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)
522 Fifth Avenue, New York, New York 10036
(Address of principal executive offices) (Zip code)
Ronald E. Robison
522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-296-6990
Date of fiscal year end: September 30, 2008
Date of reporting period: March 31, 2008
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, 2008
TOTAL RETURN FOR THE 6 MONTHS ENDED MARCH 31, 2008
..
<Table>
<Caption>
BLENDED INDEX
(A BLEND
OF 1/3
RUSSELL 1000(R)
GROWTH
INDEX, 1/3
RUSSELL 1000(R) LIPPER
VALUE INDEX, GLOBAL
AND 1/3 MULTI-CAP
S&P MSCI EAFE CORE
CLASS A CLASS B CLASS C CLASS I+ 500(R)(1) INDEX)(2) FUNDS INDEX(3)
- -11.50% -11.06% -10.92% -11.72% -12.46% -11.74% -10.51%
</Table>
+ Formerly Class D shares. Renamed Class I shares effective March 31, 2008.
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
Global economic conditions contracted during the six-month period under review
as consumers adjusted to falling home values and rising food and energy costs.
Corporations were also forced to adjust to higher input costs and lengthening
sales cycles, as revenue growth slowed. The combined impact of falling
residential property values and rising mortgage financing costs finally popped
the real estate bubble in the U.S., which had seen residential property values
in the top fifty U.S. housing markets double between 2003 and 2007. The U.K.,
Europe and Australia also experienced declines in home prices after a similar
period of appreciation.
Global gross domestic product (GDP) fell sharply from the recovery experienced
in early 2007. In the U.S., GDP growth peaked during the third quarter of the
year at an annualized rate of 4.9 percent. By March 2008, GDP was contracting
and appeared to be headed for an annualized growth rate of 2 percent for the
full year. In Europe and Japan, growth also appeared to be contracting, but at a
slower pace than in the U.S.
Developing, or emerging market economies enjoyed more robust growth during the
period under review, however monetary conditions tightened in a number of
countries as authorities tried to reign in inflationary pressures.
Interestingly, the U.S. Federal Reserve eased (or lowered) interest rates
aggressively during this same period, responding to both slow growth and
financing company credit concerns, while the European Central Bank, fearing run-
away inflation, held rates unchanged.
As might be expected, global equity markets fell during the six months ended
March 31, 2008, as rising inflation and declining profit forecasts reduced
valuations. At the same time, fixed income markets rallied as investors sought
more predictable income streams from bonds.
PERFORMANCE ANALYSIS
All share classes of Morgan Stanley Institutional Strategies Fund outperformed
the S&P 500(R), 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) and underperformed the Lipper Global Multi-Cap Core
2
Funds Index for the six months ended March 31, 2008, assuming no deduction of
applicable sales charges.
Morgan Stanley Institutional Strategies Fund invests equal allocations of its
assets in three underlying Morgan Stanley Institutional Funds -- U.S. Large Cap
Growth++, Large Cap Relative Value and Active International Allocation. For the
six-month period ended March 31, 2008, the underlying funds posted the following
total returns: Active International Allocation, -9.90 percent; U.S. Large Cap
Growth, -11.38 percent, and Large Cap Relative Value, -12.50 percent.
During the six-month period under review, equity markets in Europe, Japan and
the U.S., as well as those in emerging markets, suffered double-digit losses.
Generally speaking, growth stocks outperformed value stocks during this period.
Financial and consumer cyclical sectors suffered the largest losses in the U.S.,
while healthcare and consumer staples outperformed.
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.
++ Morgan Stanley Institutional U.S. Large Cap Growth name change to Morgan
Stanley Institutional Capital Growth effective May 1, 2008.
3
<Table>
<Caption>
PORTFOLIO ALLOCATION
Morgan Stanley Institutional
Active International Allocation 33.7%
Morgan Stanley Institutional U.S.
Large Cap Growth++ 33.3
Morgan Stanley Institutional
Large Cap Relative Value 32.9
</Table>
Data as of March 31, 2008. 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.
++ Morgan Stanley Institutional U.S. Large Cap Growth name change to Morgan
Stanley Institutional Capital Growth effective May 1, 2008.
