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Prospectus Investors should carefully consider the investment objectives and risks as well as charges and expenses of the fund before investing. To obtain a prospectus, contact your Financial Advisor or visit the fund company’s website. The prospectus contains this and other information about the fund. Read the prospectus carefully before investing.

Morgan Stanley does not render advice on tax and tax accounting matters to clients. This material was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. You should always consult your own legal or tax advisor for information concerning your individual situation

Important Information and Qualifications

The indexes are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Monthly Update report available through your Financial Advisor. Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies. The value of equity securities may fluctuate in response to specific situations for each company, industry, market conditions and general economic environments.

S&P 500 Index: This benchmark index tracks the performance of 500 widely held large-cap stocks in the industrial, transportation, utility and financial sectors. A capitalization (or market value) weighted index, it gives greater weight to stocks with the greatest number of outstanding shares and highest share prices. The stocks included in the index, their relative weightings, and the number that represent each sector vary from time to time, at S&P’s discretion.

S&P Growth and Value Indices are exhaustive, containing the full market cap of the S&P 500 Index. They use a seven-factor model (three growth/four value) to determine style and are market cap weighted. One-third of the market cap in the broader index is fully allocated to growth, one-third fully to value, and the remaining stocks that do not exhibit predominant growth or value characteristics will be spilt proportionally between the two indices. This results in the number of companies in the combined growth and value indices being greater than in the related broad index. However, the growth and value sub indices each approximate 50% of the broader S&P indices. The indices are rebalanced annually and adjusted as needed to reflect changes to the broader S&P Indices.

MSCI Indexes: These indexes, computed by the investment firm Morgan Stanley’s Capital International group (MSCI), track stocks traded in 45 international stock markets, and are considered the benchmarks for international stock investments and mutual fund portfolios. The strong performance of the Europe and Australia Far Equity Index (EAFE) between 1982 and 1996 in relation to Standard and Poor’s 500-stock index (S&P 500) is often credited with generating increased US interest investing in overseas markets.

Thomson Closed-End Muni Market Price Index: The Thomson Closed-End Market Price Index is based on an equally weighted arithmetic average of market price changes of closed-end funds that invest primarily in municipal bonds. The index values are determined by linking the monthly change in the average to the previous month’s index value. The fund returns include reinvestment of dividends, capital gains and principal distributions. These funds invest in municipal bonds that are not necessarily confined to a single state.

Thomson Closed-End Taxable Fixed-Income Market Price Index: The Thomson Closed-End Taxable Fixed-Income Market Price Index is based on an equally weighted arithmetic average of market price changes of closed end funds that invest primarily in taxable fixed-income securities. The index values are determined by linking the monthly change in the average to the previous month’s index value. The fund returns include reinvestment of dividends, capital gains and principal distributions. These funds seek income by investing in corporate debt, taxable government debt and preferred securities.

Clients should consider the investment objectives, risks, charges and expenses of the fund(s) carefully before investing. The prospectus contains this and other information about the fund(s). To obtain a prospectus, contact your Financial Advisor. Please read the prospectus carefully before investing.

This report is prepared for general circulation and is distributed for information only. The report does not have any bearing on the specific investment objectives or needs of any person. Strategic Equity Portfolios are structured and monitored on an ongoing basis by members of Morgan Stanley’s STEP Committee and may be purchased in a single transaction as individual stocks. Periodically, changes to the portfolios are recommended; investors then decide whether the recommendation makes sense for their particular financial situation. After an investor purchases the STEP, the same stocks will remain in his or her account unless individual stocks are bought or sold in response to subsequent changes in the model STEP or as otherwise individually determined by the investor. Investors should seek advice from a Financial Advisor as to the suitability of investing in any of the securities or investment strategies discussed in this report. Strategic Equity Portfolio and STEP are service marks of Morgan Stanley.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities discussed in this report may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. This report is not an offer to buy or sell any security or to participate in any trading strategy. In addition to any holdings disclosed in the section entitled "Important US Regulatory Disclosures on Subject Companies", Morgan Stanley and/or its employees not involved in the preparation of this report may have investments in securities or derivatives of securities of companies mentioned in this report, and may trade them in ways different from those discussed in this report. Derivatives may be issued by Morgan Stanley or associated persons. Morgan Stanley & Co. Incorporated and its affiliate companies do business that relates to companies covered in its research reports, including market making and specialized trading, risk arbitrage and other proprietary trading, fund management, investment services and investment banking. Morgan Stanley sells to and buys from customers the equity securities of companies covered in its research reports on a principal basis. Morgan Stanley makes every effort to use reliable, comprehensive information, but we make no representation that it is accurate or complete. We have no obligation to tell you when opinions or information in this report change apart from when we intend to discontinue research coverage of a subject company.

Investments and services are offered through Morgan Stanley & Co Incorporated, member SIPC.

Morgan Stanley 2000 Westchester Avenue Purchase, NY 10577 www.morganstanley.com/individual

©2008 Morgan Stanley

01/08

CLF# 38008

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