Morgan Stanley Investment Funds 31 December 2013

Investment Management

Société d’Investissement Morgan Stanley à Capital Variable incorporated under Investment Funds the laws of Luxembourg

Annual Report December 31, 2013

R.C.S. Luxembourg: B-29. 192

Morgan Stanley Investment Funds 31 December 2013

Table of contents

1 Shareholders’ information 87 Euro Strategic Bond Fund

96 European Currencies High Yield Bond Fund

101 Global Bond Fund Statement of investments 110 Global Convertible Bond Fund Equity Funds 115 Global Credit Fund 2 Asian Equity Fund 121 Global Fixed Income Opportunities Fund 5 Asia-Pacific Equity Fund 130 Global High Yield Bond Fund 8 Asian Property Fund 136 Global Mortgage Securities Fund 10 Emerging Europe, Middle East and Africa Equity Fund 141 Global Premier Credit Fund 12 Emerging Leaders Equity Fund 144 Short Maturity Euro Bond Fund 14 Emerging Markets Equity Fund Liquidity Funds 18 European Equity Alpha Fund 149 Euro Liquidity Fund 20 European Property Fund 151 US Dollar Liquidity Fund 22 Eurozone Equity Alpha Fund Asset Allocation Funds 24 Frontier Emerging Markets Equity Fund 152 Diversified Alpha Plus Fund 26 Global Advantage Fund 162 Global Balanced Risk Control Fund of Funds 28 Global Brands Fund

30 Global Equity Allocation Fund

38 Global Infrastructure Fund STATEMENTS AND NOTES

40 Global Opportunity Fund 164 Statement of assets and liabilities

42 Global Property Fund 175 Statement of changes in number of shares

45 Global Quality Fund 182 Statement of operations and changes in net assets

47 Indian Equity Fund 193 Statement of share and net assets statistics

49 Japanese Equity Fund 202 Notes to the financial statements

51 Latin American Equity Fund

53 US Advantage Fund Other information 55 US Growth Fund 217 Independent Auditor’s Report 58 US Property Fund 218 Directors and service providers Bond Funds 220 Paying and information agents 60 Emerging Markets Corporate Debt Fund 221 Appendix 1: Fund expense ratios (audited) 64 Emerging Markets Debt Fund 224 Appendix 2: Portfolio turnover rate (unaudited) 68 Emerging Markets Domestic Debt Fund 225 Appendix 3: Sub-Advisers 71 Euro Bond Fund 226 Appendix 4: Hedged Share Classes 76 Euro Corporate Bond (ex Financials) Fund 227 Appendix 5: Performance Summary (unaudited) 80 Euro Corporate Bond Fund 230 Appendix 6: Risk Measurement and Global Exposure (unaudited) 1 Morgan Stanley Investment Funds 31 December 2013

Shareholders’ information

The annual general meeting of shareholders Morgan Stanley & Co. International plc, London, Zurich Branch, Bahnhofstrasse 92, 8001 Zurich, is the representative in Switzerland of the Company is held at the registered office and RBC Investor Services Bank S.A., Esch-sur-Alzette, Zurich of the Company and will be held on the second Branch, Badenerstrasse 567, 8048 Zurich, is the paying agent in Switzerland. The Prospectus, the latest Key Investor Information Tuesday of the month of May at 10.30 am, Document, the Articles and the annual and semi-annual reports or if such day is not a bank business day of the Company may be obtained free of charge from the representative in Switzerland. on the following bank business day. A list of purchases and sales (securities transactions) carried out Notices of all general meetings are sent by mail to all registered by the Company during the reporting period may be obtained free shareholders at their registered address at least 8 days prior of charge from the representative in Switzerland. to the meeting. Such notices will indicate the time and place of the meeting as well as the conditions of admission thereto. The investment aims set out in this annual report are summaries Said notices will also contain the agenda and requirements only. The complete investment objectives and policies for each of Luxembourg law with regard to the necessary quorum Fund are set out in the Company’s current prospectus. and majorities at the meeting. To the extent required by law, further notices will be published in the Mémorial and in one Luxembourg newspaper.

Audited financial statements in respect of the preceding financial period are made available at the registered office of the Company and are available to shareholders upon request. In addition, unaudited semi-annual reports are also made available at the registered office.

The annual and semi-annual reports are also available on the Company’s web-site (http://morganstanleyinvestmentfunds.com).

The Company’s financial year end is 31 December.

Any other notices relevant to the Company are also published in a Luxembourg newspaper or mailed to affected shareholders.

The net asset value per share of each Class of Share is available on each dealing day during Luxembourg business hours at the registered office of the Company. Net asset value per share information is also available from market information providers, such as Bloomberg and Morningstar, as well as being available at www.morganstanleyinvestmentfunds.com.

No subscriptions can be received on the basis of financial reports alone. Subscriptions are only valid if made on the basis of the current prospectus and the latest Key Investor Information Document if applicable, the latest annual report and the most recent semi-annual report, if published thereafter. Morgan Stanley Investment Funds 31 December 2013 2

Asian Equity Fund

Investment aim Statement of investments

To seek long-term capital appreciation, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in US dollars, through investment As at 31 December 2013, expressed in US dollars. primarily in the equity securities of companies Market % of net Investments Holdings value assets domiciled in or exercising the predominant Equities part of their economic activity in Asia, China Tencent Holdings (Cayman Islands) (2) 234,300 14,944,968 5.47 excluding Japan, thereby taking advantage Bank of China ‘H’ 24,702,000 11,372,840 4.17 AIA Group (Hong Kong) (2) 1,365,600 6,850,807 2.51 of the dynamic economic growth capabilities China Construction Bank ‘H’ 9,070,400 6,843,069 2.51 China Mobile (Hong Kong) (1) (2) 656,000 6,801,873 2.49 of the region. China Pacific Insurance Group ‘H’ (1) 1,328,600 5,208,785 1.91 China Mengniu Dairy (Cayman Islands) (2) 912,000 4,328,239 1.59 China Oilfield Services ‘H’ 1,338,000 4,149,921 1.52 Beijing Enterprises Holdings (Hong Kong) (1) (2) 377,000 3,738,835 1.37 Qihoo 360 Technology ADR (Cayman Islands) (2) 43,028 3,582,942 1.31 China Overseas Land & Investment (Hong Kong) (1) (2) 954,000 2,682,091 0.98 Sihuan Pharmaceutical Holdings Group (Bermuda) (1) (2) 1,924,000 1,756,738 0.64 Uni-President China Holdings (Cayman Islands) (1) (2) 1,609,000 1,639,275 0.60 Sino Biopharmaceutical (Cayman Islands) (2) 2,020,000 1,602,120 0.59 Tsingtao Brewery ‘H’ 172,000 1,454,018 0.53 Chongqing Changan Automobile ‘B’ 537,340 1,060,252 0.39 NetEase ADR (Cayman Islands) (2) 7,900 622,441 0.23 China Overseas Grand Oceans Group (Hong Kong) (1) (2) 545,000 519,409 0.19 Autohome ADR (Cayman Islands) (2) 13,573 484,692 0.18 China Conch Venture Holdings (Cayman Islands) (2) 83,500 228,831 0.08

Total for China 29.26

South Korea Samsung Electronics 13,689 17,899,746 6.56 Hyundai Motor 33,942 7,650,496 2.80 Hyundai Engineering & Construction 99,059 5,730,647 2.10 Hyundai Glovis 18,823 4,144,020 1.52 Paradise 110,667 2,789,747 1.02 SK Telecom 10,911 2,391,737 0.88 Samsung Electronics Pfd 2,400 2,317,084 0.85 NCSoft 9,595 2,272,440 0.83 SK Hynix 64,280 2,254,471 0.83 NAVER 3,012 2,078,330 0.76 Woongjin Coway 31,272 1,978,995 0.72 Hana Financial Group 43,410 1,816,249 0.67 Hyundai Heavy Industries 7,130 1,746,400 0.64 Nexon (Japan) (2) 181,600 1,682,379 0.62 Orion (1) 1,675 1,514,963 0.55 LG Uplus 118,670 1,215,823 0.44 Hotel Shilla 17,997 1,140,625 0.42 Cheil Worldwide 33,595 880,498 0.32 Shinhan Financial Group 14,463 651,989 0.24 GS Retail 20,960 559,333 0.20 KEPCO Plant Service & Engineering (1) 9,726 507,967 0.19 Cosmax (1) 10,434 495,223 0.18 KT Skylife 15,270 430,049 0.16 SK Telecom ADR 14,500 358,005 0.13 LG Fashion (1) 6,380 204,914 0.07 LG Household & Health Care (1) 92 48,050 0.02 Hyundai Rotem 1,020 27,997 0.01

Total for South Korea 23.73

Taiwan Taiwan Semiconductor Manufacturing 3,063,362 10,836,033 3.97 Uni-President Enterprises 3,672,841 6,612,961 2.42 MediaTek 291,928 4,340,991 1.59 Fubon Financial Holding 1,246,710 1,822,517 0.67 Ginko International (Cayman Islands) (2) 85,000 1,604,526 0.59 Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 3 Morgan Stanley Investment Funds 31 December 2013

Asian Equity Fund

Taiwan (continued) Delta Electronics 273,000 1,556,077 0.57 Indonesia Hermes Microvision GDR Regd 36,713 1,191,557 0.44 PT Bank Tabungan Negara Persero 36,717,660 2,625,924 0.96 Cleanaway 178,000 1,160,805 0.43 PT Tempo Scan Pacific 4,352,500 1,162,813 0.43 Chailease Holding (Cayman Islands) (2) 291,767 766,958 0.28 PT Kalbe Farma 9,610,500 987,515 0.36 Siliconware Precision Industries 557,000 664,852 0.24 PT Semen Indonesia Persero 839,000 975,902 0.36 China Life Insurance 309,795 313,690 0.11 PT Matahari Department Store 397,000 358,981 0.13 Taiwan Cement 36,000 55,826 0.02 PT Nippon Indosari Corpindo 2,482,500 208,150 0.08 Wowprime 2,200 36,513 0.01 PT Electronic City Indonesia 890,500 203,135 0.07 PT Indosat 434,000 148,056 0.05 Total for Taiwan 11.34 Total for Indonesia 2.44

Hong Kong Hutchison Whampoa 526,000 7,149,817 2.62 Laos BOC Hong Kong Holdings 1,193,500 3,824,876 1.40 Kolao Holdings (Cayman Islands) (1) (2) 157,359 4,056,765 1.49 Wharf Holdings 492,323 3,765,073 1.38 Cheung Kong Holdings 134,000 2,115,216 0.78 Total for Laos 1.49 Samsonite International (Luxembourg) (2) 672,900 2,048,006 0.75 Hong Kong Exchanges & Clearing 88,600 1,477,409 0.54 United States of America HKT Trust 1,227,000 1,212,110 0.44 Eclat Textile 292,020 3,289,815 1.21

Total for Hong Kong 7.91 Total for United States of America 1.21

Thailand Macau Bangkok Bank Public ‘NVDR’ (1) 734,800 4,000,440 1.47 Melco Crown Entertainment ADR Thai Union Frozen Products (Foreign) 1,447,200 3,175,917 1.16 (Cayman Islands) (2) 37,500 1,445,625 0.53 Supalai (Foreign) 3,911,400 1,746,641 0.64 Land & Houses ‘NVDR’ 6,276,900 1,718,252 0.63 Advanced Info Service (Foreign) Regd 245,800 1,499,835 0.55 Total for Macau 0.53 Minor International (Foreign) 2,214,000 1,401,737 0.51 Robinson Department Store (Foreign) (1) 938,700 1,378,119 0.50 Total for Equities 96.46 Kasikornbank ‘NVDR’ (1) 283,800 1,354,115 0.50 Total Access Communication ‘NVDR’ (1) 262,499 778,786 0.29 Mutual Fund Total Access Communication (Foreign) 217,501 645,285 0.24 VGI Global Media (Foreign) 1,662,128 498,206 0.18 Morgan Stanley Liquidity Funds - US Dollar Liquidity Fund MS Reserve USD Dist. Total for Thailand 6.67 (Luxembourg) (2) (4) 8,906,927 8,906,927 3.27

Malaysia Total for Mutual Fund 3.27 CIMB Group Holdings 934,757 2,172,594 0.80 IJM 1,000,200 1,793,862 0.66 Total Investment Securities 272,223,430 99.73 Astro Malaysia Holdings 1,892,200 1,731,463 0.63 IHH Healthcare 1,394,000 1,641,251 0.60 UEM Sunrise 2,202,500 1,585,451 0.58 Gamuda 793,300 1,161,458 0.43 Mah Sing Group 1,600,898 1,103,562 0.40

Total for Malaysia 4.10

Philippines BDO Unibank 2,385,840 3,685,400 1.35 Ayala 149,938 1,748,883 0.64 DMCI Holdings 1,108,160 1,397,365 0.51 Metro Pacific Investments 13,216,600 1,285,650 0.47 International Container Terminal Services 476,610 1,094,668 0.40 LT Group 2,214,600 769,949 0.28 Rizal Commercial Banking 627,780 600,780 0.22 STI Education Systems Holdings 34,796,000 501,451 0.19

Total for Philippines 4.06

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 4

Asian Equity Fund

DERIVATIVES

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

16/01/2014 1,623,451 USD 167,251,217 JPY State Street 29,289 0.01

Unrealised Gain on Forward Foreign Currency Exchange Contracts 29,289 0.01

Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 29,289 0.01

Total Derivatives 29,289 0.01

Other Assets less Liabilities 719,461 0.26

Total Net Asset Value 272,972,180 100.00

(1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser.

The accompanying notes are an integral part of these financial statements. 5 Morgan Stanley Investment Funds 31 December 2013

Asia-Pacific Equity Fund

Investment aim Statement of investments

To seek long-term capital appreciation, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in US dollars, through investment As at 31 December 2013, expressed in US dollars. primarily in the equity securities of companies Market % of net Investments Holdings value assets domiciled in or exercising the predominant Equities part of their economic activity in the South Korea Samsung Electronics 4,006 5,238,248 4.55 Asia-Pacific region, excluding Japan, thereby Hyundai Motor 7,042 1,587,260 1.38 NCSoft 6,325 1,497,987 1.30 taking advantage of the dynamic economic SK Telecom 6,202 1,359,504 1.18 Hyundai Glovis 4,909 1,080,752 0.94 growth capabilities of the region. Hyundai Engineering & Construction 18,573 1,074,464 0.93 Woongjin Coway 16,874 1,067,842 0.93 Hana Financial Group 23,220 971,511 0.84 NAVER 1,236 852,861 0.74 SK Hynix 23,490 823,857 0.72 Shinhan Financial Group 18,270 823,608 0.71 Hyundai Heavy Industries 3,198 783,308 0.68 Nexon (Japan) (2) 81,400 754,106 0.65 Paradise 29,283 738,180 0.64 Samsung Electronics Pfd 732 706,710 0.61 Cheil Worldwide 24,370 638,718 0.55 Hotel Shilla 8,793 557,288 0.48 Orion 585 529,106 0.46 LG Uplus 44,690 457,867 0.40 GS Retail 16,920 451,523 0.39 KT Skylife 8,350 235,161 0.20 KEPCO Plant Service & Engineering 4,160 217,268 0.19 LG Household & Health Care 349 182,275 0.16 SK Telecom ADR 7,100 175,299 0.15 Cosmax 3,582 170,011 0.15 LG Fashion 3,210 103,099 0.09

Total for South Korea 20.02

China Tencent Holdings (Cayman Islands) (2) 57,200 3,648,537 3.16 Bank of China ‘H’ 6,577,000 3,028,061 2.63 China Mobile (Hong Kong) (2) 182,500 1,892,289 1.64 China Construction Bank ‘H’ 2,155,000 1,625,817 1.41 AIA Group (Hong Kong) (2) 300,800 1,509,024 1.31 China Pacific Insurance Group ‘H’ (1) 356,400 1,397,269 1.21 China Mengniu Dairy (Cayman Islands) (2) 252,000 1,195,961 1.04 China Oilfield Services ‘H’ 374,000 1,159,993 1.01 Qihoo 360 Technology ADR (Cayman Islands) (2) 12,589 1,048,286 0.91 Beijing Enterprises Holdings (Hong Kong) (1) (2) 85,500 847,932 0.74 China Overseas Land & Investment (Hong Kong) (1) (2) 278,000 781,574 0.68 Sihuan Pharmaceutical Holdings Group (Bermuda) (2) 848,000 774,279 0.67 Sino Biopharmaceutical (Cayman Islands) (2) 864,000 685,263 0.59 Tsingtao Brewery ‘H’ 80,000 676,287 0.59 Uni-President China Holdings (Cayman Islands) (1) (2) 519,000 528,765 0.46 Chongqing Changan Automobile ‘B’ 168,500 332,476 0.29 NetEase ADR (Cayman Islands) (2) 4,000 315,160 0.27 China Overseas Grand Oceans Group (Hong Kong) (1) (2) 211,000 201,092 0.17 Autohome ADR (Cayman Islands) (2) 5,544 197,976 0.17 China Conch Venture Holdings (Cayman Islands) (2) 25,000 68,512 0.06

Total for China 19.01

Australia National Australia Bank 83,978 2,617,073 2.27 Westpac Banking 75,485 2,186,927 1.90 Brambles 221,666 1,814,751 1.58 Lend Lease Group (1) 180,161 1,795,737 1.56 Coca-Cola Amatil (1) 145,228 1,563,194 1.36

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 6

Asia-Pacific Equity Fund

Australia (continued) Total for India 5.53 Computershare (1) 147,702 1,503,923 1.30 Santos 112,421 1,471,596 1.28 Seek (1) 117,326 1,407,732 1.22 Philippines Treasury Wine Estates (1) 321,171 1,385,097 1.20 BDO Unibank 614,570 949,325 0.82 AMP (1) 294,424 1,156,470 1.00 Ayala 72,148 841,537 0.73 QBE Insurance Group (1) 76,578 788,635 0.68 DMCI Holdings 610,680 770,054 0.67 Toll Holdings (1) 91,792 466,498 0.40 Metro Pacific Investments 7,282,300 708,389 0.62 Incitec Pivot 156,324 374,850 0.33 International Container Terminal Services 261,800 601,297 0.52 LT Group 1,034,300 359,595 0.31 Total for Australia 16.08 Rizal Commercial Banking 280,050 268,006 0.23 STI Education Systems Holdings 16,424,000 236,689 0.21

Taiwan Total for Philippines 4.11 MediaTek 125,524 1,866,551 1.62 Taiwan Semiconductor Manufacturing 464,000 1,641,308 1.42 Uni-President Enterprises 869,073 1,564,768 1.36 Malaysia Chailease Holding (Cayman Islands) (2) 449,900 1,182,637 1.03 CIMB Group Holdings 403,153 937,022 0.81 China Life Insurance 815,632 825,887 0.72 Astro Malaysia Holdings 628,200 574,836 0.50 Ginko International (Cayman Islands) (2) 37,000 698,441 0.61 Gamuda 386,300 565,576 0.49 Fubon Financial Holding 476,000 695,846 0.60 IJM 314,300 563,698 0.49 Delta Electronics 122,000 695,390 0.60 UEM Sunrise 734,500 528,724 0.46 Hermes Microvision GDR Regd 18,029 585,149 0.51 IHH Healthcare 370,600 436,332 0.38 Cleanaway 57,000 371,718 0.32 Mah Sing Group 621,918 428,713 0.37 Wowprime 22,000 365,130 0.32 Siliconware Precision Industries 227,000 270,954 0.23 Total for Malaysia 3.50 Taiwan Cement 91,000 141,115 0.12 China Steel 2,767 2,505 0.00 Indonesia PT Bank Tabungan Negara Persero 7,119,871 509,189 0.44 Total for Taiwan 9.46 PT Matahari Department Store 524,000 473,818 0.41 PT Kalbe Farma 3,328,500 342,016 0.30 Hong Kong PT Electronic City Indonesia 1,397,500 318,789 0.28 Hutchison Whampoa 166,000 2,256,406 1.96 PT Tempo Scan Pacific 1,116,500 298,284 0.26 Wharf Holdings 217,000 1,659,522 1.44 PT Semen Indonesia Persero 218,500 254,153 0.22 BOC Hong Kong Holdings 411,500 1,318,757 1.14 PT Ace Hardware Indonesia 5,040,000 244,439 0.21 Samsonite International (Luxembourg) (2) 272,400 829,063 0.72 PT Nippon Indosari Corpindo 2,750,000 230,580 0.20 Cheung Kong Holdings 43,000 678,763 0.59 PT Indosat 555,000 189,334 0.16 Hong Kong Exchanges & Clearing 28,400 473,571 0.41 Total for Indonesia 2.48 Total for Hong Kong 6.26 Singapore Thailand DBS Group Holdings 98,000 1,326,626 1.14 Bangkok Bank Public ‘NVDR’ (1) 199,200 1,084,496 0.94 Singapore Telecommunications 330,000 950,915 0.83 Thai Union Frozen Products (Foreign) 488,300 1,071,587 0.93 Vard Holdings 10,000 6,452 0.01 Kasikornbank ‘NVDR’ (1) 171,400 817,813 0.71 Minor International (Foreign) 1,196,100 757,280 0.66 Total for Singapore 1.98 Advanced Info Service (Foreign) Regd 118,700 724,290 0.63 Land & Houses ‘NVDR’ 2,339,800 640,502 0.56 Laos Total Access Communication ‘NVDR’ 189,700 562,805 0.49 Kolao Holdings (Cayman Islands) (2) 49,473 1,275,430 1.11 Supalai (Foreign) 1,067,300 476,604 0.41 Robinson Department Store (Foreign) (1) 266,700 391,546 0.34 Total for Laos 1.11 VGI Global Media (Foreign) (1) 806,000 241,590 0.21 Total Access Communication (Foreign) 60,100 178,306 0.15 United States of America Total for Thailand 6.03 Eclat Textile (Taiwan) (2) 85,560 963,895 0.84

Total for United States of America 0.84 India Glenmark Pharmaceuticals 94,590 815,584 0.71 Tata Consultancy Services 22,685 795,816 0.69 Macau Zee Entertainment Enterprises 154,992 692,414 0.60 Melco Crown Entertainment ADR (Cayman Islands) (2) 15,800 609,090 0.53 HDFC Bank ADR 17,915 617,530 0.54 Infosys 9,557 538,034 0.46 Total for Macau 0.53 Idea Cellular 188,280 507,533 0.44 Asian Paints 61,772 488,868 0.42 Total for Equities 111,733,162 96.94

The accompanying notes are an integral part of these financial statements. 7 Morgan Stanley Investment Funds 31 December 2013

Asia-Pacific Equity Fund

Statement of investments (continued)

Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars.

Market % of net Investments Holdings value assets Mutual Fund

United States of America Morgan Stanley Liquidity Funds - US Dollar Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 2,960,404 2,960,404 2.57

Total for United States of America 2.57

Total for Mutual Fund 2,960,404 2.57

Total Investment Securities 114,693,566 99.51

DERIVATIVES

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

16/01/2014 729,313 USD 75,135,235 JPY State Street 13,158 0.01

Unrealised Gain on Forward Foreign Currency Exchange Contracts 13,158 0.01

EUR Hedged Share Class 10/01/2014 1,156,592 EUR 1,590,395 USD J.P. Morgan 2,868 0.00

Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 2,868 0.00

Total Unrealised Gain on Forward Foreign Currency Exchange Contracts 16,026 0.01

EUR Hedged Share Class 10/1/14 898 USD 654 EUR J.P. Morgan (3) 0.00

Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (3) 0.00

Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 16,023 0.01

Total Derivatives 16,023 0.01

Other Assets less Liabilities 546,629 0.48

Total Net Asset Value 115,256,218 100.00

(1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. (3) These securities are valued at their fair value. See note 2(a) within the Notes to the Financial Statements. (4) Managed by an affiliate of the Investment Adviser.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 8

Asian Property Fund

Investment aim Statement of investments

Japan Mitsui Fudosan 1,126,000 40,620,568 10.05 Mitsubishi Estate 1,354,000 40,586,447 10.04 Sumitomo Realty & Development 491,000 24,475,124 6.06 Nippon Building Fund 1,474 8,597,865 2.13 Japan Real Estate Investment 1,484 7,977,278 1.97 Hulic 300,700 4,456,619 1.10 Japan Retail Fund Investment 2,082 4,250,518 1.05 Nippon Prologis REIT 430 4,122,951 1.02 Tokyo Tatemono 362,000 4,029,889 1.00 Activia Properties 384 3,034,083 0.75 United Urban Investment 1,863 2,686,541 0.66 Nomura Real Estate Holdings 38,700 873,443 0.22 NTT Urban Development 17,200 198,197 0.05

Total for Japan 36.10

Hong Kong Sun Hung Kai Properties 3,164,041 40,131,470 9.92 Hongkong Land Holdings (Bermuda) (2) 2,860,000 16,874,000 4.18 Link REIT 3,154,882 15,298,173 3.78 Wharf Holdings 1,934,122 14,791,328 3.66 Hysan Development 3,204,705 13,803,942 3.42 New World Development 6,322,773 7,982,867 1.98 Swire Properties 1,769,250 4,472,124 1.11 Henderson Land Development 707,791 4,039,121 1.00 Kerry Properties (Bermuda) (2) 1,130,213 3,920,859 0.96 Sino Land 2,746,652 3,754,725 0.93 Hang Lung Properties 917,000 2,897,370 0.72

Total for Hong Kong 31.66

Australia Westfield 2,180,135 19,682,097 4.87 Goodman Group 2,541,669 10,756,648 2.66 Westfield Retail Trust 3,882,262 10,316,636 2.55 GPT Group 2,337,313 7,110,377 1.76 Stockland 2,088,563 6,746,082 1.67 Mirvac Group 4,386,808 6,594,088 1.63 Federation Centres 2,086,468 4,368,420 1.08 Dexus Property 4,853,358 4,364,206 1.08 Commonwealth Property Office Fund 3,149,563 3,508,460 0.87 CFS Retail Property Trust 1,272,396 2,214,312 0.55 Investa Office Fund 214,699 601,272 0.15

Total for Australia 18.87

Singapore CapitaLand 2,862,000 6,864,967 1.70 Global Logistic Properties 2,111,000 4,829,612 1.20 UOL Group 753,000 3,689,876 0.91 CapitaMall Trust 2,393,000 3,608,809 0.89 City Developments 449,000 3,412,273 0.84 SPH REIT 3,804,000 2,951,160 0.73 Ascendas Real Estate Investment Trust 1,405,000 2,446,950 0.61 Keppel REIT 2,441,000 2,289,878 0.57 Suntec Real Estate Investment Trust 1,732,000 2,111,518 0.52 CapitaCommercial Trust 1,717,000 1,970,899 0.49 CapitaMalls Asia 1,024,000 1,588,847 0.39 Mapletree Commercial Trust 769,686 725,081 0.18

Total for Singapore 9.03

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 9 Morgan Stanley Investment Funds 31 December 2013

Asian Property Fund

Statement of investments (continued)

Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars.

Market % of net Investments Holdings value assets Equities (continued)

China China Resources Land (Cayman Islands) (2) 2,367,000 5,867,056 1.44 China Overseas Land & Investment (Hong Kong) (2) 588,000 1,653,113 0.41 Country Garden Holdings (Cayman Islands) (2) 1,933,433 1,166,927 0.29 Guangzhou R&F Properties ‘H’ 599,600 876,886 0.22 Shimao Property Holdings (Cayman Islands) (2) 255,000 586,025 0.15 Longfor Properties (Cayman Islands) (2) 310,000 433,371 0.11 Agile Property Holdings (Cayman Islands) (2) 188,000 201,478 0.05

Total for China 2.67

United Arab Emirates China Merchants Land (Cayman Islands) (2) 1,620,000 396,951 0.10

Total for United Arab Emirates 0.10

Total for Equities 98.43

Mutual Fund

Morgan Stanley Liquidity Funds - US Dollar Treasury Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 3,925,156 3,925,156 0.97

Total for Mutual Fund 0.97

Total for transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market 401,734,933 99.40

Other transferable securities and money market instruments not admitted to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars.

Equities

Malta BGP Holdings (Australia) (2) (6) 33,894,130 0 0.00

Total for Malta 0.00

Total for Equities 0.00

Total for other transferable securities and money market instruments not admitted to official exchange listing or dealt in on another regulated market 0 0.00

Total Investment Securities 401,734,933 99.40

Other Assets less Liabilities 2,409,399 0.60

Total Net Asset Value 404,144,332 100.00

(2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser. (6) This security is illiquid.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 10

Emerging Europe, Middle East and Africa Equity Fund

Investment aim Statement of investments

Total for Russia 23.79

South Africa Naspers ‘N’ 176,947 13,370,756 6.80 Mondi (United Kingdom) (2) 477,482 5,964,712 3.03 SABMiller (United Kingdom) (2) 126,824 4,658,254 2.37 AVI 1,094,366 4,329,337 2.20 Pick n Pay Stores 1,084,052 3,886,438 1.98 Vodacom Group 417,134 3,824,947 1.95 Life Healthcare Group Holdings 1,247,016 3,598,898 1.83 Sasol 93,743 3,325,236 1.69

Total for South Africa 21.85

Poland LPP 2,804 6,079,900 3.09 Bank Zachodni WBK 55,446 5,177,617 2.63 Integer.pl 53,756 4,170,218 2.12 Jeronimo Martins (Portugal) (2) 279,712 3,976,106 2.02 Bank Pekao 71,762 3,103,380 1.58 Stock Spirits Group (United Kingdom) (2) 839,370 2,822,890 1.45 Telekomunikacja Polska 994,833 2,348,833 1.19

Total for Poland 14.08

Turkey Ulker Biskuvi Sanayi 926,062 4,888,337 2.49 Turkcell Iletisim Hizmetleri 1,089,485 4,170,844 2.12 Pegasus Hava Tasimaciligi 297,828 3,666,613 1.86 Turkiye Sise ve Cam Fabrikalari 3,549,440 3,220,468 1.64 Anadolu Efes Biracilik Ve Malt Sanayii 412,237 3,204,976 1.63 Adel Kalemcilik Ticaret ve Sanayi 83,672 1,326,432 0.67

Total for Turkey 10.41

United States of America EPAM Systems 193,292 4,888,566 2.49 Luxoft Holding (British Virgin Islands) (2) 154,173 4,232,718 2.15

Total for United States of America 4.64

Romania Fondul Proprietatea 24,512,220 4,567,045 2.32 Banca Transilvania 7,580,517 2,795,951 1.42 Societatea Nationala de Gaze Naturale ROMGAZ GDR 279,322 2,058,073 1.05 OMV Petrom 4,894,500 514,006 0.26

Total for Romania 5.05

Hungary Richter Gedeon 445,963 6,603,784 3.36

Total for Hungary 3.36 Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 11 Morgan Stanley Investment Funds 31 December 2013

Emerging Europe, Middle East and Africa Equity Fund

Statement of investments (continued)

Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in Euro.

Market % of net Investments Holdings value assets Equities (continued)

Kenya Safaricom 46,709,492 4,262,983 2.17 East African Breweries 950,374 2,318,309 1.18

Total for Kenya 3.35

Austria Erste Group Bank 126,313 3,199,508 1.63 Vienna Insurance Group 71,865 2,603,310 1.32

Total for Austria 2.95

Switzerland Coca-Cola 210,225 4,449,106 2.26

Total for Switzerland 2.26

Czech Republic Komercni Banka 22,796 3,681,408 1.87

Total for Czech Republic 1.87

United Arab Emirates Al Noor Hospitals Group (United Kingdom) (2) 327,113 3,526,264 1.80

Total for United Arab Emirates 1.80

Total for Equities 95.41

Mutual Fund

Morgan Stanley Liquidity Funds - US Dollar Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 8,462,937 6,143,426 3.13

Total for Mutual Fund 3.13

Total Investment Securities 193,744,693 98.54

Other Assets less Liabilities 2,877,337 1.46

Total Net Asset Value 196,622,030 100.00

(2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 12

Emerging Leaders Equity Fund

Investment aim Statement of investments

South Korea Samsung Electronics 4,911 6,421,627 3.05 Hyundai Mobis 15,516 4,340,192 2.06 GS Retail 157,720 4,208,873 2.00 Samsung Electronics Pfd 4,155 4,011,451 1.91 Nexon (Japan) (1) (2) 346,200 3,207,266 1.52

Total for South Korea 10.54

India Akzo Nobel India Equiy Wts exp. 10/10/2013, issued by Macquarie Bank (Australia) (2) 338,804 4,698,876 2.23 Bata India Equity Wts exp.04/06/2018, issued by Merrill Lynch (Curacao) (2) 193,717 3,300,938 1.58 Religare Health Trust (Singapore) (2) 4,924,000 3,020,967 1.43 ITC Equity Wts exp.22/05/2018, issued by Merrill Lynch (Curacao) (2) 501,488 2,602,723 1.24 Tata Global Beverages Equity Wts exp.02/07/2015, issued by Merrill Lynch (Curacao) (2) 998,798 2,586,487 1.23 Larsen & Toubro Equity Wts exp. 20/05/2014, issued by Macquarie Bank (Australia) (2) 125,779 2,178,065 1.03 Agro-Tech Foods Equiy Wts exp. 01/04/2016 issued by Macquarie Bank (Australia) (2) 220,067 1,955,339 0.93 Tata Global Beverages Equity Wts exp.15/06/2018, issued by Merrill Lynch (Curacao) (2) 687,900 1,778,222 0.84

Total for India 10.51

South Africa SABMiller (United Kingdom) (2) 205,788 10,558,807 5.02 Life Healthcare Group Holdings 1,070,779 4,257,041 2.01 Shoprite Holdings 249,427 3,885,045 1.85

Total for South Africa 8.88

United Kingdom British American Tobacco 224,156 12,009,370 5.70 Diageo ADR 34,293 4,524,617 2.15

Total for United Kingdom 7.85

Brazil AMBEV ADR 827,404 5,973,857 2.84 Fleury 563,235 4,386,677 2.08 Raia Drogasil 585,983 3,665,959 1.74

Total for Brazil 6.66

Thailand Bangkok Bank Public ‘NVDR’ 887,300 4,830,690 2.30 Kasikornbank ‘NVDR’ 818,100 3,903,459 1.85 Big C Supercenter ‘NVDR’ (1) 631,400 3,553,375 1.69 Big C Supercenter (Foreign) 203,200 1,143,563 0.54

Total for Thailand 6.38

Switzerland Swatch Group ‘Bearer’ 10,464 6,923,462 3.29 Coca-Cola (1) 220,354 6,424,212 3.05

Total for Switzerland 6.34

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 13 Morgan Stanley Investment Funds 31 December 2013

Emerging Leaders Equity Fund

Market % of net Total for Turkey 1.12 Investments Holdings value assets Equities (continued) Total for Equities 94.02

United States of America Mutual Fund Yum! Brands 150,342 11,346,311 5.39 Morgan Stanley Liquidity Funds - US Dollar Total for United States of America 5.39 Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 11,068,468 11,068,468 5.26

Hong Kong Total for Mutual Fund 5.26 Samsonite International (Luxembourg) (1) (2) 3,666,000 11,157,659 5.30

Total Investment Securities 209,011,878 99.28 Total for Hong Kong 5.30

Mexico Fomento Economico Mexicano ADR 46,324 4,518,906 2.15 DERIVATIVES Grupo Financiero Santander Mexico ‘B’ ADR 281,406 3,815,865 1.81 Over-the-counter (OTC) and exchange traded derivatives Total for Mexico 3.96 as at 31 December 2013, expressed in US dollars.

Belgium Forward Foreign Currency Exchange Contracts Anheuser-Busch InBev 75,575 8,043,469 3.82 Unrealised Total for Belgium 3.82 Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

Russia O’Key Group GDR Regd (Luxembourg) (2) 513,727 6,113,351 2.90 EUR Hedged Share Class 10/01/2014 43,528,936 EUR 59,854,590 USD J.P. Morgan 108,694 0.05 Total for Russia 2.90 10/01/2014 20,432 USD 14,814 EUR J.P. Morgan 25 0.00

Unrealised Gain on NAV Hedged Share Classes China Forward Foreign Currency Exchange Contracts 108,719 0.05 Ajisen China Holdings (Cayman Islands) (2) 5,822,000 6,021,645 2.86

Total for China 2.86 EUR Hedged Share Class 10/01/2014 13,503 EUR 18,633 USD J.P. Morgan (32) 0.00 10/01/2014 152,779 USD 111,741 EUR J.P. Morgan (1,150) 0.00 Poland Jeronimo Martins (Portugal) (2) 266,423 5,217,099 2.48 Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (1,182) 0.00 Total for Poland 2.48 Net Unrealised Gain Peru on Forward Foreign Currency Exchange Contracts 107,537 0.05 Credicorp (Bermuda) (2) 38,529 5,057,702 2.40 Total Derivatives 107,537 0.05 Total for Peru 2.40 Other Assets less Liabilities 1,404,899 0.67

Philippines Total Net Asset Value 210,524,314 100.00 BDO Unibank 2,542,530 3,927,439 1.87

Total for Philippines 1.87 (1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. Taiwan (4) Managed by an affiliate of the Investment Adviser. Ginko International (Cayman Islands) (2) 205,000 3,869,740 1.84

Total for Taiwan 1.84

Indonesia PT Bank Rakyat Indonesia Persero 5,988,500 3,568,979 1.70

Total for Indonesia 1.70

Chile SACI Falabella 286,888 2,572,495 1.22

Total for Chile 1.22

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 14

Emerging Markets Equity Fund

Investment aim Statement of investments

To seek to maximise total return, measured Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. in US dollars, through investment primarily As at 31 December 2013, expressed in US dollars. in securities located in and or deriving Market % of net Investments Holdings value assets a significant portion of earnings Equities from emerging countries. South Korea Samsung Electronics 51,332 67,121,758 4.11 Hyundai Motor 136,401 30,744,662 1.88 Shinhan Financial Group 372,316 16,783,938 1.03 Hyundai Engineering & Construction 222,964 12,898,656 0.79 Woongjin Coway 192,841 12,203,614 0.75 NCSoft 47,047 11,142,416 0.68 Samsung Electronics Pfd 10,964 10,585,210 0.65 NAVER 14,507 10,010,072 0.61 Hana Financial Group 235,690 9,861,130 0.60 SK Telecom 44,619 9,780,672 0.60 Hyundai Glovis 43,103 9,489,438 0.58 Hyundai Heavy Industries (1) 35,206 8,623,247 0.53 SK Hynix 237,290 8,322,394 0.51 Nexon (Japan) (2) 796,500 7,378,936 0.45 LG Household & Health Care (1) 12,846 6,709,181 0.41 Hotel Shilla 89,610 5,679,357 0.35 Cheil Worldwide 187,363 4,910,634 0.30 Hyundai Department Store (1) 30,393 4,663,591 0.29 Paradise 177,952 4,485,900 0.27 Orion (1) 4,591 4,152,356 0.25 Cosmax (1) 78,626 3,731,784 0.23 GS Retail (1) 133,470 3,561,744 0.22 LG Uplus 311,000 3,186,324 0.20 KT Skylife 83,880 2,362,310 0.14 SK Telecom ADR 59,400 1,466,586 0.09 Hyundai Rotem 4,590 125,987 0.01

Total for South Korea 16.53

China Tencent Holdings (Cayman Islands) (2) 572,700 36,530,019 2.24 Bank of China ‘H’ 68,877,000 31,711,081 1.94 China Mobile (Hong Kong) (2) 1,872,000 19,410,222 1.19 China Construction Bank ‘H’ 25,304,910 19,091,026 1.17 China Pacific Insurance Group ‘H’ (1) 4,165,200 16,329,694 1.00 China Oilfield Services ‘H’ 4,032,000 12,505,591 0.77 Qihoo 360 Technology ADR (Cayman Islands) (2) 142,039 11,827,588 0.72 China Mengniu Dairy (Cayman Islands) (2) 2,434,000 11,551,463 0.71 Tsingtao Brewery ‘H’ (1) 932,000 7,878,748 0.48 China Overseas Land & Investment (Hong Kong) (1) (2) 2,534,000 7,124,128 0.44 Beijing Enterprises Holdings (Hong Kong) (1) (2) 681,500 6,758,663 0.41 Sihuan Pharmaceutical Holdings Group (Bermuda) (1) (2) 7,254,000 6,623,376 0.41 China Petroleum & Chemical ‘H’ 8,043,599 6,566,330 0.40 Sino Biopharmaceutical (Cayman Islands) (2) 7,384,000 5,856,463 0.36 Uni-President China Holdings (Cayman Islands) (1) (2) 5,325,000 5,425,194 0.33 Chongqing Changan Automobile ‘B’ 1,226,702 2,420,467 0.15 NetEase ADR (Cayman Islands) (2) 30,000 2,363,700 0.14 China Overseas Grand Oceans Group (Hong Kong) (1) (2) 2,254,000 2,148,162 0.13 China Conch Venture Holdings (Cayman Islands) (2) 703,500 1,927,932 0.12

Total for China 13.11

Mexico Cemex ADR 2,011,840 23,598,883 1.45 Grupo Financiero Banorte ‘O’ 3,088,167 21,466,051 1.31 Alfa ‘A’ 7,120,926 20,515,198 1.26 Fomento Economico Mexicano ADR 151,991 14,826,722 0.91 America Movil ‘L’ ADR 565,805 13,268,127 0.81 Grupo Financiero Santander Mexico ‘B’ ADR 620,123 8,408,868 0.51 Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 15 Morgan Stanley Investment Funds 31 December 2013

Emerging Markets Equity Fund

Total for Mexico 7.18 Total for Thailand 4.31

India Poland Tata Consultancy Services 480,545 16,858,076 1.03 Bank Zachodni WBK 178,262 22,931,317 1.41 ITC 2,407,020 12,512,305 0.77 Bank Pekao (1) 329,836 19,649,385 1.20 HDFC Bank (3) 1,125,095 12,342,765 0.76 Jeronimo Martins (Portugal) (1) (2) 915,681 17,930,879 1.10 Idea Cellular 4,194,183 11,305,970 0.69 Telekomunikacja Polska 2,973,301 9,670,555 0.59 Infosys 191,944 10,805,937 0.66 Sun Pharmaceutical Industries 1,174,990 10,768,765 0.66 Total for Poland 4.30 Glenmark Pharmaceuticals 1,242,219 10,710,791 0.66 Zee Entertainment Enterprises 2,129,990 9,515,549 0.58 Asian Paints 1,000,040 7,914,392 0.48 Russia IndusInd Bank 855,407 5,812,319 0.36 NovaTek GDR Regd 120,126 16,445,249 1.01 ING Vysya Bank (3) 539,663 5,369,727 0.33 Yandex ‘A’ (Netherlands) (2) 327,455 13,998,701 0.86 Oil & Natural Gas 491,863 2,295,069 0.14 Lukoil ADR 189,526 11,890,861 0.73 Mail.ru Group GDR Regd (British Virgin Islands) (2) 224,207 9,999,633 0.61 Total for India 7.12 Eurasia Drilling GDR Regd (Cayman Islands) (2) 146,390 6,587,550 0.40 MegaFon OJSC GDR Regd 187,725 6,288,788 0.38 Sistema JSFC GDR Regd 69,332 2,226,944 0.14 Brazil BRF 1,330,392 27,734,098 1.70 Total for Russia 4.13 Banco Bradesco Pfd 1,447,213 17,819,863 1.09 Petroleo Brasileiro Pfd 2,217,734 16,033,395 0.98 AMBEV ADR 1,485,060 10,722,133 0.66 Philippines Ultrapar Participacoes 422,607 10,008,407 0.61 BDO Unibank 9,317,930 14,393,380 0.88 Companhia de Concessoes Rodoviarias 1,324,801 9,964,747 0.61 DMCI Holdings 8,420,510 10,618,072 0.65 AMBEV 783,996 5,747,645 0.36 Metro Pacific Investments 104,484,900 10,163,809 0.62 Petroleo Brasileiro 848,820 5,745,029 0.35 SM Investments 599,483 9,597,668 0.59 Raia Drogasil 570,369 3,568,277 0.22 International Container Terminal Services 3,613,050 8,298,381 0.51 Petroleo Brasileiro ADR 253,778 3,484,372 0.21 LT Group 10,315,000 3,586,210 0.22 Bloomberry Resorts 14,753,100 2,860,261 0.17 Total for Brazil 6.79 Total for Philippines 3.64

Taiwan Taiwan Semiconductor Manufacturing 9,027,673 31,933,596 1.95 Malaysia MediaTek 1,133,626 16,857,104 1.03 CIMB Group Holdings 5,695,001 13,236,513 0.81 Chailease Holding (Cayman Islands) (2) 4,031,900 10,598,523 0.65 IJM 6,159,400 11,046,903 0.68 Fubon Financial Holding 5,866,030 8,575,320 0.52 Gamuda 6,061,700 8,874,839 0.54 Uni-President Enterprises 4,737,358 8,529,627 0.52 Astro Malaysia Holdings 9,036,200 8,268,598 0.50 Ginko International (Cayman Islands) (2) 448,000 8,456,798 0.52 IHH Healthcare 4,683,100 5,513,731 0.34 Delta Electronics 973,000 5,546,018 0.34 China Life Insurance 4,797,451 4,857,771 0.30 Total for Malaysia 2.87 Hermes Microvision GDR Regd 139,684 4,533,583 0.28 Cleanaway 476,000 3,104,174 0.19 Switzerland Siliconware Precision Industries 2,013,000 2,402,776 0.15 Coca-Cola 620,543 18,091,343 1.11 Taiwan Cement 583,000 904,065 0.06 Swatch Group ‘Bearer’ (1) 22,199 14,687,877 0.90 Lung Yen Life Service 131,000 368,952 0.02

Total for Switzerland 2.01 Total for Taiwan 6.53

Austria South Africa Erste Group Bank 480,636 16,771,118 1.03 Naspers ‘N’ (1) 216,072 22,491,673 1.38 Vienna Insurance Group 246,660 12,308,854 0.75 Mondi (United Kingdom) (2) 823,842 14,177,084 0.87 SABMiller (United Kingdom) (2) 227,948 11,533,683 0.71 Sasol 156,128 7,629,128 0.47 Total for Austria 1.78 Pick n Pay Stores (1) 1,330,186 6,569,381 0.40 Life Healthcare Group Holdings (1) 1,496,788 5,950,703 0.36 Vodacom Group 167,884 2,120,653 0.13

Total for South Africa 4.32

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 16

Emerging Markets Equity Fund

Market % of net Total for Panama 0.76 Investments Holdings value assets Equities (continued) Chile SACI Falabella 1,192,436 10,692,449 0.65 Turkey Anadolu Efes Biracilik Ve Malt Sanayii 618,508 6,624,203 0.41 Total for Chile 0.65 Turkiye Sise ve Cam Fabrikalari 4,844,460 6,055,012 0.37 Ulker Biskuvi Sanayi 682,087 4,959,884 0.30 Qatar Turkcell Iletisim Hizmetleri 916,026 4,830,822 0.30 Ooredoo 208,883 7,869,823 0.48 Pegasus Hava Tasimaciligi 279,192 4,734,926 0.29

Total for Qatar 0.48 Total for Turkey 1.67

Laos Indonesia Kolao Holdings GDR (Cayman Islands) (2) 449,963 5,768,481 0.36 PT Kalbe Farma 65,939,500 6,775,534 0.42 PT Matahari Department Store 7,479,000 6,762,762 0.41 Total for Laos 0.36 PT Semen Indonesia Persero 4,134,500 4,809,139 0.30 PT Bank Tabungan Negara Persero 59,418,387 4,249,404 0.26 PT Indosat 6,682,500 2,279,686 0.14 Total for Equities 97.46

Total for Indonesia 1.53 Mutual Fund

United States of America Morgan Stanley Liquidity Funds - US Dollar Yum! Brands 234,434 17,692,734 1.08 Liquidity Fund MS Reserve USD Dist. Eclat Textile (Taiwan) (2) 536,600 6,045,184 0.37 (Luxembourg) (2) (4) 38,493,731 38,493,731 2.36

Total for United States of America 1.45 Total for Mutual Fund 2.36

Total for transferable securities and money market Hong Kong instruments admitted to official exchange listing Samsonite International (Luxembourg) (2) 6,188,400 18,834,712 1.15 or dealt in on another regulated market 1,629,963,181 99.82

Total for Hong Kong 1.15 Other transferable securities and money market instruments Colombia not admitted to official exchange listing or dealt in on another Cemex Latam Holdings (Spain) (2) 964,883 7,397,186 0.45 Grupo de Inversiones Suramericana Pfd 320,900 5,814,598 0.36 regulated market. As at 31 December 2013, expressed in US dollars. Grupo de Inversiones Suramericana 281,183 4,908,504 0.30 Equities Total for Colombia 1.11 Brazil Lojas Arapua Pfd (7) 11,491,000 0 0.00 Peru Banco Nacional Pfd (7) 30,754,160 0 0.00 Credicorp (Bermuda) (2) 134,409 17,643,869 1.08

Total for Brazil 0.00 Total for Peru 1.08

Total for Equities 0 0.00 Hungary Richter Gedeon 829,130 16,913,252 1.04 Total for other transferable securities and money market instruments not admitted to official exchange listing Total for Hungary 1.04 or dealt in on another regulated market 0 0.00

Czech Republic Total Investment Securities 1,629,963,181 99.82 Komercni Banka 57,894 12,879,511 0.79

Total for Czech Republic 0.79

Spain Telefonica 772,388 12,592,568 0.77

Total for Spain 0.77

The accompanying notes are an integral part of these financial statements. 17 Morgan Stanley Investment Funds 31 December 2013

Emerging Markets Equity Fund

DERIVATIVES

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

16/01/2014 7,109,690 USD 732,454,441 JPY State Street 128,267 0.01

Unrealised Gain on Forward Foreign Currency Exchange Contracts 128,267 0.01

Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 128,267 0.01

Total Derivatives 128,267 0.01

Other Assets less Liabilities 2,926,275 0.17

Total Net Asset Value 1,633,017,723 100.00

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 18

European Equity Alpha Fund

Investment aim Statement of investments

To seek long-term capital growth, measured Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. in Euro, through investment primarily in As at 31 December 2013, expressed in Euro. a concentrated portfolio of equity securities Market % of net Investments Holdings value assets of companies listed on European Stock Equities Exchanges. United Kingdom Vodafone Group 11,846,588 33,722,840 3.92 HSBC Holdings (1) 3,752,624 29,856,430 3.47 BP 4,286,929 25,130,036 2.92 Royal Dutch Shell ‘A’ 952,424 24,743,969 2.88 GlaxoSmithKline 1,225,865 23,727,690 2.76 Prudential 1,372,612 22,092,003 2.57 British American Tobacco 545,908 21,231,409 2.47 Barclays 6,459,202 21,098,444 2.46 BG Group 1,263,955 19,697,971 2.29 Reckitt Benckiser Group 338,834 19,506,391 2.27 Rolls-Royce Holdings 1,256,335 19,239,694 2.24 Glencore Xstrata (Jersey) (1) (2) 3,964,383 14,889,702 1.73 Experian (Jersey) (2) 1,104,156 14,774,000 1.72 Imperial Tobacco Group 513,619 14,423,415 1.68 British Sky Broadcasting 1,132,259 11,478,119 1.35 Tullow Oil 1,026,682 10,543,493 1.23 Rolls-Royce Holdings Pfd ‘C’ 106,283,874 127,659 0.01

Total for United Kingdom 37.97

France AXA 1,234,066 24,940,474 2.90 BNP Paribas 407,834 23,103,796 2.69 Société Générale 439,005 18,534,791 2.16 Schneider Electric 288,799 18,309,857 2.13 Accor 436,224 14,962,483 1.74 European Aeronautic Defence and Space (Netherlands) (1) (2) 256,034 14,289,258 1.66 SES (Luxembourg) (1) (2) 579,532 13,636,388 1.59 Crédit Agricole 1,389,046 12,925,073 1.50 Suez Environnement 927,607 12,082,081 1.41

Total for France 17.78

Germany Siemens Regd 264,270 26,239,368 3.05 Bayer Regd 243,395 24,814,120 2.90 Daimler Regd 376,141 23,659,269 2.75 Volkswagen Pfd (1) 101,479 20,716,938 2.41 Muenchener Rueckversicherungs Regd 98,717 15,809,528 1.84 Fresenius 127,332 14,210,251 1.65

Total for Germany 14.60

Switzerland Nestlé Regd (1) 700,190 37,252,924 4.33 Roche Holding ‘Genusschein’ 162,943 33,083,771 3.85 Novartis Regd 552,081 32,026,839 3.73 Zurich Insurance Group 82,690 17,415,856 2.03

Total for Switzerland 13.94

Spain Banco Bilbao Vizcaya Argentaria 2,120,982 18,978,547 2.21 Amadeus IT Holding ‘A’ (1) 589,741 18,343,894 2.13

Total for Spain 4.34

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 19 Morgan Stanley Investment Funds 31 December 2013

European Equity Alpha Fund

Statement of investments (continued) DERIVATIVES

Transferable securities and money market instruments admitted Over-the-counter (OTC) and exchange traded derivatives to official exchange listing or dealt in on another regulated market. as at 31 December 2013, expressed in Euro. As at 31 December 2013, expressed in Euro. Forward Foreign Currency Exchange Contracts

Market % of net Investments Holdings value assets Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty EUR assets Equities (continued)

USD Hedged Share Class Sweden 10/01/2014 7,505,876 USD 5,458,541 EUR J.P. Morgan (9,827) 0.00 Svenska Cellulosa ‘B’ 654,556 14,622,346 1.70 Millicom International Cellular SDR Unrealised Loss on NAV Hedged Share Classes (Luxembourg) (1) (2) 172,189 12,443,129 1.45 Forward Foreign Currency Exchange Contracts (9,827) 0.00

Total for Sweden 3.15 Net Unrealised Loss on Forward Foreign Currency Exchange Contracts (9,827) 0.00 Netherlands Reed Elsevier 1,038,585 15,994,209 1.86 Total Derivatives (9,827) 0.00

Total for Netherlands 1.86 Other Assets less Liabilities 3,012,226 0.35

Finland Total Net Asset Value 859,362,345 100.00 Kone ‘B’ (1) 391,725 12,848,580 1.50

Total for Finland 1.50 (1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser. Belgium Umicore (1) 347,741 11,807,546 1.37

Total for Belgium 1.37

Portugal Galp Energia SGPS 857,088 10,212,204 1.18

Total for Portugal 1.18

Total for Equities 97.69

Mutual Fund

Morgan Stanley Liquidity Funds - Euro Liquidity Fund MS Reserve EUR Dist. (Luxembourg) (2) (4) 16,813,161 16,813,161 1.96

Total for Mutual Fund 1.96

Total Investment Securities 856,359,946 99.65

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 20

European Property Fund

Investment aim Statement of investments

United Kingdom Land Securities Group 1,088,530 12,597,218 7.25 British Land 1,486,383 11,229,590 6.46 Hammerson (1) 1,410,627 8,505,472 4.89 LXB Retail Properties (Jersey) (1) (2) 3,360,987 5,162,202 2.97 Intu Properties (1) 1,304,375 4,855,194 2.79 Derwent London (1) 128,589 3,853,513 2.22 Safestore Holdings (1) 1,832,746 3,544,138 2.04 Great Portland Estates (1) 400,540 2,881,743 1.66 Capital & Regional 4,356,292 2,302,248 1.32 Capital & Counties Properties 463,875 1,834,186 1.05 Shaftesbury 219,428 1,652,502 0.95 Quintain Estates & Development 1,448,090 1,643,652 0.95 Unite Group (1) 315,115 1,523,791 0.88 Grainger 469,598 1,149,510 0.66 ST Modwen Properties (1) 151,632 668,951 0.38 Segro (1) 108,652 435,880 0.25

Total for United Kingdom 36.72

France Unibail-Rodamco 94,569 17,613,476 10.13 ICADE (1) 109,570 7,414,602 4.26 Gecina 59,625 5,725,789 3.29 Klepierre 156,148 5,259,845 3.03 Foncière des Regions 70,895 4,448,661 2.56 Mercialys 242,946 3,704,927 2.14 Altarea (1) 3,983 509,824 0.29

Total for France 25.70

Germany LEG Immobilien 179,280 7,700,076 4.43 Deutsche Annington Immobilien 179,898 3,238,164 1.86 Deutsche Wohnen ‘Bearer’ (1) 146,829 2,060,745 1.19 Alstria Office REIT 200,710 1,836,898 1.06 Deutsche Euroshop (1) 48,694 1,549,687 0.89 Prime Office REIT 485,103 1,498,968 0.86 Deutsche Wohnen 77,805 1,049,978 0.60

Total for Germany 10.89

Switzerland PSP Swiss Property Regd 117,867 7,250,542 4.18 Swiss Prime Site Regd 44,301 2,492,347 1.43 Mobimo Holding Regd (1) 6,447 977,542 0.56

Total for Switzerland 6.17

Sweden Hufvudstaden ‘A’ 551,155 5,357,153 3.08 Atrium Ljungberg ‘B’ 362,275 3,596,881 2.07 Castellum 96,004 1,084,248 0.62 Fabege 39,912 345,836 0.20

Total for Sweden 5.97

Netherlands Corio 129,576 4,220,938 2.43 Eurocommercial Properties ‘CVA’ (1) 73,922 2,281,233 1.32 Wereldhave 23,137 1,322,742 0.76 Vastned Retail 10,797 356,139 0.20

Total for Netherlands 4.71 Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 21 Morgan Stanley Investment Funds 31 December 2013

European Property Fund

Statement of investments (continued)

Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in Euro.

