Morgan Stanley Institutional Fund, Inc.INVESTMENT MANAGEMENT Prospectus April 29, 2011 Morgan...

INVESTMENT MANAGEMENT

ProspectusApril 29, 2011

Morgan StanleyInstitutional Fund, Inc.

Real Estate PortfoliosGlobal Real Estate PortfolioInternational Real Estate PortfolioU.S. Real Estate Portfolio

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

Share Class and Ticker SymbolPortfolio Class I Class P Class H Class LGlobal Real Estate Portfolio MRLAX MRLBX MSRHX MGRLX

International Real Estate Portfolio MSUAX IERBX — —

U.S. Real Estate Portfolio MSUSX MUSDX — —

Merrill Corp - M-S Institutional Fund Real Estate Port MSIREUIPRO Prospectus [Funds] 04-29-2011 ED [AUX] | ajacksod | 26-Apr-11 23:34 | 10-22173-4.aa | Sequence: 1CHKSUM Content: 36386 Layout: 20519 Graphics: 53866 CLEAN

JOB: 10-22173-4 CYCLE#;BL#: 21; 0 TRIM: 8.375" x 10.875" COMPOSITECOLORS: Black, Black2, ~note-color 2, ~note-color 3 GRAPHICS: ms_new_k_logo.eps, ms_text_cover_lrg_flat_30k.eps V1.5

Page

Portfolio SummaryGlobal Real Estate Portfolio 1International Real Estate Portfolio 5U.S. Real Estate Portfolio 8

Details of the PortfoliosGlobal Real Estate Portfolio 11International Real Estate Portfolio 13U.S. Real Estate Portfolio 15

Additional Information about the Portfolios’ Investment Strategies and Related Risks 16

Fund Management 18Shareholder Information 20Financial Highlights 28Global Real Estate Portfolio 28International Real Estate Portfolio 32U.S. Real Estate Portfolio 34

Table of Contents

Merrill Corp - M-S Institutional Fund Real Estate Port MSIREUIPRO Prospectus [Funds] 04-29-2011 ED [AUX] | ajacksod | 26-Apr-11 23:34 | 10-22173-4.aa | Sequence: 2CHKSUM Content: 44298 Layout: 7861 Graphics: No Graphics CLEAN

JOB: 10-22173-4 CYCLE#;BL#: 21; 0 TRIM: 8.375" x 10.875" COMPOSITECOLORS: Black, Black2, ~note-color 2 GRAPHICS: none V1.5

ObjectiveThe Global Real Estate Portfolio seeks to provide currentincome and capital appreciation.

Fees and ExpensesThe table below describes the fees and expenses that youmay pay if you buy and hold shares of the Portfolio. Forshareholders of Class H shares, you may qualify for salescharge discounts if you and your family invest, or agreeto invest in the future, at least $50,000 in a portfolio ofMorgan Stanley Institutional Fund, Inc. (the “Fund”) ora portfolio of Morgan Stanley Institutional Fund Trust.More information about these and other discounts isavailable from your financial adviser and in the“Shareholder Information—How To Purchase Class HShares” section on page 21 of this Prospectus.

Shareholder Fees (fees paid directly from your investment)

Class I Class P Class H Class LMaximumsales charge(load) imposed on purchases (as a percentage of offering price) None None 4.75%† None

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

Class I Class P Class H Class LAdvisory Fee* 0.85% 0.85% 0.85% 0.85%Distribution and/or Service (12b-1) Fee None 0.25% 0.25% 0.75%Other Expenses* 0.16% 0.16% 0.16% 0.16%Total Annual Portfolio Operating Expenses* 1.01% 1.26% 1.26% 1.76%Fee Waiver and/or Expense Reimbursement* 0.00% 0.00% 0.00% 0.00%Total Annual Portfolio Operating Expenses After Fee Waiver and/or ExpenseReimbursement* 1.01% 1.26% 1.26% 1.76%

ExampleThe example below is intended to help you compare thecost of investing in the Portfolio with the cost of invest-ing in other mutual funds.

The example assumes that you invest $10,000 in thePortfolio, your investment has a 5% return each year

and that the Portfolio’s operating expenses remain thesame. Although your actual costs may be higher orlower, based on these assumptions your costs would be:

1 Year 3 Years 5 Years 10 YearsClass I $103 $322 $558 $1,236Class P $128 $400 $692 $1,523Class H $597 $856 $1,134 $1,925Class L $179 $554 $954 $2,073

† The sales charge is calculated as a percentage of theoffering price. The sales charge is reduced for the purchaseof $50,000 and over. See “Shareholder Information—HowTo Purchase Class H Shares.”

* The Portfolio’s “Adviser,” Morgan Stanley InvestmentManagement Inc., has agreed to reduce its advisory feeand/or reimburse the Portfolio so that Total Annual PortfolioOperating Expenses, excluding certain investment relatedexpenses, will not exceed 1.05% for Class I, 1.30% for ClassP, 1.30% for Class H and 1.80% for Class L. The fee waiversand/or expense reimbursements are expected to continuefor one year or until such time as the Fund’s Board ofDirectors acts to discontinue all or a portion of such waiversand/or reimbursements when it deems that such action isappropriate.

Portfolio TurnoverThe Portfolio pays transaction costs, such as commis-sions, when it buys and sells securities (or “turns over” itsportfolio). A higher portfolio turnover rate may indicatehigher transaction costs and may result in higher taxeswhen Portfolio shares are held in a taxable account.These costs, which are not reflected in Total AnnualPortfolio Operating Expenses or in the Example, affectPortfolio performance. During the most recent fiscalyear, the Portfolio’s portfolio turnover rate was 18% ofthe average value of its portfolio.

Principal Investment StrategiesUnder normal circumstances, at least 80% of thePortfolio’s assets (plus any borrowings for investmentpurposes) will be invested in equity securities of compa-nies in the real estate industry, including real estate operating companies (“REOCs”), real estate investmenttrusts (“REITs”) and similar entities established outsidethe United States (“foreign real estate companies”). Theequity securities in which the Portfolio may investinclude common stock, preferred stock, convertiblesecurities, depositary receipts and rights and warrants.

The Portfolio will invest primarily in companies locatedin the developed countries of North America, Europeand Asia, but may also invest in emerging markets.

The Adviser and the Portfolio’s “Sub-Advisers,” MorganStanley Investment Management Limited (“MSIMLimited”) and Morgan Stanley Investment ManagementCompany (“MSIM Company”), employ an approachthat emphasizes a bottom-up stock selection with atop-down global allocation. The Adviser’s and Sub-Advisers’ proprietary models drive the bottom-up value-driven approach for stock selection. The top-down

Global Real Estate Portfolio

Morgan Stanley Institutional Fund, Inc. Prospectus

Portfolio Summary

1

Merrill Corp - M-S Institutional Fund Real Estate Port MSIREUIPRO Prospectus [Funds] 04-29-2011 ED [AUX] | ajacksod | 26-Apr-11 23:34 | 10-22173-4.ba | Sequence: 1CHKSUM Content: 35484 Layout: 33824 Graphics: No Graphics CLEAN


portion seeks diversified exposure to all major asset class-es with an overweighting to property markets that offerthe best relative valuation. The bottom-up researchprocess strongly influences the Adviser’s and Sub-Advisers’ perspective on which property markets theybelieve provide better relative value and growth prospectsand, consequently, affects their decision to overweight orunderweight a given region, sector and/or country. TheAdviser and Sub-Advisers generally consider selling aportfolio holding if the holding’s share price shifts to thepoint where the position no longer represents an attrac-tive relative value opportunity versus the underlyingvalue of its assets or versus other securities in the invest-ment universe.

Principal RisksThere is no assurance that the Portfolio will achieve itsinvestment objective and you can lose money investingin this Portfolio. The principal risks of investing in thePortfolio include:

• Equity Securities. In general, prices of equity securi-ties are more volatile than those of fixed income secu-rities. The prices of equity securities will rise and fallin response to a number of different factors, includingevents that affect particular issuers as well as eventsthat affect entire financial markets or industries. Tothe extent that the Portfolio invests in convertiblesecurities, and the convertible security’s investmentvalue is greater than its conversion value, its price willbe likely to increase when interest rates fall anddecrease when interest rates rise. If the conversionvalue exceeds the investment value, the price of theconvertible security will tend to fluctuate directlywith the price of the underlying equity security.

• REITs, REOCs and Foreign Real Estate Companies.Investing in REITs, REOCs and foreign real estatecompanies exposes investors to the risks of owningreal estate directly, as well as to risks that relate specif-ically to the way in which REITs, REOCs and for-eign real estate companies are organized and operated.Operating REITs and foreign real estate companiesrequires specialized management skills and thePortfolio indirectly bears REIT and foreign real estatecompany management expenses along with the directexpenses of the Portfolio. REITs are also subject tocertain provisions under federal tax law and the fail-ure of a company to qualify as a REIT could haveadverse consequences for the Portfolio. In addition,foreign real estate companies may be subject to thelaws, rules and regulations governing those entitiesand their failure to comply with those laws, rules andregulations could negatively impact the performanceof those entities.

• Foreign and Emerging Market Securities.Investments in foreign markets entail special riskssuch as currency, political, economic and marketrisks. There also may be greater market volatility, lessreliable financial information, higher transaction andcustody costs, decreased market liquidity and lessgovernment and exchange regulation associated withinvestments in foreign markets. The risks of investingin emerging market countries are greater than risksassociated with investments in foreign developedcountries. In addition, the Portfolio’s investmentsmay be denominated in foreign currencies and there-fore, changes in the value of a country’s currencycompared to the U.S. dollar may affect the value ofthe Portfolio’s investments.

• Non-Diversified Risk. Because the Portfolio is non- diversified, it may be more susceptible to an adverseevent affecting a portfolio investment than a diversi-fied portfolio and a decline in the value of thatinstrument would cause the Portfolio’s overall valueto decline to a greater degree.

Shares of the Portfolio are not bank deposits and are notguaranteed or insured by the FDIC or any other govern-ment agency.

Performance InformationThe bar chart and table below provide some indicationof the risks of investing in the Portfolio by showingchanges in the Portfolio’s Class I shares’ performancefrom year-to-year and by showing how the Portfolio’saverage annual returns for the past one year period andsince inception compare with those of a broad measureof market performance and a comparative sector index,as well as an average that represents a group of similarmutual funds, over time. The performance of the otherClasses will differ because the Classes have differentongoing fees. The Portfolio’s past performance, beforeand after taxes, is not necessarily an indication of howthe Portfolio will perform in the future. Updated performance information is available online atwww.morganstanley.com/im.

Annual Total Returns—Calendar Years

High Quarter (Q2 ‘09) 39.91%Low Quarter (Q4 ‘08) –30.11%

50%

30% 40%

10% 20%

-40% -30%

-10% -20%

0%

-50% 2007 2008 2009 2010

-7.87

41.04

20.22

-50.000000

-33.333401

-16.666801

-0.000202

16.666397

33.332996

49.999596

-45.00

Global Real Estate Portfolio (Cont’d)

2

Merrill Corp - M-S Institutional Fund Real Estate Port MSIREUIPRO Prospectus [Funds] 04-29-2011 ED [AUX] | ajacksod | 26-Apr-11 23:34 | 10-22173-4.ba | Sequence: 2CHKSUM Content: 42170 Layout: 52495 Graphics: 34518 CLEAN

JOB: 10-22173-4 CYCLE#;BL#: 21; 0 TRIM: 8.375" x 10.875" COMPOSITECOLORS: Black, Black2, ~note-color 2 GRAPHICS: 22173-4 Gbl Real Est.eps V1.5

Average Annual Total Returns(for the calendar periods ended December 31, 2010)

Past SinceOne Year Inception

Class I (commencedoperations on 8/20/06)Return before Taxes 20.22% 0.16%Return after Taxes on Distributions 19.59% –0.74%Return after Taxes on Distributionsand Sale of Portfolio Shares 13.42% –0.30%Class P (commencedoperations on 8/20/06)Return before Taxes 19.90% –0.12%FTSE EPRA/NAREIT DevelopedReal Estate Index—Net Total Returnto U.S. investors (reflects no deductionfor fees, expenses or taxes)1 20.17% –1.41%MSCI World Index (reflects nodeduction for fees, expenses or taxes)2 11.76% 0.68%Lipper Global Real Estate FundsAverage (reflects no deductionfor taxes)3 19.03% –2.46%Class H (commencedoperations on 1/2/08)Return before Taxes 14.27% –3.99%FTSE EPRA/NAREIT DevelopedReal Estate Index—Net Total Returnto U.S. investors (reflects no deduction for fees, expenses or taxes)1 20.17% –4.65%MSCI World Index (reflects nodeduction for fees, expenses or taxes)2 11.76% –4.65%Lipper Global Real Estate FundsAverage (reflects no deductionfor taxes)3 19.03% –3.96%Class L (commenced operations on 6/16/08)Return before Taxes 19.26% –1.58%FTSE EPRA/NAREIT DevelopedReal Estate Index—Net Total Returnto U.S. investors (reflects no deduction for fees, expenses or taxes)1 20.17% –2.86%MSCI World Index (reflects nodeduction for fees, expenses or taxes)2 11.76% –3.20%Lipper Global Real Estate FundsAverage (reflects no deductionfor taxes)3 19.03% –2.74%

1 The FTSE EPRA/NAREIT Developed Real Estate Index—NetTotal Return to U.S. investors is a free float-adjusted marketcapitalization weighted index designed to reflect the stockperformance of companies engaged in specific aspects ofthe major real estate markets/regions of the developedworld. The performance of the Index is listed in U.S. dollarsand assumes reinvestment of dividends. “Net Total Return toU.S. investors” reflects a reduction in total returns aftertaking into account the withholding tax on dividends bycertain foreign countries represented in the Index for periodsafter 1/31/05 (gross returns used prior to 1/31/05). It is notpossible to invest directly in an index.

2 The Morgan Stanley Capital International (MSCI) World Index isa free float-adjusted market capitalization weighted index thatis designed to measure the global equity market performanceof developed markets. The term “free float” represents theportion of shares outstanding that are deemed to be availablefor purchase in the public equity markets by investors. TheMSCI World Index currently consists of 24 developed marketcountry indices. The performance of the Index is listed in U.S.dollars and assumes reinvestment of net dividends. It is notpossible to invest directly in an index.

