<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 28, 2006
Date of reporting period: February 28, 2006
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. PLEASE SEE THE PROSPECTUS FOR MORE COMPLETE
INFORMATION ON INVESTMENT RISKS.
<Page>
FUND REPORT
For the year ended February 28, 2006
TOTAL RETURN FOR THE 12 MONTHS ENDED FEBRUARY 28, 2006
<Table>
<Caption>
MSCI LIPPER UTILITY
WORLD FUNDS
CLASS A CLASS B CLASS C CLASS D INDEX(1) INDEX(2)
13.67% 12.93% 12.92% 14.00% 13.25% 17.65%
</Table>
THE PERFORMANCE OF THE FUND'S FOUR SHARE CLASSES VARIES BECAUSE EACH HAS
DIFFERENT EXPENSES. THE FUND'S TOTAL RETURNS ASSUME THE REINVESTMENT OF ALL
DISTRIBUTIONS BUT DO NOT REFLECT THE DEDUCTION OF ANY APPLICABLE SALES CHARGES.
SUCH COSTS WOULD LOWER PERFORMANCE. SEE PERFORMANCE SUMMARY FOR STANDARDIZED
PERFORMANCE AND BENCHMARK INFORMATION.
MARKET CONDITIONS
Many factors contributed to the strong performance of the utilities sector
during the 12-month period ended February 28, 2006. Despite the Federal Open
Market Committee's steady monetary tightening policy, interest rates remained
low by historical standards. In this environment, utilities stocks were rewarded
by investors for their yield and dividend growth potential, especially as
favorable tax treatment provided additional incentive for investors seeking
dividend income.
The market's comfort with utilities stocks was also bolstered by the sector's
increased emphasis on basic service models. Such models entailed less high risk
diversification efforts, and in turn, cleaner balance sheets and enhanced
earnings predictability. The sector benefited from the 2005 passage of federal
energy legislation, designed to stimulate infrastructure enhancement and growth,
foster wholesale competition and induce more widespread consolidation.
Merger-and-acquisition deals began to blossom, and have included non-U.S.
domiciled investment in U.S. entities.
The global utilities sector performed solidly for the period, and significantly
outperformed the overall market. In the United States, the electric and natural
gas/energy sectors were standout investment areas within utilities. Performance
was more mixed within the telecommunications sector, but did end the fiscal year
on a relatively high note as domestic and international consolidation began to
ignite.
PERFORMANCE ANALYSIS
Morgan Stanley Global Utilities Fund Class A and Class D shares outperformed the
MSCI World Index and underperformed the Lipper Utility Funds Index, and Class B
and Class C shares underperformed both Indexes for the 12 months ended February
28, 2006, assuming no deduction of applicable sales charges.
Electric and natural gas/energy stocks were the dominant contributors to returns
for most of the fiscal year. High commodity prices throughout the period served
as a catalyst for the strong gains of the electric and natural gas/energy
sectors. For example, electric companies with relatively inexpensive nuclear or
coal-based generation benefited from the high cost of natural gas-fired electric
power by competitively selling into this high priced market. In addition,
diversified natural gas companies with exploration and production exposure
gained earnings power from the historically high price level of the commodity.
During the latter portion of the period, however, selective energy positions
within the portfolio detracted from performance as the electric and natural gas
sectors came under commodity sensitive pressure.
Meanwhile, after rather lackluster performance earlier in the period, the
telecommunications sector staged a
2
<Page>
strong comeback. Selective telecommunications stocks showed favorable momentum
as merger-and-acquisition premiums and pricing stability became critical
components of the valuation formula.
Because the Fund invests in both U.S. and non-U.S. stocks, its returns may be
more influenced by currency exchange trends than the returns of domestic
utilities funds. A strengthening dollar throughout most of the fiscal year
tempered overall results for the period relative to the Fund's peer group.
The Fund ended the period fully invested with 99 percent equity and 1 percent
cash, and well diversified across the global utilities sector. Within the equity
component, electric utilities accounted for 52 percent; followed by natural
gas/energy (25 percent) and telecommunications (23 percent). The allocation to
non-U.S. domiciled investments was 14 percent and was geographically focused in
Canada and Spain. We note that the Fund's holdings and allocation may be
modified at any time, in response to our analysis of broader trends or company
specific fundamentals.
THERE IS NO GUARANTEE THAT ANY SECTORS MENTIONED WILL CONTINUE TO PERFORM AS
DISCUSSED HEREIN OR THAT SECURITIES IN SUCH SECTORS WILL BE HELD BY THE FUND IN
THE FUTURE.
TOP 10 HOLDINGS
<Table>
Telus Corporation (Non Voting) 4.7%
FPL Group, Inc. 3.4
PPL Corp. 3.4
Entergy Corp. 3.3
TXU Corp. 3.1
Dominion Resources, Inc. 3.1
American Tower Corp. (Class A) 3.0
SCANA Corp. 3.0
Exelon Corp. 2.9
AGL Resources, Inc. 2.9
</Table>
TOP FOUR COUNTRIES
<Table>
United States 84.2%
Canada 9.7
Spain 4.6
United Kingdom 0.4
</Table>
DATA AS OF FEBRUARY 28, 2006. SUBJECT TO CHANGE DAILY. ALL PERCENTAGES FOR TOP
10 HOLDINGS AND TOP FOUR COUNTRIES 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.
3
<Page>
INVESTMENT STRATEGY
THE FUND WILL NORMALLY INVEST AT LEAST 80 PERCENT 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 DEPOSITARY 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 PERCENT OF ITS REVENUES OR EARNINGS
FROM THE UTILITIES INDUSTRY OR DEVOTES AT LEAST 50 PERCENT OF ITS ASSETS TO
ACTIVITIES IN THE INDUSTRY. THESE MAY INCLUDE COMPANIES INVOLVED IN, AMONG OTHER
AREAS: GAS AND ELECTRIC ENERGY, WATER DISTRIBUTION, TELECOMMUNICATIONS,
COMPUTERS AND OTHER NEW OR EMERGING TECHNOLOGY, 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 ADVISER," 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.
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 BY FILING THE SCHEDULE ELECTRONICALLY WITH THE
SECURITIES AND EXCHANGE COMMISSION (SEC). THE SEMIANNUAL REPORTS ARE FILED ON
FORM N-CSRS AND THE ANNUAL REPORTS ARE FILED ON FORM N-CSR. 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.
4
<Page>
YOU MAY OBTAIN INFORMATION REGARDING HOW THE FUND VOTED PROXIES RELATING TO
PORTFOLIO SECURITIES DURING THE MOST RECENT TWELVE-MONTH PERIOD ENDED JUNE 30
WITHOUT CHARGE BY VISITING THE MUTUAL FUND CENTER ON OUR WEB SITE AT
www.morganstanley.com. THIS INFORMATION IS ALSO AVAILABLE ON THE SECURITIES AND
EXCHANGE COMMISSION'S WEB SITE AT http://www.sec.gov.
