fund Complex as of December 31, 2013 before deferral by the Directors under the DC Plan. As of December 31, 2013, the value (including interest) of the deferral accounts across the Fund Complex for Messrs. Kearns, Reed and Reid pursuant to the deferred compensation plan was $616,245, $1,379,775 and $739,593, respectively. Because the funds in the Fund Complex have different fiscal year ends, the amounts shown in this column are presented on a calendar year basis.

Prior to December 31, 2003, 49 of the Morgan Stanley Funds (the "Adopting Funds") had adopted a retirement program under which an Independent Director who retired after serving for at least five years as an Independent Director of any such fund (an "Eligible Director") would have been entitled to retirement payments, based on factors such as length of service, upon reaching the eligible retirement age. On December 31, 2003, the amount of accrued retirement benefits for each Eligible Director was frozen, and will be payable, together with a return of 8% per annum, at or following each such Eligible Director's retirement as shown in the table below.

The following table illustrates the retirement benefits accrued to the Fund's Independent Directors by the Adopting Funds for the fiscal year ended December 31, 2013, and the estimated retirement benefits for the Independent Directors from the Adopting Funds for each calendar year following retirement. Only the Directors noted below participated in the retirement program.

Name of Independent Director:	Retirement Benefits Accrued as Fund Expenses By All Adopting Funds			Estimated Annual Benefits Upon Retirement⁽¹⁾From All Adopting Funds
Michael Bozic⁽²⁾	$	(12,584	)	$	43,940
Manuel H. Johnson	$	30,205		$	64,338
Michael E. Nugent⁽²⁾	$	(9,647	)	$	57,539

(1) Total compensation accrued under the retirement plan, together with a return of 8% per annum, will be paid annually commencing upon retirement and continuing for the remainder of the Director's life.

(2) Messrs. Bozic's and Nugent's retirement expenses are negative due to the fact that their expenses have been overaccrued.

Code of Ethics

Pursuant to Rule 17j-1 under the 1940 Act, the Board of Directors has adopted a Code of Ethics for the Fund and approved a Code of Ethics adopted by the Adviser, each Sub-Adviser and the Distributor (collectively the "Codes"). The Codes are intended to ensure that the interests of shareholders and other clients are placed ahead of any personal interest, that no undue personal benefit is obtained from the person's employment activities and that actual and potential conflicts of interest are avoided.

The Codes are designed to detect and prevent improper personal trading. The Codes permit personnel subject to the Codes to invest in securities, including securities that may be purchased, sold or held by the Fund, subject to a number of restrictions and controls, including prohibitions against purchases of securities in an initial public offering and a pre-clearance requirement with respect to personal securities transactions.

INVESTMENT ADVISORY AND OTHER SERVICES

Adviser

The Adviser is a wholly-owned subsidiary of Morgan Stanley (NYSE: "MS"), a preeminent global financial services firm engaged in securities trading and brokerage activities, as well as providing investment banking, research and analysis, financing and financial advisory services. The principal offices of Morgan Stanley are located at 1585 Broadway, New York, NY 10036, and the principal offices of the Adviser are located at 522 Fifth Avenue, New York, NY 10036. As of March 31, 2014, the Adviser, together with its affiliated asset management companies, had approximately $382 billion in assets under management or supervision.

The Adviser provides investment advice and portfolio management services pursuant to an Investment Advisory Agreement and, subject to the supervision of the Fund's Board of Directors, makes each of the Portfolio's day-to-day investment decisions, arranges for the execution of portfolio transactions and generally manages each of the Portfolio's investments. Pursuant to the Investment Advisory Agreement, the Adviser is entitled to receive from each class of shares of each Portfolio an annual management fee, payable quarterly, equal to the percentage of average daily net assets set forth in the below table reflecting the contractual advisory fee and the maximum expense ratios for each Portfolio. The Adviser has agreed to a reduction in the fees payable to it and to reimburse the Portfolios, if necessary,

if such fees would cause the total annual operating expenses of each such Portfolio to exceed the percentage of average daily net assets set forth in the below table reflecting the contractual advisory fee and the maximum expense ratios for each Portfolio. In determining the actual amount of fee waiver and/or expense reimbursement for a Portfolio, if any, the Adviser excludes from total annual operating expenses acquired fund fees and expenses (as applicable), certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation). The fee waivers and/or expense reimbursements for a Portfolio (except for the Active International Allocation, Growth and International Equity Portfolios) will continue for at least one year (with respect to the Active International Allocation, Growth and International Equity Portfolios, at least two years from the date of the applicable reorganization) or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. In addition, with respect to the Growth Portfolio, in connection with the applicable reorganization, for at least two years from the date of the applicable reorganization or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such reimbursement when it deems such action is appropriate, the Adviser has agreed to reimburse 0.01% of expenses of the Class A shares of the Growth Portfolio to the extent that total annual operating expenses of the Class A shares of the Growth Portfolio exceed 0.96%.

The following table reflects for each Portfolio (i) the advisory fee paid; and (ii) the advisory fee waived and/or affiliated rebates for each of the past three fiscal years ended December 31, 2011, 2012 and 2013.

	Advisory Fees Paid (After Fee Waivers and/or Affiliated Rebates)						Advisory Fees Waived						Affiliated Rebates
Portfolio	2011 (000)		2012 (000)		2013 (000)		2011 (000)		2012 (000)		2013 (000)		2011 (000)		2012 (000)		2013 (000)
Active International Allocation	$	2,202	$	1,745	$	2,023	$	407	$	256	$	226	$	26	$	47	$	61
Advantage	$	0	$	0	$	0	$	51	$	89	$	125		@	$	1	$	1
Asian Equity	$	0	$	0	$	0	$	14	$	48	$	74		@		@		@
Emerging Markets	$	20,287	$	13,035	$	12,014	$	0	$	2,582	$	3,174	$	225	$	126	$	151
Emerging Markets Domestic Debt	$	271	$	337	$	114	$	238	$	274	$	295	$	13	$	12	$	3
Emerging Markets External Debt		*	$	0	$	0		*	$	101	$	163		*	$	2	$	1
Frontier Emerging Markets		*	$	0	$	1,290		*	$	111	$	118		*		@	$	10
Global Advantage	$	0	$	0	$	0	$	19	$	23	$	29		@		@		@
Global Discovery	$	0	$	0	$	0	$	25	$	45	$	75		@		@	$	1
Global Franchise	$	1,383	$	2,655	$	4,613	$	16	$	0	$	0	$	9	$	17	$	25
Global Insight	$	0	$	0	$	0		@	$	10	$	14	$	0		@		@
Global Opportunity	$	0	$	0	$	0	$	112	$	127	$	91		@	$	1		@
Global Quality		*		*	$	0		*		*	$	19		*		*		@
Global Real Estate	$	12,722	$	15,205	$	18,204	$	2	$	0	$	20	$	58	$	65	$	46
Growth	$	4,278	$	4,127	$	4,608	$	0	$	0	$	0	$	26	$	32	$	49
Insight	$	0	$	0	$	0		@	$	8	$	14	$	0		@		@
International Advantage	$	0	$	0	$	0	$	19	$	22	$	26		@		@		@
International Equity	$	32,354	$	32,867	$	39,411	$	1,356	$	957	$	1,432	$	131	$	146	$	175
International Opportunity	$	0	$	0	$	0	$	61	$	56	$	62		@		@	$	1
International Real Estate	$	2,626	$	1,177	$	774	$	0	$	203	$	307	$	3	$	3	$	3
International Small Cap	$	3,436	$	1,686	$	706	$	153	$	243	$	196	$	7	$	9	$	2
Multi-Asset		*	$	0	$	0		*	$	92	$	354		*	$	9	$	29
Opportunity	$	1,197	$	1,134	$	1,091	$	184	$	79	$	20	$	3	$	6	$	10
Select Global Infrastructure	$	0	$	0	$	0	$	100	$	125	$	202		@	$	1	$	1
Small Company Growth	$	13,471	$	11,503	$	14,910	$	855	$	938	$	594	$	51	$	38	$	113
Total Emerging Markets		*	$	0	$	0		*	$	3	$	4		*		@		@
U.S. Real Estate	$	7,165	$	7,684	$	7,707	$	140	$	0	$	129	$	27	$	25	$	17

* Not operational for the period.

@ Amount is less than $500.

The following table reflects the contractual advisory fee and the maximum expense ratios for each Portfolio.

Portfolio	Contractual Rate of Advisory Fees	Expense Cap Class I			Expense Cap Class A†			Expense Cap Class H		Expense Cap Class L
Active International Allocation	0.65% of the portion of the daily net assets not exceeding $1 billion; 0.60% of the portion of the daily net assets exceeding $1 billion.		0.90	%		1.25	%		N/A		1.75	%
Advantage	0.75% of the portion of the daily net assets not exceeding $750 million; 0.70% of the portion of the daily net assets exceeding $750 million but not exceeding $1.5 billion; and 0.65% of the portion of the daily net assets exceeding $1.5 billion.		1.05	%		1.40	%		N/A		1.19	%
Asian Equity	0.95% of the portion of the daily net assets not exceeding $1 billion; and 0.90% of the daily net assets exceeding $1 billion.		1.45	%		1.80	%		N/A		2.30	%
Emerging Markets	1.25% of the portion of the daily net assets not exceeding $500 million; 1.20% of the portion of the daily net assets exceeding $500 million but not exceeding $1 billion; 1.15% of the portion of the daily net assets exceeding $1 billion but not exceeding $2.5 billion; 1.00% of the daily net assets exceeding $2.5 billion.		1.25	%		1.60	%		N/A		2.10	%
Emerging Markets Domestic Debt	0.75% of the portion of the daily net assets not exceeding $500 million; 0.70% of the portion of the daily net assets exceeding $500 million but not exceeding $1 billion; 0.65% of the portion of the daily net assets exceeding $1 billion.		0.85	%		1.20	%		N/A		1.45	%
Emerging Markets External Debt	0.75% of the portion of the daily net assets not exceeding $500 million; 0.70% of the portion of the daily net assets exceeding $500 million but not exceeding $1 billion; and 0.65% of the portion of the daily net assets exceeding $1 billion.		0.85	%		1.20	%		N/A		1.45	%
Frontier Emerging Markets	1.25% of average daily net assets.		1.85	%		2.20	%		N/A		2.70	%
Global Advantage	0.90% of the portion of the daily net assets not exceeding $1 billion; and 0.85% of the daily net assets exceeding $1 billion.		1.30	%		1.65	%		N/A		2.15	%
Global Discovery	0.90% of the portion of the daily net assets not exceeding $1 billion; and 0.85% of the daily net assets exceeding $1 billion.		1.35	%		1.70	%		N/A		2.20	%
Global Franchise	0.80% of the portion of the daily net assets not exceeding $500 million; 0.75% of the portion of the daily net assets exceeding $500 million but not exceeding $1 billion; 0.70% of the portion of the daily net assets exceeding $1 billion.		1.00	%		1.35	%		N/A		1.85	%

Portfolio	Contractual Rate of Advisory Fees	Expense Cap Class I			Expense Cap Class A†			Expense Cap Class H			Expense Cap Class L
Global Insight	1.00% of the portion of the daily net assets not exceeding $1 billion; 0.95% of the portion of the daily net assets exceeding $1 billion.		1.35	%		1.70	%		N/A			2.20	%
Global Opportunity	0.90% of the portion of the daily net assets not exceeding $750 million; 0.85% of the portion of the daily net assets exceeding $750 million but not exceeding $1.5 billion; and 0.80% of the portion of the daily net assets exceeding $1.5 billion.		1.25	%		1.60	%		N/A			1.65	%
Global Quality	0.80% of the portion of the daily net assets not exceeding $500 million; 0.75% of the portion of the daily net assets exceeding $500 million but not exceeding $1 billion; 0.70% of the portion of the daily net assets exceeding $1 billion.		1.20	%		1.55	%		N/A			2.05	%
Global Real Estate	0.85% of the portion of the daily net assets not exceeding $2.5 billion; and 0.80% of the portion of the daily net assets exceeding $2.5 billion.		1.05	%		1.40	%		N/A			1.90	%
Growth	0.50% of the portion of the daily net assets not exceeding $1 billion; 0.45% of the portion of the daily net assets exceeding $1 billion but not exceeding $2 billion; 0.40% of the portion of the daily net assets exceeding $2 billion but not exceeding $3 billion; 0.35% of the portion of the daily net assets exceeding $3 billion.		0.70	%*		1.05	%*		N/A			1.55	%*
Insight	0.80% of the portion of the daily net assets not exceeding $750 million; 0.75% of the portion of the daily net assets exceeding $750 million but not exceeding $1.5 billion; 0.70% of the portion of the daily net assets exceeding $1.5 billion.		1.05	%		1.40	%		N/A			1.90	%
International Advantage	0.90% of the portion of the daily net assets not exceeding $1 billion; and 0.85% of the daily net assets exceeding $1 billion.		1.25	%		1.60	%		N/A			2.10	%
International Equity	0.80% of the portion of the daily net assets not exceeding $10 billion; 0.75% of the portion of the daily net assets exceeding $10 billion.		0.95	%		1.30	%		N/A			1.80	%
International Opportunity	0.90% of the portion of the daily net assets not exceeding $1 billion; 0.85% of the portion of the daily net assets exceeding $1 billion.		1.15	%		1.50	%		N/A			2.00	%
International Real Estate	0.80% of daily net assets.		1.00	%		1.35	%		1.35	%		1.85	%
International Small Cap	0.95% of the portion of the daily net assets not exceeding $1.5 billion; 0.90% of the portion of the daily net assets exceeding $1.5 billion.		1.15	%		1.50	%		N/A			2.00	%

Portfolio	Contractual Rate of Advisory Fees	Expense Cap Class I			Expense Cap Class A†			Expense Cap Class H		Expense Cap Class L
Multi-Asset	0.85% of the portion of the daily net assets not exceeding $750 million; 0.80% of the portion of the daily net assets exceeding $750 million but not exceeding $1.5 billion; and 0.75% of the portion of the daily net assets exceeding $1.5 billion.		1.10	%		1.45	%		N/A		1.95	%
Opportunity	0.50% of the portion of the daily net assets not exceeding $1 billion; 0.45% of the portion of the daily net assets exceeding $1 billion but not exceeding $2 billion; 0.40% of the portion of the daily net assets exceeding $2 billion but not exceeding $3 billion; and 0.35% of the portion of the daily net assets exceeding $3 billion.		0.88	%		1.23	%		N/A		1.73	%
Select Global Infrastructure	0.85% of daily net assets.		1.15	%		1.50	%		N/A		2.00	%
Small Company Growth	0.92% of the portion of the daily net assets not exceeding $1 billion; 0.85% of the portion of the daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.80% of the portion of the daily net assets exceeding $1.5 billion.		1.05	%		1.40	%		N/A		1.90	%
Total Emerging Markets	0.20% of average daily net assets.		1.35	%		1.70	%		N/A		2.20	%
U.S. Real Estate	0.80% of the portion of the daily net assets not exceeding $500 million; 0.75% of the portion of the daily net assets exceeding $500 million but not exceeding $1 billion; 0.70% of the portion of the daily net assets exceeding $1 billion.		1.00	%		1.35	%		N/A		1.85	%

* Following the two year period from the date of the applicable reorganization, the Adviser has agreed to reduce its advisory fee and/or reimburse the Growth Portfolio so that total annual operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.80% for Class I, 1.15% for Class A and 1.65% for Class L. These fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund's Board of Directors acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

Sub-Advisers

The Adviser has entered into Sub-Advisory Agreements with Morgan Stanley Investment Management Limited, located at 25 Cabot Square, Canary Wharf, London, E14 4QA, England (with respect to the Emerging Markets, Global Franchise, Global Quality, Global Real Estate, International Equity, International Real Estate and Select Global Infrastructure Portfolios) and Morgan Stanley Investment Management Company, located at 23 Church Street, 16-01 Capital Square, Singapore 049481 (with respect to the Asian Equity, Emerging Markets, Global Franchise, Global Quality, Global Real Estate, International Equity, International Real Estate and Select Global Infrastructure Portfolios). The Sub-Advisers are wholly owned subsidiaries of Morgan Stanley. The Sub-Advisers provide the relevant Portfolios with investment advisory services subject to the overall supervision of the Adviser and the Fund's Directors. The Adviser pays the Sub-Advisers on a monthly basis a portion of the net advisory fees the Adviser receives from the relevant Portfolios.

Proxy Voting Policy and Proxy Voting Record

The Board of Directors believes that the voting of proxies on securities held by the Fund is an important element of the overall investment process. As such, the Directors have delegated the responsibility to vote such proxies to MSIM.

A copy of MSIM's Proxy Voting Policy ("Proxy Policy") is attached hereto as Appendix A. In addition, a copy of the Proxy Policy, as well as the Fund's most recent proxy voting record for the 12-month period ended June 30, as filed with the SEC, are available without charge on our web site at www.morganstanley.com/im. The Fund's proxy voting record is also available without charge on the SEC's web site at http://www.sec.gov.

Principal Underwriter

Morgan Stanley Distribution, Inc., with principal offices at 522 Fifth Avenue, New York, NY 10036, serves as principal underwriter to the Fund. For information relating to the services provided by Morgan Stanley Distribution, Inc., see "Distribution of Shares."

Fund Administration

The Adviser also provides administrative services to the Fund pursuant to an Administration Agreement. The services provided under the Administration Agreement are subject to the supervision of the officers and the Board of Directors of the Fund and include day-to-day administration of matters related to the corporate existence of the Fund, maintenance of records, preparation of reports, supervision of the Fund's arrangements with its custodian, and assistance in the preparation of the Fund's registration statement under federal laws. For its services under the Administration Agreement, the Fund pays the Adviser a monthly fee which on an annual basis equals 0.08% of the average daily net assets of each Portfolio. The Adviser may compensate other service providers for performing shareholder servicing and administrative services.

For the fiscal years ended December 31, 2011, 2012 and 2013, the Fund paid the following administrative fees (no administrative fees were waived):

	Administrative Fees Paid
Portfolio	2011 ($000)		2012 ($000)		2013 ($000)
Active International Allocation	$	324	$	252	$	284
Advantage	$	5	$	9	$	13
Asian Equity	$	1	$	4	$	6
Emerging Markets	$	1,375	$	1,043	$	1,015
Emerging Markets Domestic Debt	$	56	$	66	$	44
Emerging Markets External Debt		*	$	11	$	17
Frontier Emerging Markets		*	$	7	$	91
Global Advantage	$	2	$	2	$	3
Global Discovery	$	2	$	4	$	7
Global Franchise	$	141	$	267	$	468
Global Insight		@	$	1	$	1
Global Opportunity	$	10	$	11	$	8
Global Quality		*		*	$	2
Global Real Estate	$	1,203	$	1,437	$	1,720
Growth	$	689	$	666	$	747
Insight		@	$	1	$	1
International Advantage	$	2	$	2	$	2
International Equity	$	3,384	$	3,397	$	4,102
International Opportunity	$	5	$	5	$	6
International Real Estate	$	263	$	138	$	108
International Small Cap	$	303	$	163	$	76
Multi-Asset		*	$	9	$	33
Opportunity	$	222	$	195	$	179
Select Global Infrastructure	$	9	$	12	$	19
Small Company Growth	$	1,295	$	1,109	$	1,417
Total Emerging Markets		*	$	1	$	2
U.S. Real Estate	$	756	$	797	$	813

* Not operational for the period.

@ Amount is less than $500.

Sub-Administrator. 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 administrative fee the Administrator receives from the Fund. The Administrator supervises and monitors the administrative and accounting services provided by State Street. Their services are also subject to the supervision of the officers and Board of Directors of the Fund.

Custodian

State Street, located at One Lincoln Street, Boston, MA 02111-2101, acts as the Fund's custodian. State Street is not an affiliate of the Adviser or the Distributor. In maintaining custody of foreign assets held outside the United States, State Street has contracted with various foreign banks and depositaries in accordance with regulations of the SEC for the purpose of providing custodial services for such assets.

In the selection of foreign sub-custodians, the Directors or their delegates consider a number of factors, including, but not limited to, the reliability and financial stability of the institution, the ability of the institution to provide efficiently the custodial services required for the Fund, and the reputation of the institution in the particular country or region.

Dividend Disbursing and Transfer Agent

Boston Financial Data Services, Inc., 2000 Crown Colony Drive, Quincy, MA 02169-0953, provides dividend disbursing and transfer agency services for the Fund.

Portfolio Managers

Other Accounts Managed by the Portfolio Managers

Because the portfolio managers may manage assets for other investment companies, pooled investment vehicles and/or other accounts (including institutional clients, pension plans and certain high net worth individuals), there may be an incentive to favor one client over another resulting in conflicts of interest. For instance, the Adviser and/or Sub-Advisers may receive fees from certain accounts that are higher than the fee it receives from the Fund, or it may receive a performance-based fee on certain accounts. In those instances, the portfolio managers may have an incentive to favor the higher and/or performance-based fee accounts over the Fund. In addition, a conflict of interest could exist to the extent the Adviser and/or Sub-Advisers have proprietary investments in certain accounts, where portfolio managers have personal investments in certain accounts or when certain accounts are investment options in the Adviser's and/or Sub-Advisers' employee benefits and/or deferred compensation plans. The portfolio manager may have an incentive to favor these accounts over others. If the Adviser and/or Sub-Advisers manage accounts that engage in short sales of securities of the type in which the Fund invests, the Adviser and/or Sub-Advisers could be seen as harming the performance of the Fund for the benefit of the accounts engaging in short sales if the short sales cause the market value of the securities to fall. The Adviser and/or Sub-Advisers have adopted trade allocation and other policies and procedures that they believe are reasonably designed to address these and other conflicts of interest.

Portfolio Manager Compensation Structure

Morgan Stanley's compensation structure is based on a total reward system of base salary and Incentive Compensation which is paid partially as a cash bonus and partially as mandatory deferred compensation. Deferred compensation may be granted as deferred cash under the Adviser's Investment Management Alignment Plan ("IMAP"), as an equity-based award or it may be granted under other plans as determined annually by Morgan Stanley's Compensation, Management Development and Succession Committee subject to vesting and other conditions.

Base salary compensation. Generally, portfolio managers receive base salary compensation based on the level of their position with the Adviser.

Incentive compensation. In addition to base compensation, portfolio managers may receive discretionary year-end compensation.

Incentive compensation may include:

• Cash Bonus.

• Deferred Compensation:

• A mandatory program that defers a portion of incentive compensation into restricted stock units or other awards based on Morgan Stanley common stock or other plans that are subject to vesting and other conditions.

• IMAP is a mandatory program that defers a portion of incentive compensation and notionally invests it in designated funds advised by the Adviser or its affiliates. The award is subject to vesting and other conditions. Portfolio managers must notionally invest a minimum of 25% to a maximum of 100% of their IMAP deferral account into a combination of the designated funds they manage that are included in the IMAP fund menu, which may or may not include one of the Portfolios.

All deferred compensation awards are subject to clawback provisions where awards can be cancelled, in whole or in part, if an employee takes any action, or omits to take any action which: causes a restatement of Morgan Stanley's consolidated financial results; constitutes a violation by the portfolio manager of Morgan Stanley's Global Risk Management Principles, Policies and Standards; or constitutes violation of internal risk and control policies involving a subsequent loss.

Several factors determine discretionary compensation, which can vary by portfolio management team and circumstances. These factors include:

• Revenues generated by the investment companies, pooled investment vehicles and other accounts managed by the portfolio manager.

• The investment performance of the funds/accounts managed by the portfolio manager.

• Contribution to the business objectives of the Adviser and/or Sub-Advisers.

• The dollar amount of assets managed by the portfolio manager.

• Market compensation survey research by independent third-parties.

• Other qualitative factors, such as contributions to client objectives.

• Performance of Morgan Stanley and Morgan Stanley Investment Management, and the overall performance of the investment team(s) of which the portfolio manager is a member.

Other Accounts Managed by Portfolio Managers as of December 31, 2013 (unless otherwise indicated)

Other Registered Investment
Companies

Other Pooled
Investment Vehicles

Other Accounts

Portfolio and Portfolio Managers

Number of
Accounts

Total Assets
in the Accounts

Number of
Accounts

Total Assets
in the Accounts

Number of
Accounts

Total Assets
in the Accounts

Active International Allocation

Ann D. Thivierge

$270.3 million

$22.6 million

10⁽¹⁾

$6.7 billion⁽¹⁾

Asian Equity

Munib Madni

$2.3 billion

$2.7 billion

19⁽²⁾

$12.7 billion⁽²⁾

Samuel Rhee

$3.5 billion

$2.7 billion

20⁽³⁾

$14.0 billion⁽³⁾

May Yu

$879.7 million

$356.3 million

$8.0 billion

Advantage

Sam G. Chainani

$21.7 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

David S. Cohen

$21.7 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Dennis P. Lynch

$21.7 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Armistead B. Nash

$21.7 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Alexander T. Norton

$21.7 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Jason C. Yeung

$21.7 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Emerging Markets

Gaite Ali

$718.2 million

$4.6 billion

17⁽⁵⁾

$7.7 billion⁽⁵⁾

Eric Carlson

$1.4 billion

$2.8 billion

15⁽³⁾

$6.0 billion⁽³⁾

Munib Madni

$1.2 billion

$2.7 billion

19⁽²⁾

$12.7 billion⁽²⁾

Ana Cristina Piedrahita

$1.3 billion

$3.2 billion

17⁽⁵⁾

$7.7 billion⁽⁵⁾

Paul C. Psaila

$1.4 billion

$2.8 billion

15⁽³⁾

$6.0 billion⁽³⁾

Samuel Rhee

$2.4 billion

$2.7 billion

20⁽³⁾

$14.0 billion⁽³⁾

Ruchir Sharma

$1.6 billion

$4.1 billion

15⁽³⁾

$6.0 billion⁽³⁾

Emerging Markets Domestic Debt

Eric J. Baurmeister

$2.1 billion

$1.9 billion

9⁽⁶⁾

$5.0 billion⁽⁶⁾

Federico L. Kaune

$2.0 billion

$1.9 billion

9⁽⁶⁾

$5.0 billion⁽⁶⁾

Emerging Markets External Debt

Eric J. Baurmeister

$2.1 billion

$1.9 billion

9⁽⁶⁾

$5.0 billion⁽⁶⁾

Federico L. Kaune

$2.0 billion

$1.9 billion

9⁽⁶⁾

$5.0 billion⁽⁶⁾

Frontier Emerging Markets

Tim Drinkall

$2.8 billion

15⁽³⁾

$6.0 billion⁽³⁾

Other Registered Investment
Companies

Other Pooled
Investment Vehicles

Other Accounts

Portfolio and Portfolio Managers

Number of
Accounts

Total Assets
in the Accounts

Number of
Accounts

Total Assets
in the Accounts

Number of
Accounts

Total Assets
in the Accounts

Global Advantage

Sam G. Chainani

$21.7 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

David S. Cohen

$21.7 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Dennis P. Lynch

$21.7 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Armistead B. Nash

$21.7 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Alexander T. Norton

$21.7 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Jason C. Yeung

$21.7 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Global Discovery

Burak Alici

$91.6 million

$77.7 thousand

Global Franchise

Vladimir A. Demine

$6.1 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Christian Derold

$6.1 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

William D. Lock

$6.1 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Bruno Paulson

$6.1 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Marcus Watson

$6.1 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Peter J. Wright†

$6.1 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Global Insight

Burak Alici

$100.5 million

$77.7 thousand

Global Opportunity

Kristian Heugh

$265.2 million

$101.5 million

Global Quality

Vladimir A. Demine

$6.8 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Christian Derold

$6.8 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

William D. Lock

$6.8 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Bruno Paulson

$6.8 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Marcus Watson

$6.8 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Peter J. Wright†

$6.8 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Global Real Estate

Theodore R. Bigman

$3.7 billion

$7.2 billion

53⁽⁸⁾

$6.7 billion⁽⁸⁾

Bill Grant*

$6.0 billion

48⁽⁹⁾

$5.5 billion⁽⁹⁾

Angeline Ho

$734.4 million

$5.8 billion

44⁽⁹⁾

$4.5 billion⁽¹⁰⁾

Michiel te Paske

$734.4 million

$5.7 billion

45⁽⁹⁾

$4.7 billion⁽¹⁰⁾

Sven van Kemenade

$734.4 million

$5.7 billion

45⁽⁹⁾

$4.7 billion⁽¹⁰⁾

Growth

Sam G. Chainani

$20.5 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

David S. Cohen

$20.5 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Dennis P. Lynch

$20.5 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Armistead B. Nash

$20.5 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Alexander T. Norton

$20.5 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Jason C. Yeung

$20.5 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Insight

Burak Alici

$99.9 million

$77.7 thousand

International Advantage

Kristian Heugh

$274.1 million

$101.5 million

International Equity

Vladimir A. Demine

$1.2 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Christian Derold

$1.2 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

William D. Lock

$1.2 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Bruno Paulson

$1.2 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Marcus Watson

$1.2 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

Peter J. Wright†

$1.2 billion

$14.6 billion

75⁽⁷⁾

$17.3 billion⁽⁷⁾

International Opportunity

Kristian Heugh

$269.3 million

$101.5 million

International Real Estate

Theodore R. Bigman

$5.7 billion

$7.2 billion

53⁽⁸⁾

$6.7 billion⁽⁸⁾

Angeline Ho

$2.7 billion

$5.8 billion

44⁽⁹⁾

$4.5 billion⁽¹⁰⁾

Michiel te Paske

$2.7 billion

$5.7 billion

45⁽⁹⁾

$4.7 billion⁽¹⁰⁾

Sven van Kemenade

$2.7 billion

$5.7 billion

45⁽⁹⁾

$4.7 billion⁽¹⁰⁾

Other Registered Investment
Companies

Other Pooled
Investment Vehicles

Other Accounts

Portfolio and Portfolio Managers

Number of
Accounts

Total Assets
in the Accounts

Number of
Accounts

Total Assets
in the Accounts

Number of
Accounts

Total Assets
in the Accounts

International Small Cap

Burak Alici

$14.3 million

$77.7 thousand

Multi-Asset

Mark A. Bavoso

$653.9 million

$88.6 million

9⁽³⁾

$5.1 billion⁽³⁾

Cyril Moullé-Berteaux

$656.2 million

$4.8 billion

9⁽³⁾

$5.1 billion⁽³⁾

Sergei Parmenov

$4.7 billion

9⁽³⁾

$5.1 billion⁽³⁾

Opportunity

Kristian Heugh

$22.7 million

$101.5 million

Select Global Infrastructure

Theodore R. Bigman

$5.8 billion

$7.2 billion

53⁽⁸⁾

$6.7 billion⁽⁸⁾

Matthew King

$456.8 million

$364.7 million

Small Company Growth

Sam G. Chainani

$19.3 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

David S. Cohen

$19.3 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Dennis P. Lynch

$19.3 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Armistead B. Nash

$19.3 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Alexander T. Norton

$19.3 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Jason C. Yeung

$19.3 billion

$7.1 billion

12⁽⁴⁾

$2.2 billion⁽⁴⁾

Total Emerging Markets

Eric J. Baurmeister

$2.1 billion

$1.9 billion

9⁽⁶⁾

$5.0 billion⁽⁶⁾

Jitania Kandhari

Federico Kaune

$2.0 billion

$1.9 billion

9⁽⁶⁾

$5.0 billion⁽⁶⁾

Cyril Moullé-Berteaux

$781.7 million

$4.8 billion

9⁽³⁾

$5.1 billion⁽³⁾

Sergei Parmenov

$4.7 billion

Paul C. Psaila

$2.5 billion

$2.8 billion

15⁽³⁾

$6.0 billion⁽³⁾

U.S. Real Estate

Theodore R. Bigman

$4.9 billion

$7.2 billion

53⁽⁸⁾

$6.7 billion⁽⁸⁾

Bill Grant*

$6.0 billion

48⁽⁹⁾

$5.5 billion⁽⁹⁾

* As of January 31, 2014.

(1) Of these other accounts, three accounts with a total of approximately $630.9 million in assets had performance-based fees.

(2) Of these other accounts, two accounts with a total of approximately $835.2 million in assets had performance-based fees.

(3) Of these other accounts, three accounts with a total of approximately $2.1 billion in assets had performance-based fees.

(4) Of these other accounts, two accounts with a total of approximately $593.0 million in assets had performance-based fees.

(5) Of these other accounts, four accounts with a total of approximately $3.8 billion in assets had performance-based fees.

(6) Of these other accounts, one account with a total of approximately $259.4 million in assets had performance-based fees.

(7) Of these other accounts, three accounts with a total of approximately $970.7 million in assets had performance-based fees.

(8) Of these other accounts, 14 accounts with a total of approximately $1.2 billion in assets had performance-based fees.

(9) Of these other accounts, 11 accounts with a total of approximately $631.4 million in assets had performance-based fees.

(10) Of these other accounts, nine accounts with a total of approximately $322.4 million in assets had performance-based fees.

† Effective December 17, 2014, Mr. Wright will retire from Morgan Stanley Investment Management.

Securities Ownership of Portfolio Managers

As of December 31, 2013 (unless otherwise noted), the dollar range of securities beneficially owned (or held notionally through IMAP) by each portfolio manager in the Fund is shown below:

Portfolio and Portfolio Managers				Portfolio Holdings
Active International Allocation
Ann D. Thivierge				$500,001-$1 million
Advantage
Sam G. Chainani				$100,001-$500,000
David S. Cohen				$500,001-$1 million
Dennis P. Lynch				$500,001-$1 million
Armistead B. Nash				$50,001-$100,000
Alexander T. Norton				$10,001-$50,000
Jason C. Yeung				$50,001-$100,000
Asian Equity
Munib Madni				$500,001-$1 million
Samuel Rhee				Over $1 million
May Yu				$10,001-$50,000
Emerging Markets
Gaite Ali				$100,001-$500,000
Eric Carlson				$100,001-$500,000
Munib Madni				None
Ana Cristina Piedrahita				$50,001-$100,000
Paul C. Psaila				$100,001-$500,000
Samuel Rhee				None
Ruchir Sharma				$500,001-$1 million
Emerging Markets Domestic Debt
Eric Baurmeister				$100,001-$500,000
Federico Kaune				None
Emerging Markets External Debt
Eric J. Baurmeister				$100,001-$500,000
Federico Kaune				None
Frontier Emerging Markets
Tim Drinkall				None
Global Advantage
Sam G. Chainani				$100,001-$500,000
David S. Cohen				$500,001-$1 million
Dennis P. Lynch				$500,001-$1 million
Armistead B. Nash				$50,001-$100,000
Alexander T. Norton				$10,001-$50,000
Jason C. Yeung				$50,001-$100,000
Global Discovery
Burak Alici				$500,001-$1 million
Global Franchise
Vladimir A. Demine				$100,001-$500,000
Christian Derold				$50,001-$100,000
William D. Lock				Over $1 million
Bruno Paulson				Over $1 million
Marcus Watson				$10,001-$50,000
Peter J. Wright†				Over $1 million
Global Insight
Burak Alici				$100,001-$500,000
Global Opportunity
Kristian Heugh				Over $1 million
Global Quality
Vladimir A. Demine				None
Christian Derold				$100,001-$500,000
William D. Lock				Over $1 million
Bruno Paulson				$500,001-$1 million
Marcus Watson				None
Peter J. Wright†				None
Global Real Estate
Theodore R. Bigman				$500,001-$1 million
Bill Grant*				$10,001-$50,000
Angeline Ho				None**
Michiel te Paske				None**
Sven van Kemenade				None**

Portfolio and Portfolio Managers				Portfolio Holdings
Growth
Sam G. Chainani				$100,001-$500,000
David S. Cohen				$100,001-$500,000
Dennis P. Lynch				Over $1 million
Armistead B. Nash				$10,001-$50,000
Alexander T. Norton				$100,001-$500,000
Jason C. Yeung				$100,001-$500,000
Insight
Burak Alici				$100,001-$500,000
International Advantage
Kristian Heugh				$100,001-$500,000
International Equity
Vladimir A. Demine				$50,001-$100,000
Christian Derold				$50,001-$100,000
William D. Lock				$500,001-$1 million
Bruno Paulson				$500,001-$1 million
Marcus Watson				$10,001-$50,000
Peter J. Wright†				Over $1 million
International Opportunity
Kristian Heugh				$100,001-$500,000
International Real Estate
Theodore R. Bigman				$500,001-$1 million
Angeline Ho				None
Michiel te Paske				None
Sven van Kemenade				None
International Small Cap
Burak Alici				$100,001-$500,000
Multi-Asset
Mark A. Bavoso				$100,001-$500,000
Cyril Moullé-Berteaux				Over $1 million
Sergei Parmenov				$100,001-$500,000
Opportunity
Kristian Heugh				$500,001-$1 million
Select Global Infrastructure
Theodore R. Bigman				$100,001-$500,000
Matthew King				$100,001-$500,000
Small Company Growth
Sam G. Chainani				$100,001-$500,000
David S. Cohen				$500,001-$1 million
Dennis P. Lynch				Over $1 million
Armistead B. Nash				$10,001-$50,000
Alexander T. Norton				$50,001-$100,000
Jason C. Yeung				$100,001-$500,000
Total Emerging Markets
Eric J. Baurmeister				None
Jitania Kandhari				None
Federico Kaune				None
Cyril Moullé-Berteaux				None
Sergei Parmenov				None
Paul C. Psaila				None
U.S. Real Estate
Theodore R. Bigman				$100,001-$500,000
Bill Grant*				$10,001-$50,000

* As of January 31, 2014.