3 The Lipper Global Real Estate Funds Average tracks theperformance of all funds in the Lipper Global Real EstateFunds classification.

The after-tax returns shown in the table above are calcu-lated using the historical highest individual federal mar-ginal income tax rates during the period shown and donot reflect the impact of state and local taxes. After-taxreturns for the Portfolio’s other Classes will vary fromClass I shares’ returns. Actual after-tax returns dependon the investor’s tax situation and may differ from thoseshown, and after-tax returns are not relevant to investorswho hold their Portfolio shares through tax deferredarrangements such as 401(k) plans or individual retire-ment accounts. After-tax returns may be higher thanbefore-tax returns due to an assumed benefit from capi-tal losses that would have been realized had Portfolioshares been sold at the end of the relevant periods, asapplicable.

Investment Adviser and Sub-AdvisersAdviser. Morgan Stanley Investment Management Inc.

Sub-Advisers. Morgan Stanley Investment ManagementLimited and Morgan Stanley Investment ManagementCompany.

Portfolio Managers. The Portfolio is managed by mem-bers of the Real Estate team. Information about themembers jointly and primarily responsible for theday-to-day management of the Portfolio is shown below:

Date BeganTitle with Managing

Name Adviser PortfolioTheodore R. Bigman Managing Director August 2006Michiel te Paske Managing Director August 2006Sven van Kemenade Managing Director August 2006Angeline Ho Managing Director August 2006

Purchase and Sale of Fund SharesThe minimum initial investment generally is$5,000,000 for Class I shares, $1,000,000 for Class Pshares and $25,000 for each of Class H and Class Lshares of the Portfolio. The minimum initial investmentwill be waived for certain investments. For moreinformation, please refer to the “Shareholder


3


Portfolio Summary



Information—How To Purchase Class I, Class P andClass L Shares” and “—How To Purchase Class HShares” sections beginning on pages 20 and 21, respectively, of this Prospectus.

Class I, Class P and Class L shares of the Portfolio maybe purchased or sold on any day the New York StockExchange (“NYSE”) is open for business directlythrough the Fund by mail (c/o Morgan Stanley ServicesCompany Inc., P.O. Box 219804, Kansas City, MO64121-9804) or by telephone (1-800-548-7786) or bycontacting your financial intermediary. You may alsopurchase Portfolio shares by wiring Federal Funds toState Street Bank and Trust Company (the “Custodian”).

For more information, please refer to the “ShareholderInformation—How To Purchase Class I, Class P andClass L Shares” and “—How To Redeem Class I, Class Pand Class L Shares” sections beginning on pages 20 and23, respectively, of this Prospectus.

Class H shares of the Portfolio may be purchased orredeemed by contacting your authorized financial representative.

Tax InformationThe Portfolio intends to make distributions that may betaxed as ordinary income or capital gains, unless you areinvesting through a tax-deferred arrangement, such as a401(k) plan or an individual retirement account.

Payments to Broker-Dealers and Other FinancialIntermediariesIf you purchase the Portfolio through a broker-dealer orother financial intermediary (such as a bank), the Adviserand/or the Portfolio’s distributor may pay the intermedi-ary for the sale of Portfolio shares and related services.These payments, which may be significant in amount,may create a conflict of interest by influencing the broker-dealer or other intermediary and your salespersonto recommend the Portfolio over another investment.Ask your salesperson or visit your financial intermediary’sweb site for more information.


4



ObjectiveThe International Real Estate Portfolio’s investment objective is to provide current income and long-term capitalappreciation.

Fees and ExpensesThe table below describes the fees and expenses that youmay pay if you buy and hold shares of the Portfolio.

Shareholder Fees (fees paid directly from your investment)

Class I Class PRedemption Fee (as a percentage of the amount redeemed on redemptions within 30 days of purchase) 2.00% 2.00%


Class I Class PAdvisory Fee* 0.80% 0.80%Distribution and/or Service (12b-1) Fee None 0.25%Other Expenses* 0.18% 0.18%Total Annual Portfolio Operating Expenses* 0.98% 1.23%Fee Waiver and/or Expense Reimbursement* 0.00% 0.00%Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement* 0.98% 1.23%


The example assumes that you invest $10,000 in thePortfolio, your investment has a 5% return each yearand that the Portfolio’s operating expenses remain thesame. Although your actual costs may be higher orlower, based on these assumptions your costs would be:

1 Year 3 Years 5 Years 10 YearsClass I $100 $312 $542 $1,201Class P $125 $390 $676 $1,489

* The Portfolio’s “Adviser,” Morgan Stanley InvestmentManagement Inc., has agreed to reduce its advisory feeand/or reimburse the Portfolio so that Total Annual PortfolioOperating Expenses, excluding certain investment relatedexpenses, will not exceed 1.00% for Class I and 1.25% forClass P. The fee waivers and/or expense reimbursementsare expected to continue for one year or until such time asthe Fund’s Board of Directors acts to discontinue all or aportion of such waivers and/or reimbursements when itdeems that such action is appropriate.

Portfolio TurnoverThe Portfolio pays transaction costs, such as commis-sions, when it buys and sells securities (or “turns over” itsportfolio). A higher portfolio turnover rate may indicatehigher transaction costs and may result in higher taxeswhen Portfolio shares are held in a taxable account.These costs, which are not reflected in Total AnnualPortfolio Operating Expenses or in the Example, affect

Portfolio performance. During the most recent fiscalyear, the Portfolio’s portfolio turnover rate was 64% ofthe average value of its portfolio.

Principal Investment StrategiesUnder normal circumstances, at least 80% of thePortfolio’s assets will be invested in equity securities ofcompanies in the real estate industry. Such companiesare located in various global markets throughout theworld (excluding the United States and Canada). Theequity securities in which the Portfolio may investinclude common stock, preferred stock, convertiblesecurities, depositary receipts and rights and warrants.

The Portfolio will invest primarily in companies locatedin the developed countries of Europe and Asia, but mayalso invest in emerging markets.

The Adviser and the Portfolio’s “Sub-Advisers,” MSIMCompany and MSIM Limited, employ an approach thatemphasizes a bottom-up stock selection with a top-downglobal allocation. The Adviser’s and Sub-Advisers’ pro-prietary models drive the bottom-up value-drivenapproach for stock selection. The top-down portionseeks diversified exposure to all major asset classes withan overweighting to property markets that offer the bestrelative valuation. The bottom-up research processstrongly influences the Adviser’s and Sub-Advisers’ per-spective on which property markets they believe providebetter relative value and growth prospects and, conse-quently, affects their decision to overweight or under-weight a given region, sector and/or country. TheAdviser and Sub-Advisers generally consider selling aportfolio holding if the holding’s share price shifts to thepoint where the position no longer represents an attrac-tive relative value opportunity versus the underlyingvalue of its assets or versus other securities in the invest-ment universe.


• Equity Securities. In general, prices of equity securi-ties are more volatile than those of fixed income secu-rities. The prices of equity securities will rise and fallin response to a number of different factors, includingevents that affect particular issuers as well as eventsthat affect entire financial markets or industries. Tothe extent that the Portfolio invests in convertiblesecurities, and the convertible security’s investmentvalue is greater than its conversion value, its price willbe likely to increase when interest rates fall anddecrease when interest rates rise. If the conversionvalue exceeds the investment value, the price of theconvertible security will tend to fluctuate directlywith the price of the underlying equity security.

• Foreign Real Estate Companies. Investing in foreignreal estate companies exposes investors to the risks of

International Real Estate Portfolio


Portfolio Summary

5



owning real estate directly, as well as to risks thatrelate specifically to the way in which foreign realestate companies are organized and operated. In addition, foreign real estate companies may be subject to the laws, rules and regulations governingthose entities and their failure to comply with thoselaws, rules and regulations could negatively impactthe performance of those entities.

• Foreign and Emerging Market Securities.Investments in foreign markets entail special riskssuch as currency, political, economic and marketrisks. There also may be greater market volatility, lessreliable financial information, higher transaction andcustody costs, decreased market liquidity and lessgovernment and exchange regulation associated withinvestments in foreign markets. The risks of investingin emerging market countries are greater than risksassociated with investments in foreign developedcountries. In addition, the Portfolio’s investmentsmay be denominated in foreign currencies and there-fore, changes in the value of a country’s currencycompared to the U.S. dollar may affect the value ofthe Portfolio’s investments.

• Non-Diversified Risk. Because the Portfolio is non-diversified, it may be more susceptible to an adverseevent affecting a portfolio investment than a diversi-fied portfolio and a decline in the value of thatinstrument would cause the Portfolio’s overall valueto decline to a greater degree.


Performance InformationThe bar chart and table below provide some indicationof the risks of investing in the Portfolio by showingchanges in the Portfolio’s Class I shares’ performancefrom year-to-year and by showing how the Portfolio’saverage annual returns for the past one, five and 10 yearperiods compare with those of a broad measure of mar-ket performance and comparative sector indexes, overtime. The performance of the other Class will differbecause the Class has different ongoing fees. ThePortfolio’s past performance, before and after taxes, isnot necessarily an indication of how the Portfolio willperform in the future. Updated performance informa-tion is available online at www.morganstanley.com/im.




Past Past PastOne Year Five Years Ten Years

Class IReturn before Taxes 9.51% 0.65% 11.14%Return after Taxes onDistributions 9.17% –0.39% 10.07%Return after Taxes onDistributions and Sale ofPortfolio Shares 7.06% 0.38% 9.62%Class PReturn before Taxes 9.26% 0.41% 10.86%FTSE EPRA/NAREITDeveloped ex-NorthAmerica Real Estate—Net Total Return Index(reflects no deduction forfees, expenses or taxes)1 14.55% 2.58% 9.67%FTSE EPRA/NAREITDeveloped ex-NorthAmerica Real EstateIndex (80% Europe/20%Asia)—Net Total Returnto U.S. investors (reflectsno deduction for fees,expenses or taxes)2 10.35% –0.13% 9.83%MSCI EAFE Index (reflectsno deduction for fees,expenses or taxes)3 7.75% 2.46% 3.50%

1 The FTSE EPRA/NAREIT Developed ex-North America RealEstate—Net Total Return Index is a free float-adjusted marketcapitalization weighted index designed to reflect the stockperformance of companies engaged in the European andAsian real estate markets. The performance of the Index islisted in U.S. dollars and assumes reinvestment of dividends.“Net Total Return to U.S. investors” reflects a reduction intotal returns after taking into account the withholding tax ondividends by certain foreign countries represented in theIndex for periods after 1/31/05 (gross returns used prior to1/31/05). It is not possible to invest directly in an index. ThePortfolio’s sector benchmark has changed from the FTSEEPRA/NAREIT Developed ex-North America Real Estate Index(80% Europe 20% Asia)—Net Total Return to U.S. investors toa non-customized version of the FTSE EPRA/NAREITDeveloped ex-North America Real Estate—Net Total ReturnIndex because the Adviser believes the FTSE EPRA/NAREITDeveloped ex-North America Real Estate—Net Total ReturnIndex is a more appropriate benchmark for the Portfolio.

2001

60%

40%

0%

20%

-20%

-60%

-40%

‘02 ‘05 ‘10‘09‘08‘06‘04‘03 ‘07

-7.85-17.59

24.52

42.4147.49 46.54

9.51

56.06

15.52

-49.95

International Real Estate Portfolio (Cont’d)

6


JOB: 10-22173-4 CYCLE#;BL#: 21; 0 TRIM: 8.375" x 10.875" COMPOSITECOLORS: Black, Black2, ~note-color 2 GRAPHICS: 22173-4 Intl Real Est.eps V1.5

2 The FTSE EPRA/NAREIT Developed ex-North America RealEstate Index (80% Europe 20% Asia)—Net Total Return toU.S. investors is a customized benchmark, 80% of whichconsists of the performance of the FTSE EPRA/NAREITDeveloped Real Estate Index: Europe Series—Net TotalReturn to U.S. investors and 20% of which consists of theperformance of the FTSE EPRA/NAREIT Developed RealEstate Index: Asia Series—Net Total Return to U.S. investors.These series are components of the FTSE EPRA/NAREITDeveloped Real Estate Index—Net Total Return to U.S.investors, which is a market capitalization weighted indexdesigned to reflect the stock performance of companiesengaged in the North American, European and Asian realestate markets. The performance of the Index is listed in U.S.dollars and assumes reinvestment of dividends. “Net TotalReturn to U.S. investors” reflects a reduction in total returnsafter taking into account the withholding tax on dividends bycertain foreign countries represented in the Index for periodsafter 1/31/05 (gross returns used prior to 1/31/05). It is notpossible to invest directly in an index.

3 The Morgan Stanley Capital International (MSCI) EAFE Index(Europe, Australasia, Far East) is a free float-adjusted marketcapitalization index that is designed to measure theinternational equity market performance of developedmarkets, excluding the United States and Canada. The term“free float” represents the portion of shares outstanding thatare deemed to be available for purchase in the public equitymarkets by investors. The MSCI EAFE Index currentlyconsists of 22 developed market country indices. Theperformance of the Index is listed in U.S. dollars andassumes reinvestment of net dividends. It is not possible toinvest directly in an index.

The after-tax returns shown in the table above are calcu-lated using the historical highest individual federal mar-ginal income tax rates during the period shown and donot reflect the impact of state and local taxes. After-taxreturns for the Portfolio’s other Class will vary fromClass I shares’ returns. Actual after-tax returns dependon the investor’s tax situation and may differ from thoseshown, and after-tax returns are not relevant to investorswho hold their Portfolio shares through tax deferredarrangements such as 401(k) plans or individual retire-ment accounts. After-tax returns may be higher thanbefore-tax returns due to an assumed benefit from capi-tal losses that would have been realized had Portfolioshares been sold at the end of the relevant periods, asapplicable.

Investment Adviser and Sub-AdvisersAdviser. Morgan Stanley Investment Management Inc.

Sub-Advisers. Morgan Stanley Investment ManagementLimited and Morgan Stanley Investment ManagementCompany.