HOUSEHOLDING NOTICE
TO REDUCE PRINTING AND MAILING COSTS, THE FUND ATTEMPTS TO ELIMINATE DUPLICATE
MAILINGS TO THE SAME ADDRESS. THE FUND DELIVERS A SINGLE COPY OF CERTAIN
SHAREHOLDER DOCUMENTS, INCLUDING SHAREHOLDER REPORTS, PROSPECTUSES AND PROXY
MATERIALS, TO INVESTORS WITH THE SAME LAST NAME WHO RESIDE AT THE SAME ADDRESS.
YOUR PARTICIPATION IN THIS PROGRAM WILL CONTINUE FOR AN UNLIMITED PERIOD OF TIME
UNLESS YOU INSTRUCT US OTHERWISE. YOU CAN REQUEST MULTIPLE COPIES OF THESE
DOCUMENTS BY CALLING (800) 350-6414, 8:00 A.M. TO 8:00 P.M., ET. ONCE OUR
CUSTOMER SERVICE CENTER HAS RECEIVED YOUR INSTRUCTIONS, WE WILL BEGIN SENDING
INDIVIDUAL COPIES FOR EACH ACCOUNT WITHIN 30 DAYS.
5
<Page>
PERFORMANCE SUMMARY
[CHART]
PERFORMANCE OF $10,000 INVESTMENT--CLASS B
ENDING VALUE
($ IN THOUSANDS)
<Table>
<Caption>
FUND++ MSCI WORLD INDEX(1) LIPPER UTILITY FUNDS INDEX(2)
Feb-1996 $ 10,000 $ 10,000 $ 10,000
Feb-1997 $ 11,291 $ 11,342 $ 11,150
Feb-1998 $ 14,233 $ 14,076 $ 14,060
Feb-1999 $ 18,161 $ 15,864 $ 15,665
Feb-2000 $ 23,576 $ 18,836 $ 19,014
Feb-2001 $ 22,218 $ 16,145 $ 19,290
Feb-2002 $ 17,164 $ 13,833 $ 14,631
Feb-2003 $ 13,658 $ 10,984 $ 11,519
Feb-2004 $ 17,427 $ 15,856 $ 15,575
Feb-2005 $ 21,216 $ 17,757 $ 18,981
Feb-2006 $ 23,959 $ 20,109 $ 22,331
</Table>
6
<Page>
AVERAGE ANNUAL TOTAL RETURNS--PERIOD ENDED FEBRUARY 28, 2006
<Table>
<Caption>
CLASS A SHARES* CLASS B SHARES** CLASS C SHARES+ CLASS D SHARES^^
(SINCE 07/28/97) (SINCE 05/31/94) (SINCE 07/28/97) (SINCE 07/28/97)
SYMBOL GUTAX GUTBX GUTCX GUTDX
1 YEAR 13.67%(3) 12.93%(3) 12.92%(3) 14.00%(3)
7.70(4) 7.93(4) 11.92(4) --
5 YEARS 2.27(3) 1.52(3) 1.57(3) 2.54(3)
1.17(4) 1.15(4) 1.57(4) --
10 YEARS -- 9.13(3) -- --
-- 9.13(4) -- --
SINCE INCEPTION 8.57(3) 9.23(3) 7.79(3) 8.86(3)
7.89(4) 9.23(4) 7.79(4) --
</Table>
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF
FUTURE RESULTS AND CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE FIGURES
SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE FIGURES, PLEASE VISIT
www.morganstanley.com OR SPEAK WITH YOUR FINANCIAL ADVISOR. INVESTMENT RETURNS
AND PRINCIPAL VALUE WILL FLUCTUATE AND FUND SHARES, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. THE 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.
* THE MAXIMUM FRONT-END SALES CHARGE FOR CLASS A IS 5.25%.
** THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE (CDSC) FOR CLASS B IS 5.0%.
THE CDSC DECLINES TO 0% AFTER SIX YEARS.
+ THE MAXIMUM CONTINGENT DEFERRED SALES CHARGE FOR CLASS C IS 1.0% FOR SHARES
REDEEMED WITHIN ONE YEAR OF PURCHASE.
^^ CLASS D HAS NO SALES CHARGE.
(1) THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD INDEX MEASURES
PERFORMANCE FROM A DIVERSE RANGE OF GLOBAL STOCK MARKETS INCLUDING THE
U.S., CANADA, NEW ZEALAND, AND THE FAR EAST. 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.
++ ENDING VALUE ASSUMING A COMPLETE REDEMPTION ON FEBRUARY 28, 2006.
7
<Page>
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 advisory fees; 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 09/01/05 - 02/28/06.
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 *
------------- ------------- ---------------
09/01/05 -
09/01/05 02/28/06 02/28/06
------------- ------------- ---------------
CLASS A
Actual (0.83% return) $ 1,000.00 $ 1,008.30 $ 6.03
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,018.79 $ 6.06
CLASS B
Actual (0.50% return) $ 1,000.00 $ 1,005.00 $ 9.74
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,015.08 $ 9.79
CLASS C
Actual (0.45% return) $ 1,000.00 $ 1,004.50 $ 9.74
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,015.08 $ 9.79
CLASS D
Actual (0.95% return) $ 1,000.00 $ 1,009.50 $ 4.78
Hypothetical (5% annual return before expenses) $ 1,000.00 $ 1,020.03 $ 4.81
</Table>
- ----------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.21%, 1.96%,
1.96% AND 0.96% FOR CLASS A, CLASS B, CLASS C AND CLASS D SHARES,
RESPECTIVELY, MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD,
MULTIPLIED BY 181/365 (TO REFLECT THE ONE-HALF YEAR PERIOD).