Market % of net Investments Holdings value assets Equities (continued)

Austria Atrium European Real Estate (Jersey) (2) 1,148,750 4,801,775 2.76

Total for Austria 2.76

Italy Beni Stabili 6,398,872 3,135,447 1.80

Total for Italy 1.80

Norway Norwegian Property 2,914,889 2,532,355 1.46

Total for Norway 1.46

Finland Sponda 709,730 2,427,277 1.39

Total for Finland 1.39

Belgium Cofinimmo 7,102 637,404 0.36

Total for Belgium 0.36

Total Investment Securities 170,271,289 97.93

Other Assets less Liabilities 3,595,719 2.07

Total Net Asset Value 173,867,008 100.00

(1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 22

Eurozone Equity Alpha Fund

Investment aim Statement of investments

To seek attractive long-term capital growth, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in Euro, through investment primarily As at 31 December 2013, expressed in Euro. in a concentrated portfolio of equity securities Market % of net Investments Holdings value assets of companies domiciled or exercising the Equities predominant part of their economic activity Germany Bayer Regd 141,278 14,403,292 5.12 in the Eurozone (being those member states Siemens Regd 142,486 14,147,435 5.03 Daimler Regd 201,250 12,658,625 4.50 of the European Union which have adopted Allianz Regd 91,661 11,948,011 4.24 Volkswagen Pfd 49,617 10,129,311 3.60 the Euro as their national currency). Muenchener Rueckversicherungs Regd 52,406 8,392,821 2.98 Henkel & Co Pfd 82,541 6,959,032 2.47 Fresenius 59,937 6,688,969 2.38 OSRAM Licht (1) 113,285 4,644,685 1.65

Total for Germany 31.97

France BNP Paribas 212,407 12,032,857 4.28 AXA 541,326 10,940,198 3.89 Société Générale 212,183 8,958,366 3.18 Schneider Electric 136,320 8,642,688 3.07 Airbus Group (Netherlands) (2) 123,368 6,885,168 2.45 Accor 198,762 6,817,537 2.42 Faurecia (1) 245,519 6,802,104 2.42 Crédit Agricole 686,573 6,388,562 2.27 Safran 124,393 6,283,090 2.23 Suez Environnement 376,753 4,907,208 1.75 Pernod-Ricard (1) 57,857 4,791,138 1.70 SES (Luxembourg) (1) (2) 255,916 6,021,704 2.14

Total for France 31.80

Netherlands Unilever ‘CVA’ (1) 329,858 9,656,593 3.43 Koninklijke Ahold 555,778 7,252,903 2.58 Reed Elsevier 449,762 6,926,335 2.46

Total for Netherlands 8.47

Spain Banco Bilbao Vizcaya Argentaria 1,194,478 10,688,189 3.80 Amadeus IT Holding ‘A’ (1) 265,081 8,245,345 2.93 Mediaset Espana Comunicacion 518,862 4,352,732 1.55

Total for Spain 8.28

Italy ENI 568,112 9,936,279 3.53 Azimut Holding 300,748 5,963,833 2.12 Ansaldo STS 590,490 4,635,347 1.65

Total for Italy 7.30

Ireland CRH 386,189 7,073,052 2.51

Total for Ireland 2.51

Finland Kone ‘B’ 180,624 5,924,467 2.11

Total for Finland 2.11

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 23 Morgan Stanley Investment Funds 31 December 2013

Eurozone Equity Alpha Fund

Statement of investments (continued) DERIVATIVES

Market % of net Investments Holdings value assets Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty EUR assets Equities (continued)

USD Hedged Share Class United Kingdom 10/01/2014 101,211 USD 73,355 EUR J.P. Morgan 117 0.00 Royal Dutch Shell ‘A’ 194,791 5,046,061 1.79

Unrealised Gain on NAV Hedged Share Classes Total for United Kingdom 1.79 Forward Foreign Currency Exchange Contracts 117 0.00

Portugal USD Hedged Share Class Galp Energia SGPS 419,491 4,998,235 1.78 10/01/2014 7,199,192 USD 5,238,538 EUR J.P. Morgan (12,453) 0.00

Total for Portugal 1.78 Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (12,453) 0.00 Belgium Umicore 139,664 4,742,290 1.68 Net Unrealised Loss on Forward Foreign Currency Exchange Contracts (12,336) 0.00 Total for Belgium 1.68 Total Derivatives (12,336) 0.00 Total for Equities 97.69 Other Assets less Liabilities 1,218,626 0.43 Mutual Fund Total Net Asset Value 281,393,802 100.00 Morgan Stanley Liquidity Funds - Euro Liquidity Fund MS Reserve EUR Dist. (Luxembourg) (2) (4) 5,303,050 5,303,050 1.88 (1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. Total for Mutual Fund 1.88 (4) Managed by an affiliate of the Investment Adviser.

Total Investment Securities 280,187,512 99.57

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 24

Frontier Emerging Markets Equity Fund*

Investment aim Statement of investments

* Fund commenced operations on 28 March 2013. Nigeria Afren (United Kingdom) (2) 553,086 1,548,410 3.63 Nigerian Breweries 1,205,917 1,264,274 2.96 Zenith Bank 6,421,510 1,098,654 2.57 Dangote Cement 650,077 888,919 2.08 Access Bank 10,508,405 629,914 1.47 Guaranty Trust Bank 3,499,518 590,427 1.39

Total for Nigeria 14.10

Qatar Qatar National Bank 36,946 1,745,033 4.09 Gulf International Services 92,403 1,547,831 3.62 Ooredoo 40,401 1,522,138 3.56 Qatar Islamic Bank 22,249 421,568 0.99

Total for Qatar 12.26

Saudi Arabia Etihad Etisalat Company Participation note, issued by HSBC Bank (United Kingdom) (2) 44,713 1,017,804 2.38 Al Rajhi Bank Participation note, issued by HSBC Bank (United Kingdom) (2) 48,806 951,539 2.23 Saudi Hollandi Bank Participation note, issued by HSBC Bank (United Kingdom) (2) 71,464 796,490 1.87 Saudi Airlines Catering Equity Wts exp. 23/05/2017, issued by Deutsche Bank (Germany) (2) 19,723 744,125 1.74 Jarir Marketing Participation note, issued by HSBC Bank (United Kingdom) (2) 14,845 635,886 1.49 Alinma Bank Equity Wts exp. 27/09/2016, issued by Deutsche Bank (Germany) (2) 159,948 633,314 1.48

Total for Saudi Arabia 11.19

Pakistan Lucky Cement 359,071 1,019,646 2.39 Oil & Gas Development 377,519 987,984 2.31 United Bank 604,364 758,603 1.78 Engro Foods 652,487 645,320 1.51

Total for Pakistan 7.99

Argentina YPF ADR 56,379 1,888,697 4.42 Banco Macro ADR 25,394 609,710 1.43 Telecom Argentina ADR 30,210 520,216 1.22

Total for Argentina 7.07

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 25 Morgan Stanley Investment Funds 31 December 2013

Frontier Emerging Markets Equity Fund*

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Mutual Fund to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars. Morgan Stanley Liquidity Funds - US Dollar Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 37 37 0.00 Market % of net Investments Holdings value assets Total for Mutual Fund 0.00 Equities (continued) Total Investment Securities 40,623,797 95.12

Romania Banca Transilvania 1,852,581 941,280 2.20 Fondul Proprietatea 2,607,893 669,349 1.57 DERIVATIVES Societatea Nationala de Gaze Naturale ROMGAZ GDR 32,117 325,988 0.76 Over-the-counter (OTC) and exchange traded derivatives Societatea Nationala de Gaze Naturale ROMGAZ 27,413 288,611 0.68 as at 31 December 2013, expressed in US dollars. Total for Romania 5.21 Forward Foreign Currency Exchange Contracts Kenya Kenya Commercial Bank 1,421,152 778,093 1.82 Unrealised Maturity Amount Amount gain/(loss) % of net Safaricom 6,039,824 759,352 1.78 date bought Ccy sold Ccy Counterparty USD assets

Total for Kenya 3.60 EUR Hedged Share Class 10/01/2014 7,298,861 EUR 10,016,027 USD J.P. Morgan 38,520 0.09 Sri Lanka John Keells Holdings 441,550 767,388 1.79 Unrealised Gain on NAV Hedged Share Classes Commercial Bank of Ceylon 821,743 756,481 1.77 Forward Foreign Currency Exchange Contracts 38,520 0.09

Total for Sri Lanka 3.56 EUR Hedged Share Class 10/01/2014 793,638 EUR 1,095,158 USD J.P. Morgan (1,882) 0.00 Panama Copa Holdings ‘A’ 7,452 1,192,096 2.79 Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (1,882) 0.00 Total for Panama 2.79 Net Unrealised Gain Laos on Forward Foreign Currency Exchange Contracts 36,638 0.09 Kolao Holdings (Cayman Islands) (2) 44,350 1,143,357 2.68 Total Derivatives 36,638 0.09 Total for Laos 2.68 Other Assets less Liabilities 2,046,733 4.79

Kuwait Total Net Asset Value 42,707,168 100.00 Burgan Bank 564,527 1,099,858 2.58

Total for Kuwait 2.58 (2) The country in brackets represents the country of incorporation of this security. (3) These securities are valued at their fair value. See note 2(a) within the Notes to the Financial Vietnam Statements. Vietnam Dairy Products (3) 49,720 334,926 0.78 (4) Managed by an affiliate of the Investment Adviser. Vietnam Diary Products Equity linked note, issued by UBS (Switzerland) (2) (3) 41,190 277,466 0.65 Vietnam Dairy Products Equity Wts exp. 22/07/2019, issued by Deutsche Bank (Germany) (2) (3) 24,900 167,732 0.40

Total for Vietnam 1.83

Bangladesh GrameenPhone 259,400 674,259 1.57 Islami Bank Bangladesh 125,049 55,980 0.13

Total for Bangladesh 1.70

Austria OMV 13,621 652,791 1.53

Total for Austria 1.53

Egypt Ghabbour Auto 35,523 183,685 0.43

Total for Egypt 0.43

Total for Equities 40,623,760 95.12 The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 26

Global Advantage Fund*

Investment aim Statement of investments

United States of America * Fund commenced operations on 31 January 2013. Amazon.com 668 263,586 6.62 Facebook ‘A’ 4,704 256,227 6.44 Google ‘A’ 222 245,836 6.18 Mastercard ‘A’ 133 110,870 2.79 Twitter 1,696 108,256 2.72 Mead Johnson Nutrition 1,296 107,840 2.71 Visa ‘A’ 476 105,415 2.65 Starbucks 1,163 90,900 2.28 Progressive 3,302 89,880 2.26 Apple 146 81,608 2.05 Motorola Solutions 1,152 77,875 1.96 Anheuser-Busch InBev ADR (Belgium) (2) 721 76,390 1.92 Thermo Fisher Scientific 543 60,105 1.51 Arch Capital Group (Bermuda) (2) 901 53,628 1.35 Berkshire Hathaway ‘B’ 445 52,492 1.32

Total for United States of America 44.76

France Eurazeo 2,421 190,032 4.77 Christian Dior 897 169,719 4.27 Edenred 4,263 142,879 3.59

Total for France 12.63

United Kingdom Intertek Group 2,633 137,145 3.45 Burberry Group 3,985 99,959 2.51 Diageo ADR 502 66,234 1.66 Manchester United ‘A’ (Cayman Islands) (2) 3,600 55,692 1.40

Total for United Kingdom 9.02

Canada Aimia 7,556 138,606 3.48 Valeant Pharmaceuticals International 799 93,259 2.34 Fairfax Financial Holdings 152 60,874 1.54

Total for Canada 7.36

Italy Tamburi Investment Partners 20,121 63,474 1.60 Moncler 2,733 59,485 1.49 Brunello Cucinelli 1,609 57,252 1.44

Total for Italy 4.53

Singapore Jardine Matheson Holdings (Bermuda) (2) 2,019 105,614 2.66 Mandarin Oriental International (Bermuda) (2) 31,000 51,770 1.30

Total for Singapore 3.96

South Africa Naspers ‘N’ 1,272 132,407 3.33

Total for South Africa 3.33

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 27 Morgan Stanley Investment Funds 31 December 2013

Global Advantage Fund*

Statement of investments (continued) DERIVATIVES

Transferable securities and money market instruments admitted Over-the-counter (OTC) and exchange traded derivatives to official exchange listing or dealt in on another regulated market. as at 31 December 2013, expressed in US dollars. As at 31 December 2013, expressed in US dollars. Options Contracts

Market % of net Investments Holdings value assets Market Number of value % of net Security Description Expiration Contracts Ccy Counterparty (USD) assets Equities (continued)

FXO CNY/USD Call Option, Switzerland Strike Price 6.50 12/12/2014 42,119 USD Royal Bank of Scotland 73 0.00 Nestlé ADR 1,722 126,792 3.19 FXO CNY/USD Call Option, Strike Price 6.50 15/12/2014 526,315 USD Royal Bank of Scotland 925 0.02 Total for Switzerland 3.19 FXO CNY/USD Call Option, Strike Price 6.50 17/12/2014 593,040 USD Royal Bank of Scotland 1,052 0.03 Hong Kong L’Occitane International (Luxembourg) (2) 55,500 118,099 2.96 Total Options Contracts at Market Value 2,050 0.05

Total for Hong Kong 2.96 Total Derivatives 2,050 0.05

Other Assets less Liabilities 114,018 2.87 Brazil JHSF Participacoes 28,386 51,185 1.29 Prumo Logistica 54,730 25,019 0.63 Total Net Asset Value 3,979,184 100.00

Total for Brazil 1.92 (2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser. Japan Fanuc 200 36,695 0.91

Total for Japan 0.91

Total for Equities 94.57

Mutual Fund

Morgan Stanley Liquidity Funds - US Dollar Treasury Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 100,017 100,017 2.51

Total for Mutual Fund 2.51

Total for transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market 3,863,116 97.08

Total Investment Securities 3,863,116 97.08

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 28

Global Brands Fund

Investment aim Statement of investments

To seek an attractive long-term rate of return, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in US dollars, through investment As at 31 December 2013, expressed in US dollars. principally in equity securities of companies Market % of net Investments Holdings value assets in the world’s developed countries, Equities by investing in a concentrated portfolio United States of America Accenture ‘A’ (Ireland) (2) 5,119,344 420,502,916 4.70 of companies whose success the Company Philip Morris International 4,809,293 416,965,703 4.66 Mondelez International ‘A’ 9,595,466 335,841,310 3.75 believes depends on intangible assets Procter & Gamble 3,990,007 325,065,870 3.63 Microsoft 8,453,953 315,586,065 3.53 (for example, but not limited to, brand names, Visa ‘A’ 1,313,346 290,853,605 3.25 3M 1,864,761 261,308,959 2.92 copyrights or methods of distribution) Dr Pepper Snapple Group 4,320,967 210,776,770 2.36 Moody’s 2,337,204 183,634,118 2.05 Nike ‘B’ 1,790,725 140,715,172 1.57 underpinning a strong business franchise. Herbalife (Cayman Islands) (2) 1,724,218 134,368,309 1.50 Kraft Foods Group 2,157,155 116,335,369 1.30 Intuit 1,332,425 101,970,485 1.14 Mead Johnson Nutrition 1,019,114 84,800,476 0.95

Total for United States of America 37.31

United Kingdom British American Tobacco 15,953,983 854,749,763 9.55 Unilever 17,172,865 705,241,001 7.88 Reckitt Benckiser Group 7,682,837 609,287,219 6.82 Diageo 13,089,038 433,142,445 4.84 Imperial Tobacco Group 7,474,048 289,130,170 3.23 Experian (Jersey) (2) 7,001,642 129,055,974 1.44 Admiral Group 2,660,586 57,668,893 0.64

Total for United Kingdom 34.40

Switzerland Nestlé Regd 11,749,126 861,113,774 9.62

Total for Switzerland 9.62

France Sanofi 4,926,779 523,408,314 5.85 LVMH Moet Hennessy Louis Vuitton 912,786 166,733,554 1.86 Pernod-Ricard 901,319 102,818,633 1.15

Total for France 8.86

Germany SAP 4,966,721 426,322,280 4.76

Total for Germany 4.76

Sweden Swedish Match 5,753,325 184,831,059 2.07

Total for Sweden 2.07

Italy Davide Campari-Milano 10,946,105 91,679,810 1.02

Total for Italy 1.02

Total for Equities 98.04

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 29 Morgan Stanley Investment Funds 31 December 2013

Global Brands Fund

Statement of investments (continued)

Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars.

Market % of net Investments Holdings value assets Mutual Fund

Morgan Stanley Liquidity Funds - US Dollar Treasury Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 172,427,605 172,427,605 1.93

Total for Mutual Fund 1.93

Total Investment Securities 8,946,335,621 99.97

DERIVATIVES

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

CHF Hedged Share Class 10/01/2014 10,819 USD 9,611 CHF J.P. Morgan 31 0.00

EUR Hedged Share Class 10/01/2014 1,128,434,543 EUR 1,551,676,487 USD J.P. Morgan 2,798,461 0.03 10/01/2014 2,610,434 USD 1,892,097 EUR J.P. Morgan 3,977 0.00

GBP Hedged Share Class 10/01/2014 105,636,658 GBP 171,724,852 USD J.P. Morgan 3,053,641 0.03

Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 5,856,110 0.06

CHF Hedged Share Class 10/01/2014 37,559,134 CHF 42,373,147 USD J.P. Morgan (215,215) 0.00

EUR Hedged Share Class 10/01/2014 13,858,567 USD 10,089,718 EUR J.P. Morgan (40,523) 0.00

GBP Hedged Share Class 10/01/2014 221,125 USD 135,152 GBP J.P. Morgan (2,488) 0.00

Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (258,226) 0.00

Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 5,597,884 0.06

Total Derivatives 5,597,884 0.06

Other Assets less Liabilities (2,601,306) (0.03)

Total Net Asset Value 8,949,332,199 100.00

(2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 30

Global Equity Allocation Fund

Investment aim Statement of investments

To seek long-term capital appreciation, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. in US dollars, by investing primarily in equity As at 31 December 2013, expressed in US dollars. securities issued by companies located Market % of net Investments Holdings value assets throughout the world. The portfolio is Equities constructed on the basis of the belief that United States of America Exxon Mobil 3,245 327,453 1.45 the most important factors to global equity Microsoft 8,409 313,908 1.39 Apple 558 311,900 1.38 investing are choice of region, country and Google ‘A’ 202 223,689 0.99 Johnson & Johnson 2,396 219,498 0.97 industry sector. The investment decisions General Electric 7,661 213,742 0.94 Wells Fargo & Co 4,486 203,530 0.89 are implemented through optimised stock JPMorgan Chase & Co. 3,283 191,038 0.84 Chevron 1,509 187,780 0.83 Amazon.com 461 181,906 0.80 baskets that are constructed to broadly track Qualcomm 2,168 160,237 0.71 Intel 6,064 157,725 0.70 the local MSCl lndices. International Business Machines 768 143,654 0.63 Philip Morris International 1,620 140,454 0.61 Pfizer 4,411 135,285 0.60 Citigroup 2,583 134,290 0.59 Procter & Gamble 1,598 130,189 0.58 Berkshire Hathaway ‘B’ 1,089 128,458 0.57 Bank of America 7,912 122,952 0.54 Oracle 2,960 112,983 0.50 Cisco Systems 5,041 112,011 0.50 Merck & Co. 2,212 109,959 0.49 Prudential Financial 1,134 104,305 0.46 3M 743 104,117 0.46 Schlumberger (Curacao) (2) 1,133 101,743 0.45 Gilead Sciences 1,363 101,666 0.45 MetLife 1,854 99,319 0.44 Coca-Cola 2,397 98,373 0.43 United Technologies 867 98,162 0.43 Occidental Petroleum 1,026 97,398 0.43 Comcast ‘A’ 1,838 95,392 0.42 Walt Disney 1,201 91,372 0.40 Amgen 758 87,109 0.39 Union Pacific 503 83,991 0.37 United Parcel Service ‘B’ 772 81,122 0.36 Goldman Sachs Group 458 80,961 0.36 Altria Group 2,004 76,833 0.34 Wal-Mart Stores 965 75,627 0.33 Visa ‘A’ 332 73,525 0.32 American International Group 1,421 72,869 0.32 Emerson Electric 987 69,396 0.31 Eaton (Ireland) (2) 902 68,759 0.30 Illinois Tool Works 810 68,259 0.30 American Express 752 68,086 0.30 Home Depot 815 66,781 0.30 Danaher 867 66,776 0.30 Bristol-Myers Squibb 1,232 64,902 0.29 ConocoPhillips 908 63,669 0.28 McDonald’s 615 59,477 0.26 Boeing 428 58,375 0.26 PVH 432 58,333 0.26 PepsiCo 696 57,476 0.25 CVS Caremark 800 57,280 0.25 AbbVie 1,060 55,671 0.25 Verizon Communications 1,125 55,226 0.24 Facebook ‘A’ 1,000 54,470 0.24 US Bancorp 1,283 51,833 0.23 Johnson Controls 1,010 51,742 0.23 Celgene 300 50,637 0.22 Parker Hannifin 380 49,066 0.22 Texas Instruments 1,114 49,005 0.22 Biogen Idec 174 48,798 0.22 AT&T 1,380 48,548 0.21 Aflac 720 48,046 0.21 Broadcom ‘A’ 1,607 47,415 0.21 Bank of New York Mellon 1,363 47,296 0.21 Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 31 Morgan Stanley Investment Funds 31 December 2013

Global Equity Allocation Fund

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Equities (continued) to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars. United States of America (continued) Principal Financial Group 478 23,637 0.10 Discovery Communications ‘A’ 262 23,567 0.10 Market % of net Liberty Interactive ‘A’ 800 23,480 0.10 Investments Holdings value assets Starbucks 300 23,448 0.10 Marathon Petroleum 252 22,753 0.10 Equities (continued) Accenture ‘A’ (Ireland) (2) 277 22,753 0.10 ACE (Switzerland) (2) 220 22,752 0.10 United States of America (continued) Yum! Brands 300 22,641 0.10 PNC Financial Services Group 600 46,572 0.21 Mondelez International ‘A’ 639 22,365 0.10 FedEx 324 46,413 0.21 CA 652 21,979 0.10 Mastercard ‘A’ 55 45,849 0.20 Discovery Communications ‘C’ 262 21,867 0.10 Raytheon 496 44,769 0.20 Fiserv 370 21,845 0.10 TJX Companies 700 44,450 0.20 Apache 252 21,617 0.10 McKesson 272 43,876 0.19 Franklin Resources 375 21,551 0.10 EOG Resources 252 42,308 0.19 American Tower 271 21,544 0.10 Simon Property Group 271 41,661 0.18 Ford Motor 1,400 21,462 0.09 Honeywell International 442 40,262 0.18 ConAgra Foods 639 21,426 0.09 Abbott Laboratories 1,023 39,130 0.17 Intuit 277 21,199 0.09 Medtronic 676 38,796 0.17 Invesco (Bermuda) (2) 571 20,893 0.09 Time Warner 555 38,794 0.17 Aetna 306 20,869 0.09 BlackRock 120 38,251 0.17 Ecolab 200 20,816 0.09 Halliburton 753 38,139 0.17 Express Scripts Holding 294 20,706 0.09 Automatic Data Processing 459 37,129 0.16 Becton Dickinson & Co 181 20,008 0.09 Dover 380 36,784 0.16 Computer Sciences 355 19,912 0.09 HCA Holdings 739 35,213 0.16 Molson Coors Brewing vtg ‘B’ 350 19,687 0.09 Lowe’s Cos 700 34,489 0.15 FMC Technologies 377 19,619 0.09 Viacom ‘B’ 393 34,435 0.15 Omnicom Group 262 19,464 0.09 Allstate 622 33,756 0.15 EI du Pont de Nemours & Co. 300 19,371 0.09 Northrop Grumman 294 33,639 0.15 Zoetis 594 19,305 0.09 General Dynamics 351 33,478 0.15 General Mills 386 19,173 0.08 CBS non-vtg ‘B’ 524 33,380 0.15 Jacobs Engineering Group 307 19,092 0.08 Norfolk Southern 348 32,287 0.14 Cincinnati Financial 362 18,936 0.08 Twenty-First Century Fox ‘A’ 917 32,251 0.14 PPG Industries 100 18,891 0.08 Kimberly-Clark 303 31,833 0.14 Baxter International 272 18,869 0.08 Time Warner Cable 231 31,180 0.14 Quanta Services 600 18,810 0.08 Devon Energy 504 31,162 0.14 Cognizant Technology Solutions ‘A’ 185 18,592 0.08 Baker Hughes 564 31,054 0.14 Sherwin-Williams 100 18,365 0.08 Charles Schwab 1,183 30,687 0.14 Pioneer Natural Resources 100 18,290 0.08 eBay 555 30,159 0.13 Comerica 383 18,212 0.08 Ingersoll-Rand (Ireland) (2) 487 29,989 0.13 DIRECTV 262 18,002 0.08 National Oilwell Varco 377 29,791 0.13 Phillips 66 232 17,734 0.08 State Street 400 29,260 0.13 Paccar 299 17,719 0.08 Hewlett-Packard 1,042 29,124 0.13 FirstEnergy 535 17,596 0.08 Weyerhaeuser 920 28,998 0.13 TE Connectivity (Switzerland) (2) 314 17,179 0.08 EMC 1,149 28,943 0.13 Zimmer Holdings 181 16,916 0.07 Caterpillar 306 27,815 0.12 St Jude Medical 272 16,853 0.07 Adobe Systems 463 27,674 0.12 Archer-Daniels-Midland 384 16,762 0.07 Waste Management 612 27,467 0.12 Salesforce.com 302 16,692 0.07 UnitedHealth Group 363 27,210 0.12 Campbell Soup 384 16,658 0.07 Deere & Co 299 27,200 0.12 Laboratory Corp of America Holdings 181 16,639 0.07 Agilent Technologies 474 27,189 0.12 Marsh & McLennan 334 16,172 0.07 CSX 944 27,017 0.12 Spectra Energy 456 16,147 0.07 AON (United Kingdom) (2) 320 26,947 0.12 PPL 535 15,975 0.07 Marathon Oil 759 26,770 0.12 Starwood Hotels & Resorts Worldwide 200 15,928 0.07 Dow Chemical 600 26,754 0.12 KBR 507 15,889 0.07 Freeport-McMoRan Copper & Gold 699 26,415 0.12 Cigna 181 15,718 0.07 Praxair 200 25,998 0.11 Tyco International (Switzerland) (2) 372 15,315 0.07 Anadarko Petroleum 326 25,835 0.11 NRG Energy 535 15,301 0.07 Valero Energy 504 25,155 0.11 Public Storage 100 15,073 0.07 WellPoint 272 25,048 0.11 Cummins 107 15,041 0.07 Walgreen 433 24,941 0.11 Comcast ‘A’ 300 14,940 0.07 Covidien (Ireland) (2) 363 24,746 0.11 GameStop ‘A’ 300 14,826 0.07 L Brands 400 24,740 0.11 International Paper 300 14,748 0.07 Northern Trust 400 24,732 0.11 Exelon 535 14,745 0.07 Fluor 307 24,508 0.11 Progressive 540 14,699 0.06 Travelers 270 24,413 0.11 Life Technologies 190 14,398 0.06 Cardinal Health 363 24,394 0.11 Applied Materials 811 14,249 0.06 Rockwell Automation 205 24,305 0.11 Equity Residential 271 14,162 0.06 Eli Lilly & Co 474 24,207 0.11 Unum Group 400 14,008 0.06 Bed Bath & Beyond 300 24,093 0.11 Motorola Solutions 207 13,993 0.06 CST Brands 656 24,029 0.11 Xilinx 304 13,966 0.06 LyondellBasell Industries ‘A’ (Netherlands) (2) 300 23,985 0.11 Harley-Davidson 200 13,860 0.06 Costco Wholesale 200 23,784 0.11 Stryker 181 13,611 0.06 Yahoo! 591 23,681 0.10 HCP 371 13,549 0.06

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 32

Global Equity Allocation Fund

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Equities (continued) to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars. United States of America (continued) Hospira 190 7,837 0.03 JB Hunt Transport Services 100 7,709 0.03 Market % of net Hudson City Bancorp 812 7,641 0.03 Investments Holdings value assets Green Mountain Coffee Roasters 100 7,547 0.03 ADT 186 7,526 0.03 Equities (continued) Cintas 124 7,377 0.03 CareFusion 181 7,245 0.03 United States of America (continued) Allegion (Ireland) (2) 162 7,188 0.03 Weatherford International (Switzerland) (2) 853 13,170 0.06 Owens-Illinois 200 7,168 0.03 Corning 732 13,088 0.06 Juniper Networks 314 7,115 0.03 NetApp 314 12,993 0.06 Newmont Mining 300 6,870 0.03 New York Community Bancorp 733 12,344 0.05 Chesapeake Energy 252 6,819 0.03 General Motors 300 12,291 0.05 DR Horton 300 6,660 0.03 L-3 Communications Holdings 114 12,182 0.05 ACCO Brands 1,003 6,560 0.03 Vulcan Materials 200 11,918 0.05 CenturyLink 200 6,402 0.03 Kroger 300 11,886 0.05 Staples 400 6,384 0.03 Liberty Global ‘A’ (United Kingdom) (2) 131 11,718 0.05 Joy Global 107 6,254 0.03 Masco 513 11,707 0.05 Dr Pepper Snapple Group 128 6,244 0.03 Monsanto 100 11,627 0.05 Ventas 108 6,233 0.03 Kimco Realty 579 11,528 0.05 Western Union 355 6,141 0.03 Ameriprise Financial 100 11,505 0.05 Ameren 165 5,955 0.03 Kraft Foods Group 212 11,433 0.05 Tractor Supply 76 5,862 0.03 Pentair Regd (Switzerland) (2) 147 11,432 0.05 CH Robinson Worldwide 100 5,834 0.03 EQT 126 11,334 0.05 Citrix Systems 92 5,829 0.03 Air Products & Chemicals 100 11,230 0.05 Celanese ‘A’ 100 5,542 0.02 Cameron International 188 11,171 0.05 Wyndham Worldwide 74 5,484 0.02 Discover Financial Services 200 11,136 0.05 Trimble Navigation 157 5,462 0.02 Liberty Global (United Kingdom) (2) 131 11,106 0.05 Delphi Automotive (Jersey) (2) 89 5,353 0.02 MeadWestvaco 300 11,016 0.05 Health Care REIT 100 5,327 0.02 Hertz Global Holdings 400 11,012 0.05 Sensata Technologies Holding (Netherlands) (2) 136 5,290 0.02 Eaton Vance 255 10,919 0.05 TransDigm Group 33 5,283 0.02 Boston Properties 108 10,914 0.05 Robert Half International 124 5,243 0.02 Nucor 200 10,732 0.05 Murphy Oil 78 5,040 0.02 SPX 107 10,690 0.05 Southwestern Energy 126 4,997 0.02 Range Resources 126 10,670 0.05 Affiliated Managers Group 23 4,981 0.02 Helmerich & Payne 126 10,665 0.05 Plum Creek Timber 100 4,653 0.02 Western Digital 127 10,624 0.05 Kinder Morgan 126 4,569 0.02 Host Hotels & Resorts 541 10,501 0.05 LinkedIn ‘A’ 21 4,506 0.02 Calpine 535 10,432 0.05 UDR 189 4,423 0.02 Xylem 299 10,399 0.05 SL Green Realty 47 4,370 0.02 Ball 200 10,362 0.05 Akamai Technologies 92 4,349 0.02 ProLogis 271 10,087 0.04 American Capital Agency 222 4,282 0.02 Safeway 300 9,810 0.04 Liberty Ventures ‘A’ 35 4,279 0.02 Quest Diagnostics 181 9,805 0.04 Electronic Arts 185 4,274 0.02 Boston Scientific 816 9,727 0.04 Nabors Industries (Bermuda) (2) 252 4,271 0.02 Vornado Realty Trust 108 9,676 0.04 Sprint 400 4,268 0.02 Regeneron Pharmaceuticals 35 9,639 0.04 Hillshire Brands 128 4,257 0.02 Roper Industries 69 9,592 0.04 Alcoa 400 4,256 0.02 Sigma-Aldrich 100 9,397 0.04 American Water Works 100 4,223 0.02 Noble (United Kingdom) (2) 252 9,314 0.04 News ‘A’ 229 4,117 0.02 Clorox 100 9,313 0.04 Iron Mountain 134 4,098 0.02 Murphy USA 219 9,257 0.04 Tenaris (Luxembourg) (2) 186 4,069 0.02 Autodesk 185 9,237 0.04 PulteGroup 200 4,060 0.02 Tiffany & Co 100 9,218 0.04 Lennar ‘A’ 100 3,975 0.02 Pall 107 9,129 0.04 Kinder Morgan Management 52 3,940 0.02 Twenty-First Century Fox 262 9,055 0.04 Equinix 22 3,817 0.02 McCormick & Co non-vtg 131 9,049 0.04 Toll Brothers 100 3,699 0.02 AMETEK 170 8,964 0.04 Hershey 38 3,690 0.02 Sempra Energy 100 8,956 0.04 International Game Technology 200 3,570 0.02 Crown Holdings 200 8,934 0.04 Delta Air Lines 126 3,476 0.02 SanDisk 126 8,917 0.04 Annaly Capital Management 350 3,455 0.02 People’s United Financial 593 8,913 0.04 Avon Products 200 3,448 0.02 Symantec 371 8,733 0.04 Liberty Property Trust 100 3,405 0.02 H&R Block 300 8,703 0.04 Charter Communications ‘A’ 25 3,385 0.01 Equifax 124 8,613 0.04 Ansys 36 3,146 0.01 IntercontinentalExchange Group 38 8,482 0.04 Dick’s Sporting Goods 51 2,970 0.01 Paychex 185 8,445 0.04 United Continental Holdings 69 2,605 0.01 Rockwell Collins 114 8,431 0.04 Li & Fung (Bermuda) (2) 2,000 2,579 0.01 T Rowe Price Group 100 8,384 0.04 Ulta Salon Cosmetics & Fragrance 27 2,535 0.01 Republic Services 248 8,248 0.04 Colgate-Palmolive 38 2,472 0.01 TripAdvisor 100 8,197 0.04 Albemarle 39 2,469 0.01 Eastman Chemical 100 8,068 0.04 Mallinckrodt (Ireland) (2) 47 2,455 0.01 Xerox 648 7,906 0.03 First Republic Bank 37 1,931 0.01

The accompanying notes are an integral part of these financial statements. 33 Morgan Stanley Investment Funds 31 December 2013

Global Equity Allocation Fund

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Equities (continued) to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars. Japan (continued) Asahi Group Holdings 400 11,300 0.05 Kajima 3,000 11,294 0.05 Market % of net Bank of Yokohama 2,000 11,170 0.05 Investments Holdings value assets Hoya 400 11,140 0.05 Tokyo Electron 200 10,980 0.05 Equities (continued) Hankyu Hanshin Holdings 2,000 10,827 0.05 OJI Holdings 2,000 10,274 0.05 United States of America (continued) Shimizu 2,000 10,122 0.04 Rackspace Hosting 42 1,614 0.01 Tobu Railway 2,000 9,722 0.04 Southwest Airlines 85 1,601 0.01 Sumitomo Heavy Industries 2,000 9,226 0.04 News ‘B’ 65 1,159 0.01 Daiichi Sankyo 500 9,164 0.04 Engility Holdings 17 574 0.00 Taisei 2,000 9,112 0.04 NEC 4,000 9,035 0.04 Total for United States of America 50.94 Kawasaki Heavy Industries 2,000 8,406 0.04 Benesse Holdings 200 8,054 0.04 Japan Sumitomo Chemical 2,000 7,854 0.03 Toyota Motor 1,800 110,141 0.49 Taiheiyo Cement 2,000 7,701 0.03 Bridgestone 2,500 94,834 0.42 Yokogawa Electric 500 7,696 0.03 Fanuc 500 91,737 0.41 Ibiden 400 7,495 0.03 Fast Retailing 175 72,388 0.32 Mitsubishi Materials 2,000 7,396 0.03 Murata Manufacturing 600 53,412 0.24 NTT Data 200 7,396 0.03 Softbank 500 43,843 0.20 Trend Micro 200 7,015 0.03 Daiwa House Industry 2,000 38,791 0.18 Mitsui & Co. 500 6,982 0.03 Tokio Marine Holdings 1,100 36,852 0.17 Aeon 500 6,791 0.03 Astellas Pharma 600 35,627 0.16 Citizen Holdings 800 6,756 0.03 Nippon Building Fund 6 34,998 0.15 Shiseido 400 6,447 0.03 Shimano 400 34,426 0.15 Yamaha 400 6,363 0.03 Nippon Steel & Sumitomo Metal 10,000 33,549 0.15 Sumitomo 500 6,295 0.03 Bank of Kyoto 4,000 33,473 0.15 Itochu 500 6,190 0.03 Japan Real Estate Investment 6 32,253 0.14 Japan Retail Fund Investment 3 6,125 0.03 Denso 600 31,738 0.14 Mitsui Chemicals 2,000 4,842 0.02 IHI 7,000 30,290 0.13 Konami 200 4,630 0.02 Toyota Industries 600 27,135 0.12 Teijin 2,000 4,461 0.02 Nippon Telegraph & Telephone 500 26,973 0.12 Toyo Seikan Group Holdings 200 4,306 0.02 Central Japan Railway 225 26,549 0.12 Komatsu 200 4,074 0.02 Japan Tobacco 800 26,077 0.12 Yamato Holdings 200 4,053 0.02 Sumitomo Mitsui Financial Group 500 25,829 0.11 Mitsubishi 200 3,845 0.02 Honda Motor 600 24,762 0.11 Nikon 200 3,830 0.02 Secom 400 24,171 0.11 Kobe Steel 2,000 3,431 0.02 Seven & I Holdings 600 23,904 0.11 Yahoo Japan 600 3,345 0.01 Hachijuni Bank 4,000 23,370 0.10 Sumitomo Electric Industries 200 3,344 0.01 Gunma Bank 4,000 22,379 0.10 Nomura Holdings 400 3,084 0.01 Shizuoka Bank 2,000 21,388 0.09 USS 200 2,753 0.01 NTT DoCoMo 1,300 21,373 0.09 JX Holdings 500 2,578 0.01 Orix 1,210 21,301 0.09 Advantest 200 2,491 0.01 Sumitomo Mitsui Trust Holdings 4,000 21,121 0.09 West Japan Railway 42 1,825 0.01 Toshiba 5,000 21,064 0.09 Mizuho Financial Group 800 1,738 0.01 Chiba Bank 3,000 20,273 0.09 Yamada Denki 200 656 0.00 Daiwa Securities Group 2,000 20,015 0.09 Nomura Research Institute 600 18,957 0.08 Total for Japan 8.34 Daito Trust Construction 200 18,738 0.08 Mitsubishi Heavy Industries 3,000 18,614 0.08 United Kingdom Takeda Pharmaceutical 400 18,395 0.08 HSBC Holdings 9,602 105,239 0.47 Omron 400 17,709 0.08 Vodafone Group 23,874 93,620 0.41 Shin-Etsu Chemical 300 17,556 0.08 Aviva 9,188 68,365 0.30 Nitto Denko 400 16,908 0.07 WPP (Jersey) (2) 2,864 65,395 0.30 Keikyu 2,000 16,527 0.07 Barclays 13,360 60,116 0.27 Itochu Techno-Solutions 400 16,260 0.07 Lloyds Banking Group 44,730 58,379 0.26 East Japan Railway 200 15,974 0.07 Legal & General Group 12,514 46,112 0.20 Kao 500 15,774 0.07 BP 5,384 43,477 0.19 Eisai 400 15,536 0.07 Prudential 1,802 39,953 0.18 NKSJ Holdings 500 13,934 0.06 Royal Dutch Shell ‘A’ 1,072 38,366 0.17 Mitsubishi Chemical Holdings 3,000 13,896 0.06 Aggreko 1,316 37,213 0.16 Credit Saison 500 13,181 0.06 Rio Tinto 652 36,782 0.16 Tokyu 2,000 12,981 0.06 Reckitt Benckiser Group 446 35,370 0.16 Canon 400 12,695 0.06 BHP Billiton 1,094 33,831 0.15 Daikin Industries 200 12,486 0.06 Standard Chartered 1,374 30,919 0.14 JFE Holdings 500 11,923 0.05 Anglo American 1,220 26,646 0.12 Mabuchi Motor 200 11,914 0.05 British American Tobacco 487 26,091 0.12 Nissan Motor 1,400 11,796 0.05 GlaxoSmithKline 941 25,091 0.11 Otsuka Holdings 400 11,590 0.05 BAE Systems 3,267 23,514 0.10 Unicharm 200 11,437 0.05 AstraZeneca 376 22,238 0.10 Obayashi 2,000 11,418 0.05 Imperial Tobacco Group 540 20,890 0.09 FUJIFILM Holdings 400 11,365 0.05

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 34

Global Equity Allocation Fund

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Equities (continued) to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars. Switzerland (continued) Lindt & Spruengli 4 18,052 0.08 Transocean 324 15,797 0.07 Market % of net Sonova Holding Regd 115 15,489 0.07 Investments Holdings value assets Adecco Regd 173 13,709 0.06 Swatch Group ‘Bearer’ 18 11,910 0.05 Equities (continued) Geberit Regd 37 11,233 0.05 SGS Regd 4 9,213 0.04 United Kingdom (continued) Givaudan Regd 6 8,580 0.04 Old Mutual 6,546 20,481 0.09 Swisscom Regd 16 8,457 0.04 Smith & Nephew 1,425 20,301 0.09 Kuehne & Nagel International Regd 62 8,149 0.04 Next 212 19,117 0.08 Schindler Holding ‘PC’ 47 6,926 0.03 Marks & Spencer Group 2,644 18,925 0.08 Syngenta Regd 12 4,784 0.02 Royal Dutch Shell ‘B’ 466 17,580 0.08 Swiss Prime Site Regd 54 4,185 0.02 Diageo 475 15,719 0.07 Unilever 381 15,647 0.07 Total for Switzerland 3.72 Sage Group 2,261 15,103 0.07 BG Group 700 15,028 0.07 Glencore Xstrata (Jersey) (2) 2,641 13,664 0.06 Germany easyJet 532 13,521 0.06 Daimler Regd 782 67,759 0.30 Carnival 307 12,704 0.06 Allianz Regd 372 66,798 0.30 Centrica 1,837 10,568 0.05 Deutsche Bank Regd 1,263 60,330 0.27 Compass Group 637 10,203 0.05 Siemens Regd 418 57,173 0.25 National Grid 753 9,818 0.04 Commerzbank 2,782 44,877 0.20 ARM Holdings 527 9,583 0.04 Deutsche Telekom Regd 2,431 41,626 0.18 Tesco 1,717 9,499 0.04 GEA Group 860 40,991 0.18 TUI Travel 1,324 9,050 0.04 Volkswagen Pfd 125 35,154 0.16 Experian (Jersey) (2) 476 8,774 0.04 Bayerische Motoren Werke 286 33,575 0.15 ICAP 1,089 8,137 0.04 Deutsche Post Regd 807 29,460 0.13 J Sainsbury 1,331 8,038 0.04 Muenchener Rueckversicherungs Regd 123 27,136 0.12 Pearson 350 7,766 0.03 Deutsche Lufthansa Regd 1,190 25,278 0.11 SSE 340 7,707 0.03 SAP 288 24,721 0.11 Johnson Matthey 137 7,435 0.03 ProSiebenSat.1 Media Regd 309 15,324 0.07 Intercontinental Hotels Group 218 7,261 0.03 Metro 306 14,838 0.07 Whitbread 112 6,951 0.03 Porsche Automobil Holding Pfd 125 13,028 0.06 Land Securities Group 434 6,919 0.03 Brenntag 70 12,994 0.06 Kingfisher 1,056 6,722 0.03 Adidas 98 12,506 0.05 Rolls-Royce Holdings 314 6,624 0.03 United Internet Regd 280 11,926 0.05 Cobham 1,407 6,390 0.03 Hannover Rueck 120 10,312 0.04 Capita 371 6,372 0.03 Fraport Frankfurt Airport Services Worldwide 104 7,792 0.03 Wolseley (Jersey) (2) 103 5,837 0.03 OSRAM Licht 38 2,146 0.01 BT Group 923 5,794 0.03 Telefonica Deutschland Holding 238 1,967 0.01 Rexam 595 5,223 0.02 Burberry Group 207 5,192 0.02 Total for Germany 2.91 British Land 493 5,131 0.02 Bunzl 206 4,942 0.02 Australia Petrofac (Jersey) (2) 196 3,969 0.02 BHP Billiton 2,282 77,568 0.34 AMEC 207 3,726 0.02 Commonwealth Bank of Australia 643 44,760 0.20 Intertek Group 68 3,542 0.02 Westpac Banking 1,235 35,780 0.16 Smiths Group 137 3,355 0.01 Australia & New Zealand Banking Group 1,197 34,518 0.15 Aberdeen Asset Management 400 3,309 0.01 National Australia Bank 1,006 31,351 0.14 Tullow Oil 215 3,042 0.01 Woolworths 741 22,443 0.10 Weir Group 84 2,963 0.01 Brambles 2,741 22,440 0.10 Meggitt 339 2,959 0.01 Rio Tinto 308 18,789 0.08 Croda International 71 2,886 0.01 Wesfarmers 373 14,698 0.06 GKN 441 2,724 0.01 CSL 190 11,723 0.05 Severn Trent 84 2,370 0.01 Woodside Petroleum 336 11,695 0.05 Inmarsat 55 688 0.00 Caltex Australia 485 8,701 0.04 Rolls-Royce Holdings Pfd ‘C’ 23,478 39 0.00 Westfield 879 7,936 0.04 Origin Energy 511 6,433 0.03 Total for United Kingdom 6.00 Macquarie Group 129 6,345 0.03 AGL Energy 425 5,715 0.03 Switzerland QBE Insurance Group 486 5,005 0.02 Nestlé Regd 2,233 163,660 0.72 Recall Holdings 548 1,991 0.01 Roche Holding ‘Genusschein’ 438 122,508 0.54 Amcor 193 1,822 0.01 Novartis Regd 1,418 113,318 0.50 Orica 56 1,196 0.01 UBS Regd 2,995 56,877 0.25 Orora 193 200 0.00 ABB Regd 1,994 52,549 0.23 Federation Centres 456 955 0.00 Holcim Regd 681 51,020 0.23 James Hardie Industries (Ireland) (2) 77 892 0.00 Zurich Insurance Group 158 45,842 0.20 Newcrest Mining 97 677 0.00 Credit Suisse Group Regd 1,094 33,485 0.15 Sydney Airport 137 466 0.00 Compagnie Financiere Richemont Regd 278 27,708 0.12 Shopping Centres Australasia Property Group 118 163 0.00 Lonza Group Regd 204 19,371 0.09 Actelion Regd 216 18,267 0.08 Total for Australia 1.65

The accompanying notes are an integral part of these financial statements. 35 Morgan Stanley Investment Funds 31 December 2013

Global Equity Allocation Fund

France Italy BNP Paribas 730 56,968 0.25 ENI 999 24,069 0.11 Renault 440 35,428 0.17 Intesa Sanpaolo 9,118 22,534 0.10 AXA 1,214 33,798 0.16 Assicurazioni Generali 656 15,453 0.06 Sanofi 317 33,677 0.16 UniCredit 1,994 14,778 0.07 Société Générale 483 28,092 0.13 Enel 2,650 11,587 0.05 Cap Gemini 350 23,688 0.10 Telecom Italia 5,238 5,202 0.02 AtoS 233 21,117 0.09 Snam 868 4,862 0.02 LVMH Moet Hennessy Louis Vuitton 114 20,824 0.09 Luxottica Group 70 3,756 0.02 Airbus Group (Netherlands) (2) 159 12,224 0.06 Atlantia 158 3,550 0.02 Compagnie de Saint-Gobain 172 9,472 0.04 Terna Rete Elettrica Nazionale 680 3,402 0.02 Schneider Electric 85 7,424 0.03 Fiat 400 3,276 0.01 Orange 594 7,364 0.03 Prysmian 124 3,196 0.01 Safran 97 6,749 0.03 Unione di Banche Italiane 408 2,774 0.01 Vinci 93 6,114 0.03 Saipem 102 2,186 0.01 Christian Dior 29 5,487 0.02 Legrand 98 5,408 0.02 Total for Italy 0.53 Compagnie Generale des Etablissements Michelin 50 5,321 0.02 Bouygues 111 4,193 0.02 Poland Alstom 85 3,100 0.01 Powszechna Kasa Oszczednosci Bank Polski 1,539 20,135 0.09 Remy Cointreau 13 1,092 0.00 Powszechny Zaklad Ubezpieczen 102 15,198 0.06 Crédit Agricole 84 1,077 0.00 Bank Pekao 229 13,642 0.06 Natixis 96 565 0.00 KGHM Polska Miedz 249 9,751 0.04 Vivendi 10 264 0.00 Jeronimo Martins (Portugal) (2) 457 8,949 0.04 Polski Koncern Naftowy Orlen 608 8,273 0.04 Total for France 1.46 PGE 1,413 7,635 0.03 Bank Zachodni WBK 51 6,561 0.03 Spain Polskie Gornictwo Naftowe i Gazownictwo 3,324 5,681 0.03 Telefonica 5,317 86,685 0.38 Mbank 34 5,642 0.02 Inditex 312 51,490 0.23 Telekomunikacja Polska 1,243 4,043 0.02 Iberdrola 6,447 41,164 0.18 Tauron Polska Energia 2,549 3,697 0.02 International Consolidated Airlines Group 5328 35,471 0.16 Eurocash 177 2,801 0.01 Repsol 1,073 27,079 0.13 Cyfrowy Polsat 230 1,511 0.01 Amadeus IT Holding ‘A’ 389 16,668 0.08 Abertis Infraestructuras 688 15,306 0.07 Total for Poland 0.50 Ferrovial 569 11,025 0.05 Gas Natural 367 9,452 0.04 Netherlands Grifols 170 8,141 0.04 ING Groep ‘CVA’ 1,949 27,117 0.12 Red Electrica 116 7,750 0.03 Koninklijke Boskalis Westminster 242 12,803 0.06 Distribuidora Internacional de Alimentacion 692 6,196 0.03 Randstad Holding 176 11,432 0.04 ACS Actividades de Construccion y Servicios 164 5,653 0.02 Wolters Kluwer 358 10,231 0.04 ENAGAS 205 5,364 0.02 Koninklijke Ahold 380 6,831 0.03 Zardoya Otis 177 3,206 0.01 Ziggo 145 6,632 0.03 Mapfre 738 3,165 0.01 Koninklijke Philips 162 5,946 0.03 Repsol Rights 1,073 733 0.00 Koninklijke KPN 1,761 5,684 0.03 Core Laboratories 27 5,157 0.02 Total for Spain 1.48 ArcelorMittal (Luxembourg) (2) 224 4,002 0.02 Gemalto 35 3,858 0.02 Hong Kong Cheung Kong Holdings 1,000 15,785 0.07 Total for Netherlands 0.44 Hutchison Whampoa 1,000 13,593 0.06 Sun Hung Kai Properties 1,024 12,988 0.06 Denmark Link REIT 2,000 9,698 0.04 Novo Nordisk ‘B’ 215 39,468 0.17 Hong Kong Exchanges & Clearing 500 8,338 0.04 Danske Bank 524 12,038 0.05 Hang Seng Bank 500 8,105 0.04 AP Moeller - Maersk ‘B’ 1 10,868 0.05 Power Assets Holdings 1,000 7,951 0.04 TDC 914 8,879 0.04 CLP Holdings 1,000 7,906 0.03 Carlsberg ‘B’ 66 7,313 0.03 Wharf Holdings 1,000 7,648 0.03 Coloplast ‘B’ 90 5,967 0.03 Hong Kong & China Gas 3,000 6,879 0.03 Novozymes ‘B’ 131 5,538 0.02 Sands China (Cayman Islands) (2) 800 6,536 0.03 DSV 109 3,579 0.02 BOC Hong Kong Holdings 2,000 6,410 0.03 Swire Pacific ‘A’ 500 5,861 0.03 Total for Denmark 0.41 Henderson Land Development 1,000 5,707 0.02 SJM Holdings 1,000 3,353 0.01 Hang Lung Properties 1,000 3,160 0.01

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 36

Global Equity Allocation Fund

Total for Sweden 0.29 Total for Portugal 0.01

Austria Brazil Andritz 293 18,401 0.08 Companhia de Bebidas das Americas Rights 0 0 0.00 Voestalpine 295 14,195 0.06 OMV 296 14,186 0.06 Total for Brazil 0 0.00 Erste Group Bank 285 9,945 0.05 Telekom Austria 840 6,369 0.04 Total for Equities 80.71 IMMOFINANZ 220 1,021 0.00 Vienna Insurance Group 16 798 0.00 Raiffeisen Bank International 9 318 0.00 Mutual Fund

Morgan Stanley Liquidity Funds - US Dollar Total for Austria 0.29 Treasury Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 1,902,195 1,902,195 8.41 Belgium Anheuser-Busch InBev 317 33,738 0.15 Total for Mutual Fund 8.41 Telenet Group Holding 100 5,975 0.03 Belgacom 69 2,044 0.01 Total Investment Securities 20,162,490 89.12 KBC Groep 12 682 0.00

Total for Belgium 0.19

Finland Metso 258 11,025 0.05 UPM-Kymmene 484 8,188 0.03 Elisa 276 7,323 0.03 Kone ‘B’ 138 6,235 0.03 Neste Oil 245 4,850 0.02 Wartsila 85 4,188 0.02

Total for Finland 0.18

China AIA Group (Hong Kong) (2) 5,800 29,097 0.13 Wynn Macau (Cayman Islands) (2) 400 1,813 0.01

Total for China 0.14

The accompanying notes are an integral part of these financial statements. 37 Morgan Stanley Investment Funds 31 December 2013

Global Equity Allocation Fund

DERIVATIVES

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars.

Financial Futures Contracts

Net unrealised gain/(loss) as at Maturity Number of Notional 31 December % of net Description date contracts commitments Counterparty 2013 assets

AMX Index Future 01/2014 1 110,852 Goldman Sachs 5,689 0.03 CAC40 10 Euro Future 01/2014 5 296,072 Goldman Sachs 15,498 0.07 DAX Index Future 03/2014 1 330,804 Goldman Sachs 16,531 0.07 DJ Euro Stoxx 50 Index Future 03/2014 13 556,589 Goldman Sachs 25,933 0.11 FTSE 100 Index Future 03/2014 5 554,084 Goldman Sachs 15,313 0.07 Mexican Bolsa Index Future 03/2014 2 66,243 Goldman Sachs 1,263 0.01 OMX Index Future 01/2014 8 165,992 Goldman Sachs 8,328 0.04 S&P 500 EMINI Future 03/2014 13 1,195,025 Goldman Sachs 34,330 0.15 FTSE MIB Index Future 03/2014 2 262,081 Goldman Sachs 11,709 0.05 S&P/TSX 60 Index Future 03/2014 2 294,255 Goldman Sachs 7,014 0.03 Topix Index Future 03/2014 2 248,285 Goldman Sachs 9,931 0.04 Yen Nikkei 225 Index Future 03/2014 1 77,559 Goldman Sachs 3,407 0.01

Unrealised Gain on Financial Futures Contracts 154,946 0.68

H-Shares Index Future 01/2014 1 69,853 Goldman Sachs (928) 0.00

Unrealised Loss on Financial Futures Contracts (928) 0.00

Net Unrealised Gain on Financial Futures Contracts 4,227,694 154,018 0.68

Cash of USD 183,905 held as collateral by Goldman Sachs in relation to financial futures contracts. Cash of USD 23 paid as collateral to Goldman Sachs in relation to financial futures contracts.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

16/01/2014 145,480 AUD 129,063 USD Commonwealth Bank 990 0.01 16/01/2014 181,717 EUR 249,488 USD Deutsche Bank 835 0.00 16/01/2014 594,822 EUR 816,648 USD State Street 2,747 0.01 16/01/2014 402,918 GBP 654,290 USD State Street 12,321 0.05 16/01/2014 88,329 USD 78,439 CHF Northern Trust 281 0.00 16/01/2014 264,598 USD 27,175,099 JPY UBS 5,577 0.03

Unrealised Gain on Forward Foreign Currency Exchange Contracts 22,751 0.10

16/01/2014 592,641 CAD 558,412 USD Citibank (799) 0.00 16/01/2014 102,152 USD 115,146 AUD Bank of New York (784) 0.00 16/01/2014 52,853 USD 38,498 EUR UBS (179) 0.00 16/01/2014 97,640 USD 59,670 GBP State Street (1,082) (0.01)

Unrealised Loss on Forward Foreign Currency Exchange Contracts (2,844) (0.01)

Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 19,907 0.09

Total Derivatives 173,925 0.77

Other Assets less Liabilities 2,287,560 10.11

Total Net Asset Value 22,623,975 100.00

(2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 38

Global Infrastructure Fund

Investment aim Statement of investments

To seek to provide long-term capital Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. appreciation, measured in US dollars, by As at 31 December 2013, expressed in US dollars. investing primarily in equity securities issued Market % of net Investments Holdings value assets by companies located throughout the world Equities that are engaged in the infrastructure United States of America American Tower 257,580 20,477,610 4.47 business. Williams 458,920 17,613,350 3.85 Crown Castle International 225,790 16,552,665 3.61 Sempra Energy 180,980 16,208,569 3.54 Spectra Energy 450,050 15,936,270 3.48 ITC Holdings 144,322 13,766,875 3.01 Oneok 222,490 13,698,709 2.99 Centerpoint Energy 479,940 11,086,614 2.41 Kinder Morgan 291,126 10,556,229 2.31 SBA Communications ‘A’ 114,885 10,306,333 2.25 PG&E 231,590 9,328,445 2.04 American Water Works 188,786 7,972,433 1.74 Northeast Utilities 180,553 7,633,781 1.67 NiSource 196,020 6,407,894 1.40 Cheniere Energy 113,220 4,858,270 1.06 Enbridge Energy Management 159,654 4,631,563 1.01 SemGroup ‘A’ 50,830 3,298,867 0.72 Atmos Energy 62,230 2,810,307 0.61

Total for United States of America 42.17

Canada TransCanada (1) 801,880 36,770,192 8.03 Enbridge 509,703 22,211,476 4.85

Total for Canada 12.88

United Kingdom National Grid 1,726,533 22,510,965 4.92 Severn Trent 167,876 4,735,938 1.03 Pennon Group 246,230 2,682,809 0.59 United Utilities Group 169,239 1,880,353 0.41

Total for United Kingdom 6.95

Italy Snam 2,443,800 13,688,112 2.99 Atlantia (1) 364,099 8,180,577 1.78 Terna Rete Elettrica Nazionale 700,406 3,504,340 0.77 Societa Iniziative Autostradali e Servizi 46,660 463,758 0.10

Total for Italy 5.64

China Beijing Enterprises Holdings (Hong Kong) (2) 691,500 6,857,837 1.50 China Gas Holdings (Bermuda) (2) 2,098,000 3,084,459 0.68 ENN Energy Holdings (Cayman Islands) (2) 408,000 3,017,604 0.66 Guangdong Investment (Hong Kong) (2) 2,312,000 2,260,090 0.49 China Merchants Holdings International (Hong Kong) (2) 564,498 2,060,238 0.45 Jiangsu Expressway ‘H’ 1,578,000 1,939,405 0.42

Total for China 4.20

France Eutelsat Communications 297,843 9,299,372 2.03 SES (Luxembourg) (2) 270,938 8,782,180 1.92

Total for France 3.95

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 39 Morgan Stanley Investment Funds 31 December 2013

Global Infrastructure Fund

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Mutual Fund to official exchange listing or dealt in on another regulated market. Morgan Stanley Liquidity Funds - US Dollar As at 31 December 2013, expressed in US dollars. Treasury Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 39,214,786 39,214,786 8.56 Market % of net Investments Holdings value assets Total for Mutual Fund 8.56

Equities (continued) Total Investment Securities 462,034,412 100.89

Australia Transurban Group 1,446,360 8,851,754 1.93 Sydney Airport 731,164 2,485,966 0.55 DERIVATIVES Macquarie Atlas Roads 855,674 2,105,416 0.46 Spark Infrastructure Group 849,542 1,235,194 0.27 DUET 692,321 1,238,894 0.27 Over-the-counter (OTC) and exchange traded derivatives APA 122,900 659,781 0.14 as at 31 December 2013, expressed in US dollars.

