UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-21899

Morgan Stanley Institutional Strategies Fund
(Exact name of registrant as specified in charter)

1221 Avenue of the Americas, New York, New York 10020
(Address of principal executive offices) (Zip code)

Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)

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

Date of fiscal year end: September 30, 2007

Date of reporting period: March 31, 2007

Item 1 - Report to Shareholders

Welcome, Shareholder:

In this report, you'll learn about how your investment in Morgan Stanley
Institutional Strategies Fund performed during the semiannual period. We will
provide an overview of the market conditions, and discuss some of the factors
that affected performance during the reporting period. In addition, this report
includes the Fund's financial statements and a list of Fund investments.

THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A PROSPECTUS FOR THE FUND BEING
OFFERED.

MARKET FORECASTS PROVIDED IN THIS REPORT MAY NOT NECESSARILY COME TO PASS. THERE
IS NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT OBJECTIVE. THE FUND IS
SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT MARKET VALUES OF
SECURITIES OWNED BY THE FUND WILL DECLINE AND, THEREFORE, THE VALUE OF THE
FUND'S SHARES MAY BE LESS THAN WHAT YOU PAID FOR THEM. ACCORDINGLY, YOU CAN LOSE
MONEY INVESTING IN THIS FUND. PLEASE SEE THE PROSPECTUS FOR MORE COMPLETE
INFORMATION ON INVESTMENT RISKS.

FUND REPORT

For the six months ended March 31, 2007

TOTAL RETURN FOR THE 6 MONTHS ENDED MARCH 31, 2007

<Table>
<Caption>
S&P 500(R) BLENDED
CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2)

10.07% 9.59% 9.58% 10.17% 7.38% 10.44%
</Table>

The performance of the Fund's four share classes varies because each has
different expenses. The Fund's total returns assume the reinvestment of all
distributions but do not reflect the deduction of any applicable sales charges.
Such costs would lower performance. See Performance Summary for standardized
performance and benchmark information.

MARKET CONDITIONS

For the six-month period ended March 31, 2007, global equity markets posted
positive returns. In the U.S., the benchmark S&P 500(R) Index returned 7.38
percent, including dividends, while internationally, the MSCI EAFE Index
returned 14.9 percent, including dividends.

While global economic conditions continued to be supportive of growth
expectations in excess of historical averages, the period under review might
best be characterized as potentially transitory. In the U.S., growth slowed as
both the consumer and industrial sectors adjusted to higher interest rates amid
more challenging housing and mortgage environments. At the same time, commodity
prices and labor costs increased slightly throughout the period, raising
concerns that record-level corporate profit margins could be squeezed from both
the "top" and "bottom" lines. In general, profit growth expectations declined
for a majority of sectors during the period under review.

Overseas, economic growth in both developed and emerging markets continued to
outpace expectations, as continental Europe, the United Kingdom, Russia, India,
China and Latin America generally exceeded growth expectations. Solid export
activity coupled with domestic demand tied to job security and purchasing power
helped drive these impressive trends. In effect, this acceleration outside the
U.S. helped many U.S. industries, as favorable currency exchange rates and years
of increased investment in international markets began to payoff in 2006, and
more recently, helped offset the slower pace of U.S. growth.

PERFORMANCE ANALYSIS

Morgan Stanley Institutional Strategies Fund outperformed the S&P 500(R) Index
and underperformed the Blended Index (a blend of 1/3 Russell 1000(R) Growth
Index, 1/3 Russell 1000(R) Value Index and 1/3 Morgan Stanley Capital
International [MSCI] EAFE Index) for the six months ended March 31, 2007,
assuming no deduction of applicable sales charges.

Morgan Stanley Institutional Strategies Fund invests equal dollar amounts in
three underlying Morgan Stanley Institutional Funds -- U.S. Large Cap Growth,
Large Cap Relative Value and Active International Allocation. For the six months
ended March 31, 2007, all three funds contributed positively to the overall
Fund's performance, with Active International Allocation returning 15.05
percent, U.S. Large Cap

Growth returning 9.93 percent, and Large Cap Relative Value returning 6.91
percent.