** Not included in the table above, the portfolio manager has made investments in one or more other pooled investment vehicles (i.e., funds not formed or registered in the United States) managed by the same portfolio management team pursuant to a similar strategy.

† Effective December 17, 2014, Mr. Wright will retire from Morgan Stanley Investment Management.

Independent Registered Public Accounting Firm

Ernst & Young LLP, located at 200 Clarendon Street, Boston, MA 02116-5021, serves as the Fund's independent registered public accounting firm and audits the annual financial statements of each Portfolio.

Fund Counsel

Dechert LLP, located at 1095 Avenue of the Americas, New York, NY 10036-6797, acts as the Fund's legal counsel.

DISTRIBUTION AND SHAREHOLDER SERVICES PLANS

Morgan Stanley Distribution, Inc., an indirect wholly owned subsidiary of Morgan Stanley, serves as the Fund's exclusive distributor of Portfolio shares pursuant to a Distribution Agreement. In addition, to promote the sale of Fund shares, the Fund has adopted a Shareholder Services Plan with respect to the Class A shares of each Portfolio, a Shareholder Services Plan with respect to the Class H shares of the International Real Estate Portfolio and a Distribution and Shareholder Services Plan with respect to Class L shares of each Portfolio under Rule 12b-1 of the 1940 Act (each, a "Plan"). Under the Plans, each Portfolio pays the Distributor a shareholder services fee of up to 0.25% of the Class A shares' average daily net assets on an annualized basis. Each Portfolio pays the Distributor a shareholder services fee of up to 0.25% of the Class L shares' average daily net assets on an annualized basis and a distribution fee of up to 0.50% (0.25% with respect to the Emerging Markets Domestic Debt and Emerging Markets External Debt Portfolios) of the Class L shares' average daily net assets on an annualized basis. The International Real Estate Portfolio pays the Distributor a shareholder services fee of up to 0.25% of the Class H shares' average daily net assets on an annualized basis. For at least one year, the Distributor has agreed to waive the 12b-1 fee on Class L shares of the Advantage and Global Opportunity Portfolios to the extent it exceeds 0.04% and 0.30%, respectively, of the average daily net assets of such shares on an annualized basis. Morgan Stanley Distribution, Inc. may retain any portion of the fees it does not expend in meeting its obligations to the Fund. The Distributor may compensate Financial Intermediaries, plan fiduciaries and administrators, which may or may not be affiliated with Morgan Stanley, for providing distribution-related and/or shareholder support services, including account maintenance services, to shareholders (including, where applicable, underlying beneficial owners) of the Fund. The Distributor and the Adviser also may compensate third-parties out of their own assets. For the Fund's fiscal year ended December 31, 2013, certain amounts paid by the Fund with respect to the distribution fee were used to compensate Financial Intermediaries for sales of Class L shares of the respective Portfolios.

The Plans for the Class A, Class H and Class L shares were approved by the Fund's Board of Directors, including the Independent Directors, none of whom has a direct or indirect financial interest in the operation of a Plan or in any agreements related thereto.

The following table describes the shareholder servicing fees paid by each Portfolio with respect to its Class A, Class H and Class L shares, as applicable, pursuant to the Plans and the distribution-related expenses for each Portfolio with respect to its Class A, Class H and Class L shares, as applicable, for the fiscal year ended December 31, 2013. To the extent that expenditures on distribution-related activities exceed the fees paid by a Portfolio, the excess amounts were paid by the Adviser or the Distributor out of its own resources.

Portfolio	Total Distribution and/or Shareholder Servicing Fees Paid by Portfolio		Distribution and/or Shareholder Servicing Expenses*		Distribution and/or Shareholder Servicing Fees Retained by Morgan Stanley Distribution, Inc. (Expenditures in Excess of Distribution and/or Shareholder Servicing Fees)
Class A⁽¹⁾
Active International Allocation	$	221,944	$	195,897	$	26,047
Advantage		6,992		6,358		634
Asian Equity		3,371		2,115		1,256
Emerging Markets		93,654		81,755		11,899
Emerging Markets Domestic Debt		18,981		18,906		75
Emerging Markets External Debt		687		165		522
Frontier Emerging Markets		9,839		10,117		(278	)
Global Advantage		1,393		363		1,030
Global Discovery		2,920		1,629		1,291
Global Franchise		165,367		162,959		2,408
Global Insight		838		388		450
Global Opportunity		8,737		7,064		1,673
Global Quality		791		715		76

Portfolio	Total Distribution and/or Shareholder Servicing Fees Paid by Portfolio			Distribution and/or Shareholder Servicing Expenses*		Distribution and/or Shareholder Servicing Fees Retained by Morgan Stanley Distribution, Inc. (Expenditures in Excess of Distribution and/or Shareholder Servicing Fees)
Global Real Estate	$	319,885		$	290,911	$	28,974
Growth		394,998			298,755		96,243
Insight		893			400		493
International Advantage		957			695		262
International Equity		3,247,529			3,211,253		36,276
International Opportunity		959			352		607
International Real Estate		9,719			7,819		1,900
International Small Cap		341			59		282
Multi-Asset		10,486			8,271		2,215
Opportunity		461,323			380,000		81,323
Select Global Infrastructure		6,821			6,060		761
Small Company Growth		555,432			555,221		211
Total Emerging Markets		553			0		553
U.S. Real Estate		283,776			252,373		31,403
Class H
International Real Estate	$	226		$	197	$	29
Class L
Active International Allocation	$	76,047		$	72,627	$	3,420
Advantage		770	⁽²⁾		10,488		(9,718	)
Asian Equity		765			0		765
Emerging Markets		958			885		73
Emerging Markets Domestic Debt		22,350			21,081		1,269
Emerging Markets External Debt		581			0		581
Frontier Emerging Markets		9,426			5,343		4,083
Global Advantage		1,218			289		929
Global Discovery		1,438			383		1,055
Global Franchise		60,412			58,609		1,803
Global Insight		100			0		100
Global Opportunity		1,292	⁽³⁾		2,658		(1,366	)
Global Quality		579			350		229
Global Real Estate		53,792			53,189		603
Growth		915			822		93
Insight		574			0		574
International Advantage		904			0		904
International Equity		90,174			79,674		10,500
International Opportunity		898			0		898
International Real Estate		209			122		87
International Small Cap		465			249		216
Multi-Asset		15,965			12,901		3,064
Opportunity		213,099			136,428		76,671
Select Global Infrastructure		3,143			2,115		1,028
Small Company Growth		15,583			14,619		964
Total Emerging Markets		828			0		828
U.S. Real Estate		38,769			35,911		2,858
Fund Total	$	6,440,666		$	6,009,540	$	431,126

* Includes payments for distribution and/or shareholder servicing to third-parties and affiliated entities.

(1) Effective September 9, 2013, Class P shares of each Portfolio (except the Global Quality Portfolio) and Class H shares of each of the Global Insight and Insight Portfolios were renamed Class A shares.

(2) The distribution and shareholder servicing fee paid by the Advantage Portfolio pursuant to the Class L Plan reflects a waiver of $13,662.

(3) The distribution and shareholder servicing fee paid by the Global Opportunity Portfolio pursuant to the Class L Plan reflects a waiver of $1,938.

Revenue Sharing

The Adviser and/or the Distributor may pay compensation, out of their own funds and not as an expense of the Portfolios, to certain Financial Intermediaries, including recordkeepers and administrators of various deferred compensation plans ("Intermediaries"), in connection with the sale, distribution, marketing and retention of shares of the Portfolios and/or shareholder servicing. For example, the Adviser or the Distributor may pay additional compensation to an Intermediary for, among other things, promoting the sale and distribution of Portfolio shares, providing access to various programs, mutual fund platforms or preferred or recommended mutual fund lists that may be offered by an Intermediary, granting the Distributor access to an Intermediary's financial advisors and consultants, providing assistance in the ongoing education and training of an Intermediary's financial personnel, furnishing marketing support, maintaining share balances and/or for sub-accounting, recordkeeping, administrative, shareholder, or transaction processing services. Such payments are in addition to any shareholder servicing fees and/or transfer agency fees that may be payable by the Portfolios. The additional payments are generally based on current assets, but may also be based on other measures as determined from time to time by the Adviser and/or the Distributor (e.g., gross sales or number of accounts). The amount of these payments may be different for different Intermediaries.

With respect to Morgan Stanley Smith Barney LLC, these payments currently include the following amounts, which are paid in accordance with the applicable compensation structure:

With respect to other Intermediaries, these payments currently include the following amounts, which are paid in accordance with the applicable compensation structure for each Intermediary:

(2) an ongoing annual fee in an amount up to 0.08% on sales of Class A, Class I and Class L shares of the Portfolio through a Financial Intermediary's brokerage accounts.

Dealer Reallowances

Upon notice to selected broker-dealers, the Distributor may reallow up to the full applicable front-end sales charge during periods specified in such notice. During periods when 90% or more of the sales charge is reallowed, such selected broker-dealers may be deemed to be underwriters as that term is defined in the securities act.

BROKERAGE PRACTICES

Portfolio Transactions

The Adviser and/or Sub-Advisers are responsible for decisions to buy and sell securities for each Portfolio, for broker-dealer selection and for negotiation of commission rates. The Adviser and/or Sub-Advisers are prohibited from directing brokerage transactions on the basis of the referral of clients or the sale of shares of advised investment companies. Purchases and sales of securities on a stock exchange are effected through brokers who charge a commission for their services. In the OTC market, securities may be traded as agency transactions through broker dealers or traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission, although the price of the security usually includes profit to the dealer. In underwritten offerings, securities are purchased at a fixed price which includes an amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. When securities are purchased or sold directly from or to an issuer, no commissions or discounts are paid.

On occasion, a Portfolio may purchase certain money market instruments directly from an issuer without payment of a commission or concession. Money market instruments are generally traded on a "net" basis with dealers acting as principal for their own accounts without a stated commission, although the price of the security usually includes a profit to the dealer.

The Fund anticipates that certain of its transactions involving foreign securities will be effected on securities exchanges. Fixed commissions on such transactions are generally higher than negotiated commissions on domestic transactions. There is also generally less government supervision and regulation of foreign securities exchanges and brokers than in the United States.

The Adviser and/or Sub-Advisers serve as investment adviser to a number of clients, including other investment companies. The Adviser and/or Sub-Advisers attempt to equitably allocate purchase and sale transactions among the Portfolios of the Fund and other client accounts. To that end, the Adviser and/or Sub-Advisers consider various factors, including respective investment objectives, relative size of portfolio holdings of the same or comparable securities, availability of cash for investment, size of investment commitments generally held and the opinions of the persons responsible for managing the Portfolios of the Fund and other client accounts.

The Adviser and/or Sub-Advisers select the brokers or dealers that will execute the purchases and sales of investment securities for each Portfolio. The Adviser and/or Sub-Advisers effect transactions with those broker-dealers that they believe provide prompt execution of orders in an effective manner at the most favorable prices. The Adviser and/or Sub-Advisers may place portfolio transactions with those brokers and dealers who also furnish research and other services to the Fund, the Adviser and/or the Sub-Advisers. Services provided may include certain research services (as described below), as well as effecting securities transactions and performing functions incidental thereto (such as clearance, settlement and custody).

The Adviser and its affiliated investment advisers have established commission sharing arrangements under a commission management program (the "Commission Management Program" or "CMP"), pursuant to which execution and research costs or a portion of those costs are decoupled in accordance with applicable laws, rules and regulations. Under the CMP, the Adviser and its affiliated investment advisers select approved equity brokers (which include the Adviser's affiliates) for execution services and after accumulation of commissions at such brokers, the Adviser and/or its affiliated investment advisers instruct these approved equity brokers to pay for eligible research provided by any executing brokers or third-party research providers, on MSIM's and its affiliated investment advisers' Approved Research Provider List, which are selected independently by a Research Services Committee of the Adviser and its affiliated investment advisers. Generally, the Adviser and its affiliated investment advisers will direct the approved equity broker to record research credits based upon a previously agreed-upon allocation and will periodically instruct the approved equity broker to direct specified dollar amounts from that pool to pay for eligible research services provided by third-party research providers and executing brokers. The research credits are pooled among the Adviser and its affiliated investment advisers and allocated on behalf of both the Adviser and its affiliated investment advisers. Likewise, the research services obtained under the CMP are shared among the Adviser and its affiliated investment advisers.

Selection of approved equity brokers for execution is based on three main criteria: access to liquidity, provision of capital and quality of execution. Under the CMP, each approved equity broker is responsible for the payment of fees for research services and obtains the research services pursuant to written agreements between the approved equity broker and the third-party research provider.

For those costs not decoupled, but retained by broker-dealers, the Adviser also effects transactions with brokers which directly pay for research services provided by those brokers in accordance with Section 28(e) of the 1934 Act. Such transactions include equity transactions and may include fixed-income transactions effected on an agency basis.

accounts involved in the transaction benefit from one or more of the services offered by such broker-dealer; and (ii) each affiliated investment adviser has approved the use of such broker-dealer and the services provided thereby.

The research services received include those of the nature described above and other services which aid the Adviser in fulfilling its investment decision making responsibilities, including (a) furnishing advice as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; and (b) furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts. Where a particular item (such as proxy services) has both research and non-research related uses, the Adviser will make a reasonable allocation of the cost of the item between research and non-research uses and will only pay for the portion of the cost allocated to research uses with client brokerage transactions. Research services furnished or paid for by brokers through whom the Adviser effects transactions for a particular account may be used by the Adviser or its affiliated investment advisers in servicing their other accounts, and not all such services may be used for the benefit of the client which pays the brokerage commission that results in the receipt of such research services. Commissions paid to brokers providing research services may be higher than those charged by brokers not providing services.

The Adviser and its affiliated investment advisers make a good faith determination of the value of research services in accordance with Section 28(e) of the 1934 Act, UK Financial Conduct Authority and Prudential Regulation Authority Rules and other relevant regulatory requirements.

Certain investment professionals and other employees of the Adviser are also officers of affiliated investment advisers and may provide investment advisory services to clients of such affiliated investment advisers. The Adviser's personnel also provide research and trading support to personnel of certain affiliated investment advisers. Research related costs may be shared by affiliated investment advisers and may benefit the clients of such affiliated investment advisers. Research services that benefit the Adviser may be received in connection with commissions generated by clients of its affiliated investment advisers. Similarly, research services received in connection with commissions generated by the Adviser's clients may benefit affiliated investment advisers and their clients. Moreover, research services provided by broker-dealers through which the Adviser effects transactions for a particular account may be used by the Adviser and/or an affiliated investment adviser in servicing its other accounts and not all such research services may be used for the benefit of the particular client, which pays the brokerage commission giving rise to the receipt of such research services.

The Adviser and certain of its affiliates currently serve as an investment adviser to a number of clients, including other investment companies, and may in the future act as investment adviser to others. It is the practice of the Adviser, and its affiliates, to cause purchase and sale transactions (including transactions in certain initial and secondary public offerings) to be allocated among clients whose assets they manage (including the Fund) in such manner they deem equitable. In making such allocations among the Fund and other client accounts, various factors may be considered, including the respective investment objectives, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment, the size of investment commitments generally held and the opinions of the persons responsible for managing the portfolios of the Fund and other client accounts. The Adviser and its affiliates may operate one or more order placement facilities and each facility will implement order allocation in accordance with the procedures described above. From time to time, each facility may transact in a security at the same time as other facilities are trading in that security.

Affiliated Brokers

Subject to the overriding objective of obtaining the best execution of orders, the Fund may use broker-dealer affiliates of the Adviser to effect Portfolio brokerage transactions, including transactions in futures contracts and options on futures contracts, under procedures adopted by the Fund's Board of Directors. In order to use such affiliates, the commission rates and other remuneration paid to the affiliates must be fair and reasonable in comparison to those of other broker-dealers for comparable transactions involving similar securities being purchased or sold during a comparable time period. This standard would allow the affiliated broker or dealer to receive no more than the remuneration which would be expected to be received by an unaffiliated broker.

Pursuant to orders issued by the SEC, the Fund is permitted to engage in principal transactions, subject to certain conditions, with Morgan Stanley & Co. LLC, a broker-dealer affiliated with the Fund's Adviser.

During the fiscal years ended December 31, 2011 and 2013, the Fund did not effect any principal transactions with Morgan Stanley & Co. LLC. During the fiscal year ended December 31, 2012, the Fund, on behalf of the Asian Equity Portfolio, effected principal transactions with Morgan Stanley & Co. LLC.

Brokerage Commissions Paid

During the fiscal years ended December 31, 2011, 2012 and 2013, the Fund paid brokerage commissions of approximately $12,788,501, $10,370,748 and $11,846,978, respectively. During the fiscal years ended December 31,

2011, 2012 and 2013, the Fund paid in the aggregate $157,372, $86,347 and $98,831, respectively, in brokerage commissions to Morgan Stanley & Co. LLC and/or its affiliated broker-dealers. During the fiscal year ended December 31, 2013, the brokerage commissions paid to Morgan Stanley & Co. LLC and/or its affiliated broker-dealers represented approximately 0.83% of the total brokerage commissions paid by the Fund during the period and were paid on account of transactions having an aggregate dollar value equal to approximately 0.51% of the aggregate dollar value of all portfolio transactions of the Fund during the period for which commissions were paid.

For the fiscal year ended December 31, 2013, each Portfolio paid brokerage commissions, including brokerage commissions paid to affiliated broker-dealers as follows:

	Brokerage Commissions Paid During Fiscal Year Ended December 31, 2013
			Commissions Paid to Morgan Stanley & Co. LLC and/or its affiliated broker-dealers
Portfolio	Total Commissions Paid		Total Commissions		Percent of Total Commissions			Percent of Total Brokered Transactions
Active International Allocation	$	193,229	$	0		0.00	%		0.00	%
Advantage	$	8,108	$	384		4.74	%		5.30	%
Asian Equity	$	13,900	$	910		6.55	%		8.66	%
Emerging Markets	$	2,242,217	$	65,644		2.93	%		3.26	%
Emerging Markets Domestic Debt	$	525	$	0		0.00	%		0.00	%
Emerging Markets External Debt	$	172	$	0		0.00	%		0.00	%
Frontier Emerging Markets	$	931,056	$	13,762		1.48	%		0.81	%
Global Advantage	$	2,993	$	92		3.07	%		2.11	%
Global Discovery	$	15,276	$	501		3.28	%		1.47	%
Global Franchise	$	256,291	$	1,423		0.56	%		0.24	%
Global Insight	$	2,172	$	62		2.84	%		1.76	%
Global Opportunity	$	8,514	$	0		0.00	%		0.00	%
Global Quality*	$	4,248	$	0		0.00	%		0.00	%
Global Real Estate	$	2,010,427	$	408		0.02	%		0.02	%
Growth	$	363,028	$	12,295		3.39	%		1.39	%
Insight	$	1,743	$	7		0.41	%		0.56	%
International Advantage	$	3,073	$	0		0.00	%		0.00	%
International Equity	$	3,412,347	$	0		0.00	%		0.00	%
International Opportunity	$	6,321	$	0		0.00	%		0.00	%
International Real Estate	$	193,717	$	1		0.00	%		0.00	%
International Small Cap	$	177,787	$	3,342		1.88	%		1.02	%
Multi-Asset	$	53,282	$	0		0.00	%		0.00	%
Opportunity	$	99,731	$	0		0.00	%		0.00	%
Select Global Infrastructure	$	18,189	$	0		0.00	%		0.00	%
Small Company Growth	$	1,369,283	$	0		0.00	%		0.00	%
Total Emerging Markets	$	0	$	0		0.00	%		0.00	%
U.S. Real Estate	$	459,349	$	0		0.00	%		0.00	%

* The Portfolio commenced operations on August 30, 2013.

For the fiscal years ended December 31, 2011 and 2012, each Portfolio paid brokerage commissions, including brokerage commissions paid to affiliated broker-dealers, as follows.

	Brokerage Commission Paid During Fiscal Years Ended December 31, 2011 and 2012
	Fiscal Year Ended December 31, 2011				Fiscal Year Ended December 31, 2012
Portfolio	Total		Morgan Stanley & Co. LLC and/or its affiliated broker-dealers		Total		Morgan Stanley & Co. LLC and/or its affiliated broker-dealers
Active International Allocation	$	222,313	$	0	$	154,061	$	0
Advantage	$	3,247	$	366	$	8,916	$	290
Asian Equity	$	1,875	$	133	$	8,245	$	118
Emerging Markets	$	4,415,616	$	68,866	$	2,374,068	$	25,365
Emerging Markets Domestic Debt	$	0	$	0	$	160	$	0
Emerging Markets External Debt*	$	—	$	—	$	34	$	0

	Brokerage Commission Paid During Fiscal Years Ended December 31, 2011 and 2012
	Fiscal Year Ended December 31, 2011				Fiscal Year Ended December 31, 2012
Portfolio	Total		Morgan Stanley & Co. LLC and/or its affiliated broker-dealers		Total		Morgan Stanley & Co. LLC and/or its affiliated broker-dealers
Frontier Emerging Markets**	$	—	$	—	$	384,005	$	0
Global Advantage	$	2,013	$	18	$	2,725	$	1
Global Discovery	$	6,051	$	316	$	8,297	$	114
Global Franchise	$	135,501	$	7	$	243,036	$	121
Global Insight***	$	482	$	0	$	878	$	0
Global Opportunity	$	16,173	$	280	$	15,073	$	24
Global Quality****	$	—	$	—	$	—	$	—
Global Real Estate	$	1,415,361	$	37,314	$	1,655,553	$	17,016
Growth	$	259,333	$	0	$	608,358	$	0
Insight***	$	468	$	0	$	1,069	$	8
International Advantage	$	1,931	$	7	$	1,973	$	0
International Equity	$	3,474,209	$	0	$	2,357,682	$	6,382
International Opportunity	$	8,121	$	106	$	6,353	$	0
International Real Estate	$	312,324	$	0	$	283,631	$	6,401
International Small Cap	$	763,576	$	0	$	772,721	$	0
Multi-Asset*****	$	—	$	—	$	24,585	$	0
Opportunity	$	176,349	$	14,168	$	119,082	$	19,694
Select Global Infrastructure	$	12,714	$	36	$	9,698	$	0
Small Company Growth	$	1,076,241	$	7,272	$	813,831	$	658
Total Emerging Markets******	$	—	$	—	$	0	$	0
U.S. Real Estate	$	473,110	$	27,699	$	516,714	$	10,155

* The Portfolio commenced operations on May 24, 2012.

** The Portfolio commenced operations on September 14, 2012.

*** The Portfolio commenced operations on December 28, 2011.

**** The Portfolio commenced operations on August 30, 2013.

***** The Portfolio commenced operations on June 22, 2012.

****** The Portfolio commenced operations on May 31, 2012.

Regular Broker-Dealers

During the fiscal year ended December 31, 2013, the following Portfolios purchased securities issued by the following issuers, which issuers were among the ten brokers or ten dealers that executed transactions for or with the Fund or the Portfolio in the largest dollar amounts during the period:

Portfolio				Issuer
Active International Allocation				Barclays Capital Group
				Credit Suisse Group AG
				Deutsche Bank Financial LLC
				HSBC Holdings PLC
				UBS Financial Services, Inc.
Frontier Emerging Markets				Credit Suisse Group AG
				Deutsche Bank Financial LLC
				HSBC Holdings PLC
				Merrill Lynch & Co.
				UBS Financial Services, Inc.
Global Opportunity				UBS Financial Services, Inc.
International Equity				HSBC Holdings PLC
				UBS Financial Services, Inc.
International Real Estate				Nomura Securities
Multi-Asset				Deutsche Bank Financial LLC

At December 31, 2013, the following Portfolios held securities issued by such brokers or dealers with the following market values:

Portfolio	Regular Broker-Dealer	Approximate Market Value at December 31, 2013
Active International Allocation	HSBC Holdings PLC	$	5,390,000
	UBS Financial Services, Inc.		3,116,000
	Barclays Capital Group		2,610,000
	Deutsche Bank Financial LLC		1,847,000
	Credit Suisse Group AG		1,778,000
International Equity	HSBC Holdings PLC		96,843,000
International Real Estate	Nomura Securities		178,000

Portfolio Turnover

The Portfolios generally do not invest for short-term trading purposes; however, when circumstances warrant, each Portfolio may sell investment securities without regard to the length of time they have been held. Market conditions in a given year could result in a higher or lower portfolio turnover rate than expected and the Portfolios will not consider portfolio turnover rate a limiting factor in making investment decisions consistent with their investment objectives and policies. Higher portfolio turnover (e.g., over 100%) necessarily will cause the Portfolios to pay correspondingly increased brokerage and trading costs. In addition to transaction costs, higher portfolio turnover may result in the realization of capital gains. As discussed under "Taxes," to the extent net short-term capital gains are realized, any distributions resulting from such gains are considered ordinary income for federal income tax purposes.

For the fiscal years ended December 31, 2011 and December 31, 2012, the International Small Cap Portfolio's turnover rates were 64% and 114%, respectively. Due to changes in the investment strategy and portfolio management team, portfolio turnover for the International Small Cap Portfolio increased during that period.

GENERAL INFORMATION

Fund History

The Fund was incorporated pursuant to the laws of the State of Maryland on June 16, 1988 under the name Morgan Stanley Institutional Fund, Inc. The Fund filed a registration statement with the SEC registering itself as an open-end management investment company offering diversified and non-diversified series under the 1940 Act and its shares under the 1933 Act, as amended, and commenced operations on November 15, 1988. On December 1, 1998, the Fund changed its name to Morgan Stanley Dean Witter Institutional Fund, Inc. Effective May 1, 2001, the Fund changed its name to Morgan Stanley Institutional Fund, Inc.

Description of Shares and Voting Rights

The Fund's Amended and Restated Articles of Incorporation permit the Directors to issue 60.5 billion shares of common stock, par value $.001 per share ($.003 with respect to the Emerging Markets Domestic Debt Portfolio—Class I, Class A, Class L and Class IS shares), from an unlimited number of classes or series of shares. The shares of each Portfolio of the Fund, when issued, are fully paid and nonassessable, and have no preference as to conversion, exchange, dividends, retirement or other features. Portfolio shares have no pre-emptive rights. The shares of the Fund have non-cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of Directors can elect 100% of the Directors if they choose to do so. Shareholders are entitled to one vote for each full share held (and a fractional vote for each fractional share held), then standing in their name on the books of the Fund. No portfolio of the Fund is subject to the liabilities of any other portfolio of the Fund.

Dividends and Capital Gains Distributions

The Fund's policy is to distribute substantially all of each Portfolio's net investment income, if any. The Fund may also distribute any net realized capital gains in the amount and at the times that will avoid both income (including taxable gains) taxes on it and the imposition of the federal excise tax on income and capital gains (see "Taxes"). However, the Fund may also choose to retain net realized capital gains and pay taxes on such gains. The amounts of any income dividends or capital gains distributions cannot be predicted.

Any dividend or distribution paid shortly after the purchase of shares of a Portfolio by an investor may have the effect of reducing the per share NAV of that Portfolio by the per share amount of the dividend or distribution. Furthermore, such dividends or distributions, although in effect a return of capital, are subject to income taxes for shareholders subject to tax as set forth herein and in the applicable Prospectus.

As set forth in the Prospectuses, unless the shareholder elects otherwise in writing, all dividends and capital gains distributions for a class of shares are automatically reinvested in additional shares of the same class of the Portfolio at NAV (as of the business day following the record date). This automatic reinvestment of dividends and distributions will remain in effect until the shareholder notifies the Fund by telephone or in writing that either the Income Option (income dividends in cash and capital gain distributions reinvested in shares at NAV) or the Cash Option (both income dividends and capital gains distributions in cash) has been elected. It may take up to three business days to effect this change. An account statement is sent to shareholders whenever a dividend or distribution is paid.

TAXES

The following is only a summary of certain additional federal income tax considerations generally affecting the Fund, Portfolios and their shareholders. No attempt is made to present a detailed explanation of the federal, state or local tax treatment of the Fund, Portfolios or shareholders, and the discussion here and in the Prospectuses is not intended to be a substitute for careful tax planning.

The following general discussion of certain federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on the date of this SAI. New legislation, as well as administrative changes or court decisions, may significantly change the conclusions expressed herein, and may have a retroactive effect with respect to the transactions contemplated herein.

Each Portfolio within the Fund is generally treated as a separate corporation for federal income tax purposes. Thus, the provisions of the Code generally will be applied to each Portfolio separately, rather than to the Fund as a whole.

Regulated Investment Company Qualification

Each Portfolio intends to qualify and elect to be treated for each taxable year as a RIC under Subchapter M of the Code. In order to so qualify, each Portfolio must, among other things, (i) derive at least 90% of its gross income each taxable year from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, and other income derived with respect to its business of investing in such stock, securities or currencies, including, generally, certain gains from options, futures and forward contracts; and (ii) diversify its holdings so that, at the end of each fiscal quarter of the Portfolio's taxable year, (a) at least 50% of the market value of the Portfolio's total assets is represented by cash and cash items, U.S. government securities, securities of other RICs, and other securities, with such other securities limited, in respect to any one issuer, to an amount not greater than 5% of the value of the Portfolio's total assets or 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of its total assets are invested in the securities (other than U.S. government securities or securities of other RICs) of any one issuer or two or more issuers which the Portfolio controls and which are engaged in the same, similar, or related trades or businesses. For purposes of the 90% gross income requirement described above, foreign currency gains will generally be treated as qualifying income under current federal income tax law. However, the Code expressly provides the U.S. Treasury with authority to issue regulations that would exclude foreign currency gains from qualifying income if such gains are not directly related to a RIC's business of investing in stock or securities (or options or futures with respect to stocks or securities). While to date the U.S. Treasury has not exercised this regulatory authority, there can be no assurance that it will not issue regulations in the future (possibly with retroactive application) that would treat some or all of a Portfolio's foreign currency gains as non-qualifying income.

For purposes of the 90% test described above, dividends received by a Portfolio will be treated as qualifying income to the extent they are attributable to the issuer's current and accumulated earnings and profits. Distributions in excess of the distributing issuer's current and accumulated earnings and profits will first reduce the Portfolio's basis in the stock as a return of capital and will not qualify as gross income. Distributions in excess of the Portfolio's basis in the stock will qualify for the 90% test discussed above as the distribution will be treated as gain from the sale of stock. This gain will be long-term capital gain if the Portfolio held the stock for more than a year.

For purposes of the diversification requirement described above, the Portfolio will not be treated as in violation of such requirement as a result of a discrepancy between the value of its various investments and the diversification percentages described above, unless such discrepancy exists immediately following the acquisition of any security or other property and is wholly or partly the result of such acquisition. Moreover, even in the event of noncompliance with the diversification requirement as of the end of any given quarter, the Portfolio is permitted to cure the violation by eliminating the discrepancy causing such noncompliance within a period of 30 days from the close of the relevant quarter other than its first quarter following its election to be taxed as a RIC.

Net income derived from an interest in a "qualified publicly traded partnership," as defined in the Code, will be treated as qualifying income for purposes of the income requirement in clause (i) above. In addition, for the purposes of the diversification requirements in clause (ii) above, the outstanding voting securities of any issuer includes the equity securities of a qualified publicly traded partnership, and no more than 25% of the value of a RIC's total assets may be invested in the securities of one or more qualified publicly traded partnerships. The separate treatment for publicly traded partnerships under the passive loss rules of the Code applies to a RIC holding an interest in a qualified publicly traded partnership, with respect to items attributable to such interest.

Certain Portfolios may make certain investments indirectly through one or more entities treated as corporations for U.S. federal income tax purposes. Such entities will generally be required to pay U.S. corporate income tax, and possibly other taxes, on their earnings, which ultimately will reduce the Portfolio's return on income derived from such investments.

In addition to the requirements described above, in order to qualify as a RIC, a Portfolio must distribute at least 90% of its investment company taxable income (which generally includes dividends, taxable interest, and the excess of net short-term capital gains over net long-term capital losses less operating expenses) and at least 90% of its net tax-exempt interest income, for each tax year, if any, to its shareholders. If a Portfolio meets all of the RIC requirements, it will not be subject to federal income tax on any of its investment company taxable income or capital gains that it distributes to shareholders.

If a Portfolio fails to qualify as a RIC for any taxable year, all of its net income will be subject to tax at regular corporate rates (whether or not distributed to shareholders), and its distributions (including capital gains distributions) will be taxable as income dividends to its shareholders to the extent of the Portfolio's current and accumulated earnings and profits, and will be eligible for the dividends-received deduction for corporate shareholders and for treatment as qualified dividend income, in the case of individual shareholders.

If a Portfolio fails to satisfy either the income test or asset diversification test described above, in certain cases, however, the Portfolio may be able to avoid losing its status as a RIC by timely providing notice of such failure to the Internal Revenue Service, curing such failure and possibly paying an additional tax or penalty.

General Tax Treatment of Qualifying RICs and Shareholders

Each Portfolio intends to distribute substantially all of its net investment income (including, for this purpose, net short-term capital gains) to shareholders. Dividends from a Portfolio's net investment income generally are taxable to shareholders as ordinary income, whether received in cash or in additional shares. Certain income distributions paid by each Portfolio to individual shareholders are taxed at rates equal to those applicable to net long-term capital gains (currently either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts). This tax treatment applies only if certain holding period requirements are satisfied by the shareholder and the dividends are attributable to qualified dividends received by the Portfolio itself. For this purpose, "qualified dividends" means dividends received by a Portfolio from certain U.S. corporations and qualifying foreign corporations, provided that the Portfolio satisfies certain holding period and other requirements in respect of the stock of such corporations. Distributions received from REITs are generally comprised of ordinary income dividends and capital gains dividends, which are generally passed along to shareholders retaining the same character and are subject to tax accordingly, as described above. In the case of securities lending transactions, payments in lieu of dividends are not qualified dividends. Dividends received by a Portfolio from REITs are qualified dividends eligible for this lower tax rate only in limited circumstances.

A dividend paid by a Portfolio to a shareholder will not be treated as qualified dividend income of the shareholder if (1) the dividend is received with respect to any share held for fewer than 61 days during the 121-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with respect to such dividend, (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property or (3) if the recipient elects to have the dividend treated as investment income for purposes of the limitation on deductibility of investment interest.

You should also be aware that the benefits of the reduced tax rate applicable to long-term capital gains and qualified dividend income may be impacted by the application of the alternative minimum tax to individual shareholders.

Dividends paid to you out of each Portfolio's investment company taxable income that are not attributable to qualified dividends generally will be taxable to you as ordinary income (currently at a maximum federal income tax rate of 39.6% in the case of an individual shareholder and 35% in the case of a corporate shareholder) to the extent of each Portfolio's earnings and profits. Distributions to you of net capital gain (the excess of net long-term capital gain over net short-term capital loss), if any, will be taxable to you as long-term capital gain, regardless of how long you have held your Fund shares.

Distributions of net long-term capital gains, if any, are taxable to shareholders as long-term capital gains regardless of how long a shareholder has held a Portfolio's shares and regardless of whether the distribution is received in additional shares or in cash. The maximum individual rate applicable to long-term capital gains is generally either 15% or 20%, depending on whether the individual's income exceeds certain threshold amounts.

Each Portfolio will decide whether to distribute or to retain all or part of any net capital gains (the excess of net long-term capital gains over net short-term capital losses) in any year for reinvestment. Distributions of net capital gains are taxable to shareholders as a long-term capital gain regardless of how long shareholders have held their shares. Each Portfolio will send reports annually to shareholders regarding the federal income tax status of all distributions made for the preceding year. To the extent such amounts include distributions received from a REIT, they may be based on estimates and be subject to change as REITs do not always have the information available by the time these reports are due and can recharacterize certain amounts after the end of the tax year. As a result, the final character and amount of distributions may differ from that initially reported. If any capital gains are retained, the Portfolio will pay federal income tax thereon, and, if the Portfolio makes an election, the shareholders will include such undistributed gains in their income, and will increase their tax basis in Portfolio shares by the difference between the amount of the includable gains and the tax deemed paid by the shareholder in respect of such shares. The shareholder will be able to claim their share of the tax paid by the Portfolio as a refundable credit.