Total for Australia 3.62 Forward Foreign Currency Exchange Contracts

Germany Unrealised Fraport Frankfurt Airport Services Worldwide 137,317 10,288,543 2.24 Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

Total for Germany 2.24 EUR Hedged Share Class 10/01/2014 76,808,474 EUR 105,616,264 USD J.P. Morgan 191,246 0.04 Spain 10/01/2014 52,191 USD 37,822 EUR J.P. Morgan 90 0.00 Ferrovial 243,432 4,716,588 1.03 Abertis Infraestructuras 107,432 2,390,103 0.52 Unrealised Gain on NAV Hedged Share Classes Red Electrica 32,360 2,162,025 0.47 Forward Foreign Currency Exchange Contracts 191,336 0.04

Total for Spain 2.02 EUR Hedged Share Class 10/01/2014 7,760 EUR 10,703 USD J.P. Morgan (13) 0.00 Brazil 10/01/2014 180,964 USD 131,991 EUR J.P. Morgan (861) 0.00 Cia de Saneamento Basico do Estado de Sao Paulo ADR 747,252 8,331,860 1.82 Unrealised Loss on NAV Hedged Share Classes Companhia de Concessoes Rodoviarias 110,200 828,891 0.18 Forward Foreign Currency Exchange Contracts (874) 0.00

Total for Brazil 2.00 Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 190,462 0.04 Japan Tokyo Gas 1,732,000 8,551,048 1.87 Total Derivatives 190,462 0.04

Total for Japan 1.87 Other Assets less Liabilities (4,256,416) (0.93)

Netherlands Total Net Asset Value 457,968,458 100.00 Koninklijke Vopak (1) 119,264 6,985,752 1.53

Total for Netherlands 1.53 (1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser. Switzerland Flughafen Zuerich Regd 10,188 5,963,278 1.30

Total for Switzerland 1.30

Austria Flughafen Wien 57,129 4,800,616 1.05

Total for Austria 1.05

Luxembourg Intelsat 189,040 4,149,428 0.91

Total for Luxembourg 0.91

Total for Equities 92.33

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 40

Global Opportunity Fund

Investment aim Statement of investments

To seek long-term capital appreciation Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in US dollars through investment As at 31 December 2013, expressed in US dollars. primarily in growth-oriented equity securities Market % of net Investments Holdings value assets on a global basis. The investment process Equities will emphasize a bottom-up stock selection United States of America Amazon.com 18,093 7,139,317 7.04 process, seeking attractive investments Facebook ‘A’ 125,260 6,822,912 6.73 Google ‘A’ 5,393 5,972,046 5.89 on an individual company basis. TAL Education Group ADR (Cayman Islands) (2) 233,042 5,140,673 5.07 Luxoft Holding (British Virgin Islands) (2) 117,927 4,459,999 4.40 Mastercard ‘A’ 3,692 3,077,688 3.03 Priceline.com 2,607 3,017,629 2.98 Visa ‘A’ 12,068 2,672,579 2.64 Cognizant Technology Solutions ‘A’ 26,153 2,628,377 2.59 Twitter 36,990 2,361,072 2.33 Greenlight Capital Re ‘A’ (Cayman Islands) (2) 50,724 1,709,399 1.69 Monsanto 14,487 1,684,404 1.66 Wynn Resorts 8,213 1,588,887 1.57 MSCI 32,366 1,411,805 1.39

Total for United States of America 49.01

China Qihoo 360 Technology ADR (Cayman Islands) (2) 45,767 3,811,018 3.76 New Oriental Education & Technology Group ADR (Cayman Islands) (2) 88,680 2,827,118 2.79 Kweichow Moutai Equity Wts exp. 18/02/2021, issued by Deutsch Bank (Germany) (2) 115,260 2,445,391 2.41 Baidu ADR (Cayman Islands) (2) 13,093 2,320,080 2.29 Autohome ADR (Cayman Islands) (2) 33,930 1,211,640 1.19 Kweichow Moutai Equity linked note, issued by UBS (Switzerland) (2) 54,400 1,153,579 1.14

Total for China 13.58

South Korea NAVER 5,025 3,467,334 3.42 Hotel Shilla 36,434 2,309,136 2.28

Total for South Korea 5.70

India Jubilant Foodworks 130,730 2,685,861 2.65 Adani Ports and Special Economic Zone 764,516 1,918,853 1.89 Nestle India 3,610 308,394 0.31

Total for India 4.85

Denmark DSV 141,763 4,654,920 4.59

Total for Denmark 4.59

United Kingdom Burberry Group 116,645 2,925,892 2.88 Intertek Group 27,888 1,452,597 1.43

Total for United Kingdom 4.31

Canada Brookfield Asset Management vtg ‘A’ 41,366 1,607,483 1.58 Brookfield Infrastructure Partners (Bermuda) (2) 40,674 1,591,614 1.57

Total for Canada 3.15

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 41 Morgan Stanley Investment Funds 31 December 2013

Global Opportunity Fund

Statement of investments (continued) DERIVATIVES

Transferable securities and money market instruments admitted Over-the-counter (OTC) and exchange traded derivatives to official exchange listing or dealt in on another regulated market. as at 31 December 2013, expressed in US dollars. As at 31 December 2013, expressed in US dollars. Options Contracts

Market % of net Investments Holdings value assets Market Number of value % of net Security Description Expiration Contracts Ccy Counterparty (USD) assets Equities (continued)

FXO CNY/USD Call Option, South Africa Strike Price 6.50 12/12/2014 1,056,677 USD Royal Bank of Scotland 1,830 0.00 Naspers ‘N’ 30,486 3,173,392 3.13 FXO CNY/USD Call Option, Strike Price 6.50 15/12/2014 13,202,097 USD Royal Bank of Scotland 23,199 0.02 Total for South Africa 3.13 FXO CNY/USD Call Option, Strike Price 6.50 17/12/2014 15,037,792 USD Royal Bank of Scotland 26,685 0.03 Brazil CETIP - Mercados Organizados 251,682 2,578,076 2.54 Total Options Contracts at Market Value 51,714 0.05

Total for Brazil 2.54 Forward Foreign Currency Exchange Contracts

Hong Kong Unrealised Louis XIII Holdings (Bermuda) (2) 1,808,800 1,821,840 1.80 Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

Total for Hong Kong 1.80 EUR Hedged Share Class 10/01/2014 7,029,611 EUR 9,665,849 USD J.P. Morgan 17,790 0.02 Japan Calbee 59,000 1,436,761 1.42 Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 17,790 0.02 Total for Japan 1.42

EUR Hedged Share Class Belgium 10/01/2014 161,686 EUR 223,064 USD J.P. Morgan (333) 0.00 Anheuser-Busch InBev 12,982 1,381,678 1.36

Unrealised Loss on NAV Hedged Share Classes Total for Belgium 1.36 Forward Foreign Currency Exchange Contracts (333) 0.00

Switzerland Net Unrealised Gain Kuehne & Nagel International Regd 10,435 1,371,485 1.35 on Forward Foreign Currency Exchange Contracts 17,457 0.02

Total for Switzerland 1.35 Total Derivatives 69,171 0.07

Italy Other Assets less Liabilities (3,359,694) (3.32) Prada 138,500 1,232,445 1.23 Total Net Asset Value 101,386,869 100.00 Total for Italy 1.23

Total for Equities 98.02 (2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser. Mutual Fund

Morgan Stanley Liquidity Funds - US Dollar Treasury Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 5,304,018 5,304,018 5.23

Total for Mutual Fund 5.23

Total Investment Securities 104,677,392 103.25

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 42

Global Property Fund

Investment aim Statement of investments

To seek to provide current income and Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. long-term capital appreciation, measured in As at 31 December 2013, expressed in US dollars.

US dollars, primarily through investment in Market % of net Investments Holdings value assets the equity securities of companies in the real Equities estate industry located throughout the world. United States of America Simon Property Group 258,646 39,761,650 4.01 Equity Residential 525,926 27,484,893 2.77 Vornado Realty Trust 213,364 19,115,281 1.93 Host Hotels & Resorts 970,524 18,837,871 1.90 AvalonBay Communities 146,197 17,368,204 1.75 Public Storage 103,063 15,534,686 1.56 General Growth Properties 587,965 11,882,773 1.20 Boston Properties 117,262 11,850,498 1.19 HCP 293,424 10,715,844 1.08 Regency Centers 223,366 10,384,285 1.05 Macerich 158,059 9,380,802 0.95 Camden Property Trust 157,673 9,145,034 0.92 Ventas 147,620 8,519,150 0.86 Starwood Hotels & Resorts Worldwide 103,604 8,251,023 0.83 ProLogis 218,030 8,115,077 0.82 Senior Housing Properties Trust 187,835 4,203,747 0.42 Forest City Enterprises ‘A’ 218,996 4,171,874 0.42 Taubman Centers 62,325 4,013,730 0.40 Mack-Cali Realty 165,945 3,635,855 0.37 Equity Lifestyle Properties 81,964 2,976,932 0.30 National Retail Properties 94,680 2,876,378 0.29 DCT Industrial Trust 394,050 2,813,517 0.28 Alexandria Real Estate Equities 42,310 2,710,379 0.27 DDR 169,490 2,615,231 0.26 Federal Realty Investment Trust 25,367 2,575,258 0.26 Healthcare Realty Trust 110,474 2,365,248 0.24 Brookfield Office Properties (Canada) (2) 115,092 2,221,276 0.22 Duke Realty 131,980 1,987,619 0.20 Cousins Properties 173,787 1,786,530 0.18 Health Care REIT 31,270 1,665,753 0.17 American Campus Communities 47,080 1,541,870 0.16 Hudson Pacific Properties 58,310 1,287,485 0.13 Liberty Property Trust 27,330 930,586 0.09 Ashford Hospitality Trust 110,770 918,283 0.09 BRE Properties 14,049 772,554 0.08 CBL & Associates Properties 41,340 746,600 0.08 PS Business Parks 7,402 567,067 0.06 Acadia Realty Trust 17,046 426,150 0.04 Ashford Hospitality Prime 22,154 402,981 0.04 Realty Income 9,170 344,517 0.03 Rexford Industrial Realty 25,020 332,015 0.03 Sovran Self Storage 4,571 297,435 0.03 American Homes 4 Rent ‘A’ 15,710 254,973 0.03 Essex Property Trust 1,765 254,354 0.03 Retail Opportunity Investments 13,481 201,271 0.02 Post Properties 3,250 147,940 0.01 Winthrop Realty Trust 2,659 29,435 0.00

Total for United States of America 28.05

United Kingdom Land Securities Group 1,838,648 29,311,857 2.95 British Land 2,605,459 27,116,143 2.73 Hammerson 2,294,430 19,057,747 1.92 Derwent London 221,822 9,157,316 0.92 Intu Properties 1,730,653 8,874,106 0.89 LXB Retail Properties (Jersey) (2) 3,772,783 7,982,529 0.81 Safestore Holdings 2,761,482 7,356,328 0.74 Great Portland Estates 721,948 7,155,266 0.72 Shaftesbury 431,085 4,472,223 0.45 Capital & Counties Properties 768,099 4,183,792 0.42 Segro 646,629 3,573,507 0.36 Unite Group 532,452 3,546,886 0.36 Quintain Estates & Development 2,029,642 3,173,542 0.32 Grainger 932,528 3,144,554 0.32

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 43 Morgan Stanley Investment Funds 31 December 2013

Global Property Fund

Total for Japan 14.07 Switzerland PSP Swiss Property Regd 172,603 14,626,388 1.47 Swiss Prime Site Regd 69,764 5,406,757 0.55 Hong Kong Mobimo Holding Regd 7,714 1,611,268 0.16 Sun Hung Kai Properties 2,967,514 37,638,798 3.79 Hongkong Land Holdings (Bermuda) (2) 2,646,000 15,611,400 1.57 Total for Switzerland 2.18 Link REIT 2,946,476 14,287,602 1.44 Wharf Holdings 1,605,777 12,280,287 1.24 Hysan Development 2,076,808 8,945,640 0.90 Sweden New World Development 5,317,965 6,714,239 0.68 Hufvudstaden ‘A’ 674,653 9,033,401 0.91 Swire Properties 1,479,350 3,739,346 0.38 Castellum 205,205 3,192,549 0.32 Kerry Properties (Bermuda) (2) 1,002,411 3,477,497 0.35 Atrium Ljungberg ‘B’ 230,718 3,155,584 0.32 Sino Land 2,188,531 2,991,763 0.30 Fabege 137,928 1,646,377 0.17 Henderson Land Development 520,248 2,968,878 0.30 Hang Lung Properties 844,189 2,667,315 0.27 Total for Sweden 1.72

Total for Hong Kong 11.22 China China Resources Land (Cayman Islands) (2) 2,479,000 6,144,669 0.62 France Country Garden Holdings (Cayman Islands) (2) 2,861,990 1,727,359 0.17 Unibail-Rodamco 188,193 48,284,780 4.86 China Overseas Land & Investment (Hong Kong) (2) 502,000 1,411,331 0.14 ICADE 99,440 9,269,745 0.93 Shimao Property Holdings (Cayman Islands) (2) 370,500 851,461 0.09 Foncière des Regions 68,086 5,885,482 0.59 Guangzhou R&F Properties ‘H’ 556,800 814,293 0.08 Klepierre 118,807 5,513,014 0.56 Agile Property Holdings (Cayman Islands) (2) 662,000 709,460 0.07 Mercialys 238,683 5,014,202 0.51 Longfor Properties (Cayman Islands) (2) 397,000 554,994 0.06 Gecina 29,992 3,967,554 0.40 Altarea 5,663 998,544 0.10 Total for China 1.23

Total for France 7.95 Canada RioCan Real Estate Investment Trust 246,011 5,726,086 0.58 Australia Boardwalk Real Estate Investment Trust 36,144 2,020,020 0.20 Westfield 2,199,999 19,861,428 2.00 First Capital Realty 79,400 1,311,526 0.13 Goodman Group 2,009,212 8,503,226 0.85 Brookfield Canada Office Properties 47,530 1,167,135 0.12 Westfield Retail Trust 2,934,137 7,797,110 0.79 Crombie Real Estate Investment Trust 48,490 622,966 0.06 GPT Group 2,007,309 6,106,466 0.61 Calloway Real Estate Investment Trust 15,747 368,153 0.04 Stockland 1,785,036 5,765,686 0.58 Canadian Apartment Properties REIT 9,584 189,338 0.02 Mirvac Group 3,304,964 4,967,900 0.50 Extendicare 28,140 180,894 0.02 Federation Centres 1,783,663 3,734,440 0.38 Dexus Property 3,695,403 3,322,957 0.33 Total for Canada 1.17 Commonwealth Property Office Fund 2,363,291 2,632,591 0.27 CFS Retail Property Trust 1,117,024 1,943,922 0.20 Investa Office Fund 195,613 547,821 0.06

Total for Australia 6.57

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 44

Global Property Fund

Statement of investments (continued) Other transferable securities and money market instruments not admitted to official exchange listing or dealt in on another Transferable securities and money market instruments admitted regulated market. As at 31 December 2013, expressed in US dollars. to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars. Market % of net Investments Holdings value assets Market % of net Investments Holdings value assets Equities Equities (continued) Malta BGP Holdings (Australia) (2) (6) 3,475,560 0 0.00 Netherlands Corio 146,603 6,578,665 0.66 Total for Malta 0.00 Eurocommercial Properties ‘CVA’ 107,876 4,585,971 0.46 Wereldhave 47,197 3,717,005 0.38 Total for Equities 0.00 Vastned Retail 26,964 1,225,212 0.12 Total other transferable securities and money market Total for Netherlands 1.62 instruments not admitted to official exchange listing or dealt in on another regulated market 0 0.00

Finland Total Investment Securities 983,091,807 99.04 Sponda 891,729 4,201,163 0.42

Total for Finland 0.42 DERIVATIVES Norway Norwegian Property 3,445,376 4,123,346 0.42 Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars. Total for Norway 0.42 Forward Foreign Currency Exchange Contracts Italy Beni Stabili 5,440,765 3,672,540 0.37 Unrealised Maturity Amount Amount gain/(loss) % of net Total for Italy 0.37 date bought Ccy sold Ccy Counterparty USD assets

Austria EUR Hedged Share Class Atrium European Real Estate (Jersey) (2) 614,034 3,535,731 0.36 10/01/2014 7,266,817 EUR 9,991,166 USD J.P. Morgan 19,237 0.00 10/01/2014 156,551 USD 113,504 EUR J.P. Morgan 193 0.00 Total for Austria 0.36 Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 19,430 0.00 Brazil BR Malls Participaçoes 193,400 1,395,754 0.14 BR Properties 168,600 1,327,390 0.12 EUR Hedged Share Class Iguatemi Empresa de Shopping Centers 84,800 800,440 0.08 10/01/2014 34,418 EUR 47,494 USD J.P. Morgan (82) 0.00 10/01/2014 10,727 USD 7,845 EUR J.P. Morgan (80) 0.00 Total for Brazil 0.34 Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (162) 0.00 Belgium Cofinimmo 7,891 975,612 0.10 Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 19,268 0.00 Total for Belgium 0.10 Total Derivatives 19,268 0.00 Total for Equities 97.75 Other Assets less Liabilities 9,482,133 0.96 Mutual Fund Total Net Asset Value 992,593,208 100.00 Morgan Stanley Liquidity Funds - US Dollar Treasury Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 12,806,338 12,806,338 1.29 (2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser. Total for Mutual Fund 1.29 (6) This security is illiquid.

Total transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market 983,091,807 99.04

The accompanying notes are an integral part of these financial statements. 45 Morgan Stanley Investment Funds 31 December 2013

Global Quality Fund*

Investment aim Statement of investments

To seek an attractive long-term rate of return, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in US dollars, through investment As at 31 December 2013, expressed in US dollars. principally in equity securities of companies in Market % of net Investments Holdings value assets the world’s developed countries. The strategy Equities will invest in a concentrated portfolio of high United States of America 3M 144,999 20,318,710 3.77 quality businesses with strong managements Johnson & Johnson 219,364 20,095,936 3.73 Accenture ‘A’ (Ireland) (2) 208,941 17,162,414 3.18 that can sustain high cross-cycle returns on Danaher 217,960 16,787,279 3.11 Philip Morris International 188,629 16,354,134 3.03 capital. Mondelez International ‘A’ 421,435 14,750,225 2.74 Google ‘A’ 12,319 13,641,691 2.53 Nielsen Holdings (Netherlands) (2) 253,802 11,692,658 2.17 Visa ‘A’ 50,627 11,211,855 2.08 * Fund commenced operations on 1 August 2013. Microsoft 272,373 10,167,684 1.89 AON (United Kingdom) (2) 100,273 8,443,989 1.57 Nike ‘B’ 106,649 8,380,478 1.54 McDonald’s 80,227 7,758,753 1.44 Procter & Gamble 85,341 6,952,731 1.29 Moody’s 82,120 6,452,168 1.20 Covidien (Ireland) (2) 91,265 6,221,535 1.15 Time Warner 81,896 5,724,530 1.06 Coach 100,701 5,662,417 1.05 Intuit 57,548 4,404,148 0.82 Mead Johnson Nutrition 31,371 2,610,381 0.48

Total for United States of America 39.83

United Kingdom Unilever 805,266 33,069,997 6.12 British American Tobacco 572,874 30,692,269 5.69 Reckitt Benckiser Group 344,090 27,288,050 5.06 Diageo 691,966 22,898,539 4.25 Aggreko 418,686 11,839,232 2.20 Weir Group 273,492 9,647,723 1.79 Imperial Tobacco Group 224,069 8,668,008 1.61 Prudential 382,039 8,470,431 1.57 Experian (Jersey) (2) 191,818 3,535,636 0.66 Smiths Group 117,191 2,869,784 0.53

Total for United Kingdom 29.48

Switzerland Nestlé Regd 478,851 35,095,818 6.51 Novartis Regd 330,940 26,446,673 4.90 Roche Holding ‘Genusschein’ 62,076 17,362,552 3.22

Total for Switzerland 14.63

Germany SAP 256,002 21,974,127 4.07 Bayer Regd 87,009 12,219,739 2.27 BASF 49,114 5,242,778 0.97

Total for Germany 7.31

France Sanofi 251,133 26,679,723 4.95 LVMH Moet Hennessy Louis Vuitton 33,081 6,042,723 1.12 Pernod-Ricard 28,989 3,306,943 0.62

Total for France 6.69

Total for Equities 97.94

Total Investment Securities 528,144,461 97.94

Global Quality Fund

DERIVATIVES

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

EUR Hedged Share Class 10/01/2014 13,012,823 EUR 17,880,971 USD J.P. Morgan 44,843 0.01

Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 44,843 0.01

EUR Hedged Share Class 10/01/2014 647,569 EUR 893,552 USD J.P. Morgan (1,494) 0.00

SGD Hedged Share Class 10/01/2014 12,358 SGD 9,826 USD J.P. Morgan (43) 0.00

Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (1,537) 0.00

Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 43,306 0.01

Total Derivatives 43,306 0.01

Other Assets less Liabilities 11,070,044 2.05

Total Net Asset Value 539,257,811 100.00

(2) The country in brackets represents the country of incorporation of this security.

The accompanying notes are an integral part of these financial statements. 47 Morgan Stanley Investment Funds 31 December 2013

Indian Equity Fund

Investment aim Statement of investments

To seek long-term capital appreciation, The investments listed are those of the Subsidiary.* measured in US dollars, by investment Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. directly (subject to the Fund’s obtaining As at 31 December 2013, expressed in US dollars. applicable regulatory approval as the case Market % of net may be) or through Morgan Stanley Investments Holdings value assets IT Services Investment Holding Company (Mauritius) Infosys 199,220 11,215,557 9.74 Cognizant Technology Solutions ‘A’ 81,828 8,223,714 7.14 Limited (the “Subsidiary”), primarily in the Tata Consultancy Services 202,023 7,087,201 6.15 equity securities of companies domiciled Total for IT Services 23.03 or exercising the predominant part of their Commercial Banks HDFC Bank (3) 621,132 6,814,079 5.92 ING Vysya Bank (3) 268,245 2,669,078 2.32 economic activity in India. IndusInd Bank 295,745 2,009,528 1.74 ICICI Bank 81,647 1,448,916 1.26

* Please refer to Significant Accounting Policies note 2(k). Total for Commercial Banks 11.24

Pharmaceuticals Glenmark Pharmaceuticals 686,110 5,915,850 5.14 Ipca Laboratories (3) 326,398 3,868,969 3.36

Total for Pharmaceuticals 8.50

Media Zee Entertainment Enterprises 1,168,398 5,219,719 4.54 D.B. 621,866 2,961,936 2.57

Total for Media 7.11

Thrifts & Mortgage Finance Housing Development Finance 458,764 5,888,021 5.11

Total for Thrifts & Mortgage Finance 5.11

Wireless Telecommunication Services Idea Cellular 1,538,190 4,146,393 3.60 Bharti Airtel 310,364 1,655,459 1.44

Total for Wireless Telecommunication Services 5.04

Oil, Gas & Consumable Fuels Reliance Industries 292,205 4,224,855 3.67 Bharat Petroleum 241,471 1,356,824 1.18

Total for Oil, Gas & Consumable Fuels 4.85

Personal Products Emami 569,659 4,361,574 3.79

Total for Personal Products 3.79

Automobiles Hero MotoCorp 124,197 4,162,901 3.62

Total for Automobiles 3.62

Indian Equity Fund

Statement of investments (continued) Market % of net Investments Holdings value assets The investments listed are those of the Subsidiary. Chemicals Berger Paints India 388,442 1,407,840 1.22 Transferable securities and money market instruments admitted Total for Chemicals 1.22 to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars. Auto Components Bosch 8,396 1,365,294 1.19 Market % of net Investments Holdings value assets Total for Auto Components 1.19 Tobacco ITC 749,999 3,898,687 3.39 Electrical Equipment Amara Raja Batteries 165,000 895,421 0.78 Total for Tobacco 3.39 Total for Electrical Equipment 0.78

Machinery Eicher Motors 43,655 3,508,370 3.05 Construction & Engineering Larsen & Toubro 51,549 891,065 0.77 Total for Machinery 3.05 Total for Construction & Engineering 0.77

Metals & Mining Total Investment Securities 113,229,890 98.34 Tata Steel 444,302 3,044,059 2.64 Other Assets less Liabilities 1,913,066 1.66 Total for Metals & Mining 2.64 Total Net Asset Value 115,142,956 100.00 Construction Materials Shree Cement 21,275 1,492,050 1.30 ACC 73,465 1,315,583 1.14 (3) These securities are valued at their fair value. See note 2(a) within the Notes to the Financial Statements. Total for Construction Materials 2.44

Real Estate Management & Development Sobha Developers 538,466 2,714,724 2.36

Total for Real Estate Management & Development 2.36

Consumer Finance Cholamandalam Investment and Finance 598,896 2,363,083 2.05

Total for Consumer Finance 2.05

Transportation Infrastructure Gujarat Pipavav Port 2,305,714 2,353,567 2.04

Total for Transportation Infrastructure 2.04

Food Products McLeod Russel India 316,940 1,646,255 1.43

Total for Food Products 1.43

Hotels, Restaurants & Leisure Mahindra Holidays & Resorts India 273,191 1,145,227 0.99 Speciality Restaurants 216,276 446,245 0.39

Total for Hotels, Restaurants & Leisure 1.38

Industry Power Producers & Energy Traders NTPC 683,255 1,511,846 1.31

Total for Industry Power Producers & Energy Traders 1.31

The accompanying notes are an integral part of these financial statements. 49 Morgan Stanley Investment Funds 31 December 2013

Japanese Equity Fund

Investment aim Statement of investments

Commercial Banks Sumitomo Mitsui Financial Group 161,940 877,715 5.40 Sumitomo Mitsui Trust Holdings 1,423,180 788,442 4.85 Mizuho Financial Group 2,886,640 658,154 4.05

Total for Commercial Banks 14.30

Insurance Dai-ichi Life Insurance 382,683 672,374 4.14 T&D Holdings 450,730 662,122 4.07

Total for Insurance 8.21

Capital Markets Daiwa Securities Group 700,600 735,630 4.53 Nomura Holdings 659,780 533,762 3.28

Total for Capital Markets 7.81

Real Estate Management & Development Mitsubishi Estate 208,600 656,047 4.03 Mitsui Fudosan 142,000 537,470 3.31

Total for Real Estate Management & Development 7.34

Marine Mitsui OSK Lines 1,267,400 600,748 3.70 Nippon Yusen 1,066,800 358,445 2.20

Total for Marine 5.90

Auto Components Yokohama Rubber 380,000 392,540 2.41 Toyota Industries 79,720 378,271 2.33

Total for Auto Components 4.74

Electric Utilities Kyushu Electric Power 350,000 469,700 2.89 Hokkaido Electric Power 232,200 280,730 1.73

Total for Electric Utilities 4.62

Machinery Sumitomo Heavy Industries 790,000 382,360 2.35 NSK 138,000 180,504 1.11 Amada 95,000 88,065 0.54

Total for Machinery 4.00

Specialty Retail K’s Holdings 176,500 536,560 3.30

Total for Specialty Retail 3.30

Japanese Equity Fund

Statement of investments (continued) Market value % of net Investments Holdings (JPY000’s) assets Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. Household Durables Sekisui House 110,600 162,582 1.00 As at 31 December 2013, expressed in Yen. Total for Household Durables 1.00 Market value % of net Investments Holdings (JPY000’s) assets Building Materials Daikin Industries 12,360 80,958 0.50 Diversified Telecommunication Services Nippon Telegraph & Telephone 94,400 534,304 3.29 Total for Building Materials 0.50

Total for Diversified Telecommunication Services 3.29 Total Investment Securities 15,864,857 97.58

Electronic Equipment, Instruments & Components Hitachi 490,000 390,040 2.40 DERIVATIVES

Total for Electronic Equipment, Instruments & Components 2.40 Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in Yen. Airlines Japan Airlines 57,700 299,463 1.84 ANA Holdings 337,000 70,770 0.43 Forward Foreign Currency Exchange Contracts

Total for Airlines 2.27 Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty (JPY000’s) assets

Software Nintendo 23,200 325,032 2.00 EUR Hedged Share Class 10/01/2014 453,285 EUR 64,094,444 JPY J.P. Morgan 1,420 0.01 Total for Software 2.00 USD Hedged Share Class 10/01/2014 311,069 USD 31,937,851 JPY J.P. Morgan 700 0.00 Road & Rail East Japan Railway 37,900 317,602 1.95 Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 2,120 0.01 Total for Road & Rail 1.95

USD Hedged Share Class Metals & Mining 10/01/2014 2,168,674 JPY 20,780 USD J.P. Morgan (12) 0.00 Nippon Steel & Sumitomo Metal 702,200 247,174 1.52 10/01/2014 17,104 USD 1,798,633 JPY J.P. Morgan (4) 0.00

Total for Metals & Mining 1.52 Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (16) 0.00 Chemicals JSR 45,600 92,842 0.57 Net Unrealised Gain Teijin 333,000 77,922 0.48 on Forward Foreign Currency Exchange Contracts 2,104 0.01 Toyobo 388,000 75,272 0.46 Total Derivatives 2,104 0.01 Total for Chemicals 1.51 Other Assets less Liabilities 391,665 2.41 Wireless Telecommunication Services NTT DoCoMo 139,400 240,465 1.48 Total Net Asset Value 16,258,626 100.00

Total for Wireless Telecommunication Services 1.48

Semiconductors & Semiconductor Equipment Tokyo Electron 20,480 117,965 0.72 Disco 13,200 92,136 0.57

Total for Semiconductors & Semiconductor Equipment 1.29

Electrical Equipment Sumitomo Electric Industries 106,300 186,450 1.15

Total for Electrical Equipment 1.15

Media Fuji Media Holdings 76,496 164,466 1.01

Total for Media 1.01

The accompanying notes are an integral part of these financial statements. 51 Morgan Stanley Investment Funds 31 December 2013

Latin American Equity Fund

Investment aim Statement of investments

Brazil Itau Unibanco Holding Pfd 2,631,987 34,926,050 6.19 BRF 1,496,250 31,191,667 5.53 AMBEV ADR 3,693,185 26,664,796 4.73 Petroleo Brasileiro Pfd 3,230,201 23,353,157 4.14 Banco Bradesco Pfd 1,541,855 18,985,211 3.36 Ultrapar Participacoes 743,880 17,616,968 3.12 Banco Bradesco ADR Pfd 1,147,608 14,368,052 2.55 Petroleo Brasileiro 1,919,432 12,991,203 2.30 Vale Pfd ‘A’ 933,525 12,933,026 2.29 Companhia de Concessoes Rodoviarias 1,677,714 12,619,250 2.24 Vale 538,356 8,137,436 1.44 Mills Estruturas e Servicos de Engenharia 534,306 7,463,322 1.32 Vale ADR Pfd 474,332 6,612,188 1.17 BR Malls Participaçoes 839,638 6,059,610 1.07 Petroleo Brasileiro ADR 440,964 6,054,436 1.07 Petroleo Brasileiro ADR 379,267 5,552,469 0.98 Raia Drogasil 885,831 5,541,834 0.98 Iochpe-Maxion 482,661 5,342,470 0.95 Gerdau Pfd 646,136 5,015,930 0.90 AMBEV 671,675 4,924,195 0.87 Vale ADR 308,219 4,694,175 0.83 Gerdau ADR 579,085 4,499,490 0.80 Grupo BTG Pactual Pfd ‘A’ 384,605 4,450,836 0.79 Itau Unibanco Holding ADR Pfd 235,075 3,173,512 0.56

Total for Brazil 50.18

Mexico Cemex ADR 2,115,007 24,809,032 4.40 Grupo Financiero Banorte ‘O’ 3,325,375 23,114,899 4.10 Alfa ‘A’ 7,637,375 22,003,074 3.90 America Movil ‘L’ ADR 883,892 20,727,267 3.67 Fomento Economico Mexicano ADR 206,704 20,163,975 3.57 Wal-Mart de Mexico ‘V’ 5,241,436 13,728,764 2.43 Mexichem 2,842,076 12,002,462 2.13 Grupo Financiero Santander Mexico ‘B’ ADR 711,509 9,648,062 1.71 Promotora y Operadora de Infraestructura 669,915 8,094,240 1.43 Banregio Grupo Financiero (1) 1,216,823 7,308,294 1.30 El Puerto de Liverpool 463,973 5,330,444 0.94 Concentradora Fibra Hotelera Mexicana 2,608,846 4,096,378 0.73

Total for Mexico 30.31

Chile SACI Falabella 1,593,670 14,290,271 2.53 CorpBanca 595,011,314 8,207,443 1.45 CFR Pharmaceuticals 18,560,226 4,166,870 0.74 Parque Arauco 1,324,352 2,432,439 0.43 Sociedad Matriz SAAM 26,692,493 2,413,802 0.43

Total for Chile 5.58

Colombia Grupo de Inversiones Suramericana Pfd 601,500 10,898,974 1.94 Cemex Latam Holdings (Spain) (2) 1,252,876 9,605,058 1.70 Pacific Rubiales Energy (Canada) (2) 303,457 5,325,627 0.95 Grupo de Inversiones Suramericana 104,303 1,820,778 0.32

Total for Colombia 4.91

Peru Credicorp (Bermuda) (2) 153,806 20,190,114 3.57 Grana y Montero ADR 188,645 4,038,889 0.72

Please refer to the full prospectus for the Fund’s investment objective and policy. Total for Peru 4.29 The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 52

Latin American Equity Fund

Statement of investments (continued)

Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars.

Market % of net Investments Holdings value assets Equities (continued)

Panama Copa Holdings ‘A’ 147,210 23,549,184 4.18

Total for Panama 4.18

Total for Equities 99.45

Mutual Fund

Morgan Stanley Liquidity Funds - US Dollar Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 5,413,723 5,413,723 0.96

Total for Mututal Fund 0.96

Total for transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market 566,551,346 100.41

Other transferable securities and money market instruments not admitted to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars.

Equities

Brazil Lojas Arapua Pfd (7) 58,205,100 0 0.00 Banco Nacional Pfd (7) 2,698,000 0 0.00

Total for Brazil 0.00

Total for Equities 0.00

Total for other transferable securities and money market instruments not admitted to official exchange listing or dealt in on another regulated market 0 0.00

Total Investment Securities 566,551,346 100.41

Other Assets less Liabilities (2,289,025) (0.41)

Total Net Asset Value 564,262,321 100.00

(1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser. (7) This security is delisted.

The accompanying notes are an integral part of these financial statements. 53 Morgan Stanley Investment Funds 31 December 2013

US Advantage Fund

Investment aim Statement of investments

To seek long-term capital appreciation, measured Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. in US dollars, by investing primarily in securities As at 31 December 2013, expressed in US dollars. issued by US companies and on ancillary Market % of net Investments Holdings value assets basis in securities issued by companies Equities that are not from the US. Internet Software & Services Facebook ‘A’ 6,450,089 351,336,348 8.06 Google ‘A’ 292,330 323,717,472 7.42 Twitter (1) 1,866,448 119,135,376 2.73 eBay 1,037,881 56,398,454 1.29

Total for Internet Software & Services 19.50

IT Services Mastercard ‘A’ 204,170 170,198,154 3.90 Visa ‘A’ 694,458 153,794,669 3.53 Cognizant Technology Solutions ‘A’ 437,443 43,963,022 1.00

Total for IT Services 8.43

Internet & Catalog Retail Amazon.com 879,594 347,078,996 7.96

Total for Internet & Catalog Retail 7.96

Food Products Mead Johnson Nutrition 1,924,488 160,136,646 3.68 Nestlé ADR (Switzerland) (2) 1,368,480 100,761,867 2.31 McCormick & Co non-vtg 1,208,791 83,503,282 1.92

Total for Food Products 7.91

Textiles, Apparel & Luxury Goods Christian Dior (France) (2) 742,946 140,571,224 3.22 Carter’s 797,846 57,261,407 1.31 Burberry Group (United Kingdom) (2) 1,923,686 48,253,232 1.11 Moncler (Italy) (1) (2) 2,024,757 44,069,742 1.01

Total for Textiles, Apparel & Luxury Goods 6.65

Insurance Progressive 5,098,039 138,768,622 3.18 Berkshire Hathaway ‘B’ 787,026 92,837,587 2.13 Arch Capital Group (Bermuda) (2) 972,362 57,874,986 1.33

Total for Insurance 6.64

Hotels, Restaurants & Leisure Starbucks 1,795,253 140,316,974 3.22 Dunkin’ Brands Group 1,281,923 61,711,773 1.41 Panera Bread ‘A’ 318,577 56,518,746 1.30

Total for Hotels, Restaurants & Leisure 5.93

Beverages Dr Pepper Snapple Group 2,042,101 99,613,687 2.29 PepsiCo 1,026,661 84,781,665 1.94 Monster Beverage 712,477 48,013,825 1.10

Total for Beverages 5.33

US Advantage Fund

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Mutual Fund to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars. Morgan Stanley Liquidity Funds - US Dollar Treasury Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 298,386,249 298,386,249 6.85 Market % of net Investments Holdings value assets Total for Mutual Fund 6.85 Equities (continued) Total Investment Securities 4,436,094,492 101.74

Pharmaceuticals Valeant Pharmaceuticals International (Canada) (2) 888,811 103,742,020 2.38 Abbott Laboratories 2,695,485 103,102,301 2.36 DERIVATIVES

Total for Pharmaceuticals 4.74 OTC and exchange traded derivatives as at 31 December 2013, expressed in US dollars. Diversified Financial Services Eurazeo (France) (2) 836,516 65,660,957 1.51 Options Contracts McGraw Hill Financial 820,888 64,472,544 1.48 MSCI 1,406,349 61,344,943 1.41 Market Number of value % of net Total for Diversified Financial Services 4.40 Security Description Expiration Contracts Ccy Counterparty (USD) assets

Computers & Peripherals FXO CNY/USD Call Option, Apple 231,219 129,242,172 2.96 Strike Price 6.50 12/12/2014 46,730,960 USD Royal Bank of Scotland 80,941 0.00 FXO CNY/USD Call Option, Total for Computers & Peripherals 2.96 Strike Price 6.50 15/12/2014 580,349,564 USD Royal Bank of Scotland 1,019,771 0.02 FXO CNY/USD Call Option, Strike Price 6.50 17/12/2014 658,365,987 USD Royal Bank of Scotland 1,168,293 0.03 Professional Services Verisk Analytics ‘A’ 971,160 64,213,099 1.47 Total Options Contracts at Market Value 2,269,005 0.05 Intertek Group (United Kingdom) (2) 1,197,771 62,388,068 1.43

Total for Professional Services 2.90 Forward Foreign Currency Exchange Contracts

Communications Equipment Unrealised Maturity Amount Amount gain/(loss) % of net Motorola Solutions (1) 1,844,943 124,718,147 2.86 date bought Ccy sold Ccy Counterparty USD assets

Total for Communications Equipment 2.86 EUR Hedged Share Class 10/01/2014 658,054,798 EUR 904,690,698 USD J.P. Morgan 1,812,656 0.04 Life Sciences Tools & Services Thermo Fisher Scientific 990,595 109,648,961 2.52 Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 1,812,656 0.04 Total for Life Sciences Tools & Services 2.52

EUR Hedged Share Class Commercial Services & Supplies 10/01/2014 842,307 EUR 1,161,968 USD J.P. Morgan (1,648) 0.00 Edenred (France) (2) 3,226,647 108,144,411 2.48 10/01/2014 2,210,908 USD 1,609,562 EUR J.P. Morgan (6,345) 0.00

Total for Commercial Services & Supplies 2.48 Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (7,993) 0,00 Multiline Retail Dollar Tree 1,661,611 93,964,102 2.16 Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 1,804,663 0.04 Total for Multiline Retail 2.16 Total Derivatives 4,073,668 0.09

Media Other Assets less Liabilities (79,679,823) (1.83) Naspers ‘N’ (South Africa) (2) 638,357 66,448,762 1.52 Total Net Asset Value 4,360,488,337 100.00 Total for Media 1.52

Total for Equities 94.89 (1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser.

The accompanying notes are an integral part of these financial statements. 55 Morgan Stanley Investment Funds 31 December 2013

US Growth Fund

Investment aim Statement of investments

To seek long-term capital appreciation, measured Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. in US dollars, by investing primarily in securities As at 31 December 2013, expressed in US dollars. issued by US companies and on ancillary Market % of net Investments Holdings value assets basis in securities issued by companies Equities that are not from the US. Computer Services Software & Systems Facebook ‘A’ 2,344,283 127,693,095 7.89 Google ‘A’ 106,774 118,238,324 7.31 Salesforce.com 872,794 48,239,324 2.98 Twitter (1) 692,647 44,211,658 2.73 LinkedIn ‘A’ 101,457 21,767,599 1.34 Workday ‘A’ 175,728 14,534,463 0.90 Baidu ADR (Cayman Islands) (2) 47,354 8,391,129 0.52 Qihoo 360 Technology ADR (Cayman Islands) (2) 91,817 7,645,602 0.47

Total for Computer Services Software & Systems 24.14

Diversified Retail Amazon.com 325,438 128,414,580 7.93 Priceline.com 53,028 61,380,440 3.80 Groupon 3,001,085 34,512,478 2.13 Netflix 42,234 15,516,772 0.96

Total for Diversified Retail 14.82

Consumer Lending Mastercard ‘A’ 71,769 59,827,356 3.70 Visa ‘A’ 244,181 54,076,324 3.34

Total for Consumer Lending 7.04

Pharmaceuticals Valeant Pharmaceuticals International (Canada) (2) 401,510 46,864,247 2.90 Mead Johnson Nutrition 502,623 41,823,260 2.58

Total for Pharmaceuticals 5.48

Computer Technology Apple 78,683 43,980,650 2.72 Yandex ‘A’ (Netherlands) (2) 385,010 16,459,178 1.02

Total for Computer Technology 3.74

Biotechnology Illumina 515,333 56,629,943 3.50

Total for Biotechnology 3.50

Insurance Property-Casualty Progressive 1,268,051 34,516,348 2.13 Arch Capital Group (Bermuda) (2) 310,900 18,504,768 1.15

Total for Insurance Property-Casualty 3.28

Communications Technology Motorola Solutions 693,924 46,909,262 2.90

Total for Communications Technology 2.90

Diversified Media Naspers ‘N’ (South Africa) (2) 230,299 23,972,610 1.48 McGraw Hill Financial 287,611 22,588,968 1.40

Total for Diversified Media 2.88

US Growth Fund

Market % of net Total for Cable Television Services 0.91 Investments Holdings value assets Equities (continued) Alternative Energy Range Resources 171,390 14,513,305 0.90 Financial Data & Systems Verisk Analytics ‘A’ 347,749 22,993,164 1.42 Total for Alternative Energy 0.90 MSCI 502,893 21,936,193 1.36 Beverage: Soft Drinks Total for Financial Data & Systems 2.78 Green Mountain Coffee Roasters (1) 183,348 13,837,274 0.86

Medical Equipment Total for Beverage: Soft Drinks 0.86 Intuitive Surgical 104,800 39,742,256 2.46 Healthcare Total for Medical Equipment 2.46 athenahealth 68,145 9,100,083 0.56

Recreational Vehicles & Boats Total for Healthcare 0.56 Edenred (France) (2) 1,181,274 39,591,620 2.45 Entertainment Total for Recreational Vehicles & Boats 2.45 Liberty Media ‘A’ 45,357 6,644,347 0.40

Chemicals - Diversified Total for Entertainment 0.40 Monsanto 323,587 37,623,461 2.32 Radio & TV Broadcasters Total for Chemicals - Diversified 2.32 Sirius XM Holdings 1,685,817 5,950,934 0.36

Textiles, Apparel & Shoes Total for Radio & TV Broadcasters 0.36 Christian Dior (France) (2) 190,032 35,955,548 2.22 Total for Equities 93.57 Total for Textiles, Apparel & Shoes 2.22 Mutual Fund Restaurants Starbucks 450,839 35,237,576 2.18 Morgan Stanley Liquidity Funds - US Dollar Treasury Liquidity Fund MS Reserve USD Dist. Total for Restaurants 2.18 (Luxembourg) (2) (4) 123,414,765 123,414,765 7.62

Total for Mutual Fund 7.62 Semiconductors & Components ARM Holdings ADR (United Kingdom) (2) 311,013 17,080,834 1.06 First Solar 236,657 13,141,563 0.81 Total Investment Securities 1,637,701,479 101.19

Total for Semiconductors & Components 1.87

Automobiles Tesla Motors (1) 196,548 29,828,125 1.84

Total for Automobiles 1.84

Asset Management & Custodian BlackRock 70,803 22,569,164 1.39

Total for Asset Management & Custodian 1.39

Commercial Services Intertek Group (United Kingdom) (2) 427,543 22,269,350 1.38

Total for Commercial Services 1.38

Insurance: Multi-Line American International Group 288,684 14,803,716 0.91

Total for Insurance: Multi-Line 0.91

The accompanying notes are an integral part of these financial statements. 57 Morgan Stanley Investment Funds 31 December 2013

US Growth Fund

DERIVATIVES

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars.

Options Contracts

Market Number of value % of net Security Description Expiration Contracts Ccy Counterparty (USD) assets

FXO CNY/USD Call Option, Strike Price 6.50 12/12/2014 16,837,549 USD Royal Bank of Scotland 29,164 0.00 FXO CNY/USD Call Option, Strike Price 6.50 15/12/2014 210,238,307 USD Royal Bank of Scotland 369,424 0.02 FXO CNY/USD Call Option, Strike Price 6.50 17/12/2014 239,404,145 USD Royal Bank of Scotland 424,831 0.03

Total Options Contracts at Market Value 823,419 0.05

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

EUR Hedged Share Class 10/01/2014 256,391,449 EUR 352,450,755 USD J.P. Morgan 741,273 0.05

Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 741,273 0.05

EUR Hedged Share Class 10/01/2014 1,649,474 EUR 2,275,830 USD J.P. Morgan (3,597) 0.00

Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (3,597) 0.00

Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 737,676 0.05

Total Derivatives 1,561,095 0.10

Other Assets less Liabilities (20,925,378) (1.29)

Total Net Asset Value 1,618,337,196 100.00

(1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 58

US Property Fund

Investment aim Statement of investments

Regional Malls Simon Property Group 301,163 46,297,788 9.89 General Growth Properties 1,733,971 35,043,554 7.48 Macerich 358,811 21,295,433 4.55 Taubman Centers 82,965 5,342,946 1.14 CBL & Associates Properties 54,540 984,992 0.21

Total for Regional Malls 23.27

Apartments Equity Residential 882,844 46,137,428 9.85 AvalonBay Communities 193,855 23,029,974 4.92 Camden Property Trust 179,998 10,439,884 2.23 American Campus Communities 86,170 2,822,068 0.60 Essex Property Trust 12,220 1,761,024 0.38 Post Properties 3,080 140,202 0.03

Total for Apartments 18.01

Health Care HCP 604,708 22,083,936 4.71 Ventas 213,160 12,301,464 2.63 Senior Housing Properties Trust 397,512 8,896,319 1.90 Healthcare Realty Trust 314,210 6,727,236 1.44 Health Care REIT 56,000 2,983,120 0.64

Total for Health Care 11.32

Lodging/Resorts Host Hotels & Resorts 1,632,077 31,678,615 6.77 Starwood Hotels & Resorts Worldwide 170,563 13,583,637 2.90 Ashford Hospitality Trust 202,760 1,680,880 0.36 Ashford Hospitality Prime 40,552 737,641 0.15

Total for Lodging/Resorts 10.18

Office Boston Properties 194,123 19,618,070 4.19 Mack-Cali Realty 403,002 8,829,774 1.89 Alexandria Real Estate Equities 93,800 6,008,828 1.28 Hudson Pacific Properties 163,760 3,615,821 0.77 Brookfield Office Properties (Canada) (2) 102,290 1,974,197 0.42

Total for Office 8.55

Diversified Vornado Realty Trust 311,221 27,882,289 5.95 Forest City Enterprises ‘A’ 323,385 6,160,484 1.32 Cousins Properties 343,961 3,535,919 0.75 Winthrop Realty Trust 66,341 734,395 0.16 American Homes 4 Rent ‘A’ 3,251 52,764 0.01 Lexington Realty Trust 2,310 23,793 0.01

Total for Diversified 8.20

Shopping Centers Regency Centers 407,539 18,946,488 4.04 Federal Realty Investment Trust 54,375 5,520,150 1.18 DDR 269,200 4,153,756 0.89 Acadia Realty Trust 35,114 877,850 0.19

Total for Shopping Centers 6.30

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 59 Morgan Stanley Investment Funds 31 December 2013

US Property Fund

Statement of investments (continued)

Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in US dollars.

Market % of net Investments Holdings value assets Equities (continued)

Self Storage Public Storage 152,385 22,968,991 4.91

Total for Self Storage 4.91

Industrial ProLogis 325,827 12,127,281 2.59 DCT Industrial Trust 906,460 6,472,124 1.38 Rexford Industrial Realty 56,940 755,594 0.16

Total for Industrial 4.13

Mixed Industrial/Office Duke Realty 237,470 3,576,298 0.76 PS Business Parks 29,810 2,283,744 0.49 Liberty Property Trust 55,340 1,884,327 0.40

Total for Mixed Industrial/Office 1.65

Manufactured Home Equity Lifestyle Properties 182,198 6,617,431 1.41

Total for Manufactured Home 1.41

Free Standing National Retail Properties 89,090 2,706,554 0.58

Total for Free Standing 0.58

Real Estate Investment Trusts (REITs) Cole Real Estate Investment 62,011 865,054 0.19

Total for Real Estate Investment Trusts (REITs) 0.19

Total for Equities 98.70

Mutual Fund

Morgan Stanley Liquidity Funds - US Dollar Treasury Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 4,628,444 4,628,444 0.99

Total for Mutual Fund 0.99

Total Investment Securities 466,788,561 99.69

Other Assets less Liabilities 1,457,581 0.31

Total Net Asset Value 468,246,142 100.00

(2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 60

Emerging Markets Corporate Debt Fund

Investment aim Statement of investments

To seek to maximize total return, measured Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. in US dollars, primarily through investments As at 31 December 2013, expressed in US dollars. across the credit spectrum of debt securities Nominal in US dollars Market % of net of corporate issuers, together with investing Investments unless specified value assets in debt securities of government and Bonds Mexico government related issuers located in Offshore Drilling Holding sr secured RegS 8.375% /2020 (Luxembourg) (1) (2) 5,000,000 5,350,000 1.45 emerging markets. The Fund intends to invest Cemex sr secured Ser144A priv plmt 7.25% /2021 5,000,000 5,187,500 1.41 its assets in emerging market corporate debt Cemex sr secured RegS 9.5% /2018 4,406,000 5,009,754 1.36 BBVA Bancomer subord RegS 6.5% /2021 4,500,000 4,770,000 1.29 securities that provide a high level of current Sigma Alimentos co gtd RegS 5.625% /2018 3,500,000 3,788,750 1.03 Tenedora Nemak sr unsecur RegS 5.5% /2023 3,520,000 3,458,400 0.94 Mexichem sr unsecur RegS 4.875% /2022 3,000,000 2,947,500 0.80 income, while at the same time holding Mexico Generadora de Energia sr secured RegS 5.5% /2032 3,000,000 2,872,500 0.78 the potential for capital appreciation. Alpek sr unsecur RegS 4.5% /2022 3,000,000 2,857,500 0.78 Metalsa co gtd RegS 4.9% /2023 3,000,000 2,737,500 0.74 Axtel sr secured RegS step cpn 7% /2020 2,500,000 2,337,500 0.63 Banco Santander Mexico Institucion de Banca Multiple Grupo Financiero Santand jr subord Ser144A priv plmt 5.95% /2024 (5) 1,070,000 1,083,375 0.29 Mexichem co gtd RegS 6.75% /2042 370,000 351,500 0.10

Total for Mexico 11.60

United Arab Emirates Dubai Electricity & Water Authority sr unsecur RegS 7.375% /2020 4,250,000 4,976,070 1.35 MAF Global Securities co gtd SerEMTN 5.25% /2019 (Cayman Islands) (2) 4,500,000 4,741,875 1.29 Ruwais Power sr secured RegS 6% /2036 4,500,000 4,725,373 1.28 MAF Global Securities co gtd 7.125% perpetual (Cayman Islands) (2) (5) 3,643,000 3,707,518 1.01 Axis Bank sr unsecur RegS 5.125% /2017 (India) (2) 3,500,000 3,650,493 0.99 DP World sr unsecur RegS 6.85% /2037 3,530,000 3,520,416 0.94 Dolphin Energy sr secured RegS 5.5% /2021 3,000,000 3,285,000 0.89 Sukuk Funding No 3 sr unsecur 4.348% /2018 (Cayman Islands) (2) 3,000,000 3,049,695 0.83 Emirate of Dubai Government International Bonds sr unsecur SerEMTN 7.75% /2020 2,500,000 2,981,250 0.81 Jafz Sukuk co gtd 7% /2019 (Cayman Islands) (2) 2,500,000 2,862,500 0.78 Emaar Sukuk sr unsecur SerEMTN 6.4% /2019 (Cayman Islands) (1) (2) 2,500,000 2,737,500 0.74

Total for United Arab Emirates 10.91

Russia Metalloinvest Finance local govt gtd RegS 5.625% /2020 (Ireland) (2) 4,500,000 4,387,500 1.19 EDC Finance co gtd RegS 4.875% /2020 (Ireland) (2) 4,200,000 4,089,750 1.11 MTS International Funding sr unsecur RegS 5% /2023 (Ireland) (1) (2) 4,000,000 3,780,000 1.03 TMK Via TMK Capital sr unsecur Ser144A priv plmt 6.75% /2020 (Luxembourg) (2) 3,500,000 3,377,500 0.92 Nord Gold co gtd RegS 6.375% /2018 (Netherlands) (1) (2) 3,500,000 3,325,000 0.90 Gazprom Neft Via GPN Capital sr unsecur RegS 6% /2023 (Luxembourg) (2) 3,000,000 3,060,000 0.83 Credit Bank of Moscow Via CBOM Finance subord Ser144A priv plmt 8.7% /2018 (Ireland) (2) 3,000,000 2,827,500 0.77 Lukoil International Finance co gtd Ser144A priv plmt 4.563% /2023 (Netherlands) (2) 3,000,000 2,827,500 0.77 Sberbank of Russia Via SB Capital subord RegS 5.25% /2023 (Luxembourg) (2) 3,000,000 2,808,900 0.76 Severstal Via Steel Capital sr unsecur RegS 4.45% /2018 (Luxembourg) (2) 2,000,000 1,987,500 0.54 Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 61 Morgan Stanley Investment Funds 31 December 2013

Emerging Markets Corporate Debt Fund

As at 31 December 2013, expressed in US dollars. China (continued) Country Garden Holdings co gtd RegS Nominal in 7.25% /2021 (Cayman Islands) (1) (2) 1,700,000 1,691,500 0.46 US dollars Market % of net KWG Property Holding co gtd RegS Investments unless specified value assets 8.625% /2020 (Cayman Islands) (1) (2) 1,500,000 1,491,818 0.40 MIE Holdings co gtd RegS 9.75% /2016 Bonds (continued) (Cayman Islands) (2) 1,000,000 1,064,865 0.29 MIE Holdings co gtd SerEMTN 6.875% /2018 Russia (continued) (Cayman Islands) (1) (2) 550,000 548,089 0.15 OJSC Novolipetsk Steel via Steel Funding sr unsecur RegS 4.95% /2019 (Ireland) (2) 1,800,000 1,786,500 0.47 Total for China 8.37 Sberbank of Russia Via SB Capital sr unsecur SerEMTN 5.4% /2017 (Luxembourg) (2) 1,500,000 1,616,250 0.44 TMK Via TMK Capital sr unsecur RegS Colombia 6.75% /2020 (Luxembourg) (2) 1,500,000 1,447,500 0.39 Pacific Rubiales Energy co gtd Ser144A priv plmt Credit Bank of Moscow Via CBOM Finance 5.375% /2019 (Canada) (2) 3,530,000 3,574,125 0.97 subord RegS 8.7% /2018 (Ireland) (2) 1,500,000 1,413,750 0.38 Ecopetrol sr unsecur 5.875% /2023 3,250,000 3,436,875 0.93 Lukoil International Finance co gtd RegS Pacific Rubiales Energy co gtd RegS 4.563% /2023 (Netherlands) (2) 1,500,000 1,413,750 0.38 5.125% /2023 (Canada) (2) 3,700,000 3,431,750 0.93 Banco Davivienda subord RegS Total for Russia 10.88 5.875% /2022 (1) 3,500,000 3,386,250 0.92 Millicom International Cellular sr unsecur RegS 4.75% /2020 (Luxembourg) (2) 2,500,000 2,412,500 0.66 Brazil Empresa de Energia de Bogota sr unsecur RegS JBS Finance II co gtd RegS 8.25% /2018 6.125% /2021 2,000,000 2,140,000 0.58 (Cayman Islands) (1) (2) 4,500,000 4,754,542 1.29 Millicom International Cellular sr unsecur RegS QGOG Constellation co gtd RegS 6.25% /2019 6.625% /2021 (Luxembourg) (2) 2,000,000 2,079,000 0.56 (Luxembourg) (2) 4,000,000 3,810,000 1.04 Bancolombia subord nts 5.125% /2022 2,100,000 1,979,124 0.54 Schahin II Finance Co sr secured RegS Banco Davivienda sr unsecur RegS 2.95% /2018 2,000,000 1,935,000 0.52 5.875% /2022 (Cayman Islands) (1) (2) 3,640,400 3,491,872 0.95 Banco de Bogota sr unsecur RegS 5% /2017 1,661,000 1,760,660 0.48 Odebrecht Finance co gtd RegS 5.125% /2022 (Cayman Islands) (2) 3,500,000 3,434,375 0.93 Total for Colombia 7.09 Cosan Luxembourg co gtd RegS 5% /2023 (Luxembourg) (2) 3,900,000 3,398,070 0.92 JBS Investments co gtd RegS 7.75% /2020 South Korea (Austria) (2) 2,200,000 2,222,000 0.60 Korea Western Power sr unsecur RegS Odebrecht Offshore Drilling Finance sr secured 2.875% /2018 5,000,000 4,988,915 1.35 RegS 6.75% /2022 (Cayman Islands) (2) 2,067,660 2,121,419 0.58 SK Broadband sr unsecur RegS 2.875% /2018 4,000,000 3,942,028 1.07 Odebrecht Offshore Drilling Finance sr secured Korea East-West Power sr unsecur RegS Ser144A priv plmt 6.75% /2022 2.625% /2018 4,000,000 3,936,812 1.07 (Cayman Islands) (2) 1,919,970 1,969,889 0.54 GS Caltex unsecur RegS 3.25% /2018 3,500,000 3,522,246 0.96 Virgolino de Oliveira Finance co gtd RegS NongHyup Bank sr unsecur RegS 2.625% /2018 2,450,000 2,435,912 0.66 10.5% /2018 (Cayman Islands) (1) (2) 2,725,000 1,893,875 0.51 BRF sr unsecur Ser144A priv plmt 3.95% /2023 2,000,000 1,735,000 0.47 Total for South Korea 5.11 BRF sr unsecur RegS 3.95% /2023 1,500,000 1,301,250 0.35 Virgolino de Oliveira Finance co gtd RegS Chile 11.75% /2022 (Cayman Islands) (1) (2) 1,500,000 1,042,500 0.28 SACI Falabella sr unsecur RegS 3.75% /2023 (1) 3,800,000 3,452,487 0.94 CFR International co gtd RegS 5.125% /2022 3,500,000 3,233,947 0.88 Total for Brazil 8.46 GeoPark Latin America Agencia en Chile sr secured RegS 7.5% /2020 (Bermuda) (2) 2,900,000 2,950,750 0.80 China Inversiones CMPC unsecur RegS 4.375% /2023 3,000,000 2,817,057 0.76 Yingde Gases Investment co gtd RegS ENTEL Chile sr unsecur RegS 4.875% /2024 (1) 2,050,000 2,012,653 0.54 8.125% /2018 (British Virgin Islands) (2) 4,000,000 4,170,000 1.13 Inversiones CMPC co gtd RegS 4.5% /2022 1,500,000 1,434,734 0.39 Shimao Property Holdings co gtd 6.625% /2020 (Cayman Islands) (2) 4,000,000 3,909,380 1.06 Total for Chile 4.31 Sunac China Holdings co gtd 9.375% /2018 (Cayman Islands) (2) 3,000,000 3,097,455 0.84 Peru Country Garden Holdings co gtd RegS Corp Lindley sr unsecur RegS 4.625% /2023 5,000,000 4,625,000 1.26 11.125% /2018 (Cayman Islands) (2) 2,245,000 2,512,582 0.68 Ajecorp co gtd RegS 6.5% /2022 Haitong International Finance Holdings sr unsecur (Netherlands) (2) 3,700,000 3,681,500 1.00 3.95% /2018 (British Virgin Islands) (2) 2,500,000 2,491,517 0.68 Ferreycorp co gtd RegS 4.875% /2020 3,900,000 3,666,000 0.99 Sound Global sr unsecur 11.875% /2017 Banco de Credito del Peru sr subord RegS (Singapore) (2) 2,000,000 2,179,146 0.59 6.125% /2027 (5) 2,500,000 2,506,437 0.68 Kaisa Group Holdings co gtd RegS Corporacion Azucarera del Peru co gtd RegS 10.25% /2020 (Cayman Islands) (2) 2,000,000 2,067,460 0.56 6.375% /2022 900,000 805,500 0.22 Yuzhou Properties co gtd 8.75% /2018 (Cayman Islands) (2) 2,000,000 2,059,060 0.56 Total for Peru 4.15 Texhong Textile Group co gtd RegS 7.625% /2016 (Cayman Islands) (2) 1,700,000 1,808,086 0.49 KWG Property Holding co gtd 13.25% /2017 (Cayman Islands) (2) 1,500,000 1,762,290 0.48