8
<Page>
MORGAN STANLEY GLOBAL UTILITIES FUND
PORTFOLIO OF INVESTMENTS - FEBRUARY 28, 2006
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------
COMMON STOCKS (98.9%)
CANADA (9.7%)
ENERGY
75,000 Canadian Natural
Resources Ltd. $ 4,092,000
50,000 Nexen Inc. 2,608,000
-------------
6,700,000
-------------
TELECOMMUNICATIONS
205,000 BCE Inc. 4,973,300
35,000 Rogers Communications, Inc. 1,401,050
315,000 Telus Corp. (Non-Voting) 12,249,692
-------------
18,624,042
-------------
TOTAL CANADA 25,324,042
-------------
SPAIN++(4.6%)
ELECTRIC UTILITIES
210,000 Iberdrola S.A. 6,621,967
-------------
TELECOMMUNICATIONS
359,136 Telefonica S.A. 5,536,378
-------------
TOTAL SPAIN 12,158,345
-------------
UNITED KINGDOM (0.4%)
TELECOMMUNICATIONS
60,100 Vodafone Group PLC (ADR) 1,161,132
-------------
UNITED STATES (84.2%)
ELECTRIC UTILITIES
394,900 AES Corp. (The)* 6,831,770
130,300 Ameren Corp. 6,602,301
145,000 Cinergy Corp. 6,391,600
125,000 CMS Energy Corp.* 1,760,000
150,700 Consolidated Edison, Inc. 6,912,609
50,900 Constellation
Energy Group, Inc. 2,989,866
106,700 Dominion Resources, Inc. 8,013,170
125,000 DPL, Inc. 3,365,000
120,700 Entergy Corp. 8,751,957
135,200 Exelon Corp. 7,721,272
114,600 FirstEnergy Corp. $ 5,853,768
215,400 FPL Group, Inc. 9,031,722
145,000 NRG Energy, Inc.* 6,271,250
165,000 PG&E Corp. 6,278,250
280,000 PPL Corp. 8,904,000
50,000 Progress Energy, Inc. 2,219,000
195,300 SCANA Corp. 7,964,334
205,900 Southern Co. (The) 7,006,777
100,000 TECO Energy, Inc. 1,706,000
155,000 TXU Corp. 8,120,450
155,800 Wisconsin Energy Corp. 6,367,546
-------------
129,062,642
-------------
ENERGY
210,100 AGL Resources, Inc. 7,542,590
25,000 Anadarko Petroleum Corp. 2,479,000
30,000 Cheniere Energy Inc.* 1,189,500
390,000 Dynegy, Inc. (Class A)* 2,109,900
200,200 Equitable Resources, Inc. 7,279,272
50,300 KeySpan Corp. 2,049,725
71,000 Kinder Morgan, Inc. 6,587,380
85,000 Ormat Technologies Inc. 3,266,550
100,100 Questar Corp. 7,332,325
100,000 Range Resources Corp. 2,393,000
155,000 Sempra Energy 7,415,200
50,000 Southern Union Co.* 1,231,000
100,000 Southwestern Energy Co.* 3,209,000
135,800 UGI Corp. 3,048,710
-------------
57,133,152
-------------
TELECOMMUNICATIONS
100,073 ALLTEL Corp. 6,319,610
250,360 American Tower Corp.
(Class A)* 7,968,959
155,900 AT&T Inc. 4,301,281
95,400 BellSouth Corp. 3,012,732
95,000 Citizens Communications Co. 1,268,250
90,000 General Communication, Inc.
(Class A)* 1,012,500
40,000 NII Holdings, Inc. (Class B)* 2,048,800
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
9
<Page>
<Table>
<Caption>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------------------------
210,000 Sprint Nextel Corp. $ 5,046,300
100,200 Verizon Communications Inc. 3,376,740
-------------
34,355,172
-------------
TOTAL UNITED STATES 220,550,966
-------------
TOTAL COMMON STOCKS
(COST $194,058,652) 259,194,485
-------------
<Caption>
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
SHORT-TERM INVESTMENT (0.9%)
REPURCHASE AGREEMENT
$ 2,350 Joint repurchase
agreement account
4.555% due 03/01/06
(dated 02/28/06;
proceeds $2,350,297) (a)
(COST $2,350,000) 2,350,000
-------------
TOTAL INVESTMENTS
(COST $196,408,653) (b) 99.8% 261,544,485
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.2 546,419
----- -------------
NET ASSETS 100.0% $ 262,090,904
===== =============
</Table>
- ----------
ADR AMERICAN DEPOSITARY RECEIPT.
* NON-INCOME PRODUCING SECURITY.
++ SECURITIES WITH TOTAL MARKET VALUE EQUAL TO $12,158,345 HAVE BEEN
VALUED AT THEIR FAIR VALUE AS DETERMINED IN GOOD FAITH UNDER
PROCEDURES ESTABLISHED BY AND UNDER THE GENERAL SUPERVISION OF THE
FUND'S TRUSTEES.
(a) COLLATERALIZED BY FEDERAL AGENCY AND U.S. TREASURY OBLIGATIONS.
(b) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $197,202,938.
THE AGGREGATE GROSS UNREALIZED APPRECIATION IS $70,442,716 AND THE
AGGREGATE GROSS UNREALIZED DEPRECIATION IS $6,101,169, RESULTING IN
NET UNREALIZED APPRECIATION OF $64,341,547.
FORWARD FOREIGN CURRENCY CONTRACT OPEN AT FEBRUARY 28, 2006:
<Table>
<Caption>
CONTRACTS IN EXCHANGE DELIVERY UNREALIZED
TO DELIVER FOR DATE DEPRECIATION
- --------------------------------------------------------------------
CAD 126,465 $ 110,046 03/01/06 $ (1,220)
============
</Table>
CURRENCY ABBREVIATION:
CAD Canadian Dollar.
SUMMARY OF INVESTMENTS
<Table>
<Caption>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------
Electric Utilities $ 135,684,609 51.8%
Energy 63,833,152 24.3
Telecommunications 59,676,724 22.8
Repurchase Agreement 2,350,000 0.9
-------------- ----
$ 261,544,485** 99.8%
============== ====
</Table>
- ----------
** DOES NOT INCLUDE OPEN FORWARD FOREIGN CURRENCY CONTRACTS WITH
UNREALIZED DEPRECIATION OF $1,220.
SEE NOTES TO FINANCIAL STATEMENTS
10
<Page>
MORGAN STANLEY GLOBAL UTILITIES FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 2006
<Table>
ASSETS:
Investments in securities, at value (cost $196,408,653) $ 261,544,485
Receivable for:
Investments sold 1,182,920
Dividends 674,352
Shares of beneficial interest sold 30,370
Foreign withholding taxes reclaimed 16,605
Prepaid expenses and other assets 33,188
---------------
TOTAL ASSETS 263,481,920
---------------
LIABILITIES:
Payable for:
Shares of beneficial interest redeemed 557,968
Investments purchased 435,266
Investment advisory fee 114,915
Distribution fee 107,741
Administration fee 16,128
Transfer agent fee 9,453
Unrealized depreciation on open forward foreign currency contract 1,220
Payable to bank 77,013
Accrued expenses and other payables 71,312
---------------
TOTAL LIABILITIES 1,391,016
---------------
NET ASSETS $ 262,090,904
===============
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 256,771,836
Net unrealized appreciation 65,137,175
Accumulated undistributed net investment income 3,971,924
Accumulated net realized loss (63,790,031)
---------------
NET ASSETS $ 262,090,904
===============
CLASS A SHARES:
Net Assets $ 161,808,460
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 10,218,884
NET ASSET VALUE PER SHARE $ 15.83
===============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE) $ 16.71
===============
CLASS B SHARES:
Net Assets $ 94,175,565
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 5,850,806
NET ASSET VALUE PER SHARE $ 16.10
===============
CLASS C SHARES:
Net Assets $ 4,619,979
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 294,439
NET ASSET VALUE PER SHARE $ 15.69
===============
CLASS D SHARES:
Net Assets $ 1,486,900
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE) 93,454
NET ASSET VALUE PER SHARE $ 15.91
===============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
11
<Page>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 2006
<Table>
NET INVESTMENT INCOME:
Income
Dividends (net of $133,267 foreign withholding tax) $ 8,266,701
Interest 128,234
---------------
TOTAL INCOME 8,394,935
---------------
EXPENSES
Investment advisory fee 1,615,891
Distribution fee (Class A shares) 352,047
Distribution fee (Class B shares) 1,334,175
Distribution fee (Class C shares) 59,318
Transfer agent fees and expenses 501,986
Administration fee 226,792
Professional fees 110,476
Registration fees 60,450
Shareholder reports and notices 60,194
Custodian fees 26,602
Trustees' fees and expenses 3,794
Other 27,344
---------------
TOTAL EXPENSES 4,379,069
---------------
NET INVESTMENT INCOME 4,015,866
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
NET REALIZED GAIN (LOSS) ON:
Investments 41,037,642
Foreign exchange transactions (22,191)
---------------
NET REALIZED GAIN 41,015,451
---------------
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments (9,005,159)
Translation of forward foreign currency contracts, other assets
and liabilities denominated in foreign currencies (10,581)
---------------
NET DEPRECIATION (9,015,740)
---------------
NET GAIN 31,999,711
---------------
NET INCREASE $ 36,015,577
===============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
12