In general, international markets provided superior returns to those available
in the U.S., with emerging markets (such as Brazil, China, India and Russia) and
continental Europe performing solidly. Within the Fund's U.S. exposure, growth
outperformed value as investors rotated into previously lagging sectors such as
information technology and health care.

There is no guarantee that any sectors mentioned will continue to perform as
discussed herein or that securities in such sectors will be held by the Fund in
the future.

<Table>
<Caption>
PORTFOLIO ALLOCATION

Active International Allocation 32.1%
U.S. Large Cap Value 30.8
Large Cap Relative Growth 30.2
</Table>

Data as of March 31, 2007. Subject to change daily. All percentages are as a
percentage of net assets. These data are provided for informational purposes
only and should not be deemed a recommendation to buy or sell the securities
mentioned. Morgan Stanley is a full-service securities firm engaged in
securities trading and brokerage activities, investment banking, research and
analysis, financing and financial advisory services.

INVESTMENT STRATEGY

The Fund is a "fund of funds," meaning that it seeks to achieve its investment
objective by investing primarily in a combination of three portfolios of Morgan
Stanley Institutional Fund, Inc. ("Underlying Funds") on a fixed allocation
basis. The Fund makes equal allocations of its assets to the following three
Underlying Funds: Active International Allocation Portfolio ("Active
International Allocation"), Large Cap Relative Value Portfolio ("Large Cap
Relative Value") and U.S. Large Cap Growth Portfolio ("U.S. Large Cap Growth").
Investors may purchase the Underlying Funds directly only if they meet certain
investment minimums or other requirements set forth in each Underlying Fund's
prospectus. The Underlying Funds invest primarily in U.S. and foreign equity
securities. The investment policies of the Underlying Funds are described in the
Fund's prospectus. The investment results of the Underlying Funds will vary. As
a result, the percentage allocations to the Underlying Funds will be monitored
daily by the Fund's "Investment Adviser," Morgan Stanley Investment Advisors
Inc., and the Fund's allocations to the Underlying Funds will be rebalanced
whenever the actual allocations exceed plus or minus 5 percent of the
pre-determined fixed percentage allocation basis. Accordingly, it may be
necessary for the Fund to sell shares of an Underlying Fund that have
appreciated in value, in order to maintain the fixed percentage allocation among
the Underlying Funds.

FOR MORE INFORMATION ABOUT PORTFOLIO HOLDINGS

Each Morgan Stanley fund provides a complete schedule of portfolio holdings in
its semiannual and annual reports within 60 days of the end of the fund's second
and fourth fiscal quarters. The semiannual reports and the annual reports are
filed electronically with the Securities and Exchange Commission (SEC) on Form
N-CSRS and Form N-CSR, respectively. Morgan Stanley also delivers the semiannual
and annual reports to fund shareholders and makes these reports available on its
public web site, www.morganstanley.com. Each Morgan Stanley fund also files a
complete schedule of portfolio holdings with the SEC for the fund's first and
third fiscal quarters on Form N-Q. Morgan Stanley does not deliver the reports
for the first and third fiscal quarters to shareholders, nor are the reports
posted to the Morgan Stanley public web site. You may, however, obtain the Form
N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the
SEC's web site, http://www.sec.gov. You may also review and copy them at the
SEC's public reference room in Washington, DC. Information on the operation of
the SEC's public reference room may be obtained by calling the SEC at (800)
SEC-0330. You can also request copies of these materials, upon payment of a
duplicating fee, by electronic request at the SEC's e-mail address
(publicinfo@sec.gov) or by writing the public reference section of the SEC,
Washington, DC 20549-0102.

PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD

You may obtain a copy of the Fund's Proxy Voting Policy and Procedures without
charge, upon request, by calling toll free (800) 869-NEWS or by visiting the
Mutual Fund Center on our Web site at www.morganstanley.com. It is also
available on the Securities and Exchange Commission's Web site at
http://www.sec.gov.

You may obtain information regarding how the Fund voted proxies relating to
portfolio securities during the most recent twelve-month period ended June 30
without charge by visiting the Mutual Fund Center on our Web site at
www.morganstanley.com. This information is also available on the Securities and
Exchange Commission's Web site at http://www.sec.gov.

