<Page> 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: 811-07119 Morgan Stanley Global Utilities 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: February 29, 2004 Date of reporting period: February 29, 2004 Item 1 - Report to Shareholders <Page> Welcome, Shareholder: In this report, you'll learn about how your investment in Morgan Stanley Global Utilities Fund performed during the annual 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. <Page> FUND REPORT For the year ended February 29, 2004 FOR THE 12-MONTH PERIOD ENDED FEBRUARY 29, 2004 <Table> <Caption> MORGAN STANLEY CAPITAL LIPPER INTERNATIONAL UTILITY (MSCI) FUNDS CLASS A CLASS B CLASS C CLASS D WORLD INDEX(1) INDEX(2) - ----------------------------------------------------------------------- 28.57% 27.60% 27.53% 28.87% 44.36% 35.21% </Table> PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES SHOWN. FOR MORE UP-TO-DATE INFORMATION, INCLUDING MONTH-END PERFORMANCE FIGURES, PLEASE VISIT 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 PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS DIFFERENT EXPENSES. THE FUND'S TOTAL RETURN FIGURES 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 INFORMATION. MARKET CONDITIONS The equity markets encountered a low point in its business cycle shortly after the beginning of the 12-month period ended February 29, 2004. Then, from mid-March 2003 through the end of the period, equities rallied strongly from their lows. Returns were strong across all sectors of the market, with such economically sensitive sectors as basic materials, industrials and technology leading the pack. Their gains were supported by a combination of strong economic signals and investors' appetite for a means of capitalizing on anticipated further growth in the economy. Traditionally defensive sectors such as health care lagged in the rally. Against this favorable backdrop, performance in the utilities sector was also solid. While utilities stocks' inherently defensive characteristics prevented them from keeping pace with the leading sectors, the sector nonetheless produced solid total returns for the period. As with the broader market, the strongest-performing utility stocks were those of the more speculative companies that benefited the most from the rallying market. PERFORMANCE ANALYSIS While it produced strongly positive gains in absolute terms, Morgan Stanley Global Utilities Fund underperformed the broader MSCI World Index, made up of companies from all sectors of the global equity markets. The Fund's underperformance relative to that of the Lipper Utility Funds Index was driven largely by its level of holdings in non-U.S. utilities. While these companies all benefited from the falling U.S. dollar, their gains were not enough to outpace those of their domestic U.S. peers, especially the more speculative companies. We pursued several key strategies during the period under review. We chose to broaden the Fund's portfolio to include securities from eight countries, up from the six with which the Fund entered the period. We introduced these holdings into the portfolio on an unhedged basis, which allowed them to benefit fully from the falling value of the U.S. dollar over most of the period. During the last two months we reduced the Fund's non-U.S. holdings to mitigate the potential negative effects of a recent rise in the dollar as interest rates showed signs of future increase. 2 <Page> TOP 10 HOLDINGS <Table> Dominion Resources Inc. VA 4.2% Entergy Corp 4.2 FPL Group Inc 4.1 Cinergy 3.9 Public SVC Enterprise 3.7 Exelon Corporation 3.6 Ameren Corporation 3.5 Scana Corp 3.3 Constellation Energy Group 3.3 Vodafone Group PLC-SP ADR 3.2 </Table> TOP FIVE COUNTRIES <Table> United States 75.0% United Kingdom 6.2 Canada 4.3 Germany 4.0 Spain 3.8 </Table> DATA AS OF FEBRUARY 29, 2004. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES ARE A PERCENTAGE OF NET ASSETS. 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 WILL NORMALLY INVEST AT LEAST 80% OF ITS ASSETS IN SECURITIES OF COMPANIES FROM AROUND THE WORLD THAT ARE PRIMARILY ENGAGED IN THE UTILITIES INDUSTRY. THESE SECURITIES CAN INCLUDE COMMON STOCK AND OTHER EQUITY SECURITIES (INCLUDING PREFERRED STOCK, CONVERTIBLE SECURITIES AND DEPOSITORY RECEIPTS) AS WELL AS INVESTMENT GRADE FIXED INCOME SECURITIES (INCLUDING ZERO COUPON SECURITIES). A COMPANY WILL BE CONSIDERED TO BE PRIMARILY ENGAGED IN THE UTILITIES INDUSTRY IF IT DERIVES AT LEAST 50% OF ITS REVENUES OR EARNINGS FROM THE UTILITIES INDUSTRY OR DEVOTES AT LEAST 50% OF ITS ASSETS TO ACTIVITIES IN THE INDUSTRY. THESE MAY INCLUDE COMPANIES INVOLVED IN, AMONG OTHER AREAS: TELECOMMUNICATIONS, COMPUTERS AND OTHER NEW OR EMERGING TECHNOLOGY COMPANIES, GAS AND ELECTRIC, ENERGY, WATER DISTRIBUTION, THE INTERNET AND INTERNET RELATED SERVICES. THE COMPANIES MAY BE TRADITIONALLY REGULATED PUBLIC UTILITIES AS WELL AS FULLY OR PARTIALLY DEREGULATED AND UNREGULATED UTILITY COMPANIES. THE FUND'S `'INVESTMENT MANAGER," MORGAN STANLEY INVESTMENT ADVISORS INC., WILL SHIFT THE FUND'S ASSETS BETWEEN DIFFERENT TYPES OF UTILITIES, AMONG COMPANIES OF DIFFERENT COUNTRIES, AND BETWEEN EQUITY AND FIXED-INCOME SECURITIES, BASED ON PREVAILING MARKET, ECONOMIC AND FINANCIAL CONDITIONS. THE FUND WILL BE INVESTED IN AT LEAST THREE COUNTRIES (INCLUDING THE UNITED STATES). IF THE FUND HOLDS ANY FIXED-INCOME SECURITIES, THE AVERAGE WEIGHTED MATURITY OF THESE INVESTMENTS IS NORMALLY EXPECTED TO BE GREATER THAN SEVEN YEARS. ANNUAL 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. PROXY VOTING POLICIES AND PROCEDURES A DESCRIPTION OF THE FUND'S POLICIES AND PROCEDURES WITH RESPECT TO THE VOTING OF PROXIES RELATING TO THE FUND'S PORTFOLIO SECURITIES IS AVAILABLE WITHOUT CHARGE, UPON REQUEST, BY CALLING (800) 869-NEWS. THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND EXCHANGE COMMISSION'S WEB SITE AT http://www.sec.gov. 3 <Page> PERFORMANCE SUMMARY [CHART] PERFORMANCE OF A $10,000 INVESTMENT--CLASS B ($ IN THOUSANDS) <Table> <Caption> CLASS B MSCI WORLD(1) LIPPER(2) May-1994 $ 10,000 $ 10,000 $ 10,000 Aug-1994 $ 10,260 $ 10,461 $ 10,204 Nov-1994 $ 10,110 $ 10,015 $ 9,849 Feb-1995 $ 9,913 $ 10,098 $ 10,308 May-1995 $ 10,594 $ 11,039 $ 10,944 Aug-1995 $ 11,082 $ 11,323 $ 11,243 Nov-1995 $ 11,276 $ 11,860 $ 12,059 Feb-1996 $ 11,773 $ 12,495 $ 12,546 May-1996 $ 12,148 $ 13,005 $ 12,578 Aug-1996 $ 11,824 $ 12,746 $ 12,526 Nov-1996 $ 12,700 $ 14,077 $ 13,582 Feb-1997 $ 13,293 $ 14,172 $ 13,988 May-1997 $ 13,971 $ 15,222 $ 14,334 Aug-1997 $ 13,897 $ 15,592 $ 14,670 Nov-1997 $ 14,966 $ 15,841 $ 16,383 Feb-1998 $ 16,757 $ 17,588 $ 17,640 May-1998 $ 18,562 $ 18,269 $ 18,280 Aug-1998 $ 17,704 $ 16,175 $ 17,191 Nov-1998 $ 19,781 $ 19,008 $ 19,360 Feb-1999 $ 21,382 $ 19,823 $ 19,654 May-1999 $ 22,468 $ 20,669 $ 21,477 Aug-1999 $ 22,126 $ 21,521 $ 21,078 Nov-1999 $ 24,741 $ 23,042 $ 22,295 Feb-2000 $ 27,756 $ 23,535 $ 23,856 May-2000 $ 27,061 $ 23,480 $ 23,766 Aug-2000 $ 28,150 $ 24,346 $ 25,297 Nov-2000 $ 26,768 $ 21,281 $ 24,095 Feb-2001 $ 26,159 $ 20,173 $ 24,202 May-2001 $ 26,333 $ 19,971 $ 24,448 Aug-2001 $ 22,783 $ 18,165 $ 21,413 Nov-2001 $ 21,056 $ 17,874 $ 19,544 Feb-2002 $ 20,208 $ 17,284 $ 18,356 May-2002 $ 20,306 $ 17,461 $ 18,158 Aug-2002 $ 17,527 $ 15,041 $ 15,505 Nov-2002 $ 16,695 $ 15,144 $ 15,277 Feb-2003 $ 16,080 $ 13,724 $ 14,452 May-2003 $ 18,674 $ 15,739 $ 17,082 Aug-2003 $ 18,073 $ 16,684 $ 16,760 Nov-2003 $ 18,911 $ 18,047 $ 17,688 Feb-2004 $ 20,518^ $ 19,812 $ 19,540 </Table> PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH LESS THAN THEIR ORIGINAL COST. THE GRAPH AND TABLE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. PERFORMANCE FOR