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 28, 2006 FEBRUARY 28, 2005
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 4,015,866 $ 4,778,898
Net realized gain 41,015,451 10,462,965
Net change in unrealized appreciation/depreciation (9,015,740) 38,746,055
----------------- -----------------
NET INCREASE 36,015,577 53,987,918
----------------- -----------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares (4,266,365) (137,674)
Class B shares (362,530) (5,581,802)
Class C shares (129,668) (104,781)
Class D shares (50,759) (48,952)
----------------- -----------------
TOTAL DIVIDENDS (4,809,322) (5,873,209)
----------------- -----------------
Net decrease from transactions in shares of beneficial interest (58,778,076) (68,604,493)
----------------- -----------------
NET DECREASE (27,571,821) (20,489,784)
NET ASSETS:
Beginning of period 289,662,725 310,152,509
----------------- -----------------
END OF PERIOD
(INCLUDING ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME OF
$3,971,924 AND $4,787,571, RESPECTIVELY) $ 262,090,904 $ 289,662,725
================= =================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
13
<Page>
MORGAN STANLEY GLOBAL UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS - FEBRUARY 28, 2006
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 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 eighteen
months, six years and one year, respectively. Class D shares are not subject to
a sales charge. Additionally, Class A shares, Class B shares and Class C shares
incur distribution expenses.
Effective August 29, 2005, the Board of Trustees of the Fund approved the
implementation of a 2% redemption fee on Class A shares, Class B shares, Class C
shares, and Class D shares, which is paid directly to the Fund, for shares
redeemed within thirty days of purchase. The redemption fee is designed to
protect the Fund and its remaining shareholders from the effects of short-term
trading.
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
Adviser") determines that the latest sale price, the bid price or the mean
between the last reported bid and asked price do not reflect a security's market
value, portfolio securities are valued at their fair value as determined in good
faith under procedures established by and under the general supervision of the
Fund's Trustees. Occasionally, developments affecting the closing prices of
securities and other assets may occur between the times at which valuations of
such securities are determined (that is, close of the foreign market on which
the securities trade) and the close of business on the NYSE. If developments
occur during such periods that are
14
<Page>
expected to materially affect the value of such securities, such valuations may
be adjusted to reflect the estimated fair value of such securities as of the
close of the NYSE, as determined in good faith by the Fund's Trustees or by the
Investment Adviser using a pricing service and/or procedures approved by the
Trustees of the Fund; (6) certain portfolio securities may be valued by an
outside pricing service approved by the Fund's Trustees; 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 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 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.
15
<Page>
The resultant unrealized exchange gains and losses are recorded as unrealized
foreign currency 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 ADVISORY/ADMINISTRATION AGREEMENTS
Pursuant to an Investment Advisory Agreement, the Fund pays the Investment
Adviser an advisory 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: 0.57% to the portion of the daily net assets not exceeding
$500 million; 0.545% to the portion of the daily net assets exceeding $500
million but not exceeding $1 billion; 0.52% to the portion of daily net assets
exceeding $1 billion but not exceeding $1.5 billion; and 0.495% to the portion
of daily net assets exceeding $1.5 billion.
Pursuant to an Administration Agreement with Morgan Stanley Services Company
Inc. (the "Administrator"), an affiliate of the Investment Adviser, the Fund
pays an administration fee, accrued daily and payable monthly, by applying the
annual rate of 0.08% to the Fund's daily net assets.
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; (ii) Class B -- up
to 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.
16
<Page>
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts totaled $6,754,264
at February 28, 2006.
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 28, 2006, 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 28, 2006,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $112, $172,091 and
$968, respectively, and received $52,584 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 28, 2006 aggregated
$67,776,499 and $122,887,628, respectively.
For the year ended February 28, 2006, the Fund incurred brokerage commissions of
$84,369 with Morgan Stanley & Co. Inc., an affiliate of the Investment Adviser,
Administrator and Distributor, for portfolio transactions executed on behalf of
the Fund. At February 28, 2006, the Portfolio's payable for investments
purchased included unsettled trades with Morgan Stanley & Co., Inc. of $201,780.
Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and
Distributor, is the Fund's 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 receives for serving on the
17
<Page>
Board of Trustees. Each eligible Trustee generally may elect to have the
deferred amounts credited with a return equal to the total return on one or more
of the Morgan Stanley funds that are offered as investment options under the
Compensation Plan. Appreciation/depreciation and distributions received from
these investments are recorded with an offsetting increase/decrease in the
deferred compensation obligation and do not affect the net asset value of the
Fund.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 28, 2006 FEBRUARY 28, 2005
------------------------------------ ------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------- ---------------- ---------------- ----------------
CLASS A SHARES
Sold 248,763 $ 3,798,892 58,494 $ 720,812
Conversion from Class B 11,674,182 169,190,617 -- --
Reinvestment of dividends 240,081 3,610,814 8,671 99,024
Redeemed (2,293,434) (35,256,454) (123,115) (1,527,205)
---------------- ---------------- ---------------- ----------------
Net increase (decrease) -- Class A 9,869,592 141,343,869 (55,950) (707,369)
---------------- ---------------- ---------------- ----------------
CLASS B SHARES
Sold 669,922 10,069,997 668,510 8,544,246
Conversion to Class A (11,658,877) (169,190,617) -- --
Reinvestment of dividends 19,040 292,646 408,632 4,695,178
Redeemed (2,603,923) (39,654,689) (6,482,545) (79,663,139)
---------------- ---------------- ---------------- ----------------
Net decrease -- Class B (13,573,838) (198,482,663) (5,405,403) (66,423,715)
---------------- ---------------- ---------------- ----------------
CLASS C SHARES
Sold 150,392 2,152,093 31,874 403,258
Reinvestment of dividends 7,772 116,423 8,332 94,816
Redeemed (222,140) (3,335,696) (148,409) (1,823,692)
---------------- ---------------- ---------------- ----------------
Net decrease -- Class C (63,976) (1,067,180) (108,203) (1,325,618)
---------------- ---------------- ---------------- ----------------
CLASS D SHARES
Sold 31,934 484,633 46,515 576,115
Reinvestment of dividends 2,533 38,219 3,651 41,699
Redeemed (70,850) (1,094,954) (63,602) (765,605)
---------------- ---------------- ---------------- ----------------
Net decrease -- Class D (36,383) (572,102) (13,436) (147,791)
---------------- ---------------- ---------------- ----------------
Net decrease in Fund (3,804,605) $ (58,778,076) (5,582,992) $ (68,604,493)
================ ================ ================ ================
</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
18
<Page>
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.