HOUSEHOLDING NOTICE

To reduce printing and mailing costs, the Fund attempts to eliminate duplicate
mailings to the same address. The Fund delivers a single copy of certain
shareholder documents, including shareholder reports, prospectuses and proxy
materials, to investors with the same last name who reside at the same address.
Your participation in this program will continue for an unlimited period of time
unless you instruct us otherwise. You can request multiple copies of these
documents by calling (800) 350-6414, 8:00 a.m. to 8:00 p.m., ET. Once our
Customer Service Center has received your instructions, we will begin sending
individual copies for each account within 30 days.

PERFORMANCE SUMMARY

TOTAL RETURNS -- PERIOD ENDED MARCH 31, 2007

<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES(+) CLASS D SHARES(++)
(since 08/28/06) (since 08/28/06) (since 08/28/06) (since 08/28/06)
SYMBOL GVIAX GVIBX GVICX GVIDX

SINCE INCEPTION 12.60%(3) 12.00%(3) 12.10%(3) 12.70%(3)
6.69(4) 7.00(4) 11.10(4) --
</Table>

Performance data quoted represents past performance, which is no guarantee of
future results and current performance may be lower or higher than the figures
shown. For most recent month-end performance figures, please visit
www.morganstanley.com or speak with your Financial Advisor. Investment returns
and principal value will fluctuate and fund shares, when redeemed, may be worth
more or less than their original cost. The table does not reflect the deduction
of taxes that a shareholder would pay on fund distributions or the redemption of
fund shares. Performance for Class A, Class B, Class C, and Class D shares will
vary due to differences in sales charges and expenses. Returns for period less
than 1 year are not annualized.

* 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.

+ The maximum contingent deferred sales charge for Class C is 1.0% for shares
redeemed within one year of purchase.

++ Class D has no sales charge.

(1) The Standard & Poor's 500(R) Index (S&P 500(R)) is a broad-based index, the
performance of which is based on the performance of 500 widely-held common
stocks chosen for market size, liquidity and industry group representation.
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 Blended Index is comprised of 1/3 Russell 1000(R) Growth Index
(measures the performance of those companies in the Russell 1000(R) Index
with higher price-to-book ratios and higher forecasted growth values), 1/3
Russell 1000(R) Value Index (measures the performance of those companies in
the Russell 1000(R) Index with lower price-to-book ratios and lower
forecasted growth values) and 1/3 Morgan Stanley Capital International
(MSCI) EAFE Index (measures the performance for a diverse range of global
stock markets within Europe, Australasia, and the Far East). 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

As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments and redemption fees;
and (2) ongoing costs, including distribution and service (12b-1) fees; and
other Fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period 10/01/06 - 03/31/07.

ACTUAL EXPENSES

The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second line of the table below provides information about hypothetical
expenses based on the Fund's actual expense ratio and an assumed rate of return
of 5% per year before expenses, which is not the Fund's actual return. The
hypothetical account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may use this
information to compare the ongoing cost of investing in the Fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) and redemption fees. Therefore, the second line of the table is
useful in comparing ongoing costs, and will not help you determine the relative
total cost of owning different funds. In addition, if these transactional costs
were included, your costs would have been higher.

<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD *
------------- ------------- ---------------
10/01/06 -
10/01/06 03/31/07 03/31/07
------------- ------------- ---------------

CLASS A
Actual (10.07% return)...................................... $1,000.00 $1,100.70 $2.93
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,022.14 $2.82
CLASS B
Actual (9.59% return)....................................... $1,000.00 $1,095.90 $7.26
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,018.00 $6.99
CLASS C
Actual (9.58% return)....................................... $1,000.00 $1,095.80 $7.26
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,018.00 $6.99
CLASS D
Actual (10.17% return)...................................... $1,000.00 $1,101.70 $2.04
Hypothetical (5% annual return before expenses)............. $1,000.00 $1,022.99 $1.97
</Table>

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

* Expenses are equal to the Fund's annualized expense ratios of 0.56%, 1.39%,
1.39% and 0.39% for Class A, Class B, Class C and Class D shares,
respectively, multiplied by the average account value over the period,
multiplied by 182/365 (to reflect the one-half year period). If the Fund had
borne all of its expenses, the annualized expense ratios would have been
15.49%, 16.32%, 16.32% and 15.32% for Class A, Class B, Class C and Class D
shares, respectively.