Portfolio Managers. The Portfolio is managed by mem-bers of the Real Estate team. Information about themembers jointly and primarily responsible for the day-to-day management of the Portfolio is shown below:


Name Adviser PortfolioTheodore R. Bigman Managing Director January 1999Michiel te Paske Managing Director March 2001Sven van Kemenade Managing Director March 2001Angeline Ho Managing Director August 2005

Purchase and Sale of Fund SharesThe minimum initial investment generally is$5,000,000 for Class I shares and $1,000,000 forClass P shares. The minimum initial investment will bewaived for certain investments. For more information,please refer to the “Shareholder Information—How ToPurchase Class I, Class P and Class L Shares” sectionbeginning on page 20 of this Prospectus.

Class I and Class P shares of the Portfolio may be pur-chased or sold on any day the NYSE is open for businessdirectly through the Fund by mail (c/o Morgan StanleyServices Company Inc., P.O. Box 219804, Kansas City,MO 64121-9804) or by telephone (1-800-548-7786) orby contacting your financial intermediary. You may alsopurchase Portfolio shares by wiring Federal Funds to theCustodian.



Payments to Broker-Dealers and Other FinancialIntermediariesIf you purchase the Portfolio through a broker-dealer orother financial intermediary (such as a bank), the Adviserand/or the Portfolio’s distributor may pay the intermedi-ary for the sale of Portfolio shares and related services.These payments, which may be significant in amount,may create a conflict of interest by influencing thebroker-dealer or other intermediary and your salespersonto recommend the Portfolio over another investment.Ask your salesperson or visit your financial intermediary’sweb site for more information.


7


Portfolio Summary



ObjectiveThe U.S. Real Estate Portfolio seeks to provide above aver-age current income and long-term capital appreciation byinvesting primarily in equity securities of companies in theU.S. real estate industry, including REITs.

Fees and ExpensesThe table below describes the fees and expenses that youmay pay if you buy and hold shares of the Portfolio. ThePortfolio does not charge any sales loads or other feeswhen you purchase or redeem shares.


Class I Class PAdvisory Fee* 0.78% 0.78%Distribution and/or Service (12b-1) Fee None 0.25%Other Expenses* 0.21% 0.21%Total Annual Portfolio Operating Expenses* 0.99% 1.24%Fee Waiver and/or Expense Reimbursement* 0.00% 0.00%Total Annual Portfolio Operating Expenses After Fee Waiver and/or Expense Reimbursement* 0.99% 1.24%


The example assumes that you invest $10,000 in thePortfolio, your investment has a 5% return each yearand that the Portfolio’s operating expenses remain thesame. Although your actual costs may be higher orlower, based on these assumptions your costs would be:

1 Year 3 Years 5 Years 10 YearsClass I $101 $315 $547 $1,213Class P $126 $393 $681 $1,500

* The Portfolio’s “Adviser,” Morgan Stanley InvestmentManagement Inc., has agreed to reduce its advisory feeand/or reimburse the Portfolio so that Total Annual PortfolioOperating Expenses, excluding certain investment relatedexpenses, will not exceed 1.00% for Class I and 1.25% forClass P. The fee waivers and/or expense reimbursementsare expected to continue for one year or until such time asthe Fund’s Board of Directors acts to discontinue all or aportion of such waivers and/or reimbursements when itdeems that such action is appropriate.

Portfolio TurnoverThe Portfolio pays transaction costs, such as commis-sions, when it buys and sells securities (or “turns over” itsportfolio). A higher portfolio turnover rate may indicatehigher transaction costs and may result in higher taxeswhen Portfolio shares are held in a taxable account.These costs, which are not reflected in Total AnnualPortfolio Operating Expenses or in the Example, affect

Portfolio performance. During the most recent fiscalyear, the Portfolio’s portfolio turnover rate was 41% ofthe average value of its portfolio.

Principal Investment StrategiesUnder normal circumstances, at least 80% of thePortfolio’s assets will be invested in equity securities ofcompanies in the U.S. real estate industry. The equitysecurities in which the Portfolio may invest include com-mon stock, preferred stock, convertible securities,depositary receipts and rights and warrants.

The Adviser seeks a combination of above average cur-rent income and long-term capital appreciation byinvesting primarily in equity securities of companies inthe U.S. real estate industry, including REITs. ThePortfolio focuses on REITs as well as REOCs that investin a variety of property types and regions.

The Adviser’s approach emphasizes bottom-up stockselection with a top-down asset allocation. The Portfoliois constructed utilizing a process that combines bothbottom-up and top-down analyses. The Adviser’s pro-prietary models drive the bottom-up value-drivenapproach for stock selection. The top-down portionseeks diversified exposure to all major asset classes withan overweighting to property markets that offer the bestrelative valuation. The bottom-up research processstrongly influences the Adviser’s perspective on whichproperty markets it believes provide better relative valueand growth prospects and, consequently, affects theirdecision to overweight or underweight a given propertymarket. The Adviser generally considers selling a portfo-lio holding if the holding’s share price shifts to the pointwhere the position no longer represents an attractive rel-ative value opportunity versus the underlying value ofits assets or versus other securities in the universe.


• Equity Securities. In general, prices of equity securitiesare more volatile than those of fixed income securities.The prices of equity securities will rise and fall inresponse to a number of different factors, includingevents that affect particular issuers as well as eventsthat affect entire financial markets or industries. Tothe extent that the Portfolio invests in convertiblesecurities, and the convertible security’s investmentvalue is greater than its conversion value, its price willbe likely to increase when interest rates fall anddecrease when interest rates rise. If the conversionvalue exceeds the investment value, the price of theconvertible security will tend to fluctuate directlywith the price of the underlying equity security.

U.S. Real Estate Portfolio

8



• REITs and REOCs. Investing in REITs and REOCsexposes investors to the risks of owning real estatedirectly, as well as to risks that relate specifically tothe way in which REITs and REOCs are organizedand operated. Operating REITs requires specializedmanagement skills and the Portfolio indirectly bearsREIT expenses along with the direct expenses of thePortfolio. REITs are also subject to certain provisionsunder federal tax law and the failure of a company toqualify as a REIT could have adverse consequencesfor the Portfolio.

• Non-Diversified Risk. Because the Portfolio is non-diversified, it may be more susceptible to an adverseevent affecting a portfolio investment than a diversi-fied portfolio and a decline in the value of thatinstrument would cause the Portfolio’s overall valueto decline to a greater degree.


Performance InformationThe bar chart and table below provide some indicationof the risks of investing in the Portfolio by showingchanges in the Portfolio’s Class I shares’ performancefrom year-to-year and by showing how the Portfolio’saverage annual returns for the past one, five and 10year periods compare with those of a broad measure ofmarket performance and a comparative sector index,as well as an average that represents a group of similarmutual funds, over time. The performance of theother Class will differ because the Class has differentongoing fees. The Portfolio’s past performance, beforeand after taxes, is not necessarily an indication of howthe Portfolio will perform in the future. Updated per-formance information is available online at www.morganstanley.com/im.




Past Past PastOne Year Five Years Ten Years

Class IReturn before Taxes 29.86% 3.83% 11.37%Return after Taxes onDistributions 29.27% –0.55% 7.40%Return after Taxes onDistributions and Sale ofPortfolio Shares 19.36% 0.84% 7.63%Class PReturn before Taxes 29.51% 3.57% 11.07%FTSE NAREIT EquityREITs Index (reflects nodeduction for fees,expenses or taxes)1 27.96% 3.04% 10.77%S&P 500® Index (reflects no deduction for fees,expenses or taxes)2 15.06% 2.29% 1.42%Lipper Real Estate FundsAverage (reflects nodeduction for taxes)3 27.60% 1.91% 9.64%

1 The FTSE NAREIT (National Association of Real EstateInvestment Trusts) Equity REITs Index is a free float adjustedmarket capitalization weighted index of tax-qualified REITslisted on the New York Stock Exchange, NYSE Amex and theNASDAQ National Market System. Effective December 20,2010 the FTSE NAREIT Equity REITs Index will not include“Timber REITs.” It is not possible to invest directly in an index.

2 The Standard & Poor’s 500® Index (S&P 500® Index)measures the performance of the large cap segment of theU.S. equities market, covering approximately 75% of the U.S.equities market. The Index includes 500 leading companies inleading industries of the U.S. economy. It is not possible toinvest directly in an index.

3 The Lipper Real Estate Funds Average tracks theperformance of all funds in the Lipper Real Estate Fundsclassification.

The after-tax returns shown in the table above are calcu-lated using the historical highest individual federal mar-ginal income tax rates during the period shown and donot reflect the impact of state and local taxes. After-taxreturns for the Portfolio’s other Class will vary fromClass I shares’ returns. Actual after-tax returns dependon the investor’s tax situation and may differ from thoseshown, and after-tax returns are not relevant to investorswho hold their Portfolio shares through tax deferredarrangements such as 401(k) plans or individual retire-ment accounts. After-tax returns may be higher thanbefore-tax returns due to an assumed benefit from capi-tal losses that would have been realized had Portfolioshares been sold at the end of the relevant periods, asapplicable.

2001

45%

30%

15%

0%

‘02

-30%

-15%

-45% ‘05 ‘07 ‘10‘09‘08‘06‘04‘03

-16.63

29.65 29.8637.61 37.28

17.66

38.85

9.27

0.18

-38.07

U.S. Real Estate Portfolio (Cont’d)

9


Portfolio Summary


JOB: 10-22173-4 CYCLE#;BL#: 21; 0 TRIM: 8.375" x 10.875" COMPOSITECOLORS: Black, Black2, ~note-color 2 GRAPHICS: 22173-4 US Real Est.eps V1.5

Investment AdviserAdviser. Morgan Stanley Investment Management Inc.

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


Name Adviser PortfolioTheodore R. Bigman Managing Director February 1995

Purchase and Sale of Fund SharesThe minimum initial investment generally is$5,000,000 for Class I shares and $1,000,000 forClass P shares. The minimum initial investment will bewaived for certain investments. For more information,please refer to the “Shareholder Information—How ToPurchase Class I, Class P and Class L Shares” sectionbeginning on page 20 of this Prospectus.

Class I and Class P shares of the Portfolio may be purchased or sold on any day the NYSE is openfor business directly through the Fund by mail(c/o Morgan Stanley Services Company Inc.,P.O. Box 219804, Kansas City, MO 64121-9804) orby telephone (1-800-548-7786) or by contacting your

financial intermediary. You may also purchase Portfolioshares by wiring Federal Funds to the Custodian.



Payments to Broker-Dealers and Other FinancialIntermediariesIf you purchase the Portfolio through a broker-dealer orother financial intermediary (such as a bank), the Adviserand/or the Portfolio’s distributor may pay the intermedi-ary for the sale of Portfolio shares and related services.These payments, which may be significant in amount,may create a conflict of interest by influencing the bro-ker-dealer or other intermediary and your salesperson torecommend the Portfolio over another investment. Askyour salesperson or visit your financial intermediary’s website for more information.

U.S. Real Estate Portfolio (Cont’d)

10



Global Real Estate Portfolio

ObjectiveThe Global Real Estate Portfolio seeks to provide currentincome and capital appreciation.

The Portfolio’s investment objective may be changed bythe Board of Directors of the Fund without shareholderapproval, but no change is anticipated. If the Portfolio’sinvestment objective changes, the Portfolio will notifyshareholders and shareholders should consider whetherthe Portfolio remains an appropriate investment in lightof the change.

ApproachThe Adviser and Sub-Advisers seek a combination ofcurrent income and capital appreciation by investing pri-marily in equity securities of companies in the real estateindustry located throughout the world, includingREOCs, REITs and foreign real estate companies. ThePortfolio will invest primarily in companies located in thedeveloped countries of North America, Europe and Asia,but may also invest in emerging markets. The Adviser’sand Sub-Advisers’ approach emphasizes a bottom-upstock selection with a top-down global allocation.

ProcessThe Adviser and Sub-Advisers actively manage thePortfolio using a combination of top-down and bot-tom-up methodologies. The Adviser’s and Sub-Advisers’proprietary models drive the bottom-up value-drivenapproach for stock selection. The top-down portionseeks diversified exposure to all major asset classes withan overweighting to property markets that offer the bestrelative valuation. The bottom-up research processstrongly influences the Adviser’s and Sub-Advisers’ per-spective on which property markets they believe providebetter relative value and growth prospects and, conse-quently, affects our decision to overweight or under-weight a given region, sector and/or country. TheAdviser and Sub-Advisers generally consider selling aportfolio holding if the holding’s share price shifts tothe point where the position no longer represents anattractive relative value opportunity versus the underly-ing value of its assets or versus other securities in theuniverse.

Under normal circumstances, at least 80% of thePortfolio’s assets (plus any borrowings for investment pur-poses) will be invested in equity securities of companies inthe real estate industry, including REOCs, REITs and for-eign real estate companies. This policy may be changedwithout shareholder approval; however, you would benotified in writing of any changes. The equity securities inwhich the Portfolio may invest include common stock,preferred stock, convertible securities, depositary receiptsand rights and warrants.

A company is considered to be in the real estate industryif it (i) derives at least 50% of its revenues or profitsfrom the ownership, construction, management, financ-ing or sale of residential, commercial or industrial realestate or (ii) has at least 50% of the fair market value ofits assets invested in residential, commercial or industrialreal estate.

RisksThe Portfolio’s principal investment strategies are subjectto the following principal risks:

Investing in the Portfolio may be appropriate for you ifyou are willing to accept the risks and uncertainties ofinvesting in the equity securities of real estate companieslocated throughout the world, including companieslocated in emerging market or developing countries. Ingeneral, prices of equity securities are more volatile thanthose of fixed income securities. The prices of equitysecurities will rise and fall in response to a number ofdifferent factors. In particular, prices of equity securitieswill respond to events that affect entire financial marketsor industries (changes in inflation or consumer demand,for example) and to events that affect particular issuers(news about the success or failure of a new product, forexample).

To the extent that the Portfolio invests in convertiblesecurities, and the convertible security’s investment valueis greater than its conversion value, its price will be likelyto increase when interest rates fall and decrease wheninterest rates rise. If the conversion value exceeds theinvestment value, the price of the convertible securitywill tend to fluctuate directly with the price of theunderlying equity security.