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 BELOW. 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
4
EXCHANGE COMMISSION (SEC) ON FORM N-CSRS AND FORM N-CSR, RESPECTIVELY. MORGAN
STANLEY ALSO DELIVERS THE SEMIANNUAL AND ANNUAL REPORTS TO FUND SHAREHOLDERS AND
MAKES THESE REPORTS AVAILABLE ON ITS PUBLIC WEB SITE, WWW.MORGANSTANLEY.COM.
EACH MORGAN STANLEY FUND ALSO FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS
WITH THE SEC FOR THE FUND'S FIRST AND THIRD FISCAL QUARTERS ON FORM N-Q. MORGAN
STANLEY DOES NOT DELIVER THE REPORTS FOR THE FIRST AND THIRD FISCAL QUARTERS TO
SHAREHOLDERS, NOR ARE THE REPORTS POSTED TO THE MORGAN STANLEY PUBLIC WEB SITE.
YOU MAY, HOWEVER, OBTAIN THE FORM N-Q FILINGS (AS WELL AS THE FORM N-CSR AND N-
CSRS FILINGS) BY ACCESSING THE SEC'S WEB SITE, HTTP://WWW.SEC.GOV. YOU MAY ALSO
REVIEW AND COPY THEM AT THE SEC'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC.
INFORMATION ON THE OPERATION OF THE SEC'S PUBLIC REFERENCE ROOM MAY BE OBTAINED
BY CALLING THE SEC AT (800) SEC-0330. YOU CAN ALSO REQUEST COPIES OF THESE
MATERIALS, UPON PAYMENT OF A DUPLICATING FEE, BY ELECTRONIC REQUEST AT THE SEC'S
E-MAIL ADDRESS (PUBLICINFO@SEC.GOV) OR BY WRITING THE PUBLIC REFERENCE SECTION
OF THE SEC, WASHINGTON, DC 20549-0102.
PROXY VOTING POLICY AND PROCEDURES AND PROXY VOTING RECORD
YOU MAY OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICY AND PROCEDURES WITHOUT
CHARGE, UPON REQUEST, BY CALLING TOLL FREE (800) 869-NEWS OR BY VISITING THE
MUTUAL FUND CENTER ON OUR WEB SITE AT WWW.MORGANSTANLEY.COM. IT IS ALSO
AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT
HTTP://WWW.SEC.GOV.
YOU MAY OBTAIN INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO
PORTFOLIO SECURITIES DURING THE MOST RECENT TWELVE-MONTH PERIOD ENDED JUNE 30
WITHOUT CHARGE BY VISITING THE MUTUAL FUND CENTER ON OUR WEB SITE AT
WWW.MORGANSTANLEY.COM. THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND
EXCHANGE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV.
HOUSEHOLDING NOTICE
TO REDUCE PRINTING AND MAILING COSTS, THE FUND ATTEMPTS TO ELIMINATE DUPLICATE
MAILINGS TO THE SAME ADDRESS. THE FUND DELIVERS A SINGLE COPY OF CERTAIN
SHAREHOLDER DOCUMENTS, INCLUDING SHAREHOLDER REPORTS, PROSPECTUSES AND PROXY
MATERIALS, TO INVESTORS WITH THE SAME LAST NAME WHO RESIDE AT THE SAME ADDRESS.
YOUR PARTICIPATION IN THIS PROGRAM WILL CONTINUE FOR AN UNLIMITED PERIOD OF TIME
UNLESS YOU INSTRUCT US OTHERWISE. YOU CAN REQUEST MULTIPLE COPIES OF THESE
DOCUMENTS BY CALLING (800) 869-NEWS, 8:00 A.M. TO 8:00 P.M., ET. ONCE OUR
CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING
INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS.
5
PERFORMANCE SUMMARY
AVERAGE ANNUAL TOTAL RETURNS -- PERIOD ENDED MARCH 31, 2008
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS I SHARES++
(since 08/28/06) (since 08/28/06) (since 08/28/06) (since 08/28/06)
SYMBOL GVIAX GVIBX GVICX GVIDX
1 YEAR (1.68)%(4) (1.45)%(4) (1.39)%(4) (1.69)%(4)
(6.84) (5) (6.23) (5) (2.35) (5) --
SINCE INCEPTION 6.61 (4) 6.40 (4) 6.51 (4) 6.66 (4)
3.05 (5) 3.96 (5) 6.51 (5) --
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/msim or speak with your Financial Advisor. Investment
returns and principal value will fluctuate and fund shares, when redeemed, may
be worth more or less than their original cost. The table does not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares. Performance for Class A, Class B, Class C, and Class
I shares will vary due to differences in sales charges and expenses.