CLASS A, CLASS B, CLASS C, AND CLASS D SHARES WILL VARY DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES. 4 <Page> AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED FEBRUARY 29, 2004 <Table> <Caption> CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES++ 07/28/97 05/31/94 07/28/97 07/28/97 SYMBOL GUTAX GUTBX GUTCX GUTDX 1 YEAR 28.57%(3) 27.60%(3) 27.53%(3) 28.87%(3) 21.82(4) 22.60(4) 26.53(4) -- 5 YEARS (0.09)(3) (0.82)(3) (0.79)(3) 0.18(3) (1.16)(4) (1.11)(4) (0.79)(4) -- SINCE INCEPTION 5.84(3) 7.65(3) 5.08(3) 6.12(3) 4.97(4) 7.65(4) 5.08(4) -- </Table> Notes on Performance (1) THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD INDEX MEASURES PERFORMANCE FROM A DIVERSE RANGE OF GLOBAL STOCK MARKETS INCLUDING SECURITIES REPRESENTATIVE OF THE MARKET STRUCTURE OF 22 DEVELOPED MARKET COUNTRIES IN NORTH AMERICA, EUROPE, AND THE ASIA/PACIFIC REGION. THE PERFORMANCE OF THE INDEX IS LISTED IN U.S. DOLLARS AND ASSUMES REINVESTMENT OF NET DIVIDENDS. "NET DIVIDENDS" REFLECTS A REDUCTION IN DIVIDENDS AFTER TAKING INTO ACCOUNT WITHHOLDING OF TAXES BY CERTAIN FOREIGN COUNTRIES REPRESENTED IN THE INDEX. INDEXES ARE UNMANAGED AND THEIR 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 LIPPER UTILITY FUNDS INDEX IS AN EQUALLY WEIGHTED PERFORMANCE INDEX OF THE LARGEST QUALIFYING FUNDS (BASED ON NET ASSETS) IN THE LIPPER UTILITY 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 10 FUNDS REPRESENTED IN THIS 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. * 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% FOR SHARES REDEEMED WITHIN ONE YEAR OF PURCHASE. ++ CLASS D HAS NO SALES CHARGE. ^ CLOSING VALUE ASSUMING A COMPLETE REDEMPTION ON FEBRUARY 29, 2004. 5 <Page> MORGAN STANLEY GLOBAL UTILITIES FUND PORTFOLIO OF INVESTMENTS - FEBRUARY 29, 2004 <Table> <Caption> NUMBER OF SHARES VALUE - ----------------------------------------------------------------------- COMMON STOCKS (95.5%) CANADA (4.3%) TELECOMMUNICATIONS 171,000 BCE Inc. $ 3,746,701 250,000 Nortel Networks Corp.* 2,001,047 438,200 Telus Corp. (Non-Voting) 7,673,745 -------------- TOTAL CANADA 13,421,493 -------------- FINLAND (0.5%) TELECOMMUNICATIONS 75,600 Nokia Oyj 1,664,702 -------------- GERMANY (4.0%) ELECTRIC UTILITIES 100,200 E. ON AG 6,808,149 122,300 RWE AG 5,428,831 -------------- TOTAL GERMANY 12,236,980 -------------- JAPAN (1.0%) TELECOMMUNICATIONS 1,500 NTT DoCoMo, Inc. 3,118,132 -------------- SPAIN (3.8%) ELECTRIC UTILITIES 259,600 Iberdrola S.A. 5,382,391 -------------- TELECOMMUNICATIONS 393,400 Telefonica S.A.* 6,422,031 -------------- TOTAL SPAIN 11,804,422 -------------- SWEDEN (0.7%) TELECOMMUNICATIONS 725,000 Telefonaktiebolaget LM Ericsson* 2,125,468 -------------- UNITED KINGDOM (6.2%) ENERGY 2,373,900 Centrica PLC 9,504,247 -------------- TELECOMMUNICATIONS 394,100 Vodafone Group PLC (ADR) $ 9,840,677 -------------- TOTAL UNITED KINGDOM 19,344,924 -------------- UNITED STATES (75.0%) ELECTRIC UTILITIES 399,900 AES Corp. (The)* 3,623,094 230,300 Ameren Corp. 10,916,220 306,000 Cinergy Corp. 11,992,140 205,500 Consolidated Edison, Inc. 9,076,935 257,400 Constellation Energy Group, Inc. 10,231,650 205,900 Dominion Resources, Inc. 12,936,697 140,600 DTE Energy Co. 5,688,676 342,400 Energy East Corp. 8,272,384 218,100 Entergy Corp. 12,931,149 164,100 Exelon Corp. 11,017,674 40,000 FirstEnergy Corp. 1,545,200 195,000 FPL Group, Inc. 12,801,750 85,000 PG&E Corp.* 2,394,450 186,500 PPL Corp. 8,677,845 244,600 Public Service Enterprise Group, Inc. 11,530,444 323,900 Puget Energy, Inc. 7,287,750 293,900 SCANA Corp. 10,283,561 300,900 Southern Co. (The) 9,123,288 56,000 TXU Corp. 1,575,280 151,800 Wisconsin Energy Corp. 4,906,176 -------------- 166,812,363 -------------- ENERGY 172,200 AGL Resources, Inc. 4,938,696 35,000 Equitable Resources, Inc. 1,508,150 257,300 KeySpan Corp. 9,777,400 132,000 Kinder Morgan, Inc. 8,145,720 277,800 NiSource, Inc. 6,031,038 43,000 Questar Corp. 1,541,550 -------------- 31,942,554 -------------- TELECOMMUNICATIONS 441,400 AT&T Wireless Services Inc.* 5,994,212 192,400 BellSouth Corp. 5,302,544 153,880 Comcast Corp. (Class A)* 4,622,555 </Table> SEE NOTES TO FINANCIAL STATEMENTS 6 <Page> <Table> <Caption> NUMBER OF SHARES VALUE - ----------------------------------------------------------------------- 147,300 Cox Communications, Inc. (Class A)* $ 4,772,520 390,000 Lucent Technologies Inc.* 1,634,100 100,000 Motorola, Inc. 1,845,000 166,800 SBC Communications, Inc. 4,004,868 152,300 Verizon Communications Inc. 5,837,659 -------------- 34,013,458 -------------- TOTAL UNITED STATES 232,768,375 -------------- TOTAL COMMON STOCKS (COST $261,084,417) 296,484,496 -------------- <Caption> PRINCIPAL AMOUNT IN THOUSANDS - ----------- SHORT-TERM INVESTMENT (4.0%) REPURCHASE AGREEMENT $ 12,265 Joint repurchase agreement account 1.03% due 03/01/04 (dated 02/27/04; proceeds $12,266,053) (a) (COST $12,265,000) 12,265,000 -------------- TOTAL INVESTMENTS (COST $273,349,417) (b) 99.5% 308,749,496 OTHER ASSETS IN EXCESS OF LIABILITIES 0.5 1,403,013 ------ -------------- NET ASSETS 100.0% $ 310,152,509 ====== ============== </Table> ADR AMERICAN DEPOSITORY RECEIPT. * NON-INCOME PRODUCING SECURITY. (a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS. (b) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $274,586,403. THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $46,175,973 AND THE AGGREGATE GROSS UNREALIZED DEPRECIATION IS $12,012,880, RESULTING IN NET UNREALIZED APPRECIATION OF $34,163,093. FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT FEBRUARY 29, 2004: <Table> <Caption> UNREALIZED CONTRACTS IN EXCHANGE DELIVERY APPRECIATION/ TO DELIVER FOR DATE DEPRECIATION - ----------------------------------------------------- CAD1,891,845 $ 1,405,531 03/02/04 $ (9,673) CAD1,999,368 $ 1,498,664 03/03/04 3,027 ------------- Net unrealized depreciation $ (6,646) ============= </Table> CURRENCY ABBREVIATION: CAD Canadian Dollar. SUMMARY OF INVESTMENTS <Table> <Caption> PERCENT OF INDUSTRY VALUE NET ASSETS - -------------------------------------------------- Electric Utilities $ 184,431,734 59.4% Energy 41,446,801 13.3 Repurchase Agreement 12,265,000 4.0 Telecommunications 70,605,961 22.8 ------------- ------- $ 308,749,496 99.5% ============= ======= </Table> <Table> <Caption> PERCENT OF TYPE OF INVESTMENT VALUE NET ASSETS - -------------------------------------------------- Common Stocks $ 296,484,496 95.5% Short-Term Investment 12,265,000 4.0 ------------- ------- $ 308,749,496 99.5% ============= ======= </Table> SEE NOTES TO FINANCIAL STATEMENTS 7 <Page> MORGAN STANLEY GLOBAL UTILITIES FUND FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2004 <Table> ASSETS: Investments in securities, at value (cost $273,349,417) $ 308,749,496 Cash 13,415 Receivable for: Investments sold 2,910,841 Dividends 752,994 Shares of beneficial interest sold 118,438 Foreign withholding taxes reclaimed 60,437 Prepaid expenses and other assets 29,814 -------------- TOTAL ASSETS 312,635,435 -------------- LIABILITIES: Unrealized depreciation on open forward foreign currency contracts 6,646 Payable for: Investments purchased 1,539,261 Shares of beneficial interest redeemed 437,345 Distribution fee 250,692 Investment management fee 165,783 Accrued expenses and other payables 83,199 -------------- TOTAL LIABILITIES 2,482,926 -------------- NET ASSETS $ 310,152,509 ============== COMPOSITION OF NET ASSETS: Paid-in-capital $ 384,154,405 Net unrealized appreciation 35,406,860 Accumulated undistributed net investment income 5,879,837 Accumulated net realized loss (115,288,593) -------------- NET ASSETS $ 310,152,509 ============== CLASS A SHARES: Net