The tax character of distributions paid was as follows:
<Table>
<Caption>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 28, 2006 FEBRUARY 28, 2005
----------------- -----------------
Ordinary income $ 4,809,322 $ 5,873,209
================= =================
As of February 28, 2006, the tax-basis components of accumulated earnings were
as follows:
Undistributed ordinary income $ 3,981,370
Undistributed long-term gains --
-----------------
Net accumulated earnings 3,981,370
Capital loss carryforward* (62,995,718)
Post-October losses (9,047)
Temporary differences (427)
Net unrealized appreciation 64,342,890
-----------------
Total accumulated earnings $ 5,319,068
=================
</Table>
*During the year ended February 28, 2006, the Fund utilized $41,098,103 of its
net capital loss carryforward. As of February 28, 2006, the Fund had a net
capital loss carryforward of $62,995,718 which will expire on February 28, 2011
to offset future capital gains to the extent provided by regulations.
As of February 28, 2006, the Fund had temporary book/tax differences primarily
attributable to post-October losses (foreign currency losses incurred after
October 31 within the taxable year which are deemed to arise on the first
business day of the Fund's next taxable year) and capital loss deferrals on wash
sales and permanent book/tax differences attributable to foreign currency
losses. To reflect reclassifications arising from the permanent differences,
accumulated undistributed net investment income was charged and accumulated net
realized loss was credited $22,191.
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward contracts")
for many purposes, including to facilitate settlement of foreign currency
denominated portfolio transactions or to manage foreign currency exposure
associated with foreign currency denominated securities.
19
<Page>
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.
8. LEGAL MATTERS
The Investment Adviser, certain affiliates of the Investment Adviser, certain
officers of such affiliates and certain investment companies advised by the
Investment Adviser or its affiliates, including the Fund, are named as
defendants in a consolidated class action. This consolidated action also names
as defendants certain individual Trustees and Directors of the Morgan Stanley
funds. The consolidated amended complaint, filed in the United States District
Court Southern District of New York on April 16, 2004, generally alleges that
defendants, including the Fund, violated their statutory disclosure obligations
and fiduciary duties by failing properly to disclose (i) that the Investment
Adviser and certain affiliates of the Investment Adviser allegedly offered
economic incentives to brokers and others to recommend the funds advised by the
Investment Adviser or its affiliates to investors rather than funds managed by
other companies, and (ii) that the funds advised by the Investment Adviser 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 have moved to dismiss the
action and intend to otherwise vigorously defend it. On March 9, 2005,
Plaintiffs sought leave to supplement their complaint to assert claims on behalf
of other investors, which motion defendants opposed. While the Fund and Adviser
believe that each has meritorious defenses, the ultimate outcome of this matter
is not presently determinable and no provision has been made in the Fund's
financial statements for the effect, if any, of this matter.
9. FUND MERGER
On February 6, 2006, the Trustees of Morgan Stanley Utilities Fund ("Utilities")
and the Fund approved a plan of reorganization whereby the Fund would be merged
into Utilities. The plan of reorganization is subject to the consent of the
Fund's shareholders at a special meeting scheduled to be held during the third
quarter of 2006. If approved, the assets of the Fund would be combined with the
assets of Utilities and shareholders of the Fund would become shareholders of
Utilities, receiving shares of the corresponding class of Utilities equal to the
value of their holdings in the Fund.
20
<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,
----------------------------------------------------------------------------
2006 2005 2004* 2003 2002
------------ ------------ ------------ ------------ ------------
CLASS A SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 14.29 $ 12.01 $ 9.70 $ 12.47 $ 16.51
------------ ------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income++ 0.28 0.30 0.28 0.32 0.31
Net realized and unrealized gain (loss) 1.65 2.33 2.45 (2.73) (3.91)
------------ ------------ ------------ ------------ ------------
Total income (loss) from investment operations 1.93 2.63 2.73 (2.41) (3.60)
------------ ------------ ------------ ------------ ------------
Less dividends and distributions from:
Net investment income (0.39) (0.35) (0.42) (0.36) (0.08)
Net realized gain - - - - (0.36)
------------ ------------ ------------ ------------ ------------
Total dividends and distributions (0.39) (0.35) (0.42) (0.36) (0.44)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 15.83 $ 14.29 $ 12.01 $ 9.70 $ 12.47
============ ============ ============ ============ ============
TOTAL RETURN+ 13.67% 22.68% 28.57% (19.79)% (22.21)%
RATIOS TO AVERAGE NET ASSETS(1):
Expenses 1.18% 1.16% 1.18% 1.15% 1.06%
Net investment income 1.78% 2.44% 2.57% 2.91% 2.06%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 161,808 $ 4,990 $ 4,868 $ 4,387 $ 7,723
Portfolio turnover rate 24% 18% 31% 18% 19%
</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
21
<Page>
<Table>
<Caption>
FOR THE YEAR ENDED FEBRUARY 28,
----------------------------------------------------------------------------
2006 2005 2004* 2003 2002
------------ ------------ ------------ ------------ ------------
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 14.30 $ 12.00 $ 9.67 $ 12.40 $ 16.50
------------ ------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income++ 0.16 0.21 0.20 0.24 0.20
Net realized and unrealized gain (loss) 1.69 2.34 2.44 (2.73) (3.89)
------------ ------------ ------------ ------------ ------------
Total income (loss) from investment operations 1.85 2.55 2.64 (2.49) (3.69)
------------ ------------ ------------ ------------ ------------
Less dividends and distributions from:
Net investment income (0.05) (0.25) (0.31) (0.24) (0.05)
Net realized gain - - - - (0.36)
------------ ------------ ------------ ------------ ------------
Total dividends and distributions (0.05) (0.25) (0.31) (0.24) (0.41)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 16.10 $ 14.30 $ 12.00 $ 9.67 $ 12.40
============ ============ ============ ============ ============
TOTAL RETURN+ 12.93% 21.74% 27.60% (20.43)% (22.75)%
RATIOS TO AVERAGE NET ASSETS(1):
Expenses 1.93% 1.92% 1.93% 1.90% 1.82%
Net investment income 1.03% 1.68% 1.82% 2.16% 1.30%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 94,176 $ 277,738 $ 298,012 $ 306,554 $ 562,343
Portfolio turnover rate 24% 18% 31% 18% 19%
</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
22
<Page>
<Table>
<Caption>
FOR THE YEAR ENDED FEBRUARY 28,
----------------------------------------------------------------------------