Investing in real estate companies entails the risks of thereal estate business generally, including sensitivity to eco-nomic and business cycles, changing demographic pat-terns and government actions. In addition, at times thePortfolio’s market sector, global real estate securities,may underperform relative to other sectors or the overallmarket.

Investing in the securities of foreign issuers, particularlythose located in emerging market or developing coun-tries, entails the risk that news and events unique to acountry or region will affect those markets and theirissuers. The value of the Portfolio’s shares may varywidely in response to political and economic factorsaffecting companies in foreign countries. These sameevents will not necessarily have an effect on the U.S.economy or similar issuers located in the United States.

In addition, the Portfolio’s investments in foreign issuersgenerally will be denominated in foreign currencies. Asa result, changes in the value of a country’s currencycompared to the U.S. dollar may affect the value of thePortfolio’s investments. These changes may occur


Details of the Portfolios

11



separately from and in response to events that do nototherwise affect the value of the security in the issuer’shome country.

Investing in REITs, REOCs and foreign real estate com-panies exposes investors to the risks of owning real estatedirectly, as well as to risks that relate specifically to theway in which REITs, REOCs and foreign real estatecompanies are organized and operated.

REITs and similar non-U.S. entities generally investdirectly in real estate, in mortgages or in some combina-tion of the two. REOCs and similar non-U.S. entitiesare entities that generally are engaged directly in realestate management or development activities. ThePortfolio will invest primarily in equity REITs and simi-lar non-U.S. entities. Operating REITs and similar non-U.S. entities require specialized management skills andthe Portfolio may indirectly bear management expensesalong with the direct expenses of the Portfolio.Individual REITs and similar non-U.S. entities may owna limited number of properties and may concentrate in aparticular region or property type. REITs also must satis-

fy specific requirements of the Internal Revenue Code of1986, as amended (the “Code”), in order to qualify forthe tax-free pass through of income. Foreign real estatecompanies may be subject to the laws, rules and regula-tions governing those entities and their failure to complywith those laws, rules and regulations could negativelyimpact the performance of those entities.

The risks of investing in the Portfolio may be intensifiedbecause the Portfolio is non-diversified, which meansthat it may invest in securities of a limited number ofissuers. As a result, the performance of a particularinvestment or a small group of investments may affectthe Portfolio’s performance more than if the Portfoliowere diversified.

Please see “Additional Information about the Portfolios’Investment Strategies and Related Risks” for furtherinformation about these and other risks of investing inthe Portfolio.


12



ObjectiveThe International Real Estate Portfolio’s investment objec-tive is to provide current income and long-term capitalappreciation.

ApproachThe Adviser and Sub-Advisers seek a combination ofcurrent income and long-term capital appreciation byinvesting primarily in equity securities of companies inthe real estate industry located throughout the world(excluding the United States and Canada). The Portfoliowill invest primarily in companies located in the devel-oped countries of Europe and Asia, but may also investin emerging markets. The Adviser’s and Sub-Advisers’approach emphasizes bottom-up stock selection with atop-down global allocation.

ProcessThe Adviser and Sub-Advisers actively manage thePortfolio using a combination of top-down and bot-tom-up methodologies. The Adviser’s and Sub-Advisers’proprietary models drive the bottom-up value-drivenapproach for stock selection. The top-down portionseeks diversified exposure to all major asset classes withan overweighting to property markets that offer the bestrelative valuation. The bottom-up research processstrongly influences the Adviser’s and Sub-Advisers’ per-spective on which property markets they believe providebetter relative value and growth prospects and, conse-quently, affects our decision to overweight or under-weight a given region, sector and/or country. TheAdviser and Sub-Advisers generally consider selling aportfolio holding if the holding’s share price shifts tothe point where the position no longer represents anattractive relative value opportunity versus the underly-ing value of its assets or versus other securities in theuniverse.

Under normal circumstances, at least 80% of thePortfolio’s assets will be invested in equity securities ofcompanies in the real estate industry. Such companiesare located in various global markets throughout theworld (excluding the United States and Canada). Thispolicy may be changed without shareholder approval;however, you would be notified in writing of anychanges. The equity securities in which the Portfoliomay invest include common stock, preferred stock, convertible securities, depositary receipts and rights and warrants.

A company is considered located outside of the UnitedStates and Canada if it (a) is not organized under thelaws of the United States or Canada, (b) does not havesecurities which are principally traded on a U.S. orCanadian stock exchange, (c) does not derive at least50% of its revenues from goods produced or sold,investments made, or services performed in the UnitedStates or Canada or (d) does not maintain at least 50%of its assets in the United States or Canada.

A company is considered to be in the real estate industryif it (i) derives at least 50% of its revenues or profitsfrom the ownership, construction, management, financ-ing or sale of residential, commercial or industrial realestate or (ii) has at least 50% of the fair market value ofits assets invested in residential, commercial or industrialreal estate.


Investing in the Portfolio may be appropriate for you ifyou are willing to accept the risks and uncertainties ofinvesting in the equity securities of real estate companieslocated throughout the world, including companieslocated in emerging market or developing countries. Ingeneral, prices of equity securities are more volatile thanthose of fixed income securities. The prices of equitysecurities will rise and fall in response to a number ofdifferent factors. In particular, prices of equity securitieswill respond to events that affect entire financial marketsor industries (changes in inflation or consumer demand,for example) and to events that affect particular issuers(news about the success or failure of a new product, forexample).


Investing in real estate companies entails the risks of thereal estate business generally, including sensitivity to eco-nomic and business cycles, changing demographic pat-terns and government actions. In addition, at times thePortfolio’s market sector, international real estate securi-ties, may underperform relative to other sectors or theoverall market.

Investing in the securities of foreign issuers, particularlythose located in emerging market or developing coun-tries, entails the risk that news and events unique to acountry or region will affect those markets and theirissuers. The value of the Portfolio’s shares may varywidely in response to political and economic factorsaffecting companies in foreign countries.

In addition, the Portfolio’s investments in foreign issuersgenerally will be denominated in foreign currencies. As aresult, changes in the value of a country’s currency compared to the U.S. dollar may affect the value of thePortfolio’s investments. These changes may occur separately from and in response to events that do not

International Real Estate Portfolio

13





otherwise affect the value of the security in the issuer’shome country.

Investing in foreign real estate companies exposesinvestors to the risks of owning real estate directly, aswell as risks that relate specifically to the way foreign realestate companies are organized and operated. Foreignreal estate companies may be subject to laws, rules andregulations governing those entities and their failure tocomply with those laws, rules and regulations could neg-atively impact the performance of those entities.

In addition, the risks of investing in the Portfolio maybe intensified because the Portfolio is non-diversified,which means that it may invest in securities of a limitednumber of issuers. As a result, the performance of a par-ticular investment or a small group of investments mayaffect the Portfolio’s performance more than if thePortfolio were diversified.



14



ObjectiveThe U.S. Real Estate Portfolio seeks to provide above aver-age current income and long-term capital appreciation byinvesting primarily in equity securities of companies in theU.S. real estate industry, including REITs.

ApproachThe Adviser seeks a combination of above average cur-rent income and long-term capital appreciation byinvesting primarily in equity securities of companies inthe U.S. real estate industry, including REITs. ThePortfolio focuses on REITs as well as REOCs that investin a variety of property types and regions. The Adviser’sapproach emphasizes bottom-up stock selection with atop-down asset allocation.

ProcessThe Adviser actively manages the Portfolio using a com-bination of top-down and bottom-up methodologies.The Portfolio is constructed utilizing a process that com-bines both bottom-up and top-down analyses. TheAdviser’s proprietary models drive the bottom-up value-driven approach for stock selection. The top-down por-tion seeks diversified exposure to all major asset classeswith an overweighting to property markets that offer thebest relative valuation. The bottom-up research processstrongly influences the Adviser’s perspective on whichproperty markets it believes provide better relative valueand growth prospects and, consequently, affects our deci-sion to overweight/underweight a given property market.The Adviser generally considers selling a portfolio hold-ing if the holding’s share price shifts to the point wherethe position no longer represents an attractive relativevalue opportunity versus the underlying value of its assetsor versus other securities in the universe.

Under normal circumstances, at least 80% of thePortfolio’s assets will be invested in equity securities ofcompanies in the U.S. real estate industry. This policymay be changed without shareholder approval; however,you would be notified in writing of any changes. Theequity securities in which the Portfolio may investinclude common stock, preferred stock, convertiblesecurities, depositary receipts and rights and warrants.

A company is considered to be in the U.S. real estateindustry if it meets the following tests: (1) a company isconsidered to be from the United States if its securitiesare traded on a recognized stock exchange in the UnitedStates, if alone or on a consolidated basis it derives 50%or more of its annual revenues from either goods pro-duced, sales made or services performed in the UnitedStates or if it is organized or has a principal office in theUnited States; and (2) a company is considered to be inthe real estate industry if it (i) derives at least 50% of itsrevenues or profits from the ownership, construction,management, financing or sale of residential, commercialor industrial real estate, or (ii) has at least 50% of thefair market value of its assets invested in residential,commercial or industrial real estate.


Investing in the Portfolio may be appropriate for you ifyou are willing to accept the risks and uncertainties ofinvesting in the equity securities of U.S. real estate com-panies. In general, prices of equity securities are morevolatile than those of fixed income securities. The pricesof equity securities will rise and fall in response to anumber of different factors. In particular, prices of equi-ty securities will respond to events that affect entirefinancial markets or industries (changes in inflation orconsumer demand, for example) and to events thataffect particular issuers (news about the success or failureof a new product, for example).


Investing in real estate companies entails the risks ofthe real estate business generally, including sensitivityto economic and business cycles, changing demograph-ic patterns and government actions. In addition, attimes the Portfolio’s market sector, U.S. real estatesecurities, may underperform relative to other sectorsor the overall market.

Investing in REITs and REOCs exposes investors to therisks of owning real estate directly, as well as to risks thatrelate specifically to the way in which REITs andREOCs are organized and operated. REITs generallyinvest directly in real estate, in mortgages or in somecombination of the two. REOCs are entities that gener-ally are engaged directly in real estate management ordevelopment activities. The Portfolio will invest primari-ly in equity REITs. Operating a REIT requires special-ized management skills and the Portfolio indirectly bearsREIT management expenses along with the directexpenses of the Portfolio. Individual REITs may own alimited number of properties and may concentrate in aparticular region or property type. REITs also must satis-fy specific requirements of the Code in order to qualifyfor the tax-free pass through of income.

The risks of investing in the Portfolio may be intensifiedbecause the Portfolio is non-diversified, which means thatit may invest in securities of a limited number of issuers.As a result, the performance of a particular investment ora small group of investments may affect the Portfolio’sperformance more than if the Portfolio were diversified.


U.S. Real Estate Portfolio

15





16

Equity SecuritiesEquity securities include common stock, preferred stock,convertible securities, depositary receipts, rights and war-rants. The Portfolios may invest in equity securities thatare publicly-traded on securities exchanges or over-the-counter or in equity securities that are not publiclytraded. Securities that are not publicly traded may bemore difficult to sell and their value may fluctuate moredramatically than other securities.

A convertible security is a bond, debenture, note, pre-ferred stock, right, warrant or other security that may beconverted into or exchanged for a prescribed amount ofcommon stock or other security of the same or a differ-ent issuer or into cash within a particular period of timeat a specified price or formula. A convertible securitygenerally entitles the holder to receive interest paid oraccrued on debt securities or the dividend paid on pre-ferred stock until the convertible security matures or isredeemed, converted or exchanged. Before conversion,convertible securities generally have characteristics simi-lar to both debt and equity securities. The value of convertible securities tends to decline as interest rates riseand, because of the conversion feature, tends to varywith fluctuations in the market value of the underlyingsecurities. Convertible securities ordinarily provide astream of income with generally higher yields thanthose of common stock of the same or similar issuers.Convertible securities generally rank senior to commonstock in a corporation’s capital structure but are usuallysubordinated to comparable nonconvertible securities.Convertible securities generally do not participate directlyin any dividend increases or decreases of the underlyingsecurities although the market prices of convertible securities may be affected by any dividend changes orother changes in the underlying securities.

Price VolatilityThe value of your investment in a Portfolio is based onthe market prices of the securities the Portfolio holds.These prices change daily due to economic and otherevents that affect markets generally, as well as those thataffect particular regions, countries, industries, companiesor governments. These price movements, sometimescalled volatility, may be greater or less depending on thetypes of securities the Portfolio owns and the markets inwhich the securities trade. Over time, equity securitieshave generally shown gains superior to fixed incomesecurities, although they have tended to be more volatilein the short term. As a result of price volatility, there is arisk that you may lose money by investing in a Portfolio.

Real Estate InvestingEach of the Portfolios invests in companies that aremainly in the real estate industry. As a result, these com-panies (and, therefore, the Portfolios) will experience the

risks of investing in real estate directly. Real estate is acyclical business, highly sensitive to general and localeconomic developments and characterized by intensecompetition and periodic overbuilding. Real estateincome and values may also be greatly affected by demographic trends, such as population shifts or chang-ing tastes and values. Government actions, such as taxincreases, zoning law changes or environmental regula-tions, may also have a major impact on real estate markets. Changing interest rates and credit qualityrequirements will also affect the cash flow of real estatecompanies and their ability to meet capital needs.

Foreign InvestingTo the extent that a Portfolio invests in foreign issuers,there is the risk that news and events unique to a countryor region will affect those markets and their issuers. Thesesame events will not necessarily have an effect on theU.S. economy or similar issuers located in the UnitedStates. In addition, some of the Portfolios’ securities,including underlying securities represented by depositaryreceipts, generally will be denominated in foreign curren-cies. As a result, changes in the value of a country’s currency compared to the U.S. dollar may affect thevalue of a Portfolio’s investments. These changes mayhappen separately from, and in response to, events thatdo not otherwise affect the value of the security in theissuer’s home country. These risks may be intensified fora Portfolio’s investments in securities of issuers located inemerging market or developing countries.