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 62

Emerging Markets Corporate Debt Fund

Turkey Total for Thailand 1.60 Turkiye Is Bankasi subord Ser144A priv plmt 7.85% /2023 4,500,000 4,495,950 1.22 Yapi ve Kredi Bankasi sr unsecur RegS Kazakhstan 5.25% /2018 3,500,000 3,408,300 0.92 Zhaikmunai co gtd RegS 7.125% /2019 (1) 5,000,000 5,237,500 1.42 Turkiye Is Bankasi sr unsecur Ser144A priv plmt 3.75% /2018 2,300,000 2,162,000 0.59 Total for Kazakhstan 1.42 KOC Holding sr unsecur RegS 3.5% /2020 2,000,000 1,714,680 0.47 Guatemala Total for Turkey 3.20 Central American Bottling co gtd Ser144A priv plmt 6.75% /2022 (British Virgin Islands) (2) 2,500,000 2,562,500 0.69 Hong Kong Central American Bottling co gtd RegS Metropolitan Light International co gtd SerEMTN 6.75% /2022 (British Virgin Islands) (2) 2,000,000 2,050,000 0.56 5.25% /2018 (Cayman Islands) (2) 4,500,000 4,539,847 1.23 Cheung Kong Infrastructure Holdings subord Total for Guatemala 1.25 7% perpetual (Bermuda) (2) 4,000,000 4,020,000 1.09 China CITIC Bank International subord SerEMTN Singapore 3.875% /2022 (1) (5) 3,000,000 2,919,330 0.79 Global A&T Electronics sr secured Ser144A priv plmt 10% /2019 (Cayman Islands) (2) 3,000,000 2,602,500 0.70 Total for Hong Kong 3.11 Global A&T Electronics sr secured RegS 10% /2019 (Cayman Islands) (1) (2) 1,950,000 1,691,625 0.46 India ICICI Bank jr subord RegS 6.375% /2022 (1) (5) 4,000,000 3,867,600 1.05 Total for Singapore 1.16 Bharti Airtel International co gtd RegS 5.125% /2023 (Netherlands) (1) (2) 3,864,000 3,587,338 0.97 Jamaica Vedanta Resources sr unsecur RegS Digicel sr unsecur Ser144A priv plmt 9.5% /2018 (United Kingdom) (2) 1,540,000 1,715,167 0.47 6% /2021 (Bermuda) (2) 4,300,000 4,149,500 1.13 Vedanta Resources sr unsecur Ser144A priv plmt 6% /2019 (United Kingdom) (2) 1,750,000 1,701,875 0.46 Total for Jamaica 1.13

Total for India 2.95 Macau Studio City Finance co gtd RegS 8.5% /2020 Philippines (British Virgin Islands) (1) (2) 2,800,000 3,114,384 0.85 Petron subord RegS 7.5% perpetual (5) 3,000,000 2,969,160 0.81 Studio City Finance co gtd Ser144A priv plmt San Miguel sr unsecur SerEMTN 4.875% /2023 3,500,000 2,888,988 0.78 8.5% /2020 (British Virgin Islands) (2) 513,000 569,430 0.15 JGSH Philippines co gtd RegS 4.375% /2023 (British Virgin Islands) (2) 3,000,000 2,761,650 0.75 Total for Macau 1.00 Alliance Global Group co gtd 6.5% /2017 (Cayman Islands) (2) 1,500,000 1,592,588 0.43 Nigeria Total for Philippines 2.77 FBN Finance subord RegS 8.25% /2020 (Netherlands) (2) (5) 2,000,000 2,070,000 0.56

Indonesia Total for Nigeria 0.56 Listrindo Capital co gtd RegS 6.95% /2019 (Netherlands) (2) 2,040,000 2,136,900 0.58 PT Bank Rakyat Indonesia Persero sr unsecur Venezuela RegS 2.95% /2018 2,000,000 1,880,000 0.51 Petroleos de Venezuela co gtd RegS 8.5% /2017 2,250,000 1,869,750 0.51 Star Energy Geothermal Wayang Windu sr secured RegS 6.125% /2020 (British Virgin Islands) (2) 2,000,000 1,865,000 0.50 Total for Venezuela 0.51 Alam Synergy co gtd RegS 6.95% /2020 (Singapore) (2) 1,917,000 1,720,508 0.47 Total for Bonds 95.57

Total for Indonesia 2.06 Mutual Fund

Qatar Morgan Stanley Liquidity Funds - US Dollar Ooredoo Tamweel sr unsecur 3.039% /2018 Liquidity Fund MS Reserve USD Dist. (Cayman Islands) (2) 7,275,000 7,245,616 1.97 (Luxembourg) (2) (4) 10,487,839 10,487,839 2.84

Total for Qatar 1.97 Total for Mutual Fund 2.84

Total Investment Securities 362,824,999 98.41

The accompanying notes are an integral part of these financial statements. 63 Morgan Stanley Investment Funds 31 December 2013

Emerging Markets Corporate Debt Fund

DERIVATIVES

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

EUR Hedged Share Class 10/01/2014 88,237,309 EUR 121,332,477 USD J.P. Morgan 218,824 0.06

Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 218,824 0.06

EUR Hedged Share Class 10/01/2014 201,823 EUR 278,369 USD J.P. Morgan (348) 0.00 10/01/2014 2,539,671 USD 1,854,061 EUR J.P. Morgan (14,390) 0.00

Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (14,738) 0.00

Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 204,086 0.06

Total Derivatives 204,086 0.06

Other Assets less Liabilities 5,631,256 1.53

Total Net Asset Value 368,660,341 100.00

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 64

Emerging Markets Debt Fund

Investment aim Statement of investments

Mexico Petroleos Mexicanos co gtd 5.5% /2021 12,640,000 13,651,200 2.70 Petroleos Mexicanos co gtd 4.875% /2022 12,820,000 13,204,600 2.61 Pemex Project Funding Master Trust co gtd 6.625% /2035 (United States of America) (2) 10,121,000 10,728,260 2.12 Mexican Bonos SerM 20 7.5% /2027 (MXN) 121,000,000 9,921,676 1.96 Pemex Project Funding Master Trust co gtd 6.625% /2038 (United States of America) (2) 7,969,000 8,247,915 1.63 Cemex sr secured RegS 9.5% /2018 4,421,000 5,026,810 0.99 Mexichem sr unsecur RegS 4.875% /2022 4,000,000 3,930,000 0.78 Tenedora Nemak sr unsecur RegS 5.5% /2023 3,690,000 3,625,425 0.71 Cemex sr secured Ser144A priv plmt 7.25% /2021 3,430,000 3,558,625 0.70 Cemex sr secured Ser144A priv plmt 6.5% /2019 1,740,000 1,805,249 0.36 Petroleos Mexicanos co gtd 3.5% /2023 1,750,000 1,607,813 0.32 Pemex Project Funding Master Trust co gtd 8.625% /2023 (United States of America) (2) 1,000,000 1,227,500 0.24 Petroleos Mexicanos co gtd 8% /2019 575,000 698,625 0.14

Total for Mexico 15.26

Russia Russian Foreign Bond - Eurobond sr unsecur RegS step cpn 7.5% /2030 (1) 25,552,779 29,820,094 5.89 Vnesheconombank Via VEB Finance sr unsecur Ser144A priv plmt 5.942% /2023 (Ireland) (2) 10,850,000 10,890,688 2.15 RZD Capital sr unsecur RegS 5.7% /2022 (Ireland) (2) 7,770,000 7,931,228 1.57 Russian Agricultural Bank OJSC Via RSHB Capital sr unsecur RegS LPN 6.299% /2017 (Luxembourg) (2) 5,192,000 5,548,949 1.10 OJSC Novolipetsk Steel via Steel Funding sr unsecur RegS 4.95% /2019 (Ireland) (2) 5,000,000 4,962,500 0.98 Vnesheconombank Via VEB Finance sr unsecur RegS LPN 6.902% /2020 (Ireland) (1) (2) 3,091,000 3,419,419 0.68 Russian Foreign Bond - Eurobond sr unsecur Ser144A priv plmt step cpn 7.5% /2030 7,150 8,344 0.00

Total for Russia 12.37

Venezuela Petroleos de Venezuela co gtd RegS 8.5% /2017 (1) 26,390,000 21,930,090 4.33 Petroleos de Venezuela co gtd RegS 12.75% /2022 11,250,000 10,321,875 2.04 Republic of Venezuela sr unsecur RegS 11.75% /2026 (1) 8,270,000 7,120,470 1.41 Republic of Venezuela sr unsecur 9.25% /2027 5,864,000 4,573,920 0.91 Republic of Venezuela sr unsecur RegS 9% /2023 5,069,000 3,809,353 0.75 Republic of Venezuela sr unsecur RegS 6% /2020 1,440,000 968,400 0.19 Republic of Venezuela sr unsecur RegS 9.25% /2028 1,000,000 746,500 0.15 Republic of Venezuela SerUSD 0% /2020 (5) 852,000 216,195 0.04

Total for Venezuela 9.82

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 65 Morgan Stanley Investment Funds 31 December 2013

Emerging Markets Debt Fund

Brazil Colombia Brazil Minas SPE Republic of Colombia sr unsecur 4.375% /2021 5,472,000 5,649,840 1.12 via State of Minas Gerais govt gtd RegS Pacific Rubiales Energy co gtd Ser144A priv plmt 5.333% /2028 (Cayman Islands) (2) 13,470,000 12,560,775 2.48 5.375% /2019 (Canada) (2) 3,820,000 3,867,750 0.76 Odebrecht Finance co gtd RegS 5.125% /2022 Republic of Colombia sr unsecur 11.75% /2020 1,890,000 2,721,600 0.54 (Cayman Islands) (1) (2) 8,000,000 7,850,000 1.55 Ecopetrol sr unsecur 5.875% /2023 1,780,000 1,882,349 0.37 Caixa Economica Federal sr unsecur RegS 3.5% /2022 4,790,000 3,891,875 0.77 Total for Colombia 2.79 Banco Safra Cayman Islands subord nts RegS 6.75% /2021 (1) 3,530,000 3,724,150 0.74 ESAL co gtd RegS 6.25% /2023 (Austria) (1) (2) 4,100,000 3,696,253 0.73 Poland Banco Nacional de Desenvolvimento Economico Government of Poland sr unsecur 3% /2023 12,370,000 11,287,625 2.23 e Social sr unsecur RegS 5.5% /2020 1,990,000 2,039,750 0.40 Government of Poland sr unsecur 5% /2022 1,290,000 1,381,913 0.27 Odebrecht Offshore Drilling Finance sr secured Ser144A priv plmt 6.75% /2022 Total for Poland 2.50 (Cayman Islands) (2) 1,585,206 1,626,421 0.32 China Total for Brazil 6.99 Sinopec Group Overseas Development 2013 co gtd RegS 4.375% /2023 Indonesia (British Virgin Islands) (2) 12,500,000 12,365,375 2.44 Majapahit Holding co gtd RegS 7.75% /2020 (Netherlands) (2) 14,130,000 15,628,557 3.09 Total for China 2.44 Perusahaan Listrik Negara sr unsecur RegS 5.5% /2021 10,120,000 9,761,347 1.93 Hungary Republic of Indonesia sr unsecur RegS Republic of Hungary sr unsecur 5.75% /2023 10,160,000 10,210,800 2.02 7.75% /2038 4,707,000 5,335,902 1.05 Republic of Hungary sr unsecur 6.375% /2021 1,050,000 1,139,249 0.22 Pertamina Persero sr unsecur RegS 5.25% /2021 (1) 2,410,000 2,325,614 0.46 Pertamina Persero sr unsecur RegS Total for Hungary 2.24 4.875% /2022 1,120,000 1,030,400 0.20 Peru Total for Indonesia 6.73 Banco de Credito del Peru sr subord RegS 6.125% /2027 (5) 4,720,000 4,732,153 0.94 Kazakhstan Republic of Peru sr unsecur 7.35% /2025 1,890,000 2,390,850 0.47 KazMunayGas National sr unsecur RegS Corporacion Azucarera del Peru co gtd RegS 9.125% /2018 (1) 5,970,000 7,268,177 1.44 6.375% /2022 (1) 1,880,000 1,682,600 0.33 KazMunayGas National sr unsecur Ser144A Fondo MIVIVIENDA sr unsecur RegS 3.5% /2023 1,505,000 1,350,738 0.27 priv plmt 5.75% /2043 7,880,000 6,904,850 1.36 KazAgro National Management Holding Total for Peru 2.01 sr unsecur Ser144A priv plmt 4.625% /2023 5,540,000 5,103,448 1.01 Development Bank of Kazakhstan sr unsecur RegS South Africa 4.125% /2022 5,240,000 4,735,650 0.93 Eskom Holdings sr unsecur RegS 5.75% /2021 7,534,000 7,534,000 1.49 KazMunayGas National sr unsecur RegS Transnet SOC sr unsecur RegS 4% /2022 2,590,000 2,292,150 0.45 6.375% /2021 1,470,000 1,600,389 0.32 Development Bank of Kazakhstan sr unsecur RegS 5.5% /2015 586,000 622,479 0.12 Total for South Africa 1.94 Intergas Finance co gtd RegS 6.375% /2017 (Netherlands) (2) 560,000 604,800 0.12 Panama Republic of Panama sr unsecur 5.2% /2020 5,310,000 5,801,175 1.14 Total for Kazakhstan 5.30 Republic of Panama sr unsecur 8.875% /2027 865,000 1,156,938 0.23 Republic of Panama sr unsecur 7.125% /2026 580,000 701,800 0.14 Turkey Republic of Turkey sr unsecur 5.625% /2021 9,470,000 9,593,110 1.89 Total for Panama 1.51 Republic of Turkey sr unsecur 3.25% /2023 8,940,000 7,397,850 1.46 Export Credit Bank of Turkey sr unsecur RegS Lithuania 5.875% /2019 6,230,000 6,325,008 1.25 Republic of Lithuania sr unsecur RegS Republic of Turkey sr unsecur 6.75% /2018 441,000 482,675 0.10 6.625% /2022 6,170,000 7,226,613 1.43

Total for Turkey 4.70 Total for Lithuania 1.43

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 66

Emerging Markets Debt Fund

Croatia Croatia sr unsecur Ser144A priv plmt 6% /2024 5,750,000 5,735,625 1.13 Mutual Fund Croatia sr unsecur RegS 5.5% /2023 1,430,000 1,394,250 0.28 Morgan Stanley Liquidity Funds - US Dollar Total for Croatia 1.41 Liquidity Fund MS Reserve USD Dist. (Luxembourg) (2) (4) 45,763,170 45,763,170 9.04

Serbia Total for Mutual Fund 9.04 Republic of Serbia sr unsecur RegS 5.25% /2017 2,990,000 3,019,900 0.60 Republic of Serbia RegS 4.875% /2020 2,000,000 1,896,000 0.37 Republic of Serbia unsecur Ser144A priv plmt Warrant 5.875% /2018 1,300,000 1,329,250 0.26 Nigeria Total for Serbia 1.23 Central Bank of Nigeria Wts exp. 15/11/2020 (3) 2,000 357,000 0.08

Total for Nigeria 0.08 Ukraine Government of Ukraine sr unsecur RegS 7.8% /2022 (1) 5,000,000 4,560,000 0.90 Total for Warrant 0.08

Total for Ukraine 0.90 Total Investment Securities 500,540,388 98.90

Uruguay Republic of Uruguay sr unsecur 4.5% /2024 4,504,200 4,515,460 0.89 DERIVATIVES

Total for Uruguay 0.89 Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars. Romania Romanian Government sr unsecur RegS Financial Futures Contracts 4.375% /2023 3,084,000 2,991,480 0.59 Romanian Government sr unsecur RegS Net unrealised 6.75% /2022 440,000 501,710 0.10 gain/(loss) as at Maturity Number of Notional 31 December % of net Total for Romania 0.69 Description date contracts commitments Counterparty 2013 assets

Côte d’Ivoire US 10yr T-note Future 03/2014 (262) (32,242,375) Goldman Sachs 612,016 0.12 Ivory Coast Government International Bond sr unsecur RegS step cpn 5.75% /2032 3,490,000 3,119,310 0.62 Unrealised Gain on Financial Futures Contracts 612,016 0.12

Total for Côte d’Ivoire 0.62 Net Unrealised Gain on Financial Futures Contracts (32,242,375) 612,016 0.12

Costa Rica Republic of Costa Rica sr unsecur RegS Cash of USD 88,357 paid as collateral to Goldman Sachs in relation to financial futures contracts. 4.25% /2023 2,730,000 2,507,695 0.51

Total for Costa Rica 0.51

Sri Lanka Republic of Sri Lanka sr unsecur RegS 5.875% /2022 1,230,000 1,157,418 0.23 Republic of Sri Lanka sr unsecur RegS 6.25% /2020 1,015,000 1,009,925 0.20

Total for Sri Lanka 0.43

India Vedanta Resources sr unsecur Ser144A priv plmt 7.125% /2023 (United Kingdom) (2) 1,550,000 1,422,125 0.28

Total for India 0.28

The accompanying notes are an integral part of these financial statements. 67 Morgan Stanley Investment Funds 31 December 2013

Emerging Markets Debt Fund

DERIVATIVES (continued)

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

EUR Hedged Share Class 10/01/2014 78,832,955 EUR 108,397,519 USD J.P. Morgan 198,815 0.04 10/01/2014 216,775 USD 157,091 EUR J.P. Morgan 374 0.00

GBP Hedged Share Class 10/01/2014 23,093,245 GBP 37,541,061 USD J.P. Morgan 667,290 0.13

Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 866,479 0.17

EUR Hedged Share Class 10/01/2014 158,536 EUR 218,661 USD J.P. Morgan (270) 0.00 10/01/2014 678,807 USD 495,985 EUR J.P. Morgan (4,436) 0.00

GBP Hedged Share Class 10/01/2014 92,314 USD 56,170 GBP J.P. Morgan (622) 0.00

Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (5,328) 0.00

Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 861,151 0.17

Total Derivatives 1,473,167 0.29

Other Assets less Liabilities 4,096,399 0.81

Total Net Asset Value 506,109,954 100.00

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 68

Emerging Markets Domestic Debt Fund

Investment aim Statement of investments

To seek to maximise total return, primarily Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. through investment in a portfolio of emerging As at 31 December 2013, expressed in US dollars. market bonds and other emerging market Nominal in US dollars Market % of net debt securities, denominated in the local Investments unless specified value assets currency of issue. The Fund intends to invest Bonds Mexico its assets in emerging market debt securities Mexican Bonos SerM 20 7.5% /2027 (MXN) 483,100,000 39,612,906 8.95 Petroleos Mexicanos co gtd RegS that provide a high level of current income, 7.65% /2021 (MXN) 199,500,000 15,815,805 3.57 while at the same time holding the potential Total for Mexico 12.52 for capital appreciation. South Africa Republic of South Africa SerR207 7.25% /2020 (ZAR) 386,827,700 36,487,436 8.24 Eskom Holdings sr unsecur RegS 5.75% /2021 13,375,000 13,375,000 3.02

Total for South Africa 11.26

Poland Government of Poland Ser0418 3.75% /2018 (PLN) 44,998,000 15,065,347 3.40 Government of Poland Ser1019 5.5% /2019 (PLN) 38,042,000 13,677,810 3.09 Government of Poland Ser1021 5.75% /2021 (PLN) 32,710,000 11,957,806 2.70 Government of Poland Ser1017 5.25% /2017 (PLN) 15,580,000 5,502,200 1.24

Total for Poland 10.43

Russia Russian Federal Bond - OFZ Ser6207 8.15% /2027 (RUB) 570,290,000 17,946,516 4.05 RZD Capital sr unsecur RegS 8.3% /2019 (Ireland) (2) (RUB) 440,300,000 13,286,887 3.00 VimpelCom Holdings co gtd RegS 9% /2018 (Netherlands) (2) (RUB) 248,700,000 7,599,515 1.72 Gazprombank ViaB Eurobond Finance sr unsecur RegS 7.875% /2016 (Ireland) (2) (RUB) 228,000,000 6,845,671 1.54

Total for Russia 10.31

Brazil Brazil Notas do Tesouro Nacional Serie F sr nts SerNTNF 10% /2017 (BRL) 8,525,000 35,894,093 8.10 Banco Nacional de Desenvolvimento Economico e Social sr unsecur RegS 5.75% /2023 9,000,000 8,887,500 2.01

Total for Brazil 10.11

Turkey Turkiye Garanti Bankasi sr unsecur RegS 7.375% /2018 (TRY) 32,530,000 12,936,728 2.92 Republic of Turkey Ser5YR 9% /2017 (TRY) 17,300,000 7,853,406 1.77 Republic of Turkey 9% /2016 (TRY) 13,140,000 6,010,747 1.36 Republic of Turkey 10.5% /2020 (TRY) 10,100,000 4,821,926 1.09 Republic of Turkey 10% /2015 (TRY) 9,756,000 4,546,635 1.02 Republic of Turkey 8.5% /2022 (TRY) 10,000,000 4,239,848 0.96

Total for Turkey 9.12

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 69 Morgan Stanley Investment Funds 31 December 2013

Emerging Markets Domestic Debt Fund

Statement of investments (continued) Holdings/ Nominal in US dollars Market % of net Transferable securities and money market instruments admitted Investments unless specified value assets to official exchange listing or dealt in on another regulated market. Bonds (continued) As at 31 December 2013, expressed in US dollars. Peru Nominal in Republic of Peru sr unsecur Ser7 US dollars Market % of net 8.6% /2017 (PEN) 14,280,000 5,874,984 1.33 Investments unless specified value assets Republic of Peru sr unsecur RegS 8.2% /2026 (PEN) 8,322,000 3,497,430 0.79 Bonds (continued) Republic of Peru sr unsecur RegS 6.95% /2031 (PEN) 4,365,000 1,564,046 0.35 Hungary Republic of Hungary Ser23/A Total for Peru 2.47 6% /2023 (HUF) 5,970,000,000 28,474,810 6.43

Nigeria Total for Hungary 6.43 Republic of Nigeria Ser10YR 16.39% /2022 (NGN) 505,000,000 3,648,992 0.82 Malaysia Government of Malaysia sr unsecur Total for Nigeria 0.82 Ser0211 3.434% 15/08/2014 (MYR) 57,500,000 17,589,879 3.97 Government of Malaysia sr unsecur Ser0512 3.314% /2017 (MYR) 22,400,000 6,748,327 1.52 Chile Government of Malaysia sr unsecur Republic of Chile sr unsecur Ser0207 3.814% /2017 (MYR) 3,700,000 1,137,262 0.26 5.5% /2020 (CLP) 669,000,000 1,297,390 0.29

Total for Malaysia 5.75 Total for Chile 0.29

Total for Bonds 94.58 Indonesia Republic of Indonesia 11% /2020, credit linked note, issued by Mutual Fund Deutsche Bank (Germany) (2) (IDR) 72,800,000,000 6,807,234 1.54 Republic of Indonesia 11.5% /2019, Morgan Stanley Liquidity Funds - US Dollar credit linked note, issued by Liquidity Fund MS Reserve USD Dist. Barclays Bank (United Kingdom) (2) (IDR) 64,500,000,000 6,064,273 1.37 (Luxembourg) (2) (4) 16,857,248 16,857,248 3.81 Republic of Indonesia 9% /2018, credit linked note, issued by Total for Mutual Fund 3.81 Barclays Bank (United Kingdom) (2) (IDR) 59,000,000,000 5,010,669 1.13 Republic of Indonesia 11.5% /2019, Total Investment Securities 435,742,436 98.39 credit linked note, issued by JPMorgan Chase Bank (United States of America) (2) (IDR) 60,000,000,000 4,900,409 1.11 Republic of Indonesia 11.5% /2019, credit linked note, issued by Deutsche Bank (Germany) (2) (IDR) 34,000,000,000 3,196,671 0.72

Total for Indonesia 5.87

Colombia Republic of Colombia sr unsecur 4.375% /2023 (COP) 16,737,000,000 7,708,037 1.74 Republic of Colombia sr unsecur 12% /2015 (COP) 10,323,000,000 6,040,064 1.36 Republic of Colombia sr unsecur 7.75% /2021 (COP) 8,000,000,000 4,579,933 1.04

Total for Colombia 4.14

Venezuela Petroleos de Venezuela co gtd RegS 8.5% /2017 14,000,000 11,634,000 2.63

Total for Venezuela 2.63

Thailand Thailand Government Bond sr unsecur 3.125% /2015 (THB) 260,000,000 8,027,714 1.81 Thailand Government Bond sr unsecur 5.25% 12/05/2014 (THB) 88,000,000 2,719,282 0.62

Total for Thailand 2.43

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 70

Emerging Markets Domestic Debt Fund

DERIVATIVES

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars.

Financial Futures Contracts

Net unrealised gain/(loss) as at Maturity Number of Notional 31 December % of net Description date contracts commitments Counterparty assets 2013

US 10yr T-note Future 03/2014 (420) (51,686,250) Goldman Sachs 981,094 0.22

Unrealised Gain on Financial Futures Contracts 981,094 0.22

Net Unrealised Gain on Financial Futures Contracts (51,686,250) 981,094 0.22

Cash of USD 65,039 paid as collateral to Goldman Sachs in relation to financial futures contracts.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

03/01/2014 9,118,087 USD 21,350,000 BRL J.P. Morgan 81,050 0.02 17/01/2014 11,416,147 USD 148,610,000 MXN J.P. Morgan 56,046 0.01

Unrealised Gain on Forward Foreign Currency Exchange Contracts 137,096 0.03

EUR Hedged Share Class 10/01/2014 49,387,535 EUR 67,911,258 USD J.P. Morgan 122,539 0.03 10/01/2014 318,052 USD 230,525 EUR J.P. Morgan 492 0.00

Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 123,031 0.03

Total Unrealised Gain on Forward Foreign Currency Exchange Contracts 260,127 0.06

03/01/2014 21,350,000 BRL 9,159,159 USD J.P. Morgan (122,122) (0.03) 17/01/2014 16,610,000 EUR 22,909,044 USD J.P. Morgan (27,989) (0.00) 17/01/2014 148,610,000 MXN 11,495,091 USD J.P. Morgan (134,991) (0.03) 17/01/2014 22,844,647 USD 16,610,000 EUR J.P. Morgan (36,408) (0.01)

Unrealised Loss on Forward Foreign Currency Exchange Contracts (321,510) (0.07)

EUR Hedged Share Class 10/01/2014 486,559 USD 355,575 EUR J.P. Morgan (3,263) 0.00

Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (3,263) 0.00

Total Unrealised Loss on Forward Foreign Currency Exchange Contracts (324,773) (0.07)

Net Unrealised Loss on Forward Foreign Currency Exchange Contracts (64,646) (0.01)

Total Derivatives 916,448 0.21

Other Assets less Liabilities 6,208,305 1.40

Total Net Asset Value 442,867,189 100.00

(2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser.

The accompanying notes are an integral part of these financial statements. 71 Morgan Stanley Investment Funds 31 December 2013

Euro Bond Fund

Investment aim Statement of investments

Euro‑denominated fixed income securities of Nominal in Euro unless Market % of net high quality issued by governments, agencies Investments specified value assets and corporations. Corporate Bonds Spain FADE - Fondo de Amortizacion del Deficit Electrico govt gtd SerEMTN 2.25% /2016 3,500,000 3,510,283 1.44 Fondo de Reestructuracion Ordenada Bancaria govt gtd 4.5% 03/02/2014 3,500,000 3,509,800 1.44 Banco Bilbao Vizcaya Argentaria covered 3.625% /2017 2,350,000 2,500,921 1.02 Instituto de Credito Oficial govt gtd SerGMTN 2.375% /2015 2,300,000 2,334,040 0.95 FADE - Fondo de Amortizacion del Deficit Electrico govt gtd 5% /2015 1,800,000 1,892,079 0.78 Banco Santander covered 2.875% /2018 (1) 1,600,000 1,671,303 0.68 CaixaBank covered 3% /2018 1,600,000 1,663,828 0.68 Santander International Debt bnk gtd SerEMTN 3.5% /2015 1,250,000 1,284,175 0.53 Gas Natural Capital Markets co gtd Ser5 4.375% /2016 1,100,000 1,193,914 0.49 Banco Popular Espanol covered SerEMTN 3.5% /2017 1,100,000 1,141,894 0.47 Santander International Debt bnk gtd SerEMTN 4.625% /2016 800,000 854,452 0.35 CaixaBank sr unsecur SerDMTN 4.125% 20/11/2014 550,000 564,839 0.23 CaixaBank sr unsecur SerEMTN 2.5% /2017 500,000 508,115 0.21 CaixaBank covered Ser28 3.375% 30/06/2014 500,000 506,113 0.21 Telefonica Emisiones co gtd SerEMTN 5.496% /2016 450,000 491,294 0.20 Telefonica Emisiones co gtd RegS 4.75% /2017 300,000 328,448 0.13 Telefonica Emisiones co gtd SerEMTN 4.693% /2019 250,000 277,898 0.11 Telefonica Emisiones co gtd SerGMTN 3.661% /2017 (1) 250,000 266,894 0.11

Total for Spain 10.03

United States of America BA Covered Bond Issuer covered SerEMTN 4.25% /2017 4,250,000 4,672,548 1.92 WM Covered Bond Program covered SerEMTN 4% /2016 3,100,000 3,355,294 1.37 Citigroup subord SerEMTN 1.5% /2017 (5) 1,750,000 1,730,094 0.71 Goldman Sachs Group sr unsecur SerEMTN 4.375% /2017 1,100,000 1,195,726 0.49 Merrill Lynch & Co sr unsecur SerEMTN 0.53% 30/05/2014 (5) 1,150,000 1,150,058 0.47 Goldman Sachs Group sr unsecur SerEMTN 6.375% /2018 (1) 800,000 948,057 0.39 Wells Fargo & Co sr unsecur SerEMTN 2.25% /2020 800,000 799,693 0.33 John Deere Bank co gtd SerEMTN 3.25% /2016 (Luxembourg) (2) 725,000 767,007 0.32 GE Capital Trust II RegS 5.5% /2067 (5) 695,000 739,500 0.30 Simon Property Group sr unsecur 2.375% /2020 720,000 720,017 0.29 Citigroup sr unsecur SerEMTN 4% /2015 670,000 708,452 0.29 International Business Machines sr unsecur 1.875% /2020 700,000 691,249 0.28 Microsoft sr unsecur 2.125% /2021 600,000 594,786 0.24 Procter & Gamble co gtd 2% /2021 575,000 565,059 0.23 JPMorgan Chase & Co sr unsecur SerEMTN 2.875% /2028 580,000 560,145 0.23 Philip Morris International sr unsecur SerEMTN 5.875% /2015 500,000 542,910 0.22 AT&T sr unsecur 3.55% /2032 540,000 518,190 0.21 Microsoft sr unsecur 3.125% /2028 500,000 495,785 0.20 Metropolitan Life Global Funding secured SerEMTN 2.375% /2023 450,000 438,385 0.18 Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 72

Euro Bond Fund

As at 31 December 2013, expressed in Euro. United Kingdom (continued) BAT International Finance co gtd SerEMTN Nominal in 5.375% /2017 140,000 159,760 0.07 Euro unless Market % of net Standard Chartered sr unsecur SerEMTN Investments specified value assets 4.125% /2019 (1) 120,000 132,049 0.05

Corporate Bonds (continued) Total for United Kingdom 9.11

United States of America (continued) AT&T sr unsecur 3.5% /2025 425,000 429,986 0.18 France JPMorgan Chase & Co sr unsecur SerEMTN Compagnie de Financement Foncier covered 2.75% /2023 400,000 402,761 0.17 SerEMTN 4.625% /2017 1,330,000 1,505,938 0.62 Philip Morris International sr unsecur SerEMTN BNP Paribas subord SerEMTN 5.431% /2017 (1) 1,330,000 1,503,607 0.62 5.75% /2016 350,000 388,116 0.16 BNP Paribas sr unsecur SerEMTN 2% /2019 1,375,000 1,389,565 0.57 Oracle sr unsecur SerEMTN 2.25% /2021 380,000 382,679 0.16 Christian Dior sr unsecur 4% /2016 1,000,000 1,056,105 0.43 PACCAR Financial Europe sr unsecur SerEMTN Banque PSA Finance govt liquid gtd SerEMTN 0.672% /2016 (Netherlands) (2) (5) 360,000 360,128 0.15 0.625% /2016 1,000,000 1,004,600 0.41 JPMorgan Chase & Co sr unsecur SerEMTN Crédit Agricole subord SerEMTN 3.9% /2021 (1) 900,000 942,845 0.39 2.625% /2021 275,000 277,901 0.11 Banque Federative du Credit Mutuel sr unsecur Metropolitan Life Global Funding secured SerGMTN SerEMTN 3% /2015 900,000 935,370 0.38 2.375% /2019 270,000 274,820 0.11 Société Générale sr unsecur SerEMTN Philip Morris International sr unsecur 4.75% /2021 (1) 700,000 818,321 0.34 2.125% /2019 140,000 141,869 0.06 Caisse d’Amortissement de la Dette Sociale AT&T sr unsecur 2.5% /2023 140,000 135,670 0.06 sr unsecur SerEMTN 3.625% /2016 750,000 804,266 0.33 LVMH Moet Hennessy Louis Vuitton sr unsecur Total for United States of America 9.83 SerEMTN 1.75% /2020 800,000 784,276 0.32 GDF Suez jr subord 3.875% perpetual (5) 700,000 723,820 0.30 BPCE sr unsecur SerEMTN 2% /2018 700,000 712,425 0.29 United Kingdom Electricité de France sr unsecur SerEMTN Abbey National Treasury Services covered SerEMTN 2.25% /2021 700,000 695,426 0.28 3.625% /2016 1,950,000 2,104,133 0.86 SA de Gestion de Stocks de Securite sr unsecur Bank of Scotland covered SerEMTN 1.75% /2019 600,000 604,848 0.25 4.625% /2017 1,550,000 1,743,229 0.72 Schneider Electric sr unsecur SerEMTN Yorkshire Building Society covered SerEMTN 2.5% /2021 600,000 602,124 0.25 3.25% /2015 1,440,000 1,505,708 0.62 Electricité de France unsecur SerEMTN Royal Bank of Scotland subord SerEMTN 2.75% /2023 600,000 599,064 0.25 10.5% /2022 (1) (5) 1,107,000 1,349,710 0.55 Orange sr unsecur SerEMTN 8.125% /2033 400,000 592,002 0.24 HSBC Holdings subord 3.625% /2020 (1) (5) 1,080,000 1,107,671 0.45 Unibail-Rodamco sr unsecur SerEMTN Elsevier Finance Via ELM sr secured SerEMTN 1.875% /2018 550,000 550,099 0.23 2.5% /2020 (Switzerland) (2) 1,100,000 1,106,805 0.45 Groupe Auchan sr unsecur SerEMTN 6% /2019 (1) 450,000 545,121 0.22 Standard Chartered sr unsecur 3.875% /2016 1,020,000 1,096,459 0.45 AXA sr unsecur SerEMTN 4.5% /2015 500,000 519,867 0.21 HBOS subord SerEMTN 4.5% /2030 (5) 1,110,000 1,058,291 0.43 Société Générale covered 1.625% /2021 500,000 492,695 0.20 Co-operative Bank sr unsecur SerEMTN Unibail-Rodamco sr unsecur SerEMTN 2.375% /2015 1,020,000 990,792 0.41 1.625% /2017 415,000 418,016 0.17 Nationwide Building Society covered SerEMTN AXA subord SerEMTN 5.125% /2043 (5) 360,000 379,061 0.16 3.5% /2015 890,000 941,456 0.39 Banque Federative du Credit Mutuel sr unsecur Royal Bank of Scotland sr unsecur SerEMTN SerEMTN 3% /2023 300,000 303,891 0.12 5.375% /2019 760,000 878,345 0.36 Socram Banque sr unsecur 2.125% /2016 300,000 302,729 0.12 HSBC Holdings subord SerEMTN 6.25% /2018 700,000 813,650 0.33 Unibail-Rodamco sr unsecur SerEMTN Barclays Bank subord SerEMTN 6% /2021 700,000 795,355 0.33 3.875% /2020 (1) 250,000 273,705 0.11 Nationwide Building Society subord SerEMTN Crédit Agricole sr unsecur SerEMTN 6.75% /2020 670,000 790,238 0.32 3.875% /2019 (1) 200,000 219,269 0.09 Lloyds Bank subord SerEMTN 6.5% /2020 (1) 600,000 696,472 0.29 AXA subord SerEMTN 5.25% /2040 (5) 200,000 214,127 0.09 Heathrow Funding sr secured Ser144A priv plmt Legrand sr unsecur SerEMTN 3.375% /2022 200,000 211,831 0.09 4.6% /2018 (Jersey) (2) 620,000 690,500 0.28 Crédit Agricole sr unsecur SerEMTN 2.375% /2020 200,000 200,960 0.08 HSBC Holdings subord SerEMTN 6% /2019 450,000 522,939 0.22 Orange sr unsecur SerEMTN 1.875% /2019 200,000 196,761 0.08 SSE sr unsecur SerEMTN 2.375% /2022 450,000 446,243 0.18 Anglo American Capital co gtd SerEMTN Total for France 8.24 5.875% /2015 400,000 425,001 0.17 British American Tobacco Holdings co gtd SerEMTN 2.375% /2023 (Netherlands) (2) 400,000 389,516 0.16 Germany Standard Chartered subord SerEMTN KfW - Kreditanstalt fuer Wiederaufbau govt gtd 4% /2025 (5) 350,000 348,517 0.14 3.875% /2019 5,310,000 6,009,146 2.46 BP Capital Markets co gtd SerEMTN State of Saxony-Anhalt Ser13 3.75% /2021 2,110,000 2,386,607 0.98 3.83% /2017 310,000 338,274 0.14 BSH Bosch und Siemens Hausgeraete sr unsecur Compass Group sr unsecur SerEMTN 1.875% /2020 1,300,000 1,278,745 0.52 3.125% /2019 310,000 328,440 0.14 Deutsche Bank subord SerEMTN 5% /2020 950,000 1,050,092 0.43 Rolls-Royce co gtd SerEMTN 2.125% /2021 325,000 320,632 0.13 Muenchener Rueckversicherungs subord SerEMTN Heathrow Funding sr secured 4.375% /2017 290,000 316,056 0.13 6% /2041 (5) 800,000 926,982 0.38 BAT International Finance co gtd SerEMTN Volkswagen International Finance co gtd SerEMTN 3.625% /2021 290,000 313,261 0.13 1.875% /2017 (Netherlands) (2) 890,000 911,745 0.37 BP Capital Markets co gtd SerEMTN 2.517% /2021 300,000 303,064 0.12 Allianz Finance II co gtd SerEMTN 5.75% /2041 Standard Chartered subord SerEMTN (Netherlands) (2) (5) 800,000 898,338 0.37 3.625% /2022 (1) 230,000 224,310 0.09 BMW US Capital co gtd SerEMTN 5% /2015 (United States of America) (2) 800,000 847,987 0.35

The accompanying notes are an integral part of these financial statements. 73 Morgan Stanley Investment Funds 31 December 2013

Euro Bond Fund

Italy Banca Monte dei Paschi di Siena covered Canada SerEMTN 4.875% /2016 1,770,000 1,865,084 0.77 Royal Bank of Canada covered RegS Banca Monte dei Paschi di Siena covered 1.25% /2018 (1) 1,300,000 1,297,114 0.53 3.125% /2015 1,640,000 1,665,124 0.68 Royal Bank of Canada covered RegS Banco Popolare covered RegS 4.75% /2016 1,020,000 1,071,291 0.44 1.625% /2020 1,200,000 1,191,763 0.49 Intesa Sanpaolo sr unsecur SerGMTN 4.75% /2017 (1) 950,000 1,027,031 0.42 Total for Canada 1.02 Snam sr unsecur SerEMTN 5.25% /2022 820,000 953,867 0.39 Telecom Italia Finance co gtd SerEMTN Sweden 7.75% /2033 (Luxembourg) (2) 850,000 935,310 0.38 Nordea Bank subord SerEMTN 4.625% /2022 (5) 1,120,000 1,199,729 0.49 Intesa Sanpaolo sr unsecur SerEMTN SBAB Bank sr unsubord SerEMTN 2.375% /2020 675,000 674,962 0.28 4.125% /2016 700,000 733,703 0.30 Svenska Handelsbanken sr unsecur SerEMTN Assicurazioni Generali sr unsecur SerEMTN 2.625% /2022 (1) 400,000 404,332 0.17 5.125% /2024 650,000 708,437 0.29 UniCredit covered SerEMTN 2.75% /2020 340,000 347,319 0.14 Total for Sweden 0.94 UniCredit covered SerEMTN 2.625% /2020 300,000 301,337 0.12 Snam sr unsecur SerEMTN 2.375% /2017 160,000 164,690 0.07 Luxembourg Total for Italy 4.00 ITW Finance Europe co gtd 5.25% 01/10/2014 1,510,000 1,562,412 0.64 Enel Finance International co gtd SerGMTN 5.75% /2018 (Netherlands) (2) 450,000 519,227 0.21 Netherlands ABN Amro Bank subord SerEMTN 6.375% /2021 1,070,000 1,239,301 0.51 Total for Luxembourg 0.85 ABN Amro Bank covered SerEMTN 1.875% /2019 960,000 980,007 0.40 Achmea Hypotheekbank sr unsecur SerEMTN 2% /2018 925,000 923,132 0.38 Australia Cooperatieve Centrale Raiffeisen-Boerenleenbank BHP Billiton Finance co gtd SerEMTN 2.25% /2020 580,000 582,726 0.24 subord SerEMTN 5.875% /2019 580,000 668,596 0.27 Macquarie Bank sr unsecur SerEMTN 2.5% /2018 400,000 409,860 0.17 Cooperatieve Centrale Raiffeisen-Boerenleenbank Australia Pacific Airports Melbourne Proprietary unsecur SerEMTN 3.5% /2018 560,000 606,993 0.25 sr secured SerEMTN 3.125% /2023 280,000 285,248 0.12 Enexis Holding sr unsecur SerEMTN 1.875% /2020 490,000 482,414 0.20 Transurban Finance Proprietary sr secured Cooperatieve Centrale Raiffeisen-Boerenleenbank SerEMTN 2.5% /2020 250,000 251,175 0.10 sr unsecur SerEMTN 3.875% /2016 450,000 480,077 0.20 Telstra co gtd SerEMTN 2.5% /2023 (1) 230,000 223,766 0.09 LeasePlan sr unsecur SerEMTN 2.375% /2019 400,000 401,945 0.16 TenneT Holding sr unsecur SerEMTN Total for Australia 0.72 4.625% /2023 310,000 354,650 0.15 SPP Infrastructure financing co gtd RegS 3.75% /2020 300,000 309,803 0.13 United Arab Emirates TenneT Holding sr unsecur SerEMTN IPIC GMTN co gtd RegS 5.875% /2021 2.125% /2020 250,000 247,316 0.10 (Cayman Islands) (2) 1,110,000 1,319,513 0.54 Achmea sr unsecur SerEMTN 2.5% /2020 200,000 198,613 0.08 IPIC GMTN co gtd RegS 2.375% /2018 (Cayman Islands) (2) 120,000 123,002 0.05 Total for Netherlands 2.83 Total for United Arab Emirates 0.59

New Zealand ANZ New Zealand International covered Russia SerEMTN 1.5% /2018 1,960,000 1,969,677 0.81 Gazprom Via Gaz Capital sr unsecur SerEMTN ANZ New Zealand International bnk gtd LPN 6.605% /2018 (Luxembourg) (2) 980,000 1,116,530 0.46 SerEMTN 0.709% /2016 (5) 500,000 500,089 0.21 BNZ International Funding bnk gtd Total for Russia 0.46 SerGMTN 1.25% /2018 310,000 304,944 0.12

Total for New Zealand 1.14

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 74

Euro Bond Fund

Total for Japan 0.42 Total for Corporate Bonds 61.88

Hong Kong Government Bonds Hutchison Whampoa Europe Finance 12 co gtd SerEMTN 2.5% /2017 (Cayman Islands) (2) 930,000 964,005 0.39 Italy Italy Buoni Poliennali Del Tesoro 5.25% /2017 16,600,000 18,329,272 7.51 Total for Hong Kong 0.39 Italy Buoni Poliennali Del Tesoro 3% /2015 7,750,000 7,957,668 3.26 Italy Buoni Poliennali Del Tesoro 6% /2031 6,000,000 6,990,981 2.86 Italy Buoni Poliennali Del Tesoro sr unsecur South Korea 5% /2039 6,000,000 6,213,279 2.55 Industrial Bank of Korea sr unsecur SerGMTN 2% /2018 600,000 594,513 0.24 Total for Italy 16.18 Korea Gas sr unsecur SerGMTN 2.375% /2019 325,000 326,758 0.13

Total for South Korea 0.37 Germany Bundesrepublik Deutschland 2.25% /2021 4,500,000 4,739,218 1.94 Bundesrepublik Deutschland Ser2007 China 4.25% /2039 3,250,000 4,138,014 1.70 Sinopec Group Overseas Development 2013 co gtd Bundesrepublik Deutschland Ser03 RegS 2.625% /2020 (British Virgin Islands) (2) 625,000 621,732 0.25 4.75% /2034 2,350,000 3,102,602 1.27 CNOOC Curtis Funding No 1 Proprietary co gtd Bundesrepublik Deutschland Ser166 2.75% /2020 (Australia) (2) 290,000 291,413 0.12 0.25% /2018 900,000 877,170 0.36 Bundesrepublik Deutschland Ser97 6.5% /2027 1 1 0.00 Total for China 0.37 Total for Germany 5.27 Austria UniCredit Bank Austria sr unsecur SerEMTN France 2.625% /2018 400,000 406,943 0.17 Government of France OAT 3.25% /2021 7,150,000 7,814,663 3.20 UniCredit Bank Austria sr unsecur SerEMTN Government of France OAT 5.5% /2029 2,900,000 3,788,986 1.55 2.5% /2019 400,000 394,435 0.16 Vienna Insurance Group subord 5.5% /2043 (5) 100,000 105,120 0.04 Total for France 4.75

Total for Austria 0.37 Poland Government of Poland sr unsecur SerEMTN Belgium 3.625% /2016 3,540,000 3,764,909 1.54 Anheuser-Busch InBev co gtd SerEMTN Government of Poland sr unsecur 5.875% 8.625% /2017 690,000 845,942 0.35 03/02/2014 2,220,000 2,230,312 0.92

Total for Belgium 0.35 Total for Poland 2.46

Mexico Netherlands America Movil sr unsecur SerEMTN 4.125% /2019 635,000 700,223 0.29 Government of Netherlands 4% /2037 2,000,000 2,382,333 0.98 Government of Netherlands 3.25% /2021 2,000,000 2,204,134 0.90 Total for Mexico 0.29 Total for Netherlands 1.88 Finland Fortum sr unsecur SerEMTN 2.25% /2022 710,000 682,304 0.28 Canada Government of Canada sr unsecur 3.5% /2020 1,330,000 1,509,480 0.62 Total for Finland 0.28 Province of Ontario sr unsecur SerEMTN 4% /2019 800,000 910,087 0.37 Israel Teva Pharmaceutical Finance IV co gtd SerEMTN Total for Canada 0.99 2.875% /2019 (Curacao) (2) 450,000 466,644 0.19 Total for Government Bonds 31.53 Total for Israel 0.19

The accompanying notes are an integral part of these financial statements. 75 Morgan Stanley Investment Funds 31 December 2013

Euro Bond Fund

Statement of investments (continued) DERIVATIVES

Holdings/ Nominal in Net unrealised Euro unless Market % of net gain/(loss) as at Maturity Number of Notional 31 December % of net Investments specified value assets Description date contracts commitments Counterparty 2013 assets Supra-National Bonds Euro BOBL Future 03/2014 (67) (8,336,810) Goldman Sachs 91,120 0.04 European Financial Stability Facility govt gtd SerEMTN 1.75% /2020 2,600,000 2,592,266 1.06 Unrealised Gain on Financial Futures Contracts 91,120 0.04 European Union sr unsecur SerEMTN 3.5% /2021 2,000,000 2,236,877 0.92 Euro Bund Future 03/2014 83 11,551,110 Goldman Sachs (190,800) (0.08) European Financial Stability Facility govt gtd Euro SCHATZ Future 03/2014 81 8,934,300 Goldman Sachs (16,020) (0.01) SerEMTN 2.75% /2016 1,160,000 1,226,098 0.50 Unrealised Loss on Financial Futures Contracts (206,820) (0.09) Total for Supra-National Bonds 2.48 Net Unrealised Loss Mortgage and Asset Backed Securities on Financial Futures Contracts 12,148,600 (115,700) (0.05)

Germany Cash of EUR 310,832 held as collateral by Goldman Sachs in relation to financial futures contracts. German Residential Funding 1.377% /2024 (5) 1,443,318 1,461,419 0.60 Credit Default Swap Contracts Total for Germany 0.60

Net unrealised United Kingdom gain/(loss) as at Taurus 2013-GMF1 A 1.268% /2024 (5) 393,001 395,260 0.16 Risk Notional Maturity 31 December % of net Granite Master Issuer 2006-4 A7 0.465% /2054 (5) 286,001 283,769 0.12 position Description Ccy amount date Counterparty 2013 assets Leek Finance 17X A2C 0.573% /2037 (5) 243,264 253,031 0.10 Granite Master Issuer 2006-2 A5 0.445% /2054 (5) 114,143 113,195 0.05 Sell iTraxx Europe Senior Financials Series 20 Total for United Kingdom 0.43 01/12/2018 EUR 13,000,000 20/12/2018 Morgan Stanley 80,850 0.03

Total for Mortgage and Asset Backed Securities 1.03 Net Unrealised Gain on Credit Default Swap Contracts 80,850 0.03

Mutual Fund Cash of EUR 10,000 paid as collateral by Morgan Stanley in relation to OTC contracts.