Shareholders generally are taxed on any ordinary dividend or capital gain distributions from a Portfolio in the year they are actually distributed. However, if any such dividends or distributions are declared in October, November or December, to shareholders of record of such month and paid in January, then such amounts will be treated for tax purposes as received by the shareholders on December 31.

After the end of each calendar year, shareholders will be sent information on their dividends and capital gain distributions for tax purposes, including the portion taxable as ordinary income, the portion taxable as long-term capital gains, and the amount of any dividends eligible for the federal dividends received deduction for corporations.

Gains or losses on the sale of securities by a Portfolio held as a capital asset will generally be long-term capital gains or losses if the securities have a tax holding period of more than one year at the time of such sale. Gains or losses on the sale of securities with a tax holding period of one year or less will be short-term capital gains or losses. Special tax rules described below may change the normal treatment of gains and losses recognized by a Portfolio when it makes certain types of investments. Those special tax rules can, among other things, affect the treatment of capital gain or loss as long-term or short-term and may result in ordinary income or loss rather than capital gain or loss. The application of these special rules would therefore also affect the character of distributions made by a Portfolio.

A gain or loss realized by a shareholder on the sale, exchange or redemption of shares of a Portfolio held as a capital asset will be capital gain or loss, and such gain or loss will be long-term if the holding period for the shares exceeds one year and otherwise will be short-term. Any loss realized on a sale, exchange or redemption of shares of a Portfolio will be disallowed to the extent the shares disposed of are replaced with substantially identical shares within the 61-day period beginning 30 days before and ending 30 days after the shares are disposed of. Any loss realized by a shareholder on the disposition of shares held six months or less is treated as a long-term capital loss to the extent of any distributions of net long-term capital gains received by the shareholder with respect to such shares or any inclusion of undistributed capital gain with respect to such shares. The ability to deduct capital losses may otherwise be limited under the Code.

dispositions of Portfolio shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds certain threshold amounts.

Due to recent legislation, the Portfolios (or their administrative agent) are required to report to the Internal Revenue Service ("IRS") and furnish to Portfolio shareholders the cost basis information for sale transactions of shares purchased on or after January 1, 2012. Shareholders may elect to have one of several cost basis methods applied to their account when calculating the cost basis of shares sold, including average cost, FIFO ("first-in, first-out") or some other specific identification method. Unless you instruct otherwise, each Portfolio will use average cost as its default cost basis method, and will treat sales as first coming from shares purchased prior to January 1, 2012. If average cost is used for the first sale of Portfolio shares covered by these new rules, the shareholder may only use an alternative cost basis method for shares purchased prospectively. Portfolio shareholders should consult with their tax advisors to determine the best cost basis method for their tax situation.

Each Portfolio will generally be subject to a nondeductible 4% federal excise tax to the extent it fails to distribute by the end of any calendar year an amount at least equal to the sum of 98% of its ordinary income (taking into account certain deferrals and elections) for that year and 98.2% of its capital gain net income (the excess of short- and long-term capital gains over short- and long-term capital losses, including any available capital loss carryforwards) for the one-year period ending on October 31 of that year, plus certain other amounts. Each Portfolio intends to make sufficient distributions or deemed distributions of its ordinary income and capital gain net income, prior to the end of each calendar year to avoid liability for federal excise tax, but can give no assurances that all such liability will be eliminated.

The Fund may be required to withhold and remit to the U.S. Treasury an amount equal to 28% of any dividends, capital gains distributions and redemption proceeds paid to any individual or certain other non-corporate shareholder (i) who has failed to provide a correct taxpayer identification number (generally an individual's social security number or non-individual's employer identification number) on the New Account Application; (ii) who is subject to backup withholding as notified by the IRS; or (iii) who has not certified to the Fund that such shareholder is not subject to backup withholding. This backup withholding is not an additional tax, and any amounts withheld would be sent to the IRS as an advance payment of taxes due on a shareholder's income for such year.

The Fund may make investments in which it recognizes income or gain prior to receiving cash with respect to such investment. For example, under certain tax rules, the Fund may be required to accrue a portion of any discount at which certain securities are purchased as income each year even though the Fund receives no payments in cash on the security during the year. To the extent that the Fund makes such investments, it generally would be required to pay out such income or gain as a distribution in each year to avoid taxation at the Fund level. Such distributions will be made from the available cash of the Fund or by liquidation of portfolio securities if necessary. If a distribution of cash necessitates the liquidation of portfolio securities, the Adviser will select which securities to sell. The Fund may realize a gain or loss from such sales. In the event the Fund realizes net capital gains from such transactions, the Fund and consequently its shareholders may receive a larger capital gain distribution, if any, than they would in the absence of such transactions.

Special Rules for Certain Foreign Currency and Derivatives Transactions

In general, gains from foreign currencies and from foreign currency options, foreign currency futures and forward foreign exchange contracts relating to investments in stock, securities or foreign currencies are currently considered to be qualifying income for purposes of determining whether the Portfolio qualifies as a RIC.

Under Section 988 of the Code, special rules are provided for certain transactions in a foreign currency other than the taxpayer's functional currency (i.e., unless certain special rules apply, currencies other than the U.S. dollar). In general, foreign currency gains or losses from forward contracts, from futures contracts that are not "regulated futures contracts," and from unlisted options will be treated as ordinary income or loss under Section 988 of the Code. Also, certain foreign exchange gains or losses derived with respect to foreign fixed income securities are also subject to Section 988 treatment. In general, therefore, Section 988 gains or losses will increase or decrease the amount of the Portfolio's investment company taxable income available to be distributed to shareholders as ordinary income, rather than increasing or decreasing the amount of the Portfolio's net capital gain.

A Portfolio's investment in options, swaps and related transactions, futures contracts and forward contracts, options on futures contracts and stock indices and certain other securities, including transactions involving actual or deemed short sales or foreign exchange gains or losses are subject to many complex and special tax rules.

For example, OTC options on debt securities and equity options, including options on stock and on narrow-based stock indices, will be subject to tax under Section 1234 of the Code, generally producing a long-term or short-term capital gain or loss upon exercise, lapse or closing out of the option or sale of the underlying stock or security. By contrast, a Portfolio's treatment of certain other options, futures and forward contracts entered into by a Portfolio is generally governed by Section 1256 of the Code. These "Section 1256" positions generally include listed options on debt securities, options on broad-based stock indices, options on securities indices, options on futures contracts, regulated futures contracts and certain foreign currency contracts and options thereon.

When a Portfolio holds options or futures contracts which substantially diminish their risk of loss with respect to other positions (as might occur in some hedging transactions), this combination of positions could be treated as a "straddle" for tax purposes, resulting in possible deferral of losses, adjustments in the holding periods of Portfolio securities and conversion of short-term capital losses into long-term capital losses. Certain tax elections exist for mixed straddles (i.e., straddles comprised of at least one Section 1256 position and at least one non-Section 1256 position) which may reduce or eliminate the operation of these straddle rules.

A Section 1256 position held by a Portfolio will generally be marked-to-market (i.e., treated as if it were sold for fair market value) on the last business day of the Fund's fiscal year, and all gain or loss associated with fiscal year transactions and mark-to-market positions at fiscal year end (except certain currency gain or loss covered by Section 988 of the Code) will generally be treated as 60% long-term capital gain or loss and 40% short-term capital gain or loss. The effect of Section 1256 mark-to-market rules may be to accelerate income or to convert what otherwise would have been long-term capital gains into short-term capital gains or short-term capital losses into long-term capital losses within a Portfolio. The acceleration of income on Section 1256 positions may require a Portfolio to accrue taxable income without the corresponding receipt of cash. In order to generate cash to satisfy the distribution requirements of the Code, a Portfolio may be required to dispose of portfolio securities that it otherwise would have continued to hold or to use cash flows from other sources. Any or all of these rules may, therefore, affect the amount, character and timing of income earned and, in turn, distributed to shareholders by a Portfolio.

Special Tax Considerations Relating to Foreign Investments

Gains or losses attributable to foreign currency contracts, or to fluctuations in exchange rates that occur between the time a Portfolio accrues interest or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Portfolio actually collects such receivables or pays such liabilities are treated as ordinary income or ordinary loss to the Portfolio. Similarly, gains or losses on disposition of debt securities denominated in a foreign currency attributable to fluctuations in the value of the foreign currency between the date of acquisition of the security and the date of disposition also are treated as ordinary gain or loss to the Portfolio. These gains or losses increase or decrease the amount of a Portfolio's net investment income available to be distributed to its shareholders as ordinary income.

It is expected that each Portfolio will be subject to foreign withholding taxes with respect to its dividend and interest income from foreign countries, and a Portfolio may be subject to foreign income taxes with respect to other income. So long as more than 50% in value of a Portfolio's total assets at the close of the taxable year consists of stock or securities of foreign corporations, the Portfolio may elect to treat certain foreign income taxes imposed on it for federal income tax purposes as paid directly by its shareholders. A Portfolio will make such an election only if it deems it to be in the best interest of its shareholders and will notify shareholders in writing each year if it makes an election and of the amount of foreign income taxes, if any, to be treated as paid by the shareholders. If a Portfolio makes the election, shareholders will be required to include in income their proportionate share of the amount of foreign income taxes treated as imposed on the Portfolio and will be entitled to claim either a credit (subject to the limitations discussed below) or, if they itemize deductions, a deduction, for their shares of the foreign income taxes in computing their federal income tax liability.

Except in the case of the Active International Allocation, Asian Equity, Emerging Markets Domestic Debt, Emerging Markets, Emerging Markets External Debt, Frontier Emerging Markets, Global Advantage, Global Discovery, Global Franchise, Global Insight, Global Opportunity, Global Real Estate, International Advantage, International Equity, International Opportunity, International Real Estate, International Small Cap and Select Global Infrastructure Portfolios, it is not expected that a Portfolio or its shareholders would be able to claim a credit for U.S. tax purposes with respect to any such foreign taxes. However, these foreign withholding taxes may not have a significant impact on such Portfolios, considering that each Portfolio's investment objective is to seek long-term capital appreciation and any dividend or interest income should be considered incidental.

Shareholders who choose to utilize a credit (rather than a deduction) for foreign taxes will be subject to a number of complex limitations regarding the availability and utilization of the credit. Because of these limitations, shareholders may be unable to claim a credit for the full amount of their proportionate shares of the foreign income

taxes paid by a Portfolio. Shareholders are urged to consult their tax advisors regarding the application of these rules to their particular circumstances.

A Portfolio may invest in stocks of foreign companies that may be classified under the Code as passive foreign investment companies ("PFICs"). In general, a foreign company is classified as a PFIC if at least one-half of its assets constitute investment-type assets or 75% or more of its gross income is investment-type income. When investing in PFIC securities, a Portfolios intends to mark-to-market these securities under certain provisions of the Code and recognize any unrealized gains as ordinary income at the end of the Portfolio's fiscal and excise tax years. Deductions for losses are allowable only to the extent of any current or previously recognized gains. These gains (reduced by allowable losses) are treated as ordinary income that the Portfolio is required to distribute, even though it has not sold or received dividends from these securities. In addition, if a Portfolio is unable to identify an investment as a PFIC and thus does not make a mark-to-market election, the Portfolio may be subject to U.S. federal income tax and interest on a portion of any "excess distribution" or gain from the disposition of such shares even if such income is distributed as a taxable dividend by the Portfolio to its shareholders.

Taxes and Foreign Shareholders

Taxation of a shareholder who, as to the United States, is a nonresident alien individual, a foreign trust or estate, a foreign corporation or a foreign partnership ("Foreign Shareholder") depends on whether the income from a Portfolio is "effectively connected" with a U.S. trade or business carried on by such shareholder.

If the income from a Portfolio is not effectively connected with a U.S. trade or business carried on by a Foreign Shareholder, distributions of investment company taxable income will generally be subject to U.S. withholding tax at the rate of 30% (or such lower treaty rate as may be applicable) upon the gross amount of the dividend. Furthermore, Foreign Shareholders will generally be exempt from U.S. federal income tax on gains realized on the sale of shares of a Portfolio, distributions of net long-term capital gains and amounts retained by the Fund that are reported as undistributed capital gains.

For distributions with respect to taxable years of regulated investment companies beginning before January 1, 2014 (or later date if extended by the U.S. Congress), the Fund is not required to withhold any amounts with respect to distributions to Foreign Shareholders that are properly reported by the Fund as "interest-related dividends" or "short-term capital gains dividends," provided that the income is not subject to federal income tax if earned directly by the Foreign Shareholder. However, the Fund generally intends to withhold these amounts regardless of the fact that it was not required to do so. Any amounts withheld from payments made to a Foreign Shareholder are eligible to be refunded or credited against the shareholder's U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS. Foreign Shareholders that own, either directly or indirectly, more than 5% of a class of Fund shares, are urged to consult their own tax advisors concerning special tax rules that may apply to their investment in Fund shares.

If the income from a Portfolio is effectively connected with a U.S. trade or business carried on by a Foreign Shareholder, then distributions from the Portfolio and any gains realized upon the sale of shares of the Portfolio will be subject to U.S. federal income tax at the rates applicable to U.S. citizens and residents or domestic corporations. In addition, Foreign Shareholders that are corporations may be subject to a branch profit tax.

A Portfolio may be required to withhold federal income tax on distributions that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate) unless the Foreign Shareholder complies with IRS certification requirements.

Effective July 1, 2014, the Portfolios will be required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends and (effective January 1, 2017) redemption proceeds and certain capital gain dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive new reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the Portfolios to enable the Portfolios to determine whether withholding is required.

The tax consequences to a Foreign Shareholder entitled to claim the benefits of an applicable tax treaty may differ from those described here. Furthermore, Foreign Shareholders are strongly urged to consult their own tax advisors with respect to the particular tax consequences to them of an investment in a Portfolio, including the potential application of the provisions of the Foreign Investment in Real Estate Property Tax Act of 1980, as amended and the possible applicability of the U.S. estate tax.

State and Local Tax Considerations

Rules of state and local taxation of dividend and capital gains from regulated investment companies often differ from the rules for federal income taxation described above. Shareholders are urged to consult their tax advisors as to the consequences of these and other state and local tax rules regarding an investment in the Fund.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

As of April 1, 2014, the following persons or entities owned, of record or beneficially, more than 5% of the shares of any Class of the following Portfolios' outstanding shares.

Portfolio	Name and Address	% of Class
Class I
Active International Allocation	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		96.07	%
Advantage	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		47.17	%
	LPL Financial 9785 Towne Centre Dr. San Diego, CA 92121		20.62	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		19.83	%
	Pershing LLC One Pershing Plaza, 14th Fl. Jersey City, NJ 07399		6.28	%
	National Financial Services LLC 200 Liberty St. One World Financial Center New York, NY 10281		5.95	%
Asian Equity	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		80.19	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		19.81	%
Emerging Markets	Mac & Co. P.O. Box 3198 525 William Penn Place Pittsburgh, PA 15230		40.90	%
	National Financial Services 499 Washington Blvd., Fl. 5 Jersey City, NJ 07310		26.21	%

Portfolio	Name and Address	% of Class
	Mac & Co. P.O. Box 3198 Pittsburgh, PA 15230		7.31	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		6.62	%
Emerging Markets Domestic Debt	Bell Atlantic Master Trust 295 N Maple Ave. Building 7, Fl. 1 Basking Ridge, NJ 07920		44.66	%
	Wells Fargo Bank NA P.O. Box 1533 Minneapolis, MN 55480		19.98	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		12.61	%
	National Financial Services 499 Washington Blvd., Fl. 5 Jersey City, NJ 07310		8.59	%
Emerging Markets External Debt	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		94.94	%
Frontier Emerging Markets	Wells Fargo Bank NA P.O. Box 1533 Minneapolis, MN 55480		33.40	%
	Charles Schwab & Co., Inc. 211 Main St. San Francisco, CA 94105		17.49	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		15.49	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		10.59	%
Global Advantage	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		76.32	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		19.22	%

Portfolio	Name and Address	% of Class
Global Discovery	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		81.94	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		11.85	%
	Mary Sue Marshall c/o Morgan Stanley Investment Management 522 Fifth Ave. New York, NY 10036		5.74	%
Global Franchise	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		25.08	%
	Trust Company of Illinois 1901 Butterfield Rd., Ste. 1000 Downers Grove, IL 60515		13.46	%
	The Northern Trust Company P.O. Box 92956 Chicago, IL 60675		11.79	%
	National Financial Services Corp. 200 Liberty St. New York, NY 10281		11.37	%
	Capinco C/O U.S. Bank P.O. Box 1787 Milwaukee, WI 53201		10.01	%
	Pershing LLC One Pershing Plaza, 14th Fl. Jersey City, NJ 07399		9.99	%
	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		7.27	%
Global Insight	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		88.04	%
	Mary Sue Marshall c/o Morgan Stanley Investment Management 522 Fifth Ave. New York, NY 10036		11.07	%
Global Opportunity	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		84.37	%

Portfolio	Name and Address	% of Class
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		12.43	%
Global Quality	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		85.19	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		14.77	%
Global Real Estate	Edward D. Jones & Co. 12555 Manchester Rd. Saint Louis, MO 63131		21.85	%
	Mac & Co. P.O. Box 3198 525 William Penn Place Pittsburgh, PA 15230		7.74	%
	State Street Bank & Trust Co. P.O. Box 5501 Boston, MA 02206		7.56	%
	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		6.62	%
	LPL Financial 9785 Towne Centre Dr. San Diego, CA 92121		5.04	%
Growth Portfolio	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		48.64	%
	National Financial Services 499 Washington Blvd., Fl. 5 Jersey City, NJ 07310		17.52	%
	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		7.07	%
Insight	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		78.54	%
	Mary Sue Marshall c/o Morgan Stanley Investment Management 522 Fifth Ave. New York, NY 10036		19.82	%

Portfolio	Name and Address	% of Class
International Advantage	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		68.58	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		31.42	%
International Equity	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		24.57	%
	National Financial Services 499 Washington Blvd., Fl. 5 Jersey City, NJ 07310		22.71	%
	The Northern Trust Company P.O. Box 92994 Chicago, IL 60675		6.05	%
	Pershing LLC One Pershing Plaza, 14th Fl. Jersey City, NJ 07399		5.05	%
International Opportunity	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		84.60	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		15.34	%
International Real Estate	Wells Fargo Bank NA P.O. Box 1533 Minneapolis, MN 55480		42.38	%
	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		20.84	%
	National Financial Services 499 Washington Blvd., Fl. 5 Jersey City, NJ 07310		13.97	%
International Small Cap	Factory Mutual Insurance Company 225 Wyman St. P.O. Box 9198 Waltham, MA 02451		67.91	%
	Global Pension Plan Equities 225 Wyman St. Waltham, MA 02451		13.09	%

Portfolio	Name and Address	% of Class
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		8.59	%
Multi-Asset	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		33.15	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		19.35	%
	Dingle & Co. P.O. Box 75000 Detroit, MI		12.20	%
	Mac & Co. P.O. Box 3198 525 William Penn Place Pittsburgh, PA 15230		10.00	%
	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		8.82	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		6.77	%
Opportunity	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		32.59	%
	Nationwide Trust Company P.O. Box 182029 Columbus, OH 43218		23.80	%
	First Clearing, LLC 2801 Market St. Saint Louis, MO 63103		22.63	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		5.01	%
Select Global Infrastructure	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		46.57	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		28.21	%

Portfolio	Name and Address	% of Class
	Society of Composers Authors and Music Publishers of Canada 41 Valleybrook Dr. Toronto, ON M3B 2S6 Canada		17.38	%
	TD Ameritrade Inc. P.O. Box 2226 Omaha, NE 68103		7.61	%
Small Company Growth	National Financial Services Corp. 200 Liberty St. New York, NY 10281		43.68	%
	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		15.02	%
	Merrill Lynch Pierce Fenner & Smith 4800 Deer Lake Dr. E Jacksonville, FL 32246		6.29	%
Total Emerging Markets	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
U.S. Real Estate	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		20.43	%
	Merrill Lynch Pierce Fenner & Smith 4800 Deer Lake Dr. E Jacksonville, FL 32246		20.03	%
	LPL Financial 9785 Towne Centre Dr. San Diego, CA 92121		12.88	%
	National Financial Services 499 Washington Blvd., Fl. 5 Jersey City, NJ 07310		10.09	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		7.74	%
Class A
Active International Allocation	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		71.91	%
	State Street Bank And Trust Co. 105 Rosemont Ave. Westwood, MA 02090		8.96	%

Portfolio	Name and Address	% of Class
Advantage	Pershing LLC 1 Pershing Plaza Jersey City, NJ 07399		37.93	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		19.96	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		19.08	%
	UBS WM USA 1000 Harbor Blvd., Fl. 5 Weehawken, NJ 07086		6.12	%
Asian Equity	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		80.07	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		15.07	%
Emerging Markets Domestic Debt	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		50.19	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		47.50	%
Emerging Markets External Debt	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		95.82	%
Frontier Emerging Markets	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		39.90	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		33.29	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		16.35	%
Global Advantage	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		29.98	%

Portfolio	Name and Address	% of Class
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		27.42	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		20.31	%
	Sandeep Chainani c/o Morgan Stanley Investment Management 522 Fifth Ave. New York, NY 10036		17.68	%
Global Discovery	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		58.31	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		21.43	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		8.64	%
	Sandeep Chainani c/o Morgan Stanley Investment Management 522 Fifth Ave. New York, NY 10036		5.35	%
Global Franchise	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		46.37	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		33.47	%
	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		14.28	%
Global Insight	Sandeep Chainani c/o Morgan Stanley Investment Management 522 Fifth Ave. New York, NY 10036		87.12	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		6.96	%

Portfolio	Name and Address	% of Class
Global Opportunity	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		23.48	%
	LPL Financial P.O. Box 509046 San Diego, CA 92150		20.03	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		17.42	%
Global Quality	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		88.69	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		6.32	%
Global Real Estate	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		67.21	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		11.76	%
	Merrill Lynch Pierce Fenner & Smith 4800 Deer Lake Dr. E Jacksonville FL 32246		5.13	%
Growth Portfolio	State of Florida Employees Deferred Compensation Plan P.O. Box 182029 Columbus, OH 43218		34.56	%
	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		14.53	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		12.85	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		11.13	%
	DCGT 711 High St. Des Moines, IA 50392		10.69	%

Portfolio	Name and Address	% of Class
	Nationwide Life Insurance Company P.O. Box 182029 Columbus, OH 43218		5.08	%
Insight	Sandeep Chainani c/o Morgan Stanley Investment Management 522 Fifth Ave. New York, NY 10036		83.04	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		7.31	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		7.16	%
International Advantage	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		49.31	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		41.11	%
	Pershing LLC 1 Pershing Plaza Jersey City, NJ 07399		5.01	%
International Equity	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		93.37	%
International Opportunity	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		73.61	%
	TD Ameritrade Inc. P.O. Box 2226 Omaha, NE 68103		23.53	%
International Real Estate	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		63.38	%
	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		9.15	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		7.54	%

Portfolio	Name and Address	% of Class
	Nora Effron c/o Morgan Stanley Investment Management 522 Fifth Ave. New York, NY 10036		7.14	%
International Small Cap	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		69.95	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		18.44	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		11.48	%
Multi-Asset	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		60.29	%
	Raymond James 880 Carillon Pkwy. St Petersburg, FL 33716		10.95	%
	LPL Financial 9785 Towne Centre Dr. San Diego, CA 92121		7.71	%
	Post & Co. c/o The Bank Of New York Mellon P.O. Box 1066 Wall Street Station New York, NY 10268		5.68	%
Opportunity	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		18.83	%
	First Clearing, LLC 2801 Market St. Saint Louis, MO 63103		6.82	%
	Pershing LLC 1 Pershing Plaza Jersey City, NJ 07399		6.41	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		5.85	%
	Nationwide Trust Company P.O. Box 182029 Columbus, OH 43218		5.13	%

100

Portfolio	Name and Address	% of Class
Select Global Infrastructure	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		67.02	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		13.85	%
	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		12.45	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		5.59	%
Small Company Growth	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		40.92	%
	State Street Bank & Trust Co. 2 Avenue De Lafayette Boston, MA 02111		20.94	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		14.95	%
	Great-West Trust Co. 8515 E Orchard Rd. 2T2 Greenwood Village, CO 80111		5.06	%
Total Emerging Markets	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		99.92	%
U.S. Real Estate	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		44.24	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		25.92	%
	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		7.49	%
Class H
International Real Estate	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		89.65	%

101

Portfolio	Name and Address	% of Class
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		10.35	%
Class L
Active International Allocation	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		80.79	%
Advantage	Great-West Trust Company LLC 8515 E Orchard Rd. Greenwood Village, CO 80111		48.89	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		31.38	%
Asian Equity	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
Emerging Markets	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		95.08	%
Emerging Markets Domestic Debt	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		91.08	%
	First Clearing, LLC 2801 Market St. Saint Louis, MO 63103		8.69	%
Emerging Markets External Debt	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		93.81	%
	Kristy Watson c/o Morgan Stanley Investment Management 522 Fifth Ave. New York, NY 10036		6.19	%
Frontier Emerging Markets	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		66.72	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		9.26	%

102

Portfolio	Name and Address	% of Class
Global Advantage	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		61.54	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		38.46	%
Global Discovery	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		50.13	%
	Pershing LLC One Pershing Plaza, 14th Fl. Jersey City, NJ 07399		43.75	%
Global Franchise	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		99.84	%
Global Insight	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
Global Opportunity	Pershing LLC 1 Pershing Plaza Jersey City, NJ 07399		33.51	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		15.16	%
	Raymond James 880 Carillon Pkwy. St. Petersburg, FL 33716		10.92	%
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		8.70	%
	LPL Financial 9785 Towne Centre Dr. San Diego, CA 92121		6.28	%
Global Quality	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		92.97	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		7.03	%

103

Portfolio	Name and Address	% of Class
Global Real Estate	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		99.39	%
Growth Portfolio	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		79.68	%
	Pershing LLC 1 Pershing Plaza Jersey City, NJ 07399		8.40	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		6.12	%
Insight	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		86.67	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		13.33	%
International Advantage	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
International Equity	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		76.67	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		6.03	%
	UBS WM USA 1000 Harbor Blvd., Fl. 5 Weehawken, NJ 07086		5.34	%
International Opportunity	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
International Real Estate	TD Ameritrade 5923 Braeburn Pl. Pittsburgh, PA 15232		86.46	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		13.54	%

104

Portfolio	Name and Address	% of Class
International Small Cap	Pershing LLC 1 Pershing Plaza Jersey City, NJ 07399		88.21	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		8.21	%
Multi-Asset	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		99.33	%
Opportunity	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		30.81	%
	First Clearing, LLC 2801 Market St. Saint Louis, MO 63103		10.64	%
	Merrill Lynch Pierce Fenner & Smith 4800 Deer Lake Dr. E, 2nd Fl. Jacksonville, FL 32246		7.46	%
	National Financial Services LLC 499 Washington Blvd. Jersey City, NJ 07310		6.41	%
Select Global Infrastructure	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		67.28	%
	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		24.82	%
Small Company Growth	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		69.73	%
	Pershing LLC 1 Pershing Plaza Jersey City, NJ 07399		13.40	%
	Charles Schwab & Co., Inc. 101 Montgomery St. San Francisco, CA 94104		7.22	%
Total Emerging Markets	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		84.65	%

105

Portfolio	Name and Address	% of Class
	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		15.35	%
U.S. Real Estate	Morgan Stanley & Co. LLC Harborside Financial Center Plaza II, 3rd Fl. Jersey City, NJ 07311		76.12	%
	First Clearing, LLC 2801 Market St. Saint Louis, MO 63103		5.02	%
	Pershing LLC 1 Pershing Plaza Jersey City, NJ 07399		5.02	%
Class IS
Advantage	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
Emerging Markets	The Northern Trust Company P.O. Box 92994 Chicago, IL 60675		93.98	%
	The Northern Trust Company P.O. Box 92994 Chicago, IL 60675		6.02	%
Emerging Markets Domestic Debt	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
Emerging Markets External Debt	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
Global Opportunity	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
Global Quality	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
Global Real Estate	The Northern Trust Company P.O. Box 92994 Chicago, IL 60675		38.72	%
	Merrill Lynch Pierce Fenner & Smith 4800 Deer Lake Dr. E Jacksonville, FL 32246		12.41	%

106

Portfolio	Name and Address	% of Class
	The California Wellness Foundation 6320 Canoga Ave., Ste. 1700 Woodland Hills, CA 91367		9.25	%
	Linercouse & Co. 1200 Crown Colony Drive Quincy, MA 02169		5.82	%
Growth	The Northern Trust Company P.O. Box 92994 Chicago, IL 60675		93.04	%
International Equity	The Northern Trust Company P.O. Box 92994 Chicago, IL 60675		42.54	%
	The Northern Trust Company P.O. Box 92994 Chicago, IL 60675		13.81	%
	The TJX Companies Inc. 770 Cochituate Rd. Framingham, MA 01701		11.57	%
	SEI Private Trust Company One Freedom Valley Dr. Oaks, PA 19456		9.34	%
International Opportunity	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
International Real Estate	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
Opportunity	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
Select Global Infrastructure	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%
Small Company Growth	The Northern Trust Company P.O. Box 92994 Chicago, IL 60675		38.68	%
	National Financial Services LLC 200 Liberty St. One World Financial Center New York, NY 10281		29.03	%

107

Portfolio	Name and Address	% of Class
	Frontier Trust Company P.O. Box 10758 Fargo, ND 58106		20.75	%
	T. Rowe Price Trust Co. P.O. Box 17215 Baltimore, MD 21297		6.55	%
U.S. Real Estate	Morgan Stanley Investment Management 485 Lexington Ave., Fl. 14 New York, NY 10017		100.00	%

The persons listed above as owning 25% or more of the outstanding shares of a Portfolio may be presumed to "control" (as that term is defined in the 1940 Act) such Portfolio. Control persons could have the ability to vote a majority of the shares of the respective Portfolio on any matter requiring the approval of shareholders of such Portfolio.

PERFORMANCE INFORMATION

The average annual compounded rates of return (unless otherwise noted) for the Portfolios for the 1-, 5- and 10-year periods ended December 31, 2013 and for the period from inception through December 31, 2013 are as follows:

Name of Portfolio†	Inception Date	One Year			Average Annual Five Years			Average Annual Ten Years			Average Annual Since Inception
Active International Allocation Class I	01/17/92		21.38	%		11.02	%		7.00	%		6.56	%
Class A‡	01/02/96		20.94	%		10.75	%		6.73	%		5.88	%
Class L	06/14/12		20.34	%		N/A			N/A			25.97	%
Advantage* Class I	06/30/08		37.11	%		24.71	%		N/A			12.11	%
Class A‡	05/21/10		36.65	%		N/A			N/A			21.44	%
Class L	06/30/08		36.97	%		24.59	%		N/A			11.96	%
Asian Equity Class I	12/28/10		-0.05	%		N/A			N/A			1.65	%
Class A‡	12/28/10		-0.15	%		N/A			N/A			1.45	%
Class L	12/28/10		-0.56	%		N/A			N/A			0.95	%
Emerging Markets Class I	09/25/92		-0.80	%		14.34	%		10.76	%		8.75	%
Class A‡	01/02/96		-1.07	%		14.04	%		10.48	%		7.64	%
Class L	04/27/12		-1.56	%		N/A			N/A			2.68	%
Emerging Markets Domestic Debt Class I	02/01/94		-12.54	%		7.00	%		6.12	%		8.70	%
Class A‡	01/02/96		-12.76	%		6.74	%		5.86	%		8.75	%
Class L	06/16/08		-13.00	%		6.24	%		N/A			3.24	%
Emerging Markets External Debt Class I	05/24/12		-8.79	%		N/A			N/A			2.92	%
Class A‡	05/24/12		-9.05	%		N/A			N/A			2.64	%
Class L	05/24/12		-9.41	%		N/A			N/A			2.21	%
Frontier Emerging Markets** Class I	08/25/08		32.95	%		13.45	%		N/A			1.23	%
Class A‡	09/14/12		32.53	%		N/A			N/A			29.52	%
Class L	09/14/12		31.81	%		N/A			N/A			28.84	%

108

Name of Portfolio†	Inception Date	One Year			Average Annual Five Years			Average Annual Ten Years			Average Annual Since Inception
Global Advantage Class I	12/28/10		29.71	%		N/A			N/A			16.92	%
Class A‡	12/28/10		29.48	%		N/A			N/A			16.62	%
Class L	12/28/10		28.78	%		N/A			N/A			16.04	%
Global Discovery Class I	12/28/10		40.72	%		N/A			N/A			19.39	%
Class A‡	12/28/10		40.33	%		N/A			N/A			19.10	%
Class L	12/28/10		39.68	%		N/A			N/A			18.49	%
Global Franchise Class I	11/28/01		19.71	%		17.45	%		10.43	%		11.93	%
Class A‡	11/28/01		19.42	%		17.13	%		10.14	%		11.63	%
Class L	04/27/12		18.78	%		N/A			N/A			11.69	%
Global Insight Class I	12/28/11		30.89	%		N/A			N/A			29.91	%
Class A‡	12/28/11		30.52	%		N/A			N/A			29.59	%
Class L	12/28/11		29.82	%		N/A			N/A			28.90	%
Global Opportunity* Class I	05/30/08		40.12	%		27.43	%		N/A			10.00	%
Class A‡	05/21/10		39.80	%		N/A			N/A			20.29	%
Class L	05/30/08		39.79	%		26.99	%		N/A			9.66	%
Global Real Estate Class I	08/30/06		3.55	%		15.61	%		N/A			2.82	%
Class A‡	08/30/06		3.18	%		15.29	%		N/A			2.54	%
Class L	06/16/08		2.77	%		14.73	%		N/A			2.46	%
Growth Class I	04/02/91		48.60	%		27.31	%		10.15	%		10.53	%
Class A‡	01/02/96		48.22	%		27.00	%		9.87	%		9.25	%
Class L	04/27/12		47.44	%		N/A			N/A			22.91	%
Insight Class I	12/28/11		40.20	%		N/A			N/A			33.92	%
Class A‡	12/28/11		39.73	%		N/A			N/A			33.56	%
Class L	12/28/11		39.13	%		N/A			N/A			32.92	%
International Advantage Class I	12/28/10		12.72	%		N/A			N/A			10.43	%
Class A‡	12/28/10		12.43	%		N/A			N/A			10.15	%
Class L	12/28/10		11.88	%		N/A			N/A			9.61	%
International Equity Class I	08/04/89		20.39	%		11.39	%		7.02	%		9.43	%
Class A‡	01/02/96		20.13	%		11.11	%		6.76	%		8.65	%
Class L	06/14/12		19.49	%		N/A			N/A			23.84	%
International Opportunity Class I	03/31/10		26.47	%		N/A			N/A			11.51	%
Class A‡	03/31/10		26.12	%		N/A			N/A			11.23	%
Class L	03/31/10		25.49	%		N/A			N/A			10.66	%
International Real Estate Class I	10/01/97		5.56	%		14.34	%		7.92	%		8.77	%
Class A‡	10/01/97		5.28	%		14.03	%		7.65	%		8.50	%
Class H	04/27/12		5.27	%		N/A			N/A			15.87	%
Class L	04/27/12		4.73	%		N/A			N/A			15.30	%
International Small Cap Class I	12/15/92		25.75	%		10.73	%		6.02	%		9.14	%
Class A‡	10/21/08		25.32	%		10.45	%		N/A			10.36	%
Class L	04/27/12		24.72	%		N/A			N/A			11.66	%

109

Name of Portfolio†	Inception Date	One Year			Average Annual Five Years			Average Annual Ten Years			Average Annual Since Inception
Multi-Asset Class I	06/22/12		18.24	%		N/A			N/A			14.89	%
Class A‡	06/22/12		17.86	%		N/A			N/A			14.58	%
Class L	06/22/12		17.23	%		N/A			N/A			13.97	%
Opportunity* Class I	08/12/05		43.92	%		27.38	%		N/A			10.82	%
Class A‡	05/21/10		43.51	%		N/A			N/A			20.27	%
Class L	05/28/98		42.78	%		26.33	%		9.22	%		5.51	%
Select Global Infrastructure Class I	09/20/10		17.91	%		N/A			N/A			17.48	%
Class A‡	09/20/10		17.69	%		N/A			N/A			17.19	%
Class L	09/20/10		16.98	%		N/A			N/A			16.59	%
Small Company Growth Class I	11/01/89		62.26	%		26.58	%		11.42	%		12.43	%
Class A‡	01/02/96		61.88	%		26.23	%		11.13	%		11.84	%
Class L	11/11/11		60.97	%		N/A			N/A			31.81	%
Total Emerging Markets Class I	05/31/12		-6.00	%		N/A			N/A			6.22	%
Class A‡	05/31/12		-6.19	%		N/A			N/A			5.94	%
Class L	05/31/12		-6.67	%		N/A			N/A			5.41	%
U.S. Real Estate Class I	02/24/95		2.45	%		16.19	%		9.38	%		12.31	%
Class A‡	01/02/96		2.14	%		15.87	%		9.10	%		11.39	%
Class L	11/11/11		1.62	%		N/A			N/A			8.35	%

† Performance information for the Class I, Class A and Class L shares of the Global Quality Portfolio will be provided once the Class I, Class A and Class L shares have completed a full calendar year of operations.