2006 2005 2004* 2003 2002
------------ ------------ ------------ ------------ ------------
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 14.16 $ 11.89 $ 9.60 $ 12.33 $ 16.38
------------ ------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income++ 0.16 0.21 0.20 0.24 0.22
Net realized and unrealized gain (loss) 1.66 2.31 2.42 (2.70) (3.85)
------------ ------------ ------------ ------------ ------------
Total income (loss) from investment operations 1.82 2.52 2.62 (2.46) (3.63)
------------ ------------ ------------ ------------ ------------
Less dividends and distributions from:
Net investment income (0.29) (0.25) (0.33) (0.27) (0.06)
Net realized gain - - - - (0.36)
------------ ------------ ------------ ------------ ------------
Total dividends and distributions (0.29) (0.25) (0.33) (0.27) (0.42)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 15.69 $ 14.16 $ 11.89 $ 9.60 $ 12.33
============ ============ ============ ============ ============
TOTAL RETURN+ 12.92% 21.71% 27.53% (20.15)% (22.78)%
RATIOS TO AVERAGE NET ASSETS(1):
Expenses 1.93% 1.89% 1.93% 1.87% 1.67%
Net investment income 1.03% 1.71% 1.82% 2.19% 1.45%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 4,620 $ 5,076 $ 5,548 $ 5,502 $ 9,374
Portfolio turnover rate 24% 18% 31% 18% 19%
</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
23
<Page>
<Table>
<Caption>
FOR THE YEAR ENDED FEBRUARY 28,
----------------------------------------------------------------------------
2006 2005 2004* 2003 2002
------------ ------------ ------------ ------------ ------------
CLASS D SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period $ 14.32 $ 12.04 $ 9.73 $ 12.53 $ 16.54
------------ ------------ ------------ ------------ ------------
Income (loss) from investment operations:
Net investment income++ 0.31 0.33 0.30 0.35 0.35
Net realized and unrealized gain (loss) 1.67 2.33 2.47 (2.73) (3.91)
------------ ------------ ------------ ------------ ------------
Total income (loss) from investment operations 1.98 2.66 2.77 (2.38) (3.56)
------------ ------------ ------------ ------------ ------------
Less dividends and distributions from:
Net investment income (0.39) (0.38) (0.46) (0.42) (0.09)
Net realized gain - - - - (0.36)
------------ ------------ ------------ ------------ ------------
Total dividends and distributions (0.39) (0.38) (0.46) (0.42) (0.45)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 15.91 $ 14.32 $ 12.04 $ 9.73 $ 12.53
============ ============ ============ ============ ============
TOTAL RETURN+ 14.00% 22.94% 28.87% (19.56)% (21.98)%
RATIOS TO AVERAGE NET ASSETS(1):
Expenses 0.93% 0.92% 0.93% 0.90% 0.82%
Net investment income 2.03% 2.68% 2.82% 3.16% 2.30%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $ 1,487 $ 1,859 $ 1,725 $ 1,371 $ 2,308
Portfolio turnover rate 24% 18% 31% 18% 19%
</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
24
<Page>
MORGAN STANLEY GLOBAL UTILITIES FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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 28, 2006, 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of February 28, 2006, by correspondence with the
custodian and brokers. 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 28, 2006, 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, 2006
25
<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 PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS HELD
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** BY TRUSTEE
- --------------------------- ----------- ------------ ----------------------------- ------------- -----------------------------
Michael Bozic (65) Trustee Since Private Investor; Director or 197 Director of various business
c/o Kramer Levin Naftalis & April 1994 Trustee of the Retail Funds organizations.
Frankel LLP (since April 1994) and the
Counsel to the Independent Institutional Funds (since
Trustees July 2003); formerly Vice
1177 Avenue of the Americas Chairman of Kmart Corporation
New York, NY 10036 (December 1998-October 2000),
Chairman and Chief Executive
Officer of Levitz Furniture
Corporation (November
1995-November 1998) and
President and Chief Executive
Officer of Hills Department
Stores (May 1991-July 1995);
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 (73) Trustee Since Consultant; Director or 197 Director of Franklin Covey
1031 N. Chartwell Court January 1993 Trustee of the Retail Funds (time management systems),
Salt Lake City, UT 84103 (since January 1993) and the BMW Bank of North America,
Institutional Funds (since Inc. (industrial loan
July 2003); member of the corporation), Escrow Bank USA
Utah Regional Advisory Board (industrial loan
of Pacific Corp. (utility corporation), United Space
company); formerly Managing Alliance (joint venture
Director of Summit Ventures between Lockheed Martin and
LLC (2000-2004) (lobbying and the Boeing Company) and
consulting firm); United Nuskin Asia Pacific
States Senator (R-Utah) (multilevel marketing);
(1974-1992) and Chairman, member of the board of
Senate Banking Committee various civic and charitable
(1980-1986), Mayor of Salt organizations.
Lake City, Utah (1971-1974),
Astronaut, Space Shuttle
Discovery (April 12-19,
1985), and Vice Chairman,
Huntsman Corporation
(chemical company).
Wayne E. Hedien (72) Trustee Since Retired; Director or Trustee 197 Director of The PMI Group
c/o Kramer Levin Naftalis & September of the Retail Funds (since Inc. (private mortgage
Frankel LLP 1997 September 1997) and the insurance); Trustee and Vice
Counsel to the Independent Institutional Funds (since Chairman of The Field Museum
Trustees July 2003); formerly of Natural History; director
1177 Avenue of the Americas associated with the Allstate of various other business and
New York, NY 10036 Companies (1966-1994), most charitable organizations.
recently as Chairman of The
Allstate Corporation (March
1993-December 1994) and
Chairman and Chief Executive
Officer of its wholly-owned
subsidiary, Allstate
Insurance Company (July
1989-December 1994).
</Table>
26
<Page>
<Table>
<Caption>
NUMBER OF
PORTFOLIOS
TERM OF IN FUND
POSITION(S) OFFICE AND COMPLEX
NAME, AGE AND ADDRESS OF HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS HELD
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** BY TRUSTEE
- --------------------------- ----------- ------------ ----------------------------- ------------- -----------------------------
Dr. Manuel H. Johnson (57) Trustee Since Senior Partner, Johnson Smick 197 Director of NVR, Inc. (home
c/o Johnson Smick Group, July 1991 International, Inc., a construction); Director of
Inc. consulting firm; Chairman of KFX Energy; Director of RBS
888 16th Street, NW the Audit Committee and Greenwich Capital Holdings
Suite 740 Director or Trustee of the (financial holding company).
Washington, D.C. 20006 Retail Funds (since July
1991) and the Institutional
Funds (since July 2003);
Co-Chairman and a founder of
the Group of Seven Council
(G7C), an international
economic commission; formerly
Vice Chairman of the Board of
Governors of the Federal
Reserve System and Assistant
Secretary of the U.S.
Treasury.