Morgan Stanley Liquidity Funds - Euro Liquidity Fund MS Reserve EUR Dist. Total Derivatives (34,850) (0.02) (Luxembourg) (2) (4) 2,200,211 2,200,211 0.89 Other Assets less Liabilities 5,368,866 2.21 Total for Mutual Fund 0.89 Total Net Asset Value 244,086,314 100.00 Total Investment Securities 238,752,298 97.81

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 76

Euro Corporate Bond (ex Financials) Fund

Investment aim Statement of investments

To provide an attractive rate of return, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in Euro, by investing primarily As at 31 December 2013, expressed in Euro. in Euro-denominated fixed income securities Nominal in Euro unless Market % of net of high quality issued by corporations and Investments specified value assets non-government related issuers excluding Corporate Bonds France issuers in the financial industry. Orange sr unsecur SerEMTN 8.125% /2033 (1) 800,000 1,184,004 1.72 Eutelsat sr unsecur 4.125% /2017 800,000 864,631 1.26 Klepierre sr unsecur SerEMTN 2.75% /2019 800,000 821,786 1.19 Edenred sr unsecur 3.625% /2017 650,000 694,324 1.01 Veolia Environnement sr unsecur SerEMTN 6.75% /2019 500,000 617,138 0.90 Legrand sr unsecur 4.25% /2017 500,000 546,052 0.79 Arkema sr unsecur 4% /2017 500,000 543,960 0.79 Groupe Auchan sr unsecur SerEMTN 2.875% /2017 500,000 530,740 0.77 Electricité de France subord SerEMTN 4.25% perpetual (5) 500,000 516,627 0.75 Foncière des Regions sr unsecur 3.875% /2018 400,000 422,997 0.62 Christian Dior sr unsecur 4% /2016 400,000 422,442 0.61 GELF Bond Issuer I co gtd SerEMTN 3.125% /2018 (Luxembourg) (2) 400,000 412,332 0.60 Unibail-Rodamco sr unsecur SerEMTN 1.625% /2017 400,000 402,907 0.59 Vinci sr unsecur SerEMTN 4.125% /2017 300,000 326,294 0.47 Mercialys sr unsecur 4.125% /2019 300,000 324,435 0.47 Arkema sr unsecur 3.85% /2020 (1) 300,000 323,612 0.47 GDF Suez jr subord 3.875% perpetual (5) 300,000 310,209 0.45 Alstom sr unsecur SerEMTN 2.25% /2017 300,000 305,640 0.44 Alstom sr unsecur SerEMTN 3% /2019 300,000 305,451 0.44 Carrefour sr unsecur SerEMTN 1.875% /2017 300,000 304,008 0.44 Danone sr unsecur SerEMTN 1.25% /2018 300,000 297,979 0.43 Alstom sr unsecur 4.125% /2017 250,000 268,817 0.39 Lafarge sr unsecur SerEMTN 6.75% /2019 (1) 200,000 231,840 0.34 Compagnie Generale des Etablissements Michelin sr unsecur SerML CV 0% /2017 168,600 231,823 0.34 Cie Financiere et Industrielle des Autoroutes sr unsecur 5.875% /2016 200,000 225,864 0.33 Areva sr unsecur SerEMTN 4.625% /2017 200,000 220,286 0.32 Legrand sr unsecur SerEMTN 3.375% /2022 200,000 211,831 0.31 Societe Fonciere Lyonnaise sr unsecur 3.5% /2017 (1) 200,000 211,533 0.31 LVMH Moet Hennessy Louis Vuitton sr unsecur SerEMTN 1.75% /2020 200,000 196,069 0.28 Electricité de France unsecur SerEMTN 2.75% /2023 200,000 199,688 0.29 Unibail-Rodamco sr unsecur SerEMTN 2.375% /2021 150,000 149,129 0.22 Elior Finance & Co sr secured RegS 6.5% /2020 (Luxembourg) (1) (2) 100,000 109,258 0.16 Legrand sr unsecur 4.375% /2018 100,000 111,510 0.16 Eurofins Scientific sr unsecur 3.125% /2018 (Luxembourg) (2) 100,000 100,031 0.15 Imerys sr unsecur SerEMTN 2.5% /2020 100,000 99,017 0.14 Eutelsat sr unsecur 2.625% /2020 100,000 99,252 0.14

Total for France 19.09

United Kingdom British American Tobacco Holdings co gtd SerEMTN 4.875% /2021 (Netherlands) (2) 1,000,000 1,161,845 1.69 Smiths Group co gtd 4.125% /2017 750,000 805,084 1.17 G4S International Finance co gtd SerEMTN 2.625% /2018 725,000 725,588 1.05 Heathrow Funding sr secured RegS 4.6% /2018 (Jersey) (2) 600,000 668,157 0.97 BG Energy Capital co gtd SerEMTN 3.625% /2019 600,000 651,968 0.95 Imperial Tobacco Finance co gtd SerEMTN 5% /2019 500,000 573,399 0.83

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 77 Morgan Stanley Investment Funds 31 December 2013

Euro Corporate Bond (ex Financials) Fund

As at 31 December 2013, expressed in Euro. Italy (continued) Aeroporti di Roma sr unsecur SerEMTN Nominal in 3.25% /2021 150,000 151,351 0.22 Euro unless Market % of net Ferrovie dello Stato sr unsecur SerEMTN Investments specified value assets 4% /2020 100,000 104,845 0.15 Corporate Bonds (continued) Total for Italy 11.99

United Kingdom (continued) GKN Holdings sr unsecur SerEMTN Germany 5.375% /2022 (GBP) 450,000 564,811 0.82 Siemens Financieringsmaatschappij co gtd Compass Group sr unsecur SerEMTN SerWW CV 1.65% /2019 (Netherlands) (2) (USD) 1,000,000 857,977 1.25 3.125% /2019 500,000 529,742 0.77 Linde Finance co gtd 7.375% /2066 FCE Bank sr unsecur SerEMTN 4.75% /2015 500,000 519,815 0.75 (Netherlands) (1) (2) (5) 500,000 566,744 0.82 NGG Finance co gtd SerEUR 4.25% /2076 (5) 500,000 507,330 0.74 Eurogrid co gtd SerEMTN 3.875% /2020 500,000 547,761 0.80 Westfield UK & Europe Finance co gtd Volkswagen Leasing co gtd RegS SerEMTN 4.25% /2022 (GBP) 400,000 493,674 0.72 3.375% /2016 500,000 530,790 0.77 FCE Bank sr unsecur SerEMTN Deutsche Annington Finance co gtd 1.625% /2016 475,000 478,430 0.69 3.625% /2021 (Netherlands) (2) 450,000 462,582 0.67 Experian Finance co gtd SerEMTN Deutsche Telekom International Finance 4.75% /2020 400,000 453,777 0.66 co gtd SerEMTN 6% /2017 EE Finance co gtd SerEMTN 3.5% /2017 400,000 422,575 0.61 (Netherlands) (1) (2) 400,000 457,000 0.66 GlaxoSmithKline Capital co gtd SerEMTN Siemens Financieringsmaatschappij 5.625% /2017 350,000 409,228 0.59 co gtd SerEMTN 1.75% /2021 Rentokil Initial co gtd SerEMTN (Netherlands) (2) 450,000 438,033 0.64 4.625% 27/03/2014 400,000 403,344 0.59 SAP sr unsecur SerEMTN 2.125% /2019 385,000 386,430 0.56 SSE jr subord SerEMTN 5.025% perpetual (5) 350,000 362,964 0.53 O2 Telefonica Deutschland Finanzierungs WPP Finance 2013 co gtd SerEMTN 3% /2023 350,000 347,835 0.51 co gtd 1.875% /2018 375,000 373,702 0.54 Vodafone Group sr unsecur SerEMTN Deutsche Annington Finance co gtd 6.25% /2016 300,000 332,796 0.48 2.125% /2016 (Netherlands) (2) 300,000 305,145 0.44 Anglo American Capital co gtd SerEMTN Celesio Finance co gtd SerEMTN 4% /2016 1.75% /2017 300,000 297,407 0.43 (Netherlands) (2) 275,000 289,172 0.42 WM Morrison Supermarkets co gtd SerEMTN HSE Netz sr secured 6.125% /2041 200,000 253,798 0.37 2.25% /2020 240,000 235,835 0.34 Daimler sr unsecur SerEMTN 1.5% /2018 250,000 250,022 0.36 Rolls-Royce co gtd SerEMTN 2.125% /2021 235,000 231,841 0.34 SGL Carbon sr unsecur CV 2.75% /2018 200,000 207,190 0.30 National Grid USA sr unsecur SerEMTN ThyssenKrupp sr unsecur SerEMTN 3.25% /2015 (United States of America) (2) 200,000 206,977 0.30 4.375% /2015 200,000 206,315 0.30 SSE sr unsecur SerEMTN 2.375% /2022 200,000 198,330 0.29 Brenntag Finance co gtd 5.5% /2018 Anglo American Capital co gtd Ser144A (Netherlands) (2) 150,000 168,333 0.24 priv plmt 9.375% /2019 (USD) 200,000 184,587 0.27 Vier Gas Transport sr unsecur SerEMTN InterContinental Hotels Group co gtd 2% /2020 150,000 147,972 0.22 SerEMTN 3.875% /2022 (GBP) 150,000 177,350 0.26 RWE jr subord 7% perpetual (5) (GBP) 100,000 127,292 0.19 InterContinental Hotels Group co gtd Vier Gas Transport sr unsecur SerEMTN SerEMTN 6% /2016 (GBP) 100,000 133,338 0.19 3.125% /2023 100,000 102,479 0.15 High Speed Rail Finance 1 sr secured Deutsche Annington Finance co gtd SerEMTN 4.375% /2038 (GBP) 110,000 132,103 0.19 3.125% /2019 (Netherlands) (2) 100,000 102,402 0.15 Heathrow Finance sr secured RegS 5.375% /2019 (GBP) 100,000 124,508 0.18 Total for Germany 9.85

Total for United Kingdom 17.91 Spain Telefonica Emisiones co gtd SerEMTN Italy 4.71% /2020 (1) 1,300,000 1,440,879 2.09 Enel Finance International co gtd Ser144A Amadeus Capital Markets co gtd SerEMTN priv plmt 5.125% /2019 (Netherlands) (2) (USD) 1,900,000 1,474,356 2.14 4.875% /2016 700,000 762,079 1.11 Telecom Italia sr unsecur SerEMTN Telefonica Emisiones co gtd SerEMTN 8.25% /2016 800,000 900,292 1.31 4.967% /2016 700,000 752,954 1.09 Davide Campari-Milano sr unsecur Prosegur Cia de Seguridad sr unsecur 5.375% /2016 700,000 759,973 1.11 2.75% /2018 700,000 711,155 1.03 ENI sr unsecur SerEMTN 5% /2016 700,000 757,766 1.10 Ferrovial Emisiones co gtd RegS 3.375% /2018 650,000 678,085 0.99 Luxottica Group co gtd 4% /2015 700,000 739,309 1.07 Gas Natural Capital Markets co gtd Ser4 Snam sr unsecur SerEMTN 5.25% /2022 550,000 639,789 0.93 6.375% /2019 500,000 599,816 0.87 Enel sr unsecur SerEMTN 5.25% /2017 400,000 444,833 0.65 Red Electrica Financiaciones co gtd 3.5% /2016 500,000 529,500 0.77 Enel jr subord 6.5% /2074 (1) (5) 400,000 429,964 0.63 Red Electrica Financiaciones co gtd SerEMTN Gtech Spa co gtd 5.375% /2018 350,000 393,609 0.57 2.375% /2019 400,000 401,490 0.58 Telecom Italia sr unsecur SerEMTN Telefonica Europe co gtd 6.5% perpetual 6.125% /2018 270,000 298,273 0.43 (Netherlands) (2) (5) 300,000 321,465 0.47 Snam sr unsecur SerEMTN 4.375% /2016 250,000 269,272 0.39 Gas Natural Fenosa Finance co gtd SerEMTN Snam sr unsecur SerEMTN 2.375% /2017 250,000 257,328 0.37 3.5% /2021 (Netherlands) (2) 200,000 208,323 0.30 Gtech Spa co gtd 5.375% /2016 200,000 220,964 0.32 Ferrovial Emisiones co gtd RegS 3.375% /2021 150,000 150,814 0.22 Davide Campari-Milano sr unsecur 4.5% /2019 200,000 211,893 0.31 Gas Natural Capital Markets co gtd SerEMTN Ferrovie dello Stato sr unsecur SerEMTN 5% /2018 (1) 100,000 112,341 0.17 3.5% /2021 (1) 200,000 199,975 0.29 Total for Spain 9.69

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 78

Euro Corporate Bond (ex Financials) Fund

As at 31 December 2013, expressed in Euro. Australia (continued) Australia Pacific Airports Melbourne Proprietary Nominal in sr secured SerEMTN 3.125% /2023 160,000 162,999 0.24 Euro unless Market % of net Origin Energy Finance co gtd SerEMTN Investments specified value assets 2.875% /2019 100,000 101,625 0.15 Telstra co gtd SerEMTN 2.5% /2023 100,000 97,289 0.14 Corporate Bonds (continued) Total for Australia 1.79 United States of America Philip Morris International sr unsecur 2.875% /2024 900,000 899,188 1.30 Ireland Procter & Gamble sr unsecur 4.875% /2027 500,000 597,834 0.87 WPP Finance co gtd 5.25% /2015 (France) (2) 650,000 680,971 0.99 Mondelez International sr unsecur 2.375% /2021 550,000 543,766 0.79 CRH Finland Services co gtd SerEMTN Microsoft sr unsecur 3.125% /2028 450,000 446,207 0.65 2.75% /2020 (Finland) (2) 300,000 301,508 0.44 National Grid Holdings unsecur SerEMTN Bord Gais Eireann sr unsecur SerEMTN 1.75% /2018 400,000 403,627 0.59 3.625% /2017 100,000 106,214 0.15 AT&T sr unsecur 3.55% /2032 350,000 335,864 0.49 SES Global Americas Holdings co gtd SerEMTN Total for Ireland 1.58 1.875% /2018 250,000 248,529 0.36 Microsoft sr unsecur 2.125% /2021 250,000 247,828 0.36 AT&T sr unsecur 2.5% /2023 200,000 193,814 0.28 United Arab Emirates AT&T sr unsecur 3.5% /2025 175,000 177,052 0.26 IPIC GMTN co gtd RegS 5.875% /2021 Oracle sr unsecur SerEMTN 2.25% /2021 175,000 176,234 0.25 (Cayman Islands) (2) 500,000 594,375 0.86 Abu Dhabi National Energy sr unsecur Total for United States of America 6.20 RegS 3.625% /2023 (USD) 250,000 169,082 0.25 IPIC GMTN co gtd RegS 2.375% /2018 (Cayman Islands) (2) 150,000 153,751 0.22 Netherlands RWE Finance co gtd SerEMTN 6.5% /2021 600,000 758,168 1.10 Total for United Arab Emirates 1.33 Nederlandse Gasunie sr unsecur SerEMTN 2.625% /2022 500,000 504,483 0.73 Repsol International Finance co gtd SerEMTN Brazil 3.625% /2021 400,000 413,775 0.60 Petrobras International Finance co gtd Enel Finance International co gtd SerEMTN 4.875% /2018 (Cayman Islands) (2) 700,000 756,742 1.10 4.875% /2020 310,000 344,301 0.50 Siemens Financieringsmaatschappij co gtd Total for Brazil 1.10 5.25% /2066 (5) 300,000 323,376 0.47 SPP Infrastructure financing co gtd RegS Luxembourg 3.75% /2020 200,000 206,535 0.30 ArcelorMittal sr unsecur 10.625% /2016 600,000 719,361 1.04 Enexis Holding sr unsecur SerEMTN 1.875% /2020 175,000 172,291 0.25 Repsol International Finance co gtd SerEMTN Total for Luxembourg 1.04 4.375% /2018 100,000 109,401 0.16

Total for Netherlands 4.11 China CNOOC Curtis Funding No 1 Proprietary co gtd 2.75% /2020 (Australia) (2) 265,000 266,291 0.39 Belgium Sinopec Group Overseas Development 2013 co gtd Anheuser-Busch InBev co gtd SerEMTN RegS 2.625% /2020 (British Virgin Islands) (2) 350,000 348,170 0.50 8.625% /2017 675,000 827,551 1.20 Barry Callebaut Services co gtd 5.625% /2021 500,000 559,345 0.82 Total for China 0.89 Solvay Finance co gtd 5.425% perpetual (France) (2) (5) 350,000 364,511 0.53 Anheuser-Busch InBev co gtd SerEMTN 4% /2018 300,000 331,811 0.48 Israel UCB sr unsecur SerEMTN 4.125% /2021 195,000 200,309 0.29 Teva Pharmaceutical Finance IV co gtd SerEMTN Brussels Airport Holding sr secured SerEMTN 2.875% /2019 (Curacao) (2) 500,000 518,494 0.75 3.25% /2020 100,000 103,977 0.15 Total for Israel 0.75 Total for Belgium 3.47

Finland Denmark Fingrid sr unsecur SerEMTN 3.5% /2024 450,000 473,931 0.69 AP Moeller - Maersk sr unsecur SerEMTN 3.375% /2019 500,000 529,066 0.77 Total for Finland 0.69 TDC sr unsecur SerEMTN 3.75% /2022 400,000 428,856 0.62 DONG Energy jr subord SerEXCH 6.25% /3013 (5) 340,000 373,252 0.54 Russia Gazprom Via Gaz Capital sr unsecur Total for Denmark 1.93 SerEMTN LPN 6.605% /2018 (Luxembourg) (2) 350,000 398,761 0.58

Australia Total for Russia 0.58 BHP Billiton Finance co gtd SerEMTN 2.25% /2020 425,000 426,998 0.62 Origin Energy Finance co gtd SerEMTN Norway 2.5% /2020 250,000 245,134 0.35 Statkraft sr unsecur SerEMTN 2.5% /2022 350,000 343,705 0.50 Transurban Finance Proprietary sr secured SerEMTN 2.5% /2020 200,000 200,940 0.29 Total for Norway 0.50

The accompanying notes are an integral part of these financial statements. 79 Morgan Stanley Investment Funds 31 December 2013

Euro Corporate Bond (ex Financials) Fund

Statement of investments (continued) DERIVATIVES

Unrealised Gain on Financial Futures Contracts 102,822 0.15 Total for Japan 0.47

Euro Bund Future 03/2014 5 695,850 Goldman Sachs (11,800) (0.02) South Korea Euro SCHATZ Future 03/2014 25 2,757,500 Goldman Sachs (6,000) (0.01) Korea Gas sr unsecur SerGMTN 2.375% /2019 300,000 301,623 0.44

Unrealised Loss on Financial Futures Contracts (17,800) (0.03) Total for South Korea 0.44

Net Unrealised Gain Qatar on Financial Futures Contracts (3,380,865) 85,022 0.12 Qtel International Finance co gtd RegS 3.25% /2023 (Bermuda) (2) (USD) 400,000 261,625 0.38 Cash of EUR 46,236 held as collateral by Goldman Sachs in relation to financial futures contracts.

Total for Qatar 0.38 Forward Foreign Currency Exchange Contracts Colombia Ecopetrol sr unsecur 5.875% /2023 (USD) 290,000 223,434 0.32 Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty EUR assets Total for Colombia 0.32

10/01/2014 219,322 EUR 300,000 USD Westpac Bank 1,544 0.00 Austria Atrium European Real Estate sr unsecur Unrealised Gain 4% /2020 (Jersey) (2) 200,000 200,311 0.29 on Forward Foreign Currency Exchange Contracts 1,544 0.00

Total for Austria 0.29 22/01/2014 3,198,958 EUR 4,410,000 USD Westpac Bank (2,390) 0.00 23/01/2014 1,758,215 EUR 1,480,000 GBP RBC (19,215) (0.03) India Bharti Airtel International co gtd 4% /2018 Unrealised Loss (Netherlands) (2) 200,000 201,173 0.29 on Forward Foreign Currency Exchange Contracts (21,605) (0.03)

Total for India 0.29 Net Unrealised Loss on Forward Foreign Currency Exchange Contracts (20,061) (0.03) Saudi Arabia SABIC Capital I co gtd 2.75% /2020 Total Derivatives 64,961 0.09 (Netherlands) (2) 200,000 201,058 0.29 Other Assets less Liabilities 1,857,384 2.70 Total for Saudi Arabia 0.29 Total Net Asset Value 68,863,171 100.00

Portugal REN Finance sr unsecur SerEMTN 4.75% /2020 (Netherlands) (2) 150,000 155,975 0.24 (1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser. Total for Portugal 0.24 (5) Variable coupon rates are those quoted as of 31 December 2013.

Total for Corporate Bonds 97.21

Mutual Fund

Morgan Stanley Liquidity Funds - Euro Liquidity Fund MS Reserve EUR Dist. (Luxembourg) (2) (4) 2,145 2,145 0.00

Total for Mutual Fund 0.00

Total Investment Securities 66,940,826 97.21

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 80

Euro Corporate Bond Fund

Investment aim Statement of investments

To provide an attractive rate of return, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in Euro, primarily through investment As at 31 December 2013, expressed in Euro. in Euro-denominated fixed income securities Nominal in Euro unless Market % of net of high quality issued by corporations Investments specified value assets and non-government related issuers. Corporate Bonds France Société Générale sr unsecur Ser144A priv plmt 5.2% /2021 (USD) 26,000,000 20,786,166 0.96 Banque Federative du Credit Mutuel sr unsecur Ser144A priv plmt 2.5% /2018 (USD) 24,580,000 17,674,615 0.81 BNP Paribas bnk gtd SerBKNT 5% /2021 (USD) 16,000,000 12,756,410 0.59 Edenred sr unsecur 3.625% /2017 11,000,000 11,750,095 0.54 BPCE sr unsecur SerEMTN 2% /2018 (1) 10,700,000 10,889,930 0.50 Societe Des Autoroutes Paris-Rhin-Rhone sr unsecur SerEMTN 5% /2017 (1) 9,500,000 10,499,937 0.48 Groupama sr subord 7.875% /2039 (5) 9,800,000 10,216,010 0.47 Total Capital International co gtd SerEMTN 2.125% /2021 10,000,000 9,883,320 0.45 Areva sr unsecur SerEMTN 3.25% /2020 (1) 9,500,000 9,706,891 0.45 Christian Dior sr unsecur 4% /2016 9,000,000 9,504,945 0.44 Orange sr unsecur SerEMTN 1.875% /2019 8,900,000 8,755,878 0.40 Société Générale jr subord 9.375% perpetual (5) 7,250,000 8,663,750 0.40 GELF Bond Issuer I co gtd SerEMTN 3.125% /2018 (Luxembourg) (2) 8,250,000 8,504,339 0.39 Electricité de France subord SerEMTN 4.25% perpetual (5) 8,000,000 8,266,032 0.38 Societe Fonciere Lyonnaise sr unsecur 4.625% /2016 7,000,000 7,510,227 0.35 Electricité de France sr unsecur SerEMTN 2.25% /2021 (1) 7,200,000 7,152,955 0.33 Banque Federative du Credit Mutuel sr unsecur SerEMTN 3% /2023 6,800,000 6,888,189 0.32 ALD International sr unsecur SerEMTN 2% /2017 6,800,000 6,768,380 0.31 GDF Suez jr subord 3.875% perpetual (1) (5) 6,500,000 6,721,188 0.31 Crédit Agricole sr unsecur SerEMTN 2.375% /2020 6,400,000 6,430,720 0.30 Eutelsat sr unsecur 2.625% /2020 6,300,000 6,252,845 0.29 BNP Paribas sr unsecur SerEMTN 2% /2019 (1) 5,500,000 5,558,262 0.26 Crédit Agricole subord SerEMTN 3.9% /2021 (1) 5,000,000 5,238,025 0.24 LVMH Moet Hennessy Louis Vuitton sr unsecur SerEMTN 1.75% /2020 5,325,000 5,220,337 0.24 Electricité de France unsecur SerEMTN 2.75% /2023 5,100,000 5,092,047 0.23 AXA subord SerEMTN 5.25% /2040 (5) 4,700,000 5,031,987 0.23 Unibail-Rodamco sr unsecur SerEMTN 1.625% /2017 4,875,000 4,910,424 0.23 Crédit Agricole subord SerEMTN 5.875% /2019 4,000,000 4,615,658 0.21 Banque Federative du Credit Mutuel sr unsecur SerEMTN 2% /2019 4,500,000 4,477,320 0.21 Edenred sr unsecur 2.625% /2020 4,500,000 4,444,920 0.20 Orange sr unsecur SerEMTN 3.125% /2024 4,400,000 4,370,117 0.20 Foncière des Regions sr unsecur 3.875% /2018 (1) 4,000,000 4,229,974 0.19 RCI Banque sr unsecur SerEMTN 5.625% /2015 4,000,000 4,216,014 0.19 Gecina sr unsecur SerEMTN 4.25% /2016 3,800,000 4,040,420 0.19 Carrefour sr unsecur SerEMTN 1.875% /2017 3,800,000 3,850,762 0.18 Compagnie Generale des Etablissements Michelin sr unsecur SerML CV 0% /2017 2,383,201 3,276,878 0.15 Mercialys sr unsecur 4.125% /2019 3,000,000 3,244,350 0.15 Arkema sr unsecur 3.85% /2020 (1) 3,000,000 3,236,115 0.15 AXA subord SerEMTN 5.125% /2043 (5) 3,000,000 3,158,846 0.15 Socram Banque sr unsecur 2.125% /2016 3,100,000 3,128,195 0.14 Alstom sr unsecur SerEMTN 2.25% /2017 3,000,000 3,056,400 0.14 Société Générale subord SerEMTN 4% /2023 (1) 3,000,000 3,009,684 0.14 Eurofins Scientific sr unsecur 3.125% /2018 (Luxembourg) (2) 2,950,000 2,950,900 0.14 Galeries Lafayette sr unsecur 4.5% /2017 (1) 2,700,000 2,883,654 0.13 Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 81 Morgan Stanley Investment Funds 31 December 2013

Euro Corporate Bond Fund

As at 31 December 2013, expressed in Euro. United Kingdom (continued) FCE Bank sr unsecur SerEMTN Nominal in 1.625% /2016 5,625,000 5,665,613 0.26 Euro unless Market % of net Rolls-Royce co gtd SerEMTN 2.125% /2021 (1) 5,500,000 5,426,077 0.25 Investments specified value assets Rentokil Initial co gtd SerEMTN 4.625% 27/03/2014 5,175,000 5,218,263 0.24 Corporate Bonds (continued) SABMiller Holdings co gtd SerEMTN 1.875% /2020 (United States of America) (2) 5,000,000 4,928,723 0.23 France (continued) Coventry Building Society sr unsecur Unibail-Rodamco sr unsecur SerEMTN SerEMTN 2.25% /2017 4,500,000 4,599,650 0.21 2.375% /2021 2,750,000 2,734,033 0.13 Experian Finance co gtd SerEMTN Areva sr unsecur SerEMTN 4.625% /2017 (1) 2,400,000 2,643,426 0.12 4.75% /2020 (1) 4,000,000 4,537,770 0.21 Imerys sr unsecur SerEMTN 2.5% /2020 (1) 2,500,000 2,475,413 0.11 WPP Finance 2013 co gtd SerEMTN 3% /2023 4,100,000 4,074,642 0.19 Klepierre sr unsecur SerEMTN 2.75% /2019 2,400,000 2,465,357 0.11 Compass Group sr unsecur SerEMTN Crédit Agricole sr unsecur SerEMTN 3.125% /2019 (1) 3,450,000 3,655,220 0.17 3.875% /2019 (1) 2,000,000 2,192,689 0.10 BAT International Finance co gtd SerEMTN Legrand sr unsecur SerEMTN 3.375% /2022 2,000,000 2,118,310 0.10 3.625% /2021 3,350,000 3,618,709 0.17 Lafarge sr unsecur SerEMTN EE Finance co gtd SerEMTN 3.5% /2017 (1) 3,000,000 3,169,314 0.15 6.625% /2018 (1) 1,800,000 2,066,013 0.09 Imperial Tobacco Finance co gtd SerEMTN AXA jr subord SerEMTN 6.211% perpetual (1) (5) 1,600,000 1,718,128 0.08 7.25% 15/09/2014 3,000,000 3,134,475 0.14 Societe Fonciere Lyonnaise sr unsecur Heathrow Funding secured SerEMTN 3.5% /2017 1,400,000 1,480,729 0.07 6.25% /2018 (Jersey) (1) (2) (GBP) 2,250,000 3,033,899 0.14 Orange sr unsecur SerEMTN 8.125% /2033 1,000,000 1,480,006 0.07 LBG Capital No.2 bnk gtd Ser22 Electricité de France sr unsecur 15% /2019 (1) 2,000,000 3,006,000 0.14 SerEMTN 4.5% /2040 (1) 1,000,000 1,104,078 0.05 HBOS subord SerEMTN 4.5% /2030 (1) (5) 2,830,000 2,698,164 0.12 Westfield UK & Europe Finance co gtd Total for France 14.79 SerEMTN 4.25% /2022 (GBP) 2,150,000 2,653,499 0.12 HSBC Holdings subord 3.625% /2020 (1) (5) 2,498,000 2,562,003 0.12 ICAP Group Holdings sr unsecur SerGMTN United Kingdom 7.5% 28/07/2014 (1) 2,400,000 2,472,048 0.11 HSBC Holdings subord SerEMTN Aviva subord SerEMTN 6.125% /2043 (5) 2,200,000 2,446,026 0.11 3.375% /2024 (5) 18,100,000 18,456,887 0.85 High Speed Rail Finance 1 sr secured Lloyds Bank subord SerEMTN 6.5% /2020 (1) 12,000,000 13,929,438 0.64 SerEMTN 4.375% /2038 (GBP) 2,000,000 2,401,871 0.11 Royal Bank of Scotland sr unsecur WPP co gtd SerEMTN 6.625% /2016 SerEMTN 5.5% /2020 11,070,000 12,917,910 0.59 (Jersey) (2) 2,000,000 2,259,227 0.10 Abbey National Treasury Services bnk gtd InterContinental Hotels Group co gtd SerEMTN 2.625% /2020 10,550,000 10,619,472 0.49 SerEMTN 3.875% /2022 (GBP) 1,900,000 2,246,431 0.10 NGG Finance co gtd SerEUR 4.25% /2076 (5) 9,975,000 10,121,233 0.47 Anglo American Capital co gtd Ser144A Nationwide Building Society nts Ser144A priv plmt 9.375% /2019 (USD) 2,390,000 2,205,818 0.10 priv plmt 6.25% /2020 (USD) 11,565,000 9,635,983 0.44 Standard Chartered sr unsecur SerEMTN EE Finance co gtd SerEMTN 3.25% /2018 9,000,000 9,429,547 0.43 4.125% /2019 (1) 2,000,000 2,200,810 0.10 G4S International Finance co gtd SerEMTN Heathrow Funding sr secured Ser144A 2.625% /2018 9,250,000 9,257,506 0.43 priv plmt 4.6% /2018 (Jersey) (2) 1,750,000 1,948,991 0.09 Smiths Group co gtd 4.125% /2017 8,000,000 8,587,560 0.40 InterContinental Hotels Group co gtd Co-operative Bank sr unsecur SerEMTN SerEMTN 6% /2016 (GBP) 1,267,000 1,689,390 0.08 2.375% /2015 8,800,000 8,548,012 0.39 Barclays Bank jr subord SerRCI 14% Anglo American Capital co gtd SerEMTN perpetual (5) (GBP) 900,000 1,440,282 0.07 1.75% /2017 7,850,000 7,782,160 0.36 British American Tobacco Holdings co gtd SerEMTN 2.375% /2023 (Netherlands) (2) 7,725,000 7,522,524 0.35 Total for United Kingdom 13.77 Nationwide Building Society subord SerEMTN 4.125% /2023 (1) (5) 7,000,000 7,281,554 0.34 United States of America BP Capital Markets co gtd SerEMTN Microsoft sr unsecur 2.125% /2021 15,900,000 15,761,829 0.73 2.517% /2021 7,100,000 7,172,519 0.33 Mondelez International sr unsecur Barclays Bank subord SerEMTN 6% /2021 6,200,000 7,044,570 0.32 2.375% /2021 15,450,000 15,274,874 0.70 GKN Holdings sr unsecur SerEMTN International Business Machines sr unsecur 5.375% /2022 (GBP) 5,450,000 6,840,486 0.32 1.875% /2020 15,000,000 14,812,477 0.68 Royal Bank of Scotland subord SerEMTN Goldman Sachs Group sr unsecur RegS 10.5% /2022 (1) (5) 5,500,000 6,705,875 0.31 4.5% /2016 12,000,000 12,897,222 0.59 Standard Chartered sr unsecur SerEMTN Bank of America sr unsecur SerEMTN 1.75% /2017 (1) 6,225,000 6,271,342 0.29 1.875% /2019 12,750,000 12,669,101 0.58 Imperial Tobacco Finance co gtd SerEMTN Genworth Holdings co gtd 7.2% /2021 (USD) 15,000,000 12,638,706 0.58 4.5% /2018 5,500,000 6,111,966 0.28 Microsoft sr unsecur 3.125% /2028 12,400,000 12,295,468 0.57 SSE sr unsecur SerEMTN 2.375% /2022 (1) 6,150,000 6,098,648 0.28 Citigroup sr unsecur SerEMTN 4% /2015 11,465,000 12,122,982 0.56 Heathrow Funding sr secured Bank of America sr unsecur SerEMTN SerEMTN 6.75% /2026 (Jersey) (2) (GBP) 4,050,000 5,985,974 0.28 7% /2016 10,000,000 11,400,665 0.53 Standard Chartered subord SerEMTN Goldman Sachs Group sr unsecur SerEMTN 4% /2025 (5) 6,000,000 5,974,581 0.27 4.375% /2017 10,000,000 10,870,240 0.50 Aviva subord SerEMTN 6.875% /2038 (5) 5,200,000 5,934,583 0.27 JPMorgan Chase & Co sr unsecur SerEMTN Nationwide Building Society subord SerEMTN 2.625% /2021 9,600,000 9,701,266 0.45 6.75% /2020 5,000,000 5,897,300 0.27 Simon Property Group sr unsecur Standard Chartered subord SerEMTN 2.375% /2020 8,900,000 8,900,214 0.41 3.625% /2022 (1) 6,000,000 5,851,569 0.27 Wells Fargo & Co sr unsecur SerEMTN National Express Group co gtd SerEMTN 2.25% /2020 8,650,000 8,646,678 0.40 6.25% /2017 (1) (GBP) 4,400,000 5,796,404 0.27 GE Capital Trust II RegS 5.5% /2067 (1) (5) 7,600,000 8,086,617 0.37

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 82

Euro Corporate Bond Fund

As at 31 December 2013, expressed in Euro. Italy (continued) UniCredit sr unsecur SerEMTN Nominal in 4.875% /2017 (1) 5,600,000 6,075,854 0.28 Euro unless Market % of net Intesa Sanpaolo Vita subord 5.35% /2018 5,300,000 5,598,549 0.26 Investments specified value assets FGA Capital Ireland co gtd SerEMTN 5.25% 28/02/2014 (Ireland) (2) 4,800,000 4,833,384 0.22 Corporate Bonds (continued) Luxottica Group co gtd 4% /2015 4,500,000 4,752,702 0.22 Snam sr unsecur SerEMTN 2.375% /2017 (1) 3,950,000 4,065,786 0.19 United States of America (continued) Telecom Italia sr unsecur SerEMTN JPMorgan Chase & Co subord nts 8.25% /2016 3,500,000 3,938,777 0.18 3.375% /2023 (USD) 11,350,000 7,714,327 0.36 FGA Capital Ireland co gtd SerEMTN JPMorgan Chase & Co sr unsecur SerEMTN 4% /2018 (Ireland) (2) 3,750,000 3,858,431 0.18 2.875% /2028 7,050,000 6,808,661 0.31 Aeroporti di Roma sr unsecur SerEMTN Philip Morris International sr unsecur 3.25% /2021 (1) 3,600,000 3,632,418 0.17 1.75% /2020 (1) 6,500,000 6,369,519 0.29 UniCredit sr unsecur SerEMTN 2.25% /2016 3,350,000 3,385,745 0.16 Citigroup sr unsecur SerEMTN Banca Monte dei Paschi di Siena sr unsecur 7.375% 16/06/2014 6,000,000 6,181,050 0.28 SerEMTN 4.75% 30/04/2014 3,000,000 3,009,555 0.14 SES Global Americas Holdings co gtd Ferrovie dello Stato sr unsecur SerEMTN SerEMTN 1.875% /2018 6,000,000 5,964,696 0.28 4% /2020 (1) 2,750,000 2,883,238 0.13 AT&T sr unsecur 3.5% /2025 4,825,000 4,881,602 0.23 Snam sr unsecur SerEMTN 4.375% /2016 2,400,000 2,585,010 0.12 Bank of America sr unsecur SerEMTN Pirelli & C. co gtd RegS 5.125% /2016 2,350,000 2,505,135 0.11 4.75% /2017 4,000,000 4,413,914 0.20 Assicurazioni Generali sr subord SerEMTN JPMorgan Chase & Co sr unsecur 7.75% /2042 (5) 2,100,000 2,421,535 0.11 3.25% /2022 (USD) 6,295,000 4,382,523 0.20 Davide Campari-Milano sr unsecur GE Capital European Funding co gtd 4.5% /2019 (1) 2,200,000 2,330,823 0.11 SerEMTN 4.125% /2016 (Ireland) (1) (2) 4,000,000 4,331,532 0.20 UniCredit covered SerEMTN 2.75% /2020 1,500,000 1,532,288 0.07 AT&T sr unsecur 3.55% /2032 (1) 4,500,000 4,318,254 0.20 Telecom Italia sr unsecur SerEMTN 7% /2017 1,000,000 1,119,730 0.05 AT&T sr unsecur 2.5% /2023 (1) 4,000,000 3,876,272 0.18 CRH Finance co gtd SerEMTN 5% /2019 Total for Italy 10.04 (Nertherlands) (2) 3,200,000 3,623,917 0.17 American International Group sr unsecur 6.4% /2020 (USD) 3,985,000 3,434,212 0.16 Spain Wells Fargo & Co sr unsecur SerEMTN Santander Consumer Finance sr unsecur 2.25% /2023 (1) 3,450,000 3,339,379 0.15 1.625% /2015 (1) 17,000,000 17,092,123 0.79 Citigroup subord SerEMTN 1.5% /2017 (1) (5) 3,275,000 3,237,747 0.15 Ferrovial Emisiones co gtd RegS Metropolitan Life Global Funding secured 3.375% /2018 14,000,000 14,604,898 0.67 SerGMTN 2.375% /2019 2,550,000 2,595,525 0.12 CaixaBank sr unsecur SerDMTN Philip Morris International sr unsecur 4.125% 20/11/2014 13,050,000 13,402,089 0.62 2.125% /2019 2,000,000 2,026,696 0.09 CaixaBank sr unsecur SerEMTN 2.5% /2017 11,700,000 11,889,897 0.55 Bank of America sr unsecur SerEMTN Santander International Debt bnk gtd 4.625% /2017 1,000,000 1,105,980 0.05 SerEMTN 3.5% /2015 11,500,000 11,814,410 0.54 Amadeus Capital Markets co gtd SerEMTN Total for United States of America 11.27 4.875% /2016 10,000,000 10,886,840 0.50 Banco Bilbao Vizcaya Argentaria covered 3.625% /2017 9,600,000 10,216,526 0.47 Italy Prosegur Cia de Seguridad sr unsecur Intesa Sanpaolo sr unsecur Ser144A 2.75% /2018 (1) 9,700,000 9,854,570 0.45 priv plmt 6.5% /2021 (USD) 26,000,000 20,676,414 0.95 Mapfre sr unsecur 5.125% /2015 9,000,000 9,558,810 0.44 Enel Finance International co gtd Telefonica Europe co gtd 6.5% perpetual Ser144A priv plmt 5.125% /2019 (Netherlands) (2) (5) 8,600,000 9,215,330 0.42 (Netherlands) (2) (USD) 24,750,000 19,205,433 0.88 Telefonica Emisiones co gtd SerEMTN Banca Monte dei Paschi di Siena covered 4.71% /2020 (1) 7,800,000 8,645,274 0.40 SerEMTN 4.875% /2016 13,000,000 13,698,360 0.63 BBVA Senior Finance bnk gtd SerGMTN Banco Popolare covered RegS 4.75% /2016 11,000,000 11,553,140 0.53 3.25% /2016 6,500,000 6,751,969 0.31 Assicurazioni Generali subord SerEMTN Telefonica Emisiones co gtd SerEMTN 10.125% /2042 (5) 8,000,000 10,337,912 0.48 4.693% /2019 (1) 6,000,000 6,669,549 0.31 Davide Campari-Milano sr unsecur Gas Natural Fenosa Finance co gtd 5.375% /2016 (1) 9,000,000 9,771,075 0.45 SerEMTN 3.5% /2021 (Netherlands) (1) (2) 4,900,000 5,103,921 0.24 Enel jr subord 6.5% /2074 (5) 8,800,000 9,459,208 0.44 Red Electrica Financiaciones co gtd Enel sr unsecur SerEMTN 5.25% /2017 8,000,000 8,896,664 0.41 SerEMTN 2.375% /2019 (1) 5,000,000 5,018,625 0.23 Snam sr unsecur SerEMTN 5.25% /2022 7,450,000 8,666,235 0.40 Telefonica Emisiones co gtd SerEMTN Intesa Sanpaolo sr unsecur SerEMTN 4.967% /2016 4,100,000 4,410,163 0.20 4.125% /2016 7,500,000 7,861,106 0.36 CaixaBank covered 3% /2018 (1) 4,200,000 4,367,549 0.20 Intesa Sanpaolo sr unsecur SerEMTN Telefonica Emisiones co gtd SerGMTN 3% /2019 (1) 6,800,000 6,860,173 0.32 3.961% /2021 (1) 4,000,000 4,236,980 0.20 Gtech Spa co gtd 5.375% /2018 (1) 6,000,000 6,747,585 0.31 Banco Bilbao Vizcaya Argentaria subord Telecom Italia Finance co gtd SerEMTN 4.375% /2019 (1) (5) 3,500,000 3,318,123 0.15 7.75% /2033 (Luxembourg) (2) 6,000,000 6,602,190 0.30 Gas Natural Capital Markets co gtd Assicurazioni Generali sr unsecur SerEMTN SerEMTN 4.125% /2017 2,700,000 2,922,458 0.13 5.125% /2024 6,000,000 6,539,418 0.30 Ferrovial Emisiones co gtd RegS UniCredit covered SerEMTN 2.625% /2020 6,350,000 6,378,296 0.29 3.375% /2021 (1) 2,300,000 2,312,487 0.11 Ferrovie dello Stato sr unsecur SerEMTN 3.5% /2021 (1) 6,200,000 6,199,225 0.29 Total for Spain 7.93

The accompanying notes are an integral part of these financial statements. 83 Morgan Stanley Investment Funds 31 December 2013

Euro Corporate Bond Fund

As at 31 December 2013, expressed in Euro. Netherlands (continued) LeasePlan sr unsecur SerEMTN 2.375% /2019 6,250,000 6,280,397 0.29 Nominal in TenneT Holding sr unsecur SerEMTN Euro unless Market % of net 4.5% /2022 5,000,000 5,689,267 0.26 Investments specified value assets ABN Amro Bank sr unsecur SerEMTN 4.125% /2022 5,000,000 5,533,973 0.26 Corporate Bonds (continued) ABN Amro Bank sr unsecur Ser144A priv plmt 4.25% /2017 (USD) 5,500,000 4,290,228 0.20 Germany Nederlandse Gasunie sr unsecur Muenchener Rueckversicherungs subord SerEMTN 0.875% /2015 4,100,000 4,117,769 0.19 SerEMTN 6% /2041 (5) 11,000,000 12,746,002 0.59 TenneT Holding sr unsecur SerEMTN Deutsche Annington Finance co gtd 2.125% /2020 4,100,000 4,055,974 0.19 3.625% /2021 (Netherlands) (2) 10,225,000 10,510,891 0.48 Achmea sr unsecur SerEMTN 2.5% /2020 4,000,000 3,972,258 0.18 Daimler sr unsecur SerEMTN 1.5% /2018 (1) 10,500,000 10,500,903 0.48 ING Bank subord SerEMTN O2 Telefonica Deutschland Finanzierungs 6.125% /2023 (1) (5) 2,500,000 2,785,553 0.13 co gtd 1.875% /2018 10,500,000 10,463,644 0.48 Cooperatieve Centrale Raiffeisen-Boerenleenbank Allianz Finance II co gtd SerEMTN jr subord Ser144A priv plmt 5.75% /2041 (Netherlands) (2) (5) 9,000,000 10,106,307 0.47 11% perpetual (5) (USD) 2,675,000 2,578,675 0.12 Linde Finance co gtd 7.375% /2066 Repsol International Finance co gtd (Netherlands) (2) (5) 8,700,000 9,861,341 0.45 SerEMTN 4.375% /2018 (1) 2,000,000 2,188,012 0.10 HSE Netz sr secured 6.125% /2041 7,500,000 9,517,425 0.44 Achmea subord SerEMTN 6% /2043 (1) (5) 1,200,000 1,300,366 0.06 Siemens Financieringsmaatschappij co gtd SerEMTN 1.75% /2021 Total for Netherlands 6.69 (Netherlands) (1) (2) 9,000,000 8,760,668 0.40 Commerzbank subord SerEMTN 7.75% /2021 (1) 7,000,000 8,047,935 0.37 Australia Celesio Finance co gtd 4.5% /2017 Origin Energy Finance co gtd SerEMTN (Netherlands) (2) 6,225,000 6,663,396 0.31 2.5% /2020 10,000,000 9,805,375 0.45 Allianz subord 4.75% perpetual (5) 6,200,000 6,359,445 0.29 BHP Billiton Finance co gtd SerEMTN Deutsche Telekom International Finance 2.25% /2020 5,625,000 5,651,437 0.26 co gtd SerEMTN 4.25% /2022 (Netherlands) (2) 5,000,000 5,568,020 0.26 Transurban Finance Proprietary sr secured Deutsche Annington Finance co gtd SerEMTN 2.5% /2020 5,200,000 5,224,440 0.24 2.125% /2016 (Netherlands) (2) 5,100,000 5,187,468 0.24 Macquarie Bank sr unsecur SerEMTN Volkswagen International Finance co gtd 2.5% /2018 4,775,000 4,892,706 0.23 SerEMTN 1% /2016 (Netherlands) (2) 5,000,000 5,018,362 0.23 QBE Capital Funding III co gtd Ser144A SAP sr unsecur SerEMTN 2.125% /2019 4,865,000 4,883,073 0.23 priv plmt 7.25% /2041 (Jersey) (2) (5) (USD) 6,100,000 4,590,499 0.21 BMW US Capital co gtd SerEMTN Australia Pacific Airports Melbourne 1% /2017 (United States of America) (2) 3,475,000 3,462,737 0.16 Proprietary sr secured SerEMTN RWE jr subord 7% perpetual (5) (GBP) 2,600,000 3,309,581 0.15 3.125% /2023 3,700,000 3,769,353 0.17 SGL Carbon sr unsecur CV 2.75% /2018 2,900,000 3,004,255 0.14 Amcor co gtd SerEMTN 2.75% /2023 3,600,000 3,460,032 0.16 MAN sr unsecur SerEMTN 1% /2015 2,900,000 2,919,447 0.13 Origin Energy Finance co gtd SerEMTN Siemens Financieringsmaatschappij 2.875% /2019 450,000 457,311 0.02 co gtd SerWW CV 1.65% /2019 (Netherlands) (2) (USD) 3,000,000 2,573,932 0.12 Total for Australia 1.74 Vier Gas Transport sr unsecur SerEMTN 2% /2020 2,400,000 2,367,557 0.11 United Arab Emirates Deutsche Annington Finance co gtd Xstrata Finance Dubai co gtd SerEMTN 3.125% /2019 (Netherlands) (2) 2,200,000 2,252,833 0.10 2.625% /2018 (1) 15,075,000 15,260,679 0.70 Vier Gas Transport sr unsecur SerEMTN IPIC GMTN co gtd RegS 5.875% /2021 3.125% /2023 2,100,000 2,152,049 0.10 (Cayman Islands) (2) 8,000,000 9,510,000 0.44 Brenntag Finance co gtd 5.5% /2018 ADCB Finance Cayman bnk gtd SerGMTN (Netherlands) (2) 1,500,000 1,683,330 0.08 2.5% /2018 (Cayman Islands) (1) (2) (USD) 9,000,000 6,464,691 0.30 Muenchener Rueckversicherungs jr subord Abu Dhabi National Energy sr unsecur 5.767% perpetual (1) (5) 1,200,000 1,298,059 0.06 RegS 3.625% /2023 (USD) 7,000,000 4,734,284 0.22 IPIC GMTN co gtd RegS 2.375% /2018 Total for Germany 6.87 (Cayman Islands) (1) (2) 1,750,000 1,793,773 0.08

Netherlands Total for United Arab Emirates 1.74 Cooperatieve Centrale Raiffeisen-Boerenleenbank sr unsecur RegS 6.875% /2020 (1) 15,400,000 17,462,137 0.80 Belgium ABN Amro Bank subord SerEMTN UCB sr unsecur 5.75% /2016 7,000,000 7,685,020 0.36 6.375% /2021 11,500,000 13,319,593 0.61 Anheuser-Busch InBev co gtd SerEMTN Achmea Hypotheekbank sr unsecur 8.625% /2017 5,825,000 7,141,470 0.33 SerEMTN 2% /2018 12,000,000 11,975,760 0.55 Barry Callebaut Services co gtd Cooperatieve Centrale Raiffeisen-Boerenleenbank 5.625% /2021 5,600,000 6,264,664 0.29 subord 3.875% /2023 (1) 11,500,000 11,548,127 0.53 UCB sr unsecur SerEMTN 4.125% /2021 4,705,000 4,833,094 0.22 Repsol International Finance co gtd Solvay Finance co gtd 5.425% perpetual SerEMTN 3.625% /2021 10,600,000 10,965,037 0.51 (France) (2) (5) 3,500,000 3,645,110 0.17 ING Bank sr unsecur SerEMTN 1.875% /2018 10,000,000 10,116,275 0.47 Brussels Airport Holding sr secured ING Bank subord SerEMTN 3.5% /2023 (5) 10,000,000 10,055,000 0.46 SerEMTN 3.25% /2020 3,000,000 3,119,310 0.14 SPP Infrastructure financing co gtd RegS 3.75% /2020 8,500,000 8,777,738 0.40 Total for Belgium 1.51 SRLEV co gtd 9% /2041 6,850,000 8,257,367 0.38

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 84

Euro Corporate Bond Fund

Norway Sweden DNB Bank subord SerEMTN 3% /2023 (1) (5) 9,800,000 9,885,735 0.47 Nordea Bank subord SerEMTN SpareBank 1 SR Bank sr unsecur SerEMTN 4.625% /2022 (5) 10,000,000 10,711,870 0.49 2.125% /2019 8,000,000 7,989,360 0.37 Sparebank 1 SR Bank sr unsecur SerEMTN Total for Sweden 0.49 2.125% /2020 (1) 6,450,000 6,350,992 0.29 Luxembourg Total for Norway 1.13 ArcelorMittal sr unsecur 10.625% /2016 5,300,000 6,354,355 0.29 Glencore Finance Europe co gtd SerEMTN Switzerland step cpn 4.625% /2018 (1) 3,500,000 3,838,231 0.18 Cloverie for Zurich Insurance subord SerEMTN 7.5% /2039 (Ireland) (2) (5) 9,500,000 11,359,957 0.52 Total for Luxembourg 0.47 Credit Suisse subord 5.75% /2025 (5) 5,100,000 5,463,987 0.25 Aquarius and Investments for Zurich Insurance New Zealand unsecur SerEMTN 4.25% /2043 (Ireland) (2) (5) 3,000,000 3,002,367 0.14 ASB Finance covered SerEMTN 1.5% /2018 8,750,000 8,752,231 0.40 UBS jr subord 4.28% perpetual (5) 1,100,000 1,110,912 0.05

Total for New Zealand 0.40 Total for Switzerland 0.96

Brazil South Korea Petrobras International Finance co gtd Industrial Bank of Korea sr unsecur SerGMTN 4.875% /2018 (Cayman Islands) (2) 7,700,000 8,324,162 0.38 2% /2018 13,150,000 13,029,743 0.60 Korea Gas sr unsecur SerGMTN 2.375% /2019 7,325,000 7,364,628 0.34 Total for Brazil 0.38

Total for South Korea 0.94 Russia Gazprom Via Gaz Capital sr unsecur Japan SerEMTN LPN 6.605% /2018 (Luxembourg) (2) 6,800,000 7,747,352 0.36 Sumitomo Mitsui Banking sr unsecur 2.25% /2020 12,300,000 12,195,880 0.56 Total for Russia 0.36 American Honda Finance sr unsecur SerEMTN 1.875% /2019 (United States of America) (2) 7,350,000 7,331,992 0.34 Ireland CRH Finland Services co gtd SerEMTN Total for Japan 0.90 2.75% /2020 (Finland) (2) 5,600,000 5,628,140 0.26 Bord Gais Eireann sr unsecur SerEMTN 3.625% /2017 1,450,000 1,540,110 0.07 Austria UniCredit Bank Austria sr unsecur Total for Ireland 0.33 SerEMTN 2.5% /2019 7,700,000 7,592,874 0.35 Vienna Insurance Group subord 5.5% /2043 (1) (5) 5,900,000 6,202,065 0.29 Finland Atrium European Real Estate sr unsecur Fortum sr unsecur SerEMTN 2.25% /2022 7,400,000 7,111,333 0.33 4% /2020 (Jersey) (2) 3,550,000 3,555,520 0.16 Total for Finland 0.33 Total for Austria 0.80

Qatar Mexico QNB Finance bnk gtd RegS 2.75% /2018 Petroleos Mexicanos co gtd SerEMTN (Cayman Islands) (2) (USD) 6,900,000 4,929,942 0.22 5.5% /2017 6,800,000 7,556,956 0.35 Qtel International Finance co gtd RegS America Movil sr unsecur SerEMTN 3.25% /2023 (Bermuda) (2) (USD) 3,250,000 2,125,702 0.10 4.125% /2019 4,000,000 4,410,856 0.20 Petroleos Mexicanos co gtd RegS Total for Qatar 0.32 3.125% /2020 4,050,000 4,100,064 0.19

Portugal Total for Mexico 0.74 REN Finance sr unsecur SerEMTN 4.75% /2020 (Netherlands) (2) 3,550,000 3,691,397 0.17 China EDP Finance sr unsecur SerEMTN Sinopec Group Overseas Development 2013 5.5% 18/02/2014 (Netherlands) (2) 3,300,000 3,315,295 0.15 co gtd RegS 2.625% /2020 (British Virgin Islands) (2) 8,450,000 8,405,811 0.38 Total for Portugal 0.32 CNOOC Curtis Funding No 1 Proprietary co gtd 2.75% /2020 (Australia) (2) 6,435,000 6,466,345 0.30

Total for China 0.68

The accompanying notes are an integral part of these financial statements. 85 Morgan Stanley Investment Funds 31 December 2013

Euro Corporate Bond Fund

Statement of investments (continued) DERIVATIVES

Nominal in Net unrealised Euro unless Market % of net gain/(loss) as at Investments specified value assets Maturity Number of Notional 31 December % of net Description date contracts commitments Counterparty 2013 assets Corporate Bonds (continued) Euro Bund Future 03/2014 (375) (52,188,750) Goldman Sachs 412,820 0.02 Hong Kong Long Gilt Future 03/2014 (166) (21,246,373) Goldman Sachs 425,024 0.02 Hutchison Whampoa Europe Finance 12 US 5yr T-note Future 03/2014 (406) (35,164,259) Goldman Sachs 460,509 0.02 co gtd SerEMTN 2.5% /2017 (Cayman Islands) (2) 6,000,000 6,219,390 0.29 Unrealised Gain on Financial Futures Contracts 1,298,353 0.06

Total for Hong Kong 0.29 Duration Hedged Share Class Euro BOBL Future 03/2014 (2,148) (267,275,640) Goldman Sachs 2,777,360 0.13 Slovakia Euro Bund Future 03/2014 (817) (113,701,890) Goldman Sachs 1,905,700 0.09 Zapadoslovenska Energetika unsecur Euro SCHATZ Future 03/2014 (1,422) (156,846,600) Goldman Sachs 333,831 0.01 SerEMTN 4% /2023 5,250,000 5,340,064 0.25 Unrealised Gain on Duration Hedged Total for Slovakia 0.25 Financial Futures Contracts 5,016,891 0.23

India Total Unrealised Gain on Financial Futures Contracts 6,315,244 0.29 Bharti Airtel International co gtd 4% /2018 (Netherlands) (2) 5,200,000 5,230,498 0.24 Euro BOBL Future 03/2014 325 40,439,750 Goldman Sachs (39,090) 0.00 Euro SCHATZ Future 03/2014 2,347 258,874,100 Goldman Sachs (454,005) (0.02) Total for India 0.24 US 2yr T-note Future 03/2014 812 129,549,623 Goldman Sachs (254,144) (0.01) US 10yr T-note Future 03/2014 261 23,316,090 Goldman Sachs (441,097) (0.02) Colombia US Long Bond Future 03/2014 800 74,751,737 Goldman Sachs (1,043,512) (0.05) Ecopetrol sr unsecur 5.875% /2023 (USD) 6,690,000 5,154,402 0.24 US Treasury Ultra Bond Future 03/2014 374 37,237,172 Goldman Sachs (328,617) (0.02) Total for Colombia 0.24 Total Unrealised Loss on Financial Futures Contracts (2,560,465) (0.12)

Czech Republic Net Unrealised Gain CEZ sr unsecur Ser144A priv plmt on Financial Futures Contracts (82,255,040) 3,754,779 0.17 4.25% /2022 (USD) 6,130,000 4,473,668 0.21

Total for Czech Republic 0.21 Cash of EUR 10,391,103 held as collateral by Goldman Sachs in relation to financial futures contracts.

Saudi Arabia Forward Foreign Currency Exchange Contracts SABIC Capital I co gtd 2.75% /2020 (Netherlands) (1) (2) 3,800,000 3,820,110 0.18 Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty EUR assets Total for Saudi Arabia 0.18

Total for Corporate Bonds 87.90 22/01/2014 1,462,374 EUR 2,000,000 USD Commonwealth Bank 10,516 0.00 22/01/2014 7,676,073 EUR 10,500,000 USD Westpac Bank 53,815 0.00

Mutual Fund Unrealised Gain on Forward Foreign Currency Exchange Contracts 64,331 0.00 Morgan Stanley Liquidity Funds - Euro Liquidity Fund MS Reserve EUR Dist. (Luxembourg) (2) (4) 106,783,112 106,783,112 4.91 USD Hedged Share Class 10/01/2014 44,979 EUR 61,501 USD J.P. Morgan 334 0.00 10/01/2014 10,963 USD 7,944 EUR J.P. Morgan 13 0.00 Total for Mutual Fund 4.91

Unrealised Gain on NAV Hedged Share Classes Mortgage and Asset Backed Securities Forward Foreign Currency Exchange Contracts 347 0.00

United Kingdom Total Unrealised Gain Taurus 2013-GMF1 A 1.268% /2024 (5) 5,770,641 5,803,823 0.27 on Forward Foreign Currency Exchange Contracts 64,678 0.00

Total for United Kingdom 0.27 22/01/2014 87,415,302 EUR 120,495,000 USD HSBC (55,542) 0.00 22/01/2014 87,416,570 EUR 120,495,000 USD State Street (54,274) 0.00 Total for Mortgage and Asset Backed Securities 0.27 23/01/2014 35,681,065 EUR 30,035,000 GBP RBC (389,946) (0.02)

Total Investment Securities 2,021,277,455 93.08 Unrealised Loss on Forward Foreign Currency Exchange Contracts (499,762) (0.02)

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 86

Euro Corporate Bond Fund

DERIVATIVES (continued) Interest Rate Swap Contracts

Over-the-counter (OTC) and exchange traded derivatives Net unrealised gain/(loss) as at as at 31 December 2013, expressed in Euro. Notional Maturity 31 December % of net Description Currency amount date Counterparty 2013 assets Forward Foreign Currency Exchange Contracts (continued) Pay fixed rate 2.040% Unrealised Receive floating rate Maturity Amount Amount gain/(loss) % of net USD LIBOR 3 months USD 30,990,000 13/02/2023 Bank of America 1,377,581 0.06 date bought Ccy sold Ccy Counterparty EUR assets

Pay fixed rate 2.058% USD Hedged Share Class Receive floating rate 10/01/2014 23,085,157 USD 16,788,656 EUR J.P. Morgan (30,529) 0.00 USD LIBOR 3 months USD 40,530,000 06/02/2023 J.P. Morgan 1,733,406 0.08

Unrealised Loss on NAV Hedged Share Classes Pay fixed rate 2.091% Forward Foreign Currency Exchange Contracts (30,529) 0.00 Receive floating rate USD LIBOR 3 months USD 47,190,000 15/02/2023 J.P. Morgan 1,950,525 0.09 Total Unrealised Loss on Forward Foreign Currency Exchange Contracts (530,291) (0.02) Pay fixed rate 2.748% Receive floating rate USD LIBOR 3 months USD 158,950,000 20/11/2023 Deutsche Bank 2,131,634 0.10 Net Unrealised Loss on Forward Foreign Currency Exchange Contracts (465,613) (0.02) Pay fixed rate 2.803% Receive floating rate Royal Bank Credit Default Contracts USD LIBOR 3 months USD 19,070,000 01/05/2043 of Scotland 2,589,108 0.12

Net unrealised Pay fixed rate 2.903% gain/(loss) as at Receive floating rate Risk Notional Maturity 31 December % of net USD LIBOR 3 months USD 28,530,000 13/05/2043 UBS 3,501,980 0.16 position Description Ccy amount date Counterparty 2013 assets Unrealised Gain on Interest Rate Swap Contracts 13,284,234 0.61 Sell iTraxx Europe Senior Financials Series 20 01/12/2018 EUR 60,000,000 20/12/2018 Morgan Stanley 373,154 0.02 Pay fixed rate 0.478% Receive floating rate Sell iTraxx Europe USD LIBOR 3 months USD 251,997,000 01/08/2015 Goldman Sachs (573,163) (0.02) Series 20 01/12/2018 EUR 7,500,000 20/12/2018 Bank of America 107,941 0.01 Pay fixed rate 3.706% Receive floating rate Societe Generale USD LIBOR 3 months USD 46,700,000 25/01/2020 Bank of America (3,641,385) (0.17) Sell iTraxx Europe Corporate Series 20 & Investment Unrealised Loss on Interest Rate Swap Contracts (4,214,548) (0.19) 01/12/2018 EUR 15,000,000 20/12/2018 Banking 215,882 0.01 Net Unrealised Gain on Interest Rate Swap Contracts 9,069,686 0.42 Sell iTraxx Europe Series 20 Cash of EUR 281,567 paid as collateral by Morgan Stanley in relation to OTC contracts. 01/12/2018 EUR 20,000,000 20/12/2018 Barclays Capital 287,842 0.01 Cash of EUR 510,000 paid as collateral by Societe Generale Corporate & Investment Banking in relation to OTC contracts. Societe Generale Cash of EUR 50,000 held as collateral by HSBC in relation to OTC contracts. Sell iTraxx Europe Corporate Cash of EUR 740,000 held as collateral by State Street in relation to OTC contracts. Series 20 & Investment Cash of EUR 1,964,000 held as collateral by Bank of America in relation to OTC contracts. 01/12/2018 EUR 20,000,000 20/12/2018 Banking 287,843 0.01 Cash of EUR 3,609,839 paid as collateral by J.P. Morgan in relation to OTC contracts. Cash of EUR 2,579,000 paid as collateral by Deutsche Bank in relation to OTC contracts. Net Unrealised Gain on Credit Default Swap Contracts 1,272,662 0.06 Cash of EUR 2,601,000 paid as collateral by Royal Bank of Scotland in relation to OTC contracts. Cash of EUR 3,479,000 paid as collateral by UBS in relation to OTC contracts. Cash of EUR 586,000 held as collateral by Goldman Sachs in relation to OTC contracts.