Morgan Stanley Institutional Strategies Fund
PORTFOLIO OF INVESTMENTS - MARCH 31, 2007 (UNAUDITED)

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

Common Stocks (93.1%)
Investment Trusts/Mutual Funds
22,647 Morgan Stanley Institutional Active International Allocation Portfolio
(Class A)................................................................. $ 356,911
27,488 Morgan Stanley Institutional Large Cap Relative Value Portfolio (Class A)... 335,350
16,444 Morgan Stanley Institutional U.S. Large Cap Growth Portfolio (Class A)...... 342,849
----------
</Table>

<Table>

Total Investments (Cost $942,405) (a)............................ 93.1% 1,035,110

Other Assets in Excess of Liabilities............................ 6.9 76,328
----- ----------
Net Assets....................................................... 100.0% $1,111,438
===== ==========
</Table>

- ---------------------
(a) The aggregate cost for federal income tax purposes approximates the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $92,705.

See Notes to Financial Statements
7

Morgan Stanley Institutional Strategies Fund
FINANCIAL STATEMENTS

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

<Table>

Assets:
Investments in securities, at value
(cost $942,405)........................................... $1,035,110
Cash........................................................ 55,021
Deferred offering costs..................................... 40,093
Prepaid expenses............................................ 36,707
Receivable from Investment Adviser.......................... 16,983
----------
Total Assets............................................ 1,183,914
----------
Liabilities:
Payable for distribution fee................................ 576
Accrued expenses............................................ 10,374
Offering costs.............................................. 61,526
----------
Total Liabilities....................................... 72,476
----------
Net Assets.............................................. $1,111,438
==========
Composition of Net Assets:
Paid-in-capital............................................. $1,001,623
Net unrealized appreciation................................. 92,705
Undistributed net investment income......................... 6,209
Accumulated undistributed net realized gain................. 10,901
----------
Net Assets.............................................. $1,111,438
==========
Class A Shares:
Net Assets.................................................. $374,923
Shares Outstanding (unlimited authorized, $.01 par value)... 33,299
Net Asset Value Per Share............................... $11.26
==========
Maximum Offering Price Per Share,
(net asset value plus 5.54% of net asset value)......... $11.88
==========
Class B Shares:
Net Assets.................................................. $363,635
Shares Outstanding (unlimited authorized, $.01 par value)... 32,460
Net Asset Value Per Share............................... $11.20
==========
Class C Shares:
Net Assets.................................................. $231,969
Shares Outstanding (unlimited authorized, $.01 par value)... 20,698
Net Asset Value Per Share............................... $11.21
==========
Class D Shares:
Net Assets.................................................. $140,911
Shares Outstanding (unlimited authorized, $.01 par value)... 12,500
Net Asset Value Per Share............................... $11.27
==========
</Table>

See Notes to Financial Statements
8

Morgan Stanley Institutional Strategies Fund
FINANCIAL STATEMENTS continued

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

<Table>

Net Investment Income:
Income
Dividends................................................... $ 11,611
Interest.................................................... 62
--------
Total Income............................................ 11,673
--------
Expenses
Offering costs.............................................. 48,778
Professional fees........................................... 15,070
Shareholder reports and notices............................. 11,655
Registration fees........................................... 3,592
Distribution fee (Class A shares)........................... 260
Distribution fee (Class B shares)........................... 2,003
Distribution fee (Class C shares)........................... 1,125
Custodian fees.............................................. 282
Trustees' fees and expenses................................. 146
Other....................................................... 2,028
--------
Total Expenses.......................................... 84,939
Less: amounts waived/reimbursed (79,473)
Less: expense offset........................................ (2)
--------
Net Expenses............................................ 5,464
--------
Net Investment Income................................... 6,209
--------
Net Realized and Unrealized Gain:
Net realized gain on:
Investments................................................. 2,158
Capital gain distribution received.......................... 8,818
--------
Net Realized Gain....................................... 10,976
Net change in unrealized appreciation....................... 79,296
--------
Net Gain................................................ 90,272
--------
Net Increase................................................ $ 96,481
========
</Table>