Joseph J. Kearns (63) Trustee Since President, Kearns & 198 Director of Electro Rent
c/o Kearns & Associates LLC July 2003 Associates LLC (investment Corporation (equipment
PMB754 consulting); Deputy Chairman leasing), The Ford Family
23852 Pacific Coast Highway of the Audit Committee and Foundation, and the UCLA
Malibu, CA 90265 Director or Trustee of the Foundation.
Retail Funds (since July
2003) and the Institutional
Funds (since August 1994);
previously Chairman of the
Audit Committee of the
Institutional Funds (October
2001-July 2003); formerly CFO
of the J. Paul Getty Trust.
Michael E. Nugent (69) Trustee Since General Partner of Triumph 197 None.
c/o Triumph Capital, L.P. July 1991 Capital, L.P., a private
445 Park Avenue investment partnership;
New York, NY 10022 Chairman of the Insurance
Committee and Director or
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 (73) Trustee Since Chairman of Lumelite Plastics 198 Trustee and Director of
c/o Lumelite Plastics July 2003 Corporation; Chairman of the certain investment companies
Corporation Governance Committee and in the JPMorgan Funds complex
85 Charles Colman Blvd. Director or Trustee of the managed by J.P. Morgan
Pawling, NY 12564 Retail Funds (since July Investment Management Inc.
2003) and the Institutional
Funds (since June 1992).
</Table>
27
<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 PRINCIPAL OCCUPATION(S) OVERSEEN OTHER DIRECTORSHIPS HELD
INDEPENDENT TRUSTEE REGISTRANT TIME SERVED* DURING PAST 5 YEARS** BY TRUSTEE*** BY TRUSTEE
- --------------------------- ----------- ------------ ----------------------------- ------------- -----------------------------
Charles A. Fiumefreddo (72) Chairman of Since Chairman and Director or 197 None.
c/o Morgan Stanley Trust the Board July 1991 Trustee of the Retail Funds
Harborside Financial and Trustee (since July 1991) and the
Center, Institutional Funds (since
Plaza Two, July 2003); formerly Chief
Jersey City, NJ 07311 Executive Officer of the
Retail Funds (until September
2002).
James F. Higgins (58) Trustee Since Director or Trustee of the 197 Director of AXA Financial,
c/o Morgan Stanley Trust June 2000 Retail Funds (since June Inc. and The Equitable Life
Harborside Financial 2000) and the Institutional Assurance Society of the
Center, Funds (since July 2003); United States (financial
Plaza Two, Senior Advisor of Morgan services).
Jersey City, NJ 07311 Stanley (since August 2000);
Director of Dean Witter
Realty Inc.
</Table>
- ----------
* THIS IS THE EARLIEST DATE THE TRUSTEE BEGAN SERVING THE FUNDS ADVISED BY
MORGAN STANLEY INVESTMENT ADVISORS INC. (THE "INVESTMENT ADVISER") (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 ADVISER AND ANY FUNDS THAT
HAVE AN INVESTMENT ADVISER THAT IS AN AFFILIATED PERSON OF THE INVESTMENT
ADVISER (INCLUDING, BUT NOT LIMITED TO, MORGAN STANLEY INVESTMENT
MANAGEMENT INC.).
28
<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**
- ------------------------------ -------------------- -------------------- --------------------------------------------------
Ronald E. Robison (67) President and Since May 2003 President (since September 2005) and Principal
1221 Avenue of the Americas Principal Executive Executive Officer (since May 2003) of funds in the
New York, NY 10020 Officer Fund Complex; President (since September 2005) and
Principal Executive Officer (since May 2003) of
the Van Kampen Funds; Managing Director of Morgan
Stanley, Morgan Stanley Investment Management and
Morgan Stanley & Co. Incorporated; Managing
Director and Director of Morgan Stanley Investment
Advisors Inc.; Managing Director and (since May
2002) Director of Morgan Stanley Investment
Management Inc., Managing Director and (since
January 2005) Director of Van Kampen Asset
Management and Van Kampen Investments Inc.
Director, President (since February 2006) and
Chief Executive Officer (since February 2006) of
Morgan Stanley Services Company Inc., Director of
Morgan Stanley Distributors Inc., Morgan Stanley
Distribution, Inc. and Morgan Stanley Trust;
Director of Morgan Stanley SICAV (since May 2004).
Formerly, Executive Vice President (July 2003 to
September 2005) of funds in the Fund Complex and
the Van Kampen Funds; President and Director of
the Institutional Funds (March 2001 to July 2003);
Chief Global Operating Officer of Morgan Stanley
Investment Management Inc.; Chief Administrative
Officer of Morgan Stanley Investment Advisors
Inc.; Chief Administrative Officer of Morgan
Stanley Services Company Inc. (November 2003 to
February 2006).
J. David Germany (51) Vice President Since February 2006 Managing Director and (since December 2005) Chief
25 Cabot Square, Canary Wharf, Investment Officer - Global Fixed Income of Morgan
London, United Kingdom Stanley Investment Advisors Inc., Morgan Stanley
E144QA Investment Management Inc., Van Kampen Asset
Management and Van Kampen Advisors Inc.; Managing
Director and Director of Morgan Stanley Investment
Management Ltd.; Vice President (since February
2006) of the Retail and Institutional Funds.
Dennis F. Shea (52) Vice President Since February 2006 Managing Director and (since February 2006) Chief
1221 Avenue of the Americas Investment Officer - Global Equity of Morgan
New York, NY 10020 Stanley Investment Advisors Inc., Morgan Stanley
Investment Management Inc., Van Kampen Asset
Management and Van Kampen Advisors Inc. Vice
President (since February 2006) of the Retail and
Institutional Funds. Formerly, Managing Director
and Director of Global Equity Research at Morgan
Stanley.
Barry Fink (51) Vice President Since February 1997 Managing Director of Morgan Stanley Investment
1221 Avenue of the Americas Management, Morgan Stanley Investment Advisors
New York, NY 10020 Inc. and Morgan Stanley Investment Management
Inc.; Vice President of the Retail Funds and
(since July 2003) the Institutional Funds.
Formerly, General Counsel (May 2000 to February
2006) of Morgan Stanley Investment Management;
Secretary (October 2003 to February 2006), General
Counsel (May 2004 to February 2006) and Director
(July 1998 to January 2005) of Morgan Stanley
Investment Advisors Inc. and Morgan Stanley
Services Company Inc.; Secretary and General
Counsel of Morgan Stanley Investment Management
Inc. (November 2002 to February 2006); Secretary
and Director of Morgan Stanley Distributors Inc.;
Secretary (February 1997 to July 2003) and General
Counsel (February 1997 to April 2004) of the
Retail Funds; Vice President and Assistant General
Counsel of Morgan Stanley Investment Advisors Inc.
and Morgan Stanley Distributors Inc. (February
1997 to December 2001).
</Table>
29
<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**
- ------------------------------ -------------------- -------------------- --------------------------------------------------
Amy R. Doberman (43) Vice President Since July 2004 Managing Director and General Counsel, U.S.