Total Derivatives 13,631,514 0.63

Other Assets less Liabilities 136,627,430 6.29

Total Net Asset Value 2,171,536,399 100.00

The accompanying notes are an integral part of these financial statements. 87 Morgan Stanley Investment Funds 31 December 2013

Euro Strategic Bond Fund

Investment aim Statement of investments

To provide an attractive rate of return, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in Euro, through market, instrument As at 31 December 2013, expressed in Euro. and currency selection. The Fund consists of Nominal in Euro unless Market % of net fixed income securities of varying maturities Investments specified value assets denominated primarily in the Euro and other Corporate Bonds France European currencies and may invest in other Compagnie de Financement Foncier covered SerEMTN 4.375% /2021 2,000,000 2,321,857 0.45 fixed income securities denominated in other Société Générale sr unsecur Ser144A priv plmt 5.2% /2021 (USD) 2,445,000 1,954,699 0.38 currencies including Emerging Markets fixed Crédit Agricole subord SerEMTN 3.9% /2021 (1) 1,650,000 1,728,548 0.33 income securities. BPCE sr unsecur SerEMTN 2% /2018 1,600,000 1,628,401 0.32 BNP Paribas Home Loan covered 3.875% /2021 1,200,000 1,364,453 0.26 BNP Paribas Home Loan covered SerEMTN 3.75% /2021 (1) 1,100,000 1,240,329 0.24 BNP Paribas bnk gtd SerBKNT 5% /2021 (USD) 1,370,000 1,092,268 0.21 Europcar Groupe subord RegS 9.375% /2018 (1) 1,000,000 1,071,665 0.21 La Financiere Atalian sr unsecur RegS 7.25% /2020 1,000,000 1,058,330 0.20 AXA subord SerEMTN 5.25% /2040 (5) 950,000 1,017,104 0.20 Societe Des Autoroutes Paris-Rhin-Rhone sr unsecur SerEMTN 5% /2017 900,000 994,731 0.19 Société Générale covered 1.625% /2021 1,000,000 985,390 0.19 Elior Finance & Co sr secured RegS 6.5% /2020 (Luxembourg) (2) 900,000 983,322 0.19 GELF Bond Issuer I co gtd SerEMTN 3.125% /2018 (Luxembourg) (2) 950,000 979,288 0.19 Christian Dior sr unsecur 4% /2016 900,000 950,494 0.18 GDF Suez jr subord 3.875% perpetual (5) 900,000 930,626 0.18 Banque Federative du Credit Mutuel sr unsecur SerEMTN 3% /2023 900,000 911,672 0.18 Electricité de France unsecur SerEMTN 2.75% /2023 900,000 898,596 0.17 Orange sr unsecur SerEMTN 1.875% /2019 900,000 885,426 0.17 Mercialys sr unsecur 4.125% /2019 800,000 865,160 0.17 BNP Paribas subord SerEMTN 5.431% /2017 (1) 750,000 847,899 0.16 Electricité de France subord SerEMTN 4.25% perpetual (5) 800,000 826,603 0.16 Compagnie Generale des Etablissements Michelin sr unsecur SerML CV 0% /2017 582,300 800,657 0.16 Eutelsat sr unsecur 2.625% /2020 800,000 794,012 0.15 Lafarge sr unsecur SerEMTN 4.75% /2020 750,000 791,771 0.15 Foncière des Regions sr unsecur 3.875% /2018 (1) 700,000 740,245 0.14 Unibail-Rodamco sr unsecur SerEMTN 2.375% /2021 700,000 695,936 0.14 Electricité de France sr unsecur SerEMTN 2.25% /2021 700,000 695,426 0.13 Banque Federative du Credit Mutuel sr unsecur SerEMTN 3% /2015 (1) 650,000 675,545 0.13 Carrefour sr unsecur SerEMTN 1.875% /2017 650,000 658,683 0.13 RCI Banque sr unsecur SerEMTN 5.625% /2015 600,000 632,402 0.12 AXA subord SerEMTN 5.125% /2043 (5) 550,000 579,122 0.11 Eutelsat sr unsecur 5% /2019 500,000 560,750 0.11 Societe Fonciere Lyonnaise sr unsecur 4.625% /2016 500,000 536,445 0.10 Edenred sr unsecur 3.625% /2017 500,000 534,095 0.10 Unibail-Rodamco sr unsecur SerEMTN 1.625% /2017 525,000 528,815 0.10 Alstom sr unsecur SerEMTN 2.25% /2017 500,000 509,400 0.10 Crédit Agricole sr unsecur SerEMTN 2.375% /2020 500,000 502,400 0.10 Orange sr unsecur SerEMTN 3.125% /2024 500,000 496,604 0.10 Eurofins Scientific sr unsecur 3.125% /2018 (Luxembourg) (2) 475,000 475,145 0.09 Arkema sr unsecur 3.85% /2020 (1) 400,000 431,482 0.08 Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 88

Euro Strategic Bond Fund

As at 31 December 2013, expressed in Euro. United Kingdom (continued) Westfield UK & Europe Finance co gtd Nominal in SerEMTN 4.25% /2022 (GBP) 400,000 493,674 0.09 Euro unless Market % of net High Speed Rail Finance 1 sr secured Investments specified value assets SerEMTN 4.375% /2038 (GBP) 400,000 480,374 0.09 Rolls-Royce co gtd SerEMTN 2.125% /2021 475,000 468,616 0.09 Corporate Bonds (continued) Anglo American Capital co gtd Ser144A priv plmt 9.375% /2019 (USD) 500,000 461,468 0.09 France (continued) Royal Bank of Scotland subord SerEMTN Socram Banque sr unsecur 2.125% /2016 400,000 403,638 0.08 6.934% /2018 (1) 400,000 454,748 0.09 Legrand sr unsecur 4.375% /2018 300,000 334,530 0.07 Experian Finance co gtd SerEMTN 4.75% /2020 400,000 453,777 0.09 Areva sr unsecur SerEMTN 4.625% /2017 300,000 330,428 0.06 EE Finance co gtd SerEMTN 3.5% /2017 425,000 448,986 0.09 Crédit Agricole sr unsecur SerEMTN Heathrow Funding sr secured Ser144A 3.875% /2019 (1) 300,000 328,903 0.06 priv plmt 4.6% /2018 (Jersey) (2) 400,000 445,484 0.09 AXA sr unsecur SerEMTN 4.5% /2015 300,000 311,920 0.06 Heathrow Funding sr secured 4.375% /2017 400,000 435,939 0.08 Klepierre sr unsecur SerEMTN 2.75% /2019 300,000 308,170 0.06 BAT International Finance co gtd SerEMTN Banque Federative du Credit Mutuel 3.625% /2021 400,000 432,085 0.08 sr unsecur SerEMTN 2% /2019 300,000 298,488 0.06 Barclays Bank sr unsecur SerEMTN Gecina sr unsecur SerEMTN 4.25% /2016 200,000 212,654 0.04 4.125% /2016 400,000 427,547 0.08 Legrand sr unsecur SerEMTN 3.375% /2022 200,000 211,831 0.04 Bakkavor Finance 2 sr secured RegS Societe Fonciere Lyonnaise sr unsecur 8.25% /2018 (GBP) 325,000 418,591 0.08 3.5% /2017 200,000 211,533 0.04 Standard Chartered subord SerEMTN Picard Groupe SAS sr secured RegS 3.625% /2022 (1) 425,000 414,486 0.08 4.48% /2019 (5) 200,000 204,079 0.04 Co-operative Bank sr unsecur SerEMTN Veolia Environnement sr unsecur SerEMTN 2.375% /2015 400,000 388,546 0.07 5.125% /2022 (1) 114,000 133,773 0.03 Compass Group sr unsecur SerEMTN 3.125% /2019 350,000 370,819 0.07 Total for France 7.81 WPP Finance 2013 co gtd SerEMTN 3% /2023 350,000 347,835 0.07 National Express Group co gtd SerEMTN 6.25% /2017 (1) (GBP) 250,000 329,341 0.06 United Kingdom Royal Bank of Scotland subord SerEMTN Lloyds Bank subord SerEMTN 6.5% /2020 (1) 2,300,000 2,669,809 0.51 10.5% /2022 (1) (5) 258,000 314,567 0.06 Abbey National Treasury Services covered HSBC Holdings subord 3.625% /2020 (1) (5) 300,000 307,686 0.06 SerEMTN 3.625% /2016 2,250,000 2,427,846 0.47 HBOS subord SerEMTN 4.5% /2030 (5) 300,000 286,025 0.05 Royal Bank of Scotland sr unsecur Standard Chartered sr unsecur SerEMTN SerEMTN 5.5% /2020 1,800,000 2,100,473 0.41 1.75% /2017 (1) 250,000 251,861 0.05 FCE Bank sr unsecur SerEMTN 1.625% /2016 1,800,000 1,812,996 0.35 Barclays Bank jr subord SerRCI 14% HSBC Holdings subord SerEMTN 6% /2019 1,300,000 1,510,714 0.29 perpetual (5) (GBP) 150,000 240,047 0.05 Barclays Bank subord SerEMTN 6% /2021 1,050,000 1,193,032 0.23 InterContinental Hotels Group co gtd Nationwide Building Society subord SerEMTN 3.875% /2022 (GBP) 200,000 236,466 0.05 SerEMTN 6.75% /2020 1,000,000 1,179,460 0.23 Imperial Tobacco Finance co gtd SerEMTN NGG Finance co gtd SerEUR 4.25% /2076 (5) 1,100,000 1,116,126 0.22 4.5% /2018 200,000 222,253 0.04 Standard Chartered sr unsecur 3.875% /2016 1,000,000 1,074,959 0.21 BP Capital Markets co gtd SerEMTN Yorkshire Building Society covered 3.83% /2017 200,000 218,241 0.04 SerEMTN 3.25% /2015 1,000,000 1,045,630 0.20 Smiths Group co gtd 4.125% /2017 195,000 209,322 0.04 HSBC Holdings sr unsecur 4% /2022 (USD) 1,375,000 1,023,814 0.20 InterContinental Hotels Group co gtd G4S International Finance co gtd SerEMTN SerEMTN 6% /2016 (GBP) 150,000 200,007 0.04 2.625% /2018 975,000 975,791 0.19 Barclays Bank sr unsecur 3.5% /2015 150,000 155,073 0.03 Aviva subord SerEMTN 6.875% /2038 (5) 800,000 913,013 0.18 Standard Chartered sr unsecur SerEMTN SSE sr unsecur SerEMTN 2.375% /2022 900,000 892,485 0.17 4.125% /2019 (1) 100,000 110,041 0.02 Grainger sr secured 5% /2020 (GBP) 700,000 857,785 0.17 Anglo American Capital co gtd SerEMTN 1.75% /2017 850,000 842,654 0.16 Total for United Kingdom 7.42 Bank of Scotland covered SerEMTN 4.625% /2017 700,000 787,265 0.15 Spain Nationwide Building Society subord SerEMTN Instituto de Credito Oficial govt gtd SerGMTN 4.125% /2023 (5) 750,000 780,166 0.15 2.375% /2015 4,900,000 4,972,520 0.96 Standard Chartered subord SerEMTN CaixaBank covered 3% /2018 2,400,000 2,495,742 0.48 4% /2025 (5) 675,000 672,140 0.13 Banco Popular Espanol covered SerEMTN HSBC Bank sr unsecur SerEMTN 3.5% /2017 2,400,000 2,491,404 0.48 3.125% /2017 600,000 640,612 0.12 Banco Bilbao Vizcaya Argentaria covered Imperial Tobacco Finance co gtd SerEMTN 3.625% /2017 2,000,000 2,128,443 0.41 7.25% 15/09/2014 600,000 626,895 0.12 Santander International Debt bnk gtd Anglian Water Osprey Financing sr secured SerEMTN 4% /2017 1,500,000 1,605,210 0.31 SerEMTN 7% /2018 (GBP) 450,000 585,990 0.11 CaixaBank sr unsecur SerEMTN 2.5% /2017 1,500,000 1,524,346 0.29 Imperial Tobacco Finance co gtd SerEMTN Santander Consumer Finance sr unsecur 8.375% /2016 500,000 575,609 0.11 1.625% /2015 1,500,000 1,508,128 0.29 Kelda Finance No 3 sr secured RegS Banco Santander covered 2.875% /2018 (1) 1,400,000 1,462,390 0.28 5.75% /2020 (GBP) 450,000 558,876 0.11 BBVA Senior Finance bnk gtd SerGMTN Aviva subord SerEMTN 6.125% /2043 (5) 500,000 555,915 0.11 3.25% /2016 1,300,000 1,350,394 0.26 British American Tobacco Holdings co gtd FADE - Fondo de Amortizacion del Deficit SerEMTN 2.375% /2023 (Netherlands) (2) 550,000 535,584 0.10 Electrico govt gtd 5% /2015 1,200,000 1,261,386 0.24 HSBC Holdings subord SerEMTN Ferrovial Emisiones co gtd RegS 3.375% /2024 (5) 525,000 535,352 0.10 3.375% /2018 1,200,000 1,251,848 0.24

The accompanying notes are an integral part of these financial statements. 89 Morgan Stanley Investment Funds 31 December 2013

Euro Strategic Bond Fund

As at 31 December 2013, expressed in Euro. United States of America (continued) JPMorgan Chase & Co sr unsecur SerEMTN Nominal in 2.625% /2021 550,000 555,802 0.11 Euro unless Market % of net WM Covered Bond Program covered Investments specified value assets SerEMTN 4% /2016 500,000 541,177 0.10 PACCAR Financial Europe sr unsecur Corporate Bonds (continued) SerEMTN 0.672% /2016 (Netherlands) (2) (5) 500,000 500,178 0.10 Pioneer Natural Resources sr unsecur Spain (continued) 7.5% /2020 (USD) 500,000 441,316 0.09 Telefonica Europe co gtd 6.5% perpetual Oracle sr unsecur SerEMTN 2.25% /2021 400,000 402,820 0.08 (Netherlands) (2) (5) 1,000,000 1,071,550 0.21 Wells Fargo & Co sr unsecur SerEMTN BBVA Senior Finance bnk gtd SerEMTN 2.25% /2023 (1) 400,000 387,174 0.08 3.625% 03/10/2014 1,000,000 1,019,880 0.20 Metropolitan Life Global Funding secured Amadeus Capital Markets co gtd SerEMTN SerGMTN 2.375% /2019 325,000 330,802 0.06 4.875% /2016 900,000 979,816 0.19 Philip Morris International sr unsecur Santander International Debt bnk gtd SerEMTN 5.875% /2015 250,000 271,455 0.05 SerEMTN 4.625% /2016 900,000 961,260 0.19 Citigroup subord SerEMTN 1.5% /2017 (5) 200,000 197,725 0.04 Red Electrica Financiaciones co gtd AT&T sr unsecur 2.5% /2023 200,000 193,814 0.04 SerEMTN 2.375% /2019 700,000 702,608 0.14 American International Group sr unsecur Empark Funding sr secured RegS 6.4% /2020 (USD) 185,000 159,430 0.03 6.75% /2019 500,000 513,978 0.10 Gas Natural Capital Markets co gtd Total for United States of America 4.50 SerEMTN 4.125% /2017 400,000 432,957 0.08 Prosegur Cia de Seguridad sr unsecur Italy 2.75% /2018 (1) 400,000 406,374 0.08 Intesa Sanpaolo sr unsecur Ser144A CaixaBank covered Ser28 priv plmt 6.5% /2021 (USD) 2,060,000 1,638,208 0.32 3.375% 30/06/2014 400,000 404,890 0.08 Banca Monte dei Paschi di Siena covered Telefonica Emisiones co gtd SerGMTN SerEMTN 4.875% /2016 1,400,000 1,475,208 0.29 3.661% /2017 (1) 350,000 373,651 0.07 Enel sr unsecur SerEMTN 5.25% /2017 1,250,000 1,390,104 0.27 Santander International Debt bnk gtd Snam sr unsecur SerEMTN 5.25% /2022 1,000,000 1,163,253 0.22 SerEMTN 3.5% /2015 350,000 359,569 0.07 Gtech Spa co gtd 5.375% /2018 850,000 955,908 0.18 Ferrovial Emisiones co gtd RegS Ferrovie dello Stato sr unsecur SerEMTN 3.375% /2021 (1) 250,000 251,357 0.05 3.5% /2021 (1) 950,000 949,881 0.18 Telefonica Emisiones co gtd SerEMTN Ferrovie dello Stato sr unsecur SerEMTN 4.967% /2016 200,000 215,130 0.04 4% /2020 900,000 943,605 0.18 CaixaBank sr unsecur SerDMTN Wind Acquisition Finance sr secured RegS 4.125% 20/11/2014 200,000 205,396 0.04 7.375% /2018 (Luxembourg) (2) 875,000 926,603 0.18 Santander US Debt bnk gtd Ser144A Enel jr subord 6.5% /2074 (5) 825,000 886,801 0.17 priv plmt 3.724% /2015 (USD) 30,000 22,219 0.00 Banco Popolare covered RegS 4.75% /2016 800,000 840,228 0.16 Telecom Italia Finance co gtd SerEMTN Total for Spain 5.78 7.75% /2033 (Luxembourg) (2) 700,000 770,255 0.15 FGA Capital Ireland co gtd SerEMTN 5.25% 28/02/2014 (Ireland) (2) 750,000 755,216 0.15 United States of America FGA Capital Ireland co gtd SerEMTN BA Covered Bond Issuer covered SerEMTN 4% /2018 (Ireland) (2) 700,000 720,240 0.14 4.25% /2017 2,000,000 2,198,846 0.42 Assicurazioni Generali sr subord SerEMTN Philip Morris International sr unsecur 7.75% /2042 (5) 600,000 691,867 0.13 1.75% /2020 2,000,000 1,959,852 0.38 Davide Campari-Milano sr unsecur 4.5% /2019 650,000 688,652 0.13 JPMorgan Chase & Co sr unsecur SerEMTN UniCredit covered SerEMTN 2.625% /2020 650,000 652,896 0.13 2.75% /2023 1,300,000 1,308,974 0.25 Banca Monte dei Paschi di Siena covered Microsoft sr unsecur 2.125% /2021 1,250,000 1,239,137 0.24 3.125% /2015 600,000 609,192 0.12 Mondelez International sr unsecur Enel Finance International co gtd Ser144A 2.375% /2021 1,200,000 1,186,398 0.23 priv plmt 5.125% /2019 (Netherlands) (2) (USD) 700,000 543,184 0.11 GE Capital European Funding co gtd UniCredit sr unsecur SerEMTN 4.875% /2017 500,000 542,487 0.10 SerEMTN 3.75% /2016 (Ireland) (2) 1,000,000 1,061,196 0.20 Aeroporti di Roma sr unsecur SerEMTN Wells Fargo & Co sr unsecur SerEMTN 3.25% /2021 (1) 500,000 504,503 0.10 2.25% /2020 1,050,000 1,049,597 0.20 Snam sr unsecur SerEMTN 2.375% /2017 450,000 463,191 0.09 Bank of America sr unsecur SerEMTN Snam sr unsecur SerEMTN 4.375% /2016 400,000 430,835 0.08 1.875% /2019 1,000,000 993,655 0.19 Intesa Sanpaolo Vita subord 5.35% /2018 400,000 422,532 0.08 Microsoft sr unsecur 3.125% /2028 1,000,000 991,570 0.19 Intesa Sanpaolo sr unsecur SerEMTN Goldman Sachs Group sr unsecur 4.125% /2016 400,000 419,259 0.08 SerEMTN 4.375% /2017 900,000 978,322 0.19 Assicurazioni Generali subord SerEMTN Goldman Sachs Group sr unsecur 10.125% /2042 (5) 300,000 387,672 0.08 SerEMTN 6.375% /2018 (1) 800,000 948,057 0.18 Telecom Italia sr unsecur SerEMTN JPMorgan Chase & Co sr unsecur 8.25% /2016 300,000 337,610 0.07 SerEMTN 2.875% /2028 900,000 869,191 0.17 Assicurazioni Generali sr unsecur SerEMTN SES Global Americas Holdings co gtd 5.125% /2024 250,000 272,476 0.05 Gtech Spa co gtd 5.375% /2016 (1) 200,000 220,964 0.04 SerEMTN 1.875% /2018 825,000 820,146 0.16 UniCredit covered SerEMTN 2.75% /2020 200,000 204,305 0.04 AT&T sr unsecur 3.5% /2025 800,000 809,385 0.16 Pirelli & C. co gtd RegS 5.125% /2016 100,000 106,602 0.02 GE Capital Trust II RegS 5.5% /2067 (5) 750,000 798,021 0.15 Telecom Italia sr unsecur RegS 5.125% /2016 100,000 105,548 0.02 Citigroup sr unsecur SerEMTN 4% /2015 750,000 793,043 0.15 AT&T sr unsecur 3.55% /2032 (1) 800,000 767,690 0.15 Merrill Lynch & Co sr unsecur SerEMTN Total for Italy 4.06 4.875% 30/05/2014 550,000 559,287 0.11

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 90

Euro Strategic Bond Fund

As at 31 December 2013, expressed in Euro. Netherlands (continued) ABN Amro Bank sr unsecur Ser144A Nominal in priv plmt 4.25% /2017 (USD) 830,000 647,434 0.12 Euro unless Market % of net Cooperatieve Centrale Raiffeisen-Boerenleenbank Investments specified value assets sr unsecur RegS 6.875% /2020 500,000 566,952 0.11 Cooperatieve Centrale Raiffeisen-Boerenleenbank Corporate Bonds (continued) unsecur SerEMTN 3.5% /2018 500,000 541,958 0.10 SPP Infrastructure financing co gtd RegS Germany 3.75% /2020 500,000 516,337 0.10 State of Saxony-Anhalt Ser13 3.75% /2021 1,800,000 2,035,968 0.39 Enel Finance International co gtd SerEMTN Deutsche Bank subord SerEMTN 5% /2020 (1) 1,700,000 1,879,112 0.36 4.875% /2020 (1) 400,000 444,260 0.09 Deutsche Annington Finance co gtd Enexis Holding sr unsecur SerEMTN 3.625% /2021 (Netherlands) (2) 1,250,000 1,284,950 0.25 1.875% /2020 450,000 443,033 0.09 Allianz Finance II co gtd SerEMTN ABN AMRO Bank sr unsecur SerEMTN 5.75% /2041 (Netherlands) (2) (5) 1,000,000 1,122,923 0.22 4.25% /2016 400,000 429,648 0.08 Daimler sr unsecur SerEMTN 1.5% /2018 1,100,000 1,100,095 0.21 Achmea sr unsecur SerEMTN 2.5% /2020 400,000 397,226 0.08 Volkswagen International Finance co gtd Achmea subord SerEMTN 6% /2043 (5) 300,000 325,091 0.06 SerEMTN 1.875% /2017 (Netherlands) (2) 1,000,000 1,024,433 0.20 Cooperatieve Centrale Raiffeisen-Boerenleenbank BMW Finance co gtd SerEMTN sr unsecur SerEMTN 3.875% /2016 175,000 186,697 0.04 2.125% /2015 (Nertherlands) (2) 900,000 914,868 0.18 Cooperatieve Centrale Raiffeisen-Boerenleenbank RWE jr subord 7% perpetual (5) (GBP) 700,000 891,041 0.17 jr subord Ser144A priv plmt 11% perpetual (5) (USD) 105,000 101,219 0.02 SAP sr unsecur SerEMTN 2.125% /2019 850,000 853,158 0.16 O2 Telefonica Deutschland Finanzierungs Total for Netherlands 2.75 co gtd 1.875% /2018 850,000 847,057 0.16 Commerzbank subord SerEMTN 7.75% /2021 700,000 804,793 0.16 SGL Carbon sr unsecur CV 2.75% /2018 700,000 725,165 0.14 Australia Allianz subord 4.75% perpetual (5) 700,000 718,002 0.14 Santos Finance co gtd SerEMTN Deutsche Annington Finance co gtd 8.25% /2070 (5) 1,450,000 1,633,969 0.31 2.125% /2016 (Netherlands) (2) 700,000 712,005 0.14 Macquarie Bank sr unsecur SerEMTN Muenchener Rueckversicherungs subord 2.5% /2018 800,000 819,720 0.16 SerEMTN 6% /2041 (5) 600,000 695,236 0.13 BHP Billiton Finance co gtd SerEMTN Deutsche Telekom International Finance 2.25% /2020 650,000 653,055 0.13 co gtd SerEMTN 4.25% /2022 (Netherlands) (2) 600,000 668,162 0.13 Commonwealth Bank of Australia covered Siemens Financieringsmaatschappij co gtd SerEMTN 2.625% /2017 600,000 633,110 0.12 SerWW CV 1.65% /2019 (Netherlands) (2) (USD) 750,000 643,483 0.12 Australia Pacific Airports Melbourne Proprietary KION Finance sr secured RegS 6.75% /2020 sr secured SerEMTN 3.125% /2023 550,000 560,309 0.11 (Luxembourg) (2) 500,000 547,710 0.11 Transurban Finance Proprietary sr secured Vier Gas Transport sr unsecur SerEMTN SerEMTN 2.5% /2020 500,000 502,350 0.10 3.125% /2023 500,000 512,393 0.10 Telstra co gtd SerEMTN 2.5% /2023 (1) 400,000 389,158 0.07 Vier Gas Transport sr unsecur SerEMTN Amcor co gtd SerEMTN 2.75% /2023 400,000 384,448 0.07 2% /2020 500,000 493,241 0.10 QBE Capital Funding III co gtd Ser144A Linde Finance co gtd 7.375% /2066 priv plmt 7.25% /2041 (Jersey) (2) (5) (USD) 400,000 301,016 0.06 (Netherlands) (2) (5) 350,000 396,721 0.08 Commonwealth Bank of Australia sr unsecur Phoenix PIB Dutch Finance co gtd SerEMTN Ser144A priv plmt 5% /2019 (USD) 310,000 251,082 0.05 3.125% /2020 (Netherlands) (1) (2) 400,000 390,106 0.08 Westpac Banking sr unsecur SerEMTN Techem Energy Metering Service & Co co gtd 0.544% /2016 (5) 250,000 249,884 0.05 RegS 7.875% /2020 300,000 337,127 0.06 Muenchener Rueckversicherungs jr subord Total for Australia 1.23 5.767% perpetual (1) (5) 300,000 324,515 0.06 Deutsche Annington Finance co gtd 3.125% /2019 (Netherlands) (2) 300,000 307,205 0.06 Sweden Brenntag Finance co gtd 5.5% /2018 SBAB Bank sr unsubord SerEMTN (Netherlands) (2) 200,000 224,444 0.04 2.375% /2020 1,400,000 1,399,921 0.27 Celesio Finance co gtd SerEMTN 4% /2016 Nordea Bank subord SerEMTN (Netherlands) (2) 120,000 126,184 0.02 4.625% /2022 (5) 1,200,000 1,285,425 0.25 Celesio Finance co gtd 4.5% /2017 Svenska Handelsbanken bnk gtd (Netherlands) (2) 58,000 62,085 0.01 2.875% /2017 (USD) 1,460,000 1,101,709 0.21 Swedbank sr unsecur SerEMTN Total for Germany 3.98 3.375% /2017 700,000 746,666 0.14 Nordea Bank sr unsecur SerEMTN 4% /2019 (1) 450,000 499,057 0.10 Netherlands Svenska Handelsbanken sr unsecur SerEMTN Cooperatieve Centrale Raiffeisen-Boerenleenbank 2.625% /2022 (1) 425,000 429,603 0.08 subord 3.875% /2023 1,650,000 1,656,905 0.32 Achmea Hypotheekbank sr unsecur SerEMTN 2% /2018 1,450,000 1,447,071 0.28 Total for Sweden 1.05 Repsol International Finance co gtd SerEMTN 3.625% /2021 1,200,000 1,241,325 0.24 Canada ING Bank sr unsecur 4.875% /2021 1,000,000 1,161,580 0.22 Royal Bank of Canada covered RegS ABN Amro Bank covered SerEMTN 1.625% /2020 4,300,000 4,270,487 0.82 1.875% /2019 1,050,000 1,071,883 0.21 Bombardier sr unsecur Ser144A priv plmt ABN Amro Bank subord SerEMTN 7.75% /2020 (USD) 245,000 202,305 0.04 6.375% /2021 850,000 984,492 0.19 Bombardier sr unsecur Ser144A priv plmt ING Bank sr unsecur SerEMTN 3.875% /2016 700,000 746,490 0.14 7.5% /2018 (USD) 120,000 99,524 0.02 SRLEV co gtd 9% /2041 600,000 723,273 0.14 ABN Amro Bank sr unsecur SerEMTN Total for Canada 0.88 3.625% /2017 600,000 647,910 0.12

The accompanying notes are an integral part of these financial statements. 91 Morgan Stanley Investment Funds 31 December 2013

Euro Strategic Bond Fund

As at 31 December 2013, expressed in Euro. Norway (continued) Sparebank 1 SR Bank sr unsecur 3.625% /2015 450,000 465,832 0.09 Nominal in SpareBank 1 SR Bank sr unsecur 3.5% /2016 150,000 158,298 0.03 Euro unless Market % of net Investments specified value assets Total for Norway 0.49 Corporate Bonds (continued) Luxembourg Switzerland Geo Debt Finance sr secured RegS Sunrise Communications Holdings secured RegS 7.5% /2018 800,000 853,732 0.16 8.5% /2018 (Luxembourg) (1) (2) 800,000 872,976 0.17 Bormioli Rocco Holdings sr secured Credit Suisse sr unsecur SerEMTN RegS 10% /2018 500,000 548,552 0.11 5.125% /2017 650,000 738,545 0.14 Glencore Finance Europe co gtd SerEMTN Credit Suisse subord 5.75% /2025 (5) 600,000 642,822 0.12 step cpn 4.625% /2018 (1) 500,000 548,319 0.11 Nestle Finance International co gtd SerEMTN Gategroup Finance Luxembourg co gtd 1.75% /2022 (Luxembourg) (2) 600,000 575,492 0.11 RegS 6.75% /2019 (1) 300,000 318,443 0.06 Aquarius and Investments for Zurich Insurance ArcelorMittal subord 8.75% perpetual (5) (USD) 200,000 157,542 0.03 unsecur SerEMTN 4.25% /2043 (Ireland) (2) (5) 400,000 400,316 0.08 ArcelorMittal sr unsecur SerEMTN Cloverie for Zurich Insurance subord 5.875% /2017 100,000 111,481 0.02 SerEMTN 7.5% /2039 (Ireland) (2) (5) 250,000 298,946 0.06 Willow No.2 Ireland for Zurich Insurance Total for Luxembourg 0.49 sr unsecur SerEMTN 3.375% /2022 (Ireland) (2) 250,000 263,995 0.05 Credit Suisse sr unsecur SerEMTN Austria 4.75% /2019 200,000 229,193 0.05 UniCredit Bank Austria sr unsecur Zurich Finance USA co gtd SerEMTN SerEMTN 2.5% /2019 800,000 788,870 0.15 6.5% /2015 (United States of America) (2) 200,000 220,009 0.04 Vienna Insurance Group subord 5.5% /2043 (5) 600,000 630,718 0.12 Total for Switzerland 0.82 UniCredit Bank Austria sr unsecur SerEMTN 2.625% /2018 500,000 508,679 0.10 Mexico Atrium European Real Estate sr unsecur Petroleos Mexicanos co gtd 4% /2020 (Jersey) (2) 500,000 500,778 0.10 4.875% /2022 (USD) 3,000,000 2,239,710 0.43 America Movil sr unsecur SerEMTN Total for Austria 0.47 4.125% /2019 700,000 771,900 0.15 Petroleos Mexicanos co gtd RegS Belgium 3.125% /2020 600,000 607,417 0.12 Anheuser-Busch InBev co gtd SerEMTN Petroleos Mexicanos co gtd SerEMTN 8.625% /2017 800,000 980,803 0.19 5.5% /2017 150,000 166,698 0.03 UCB sr unsecur SerEMTN 4.125% /2021 550,000 564,974 0.11 Brussels Airport Holding sr secured SerEMTN Total for Mexico 0.73 3.25% /2020 500,000 519,885 0.10 Solvay Finance co gtd 5.425% perpetual United Arab Emirates (France) (2) (5) 300,000 312,438 0.06 IPIC GMTN co gtd RegS 5.875% /2021 (Cayman Islands) (2) 900,000 1,069,875 0.20 Total for Belgium 0.46 ADCB Finance Cayman bnk gtd SerGMTN 2.5% /2018 (Cayman Islands) (2) (USD) 1,300,000 933,789 0.18 Kazakhstan Xstrata Finance Dubai co gtd SerEMTN KazMunayGas National sr unsecur RegS 2.625% /2018 700,000 708,622 0.14 6.375% /2021 (USD) 2,700,000 2,131,731 0.41 IPIC GMTN co gtd RegS 2.375% /2018 (Cayman Islands) (2) 300,000 307,504 0.06 Total for Kazakhstan 0.41

Total for United Arab Emirates 0.58 Russia Gazprombank ViaB Eurobond Finance Ireland sr unsecur RegS 7.875% /2016 Ardagh Glass Finance co gtd RegS (Ireland) (2) (RUB) 56,000,000 1,215,930 0.23 8.75% /2020 900,000 958,500 0.19 Gazprom Via Gaz Capital sr unsecur WPP Finance co gtd 5.25% /2015 (France) (2) 500,000 523,824 0.10 SerEMTN 3.7% /2018 (Luxembourg) (1) (2) 500,000 518,267 0.10 CRH Finland Services co gtd SerEMTN Gazprom Via Gaz Capital sr unsecur 2.75% /2020 (Finland) (2) 500,000 502,512 0.10 SerEMTN LPN 6.605% /2018 (Luxembourg) (2) 300,000 341,795 0.07 CRH America co gtd 6% /2016 (United States of America) (2) (USD) 400,000 325,458 0.06 Total for Russia 0.40 Bord Gais Eireann sr unsecur SerEMTN 3.625% /2017 200,000 212,429 0.04 Portugal Total for Ireland 0.49 REN Finance sr unsecur SerEMTN 4.75% /2020 (Netherlands) (2) 1,000,000 1,039,830 0.20 Brisa Concessao Rodoviaria sr secured Norway SerEMTN 6.875% /2018 900,000 998,905 0.19 DNB Bank sr unsecur RegS 4.375% /2021 600,000 677,065 0.13 DNB Bank subord SerEMTN 3% /2023 (5) 660,000 665,774 0.13 Total for Portugal 0.39 Sparebank 1 SR Bank sr unsecur SerEMTN 2.125% /2020 (1) 600,000 590,790 0.11

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 92

Euro Strategic Bond Fund

India Total for Saudi Arabia 0.10 Vedanta Resources sr unsecur Ser144A priv plmt 6% /2019 (United Kingdom) (2) (USD) 1,900,000 1,339,638 0.26 Qatar Bharti Airtel International co gtd 4% /2018 Qtel International Finance co gtd RegS (Netherlands) (2) 500,000 502,933 0.10 3.25% /2023 (Bermuda) (2) (USD) 600,000 392,437 0.08

Total for India 0.36 Total for Qatar 0.08

South Korea Finland Industrial Bank of Korea sr unsecur SerGMTN Pohjola Bank sr unsecur SerEMTN 2% /2018 1,150,000 1,139,483 0.22 1.25% /2018 320,000 316,270 0.06 Korea Gas sr unsecur SerGMTN 2.375% /2019 650,000 653,516 0.13 Total for Finland 0.06

Total for South Korea 0.35 Total for Corporate Bonds 48.02

New Zealand Westpac Securities covered SerEMTN Government Bonds 3.5% /2016 1,400,000 1,495,832 0.29 Italy Italy Buoni Poliennali Del Tesoro 5.25% /2017 19,400,000 21,420,956 4.13 Total for New Zealand 0.29 Italy Buoni Poliennali Del Tesoro 4.5% /2015 17,250,000 18,116,079 3.49 Italy Buoni Poliennali Del Tesoro 5.5% /2022 12,850,000 14,466,035 2.79 Japan Italy Buoni Poliennali Del Tesoro sr unsecur Sumitomo Mitsui Banking sr unsecur 5% /2039 9,500,000 9,837,692 1.90 2.25% /2020 1,250,000 1,239,419 0.24 Italy Buoni Poliennali Del Tesoro 3% /2015 9,500,000 9,754,562 1.88 Italy Buoni Poliennali Del Tesoro 4% /2020 8,750,000 9,191,507 1.77 Total for Japan 0.24 Italy Buoni Poliennali Del Tesoro 3% /2015 1,000,000 1,025,228 0.20

Total for Italy 16.16 Denmark DONG Energy jr subord SerEMTN 4.875% /3013 (5) 600,000 630,775 0.12 France DONG Energy jr subord SerEXCH Government of France OAT 5.5% /2029 13,100,000 17,115,766 3.30 6.25% /3013 (5) 396,000 434,730 0.09 Government of France OAT 3.25% /2021 5,000,000 5,464,800 1.06 French Treasury Note BTAN nts 1.75% /2017 2,200,000 2,278,131 0.44 Total for Denmark 0.21 Total for France 4.80 Hong Kong Hutchison Whampoa Europe Finance 12 Spain co gtd SerEMTN 2.5% /2017 Government of Spain sr unsecur 4.4% /2023 15,670,000 15,997,895 3.09 (Cayman Islands) (2) 1,000,000 1,036,565 0.20 Government of Spain 4% /2015 2,750,000 2,865,478 0.55 Government of Spain sr unsecur RegS Total for Hong Kong 0.20 4% /2018 (USD) 3,250,000 2,415,901 0.47 Government of Spain 5.85% /2022 1,000,000 1,137,421 0.22

Colombia Total for Spain 4.33 Ecopetrol sr unsecur 5.875% /2023 (USD) 1,210,000 932,261 0.18

Total for Colombia 0.18 Germany Bundesrepublik Deutschland Ser2007 4.25% /2039 14,800,000 18,843,878 3.64 Brazil Bundesrepublik Deutschland 2.25% /2021 3,000,000 3,159,478 0.61 Petrobras International Finance co gtd 4.875% /2018 (Cayman Islands) (2) 800,000 864,848 0.17 Total for Germany 4.25

Total for Brazil 0.17 The accompanying notes are an integral part of these financial statements. 93 Morgan Stanley Investment Funds 31 December 2013

Euro Strategic Bond Fund

Statement of investments (continued) Holdings/ Nominal in Euro unless Market % of net Transferable securities and money market instruments admitted Investments specified value assets to official exchange listing or dealt in on another regulated market. Government Bonds (continued) As at 31 December 2013, expressed in Euro. Russia Nominal in Russian Foreign Bond - Eurobond Euro unless Market % of net sr unsecur RegS 4.5% /2022 (1) (USD) 2,000,000 1,470,637 0.29 Investments specified value assets Russian Federal Bond - OFZ Ser6207 8.15% /2027 (RUB) 46,000,000 1,050,828 0.20 Government Bonds (continued) Total for Russia 0.49 Sweden Swedish Government Ser1057 1.5% /2023 (SEK) 108,000,000 11,116,216 2.14 Brazil Sweden Government sr unsecur Brazil Notas do Tesouro Nacional Serie F SerEMTN 0.25% /2016 2,160,000 2,150,756 0.42 sr nts SerNTNF 10% /2017 (BRL) 425,600 1,300,832 0.24

Total for Sweden 2.56 Total for Brazil 0.24

Total for Government Bonds 44.65 Poland Government of Poland Ser1017 5.25% /2017 (PLN) 24,500,000 6,286,250 1.21 Supra-National Bonds Government of Poland Ser1021 5.75% /2021 (PLN) 12,340,000 3,280,082 0.63 European Union sr unsecur SerEMTN Government of Poland sr unsecur 3.25% /2018 6,500,000 7,136,012 1.38 3.75% /2017 2,200,000 2,403,060 0.47 European Union sr unsecur SerEMTN Government of Poland sr unsecur 3.5% /2021 5,500,000 6,151,412 1.19 SerEMTN 4.675% /2019 750,000 866,404 0.17 European Financial Stability Facility govt gtd SerEMTN 1.75% /2020 5,000,000 4,985,127 0.96 Total for Poland 2.48 European Financial Stability Facility govt gtd SerEMTN 2.75% /2016 800,000 845,585 0.16

Netherlands Total for Supra-National Bonds 3.69 Government of Netherlands 4% /2037 6,500,000 7,742,585 1.49 Government of Netherlands 3.25% /2021 4,000,000 4,408,268 0.85 Mortgage and Asset Backed Securities Total for Netherlands 2.34 Germany German Residential Funding 1.377% /2024 (5) 2,070,415 2,096,380 0.40 Portugal Portugal Obrigacoes do Tesouro OT Total for Germany 0.40 sr unsecur 4.45% /2018 5,060,000 4,983,518 0.96 Portugal Obrigacoes do Tesouro OT sr unsecur 5.65% /2024 4,905,000 4,724,300 0.91 United Kingdom Taurus 2013-GMF1 A 1.268% /2024 (5) 646,710 650,428 0.13 Total for Portugal 1.87 Leek Finance 17X A2C 0.573% /2037 (5) 139,008 144,589 0.03 Granite Master Issuer 2006-4 A7 0.465% /2054 (5) 103,063 102,260 0.02 Ireland Granite Master Issuer 2007-2 3A2 Government of Ireland 3.9% /2023 6,400,000 6,632,691 1.28 0.425% /2054 (5) 77,298 76,656 0.01

Total for Ireland 1.28 Total for United Kingdom 0.19

United Kingdom Total for Mortgage and Asset Backed Securities 0.59 UK Treasury 1.25% /2018 (GBP) 4,600,000 5,379,378 1.04 Mutual Fund Total for United Kingdom 1.04

Morgan Stanley Liquidity Funds - Greece Euro Liquidity Fund MS Reserve EUR Dist. Republic of Greece SerPSI step cpn (Luxembourg) (2) (4) 1,302,297 1,302,297 0.25 2% /2025 8,270,000 5,237,184 1.01 Total for Mutual Fund 0.25 Total for Greece 1.01 Total for transferable securities and money market Belgium instruments admitted to official exchange listing Kingdom of Belgium sr unsecur Ser61 or dealt in on another regulated market 503,787,364 97.20 4.25% /2021 4,400,000 5,077,508 0.98

Total for Belgium 0.98

Mexico Mexican Bonos SerM 20 10% /2024 (MXN) 59,500,000 4,226,640 0.82

Total for Mexico 0.82

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 94

Euro Strategic Bond Fund

Statement of investments (continued) Forward Foreign Currency Exchange Contracts

Other transferable securities and money market instruments Unrealised Maturity Amount Amount gain/(loss) % of net not admitted to official exchange listing or dealt in on another date bought Ccy sold Ccy Counterparty EUR assets regulated market. As at 31 December 2013, expressed in Euro. 09/01/2014 4,886,683 EUR 87,300,000 MXN State Street 39,113 0.01 09/01/2014 49,300,000 MXN 3,752,225 USD State Street 13,680 0.00 Nominal in Euro unless Market % of net 09/01/2014 3,238,637 USD 42,000,000 MXN J.P. Morgan 18,846 0.00 Investments specified value assets 14/01/2014 6,724,561 USD 7,468,000 AUD Commonwealth Bank 34,518 0.01 15/01/2014 10,400,000 PLN 3,380,146 USD Deutsche Bank 49,873 0.01 Equities 22/01/2014 73,119 EUR 100,000 USD Commonwealth Bank 526 0.00 22/01/2014 1,096,582 EUR 1,500,000 USD Westpac Bank 7,688 0.00 23/01/2014 3,700,000 GBP 6,042,603 USD RBC 57,070 0.01 United States of America 24/01/2014 1,801,029 USD 4,200,000 BRL J.P. Morgan 24,038 0.01 WA Funding TR III (6) 200 0 0.00 24/01/2014 3,183,941 USD 105,000,000 RUB Deutsche Bank 2,294 0.00

Total for United States of America 0 0.00 Unrealised Gain on Forward Foreign Currency Exchange Contracts 247,646 0.05 Total for Equities 0 0.00

Total for other transferable securities and money market 09/01/2014 6,890,747 USD 7,327,000 CAD RBC (3,221) 0.00) instruments not admitted to official exchange listing 15/01/2014 9,308,460 EUR 39,100,000 PLN Deutsche Bank (104,169) (0.02) or dealt in on another regulated market 0 0.00 15/01/2014 6,681,589 USD 6,000,000 CHF UBS (38,739) (0.01) 16/01/2014 11,354,272 EUR 101,000,000 SEK Westpac Bank (38,533) (0.01) Total Investment Securities 503,787,364 97.20 22/01/2014 24,683,477 EUR 34,028,000 USD Westpac Bank (18,443) 0.00 23/01/2014 10,103,794 EUR 8,505,000 GBP RBC (110,421) (0.02)

Unrealised Loss DERIVATIVES on Forward Foreign Currency Exchange Contracts (313,526) (0.06)

Over-the-counter (OTC) and exchange traded derivatives Net Unrealised Loss as at 31 December 2013, expressed in Euro. on Forward Foreign Currency Exchange Contracts (65,880) (0.01)

Financial Futures Contracts Credit Default Swap Contracts

Net unrealised Net unrealised gain/(loss) as at gain/(loss) as at Maturity Number of Notional 31 December % of net Risk Notional Maturity 31 December % of net Description date contracts commitments Counterparty 2013 assets position Description Ccy amount date Counterparty 2013 assets

Euro Bund Future 03/2014 (97) (13,499,490) Goldman Sachs 198,450 0.04 Buy WPP 2008 6% Long Gilt Future 03/2014 (28) (3,583,726) Goldman Sachs 71,634 0.01 04/04/2017 EUR 1,000,000 20/06/2015 J.P. Morgan (17,864) 0.00 US 5yr T-note Future 03/2014 (111) (9,613,874) Goldman Sachs 125,903 0.03 Net Unrealised Loss on Credit Default Swap Contracts (17,864) 0.00 Unrealised Gain on Financial Futures Contracts 395,987 0.08

Duration Hedged Share Class Euro BOBL Future 03/2014 (400) (49,772,000) Goldman Sachs 528,270 0.10 Euro Bund Future 03/2014 (393) (54,693,810) Goldman Sachs 885,970 0.17 Euro SCHATZ Future 03/2014 (329) (36,288,700) Goldman Sachs 74,496 0.01

Unrealised Gain on Duration Hedged Financial Futures Contracts 1,488,736 0.28

Total Unrealised Gain on Financial Futures Contracts 1,884,723 0.36

Euro BOBL Future 03/2014 60 7,465,800 Goldman Sachs (67,990) (0.01) Euro SCHATZ Future 03/2014 457 50,407,100 Goldman Sachs (98,635) (0.02) US 2yr T-note Future 03/2014 314 50,096,776 Goldman Sachs (98,277) (0.02) US 10yr T-note Future 03/2014 334 29,837,449 Goldman Sachs (564,469) (0.11) US Long Bond Future 03/2014 305 28,499,100 Goldman Sachs (397,839) (0.07) US Treasury Ultra Bond Future 03/2014 103 10,255,157 Goldman Sachs (90,502) (0.02)

Total Unrealised Loss on Financial Futures Contracts (1,317,712) (0.25)

Net Unrealised Gain on Financial Futures Contracts 9,109,782 567,011 0.11

Cash of EUR 3,930,326 held as collateral by Goldman Sachs in relation to financial futures contracts.

The accompanying notes are an integral part of these financial statements. 95 Morgan Stanley Investment Funds 31 December 2013

Euro Strategic Bond Fund

DERIVATIVES (continued)

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in Euro.

Interest Rate Swap Contracts

Net unrealised gain/(loss) as at Notional Maturity 31 December % of net Description Currency amount date Counterparty 2013 assets

Pay fixed rate 2.040% Receive floating rate USD LIBOR 3 months USD 12,650,000 13/02/2023 Bank of America 562,323 0.11

Pay fixed rate 2.058% Receive floating rate USD LIBOR 3 months USD 12,650,000 06/02/2023 J.P. Morgan 541,021 0.10

Pay fixed rate 2.091% Receive floating rate USD LIBOR 3 months USD 22,510,000 15/02/2023 Goldman Sachs 930,416 0.18

Pay fixed rate 2.803% Receive floating rate Royal Bank USD LIBOR 3 months USD 5,340,000 01/05/2043 of Scotland 725,004 0.14

Pay fixed rate 2.748% Receive floating rate USD LIBOR 3 months USD 57,800,000 20/11/2023 Goldman Sachs 775,140 0.15

Pay fixed rate 2.903% Receive floating rate USD LIBOR 3 months USD 7,780,000 13/05/2043 UBS 954,974 0.18

Unrealised Gain on Interest Rate Swap Contracts 4,488,878 0.86

Pay fixed rate 0.478% Receive floating rate USD LIBOR 3 months USD 84,640,000 01/08/2015 Goldman Sachs (192,512) (0.04)

Unrealised Loss on Interest Rate Swap Contracts (192,512) (0.04)

Net Unrealised Gain on Interest Rate Swap Contracts 4,296,366 0.82

Cash of EUR 120,000 paid as collateral by State Street in relation to OTC contracts. Cash of EUR 523,000 paid as collateral by Bank of America in relation to OTC contracts. Cash of EUR 1,829,000 paid as collateral by Goldman Sachs in relation to OTC contracts. Cash of EUR 680,000 paid as collateral by Royal Bank of Scotland in relation to OTC contracts. Cash of EUR 974,000 paid as collateral by UBS in relation to OTC contracts.

Total Derivatives 4,779,633 0.92

Other Assets less Liabilities 9,735,565 1.88

Total Net Asset Value 518,302,562 100.00

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 96

European Currencies High Yield Bond Fund

Investment aim Statement of investments

Total for United Kingdom 12.40

France Europcar Groupe subord RegS 9.375% /2018 (1) 9,000,000 9,644,985 1.31 Faurecia sr unsecur SerEMTN 8.75% /2019 (1) 6,500,000 7,476,885 1.01 Oberthur Technologies Holding sr secured RegS 9.25% /2020 6,500,000 6,860,750 0.93 La Financiere Atalian sr unsecur RegS 7.25% /2020 (1) 5,500,000 5,820,815 0.79 Loxam sr subord RegS 7.375% /2020 (1) 5,000,000 5,356,825 0.73 Elior Finance & Co sr secured RegS 6.5% /2020 (Luxembourg) (2) 4,500,000 4,916,610 0.67 SMCP SAS sr secured RegS 8.875% /2020 4,000,000 4,365,000 0.59 Crown European Holdings co gtd RegS 7.125% /2018 4,000,000 4,269,160 0.58 Renault sr unsecur SerEMTN 4.625% /2016 4,000,000 4,254,740 0.57 Holding Medi-Partenaires sr secured RegS 7% /2020 3,500,000 3,608,727 0.49 Lafarge sr unsecur SerEMTN 5.875% /2019 3,000,000 3,396,540 0.46 Lafarge nts SerEMTN 6.25% /2018 3,000,000 3,367,800 0.46 SPCM sr unsecur RegS 5.5% /2020 (1) 3,000,000 3,263,745 0.44 Renault sr unsecur SerEMTN 4.625% /2017 3,000,000 3,220,575 0.44 Lafarge sr unsecur SerEMTN 4.75% /2020 (1) 3,000,000 3,214,845 0.44

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 97 Morgan Stanley Investment Funds 31 December 2013

European Currencies High Yield Bond Fund

Statement of investments (continued) Nominal in Euro unless Market % of net Investments specified value assets Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. Corporate Bonds (continued) As at 31 December 2013, expressed in Euro. Germany HeidelbergCement Finance Luxembourg Nominal in co gtd 7.5% /2020 (Luxembourg) (2) 9,500,000 11,582,875 1.57 Euro unless Market % of net Trionista TopCo subord RegS 6.875% /2021 6,000,000 6,334,290 0.86 Investments specified value assets Heckler & Koch sr secured RegS 9.5% /2018 (1) 6,000,000 6,057,480 0.82 Corporate Bonds (continued) WEPA Hygieneprodukte sr secured RegS 6.5% /2020 (1) 5,000,000 5,386,125 0.73 France (continued) Unitymedia Kabel secured RegS Banque PSA Finance sr unsecur SerEMTN 9.625% /2019 4,500,000 5,001,750 0.68 6% 16/07/2014 3,000,000 3,071,775 0.42 HeidelbergCement Finance co gtd Nexans sr unsecur SerEMTN 5.75% /2017 (1) 2,500,000 2,765,913 0.37 8% /2017 (Netherlands) (2) 4,000,000 4,688,640 0.64 Rexel sr unsecur 7% /2018 2,500,000 2,746,763 0.37 Techem Energy Metering Service & Co Lafarge sr unsecur SerEMTN 8.875% /2016 2,000,000 2,366,940 0.32 co gtd RegS 7.875% /2020 4,000,000 4,495,020 0.61 Peugeot sr unsecur SerEMTN 6.5% /2019 2,000,000 2,173,040 0.29 KION Finance sr secured RegS Lafarge sr unsecur SerEMTN 4.75% /2020 2,025,000 2,137,782 0.29 6.75% /2020 (Luxembourg) (2) 4,000,000 4,381,680 0.59 Lafarge sr unsecur SerEMTN 6.625% /2018 1,000,000 1,147,785 0.16 Unitymedia Hessen & Co sr secured RegS Picard Groupe SAS sr secured RegS 7.5% /2019 3,000,000 3,270,105 0.44 4.48% /2019 (5) 900,000 918,356 0.12 Hellenic Petroleum Finance co gtd SerEMTN Société Générale jr subord RegS 8% /2017 (United Kingdom) (2) 3,000,000 3,192,750 0.43 7.875% perpetual (5) (USD) 1,200,000 878,911 0.12 Commerzbank subord SerEMTN 7.75% /2021 2,300,000 2,644,322 0.36 Unitymedia Hessen & Co sr secured RegS Total for France 12.37 5.5% /2022 (1) 2,500,000 2,575,987 0.35 Techem sr secured RegS 6.125% /2019 (1) 2,000,000 2,181,660 0.30 Unitymedia Hessen & Co sr secured RegS Luxembourg 5.625% /2023 (1) 2,000,000 2,045,000 0.27 ARD Finance sr secured RegS PIK Phoenix PIB Dutch Finance co gtd SerEMTN 11.125% /2018 (1) 8,370,215 9,018,907 1.22 3.125% /2020 (Netherlands) (1) (2) 2,000,000 1,950,530 0.26 Bormioli Rocco Holdings sr secured RegS Unitymedia Kabel secured RegS 9.5% /2021 1,500,000 1,749,068 0.24 10% /2018 5,500,000 6,034,078 0.82 HeidelbergCement Finance Luxembourg Spie BondCo 3 co gtd RegS 11% /2019 5,000,000 5,715,450 0.77 co gtd 8.5% /2019 (Luxembourg) (2) 1,000,000 1,276,500 0.17 Geo Debt Finance sr secured RegS Aabar Investments sr unsecur RegS CV 7.5% /2018 5,300,000 5,655,974 0.77 4% /2016 (United Arab Emirates) (2) 900,000 1,066,842 0.14 Albea Beauty Holdings sr secured RegS SGL Carbon sr unsecur CV 2.75% /2018 900,000 932,355 0.13 8.75% /2019 (1) 5,000,000 5,339,175 0.72 Brenntag Finance co gtd 5.5% /2018 Telenet Finance V Luxembourg sr secured (Netherlands) (2) 800,000 897,776 0.12 RegS 6.25% /2022 5,000,000 5,327,500 0.72 Fresenius Medical Care US Finance co gtd Mobile Challenger Intermediate Group 6.875% /2017 sr secured RegS PIK 8.75% /2019 4,500,000 4,709,655 0.64 (United States of America) (2) (USD) 1,000,000 828,236 0.11 Numericable Finance & Co sr secured RegS Fresenius Medical Care US Finance II co gtd 8.75% /2019 4,052,090 4,591,727 0.62 RegS 5.625% /2019 ArcelorMittal sr unsecur SerEMTN (United States of America) (2) (USD) 455,000 355,066 0.05 5.875% /2017 (1) 4,000,000 4,459,240 0.60 Deutsche Raststaetten Gruppe IV secured Altice Financing sr secured RegS 8% /2019 (1) (2) 4,000,000 4,381,160 0.59 RegS 6.75% /2020 (1) 250,000 262,125 0.04 Matterhorn Midco co gtd RegS 7.75% /2020 (1) 4,106,000 4,259,626 0.58 Matterhorn Financing & CY sr secured RegS Total for Germany 9.91 PIK 9% /2019 (1) 4,000,000 4,124,240 0.57 INEOS Group Holdings co gtd RegS Italy 6.5% /2018 (1) 4,000,000 4,109,340 0.56 Wind Acquisition Finance sr secured RegS Gategroup Finance Luxembourg co gtd 7.375% /2018 (Luxembourg) (1) (2) 9,000,000 9,530,775 1.29 RegS 6.75% /2019 (1) 3,000,000 3,184,425 0.43 Fiat Finance & Trade co gtd SerGMTN Lecta sr secured RegS 8.875% /2019 (1) 3,000,000 2,859,015 0.39 6.75% /2019 (Luxembourg) (1) (2) 8,100,000 8,778,456 1.19 Codere Finance Luxembourg sr secured RegS Enel jr subord 7.75% /2075 (5) (GBP) 5,000,000 6,361,945 0.86 8.25% /2015 (1) 4,000,000 2,291,680 0.31 Sisal Holding Istituto di Pagamento Altice Financing sr secured RegS 6.5% /2022 (2) 1,150,000 1,159,511 0.16 sr secured RegS 7.25% /2017 (1) 6,000,000 6,146,340 0.83 Fiat Finance & Trade co gtd SerEMTN Gtech Spa jr subord RegS 8.25% /2066 (5) 5,500,000 5,982,213 0.81 7.75% /2016 1,000,000 1,113,140 0.15 CNH Industrial Finance Europe co gtd Codere Finance Luxembourg sr secured RegS SerEMTN 6.25% /2018 (Luxembourg) (2) 4,000,000 4,546,200 0.62 8.25% /2015 1,000,000 557,500 0.08 Wind Acquisition Finance secured RegS ArcelorMittal subord 8.75% perpetual (5) (USD) 700,000 551,398 0.07 11.75% /2017 (Luxembourg) (2) 4,000,000 4,258,640 0.58 GCS Holdco Finance I sr secured RegS Telecom Italia sr unsecur SerEMTN 6.5% /2018 500,000 517,453 0.07 5.375% /2019 (1) 3,000,000 3,201,585 0.43 Hellas Telecommunications Luxembourg II Fiat Finance & Trade co gtd SerGMTN subord nts RegS 0% /2015 1,000,000 7,500 0.00 6.375% /2016 (Luxembourg) (1) (2) 2,500,000 2,674,875 0.36 Fiat Finance & Trade co gtd SerEMTN Total for Luxembourg 10.84 7.375% /2018 (Luxembourg) (2) 2,000,000 2,232,150 0.30