See Notes to Financial Statements
9

Morgan Stanley Institutional Strategies Fund
FINANCIAL STATEMENTS continued

Statements of Changes in Net Assets

<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX AUGUST 28, 2006*
MONTHS ENDED THROUGH
MARCH 31, 2007 SEPTEMBER 30, 2006
-------------- ------------------
(unaudited)

Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss)................................ $ 6,209 $ (462)
Net realized gain (loss).................................... 10,976 (10)
Net change in unrealized appreciation....................... 79,296 13,409
---------- --------
Net Increase............................................ 96,481 12,937
Net increase from transactions in shares of beneficial
interest.................................................. 186,183 715,837
---------- --------
Net Increase............................................ 282,664 728,774
Net Assets:
Beginning of period......................................... 828,774 100,000
---------- --------
End of Period
(Including undistributed net investment income of
$6,209 and $0, respectively)................................ $1,111,438 $828,774
========== ========
</Table>

- ---------------------
* Commencement of operations.

See Notes to Financial Statements
10

Morgan Stanley Institutional Strategies Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2007 (UNAUDITED)

1. Organization and Accounting Policies

Morgan Stanley Institutional Strategies Fund (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a
non-diversified, open-end management investment company. The Fund will invest in
a combination of three portfolios of Morgan Stanley Institutional Fund, Inc.
(individually, an "Underlying Fund" and collectively, the "Underlying Funds") on
a fixed allocation basis. The Fund's investment objective is to seek capital
appreciation. The Fund was organized as a Massachusetts business trust on May 2,
2006 and commenced operations on August 28, 2006.

The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within eighteen
months, six years and one year, respectively. Class D shares are not subject to
a sales charge. Additionally, Class A shares, Class B shares and Class C shares
incur distribution expenses.

The following is a summary of significant accounting policies:

A. Valuation of Investments -- (1) Investments are valued at the net asset value
per share of each Underlying Fund determined as of the close of the New York
Stock Exchange on valuation date; and (2) short-term debt securities having a
maturity date of more than sixty days at time of purchase are valued on a
mark-to-market basis until sixty days prior to maturity and thereafter at
amortized cost based on their value on the 61st day. Short-term debt securities
having a maturity date of sixty days or less at the time of purchase are valued
at amortized cost.

B. Accounting for Investments -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted and premiums are amortized over the life of the
respective securities. Interest income is accrued daily.

C. Repurchase Agreements -- Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated
entities managed by the Investment Adviser, may transfer uninvested cash
balances into one or more joint repurchase agreement accounts. These balances
are invested in one or more repurchase agreements and are collateralized by
cash, U.S. Treasury or federal agency obligations. The Fund may also invest
directly with institutions in repurchase agreements. The Fund's custodian
receives the collateral, which is marked-

Morgan Stanley Institutional Strategies Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2007 (UNAUDITED) continued

to-market daily to determine that the value of the collateral does not decrease
below the repurchase price plus accrued interest.

D. Multiple Class Allocations -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.

E. Federal Income Tax Policy -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.

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

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

H. Offering Costs -- The Investment Adviser incurred offering costs on behalf of
the Fund in an amount of $98,000 which will be reimbursed by the Fund for the
full amount thereof. Such expenses were deferred and are being amortized on the
straight-line method over a period of approximately one year or less from the
commencement of operations.

2. Investment Advisory/Administration Agreements

Pursuant to an Investment Advisory Agreement, the Fund pays no investment
advisory fee. However, the Fund, through its investments in the Underlying
Funds, will pay its pro rata share of the advisory fees to the Investment
Adviser of the Underlying Funds.

Pursuant to an Administration Agreement with Morgan Stanley Services Company
Inc. (the "Administrator"), an affiliate of the Investment Adviser, the Fund
pays no administration fee. However, the Fund through its investments in the
Underlying Funds, will pay its pro rata share of the administration fee to the
Administrator of the Underlying Funds.