Assets $ 4,867,767 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 405,242 NET ASSET VALUE PER SHARE $ 12.01 ============== MAXIMUM OFFERING PRICE PER SHARE, (NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 12.68 ============== CLASS B SHARES: Net Assets $ 298,012,138 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 24,830,047 NET ASSET VALUE PER SHARE $ 12.00 ============== CLASS C SHARES: Net Assets $ 5,547,868 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 466,618 NET ASSET VALUE PER SHARE $ 11.89 ============== CLASS D SHARES: Net Assets $ 1,724,736 Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 143,273 NET ASSET VALUE PER SHARE $ 12.04 ============== </Table> SEE NOTES TO FINANCIAL STATEMENTS 8 <Page> STATEMENT OF OPERATIONS FOR THE YEAR ENDED FEBRUARY 29, 2004 <Table> NET INVESTMENT INCOME: INCOME Dividends (net of $279,702 foreign withholding tax) $ 11,789,595 Interest 165,242 -------------- TOTAL INCOME 11,954,837 -------------- EXPENSES Distribution fee (Class A shares) 11,503 Distribution fee (Class B shares) 3,071,020 Distribution fee (Class C shares) 56,559 Investment management fee 2,073,012 Transfer agent fees and expenses 646,762 Shareholder reports and notices 79,669 Professional fees 64,190 Registration fees 48,099 Custodian fees 25,928 Trustees' fees and expenses 7,639 Other 16,696 -------------- TOTAL EXPENSES 6,101,077 -------------- NET INVESTMENT INCOME 5,853,760 Net Realized and Unrealized Gain: Net Realized Gain on: Investments 23,976,172 Foreign exchange transactions 25,953 -------------- NET REALIZED GAIN 24,002,125 -------------- NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON: Investments 47,834,434 Translation of forward foreign currency contracts, other assets and liabilities denominated in foreign currencies (29,328) -------------- NET APPRECIATION 47,805,106 -------------- NET GAIN 71,807,231 -------------- NET INCREASE $ 77,660,991 ============== </Table> SEE NOTES TO FINANCIAL STATEMENTS 9 <Page> STATEMENT OF CHANGES IN NET ASSETS <Table> <Caption> FOR THE YEAR FOR THE YEAR ENDED ENDED FEBRUARY 29, 2004 FEBRUARY 28, 2003 ----------------- ----------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income $ 5,853,760 $ 9,507,845 Net realized gain (loss) 24,002,125 (86,890,416) Net change in unrealized depreciation 47,805,106 (23,704,308) ----------------- ----------------- NET INCREASE (DECREASE) 77,660,991 (101,086,879) ----------------- ----------------- DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME: Class A shares (182,402) (203,097) Class B shares (9,102,987) (9,693,522) Class C shares (175,267) (186,203) Class D shares (60,665) (70,941) ----------------- ----------------- TOTAL DIVIDENDS (9,521,321) (10,153,763) ----------------- ----------------- Net decrease from transactions in shares of beneficial interest (75,801,985) (152,692,577) ----------------- ----------------- NET DECREASE (7,662,315) (263,933,219) NET ASSETS: Beginning of period 317,814,824 581,748,043 ----------------- ----------------- END OF PERIOD (Including accumulated undistributed net investment income of $5,879,837 and $9,521,310, respectively) $ 310,152,509 $ 317,814,824 ================= ================= </Table> SEE NOTES TO FINANCIAL STATEMENTS 10 <Page> MORGAN STANLEY GLOBAL UTILITIES FUND NOTES TO FINANCIAL STATEMENTS - FEBRUARY 29, 2004 1. ORGANIZATION AND ACCOUNTING POLICIES Morgan Stanley Global Utilities Fund (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund's investment objective is to seek both capital appreciation and current income. The Fund seeks to achieve its objective by investing in equity and fixed income securities of issuers worldwide, which are primarily engaged in the utilities industry. The Fund was organized as a Massachusetts business trust on October 22, 1993 and commenced operations on May 31, 1994. On July 28, 1997, the Fund converted to a multiple class share structure. 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 one year, 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) an equity portfolio security listed or traded on the New York Stock Exchange ("NYSE") or American Stock Exchange or other exchange is valued at its latest sale price prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (2) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) all other portfolio securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (4) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (5) when market quotations are not readily available or Morgan Stanley Investment Advisors Inc. (the "Investment Manager") determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by 11 <Page> the Fund's Trustees or by the Investment Manager using a pricing service and/or procedures approved by the Trustees of the Fund; (6) certain portfolio securities may be valued by an outside pricing service approved by the Fund's Trustees; and (7) 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 except for certain dividends on foreign securities which are recorded as soon as the Fund is informed after the ex-dividend date. Discounts are accreted and premiums are amortized over the life of the respective securities. 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 Manager, 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 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. FOREIGN CURRENCY TRANSLATION AND FORWARD FOREIGN CURRENCY CONTRACTS -- The books and records of the Fund are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities, other assets and liabilities and forward foreign currency contracts ("forward contracts") are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the exchange rates prevailing on the respective dates of such transactions. The resultant exchange gains and losses are recorded as realized and unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. federal income tax regulations, certain foreign exchange gains/losses included in realized and unrealized gain/loss are included in or are a reduction of ordinary income for federal income tax purposes. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of the securities. Forward contracts are valued daily at the appropriate exchange rates. The resultant unrealized exchange gains and losses are recorded as unrealized foreign currency 12 <Page> gain or loss. The Fund records realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (compensated) by entering into a closing transaction prior to delivery. F. 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. G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to shareholders are recorded on the ex-dividend date. H. 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 MANAGEMENT AGREEMENT Pursuant to an Investment Management Agreement, the Fund pays the Investment Manager a management fee, accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined as of the close of each business day: 0.65% to the portion of the daily net assets not exceeding $500 million; 0.625% to the portion of the daily net assets exceeding $500 million but not exceeding $1 billion; 0.60% to the portion of daily net assets exceeding $1 billion but not exceeding $1.5 billion; and 0.575% to the portion of daily net assets exceeding $1.5 billion. 3. PLAN OF DISTRIBUTION Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager. 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; (ii) Class B -- 1.0% of the lesser of: (a) the average daily aggregate gross sales of the Class B shares since the inception of the Fund (not including reinvestment of dividend or capital gain distributions) less the average daily aggregate net asset value of the Class B shares redeemed since the Fund's inception upon which a contingent deferred sales charge has been imposed or waived; or (b) the average daily net assets of Class B; and (iii) Class C -- up to 1.0% of the average daily net assets of Class C. 