Foreign SecuritiesForeign issuers generally are subject to different account-ing, auditing and financial reporting standards than U.S.issuers. There may be less information available to thepublic about foreign issuers. Securities of foreign issuerscan be less liquid and experience greater price move-ments. In some foreign countries, there is also the risk ofgovernment expropriation, excessive taxation, political orsocial instability, the imposition of currency controls ordiplomatic developments that could affect a Portfolio’sinvestment. There also can be difficulty obtaining andenforcing judgements against issuers in foreign coun-tries. Foreign stock exchanges, broker-dealers and listedissuers may be subject to less government regulation andoversight. The cost of investing in foreign securities,including brokerage commissions and custodial expenses,can be higher than in the United States.

Emerging Market RisksCertain Portfolios may invest in emerging market or developing countries, which are countries that majorinternational financial institutions, such as the WorldBank, generally consider to be less economically maturethan developed nations, such as the United States ormost nations in Western Europe. Emerging market or

This section discussesadditional informationrelating to thePortfolios’ investmentstrategies, other typesof investments that thePortfolios may makeand related risk factors.The Portfolios’investment practicesand limitations aredescribed in moredetail in the Statementof AdditionalInformation (“SAI”),which is incorporatedby reference and legallyis a part of thisProspectus. For detailson how to obtain acopy of the SAI andother reports andinformation, see theback cover of thisProspectus.

Merrill Corp - M-S Institutional Fund Real Estate Port MSIREUIPRO Prospectus [Funds] 04-29-2011 ED [AUX] | cmashak | 27-Apr-11 17:17 | 10-22173-4.ca | Sequence: 1CHKSUM Content: 4503 Layout: 44861 Graphics: No Graphics CLEAN


17

developing countries can include every nation in theworld except the United States, Canada, Japan,Australia, New Zealand and most countries located inWestern Europe. Emerging market or developing coun-tries may be more likely to experience political turmoilor rapid changes in economic conditions than moredeveloped countries, and the financial condition ofissuers in emerging market or developing countries maybe more precarious than in other countries. In addition,emerging market and developing country securities generally are less liquid and subject to wider price andcurrency fluctuations than securities issued in moredeveloped countries. These characteristics result ingreater risk of price volatility in emerging market ordeveloping countries, which may be heightened by currency fluctuations relative to the U.S. dollar.

Foreign CurrencyThe investments of the Portfolios generally will bedenominated in foreign currencies. The value of for-eign currencies may fluctuate relative to the value ofthe U.S. dollar. Since a Portfolio may invest in suchnon-U.S. dollar-denominated securities, and thereforemay convert the value of such securities into U.S. dollars,changes in currency exchange rates can increase ordecrease the U.S. dollar value of a Portfolio’s assets.The Adviser and/or Sub-Advisers may use derivatives

to reduce the risk. The Adviser and/or Sub-Advisersmay in their discretion choose not to hedge againstcurrency risk. In addition, certain market conditionsmay make it impossible or uneconomical to hedgeagainst currency risk.

Investment DiscretionIn pursuing the Portfolios’ investment objectives, theAdviser and/or Sub-Advisers have considerable leeway indeciding which investments they buy, hold or sell on aday-to-day basis, and which trading strategies they use.For example, the Adviser and/or Sub-Advisers in theirdiscretion may determine to use some permitted tradingstrategies while not using others. The success or failureof such decisions will affect the Portfolios’ performance.

Temporary Defensive InvestmentsWhen the Adviser and/or Sub-Advisers believe thatchanges in economic, financial or political conditionswarrant, each Portfolio may invest without limit in cer-tain short- and medium-term fixed income securities fortemporary defensive purposes that may be inconsistentwith a Portfolio’s principal investment strategies. If theAdviser and/or Sub-Advisers incorrectly predict theeffects of these changes, such defensive investments mayadversely affect a Portfolio’s performance and thePortfolio may not achieve its investment objective.


Additional Information about the Portfolios’ Investment Strategies and Related Risks



Investment Adviser

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The Adviser has entered into Sub-Advisory Agreementswith MSIM Limited, located at 25 Cabot Square,Canary Wharf, London, E14 4QA, England and MSIMCompany, located at 23 Church Street, 16-01 CapitalSquare, Singapore 049481 with respect to theInternational Real Estate and Global Real EstatePortfolios. The Sub-Advisers are wholly owned

subsidiaries of Morgan Stanley. The Sub-Advisers pro-vide the Portfolios with investment advisory services subject to the overall supervision of the Adviser and theFund’s Officers and Directors. The Adviser pays theSub-Advisers on a monthly basis a portion of the netadvisory fees the Adviser receives from the Portfolios.

Morgan Stanley Investment Management Inc., withprincipal offices at 522 Fifth Avenue, New York, NY10036, conducts a worldwide portfolio managementbusiness and provides a broad range of portfolio manage-ment services to customers in the United States andabroad. Morgan Stanley is the direct parent of theAdviser and the indirect parent of Morgan StanleyDistribution, Inc. (“Morgan Stanley Distribution”), the

Fund’s Distributor. Morgan Stanley is a preeminentglobal financial services firm engaged in securities trad-ing and brokerage activities, as well as providing invest-ment banking, research and analysis, financing andfinancial advisory services. As of March 31, 2011, theAdviser, together with its affiliated asset managementcompanies, had approximately $275.8 billion in assetsunder management or supervision.

Sub-Advisers

Advisory FeesFor the fiscal year ended December 31, 2010, theAdviser received from each Portfolio the advisory fee(net of fee waivers and/or expense reimbursements) setforth in the table below.

Adviser’s Rates of Compensation(as a percentage of average net assets)Global Real Estate Portfolio 0.85%International Real Estate Portfolio 0.80%U.S. Real Estate Portfolio 0.78%

Global Real Estate Portfolio andInternational Real Estate PortfolioEach Portfolio is managed by members of the RealEstate team. The team consists of portfolio managersand analysts. Current members of the team jointly andprimarily responsible for the day-to-day management ofeach Portfolio are Theodore R. Bigman, Michiel tePaske, Sven van Kemenade and Angeline Ho.

Mr. Bigman has been associated with the Adviser inan investment management capacity since 1995.Mr. te Paske has been associated with the Adviser inan investment management capacity since 1997.Mr. van Kemenade has been associated with theAdviser in an investment management capacity since1997. Ms. Ho has been associated with the Adviser inan investment management capacity since 1997.

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

U.S. Real Estate PortfolioThe Portfolio is managed by members of the RealEstate team. The team consists of a portfolio managerand analysts. Theodore R. Bigman is the Portfolio’s port-folio manager and is primarily responsible for the day-to-day management of the Portfolio.

Mr. Bigman has been associated with the Adviser in aninvestment management capacity since 1995.

Mr. Bigman is supported by a team of six research analysts. Together, Mr. Bigman and the team determineinvestment strategy, establish asset-allocation frameworksand direct the implementation of investment strategy.

Portfolio Management



19


Fund Management

Additional InformationThe Portfolios’ SAI provides additional informationabout the portfolio managers’ compensation structure,other accounts managed by the portfolio managers andthe portfolio managers’ ownership of securities in thePortfolios.

The composition of each team may change from time totime.

A discussion regarding the Board of Directors’approval of the Investment Advisory Agreement andthe Sub-Advisory Agreements is available in the Fund’sSemiannual Report to Shareholders for the periodended June 30, 2010.

Portfolio Management (Cont’d)



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Share ClassThis Prospectus offers Class I, Class P, Class H andClass L shares of the Global Real Estate Portfolio andClass I and Class P shares of each of the InternationalReal Estate Portfolio and U.S. Real Estate Portfolio.Neither Class I shares, Class P shares nor Class L sharesare subject to a sales charge, and Class I shares are notsubject to a shareholder services fee. Both Class I andClass P shares generally require investments in mini-mum amounts that are substantially higher than Class Hand Class L shares.

Distribution of Portfolio SharesMorgan Stanley Distribution is the exclusiveDistributor of Class I and Class P shares of eachPortfolio and Class H and Class L shares of the GlobalReal Estate Portfolio. Morgan Stanley Distributionreceives no compensation from the Fund for distribut-ing Class I shares of the Portfolios. The Fund hasadopted a Shareholder Services Plan with respect to theClass P shares of each Portfolio, a Shareholder ServicesPlan with respect to the Class H shares of the GlobalReal Estate Portfolio and a Distribution andShareholder Services Plan with respect to the Class Lshares of the Global Real Estate Portfolio (the “Plans”)pursuant to Rule 12b-1 under the InvestmentCompany Act of 1940. Under the Plans, each Portfoliopays the Distributor a shareholder services fee of up to0.25% of the average daily net assets of the Class Pshares on an annualized basis, and the Global RealEstate Portfolio pays the Distributor a shareholder serv-ices fee of up to 0.25% of the average daily net assets ofeach of the Class H shares and Class L shares on anannualized basis and a distribution fee of up to 0.50%of the average daily net assets of the Class L shares onan annualized basis. The Distributor may compensateother parties for providing distribution-related and/orshareholder support services to investors who purchaseClass P, Class H and Class L shares. Such fees relatesolely to the Class P, Class H and Class L shares andwill reduce the net investment income and total returnof the Class P, Class H and Class L shares, respectively.

The Adviser and/or Distributor may pay compensationto certain brokers or other service providers in connec-tion with the sale, distribution, marketing and retentionof a Portfolio’s shares and/or shareholder servicing. Suchcompensation may be significant in amount and theprospect of receiving any such additional compensationmay provide affiliated or unaffiliated entities with anincentive to favor sales of shares of the Portfolios overother investment options. Any such payments will notchange the net asset value (“NAV”) or the price of aPortfolio’s shares. For more information, please see thePortfolios’ SAI.

About Net Asset ValueThe NAV per share of a class of shares of a Portfolio isdetermined by dividing the total of the value of thePortfolio’s investments and other assets attributable tothe class, less any liabilities attributable to the class, by

the total number of outstanding shares of that class ofthe Portfolio. In making this calculation, each Portfoliogenerally values securities at market price. If marketprices are unavailable or may be unreliable because ofevents occurring after the close of trading, including cir-cumstances under which the Adviser and/or Sub-Advisersdetermine that a security’s market price is not accurate,fair value prices may be determined in good faith usingmethods approved by the Board of Directors.

In addition, with respect to securities that primarily arelisted on foreign exchanges, when an event occurs afterthe close of such exchanges that is likely to have changedthe value of the securities (e.g., a percentage change invalue of one or more U.S. securities indices in excess ofspecified thresholds), such securities will be valued attheir fair value, as determined under procedures estab-lished by the Fund’s Board of Directors. Securities alsomay be fair valued in the event of a significant develop-ment affecting a country or region or an issuer-specificdevelopment which is likely to have changed the valueof the security. In these cases, a Portfolio’s NAV willreflect certain portfolio securities’ fair value rather thantheir market price. To the extent a Portfolio invests inopen-end management companies that are registeredunder the Investment Company Act of 1940, thePortfolio’s net asset value is calculated based upon thenet asset value of such funds. The prospectuses for suchfunds explain the circumstances under which they willuse fair value pricing and its effects.

Fair value pricing involves subjective judgments and it ispossible that the fair value determined for a security ismaterially different than the value that could be realizedupon the sale of that security. With respect to securitiesthat are primarily listed on foreign exchanges, the valuesof a Portfolio’s investment securities may change on dayswhen you will not be able to purchase or sell your shares.

Pricing of Portfolio SharesYou may buy or sell (redeem) Class I and Class P sharesof each Portfolio and Class H and Class L shares of theGlobal Real Estate Portfolio at the NAV next deter-mined for the class after receipt of your order, plus anyapplicable sales charge. The Fund determines the NAVper share for the Portfolios as of the close of the NYSE(normally 4:00 p.m. Eastern Time) on each day that theNYSE is open for business (the “Pricing Time”).

Portfolio HoldingsA description of the Fund’s policies and procedures withrespect to the disclosure of each Portfolio’s securities isavailable in the Portfolios’ SAI.

How To Purchase Class I, Class P and Class L SharesYou may purchase Class I, Class P and Class L shares ofthe applicable Portfolio directly from the Fund, from theDistributor or through certain third parties (“FinancialIntermediaries”) on each day that the Portfolios are openfor business.

Shareholder Information



21

Investors purchasing Class I, Class P and Class L sharesthrough a Financial Intermediary may be charged atransaction-based or other fee by the FinancialIntermediary for its services. If you are purchasingClass I, Class P or Class L shares through a FinancialIntermediary, please consult your Financial Intermediaryfor purchase instructions.

The minimum initial investment generally is$5,000,000 for Class I shares, and $1,000,000 forClass P shares of the Portfolios and $25,000 for Class Lshares of the Global Real Estate Portfolio. The mini-mum initial investment will be waived for certain invest-ments, including sales through banks, broker-dealers andother financial institutions (including registered invest-ment advisers and financial planners) purchasing shareson behalf of their clients in (i) discretionary and non-discretionary advisory programs, (ii) fund supermarkets,(iii) asset allocation programs or (iv) other programs inwhich the client pays an asset-based fee for advice or forexecuting transactions in Portfolio shares or for other-wise participating in the program; certain retirementplans (with plan assets of at least $5 million for Class Iand Class P shares) investing directly with the Fund;retirement plans investing through certain retirementplan platforms; certain endowments, foundations andother not for profit entities (with at least $5 million ofinvestable assets for Class I and Class P shares) investingdirectly with the Fund; certain unit investment trustssponsored by Morgan Stanley or any of its affiliates;other registered investment companies advised byMorgan Stanley Investment Management or any of itsaffiliates; Morgan Stanley Investment Management andits affiliates with respect to shares held in connectionwith certain retirement and deferred compensation pro-grams established for their employees; the independentDirectors of the Fund; and, with respect to Class I andClass P shares only, clients who owned Portfolio sharesas of December 31, 2007. If the value of your accountfalls below the minimum initial investment amount forClass I, Class P or Class L shares as a result of shareredemptions or you no longer meet one of the waivercriteria set forth above, your account may be subject toinvoluntary conversion or involuntary redemption. Youwill be notified prior to any such conversions orredemptions.