The Investment Adviser agreed to waive or reimburse all or a portion of the
Fund's other expenses such that the annualized actual total fund operating
expenses (exclusive of any indirect expenses from the Underlying Funds) does not
exceed 0.64%, 1.39%, 1.39% and 0.39% for Class A, Class B, Class C and Class D
shares respectively, until August 31, 2007. Thereafter, the fee waiver and/or
expense reimbursement can be terminated at any time. At March 31, 2007, included
in the

Morgan Stanley Institutional Strategies Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2007 (UNAUDITED) continued

Statements of Assets and Liabilities is a receivable from the Investment Adviser
an affiliate, which represents expense reimbursements due to the Fund.

3. Plan of Distribution

Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the
"Distributor"), an affiliate of the Investment Adviser and Administrator. The
Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act. The Plan provides that the Fund will pay the Distributor a fee
which is accrued daily and paid monthly at the following annual rates: (i) Class
A -- up to 0.25% of the average daily net assets of Class A shares; (ii) Class
B -- up to 1.0% of the average daily net assets of Class B shares; and (iii)
Class C -- up to 1.0% of the average daily net assets of Class C shares.

In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts totaled $3,280 at
March 31, 2007

In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Financial Advisors and other authorized
financial representatives at the time of sale may be reimbursed in the
subsequent calendar year. For the six months ended March 31, 2007, the
distribution fee was accrued for Class A shares and Class C shares at the annual
rate of 0.17% and 1.0%, respectively.

The Distributor has informed the Fund that for the six months ended March 31,
2007, it received no contingent deferred sales charges from certain redemptions
of the Fund's Class A shares, Class B shares and Class C shares, respectively
and received no 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 Institutional Strategies Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2007 (UNAUDITED) continued

4. Security Transactions and Transactions with Affiliates

The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ending March 31, 2007 aggregated
$394,851 and $51,065, respectively.

Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and
Distributor, is the Funds transfer agent.

The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan")
which allows each independent Trustee to defer payment of all, or a portion, of
the fees he or she receives for serving on the Board of Trustees. Each eligible
Trustee generally may elect to have the deferred amounts credited with a return
equal to the total return on one or more of the Morgan Stanley funds that are
offered as investment options under the Compensation Plan.
Appreciation/depreciation and distributions received from these investments are
recorded with an offsetting increase/decrease in the deferred compensation
obligation and do not affect the net asset value of the Fund.

5. Shares of Beneficial Interest

<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX AUGUST 28, 2006*
MONTHS ENDED THROUGH
MARCH 31, 2007 SEPTEMBER 30, 2006
------------------ ------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
------ -------- ------ --------

CLASS A SHARES
Sold........................................................ 12,915 $134,327 10,891 $109,115
Conversion from Class B..................................... 6,993 78,259 -- --
------ -------- ------ --------
Net increase - Class A...................................... 19,908 212,586 10,891 109,115
------ -------- ------ --------
CLASS B SHARES
Sold........................................................ 5,024 51,967 31,949 324,156
Conversion to Class A....................................... (7,013) (78,259) -- --
------ -------- ------ --------
Net increase (decrease) - Class B........................... (1,989) (26,292) 31,949 324,156
------ -------- ------ --------
CLASS C SHARES
Sold........................................................ -- -- 18,208 182,566
Redeemed.................................................... (10) (111) -- --
------ -------- ------ --------
Net increase (decrease) - Class C........................... (10) (111) 18,208 182,566
------ -------- ------ --------
CLASS D SHARES
Sold........................................................ -- -- 10,000 100,000
------ -------- ------ --------
Net increase - Class D...................................... -- -- 10,000 100,000
------ -------- ------ --------
Net increase in Fund........................................ 17,909 $186,183 71,048 $715,837
====== ======== ====== ========
</Table>

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

* Commencement of operations.

Morgan Stanley Institutional Strategies Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2007 (UNAUDITED) continued

6. Expense Offset

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

7. Federal Income Tax Status

The amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for tax purposes are reported as distributions of paid-in-capital.

As of September 30, 2006, the Fund had temporary book/tax differences
attributable to capital loss deferrals on wash sales.

8. Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation 48, Accounting for Uncertainty in Income Taxes -- an
interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting
for income taxes by prescribing the minimum recognition threshold a tax position
must meet before being recognized in the financial statements. FIN 48 is
effective for fiscal years beginning after December 15, 2006 and is to be
applied to all open tax years as of the effective date. The impact to the Fund's
inancial statements, if any is currently being assessed.