‡ Effective September 9, 2013, Class P shares of each Portfolio and Class H shares of each of the Global Insight and Insight Portfolios were renamed Class A shares.

* Performance shown for each Portfolio's Class I and Class L shares, as applicable, for periods prior to May 21, 2010 reflects the performance of the Class I and Class C shares, respectively, of the applicable Predecessor Fund.

** Performance shown for the Portfolio's Class I shares, as applicable, for periods prior to September 17, 2012 reflects the performance of the common shares of the applicable Predecessor Fund. The Predecessor Fund had an October 31 fiscal year end.

The average annual compounded rates of return, inclusive of a maximum sales charge of 4.75%, of the Class H shares of the International Real Estate Portfolio for the 1-, 5- and 10-year periods ended December 31, 2013 and for the period from inception through December 31, 2013 are as follows:

Name of Portfolio

Inception
Date

One
Year

Average
Annual Five
Years

Average
Annual Ten
Years

Average
Annual Since
Inceptions

International Real Estate
Class H

04/27/12

0.29

N/A

12.58

The average annual compounded rates of return, inclusive of a maximum sales charge of 5.25% (4.25% with respect to the Emerging Markets Domestic Debt and Emerging Markets External Debt Portfolios), of the Class A shares‡ of the Portfolios for the 1-, 5- and 10-year periods ended December 31, 2013 and for the period from inception through December 31, 2013 are as follows:

Name of Portfolio†	Inception Date	One Year			Average Annual Five Years			Average Annual Ten Years			Average Annual Since Inception
Active International Allocation Class A	01/02/96		14.58	%		9.57	%		6.15	%		5.56	%
Advantage Class A	05/21/10		29.44	%		N/A			N/A			19.63	%

110

Name of Portfolio†	Inception Date	One Year			Average Annual Five Years			Average Annual Ten Years			Average Annual Since Inception
Asian Equity Class A	12/28/10		-5.35	%		N/A			N/A			-0.34	%
Emerging Markets Class A	01/02/96		-6.26	%		12.81	%		9.89	%		7.32	%
Emerging Markets Domestic Debt Class A	01/02/96		-16.47	%		5.82	%		5.40	%		8.49	%
Emerging Markets External Debt Class A	05/24/12		-12.90	%		N/A			N/A			-0.07	%
Frontier Emerging Markets Class A	09/14/12		25.55	%		N/A			N/A			24.26	%
Global Advantage Class A	12/28/10		22.68	%		N/A			N/A			14.56	%
Global Discovery Class A	12/28/10		32.92	%		N/A			N/A			16.99	%
Global Franchise Class A	11/28/01		13.15	%		15.88	%		9.55	%		11.14	%
Global Insight Class A	12/28/11		23.71	%		N/A			N/A			26.18	%
Global Opportunity Class A	05/21/10		32.41	%		N/A			N/A			18.50	%
Global Real Estate Class A	08/30/06		-2.25	%		14.07	%		N/A			1.79	%
Growth Class A	01/02/96		40.44	%		25.64	%		9.28	%		8.92	%
Insight Class A	12/28/11		32.36	%		N/A			N/A			30.05	%
International Advantage Class A	12/28/10		6.55	%		N/A			N/A			8.21	%
International Equity Class A	01/02/96		13.79	%		9.92	%		6.19	%		8.32	%
International Opportunity Class A	03/31/10		19.49	%		N/A			N/A			9.65	%
International Real Estate Class A	10/01/97		-0.27	%		12.80	%		7.07	%		8.14	%
International Small Cap Class A	10/21/08		18.74	%		9.26	%		N/A			9.23	%
Multi-Asset Class A	06/22/12		11.68	%		N/A			N/A			10.63	%
Opportunity Class A	05/21/10		35.99	%		N/A			N/A			18.50	%
Select Global Infrastructure Class A	09/20/10		11.55	%		N/A			N/A			15.29	%
Small Company Growth Class A	01/02/96		53.35	%		24.87	%		10.53	%		11.50	%
Total Emerging Markets Class A	05/31/12		-11.08	%		N/A			N/A			2.42	%
U.S. Real Estate Class A	01/02/96		-3.22	%		14.64	%		8.51	%		11.06	%

† Performance information for the Class A shares of the Global Quality Portfolio will be provided once the Class A shares have completed a full calendar year of operations.

‡ Effective September 9, 2013, Class P shares of each Portfolio (except the Global Quality Portfolio) and Class H shares of each of the Global Insight and Insight Portfolios were renamed Class A shares.

111

The average annual compounded rates of return (after taxes on distributions) (unless otherwise noted) for the Class I shares (with the exception of Opportunity Portfolio which shows results for Class L shares) of the Portfolios for the 1-, 5- and 10- year periods ended December 31, 2013 and for the period from inception through December 31, 2013 are as follows:

Name of Portfolio†	Inception Date	One Year			Average Annual Five Years			Average Annual Ten Years			Average Annual Since Inception
Active International Allocation Class I	01/17/92		20.37	%		10.62	%		6.40	%		5.18	%
Advantage* Class I	06/30/08		35.89	%		24.20	%		N/A			11.56	%
Asian Equity Class I	12/28/10		-0.01	%		N/A			N/A			1.64	%
Emerging Markets Class I	09/25/92		-1.62	%		14.13	%		9.88	%		7.89	%
Emerging Markets Domestic Debt Class I	02/01/94		-13.80	%		5.09	%		4.03	%		3.66	%
Emerging Markets External Debt Class I	05/24/12		-11.68	%		N/A			N/A			0.16	%
Frontier Emerging Markets** Class I	08/25/08		32.88	%		13.22	%		N/A			1.04	%
Global Advantage Class I	12/28/10		26.74	%		N/A			N/A			15.55	%
Global Discovery Class I	12/28/10		36.00	%		N/A			N/A			17.54	%
Global Franchise Class I	11/28/01		18.57	%		16.85	%		9.42	%		11.07	%
Global Insight Class I	12/28/11		25.15	%		N/A			N/A			25.76	%
Global Opportunity* Class I	05/30/08		36.66	%		26.31	%		N/A			9.14	%
Global Real Estate Class I	08/30/06		2.73	%		14.67	%		N/A			1.93	%
Growth Class I	04/02/91		46.96	%		27.00	%		9.98	%		9.07	%
Insight Class I	12/28/11		37.23	%		N/A			N/A			31.02	%
International Advantage Class I	12/28/10		11.25	%		N/A			N/A			9.76	%
International Equity Class I	08/04/89		19.98	%		11.05	%		5.76	%		7.94	%
International Opportunity Class I	03/31/10		25.65	%		N/A			N/A			11.02	%
International Real Estate Class I	10/01/97		2.92	%		13.07	%		6.71	%		7.67	%
International Small Cap Class I	12/15/92		23.74	%		10.40	%		4.64	%		7.77	%
Multi-Asset Class I	06/22/12		16.36	%		N/A			N/A			13.31	%
Opportunity* Class L	05/28/98		38.86	%		25.63	%		8.92	%		5.14	%
Select Global Infrastructure Class I	09/20/10		16.08	%		N/A			N/A			16.38	%
Small Company Growth Class I	11/01/89		58.13	%		25.63	%		10.55	%		10.07	%
Total Emerging Markets Class I	05/31/12		-7.61	%		N/A			N/A			4.60	%
U.S. Real Estate Class I	02/24/95		0.84	%		15.27	%		6.00	%		8.91	%

† Performance information for the Class I shares of the Global Quality Portfolio will be provided once the Class I shares have completed a full calendar year of operations.

112

The average annual compounded rates of return (after taxes on distributions and redemptions) (unless otherwise noted) for the Class I shares (with the exception of Opportunity Portfolio which shows results for Class L shares) of the Portfolios for the 1-, 5- and 10-year periods ended December 31, 2013 and for the period from inception through December 31, 2013 are as follows:

Name of Portfolio†	Inception Date	One Year			Average Annual Five Years			Average Annual Ten Years			Average Annual Since Inception
Active International Allocation Class I	01/17/92		12.50	%		8.86	%		5.74	%		4.95	%
Advantage* Class I	06/30/08		21.72	%		20.48	%		N/A			9.66	%
Asian Equity Class I	12/28/10		0.32	%		N/A			N/A			1.40	%
Emerging Markets Class I	09/25/92		0.53	%		11.81	%		9.40	%		7.51	%
Emerging Markets Domestic Debt Class I	02/01/94		-7.05	%		4.86	%		4.08	%		4.22	%
Emerging Markets External Debt Class I	05/24/12		-4.94	%		N/A			N/A			1.15	%
Frontier Emerging Markets** Class I	08/25/08		18.79	%		10.87	%		N/A			1.00	%
Global Advantage Class I	12/28/10		18.18	%		N/A			N/A			13.24	%
Global Discovery Class I	12/28/10		25.66	%		N/A			N/A			15.18	%
Global Franchise Class I	11/28/01		12.17	%		14.27	%		8.66	%		10.15	%
Global Insight Class I	12/28/11		19.80	%		N/A			N/A			22.32	%
Global Opportunity* Class I	05/30/08		25.05	%		22.77	%		N/A			7.93	%
Global Real Estate Class I	08/30/06		2.09	%		12.28	%		N/A			1.91	%
Growth Class I	04/02/91		28.67	%		22.72	%		8.38	%		8.29	%
Insight Class I	12/28/11		24.12	%		N/A			N/A			25.79	%
International Advantage Class I	12/28/10		8.34	%		N/A			N/A			8.13	%
International Equity Class I	08/04/89		11.99	%		9.19	%		5.90	%		7.81	%
International Opportunity Class I	03/31/10		15.60	%		N/A			N/A			9.08	%
International Real Estate Class I	10/01/97		3.23	%		11.22	%		6.38	%		7.18	%
International Small Cap Class I	12/15/92		16.88	%		8.76	%		5.52	%		7.90	%
Multi-Asset Class I	06/22/12		10.53	%		N/A			N/A			10.81	%
Opportunity* Class L	05/28/98		27.13	%		21.83	%		7.57	%		4.43	%
Select Global Infrastructure Class I	09/20/10		11.43	%		N/A			N/A			13.98	%
Small Company Growth Class I	11/01/89		38.27	%		22.03	%		9.40	%		9.56	%

113

Name of Portfolio†	Inception Date	One Year			Average Annual Five Years			Average Annual Ten Years			Average Annual Since Inception
Total Emerging Markets Class I	05/31/12		-3.34	%		N/A			N/A			4.12	%
U.S. Real Estate Class I	02/24/95		1.82	%		12.77	%		6.24	%		8.76	%

† Performance information for the Class I shares of the Global Quality Portfolio will be provided once the Class I shares have completed a full calendar year of operations.

Calculation of Yield For Fixed Income Portfolios

The current yields for the Fixed Income Portfolios for the 30-day period ended December 31, 2013 were as follows:

Portfolio Name	Class I Shares			Class A‡ Shares			Class L Shares
Emerging Markets Domestic Debt		5.00	%		4.56	%		4.68	%
Emerging Markets External Debt		5.40	%		4.76	%		4.74	%

‡ Effective September 9, 2013, Class P shares of each Portfolio were renamed Class A shares.

FINANCIAL STATEMENTS

The Portfolios' audited financial statements for the fiscal year ended December 31, 2013 (fiscal period ended December 31, 2013 with respect to the Global Quality Portfolio), including notes thereto, and the reports of Ernst & Young LLP, an independent registered public accounting firm, are herein incorporated by reference to the Portfolios' Annual Reports to Shareholders. A copy of the Portfolios' Annual Reports to Shareholders must accompany the delivery of this SAI.

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APPENDIX A

MORGAN STANLEY INVESTMENT MANAGEMENT
PROXY VOTING POLICY AND PROCEDURES

I. POLICY STATEMENT

Morgan Stanley Investment Management's ("MSIM") policy and procedures for voting proxies ("Policy") with respect to securities held in the accounts of clients applies to those MSIM entities that provide discretionary investment management services and for which an MSIM entity has authority to vote proxies. This Policy is reviewed and updated as necessary to address new and evolving proxy voting issues and standards.

The MSIM entities covered by this Policy currently include the following: Morgan Stanley AIP GP LP, Morgan Stanley Investment Management Inc., Morgan Stanley Investment Management Limited, Morgan Stanley Investment Management Company, Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan Stanley Investment Management Private Limited and Private Investment Partners Inc. (each an "MSIM Affiliate" and collectively referred to as the "MSIM Affiliates" or as "we" below).

Each MSIM Affiliate will use its best efforts to vote proxies as part of its authority to manage, acquire and dispose of account assets. With respect to the MSIM registered management investment companies (the "MSIM Funds"), each MSIM Affiliate will vote proxies under this Policy pursuant to authority granted under its applicable investment advisory agreement or, in the absence of such authority, as authorized by the Board of Directors/Trustees of the MSIM Funds. A MSIM Affiliate will not vote proxies unless the investment management or investment advisory agreement explicitly authorizes the MSIM Affiliate to vote proxies. MSIM Affiliates will vote proxies in a prudent and diligent manner and in the best interests of clients, including beneficiaries of and participants in a client's benefit plan(s) for which the MSIM Affiliates manage assets, consistent with the objective of maximizing long-term investment returns ("Client Proxy Standard"). In addition to voting proxies at portfolio companies, MSIM routinely engages with the management or board of companies in which we invest on a range of governance issues. Governance is a window into or proxy for management and board quality. MSIM engages with companies where we believe we can make a positive impact on the governance structure. MSIM's engagement process, through private communication with companies, allows us to understand the governance structure at investee companies and better inform our voting decisions. In certain situations, a client or its fiduciary may provide an MSIM Affiliate with a proxy voting policy. In these situations, the MSIM Affiliate will comply with the client's policy.

Proxy Research Services—ISS Governance Services ("ISS") and Glass Lewis (together with other proxy research providers as we may retain from time to time, the "Research Providers") are independent advisers that specialize in providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors, custodians, consultants, and other institutional investors. The services provided include in-depth research, global issuer analysis, and voting recommendations. While we may review and utilize the recommendations of one or more Research Providers in making proxy voting decisions, we are in no way obligated to follow such recommendations. In addition to research, ISS provides vote execution, reporting, and recordkeeping services.

Voting Proxies for Certain Non-U.S. Companies—Voting proxies of companies located in some jurisdictions may involve several problems that can restrict or prevent the ability to vote such proxies or entail significant costs. These problems include, but are not limited to: (i) proxy statements and ballots being written in a language other than English; (ii) untimely and/or inadequate notice of shareholder meetings; (iii) restrictions on the ability of holders outside the issuer's jurisdiction of organization to exercise votes; (iv) requirements to vote proxies in person; (v) the imposition of restrictions on the sale of the securities for a period of time in proximity to the shareholder meeting; and (vi) requirements to provide local agents with power of attorney to facilitate our voting instructions. As a result, we vote clients' non-U.S. proxies on a best efforts basis only, after weighing the costs and benefits of voting such proxies, consistent with the Client Proxy Standard. ISS has been retained to provide assistance in connection with voting non-U.S. proxies.

II. GENERAL PROXY VOTING GUIDELINES

A-1

decisions, as do factors specific to a given company. Pursuant to the procedures set forth herein, we may vote in a manner that is not in accordance with the following general guidelines, provided the vote is approved by the Proxy Review Committee (see Section III for description) and is consistent with the Client Proxy Standard. Morgan Stanley AIP GP LP will follow the procedures as described in Appendix A.

We endeavor to integrate governance and proxy voting policy with investment goals, using the vote to encourage portfolio companies to enhance long-term shareholder value and to provide a high standard of transparency such that equity markets can value corporate assets appropriately.

We seek to follow the Client Proxy Standard for each client. At times, this may result in split votes, for example when different clients have varying economic interests in the outcome of a particular voting matter (such as a case in which varied ownership interests in two companies involved in a merger results in different stakes in the outcome). We also may split votes at times based on differing views of portfolio managers.

We may abstain on matters for which disclosure is inadequate.

A. Routine Matters.

We generally support routine management proposals. The following are examples of routine management proposals:

• Approval of financial statements and auditor reports if delivered with an unqualified auditor's opinion.

• General updating/corrective amendments to the charter, articles of association or bylaws, unless we believe that such amendments would diminish shareholder rights.

• Most proposals related to the conduct of the annual meeting, with the following exceptions. We generally oppose proposals that relate to "the transaction of such other business which may come before the meeting," and open-ended requests for adjournment. However, where management specifically states the reason for requesting an adjournment and the requested adjournment would facilitate passage of a proposal that would otherwise be supported under this Policy (i.e. an uncontested corporate transaction), the adjournment request will be supported.

We generally support shareholder proposals advocating confidential voting procedures and independent tabulation of voting results.

B. Board of Directors.

1. Election of directors: Votes on board nominees can involve balancing a variety of considerations. In vote decisions, we may take into consideration whether the company has a majority voting policy in place that we believe makes the director vote more meaningful. In the absence of a proxy contest, we generally support the board's nominees for director except as follows:

a. We consider withholding support from or voting against a nominee if we believe a direct conflict exists between the interests of the nominee and the public shareholders, including failure to meet fiduciary standards of care and/or loyalty. We may oppose directors where we conclude that actions of directors are unlawful, unethical or negligent. We consider opposing individual board members or an entire slate if we believe the board is entrenched and/or dealing inadequately with performance problems; if we believe the board is acting with insufficient independence between the board and management; or if we believe the board has not been sufficiently forthcoming with information on key governance or other material matters.

b. We consider witholding support from or voting against interested directors if the company's board does not meet market standards for director independence, or if otherwise we believe board independence is insufficient. We refer to prevalent market standards as promulgated by a stock exchange or other authority within a given market (e.g., New York Stock Exchange or Nasdaq rules for most U.S. companies, and The Combined Code on Corporate Governance in the United Kingdom). Thus, for an NYSE company with no controlling shareholder, we would expect that at a minimum a majority of directors should be independent as defined by NYSE. Where we view market standards as inadequate, we may withhold votes based on stronger independence standards. Market standards notwithstanding, we generally do not view long board tenure alone as a basis to classify a director as non-independent.

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i. At a company with a shareholder or group that controls the company by virtue of a majority economic interest in the company, we have a reduced expectation for board independence, although we believe the presence of independent directors can be helpful, particularly in staffing the audit committee, and at times we may withhold support from or vote against a nominee on the view the board or its committees are not sufficiently independent. In markets where board independence is not the norm (e.g. Japan), however, we consider factors including whether a board of a controlled company includes independent members who can be expected to look out for interests of minority holders.

ii. We consider withholding support from or voting against a nominee if he or she is affiliated with a major shareholder that has representation on a board disproportionate to its economic interest.

c. Depending on market standards, we consider withholding support from or voting against a nominee who is interested and who is standing for election as a member of the company's compensation/renumeration, nominating/governance or audit committee.

d. We consider withholding support or voting against nominees if the term for which they are nominated is excessive. We consider this issue on a market-specific basis.

e. We consider withholding support from or voting against nominees if, in our view, there has been insufficient board renewal (turnover), particularly in the context of extended poor company performance.

f. We consider withholding support from or voting against a nominee standing for election if the board has not taken action to implement generally accepted governance practices for which there is a "bright line" test. For example, in the context of the U.S. market, failure to eliminate a dead hand or slow hand poison pill would be seen as a basis for opposing one or more incumbent nominees.

g. In markets that encourage designated audit committee financial experts, we consider voting against members of an audit committee if no members are designated as such. We also consider voting against the audit committee members if the company has faced financial reporting issues and/or does not put the auditor up for ratification by shareholders.

h. We believe investors should have the ability to vote on individual nominees, and may abstain or vote against a slate of nominees where we are not given the opportunity to vote on individual nominees.

i. We consider withholding support from or voting against a nominee who has failed to attend at least 75% of the nominee's board and board committee meetings within a given year without a reasonable excuse. We also consider opposing nominees if the company does not meet market standards for disclosure on attendance.

j. We consider withholding support from or voting against a nominee who appears overcommitted, particularly through service on an excessive number of boards. Market expectations are incorporated into this analysis; for U.S. boards, we generally oppose election of a nominee who serves on more than six public company boards (excluding investment companies), although we may reference National Association of Corporate Directors guidance suggesting that public company CEOs, for example, should serve no more than two outside boards given the level of time commitment required in their primary job.

2. Discharge of directors' duties: In markets where an annual discharge of directors' responsibility is a routine agenda item, we generally support such discharge. However, we may vote against discharge or abstain from voting where there are serious findings of fraud or other unethical behavior for which the individual bears responsibility. The annual discharge of responsibility represents shareholder approval of disclosed actions taken by the board during the year and may make future shareholder action against the board difficult to pursue.

3. Board independence: We generally support U.S. shareholder proposals requiring that a certain percentage (up to 66 2/3%) of the company's board members be independent directors, and promoting all-independent audit, compensation and nominating/governance committees.

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4. Board diversity: We consider on a case-by-case basis shareholder proposals urging diversity of board membership with respect to social, religious or ethnic group.

5. Majority voting: We generally support proposals requesting or requiring majority voting policies in election of directors, so long as there is a carve-out for plurality voting in the case of contested elections.

6. Proxy access: We consider on a case-by-case basis shareholder proposals on particular procedures for inclusion of shareholder nominees in company proxy statements.

7. Reimbursement for dissident nominees: We generally support well-crafted U.S. shareholder proposals that would provide for reimbursement of dissident nominees elected to a board, as the cost to shareholders in electing such nominees can be factored into the voting decision on those nominees.

8. Proposals to elect directors more frequently: In the U.S. public company context, we usually support shareholder and management proposals to elect all directors annually (to "declassify" the board), although we make an exception to this policy where we believe that long-term shareholder value may be harmed by this change given particular circumstances at the company at the time of the vote on such proposal. As indicated above, outside the U.S., we generally support greater accountability to shareholders that comes through more frequent director elections, but recognize that many markets embrace longer term lengths, sometimes for valid reasons given other aspects of the legal context in electing boards.

9. Cumulative voting: We generally support proposals to eliminate cumulative voting in the U.S. market context. (Cumulative voting provides that shareholders may concentrate their votes for one or a handful of candidates, a system that can enable a minority bloc to place representation on a board.) U.S. proposals to establish cumulative voting in the election of directors generally will not be supported.

10. Separation of Chairman and CEO positions: We vote on shareholder proposals to separate the Chairman and CEO positions and/or to appoint an independent Chairman based in part on prevailing practice in particular markets, since the context for such a practice varies. In many non-U.S. markets, we view separation of the roles as a market standard practice, and support division of the roles in that context. In the U.S., we consider such proposals on a case-by-case basis, considering, among other things, the existing board leadership structure, company performance, and any other evidence of entrenchment or perceived risk that power is overly concentrated in a single individual.

11. Director retirement age and term limits: Proposals setting or recommending director retirement ages or director term limits are voted on a case-by-case basis that includes consideration of company performance, the rate of board renewal, evidence of effective individual director evaluation processes, and any indications of entrenchment.

12. Proposals to limit directors' liability and/or broaden indemnification of officers and directors. Generally, we will support such proposals provided that an individual is eligible only if he or she has not acted in bad faith, with gross negligence or with reckless disregard of his or her duties.

C. Statutory auditor boards

The statutory auditor board, which is separate from the main board of directors, plays a role in corporate governance in several markets. These boards are elected by shareholders to provide assurance on compliance with legal and accounting standards and the company's articles of association. We generally vote for statutory auditor nominees if they meet independence standards. In markets that require disclosure on attendance by internal statutory auditors, however, we consider voting against nominees for these positions who failed to attend at least 75% of meetings in the previous year. We also consider opposing nominees if the company does not meet market standards for disclosure on attendance.

D. Corporate transactions and proxy fights.

We examine proposals relating to mergers, acquisitions and other special corporate transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings and recapitalizations) on a case-by-case basis in the interests of each fund or other account. Proposals for mergers or other significant transactions that are friendly and approved by the Research Providers usually are supported if there is no portfolio manager objection. We also analyze proxy contests on a case-by-case basis.

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E. Changes in capital structure.

1. We generally support the following:

• Management and shareholder proposals aimed at eliminating unequal voting rights, assuming fair economic treatment of classes of shares we hold.

• U.S. management proposals to increase the authorization of existing classes of common stock (or securities convertible into common stock) if: (i) a clear business purpose is stated that we can support and the number of shares requested is reasonable in relation to the purpose for which authorization is requested; and/or (ii) the authorization does not exceed 100% of shares currently authorized and at least 30% of the total new authorization will be outstanding. (We consider proposals that do not meet these criteria on a case-by-case basis.)

• U.S. management proposals to create a new class of preferred stock or for issuances of preferred stock up to 50% of issued capital, unless we have concerns about use of the authority for anti-takeover purposes.

• Proposals in non-U.S. markets that in our view appropriately limit potential dilution of existing shareholders. A major consideration is whether existing shareholders would have preemptive rights for any issuance under a proposal for standing share issuance authority. We generally consider market-specific guidance in making these decisions; for example, in the U.K. market, we usually follow Association of British Insurers' ("ABI") guidance, although company-specific factors may be considered and for example, may sometimes lead us to voting against share authorization proposals even if they meet ABI guidance.

• Management proposals to authorize share repurchase plans, except in some cases in which we believe there are insufficient protections against use of an authorization for anti-takeover purposes.

• Management proposals to reduce the number of authorized shares of common or preferred stock, or to eliminate classes of preferred stock.

• Management proposals to effect stock splits.

• Management proposals to effect reverse stock splits if management proportionately reduces the authorized share amount set forth in the corporate charter. Reverse stock splits that do not adjust proportionately to the authorized share amount generally will be approved if the resulting increase in authorized shares coincides with the proxy guidelines set forth above for common stock increases.

• Management dividend payout proposals, except where we perceive company payouts to shareholders as inadequate.

2. We generally oppose the following (notwithstanding management support):

• Proposals to add classes of stock that would substantially dilute the voting interests of existing shareholders.

• Proposals to increase the authorized or issued number of shares of existing classes of stock that are unreasonably dilutive, particularly if there are no preemptive rights for existing shareholders. However, depending on market practices, we consider voting for proposals giving general authorization for issuance of shares not subject to pre-emptive rights if the authority is limited.

• Proposals that authorize share issuance at a discount to market rates, except where authority for such issuance is de minimis, or if there is a special situation that we believe justifies such authorization (as may be the case, for example, at a company under severe stress and risk of bankruptcy).

• Proposals relating to changes in capitalization by 100% or more.

We consider on a case-by-case basis shareholder proposals to increase dividend payout ratios, in light of market practice and perceived market weaknesses, as well as individual company payout history and current circumstances. For example, currently we perceive low payouts to shareholders as a concern at some Japanese companies, but may deem a low payout ratio as appropriate for a growth company making good use of its cash, notwithstanding the broader market concern.

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F. Takeover Defenses and Shareholder Rights.

1. Shareholder rights plans: We generally support proposals to require shareholder approval or ratification of shareholder rights plans (poison pills). In voting on rights plans or similar takeover defenses, we consider on a case-by-case basis whether the company has demonstrated a need for the defense in the context of promoting long-term share value; whether provisions of the defense are in line with generally accepted governance principles in the market (and specifically the presence of an adequate qualified offer provision that would exempt offers meeting certain conditions from the pill); and the specific context if the proposal is made in the midst of a takeover bid or contest for control.

2. Supermajority voting requirements: We generally oppose requirements for supermajority votes to amend the charter or bylaws, unless the provisions protect minority shareholders where there is a large shareholder. In line with this view, in the absence of a large shareholder we support reasonable shareholder proposals to limit such supermajority voting requirements.

3. Shareholder right to call meetings: We consider proposals to enhance a shareholder's rights to call a special meeting on a case-by-case basis. At large-cap U.S. companies, we generally support efforts to establish the rights of holders of 10% or more of shares to call special meetings, unless the board or state law has a set policy or law establishing such rights at a threshold that we believe to be acceptable.

4. Written consent rights: In the U.S. context, we examine proposals for shareholder written consent rights on a case-by-case basis.

5. Reincorporation: We consider management and shareholder proposals to reincorporate to a different jurisdiction on a case-by-case basis. We oppose such proposals if we believe the main purpose is to take advantage of laws or judicial precedents that reduce shareholder rights.

6. Anti-greenmail provisions: Proposals relating to the adoption of anti-greenmail provisions will be supported, provided that the proposal: (i) defines greenmail; (ii) prohibits buyback offers to large block holders (holders of at least 1% of the outstanding shares and in certain cases, a greater amount) not made to all shareholders or not approved by disinterested shareholders; and (iii) contains no anti-takeover measures or other provisions restricting the rights of shareholders.

7. Bundled proposals: We may consider opposing or abstaining on proposals if disparate issues are "bundled" and presented for a single vote.

G. Auditors.

We generally support management proposals for selection or ratification of independent auditors. However, we may consider opposing such proposals with reference to incumbent audit firms if the company has suffered from serious accounting irregularities and we believe rotation of the audit firm is appropriate, or if fees paid to the auditor for non-audit-related services are excessive. Generally, to determine if non-audit fees are excessive, a 50% test will be applied (i.e., non-audit-related fees should be less than 50% of the total fees paid to the auditor). We generally vote against proposals to indemnify auditors.

H. Executive and Director Remuneration.

1. We generally support the following:

• Proposals for employee equity compensation plans and other employee ownership plans, provided that our research does not indicate that approval of the plan would be against shareholder interest. Such approval may be against shareholder interest if it authorizes excessive dilution and shareholder cost, particularly in the context of high usage ("run rate") of equity compensation in the recent past; or if there are objectionable plan design and provision.

• Proposals relating to fees to outside directors, provided the amounts are not excessive relative to other companies in the country or industry, and provided that the structure is appropriate within the market context. While stock-based compensation to outside directors is positive if moderate and appropriately structured, we are wary of significant stock option awards or other performance-based awards for outside directors, as well as provisions that could result in significant forfeiture of value on a director's decision to resign from a board (such forfeiture can undercut director independence).

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• Proposals for employee stock purchase plans that permit discounts, but only for grants that are part of a broad-based employee plan, including all non-executive employees, and only if the discounts are limited to a reasonable market standard or less.

• Proposals for the establishment of employee retirement and severance plans, provided that our research does not indicate that approval of the plan would be against shareholder interest.

2. We generally oppose retirement plans and bonuses for non-executive directors and independent statutory auditors.

3. In the U.S. context, we generally vote against shareholder proposals requiring shareholder approval of all severance agreements, but we generally support proposals that require shareholder approval for agreements in excess of three times the annual compensation (salary and bonus). We generally oppose shareholder proposals that would establish arbitrary caps on pay. We consider on a case-by-case basis shareholder proposals that seek to limit Supplemental Executive Retirement Plans (SERPs), but support such proposals where we consider SERPs to be excessive.

4. Shareholder proposals advocating stronger and/or particular pay-for-performance models will be evaluated on a case-by-case basis, with consideration of the merits of the individual proposal within the context of the particular company and its labor markets, and the company's current and past practices. While we generally support emphasis on long-term components of senior executive pay and strong linkage of pay to performance, we consider factors including whether a proposal may be overly prescriptive, and the impact of the proposal, if implemented as written, on recruitment and retention.

5. We generally support proposals advocating reasonable senior executive and director stock ownership guidelines and holding requirements for shares gained in executive equity compensation programs

6. We generally support shareholder proposals for reasonable "claw-back" provisions that provide for company recovery of senior executive bonuses to the extent they were based on achieving financial benchmarks that were not actually met in light of subsequent restatements.

7. Management proposals effectively to re-price stock options are considered on a case-by-case basis. Considerations include the company's reasons and justifications for a re-pricing, the company's competitive position, whether senior executives and outside directors are excluded, potential cost to shareholders, whether the re-pricing or share exchange is on a value-for-value basis, and whether vesting requirements are extended.

8. Say-on-Pay: We consider proposals relating to an advisory vote on remuneration on a case-by-case basis. Considerations include a review of the relationship between executive remuneration and performance based on operating trends and total shareholder return over multiple performance periods. In addition, we review remuneration structures and potential poor pay practices, including relative magnitude of pay, discretionary bonus awards, tax gross ups, change-in-control features, internal pay equity and peer group construction. As long-term investors, we support remuneration policies that align with long-term shareholder returns.

I. Social, Political and Environmental Issues. Shareholders in the U.S. and certain other markets submit proposals encouraging changes in company disclosure and practices related to particular corporate, social, political and environmental matters. We consider how to vote on the proposals on a case-by-case basis to determine likely impacts on shareholder value. We seek to balance concerns on reputational and other risks that lie behind a proposal against costs of implementation, while considering appropriate shareholder and management prerogatives. We may abstain from voting on proposals that do not have a readily determinable financial impact on shareholder value. We support proposals that, if implemented, would enhance useful disclosure, but we generally vote against proposals requesting reports that we believe are duplicative, related to matters not material to the business, or that would impose unnecessary or excessive costs. We believe that certain social and environmental shareholder proposals may intrude excessively on management prerogatives, which can lead us to oppose them.

J. Fund of Funds. Certain Funds advised by an MSIM Affiliate invest only in other MSIM Funds. If an underlying fund has a shareholder meeting, in order to avoid any potential conflict of interest, such proposals will be voted in the same proportion as the votes of the other shareholders of the underlying fund, unless otherwise determined by the Proxy Review Committee. Other MSIM Funds invest in unaffiliated funds. If an unaffiliated underlying fund has a shareholder meeting and the MSIM Fund owns more than 25% of the voting shares of the underlying fund, the MSIM Fund will vote its shares in the unaffiliated underlying fund in the same proportion as the votes of the other shareholders of the underlying fund.

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III. ADMINISTRATION OF POLICY

The MSIM Proxy Review Committee (the "Committee") has overall responsibility for the Policy. The Committee, which is appointed by MSIM's Long-Only Executive Committee, consists of investment professionals who represent the different investment disciplines and geographic locations of the firm, and is chaired by the director of the Corporate Governance Team ("CGT"). Because proxy voting is an investment responsibility and impacts shareholder value, and because of their knowledge of companies and markets, portfolio managers and other members of investment staff play a key role in proxy voting, although the Committee has final authority over proxy votes.

The CGT Director is responsible for identifying issues that require Committee deliberation or ratification. The CGT, working with advice of investment teams and the Committee, is responsible for voting on routine items and on matters that can be addressed in line with these Policy guidelines. The CGT has responsibility for voting case-by-case where guidelines and precedent provide adequate guidance.

The Committee will periodically review and have the authority to amend, as necessary, the Policy and establish and direct voting positions consistent with the Client Proxy Standard.

CGT and members of the Committee may take into account Research Providers' recommendations and research as well as any other relevant information they may request or receive, including portfolio manager and/or analyst comments and research, as applicable. Generally, proxies related to securities held in accounts that are managed pursuant to quantitative, index or index-like strategies ("Index Strategies") will be voted in the same manner as those held in actively managed accounts, unless economic interests of the accounts differ. Because accounts managed using Index Strategies are passively managed accounts, research from portfolio managers and/or analysts related to securities held in these accounts may not be available. If the affected securities are held only in accounts that are managed pursuant to Index Strategies, and the proxy relates to a matter that is not described in this Policy, the CGT will consider all available information from the Research Providers, and to the extent that the holdings are significant, from the portfolio managers and/or analysts.