Initial Purchase by MailYou may open an account, subject to acceptance by theFund, by completing and signing an Account RegistrationForm provided by Morgan Stanley Services CompanyInc. (“Morgan Stanley Services”), the Fund’s transferagent, which you can obtain by calling Morgan StanleyServices at 1-800-548-7786 and mailing it to MorganStanley Institutional Fund, Inc., c/o Morgan StanleyServices Company Inc., P.O. Box 219804, Kansas City,MO 64121-9804 together with a check payable toMorgan Stanley Institutional Fund, Inc.

Please note that payments to investors who redeemClass I, Class P and Class L shares purchased by checkwill not be made until payment of the purchase has beencollected, which may take up to eight business days afterpurchase. You can avoid this delay by purchasing Class I,Class P and Class L shares by wire.

Initial Purchase by WireYou may purchase Class I, Class P and Class L shares ofeach Portfolio, as applicable, by wiring Federal Funds(monies credited by a Federal Reserve Bank) to theCustodian. You should forward a completed AccountRegistration Form to Morgan Stanley Services in advance ofthe wire. See the section above entitled “Pricing ofPortfolio Shares.” Instruct your bank to send a FederalFunds wire in a specified amount to the Custodian usingthe following wire instructions:

State Street Bank and Trust CompanyOne Lincoln Street Boston, MA 02111-2101ABA #011000028DDA #00575373Attn: Morgan Stanley Institutional Fund, Inc.Subscription AccountRef: (Portfolio Name, Account Number,Account Name)

Additional InvestmentsYou may purchase additional Class I, Class P andClass L shares for your account at any time by purchas-ing shares at NAV by any of the methods describedabove. For additional purchases directly from the Fund,your account name, account number, the Portfolio nameand the class selected must be specified in the letter toassure proper crediting to your account. In addition, youmay purchase additional shares by wire by followinginstructions under “Initial Purchase by Wire.”

How To Purchase Class H SharesClass H shares of the Global Real Estate Portfolio maybe purchased by contacting your authorized financialrepresentative who will assist you, step-by-step, with theprocedures to invest in Class H shares.

Class H shares are available to investors with a mini-mum investment of $25,000. If the value of youraccount falls below the minimum initial investmentamount for Class H shares as a result of share redemp-tions, your account may be subject to involuntaryredemption. You will be notified prior to any suchredemptions.

Class H shares are subject to a sales charge equal to amaximum of 4.75% calculated as a percentage of theoffering price on a single transaction as shown in thetable below. As shown below, the sales charge is reducedfor purchases of $50,000 and over. Class H shares aresubject to a monthly shareholder services fee at an annu-al rate of 0.25% of the Global Real Estate Portfolio’saverage daily net assets attributable to Class H shares.

Shareholder Information (Cont’d)





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You may benefit from a reduced sales charge schedule(i.e., breakpoint discount) for purchases of Class Hshares of the Global Real Estate Portfolio, by combining,in a single transaction, your purchase with purchases ofClass H shares of the Global Real Estate Portfolio by thefollowing related accounts:

• A single account (including an individual, trust orfiduciary account).

• A family member account (limited to spouse, andchildren under the age of 21).

• Pension, profit sharing or other employee benefitplans of companies and their affiliates.

• Employer sponsored and individual retirementaccounts (including IRAs, Keogh, 401(k), 403(b),408(k) and 457(b) Plans).

• Tax-exempt organizations.• Groups organized for a purpose other than to buy

mutual fund shares.

In addition to investments of $1 million or more, pur-chases of Class H shares are not subject to a front-endsales charge for accounts of employees of Morgan Stanleyand its subsidiaries, such persons’ family members (limit-ed to spouse, and children under the age of 21) and trustaccounts for which any such person is a beneficiary.

Combined Purchase PrivilegeYou will have the benefit of reduced sales charges bycombining purchases of Class H shares of the GlobalReal Estate Portfolio for any related account in a singletransaction with purchases of Class H shares of anotherportfolio of the Fund or of a portfolio of MorganStanley Institutional Fund Trust for the related accountor any other related account. For the purpose of thiscombined purchase privilege, a “related account” is:

• A single account (including an individual account, ajoint account and a trust account established solelyfor the benefit of the individual).

• A family member account (limited to spouse, andchildren under the age of 21, but including trustaccounts established solely for the benefit of a spouse,or children under the age of 21).

• An IRA and single participant retirement account(such as a Keogh).

• An UGMA/UTMA account.

Right of AccumulationYou may benefit from a reduced sales charge if thecumulative net asset value of Class H shares of theGlobal Real Estate Portfolio purchased in a single trans-action, together with the net asset value of all Class Hshares of a portfolio of the Fund or of a portfolio ofMorgan Stanley Institutional Fund Trust held in relatedaccounts, amounts to $50,000 or more. For the purpos-es of the right of accumulation privilege, a relatedaccount is any one of the accounts listed under“Combined Purchase Privilege” above.

NotificationYou must notify your authorized financial representativeat the time a purchase order is placed, that the purchasequalifies for a reduced sales charge under any of the priv-ileges discussed above. The reduced sales charge will notbe granted if: (i) notification is not furnished at the timeof the order; or (ii) a review of the records of MorganStanley Smith Barney LLC (“Morgan Stanley SmithBarney”) or your authorized financial representative orthe Fund’s transfer agent, Morgan Stanley Services, doesnot confirm your represented holdings.

In order to obtain a reduced sales charge under any ofthe privileges discussed above, it may be necessary at thetime of purchase for you to inform your authorizedfinancial representative of the existence of other accountsin which there are holdings eligible to be aggregated tomeet the sales load breakpoint and/or right of accumula-tion threshold. In order to verify your eligibility, youmay be required to provide account statements and/orconfirmations regarding Class H shares of a portfolio ofthe Fund or of a portfolio of Morgan StanleyInstitutional Fund Trust held in all related accountsdescribed above at your authorized financial representa-tive, as well as shares held by related parties, such asmembers of the same family or household, in order todetermine whether you have met the sales load break-point and/or right of accumulation threshold.

Letter of IntentThe above schedule of reduced sales charges for largerpurchases also will be available to you if you enter into awritten “Letter of Intent.” A Letter of Intent provides forthe purchase of Class H shares of a portfolio of the Fundor of a portfolio of Morgan Stanley Institutional FundTrust within a 13-month period. The initial purchaseunder a Letter of Intent must be at least 5% of the statedinvestment goal. The Letter of Intent does not preclude


Front End Sales Charge

Percentage of Approximate PercentageAmount of Single Transaction Public Offering Price of Net Amount Invested$25,000 but less than $50,000 4.75% 4.99%$50,000 but less than $100,000 4.00% 4.17%$100,000 but less than $250,000 3.00% 3.09%$250,000 but less than $500,000 2.50% 2.56%$500,000 but less than $1 million 2.00% 2.04%$1 million and over 0.00% 0.00%



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the Global Real Estate Portfolio from discontinuing salesof its shares. To determine the applicable sales chargereduction, you may also include (1) the cost of otherClass H shares which were previously purchased at aprice including a front-end sales charge during the 90-day period prior to the Distributor receiving the Letter ofIntent and (2) the historical cost of Class H shares ofother portfolios of the Fund or of other Morgan StanleyInstitutional Funds you currently own acquired inexchange for shares of other portfolios of the Fund orportfolios of Morgan Stanley Institutional Fund Trustpurchased during that period at a price including a front-end sales charge. You may combine purchases andexchanges by family members (limited to spouse, andchildren under the age of 21) during the period refer-enced above. You should retain any records necessary tosubstantiate historical costs because the Fund, MorganStanley Services and your authorized financial representa-tive may not maintain this information. You can obtain aLetter of Intent by contacting your authorized financialrepresentative. If you do not achieve the stated investmentgoal within the 13-month period, you are required to paythe difference between the sales charges otherwise applica-ble and sales charges actually paid, which may be deduct-ed from your investment. Shares acquired through rein-vestment of distributions are not aggregated to achieve thestated investment goal.

Additional InvestmentsYou may purchase additional Class H shares for youraccount at any time by purchasing shares at NAV, plusany applicable sales charge.

Order Processing FeesYour financial intermediary may charge processing orother fees in connection with the purchase or sale ofClass H shares. For example, the Morgan Stanley channelof Morgan Stanley Smith Barney charges clients an orderprocessing fee of $6.00 (except in certain circumstances,including, but not limited to, activity in fee-basedaccounts, exchanges, dividend reinvestments and system-atic investment and withdrawal plans) when a client buysor redeems Class H shares of the Global Real EstatePortfolio. Please consult your authorized financial repre-sentative for more information regarding any such fee.

GeneralClass I, Class P, Class H and Class L shares may, in theFund’s discretion, be purchased with investment securi-ties (in lieu of or, in conjunction with, cash) acceptableto the Fund. The securities would be accepted by theFund at their market value in return for Portfolio sharesof equal value, taking into account any applicable salescharge.

To help the Government fight the funding of terrorismand money laundering activities, federal law requires allfinancial institutions to obtain, verify and record infor-mation that identifies each person who opens anaccount. What this means to you: when you open an

account, we will ask your name, address, date of birthand other information that will allow us to identify you.If we are unable to verify your identity, we reserve theright to restrict additional transactions and/or liquidateyour account at the next calculated NAV after youraccount is closed (less any applicable sales/accountcharges and/or tax penalties) or take any other actionrequired by law. In accordance with federal law require-ments, the Fund has implemented an anti-money laundering compliance program, which includes the des-ignation of an anti-money laundering compliance officer.

Other Transaction InformationThe Fund may suspend the offering of shares, or anyclass of shares, of the Portfolios or reject any purchaseorders when we think it is in the best interests of theFund.

Certain patterns of exchange and/or purchase or saletransactions involving the Portfolios may result in theFund rejecting, limiting or prohibiting, at its sole discre-tion, and without prior notice, additional purchasesand/or exchanges and may result in a shareholder’saccount being closed. Determination in this regard maybe made based on the frequency or dollar amount of theprevious exchange or purchase or sale transaction. See“Frequent Purchases and Redemptions of Shares.”

How To Redeem Class I, Class P and Class L SharesYou may redeem Class I, Class P and Class L shares of aPortfolio, as applicable, by mail or, if authorized, by tele-phone, at no charge other than as described below. Thevalue of shares redeemed may be more or less than thepurchase price, depending on the NAV at the time ofredemption. Class I, Class P and Class L shares of aPortfolio, as applicable, will be redeemed at the NAVnext determined after we receive your redemptionrequest in good order.

Requests should be addressed to Morgan StanleyInstitutional Fund, Inc., c/o Morgan Stanley ServicesCompany Inc., P.O. Box 219804, Kansas City,MO 64121-9804.

To be in good order, redemption requests must includethe following documentation:

(a) A letter of instruction, if required, or a stock assignment specifying the number of shares or dollaramount to be redeemed, signed by all registered ownersof the shares in the exact names in which the shares areregistered;

(b) The share certificates, if issued;

(c) Any required signature guarantees; and

(d) Other supporting legal documents, if required, inthe case of estates, trusts, guardianships, custodianship,corporations, pension and profit sharing plans and otherorganizations.






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You automatically have telephone redemption andexchange privileges unless you indicate otherwise bychecking the applicable box on the new account applica-tion form or calling Morgan Stanley Services to opt outof such privileges. You may request a redemption ofClass I, Class P and Class L shares by calling the Fund at1-800-548-7786 and requesting that the redemptionproceeds be wired to you. You cannot redeem Class I,Class P and Class L shares by telephone if you holdshare certificates for those shares. For your protectionwhen calling the Fund, we will employ reasonable proce-dures to confirm that instructions communicated overthe telephone are genuine. These procedures mayinclude requiring various forms of personal identificationsuch as name, mailing address, social security number orother tax identification number. Telephone instructionsmay also be recorded. If reasonable procedures areemployed, none of Morgan Stanley, Morgan StanleyServices or the Fund will be liable for following tele-phone instructions which it reasonably believes to begenuine. Telephone redemptions and exchanges may notbe available if you cannot reach Morgan Stanley Servicesby telephone, whether because all telephone lines arebusy or for any other reason; in such case, a shareholderwould have to use the Fund’s other redemption andexchange procedures described in this prospectus.During periods of drastic economic or market changes,it is possible that the telephone privileges may be diffi-cult to implement, although this has not been the casewith the Fund in the past. To opt out of telephone privileges, please contact Morgan Stanley Services at1-800-548-7786.

The Fund will ordinarily distribute redemption proceedsin cash within one business day of your redemptionrequest, but may take up to seven days. However, if youpurchased Class I, Class P and Class L shares by check,the Fund will not distribute redemption proceeds until ithas collected your purchase payment, which may takeup to eight days.

If we determine that it is in the best interest of the Fundor Portfolio not to pay redemption proceeds in cash, wemay distribute to you securities held by the Portfoliofrom which you are redeeming. If requested, we will paya portion of your redemption(s) in cash (during any90 day period) up to the lesser of $250,000 or 1% ofthe net assets of the Portfolio at the beginning of suchperiod. Such in-kind securities may be illiquid and diffi-cult or impossible for a shareholder to sell at a time andat a price that a shareholder would like. Redemptionspaid in such securities generally will give rise to income,gain or loss for income tax purposes in the same manneras redemptions paid in cash. In addition, you may incurbrokerage costs and a further gain or loss for income taxpurposes when you ultimately sell the securities.

Class I and Class P shares of the International RealEstate Portfolio redeemed within 30 days of purchase

will be subject to a 2% redemption fee, payable to theInternational Real Estate Portfolio. The redemption feeis designed to protect the International Real EstatePortfolio and its remaining shareholders from the effectsof short-term trading. The redemption fee is notimposed on redemptions made: (i) through systematicwithdrawal/exchange plans, (ii) through pre-approvedasset allocation programs, (iii) of shares received by rein-vesting income dividends or capital gain distributions,(iv) through certain collective trust funds or otherpooled vehicles and (v) on behalf of advisory accountswhere client allocations are solely at the discretion of theMorgan Stanley Investment Management investmentteam. The redemption fee is based on, and deductedfrom, the redemption proceeds. Each time you redeem orexchange Class I, Class P and Class L shares, as applica-ble, of a Portfolio, the shares held the longest will beredeemed or exchanged first.