* 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 I 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) The Lipper Global Multi-Cap Core Funds Index is an equally weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper Global Multi-Cap Core Funds classification. The Index, which is
adjusted for capital gains distributions and income dividends, is unmanaged
and should not be considered an investment. There are currently 30 funds
represented in this Index. As of the date of this report, the Fund is in the
Lipper Global Multi-Cap Core Funds classification.
(4) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(5) 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.
6
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
10/01/07 - 03/31/08.
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 @
------------- ------------- ---------------
10/01/07 -
10/01/07 03/31/08 03/31/08
------------- ------------- ---------------
CLASS A
Actual (-11.50% return)....................... $1,000.00 $ 885.00 $1.13
Hypothetical (5% annual return before
expenses)................................... $1,000.00 $1,023.80 $1.21
CLASS B
Actual (-11.06% return)....................... $1,000.00 $ 889.40 $3.16
Hypothetical (5% annual return before
expenses)................................... $1,000.00 $1,021.65 $3.39
CLASS C
Actual (-10.92% return)....................... $1,000.00 $ 890.80 $0.85
Hypothetical (5% annual return before
expenses)................................... $1,000.00 $1,024.10 $0.91
CLASS I @@
Actual (-11.72% return)....................... $1,000.00 $ 882.80 $0.85
Hypothetical (5% annual return before
expenses)................................... $1,000.00 $1,024.10 $0.91
</Table>
- ---------
@ Expenses are equal to the Fund's annualized expense ratios of 0.46%, 0.89%,
0.39% and 0.39% for Class A, Class B, Class C and Class I shares,
respectively, multiplied by the average account value over the period,
multiplied by 183/366 (to reflect the one-half year period). If the Fund had
borne all of its expenses, the annualized expense ratios would have been
21.03%, 21.46%, 19.77% and 20.96% for Class A, Class B, Class C and Class I
shares, respectively.
@@ Formerly Class D Shares. Renamed Class I Shares effective March 31, 2008.
7
Morgan Stanley Institutional Strategies Fund
PORTFOLIO OF INVESTMENT - MARCH 31, 2008 (UNAUDITED)
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- ---------------------------------------------------------------------------------------
Common Stocks (99.9%)
Investment Trusts/Mutual Funds
24,370 Morgan Stanley Institutional Active International
Allocation Portfolio (Class A).................... $ 354,092
16,145 Morgan Stanley Institutional U.S. Large Cap Growth
Portfolio (Class A) (a)........................... 349,533
32,276 Morgan Stanley Institutional Large Cap Relative
Value Portfolio (Class A)......................... 345,672
-----------
Total Investments (Cost $1,022,498) (b).............. 99.9% 1,049,297
Other Assets in Excess of Liabilities ............... 0.1 907
----- -----------
Net Assets ......................................... 100.0% $ 1,050,204
===== ===========
</Table>
- ----------
<Table>
(a) Morgan Stanley Institutional U.S. Large Cap Growth name change
to Morgan Stanley Institutional Capital Growth effective May 1,
2008.