A. Committee Procedures

The Committee meets at least quarterly and reviews and considers changes to the Policy at least annually. Through meetings and/or written communications, the Committee is responsible for monitoring and ratifying "split votes" (i.e., allowing certain shares of the same issuer that are the subject of the same proxy solicitation and held by one or more MSIM portfolios to be voted differently than other shares) and/or "override voting" (i.e., voting all MSIM portfolio shares in a manner contrary to the Policy). The Committee will review developing issues and approve upcoming votes, as appropriate, for matters as requested by CGT.

The Committee reserves the right to review voting decisions at any time and to make voting decisions as necessary to ensure the independence and integrity of the votes.

B. Material Conflicts of Interest

In addition to the procedures discussed above, if the CGT Director determines that an issue raises a material conflict of interest, the CGT Director may request a special committee to review, and recommend a course of action with respect to, the conflict(s) in question ("Special Committee").

A potential material conflict of interest could exist in the following situations, among others:

1. The issuer soliciting the vote is a client of MSIM or an affiliate of MSIM and the vote is on a matter that materially affects the issuer.

2. The proxy relates to Morgan Stanley common stock or any other security issued by Morgan Stanley or its affiliates except if echo voting is used, as with MSIM Funds, as described herein.

3. Morgan Stanley has a material pecuniary interest in the matter submitted for a vote (e.g., acting as a financial advisor to a party to a merger or acquisition for which Morgan Stanley will be paid a success fee if completed).

If the CGT Director determines that an issue raises a potential material conflict of interest, depending on the facts and circumstances, the issue will be addressed as follows:

1. If the matter relates to a topic that is discussed in this Policy, the proposal will be voted as per the Policy.

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2. If the matter is not discussed in this Policy or the Policy indicates that the issue is to be decided case-by-case, the proposal will be voted in a manner consistent with the Research Providers, provided that all the Research Providers consulted have the same recommendation, no portfolio manager objects to that vote, and the vote is consistent with MSIM's Client Proxy Standard.

3. If the Research Providers' recommendations differ, the CGT Director will refer the matter to a Special Committee to vote on the proposal, as appropriate.

Any Special Committee shall be comprised of the CGT Director and at least two portfolio managers (preferably members of the Committee) as approved by the Committee. The CGT Director may request non-voting participation by MSIM's General Counsel or his/her designee and the Chief Compliance Officer or his/her designee. In addition to the research provided by Research Providers, the Special Committee may request analysis from MSIM Affiliate investment professionals and outside sources to the extent it deems appropriate.

C. Proxy Voting Reporting

The CGT will document in writing all Committee and Special Committee decisions and actions, which documentation will be maintained by the CGT for a period of at least six years. To the extent these decisions relate to a security held by an MSIM Fund, the CGT will report the decisions to each applicable Board of Trustees/Directors of those Funds at each Board's next regularly scheduled Board meeting. The report will contain information concerning decisions made during the most recently ended calendar quarter immediately preceding the Board meeting.

MSIM will promptly provide a copy of this Policy to any client requesting it. MSIM will also, upon client request, promptly provide a report indicating how each proxy was voted with respect to securities held in that client's account.

MSIM's Legal Department is responsible for filing an annual Form N-PX on behalf of each MSIM Fund for which such filing is required, indicating how all proxies were voted with respect to such Fund's holdings.

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APPENDIX A

The following procedures apply to accounts managed by Morgan Stanley AIP GP LP and Private Investment Partners Inc. ("AIP"): (i) closed-end funds registered under the Investment Company Act of 1940, as amended, (ii) separate accounts and (iii) unregistered funds.

Generally, AIP will follow the guidelines set forth in Section II of MSIM's Proxy Voting Policy and Procedures. To the extent that such guidelines do not provide specific direction, or AIP determines that consistent with the Client Proxy Standard, the guidelines should not be followed, the Proxy Review Committee has delegated the voting authority to vote securities held by accounts managed by AIP to the Fund of Hedge Funds investment team, the Private Equity Fund of Funds investment team or the Private Equity Real Estate Fund of Funds investment team of AIP. A summary of decisions made by the investment teams will be made available to the Proxy Review Committee for its information at the next scheduled meeting of the Proxy Review Committee.

In certain cases, AIP may determine to abstain from determining (or recommending) how a proxy should be voted (and therefore abstain from voting such proxy or recommending how such proxy should be voted), such as where the expected cost of giving due consideration to the proxy does not justify the potential benefits to the affected account(s) that might result from adopting or rejecting (as the case may be) the measure in question.

Waiver of Voting Rights

For regulatory reasons, AIP may either 1) invest in a class of securities of an underlying fund (the "Fund") that does not provide for voting rights; or 2) waive 100% of its voting rights with respect to the following:

1. Any rights with respect to the removal or replacement of a director, general partner, managing member or other person acting in a similar capacity for or on behalf of the Fund (each individually a "Designated Person," and collectively, the "Designated Persons"), which may include, but are not limited to, voting on the election or removal of a Designated Person in the event of such Designated Person's death, disability, insolvency, bankruptcy, incapacity, or other event requiring a vote of interest holders of the Fund to remove or replace a Designated Person; and

2. Any rights in connection with a determination to renew, dissolve, liquidate, or otherwise terminate or continue the Fund, which may include, but are not limited to, voting on the renewal, dissolution, liquidation, termination or continuance of the Fund upon the occurrence of an event described in the Fund's organizational documents; provided, however, that, if the Fund's organizational documents require the consent of the Fund's general partner or manager, as the case may be, for any such termination or continuation of the Fund to be effective, then AIP may exercise its voting rights with respect to such matter.

Ratified by the Morgan Stanley Funds Board on October 2-3, 2013.

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APPENDIX B

DESCRIPTION OF RATINGS

I. Excerpts from Moody's Investors Service, Inc.'s Corporate Bond Ratings:

Aaa: Judged to be of the highest quality, with minimal credit risk;

Aa: judged to be of high quality and are subject to very low credit risk;

A: judged to be upper medium-grade obligations, subject to low credit risk;

Baa: judged to be medium-grade obligations and subject to moderate credit risk and as such may possess certain speculative characteristics;

Ba: judged to be speculative and are subject to substantial credit risk;

B: considered speculative and are subject to high credit risk;

Caa: judged to be of poor standing and are subject to very high credit risk;

Ca: highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest;

C: the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

II. Excerpts from Standard & Poor's Rating Group's Corporate Bond Ratings:

AAA: Highest rating assigned for an obligation; obligor's capacity to meet its financial commitment on the obligation is extremely strong;

AA: obligation differs from the highest-rated obligations only to a small degree; obligor's capacity to meet its financial commitment on the obligation is very strong;

A: obligation is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories; obligor's capacity to meet its financial commitment on the obligation is still strong;

BBB: obligation exhibits adequate protection parameters; adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation;

BB, B, CCC, CC, C: obligations rated BB, B, CCC, CC and C are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions;

BB: obligation is less vulnerable to nonpayment than other speculative issues; it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation;

B: obligation is more vulnerable to nonpayment than obligations rated BB, but the obligor currently has the capacity to meet its financial commitment on the obligation; adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation;

CCC: obligation is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation; in the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation;

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CC: obligation is currently highly vulnerable to nonpayment; default has not yet occurred, but Standard & Poor's expects default to be a virtual certainty, regardless of the anticipated time to default;

C: currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher;

D: obligation is in payment default. The D rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payments will be made within five business days. The D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

Plus (+) or minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

NR: indicates that no rating has been requested, or that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy.

III. Excerpts from Fitch, Inc.'s Corporate Bond Ratings:

AAA: Highest credit quality; denotes the lowest expectation of credit risk; assigned only in case of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

AA: Very high credit quality; denote expectations of very low credit risk; indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

A: High credit quality; denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.

BBB: Good credit quality; indicate that expectations of credit risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse changes in circumstances and economic conditions are more likely to impair this capacity. This is the lowest investment grade category.

BB: Speculative; indicate an elevated vulnerability to credit risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments. Securities rated in this category are not investment grade.

B: Highly speculative; indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.

CCC: Substantial credit risk; default is a real possibility.

CC: Very high levels of credit risk; default of some kind appears probable.

C: Exceptionally high levels of credit risk; default is imminent or inevitable, or the issuer is in standstill.

RD: Indicates an issuer that in Fitch's opinion has experienced an uncured payment default on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and which has not otherwise ceased business.

D: Default indicates an issuer that in Fitch Ratings' opinion has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, or which has otherwise ceased business.

The modifiers "+" or "-" may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the AAA Long-Term rating category or to categories below CCC.

IV. Excerpts from Moody's Investors Service, Inc.'s Preferred Stock Ratings:

aaa: An issue which is rated aaa is considered to be a top-quality preferred stock. This rating indicates good asset protection and the least risk of dividend impairment within the universe of preferred stocks.

B-2

aa: An issue which is rated aa is considered a high-grade preferred stock. This rating indicates that there is reasonable assurance that earnings and asset protection will remain relatively well maintained in the foreseeable future.

a: An issue which is rated a is considered to be an upper medium-grade preferred stock. While risks are judged to be somewhat greater than in the aaa and aa classifications, earnings and asset protection are, nevertheless, expected to be maintained at adequate levels.

baa: An issue which is rated baa is considered to be medium-grade preferred stock, neither highly protected nor poorly secured. Earnings and asset protection appear adequate at present but may be questionable over any great length of time.

ba: an issue which is rated ba is considered to have speculative elements and its future cannot be considered well assured. Earnings and asset protection may be very moderate and not well safeguarded during adverse periods. Uncertainty of position characterizes preferred stocks in this class.

b: An issue which is rated b generally lacks the characteristics of a desirable investment. Assurance of dividend payments and maintenance of other terms of the issue over any long period of time may be small.

caa: An issue which is rated caa is likely to be in arrears on dividend payments. This rating designation does not purport to indicate the future status of payments.

ca: An issue which is rated ca is speculative in a high degree and is likely to be in arrears on dividends with little likelihood of eventual payments.

c: This is the lowest rated class of preferred or preference stock. Issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

Note: Moody's may apply numerical modifiers 1, 2 and 3 in each rating classification. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.

V. Excerpts from Standard & Poor's Rating Group's Preferred Stock Ratings:

AAA: This is the highest rating that may be assigned by S&P to a preferred stock issue and indicates an extremely strong capacity to pay the preferred stock obligations.

AA: A preferred stock issue rated AA also qualifies as a high-quality fixed-income security. The capacity to pay preferred stock obligations is very strong, although not as overwhelming as for issues rated AAA.

A: An issue rated A is backed by a sound capacity to pay the preferred stock obligations, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions.

BBB: An issue rated BBB is regarded as backed by an adequate capacity to pay the preferred stock obligations. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to make payments for a preferred stock in this category than for issues in the A category.

BB, B, CCC: Preferred stock rated BB, B, and CCC are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay preferred stock obligations. BB indicates the lowest degree of speculation and CCC the highest degree of speculation. While such issues will likely have some quality and protective characteristics, these are outweighed by large uncertainties of major risk exposures to adverse conditions.

CC: The rating CC is reserved for a preferred stock in arrears on dividends or sinking fund payments but that is currently paying.

C: A preferred stock rated C is a non-paying issue.

D: A preferred stock rated D is a non-paying issue with the issuer in default on debt instruments.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

B-3

NR: Indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy.

VI. Excerpts from Fitch, Inc's Preferred Stock Ratings:

AAA: These preferred stocks are considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong capacity for payment of financial commitments, which is unlikely to be adversely affected by foreseeable events.

AA: These preferred stocks are considered to be investment grade and of very high credit quality. The obligor's capacity for payment of financial commitments is very strong and is not significantly vulnerable to foreseeable events.

A: These preferred stocks are considered to be investment grade and of high credit quality. The obligor's capacity for payment of financial commitments is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than preferred stocks with higher ratings.

BBB: These preferred stocks are considered to be investment grade and of good credit quality. The obligor's capacity for payment of financial commitments is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to impair this capacity.

BB: These preferred stocks are considered speculative and have an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time. However, business or financial flexibility exists which supports the servicing of financial commitments.

B: These preferred stocks are considered highly speculative. While preferred in this class are currently meeting financial commitments, the capacity for continued timely payment is vulnerable to deterioration in the business and economic environment.

CCC: These preferred stocks are considered to have substantial credit risk. Default is a real possibility.

CC: These preferred stocks are considered to have very high levels of credit risk. Default of some kind appears probable.

C: These preferred stocks are considered to have exceptionally high levels of credit risk. Default is imminent or inevitable, or the issuer is in standstill.

Default ratings are not assigned prospectively to entities or their obligations; within this context, non-payment on an instrument that contains a deferral feature or grace period will generally not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven by bankruptcy or other similar circumstance, or by a distressed debt exchange.

"Imminent" default typically refers to the occasion where a payment default has been intimated by the issuer, and is all but inevitable. This may, for example, be where an issuer has missed a scheduled payment, but (as is typical) has a grace period during which it may cure the payment default. Another alternative would be where an issuer has formally announced a distressed debt exchange, but the date of the exchange still lies several days or weeks in the immediate future. In all cases, the assignment of a default rating reflects the agency's opinion as to the most appropriate rating category consistent with the rest of its universe of ratings, and may differ from the definition of default under the terms of an issuer's financial obligations or local commercial practice.

The modifiers "+" or "-" may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the AAA Long-Term rating category, or to categories below CCC.

B-4

July 25, 2014

Supplement

SUPPLEMENT DATED JULY 25, 2014 TO THE STATEMENT OF ADDITIONAL INFORMATION OF

Morgan Stanley European Equity Fund Inc., dated February 28, 2014
Morgan Stanley Global Infrastructure Fund, dated April 30, 2014
Morgan Stanley Multi Cap Growth Trust, dated March 31, 2014
(collectively, the "Funds")

The following is hereby added to the end of the section of each Fund's Statement of Additional Information ("SAI") entitled "B. Investment Strategies and Risks":

***

The following information hereby replaces in its entirety the biographical information for Mr. John Gernon contained in each Fund's SAI:

Name, Age and Address of
Executive Officer

Position(s)
Held with
Registrant

Length of
Time
Served*

Principal Occupation(s) During
Past 5 Years

John H. Gernon (50)
522 Fifth Avenue
New York, NY 10036

President and Principal Executive Officer

Since September 2013

* This is the earliest date the officer began serving the Morgan Stanley Funds. Each officer serves an indefinite term, until his or her successor is elected.

***

The Board of Directors/Trustees of the Funds have approved (i) the offering of a commission, which will be paid by Morgan Stanley Distribution, Inc., as distributor of the Funds, to certain financial intermediaries as compensation on sales of Class A shares of the Funds of $1 million or more; and (ii) the imposition of a contingent deferred sales charge on Class A shares of the Funds in relation thereto. As a result, effective August 1, 2014, the following changes to each Fund's SAI are necessary:

The section of each Fund's SAI entitled "V. Investment Advisory and Other Services—J. Revenue Sharing" is hereby deleted and replaced with the following:

The Adviser and/or Distributor may pay compensation, out of their own funds and not as an expense of the Fund, to certain Financial Intermediaries, including recordkeepers and administrators of various deferred compensation plans ("Intermediaries") in connection with the sale, distribution, marketing and retention of Fund shares and/or shareholder servicing. For example, the Adviser or the Distributor may pay additional compensation to Intermediaries for, among other things, promoting the sale and distribution of Fund shares, providing access to various programs, mutual fund platforms or preferred or recommended mutual fund lists that may be offered by an Intermediary, granting the Distributor access to an Intermediary's financial advisors and consultants, providing assistance in the ongoing education and training of an Intermediary's financial personnel, furnishing marketing support, maintaining share balances and/or for sub-accounting, recordkeeping, administrative, shareholder or transaction processing services. Such payments are in addition to any distribution fees, shareholder service fees and/or transfer agency fees that may be payable by the Fund. The additional payments may be based on various factors, including level of sales (based on gross or net sales or some specified minimum sales or some other similar criteria related to sales of the Fund and/or some or all other Morgan Stanley Funds), amount of assets invested by the Intermediary's customers (which could include current or aged assets of the Fund and/or some or all other Morgan Stanley Funds), a Fund's advisory fees, some other agreed upon amount, or other measures as determined from time to time by the Adviser and/or Distributor. The amount of these payments may be different for different Intermediaries.

With respect to Morgan Stanley Smith Barney LLC, these payments currently include the following amounts which are paid in accordance with the applicable compensation structure:

(2) on Class A, Class B and Class L shares of the Fund held in Morgan Stanley Smith Barney LLC brokerage accounts, an ongoing annual fee, payable quarterly, in an amount up to 0.16% of the total average daily net asset value of such shares for the applicable quarterly period;

(3) on Class I shares of the Fund held in Morgan Stanley Smith Barney LLC brokerage accounts, an ongoing annual fee, payable quarterly, in an amount up to 35% of the advisory fee the Adviser receives based on the total average daily net asset value of such shares for the applicable quarterly period;

(4) on Class A and Class I shares of the Fund held in taxable accounts through any fee-based advisory program offered by Morgan Stanley Smith Barney LLC, an ongoing annual fee, payable quarterly, in an amount up to 0.12% of the total average daily net asset value of such shares for the applicable quarterly period;

(5) on any shares of the Fund held in an account through certain 401(k) platforms in Morgan Stanley Smith Barney LLC's Corporate Retirement Solutions, an ongoing annual fee, payable quarterly, in an amount up to 0.20% of the total average daily net asset value of such shares for the applicable quarterly period; and

(6) on purchases of $1 million or more of Class A shares (for which no initial sales charge was paid), Morgan Stanley Smith Barney LLC may, at the discretion of the Distributor, receive a gross sales credit of up to 1.00% of the amount sold.*

With respect to other Intermediaries, these payments currently include the following amounts, which are paid in accordance with the applicable compensation structure for each Intermediary:

(1) on Class A, Class B, Class I and Class L shares of the Fund held in Intermediary brokerage and/or advisory program accounts, an ongoing annual fee, payable quarterly, in an amount up to 0.15% of the total average daily net asset value of such shares for the applicable quarterly period;

(2) an ongoing annual fee, payable quarterly, in an amount up to 0.08% on sales of Class A, Class I and Class L shares of the Fund through a Financial Intermediary's brokerage accounts; and

(3) on purchases of $1 million or more of Class A shares (for which no sales initial charge was paid), Intermediaries may, at the discretion of the Distributor, receive a gross sales credit of up to 1.00% of the amount sold.*

The prospect of receiving, or the receipt of, additional compensation, as described above, by Morgan Stanley Smith Barney LLC or other Financial Intermediaries may provide such Financial Intermediaries, and/or their financial advisors or other sales persons, with an incentive to favor sales of shares of the Fund over other investment options with respect to which a Financial Intermediary does not receive additional compensation (or receives lower levels of additional compensation). These payment arrangements, however, will not change the price that an investor pays for shares of the Fund or the amount that the Fund receives to invest on behalf of an investor. Investors may wish to take such payment arrangements into account when considering and evaluating any recommendations relating to Fund shares and should review carefully any disclosure provided by Morgan Stanley Smith Barney LLC or other Financial Intermediaries as to their compensation.

* Commissions or transaction fees paid when Morgan Stanley Smith Barney LLC or other Intermediaries initiate and are responsible for purchases of $1 million or more are computed on a percentage of the dollar value of such shares sold as follows: 1.00% on sales of $1 million to $4 million, 0.50% on sales over $4 million to $15 million, and 0.25% on the excess over $15 million.

PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.

STATEMENT OF ADDITIONAL INFORMATION

April 30, 2014

Morgan Stanley

Global Infrastructure Fund

Share Class				Ticker Symbol
Class A				UTLAX
Class B				UTLBX
Class L				UTLCX
Class I				UTLDX

This Statement of Additional Information ("SAI") is not a prospectus. The Prospectus (dated April 30, 2014) for Classes A, B, L and I shares of Morgan Stanley Global Infrastructure Fund may be obtained without charge from the Fund at its address or telephone number listed below. This SAI applies to Classes A, B, L and I shares of the Fund.

The Fund's audited financial statements for the fiscal year ended December 31, 2013, including notes thereto, and the report of the Fund's independent registered public accounting firm, are herein incorporated by reference to the Fund's Annual Report to Shareholders. A copy of the Fund's Annual Report to Shareholders must accompany the delivery of this SAI.

Morgan Stanley
Global Infrastructure Fund
522 Fifth Avenue
New York, NY 10036
(800) 548-7786

TABLE OF CONTENTS

I.	Fund History		4
II.	Description of the Fund and Its Investments and Risks		4
	A. Classification		4
	B. Investment Strategies and Risks		4
	C. Fund Policies/Investment Restrictions		22
	D. Disclosure of Portfolio Holdings		24
III.	Management of the Fund		26
	A. Board of Trustees		26
	B. Management Information		27
	C. Compensation		36
IV.	Control Persons and Principal Holders of Securities		38
V.	Investment Advisory and Other Services		38
	A. Adviser, Sub-Advisers and Administrator		38
	B. Principal Underwriter		39
	C. Services Provided by the Adviser, Sub-Advisers and Administrator		39
	D. Dealer Reallowances		40
	E. Rule 12b-1 Plan		40
	F. Other Service Providers		43
	G. Fund Management		44
	H. Codes of Ethics		45
	I. Proxy Voting Policy and Proxy Voting Record		45
	J. Revenue Sharing		45
VI.	Brokerage Allocation and Other Practices		47
	A. Brokerage Transactions		47
	B. Commissions		47
	C. Brokerage Selection		47
	D. Regular Broker-Dealers		49
VII.	Capital Stock and Other Securities		49
VIII.	Purchase, Redemption and Pricing of Shares		50
	A. Purchase/Redemption of Shares		50
	B. Offering Price		51
IX.	Taxation of the Fund and Shareholders		52
X.	Underwriters		55
XI.	Performance Data		55
XII.	Financial Statements		56
XIII.	Fund Counsel		56
Appendix A.	Morgan Stanley Investment Management Proxy Voting Policy and Procedures	A-1

Glossary of Selected Defined Terms

The terms defined in this glossary are frequently used in this SAI (other terms used occasionally are defined in the text of the document).

"Administrator" — Morgan Stanley Investment Management Inc., a wholly-owned fund services subsidiary of Morgan Stanley.

"Adviser" — Morgan Stanley Investment Management Inc., a wholly-owned investment adviser subsidiary of Morgan Stanley.

"Custodian" — State Street Bank and Trust Company.

"Distributor" — Morgan Stanley Distribution, Inc., a wholly-owned broker-dealer subsidiary of Morgan Stanley.

"Financial Intermediaries" — Morgan Stanley authorized financial services representatives or other authorized third-parties, such as brokers, dealers or other financial intermediaries that have entered into a selling agreement with the Distributor.

"Fund" — Morgan Stanley Global Infrastructure Fund, a registered open-end investment company.

"Independent Trustees" — Trustees who are not "interested persons" (as defined in the Investment Company Act of 1940, as amended ("Investment Company Act")) of the Fund.

"Morgan Stanley & Co. LLC" — Morgan Stanley & Co. LLC, a wholly-owned broker-dealer subsidiary of Morgan Stanley.

"Morgan Stanley Funds" — Registered investment companies for which the Adviser serves as the investment adviser and that hold themselves out to investors as related companies for investment and investor services.

"Sub-Advisers" — Morgan Stanley Investment Management Limited and Morgan Stanley Investment Management Company, each a wholly-owned subsidiary of Morgan Stanley.

"Transfer Agent" — Boston Financial Data Services, Inc.

"Trustees" — The Board of Trustees of the Fund.

I. FUND HISTORY

II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS

A. Classification

The Fund is an open-end, diversified management investment company whose investment objective is to seek both capital appreciation and current income.

B. Investment Strategies and Risks

The following discussion of the Fund's investment strategies and risks should be read with the sections of the Fund's Prospectus titled "Principal Investment Strategies," "Principal Risks" and "Additional Information about the Fund's Investment Objective, Strategies and Risks."

Foreign Investment. Investing in foreign securities involves certain special considerations which are not typically associated with investments in the securities of U.S. issuers. Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards and may have policies that are not comparable to those of domestic issuers. As a result, there may be less information available about foreign issuers than about domestic issuers. Securities of some foreign issuers may be less liquid and more volatile than securities of comparable domestic issuers. There is generally less government supervision and regulation of stock exchanges, brokers and listed issuers than in the United States. In addition, with respect to certain foreign countries, there is a possibility of expropriation or confiscatory taxation, political and social instability, or diplomatic development which could affect U.S. investments in those countries. The costs of investing in foreign countries frequently are higher than the costs of investing in the United States. Although the Adviser and Sub-Advisers endeavor to achieve the most favorable execution costs in portfolio transactions, fixed commissions on many foreign stock exchanges are generally higher than negotiated commissions on U.S. exchanges. In addition, investments in certain foreign markets which have historically been considered stable may become more volatile and subject to increased risk due to ongoing developments and changing conditions in such markets. Moreover, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions.

Investments in securities of foreign issuers may be denominated in foreign currencies. Accordingly, the value of the Fund's assets, as measured in U.S. dollars, may be affected favorably or unfavorably by changes in currency exchange rates and in exchange control regulations. The Fund may incur costs in connection with conversions between various currencies.

the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. Any of these actions could severely affect security prices, impair the Fund's ability to purchase or sell foreign securities or transfer the Fund's assets back into the U.S., or otherwise adversely affect the Fund's operations. Certain foreign investments may become less liquid in response to market developments or adverse investor perceptions, or become illiquid after purchase by the Fund, particularly during periods of market turmoil. Certain foreign investments may become illiquid when, for instance, there are few, if any, interested buyers and sellers or when dealers are unwilling to make a market for certain securities. When the Fund holds illiquid investments, its portfolio may be harder to value.

Certain foreign governments may levy withholding or other taxes on dividend and interest income. Although in some countries a portion of these taxes may be recoverable, the non-recovered portion of foreign withholding taxes will reduce the income received from investments in such countries. The Fund may be able to pass through to its shareholders a credit for U.S. tax purposes with respect to any such foreign taxes.

Emerging Market Securities. An emerging market security is one issued by a foreign government or private issuer that has one or more of the following characteristics: (i) its principal securities trading market is in an emerging market or developing country, (ii) alone or on a consolidated basis it derives 50% or more of its annual revenue from goods produced, sales made or services performed in emerging markets or (iii) it is organized under the laws of, or has a principal office in, an emerging market or developing country. Based on these criteria it is possible for a security to be considered issued by an issuer in more than one country. Therefore, it is possible for the securities of any issuer that has one or more of these characteristics in connection with any emerging market or developing country not to be considered an emerging market security if it has one or more of these characteristics in connection with a developed country.

The economies of individual emerging market or developing countries may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation or deflation, currency depreciation, capital reinvestment, resource self-sufficiency and balance of payments position. Further, the economies of developing countries generally are heavily dependent upon international trade and, accordingly, have been, and may continue to be, adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures. These economies also have been, and may continue to be, adversely effected by economic conditions in the countries with which they trade.

Prior governmental approval for foreign investments may be required under certain circumstances in some emerging market or developing countries, and the extent of foreign investment in certain fixed-income securities and domestic companies may be subject to limitation in other emerging market or developing countries. Foreign ownership limitations also may be imposed by the charters of individual companies in emerging market or developing countries to prevent, among other concerns, violation of foreign investment limitations. Repatriation of investment income, capital and the proceeds of sales by foreign investors may require governmental registration and/or approval in some emerging market or developing countries. The Fund could be adversely affected by delays in, or a refusal to grant, any required governmental registration or approval for such repatriation. Any investment subject to such repatriation controls will be considered illiquid if it appears reasonably likely that this process will take more than seven days.

or reschedule their obligations and in entities that have little or no proven credit rating or credit history. In any such case, the issuer's poor or deteriorating financial condition may increase the likelihood that the Fund will experience losses or diminution in available gains due to bankruptcy, insolvency or fraud. Emerging market or developing countries also pose the risk of nationalization, expropriation or confiscatory taxation, political changes, government regulation, social instability or diplomatic development (including war) that could affect adversely the economies of such countries or the value of a fund's investments in those countries. In addition, it may be difficult to obtain and enforce a judgment in a court outside the United States.

The Fund may also be exposed to an extra degree of custodial and/or market risk, especially where the securities purchased are not traded on an official exchange or where ownership records regarding the securities are maintained by an unregulated entity (or even the issuer itself).

Depositary Receipts. Depositary Receipts represent an ownership interest in securities of foreign companies (an "underlying issuer") that are deposited with a depositary. Depositary Receipts are not necessarily denominated in the same currency as the underlying securities. Depositary Receipts include American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and other types of Depositary Receipts (which, together with ADRs and GDRs, are hereinafter collectively referred to as "Depositary Receipts"). ADRs are dollar-denominated Depositary Receipts typically issued by a U.S. financial institution which evidence an ownership interest in a security or pool of securities issued by a foreign issuer. ADRs are listed and traded in the United States. ADRs also include American depositary shares. GDRs and other types of Depositary Receipts are typically issued by foreign banks or trust companies, although they also may be issued by U.S. financial institutions, and evidence ownership interests in a security or pool of securities issued by either a foreign or a U.S. corporation. Generally, Depositary Receipts in registered form are designed for use in the U.S. securities market and Depositary Receipts in bearer form are designed for use in securities markets outside the United States.

Depositary Receipts may be "sponsored" or "unsponsored." Sponsored Depositary Receipts are established jointly by a depositary and the underlying issuer, whereas unsponsored Depositary Receipts may be established by a depositary without participation by the underlying issuer. Holders of unsponsored Depositary Receipts generally bear all the costs associated with establishing unsponsored Depositary Receipts. In addition, the issuers of the securities underlying unsponsored Depositary Receipts are not obligated to disclose material information in the United States and, therefore, there may be less information available regarding such issuers and there may not be a correlation between such information and the market value of the Depositary Receipts. For purposes of the Fund's investment policies, the Fund's investments in Depositary Receipts will be deemed to be an investment in the underlying securities, except that ADRs may be deemed to be issued by a U.S. issuer.

Money Market Securities. The Fund may invest in various money market securities for cash management purposes or when assuming a temporary defensive position, which among others may include commercial paper, bankers' acceptances, bank obligations, corporate debt securities, certificates of deposit, U.S. government securities, obligations of savings institutions and repurchase agreements. Such securities are limited to:

U.S. Government Securities. Obligations issued or guaranteed as to principal and interest by the United States or its agencies (such as the Export-Import Bank of the United States, Federal Housing Administration and Government National Mortgage Association) or its instrumentalities (such as the Federal Home Loan Banks), including Treasury bills, notes and bonds;

Bank Obligations. Obligations (including certificates of deposit, time deposits and bankers' acceptances) of banks subject to regulation by the U.S. Government and having total assets of $1 billion or more, and instruments secured by such obligations, not including obligations of foreign branches of domestic banks except to the extent below;

Eurodollar Certificates of Deposit. Eurodollar certificates of deposit issued by foreign branches of domestic banks having total assets of $1 billion or more;

Obligations of Savings Institutions. Certificates of deposit of savings banks and savings and loan associations, having total assets of $1 billion or more;

Fully Insured Certificates of Deposit. Certificates of deposit of banks and savings institutions, having total assets of less than $1 billion if the principal amount of the obligation is federally insured by the Bank Insurance Fund or the Savings Association Insurance Fund (each of which is administered by

the FDIC), limited to $250,000 principal amount per certificate and to 15% or less of the Fund's total assets in all such obligations and in all illiquid assets, in the aggregate;

Commercial Paper. Commercial paper rated within the two highest grades by Standard & Poor's Rating Group, a division of The McGraw-Hill Companies, Inc. ("S&P"), or by Moody's Investors Service, Inc. ("Moody's") or, if not rated, issued by a company having an outstanding debt issue rated at least AA by S&P or Aa by Moody's; and

Repurchase Agreements. The Fund may invest in repurchase agreements. When cash may be available for only a few days, it may be invested by the Fund in repurchase agreements until such times as it may otherwise be invested or used for payments of obligations of the Fund. These agreements typically involve the acquisition by the Fund of debt securities from a selling financial institution such as a bank, savings and loan association or broker-dealer. The agreement provides that the Fund will sell back to the institution, and that the institution will repurchase, the underlying securities serving as collateral at a specified price and at a fixed time in the future, usually not more than seven days from the date of purchase. The collateral will be marked-to-market daily to determine that the value of the collateral, as specified in the agreement, does not decrease below the purchase price plus accrued interest. If such decrease occurs, additional collateral will be requested and, when received, added to the account to maintain full collateralization. The Fund will accrue interest from the institution until the time when the repurchase is to occur. Although this date is deemed by the Fund to be the maturity date of a repurchase agreement, the maturities of securities subject to repurchase agreements are not subject to any limits.

While repurchase agreements involve certain risks not associated with direct investments in debt securities, the Fund follows procedures approved by the Trustees that are designed to minimize such risks. These procedures include effecting repurchase transactions only with large, well-capitalized and well-established financial institutions whose financial condition will be continually monitored by the Adviser and/or Sub-Advisers. In addition, as described above, the value of the collateral underlying the repurchase agreement will be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, the Fund will seek to liquidate such collateral. However, the exercising of the Fund's right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, the Fund could suffer a loss.

Zero Coupon Treasury Securities. A portion of the U.S. government securities purchased by the Fund may be "zero coupon" Treasury securities. These are U.S. Treasury notes and bonds which have been stripped of their unmatured interest coupons and receipts or which are certificates representing interests in such stripped debt obligations and coupons. Such securities are purchased at a discount from their face amount, giving the purchaser the right to receive their full value at maturity.

A zero coupon security pays no interest to its holder during its life. Therefore, to the extent the Fund invests in zero coupon securities, it will not receive current cash available for distribution to shareholders. In addition, zero coupon securities are subject to substantially greater market price fluctuations during periods of changing prevailing interest rates than are comparable debt securities which make current distributions of interest. Current federal tax law requires that a holder (such as the Fund) of a zero coupon security accrue a portion of the discount at which the security was purchased as income each year even though the Fund receives no interest payments in cash on the security during the year.

Borrowing. The Fund has an operating policy, which may be changed by the Fund's Board of Trustees, not to borrow except from a bank for temporary or emergency purposes in amounts not exceeding 5% (taken at the lower of cost or current value) of its total assets (not including the amount borrowed). Should the Board of Trustees remove this operating policy, the Fund would be permitted to borrow money from banks in accordance with the Investment Company Act or the rules and regulations promulgated by the SEC thereunder. Currently, the Investment Company Act permits a fund to borrow money from banks in an amount up to 33¹/₃% of its total assets (including the amount borrowed) less its liabilities (not including any borrowings but including the fair market value at the time of computation of any other senior securities then outstanding). The Fund may also borrow an additional 5% of its total assets without regard to the foregoing limitation for temporary purposes such as clearance of portfolio transactions. The Fund will only borrow when the Adviser and/or Sub-Advisers believe that such borrowings will benefit the Fund after taking into account considerations such as interest income and possible gains or losses upon liquidation. The Fund will maintain asset coverage in accordance with the Investment Company Act.

Borrowing by the Fund creates an opportunity for increased net income but, at the same time, creates special risks. For example, leveraging may exaggerate changes in and increase the volatility of the NAV of Fund shares. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund's portfolio securities. The use of leverage also may cause the Fund to liquidate portfolio positions when it may not be advantageous in order to do so to satisfy its obligations or to maintain asset coverage.

In general, the Fund may not issue any class of senior security, except that the Fund may (i) borrow from banks, provided that immediately following any such borrowing there is an asset coverage of at least 300% for all Fund borrowings and in the event such asset coverage falls below 300% the Fund will within three days or such longer period as the SEC may prescribe by rules and regulations, reduce the amount of its borrowings to an extent that the asset coverage of such borrowings shall be at least 300%, and (ii) engage in trading practices which could be deemed to involve the issuance of a senior security, including but not limited to options, futures, forward contracts and reverse repurchase agreements, provided that the Fund earmarks cash or segregates liquid assets in accordance with applicable SEC regulations and interpretations.

Loans of Portfolio Securities. The Fund may lend its portfolio securities to brokers, dealers, banks and other institutional investors. By lending its portfolio securities, the Fund attempts to increase its net investment income through the receipt of interest on the cash collateral with respect to the loan or fees received from the borrower in connection with the loan. Any gain or loss in the market price of the securities loaned that might occur during the term of the loan would be for the account of the Fund. The Fund employs an agent to implement the securities lending program and the agent receives a fee from the Fund for its services. The Fund will not lend more than 25% of the value of its total assets.