1221 Avenue of the Americas Investment Management (since July 2004); Vice
New York, NY 10020 President of the Retail Funds and the
Institutional Funds (since July 2004); Vice
President of the Van Kampen Funds (since August
2004); Secretary (since February 2006) and
Managing Director (since July 2004) of Morgan
Stanley Investment Advisors Inc., Morgan Stanley
Services Company Inc., Morgan Stanley Investment
Management Inc., Van Kampen Asset Management, Van
Kampen Advisors Inc. and Van Kampen Investments
Inc.; Secretary (since February 2006) of Morgan
Stanley Distributors Inc. and Morgan Stanley
Distribution, Inc. Formerly, Managing Director and
General Counsel - Americas, UBS Global Asset
Management (July 2000 to July 2004).
Carsten Otto (42) Chief Compliance Since October 2004 Managing Director and U.S. Director of Compliance
1221 Avenue of the Americas Officer for Morgan Stanley Investment Management (since
New York, NY 10020 October 2004); Managing Director and Chief
Compliance Officer (since February 2005) of Morgan
Stanley Investment Advisors Inc. and Morgan
Stanley Investment Management Inc. and (since June
2004) of Van Kampen Asset Management, Van Kampen
Advisors Inc. and Van Kampen Investments Inc.
Formerly, Assistant Secretary and Assistant
General Counsel of the Retail Funds.
Stefanie V. Chang Yu (39) Vice President Since July 2003 Executive Director of Morgan Stanley & Co.
1221 Avenue of the Americas Incorporated, Morgan Stanley Investment Advisors
New York, NY 10020 Inc., Morgan Stanley Investment Management Inc.,
Van Kampen Asset Management, Van Kampen Advisors
Inc. and Van Kampen Investments Inc. Vice
President of the Retail Funds (since July 2002)
and the Institutional Funds (since December 1997).
Formerly, Secretary of Van Kampen Asset Management
Inc., Van Kampen Advisors Inc. and Van Kampen
Investments Inc. (December 2002 to February 2006);
Secretary of Morgan Stanley Distribution, Inc.
(October 2005 to February 2006).
Francis J. Smith (40) Treasurer and Chief Treasurer since July Executive Director of Morgan Stanley Investment
c/o Morgan Stanley Trust Financial Officer 2003 and Chief Advisors Inc. and Morgan Stanley Services Company
Harborside Financial Center, Financial Officer Inc.; Treasurer and Chief Financial Officer of the
Plaza Two, since September 2002 Retail Funds (since July 2003). Formerly, Vice
Jersey City, NJ 07311 President of the Retail Funds (September 2002 to
July 2003).
Thomas F. Caloia (59) Vice President Since July 2003 Executive Director of Morgan Stanley Investment
c/o Morgan Stanley Trust Advisors Inc. and Morgan Stanley Services Company
Harborside Financial Center, Inc.; Assistant Treasurer of Morgan Stanley
Plaza Two, Investment Advisors Inc., Morgan Stanley Services
Jersey City, NJ 07311 Company Inc. and Morgan Stanley Distributors Inc.;
Vice President of the Retail Funds. Formerly,
Treasurer of the Retail Funds (April 1989-July
2003).
</Table>
30
<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**
- ------------------------------ -------------------- -------------------- --------------------------------------------------
Mary E. Mullin (38) Secretary Since July 2003 Executive Director of Morgan Stanley & Co.
1221 Avenue of the Americas Incorporated, Morgan Stanley Investment Advisors
New York, NY 10020 Inc. and Morgan Stanley Investment Management
Inc.; Secretary of the Retail Funds (since July
2003) and the Institutional Funds (since June
1999).
</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.
2006 FEDERAL TAX NOTICE (UNAUDITED)
During the fiscal year ended February 28, 2006, 100% of the ordinary
dividends paid by the Fund qualified for the dividends received
deduction available to corporations. Additionally, please note that
100% of the Fund's ordinary dividends paid during the fiscal year
ended February 28, 2006 qualified for the lower income tax rate
available to individuals under the Jobs and Growth Tax Relief
Reconciliation Act of 2003.
31
<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
Fergus Reid
OFFICERS
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
Ronald E. Robison
PRESIDENT and PRINCIPAL EXECUTIVE OFFICER
J. David Germany
VICE PRESIDENT
Dennis F. Shea
VICE PRESIDENT
Barry Fink
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
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 REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT ADVISER
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
(C) 2006 Morgan Stanley
[MORGAN STANLEY LOGO]
37873RPT-RA06-00310P-Y02/06
[GRAPHIC]
MORGAN STANLEY FUNDS
MORGAN STANLEY
GLOBAL UTILITIES FUND
ANNUAL REPORT
FEBRUARY 28, 2006
[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) The Fund has amended its Code of Ethics during the period covered by the
shareholder report presented in Item 1 hereto to delete from the end of the
following paragraph on page 2 of the Code the phrase "to the detriment of the
Fund.":
"Each Covered Officer must not use his personal influence or personal
relationship improperly to influence investment decisions or financial reporting
by the Fund whereby the Covered Officer would benefit personally (directly or
indirectly)."
Additionally, Exhibit B was amended to remove Mitchell M. Merin as a covered
officer.
(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:
2006
<Table>
<Caption>
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 42,144 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ 540(2) $ 5,190,300(2)
TAX FEES $ 5,476(3) $ 2,044,491(4)
ALL OTHER FEES $ - $ -
TOTAL NON-AUDIT FEES $ 6,016 $ 7,234,791
TOTAL $ 48,160 $ 7,234,791
</Table>
2005
<Table>
<Caption>
REGISTRANT COVERED ENTITIES(1)
AUDIT FEES $ 40,142 N/A
NON-AUDIT FEES
AUDIT-RELATED FEES $ 452(2) $ 3,746,495(2)
TAX FEES $ 5,828(3) $ 79,800(4)
ALL OTHER FEES $ - $ -(5)
TOTAL NON-AUDIT FEES $ 6,280 $ 3,826,295
TOTAL $ 46,422 $ 3,826,295
</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:
APPENDIX A
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS
AS ADOPTED AND AMENDED JULY 23, 2004,(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, supersedes 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).
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
<Page>
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.
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
<Page>
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. 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 Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
Van Kampen Asset Management
Morgan Stanley Services Company, Inc.
Morgan Stanley Distributors Inc.
Morgan Stanley Trust FSB
<Page>
MORGAN STANLEY INSTITUTIONAL FUNDS
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Advisors Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management Co., Limited
Morgan Stanley Investment Management Company
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 Covered Entities is compatible with maintaining the auditors'
independence in performing audit services.
Item 5. Audit Committee of Listed Registrants.
(a) The Fund has a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act whose members are:
Michael Bozic, Edwin J. Garn, Wayne E. Hedien, Manual H. Johnson, Joseph J.
Kearns, Michael Nugent and Fergus Reid.
(b) Not applicable.
Item 6. Schedule of Investments
Refer to Item 1.
<Page>
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Applicable only to reports filed by closed-end funds.
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 only 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 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.
Item 12. 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.
<Page>
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 19, 2006
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 19, 2006
/s/ Francis Smith
Francis Smith
Principal Financial Officer
April 19, 2006