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

Morgan Stanley Institutional Strategies Fund
FINANCIAL HIGHLIGHTS

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

<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX AUGUST 28, 2006*
MONTHS ENDED THROUGH
MARCH 31, 2007 SEPTEMBER 30, 2006
-------------- ------------------
(unaudited)

Class A Shares
Selected Per Share Data:
Net asset value, beginning of period........................ $ 10.23 $ 10.00
------- -------

Income from investment operations:
Net investment income++................................. 0.08 0.00
Net realized and unrealized gain........................ 0.95 0.23
------- -------
Total income from investment operations..................... 1.03 0.23
------- -------
Net asset value, end of period.............................. $ 11.26 $ 10.23
======= =======
Total Return+............................................... 10.07%(1) 2.30 %(1)
Ratios to Average Net Assets(3)(4)(5):
Total expenses (before expense offset)...................... 0.56%(2) 0.64 %(2)
Net investment income (loss)................................ 1.63%(2) (0.50)%(2)
Supplemental Data:
Net assets, end of period, in thousands..................... $375 $137
Portfolio turnover rate..................................... 5%(1) 3 %(1)
</Table>

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

<Table>

* Commencement of operations.
++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated
based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Does not include any expenses incurred as a result of
investment in the Underlying Funds.
(4) Reflects overall Fund ratios for investment income and
non-class specific expenses.
(5) If the Fund had borne all its expenses that were reimbursed
or waived by the Investment Adviser and Administrator, the
annualized expense and net investment loss ratios, before
expense offset, would have been as follows:
</Table>

<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED RATIO LOSS RATIO
------------ ------- --------------

March 31, 2007 15.49% (13.30)%
September 30,
2006 52.09 (51.95)
</Table>

See Notes to Financial Statements
16

Morgan Stanley Institutional Strategies Fund
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX AUGUST 28, 2006*
MONTHS ENDED THROUGH
MARCH 31, 2007 SEPTEMBER 30, 2006
-------------- ------------------
(unaudited)

Class B Shares
Selected Per Share Data:
Net asset value, beginning of period........................ $ 10.22 $ 10.00
------- -------

Income (loss) from investment operations:
Net investment income (loss)++.......................... 0.05 (0.01)
Net realized and unrealized gain........................ 0.93 0.23
------- -------
Total income from investment operations..................... 0.98 0.22
------- -------
Net asset value, end of period.............................. $ 11.20 $ 10.22
======= =======
Total Return+............................................... 9.59%(1) 2.20 %(1)
Ratios to Average Net Assets(3)(4)(5):
Total expenses (before expense offset)...................... 1.39%(2) 1.39 %(2)
Net investment income (loss)................................ 0.80%(2) (1.25)%(2)
Supplemental Data:
Net assets, end of period, in thousands..................... $364 $352
Portfolio turnover rate..................................... 5%(1) 3 %(1)
</Table>

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

<Table>

* Commencement of operations.
++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated
based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Does not include any expenses incurred as a result of
investment in the Underlying Funds.
(4) Reflects overall Fund ratios for investment income and
non-class specific expenses.
(5) If the Fund had borne all its expenses that were reimbursed
or waived by the Investment Adviser and Administrator, the
annualized expense and net investment loss, before expense
offset, ratios would have been as follows:
</Table>

<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED RATIO LOSS RATIO
------------ ------- --------------

March 31, 2007 16.32% (14.13)%
September 30,
2006 52.84 (52.70)
</Table>

See Notes to Financial Statements
17

Morgan Stanley Institutional Strategies Fund
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX AUGUST 28, 2006*
MONTHS ENDED THROUGH
MARCH 31, 2007 SEPTEMBER 30, 2006
-------------- ------------------
(unaudited)

Class C Shares
Selected Per Share Data:
Net asset value, beginning of period........................ $ 10.22 $ 10.00
------- -------