(b) The aggregate cost for federal income tax purposes approximates
the aggregate cost for book purposes. The aggregate gross
unrealized appreciation is $59,952 and the aggregate gross
unrealized depreciation is $33,152, resulting in a net
appreciation of $26,799
</Table>
See Notes to Financial Statements
8
Morgan Stanley Institutional Strategies Fund
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
March 31, 2008 (unaudited)
<Table>
Assets:
Investments in securities, at value (cost $1,022,498)............ $1,049,297
Cash............................................................. 75,786
Receivable for shares of beneficial interest sold................ 5,325
Prepaid expenses and other assets................................ 29,343
Receivable from Investment Adviser............................... 25,793
----------
Total Assets.................................................. 1,185,544
----------
Liabilities:
Distribution fee payable......................................... 504
Accrued expenses and other payables.............................. 134,836
----------
Total Liabilities............................................. 135,340
----------
Net Assets.................................................... $1,050,204
==========
Composition of Net Assets:
Paid-in-capital.................................................. $ 986,333
Net unrealized appreciation...................................... 26,799
Accumulated undistributed net investment income.................. 17,897
Accumulated undistributed net realized gain...................... 19,175
----------
Net Assets.................................................... $1,050,204
==========
Class A Shares:
Net Assets....................................................... $423,165
Shares Outstanding (unlimited authorized, $.01 par value)........ 39,394
Net Asset Value Per Share..................................... $10.74
======
Maximum Offering Price Per Share,
(net asset value plus 5.54% of net asset value)............... $11.33
======
Class B Shares:
Net Assets....................................................... $313,547
Shares Outstanding (unlimited authorized, $.01 par value)........ 29,288
Net Asset Value Per Share..................................... $10.71
======
Class C Shares:
Net Assets....................................................... $ 179,407
Shares Outstanding (unlimited authorized, $.01 par value)........ 16,587
Net Asset Value Per Share..................................... $10.82
======
Class I Shares:@@
Net Assets....................................................... $134,085
Shares Outstanding (unlimited authorized, $.01 par value)........ 12,500
Net Asset Value Per Share..................................... $10.73
======
</Table>
- ----------
@@ Formerly Class D shares. Renamed Class I shares effective March 31, 2008.
See Notes to Financial Statements
9
Morgan Stanley Institutional Strategies Fund
FINANCIAL STATEMENTS continued
Statement of Operations
For the six months ended March 31, 2008 (unaudited)
<Table>
Net Investment Income:
Dividend Income.................................................. $ 19,920
---------
Expenses
Professional fees................................................ 61,832
Registration fees................................................ 32,998
Shareholder reports and notices.................................. 13,082
Transfer agent fees and expenses................................. 3,665
Distribution fee (Class A shares)................................ 149
Distribution fee (Class B shares)................................ 870
Trustees' fees and expenses...................................... 164
Other............................................................ 7,039
---------
Total Expenses................................................ 119,799
Less: amounts waived/reimbursed.................................. (117,776)
---------
Net Expenses.................................................. 2,023
---------
Net Investment Income......................................... 17,897
---------
Realized and Unrealized Gain (Loss):
Investments...................................................... (8,865)
Capital gain distribution received............................... 28,116
---------
Net Realized Gain............................................. 19,251
---------
Net Change in Unrealized Appreciation/Depreciation............ (177,692)
---------
Net Loss...................................................... (158,441)
---------
Net Decrease..................................................... $(140,544)
=========
</Table>
See Notes to Financial Statements
10
Morgan Stanley Institutional Strategies Fund
FINANCIAL STATEMENTS continued
Statements of Changes in Net Assets
<Table>
<Caption>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 2008 SEPTEMBER 30, 2007
-------------- ------------------
(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment income............................. $ 17,897 $ 7,677
Net realized gain................................. 19,251 22,754
Net change in unrealized
appreciation/depreciation....................... (177,692) 191,082
---------- ----------
Net Increase (Decrease)........................ (140,544) 221,513
---------- ----------
Dividends and Distributions to Shareholders from:
Net investment income
Class A shares................................. (5,147) --
Class B shares................................. (3,937) --
Class C shares................................. (494) --
Class I shares@@............................... (1,973) --
Net realized gain
Class A shares................................. (8,731) --
Class B shares................................. (6,854) --
Class C shares................................. (4,263) --
Class I shares@@............................... (2,905) --
---------- ----------
Total Dividends and Distributions.............. (34,305) --
---------- ----------
Net increase from transactions in shares of
beneficial interest............................. 4,230 170,536
Net Increase (Decrease)........................ (170,619) 392,049
Net Assets:
Beginning of period............................... 1,220,823 828,774
---------- ----------
End of Period
(Including accumulated undistributed net
investment income of $17,897 and $11,551,
respectively)..................................... $1,050,204 $1,220,823
========== ==========
</Table>
- ----------
@@ Formerly Class D shares. Renamed Class I shares effective March 31, 2008.