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 13 <Page> 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 $10,218,603 at February 29, 2004. 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 or other selected broker-dealer representatives may be reimbursed in the subsequent calendar year. For the year ended February 29, 2004, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.25% and 1.0%, respectively. The Distributor has informed the Fund that for the year ended February 29, 2004, it received contingent deferred sales charges from certain redemptions of the Fund's Class B shares and Class C shares of $247,374, and $327, respectively and received $31,740 in front-end sales charges from sales of the Fund's Class A shares. The respective shareholders pay such charges which are not an expense of the Fund. 4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the year ended February 29, 2004 aggregated $95,007,335 and $172,370,357, respectively. For the year ended February 29, 2004, the Fund incurred brokerage commissions of $65,540 with Morgan Stanley & Co. Inc., an affiliate of the Investment Manager and Distributor, for portfolio transactions executed on behalf of the Fund. Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is the Fund's transfer agent. At February 29, 2004, the Fund had transfer agent fees and expenses payable of approximately $11,000. 14 <Page> 5. SHARES OF BENEFICIAL INTEREST Transactions in shares of beneficial interest were as follows: <Table> <Caption> FOR THE YEAR FOR THE YEAR ENDED ENDED FEBRUARY 29, 2004 FEBRUARY 28, 2003 ------------------------------ ------------------------------- SHARES AMOUNT SHARES AMOUNT ------------- ------------- ------------- -------------- CLASS A SHARES Sold 96,805 $ 1,063,129 71,591 $ 811,409 Reinvestment of dividends 12,577 138,350 13,962 162,659 Redeemed (156,216) (1,680,197) (252,576) (2,822,338) ------------- ------------- ------------- -------------- Net decrease -- Class A (46,834) (478,718) (167,023) (1,848,270) ------------- ------------- ------------- -------------- CLASS B SHARES Sold 898,046 9,858,570 1,113,955 12,401,588 Reinvestment of dividends 706,639 7,808,361 719,502 8,396,588 Redeemed (8,462,835) (91,888,153) (15,503,437) (169,176,749) ------------- ------------- ------------- -------------- Net decrease -- Class B (6,858,150) (74,221,222) (13,669,980) (148,378,573) ------------- ------------- ------------- -------------- CLASS C SHARES Sold 46,214 495,744 63,651 682,797 Reinvestment of dividends 14,518 158,968 14,970 173,348 Redeemed (167,415) (1,799,357) (265,665) (2,857,946) ------------- ------------- ------------- -------------- Net decrease -- Class C (106,683) (1,144,645) (187,044) (2,001,801) ------------- ------------- ------------- -------------- CLASS D SHARES Sold 54,191 609,021 49,806 557,019 Reinvestment of dividends 4,910 54,061 5,558 64,802 Redeemed (56,772) (620,482) (98,541) (1,085,754) ------------- ------------- ------------- -------------- Net increase (decrease)-- Class D 2,329 42,600 (43,177) (463,933) ------------- ------------- ------------- -------------- Net decrease in Fund (7,009,338) $ (75,801,985) (14,067,224) $ (152,692,577) ============= ============= ============= ============== </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. 15 <Page> The tax character of distributions paid was as follows: <Table> <Caption> FOR THE YEAR FOR THE YEAR ENDED ENDED FEBRUARY 29, 2004 FEBRUARY 28, 2003 ----------------- ----------------- Ordinary income $ 9,521,321 $ 10,153,763 =========== ============ </Table> As of February 29, 2004, the tax-basis components of accumulated losses were as follows: <Table> Undistributed ordinary income $ 5,873,191 Undistributed long-term gains -- --------------- Net accumulated earnings $ 5,873,191 Capital loss carryforward* (114,051,607) Net unrealized appreciation 34,176,520 --------------- Total accumulated losses $ (74,001,896) =============== </Table> *During the year ended February 29, 2004, the Fund utilized $5,174,050 of its net capital loss carryforward. As of February 29, 2004, the Fund had a net capital loss carryforward of $114,051,607 of which $35,822,406 will expire on February 28, 2010 and $78,229,201 will expire on February 28, 2011 to offset future capital gains to the extent provided by regulations. As of February 29, 2004, the Fund had temporary book/tax differences primarily attributable to capital loss deferrals on wash sales and permanent book/tax differences primarily attributable to foreign currency gains. To reflect reclassifications arising from the permanent differences, paid-in-capital was charged $135, accumulated net realized loss was charged $25,953 and accumulated undistributed net investment income was credited $26,088. 7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS The Fund may enter into forward foreign currency contracts ("forward contracts") to facilitate settlement of foreign currency denominated portfolio transactions or to manage foreign currency exposure associated with foreign currency denominated securities. Forward contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rates underlying the forward contracts. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. 16 <Page> 8. LEGAL MATTERS The Investment Manager, certain affiliates of the Investment Manager, certain officers of such affiliates and certain investment companies advised by the Investment Manager or its affiliates, including the Fund, are named as defendants in a number of similar class action complaints which were recently consolidated. This consolidated action also names as defendants certain individual Trustees and Directors of the Morgan Stanley funds. The consolidated amended complaint generally alleges that defendants, including the Fund, violated their statutory disclosure obligations and fiduciary duties by failing properly to disclose (i) that the Investment Manager and certain affiliates of the Investment Manager allegedly offered economic incentives to brokers and others to recommend the funds advised by the Investment Manager or its affiliates to investors rather than funds managed by other companies, and (ii) that the funds advised by the Investment Manager or its affiliates, including the Fund, allegedly paid excessive commissions to brokers in return for their efforts to recommend these funds to investors. The complaint seeks, among other things, unspecified compensatory damages, rescissionary damages, fees and costs. The defendants intend to move to dismiss the action and otherwise vigorously to defend it. While the Fund believes that it has meritorious defenses, the ultimate outcome of this matter is not presently determinable at this early stage of the litigation, and no provision has been made in the Fund's financial statements for the effect, if any, of this matter. 