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 98

European Currencies High Yield Bond Fund

As at 31 December 2013, expressed in Euro. Portugal (continued) Portugal Telecom International Finance Nominal in sr unsecur SerEMTN 5.875% /2018 Euro unless Market % of net (Netherlands) (1) (2) 2,000,000 2,193,020 0.30 Investments specified value assets Portugal Telecom International Finance sr unsecur SerEMTN 5.625% /2016 Corporate Bonds (continued) (Netherlands) (2) 1,000,000 1,070,090 0.15 Portucel sr unsecur RegS 5.375% /2020 (1) 1,000,000 1,066,815 0.14 Italy (continued) Enel jr subord 6.5% /2074 (5) 1,700,000 1,827,347 0.25 Total for Portugal 5.67 Astaldi sr unsecur RegS 7.125% /2020 1,700,000 1,809,497 0.25 FGA Capital Ireland co gtd SerEMTN 4% /2018 (Ireland) (2) 1,500,000 1,543,372 0.21 Netherlands Telecom Italia sr unsecur SerEMTN UPC Holding secured RegS 6.375% /2022 (1) 9,000,000 9,240,480 1.25 5.875% /2023 (GBP) 1,000,000 1,154,266 0.16 Schaeffler Finance sr secured RegS Intesa Sanpaolo Vita subord 5.35% /2018 1,000,000 1,056,330 0.14 7.75% /2017 (1) 4,000,000 4,642,500 0.63 Refresco Group sr secured RegS Total for Italy 8.28 7.375% /2018 4,000,000 4,293,340 0.58 OI European Group co gtd RegS 6.75% /2020 3,500,000 4,077,500 0.54 Spain FMC Finance VIII co gtd RegS Telefonica Europe co gtd 6.5% perpetual 6.5% /2018 (Luxembourg) (2) 3,250,000 3,831,360 0.52 (Netherlands) (2) (5) 6,500,000 6,965,075 0.94 Fresenius Finance co gtd RegS Nara Cable Funding sr secured RegS 4.25% /2019 (1) 3,000,000 3,291,255 0.45 8.875% /2018 (Ireland) (2) 6,000,000 6,525,000 0.88 UPCB Finance II sr secured RegS AG Spring Finance II sr secured RegS 6.375% /2020 (Cayman Islands) (2) 3,000,000 3,218,175 0.44 9.5% /2019 (Ireland) (1) (2) 5,500,000 5,700,475 0.77 SRLEV co gtd 9% /2041 2,500,000 3,013,637 0.41 Obrascon Huarte Lain sr unsecur SerEMTN Carlson Wagonlit sr secured RegS 8.75% /2018 5,000,000 5,572,975 0.76 7.5% /2019 (1) 1,300,000 1,410,500 0.19 Ono Finance II co gtd RegS Schaeffler Finance sr secured RegS 11.125% /2019 (Ireland) (2) 4,000,000 4,422,740 0.60 4.25% /2018 (1) 1,000,000 1,042,500 0.14 Obrascon Huarte Lain sr unsecur SerEMTN FMC Finance VIII co gtd RegS 7.375% /2015 (1) 3,000,000 3,223,830 0.44 5.25% /2019 (Luxembourg) (1) (2) 300,000 338,394 0.05 Banco Popular Espanol jr subord SerEMTN Schaeffler Finance sr secured RegS 11.5% perpetual (5) 2,500,000 2,750,212 0.37 8.75% /2019 294,000 334,885 0.05 PortAventura Entertainment Barcelona sr secured RegS 7.25% /2020 (Netherlands) (2) 2,500,000 2,561,238 0.35 Total for Netherlands 5.25 PortAventura Entertainment Barcelona sr secured RegS 5.897% /2019 (Netherlands) (2) (5) 1,500,000 1,484,183 0.20 United States of America Empark Funding sr secured RegS US Coatings Acquisition sr secured 5.779% /2019 (5) 1,000,000 1,000,095 0.14 RegS 5.75% /2021 (1) 5,000,000 5,245,850 0.71 Bilbao Luxembourg unsecur RegS PIK Virgin Media Finance co gtd RegS 10.5% /2018 (Luxembourg) (2) 1,000,000 984,170 0.13 7% /2023 (United Kingdom) (2) (GBP) 4,000,000 5,011,724 0.69 Empark Funding sr secured RegS MPT Operating Partnership co gtd 6.75% /2019 850,000 873,762 0.12 SerEMTN 5.75% /2020 4,000,000 4,219,000 0.57 Belden sr subord RegS 5.5% /2023 4,000,000 3,909,700 0.54 Total for Spain 5.70 Iron Mountain co gtd SerEMTN 6.75% /2018 3,800,000 3,852,193 0.52 Jarden co gtd Ser1 7.5% /2020 2,000,000 2,160,000 0.29 Momentive Performance Materials Portugal secured 9.5% /2021 2,400,000 2,020,800 0.27 Brisa Concessao Rodoviaria sr secured Huntsman International co gtd RegS SerEMTN 6.875% /2018 8,000,000 8,879,160 1.20 5.125% /2021 750,000 755,246 0.10 EDP Finance sr unsecur SerEMTN BMC Software Finance sr unsecur 5.75% /2017 (Netherlands) (1) (2) 5,000,000 5,505,550 0.75 Ser144A priv plmt 8.125% /2021 (USD) 1,000,000 751,328 0.10 EDP Finance sr unsecur SerEMTN 4.625% /2016 (Netherlands) (2) 4,000,000 4,217,300 0.57 Total for United States of America 3.79 Portugal Telecom International Finance sr unsecur SerEMTN 4.625% /2020 (Netherlands) (1) (2) 4,000,000 4,102,380 0.56 Ireland REN Finance sr unsecur SerEMTN Smurfit Kappa Acquisitions sr secured 4.75% /2020 (Netherlands) (2) 3,400,000 3,535,422 0.48 RegS 7.75% /2019 6,000,000 6,562,500 0.89 REN - Redes Energeticas Nacionais Rottapharm co gtd RegS 6.125% /2019 (1) 5,000,000 5,197,850 0.70 sr unsecur SerEMTN 4.125% /2018 (1) 3,000,000 3,093,210 0.42 Ardagh Packaging Finance sr secured EDP Finance sr unsecur SerEMTN RegS 7.375% /2017 (1) 3,000,000 3,218,760 0.45 4.125% /2021 (Netherlands) (2) 3,000,000 3,039,690 0.41 Ardagh Glass Finance co gtd RegS EDP Finance sr unsecur SerEMTN 8.75% /2020 2,500,000 2,662,500 0.36 6.625% /2017 (Netherlands) (2) (GBP) 2,000,000 2,626,802 0.36 Ardagh Glass Finance co gtd RegS EDP Finance sr unsecur SerEMTN 7.125% /2017 (1) 2,000,000 2,063,000 0.28 5.875% /2016 (Netherlands) (2) 2,300,000 2,467,980 0.33 Altice Finco co gtd RegS 9% /2023 (Luxembourg) (2) 1,000,000 1,098,185 0.15

The accompanying notes are an integral part of these financial statements. 99 Morgan Stanley Investment Funds 31 December 2013

European Currencies High Yield Bond Fund

Ireland (continued) Croatia Smurfit Kappa Acquisitions sr secured Agrokor co gtd RegS 9.125% /2020 (1) 5,500,000 6,169,543 0.84 Ser144A priv plmt 5.125% /2018 1,000,000 1,090,000 0.15 Nara Cable Funding II sr secured RegS Total for Croatia 0.84 8.5% /2020 600,000 699,546 0.09 Smurfit Kappa Acquisitions sr secured New Zealand RegS 5.125% /2018 (1) 500,000 543,638 0.07 Beverage Packaging Holdings Luxembourg II secured RegS 9.5% /2017 (Luxembourg) (2) 5,000,000 5,193,000 0.70 Total for Ireland 3.14 Total for New Zealand 0.70 Greece OTE co gtd SerEMTN 7.875% /2018 Denmark (United Kingdom) (1) (2) 8,000,000 9,131,080 1.24 DONG Energy jr subord SerEXCH OTE co gtd SerEMTN step cpn 6.25% /3013 (5) 4,541,000 4,985,123 0.68 7.25% /2015 (United Kingdom) (2) 2,000,000 2,108,820 0.29 FAGE USA Dairy Industry co gtd RegS Total for Denmark 0.68 9.875% /2020 (USD) 2,500,000 1,917,412 0.25

Total for Greece 1.78 India Vedanta Resources sr unsecur Ser144A priv plmt 6% /2019 (United Kingdom) (2) (USD) 5,000,000 3,525,364 0.48 Poland TVN Finance III co gtd RegS 7.375% /2020 Total for India 0.48 (Sweden) (2) 4,200,000 4,533,375 0.62 Cyfrowy Polsat Finance sr secured RegS 7.125% /2018 (Sweden) (2) 2,700,000 2,907,144 0.39 Austria TVN Finance III co gtd RegS 7.875% /2018 Atrium European Real Estate sr unsecur (Sweden) (2) 2,000,000 2,126,760 0.29 4% /2020 (Jersey) (2) 1,300,000 1,302,021 0.18 Vienna Insurance Group subord Total for Poland 1.30 5.5% /2043 (5) 1,000,000 1,051,198 0.14

Total for Austria 0.32 Australia Santos Finance co gtd SerEMTN 8.25% /2070 (5) 6,000,000 6,761,250 0.91 South Africa QBE Capital Funding III co gtd Ser144A Edcon Proprietary sr secured RegS priv plmt 7.25% /2041 (Jersey) (2) (5) (USD) 1,650,000 1,241,692 0.17 9.5% /2018 (1) 2,000,000 2,057,550 0.28

Total for Australia 1.08 Total for South Africa 0.28

Canada Slovenia Bombardier sr unsecur RegS Adria Bidco sr secured RegS 6.125% /2021 (1) 6,500,000 7,068,750 0.96 7.875% /2020 (Netherlands) (1) (2) 1,900,000 1,921,736 0.26

Total for Canada 0.96 Total for Slovenia 0.26

Belgium Sweden Ontex IV co gtd RegS 9% /2019 NorCell 1B sr secured RegS PIK (Luxembourg) (1) (2) 3,500,000 3,806,250 0.51 12.4% /2019 1,201,003 1,281,770 0.17 Ontex IV sr secured RegS 7.5% /2018 (Luxembourg) (1) (2) 2,700,000 2,842,317 0.39 Total for Sweden 0.17

Total for Belgium 0.90 Mexico Banco Santander Mexico Institucion Switzerland de Banca Multiple Grupo Financiero Sunrise Communications Holdings secured Santand jr subord Ser144A priv plmt RegS 8.5% /2018 (Luxembourg) (1) (2) 4,000,000 4,364,880 0.59 5.95% /2024 (5) (USD) 1,350,000 991,210 0.12 Credit Suisse subord 5.75% /2025 (5) 2,000,000 2,142,740 0.29 Total for Mexico 0.12 Total for Switzerland 0.88 Total for Corporate Bonds 88.94

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 100

European Currencies High Yield Bond Fund

Statement of investments (continued) Credit Default Swap Contracts

Transferable securities and money market instruments admitted Net unrealised gain/(loss) as at to official exchange listing or dealt in on another regulated market. Risk Notional Maturity 31 December % of net As at 31 December 2013, expressed in Euro. position Description Ccy amount date Counterparty 2013 assets Sell Fiat Finance Societe Generale Nominal in North America Corporate Euro unless Market % of net 5.625% & Investment Investments specified value assets 12/06/2017 EUR 1,000,000 20/06/2017 Banking 93,429 0.01 Mutual Fund Sell Fiat Finance North America Morgan Stanley Liquidity Funds - 5.625% Euro Liquidity Fund MS Reserve EUR Dist. 12/06/2017 EUR 2,000,000 20/09/2017 Morgan Stanley 185,012 0.02 (Luxembourg) (2) (4) 35,679,946 35,679,946 4.84 Sell iTraxx Europe Total for Mutual Fund 4.84 Crossover Series 20 01/12/2018 EUR 9,000,000 20/12/2018 Barclays Capital 852,300 0.12 Total Investment Securities 691,878,876 93.78 Societe Generale Sell iTraxx Europe Corporate Crossover Series 20 & Investment DERIVATIVES 01/12/2018 EUR 16,000,000 20/12/2018 Banking 1,515,199 0.21

Over-the-counter (OTC) and exchange traded derivatives Net Unrealised Gain on Credit Default Swap Contracts 2,645,940 0.36 as at 31 December 2013, expressed in Euro. Cash of EUR 1,401,000 paid as collateral by Societe Generale Corporate & Investment Banking Financial Futures Contracts in relation to OTC contracts. Cash of EUR 384,000 paid as collateral by Morgan Stanley in relation to OTC contracts. Net unrealised Cash of EUR 786,000 paid as collateral by Barclays Bank in relation to OTC contracts. gain/(loss) as at Maturity Number of Notional 31 December % of net Description date contracts commitments Counterparty 2013 assets Total Derivatives 2,306,999 0.31 Euro BOBL Future 03/2014 (161) (20,033,230) Goldman Sachs 218,960 0.03 Euro Bund Future 03/2014 (42) (5,845,140) Goldman Sachs 98,700 0.01 Other Assets less Liabilities 43,588,255 5.91 US 5yr T-note Future 03/2014 (28) (2,425,122) Goldman Sachs 31,759 0.00 US 10yr T-note Future 03/2014 (46) (4,109,349) Goldman Sachs 77,502 0.01 Total Net Asset Value 737,774,130 100.00

Unrealised Gain on Financial Futures Contracts 426,921 0.05 (1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. Duration Hedged Share Class (4) Managed by an affiliate of the Investment Adviser. Euro BOBL Future 03/2014 (131) (16,300,330) Goldman Sachs 170,530 0.02 (5) Variable coupon rates are those quoted as of 31 December 2013. Euro Bund Future 03/2014 (10) (1,391,700) Goldman Sachs 20,840 0.01 Euro SCHATZ Future 03/2014 (82) (9,044,600) Goldman Sachs 17,828 0.00

Unrealised Gain on Duration Hedged Financial Futures Contracts 209,198 0.03

Net Unrealised Gain on Financial Futures Contracts (59,149,471) 636,119 0.08

Cash of EUR 284,803 held as collateral by Goldman Sachs in relation to financial futures contracts. Cash of EUR 145,184 paid as collateral to Goldman Sachs in relation to financial futures contracts.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty EUR assets

22/01/2014 2,624,138 EUR 3,615,000 USD Commonwealth Bank (96) 0.00 22/01/2014 2,629,823 EUR 3,625,000 USD HSBC (1,671) 0.00 22/01/2014 2,628,602 EUR 3,625,000 USD J.P. Morgan (2,891) 0.00 22/01/2014 2,629,861 EUR 3,625,000 USD State Street (1,633) 0.00 23/01/2014 88,644,904 EUR 74,618,000 GBP RBC (968,769) (0.13)

Unrealised Loss on Forward Foreign Currency Exchange Contracts (975,060) (0.13)

Net Unrealised Loss on Forward Foreign Currency Exchange Contracts (975,060) (0.13)

The accompanying notes are an integral part of these financial statements. 101 Morgan Stanley Investment Funds 31 December 2013

Global Bond Fund

Investment aim Statement of investments

To provide an attractive rate of return, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in US dollars, through market, As at 31 December 2013, expressed in US dollars. instrument and currency selection. Nominal in US dollars Market % of net The Fund consists of domestic, international Investments unless specified value assets and Euromarket fixed income securities Corporate Bonds United States of America of varying maturities denominated in Citigroup sr unsecur 8.5% /2019 1,669,000 2,143,513 0.43 Bank of America sr unsecur 5.7% /2022 1,850,000 2,096,513 0.42 US dollars and other currencies, including Mondelez International sr unsecur 2.375% /2021 (EUR) 1,350,000 1,838,626 0.37 emerging markets. Priceline.com sr unsecur Ser144A priv plmt CV 0.35% /2020 1,433,000 1,629,235 0.33 Yahoo! sr unsecur Ser144A priv plmt CV 0% /2018 1,475,000 1,529,391 0.31 Discover Bank sr unsecur 2% /2018 1,530,000 1,509,284 0.30 Lam Research sr unsecur CV 1.25% /2018 1,161,000 1,418,597 0.29 Verizon Communications sr unsecur 6.55% /2043 1,150,000 1,356,805 0.27 General Electric Capital sr unsecur SerGMTN 6% /2019 1,105,000 1,301,983 0.26 Marathon Petroleum sr unsecur 5.125% /2021 1,195,000 1,297,890 0.26 Jefferies Group sr unsecur CV 3.875% /2029 1,202,000 1,287,216 0.26 Silgan Holdings sr unsecur Ser144A priv plmt 5.5% /2022 1,250,000 1,240,625 0.25 International Game Technology sr unsecur CV 3.25% 01/05/2014 1,161,000 1,231,577 0.25 Bank of America sr unsecur 5.625% /2020 1,075,000 1,227,403 0.25 Five Corners Funding Trust unsecur Ser144A priv plmt 4.419% /2023 1,225,000 1,210,321 0.24 Intel jr subord CV 2.95% /2035 1,072,000 1,201,873 0.24 Allegheny Technologies sr unsecur CV 4.25% 01/06/2014 1,162,000 1,199,950 0.24 Goldman Sachs Group sr unsecur SerEMTN 4.375% /2017 (EUR) 800,000 1,197,952 0.24 Boston Properties sr unsecur 3.85% /2023 1,200,000 1,175,651 0.24 Boston Properties sr unsecur Ser144A priv plmt CV 3.625% 15/02/2014 1,167,000 1,173,564 0.24 Capital One Bank USA subord 3.375% /2023 1,254,000 1,169,098 0.24 Boston Scientific sr unsecur 6% /2020 985,000 1,135,178 0.23 Citigroup sr unsecur 6.125% /2018 913,000 1,058,414 0.21 American Tower sr unsecur 3.5% /2023 1,150,000 1,057,546 0.21 UnitedHealth Group sr unsecur 2.875% /2023 1,125,000 1,051,133 0.21 JPMorgan Chase & Co subord nts 3.375% /2023 1,100,000 1,029,925 0.21 Viacom sr unsecur 5.85% /2043 925,000 980,306 0.20 DCP Midstream Operating co gtd 3.875% /2023 975,000 902,636 0.18 American International Group sr unsecur 6.4% /2020 760,000 902,242 0.18 Ares Capital sr unsecur Ser144A priv plmt CV 4.375% /2019 826,000 860,589 0.17 Genworth Holdings co gtd 7.2% /2021 700,000 812,494 0.16 Hewlett-Packard sr unsecur 4.65% /2021 780,000 806,387 0.16 JPMorgan Chase & Co sr unsecur SerEMTN 2.875% /2028 (EUR) 600,000 798,242 0.16 Transocean co gtd 6.375% /2021 (Cayman Islands) (2) 700,000 788,739 0.16 Goldman Sachs Group sr unsecur SerGLOB 2.375% /2018 785,000 787,504 0.16 Archer-Daniels-Midland sr unsecur CV 0.875% 15/02/2014 743,000 786,811 0.16 JPMorgan Chase & Co sr unsecur 3.25% /2022 800,000 767,236 0.15 Ford Motor Credit sr unsecur 4.207% /2016 710,000 756,189 0.15 ING US co gtd 5.5% /2022 650,000 705,942 0.14 Wells Fargo & Co sr unsecur SerEMTN 2.25% /2020 (EUR) 500,000 688,515 0.14 Altria Group co gtd 2.85% /2022 705,000 651,191 0.13 PPL WEM Holdings sr unsecur Ser144A priv plmt 3.9% /2016 (United Kingdom) (2) 600,000 627,466 0.13

Global Bond Fund

As at 31 December 2013, expressed in US dollars. United Kingdom (continued) Heathrow Funding secured SerEMTN Nominal in 6.25% /2018 (Jersey) (2) (GBP) 150,000 278,625 0.06 US dollars Market % of net BAT International Finance co gtd Ser144A Investments unless specified value assets priv plmt 9.5% /2018 190,000 250,855 0.05 Heathrow Funding sr secured Ser144A Corporate Bonds (continued) priv plmt 4.6% /2018 (Jersey) (2) (EUR) 150,000 230,130 0.05 Heathrow Funding sr secured SerEMTN United States of America (continued) 4.125% /2016 (Jersey) (2) (EUR) 100,000 148,497 0.03 Kinder Morgan sr secured Ser144A HBOS subord SerGMTN 6.75% /2018 130,000 147,848 0.03 priv plmt 5.625% /2023 640,000 624,248 0.13 JPMorgan Chase & Co sr unsecur 3.2% /2023 650,000 618,183 0.13 Total for United Kingdom 3.71 Wells Fargo & Co subord SerM 3.45% /2023 615,000 579,994 0.12 Thermo Fisher Scientific sr unsecur 4.15% /2024 560,000 557,547 0.11 Germany American International Group sr unsecur KfW - Kreditanstalt fuer Wiederaufbau 4.875% /2022 500,000 536,754 0.11 govt gtd SerMTN 3.75% /2018 (AUD) 5,200,000 4,619,032 0.93 Freeport-McMoRan Copper & Gold co gtd Allianz Finance II co gtd SerEMTN 3.875% /2023 550,000 521,557 0.11 5.75% /2041 (Netherlands) (2) (5) (EUR) 1,900,000 2,939,098 0.59 Pioneer Natural Resources sr unsecur Muenchener Rueckversicherungs subord 7.5% /2020 425,000 516,749 0.10 SerEMTN 6% /2041 (5) (EUR) 1,200,000 1,915,459 0.39 GE Capital Trust II RegS 5.5% /2067 (5) (EUR) 350,000 513,017 0.10 Siemens Financieringsmaatschappij co gtd Time Warner Cable co gtd 4.5% /2042 650,000 491,338 0.10 SerWW CV 1.65% /2019 (Netherlands) (2) 1,250,000 1,477,394 0.30 Goldman Sachs Group subord 6.75% /2037 420,000 468,873 0.10 Aabar Investments sr unsecur RegS CV General Electric Capital subord 5.3% /2021 375,000 421,879 0.09 4% /2016 (United Arab Emirates) (2) (EUR) 900,000 1,469,639 0.30 Monongahela Power Ser144A priv plmt RWE jr subord 7% perpetual (5) (GBP) 700,000 1,227,462 0.25 5.4% /2043 400,000 419,329 0.09 Deutsche Bank subord nts 4.296% /2028 (5) 1,095,000 993,811 0.20 Goldman Sachs Group sr unsecur Deutsche Annington Finance co gtd 3.625% /2023 410,000 397,800 0.08 3.625% /2021 (Netherlands) (2) (EUR) 450,000 637,234 0.13 L-3 Communications co gtd 4.75% /2020 370,000 385,879 0.08 O2 Telefonica Deutschland Finanzierungs Altria Group co gtd 5.375% /2044 340,000 345,129 0.07 co gtd 1.875% /2018 (EUR) 375,000 514,796 0.10 Direct TV Financing co gtd 4.6% /2021 250,000 258,026 0.05 E.ON International Finance co gtd Ser144A Verizon Communications sr unsecur priv plmt 5.8% /2018 (Netherlands) (2) 450,000 514,172 0.10 3.85% /2042 300,000 246,423 0.05 Techem Energy Metering Service & Co Omnicom Group co gtd 3.625% /2022 250,000 243,043 0.05 co gtd RegS 7.875% /2020 (EUR) 300,000 464,412 0.09 Citigroup subord 6.675% /2043 70,000 81,385 0.02 Deutsche Annington Finance co gtd Citigroup subord 5.5% /2025 70,000 73,857 0.02 3.125% /2019 (Netherlands) (2) (EUR) 300,000 423,193 0.09 Daimler Finance North America co gtd Total for United States of America 11.24 8.5% /2031 (United States of America) (2) 35,000 51,145 0.01

Total for Germany 3.48 United Kingdom Royal Bank of Scotland sr unsecur SerEMTN 5.5% /2020 (EUR) 1,600,000 2,572,025 0.52 France Lloyds Bank subord SerEMTN Société Générale sr unsecur Ser144A 6.5% /2020 (1) (EUR) 1,300,000 2,078,769 0.42 priv plmt 5.2% /2021 2,100,000 2,312,762 0.47 Aviva subord SerEMTN 6.875% /2038 (5) (EUR) 1,200,000 1,886,595 0.38 AXA subord SerEMTN 5.25% /2040 (5) (EUR) 1,200,000 1,769,838 0.36 HSBC Holdings sr unsecur 4% /2022 1,330,000 1,364,208 0.28 Crédit Agricole subord SerEMTN HSBC Holdings subord SerEMTN 6% /2019 (EUR) 850,000 1,360,718 0.28 3.9% /2021 (1) (EUR) 750,000 1,082,353 0.22 Experian Finance co gtd Ser144A priv plmt BNP Paribas bnk gtd SerBKNT 5% /2021 955,000 1,048,872 0.21 2.375% /2017 1,025,000 1,011,153 0.20 Crédit Agricole sr unsecur Ser144A NGG Finance co gtd SerGBP priv plmt 2.125% /2018 1,000,000 994,155 0.20 5.625% /2073 (5) (GBP) 600,000 1,004,413 0.20 AXA subord SerEMTN 5.125% /2043 (5) (EUR) 625,000 906,562 0.18 Imperial Tobacco Finance co gtd SerEMTN Electricité de France sr unsecur Ser144A 7.75% /2019 (GBP) 500,000 1,000,623 0.20 priv plmt 4.6% /2020 810,000 879,591 0.18 Nationwide Building Society nts Ser144A Banque Federative du Credit Mutuel priv plmt 6.25% /2020 620,000 711,627 0.14 sr unsecur SerEMTN 3% /2023 (EUR) 500,000 697,713 0.14 Barclays Bank jr subord SerRCI Société Générale jr subord SerEMTN 14% perpetual (5) (GBP) 250,000 551,132 0.11 8.25% perpetual (1) (5) 625,000 670,581 0.13 Anglian Water Osprey Financing sr secured Eutelsat sr unsecur 5% /2019 (EUR) 400,000 617,973 0.12 SerEMTN 7% /2018 (GBP) 300,000 538,157 0.11 Eutelsat sr unsecur 2.625% /2020 (EUR) 400,000 546,900 0.11 Royal Bank of Scotland Group subord Elior Finance & Co sr secured RegS 6% /2023 500,000 504,563 0.10 6.5% /2020 (Luxembourg) (2) (EUR) 200,000 301,019 0.06 Anglo American Capital co gtd Ser144A Banque Federative du Credit Mutuel priv plmt 9.375% /2019 395,000 502,203 0.10 sr unsecur SerEMTN 2% /2019 (EUR) 200,000 274,123 0.06 High Speed Rail Finance 1 sr secured Crédit Agricole subord SerEMTN SerEMTN 4.375% /2038 (GBP) 300,000 496,308 0.10 5.875% /2019 (EUR) 150,000 238,438 0.05 Barclays Bank subord SerEMTN 6% /2021 (EUR) 300,000 469,564 0.10 Areva sr unsecur SerEMTN 4.625% /2017 (EUR) 100,000 151,728 0.03 Barclays Bank subord SerEMTN 6% /2018 (1) (EUR) 300,000 466,685 0.09 Orange sr unsecur 8.75% /2031 35,000 48,470 0.01 Rolls-Royce co gtd SerEMTN 2.125% /2021 (1) (EUR) 300,000 407,713 0.08 Total for France 2.53 Standard Chartered subord SerEMTN 3.625% /2022 (1) (EUR) 300,000 403,044 0.08

The accompanying notes are an integral part of these financial statements. 103 Morgan Stanley Investment Funds 31 December 2013

Global Bond Fund

As at 31 December 2013, expressed in US dollars. Spain (continued) Santander Holdings USA sr unsecur Nominal in 3.45% /2018 (United States of America) (2) 350,000 359,328 0.07 US dollars Market % of net Iberdrola Finance Ireland co gtd Ser144A Investments unless specified value assets priv plmt 5% /2019 (Ireland) (2) 300,000 321,444 0.07 Telefonica Emisiones co gtd SerEMTN Corporate Bonds (continued) 4.797% /2018 (EUR) 200,000 305,690 0.06 Telefonica Emisiones co gtd SerEMTN Italy 4.693% /2019 (EUR) 150,000 229,693 0.05 Intesa Sanpaolo sr unsecur Ser144A priv plmt 6.5% /2021 2,280,000 2,497,740 0.50 Total for Spain 1.75 Eni sr unsecur SerGALP CV 0.25% /2015 (EUR) 1,200,000 1,708,533 0.35 Assicurazioni Generali subord SerEMTN 10.125% /2042 (5) (EUR) 800,000 1,424,109 0.29 Russia Enel jr subord 6.5% /2074 (5) (EUR) 675,000 999,508 0.20 Vnesheconombank Via VEB Finance Enel Finance International co gtd Ser144A sr unsecur Ser144A priv plmt priv plmt 5.125% /2019 (Netherlands) (2) 900,000 962,059 0.19 6.025% /2022 (Ireland) (2) 2,900,000 2,984,564 0.60 Enel subord Ser144A priv plmt Vnesheconombank Via VEB Finance 8.75% /2073 (5) 645,000 703,821 0.14 sr unsecur Ser144A priv plmt 5.942% /2023 Gtech Spa co gtd 5.375% /2018 (1) (EUR) 300,000 464,760 0.09 (Ireland) (2) 1,470,000 1,469,860 0.30 Telecom Italia Finance co gtd SerEMTN Gazprombank ViaB Eurobond Finance 7.75% /2033 (Luxembourg) (2) (EUR) 300,000 454,746 0.09 sr unsecur RegS 7.875% /2016 Assicurazioni Generali sr unsecur SerEMTN (Ireland) (2) (RUB) 47,000,000 1,405,817 0.28 5.125% /2024 (EUR) 250,000 375,351 0.08 Lukoil International Finance co gtd CV Gtech Spa co gtd 5.375% /2016 (1) (EUR) 150,000 228,294 0.05 2.625% /2015 (Netherlands) (2) 1,100,000 1,188,847 0.24 Intesa Sanpaolo sr unsecur 3.875% /2018 220,000 224,036 0.05 Total for Russia 1.42 Total for Italy 2.03 Netherlands Australia ABN Amro Bank subord SerEMTN Santos Finance co gtd SerEMTN 6.375% /2021 (EUR) 1,100,000 1,755,078 0.35 8.25% /2070 (5) (EUR) 750,000 1,164,253 0.23 Cooperatieve Centrale Raiffeisen-Boerenleenbank Commonwealth Bank of Australia sr unsecur subord SerGMTN 3.75% /2020 (EUR) 1,000,000 1,422,796 0.29 Ser144A priv plmt 5% /2019 930,000 1,037,643 0.21 ING Bank subord Ser144A priv plmt Australia & New Zealand Banking Group 5.8% /2023 910,000 948,188 0.19 sr unsecur Ser144A priv plmt 4.875% /2021 925,000 1,009,073 0.20 Aegon sr unsecur 4.625% /2015 600,000 639,662 0.13 Wesfarmers co gtd Ser144A priv plmt Cooperatieve Centrale Raiffeisen-Boerenleenbank 1.874% /2018 935,000 918,605 0.18 sr unsecur RegS 6.875% /2020 (1) (EUR) 400,000 624,809 0.13 Commonwealth Bank of Australia sr unsecur Achmea sr unsecur SerEMTN 2.5% /2020 (EUR) 300,000 410,402 0.08 Ser144A priv plmt 5% /2020 800,000 886,880 0.18 ABN Amro Bank sr unsecur SerEMTN Macquarie Bank subord Ser144A priv plmt 3.625% /2017 (EUR) 200,000 297,512 0.06 6.625% /2021 755,000 835,642 0.17 ABN AMRO Bank sr unsecur SerEMTN QBE Capital Funding III co gtd Ser144A 4.25% /2016 (EUR) 200,000 295,933 0.06 priv plmt 7.25% /2041 (Jersey) (2) (5) 700,000 725,669 0.15 Cooperatieve Centrale Raiffeisen-Boerenleenbank BHP Billiton Finance USA co gtd 3.85% /2023 720,000 723,377 0.15 jr subord Ser144A priv plmt 11% perpetual (5) 75,000 99,597 0.02 Origin Energy Finance co gtd Ser144A priv plmt 3.5% /2018 525,000 528,745 0.11 Total for Netherlands 1.31 Transurban Finance Proprietary sr secured SerEMTN 2.5% /2020 (EUR) 350,000 484,412 0.10 China Telstra co gtd SerEMTN 2.5% /2023 (1) (EUR) 300,000 402,066 0.08 Tong Jie co gtd Ser363 CV 0% /2018 Origin Energy Finance co gtd SerEMTN (British Virgin Islands) (2) (HKD) 13,000,000 1,757,308 0.35 2.875% /2019 (EUR) 100,000 139,994 0.03 Wharf Finance 2014 co gtd CV 2.3% 07/06/2014 Total for Australia 1.79 (British Virgin Islands) (2) (HKD) 10,000,000 1,294,322 0.26 Billion Express Investments co gtd CV Spain 0.75% /2015 (British Virgin Islands) (2) 1,200,000 1,235,621 0.25 Prosegur Cia de Seguridad sr unsecur Want Want China Finance co gtd Ser144A 2.75% /2018 (1) (EUR) 1,000,000 1,399,511 0.28 priv plmt 1.875% /2018 (Cayman Islands) (2) 990,000 946,772 0.19 CaixaBank sr unsecur SerEMTN 2.5% /2017 (EUR) 800,000 1,119,935 0.23 Amber Circle Funding co gtd RegS Telefonica Europe co gtd 6.5% perpetual 3.25% /2022 (Cayman Islands) (2) 900,000 824,328 0.17 (Netherlands) (2) (5) (EUR) 700,000 1,033,287 0.21 Banco Bilbao Vizcaya Argentaria covered Total for China 1.22 3.625% /2017 (EUR) 700,000 1,026,220 0.21 BBVA Senior Finance bnk gtd SerGMTN South Korea 3.25% /2016 (EUR) 500,000 715,480 0.14 Korea Gas sr unsecur Ser144A priv plmt Telefonica Emisiones co gtd SerEMTN 2.25% /2017 3,000,000 2,994,915 0.61 4.71% /2020 (1) (EUR) 400,000 610,738 0.12 Korea Finance sr unsecur 4.625% /2021 1,275,000 1,346,916 0.27 Telefonica Emisiones co gtd SerEMTN SK Telecom sr unsecur Ser144A priv plmt 4.967% /2016 (EUR) 400,000 592,709 0.12 2.125% /2018 570,000 554,040 0.11 Santander International Debt bnk gtd SerEMTN 3.5% /2015 (EUR) 400,000 566,089 0.11 Total for South Korea 0.99 Santander US Debt bnk gtd Ser144A priv plmt 3.724% /2015 400,000 408,105 0.08

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 104

Global Bond Fund

As at 31 December 2013, expressed in US dollars. India (continued) Bharat Petroleum sr unsecur 4.625% /2022 530,000 478,166 0.10 Nominal in Bharti Airtel International co gtd Ser144A US dollars Market % of net priv plmt 5.125% /2023 (Netherlands) (2) 490,000 453,938 0.09 Investments unless specified value assets Corporate Bonds (continued) Total for India 0.62

Brazil Portugal Odebrecht Finance co gtd RegS EDP Finance sr unsecur Ser144A 5.125% /2022 (Cayman Islands) (1) (2) 1,550,000 1,516,032 0.31 priv plmt 6% /2018 (Netherlands) (2) 1,600,000 1,721,600 0.35 Petrobras International Finance co gtd Brisa Concessao Rodoviaria sr secured 5.75% /2020 (Cayman Islands) (2) 1,050,000 1,086,355 0.22 SerEMTN 6.875% /2018 (EUR) 800,000 1,223,158 0.24 Banco Bradesco sr unsecur Ser144A priv plmt 4.125% /2016 720,000 756,000 0.15 Total for Portugal 0.59 BRF sr unsecur Ser144A priv plmt 3.95% /2023 420,000 362,235 0.07 Kazakhstan Vale Overseas co gtd 5.625% /2019 KazMunayGas National sr unsecur (Cayman Islands) (2) 325,000 354,302 0.07 Ser144A priv plmt 6.375% /2021 1,500,000 1,631,783 0.33 Vale Overseas co gtd 6.875% /2039 KazMunayGas National sr unsecur RegS (Cayman Islands) (2) 75,000 78,095 0.02 6.375% /2021 1,100,000 1,196,388 0.24

Total for Brazil 0.84 Total for Kazakhstan 0.57

Switzerland Canada Credit Suisse subord Ser144A priv plmt Goldcorp sr unsecur 3.7% /2023 1,790,000 1,605,916 0.32 6.5% /2023 1,100,000 1,171,572 0.24 Brookfield Asset Management sr unsecur Credit Suisse Group jr subord Ser144A 5.8% /2017 510,000 557,464 0.11 priv plmt 7.5% perpetual (5) 1,030,000 1,090,137 0.22 Barrick Gold sr unsecur 4.1% /2023 530,000 482,827 0.10 Syngenta Finance co gtd 3.125% /2022 (Netherlands) (2) 840,000 810,067 0.16 Total for Canada 0.53 Aquarius and Investments for Zurich Insurance unsecur SerEMTN 4.25% /2043 (Ireland) (2) (5) (EUR) 300,000 413,594 0.08 Mexico Credit Suisse subord 5.75% /2025 (5) (EUR) 200,000 295,175 0.06 Petroleos Mexicanos co gtd 4.875% /2022 2,500,000 2,571,113 0.52

Total for Switzerland 0.76 Total for Mexico 0.52

Sweden Thailand Nordea Bank subord SerEMTN 4% /2021 (EUR) 1,700,000 2,483,611 0.50 PTT Exploration & Production sr unsecur Industrivarden sr unsecur RegS CV Ser144A priv plmt 3.707% /2018 1,040,000 1,056,947 0.21 1.875% /2017 (EUR) 800,000 1,179,544 0.24 PTT sr unsecur Ser144A priv plmt 3.375% /2022 800,000 719,224 0.14 Total for Sweden 0.74 Thai Oil sr unsecur RegS 4.875% /2043 875,000 716,760 0.14

Total for Thailand 0.49 Indonesia Perusahaan Listrik Negara sr unsecur RegS 5.5% /2021 2,400,000 2,314,224 0.46 United Arab Emirates Pertamina Persero sr unsecur Ser144A ADCB Finance Cayman bnk gtd SerGMTN priv plmt 4.875% /2022 960,000 880,464 0.18 2.5% /2018 (Cayman Islands) (1) (2) 800,000 791,600 0.16 IPIC GMTN co gtd RegS 5.875% /2021 Total for Indonesia 0.64 (Cayman Islands) (2) (EUR) 400,000 655,030 0.13 IPIC GMTN co gtd RegS 2.375% /2018 (Cayman Islands) (2) (EUR) 250,000 353,004 0.07 Luxembourg Glencore Finance Europe co gtd CV Total for United Arab Emirates 0.36 5% 31/12/2014 1,100,000 1,233,694 0.25 Bormioli Rocco Holdings sr secured RegS 10% /2018 (EUR) 500,000 755,664 0.15 Singapore Geo Debt Finance sr secured RegS CapitaLand sr unsecur RegS CV 7.5% /2018 (EUR) 500,000 735,042 0.15 1.85% /2020 (SGD) 2,250,000 1,632,009 0.33 ArcelorMittal subord 8.75% perpetual (5) 400,000 434,048 0.09 Total for Singapore 0.33 Total for Luxembourg 0.64

Peru India Banco de Credito del Peru sr subord Vedanta Resources sr unsecur Ser144A Ser144A priv plmt 6.125% /2027 (5) 1,525,000 1,528,813 0.31 priv plmt 6% /2019 (United Kingdom) (2) 1,700,000 1,651,176 0.33 Bharti Airtel International co gtd 4% /2018 Total for Peru 0.31 (Netherlands) (2) (EUR) 350,000 484,974 0.10

The accompanying notes are an integral part of these financial statements. 105 Morgan Stanley Investment Funds 31 December 2013

Global Bond Fund

Jersey Derwent London Capital No 2 Jersey United States of America co gtd SerDLN CV 1.125% /2019 (GBP) 800,000 1,328,995 0.27 US Treasury 3.5% /2039 15,300,000 14,503,922 2.93 US Treasury 3.5% /2018 7,000,000 7,604,570 1.53 Total for Jersey 0.27 Total for United States of America 4.46

Colombia Ecopetrol sr unsecur 5.875% /2023 1,100,000 1,167,496 0.24 Italy Italy Buoni Poliennali Del Tesoro Total for Colombia 0.24 5.5% /2022 (EUR) 6,500,000 10,080,226 2.04 Italy Buoni Poliennali Del Tesoro 3.75% /2016 (EUR) 3,700,000 5,369,380 1.08 Hong Kong Italy Buoni Poliennali Del Tesoro Hutchison Whampoa Europe Finance 12 4% /2020 (EUR) 2,500,000 3,617,672 0.73 co gtd SerEMTN 2.5% /2017 (Cayman Islands) (2) (EUR) 800,000 1,142,344 0.23 Total for Italy 3.85

Total for Hong Kong 0.23 Spain Government of Spain sr unsecur Ireland 4.4% /2023 (EUR) 5,200,000 7,313,204 1.48 CRH America co gtd 6% /2016 Government of Spain 5.85% /2022 (EUR) 3,400,000 5,327,343 1.08 (United States of America) (2) 615,000 689,320 0.14 Government of Spain sr unsecur RegS 4% /2018 2,200,000 2,252,833 0.45 Total for Ireland 0.14 Total for Spain 3.01 Romania Cable Communications Systems sr secured United Kingdom RegS 7.5% /2020 (Netherlands) (2) (EUR) 450,000 638,877 0.13 UK Treasury 4.25% /2039 (GBP) 3,200,000 5,857,260 1.18 UK Treasury 4.25% /2032 (GBP) 3,200,000 5,828,505 1.17 Total for Romania 0.13 UK Treasury 1.75% /2022 (GBP) 1,300,000 1,968,989 0.40

Austria Total for United Kingdom 2.75 Atrium European Real Estate sr unsecur 4% /2020 (Jersey) (2) (EUR) 450,000 620,866 0.13 Germany Bundesrepublik Deutschland Ser03 Total for Austria 0.13 4.75% /2034 (EUR) 2,300,000 4,183,083 0.85 Bundesrepublik Deutschland Ser05 4% /2037 (EUR) 2,400,000 4,006,630 0.81 Israel KfW - Kreditanstalt fuer Wiederaufbau Teva Pharmaceutical Finance IV co gtd govt gtd 2.05% /2026 (JPY) 315,000,000 3,424,508 0.69 3.65% /2021 (Curacao) (2) 630,000 618,052 0.12

Total for Germany 2.35 Total for Israel 0.12

Mexico Chile Mexican Bonos SerM 20 10% /2024 (MXN) 70,000,000 6,849,941 1.38 ENTEL Chile sr unsecur Ser144A priv plmt United Mexican States sr unsecur 4.875% /2024 500,000 489,618 0.10 3.625% /2022 3,400,000 3,368,516 0.68

Total for Chile 0.10 Total for Mexico 2.06

Qatar Sweden Qtel International Finance co gtd RegS Swedish Government Ser1057 3.25% /2023 (Bermuda) (2) 450,000 405,455 0.08 1.5% /2023 (SEK) 57,000,000 8,081,995 1.63 Swedish Government Ser1052 Total for Qatar 0.08 4.25% /2019 (SEK) 5,000,000 870,099 0.18

Belgium Total for Sweden 1.81 Solvay Finance co gtd 5.425% perpetual (France) (2) (5) (EUR) 225,000 322,802 0.07 Ireland Government of Ireland 3.9% /2023 (EUR) 5,100,000 7,280,991 1.47 Total for Belgium 0.07

Total for Ireland 1.47 Total for Corporate Bonds 40.92

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 106

Global Bond Fund

Total for Russia 0.25 Australia Government of Australia sr unsecur South Korea Ser122 5.25% /2019 (AUD) 3,800,000 3,685,749 0.74 Republic of Korea sr unsecur 7.125% /2019 500,000 610,725 0.12 Government of Australia sr unsecur Ser124 5.75% /2021 (AUD) 2,900,000 2,903,871 0.59 Total for South Korea 0.12 Total for Australia 1.33 Total for Government Bonds 34.21

Canada Government of Canada 3.75% /2019 (CAD) 3,500,000 3,579,703 0.72 Mortgage and Asset Backed Securities Government of Canada 3.25% /2021 (CAD) 2,900,000 2,884,155 0.58 United States of America Total for Canada 1.30 FNMA Pool TBA 30 Years 4% /2044 5,235,000 5,363,421 1.08 FNMA Pool TBA 30 Years 4.5% /2044 4,680,000 4,951,294 1.00 GNMA Pool TBA 30 Years 4.5% /2044 4,480,000 4,763,500 0.96 Greece FNMA Pool AD4062 5% /2040 3,272,205 3,554,944 0.72 Republic of Greece SerPSI step cpn WaMu Mortgage Pass Through 2% /2025 (EUR) 5,000,000 4,361,871 0.88 Certificates 2007-OA4 1A 0.909% /2047 (5) 3,613,112 3,141,055 0.63 FNMA Pool AJ9630 4% /2041 2,964,408 3,057,509 0.62 Total for Greece 0.88 RALI Trust 2006-QS8 A1 6% /2036 3,912,637 2,979,195 0.60 JP Morgan Mortgage Trust 2006-S4 A8 0.545% /2037 (5) 4,499,499 2,977,373 0.60 Norway Chase Mortgage Finance 2007-A1 11A4 Government of Norway Ser472 2.663% /2037 (5) 2,616,921 2,409,263 0.49 4.25% /2017 (NOK) 12,000,000 2,131,234 0.43 FNMA Pool AI1647 4.5% /2041 2,236,339 2,373,665 0.48 Queens Centre Mortgage Trust 2013-QCA A Total for Norway 0.43 3.275% /2037 2,570,870 2,366,877 0.48 JP Morgan Mortgage Trust 2007-A4 2A3 Brazil 5.321% /2037 (5) 2,385,641 2,080,969 0.42 Brazil Notas do Tesouro Nacional FNMA Pool TBA 30 Years 4.5% /2044 1,940,000 2,045,184 0.41 Serie F sr nts SerNTNF 10% /2017 (BRL) 439,300 1,849,658 0.37 Commercial Mortgage Trust 2012-CR4 A3 2.853% /2045 2,075,000 1,958,047 0.40 Total for Brazil 0.37 Countrywide Alternative Loan Trust 2007-5CB 1A12 6% /2037 2,425,395 1,884,481 0.38 JP Morgan Alternative Loan Trust Bermuda 2006-S1 1A19 6.5% /2036 2,130,156 1,883,825 0.38 Bermuda Government International Bond GNMA II Pool MA0535 4% /2042 1,804,484 1,879,201 0.38 sr unsecur RegS 4.854% /2024 1,680,000 1,686,451 0.34 GNMA Pool TBA 30 Years 3.5% /2044 1,847,000 1,851,906 0.37 Banc of America Funding 2006-G 2A4 Trust Total for Bermuda 0.34 0.457% /2036 (5) 1,935,000 1,698,458 0.34 GNMA Pool TBA 30 Years 3.5% /2044 1,627,080 1,633,436 0.33 Slovenia Indymac Index Mortgage Loan Trust 2005-AR23 Republic of Slovenia Ser144A priv plmt 2A1 2.378% /2035 (5) 1,933,884 1,569,323 0.32 5.85% /2023 1,650,000 1,686,218 0.34 Countrywide Alternative Loan Trust 2006-14CB A7 6% /2036 1,813,912 1,500,508 0.30 GS Mortgage Securities II 2013-KYO D Total for Slovenia 0.34 2.768% /2029 (5) 1,500,000 1,496,197 0.30 GNMA 2013-71 IG 3.5% /2043 6,034,264 1,415,470 0.29 Portugal FNMA Pool AU1323 4% /2043 1,253,382 1,292,746 0.26 Portugal Obrigacoes do Tesouro OT Wells Fargo Commercial Mortgage Trust sr unsecur 5.65% /2024 (EUR) 1,240,000 1,645,245 0.33 2012-LC5 A3 2.918% /2045 1,317,000 1,249,972 0.25 Commercial Mortgage Trust 2013-CR9 C Total for Portugal 0.33 4.261% /2045 (5) 1,310,000 1,233,047 0.25 Commercial Mortgage Trust Pass Through Certificates 2012-CR3 A3 2.822% /2045 1,252,847 1,184,705 0.24 Freddie Mac Gold Pool Q04858 4% /2041 1,106,031 1,137,655 0.23

The accompanying notes are an integral part of these financial statements. 107 Morgan Stanley Investment Funds 31 December 2013

Global Bond Fund

Mortgage and Asset Backed Securities (continued) Total for United States of America 16.81

United States of America (continued) Countrywide Alternative Loan Trust United Kingdom 2006-36T2 2A5 6% /2036 1,352,765 1,022,314 0.21 Holmes Master Issuer 2012-3A A1 FNMA Pool TBA 15 Years 3% /2029 950,000 967,812 0.20 2.07% /2054 (5) (GBP) 1,378,000 2,355,595 0.48 FNMA Pool AH5714 5% /2041 877,864 953,717 0.19 FNMA Pool AD0426 5.5% /2038 807,919 888,333 0.18 Total for United Kingdom 0.48 CGBAM Commercial Mortgage Trust 2013-BREH D 3.018% /2030 (5) 879,000 883,230 0.18 Total for Mortgage and Asset Backed Securities 17.29 Banc of America Funding 2007-5 3A1 6% /2037 1,030,177 835,245 0.17 Citigroup Mortgage Loan Trust 2005-9 Supra-National Bonds 2A2 5.5% /2035 829,041 824,262 0.17 FNMA Pool AJ2800 4% /2041 768,221 792,348 0.16 European Investment Bank sr unsecur FNMA Pool AH2426 5% /2041 697,694 757,980 0.15 2.15% /2027 (JPY) 190,000,000 2,032,104 0.41 Banc of America Funding 2006 8T2 A6 Trust step cpn 6.049% /2036 871,059 717,305 0.14 RALI Trust 2006-QS4 A2 6% /2036 886,534 691,841 0.14 Total for Supra-National Bonds 0.41 Countrywide Alternative Loan Trust 2006-4CB 1A1 6% /2036 827,707 688,035 0.14 Mutual Fund JP Morgan Chase Commercial Mortgage Securities 4.717% /2046 600,000 650,930 0.13 Morgan Stanley Liquidity Funds - RALI Trust 2007-QS2 A1 6% /2037 694,800 546,693 0.11 Euro Liquidity Fund MS Reserve EUR Dist. Residential Asset Securitization Trust (Luxembourg) (2) (4) 401,562 553,176 0.11 2006-A6 2A6 6% /2036 626,736 513,568 0.10 Banc of America Alternative Loan Trust Total for Mutual Fund 0.11 2005-8 2CB1 6% /2035 530,737 493,537 0.10 Luminent Mortgage Trust 2006-6 A2A Total Investment Securities 460,658,568 92.94 0.335% /2046 (5) 1,269,276 433,182 0.09 WFRBS Commercial Mortgage Trust 2013-C11 B 3.714% /2045 (5) 430,000 409,252 0.08 Countrywide Alternative Loan Trust DERIVATIVES 2005-86CB A4 5.5% /2036 440,068 370,750 0.07 Freddie Mac Gold Pool A68767 6% /2037 324,016 358,594 0.07 CVS Pass-Through Trust Pass Through Over-the-counter (OTC) and exchange traded derivatives Certificates Ser144A priv plmt 8.353% /2031 260,602 328,056 0.07 as at 31 December 2013, expressed in US dollars. Citigroup Mortgage Loan Trust 2005-WF1 A4 step cpn 5.53% /2034 300,000 310,403 0.06 Financial Futures Contracts Countrywide Alternative Loan Trust 2007-5CB 2A1 6% /2037 372,592 291,355 0.06 CVS Pass-Through Trust Pass Through Net unrealised Certificates 6.036% /2028 254,718 281,781 0.06 gain/(loss) as at Maturity Number of Notional 31 December % of net CNH Equipment Trust 2011-A A3 1.2% /2016 231,713 231,897 0.05 Description date contracts commitments Counterparty 2013 assets Countrywide Alternative Loan Trust 2005-86CB A11 5.5% /2036 248,862 209,663 0.04 Euro Bund Future 03/2014 (87) (16,679,207) Goldman Sachs 272,385 0.05 Lehman Mortgage Trust 2005-1 2A1 5.5% /2035 207,849 197,371 0.04 Long Gilt Future 03/2014 (9) (1,586,828) Goldman Sachs 18,750 0.00 FNMA Pool 962304 5.5% /2038 162,748 178,946 0.04 US 10yr T-note Future 03/2014 (166) (20,428,375) Goldman Sachs 375,504 0.08 FNMA Pool AH2962 5% /2041 134,593 146,223 0.03 FNMA Pool 490758 6.5% /2029 106,700 118,287 0.02 FNMA Pool AK8789 3.5% /2042 67,098 66,794 0.01 Unrealised Gain on Financial Futures Contracts 666,639 0.13 Freddie Mac Gold Pool A64548 6% /2037 33,324 36,881 0.01 FNMA Pool AD0273 8.5% /2032 22,213 26,766 0.01 Canada 10 Year FNMA Pool 253894 6.5% /2031 23,855 26,445 0.01 Bond Future 03/2014 55 6,565,441 Goldman Sachs (54,885) (0.01) Freddie Mac Gold Pool G05631 7.5% /2035 22,083 25,480 0.01 Euro BOBL Future 03/2014 61 10,455,997 Goldman Sachs (112,602) (0.02) Freddie Mac Gold Pool C90299 7.5% /2019 15,176 16,557 0.00 US 2yr T-note Future 03/2014 384 84,396,000 Goldman Sachs (165,564) (0.03) Freddie Mac Gold Pool G05640 8.5% /2031 12,915 15,861 0.00 US 5yr T-note Future 03/2014 120 14,317,500 Goldman Sachs (187,500) (0.04) Freddie Mac Gold Pool G05639 8% /2032 12,095 14,263 0.00 US Long Bond Future 03/2014 111 14,287,781 Goldman Sachs (195,156) (0.04) FNMA Pool 485674 6.5% /2029 10,136 11,237 0.00 US Treasury Ultra Freddie Mac Gold Pool G00876 6.5% /2028 9,098 10,064 0.00 Bond Future 03/2014 113 15,498,657 Goldman Sachs (136,776) (0.03) FNMA Pool 253794 6.5% /2031 8,586 9,518 0.00 FNMA Pool 625393 6.5% /2032 7,942 8,804 0.00 Unrealised Loss on Financial Futures Contracts (852,483) (0.17) FNMA Pool 251898 6.5% /2028 5,256 5,827 0.00 FNMA Pool 527244 6.5% /2029 4,364 4,837 0.00 Net Unrealised Loss FNMA Pool 251626 7% /2018 4,239 4,507 0.00 on Financial Futures Contracts 106,826,966 (185,844) (0.04) FNMA Pool 653071 6.5% /2032 3,897 4,321 0.00 FNMA Pool 252589 6.5% /2029 2,729 3,026 0.00 FNMA Pool 711986 6.5% /2033 2,675 2,966 0.00 Cash of USD 1,819,498 held as collateral by Goldman Sachs in relation to financial futures contracts. FNMA Pool 675952 6.5% /2032 2,155 2,390 0.00 Cash of USD 11 paid as collateral to Goldman Sachs in relation to financial futures contracts. FNMA Pool 591189 6.5% /2031 1,475 1,636 0.00 The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 108

Global Bond Fund

DERIVATIVES (continued) Forward Foreign Currency Exchange Contracts (continued)

Over-the-counter (OTC) and exchange traded derivatives Unrealised Maturity Amount Amount gain/(loss) % of net as at 31 December 2013, expressed in US dollars. date bought Ccy sold Ccy Counterparty USD assets

Forward Foreign Currency Exchange Contracts EUR Hedged Share Class 10/01/2014 1,060,991 USD 773,349 EUR J.P. Morgan (4,335) 0.00 Unrealised Maturity Amount Amount gain/(loss) % of net Unrealised Loss on NAV Hedged Share Classes date bought Ccy sold Ccy Counterparty USD assets Forward Foreign Currency Exchange Contracts (4,335) 0.00

09/01/2014 105,000 CAD 98,532 USD RBC 280 0.00 Total Unrealised Loss 09/01/2014 492,412 USD 545,000 AUD Deutsche Bank 4,968 0.00 on Forward Foreign Currency Exchange Contracts (1,108,531) (0.22) 09/01/2014 2,544,643 USD 33,000,000 MXN J.P. Morgan 20,398 0.01 09/01/2014 1,795,591 USD 2,250,000 SGD HSBC 14,402 0.00 Net Unrealised Gain 10/01/2014 1,800,000 EUR 2,447,046 USD State Street 32,544 0.01 on Forward Foreign Currency Exchange Contracts 152,404 0.03 10/01/2014 35,457,000 EUR 48,114,085 USD Westpac Bank 729,703 0.15 10/01/2014 2,755,986 USD 2,000,000 EUR Deutsche Bank 886 0.00 14/01/2014 3,171,724 CAD 3,300,000 AUD Commonwealth Bank 33,945 0.01 Credit Default Swap Contracts 14/01/2014 1,979,000 NZD 1,615,739 USD Westpac Bank 11,481 0.00 14/01/2014 10,956,308 USD 12,164,000 AUD Commonwealth Bank 80,685 0.02 Net unrealised 14/01/2014 3,057,030 USD 23,700,000 HKD HSBC 576 0.00 gain/(loss) as at 15/01/2014 3,400,000 PLN 809,431 EUR Deutsche Bank 12,478 0.00 Risk Notional Maturity 31 December % of net position Description Ccy amount date Counterparty 2013 assets 16/01/2014 12,600,000 DKK 2,307,840 USD Commonwealth Bank 19,330 0.00 16/01/2014 3,600,000 EUR 4,942,897 USD Westpac Bank 16,273 0.00 16/01/2014 4,940,000 NOK 799,644 USD Deutsche Bank 13,180 0.00 Buy Alcoa 5.72% 16/01/2014 3,450,000 SEK 387,844 EUR Westpac Bank 1,813 0.00 23/02/2019 USD 1,570,000 20/09/2018 Barclays Bank 40,879 0.01 22/01/2014 6,500,000 USD 4,715,017 EUR Westpac Bank 4,853 0.00 23/01/2014 2,415,000 GBP 2,868,979 EUR RBC 43,192 0.01 Buy Quest Diagnostics 23/01/2014 3,280,000 GBP 5,356,686 USD RBC 69,693 0.02 6.95% 24/01/2014 6,170,000,000 KRW 5,858,058 USD HSBC 13,135 0.00 01/07/2037 USD 2,525,000 20/12/2018 Barclays Bank 26,198 0.01 24/01/2014 3,730,703 USD 8,700,000 BRL J.P. Morgan 68,592 0.01 24/01/2014 1,440,354 USD 47,500,000 RUB Deutsche Bank 1,430 0.00 Sell CDX.NA.IG.18-V 24/01/2014 484,227 USD 5,035,000 ZAR Westpac Bank 7,530 0.00 01/06/2017 USD 10,000,000 20/06/2017 J.P. Morgan 215,180 0.04

Sell CDX.NA.IG.20-V Unrealised Gain 01/06/2018 USD 2,525,000 20/06/2018 Barclays Bank 49,636 0.01 on Forward Foreign Currency Exchange Contracts 1,201,367 0.24

Sell CDX.NA.IG.20-V EUR Hedged Share Class 01/06/2018 USD 5,525,000 20/06/2018 J.P. Morgan 108,610 0.02 10/01/2014 23,968,051 EUR 32,957,715 USD J.P. Morgan 59,473 0.01 10/01/2014 60,545 USD 43,883 EUR J.P. Morgan 95 0.00 Sell CDX.NA.IG.21-V 01/12/2018 USD 2,500,000 20/12/2018 Barclays Bank 44,008 0.01 Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 59,568 0.01 Unrealised Gain on Credit Default Swap Contracts 484,511 0.10

Total Unrealised Gain Buy Kohl’s 6.25% on Forward Foreign Currency Exchange Contracts 1,260,935 0.25 15/12/2017 USD 3,100,000 20/06/2018 J.P. Morgan (1,205) 0.00

09/01/2014 1,200,000 CAD 829,606 EUR RBC (13,548) 0.00 Buy Yum! Brands 6.25% 09/01/2014 9,600,000 MXN 537,367 EUR State Street (5,925) 0.00 15/03/2018 USD 2,500,000 20/12/2018 Barclays Bank (64,333) (0.01) 09/01/2014 6,605,405 USD 7,025,000 CAD RBC (5,577) 0.00 09/01/2014 3,589,730 USD 47,165,000 MXN State Street (18,028) 0.00 Unrealised Loss on Credit Default Swap Contracts (65,538) (0.01) 10/01/2014 3,149,928 USD 2,300,000 EUR Westpac Bank (18,437) 0.00 14/01/2014 280,000 NZD 168,330 EUR Westpac Bank (1,654) 0.00 Net Unrealised Gain on Credit Default Swap Contracts 418,973 0.09 15/01/2014 1,169,278 USD 1,050,000 CHF UBS (9,339) 0.00 15/01/2014 3,285,567 USD 10,109,000 PLN Deutsche Bank (66,780) (0.01) 16/01/2014 1,021,765 EUR 8,620,000 NOK Deutsche Bank (10,798) 0.00 16/01/2014 357,968 USD 2,210,000 NOK Deutsche Bank (5,663) 0.00 16/01/2014 6,741,287 USD 43,910,000 SEK Westpac Bank (81,775) (0.02) 24/01/2014 1,500,000 BRL 638,434 USD J.P. Morgan (7,035) 0.00 24/01/2014 2,750,000 BRL 1,169,466 USD State Street (11,902) 0.00 24/01/2014 4,150,000 MYR 1,289,501 USD HSBC (25,305) (0.02) 28/01/2014 1,923,750,000 JPY 13,591,468 EUR State Street (384,688) (0.08) 28/01/2014 2,373,200,000 JPY 23,060,255 USD State Street (437,742) (0.09)

Unrealised Loss on Forward Foreign Currency Exchange Contracts (1,104,196) (0.22)

The accompanying notes are an integral part of these financial statements. 109 Morgan Stanley Investment Funds 31 December 2013

Global Bond Fund

DERIVATIVES (continued)

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars.