See Notes to Financial Statements
11
Morgan Stanley Institutional Strategies Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2008 (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 I
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within eighteen
months, six years and one year, respectively. Class I shares are not subject to
a sales charge. Additionally, Class A shares, Class B shares and Class C shares
incur distribution expenses. Effective March 31, 2008, Class D shares were
renamed Class I shares.
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 and are included in interest income. 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-to-market daily
12
Morgan Stanley Institutional Strategies Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2008 (UNAUDITED) continued
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 Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no provision for federal income
taxes is required. The Fund files tax returns with the U.S. Internal Revenue
Service, New York State and New York City. The Fund adopted the provisions of
the Financial Accounting Standards Board ("FASB") Interpretation No. 48 ("FIN
48") Accounting for Uncertainty in Income Taxes on March 30, 2008. FIN 48 sets
forth a minimum threshold for financial statement recognition of the benefit of
a tax position taken or expected to be taken in a tax return. The implementation
of FIN 48 did not result in any unrecognized tax benefits in the accompanying
financial statements. If applicable, the Fund recognizes interest accrued
related to unrecognized tax benefits in interest expense and penalties in other
expenses in the Statement of Operations. Each of the tax years in the four year
period ended March 31, 2008, remains subject to examination by taxing
authorities.
F. Dividends and Distributions to Shareholders -- Dividends and distributions to
shareholders are recorded on the ex-dividend date.
G. Use of Estimates -- The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from those estimates.
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. Under an agreement between the
13
Morgan Stanley Institutional Strategies Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2008 (UNAUDITED) continued
Administrator and State Street Bank and Trust Company ("State Street"), State
Street provides certain administrative services to the Fund.
The Investment Adviser has voluntarily agreed to cap the Fund's operating
expenses (exclusive of any indirect expenses from the Underlying Funds) by
assuming the Fund's "other expenses" so that such operating expenses do not
exceed 0.64%, 1.39%, 1.39% and 0.39% for Class A, Class B, Class C and Class I
shares respectively (on an annualized basis). These reimbursements are voluntary
and the Investment Adviser reserves the right to terminate them at any time and
without notice. At March 31, 2008, included in the 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 there were no excess amounts at March
31, 2008.
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, 2008, the
distribution fee was accrued for Class A shares and Class C shares at the annual
rate of 0.07% and 0.00%, respectively.
14
Morgan Stanley Institutional Strategies Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2008 (UNAUDITED) continued
The Distributor has informed the Fund that for the six months ended March 31,
2008, 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.
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 ended March 31, 2008 aggregated
$115,166 and $92,013, 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.
15
Morgan Stanley Institutional Strategies Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2008 (UNAUDITED) continued
5. Shares of Beneficial Interest
<Table>
<Caption>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
MARCH 31, 2008 ENDED
---------------- SEPTEMBER 30, 2007
(unaudited) -------------------
SHARES AMOUNT SHARES AMOUNT
------ ------- ------- ---------
CLASS A SHARES
Sold............................................ 813 9,914 12,915 $ 134,327
Conversion from Class B......................... 1,495 18,388 10,271 116,791
Reinvestment of dividends and distributions..... 769 8,846 -- --
Redeemed........................................ (26) (304) (234) (2,743)
------ ------- ------- ---------
Net increase - Class A.......................... 3,051 36,844 22,952 248,375
------ ------- ------- ---------
CLASS B SHARES
Sold............................................ 316 3,339 7,274 78,259
Conversion to Class A........................... (1,496) (18,388) (10,313) (116,791)
Reinvestment of dividends and distributions..... 860 9,885 -- --
Redeemed........................................ (817) (8,959) (884) (10,327)
------ ------- ------- ---------
Net decrease - Class B.......................... (1,137) (14,123) (3,923) (48,859)
------ ------- ------- ---------
CLASS C SHARES
Sold............................................ 16 326 2,343 26,735
Reinvestment of dividends and distributions..... 132 1,515 -- --
Redeemed........................................ (1,888) (20,332) (4,723) (55,715)
------ ------- ------- ---------
Net decrease - Class C.......................... (1,740) (18,491) (2,380) (28,980)
------ ------- ------- ---------
Net increase in Fund............................ 174 4,230 16,649 $ 170,536
====== ======= ======= =========
</Table>
6. 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, 2007, the Fund had temporary book/tax differences
attributable to capital loss deferrals on wash sales.