17 <Page> MORGAN STANLEY GLOBAL UTILITIES FUND FINANCIAL HIGHLIGHTS Selected ratios and per share data for a share of beneficial interest outstanding throughout each period: <Table> <Caption> FOR THE YEAR ENDED FEBRUARY 28, ----------------------------------------------------------------------- 2004* 2003 2002 2001 2000* ----------- ----------- ----------- ----------- ----------- CLASS A SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 9.70 $ 12.47 $ 16.51 $ 20.02 $ 17.16 ----------- ----------- ----------- ----------- ----------- Income (loss) from investment operations: Net investment income++ 0.28 0.32 0.31 0.29 0.23 Net realized and unrealized gain (loss) 2.45 (2.73) (3.91) (1.22) 4.78 ----------- ----------- ----------- ----------- ----------- Total income (loss) from investment operations 2.73 (2.41) (3.60) (0.93) 5.01 ----------- ----------- ----------- ----------- ----------- Less dividends and distributions from: Net investment income (0.42) (0.36) (0.08) (0.26) (0.20) Net realized gain - - (0.36) (2.32) (1.95) ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (0.42) (0.36) (0.44) (2.58) (2.15) ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 12.01 $ 9.70 $ 12.47 $ 16.51 $ 20.02 =========== =========== =========== =========== =========== TOTAL RETURN+ 28.57% (19.79)% (22.21)% (5.05)% 30.68% RATIOS TO AVERAGE NET ASSETS(1): Expenses 1.18% 1.15% 1.06% 1.00% 1.06% Net investment income 2.57% 2.91% 2.06% 1.54% 1.25% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 4,868 $ 4,387 $ 7,723 $ 16,970 $ 13,313 Portfolio turnover rate 31% 18% 19% 31% 52% </Table> - ---------- * YEAR ENDED FEBRUARY 29. ++ 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) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 18 <Page> <Table> <Caption> FOR THE YEAR ENDED FEBRUARY 28, ----------------------------------------------------------------------- 2004* 2003 2002 2001 2000* ----------- ----------- ----------- ----------- ----------- CLASS B SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 9.67 $ 12.40 $ 16.50 $ 20.01 $ 17.15 ----------- ----------- ----------- ----------- ----------- Income (loss) from investment operations: Net investment income++ 0.20 0.24 0.20 0.15 0.11 Net realized and unrealized gain (loss) 2.44 (2.73) (3.89) (1.22) 4.78 ----------- ----------- ----------- ----------- ----------- Total income (loss) from investment operations 2.64 (2.49) (3.69) (1.07) 4.89 ----------- ----------- ----------- ----------- ----------- Less dividends and distributions from: Net investment income (0.31) (0.24) (0.05) (0.12) (0.08) Net realized gain - - (0.36) (2.32) (1.95) ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (0.31) (0.24) (0.41) (2.44) (2.03) ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 12.00 $ 9.67 $ 12.40 $ 16.50 $ 20.01 =========== =========== =========== =========== =========== TOTAL RETURN+ 27.60% (20.43)% (22.75)% (5.76)% 29.81% RATIOS TO AVERAGE NET ASSETS(1): Expenses 1.93% 1.90% 1.82% 1.74% 1.74% Net investment income 1.82% 2.16% 1.30% 0.80% 0.57% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 298,012 $ 306,554 $ 562,343 $ 914,995 $ 944,600 Portfolio turnover rate 31% 18% 19% 31% 52% </Table> - ---------- * YEAR ENDED FEBRUARY 29. ++ 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) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 19 <Page> <Table> <Caption> FOR THE YEAR ENDED FEBRUARY 28, ----------------------------------------------------------------------- 2004* 2003 2002 2001 2000* ----------- ----------- ----------- ----------- ----------- CLASS C SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 9.60 $ 12.33 $ 16.38 $ 19.90 $ 17.08 ----------- ----------- ----------- ----------- ----------- Income (loss) from investment operations: Net investment income++ 0.20 0.24 0.22 0.14 0.09 Net realized and unrealized gain (loss) 2.42 (2.70) (3.85) (1.21) 4.76 ----------- ----------- ----------- ----------- ----------- Total income (loss) from investment operations 2.62 (2.46) (3.63) (1.07) 4.85 ----------- ----------- ----------- ----------- ----------- Less dividends and distributions from: Net investment income (0.33) (0.27) (0.06) (0.13) (0.08) Net realized gain - - (0.36) (2.32) (1.95) ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (0.33) (0.27) (0.42) (2.45) (2.03) ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 11.89 $ 9.60 $ 12.33 $ 16.38 $ 19.90 =========== =========== =========== =========== =========== TOTAL RETURN+ 27.53% (20.15)% (22.78)% (5.81)% 29.73% RATIOS TO AVERAGE NET ASSETS(1): Expenses 1.93% 1.87% 1.67% 1.78% 1.81% Net investment income 1.82% 2.19% 1.45% 0.76% 0.50% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 5,548 $ 5,502 $ 9,374 $ 15,266 $ 10,156 Portfolio turnover rate 31% 18% 19% 31% 52% </Table> - ---------- * YEAR ENDED FEBRUARY 29. ++ 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) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 20 <Page> <Table> <Caption> FOR THE YEAR ENDED FEBRUARY 28, ----------------------------------------------------------------------- 2004* 2003 2002 2001 2000* ----------------------------------------------------------------------- CLASS D SHARES SELECTED PER SHARE DATA: Net asset value, beginning of period $ 9.73 $ 12.53 $ 16.54 $ 20.06 $ 17.18 ----------- ----------- ----------- ----------- ----------- Income (loss) from investment operations: Net investment income++ 0.30 0.35 0.35 0.29 0.32 Net realized and unrealized gain (loss) 2.47 (2.73) (3.91) (1.18) 4.76 ----------- ----------- ----------- ----------- ----------- Total income (loss) from investment operations 2.77 (2.38) (3.56) (0.89) 5.08 ----------- ----------- ----------- ----------- ----------- Less dividends and distributions from: Net investment income (0.46) (0.42) (0.09) (0.31) (0.25) Net realized gain - - (0.36) (2.32) (1.95) ----------- ----------- ----------- ----------- ----------- Total dividends and distributions (0.46) (0.42) (0.45) (2.63) (2.20) ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 12.04 $ 9.73 $ 12.53 $ 16.54 $ 20.06 =========== =========== =========== =========== =========== TOTAL RETURN+ 28.87% (19.56)% (21.98)% (4.85)% 31.08% RATIOS TO AVERAGE NET ASSETS(1): Expenses 0.93% 0.90% 0.82% 0.78% 0.81% Net investment income 2.82% 3.16% 2.30% 1.76% 1.50% SUPPLEMENTAL DATA: Net assets, end of period, in thousands $ 1,725 $ 1,371 $ 2,308 $ 2,750 $ 166 Portfolio turnover rate 31% 18% 19% 31% 52% </Table> - ---------- * YEAR ENDED FEBRUARY 29. ++ 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) REFLECTS OVERALL FUND RATIOS FOR INVESTMENT INCOME AND NON-CLASS SPECIFIC EXPENSES. SEE NOTES TO FINANCIAL STATEMENTS 21 <Page> MORGAN STANLEY GLOBAL UTILITIES FUND INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Trustees of Morgan Stanley Global Utilities Fund: We have audited the accompanying statement of assets and liabilities of Morgan Stanley Global Utilities Fund (the "Fund"), including the portfolio of investments, as of February 29, 2004, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of February 29, 2004, by correspondence with the custodian and broker. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Morgan Stanley Global Utilities Fund as of February 29, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP NEW YORK, NEW YORK APRIL 19, 2004 2004 FEDERAL TAX NOTICE (UNAUDITED) During the fiscal year ended February 29, 2004, 100% of the income dividends paid by the Fund qualified for the dividends received deduction available to corporations. Additionally, please note that 22.37% of the Fund's income dividends paid during the fiscal year ended February 29, 2004 qualified for the lower income tax rate available to individuals under the Jobs and Growth Tax Relief Reconciliation Act of 2003. 