The Fund may lend its portfolio securities so long as the terms, structure and the aggregate amount of such loans are not inconsistent with the Investment Company Act or the rules and regulations or interpretations of the SEC thereunder, which currently require that (i) the borrower pledge and maintain with the Fund collateral consisting of liquid, unencumbered assets having a value not less than 100% of the value of the securities loaned; (ii) the borrower add to such collateral whenever the price of the securities loaned rises (i.e., the borrower "mark-to-market" on a daily basis); (iii) the loan be made subject to termination by the Fund at any time; and (iv) the Fund receives a reasonable return on the loan (which may include the Fund investing any cash collateral in interest bearing short-term investments), any distributions on the loaned securities and any increase in their market value. In addition, voting rights may pass with the loaned securities, but the Fund will retain the right to call any security in anticipation of a vote that its Adviser and/or Sub-Advisers deem material to the security on loan.

There may be risks of delay and costs involved in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. These delays and costs could be greater for foreign securities. However, loans will be made only to borrowers deemed by the Adviser or the Sub-Advisers to be creditworthy and when, in the judgment of the Adviser and/or Sub-Advisers, the income which can be earned from such securities loans justifies the attendant risk. All relevant facts and circumstances, including the creditworthiness of the broker, dealer, bank or institution, will be considered in making decisions with respect to the lending of securities, subject to review by the Fund's Board of Trustees. The Fund also bears the risk that the reinvestment of collateral will result in a principal loss. Finally, there is the risk that the price of the securities will increase while they are on loan and the collateral will not be adequate to cover their value.

When-Issued and Delayed Delivery Securities and Forward Commitments. From time to time, the Fund may purchase securities on a when-issued or delayed delivery basis or may purchase or sell securities on a forward commitment basis. When these transactions are negotiated, the price is fixed at the time of the commitment, but delivery and payment may take place a month or more after the date of commitment. While the Fund will only purchase securities on a when-issued, delayed delivery or forward commitment basis with the intention of acquiring the securities, the Fund may sell the securities before the settlement date, if it is deemed advisable. The securities so purchased or sold are subject to market fluctuation and no interest or dividends accrue to the purchaser prior to the settlement date.

day, of such security purchased, or if a sale, the proceeds to be received, in determining its NAV. At the time of delivery of the securities, their value may be more or less than the purchase or sale price. An increase in the percentage of the Fund's assets committed to the purchase of securities on a when-issued, delayed delivery or forward commitment basis may increase the volatility of its NAV. The Fund will also earmark cash or segregate liquid assets or establish a segregated account on the Fund's books in which it will continually maintain cash or cash equivalents or other liquid portfolio securities equal in value to commitments to purchase securities on a when-issued, delayed delivery or forward commitment basis.

When, As and If Issued Securities. The Fund may purchase securities on a "when, as and if issued" basis, under which the issuance of the security depends upon the occurrence of a subsequent event, such as approval of a merger, corporate reorganization or debt restructuring. The commitment for the purchase of any such security will not be recognized in the portfolio of the Fund until the Adviser and/or Sub-Advisers determine that issuance of the security is probable. At that time, the Fund will record the transaction and, in determining its NAV, will reflect the value of the security daily. At that time, the Fund will also earmark cash or segregate liquid assets or establish a segregated account on the Fund's books in which it will maintain cash, cash equivalents or other liquid portfolio securities equal in value to recognized commitments for such securities.

An increase in the percentage of the Fund's assets committed to the purchase of securities on a "when, as and if issued" basis may increase the volatility of its NAV. The Fund may also sell securities on a "when, as and if issued" basis provided that the issuance of the security will result automatically from the exchange or conversion of a security owned by the Fund at the time of sale.

Private Placements and Restricted Securities. The Fund may invest up to 15% of its total assets, determined at the time of investment, in securities which are subject to restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or which are otherwise not readily marketable. (Securities eligible for resale pursuant to Rule 144A under the Securities Act, and determined to be liquid pursuant to the procedures discussed in the following paragraph, are not subject to the foregoing restriction.) These securities are generally referred to as private placements or restricted securities. Such securities may involve a higher degree of business and financial risk that can result in substantial losses. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. To the extent these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by the Fund or less than what may be considered the fair value of such securities. Furthermore, companies whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements which might be applicable if their securities were publicly traded. The illiquidity of the market, as well as the lack of publicly available information regarding these securities, may also adversely affect the ability to arrive at a fair value for certain securities at certain times and could make it difficult for the Fund to sell certain securities. If such securities are required to be registered under the securities laws of one or more jurisdictions before being sold, the Fund may be required to bear the expenses of registration.

Rule 144A permits the Fund to sell restricted securities to qualified institutional buyers without limitation. The Adviser and/or the Sub-Advisers, pursuant to procedures adopted by the Trustees, will make a determination as to the liquidity of each restricted security purchased by the Fund. If a restricted security is determined to be "liquid," the security will not be included within the category "illiquid securities," which may not exceed 15% of the Fund's total assets, determined at the time of investment. However, investing in Rule 144A securities could have the effect of increasing the level of Fund illiquidity to the extent the Fund, at a particular point in time, may be unable to find qualified institutional buyers interested in purchasing such securities.

Convertible Securities. The Fund may invest in securities which are convertible into common stock or other securities of the same or a different issuer or into cash within a particular period of time at a specified price or formula ("convertible securities"). Convertible securities are generally fixed-income securities (but may include preferred stock) and generally rank senior to the common stocks in a corporation's capital structure and, therefore, entail less risk than the corporation's common stock. The value of a convertible security is a function of its "investment value" (its value as if it did not have a conversion privilege), and its "conversion value" (the security's worth if it were to be exchanged for the underlying security, at market value, pursuant to its conversion privilege).

To the extent that a convertible security's investment value is greater than its conversion value, its price will be primarily a reflection of such investment value and its price will be likely to increase when interest rates fall and decrease when interest rates rise, as with a fixed-income security (the credit standing of the issuer and other factors may also have an effect on the convertible security's value). If the conversion value exceeds the investment value, the price of the convertible security will rise above its investment value and, in addition, will sell at some premium over its conversion value. (This premium represents the price investors are willing to pay for the privilege of purchasing a fixed-income security with a possibility of capital appreciation due to the conversion privilege.) At such times the price of the convertible security will tend to fluctuate directly with the price of the underlying equity security. Convertible securities may be purchased by the Fund at varying price levels above their investment values and/or their conversion values in keeping with the Fund's objective.

Up to 5% of the Fund's net assets may be invested in convertible securities that are below investment grade. Debt securities rated below investment grade are commonly known as "junk bonds." Although the Fund selects these securities primarily on the basis of their equity characteristics, investors should be aware that convertible securities rated in these categories are considered high risk securities; the rating agencies consider them speculative with respect to the issuer's continuing ability to make timely payments of interest and principal. Thus, to the extent that such convertible securities are acquired by the Fund, there is a greater risk as to the timely repayment of the principal of, and timely payment of interest or dividends on, such securities than in the case of higher-rated convertible securities.

Real Estate Investment Trusts ("REITs") and Foreign Real Estate Companies. The Fund may invest in REITs and foreign real estate companies, which are similar to entities organized and operated as REITs in the United States. REITs and foreign real estate companies pool investors' funds for investment primarily in real estate properties or real estate-related loans. REITs and foreign real estate companies generally derive their income from rents on the underlying properties or interest on the underlying loans, and their value is impacted by changes in the value of the underlying property or changes in interest rates affecting the underlying loans owned by the REITs and/or foreign real estate companies. REITs and foreign real estate companies are more susceptible to risks associated with the ownership of real estate and the real estate industry in general. These risks can include fluctuations in the value of underlying properties; defaults by borrowers or tenants; market saturation; changes in general and local economic conditions; decreases in market rates for rents; increases in competition, property taxes, capital expenditure or operating expenses; and other economic, political or regulatory occurrences affecting the real estate industry. In addition, REITs and foreign real estate companies depend upon specialized management skills, may not be diversified (which may increase the volatility of a REIT's and/or foreign real estate company's value), may have less trading volume and may be subject to more abrupt or erratic price movements than the overall securities market. Foreign real estate companies may be subject to laws, rules and regulations governing those entities and their failure to comply with those laws, rules and regulations could negatively impact the performance of those entities. Operating REITs and foreign real estate companies requires specialized management skills and the Fund indirectly bears REIT and foreign real estate company management expenses along with the direct expenses of the Fund. REITs are not taxed on income distributed to shareholders provided they comply with several requirements of the Code. REITs are subject to the risk of failing to qualify for tax-free pass-through income under the Code.

Private Investments in Public Equity. The Fund may purchase equity securities in a private placement that are issued by issuers who have outstanding, publicly-traded equity securities of the same class ("private investments in public equity" or "PIPES"). Shares in PIPES generally are not registered with the SEC until after a certain time period from the date the private sale is completed. This restricted period can last many months. Until the public registration process is completed, PIPES are restricted as to resale and the Fund cannot freely trade the securities. Generally, such restrictions cause the PIPES to be illiquid during this time. PIPES may contain provisions that the issuer will pay specified financial penalties to the holder if the issuer does not publicly register the restricted equity securities within a specified period of time, but there is no assurance that the restricted equity securities will be publicly registered, or that the registration will remain in effect.

Limited Partnership and Limited Liability Company Interests. A limited partnership interest entitles the Fund to participate in the investment return of the partnership's assets as defined by the agreement among the partners. As a limited partner, the Fund generally is not permitted to participate in

the management of the partnership. However, unlike a general partner whose liability is not limited, a limited partner's liability generally is limited to the amount of its commitment to the partnership. The Fund may invest in limited liability company interests to the same extent it invests in limited partnership interests. Limited liability company interests have similar characteristics as limited partnership interests.

Investment Company Securities. Investment company securities are securities of other open-end, closed-end and unregistered investment companies, including foreign investment companies and exchange-traded funds. The Fund may invest in investment company securities as may be permitted by (i) the Investment Company Act; (ii) the rules and regulations promulgated by the SEC under the Investment Company Act; or (iii) an exemption or other relief applicable to the Fund from provisions of the Investment Company Act. The Investment Company Act generally prohibits an investment company from acquiring more than 3% of the outstanding voting shares of an investment company and limits such investments to no more than 5% of the Fund's total assets in any one investment company, and no more than 10% in any combination of investment companies. The Fund may invest in investment company securities of investment companies managed by the Adviser, the Sub-Advisers or their affiliates to the extent permitted under the Investment Company Act or as otherwise authorized by the SEC. To the extent the Fund invests a portion of its assets in investment company securities, those assets will be subject to the risks of the purchased investment company's portfolio securities, and a shareholder in the Fund will bear not only his proportionate share of the expenses of the Fund, but also, indirectly the expenses of the purchased investment company.

To the extent permitted by applicable law, the Fund may invest all or some of its short term cash investments in any money market fund advised or managed by the Adviser, the Sub-Advisers or their affiliates. In connection with any such investments, the Fund, to the extent permitted by the Investment Company Act, will pay its share of all expenses (other than advisory and administrative fees) of a money market fund in which it invests which may result in the Fund bearing some additional expenses.

Exchange-Traded Funds ("ETFs"). The Fund may invest in various ETFs. Investments in ETFs are subject to a variety of risks, including risks of a direct investment in the underlying securities that the ETF holds. For example, the general level of stock prices may decline, thereby adversely affecting the value of the underlying investments of the ETF and, consequently, the value of the ETF. In addition, the market value of the ETF shares may differ from their NAV because the supply and demand the market for ETF shares at any point is not always identical to the supply and demand in the market for the underlying securities. Also, ETFs that track particular indices typically will be unable to match the performance of the index exactly due to, among other things, the ETF's operating expenses and transaction costs. ETFs typically incur fees that are separate from those fees incurred directly by the Fund. Therefore, as a shareholder in an ETF (as with other investment companies), the Fund would bear its ratable share of that entity's expenses. At the same time, the Fund would continue to pay its own investment management fees and other expenses. As a result, the Fund and its shareholders, in effect, will be absorbing duplicate levels of fees with respect to investments in ETFs.

Warrants and Subscription Rights. The Fund may acquire warrants and subscription rights attached to other securities. A warrant is, in effect, an option to purchase equity securities at a specific price, generally valid for a specific period of time, and has no voting rights, pays no dividends and has no rights with respect to the corporation issuing it.

A subscription right is a privilege granted to existing shareholders of a corporation to subscribe to shares of a new issue of common stock before it is offered to the public. A subscription right normally has a life of two to four weeks and a subscription price lower than the current market value of the common stock.

Unit Offerings. The Fund may also purchase unit offerings (where corporate debt securities are offered as a unit with convertible securities, preferred or common stocks, warrants, or any combination thereof).

Derivatives. The Fund may, but is not required to, use various derivatives and related investment strategies as described below. Derivatives may be used for a variety of purposes including hedging, risk management, portfolio management or to earn income. Any or all of the investment techniques described herein may be used at any time and there is no particular strategy that dictates the use of one technique rather than another, as the use of any derivative by the Fund is a function of numerous variables, including market conditions. The Fund complies with applicable regulatory requirements when using derivatives,

including the earmarking of cash or segregation of liquid assets when mandated by U.S. Securities and Exchange Commission ("SEC") rules or SEC staff positions. Although the Adviser and/or Sub-Advisers seeks to use derivatives to further the Fund's investment objective, no assurance can be given that the use of derivatives will achieve this result.

General Risks of Derivatives.

Derivatives utilized by the Fund may involve the purchase and sale of derivative instruments. A derivative is a financial instrument the value of which depends upon (or derives from) the value of another asset, security, interest rate or index. Derivatives may relate to a wide variety of underlying instruments, including equity and debt securities, indices, interest rates, currencies and other assets. Certain derivative instruments which the Fund may use and the risks of those instruments are described in further detail below. The Fund may in the future also utilize derivatives techniques, instruments and strategies that may be newly developed or permitted as a result of regulatory changes, consistent with the Fund's investment objective and policies. Such newly developed techniques, instruments and strategies may involve risks different than or in addition to those described herein. No assurance can be given that any derivatives strategy employed by the Fund will be successful.

• Derivatives are subject to the risk that the market value of the derivative itself or the market value of underlying instruments will change in a way adverse to the Fund's interests. The Fund bears the risk that the Adviser and/or Sub-Advisers may incorrectly forecast future market trends and other financial or economic factors or the value of the underlying security, index, interest rate or currency when establishing a derivatives position for the Fund.

• Many derivatives are complex and often valued subjectively. Improper valuations can result in increased payment requirements to counterparties or a loss of value to the Fund.

• Using derivatives as a hedge against a portfolio investment subjects the Fund to the risk that the derivative will have imperfect correlation with the portfolio investment, which could result in the Fund incurring substantial losses. This correlation risk may be greater in the case of derivatives based on an index or other basket of securities, as the portfolio securities being hedged may not duplicate the components of the underlying index or the basket may not be of exactly the same type of obligation as those underlying the derivative. The use of derivatives for "cross hedging" purposes (using a derivative based on one instrument as a hedge for a different instrument) may also involve greater correlation risks.

• While using derivatives for hedging purposes can reduce the Fund's risk of loss, it may also limit the Fund's opportunity for gains or result in losses by offsetting or limiting the Fund's ability to participate in favorable price movements in portfolio investments.

• Derivatives transactions for non-hedging purposes involve greater risks and may result in losses which would not be offset by increases in the value of portfolio securities or declines in the cost of securities to be acquired. In the event that the Fund enters into a derivatives transaction as an alternative to purchasing or selling the underlying instrument or in order to obtain desired exposure to an index or market, the Fund will be exposed to the same risks as are incurred in purchasing or selling the underlying instruments directly as well as additional risks associated with derivatives transactions.

• The use of certain derivatives transactions, including over-the-counter ("OTC") derivatives, involves the risk of loss resulting from the insolvency or bankruptcy of the counterparty to the

contract or the failure by the counterparty to make required payments or otherwise comply with the terms of the contract. In the event of default by a counterparty, the Fund may have contractual remedies pursuant to the agreements related to the transaction.

• Liquidity risk exists when a particular derivative is difficult to purchase or sell. If a derivative transaction is particularly large or if the relevant market is illiquid, the Fund may be unable to initiate a transaction or liquidate a position at an advantageous time or price.

• While some derivatives are cleared through a regulated, central clearinghouse, many derivatives transactions are not entered into or traded on exchanges or in markets regulated by the U.S. Commodity Futures Trading Commission ("CFTC") or the SEC. Instead, such bilateral OTC derivatives are entered into directly by the Fund and a counterparty and may be traded only through financial institutions acting as market makers. OTC derivatives transactions can only be entered into with a willing counterparty that is approved by the Adviser and/or Sub-Advisers in accordance with guidelines established by the Board. Where no such counterparty is available, the Fund will be unable to enter into a desired OTC transaction. There also may be greater risk that no liquid secondary market in the trading of OTC derivatives will exist, in which case the Fund may be required to hold such instruments until exercise, expiration or maturity. Many of the protections afforded to participants in the cleared derivatives markets are not available to participants in bilateral OTC derivatives transactions. Bilateral OTC derivatives transactions are not subject to the guarantee of a clearinghouse and, as a result, the Fund would bear greater risk of default by the counterparties to such transactions.

• The Fund may be required to make physical delivery of portfolio securities underlying a derivative in order to close out a derivatives position or to sell portfolio securities at a time or price at which it may be disadvantageous to do so in order to obtain cash to close out or to maintain a derivatives position.

• Certain derivatives may be considered illiquid and therefore subject to the Fund's limitation on investments in illiquid securities.

• Derivatives transactions conducted outside the United States may not be conducted in the same manner as those entered into on U.S. exchanges, and may be subject to different margin, exercise, settlement or expiration procedures. Brokerage commissions, clearing costs and other transaction costs may be higher on foreign exchanges. Many of the risks of OTC derivatives transactions are also applicable to derivatives transactions conducted outside the United States. Derivatives transactions conducted outside the United States are subject to the risk of governmental action affecting the trading in, or the prices of, foreign securities, currencies and other instruments. The value of such positions could be adversely affected by foreign political and economic factors; lesser availability of data on which to make trading decisions; delays on the Fund's ability to act upon economic events occurring in foreign markets; and less liquidity than U.S. markets.

• Currency derivatives are subject to additional risks. Currency derivatives transactions may be negatively affected by government exchange controls, blockages and manipulations. Currency exchange rates may be influenced by factors extrinsic to a country's economy. There is no systematic reporting of last sale information with respect to foreign currencies. As a result, the available information on which trading in currency derivatives will be based may not be as complete as comparable data for other transactions. Events could occur in the foreign currency market which will not be reflected in currency derivatives until the following day, making it more difficult for the Fund to respond to such events in a timely manner.

Options

date for American options or only at expiration for European options (the "expiration date"). The buyer of the option pays to the option writer the option premium, which is the purchase price of the option.

Exchange-traded options are issued by a regulated intermediary such as the Options Clearing Corporation ("OCC"), which guarantees the performance of the obligations of the parties to such options. OTC options are purchased from or sold to counterparties through direct bilateral agreements between the Fund and its counterparties. Certain options, such as options on individual securities, may be settled through physical delivery of the underlying security, whereas other options, such as index options, are settled in cash in an amount based on the difference between the value of the underlying instrument and the strike price, which is then multiplied by a specified multiplier.

Writing Options. The Fund may write call and put options. As the writer of a call option, the Fund receives the premium from the purchaser of the option and has the obligation, upon exercise of the option, to deliver the underlying security upon payment of the exercise price. If the option expires without being exercised the Fund is not required to deliver the underlying security and retains the premium received.

The Fund may only write call options that are "covered." A call option on a security is covered if (a) the Fund owns the security underlying the call or has an absolute and immediate right to acquire that security without additional cash consideration (or, if additional cash consideration is required, such amount is maintained by the Fund in earmarked cash or segregated liquid assets) upon conversion or exchange of other securities held by the Fund; or (b) the Fund has purchased a call on the underlying security, the exercise price of which is (i) equal to or less than the exercise price of the call written, or (ii) greater than the exercise price of the call written, provided the difference is maintained by the Fund in earmarked cash or segregated liquid assets.

Selling call options involves the risk that the Fund may be required to sell the underlying security at a disadvantageous price, below the market price of such security, at the time the option is exercised. As the writer of a covered call option, the Fund forgoes, during the option's life, the opportunity to profit from increases in the market value of the underlying security covering the option above the sum of the premium and the exercise price but retains the risk of loss should the price of the underlying security decline.

The Fund may write put options. As the writer of a put option, the Fund receives the premium from the purchaser of the option and has the obligation, upon exercise of the option, to pay the exercise price and receive delivery of the underlying security. If the option expires without being exercised, the Fund is not required to receive the underlying security in exchange for the exercise price and retains the option premium.

The Fund may only write put options that are "covered." A put option on a security is covered if (a) the Fund earmarks cash or segregates liquid assets equal to the exercise price; or (b) the Fund has purchased a put on the same security as the put written, the exercise price of which is (i) equal to or greater than the exercise price of the put written, or (ii) less than the exercise price of the put written, provided the difference is maintained by the Fund in earmarked cash or segregated liquid assets.

Selling put options involves the risk that the Fund may be required to buy the underlying security at a disadvantageous price, above the market price of such security, at the time the option is exercised. While the Fund's potential gain in writing a covered put option is limited to the premium received plus the interest earned on the liquid assets covering the put option, the Fund's risk of loss is equal to the entire value of the underlying security, offset only by the amount of the premium received.

The Fund may close out an options position which it has written through a closing purchase transaction. The Fund could execute a closing purchase transaction with respect to a written call option by purchasing a call option on the same underlying security which has the same exercise price and expiration date as the call option written by the Fund. The Fund could execute a closing purchase transaction with respect to a put option written by purchasing a put option on the same underlying security and having the same exercise price and expiration date as the put option written by the Fund. A closing purchase transaction may or may not result in a profit to a Fund. The Fund can close out its position as an option writer only if a liquid market exists for options on the same underlying security which have the same exercise date as the option written by the Fund. There is no assurance that such a market will exist with respect to any particular option.

received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the option. Thus, the use of options may require the Fund to buy or sell portfolio securities at inopportune times or for prices other than the current market values of such securities, which may limit the amount of appreciation the Fund can realize on an investment, or may cause the Fund to hold a security that it might otherwise sell.

Purchasing Options. The Fund may purchase call and put options. As the buyer of a call option, the Fund pays the premium to the option writer and has the right to purchase the underlying security from the option writer at the exercise price. If the market price of the underlying security rises above the exercise price, the Fund could exercise the option and acquire the underlying security at a below-market price, which could result in a gain to the Fund, minus the premium paid. As the buyer of a put option, the Fund pays the premium to the option writer and has the right to sell the underlying security to the option writer at the exercise price. If the market price of the underlying security declines below the exercise price, the Fund could exercise the option and sell the underlying security at an above-market price, which could result in a gain to the Fund, minus the premium paid. The Fund may buy call and put options whether or not it holds the underlying securities.

As a buyer of a call or put option, the Fund may sell put or call options that it has purchased at any time prior to such option's expiration date through a closing sale transaction. The principal factors affecting the market value of a put or a call option include supply and demand, interest rates, the current market price of the underlying security in relation to the exercise price of the option, the volatility of the underlying security, the underlying security's dividend policy, and the time remaining until the expiration date. A closing sale transaction may or may not result in a profit to the Fund. The Fund's ability to initiate a closing sale transaction is dependent upon the liquidity of the options market and there is no assurance that such a market will exist with respect to any particular option. If the Fund does not exercise or sell an option prior to its expiration date, the option expires and becomes worthless.

OTC Options. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size and strike price, the terms of OTC options generally are established through negotiation between the parties to the options contract. This type of arrangement allows the purchaser and writer greater flexibility to tailor the option to their needs. OTC options are available for a greater variety of securities or other assets, and in a wider range of expiration dates and exercise prices than exchange-traded options. However, unlike exchange-traded options, which are issued and guaranteed by a regulated intermediary, such as the OCC, OTC options are entered into directly with the counterparty. Unless the counterparties provide for it, there is no central clearing or guaranty function for an OTC option. Therefore, OTC options are subject to the risk of default or non-performance by the counterparty. Accordingly, the Adviser and/or Sub-Advisers must assess the creditworthiness of the counterparty to determine the likelihood that the terms of the option will be satisfied. There can be no assurance that a continuous liquid secondary market will exist for any particular OTC option at any specific time. As a result, the Fund may be unable to enter into closing sale transactions with respect to OTC options.

Index Options. Call and put options on indices operate similarly to options on securities. Rather than the right to buy or sell a single security at a specified price, options on an index give the holder the right to receive, upon exercise of the option, an amount of cash determined by reference to the difference between the value of the underlying index and the strike price. The underlying index may be a broad-based index or a narrower market index. Unlike many options on securities, all settlements are in cash. The settlement amount, which the writer of an index option must pay to the holder of the option upon exercise, is generally equal to the difference between the strike price of the option and the value of the underlying index, multiplied by a specified multiplier. The multiplier determines the size of the investment position the option represents. Gain or loss to the Fund on index options transactions will depend, in part, on price movements of the underlying index generally or in a particular segment of the index rather than price movements of individual components of the index. As with other options, the Fund may close out its position in index options through closing purchase transactions and closing sale transactions provided that a liquid secondary market exists for such options.

Index options written by the Fund will generally be covered in a manner similar to the covering of other types of options, by holding an offsetting financial position and/or earmarking cash or segregating liquid assets. The Fund may cover call options written on an index by owning securities or other assets

whose price changes, in the opinion of the Adviser and/or Sub-Advisers, are expected to correlate to those of the underlying index.

Foreign Currency Options. Options on foreign currencies operate similarly to options on securities. Rather than the right to buy or sell a single security at a specified price, options on foreign currencies give the holder the right to buy or sell foreign currency for a fixed amount in U.S. dollars or other base currencies. Options on foreign currencies are traded primarily in the OTC market, but may also be traded on U.S. and foreign exchanges. The value of a foreign currency option is dependent upon the value of the underlying foreign currency relative to the U.S. dollar or other base currency. The price of the option may vary with changes in, among other things, the value of either or both currencies and has no relationship to the investment merits of a foreign security. Options on foreign currencies are affected by all of those factors which influence foreign exchange rates and foreign investment generally. As with other options, the Fund may close out its position in foreign currency options through closing purchase transactions and closing sale transactions provided that a liquid market exists for such options.

Foreign currency options written by the Fund will generally be covered in a manner similar to the covering of other types of options, by holding an offsetting financial position and/or earmarking cash or segregating liquid assets.

Additional Risks of Options Transactions. The risks associated with options transactions are different from, and possibly greater than, the risks associated with investing directly in the underlying instruments. Options are highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments. The use of options requires an understanding not only of the underlying instrument but also of the option itself. Options may be subject to the risk factors generally applicable to derivatives transactions described herein, and may also be subject to certain additional risk factors, including:

• The exercise of options written or purchased by the Fund could cause the Fund to sell portfolio securities, thus increasing the Fund's portfolio turnover.

• The Fund pays brokerage commissions each time it writes or purchases an option or buys or sells an underlying security in connection with the exercise of an option. Such brokerage commissions could be higher relative to the commissions for direct purchases of sales of the underlying securities.

• The Fund's options transactions may be limited by limitations on options positions established by the SEC, the CFTC or the exchanges on which such options are traded.

• The Fund is subject to the risk of market movements between the time that an option is exercised and the time of performance thereunder, which could increase the extent of any losses suffered by the Fund in connection with options transactions.

Futures Contracts

A futures contract is a standardized, exchange-traded agreement to buy or sell a specific quantity of an underlying asset, reference rate or index at a specific price at a specific future time (the "settlement date"). Futures contracts may be based on, among other things, a specified equity security (securities futures), a specified debt security or reference rate (interest rate futures), the value of a specified securities index (index futures) or the value of a foreign currency (currency futures). The value of a futures contract tends to increase and decrease in tandem with the value of the underlying instrument. The buyer of a futures contract agrees to purchase the underlying instrument on the settlement date and is said to be "long" the contract. The seller of a futures contract agrees to sell the underlying instrument on the settlement

date and is said to be "short" the contract. Futures contracts call for settlement only on the expiration date and cannot be "exercised" at any other time during their term.

Depending on the terms of the particular contract, futures contracts are settled through either physical delivery of the underlying instrument on the settlement date (such as in the case of securities futures based on a specified debt security) or by payment of a cash settlement amount on the settlement date (such as in the case of futures contracts relating to broad-based securities indices). In the case of cash-settled futures contracts, the settlement amount is equal to the difference between the reference instrument's price on the last trading day of the contract and the reference instrument's price at the time the contract was entered into. Most futures contracts, particularly futures contracts requiring physical delivery, are not held until the settlement date, but instead are offset before the settlement date through the establishment of an opposite and equal futures position (buying a contract that had been sold, or selling a contract that had been purchased). All futures transactions are effected through a clearinghouse associated with the exchange on which the futures are traded.

In addition, the Fund may be required to earmark cash or segregate liquid assets or maintain earmarked cash or segregated liquid assets in order to cover futures transactions. The Fund will earmark cash or segregate liquid assets in an amount equal to the difference between the market value of a futures contract entered into by the Fund and the aggregate value of the initial and variation margin payments made by the Fund with respect to such contract or as otherwise permitted by SEC rules or SEC staff positions. See "Regulatory Matters" below.

Forwards. A foreign currency forward exchange contract is a negotiated agreement between two parties to exchange specified amounts of two or more currencies at a specified future time at a specified rate. The rate specified by the foreign currency forward exchange contract can be higher or lower than the spot rate between the currencies that are the subject of the contract. Currency futures are similar to foreign currency forward exchange contracts, except that they are traded on an exchange and standardized as to contract size and delivery date. Most currency futures call for payment or delivery in U.S. dollars. Unanticipated changes in currency prices may result in losses to the Fund and poorer overall performance for the Fund than if it had not entered into foreign currency forward exchange contracts. The Fund may enter into foreign currency forward exchange contracts under various circumstances. The typical use of a foreign currency forward exchange contract is to "lock in" the price of a security in U.S. dollars or some other foreign currency, which the Fund is holding in its portfolio. By entering into a foreign currency forward exchange contract for the purchase or sale, for a fixed amount of dollars or other currency, of the amount of foreign currency involved in the underlying security transactions, the Fund may be able to protect itself against a possible loss resulting from an adverse change in the relationship between the U.S. dollar or other currency which is being used for the security purchase and the foreign currency in which the security is denominated during the period between the date on which the security is purchased or sold and the date on which payment is made or received. The Adviser and/or Sub-Advisers also may from time to time utilize foreign currency forward exchange contracts for other purposes. For example, they may be used to hedge a foreign security held in the portfolio, against a decline in value of the applicable foreign currency. They also may be used to lock in the current exchange rate of the currency in which those securities anticipated to be purchased are denominated. At times, the Fund may enter into "cross-currency" hedging transactions involving currencies other than those in which securities are held or proposed to be purchased are denominated.

The Fund will not enter into foreign currency forward exchange contracts or maintain a net exposure to these contracts where the consummation of the contracts would obligate the Fund to deliver an amount of foreign currency in excess of the value of the Fund's portfolio securities.

When required by law, the Fund will earmark cash or segregate U.S. government securities or other appropriate liquid portfolio securities in an amount equal to the value of the Fund's total assets committed to the consummation of foreign currency forward exchange contracts entered into under the circumstances set forth above. If the value of the securities so earmarked declines, additional cash or securities will be earmarked or segregated on a daily basis so that the value of such securities will equal the amount of the Fund's commitments with respect to such contracts.

The Fund may be limited in its ability to enter into hedging transactions involving foreign currency forward exchange contracts by the Internal Revenue Code of 1986, as amended (the "Code"), requirements relating to qualification as a regulated investment company.

Foreign currency forward exchange contracts may limit gains on portfolio securities that could otherwise be realized had they not been utilized and could result in losses. The contracts also may increase the Fund's volatility and may involve a significant amount of risk relative to the investment of cash.

Options on Futures Contracts. Options on futures contracts are similar to options on securities except that options on futures contracts give the purchasers the right, in return for the premium paid, to assume a position in a futures contract (a long position in the case of a call option and a short position in the case of a put option) at a specified exercise price at any time prior to the expiration of the option. Upon exercise of the option, the parties will be subject to all of the risks associated with futures transactions and subject to margin requirements. As the writer of options on futures contracts, the Fund would also be subject to initial and variation margin requirements on the option position.

Options on futures contracts written by the Fund will generally be covered in a manner similar to the covering of other types of options, by holding an offsetting financial position and/or earmarking cash or segregating liquid assets. The Fund may cover an option on a futures contract by purchasing or selling the underlying futures contract. In such instances the exercise of the option will serve to close out the Fund's futures position.

Additional Risks of Futures Transactions. The risks associated with futures contract transactions are different from, and possibly greater than, the risks associated with investing directly in the underlying instruments. Futures are highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments. The use of futures requires an understanding not only of the underlying instrument but also of the futures contract itself. Futures may be subject to the risk factors generally applicable to derivatives transactions described herein, and may also be subject to certain additional risk factors, including:

• Buying and selling futures contracts may result in losses in excess of the amount invested in the position in the form of initial margin. In the event of adverse price movements in the underlying commodity, security, index, currency or instrument, the Fund would be required to make daily cash payments to maintain its required margin. The Fund may be required to sell portfolio securities, or make or take delivery of the underlying securities in order to meet daily margin requirements at a time when it may be disadvantageous to do so. The Fund could lose margin payments deposited with a futures commission merchant if the futures commission merchant breaches its agreement with the Fund, becomes insolvent or declares bankruptcy.

• Most exchanges limit the amount of fluctuation permitted in futures contract prices during any single trading day. Once the daily limit has been reached in a particular futures contract, no trades may be made on that day at prices beyond that limit. If futures contract prices were to move to the daily limit for several trading days with little or no trading, the Fund could be prevented from prompt liquidation of a futures position and subject to substantial losses. The daily limit governs only price movements during a single trading day and therefore does not limit the Fund's potential losses.

• Index futures based upon a narrow index of securities may present greater risks than futures based on broad market indices, as narrower indices are more susceptible to rapid and extreme fluctuations as a result of changes in value of a small number of securities.

Swap Contracts and Related Derivative Instruments

An OTC swap contract is an agreement between two parties pursuant to which the parties exchange payments at specified dates on the basis of a specified notional amount, with the payments calculated by reference to specified securities, indices, reference rates, currencies or other instruments. Most swap agreements provide that when the period payment dates for both parties are the same, the payments are made on a net basis (i.e., the two payment streams are netted out, with only the net amount paid by one party to the other). The Fund's obligations or rights under a swap contract entered into on a net basis will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each party. Many swap agreements are not entered into or traded on exchanges and there is often no central clearing or guaranty function for swaps. These OTC swaps are often subject to the risk of default or non-performance by the counterparty. Accordingly, the Adviser and/or Sub-Advisers must assess the creditworthiness of the counterparty to determine the likelihood that the terms of the swap will be satisfied.

Swap agreements allow for a wide variety of transactions. For example, fixed rate payments may be exchanged for floating rate payments, U.S. dollar-denominated payments may be exchanged for payments denominated in foreign currencies, and payments tied to the price of one security, index, reference rate, currency or other instrument may be exchanged for payments tied to the price of a different security, index, reference rate, currency or other instrument. Swap contracts are typically individually negotiated and structured to provide exposure to a variety of particular types of investments or market factors. Swap contracts can take many different forms and are known by a variety of names. To the extent consistent with a Fund's investment objectives and policies, the Fund is not limited to any particular form or variety of swap contract. The Fund may utilize swaps to increase or decrease its exposure to the underlying instrument, reference rate, foreign currency, market index or other asset. The Fund may also enter into related derivative instruments including caps, floors and collars.

The Fund may be required to cover swap transactions. Obligations under swap agreements entered into on a net basis are generally accrued daily and any accrued but unpaid amounts owed by the Fund to the swap counterparty will be covered by earmarking cash or segregating liquid assets. If the Fund enters into a swap agreement on other than a net basis, the Fund will earmark cash or segregate liquid assets with a value equal to the full notional amount of the agreement.