16
Morgan Stanley Institutional Strategies Fund
NOTES TO FINANCIAL STATEMENTS - MARCH 31, 2008 (UNAUDITED) continued
7. Accounting Pronouncements
On March 19, 2008, Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("FAS 161"). FAS 161 requires qualitative
disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related contingent features in
derivative agreements. The application of FAS 161 is required for fiscal years
beginning after November 15, 2008 and interim periods within those fiscal years.
At this time, management is evaluating the implications of FAS 161 and its
impact on the financial statements has not yet been determined.
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.
17
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 FOR THE YEAR AUGUST 28, 2006*
MONTHS ENDED ENDED THROUGH
MARCH 31, 2008 SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
-------------- ------------------ ------------------
(unaudited)
Class A Shares
Selected Per Share Data:
Net asset value, beginning of period......... $12.51 $10.23 $10.00
------ ------ ------
Income (loss) from investment operations:
Net investment income++................... 0.18 0.07 0.00
Net realized and unrealized gain (loss)... (1.58) 2.21 0.23
------ ----- -----
Total income (loss) from investment
operations.................................. (1.40) 2.28 0.23
------ ----- -----
Less dividends and distributions from:
Net investment income..................... (0.14) -- --
Net realized gain......................... (0.23) -- --
------ ----- -----
Total dividends and distributions............ (0.37) -- --
------ ----- -----
Net asset value, end of period............... $10.74 $12.51 $10.23
====== ====== ======
Total Return++++............................. (11.50)%(1) 22.29% 2.30 %(1)
Ratios to Average Net Assets(3)(4)(5):
Expenses..................................... 0.46 %(2) 0.61% 0.64 %(2)
Net investment income (loss)................. 3.02 %(2) 0.81% (0.50)%(2)
Supplemental Data:
Net assets, end of period, in thousands...... $423 $455 $137
Portfolio turnover rate...................... 8 %(1) 12% 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 would have been as follows:
</Table>
<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED RATIO LOSS RATIO
- ------------ ------- --------------
March 31, 2008 21.03% (17.55)%
September 30, 2007 18.55 (17.13)
September 30, 2006 52.09 (51.95)
</Table>
See Notes to Financial Statements
18
Morgan Stanley Institutional Strategies Fund
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR AUGUST 28, 2006*
MONTHS ENDED ENDED THROUGH
MARCH 31, 2008 SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
-------------- ------------------ ------------------
(unaudited)
Class B Shares
Selected Per Share Data:
Net asset value, beginning of period......... $12.51 $10.22 $10.00
------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)++............ 0.15 0.11 (0.01)
Net realized and unrealized gain (loss)... (1.59) 2.18 0.23
------ ----- -----
Total income (loss) from investment
operations.................................. (1.44) 2.29 0.22
------ ----- -----
Less dividends and distributions from:
Net investment income..................... (0.13) -- --
Net realized gain......................... (0.23) -- --
------ ------ -------
Total dividends and distributions............ (0.36) -- --
------ ----- -----
Net asset value, end of period............... $10.71 $12.51 $10.22
====== ====== ======
Total Return++++............................. (11.06)%(1) 21.43% 2.20 %(1)
Ratios to Average Net Assets(3)(4)(5):
Expenses..................................... 0.89 %(2) 0.58% 1.39 %(2)
Net investment income (loss)................. 2.59 %(2) 0.84% (1.25)%(2)
Supplemental Data:
Net assets, end of period, in thousands...... $314 $382 $352
Portfolio turnover rate...................... 8 %(1) 12% 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 would have been as follows:
</Table>
<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED RATIO LOSS RATIO
- ------------ ------- --------------
March 31, 2008 21.46% (17.98)%
September 30, 2007 18.52 (17.10)
September 30, 2006 52.84 (52.70)
</Table>
See Notes to Financial Statements
19
Morgan Stanley Institutional Strategies Fund
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR AUGUST 28, 2006*
MONTHS ENDED ENDED THROUGH
MARCH 31, 2008 SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
-------------- ------------------ ------------------
(unaudited)
Class C Shares
Selected Per Share Data:
Net asset value, beginning of period......... $12.41 $10.22 $10.00
------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)++............ 0.25 0.01 (0.01)