22 <Page> MORGAN STANLEY GLOBAL UTILITIES FUND TRUSTEE AND OFFICER INFORMATION INDEPENDENT TRUSTEES: <Table> <Caption> NUMBER OF PORTFOLIOS TERM OF IN FUND POSITION(S) OFFICE AND COMPLEX NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF OVERSEEN OTHER DIRECTORSHIPS INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE - ------------------------- ----------- ------------ -------------------------------------------- ------------ ---------------------- Michael Bozic (63) Trustee Since Private Investor; Director or Trustee of the 208 Director of Weirton c/o Kramer Levin Naftalis April 1994 Retail Funds (since April 1994) and the Steel Corporation. & Frankel LLP Institutional Funds (since July 2003); Counsel to the formerly Vice Chairman of Kmart Corporation Independent Trustees (December 1998- October 2000), Chairman and 919 Third Avenue Chief Executive Officer of Levitz Furniture New York, NY Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991- July 1995); formerly variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co. Edwin J. Garn (71) Trustee Since Director or Trustee of the Retail Funds 208 Director of Franklin c/o Summit Ventures LLC January 1993 (since January 1993) and the Institutional Covey (time management 1 Utah Center Funds (since July 2003); member of the Utah systems), BMW Bank of 201 S. Main Street Regional Advisory Board of Pacific Corp.; North America, Inc. Salt Lake City, UT formerly United States Senator (R-Utah) (industrial loan (1974-1992) and Chairman, Senate Banking corporation), United Committee (1980-1986), Mayor of Salt Lake Space Alliance (joint City, Utah (1971-1974), Astronaut, Space venture between Shuttle Discovery (April 12-19, 1985), and Lockheed Martin and Vice Chairman, Huntsman Corporation the Boeing Company) (chemical company). and Nuskin Asia Pacific (multilevel marketing); member of the board of various civic and charitable organizations. Wayne E. Hedien (70) Trustee Since Retired; Director or Trustee of the Retail 208 Director of The PMI c/o Kramer Levin Naftalis September Funds (since September 1997) and the Group Inc. (private & Frankel LLP 1997 Institutional Funds (since July 2003); mortgage insurance); Counsel to the formerly associated with the Allstate Trustee and Vice Independent Trustees Companies (1966-1994), most recently as Chairman of The Field 919 Third Avenue Chairman of The Allstate Corporation Museum of Natural New York, NY (March 1993- December 1994) and Chairman and History; director of Chief Executive Officer of its wholly-owned various other business subsidiary, Allstate Insurance Company and charitable (July 1989-December 1994). organizations. </Table> 23 <Page> <Table> <Caption> NUMBER OF PORTFOLIOS TERM OF IN FUND POSITION(S) OFFICE AND COMPLEX NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF OVERSEEN OTHER DIRECTORSHIPS INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE - ------------------------- ----------- ------------ -------------------------------------------- ------------ ---------------------- Dr.Manuel H. Johnson (55) Trustee Since Senior Partner, Johnson Smick International, 208 Director of NVR, Inc. c/o Johnson Smick July 1991 Inc., a consulting firm; Chairman of the (home construction); International, Inc. Audit Committee and Director or Trustee of Chairman and Trustee 2099 Pennsylvania the Retail Funds (since July 1991) and the of the Financial Avenue, N.W. Institutional Funds (since July 2003); Accounting Foundation Suite 950 Co-Chairman and a founder of the Group of (oversight Washington, D.C. Seven Council (G7C), an international organization of the economic commission; formerly Vice Chairman Financial Accounting of the Board of Governors of the Federal Standards Board); Reserve System and Assistant Secretary of Director of RBS the U.S. Treasury. Greenwich Capital Holdings (financial holding company). Joseph J. Kearns (61) Trustee Since President, Kearns & Associates LLC 209 Director of Electro PMB754 July 2003 (investment consulting); Deputy Chairman of Rent Corporation 23852 Pacific Coast the Audit Committee and Director or Trustee (equipment leasing), Highway of the Retail Funds (since July 2003) and The Ford Family Malibu, CA the Institutional Funds (since August Foundation, and the 1994);previously Chairman of the Audit UCLA Foundation. Committee of the Institutional Funds (October 2001- July 2003); formerly CFO of the J. Paul Getty Trust. Michael E. Nugent (67) Trustee Since General Partner of Triumph Capital, L.P., a 208 Director of various c/o Triumph Capital, L.P. July 1991 private investment partnership; Chairman of business 445 Park Avenue the Insurance Committee and Director or organizations. New York, NY Trustee of the Retail Funds (since July 1991) and the Institutional Funds (since July 2001); formerly Vice President, Bankers Trust Company and BT Capital Corporation (1984-1988). Fergus Reid (71) Trustee Since Trustee and Chairman of Lumelite Plastics 209 Trustee and Director c/o Lumelite Plastics July 2003 Corporation; Chairman of the Governance of certain investment Corporation Committee and Director or Trustee of the companies in the 85 Charles Colman Blvd. Retail Funds (since July 2003) and the JPMorgan Funds complex Pawling, NY Institutional Funds (since June 1992). managed by J.P. Morgan Investment Management Inc. </Table> 24 <Page> Interested Trustees: <Table> <Caption> NUMBER OF PORTFOLIOS TERM OF IN FUND POSITION(S) OFFICE AND COMPLEX NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF OVERSEEN OTHER DIRECTORSHIPS INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS** BY TRUSTEE*** HELD BY TRUSTEE - ------------------------- ----------- ------------ -------------------------------------------- ------------- ---------------------- Charles A. Chairman of Since Chairman and Director or Trustee of the 208 None Fiumefreddo (70) the Board July 1991 Retail Funds (since July 1991) and the c/o Morgan Stanley Trust and Trustee Institutional Funds (since July 2003); Harborside Financial formerly Chief Executive Officer of the Center, Retail Funds (until September 2002). Plaza Two, Jersey City, NJ James F. Higgins (56) Trustee Since Director or Trustee of the Retail Funds 208 Financial, Inc. and c/o Morgan Stanley Trust June 2000 (since June 2000) and the Institutional Funds The Equitable Life Harborside Financial (since July 2003); Senior Advisor of Morgan Assurance Society of Center, Stanley (since August 2000); Director of the the United States Plaza Two, Distributor and Dean Witter Realty Inc.; (financial services). Jersey City, NJ previously President and Chief Operating Officer of the Private Client Group of Morgan Stanley (May 1999- August 2000), and President and Chief Operating Officer of Individual Securities of Morgan Stanley (February 1997-May 1999). Philip J. Purcell (60) Trustee Since Chairman of the Board of Directors and Chief 208 Director of American 1585 Broadway April 1994 Executive Officer of Morgan Stanley and Airlines, Inc. and it New York, NY Morgan Stanley DW Inc.; Director or Trustee parent company, AMR of the Retail Funds (since April 1994) and Corporation. the Institutional Funds (since July 2003); Director of the Distributor; Chairman of the Board of Directors and Chief Executive Officer of Novus Credit Services Inc.; Director and/or officer of various Morgan Stanley subsidiaries. </Table> - ---------- * THIS IS THE EARLIEST DATE THE TRUSTEE BEGAN SERVING THE FUNDS ADVISED BY MORGAN STANLEY INVESTMENT ADVISORS INC. (THE "INVESTMENT MANAGER ") (THE "RETAIL FUNDS "). ** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICES AS DIRECTOR/TRUSTEE FOR THE RETAIL FUNDS AND THE FUNDS ADVISED BY MORGAN STANLEY INVESTMENT MANAGEMENT INC. AND MORGAN STANLEY AIP GP LP (THE "INSTITUTIONAL FUNDS") REFLECT THE EARLIEST DATE THE DIRECTOR/TRUSTEE BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS AS APPLICABLE. *** THE FUND COMPLEX INCLUDES ALL OPEN-END AND CLOSED-END FUNDS (INCLUDING ALL OF THEIR PORTFOLIOS) ADVISED BY THE INVESTMENT MANAGER AND ANY FUNDS THAT HAVE AN INVESTMENT ADVISOR THAT IS AN AFFILIATED PERSON OF THE INVESTMENT MANAGER (INCLUDING BUT NOT LIMITED TO MORGAN STANLEY INVESTMENT MANAGEMENT INC.). 