The redemption fee may not be imposed on transactionsthat occur through certain omnibus accounts at FinancialIntermediaries. Certain Financial Intermediaries may nothave the ability to assess a redemption fee. CertainFinancial Intermediaries may apply different methodolo-gies than those described above in assessing redemptionfees, may impose their own redemption fee that may differ from the International Real Estate Portfolio’sredemption fee or may impose certain trading restric-tions to deter market-timing and frequent trading. Ifyou invest in a Portfolio through a FinancialIntermediary, please read that Financial Intermediary’smaterials carefully to learn about any other restrictionsor fees that may apply.

Exchange PrivilegeYou may exchange Class I, Class P and Class L shares forthe same class of shares of other available portfolios ofthe Fund and available portfolios of Morgan StanleyInstitutional Fund Trust. Exchanges are effected basedon the respective NAVs of the applicable portfolios (subject to any applicable redemption fee). To obtain aprospectus for another portfolio, call the Fund at1-800-548-7786 or contact your Financial Intermediary.If you purchased Portfolio shares through a FinancialIntermediary, certain portfolios may be unavailable forexchange. Contact your Financial Intermediary to deter-mine which portfolios are available for exchange.

You can process your exchange by contacting yourFinancial Intermediary. Otherwise, you should sendexchange requests to Morgan Stanley Services by mail toMorgan Stanley Institutional Fund, Inc., c/o MorganStanley Services Company Inc., P.O. Box 219804,Kansas City, MO 64121-9804. Exchange requests canalso be made by calling 1-800-548-7786.

When you exchange for Class I, Class P or Class Lshares of another portfolio, your transaction will betreated the same as an initial purchase. You will be




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subject to the same minimum initial investment andaccount size as an initial purchase. Your exchange pricewill be the price calculated at the next Pricing Time afterthe Fund receives your exchange order. The Fund, in itssole discretion, may waive the minimum initial invest-ment amount in certain cases. An exchange ofInternational Real Estate Portfolio shares held for lessthan 30 days from the date of purchase will be subject tothe 2% redemption fee described above. The Fund mayterminate or revise the exchange privilege upon requirednotice or in certain cases without notice.

How To Redeem Class H SharesYou may redeem Class H shares of the Global RealEstate Portfolio by contacting your authorized financialrepresentative. The value of Class H shares redeemedmay be more or less than the purchase price, dependingon the NAV at the time of redemption. Class H sharesof the Global Real Estate Portfolio will be redeemed atthe NAV next determined after we receive your redemp-tion request in good order.

The Fund will ordinarily distribute redemption proceedsin cash within one business day of your redemptionrequest, but it may take up to seven days.

If we determine that it is in the best interest of the Fundor the Global Real Estate Portfolio not to pay redemp-tion proceeds in cash, we may distribute to you securitiesheld by the Portfolio from which you are redeeming. Ifrequested, we will pay a portion of yourredemption(s) in cash (during any 90 day period) up tothe lesser of $250,000 or 1% of the net assets of thePortfolio at the beginning of such period. Such in-kindsecurities may be illiquid and difficult or impossible fora shareholder to sell at a time and at a price that a share-holder would like. Redemptions paid in such securitiesgenerally will give rise to income, gain or loss for incometax purposes in the same manner as redemptions paid incash. In addition, you may incur brokerage costs and afurther gain or loss for income tax purposes when youultimately sell the securities.

Exchange PrivilegeYou may exchange Class H shares of the Global RealEstate Portfolio for Class H shares of other availableportfolios of the Fund. In addition, you may exchangeClass H shares for Class H shares of available portfoliosof Morgan Stanley Institutional Fund Trust. Not allportfolios of the Fund or of Morgan Stanley InstitutionalFund Trust offer Class H shares. Your ability to exchangeClass H shares may therefore be limited. A front-endsales charge (load) is not imposed on exchanges ofClass H shares. Exchanges are effected based on therespective NAVs of the applicable portfolios (subject toany applicable redemption fee). To obtain a prospectusfor another portfolio, call the Fund at 1-800-548-7786or contact your Financial Intermediary. If you purchasedPortfolio shares through a Financial Intermediary, certain portfolios may be unavailable for exchange.

Contact your Financial Intermediary to determine whichportfolios are available for exchange.

You can process your exchange by contacting yourFinancial Intermediary.

When you exchange for shares of another portfolio, yourtransaction will be treated the same as an initial pur-chase. You will be subject to the same minimum initialinvestment and account size as an initial purchase,except that it will not be subject to a front-end salescharge. Your exchange price will be the price calculatedat the next Pricing Time after the Fund receives yourexchange order. The Fund, in its sole discretion, maywaive the minimum initial investment amount in certaincases. An exchange of the International Real EstatePortfolio held for less than 30 days from the date of purchase will be subject to the 2% redemption feedescribed above. The Fund may terminate or revise theexchange privilege upon required notice or in certaincases without notice.

Frequent Purchases and Redemptions of SharesFrequent purchases and redemptions of shares byPortfolio shareholders are referred to as “market-timing”or “short-term trading” and may present risks for othershareholders of a Portfolio, which may include, amongother things, diluting the value of a Portfolio’s shares heldby long-term shareholders, interfering with the efficientmanagement of the Portfolio, increasing brokerage andadministrative costs, incurring unwanted taxable gainsand forcing the Portfolio to hold excess levels of cash.

In addition, a Portfolio is subject to the risk that market-timers and/or short-term traders may take advantage oftime zone differences between the foreign markets onwhich a Portfolio’s securities trade and the time thePortfolio’s NAV is calculated (“time-zone arbitrage”). Forexample, a market-timer may purchase shares of aPortfolio based on events occurring after foreign marketclosing prices are established, but before the Portfolio’sNAV calculation, that are likely to result in higher pricesin foreign markets the following day. The market-timerwould redeem the Portfolio’s shares the next day, whenthe Portfolio’s share price would reflect the increasedprices in foreign markets for a quick profit at theexpense of long-term Portfolio shareholders.

Investments in other types of securities also may be sus-ceptible to short-term trading strategies. These invest-ments include securities that are, among other things,thinly traded, traded infrequently or relatively illiquid,which have the risk that the current market price for thesecurities may not accurately reflect current market val-ues. A shareholder may seek to engage in short-termtrading to take advantage of these pricing differences(referred to as “price arbitrage”).

The Fund discourages and does not accommodate fre-quent purchases and redemptions of Portfolio shares byPortfolio shareholders and the Fund’s Board of Directorshas adopted policies and procedures with respect to suchfrequent purchases and redemptions.






26

The Fund’s policies with respect to purchases, exchangesand redemptions of Portfolio shares are described in the“Shareholder Information—How To Purchase Class I,Class P and Class L Shares,” “ShareholderInformation—How To Purchase Class H Shares,”“Shareholder Information—Other TransactionInformation,” “Shareholder Information—How ToRedeem Class I, Class P and Class L Shares” and“Shareholder Information—How To Redeem Class HShares” sections of this Prospectus. Except as describedin each of these sections, and with respect to trades thatoccur through omnibus accounts at FinancialIntermediaries, as described below, the Fund’s policiesregarding frequent trading of Portfolio shares areapplied uniformly to all shareholders. With respect totrades that occur through omnibus accounts atFinancial Intermediaries, such as investment advisers,broker-dealers, transfer agents and third party adminis-trators, the Fund (i) has requested assurance that suchFinancial Intermediaries currently selling Portfolioshares have in place internal policies and procedures reasonably designed to address market-timing concernsand has instructed such Financial Intermediaries tonotify the Fund immediately if they are unable to com-ply with such policies and procedures and (ii) requiresall prospective Financial Intermediaries to agree tocooperate in enforcing the Fund’s policies with respectto frequent purchases, exchanges and redemptions ofPortfolio shares.

With respect to trades that occur through omnibusaccounts at Financial Intermediaries, to some extent, theFund relies on the Financial Intermediary to monitorfrequent short-term trading within a Portfolio by theFinancial Intermediary’s customers and to collect theInternational Real Estate Portfolio’s redemption fee fromits customers. However, the Fund has entered into agree-ments with Financial Intermediaries whereby FinancialIntermediaries are required to provide certain customeridentification and transaction information upon theFund’s request. The Fund may use this information tohelp identify and prevent market-timing activity in theFund. There can be no assurance that the Fund will beable to identify or prevent all market-timing activities.

Dividends and DistributionsThe Global Real Estate Portfolio’s and International RealEstate Portfolio’s policy is to distribute to shareholderssubstantially all of their net investment income, if any, inthe form of an annual dividend and to distribute netrealized capital gains, if any, at least annually.

The U.S. Real Estate Portfolio’s policy is to distributeto shareholders substantially all of its net investment

income, if any, in the form of quarterly dividends andto distribute net realized capital gains, if any, at leastannually.

The Fund automatically reinvests all dividends and distributions in additional shares. However, you mayelect to receive distributions in cash by giving writtennotice to the Fund or your Financial Intermediary or bychecking the appropriate box in the Distribution Option section on the Account Registration Form.

TaxesThe dividends and distributions you receive from aPortfolio may be subject to federal, state and local taxa-tion, depending on your tax situation. The tax treatmentof dividends and distributions is the same whether ornot you reinvest them. For taxable years beginningbefore January 1, 2013, dividends paid by a Portfoliothat are attributable to “qualified dividends” received bythe Portfolio may be taxed at reduced rates to individualshareholders (15% at the maximum), if certain require-ments are met by the Portfolio and the shareholders.

Dividends paid by the Portfolio not attributable to“qualified dividends” received by a Portfolio, includingdistributions of short-term capital gains, will generally betaxed at normal tax rates applicable to ordinary income.Generally, dividends paid by REITs will be comprised ofinvestment income, long-term capital gains and returnsof capital, each of which may be passed on to sharehold-ers of the Fund. “Qualified dividends” may include dividends distributed by certain foreign corporations(generally, corporations incorporated in a possession ofthe United States, some corporations eligible for treatybenefits under a treaty with the United States and corpo-rations whose stock with respect to which such dividendis paid is readily tradable on an established securitiesmarket in the United States). Long-term capital gainsdistributions to individuals are taxed at a reduced rate(15% at the maximum) before January 1, 2013, regard-less of how long you have held your shares. Unless further Congressional legislative action is taken, reducedrates for dividends and long-term capital gain will ceaseto be in effect after December 31, 2012. A Portfoliomay be able to pass through to you a credit for foreignincome taxes it pays.

The Fund will tell you annually how to treat dividendsand distributions.

If you redeem shares of a Portfolio, you may be subjectto tax on any gains you earn based on your holding peri-od for the shares and your marginal tax rate. Anexchange of shares of a Portfolio for shares of another




27

portfolio is treated for tax purposes as a sale of the originalshares in the Portfolio, followed by the purchase ofshares in the other portfolio. Conversions of sharesbetween classes will not result in taxation.

Because each investor’s tax circumstances are unique andthe tax laws may change, you should consult your taxadvisor about your investment.




The Fund currently consists of the following portfolios:

U.S. EquityAdvantage PortfolioFocus Growth PortfolioGrowth PortfolioOpportunity PortfolioSmall Company Growth Portfolio*U.S. Real Estate Portfolio

Global and International EquityActive International Allocation PortfolioAsian Equity PortfolioEmerging Markets Portfolio

Global Advantage PortfolioGlobal Discovery PortfolioGlobal Franchise PortfolioGlobal Opportunity PortfolioGlobal Real Estate PortfolioInternational Advantage PortfolioInternational Equity PortfolioInternational Opportunity PortfolioInternational Real Estate PortfolioInternational Small Cap PortfolioSelect Global Infrastructure Portfolio

Fixed IncomeEmerging Markets Debt Portfolio

* Portfolio is currently closed to new investors


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The financial highlights tables that follow are intendedto help you understand the financial performance ofthe Class I, Class P, Class H and Class L shares of eachPortfolio, as applicable, for the past five years or sinceinception if less than five years. Certain information reflects financial results for a single Portfolio share. Thetotal returns in the tables represent the rate that an investor would have earned (or lost) on an investmentin each Portfolio (assuming reinvestment of all dividends and distributions).

The ratio of expenses to average net assets listed in thetables below for each class of shares of the Portfolios arebased on the average net assets of such Portfolio for eachof the periods listed in the tables. To the extent that a

Portfolio’s average net assets decrease over the Portfolio’snext fiscal year, such expense ratios can be expected to increase, potentially significantly, because certain fixedcosts will be spread over a smaller amount of assets.

The information has been audited by Ernst &Young LLP, an independent registered public account-ing firm. Ernst & Young LLP’s report, along with thePortfolios’ financial statements, are incorporated by ref-erence into the Portfolios’ SAI and are included in theFund’s Annual Report to Shareholders. The Annual Re-port to Shareholders and the Portfolios’ financial state-ments, as well as the SAI, are available at no cost fromthe Fund at the toll-free number noted on the backcover to this Prospectus.

Financial Highlights

28

Global Real Estate PortfolioClass I

Period from August 30,

Year Ended December 31, 2006^ to December 31,

Selected Per Share Data and Ratios 2010 2009 2008 2007 2006Net Asset Value, Beginning of Period $ 7.47 $ 5.49 $ 10.04 $ 11.56 $ 10.00

Income (Loss) from Investment Operations:Net Investment Income† 0.19 0.14 0.16 0.18 0.06Net Realized and Unrealized Gain (Loss) on Investments 1.31 2.11 (4.67) (1.09) 1.66

Total from Investment Operations 1.50 2.25 (4.51) (0.91) 1.72

Distributions from and/or in Excess of:Net Investment Income (0.19) (0.27) (0.02) (0.40) (0.13)Net Realized Gain — — (0.02) (0.21) (0.03)

Total Distributions (0.19) (0.27) (0.04) (0.61) (0.16)

Redemption Fees — 0.00‡ 0.00‡ 0.00‡ 0.00‡

Net Asset Value, End of Period $ 8.78 $ 7.47 $ 5.49 $ 10.04 $ 11.56

Total Return++ 20.22% 41.04% (45.00)% (7.87)% 17.20%#

Ratios and Supplemental Data:Net Assets, End of Period (Thousands) $1,215,881 $638,744 $473,459 $632,737 $238,647Ratio of Expenses to Average Net Assets (1) 1.01%+†† 1.01%+ 1.05%+ 1.02%+ 1.05%*Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses 1.01%+†† 1.01%+ 1.04%+ 1.02%+ N/ARatio of Net Investment Income to Average Net Assets (1) 2.43%+†† 2.31%+ 1.92%+ 1.55%+ 1.53%*Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets 0.00%††§ 0.00%§ 0.00%§ 0.00%§ N/APortfolio Turnover Rate 18% 59% 40% 39% 4%#(1) Supplemental Information on the Ratios to Average Net Assets:

Ratios Before Expense Limitation:Expenses to Average Net Assets N/A N/A N/A N/A 1.15%*Net Investment Income to Average Net Assets N/A N/A N/A N/A 1.43%*

^ Commencement of Operations.† Per share amount is based on average shares outstanding.‡ Amount is less than $0.005 per share.++ Calculated based on the net asset value as of the last business day of the period.# Not Annualized.+ The Ratios of Expenses and Net Investment Income reflect the rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley affiliates

during the period. The effect of the rebate on the ratios is disclosed in the above table as “Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets.”†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.* Annualized.§ Amount is less than 0.005%.