Net realized and unrealized gain (loss)... (1.58) 2.18 0.23
------ ----- -----
Total income (loss) from investment
operations.................................. (1.33) 2.19 0.22
------ ----- -----
Less dividends and distributions from:
Net investment income..................... (0.03) -- --
Net realized gain......................... (0.23) -- --
------ ----- -----
Total dividends and distributions............ (0.26) -- --
------ ----- -----
Net asset value, end of period............... $10.82 $12.41 $10.22
====== ====== ======
Total Return++++............................. (10.92)%(1) 21.31% 2.30 %(1)
Ratios to Average Net Assets(3)(4)(5):
Expenses..................................... 0.39 %(2) 1.39% 1.39 %(2)
Net investment income (loss)................. 3.09 %(2) 0.03% (1.25)%(2)
Supplemental Data:
Net assets, end of period, in thousands...... $179 $227 $212
Portfolio turnover rate...................... 8 %(1) 12% 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 would have been as follows:
</Table>
<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED RATIO LOSS RATIO
- ------------ ------- --------------
March 31, 2008 19.77% (17.48)%
September 30, 2007 19.33 (17.91)
September 30, 2006 52.84 (52.70)
</Table>
See Notes to Financial Statements
20
Morgan Stanley Institutional Strategies Fund
FINANCIAL HIGHLIGHTS continued
<Table>
<Caption>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR AUGUST 28, 2006*
MONTHS ENDED ENDED THROUGH
MARCH 31, 2008 SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
-------------- ------------------ ------------------
(unaudited)
Class I Shares@@
Selected Per Share Data:
Net asset value, beginning of period......... $12.54 $10.23 $10.00
Income (loss) from investment operations:
Net investment income++................... 0.18 0.12 0.00
Net realized and unrealized gain (loss)... (1.60) 2.19 0.23
------ ----- -----
Total income (loss) from investment
operations.................................. (1.42) 2.31 0.23
------ ----- -----
Less dividends and distributions from:
Net investment income..................... (0.16) -- --
Net realized gain......................... (0.23) -- --
------ ------ -------
Total dividends and distributions............ (0.39) -- --
------ ----- -----
Net asset value, end of period............... $10.73 $12.54 $10.23
====== ====== ======
Total Return++++............................. (11.72)%(1) 22.68% 2.30 %(1)
Ratios to Average Net Assets(3)(4)(5):
Expenses..................................... 0.39 %(2) 0.39% 0.39 %(2)
Net investment income (loss)................. 3.09 %(2) 1.03% (0.25)%(2)
Supplemental Data:
Net assets, end of period, in thousands...... $134 $157 $128
Portfolio turnover rate...................... 8 %(1) 12% 3 %(1)
</Table>
- ----------
<Table>
* Commencement of operations.
@@ Formerly Class D shares. Renamed Class I shares effective March 31,
2008.
++ 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 would have been as follows:
</Table>
<Table>
<Caption>
EXPENSE NET INVESTMENT
PERIOD ENDED RATIO LOSS RATIO
- ------------ ------- --------------
March 31, 2008 20.96% (17.48)%
September 30, 2007 18.33 (16.91)
September 30, 2006 51.84 (51.70)
</Table>
See Notes to Financial Statements
21
(This Page Intentionally Left Blank)
(This Page Intentionally Left Blank)
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
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 FINRA
(c) 2008 Morgan Stanley
[MORGAN STANLEY LOGO]
MORGAN STANLEY FUNDS
Morgan Stanley
Institutional Strategies
Fund
Semiannual Report
March 31, 2008
INSTSTRATSAN
IU08-02985P-Y03/08
Item 2. Code of Ethics.
Not applicable for semiannual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semiannual reports.
Item 4. Principal Accountant Fees and Services
Not applicable for semiannual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semiannual reports.
Item 6.
Refer to Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable for semiannual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Applicable only to reports filed by closed-end funds.
Item 9. Closed-End Fund Repurchases
Applicable to reports filed by closed-end funds.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits
(a) Code of Ethics - Not applicable for semiannual reports.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Institutional Strategies Fund
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
May 20, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Ronald E. Robison
Ronald E. Robison
Principal Executive Officer
May 20, 2008
/s/ Francis Smith
Francis Smith
Principal Financial Officer
May 20, 2008
3