The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") and related regulatory developments require the eventual clearing and exchange-trading of many standardized OTC derivative instruments that the CFTC and SEC recently defined as "swaps" and "security based swaps," respectively. Mandatory exchange-trading and clearing is occurring on a phased-in basis based on the type of market participant and CFTC approval of contracts for central clearing and exchange trading. In a cleared swap, the Fund's ultimate counterparty is a central clearinghouse rather than a brokerage firm, bank or other financial institution. The Fund initially will enter into cleared swaps through an executing broker. Such transactions will then be submitted for clearing and, if cleared, will be held at regulated futures commission merchants ("FCMs") that are members of the clearinghouse that serves as the central counterparty. When the Fund enters into a cleared swap, it must deliver to the central counterparty (via an FCM) an amount referred to as "initial margin." Initial margin requirements are determined by the central counterparty, but an FCM may require additional initial margin above the amount required by the central counterparty. During the term of the swap agreement, a "variation margin" amount may also be required to be paid by the Fund or may be received by the Fund in accordance with margin controls set for such accounts, depending upon changes in the price of the underlying reference asset subject to the swap agreement. At the conclusion of the term of the swap agreement, if the Fund has a loss equal to or greater than the margin amount, the margin amount is paid to the FCM along with any loss that is greater than such margin amount. If the Fund has a loss of less than the margin amount, the excess margin is returned to the Fund. If the Fund has a gain, the full margin amount and the amount of the gain is paid to the Fund.

FCM or central counterparty because the Fund might be limited to recovering only a pro rata share of all available funds and margin segregated on behalf of an FCM's or central counterparty's customers or clearing members. If the FCM does not provide accurate reporting, the Fund is also subject to the risk that the FCM could use the Fund's assets, which are held in an omnibus account with assets belonging to the FCM's other customers, to satisfy its own financial obligations or the payment obligations of another customer to the central counterparty. Certain swaps have begun trading on exchanges called swap execution facilities. Exchange-trading is expected to increase liquidity of swaps trading.

In addition, with respect to cleared swaps, the Fund may not be able to obtain as favorable terms as it would be able to negotiate for an uncleared swap. In addition, an FCM may unilaterally impose position limits or additional margin requirements for certain types of swaps in which the Fund may invest. Central counterparties and FCMs generally can require termination of existing cleared swap transactions at any time, and can also require increases in margin above the margin that is required at the initiation of the swap agreement. Margin requirements for cleared swaps vary on a number of factors, and the margin required under the rules of the clearinghouse and FCM may be in excess of the collateral required to be posted by the Fund to support its obligations under a similar uncleared swap. However, regulators are expected to adopt rules imposing certain margin requirements, including minimums, on uncleared swaps in the near future, which could change this comparison.

The Fund is also subject to the risk that, after entering into a cleared swap with an executing broker, no FCM or central counterparty is willing or able to clear the transaction. In such an event, the central counterparty would void the trade. Before the Fund can enter into a new trade, market conditions may become less favorable to the Fund.

The Adviser will continue to monitor developments regarding trading and execution of cleared swaps on exchanges, particularly to the extent regulatory changes affect the Fund's ability to enter into swap agreements and the costs and risks associated with such investments.

Index Swaps. An index swap consists of an agreement between two parties in which a party typically exchanges a cash flow based on a notional amount of a reference index for a cash flow based on a different index or on another specified instrument or reference rate. Index swaps are generally entered into on a net basis.

Inflation Swaps. Inflation swap agreements are contracts in which one party typically agrees to pay the cumulative percentage increase in a price index, such as the Consumer Price Index, over the term of the swap (with some lag on the referenced inflation index), and the other party pays a compounded fixed rate. Inflation swap agreements may be used to protect the net asset value ("NAV") of the Fund against an unexpected change in the rate of inflation measured by an inflation index. The value of inflation swap agreements is expected to change in response to changes in real interest rates. Real interest rates are tied to the relationship between nominal interest rates and the rate of inflation.

Swaptions. An option on a swap agreement, also called a "swaption," is an option that gives the buyer the right, but not the obligation, to enter into a swap on a future date in exchange for a premium. A receiver swaption gives the owner the right to receive the return of a specified asset, reference rate, or index. A payer swaption gives the owner the right to pay the return of a specified asset, reference rate, or index. Swaptions also include options that allow an existing swap to be terminated or extended by one of the counterparties.

General Risks of Swaps. The risks associated with swap transactions are different from, and possibly greater than, the risks associated with investing directly in the underlying instruments. Swaps are highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments. The use of swaps requires an understanding not only of the underlying instrument but also of the swap contract itself. Swap transactions may be subject to the risk factors generally applicable to derivatives transactions described above, and may also be subject to certain additional risk factors, including:

• OTC swap agreements are not traded on exchanges and may be subject to liquidity risks, which exist when a particular swap is difficult to purchase or sell.

• The swaps market is subject to extensive regulation under the Dodd-Frank Act and certain CFTC and SEC rules promulgated thereunder. It is possible that further developments in the swaps market, including new and additional governmental regulation, could result in higher Fund costs and expenses and could adversely affect the Fund's ability to utilize swaps, terminate existing swap agreements or realize amounts to be received under such agreements.

Combined Transactions

Combined transactions involve entering into multiple derivatives transactions (such as multiple options transactions, including purchasing and writing options in combination with each other; multiple futures transactions; and combinations of options, futures, forward and swap transactions) instead of a single derivatives transaction in order to customize the risk and return characteristics of the overall position. Combined transactions typically contain elements of risk that are present in each of the component transactions. The Fund may enter into a combined transaction instead of a single derivatives transaction when, in the opinion of the Adviser and/or Sub-Advisers, it is in the best interest of the Fund to do so. Because combined transactions involve multiple transactions, they may result in higher transaction costs and may be more difficult to close out.

Regulatory Matters

As described herein, the Fund may be required to cover its potential economic exposure to certain derivatives transactions by holding an offsetting financial position and/or earmarking cash or segregating liquid assets equal in value to the Fund's potential economic exposure under the transaction. The Fund will cover such transactions as described herein or in such other manner as may be in accordance with applicable laws and regulations. Assets used to cover derivatives transactions cannot be sold while the derivatives position is open, unless they are replaced by other appropriate assets. Earmarked cash or segregated liquid assets and assets held in margin accounts are not otherwise available to the Fund for investment purposes. If a large portion of the Fund's assets are used to cover derivatives transactions or are otherwise earmarked or segregated, it could affect portfolio management or the Fund's ability to meet redemption requests or other current obligations. With respect to derivatives which are cash-settled (i.e., have no physical delivery requirement), the Fund is permitted to earmark cash or segregate liquid assets in an amount equal to the Fund's daily marked-to-market net obligations (i.e., the Fund's daily net liability) under the derivative, if any, rather than the derivative's full notional amount or the market value of the instrument underlying the derivative, as applicable. By earmarking cash or segregating assets equal to only its net obligations under cash-settled derivatives, the Fund will have the ability to employ leverage to a greater extent than if the Fund were required to earmark cash or segregate assets equal to the full notional amount of the derivative or the market value of the underlying instrument, as applicable.

Regulatory developments affecting the exchange-traded and OTC derivatives markets may impair the Fund's ability to manage or hedge its investment portfolio through the use of derivatives. The Dodd-Frank Act and the rules promulgated thereunder may limit the ability of the Fund to enter into one or more exchange-traded or OTC derivatives transactions.

The Fund's use of derivatives may also be limited by the requirements of the Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a regulated investment company for U.S. federal income tax purposes.

The Fund has filed a notice of eligibility with the National Futures Association ("NFA") claiming an exclusion from the definition of the term "commodity pool operator" ("CPO") pursuant to CFTC Regulation 4.5, as promulgated under the Commodity Exchange Act, as amended ("CEA"), with respect to the Fund's operations. Therefore, neither the Fund nor the Adviser (with respect to the Fund) is subject to registration or regulation as a CPO under the CEA. If the Fund becomes subject to these requirements, as well as related NFA rules, the Fund may incur additional compliance and other expenses.

adviser to claim an exemption from being considered a CPO. First, the aggregate initial margin and premiums required to establish an investment company's positions in such investments may not exceed five percent (5%) of the liquidation value of the investment company's portfolio (after accounting for unrealized profits and unrealized losses on any such investments). Alternatively, the aggregate net notional value of such instruments, determined at the time of the most recent position established, may not exceed one hundred percent (100%) of the liquidation value of the investment company's portfolio (after accounting for unrealized profits and unrealized losses on any such positions). In addition to meeting one of the foregoing trading limitations, the investment company may not market itself as a commodity pool or otherwise as a vehicle for trading in the commodity futures, commodity options or swaps and derivatives markets.

Contracts for Difference ("CFDs"). The Fund may purchase CFDs. A CFD is a privately negotiated contract between two parties, buyer and seller, stipulating that the seller will pay to or receive from the buyer the difference between the nominal value of the underlying instrument at the opening of the contract and that instrument's value at the end of the contract. The underlying instrument may be a single security, stock basket or index. A CFD can be set up to take either a short or long position on the underlying instrument. The buyer and seller are both typically required to post margin, which is adjusted daily. The buyer will also pay to the seller a financing rate on the notional amount of the capital employed by the seller less the margin deposit. A CFD is usually terminated at the buyer's initiative. The seller of the CFD will simply match the exposure of the underlying instrument in the open market and the parties will exchange whatever payment is due.

As is the case with owning any financial instrument, there is the risk of loss associated with buying a CFD. For example, if the Fund buys a long CFD and the underlying security is worth less at the end of the contract, the Fund would be required to make a payment to the seller and would suffer a loss. Also, there may be liquidity risk if the underlying instrument is illiquid because the liquidity of a CFD is based on the liquidity of the underlying instrument. A further risk is that adverse movements in the underlying security will require the buyer to post additional margin. CFDs also carry counterparty risk, i.e., the risk that the counterparty to the CFD transaction may be unable or unwilling to make payments or to otherwise honor its financial obligations under the terms of the contract. If the counterparty were to do so, the value of the contract, and of the Fund's shares, may be reduced.

To the extent that there is an imperfect correlation between the return on the Fund's obligation to its counterparty under the CFDs and the return on related assets in its portfolio, the CFD transaction may increase the Fund's financial risk. The Fund will not enter into a CFD transaction that is inconsistent with its investment objective, policies and strategies.

C. Fund Policies/Investment Restrictions

The investment objective, policies and restrictions listed below have been adopted by the Fund as fundamental policies. Under the Investment Company Act, a fundamental policy may not be changed without the vote of a majority of the outstanding voting securities of the Fund. The Investment Company Act defines a majority as the lesser of (a) 67% or more of the shares present at a meeting of shareholders, if the holders of 50% of the outstanding shares of the Fund are present or represented by proxy; or (b) more than 50% of the outstanding shares of the Fund. For purposes of the following restrictions: (i) all percentage limitations apply immediately after a purchase or initial investment; and (ii) any subsequent change in any applicable percentage resulting from market fluctuations or other changes in total or net assets does not require elimination of any security from the portfolio, except in the case of borrowings.

The Fund will:

1. Seek to provide both capital appreciation and current income.

The Fund will not:

1. Invest in a manner inconsistent with its classification as a "diversified company" as provided by (i) the Investment Company Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the Investment Company Act, as amended from time to time, or (iii) an exemption or other relief applicable to the Fund from the provisions of the Investment Company Act, as amended from time to time.

2. Invest 25% or more of the value of its total assets in securities of issuers in any one industry, except that the Fund will concentrate in the infrastructure industry. The restriction does not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.

3. Purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments; provided that this restriction shall not prohibit the Fund from purchasing or selling options, futures contracts and related options thereon, forward contracts, swaps, caps, floors, collars and any other financial instruments or from investing in securities or other instruments backed by physical commodities or as otherwise permitted by (i) the Investment Company Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the Investment Company Act, as amended from time to time, or (iii) an exemption or other relief applicable to the Fund from the provisions of the Investment Company Act, as amended from time to time.

4. Purchase or sell real estate or interests therein (including limited partnership interests), although the Fund may purchase securities of issuers which engage in real estate operations and securities secured by real estate or interests therein.

5. Make loans of money or property to any person except, (a) to the extent that securities or interests in which the Fund may invest are considered to be loans, (b) through the loan of portfolio securities, (c) by engaging in repurchase agreements or (d) as may otherwise be permitted by (i) the Investment Company Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the Investment Company Act, as amended from time to time, or (iii) an exemption or other relief applicable to the Fund from the provisions of the Investment Company Act, as amended from time to time.

6. Borrow money, except that the Fund may borrow money to the extent permitted by (i) the Investment Company Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the Investment Company Act, as amended from time to time, or (iii) an exemption or other relief applicable to the Fund from the provisions of the Investment Company Act, as amended from time to time.

7. Issue senior securities, except the Fund may issue senior securities to the extent permitted by (i) the Investment Company Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the Investment Company Act, as amended from time to time, or (iii) an exemption or other relief applicable to the Fund from the provisions of the Investment Company Act, as amended from time to time.

8. Engage in the underwriting of securities, except insofar as the Fund may be deemed an underwriter under the Securities Act in disposing of a portfolio security.

In addition, as non-fundamental policies, which can be changed with Board approval and without shareholder vote, the Fund will not:

1. Make short sales of securities, except short sales against the box.

2. Invest more than 15% of its net assets or such other amount as may be permitted by SEC guidelines in illiquid securities, including restricted securities.

3. Invest its assets in the securities of any investment company except as may be permitted by (i) the Investment Company Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the Investment Company Act, as amended from time to time, or (iii) an exemption or other relief applicable to the Fund from the provisions of the Investment Company Act, as amended from time to time.

4. Invest in other investment companies in reliance on Sections 12(d)(1)(F), 12(d)(1)(G) or 12(d)(1)(J) of the Investment Company Act, as amended from time to time.

The Fund has an operating policy, which may be changed by the Fund's Board of Trustees, not to borrow except from a bank for temporary or emergency purposes in amounts not exceeding 5% (taken at the lower of cost or current value) of its total assets (not including the amount borrowed).

Notwithstanding any other investment policy or restriction, the Fund may seek to achieve its investment objective by investing all or substantially all of its assets in another investment company having substantially the same investment objective and policies as the Fund.

conditions or increased governmental intervention in the markets or industries. During such periods, the Fund may not invest according to its principal investment strategies or in the manner in which its name may suggest, and may be subject to different and/or heightened risks. It is possible that such unusual or adverse conditions may continue for extended periods of time.

D. Disclosure of Portfolio Holdings

The Fund's Board of Trustees, the Adviser and the Sub-Advisers have adopted policies and procedures regarding disclosure of portfolio holdings (the "Policy"). Pursuant to the Policy, the Adviser and the Sub-Advisers may disclose information concerning Fund portfolio holdings only if such disclosure is consistent with the antifraud provisions of the federal securities laws and the Fund's, the Adviser's and the Sub-Advisers' fiduciary duties to Fund shareholders. In no instance may the Adviser, Sub-Advisers or the Fund receive compensation or any other consideration in connection with the disclosure of information about the portfolio securities of the Fund. Consideration includes any agreement to maintain assets in the Fund or in other investment companies or accounts managed by the Adviser, the Sub-Advisers or by any affiliated person of the Adviser or the Sub-Advisers. Non-public information concerning portfolio holdings may be divulged to third-parties only when the Fund has a legitimate business purpose for doing so and the recipients of the information are subject to a duty of confidentiality. Under no circumstances shall current or prospective Fund shareholders receive non-public portfolio holdings information, except as described below.

The Fund makes available on its public website the following portfolio holdings information:

• complete portfolio holdings information monthly, at least 15 calendar days after the end of each month; and

• top 10 holdings monthly, at least 15 calendar days after the end of each month.

All other portfolio holdings information that has not been disseminated in a manner making it available to investors generally as described above is non-public information for purposes of the Policy.

The Fund may make selective disclosure of non-public portfolio holdings information pursuant to certain exemptions set forth in the Policy. Third-parties eligible for exemptions under the Policy and therefore eligible to receive such disclosures currently include fund rating agencies, information exchange subscribers, consultants and analysts, portfolio analytics providers and service providers, provided that the third-party expressly agrees to maintain the disclosed information in confidence and not to trade portfolio securities or related derivative securities based on the non-public information. Non-public portfolio holdings information may not be disclosed to a third-party pursuant to an exemption unless and until the third-party recipient has entered into a non-disclosure agreement with the Fund and the arrangement has been reviewed and approved, as set forth in the Policy and discussed below. In addition, persons who owe a duty of trust or confidence to the Fund or the Adviser may receive non-public portfolio holdings information without entering into a non-disclosure agreement. Currently, these persons include (i) the Fund's independent registered public accounting firm (as of the Fund's fiscal year-end and on an as-needed basis), (ii) counsel to the Fund (on an as-needed basis), (iii) counsel to the independent Trustees (on an as-needed basis) and (iv) members of the Board of Trustees (on an as-needed basis). Subject to the terms and conditions of any agreement between the Adviser or the Fund and the third-party recipient, if these conditions for disclosure are satisfied, there shall be no restriction on the frequency with which Fund non-public portfolio holdings information is released, and no lag period shall apply (unless otherwise indicated below).

The Adviser and the Sub-Advisers may provide interest lists to broker-dealers who execute securities transactions for the Fund without entering into a non-disclosure agreement with the broker-dealers, provided that the interest list satisfies all of the following criteria: (1) the interest list must contain only the CUSIP numbers and/or ticker symbols of securities held in all registered management investment companies advised by the Adviser, the Sub-Advisers or any affiliate of the Adviser or the Sub-Advisers (the "MSIM Funds") on an aggregate, rather than a fund-by-fund basis; (2) the interest list must not contain information about the number or value of shares owned by a specified MSIM Fund; (3) the interest list may identify the investment strategy, but not the particular MSIM Funds, to which the list relates; and (4) the interest list may not identify the portfolio manager or team members responsible for managing the MSIM Funds.

The Fund may discuss or otherwise disclose performance attribution analyses (i.e., mention the effects of having a particular security in the portfolio(s)) where such discussion is not contemporaneously made public, provided that the particular holding has been disclosed publicly or the information that includes such holding(s) has been made available to shareholders requesting such information. Additionally, any discussion of the analyses may not be more current than the date the holding was disclosed publicly or the information that includes such holding(s) has been made available to shareholders requesting such information.

The Adviser, Sub-Advisers and/or the Fund currently have entered into ongoing arrangements with the following parties:

Name

Information Disclosed

Frequency^₍₁₎

Lag Time

Service Providers

RiskMetrics Group (proxy voting agent)^(*)

Complete portfolio holdings

Daily basis

⁽²⁾

State Street Bank and Trust Company^(*)

Complete portfolio holdings

As needed

⁽²⁾

Fund Rating Agencies

Lipper^(*)

Top ten and complete portfolio holdings

Monthly basis

Approximately six business days after month end

Consultants and Analysts

Citigroup^(*)

Complete portfolio holdings

Quarterly basis⁽³⁾

At least one day after quarter end

Credit Suisse First Boston^(*)

Top ten and complete portfolio holdings

Monthly and quarterly basis, respectively

Approximately 10-12 days after month/quarter end

Evaluation Associates^(*)

Top ten and complete portfolio holdings

Monthly and quarterly basis, respectively⁽³⁾

Approximately 10-12 days after month/quarter end

Merrill Lynch^(*)

Top ten and complete portfolio holdings

Monthly and quarterly basis, respectively⁽³⁾

Approximately 10-12 days after month/quarter end

Portfolio Analytics Providers

FactSet Research Systems, Inc.^(*)

Complete portfolio holdings

Daily basis

One day

^(*) This entity has agreed to maintain Fund non-public portfolio holdings information in confidence and not to trade portfolio securities based on the non-public portfolio holdings information.

⁽¹⁾ Dissemination of portfolio holdings information to entities listed above may occur less frequently than indicated (or not at all).

⁽²⁾ Information will typically be provided on a real time basis or as soon thereafter as possible.

⁽³⁾ This information will also be provided upon request from time to time.

parties receiving non-public portfolio holdings information pursuant to an exemption; and (ii) any new non-disclosure agreements entered into during the reporting period. Procedures to monitor the use of such non-public portfolio holdings information may include requiring annual certifications that the recipients have utilized such information only pursuant to the terms of the agreement between the recipient and the Adviser and/or the Sub-Advisers and, for those recipients receiving information electronically, acceptance of the information will constitute reaffirmation that the third-party expressly agrees to maintain the disclosed information in confidence and not to trade portfolio securities based on the non-public information.

III. MANAGEMENT OF THE FUND

A. Board of Trustees

General. The Board of Trustees of the Fund oversees the management of the Fund, but does not itself manage the Fund. The Trustees review various services provided by or under the direction of the Adviser to ensure that the Fund's general investment policies and programs are properly carried out. The Trustees also conduct their review to ensure that administrative services are provided to the Fund in a satisfactory manner.

Under state law, the duties of the Trustees are generally characterized as a duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to exercise his or her powers in the interest of the Fund and not the Trustee's own interest or the interest of another person or organization. A Trustee satisfies his or her duty of care by acting in good faith with the care of an ordinarily prudent person and in a manner the Trustee reasonably believes to be in the best interest of the Fund and its shareholders.

Trustees and Officers. The Board of the Fund consists of 10 Trustees. These same individuals also serve as directors or trustees for certain of the funds advised by the Adviser and Morgan Stanley AIP GP LP. Nine Trustees have no affiliation or business connection with the Adviser or any of its affiliated persons and do not own any stock or other securities issued by the Adviser's parent company, Morgan Stanley. These are the "non-interested" or "Independent" Trustees. The other Trustee (the "Interested Trustee") is affiliated with the Adviser.

Board Structure and Oversight Function. The Board's leadership structure features an Independent Trustee serving as Chairperson and the Board Committees described below. The Chairperson participates in the preparation of the agenda for meetings of the Board and the preparation of information to be presented to the Board with respect to matters to be acted upon by the Board. The Chairperson also presides at all meetings of the Board and is involved in discussions regarding matters pertaining to the oversight of the management of the Fund between meetings.

The Board of Trustees operates using a system of committees to facilitate the timely and efficient consideration of all matters of importance to the Trustees, the Fund and Fund shareholders, and to facilitate compliance with legal and regulatory requirements and oversight of the Fund's activities and associated risks. The Board of Trustees has established four standing committees: (1) Audit Committee, (2) Governance Committee, (3) Compliance and Insurance Committee, (4) Investment Committee and (5) Closed-End Fund Committee. The Audit Committee, the Governance Committee and the Closed-End Fund Committee are comprised exclusively of Independent Trustees. Each committee charter governs the scope of the committee's responsibilities with respect to the oversight of the Fund. The responsibilities of each committee, including their oversight responsibilities, are described further under the caption "Independent Trustees and the Committees."

each asset class. The Board's committee structure allows separate committees to focus on different aspects of risk and the potential impact of these risks on some or all of the funds in the complex and then report back to the full Board. In between regular meetings, Fund officers also communicate with the Trustees regarding material exceptions and items relevant to the Board's risk oversight function. The Board recognizes that it is not possible to identify all of the risks that may affect the Fund, and that it is not possible to develop processes and controls to eliminate all of the risks that may affect the Fund. Moreover, the Board recognizes that it may be necessary for the Fund to bear certain risks (such as investment risks) to achieve its investment objective.

B. Management Information

Trustees. The Fund seeks as Trustees individuals of distinction and experience in business and finance, government service or academia. In determining that a particular Trustee was and continues to be qualified to serve as Trustee, the Board has considered a variety of criteria, none of which, in isolation, was controlling. Based on a review of the experience, qualifications, attributes or skills of each Trustee, including those enumerated in the table below, the Board has determined that each of the Trustees is qualified to serve as a Trustee of the Fund. In addition, the Board believes that, collectively, the Trustees have balanced and diverse experience, qualifications, attributes and skills that allow the Board to operate effectively in governing the Fund and protecting the interests of shareholders. Information about the Fund's Governance Committee and Board of Trustees nomination process is provided below under the caption "Independent Trustees and the Committees."

The Trustees of the Fund, their ages, addresses, positions held, length of time served, their principal business occupations during the past five years, the number of portfolios in the Fund Complex (defined below) overseen by each Trustee (as of December 31, 2013) and other directorships, if any, held by the Trustees, are shown below. The Fund Complex includes all open-end and closed-end funds (including all of their portfolios) advised by the Adviser and any registered funds that have an investment adviser that is an affiliate of the Adviser (including, but not limited to, Morgan Stanley AIP GP LP) (the "Morgan Stanley AIP Funds") (collectively, the "Morgan Stanley Funds").

Independent Trustees:

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Length of
Time
Served*

Principal Occupation(s) During
Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Independent
Trustee

Other Directorships Held
by Independent Trustee**

Frank L. Bowman (69)
c/o Kramer Levin
Naftalis & Frankel LLP
Counsel to the
Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since August 2006

President, Strategic Decisions, LLC (consulting) (since February 2009); Director or Trustee of various Morgan Stanley Funds (since August 2006); Chairperson of the Insurance Sub-Committee of the Compliance and Insurance Committee (since February 2007); served as President and Chief Executive Officer of the Nuclear Energy Institute (policy organization) (February 2005-November 2008); retired as Admiral, U.S. Navy after serving over 38 years on active duty including 8 years as Director of the Naval Nuclear Propulsion Program in the Department of the Navy and the U.S. Department of Energy (1996-2004); served as Chief of Naval Personnel (July 1994-September 1996) and on the Joint Staff as Director of Political Military Affairs (June 1992-July 1994); knighted as Honorary Knight Commander of the Most Excellent Order of the British Empire; awarded the Officier de l'Orde National du Mérite by the French Government; elected to the National Academy of Engineering (2009).

Director BP p.l.c.; Director of Naval and Nuclear Technologies LLP; Director of the Armed Services YMCA of the USA and the U.S. Naval Submarine League; Director of the American Shipbuilding Suppliers Association; Member of the National Security Advisory Council of the Center for U.S. Global Engagement and a member of the CNA Military Advisory Board; Chairman of the charity J Street Cup Golf; Trustee of Fairhaven United Methodist Church.

Michael Bozic (73)
c/o Kramer Levin
Naftalis & Frankel LLP
Counsel to the
Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since April 1994

Private investor and a member of the advisory board of American Road Group LLC (retail) (since June 2000); Chairperson of the Compliance and Insurance Committee (since October 2006); Director or Trustee of various Morgan Stanley Funds (since April 1994); formerly, Chairperson of the Insurance Committee (July 2006-September 2006); Vice Chairman of Kmart Corporation (December 1998-October 2000); Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co.

100

Trustee and member of the Hillside College Board of Trustees.

* This is the earliest date the Trustee began serving the Morgan Stanley Funds. Each Trustee serves an indefinite term, until his or her successor is elected.

** This includes any directorships at public companies and registered investment companies held by the Trustee at any time during the past five years.

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Length of
Time
Served*

Principal Occupation(s) During
Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Independent
Trustee

Other Directorships Held
by Independent Trustee**

Kathleen A. Dennis (60)
c/o Kramer Levin
Naftalis & Frankel LLP
Counsel to the
Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since August 2006

Director of various non-profit organizations.

Dr. Manuel H. Johnson (65)
c/o Johnson Smick
International, Inc.
220 I Street, NE
Suite 200
Washington, D.C. 20002

Trustee

Since July 1991

Senior Partner, Johnson Smick International, Inc. (consulting firm); Chairperson of the Investment Committee (since October 2006) and Director or Trustee of various Morgan Stanley Funds (since July 1991); Co-Chairman and a founder of the Group of Seven Council (G7C) (international economic commission); formerly, Chairperson of the Audit Committee (July 1991-September 2006); Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury.

100

Director of NVR, Inc. (home construction).

Joseph J. Kearns (71)
c/o Kearns & Associates LLC
23823 Malibu Road
S-50-440
Malibu, CA 90265

Trustee

Since
August 1994

101

Director of Electro Rent Corporation (equipment leasing). Prior to December 31, 2013, Director of The Ford Family Foundation.

Michael F. Klein (55)
c/o Kramer Levin
Naftalis & Frankel LLP
Counsel to the
Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since
August 2006

Director of certain investment funds managed or sponsored by Aetos Capital, LLC; Director of Sanitized AG and Sanitized Marketing AG (specialty chemicals).

* This is the earliest date the Trustee began serving the Morgan Stanley Funds. Each Trustee serves an indefinite term, until his or her successor is elected.

** This includes any directorships at public companies and registered investment companies held by the Trustee at any time during the past five years.

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Length of
Time
Served*

Principal Occupation(s) During
Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Independent
Trustee

Other Directorships Held
by Independent Trustee**

Michael E. Nugent (77)
522 Fifth Avenue
New York, NY 10036

Chairperson of the Board and Trustee

Chairperson of the Boards since July 2006 and Trustee since July 1991

100

None.

W. Allen Reed (67)
c/o Kramer Levin
Naftalis & Frankel LLP
Counsel to the
Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since
August 2006

Director of Temple-Inland Industries (packaging and forest products), Director of Legg Mason, Inc. and Director of the Auburn University Foundation.

Fergus Reid (81)
c/o Joe Pietryka, Inc.
85 Charles Colman Blvd.
Pawling, NY 12564

Trustee

Since
June 1992

Chairman, Joe Pietryka, Inc.; Chairperson of the Governance Committee and Director or Trustee of various Morgan Stanley Funds (since June 1992).

101

Through December 31, 2012, Trustee and Director of certain investment companies in the JP Morgan Fund complex managed by JP Morgan Investment Management Inc.

Interested Trustee:

Name, Age and Address of
Interested Trustee

Position(s)
Held with
Registrant

Length of
Time
Served*

Principal Occupation(s) During
Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Interested
Trustee

Other Directorships Held
by Interested Trustee**

James F. Higgins (66)
One New York Plaza
New York, NY 10004

Trustee

Since June
2000

Director or Trustee of various Morgan Stanley Funds (since June 2000); Senior Advisor of Morgan Stanley (since August 2000).

* This is the earliest date the Trustee began serving the Morgan Stanley Funds. Each Trustee serves an indefinite term, until his or her successor is elected.

** This includes any directorships at public companies and registered investment companies held by the Trustee at any time during the past five years.

The executive officers of the Fund, their ages, addresses, positions held, length of time served and their principal business occupations during the past five years are shown below.

Executive Officers:

Name, Age and Address of
Executive Officer

Position(s)
Held with
Registrant

Length of
Time
Served*

Principal Occupation(s) During
Past 5 Years

John H. Gernon (50)
522 Fifth Avenue
New York, NY 10036

President and Principal Executive Officer

Since September 2013

Stefanie V. Chang Yu (47)
522 Fifth Avenue
New York, NY 10036

Chief Compliance Officer

Since
January 2014

Joseph C. Benedetti (48)
522 Fifth Avenue
New York, NY 10036

Vice President

Since
January 2014

Managing Director of the Adviser and various entities affiliated with the Adviser; Vice President of various Morgan Stanley Funds (since January 2014). Formerly, Assistant Secretary of various Morgan Stanley Funds (October 2004-January 2014).

Francis J. Smith (48)
522 Fifth Avenue
New York, NY 10036

Treasurer and Principal Financial Officer

Treasurer since July 2003 and Principal Financial Officer since September 2002

Executive Director of the Adviser and various entities affiliated with the Adviser; Treasurer (since July 2003) and Principal Financial Officer of various Morgan Stanley Funds (since September 2002).

Mary E. Mullin (47)
522 Fifth Avenue
New York, NY 10036

Secretary

Since
June 1999

Executive Director of the Adviser and various entities affiliated with the Adviser; Secretary of various Morgan Stanley Funds (since June 1999).

* This is the earliest date the officer began serving the Morgan Stanley Funds. Each officer serves an indefinite term, until his or her successor is elected.

In addition, the following individuals who are officers of the Adviser or its affiliates serve as assistant secretaries of the Fund: Joanne Antico, Daniel E. Burton and Edward J. Meehan.

For each Trustee, the dollar range of equity securities beneficially owned by the Trustee in the Fund and in the Family of Investment Companies (Family of Investment Companies includes all of the registered investment companies advised by the Adviser and Morgan Stanley AIP GP LP) for the calendar year ended December 31, 2013, is set forth in the table below.

Name of Trustee	Dollar Range of Equity Securities in the Fund (As of December 31, 2013)		Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Trustee in Family of Investment Companies (As of December 31, 2013)
Independent:
Frank L. Bowman⁽¹⁾		None	over $100,000
Michael Bozic		None	over $100,000
Kathleen A. Dennis		None	over $100,000
Manuel H. Johnson		None	over $100,000
Joseph J. Kearns⁽¹⁾		None	over $100,000
Michael F. Klein		None	over $100,000
Michael E. Nugent	over $100,000		over $100,000
W. Allen Reed⁽¹⁾		None	over $100,000
Fergus Reid⁽¹⁾		None	over $100,000

Name of Trustee	Dollar Range of Equity Securities in the Fund (As of December 31, 2013)		Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Trustee in Family of Investment Companies (As of December 31, 2013)
Interested:
James F. Higgins		None	$	1 - $10,000

⁽¹⁾ Includes the total amount of compensation deferred by the Trustee at his election pursuant to a deferred compensation plan. Such deferred compensation is placed in a deferral account and deemed to be invested in one or more of the Morgan Stanley Funds (or portfolio thereof) that are offered as investment options under the plan.

As to each Independent Trustee and his or her immediate family members, no person owned beneficially or of record securities of an investment adviser or principal underwriter of the Fund, or a person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with an investment adviser or principal underwriter of the Fund.

Independent Trustees and the Committees. Law and regulation establish both general guidelines and specific duties for the Independent Trustees. The Board has five committees: (1) Audit Committee, (2) Governance Committee, (3) Compliance and Insurance Committee, (4) Investment Committee and (5) Closed-End Fund Committee.

The Independent Trustees are charged with recommending to the full Board approval of management, advisory and administration contracts, Rule 12b-1 plans and distribution and underwriting agreements; continually reviewing fund performance; checking on the pricing of portfolio securities, brokerage commissions, transfer agent costs and performance and trading among funds in the same complex; and approving fidelity bond and related insurance coverage and allocations, as well as other matters that arise from time to time. The Independent Trustees are required to select and nominate individuals to fill any Independent Trustee vacancy on the board of any fund that has a Rule 12b-1 plan of distribution. Most of the retail Morgan Stanley Funds have a Rule 12b-1 plan.

The Board of Trustees has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the "1934 Act"). The Audit Committee is charged with recommending to the full Board the engagement or discharge of the Fund's independent registered public accounting firm; directing investigations into matters within the scope of the independent registered public accounting firm's duties, including the power to retain outside specialists; reviewing with the independent registered public accounting firm the audit plan and results of the auditing engagement; approving professional services provided by the independent registered public accounting firm and other accounting firms prior to the performance of the services; reviewing the independence of the independent registered public accounting firm; considering the range of audit and non-audit fees; reviewing the adequacy of the Fund's system of internal controls and reviewing the valuation process. The Fund has adopted a formal, written Audit Committee Charter.

The members of the Audit Committee of the Fund are Joseph J. Kearns, Michael F. Klein, Michael E. Nugent and W. Allen Reed. None of the members of the Fund's Audit Committee is an "interested person," as defined under the Investment Company Act, of the Fund (with such disinterested Trustees being "Independent Trustees" or individually, an "Independent Trustee"). Each Independent Trustee is also "independent" from the Fund under the listing standards of the New York Stock Exchange, Inc. ("NYSE"). The Chairperson of the Audit Committee of the Fund is Joseph J. Kearns.

The Board of Trustees of the Fund also has a Governance Committee. The Governance Committee identifies individuals qualified to serve as Independent Trustees on the Fund's Board and on committees of such Board and recommends such qualified individuals for nomination by the Fund's Independent Trustees as candidates for election as Independent Trustees, advises the Fund's Board with respect to Board composition, procedures and committees, develops and recommends to the Fund's Board a set of corporate governance principles applicable to the Fund, monitors and makes recommendations on corporate governance matters and policies and procedures of the Fund's Board of Trustees and any Board committees and oversees periodic evaluations of the Fund's Board and its committees. The members of the Governance Committee of the Fund are Kathleen A. Dennis and Fergus Reid, each of whom is an Independent Trustee. The Chairperson of the Governance Committee is Fergus Reid.

The Fund does not have a separate nominating committee. While the Fund's Governance Committee recommends qualified candidates for nominations as Independent Trustees, the Board of Trustees of the Fund believes that the task of nominating prospective Independent Trustees is important enough to require the participation of all current Independent Trustees, rather than a separate committee consisting of only certain Independent Trustees. Accordingly, each Independent Trustee (Frank L. Bowman, Michael Bozic, Kathleen A. Dennis, Manuel H. Johnson, Joseph J. Kearns, Michael F. Klein, Michael E. Nugent, W. Allen Reed and Fergus Reid) participates in the election and nomination of candidates for election as Independent Trustees for the Fund. Persons recommended by the Fund's Governance Committee as candidates for nomination as Independent Trustees shall possess such experience, qualifications, attributes, skills and diversity so as to enhance the Board's ability to manage and direct the affairs and business of the Fund, including, when applicable, to enhance the ability of committees of the Board to fulfill their duties and/or to satisfy any independence requirements imposed by law, regulation or any listing requirements of the NYSE. While the Independent Trustees of the Fund expect to be able to continue to identify from their own resources an ample number of qualified candidates for the Fund's Board as they deem appropriate, they will consider nominations from shareholders to the Board. Nominations from shareholders should be in writing and sent to the Independent Trustees as described below under the caption "Shareholder Communications."