Merrill Corp - M-S Institutional Fund Real Estate Port MSIREUIPRO Prospectus [Funds] 04-29-2011 ED [AUX] | ajacksod | 26-Apr-11 23:34 | 10-22173-4.da | Sequence: 1CHKSUM Content: 32797 Layout: 14019 Graphics: No Graphics CLEAN


29



Global Real Estate PortfolioClass P

Period from August 30,

Year Ended December 31, 2006^ to December 31,

Selected Per Share Data and Ratios 2010 2009 2008 2007 2006Net Asset Value, Beginning of Period $ 7.44 $ 5.47 $ 10.02 $ 11.56 $10.00





Redemption Fees — 0.00‡ 0.00‡ 0.00‡ 0.00‡

Net Asset Value, End of Period $ 8.74 $ 7.44 $ 5.47 $ 10.02 $11.56

Total Return++ 19.90% 40.66% (45.15)% (8.15)% 17.11%#

Ratios and Supplemental Data:Net Assets, End of Period (Thousands) $67,812 $52,663 $44,555 $13,187 $ 116Ratio of Expenses to Average Net Assets (1) 1.26%+†† 1.26%+ 1.30%+ 1.27%+ 1.30%*Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses 1.26%+†† 1.26%+ 1.29%+ 1.27%+ N/ARatio of Net Investment Income to Average Net Assets (1) 2.18%+†† 2.08%+ 2.32%+ 1.39%+ 1.07%*Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets 0.00%††§ 0.00%§ 0.00%§ 0.00%§ N/APortfolio Turnover Rate 18% 59% 40% 39% 4%#(1) Supplemental Information on the Ratios to Average Net Assets:

Ratios Before Expense Limitation:Expenses to Average Net Assets N/A N/A 1.32%+ N/A 1.41%*Net Investment Income to Average Net Assets N/A N/A 2.30%+ N/A 0.96%*





30

Global Real Estate PortfolioClass H

Period from

Year Ended January 2,

December 31, 2008^ toDecember 31,

Selected Per Share Data and Ratios 2010 2009 2008Net Asset Value, Beginning of Period $ 7.43 $ 5.47 $ 9.95

Income (Loss) from Investment Operations:Net Investment Income† 0.18 0.13 0.11Net Realized and Unrealized Gain (Loss) on Investments 1.29 2.08 (4.57)

Total from Investment Operations 1.47 2.21 (4.46)

Distributions from and/or in Excess of:Net Investment Income (0.18) (0.25) —Net Realized Gain — — (0.02)

Total Distributions (0.18) (0.25) (0.02)

Redemption Fees — 0.00‡ —

Net Asset Value, End of Period $ 8.72 $ 7.43 $ 5.47

Total Return++ 19.96% 40.59% (44.88)%#

Ratios and Supplemental Data:Net Assets, End of Period (Thousands) $11,381 $ 607 $ 391Ratio of Expenses to Average Net Assets (1) 1.26%+†† 1.26%+ 1.70%+*Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses 1.26%+†† 1.26%+ 1.29%+*Ratio of Net Investment Income to Average Net Assets (1) 2.18%+†† 2.03%+ 1.42%+*Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets 0.00%††§ 0.00%§ 0.00%*§Portfolio Turnover Rate 18% 59% 40%#(1) Supplemental Information on the Ratios to Average Net Assets:

Ratios Before Expense Limitation:Expenses to Average Net Assets N/A N/A 1.70%+*Net Investment Income to Average Net Assets N/A N/A 1.42%+*

^ Commencement of Operations.† Per share amount is based on average shares outstanding.‡ Amount is less than $0.005 per share.++ Calculated based on the net asset value which does not reflect sales charges, if applicable, as of the last business day of the period.# Not Annualized.+ The Ratios of Expenses and Net Investment Income reflect the rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley affiliates




31



Global Real Estate PortfolioClass L

Period from

Year Ended June 16,

December 31, 2008^ toDecember 31,

Selected Per Share Data and Ratios 2010 2009 2008Net Asset Value, Beginning of Period $ 7.35 $ 5.43 $ 9.46

Income (Loss) from Investment Operations:Net Investment Income† 0.13 0.08 0.04Net Realized and Unrealized Gain (Loss) on Investments 1.28 2.08 (4.05)

Total from Investment Operations 1.41 2.16 (4.01)

Distributions from and/or in Excess of:Net Investment Income (0.14) (0.24) —Net Realized Gain — — (0.02)

Total Distributions (0.14) (0.24) (0.02)

Redemption Fees — 0.00‡ —

Net Asset Value, End of Period $ 8.62 $ 7.35 $ 5.43

Total Return++ 19.26% 39.91% (42.45)%#

Ratios and Supplemental Data:Net Assets, End of Period (Thousands) $5,043 $1,603 $ 261Ratio of Expenses to Average Net Assets (1) 1.76%+†† 1.76%+ 1.81%+*Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses 1.76%+†† 1.76%+ 1.80%+*Ratio of Net Investment Income to Average Net Assets (1) 1.68%+†† 1.23%+ 1.20%+*Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets 0.00%††§ 0.00%§ 0.00%*§Portfolio Turnover Rate 18% 59% 40%#(1) Supplemental Information on the Ratios to Average Net Assets:

Ratios Before Expense Limitation:Expenses to Average Net Assets N/A N/A 1.84%+*Net Investment Income to Average Net Assets N/A N/A 1.17%+*





32

International Real Estate PortfolioClass I

Year Ended December 31,




Distributions from and/or in Excess of:Net Investment Income (0.62) (0.63) — (1.77) (0.85)Net Realized Gain — — (0.12) (1.65) (1.09)


Redemption Fees 0.00‡ 0.00‡ 0.00‡ 0.00‡ 0.00‡


Total Return++ 9.51% 46.54% (49.95)% (17.59)% 56.06%

Ratios and Supplemental Data:Net Assets, End of Period (Thousands) $397,514 $463,649 $427,148 $1,053,018 $1,125,569Ratio of Expenses to Average Net Assets (1) 0.98%+†† 0.93%+ 0.95%+ 0.94%+ 0.95%Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses 0.98%+†† 0.93%+ 0.94%+ 0.94%+ 0.95%Ratio of Net Investment Income to Average Net Assets (1) 3.97%+†† 3.04%+ 2.68%+ 2.10%+ 1.19%Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets 0.00%††§ 0.00%§ 0.00%§ 0.00%§ N/APortfolio Turnover Rate 64% 56% 54% 55% 36%(1) Supplemental Information on the Ratios to Average Net Assets:

Ratios Before Expense Limitation:Expenses to Average Net Assets N/A N/A 0.97%+ N/A N/ANet Investment Income to Average Net Assets N/A N/A 2.66%+ N/A N/A

† Per share amount is based on average shares outstanding.‡ Amount is less than $0.005 per share.++ Calculated based on the net asset value as of the last business day of the period.+ The Ratios of Expenses and Net Investment Income reflect the rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley affiliates

during the period. The effect of the rebate on the ratios is disclosed in the above table as “Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets.”†† Reflects overall Portfolio ratios for investment income and non-class specific expenses.§ Amount is less than 0.005%.



33



International Real Estate PortfolioClass P


Selected Per Share Data and Ratios 2010 2009 2008 2007 2006Net Asset Value, Beginning of Period $17.77 $12.58 $ 25.33 $ 34.83 $ 23.68



Distributions from and/or in Excess of:Net Investment Income (0.56) (0.59) — (1.69) (0.82)Net Realized Gain — — (0.12) (1.65) (1.09)


Redemption Fees 0.00‡ 0.00‡ 0.00‡ 0.00‡ 0.00‡

Net Asset Value, End of Period $18.83 $17.77 $ 12.58 $ 25.33 $ 34.83

Total Return++ 9.26% 46.08% (50.05)% (17.76)% 55.69%

Ratios and Supplemental Data:Net Assets, End of Period (Thousands) $5,547 $8,429 $ 9,141 $97,800 $97,951Ratio of Expenses to Average Net Assets (1) 1.23%+†† 1.18%+ 1.19%+ 1.19%+ 1.20%Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses 1.23%+†† 1.18%+ 1.19%+ 1.19%+ 1.20%Ratio of Net Investment Income to Average Net Assets (1) 3.72%+†† 2.74%+ 2.66%+ 1.76%+ 0.94%Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets 0.00%††§ 0.00%§ 0.00%§ 0.00%§ N/APortfolio Turnover Rate 64% 56% 54% 55% 36%(1) Supplemental Information on the Ratios to Average Net Assets:

Ratios Before Expense Limitation:Expenses to Average Net Assets N/A N/A 1.22%+ N/A N/ANet Investment Income to Average Net Assets N/A N/A 2.64%+ N/A N/A





34

U.S. Real Estate PortfolioClass I







Redemption Fees — 0.00‡ 0.00‡ 0.00‡ 0.00‡


Total Return++ 29.86% 29.65% (38.07)% (16.63)% 38.85%

Ratios and Supplemental Data:Net Assets, End of Period (Thousands) $855,474 $584,820 $448,897 $911,819 $1,635,926Ratio of Expenses to Average Net Assets (1) 0.99%+†† 0.99%+ 0.95%+ 0.90%+ 0.87%Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses 0.98%+†† 0.96%+ 0.91%+ 0.88%+ 0.87%Ratio of Net Investment Income to Average Net Assets (1) 2.34%+†† 2.70%+ 2.19%+ 1.23%+ 1.55%Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets 0.00%††§ 0.00%§ 0.00%§ 0.00%§ N/APortfolio Turnover Rate 41% 30% 38% 38% 36%(1) Supplemental Information on the Ratios to Average Net Assets:

Ratios Before Expense Limitation:Expenses to Average Net Assets N/A 1.00%+ 0.96%+ N/A N/ANet Investment Income to Average Net Assets N/A 2.69%+ 2.18%+ N/A N/A





35



U.S. Real Estate PortfolioClass P







Redemption Fees — 0.00‡ 0.00‡ 0.00‡ 0.00‡


Total Return++ 29.51% 29.31% (38.26)% (16.80)% 38.52%

Ratios and Supplemental Data:Net Assets, End of Period (Thousands) $89,321 $116,164 $95,828 $171,578 $268,537Ratio of Expenses to Average Net Assets (1) 1.24%+†† 1.24%+ 1.20%+ 1.15%+ 1.12%Ratio of Expenses to Average Net Assets Excluding Non Operating Expenses 1.23%+†† 1.21%+ 1.16%+ 1.13%+ 1.12%Ratio of Net Investment Income to Average Net Assets (1) 2.09%+†† 2.45%+ 2.05%+ 1.02%+ 1.37%Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets 0.00%††§ 0.00%§ 0.00%§ 0.00%§ N/APortfolio Turnover Rate 41% 30% 38% 38% 36%(1) Supplemental Information on the Ratios to Average Net Assets:

Ratios Before Expense Limitation:Expenses to Average Net Assets N/A 1.25%+ 1.21%+ N/A N/ANet Investment Income to Average Net Assets N/A 2.44%+ 2.04%+ N/A N/A





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Additional Information

In addition to this Prospectus, the Fund has aStatement of Additional Information, dated April 29,2011, which contains additional, more detailedinformation about the Fund and the Portfolios. TheSAI is incorporated by reference into this Prospectusand, therefore, legally forms a part of this Prospectus.

The Fund publishes Annual and Semiannual Reportsto Shareholders (“Shareholder Reports”) that containadditional information about each Portfolio’sinvestments. In the Fund’s Annual Report toShareholders, you will find a discussion of the marketconditions and the investment strategies thatsignificantly affected each Portfolio’s performanceduring the last fiscal year. For additional Fundinformation, including information regarding theinvestments comprising each of the Portfolios, pleasecall the toll-free number below.

You may obtain the Statement of Additional Informationand Shareholder Reports without charge by contactingthe Fund at the toll-free number below or on ourinternet site at: www.morganstanley.com/im. If youpurchased shares through a Financial Intermediary, youmay also obtain these documents, without charge, bycontacting your Financial Intermediary.

Information about the Fund, including the Statementof Additional Information and Shareholder Reports

may be obtained from the Commission in any of thefollowing ways:

(1) In person: you may review and copy documents inthe Commission’s Public Reference Room inWashington D.C. (for information call1-202-551-8090); (2) On-line: you may retrieveinformation from the Commission’s web site athttp://www.sec.gov; (3) By mail: you may requestdocuments, upon payment of a duplicating fee, bywriting to the Securities and Exchange Commission,Public Reference Section, Washington, D.C.20549-1520; or (4) By e-mail: you may requestdocuments, upon payment of a duplicating fee, bye-mailing the Commission at the following address:[email protected].

Morgan Stanley Institutional Fund, Inc.c/o Morgan Stanley Services Company Inc.P.O. Box 219804Kansas City, MO 64121-9804

For Shareholder Inquiries,call 1-800-548-7786.

Prices and Investment Results are available atwww.morganstanley.com/im.

The Fund’s Investment Company Act registration number is

811-05624.

Where to FindAdditional Information

MSIREUIPRO-0411

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