25 <Page> OFFICERS: <Table> <Caption> TERM OF POSITION(S) OFFICE AND NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS** - --------------------------- ----------- -------------- -------------------------------------------------------------------------- Mitchell M. Merin (50) President Since May 1999 President and Chief Operating Officer of Morgan Stanley Investment 1221 Avenue of the Americas Management Inc.; President, Director and Chief Executive Officer of the New York, NY Investment Manager and Morgan Stanley Services; Chairman and Director of the Distributor; Chairman and Director of the Transfer Agent; Director of various Morgan Stanley subsidiaries; President of the Institutional Funds (since July 2003) and President of the Retail Funds (since May 1999 ); Trustee (since July 2003) and President (since December 2002) of the Van Kampen Closed-End Funds; Trustee (since May 1999) and President (since October 2002) of the Van Kampen Open-End Funds. Ronald E. Robison (65) Executive Since Chief Global Operations Officer and Managing Director of Morgan Stanley 1221 Avenue of the Americas Vice April 2003 Investment Management Inc.; Managing Director of Morgan Stanley & Co. New York, NY President Incorporated; Managing Director of Morgan Stanley; Managing Director, and Chief Administrative Officer and Director of the Investment Manager and Principal Morgan Stanley Services; Chief Executive Officer and Director of the Executive Transfer Agent; Managing Director and Director of the Distributor; Officer Executive Vice President and Principal Executive Officer of the Institutional Funds (since July 2003); previously President and Director of the Institutional Funds (March 2001-July 2003). Barry Fink (49) Vice Since General Counsel (since May 2000) and Managing Director (since December 1221 Avenue of the Americas President February 1997 2000) of Morgan Stanley Investment Management; Managing Director (since New York, NY and General December 2000), Secretary (since February 1997) and Director (since July Counsel 1998) of the Investment Manager and Morgan Stanley Services; Assistant Secretary of Morgan Stanley DW; Vice President of the Institutional Funds (since July 2003); Managing Director, Secretary and Director of the Distributor; previously Secretary of the Retail Funds (February 1997-July 2003); previously Vice President and Assistant General Counsel of the Investment Manager and Morgan Stanley Services (February 1997-December 2001). Joseph J. McAlinden (61) Vice Since July Managing Director and Chief Investment Officer of the Investment Manager 1221 Avenue of the Americas President 1995 and Morgan Stanley Investment Management Inc., Director of the Transfer New York, NY Agent, Chief Investment Officer of the Van Kampen Funds; Vice President of the Institutional Funds (since July 2003) and the Retail Funds (since July 1995). Stefanie V. Chang (37) Vice Since July Executive Director of Morgan Stanley & Co. Incorporated and Morgan Stanley 1221 Avenue of the Americas President 2003 Investment Management Inc. and Vice President of the Institutional Funds New York, NY (since December 1997) and the Retail Funds (since July 2003); formerly practiced law with the New York law firm of Rogers & Wells (now Clifford Chance US LLP). </Table> 26 <Page> <Table> <Caption> TERM OF POSITION(S) OFFICE AND NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF EXECUTIVE OFFICER REGISTRANT TIME SERVED* PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS** - --------------------------- ----------- -------------- -------------------------------------------------------------------------- Francis J. Smith (38) Treasurer Treasurer Executive Director of the Investment Manager and Morgan Stanley Services c/o Morgan Stanley Trust and Chief since July (since December 2001); previously Vice President of the Retail Funds Harborside Financial Center, Financial 2003 and Chief (September 2002- July 2003); previously Vice President of the Investment Plaza Two, Officer Financial Manager and Morgan Stanley Services (August 2000-November 2001) and Senior Jersey City, NJ Officer since Manager at PricewaterhouseCoopers LLP (January 1998-August 2000). September 2002 Thomas F. Caloia (57) Vice Since July Executive Director (since December 2002) and Assistant Treasurer of the c/o Morgan Stanley Trust President 2003 Investment Manager, the Distributor and Morgan Stanley Services; Harborside Financial Center, previously Treasurer of the Retail Funds (April 1989-July 2003); formerly Plaza Two, First Vice President of the Investment Manager, the Distributor and Morgan Jersey City, NJ Stanley Services. Mary E. Mullin (36) Secretary Since July Executive Director of Morgan Stanley & Co. Incorporated and Morgan Stanley 1221 Avenue of the Americas 2003 Investment Management Inc.; Secretary of the Institutional Funds (since New York, NY June 1999) and the Retail Funds (since July 2003); formerly practiced law with the New York law firms of McDermott, Will & Emery and Skadden, Arps, Slate, Meagher & Flom LLP. </Table> - ---------------- * THIS IS THE EARLIEST DATE THE OFFICER BEGAN SERVING THE RETAIL FUNDS. EACH OFFICER SERVES AN INDEFINITE TERM, UNTIL HIS OR HER SUCCESSOR IS ELECTED. ** THE DATES REFERENCED BELOW INDICATING COMMENCEMENT OF SERVICE AS AN OFFICER FOR THE RETAIL AND INSTITUTIONAL FUNDS REFLECT THE EARLIEST DATE THE OFFICER BEGAN SERVING THE RETAIL OR INSTITUTIONAL FUNDS AS APPLICABLE. 27 <Page> TRUSTEES Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien James F. Higgins Dr. Manuel H. Johnson Joseph J. Kearns Michael E. Nugent Philip J. Purcell Fergus Reid OFFICERS Charles A. Fiumefreddo CHAIRMAN OF THE BOARD Mitchell M. Merin PRESIDENT Ronald E. Robison EXECUTIVE VICE PRESIDENT and PRINCIPAL EXECUTIVE OFFICER Barry Fink VICE PRESIDENT and GENERAL COUNSEL Joseph J. McAlinden VICE PRESIDENT Stefanie V. Chang VICE PRESIDENT Francis J. Smith TREASURER and CHIEF FINANCIAL OFFICER Thomas F. Caloia VICE PRESIDENT Mary E. Mullin SECRETARY TRANSFER AGENT Morgan Stanley Trust Harborside Financial Center, Plaza Two Jersey City, New Jersey 07311 INDEPENDENT AUDITORS Deloitte & Touche LLP Two World Financial Center New York, New York 10281 INVESTMENT MANAGER Morgan Stanley Investment Advisors Inc. 1221 Avenue of the Americas New York, New York 10020 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. Investments and services offered through Morgan Stanley DW Inc., member SIPC. Morgan Stanley Distributors Inc., member NASD. [MORGAN STANLEY LOGO] (C) 2004 Morgan Stanley [MORGAN STANLEY LOGO] 37873RPT-RA04-00024P-A02/04 [GRAPHIC] MORGAN STANLEY FUNDS MORGAN STANLEY GLOBAL UTILITIES FUND ANNUAL REPORT FEBRUARY 29, 2004 [MORGAN STANLEY LOGO] <Page> Item 2. Code of Ethics. (a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Fund or a third party. (b) No information need be disclosed pursuant to this paragraph. (c) Not applicable. (d) Not applicable. (e) Not applicable. (f) (1) The Fund's Code of Ethics is attached hereto as Exhibit A. (2) Not applicable. (3) Not applicable. Item 3. Audit Committee Financial Expert. The Fund's Board of Trustees has determined that it has two "audit committee financial experts" serving on its audit committee, each of whom are "independent" Trustees: Dr. Manuel H. Johnson and Joseph J. Kearns. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification. <Page> Item 4. Principal Accountant Fees and Services. (a)(b)(c)(d) and (g). Based on fees billed for the periods shown: 2004 <Table> <Caption> REGISTRANT COVERED ENTITIES(1) AUDIT FEES $ 38,530 N/A NON-AUDIT FEES AUDIT-RELATED FEES $ 684(2) $ 3,364,576(2) TAX FEES $ 5,667(3) $ 652,431(4) ALL OTHER FEES $ 0 $ 0 TOTAL NON-AUDIT FEES $ 6,351 $ 4,017,007 TOTAL $ 44,881 $ 4,017,007 </Table> 2003 <Table> <Caption> REGISTRANT COVERED ENTITIES(1) AUDIT FEES $ 39,213 N/A NON-AUDIT FEES AUDIT-RELATED FEES $ 657(2) $ 2,620,902(2) TAX FEES $ 5,050(3) $ 302,377(4) ALL OTHER FEES $ 0 $ 423,095(5) TOTAL NON-AUDIT FEES $ 5,707 $ 3,346,374 TOTAL $ 44,920 $ 3,346,374 </Table> N/A- Not applicable, as not required by Item 4. (1) Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant. (2) Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities' and funds advised by the Adviser or its affiliates, specifically data verification and agreed-upon procedures related to asset securitizations and agreed-upon procedures engagements. (3) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the preparation and review of the Registrant's tax returns. (4) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the review of Covered Entities' tax returns. (5) All other fees represent project management for future business applications and improving business and operational processes. <Page> (e)(1) The audit committee's pre-approval policies and procedures are as follows: AUDIT COMMITTEE AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY AND PROCEDURES OF THE MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS AS ADOPTED JULY 31, 2003(1) 1. STATEMENT OF PRINCIPLES The Audit Committee of the Board is required to review and, in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities in order to assure that services performed by the Independent Auditors do not impair the auditor's independence from the Fund. The SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committee's administration of the engagement of the independent auditor. The SEC's rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee ("GENERAL PRE-APPROVAL"); or require the specific pre-approval of the Audit Committee or its delegate ("SPECIFIC PRE-APPROVAL"). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated) if it is to be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee. The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations. - ---------- (1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the "POLICY"), adopted as of the date above, supercedes and replaces all prior versions that may have been adopted from time to time. <Page> The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee's responsibilities to pre-approve services performed by the Independent Auditors to management. The Fund's Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors' independence. 2. DELEGATION As provided in the Act and the SEC's rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. 3. AUDIT SERVICES The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Fund's financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items. In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings. The Audit Committee has pre-approved the Audit services in Appendix B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). <Page> 4. AUDIT-RELATED SERVICES Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Fund's financial statements and, to the extent they are Covered Services, the Covered Entities or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC's rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as "Audit services"; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and/or N-CSR. The Audit Committee has pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 5. TAX SERVICES The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditor's independence, and the SEC has stated that the Independent Auditors may provide such services. Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 6. ALL OTHER SERVICES The Audit Committee believes, based on the SEC's rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC's rules on auditor independence. <Page> The Audit Committee has pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services. 8. PROCEDURES All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund's Chief Financial Officer and must include a detailed description of the services to be rendered. The Fund's Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the Independent Auditors and the Fund's Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC's rules on auditor independence. The Audit Committee has designated the Fund's Chief Financial Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Fund's Chief Financial Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Fund's Chief Financial Officer and management will immediately report to the chairman of the Audit Committee any breach of this Policy that comes to the attention of the Fund's Chief Financial Officer or any member of management. 9. ADDITIONAL REQUIREMENTS The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor's independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with Independence Standards Board No. <Page> 1, and discussing with the Independent Auditors its methods and procedures for ensuring independence. 10. COVERED ENTITIES Covered Entities include the Fund's investment adviser(s) and any entity controlling, controlled by or under common control with the Fund's investment adviser(s) that provides ongoing services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Fund's audit committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include: MORGAN STANLEY RETAIL FUNDS Morgan Stanley Investment Advisors Inc. Morgan Stanley & Co. Incorporated Morgan Stanley DW Inc. Morgan Stanley Investment Management Morgan Stanley Investments LP Van Kampen Asset Management Inc. Morgan Stanley Services Company, Inc. Morgan Stanley Distributors Inc. Morgan Stanley Trust FSB MORGAN STANLEY INSTITUTIONAL FUNDS Morgan Stanley Investment Management Inc. Morgan Stanley Investments LP Morgan Stanley & Co. Incorporated Morgan Stanley Distribution, Inc. Morgan Stanley AIP GP LP Morgan Stanley Alternative Investment Partners LP (e)(2) Beginning with non-audit service contracts entered into on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services were pre-approved by the audit committee pursuant to the Audit Committee's pre-approval policies and procedures (attached hereto). (f) Not applicable. (g) See table above. (h) The audit committee of the Board of Trustees has considered whether the provision of services other than audit services performed by the auditors to the Registrant and <Page> Covered Entities is compatible with maintaining the auditors' independence in performing audit services. Item 5. Audit Committee of Listed Registrants. Applicable only for reports covering periods ending on or after the earlier of (i) the first annual shareholder meeting after January 15, 2004 or (ii) October 31, 2004. Item 6. [Reserved.] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Applicable only to annual reports filed by closed-end funds. Item 8. [Reserved.] Item 9 - 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. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Fund's internal controls or in other factors that could significantly affect the Fund's internal controls subsequent to the date of their evaluation. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. <Page> Item 10 Exhibits (a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto. (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. 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 Global Utilities Fund /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer April 20, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer April 20, 2004 /s/ Francis Smith Francis Smith Principal Financial Officer April 20, 2004