The Board formed the Compliance and Insurance Committee to address insurance coverage and oversee the compliance function for the Fund and the Board. The Compliance and Insurance Committee consists of Frank L. Bowman, Michael Bozic, James F. Higgins and Manuel H. Johnson. Frank L. Bowman, Michael Bozic and Manuel H. Johnson are Independent Trustees. The Chairperson of the Compliance and Insurance Committee is Michael Bozic. The Compliance and Insurance Committee has an Insurance Sub-Committee to review and monitor the insurance coverage maintained by the Fund. The Chairperson of the Insurance Sub-Committee is Frank L. Bowman.

(1) Equity — W. Allen Reed (Chairperson), Frank L. Bowman and Michael E. Nugent.

(2) Fixed Income — Michael F. Klein (Chairperson), Michael Bozic and Fergus Reid.

(3) Money Market and Alternatives — Kathleen A. Dennis (Chairperson), James F. Higgins and Joseph J. Kearns.

During the Fund's fiscal year ended December 31, 2013, the Board of Trustees held the following meetings:

Board of Trustees		7
Committee/Sub-Committee:	Number of meetings:
Audit Committee		4
Governance Committee		4
Compliance and Insurance Committee		4
Insurance Sub-Committee		1
Investment Committee		5
Equity Sub-Committee		5
Fixed Income Sub-Committee		5
Money Market and Alternatives Sub-Committee		5
Closed-End Fund Committee		4

Experience, Qualifications and Attributes. The Board has concluded, based on each Trustee's experience, qualifications and attributes that each Board member should serve as a Trustee. Following is a brief summary of the information that led to and/or supports this conclusion.

Mr. Bowman has experience in a variety of business and financial matters through his prior service as a Director or Trustee for various other funds in the Fund Complex, where he serves as Chairperson of the Insurance Sub-Committee of the Compliance and Insurance Committee, and as a Director of BP p.l.c. and Naval and Nuclear Technologies LLP. Mr. Bowman also serves as a Director for the Armed Services YMCA of the USA, the U.S. Naval Submarine League, the American Shipbuilding Suppliers Association and as Chairman of the charity J Street Cup Golf. Mr. Bowman serves as a Trustee of the Fairhaven United Methodist Church. Mr. Bowman is also a member of the National Security Advisory Council of the Center for U.S. Global Engagement and a member of the CNA Military Advisory Board. Mr. Bowman retired as an Admiral in the U.S. Navy after serving over 38 years on active duty including eight years as Director of the Naval Nuclear Propulsion Program in the Department of the Navy and the U.S. Department of Energy (1996-2004). Additionally, Mr. Bowman served as the U.S. Navy's Chief of Naval Personnel (1994-1996) where he was responsible for the planning and programming of all manpower, personnel, training and education resources for the U.S. Navy and on the Joint Staff as Director of Political Military Affairs (1992-1994). In addition, Mr. Bowman served as President and Chief Executive Officer of the Nuclear Energy Institute. Mr. Bowman has received such distinctions as a knighthood as Honorary Knight Commander of the Most Excellent Order of the British Empire and the Officier de l'Orde National du Mérite from the French Government and was elected to the National Academy of Engineering (2009). He is President of the consulting firm Strategic Decisions, LLC.

Federal Reserve System and Assistant Secretary of the U.S. Treasury. In addition, Dr. Johnson also served as Chairman of the Financial Accounting Foundation, which oversees the Financial Accounting Standards Board, for seven years.

Mr. Reed has experience on investment company boards and is experienced with financial, accounting, investment and regulatory matters through his prior service as a Director of iShares, Inc. and his service as Trustee or Director of other funds in the Fund Complex. Mr. Reed also gained substantial experience in the financial services industry through his position as a Director of Legg Mason, Inc. and prior position as President and CEO of General Motors Asset Management.

Mr. Reid has served on a number of mutual fund boards, including as a Trustee or Director of certain investment companies in the JPMorgan Funds complex and as a Trustee or Director of other funds in the Fund Complex. Therefore, Mr. Reid is experienced with financial, accounting, investment and regulatory matters, enabling him to provide management input and investment guidance to the Board.

The Trustees' principal occupations during the past five years or more are shown in the above tables.

Advantages of Having the Same Individuals as Trustees for the Morgan Stanley Funds. The Independent Trustees and the Fund's management believe that having the same Independent Trustees for each of the Morgan Stanley Funds avoids the duplication of effort that would arise from having different groups of individuals serving as Independent Trustees for each of the funds or even of sub-groups of funds. They believe that having the same individuals serve as Independent Trustees of all the Morgan Stanley Funds tends to increase their knowledge and expertise regarding matters which affect the Fund Complex generally and enhances their ability to negotiate on behalf of each fund with the fund's service providers. This arrangement also precludes the possibility of separate groups of Independent Trustees arriving at conflicting decisions regarding operations and management of the funds and avoids the cost and confusion that would likely ensue. Finally, having the same Independent Trustees serve on all fund boards enhances the ability of each fund to obtain, at modest cost to each separate fund, the services of Independent Trustees of the caliber, experience and business acumen of the individuals who serve as Independent Trustees of the Morgan Stanley Funds.

Trustee and Officer Indemnification. The Fund's Declaration of Trust provides that no Trustee, Officer, employee or agent of the Fund is liable to the Fund or to a shareholder, nor is any Trustee, Officer, employee or agent liable to any third persons in connection with the affairs of the Fund, except as such liability may arise from his/her or its own bad faith, willful misfeasance, gross negligence or reckless disregard of his/her or its duties. It also provides that all third persons shall look solely to Fund property for satisfaction of claims arising in connection with the affairs of the Fund. With the exceptions stated, the Declaration of Trust provides that a Trustee, officer, employee or agent is entitled to be indemnified against all liability in connection with the affairs of the Fund.

Shareholder Communications. Shareholders may send communications to the Fund's Board of Trustees. Shareholders should send communications intended for the Fund's Board by addressing the communications directly to the Board (or individual Board members) and/or otherwise clearly indicating in the salutation that the communication is for the Board (or individual Board members) and by sending the communication to either the Fund's office or directly to such Board member(s) at the address specified for each Trustee previously noted. Other shareholder communications received by the Fund not directly addressed and sent to the Board will be reviewed and generally responded to by management, and will be forwarded to the Board only at management's discretion based on the matters contained therein.

C. Compensation

Effective January 1, 2014, each Trustee (except for the Chairperson of the Boards) receives an annual retainer fee of $230,000 ($220,000 prior to January 1, 2014) for serving as a Trustee of the Morgan Stanley Funds.

The Chairperson of the Audit Committee receives an additional annual retainer fee of $78,750 and the Investment Committee Chairperson receives an additional annual retainer fee of $63,000. Other Committee and Sub-Commitee Chairpersons (except for the Chairperson of the Closed-End Fund Committee) receive an additional annual retainer fee of $31,500. The aggregate compensation paid to each Trustee is paid by the Morgan Stanley Funds, and is allocated on a pro rata basis among each of the operational funds/portfolios of the Morgan Stanley Funds based on the relative net assets of each of the funds/portfolios. Michael E. Nugent receives a total annual retainer fee of $460,000 ($440,000 prior to January 1, 2014) for his services as Chairperson of the Boards of the Morgan Stanley Funds and for administrative services provided to each Board.

The Fund also reimburses such Trustees for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. Trustees of the Fund who are employed by the Adviser receive no compensation or expense reimbursement from the Fund for their services as Trustee.

Effective April 1, 2004, the Fund began a Deferred Compensation Plan (the "DC Plan"), which allows each Trustee to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Trustees throughout the year. 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 (or portfolios thereof) that are offered as investment options under the DC Plan. At the Trustee's election, distributions are either in one lump sum payment, or in the form of equal annual installments over a period of five years. The rights of an eligible Trustee and the beneficiaries to the amounts held under the DC Plan are unsecured and such amounts are subject to the claims of the creditors of the Fund.

Prior to April 1, 2004, certain Morgan Stanley Funds maintained a similar Deferred Compensation Plan (the "Prior DC Plan"), which also allowed each Independent Trustee to defer payment of all, or a portion, of the fees he or she received for serving on the Board of Trustees throughout the year. Generally, the DC Plan amends and supersedes the Prior DC Plan and all amounts payable under the Prior DC Plan are now subject to the terms of the DC Plan (except for amounts paid during the calendar year 2004, which remain subject to the terms of the Prior DC Plan).

The following table shows aggregate compensation payable to each of the Fund's Trustees from the Fund for the fiscal year ended December 31, 2013 and the aggregate compensation payable to each of the funds' Trustees by the Fund Complex (which includes all of the Morgan Stanley Funds) for the calendar year ended December 31, 2013.

Compensation^₍₁₎

Name of Independent Trustee:	Aggregate Compensation From the Fund⁽²⁾		Total Compensation From Fund and Fund Complex Paid to Trustee⁽³⁾
Frank L. Bowman	$	743	$	251,500
Michael Bozic		729		251,500
Kathleen A. Dennis		743		251,500
Manuel H. Johnson		821		283,000
Joseph J. Kearns⁽³⁾		866		339,000
Michael F. Klein		743		251,500
Michael E. Nugent		1,276		440,000
W. Allen Reed⁽²⁾⁽³⁾		543		188,625
Fergus Reid⁽³⁾		729		281,750
Name of Interested Trustee:
James F. Higgins		640		220,000

(1) Includes all amounts paid for serving as director/trustee of the funds, as well as serving as Chairperson of the Boards or a Chairperson of a Committee or Sub-Committee.

(2) The amounts shown in this column represent the aggregate compensation before deferral with respect to the Fund's fiscal year. The following Trustee deferred compensation from the Fund during the fiscal year ended December 31, 2013: Mr. Reed, $543.

(3) The amounts shown in this column represent the aggregate compensation paid by all of the funds in the Fund Complex as of December 31, 2013 before deferral by the Trustees under the DC Plan. As of December 31, 2013, the value (including interest) of the deferral accounts across the Fund Complex for Messrs. Kearns, Reed and Reid pursuant to the deferred compensation plan was $616,245, $1,379,775 and $739,593, respectively. Because the funds in the Fund Complex have different fiscal year ends, the amounts shown in this column are presented on a calendar year basis.

Prior to December 31, 2003, 49 of the Morgan Stanley Funds (the "Adopting Funds"), including the Fund, had adopted a retirement program under which an Independent Trustee who retired after serving for at least five years as an Independent Trustee of any such fund (an "Eligible Trustee") would have been entitled to retirement payments, based on factors such as length of service, upon reaching the eligible retirement age. On December 31, 2003, the amount of accrued retirement benefits for each Eligible Trustee was frozen, and will be payable, together with a return of 8% per annum, at or following each such Eligible Trustee's retirement as shown in the table below.

The following table illustrates the retirement benefits accrued to the Fund's Independent Trustees by the Fund for the fiscal year ended December 31, 2013 and by the Adopting Funds for the calendar year ended December 31, 2013, and the estimated retirement benefits for the Independent Trustees from the Fund as of the fiscal year ended December 31, 2013 and from the Adopting Funds for each calendar year following retirement. Only the Trustees listed below participated in the retirement program.

	Retirement Benefits Accrued as Fund Expenses						Estimated Annual Benefits Upon Retirement⁽¹⁾
Name of Independent Trustee:	By the Fund			By all Adopting Funds			From the Fund		From all Adopting Funds
Michael Bozic⁽²⁾	$	(278	)	$	(12,584	)	$	967	$	43,940
Manuel H. Johnson		651			30,205			1,420		64,338
Michael E. Nugent⁽²⁾		(214	)		(9,647	)		1,269		57,539

(2) Messrs. Bozic's and Nugent's retirement expenses are negative due to the fact that their expenses have been overaccrued.

IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

The following owned beneficially or of record 5% or more of the outstanding Class A shares of the Fund as of April 1, 2014: Morgan Stanley & Co. LLC, Harborside Financial Center, 201 Plaza Two, 3rd Fl., Jersey City, NJ 07311 — 76.29%. The following owned beneficially or of record 5% or more of the outstanding Class B shares of the Fund as of April 1, 2014: Morgan Stanley & Co. LLC, Harborside Financial Center, 201 Plaza Two, 3rd Fl., Jersey City, NJ 07311 — 60.40%; First Clearing, LLC, 2801 Market St., Saint Louis, MO 63103 — 15.63%; and Merrill Lynch Pierce Fenner & Smith Inc., 4800 Deer Lake Dr. E., Jacksonville, FL 32246 — 5.27%. The following owned beneficially or of record 5% or more of the outstanding Class L shares of the Fund as of April 1, 2014: Morgan Stanley & Co. LLC, Harborside Financial Center, 201 Plaza Two, 3rd Fl., Jersey City, NJ 07311 — 83.12%. The following owned beneficially or of record 5% or more of the outstanding Class I shares of the Fund as of April 1, 2014: Morgan Stanley & Co. LLC, Harborside Financial Center, 201 Plaza Two, 3rd Fl., Jersey City, NJ 07311 — 43.27%; National Financial Services LLC, 499 Washington Blvd., 5th Fl., Jersey City, NJ 07310 — 23.13%; State Street Bank and Trust Co., 105 Rosemont Ave., Westwood, MA 02090 — 18.25%; First Clearing, LLC, 2801 Market St., Saint Louis, MO 63103 — 12.74%. The percentage ownership of shares of the Fund changes from time to time depending on purchases and redemptions by shareholders and the total number of shares outstanding.

As of the date of this SAI, the aggregate number of shares of beneficial interest of the Fund owned by the Fund's officers and Trustees as a group was less than 1% of the Fund's shares of beneficial interest outstanding.

V. INVESTMENT ADVISORY AND OTHER SERVICES

A. Adviser, Sub-Advisers and Administrator

The Adviser to the Fund is Morgan Stanley Investment Management Inc., a Delaware corporation, whose address is 522 Fifth Avenue, New York, NY 10036. The Adviser is a wholly-owned subsidiary of Morgan Stanley, a Delaware corporation traded on the NYSE under the symbol "MS". Morgan Stanley is a preeminent global financial services firm engaged in securities trading and brokerage activities, as well as providing investment banking, research and analysis, financing and financial advisory services.

The Sub-Advisers are Morgan Stanley Investment Management Limited, located at 25 Cabot Square, Canary Wharf, London, E14 4QA, England and Morgan Stanley Investment Management Company, Located at 23 Church Street, 16-01 Capital Square, Singapore 049481. Each is a wholly-owned subsidiary of Morgan Stanley.

Pursuant to an Investment Advisory Agreement (the "Investment Advisory Agreement") with the Adviser, the Fund had retained the Adviser to manage and/or oversee the investment of the Fund's assets, including the placing of orders for the purchase and sale of portfolio securities. The Fund pays the Adviser monthly compensation calculated daily by applying the following rates to the average daily net assets of the Fund determined as of the close of each business day: 0.57% of the portion of daily net assets not exceeding $500 million; 0.47% of the portion of daily net assets exceeding $500 million but not exceeding $1 billion; 0.445% of the portion of daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.42% of the portion of daily net assets exceeding $1.5 billion but not exceeding $2.5 billion; 0.395% of the portion of daily net assets exceeding $2.5 billion but not exceeding $3.5 billion; 0.37% of the portion of daily net assets exceeding $3.5 billion but not exceeding $5 billion; and 0.345% of the portion of daily net assets exceeding $5 billion. The investment advisory fee is allocated among the Classes pro rata based on the net assets of the Fund attributable to each Class.

Administration services are provided to the Fund by Morgan Stanley Investment Management Inc. ("Administrator"), a wholly-owned subsidiary of Morgan Stanley, pursuant to a separate administration agreement (the "Administration Agreement") entered into by the Fund with the Administrator. Prior to January 1, 2014, the Administrator was Morgan Stanley Services Company Inc. The Fund pays the Administrator monthly compensation of 0.08% of daily net assets.

The Adviser has entered into a Sub-Advisory Agreement with each Sub-Adviser. The Sub-Advisers provide the Fund with investment advisory services subject to the overall supervision of the Adviser and

the Fund's Trustees. The Adviser pays the Sub-Advisers on a monthly basis a portion of the net advisory fees the Adviser receives from the Fund.

The following table reflects for the Fund (i) the advisory fee paid; and (ii) the advisory fee waived and/or affiliated rebates for each of the past three fiscal years ended December 31, 2011, 2012 and 2013:

Advisory Fees Paid (After Fee Waivers and/or Affiliated Rebates)						Advisory Fees Waived						Affiliated Rebates
2011		2012		2013		2011		2012		2013		2011		2012		2013
$	2,048,310	$	2,010,758	$	2,050,396		—		—		—	$	5,928	$	6,403	$	9,373

For the fiscal years ended December 31, 2011, 2012 and 2013, the Fund paid compensation under its Administration Agreement as follows (no administration fees were waived):

Compensation Paid for the Fiscal Year Ended December 31,
2011		2012		2013
$	288,314	$	283,110	$	289,090

Under a Sub-Administration 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. The Administrator supervises and monitors the administrative and accounting services provided by State Street. Their services are also subject to the supervision of the officers and Board of Trustees of the Fund. State Street's business address is One Lincoln Street, Boston, MA 02111-2101.

B. Principal Underwriter

The Fund's principal underwriter is the Distributor (which has the same address as the Adviser). In this capacity, the Fund's shares are distributed by the Distributor. The Distributor has entered into a selected dealer agreement with Morgan Stanley Smith Barney LLC and Morgan Stanley & Co. LLC, which through their own sales organizations sell shares of the Fund. In addition, the Distributor may enter into similar agreements with other selected broker-dealers. The Distributor, a Delaware corporation, is a wholly-owned subsidiary of Morgan Stanley.

The Distributor bears all expenses it may incur in providing services under the Distribution Agreement. These expenses include the payment to Financial Intermediaries of any sales commissions, service fees and other expenses for sales of the Fund's shares incurred or paid by Financial Intermediaries. The Distributor also pays certain expenses in connection with the distribution of the Fund's shares, including the costs of preparing, printing and distributing advertising or promotional materials, and the costs of printing and distributing prospectuses and supplements thereto used in connection with the offering and sale of the Fund's shares. The Fund bears the costs of initial typesetting, printing and distribution of prospectuses and supplements thereto to shareholders. The Fund also bears the costs of registering the Fund and its shares under federal and state securities laws and pays filing fees in accordance with state securities laws.

The Fund and the Distributor have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. Under the Distribution Agreement, the Distributor uses its best efforts in rendering services to the Fund, but in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations, the Distributor is not liable to the Fund or any of its shareholders for any error of judgment or mistake of law or for any act or omission or for any losses sustained by the Fund or its shareholders.

C. Services Provided by the Adviser, Sub-Advisers and Administrator

The Adviser manages the Fund's business affairs and supervises the investment of the Fund's assets, including the placing of orders for the purchase and sale of portfolio securities. The Sub-Advisers, subject to the overall supervision of the Adviser and the Trustees of the Fund, may furnish investment advice concerning individual security selections, asset allocations and economic trends and management of the Fund's portfolio.

also assists in the preparation of prospectuses, proxy statements and reports required to be filed with federal and state securities commissions (except insofar as the participation or assistance of the independent registered public accounting firm and attorneys is, in the opinion of the Administrator, necessary or desirable). The Administrator also bears the cost of telephone service, heat, light, power and other utilities provided to the Fund.

Pursuant to the Sub-Advisory Agreements, the Sub-Advisers have been retained, subject to the overall supervision of the Adviser, to continuously furnish investment advice concerning individual security selections, asset allocations and overall economic trends and to manage the Fund's portfolio.

Expenses not expressly assumed by the Adviser under the Investment Advisory Agreement, the Sub-Advisers under the the Sub-Advisory Agreements, by the Administrator under the Administration Agreement, or by the Distributor will be paid by the Fund. These expenses will be allocated among the four Classes of shares pro rata based on the net assets of the Fund attributable to each Class, except as described below. Such expenses include, but are not limited to: expenses of the Plan of Distribution pursuant to Rule 12b-1; charges and expenses of any registrar, custodian, stock transfer and dividend disbursing agent; brokerage commissions; taxes; engraving and printing share certificates; registration costs of the Fund and its shares under federal and state securities laws; the cost and expense of printing, including typesetting, and distributing prospectuses of the Fund and supplements thereto to the Fund's shareholders; all expenses of shareholders' and Trustees' meetings and of preparing, printing and mailing of proxy statements and reports to shareholders; fees and travel expenses of Trustees or members of any advisory board or committee who are not employees of the Adviser and/or the Sub-Advisers or any corporate affiliate of the Adviser and/or the Sub-Advisers; all expenses incident to any dividend, withdrawal or redemption options; charges and expenses of any outside service used for pricing of the Fund's shares; fees and expenses of legal counsel, including counsel to the Trustees who are not interested persons of the Fund or of the Adviser (not including compensation or expenses of attorneys who are employees of the Adviser); fees and expenses of the Fund's independent registered public accounting firm; membership dues of industry associations; interest on Fund borrowings; postage; insurance premiums on property or personnel (including officers and Trustees) of the Fund which inure to its benefit; extraordinary expenses (including, but not limited to, legal claims and liabilities and litigation costs and any indemnification relating thereto); and all other costs of the Fund's operation. The 12b-1 fees relating to a particular Class will be allocated directly to that Class. In addition, sub-accounting and other expenses directly attributable to a particular Class (except advisory or custodial fees) will be allocated directly to such Class.

The Investment Advisory Agreement provides that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations thereunder, the Adviser is not liable to the Fund or any of its investors for any act or omission by the Adviser or for any losses sustained by the Fund or its investors.

The Investment Advisory Agreement and the Sub-Advisory Agreements will remain in effect from year to year, provided continuance of the Investment Advisory Agreement and the Sub-Advisory Agreements is approved at least annually by the vote of the holders of a majority, as defined in the Investment Company Act, of the outstanding shares of the Fund, or by the Trustees; provided that in either event such continuance is approved annually by the vote of a majority of the Independent Trustees.

The Administration Agreement provides that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations thereunder, the Administrator is not liable to the Fund or any of its investors for any act or omission by the Administrator or for any losses sustained by the Fund or its investors. The Administration Agreement will continue unless terminated by either party by written notice delivered to the other party within 30 days.

D. Dealer Reallowances

E. Rule 12b-1 Plan

The Fund has adopted an Amended and Restated Plan of Distribution, effective February 25, 2013, pursuant to Rule 12b-1 under the Investment Company Act (the "Current Plan") pursuant to which each Class, other than Class I, pays the Distributor compensation accrued daily and payable monthly at the

following maximum annual rates: 0.25%, 1.00% and 0.75% of the average daily net assets of Class A, Class B and Class L shares, respectively. Prior to February 25, 2013, in accordance with Rule 12b-1 under the Investment Company Act, the Fund had adopted an Amended and Restated Plan of Distribution, effective July 31, 2011 (the "Prior Plan" and together with the Current Plan, the "Plan"), pursuant to which each Class, other than Class I, paid the Distributor compensation accrued daily and payable monthly at the following annual rates: 0.25%, 1.00% and 1.00% of the average daily net assets of Class A, Class B and Class L shares, respectively. Prior to July 31, 2011, in accordance with Rule 12b-1 under the Investment Company Act, the Fund had adopted a Plan of Distribution with respect to the Class A, Class B and Class L shares between the Fund and Morgan Stanley Distributors Inc. (the "Prior Distributor"), pursuant to which the Prior Distributor provided certain services in connection with the promotion and sale of the Fund's shares.

The Distributor also receives the proceeds of front-end sales charges ("FSCs") and of contingent deferred sales charges ("CDSCs") imposed on certain redemptions of shares, which are separate and apart from payments made pursuant to the Plan. The Distributor and the Prior Distributor have informed the Fund that they and/or Morgan Stanley & Co. LLC received the proceeds of CDSCs and FSCs, for the last three fiscal years ended December 31, in approximate amounts as provided in the table below:

	2011			2012			2013
Class A⁽¹⁾	FSCs:⁽²⁾	$	16,974	FSCs:⁽²⁾	$	7,810	FSCs:⁽²⁾	$	4,814
	CDSCs:	$	1	CDSCs:	$	0	CDSCs:	$	0
Class B	CDSCs:	$	4,005	CDSCs:	$	9,344	CDSCs:	$	514
Class L⁽³⁾	CDSCs:	$	380	CDSCs:	$	109	CDSCs:	$	0

(1) The CDSC on Class A was eliminated effective October 1, 2013.

(2) FSCs apply to Class A only.

(3) The CDSC on Class L was eliminated effective February 25, 2013.

The entire fee payable by Class A and a portion of the fees payable by each of Class B and Class L shares each year pursuant to the Plan equal to 0.25% of such Class' average daily net assets are currently each characterized as a "service fee" under the Rules of the Financial Industry Regulatory Authority ("FINRA") (of which the Distributor is a member). The "service fee" is a payment made for personal service and/or the maintenance of shareholder accounts. The remaining portion of the Plan fees payable by a Class, if any, is characterized as an "asset-based sales charge" as such is defined by the Rules of FINRA.

Under the Plan and as required by Rule 12b-1, the Trustees receive and review promptly after the end of each calendar quarter a written report provided by the Distributor of the amounts expended under the Plan and the purpose for which such expenditures were made. For the fiscal year ended December 31, 2013, Class A, Class B and Class L shares of the Fund made payments under the Plan amounting to $224,187, $16,713 and $55,789, respectively, which amounts are equal to 0.25%, 1.00% and 0.79% of the average daily net assets of Class A, Class B and Class L, respectively, for the fiscal year. The amount paid by Class A shares and Class L shares reflect a reduction of $51 and $409, respectively.

The Plan was adopted in order to permit the implementation of the Fund's method of distribution. Under this distribution method the Fund offers four Classes, each with a different distribution arrangement.

With respect to Class A shares of the Fund, the Distributor generally compensates Financial Intermediaries from proceeds of the FSC, commissions for the sale of Class A shares, currently a gross sales credit of up to 5.00% of the amount sold and an annual residual commission, currently a residual of up to 0.25% of the current value of the respective accounts for which they are dealers of record in all cases.

With respect to sales of Class B shares of the Fund, a commission or transaction fee generally will be compensated by the Distributor at the time of purchase directly out of the Distributor's assets (and not out of the Fund's assets) to Financial Intermediaries who initiate and are responsible for such purchases computed based on a percentage of the dollar value of such shares sold of up to 4.00% on Class B shares.

Proceeds from any CDSC and any distribution fees on Class B shares are paid to the Distributor and are used by the Distributor to defray its distribution related expenses in connection with the sale of the Fund's shares, such as the payment to Financial Intermediaries for selling such shares.

With respect to Class L shares of the Fund, the Financial Intermediaries generally receive from the Distributor ongoing distribution fees of up to 0.75% of the average daily net assets of the Fund's Class L shares annually.

The distribution fee that the Distributor receives from the Fund under the Plan, in effect, offsets distribution expenses incurred under the Plan on behalf of the Fund and, in the case of Class B shares, opportunity costs, such as the gross sales credit and an assumed interest charge thereon ("carrying charge"). These expenses may include the cost of Fund-related educational and/or business-related trips or payment of Fund-related educational and/or promotional expenses of Financial Intermediaries. In the Distributor's reporting of the distribution expenses to the Fund, in the case of Class B shares, such assumed interest (computed at the "broker's call rate") has been calculated on the gross credit as it is reduced by amounts received by the Distributor under the Plan and any CDSCs received by the Distributor upon redemption of shares of the Fund. No other interest charge is included as a distribution expense in the Distributor's calculation of its distribution costs for this purpose. The broker's call rate is the interest rate charged to securities brokers on loans secured by exchange-listed securities.

The Fund may reimburse expenses incurred or to be incurred in promoting the distribution of the Fund's Class A, Class B and Class L shares and/or in servicing shareholder accounts. Reimbursement will be made through payments at the end of each month. The amount of each monthly payment may in no event exceed an amount equal to a payment at the annual rate of 0.25%, in the case of Class A, 1.00%, in the case of Class B and 0.75%, in the case of Class L, of the average net assets of the respective Class during the month. No interest or other financing charges, if any, incurred on any distribution expenses on behalf of Class A, Class B and Class L will be reimbursable under the Plan.

Each Class paid 100% of the amounts accrued under the Plan with respect to that Class for the fiscal year ended December 31, 2013 to the Distributor. It is estimated that the Distributor spent this amount in approximately the following ways: (i) 0% ($0) — advertising and promotional expenses; (ii) 0% ($0) — printing and mailing of prospectuses for distribution to other than current shareholders; and (iii) 100% ($4,206) — other expenses, including the gross sales credit and the carrying charge, of which 0% ($0) represents carrying charges, 41.40% ($1,741) represents commission credits for payments of commissions to Financial Intermediaries, and 58.60% ($2,465) represents overhead and other branch office distribution-related expenses. The amounts accrued by Class A and a portion of the amounts accrued by Class L under the Plan during the fiscal year ended December 31, 2013 were service fees. The remainder of the amounts accrued by Class L were for expenses, which relate to compensation of sales personnel and associated overhead expenses.

In the case of Class B shares, at any given time, the expenses of distributing shares of the Fund may be more or less than the total of (i) the payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs paid by investors upon redemption of shares. For example, if $1 million in expenses in distributing Class B shares of the Fund had been incurred and $750,000 had been received as described in (i) and (ii) above, the excess expense would amount to $250,000. The Distributor has advised the Fund that in the case of Class B shares the excess distribution expenses, including the carrying charge designed to approximate the opportunity costs incurred by Financial Intermediaries which arise from their having advanced monies without having received the amount of any sales charges imposed at the time of sale of the Fund's Class B shares, totaled $5,179,281 as of December 31, 2013 (the end of the Fund's fiscal year), which was equal to 385.72% of the net assets of Class B on such date. Because there is no requirement under the Plan that the Distributor be reimbursed for all distribution expenses with respect to Class B shares or any requirement that the Plan be continued from year to year, an excess amount does not constitute a liability of the Fund. 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 CDSCs 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. Any cumulative expenses incurred, but not yet recovered through distribution fees or CDSCs, may or may not be recovered through future distribution fees or CDSCs.

In the case of Class A and Class L shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25% or 0.75% of the average daily net assets of Class A and Class L shares, respectively, will not be reimbursed by the Fund through payments in any subsequent year, except that expenses representing a gross sales commission credited to Financial Intermediaries at the time of sale may be

reimbursed in the subsequent calendar year. The Distributor has advised the Fund that unreimbursed expenses representing a gross sales commission credited to Financial Intermediaries at the time of sale totaled $37 in the case of Class L at December 31, 2013 (the end of the calendar year), which amount was equal to approximately 0.0005% of the net assets of Class L and that there were no such expenses that may be reimbursed in the subsequent year in the case of Class A on such date. No interest or other financing charges will be incurred on any Class A and Class L distribution expenses incurred by the Distributor under the Plan or on any unreimbursed expenses due to the Distributor pursuant to the Plan.

No interested person of the Fund nor any Independent Trustee has any direct financial interest in the operation of the Plan except to the extent that the Distributor, the Adviser, the Administrator, Morgan Stanley Smith Barney LLC or certain of their employees may be deemed to have such an interest as a result of benefits derived from the successful operation of the Plan or as a result of receiving a portion of the amounts expended thereunder by the Fund.

On an annual basis, the Trustees, including a majority of the Independent Trustees, consider whether the Plan should be continued. Prior to approving the last continuation of the Plan, the Trustees requested and received from the Distributor and reviewed all the information which they deemed necessary to arrive at an informed determination. In making their determination to continue the Plan, the Trustees considered: (1) the Fund's experience under the Plan and whether such experience indicates that the Plan is operating as anticipated; (2) the benefits the Fund had obtained, was obtaining and would be likely to obtain under the Plan, including that: (a) the Plan is essential in order to give Fund investors a choice of alternatives for payment of distribution and service charges and to enable the Fund to continue to grow and avoid a pattern of net redemptions which, in turn, are essential for effective investment management; and (b) without the compensation to individual brokers and the reimbursement of distribution and account maintenance expenses of Financial Intermediaries made possible by the 12b-1 fees, Financial Intermediaries could not establish and maintain an effective system for distribution, servicing of Fund shareholders and maintenance of shareholder accounts; and (3) what services had been provided and were continuing to be provided under the Plan to the Fund and its shareholders. Based upon their review, the Trustees, including each of the Independent Trustees, determined that continuation of the Plan would be in the best interest of the Fund and would have a reasonable likelihood of continuing to benefit the Fund and its shareholders.

The Plan may not be amended to increase materially the amount to be spent for the services described therein without approval by the shareholders of the affected Class or Classes of the Fund, and all material amendments to the Plan must also be approved by the Trustees. The Plan may be terminated at any time, without payment of any penalty, by vote of a majority of the Independent Trustees or by a vote of a majority of the outstanding voting securities of the Fund (as defined in the Investment Company Act) on not more than 30 days' written notice to any other party to the Plan. So long as the Plan is in effect, the election and nomination of Independent Trustees shall be committed to the discretion of the Independent Trustees.

F. Other Service Providers

(1) Transfer Agent/Dividend Disbursing Agent

Boston Financial Data Services, Inc., 2000 Crown Colony Drive, Quincy, MA 02169-0953, is the Transfer Agent for the Fund's shares and the Dividend Disbursing Agent for payment of dividends and distributions on Fund shares.

(2) Custodian and Independent Registered Public Accounting Firm

State Street Bank and Trust Company, One Lincoln Street, Boston, MA 02111, is the Custodian of the Fund's assets. Any of the Fund's cash balances with the Custodian in excess of $250,000 are unprotected by federal deposit insurance. These balances may, at times, be substantial.

Ernst & Young LLP, located at 200 Clarendon Street, Boston, MA 02116-5021, is the independent registered public firm for the Fund. The Fund's independent registered public accounting firm is responsible for auditing the annual financial statements.

G. Fund Management

Other Accounts Managed by the Portfolio Managers

Other Accounts Managed by Portfolio Managers at December 31, 2013 (unless otherwise indicated):

Other Registered
Investment Companies

Other Pooled
Investment Vehicles

Other Accounts

Portfolio Managers

Number of
Accounts

Total Assets
in the
Accounts

Number of
Accounts

Total Assets
in the
Accounts

Number of
Accounts

Total Assets
in the
Accounts

Theodore R. Bigman

$5.5 billion

$7.2 billion

⁽¹⁾

$6.7 billion⁽¹⁾

Matthew King

$128.1 million

$364.7 million

(1) Of these other accounts, 14 accounts with a total of approximately $1.2 billion in assets had performance-based fees.

Because the portfolio managers may manage assets for other investment companies, pooled investment vehicles and/or other accounts (including institutional clients, pension plans and certain high net worth individuals), there may be an incentive to favor one client over another resulting in conflicts of interest. For instance, the Adviser and/or the Sub-Advisers may receive fees from certain accounts that are higher than the fee they receive from the Fund, or they may receive a performance-based fee on certain accounts. In those instances, the portfolio managers may have an incentive to favor the higher and/or performance-based fee accounts over the Fund. In addition, a conflict of interest could exist to the extent the Adviser and/or the Sub-Advisers have proprietary investments in certain accounts, where portfolio managers have personal investments in certain accounts or when certain accounts are investment options in the Adviser's and/or the Sub-Advisers' employee benefits and/or deferred compensation plans. The portfolio managers may have an incentive to favor these accounts over others. If the Adviser and/or the Sub-Advisers manage accounts that engage in short sales of securities of the type in which the Fund invests, the Adviser and/or the Sub-Advisers could be seen as harming the performance of the Fund for the benefit of the accounts engaging in short sales if the short sales cause the market value of the securities to fall. The Adviser and Sub-Advisers have adopted trade allocation and other policies and procedures that they believe are reasonably designed to address these and other conflicts of interest.

Portfolio Manager Compensation Structure

Base salary compensation. Generally, portfolio managers receive base salary compensation based on the level of their position with the Adviser or Sub-Adviser.

Incentive compensation. In addition to base compensation, portfolio managers may receive discretionary year-end compensation.

Incentive compensation may include:

• Cash Bonus.

• Deferred Compensation:

All deferred compensation awards are subject to clawback provisions where awards can be cancelled, in whole or in part, if an employee takes any action, or omits to take any action which: causes a restatement of Morgan Stanley's consolidated financial results; constitutes a violation by the portfolio manager of Morgan Stanley's Global Risk Management Principles, Policies and Standards; or constitutes a violation of internal risk and control policies involving a subsequent loss.