Income (loss) from investment operations:
Net investment income (loss)++.......................... 0.04 (0.01)
Net realized and unrealized gain........................ 0.95 0.23
------- -------
Total income from investment operations..................... 0.99 0.22
------- -------
Net asset value, end of period.............................. $ 11.21 $ 10.22
======= =======
Total Return+............................................... 9.58%(1) 2.30 %(1)
Ratios to Average Net Assets(3)(4)(5):
Total expenses (before expense offset)...................... 1.39%(2) 1.39 %(2)
Net investment income (loss)................................ 0.80%(2) (1.25)%(2)
Supplemental Data:
Net assets, end of period, in thousands..................... $232 $212
Portfolio turnover rate..................................... 5%(1) 3 %(1)
</Table>

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

<Table>

<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED RATIO LOSS RATIO
------------ ------- --------------

March 31, 2007 16.32% (14.13)%
September 30,
2006 52.84 (52.70)
</Table>

See Notes to Financial Statements
18

Morgan Stanley Institutional Strategies Fund
FINANCIAL HIGHLIGHTS continued

<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX AUGUST 28, 2006*
MONTHS ENDED THROUGH
MARCH 31, 2007 SEPTEMBER 30, 2006
-------------- ------------------
(unaudited)

Class D Shares
Selected Per Share Data:
Net asset value, beginning of period........................ $ 10.23 $ 10.00
------- -------

Income from investment operations:
Net investment income++................................. 0.10 0.00
Net realized and unrealized gain........................ 0.94 0.23
------- -------
Total income from investment operations..................... 1.04 0.23
------- -------
Net asset value, end of period.............................. $ 11.27 $ 10.23
======= =======
Total Return+............................................... 10.17%(1) 2.30 %(1)
Ratios to Average Net Assets(3)(4)(5):
Total expenses (before expense offset)...................... 0.39%(2) 0.39 %(2)
Net investment income (loss)................................ 1.80%(2) (0.25)%(2)
Supplemental Data:
Net assets, end of period, in thousands..................... $141 $128
Portfolio turnover rate..................................... 5%(1) 3 %(1)
</Table>

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

<Table>

* Commencement of operations.
++ The per share amounts were computed using an average number
of shares outstanding during the period.
+ Calculated based on the net asset value as of the last
business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Does not include any expenses incurred as a result of
investment in the Underlying Funds.
(4) Reflects overall Fund ratios for investment income and
non-class specific expenses.
(5) If the Fund had borne all its expenses that were reimbursed
or waived by the Investment Adviser and Administrator, the
annualized expense and net investment loss ratios, before
expense offset, would have been as follows:
</Table>

<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED RATIO LOSS RATIO
------------ ------- --------------

March 31, 2007 15.32% (13.13)%
September 30,
2006 51.84 (51.70)
</Table>

See Notes to Financial Statements
19

TRUSTEES

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

OFFICERS

Michael E. Nugent
Chairperson of the Board

Ronald E. Robison
President and Principal Executive Officer

J. David Germany
Vice President

Dennis F. Shea
Vice President

Amy R. Doberman
Vice President

Carsten Otto
Chief Compliance Officer

Stefanie V. Chang Yu
Vice President

Francis J. Smith
Treasurer and Chief Financial Officer

Mary E. Mullin
Secretary

TRANSFER AGENT

Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281

LEGAL COUNSEL

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

COUNSEL TO THE INDEPENDENT TRUSTEES

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

INVESTMENT ADVISER

Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020

The financial statements included herein have been taken from the records of the
Fund without examination by the independent auditors and accordingly they do not
express an opinion thereon.

This report is submitted for the general information of the shareholders of the
Fund. For more detailed information about the Fund, its fees and expenses and
other pertinent information, please read its Prospectus. The Fund's Statement of
Additional information contains additional information about the Fund, including
its trustees. It is available, without charge, by calling (800) 869-NEWS.

This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective Prospectus. Read the
Prospectus carefully before investing.

Morgan Stanley Distributors Inc., member NASD

[MORGAN STANLEY LOGO]

MORGAN STANLEY FUNDS

Morgan Stanley
Institutional Strategies
Fund

Semiannual Report
March 31, 2007

[MORGAN STANLEY LOGO]

INSTSTRATSAR-IUO7-01109P-Y03/07

Item 2. Code of Ethics.