Interest Rate Swap Contracts

Net unrealised gain/(loss) as at Notional Maturity 31 December % of net Description Currency amount date Counterparty 2013 assets

Pay fixed rate 2.040% Receive floating rate USD LIBOR 3 months USD 13,090,000 13/02/2023 Bank of America 800,968 0.16

Pay fixed rate 2.058% Receive floating rate USD LIBOR 3 months USD 12,360,000 06/02/2023 J.P. Morgan 728,203 0.15

Pay fixed rate 2.091% Receive floating rate USD LIBOR 3 months USD 17,110,000 15/02/2023 Goldman Sachs 974,231 0.20

Pay fixed rate 2.748% Receive floating rate USD LIBOR 3 months USD 26,990,000 20/11/2023 Deutsche Bank 498,615 0.10

Pay fixed rate 2.803% Receive floating rate Royal Bank USD LIBOR 3 months USD 5,685,000 01/05/2043 of Scotland 1,063,263 0.21

Pay fixed rate 2.903% Receive floating rate USD LIBOR 3 months USD 7,140,000 13/05/2043 UBS 1,207,315 0.24

Unrealised Gain on Interest Rate Swap Contracts 5,272,595 1.06

Pay fixed rate 0.478% Receive floating rate USD LIBOR 3 months USD 63,462,000 01/08/2015 Goldman Sachs (198,841) (0.04)

Unrealised Loss on Interest Rate Swap Contracts (198,841) (0.04)

Net Unrealised Gain on Interest Rate Swap Contracts 5,073,754 1.02

Cash of USD 551,100 paid as collateral by Barclays Bank in relation to OTC contracts. Cash of USD 730,000 paid as collateral by Bank of America in relation to OTC contracts. Cash of USD 1,010,000 paid as collateral by J.P. Morgan in relation to OTC contracts. Cash of USD 880,000 paid as collateral by Goldman Sachs in relation to OTC contracts. Cash of USD 550,000 paid as collateral by Westpac Bank in relation to OTC contracts. Cash of USD 930,000 paid as collateral by Royal Bank of Scotland in relation to OTC contracts. Cash of USD 550,000 paid as collateral by Deutsche Bank in relation to OTC contracts. Cash of USD 1,190,000 paid as collateral by UBS in relation to OTC contracts. Cash of USD 850,000 held as collateral by State Street in relation to OTC contracts.

Total Derivatives 5,459,287 1.10

Other Assets less Liabilities 29,530,030 5.96

Total Net Asset Value 495,647,885 100.00

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 110

Global Convertible Bond Fund

Investment aim Statement of investments

Total for Oil & Gas 7.13

Diversified Financial Services Tong Jie co gtd Ser363 CV 0% /2018 (HKD) 75,000,000 10,138,314 1.07 Portfolio Recovery Associates sr unsecur Ser144A priv plmt CV 3% /2020 8,104,000 8,886,036 0.93 Holdgrove co gtd CV 1% /2017 7,000,000 7,022,785 0.74 Azimut Holding subord CV 2.125% /2020 (EUR) 5,000,000 6,941,662 0.73 Magnolia Finance subord SerMOL CV 4% perpetual (5) (EUR) 5,200,000 6,795,870 0.71 Franshion Capital co gtd RegS CV 6.8% perpetual 5,700,000 6,386,907 0.67 China Overseas Grand Oceans Finance Cayman co gtd CV step cpn 2% /2017 (HKD) 41,000,000 5,836,000 0.61 Magyar Nemzeti Vagyonkezelo govt gtd SerRICH CV 3.375% /2019 (EUR) 3,000,000 4,284,721 0.45

Total for Diversified Financial Services 5.91

Internet Priceline.com sr unsecur Ser144A priv plmt CV 0.35% /2020 12,800,000 14,552,832 1.52 SINA sr unsecur Ser144A priv plmt CV 1% /2018 9,379,000 9,426,223 0.99 Yahoo! sr unsecur Ser144A priv plmt CV 0% /2018 7,268,000 7,586,083 0.80 Ctrip.com International sr unsecur Ser144A priv plmt CV 1.25% /2018 7,150,000 7,154,469 0.75 TIBCO Software sr unsecur CV 2.25% /2032 6,151,000 6,168,315 0.65 SBI Holdings sr unsecur CV 0% /2017 (JPY) 500,000,000 5,736,514 0.60

Total for Internet 5.31

Semiconductors ON Semiconductor co gtd SerB CV 2.625% /2026 8,689,000 9,552,339 1.00 Semiconductor Manufacturing International sr unsecur RegS CV 0% /2018 9,300,000 9,454,566 0.99 SK Hynix sr unsecur CV 2.65% /2015 6,600,000 8,158,128 0.86 SunEdison sr unsecur Ser144A priv plmt CV 2% /2018 7,000,000 7,895,825 0.83

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 111 Morgan Stanley Investment Funds 31 December 2013

Global Convertible Bond Fund

Statement of investments (continued) Holdings/ Nominal in US dollars Market % of net Transferable securities and money market instruments admitted Investments unless specified value assets to official exchange listing or dealt in on another regulated market. Convertible Bonds (continued) As at 31 December 2013, expressed in US dollars. Real Estate Holdings/ Swiss Prime Site sr unsecur CV Nominal in 1.875% /2016 (CHF) 6,920,000 7,998,240 0.84 US dollars Market % of net Kaisa Group Holdings Investments unless specified value assets sr secured Ser1638 CV 8% /2015 (CNH) 39,400,000 7,043,147 0.74 CapitaLand sr unsecur RegS CV Convertible Bonds (continued) 1.85% /2020 (SGD) 8,750,000 6,346,703 0.67 Agile Property Holdings sr secured CV Semiconductors (continued) 4% /2016 6,200,000 6,213,051 0.65 Linear Technology sr unsecur SerA CV Shui On Land sr unsecur CV 4.5% /2015 (CNH) 36,800,000 6,049,448 0.63 3% /2027 6,849,000 7,837,824 0.82 NVIDIA sr unsecur Ser144A priv plmt CV Total for Real Estate 3.53 1% /2018 7,192,000 7,331,345 0.77

Total for Semiconductors 5.27 Mining Newmont Mining co gtd SerA CV 1.25% 15/07/2014 8,144,000 8,159,270 0.86 Real Estate Investment Trusts (REITs) Goldcorp sr unsecur CV 2% 01/08/2014 6,170,000 6,200,850 0.65 Boston Properties sr unsecur Ser144A Vedanta Resources Jersey co gtd CV priv plmt CV 3.625% 15/02/2014 8,467,000 8,514,627 0.90 5.5% /2016 6,000,000 6,123,000 0.64 Colony Financial sr unsecur CV 5% /2023 8,196,000 8,508,309 0.89 China Precious Metal Resources Holdings Starwood Property Trust sr unsecur CV sr unsecur CV 7.25% /2018 (HKD) 40,000,000 3,881,817 0.41 4.55% /2018 7,100,000 7,817,917 0.82 Silver Standard Resources sr unsecur Pennymac co gtd Ser144A priv plmt CV Ser144A priv plmt CV 2.875% /2033 5,000,000 3,834,000 0.40 5.375% /2020 6,682,000 6,385,820 0.67 Paladin Energy sr unsecur CV 6% /2017 5,000,000 3,550,000 0.37 IAS Operating Partnership sr unsecur Ser144A priv plmt CV 5% /2018 6,619,000 6,225,170 0.65 Total for Mining 3.33 Extra Space Storage sr unsecur Ser144A priv plmt CV 2.375% /2033 6,065,000 6,091,534 0.64 Holding Companies - Diversified Total for Real Estate Investment Trusts (REITs) 4.57 OHL Investments secured SerOHL CV 4% /2018 (EUR) 8,000,000 11,480,199 1.20 Siem Industries sr secured SerSUBC CV Investment Companies 1% /2019 10,400,000 10,444,304 1.10 Billion Express Investments co gtd CV Wharf Finance 2014 co gtd CV 0.75% /2015 16,400,000 16,886,834 1.77 2.3% 07/06/2014 (HKD) 56,000,000 7,248,202 0.76 Aabar Investments sr unsecur RegS CV 4% /2016 (EUR) 7,800,000 12,736,870 1.34 Total for Holding Companies - Diversified 3.06 Ares Capital sr unsecur Ser144A priv plmt CV 4.375% /2019 8,829,000 9,198,714 0.96 Computers Total for Investment Companies 4.07 SanDisk sr unsecur Ser144A priv plmt CV 0.5% /2020 16,667,000 16,510,747 1.73 Cap Gemini sr unsecur SerCAP CV Pharmaceuticals 0% /2019 (EUR) 6,200,000 6,177,314 0.65 Salix Pharmaceuticals sr nts CV 1.5% /2019 4,224,000 6,273,105 0.66 Indra Sistemas sr unsecur SerIDR CV Algeta sr unsecur SerALGE CV 3.375% /2018 4,200,000 6,039,159 0.63 1.75% /2018 (EUR) 4,000,000 5,911,688 0.62 BioMarin Pharmaceutical sr subord CV 1.5% /2020 5,218,000 5,585,191 0.58 Total for Computers 3.00 Celltrion sr unsecur CV 2.75% /2018 5,250,000 4,542,799 0.48 Auxilium Pharmaceuticals sr unsecur CV 1.5% /2018 3,550,000 3,928,537 0.41 Health Care Medivation sr unsecur CV 2.625% /2017 2,608,000 3,820,720 0.40 Hengan International Group Vivus sr unsecur Ser144A priv plmt CV sr unsecur CV 0% /2018 (HKD) 70,000,000 9,610,703 1.01 4.5% /2020 3,540,000 3,055,463 0.32 QIAGEN Euro Finance Luxembourg Opko Health sr unsecur Ser144A co gtd SerQGEN CV 3.25% /2026 4,000,000 5,088,120 0.53 priv plmt CV 3% /2033 2,068,000 2,725,883 0.29 WellPoint sr unsecur CV 2.75% /2042 3,578,000 4,840,712 0.51 HeartWare International sr unsecur CV Total for Pharmaceuticals 3.77 3.5% /2017 3,581,000 4,301,855 0.45 Volcano sr unsecur CV 1.75% /2017 3,650,000 3,622,935 0.38

Software Total for Health Care 2.88 Salesforce.com sr unsecur Ser144A priv plmt CV 0.25% /2018 12,997,000 14,120,136 1.48 Nuance Communications sr unsecur CV Transportation 2.75% /2031 9,682,000 9,425,233 0.99 Deutsche Post sr unsecur SerDPW CV Take-Two Interactive Software 0.6% /2019 (EUR) 5,300,000 9,883,090 1.04 sr unsecur CV 1% /2018 6,000,000 6,445,110 0.68 Kawasaki Kisen Kaisha sr unsecur CV Electronic Arts sr unsecur CV 0.75% /2016 4,426,000 4,720,705 0.49 0% /2018 (JPY) 550,000,000 5,784,645 0.61 Seino Holdings sr unsecur CV 0% /2018 (JPY) 530,000,000 5,424,014 0.57 Total for Software 3.64 Nagoya Railroad sr unsecur CV 0% /2023 (JPY) 500,000,000 5,081,252 0.53

Total for Transportation 2.75

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 112

Global Convertible Bond Fund

Electrical Components & Equipments Chaowei Power Holdings Oil & Gas Services sr unsecur RegS CV 7.25% /2017 (CNH) 49,000,000 8,224,497 0.86 CGG sr unsecur CV 1.25% /2019 (EUR) 16,733,600 6,644,606 0.70 Prysmian sr unsecur SerPRY CV Technip sr unsecur SerTEC CV 1.25% /2018 (EUR) 4,500,000 6,999,375 0.73 0.5% /2016 (EUR) 4,208,100 5,287,014 0.55 General Cable subord CV step cpn 5% /2029 5,380,000 5,773,413 0.61 Total for Oil & Gas Services 1.25

Total for Electrical Components & Equipments 2.20 Airlines Lufthansa Malta Blues co gtd SerJBLU CV Biotechnology 0.75% /2017 (EUR) 3,401,000 6,390,545 0.67 Illumina sr unsecur Ser144A priv plmt CV International Consolidated Airlines Group 0.25% /2016 7,000,000 9,689,785 1.02 sr unsecur CV 1.75% /2018 (EUR) 3,000,000 5,483,901 0.58 Incyte sr unsecur Ser144A priv plmt CV 0.375% /2018 3,255,000 3,923,062 0.41 Total for Airlines 1.25 Medicines sr unsecur CV 1.375% /2017 2,457,000 3,700,856 0.39 Cubist Pharmaceuticals sr unsecur Ser144A Home Builders priv plmt CV 1.875% /2020 3,342,000 3,613,370 0.38 Toll Brothers Finance co gtd CV 0.5% /2032 6,577,000 6,860,633 0.72 Meritage Homes co gtd CV 1.875% /2032 3,633,000 4,083,492 0.43 Total for Biotechnology 2.20 Total for Home Builders 1.15 Miscellaneous Manufacturers Siemens Financieringsmaatschappij co gtd Electronics SerWW CV 1.65% /2019 8,000,000 9,455,320 0.99 TTM Technologies sr unsecur CV Trinity Industries subord nts CV 1.75% /2020 7,869,000 8,498,520 0.89 3.875% /2036 4,123,000 5,501,504 0.58 InvenSense sr unsecur Ser144A Nikkiso sr unsecur CV 0% /2018 (JPY) 410,000,000 4,298,513 0.45 priv plmt CV 1.75% /2018 2,000,000 2,208,600 0.23

Total for Miscellaneous Manufacturers 2.02 Total for Electronics 1.12

Telecommunications Building Materials Comtech Telecommunications sr unsecur CV Cemex subord nts CV 4.875% /2015 8,851,000 10,437,498 1.09 3% /2029 6,230,000 6,575,734 0.69 JDS Uniphase sr unsecur Ser144A Total for Building Materials 1.09 priv plmt CV 0.625% /2033 6,387,000 6,403,574 0.67 InterDigital co gtd CV 2.5% /2016 6,139,000 6,273,291 0.66 Household Products/Wares Total for Telecommunications 2.02 Jarden co gtd CV 1.875% /2018 7,332,000 10,310,625 1.08

Total for Household Products/Wares 1.08 Banks CaixaBank sr unsecur SerREPS CV 4.5% /2016 (EUR) 7,000,000 9,830,089 1.03 Chemicals BES Finance bnk gtd SerBBDC CV SGL Carbon sr unsecur CV 3.5% /2015 7,100,000 7,478,004 0.79 2.75% /2018 (EUR) 3,600,000 5,137,500 0.54 Fufeng Group sr unsecur CV Total for Banks 1.82 3% /2018 (CNY) 30,000,000 5,017,344 0.53

Total for Chemicals 1.07 Retail Lotte Shopping sr unsecur SerLOTT CV 0% /2018 (KRW) 6,800,000,000 7,050,581 0.74 Food Rallye sr unsecur SerCOFP CV Olam International sr unsecur CV 6% /2016 9,400,000 9,304,167 0.98 1% /2020 (EUR) 4,037,500 6,091,057 0.64 361 Degrees International sr unsecur CV Total for Food 0.98 4.5% /2017 4,100,000 3,952,318 0.41

Commercial Services Total for Retail 1.79 PHH sr unsecur CV 4% 01/09/2014 7,511,000 8,065,762 0.85

Total for Commercial Services 0.85

The accompanying notes are an integral part of these financial statements. 113 Morgan Stanley Investment Funds 31 December 2013

Global Convertible Bond Fund

Statement of investments (continued) Holdings/ Nominal in US dollars Market % of net Transferable securities and money market instruments admitted Investments unless specified value assets to official exchange listing or dealt in on another regulated market. Convertible Bonds (continued) As at 31 December 2013, expressed in US dollars. Forest Products & Paper Holdings/ Sumitomo Forestry sr unsecur CV Nominal in 0% /2018 (JPY) 610,000,000 5,988,372 0.63 US dollars Market % of net Investments unless specified value assets Total for Forest Products & Paper 0.63 Convertible Bonds (continued) Metal Fabricate/Hardware Iron & Steel TMK Bonds co gtd CV 5.25% /2015 5,600,000 5,676,636 0.60 Allegheny Technologies sr unsecur CV 4.25% 01/06/2014 7,735,000 7,987,625 0.84 Total for Metal Fabricate/Hardware 0.60

Total for Iron & Steel 0.84 Total for Convertible Bonds 90.49

Home Furnishings Equities Steinhoff Finance Holding co gtd SerSHF CV 5% /2016 (EUR) 4,450,000 7,841,095 0.82 Electric PPL Pfd Stock CV 8.75% 01/05/2014 121,100 6,349,273 0.67 Total for Home Furnishings 0.82 NextEra Energy Pfd Stock CV 5.889% /2015 110,000 6,221,600 0.65

Total for Electric 1.32 Distribution/Wholesale Glencore Finance Europe co gtd CV 5% /2014 6,800,000 7,626,472 0.80 Banks Bank of America Pfd Stock SerL CV Total for Distribution/Wholesale 0.80 7.25% perpetual 8,000 8,512,000 0.89

Total for Banks 0.89 Auto Manufacturers Volkswagen International Finance co gtd RegS CV 5.5% /2015 (EUR) 4,300,000 7,364,727 0.77 Oil & Gas Halcon Resources Pfd Stock SerA CV 5.75% 3,000 2,379,900 0.25 Total for Auto Manufacturers 0.77 Total for Oil & Gas 0.25 Apparel Iconix Brand Group sr subord CV Total for Equities 2.46 2.5% /2016 5,299,000 7,324,781 0.77 Mutual Fund Total for Apparel 0.77 Morgan Stanley Liquidity Funds - US Dollar Agriculture Liquidity Fund MS Reserve USD Dist. Golden Agri-Resources sr unsecur RegS CV (Luxembourg) (2) (4) 51,445,723 51,445,723 5.40 2.5% /2017 7,600,000 7,188,764 0.75 Total for Mutual Fund 5.40 Total for Agriculture 0.75 Total Investment Securities 937,525,194 98.35

Gas ENN Energy Holdings sr unsecur CV 0% /2018 5,500,000 7,082,213 0.74

Total for Gas 0.74

Engineering & Construction Aecon Group subord CV 5.5% /2018 (CAD) 6,400,000 6,431,745 0.67

Total for Engineering & Construction 0.67

Entertainment International Game Technology sr unsecur CV 3.25% 01/05/2014 6,060,000 6,428,387 0.67

Total for Entertainment 0.67

Lodging Resorttrust sr unsecur CV 0% /2018 (JPY) 555,000,000 6,042,422 0.63

Total for Lodging 0.63

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 114

Global Convertible Bond Fund

DERIVATIVES Forward Foreign Currency Exchange Contracts (continued)

OTC and exchange traded derivatives as at 31 December 2013, Unrealised Maturity Amount Amount gain/(loss) % of net expressed in US dollars. date bought Ccy sold Ccy Counterparty USD assets

Options Contracts CHF Hedged Share Class 10/01/2014 286,461 CHF 323,177 USD J.P. Morgan (1,641) 0.00 Market Number of value % of net EUR Hedged Share Class Security Description Expiration Contracts Ccy Counterparty (USD) assets 10/01/2014 205,185 EUR 283,140 USD J.P. Morgan (488) 0.00 10/01/2014 1,112,642 USD 812,355 EUR J.P. Morgan (6,419) 0.00 EURO STOXX 50 Index, Call Option, Strike Price 2,850 20/06/2014 1,000 EUR Goldman Sachs 3,617,472 0.38 Unrealised Loss on NAV Hedged Share Classes INTC, Call Option, Strike Price 25 17/01/2015 7,821 USD Goldman Sachs 1,955,250 0.21 Forward Foreign Currency Exchange Contracts (8,548) 0.00

Total Options Contracts at Market Value 5,572,722 0.59 Total Unrealised Loss on Forward Foreign Currency Exchange Contracts (581,497) (0.06) Forward Foreign Currency Exchange Contracts Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 1,448,903 0.15 Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets Cash of USD 1,030,000 paid as collateral by State Street in relation to OTC contracts. Cash of USD 20,000 held as collateral by UBS in relation to OTC contracts. 21/01/2014 5,400,000 EUR 7,429,358 USD Westpac Bank 9,386 0.00 Cash of USD 200,000 held as collateral by Deutsche Bank in relation to OTC contracts. 21/01/2014 650,000 HKD 83,826 USD State Street 1 0.00 21/01/2014 8,042,772 USD 7,150,000 CHF UBS 16,518 0.00 21/01/2014 37,019,218 USD 287,000,000 HKD State Street 6,179 0.00 Total Derivatives 7,021,625 0.74 21/01/2014 50,518,593 USD 5,200,000,000 JPY J.P. Morgan 952,505 0.10 21/01/2014 6,482,697 USD 8,100,000 SGD State Street 70,471 0.01 Other Assets less Liabilities 8,701,865 0.91 Unrealised Gain on Forward Foreign Currency Exchange Contracts 1,055,060 0.11 Total Net Asset Value 953,248,684 100.00

EUR Hedged Share Class (2) The country in brackets represents the country of incorporation of this security. 10/01/2014 390,905,285 EUR 537,516,301 USD J.P. Morgan 975,254 0.10 (4) Managed by an affiliate of the Investment Adviser. 10/01/2014 69,627 USD 50,482 EUR J.P. Morgan 86 0.00 (5) Variable coupon rates are those quoted as of 31 December 2013.

Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 975,340 0.10

Total Unrealised Gain on Forward Foreign Currency Exchange Contracts 2,030,400 0.21

21/01/2014 200,000,000 JPY 1,940,982 USD J.P. Morgan (34,594) 0.00 21/01/2014 1,000,000,000 JPY 9,597,509 USD Westpac Bank (65,569) (0.01) 21/01/2014 6,946,426 USD 7,400,000 CAD RBC (15,292) 0.00 21/01/2014 6,838,605 USD 5,000,000 EUR Commonwealth Bank (49,121) (0.01) 21/01/2014 73,940,568 USD 53,800,000 EUR Deutsche Bank (171,362) (0.02) 21/01/2014 1,429,218 USD 1,040,000 EUR J.P. Morgan (3,429) 0.00 21/01/2014 1,501,379 USD 1,100,000 EUR State Street (13,921) 0.00 21/01/2014 79,006,063 USD 57,500,000 EUR Westpac Bank (202,784) (0.02) 21/01/2014 7,026,206 USD 7,400,000,000 KRW HSBC (16,877) 0.00

Unrealised Loss on Forward Foreign Currency Exchange Contracts (572,949) (0.06)

The accompanying notes are an integral part of these financial statements. 115 Morgan Stanley Investment Funds 31 December 2013

Global Credit Fund

Investment aim Statement of investments

To provide an attractive rate of return, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in US dollars, primarily through As at 31 December 2013, expressed in US dollars. investment in fixed income securities Nominal in US dollars Market % of net of high quality issued by corporations and Investments unless specified value assets non‑government related issuers organised Corporate Bonds United States of America or operating in both developed and emerging General Electric Capital sr unsecur SerMTN 5.875% /2038 780,000 891,442 1.19 markets and denominated in global Bank of America sr unsecur 5.625% /2020 775,000 884,872 1.19 American Airlines 2013-1 Class A currencies. Pass Through Trust Ser144A priv plmt 4% /2025 775,000 762,891 1.02 Ford Motor Credit sr unsecur 5.875% /2021 625,000 709,081 0.95 Citigroup sr unsecur 8.5% /2019 525,000 674,263 0.90 JPMorgan Chase & Co sr unsecur 3.2% /2023 625,000 594,406 0.80 Verizon Communications sr unsecur 6.55% /2043 500,000 589,915 0.79 American International Group sr unsecur 6.4% /2020 450,000 534,222 0.71 AT&T sr unsecur 6.3% /2038 450,000 500,517 0.67 JPMorgan Chase & Co subord nts 3.375% /2023 500,000 468,148 0.63 Priceline.com sr unsecur Ser144A priv plmt CV 0.35% /2020 363,000 412,709 0.55 Mondelez International sr unsecur 2.375% /2021 (EUR) 300,000 408,584 0.55 Citigroup subord 4.05% /2022 400,000 397,046 0.53 Goldman Sachs Group sr unsecur 3.625% /2023 405,000 392,949 0.53 American Financial Group sr unsecur 9.875% /2019 300,000 386,231 0.52 United Airlines 2013-1 Class A Pass Through Trust SerA 4.3% /2025 375,000 381,562 0.51 Lam Research sr unsecur CV 1.25% /2018 302,000 369,006 0.49 Weingarten Realty Investors sr unsecur 4.45% /2024 375,000 368,920 0.49 Enterprise Products Operating co gtd 5.25% /2020 325,000 363,412 0.49 Energy Transfer Partners sr unsecur 4.9% /2024 350,000 355,784 0.48 Kinder Morgan Energy Partners sr unsecur 6.85% /2020 300,000 355,718 0.48 UnitedHealth Group sr unsecur 2.875% /2023 375,000 350,378 0.47 Genworth Holdings co gtd 7.2% /2021 300,000 348,212 0.47 CNA Financial sr unsecur 5.75% /2021 300,000 337,141 0.45 American Tower sr unsecur 3.5% /2023 365,000 335,656 0.45 Goldman Sachs Group subord 6.75% /2037 300,000 334,910 0.45 NBCUniversal Media co gtd 5.95% /2041 300,000 331,316 0.44 Intel jr subord CV 2.95% /2035 295,000 330,739 0.44 International Game Technology sr unsecur CV 3.25% 01/05/2014 296,000 313,994 0.42 Weatherford International co gtd 4.5% /2022 (Bermuda) (2) 300,000 302,462 0.40 Pioneer Natural Resources sr unsecur 3.95% /2022 300,000 299,581 0.40 Buckeye Partners sr unsecur 4.15% /2023 300,000 288,150 0.39 Allegheny Technologies sr unsecur CV 4.25% 01/06/2014 274,000 282,949 0.38 Philip Morris International sr unsecur 4.5% /2042 300,000 282,684 0.38 CC Holdings GS V sr secured 3.849% /2023 300,000 281,714 0.38 QVC sr secured 4.375% /2023 300,000 281,623 0.38 Mallinckrodt International Finance co gtd Ser144A priv plmt 4.75% /2023 (Luxembourg) (2) 300,000 277,992 0.37 DCP Midstream Operating co gtd 3.875% /2023 300,000 277,734 0.37 Altera sr unsecur 2.5% /2018 275,000 274,633 0.37 National Retail Properties sr unsecur 3.3% /2023 300,000 273,429 0.37 Glencore Funding co gtd Ser144A priv plmt 4.125% /2023 285,000 267,363 0.36 Prudential Financial jr subord 5.625% /2043 (5) 270,000 266,009 0.36 Verizon Communications sr unsecur 8.75% /2018 200,000 256,618 0.34 21st Century Fox America co gtd 6.15% /2041 225,000 252,269 0.34 Rockwood Specialties Group co gtd 4.625% /2020 235,000 241,022 0.32 JPMorgan Chase & Co sr unsecur 6.4% /2038 200,000 240,297 0.32 HSBC Finance subord 6.676% /2021 200,000 233,828 0.31

Global Credit Fund

As at 31 December 2013, expressed in US dollars. United States of America (continued) Time Warner Cable co gtd 4.5% /2042 175,000 132,283 0.18 Nominal in Lincoln National sr unsecur 7% /2040 100,000 127,135 0.17 US dollars Market % of net Citigroup sr unsecur 6.875% /2038 100,000 125,800 0.17 Investments unless specified value assets Verizon Communications sr unsecur 3.85% /2042 150,000 123,212 0.17 Omnicom Group co gtd 3.625% /2022 125,000 121,521 0.16 Corporate Bonds (continued) Plains All American Finance sr unsecur 6.7% /2036 100,000 118,158 0.16 United States of America (continued) Kinder Morgan Energy Partners sr unsecur Yahoo! sr unsecur Ser144A priv plmt CV 3.5% /2023 125,000 115,369 0.15 0% /2018 225,000 233,297 0.31 Capital One Financial subord 6.15% /2016 100,000 112,080 0.15 General Motors sr unsecur Ser144A priv plmt Boston Properties sr unsecur 3.8% /2024 110,000 105,732 0.14 4.875% /2023 225,000 228,472 0.31 Tesoro co gtd 5.375% /2022 100,000 101,046 0.13 CBL & Associates 5.25% /2023 225,000 226,679 0.30 US Airways 2013-1 Class A Bank of America sr unsecur 5.7% /2022 200,000 226,650 0.30 Pass Through Certificates 3.95% /2025 100,000 97,938 0.13 Hartford Financial Services Group sr unsecur Ashland sr unsecur 6.875% /2043 100,000 95,000 0.13 5.5% /2020 200,000 225,303 0.30 American Campus Communities Operating AES sr unsecur 7.375% /2021 200,000 224,926 0.30 Partnership co gtd 3.75% /2023 100,000 93,264 0.12 Boston Scientific sr unsecur 4.125% /2023 225,000 223,684 0.30 Host Hotels & Resorts sr unsecur SerD RR Donnelley & Sons sr unsecur 7.875% /2021 200,000 221,770 0.30 3.75% /2023 100,000 93,036 0.12 Packaging of America sr unsecur 4.5% /2023 220,000 220,850 0.30 Kinder Morgan sr secured Ser144A priv plmt ADT sr unsecur Ser144A priv plmt 6.25% /2021 210,000 220,763 0.30 5.625% /2023 95,000 92,661 0.12 Wal-Mart Stores sr unsecur 5.25% /2035 200,000 219,454 0.29 Citigroup subord 6.675% /2043 70,000 81,385 0.11 Williams Partners sr unsecur 5.25% /2020 200,000 218,808 0.29 Citigroup subord 5.5% /2025 70,000 73,858 0.10 NOVA Chemicals sr unsecur Ser144A priv plmt ACMP Finance co gtd 4.875% /2023 65,000 62,888 0.08 5.25% /2023 (Canada) (2) 210,000 216,956 0.29 Altria Group co gtd 5.375% /2044 55,000 55,830 0.07 Marquette Transportation Finance secured PPL WEM Holdings sr unsecur Ser144A priv plmt 10.875% /2017 200,000 212,000 0.28 3.9% /2016 (United Kingdom) (2) 50,000 52,289 0.07 ARAMARK co gtd Ser144A priv plmt 5.75% /2020 200,000 209,650 0.28 Altria Group co gtd 10.2% /2039 33,000 51,678 0.07 MetroPCS Wireless co gtd Ser144A priv plmt Lowe’s Companies sr unsecur 5% /2043 50,000 51,223 0.07 6.25% /2021 200,000 207,750 0.28 NetApp sr unsecur 2% /2017 50,000 49,941 0.07 Wells Fargo & Co sr unsecur SerEMTN Piedmont Operating Partnership co gtd 2.25% /2020 (EUR) 150,000 206,555 0.28 3.4% /2023 50,000 44,945 0.06 Hewlett-Packard sr unsecur 2.6% /2017 200,000 204,667 0.27 Salesforce.com sr unsecur Ser144A priv plmt CV Exelon Generation sr unsecur 6.25% /2039 200,000 203,115 0.27 0.25% /2018 30,000 32,592 0.04 Amgen sr unsecur 5.15% /2041 200,000 200,495 0.27 Boston Properties sr unsecur Ser144A Glencore Funding co gtd Ser144A priv plmt priv plmt CV 3.625% 15/02/2014 29,000 29,163 0.04 2.5% /2019 205,000 198,502 0.27 Kinder Morgan Energy Partners sr unsecur Silgan Holdings sr unsecur Ser144A priv plmt 2.65% /2019 25,000 24,835 0.03 5.5% /2022 200,000 198,500 0.27 United Technologies sr unsecur 3.1% /2022 200,000 196,797 0.26 Total for United States of America 39.18 ING US co gtd 5.65% /2053 (5) 200,000 194,050 0.26 Boston Gas sr unsecur Ser144A priv plmt 4.487% /2042 200,000 189,317 0.25 United Kingdom Thermo Fisher Scientific sr unsecur 4.15% /2024 190,000 189,168 0.25 HSBC Holdings subord SerEMTN 6% /2019 (EUR) 450,000 720,380 0.96 Bank of America sr unsecur SerMTN 3.3% /2023 200,000 189,085 0.25 NGG Finance co gtd SerGBP Wells Fargo & Co subord SerM 3.45% /2023 200,000 188,616 0.25 5.625% /2073 (5) (GBP) 400,000 669,608 0.90 Direct TV Financing co gtd 3.8% /2022 195,000 187,288 0.25 Vodafone Group sr unsecur 5.45% /2019 500,000 567,977 0.76 Viacom sr unsecur 5.85% /2043 175,000 185,463 0.25 Lloyds Bank subord SerEMTN 6.5% /2020 (EUR) 350,000 559,669 0.75 Healthcare Trust of America Holdings co gtd Barclays Bank sr unsecur 5.125% /2020 500,000 555,097 0.74 3.7% /2023 200,000 185,067 0.25 Standard Chartered Bank subord Realty Income sr unsecur 3.25% /2022 200,000 183,368 0.25 SerEMTN 5.875% /2017 (EUR) 350,000 545,000 0.73 Goldman Sachs Group sr unsecur SerGLOB G4S International Finance co gtd 2.375% /2018 180,000 180,574 0.24 SerEMTN 2.625% /2018 (EUR) 300,000 413,603 0.55 Apple sr unsecur 2.4% /2023 200,000 179,966 0.24 Barclays Bank subord SerEMTN 6% /2021 (EUR) 250,000 391,303 0.52 Transocean co gtd 6.375% /2021 BP Capital Markets co gtd 3.245% /2022 400,000 388,394 0.52 (Cayman Islands) (2) 150,000 169,016 0.23 InterContinental Hotels Group co gtd Verizon Communications sr unsecur 5.15% /2023 150,000 161,462 0.22 SerEMTN 3.875% /2022 (GBP) 225,000 366,465 0.49 MasTec co gtd 4.875% /2023 170,000 161,075 0.22 Royal Bank of Scotland sr unsecur Monongahela Power Ser144A priv plmt SerEMTN 5.5% /2020 (EUR) 200,000 321,503 0.43 5.4% /2043 150,000 157,248 0.21 Royal Bank of Scotland sr unsecur L-3 Communications co gtd 4.75% /2020 150,000 156,437 0.21 SerEMTN 5.375% /2019 (EUR) 200,000 318,414 0.43 SanDisk sr unsecur Ser144A priv plmt CV BAT International Finance co gtd 0.5% /2020 150,000 148,594 0.20 SerEMTN 5.375% /2017 (EUR) 200,000 314,399 0.42 Freeport-McMoRan Copper & Gold co gtd Abbey National Treasury Services bnk gtd 3.875% /2023 150,000 142,243 0.19 3.05% /2018 290,000 297,984 0.40 Oracle sr unsecur SerEMTN 2.25% /2021 (EUR) 100,000 138,727 0.19 Smiths Group co gtd 4.125% /2017 (EUR) 200,000 295,747 0.40 Wells Fargo & Co sr unsecur SerEMTN British Airways 2013-1 Class A Pass Through 2.625% /2022 (EUR) 100,000 138,096 0.18 Trust Pass Through Certificates Ser144A American International Group sr unsecur priv plmt 4.625% /2024 275,000 281,187 0.38 4.875% /2022 125,000 134,189 0.18 WPP Finance 2010 co gtd 3.625% /2022 200,000 192,440 0.26 JPMorgan Chase & Co sr unsecur SerEMTN Royal Bank of Scotland Group subord 2.875% /2028 (EUR) 100,000 133,040 0.18 6% /2023 170,000 171,551 0.23

The accompanying notes are an integral part of these financial statements. 117 Morgan Stanley Investment Funds 31 December 2013

Global Credit Fund

As at 31 December 2013, expressed in US dollars. Australia (continued) BHP Billiton Finance USA co gtd 3.85% /2023 370,000 371,735 0.50 Nominal in Australia & New Zealand Banking Group US dollars Market % of net subord SerEMTN 5.125% /2019 (EUR) 200,000 312,661 0.42 Investments unless specified value assets Wesfarmers co gtd Ser144A priv plmt 1.874% /2018 305,000 299,652 0.40 Corporate Bonds (continued) Origin Energy Finance co gtd Ser144A priv plmt 3.5% /2018 200,000 201,427 0.27 United Kingdom (continued) Australia Pacific Airports Melbourne Proprietary HSBC Bank sr unsecur SerEMTN sr secured SerEMTN 3.125% /2023 (EUR) 100,000 140,338 0.19 3.75% /2016 (EUR) 50,000 74,581 0.10 Transurban Finance Proprietary sr secured Nationwide Building Society sr unsecur SerEMTN 2.5% /2020 (EUR) 100,000 138,403 0.19 SerEMTN 3.75% /2015 (EUR) 50,000 70,998 0.09 Total for Australia 4.93 Total for United Kingdom 10.06

Italy France Intesa Sanpaolo sr unsecur Ser144A priv plmt Société Générale sr unsecur Ser144A priv plmt 6.5% /2021 600,000 657,300 0.88 5.2% /2021 775,000 853,519 1.14 UniCredit sr unsecur SerEMTN BNP Paribas subord SerEMTN 4.875% /2017 (EUR) 400,000 597,847 0.80 5.431% /2017 (EUR) 300,000 467,212 0.63 Enel Finance International co gtd Ser144A Crédit Agricole sr unsecur Ser144A priv plmt priv plmt 5.125% /2019 (Netherlands) (2) 400,000 427,582 0.57 2.125% /2018 400,000 397,662 0.53 Wind Acquisition Finance sr secured RegS AXA subord SerEMTN 5.125% /2043 (5) (EUR) 250,000 362,625 0.49 7.375% /2018 (Luxembourg) (2) (EUR) 275,000 401,170 0.54 Crédit Agricole subord SerEMTN Gtech Spa co gtd 5.375% /2018 (EUR) 200,000 309,840 0.41 3.9% /2021 (EUR) 250,000 360,785 0.48 Enel Finance International co gtd Orange sr unsecur SerEMTN SerEMTN 5% /2022 (Netherlands) (2) (EUR) 200,000 305,323 0.41 5% /2016 (GBP) 200,000 354,240 0.47 Enel subord Ser144A priv plmt Eutelsat sr unsecur 4.125% /2017 (EUR) 200,000 297,770 0.40 8.75% /2073 (5) 210,000 229,151 0.31 Edenred sr unsecur 3.625% /2017 (EUR) 200,000 294,299 0.39 Telecom Italia Finance co gtd SerEMTN BNP Paribas bnk gtd SerBKNT 5% /2021 250,000 274,574 0.37 7.75% /2033 (Luxembourg) (2) (EUR) 150,000 227,373 0.30 Société Générale jr subord SerEMTN Enel jr subord 6.5% /2074 (5) (EUR) 150,000 222,113 0.30 8.25% perpetual (5) 200,000 214,586 0.29 Intesa Sanpaolo co gtd 3.875% /2019 200,000 200,042 0.27 Lafarge sr unsecur SerEMTN 4.75% /2020 (EUR) 100,000 145,428 0.20 Banque Federative du Credit Mutuel sr Total for Italy 4.79 unsecur SerEMTN 4.375% /2016 (EUR) 50,000 74,505 0.10

Total for France 5.49 Netherlands ABN Amro Bank subord SerEMTN 6.375% /2021 (EUR) 400,000 638,210 0.86 Spain Cooperatieve Centrale Raiffeisen-Boerenleenbank Amadeus Capital Markets co gtd SerEMTN bnk gtd 3.875% /2022 365,000 367,197 0.49 4.875% /2016 (EUR) 400,000 599,891 0.80 Cooperatieve Centrale Raiffeisen-Boerenleenbank Telefonica Emisiones co gtd SerEMTN subord SerGMTN 3.75% /2020 (EUR) 250,000 355,699 0.48 4.967% /2016 (EUR) 400,000 592,709 0.79 Koninklijke Philips sr unsecur 5.75% /2018 300,000 345,720 0.46 Ferrovial Emisiones co gtd RegS ING Bank subord Ser144A priv plmt 3.375% /2018 (EUR) 400,000 574,832 0.77 5.8% /2023 300,000 312,589 0.42 BBVA Senior Finance bnk gtd SerGMTN ING Groep sr unsecur SerEMTN 3.25% /2016 (EUR) 400,000 572,384 0.77 4.75% /2017 (EUR) 200,000 304,900 0.41 CaixaBank sr unsecur SerEMTN Koninklijke KPN sr unsecur SerGMTN 2.5% /2017 (EUR) 400,000 559,967 0.75 5.625% /2024 (EUR) 100,000 158,803 0.21 Telefonica Emisiones co gtd SerEMTN SPP Infrastructure financing co gtd RegS 4.693% /2019 (EUR) 200,000 306,257 0.41 3.75% /2020 (EUR) 100,000 142,257 0.19 Banco Bilbao Vizcaya Argentaria covered Achmea sr unsecur SerEMTN 2.5% /2020 (EUR) 100,000 136,801 0.18 SerEMTN 4.25% /2017 (EUR) 200,000 298,311 0.40 Aegon sr unsecur 4.625% /2015 50,000 53,305 0.07 Telefonica Europe co gtd 6.5% perpetual (Netherlands) (2) (5) (EUR) 200,000 295,225 0.39 Total for Netherlands 3.77 Santander Holdings USA sr unsecur 3.45% /2018 (United States of America) (2) 130,000 133,465 0.18 China Total for Spain 5.26 Want Want China Finance co gtd Ser144A priv plmt 1.875% /2018 (Cayman Islands) (2) 775,000 741,160 0.99 Amber Circle Funding co gtd RegS Australia 3.25% /2022 (Cayman Islands) (2) 775,000 709,838 0.95 Commonwealth Bank of Australia sr unsecur Baidu sr unsecur 3.25% /2018 Ser144A priv plmt 5% /2020 675,000 748,305 1.00 (Cayman Islands) (2) 225,000 227,587 0.31 Macquarie Group sr unsecur Ser144A CNOOC Finance 2012 co gtd Ser144A priv plmt 6% /2020 500,000 551,962 0.74 priv plmt 3.875% /2022 (British Virgin Islands) (2) 200,000 193,321 0.26 National Australia Bank subord SerEMTN 6.75% /2023 (5) (EUR) 325,000 525,146 0.70 Total for China 2.51 Santos Finance co gtd SerEMTN 8.25% /2070 (5) (EUR) 250,000 388,084 0.52

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 118

Global Credit Fund

As at 31 December 2013, expressed in US dollars. Ireland (continued) CRH America co gtd 6% /2016 Nominal in (United States of America) (2) 200,000 224,169 0.30 US dollars Market % of net Investments unless specified value assets Total for Ireland 1.48 Corporate Bonds (continued) Luxembourg Mexico ArcelorMittal sr unsecur 10.35% /2019 300,000 380,832 0.51 Sigma Alimentos co gtd Ser144A Geo Debt Finance sr secured RegS priv plmt 5.625% /2018 600,000 648,033 0.87 7.5% /2018 (EUR) 250,000 367,521 0.49 BBVA Bancomer subord Ser144A riv plmt 6.5% /2021 600,000 634,164 0.85 Total for Luxembourg 1.00 Mexichem sr unsecur Ser144A priv plmt 4.875% /2022 275,000 269,060 0.36 Austria Cemex sr secured Ser144A priv plmt Atrium European Real Estate sr unsecur 6.5% /2019 200,000 206,814 0.27 4% /2020 (Jersey) (2) (EUR) 400,000 551,881 0.74 Vienna Insurance Group subord Total for Mexico 2.35 5.5% /2043 (5) (EUR) 100,000 144,809 0.19

Canada Total for Austria 0.93 Goldcorp sr unsecur 3.7% /2023 500,000 448,580 0.60 TransAlta sr unsecur 4.5% /2022 400,000 387,690 0.52 Brazil Canadian Oil Sands co gtd Ser144A priv plmt Vale Overseas co gtd 5.625% /2019 7.75% /2019 300,000 360,824 0.48 (Cayman Islands) (2) 200,000 218,032 0.29 MDC Partners co gtd Ser144A priv plmt Banco Bradesco sr unsecur Ser144A 6.75% /2020 200,000 210,250 0.28 priv plmt 4.125% /2016 200,000 210,000 0.28 Barrick Gold sr unsecur 4.1% /2023 165,000 150,314 0.20 JBS Investments co gtd Ser144A priv plmt Eldorado Gold sr unsecur Ser144A priv plmt 7.75% /2020 (Austria) (2) 200,000 204,012 0.28 6.125% /2020 135,000 130,950 0.18 Kinross Gold co gtd 5.125% /2021 50,000 48,481 0.07 Total for Brazil 0.85

Total for Canada 2.33 India Vedanta Resources sr unsecur Ser144A Germany priv plmt 6% /2019 (United Kingdom) (2) 400,000 388,532 0.52 Deutsche Bank subord nts 4.296% /2028 (5) 400,000 363,036 0.49 Bharti Airtel International co gtd 4% /2018 Linde Finance co gtd 7.375% /2066 (Netherlands) (2) (EUR) 100,000 138,564 0.19 (Netherlands) (2) (5) (EUR) 200,000 312,289 0.42 Daimler Finance North America co gtd Total for India 0.71 8.5% /2031 (United States of America) (2) 200,000 292,255 0.39 O2 Telefonica Deutschland Finanzierungs co gtd 1.875% /2018 (EUR) 150,000 205,919 0.27 Russia Deutsche Annington Finance co gtd Lukoil International Finance co gtd CV 3.625% /2021 (Netherlands) (2) (EUR) 125,000 177,010 0.24 2.625% /2015 (Netherlands) (2) 400,000 432,308 0.58 Deutsche Annington Finance co gtd 3.125% /2019 (Netherlands) (2) (EUR) 100,000 141,064 0.19 Total for Russia 0.58 Deutsche Telekom International Finance co gtd 8.75% /2030 (Netherlands) (2) 100,000 140,964 0.19 Portugal EDP Finance sr unsecur Ser144A priv plmt Total for Germany 2.19 6% /2018 (Netherlands) (2) 400,000 430,400 0.58

Switzerland Total for Portugal 0.58 Aquarius and Investments for Zurich Insurance unsecur SerEMTN 4.25% /2043 (Ireland) (2) (5) (EUR) 400,000 551,459 0.74 Thailand Willow No.2 Ireland for Zurich PTT Exploration & Production sr unsecur Insurance sr unsecur SerEMTN Ser144A priv plmt 3.707% /2018 240,000 243,911 0.33 3.375% /2022 (Ireland) (2) (EUR) 225,000 327,302 0.44 Thai Oil sr unsecur Ser144A priv plmt Credit Suisse subord Ser144A priv plmt 3.625% /2023 200,000 178,880 0.24 6.5% /2023 300,000 319,519 0.42 Credit Suisse Group jr subord Ser144A Total for Thailand 0.57 priv plmt 7.5% perpetual (5) 260,000 275,180 0.37 Peru Total for Switzerland 1.97 Banco de Credito del Peru sr subord Ser144A priv plmt 6.125% /2027 (5) 400,000 401,000 0.54 Ireland Bord Gais Eireann sr unsecur SerEMTN Total for Peru 0.54 3.625% /2017 (EUR) 400,000 585,267 0.79 Ardagh Glass Finance co gtd RegS 8.75% /2020 (EUR) 200,000 293,420 0.39

The accompanying notes are an integral part of these financial statements. 119 Morgan Stanley Investment Funds 31 December 2013

Global Credit Fund

Statement of investments (continued) DERIVATIVES

Transferable securities and money market instruments admitted Over-the-counter (OTC) and exchange traded derivatives to official exchange listing or dealt in on another regulated market. as at 31 December 2013, expressed in US dollars. As at 31 December 2013, expressed in US dollars. Financial Futures Contracts

Nominal in US dollars Market % of net Net unrealised Investments unless specified value assets gain/(loss) as at Maturity Number of Notional 31 December % of net Description date contracts commitments Counterparty 2013 assets Corporate Bonds (continued) Euro BOBL Future 03/2014 (5) (857,049) Goldman Sachs 9,367 0.01 United Arab Emirates Euro Bund Future 03/2014 (1) (191,715) Goldman Sachs 1,694 0.00 ADCB Finance Cayman bnk gtd SerGMTN Euro OAT Future 03/2014 (4) (724,266) Goldman Sachs 10,249 0.02 2.5% /2018 (Cayman Islands) (2) 400,000 395,800 0.53 Euro SCHATZ Future 03/2014 (3) (455,835) Goldman Sachs 996 0.00 US 5yr T-note Future 03/2014 (3) (357,938) Goldman Sachs 4,688 0.01 Total for United Arab Emirates 0.53 US 10yr T-note Future 03/2014 (22) (2,707,375) Goldman Sachs 45,573 0.06

Israel Unrealised Gain on Financial Futures Contracts 72,567 0.10 Teva Pharmaceutical Finance IV co gtd 3.65% /2021 (Curacao) (2) 330,000 323,742 0.43 Canada 10 Year Teva Pharmaceutical Finance co gtd Bond Future 03/2014 12 1,432,460 Goldman Sachs (11,975) (0.02) 2.95% /2022 (Curacao) (2) 50,000 45,679 0.06 Long Gilt Future 03/2014 18 3,173,655 Goldman Sachs (63,735) (0.09) US 2yr T-note Future 03/2014 34 7,472,563 Goldman Sachs (14,659) (0.02) Total for Israel 0.49 US Long Bond Future 03/2014 13 1,673,344 Goldman Sachs (23,359) (0.02) US Treasury Hong Kong Ultra Bond Future 03/2014 10 1,371,563 Goldman Sachs (12,104) (0.02) Champion MTN co gtd SerEMTN 3.75% /2023 (Cayman Islands) (2) 400,000 341,634 0.46 Unrealised Loss on Financial Futures Contracts (125,832) (0.17)

Total for Hong Kong 0.46 Net Unrealised Loss on Financial Futures Contracts 9,829,407 (53,265) (0.07)

Belgium Solvay Finance co gtd 5.425% perpetual Cash of USD 285,301 held as collateral by Goldman Sachs in relation to financial futures contracts. (France) (2) (5) (EUR) 100,000 143,467 0.19 Forward Foreign Currency Exchange Contracts Total for Belgium 0.19 Unrealised Romania Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets Cable Communications Systems sr secured RegS 7.5% /2020 (Netherlands) (2) (EUR) 100,000 141,973 0.19 09/01/2014 1,115,000 CAD 1,048,612 USD RBC 675 0.00 Total for Romania 0.19 14/01/2014 958,979 USD 1,065,000 AUD Commonwealth Bank 6,781 0.01 16/01/2014 2,285,000 NOK 369,876 USD Deutsche Bank 6,096 0.01 23/01/2014 3,015,000 GBP 4,923,905 USD RBC 64,062 0.08 Sweden Telefonaktiebolaget LM Ericsson sr unsecur Unrealised Gain 4.125% /2022 50,000 49,112 0.07 on Forward Foreign Currency Exchange Contracts 77,614 0.10

Total for Sweden 0.07 10/01/2014 516,812 USD 380,000 EUR State Street (6,657) (0.01) Total for Corporate Bonds 94.00 10/01/2014 1,404,464 USD 1,035,000 EUR Westpac Bank (21,300) (0.03) 15/01/2014 55,680 USD 50,000 CHF UBS (445) 0.00 16/01/2014 255,441 EUR 2,155,000 NOK Deutsche Bank (2,700) 0.00 Total Investment Securities 70,192,464 94.00 23/01/2014 118,798 EUR 100,000 GBP RBC (1,788) 0.00 28/01/2014 163,350,000 JPY 1,587,263 USD State Street (30,130) (0.04)

Unrealised Loss on Forward Foreign Currency Exchange Contracts (63,020) (0.08)

Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 14,594 0.02

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 120

Global Credit Fund

DERIVATIVES (continued) Interest Rate Swap Contracts

Over-the-counter (OTC) and exchange traded derivatives Net unrealised gain/(loss) as at as at 31 December 2013, expressed in US dollars. Notional Maturity 31 December % of net Description Currency amount date Counterparty 2013 assets Credit Default Swap Contracts Pay fixed rate 2.044% Net unrealised Receive floating rate Royal Bank gain/(loss) as at USD LIBOR 3 months USD 2,250,000 14/05/2023 of Scotland 160,025 0.22 Risk Notional Maturity 31 December % of net position Description Ccy amount date Counterparty assets 2013 Pay fixed rate 2.748% Receive floating rate Buy Alcoa 5.72% USD LIBOR 3 months USD 8,110,000 20/11/2023 Barclays Capital 149,825 0.20 23/02/2019 USD 50,000 20/09/2018 Barclays Capital 1,302 0.00 Pay fixed rate 3.030% Buy Quest Diagnostics Receive floating rate Royal Bank 6.95% USD LIBOR 3 months USD 1,040,000 14/05/2043 of Scotland 150,929 0.20 01/07/2037 USD 355,000 20/12/2018 Barclays Capital 3,683 0.00 Unrealised Gain on Interest Rate Swap Contracts 460,779 0.62 Sell CDX.NA.IG.20-V 01/06/2018 USD 40,000 20/06/2018 J.P. Morgan 786 0.00 Pay fixed rate 0.478% Receive floating rate Sell CDX.NA.IG.20-V USD LIBOR 3 months USD 8,992,000 3 01/08/2015 Barclays Capital (28,174) (0.04) 01/06/2018 USD 200,000 20/06/2018 Barclays Capital 3,932 0.01

Sell CDX.NA.IG.20-V Unrealised Loss on Interest Rate Swap Contracts (28,174) (0.04) 01/06/2018 USD 355,000 20/06/2018 Barclays Capital 6,979 0.01 Net Unrealised Gain on Interest Rate Swap Contracts 432,605 0.58 Sell CDX.NA.IG.21-V 01/12/2018 USD 375,000 20/12/2018 Barclays Capital 6,601 0.01 Cash of USD 300,000 paid as collateral by Royal Bank of Scotland in relation to OTC contracts.

Sell iTraxx Europe Senior Financials Series 20 Total Derivatives 412,668 0.56 01/12/2018 EUR 600,000 20/12/2018 Barclays Capital 5,140 0.01 Other Assets less Liabilities 4,066,042 5.44 Unrealised Gain on Credit Default Swap Contracts 28,423 0.04 Total Net Asset Value 74,671,174 100.00 Buy Kohl’s 6.25% 15/12/2017 USD 100,000 20/06/2018 Barclays Capital (39) 0.00 (2) The country in brackets represents the country of incorporation of this security. Buy Yum! Brands 6.25% (5) Variable coupon rates are those quoted as of 31 December 2013. 15/03/2018 USD 375,000 20/12/2018 Barclays Capital (9,650) (0.01)

Unrealised Loss on Credit Default Swap Contracts (9,689) (0.01)

Net Unrealised Gain on Credit Default Swap Contracts 18,734 0.03

The accompanying notes are an integral part of these financial statements. 121 Morgan Stanley Investment Funds 31 December 2013

Global Fixed Income Opportunities Fund

Investment aim Statement of investments

To provide an attractive level of total return, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in US dollars, through investment As at 31 December 2013, expressed in US dollars. primarily in the global securities of corporate, Nominal in US dollars Market % of net government and government related issuers Investments unless specified value assets across a spectrum of fixed income asset Corporate Bonds United States of America classes including high yield bonds, GE Capital Trust II RegS 5.5% /2067 (5) (EUR) 675,000 989,390 0.45 Goldman Sachs Group subord 6.75% /2037 825,000 921,001 0.41 investment-grade bonds, mortgage-backed Prudential Financial jr subord 5.625% /2043 (5) 890,000 876,846 0.39 securities, convertibles and currencies. ING US co gtd 5.65% /2053 (5) 775,000 751,944 0.34 Archer-Daniels-Midland sr unsecur CV 0.875% 15/02/2014 634,000 671,384 0.30 PHH sr unsecur CV 4% 01/09/2014 592,000 635,725 0.29 ON Semiconductor co gtd SerB CV 2.625% /2026 565,000 621,138 0.28 KCG Holdings sr secured Ser144A priv plmt 8.25% /2018 500,000 529,375 0.24 Nuveen Investments sr unsecur Ser144A priv plmt 9.125% /2017 525,000 528,937 0.24 INTCOMEX secured 13.25% /2014 539,000 526,199 0.24 Alion Science & Technology sr secured PIK 12% 01/11/2014 509,040 523,039 0.24 Genworth Holdings co gtd 7.2% /2021 450,000 522,317 0.24 Merrill Lynch & Co subord 6.11% /2037 475,000 517,717 0.23 Hewlett-Packard sr unsecur 4.65% /2021 500,000 516,915 0.23 Jefferies LoanCore / JLC Finance sr unsecur Ser144A priv plmt 6.875% /2020 500,000 497,500 0.22 inVentiv Health sr secured Ser144A priv plmt 9% /2018 465,000 489,412 0.22 Visant co gtd 10% /2017 500,000 484,532 0.22 Consolidated Container Capital co gtd Ser144A priv plmt 10.125% /2020 430,000 457,950 0.21 RR Donnelley & Sons sr unsecur 7.875% /2021 407,000 451,302 0.20 Chrysler Group/CG Co-Issuer secured 8% /2019 400,000 443,530 0.20 Pretium Packaging Finance secured 11.5% /2016 400,000 429,000 0.19 Marquette Transportation Finance secured 10.875% /2017 400,000 424,000 0.19 Iracore International Holdings sr secured Ser144A priv plmt 9.5% /2018 400,000 422,000 0.19 American Achievement secured Ser144A priv plmt 10.875% /2016 400,000 421,000 0.19 Rite Aid co gtd 6.75% /2021 400,000 421,000 0.19 Jefferies Finance sr unsecur Ser144A priv plmt 7.375% /2020 400,000 418,000 0.19 Associated Asphalt Finance sr secured Ser144A priv plmt 8.5% /2018 400,000 414,000 0.19 Allied Specialty Vehicles sr secured Ser144A priv plmt 8.5% /2019 400,000 412,000 0.19 Harland Clarke Holdings co gtd 9.5% /2015 408,000 410,295 0.18 Midcontinent Communications & Midcontinent Finance co gtd Ser144A priv plmt 6.25% /2021 400,000 405,000 0.18 American Builders & Contractors Supply sr unsecur Ser144A priv plmt 5.625% /2021 400,000 403,000 0.18 Cenveo secured 8.875% /2018 400,000 402,212 0.18 Snoqualmie Entertainment Authority sr secured Ser144A priv plmt 9.125% /2015 400,000 396,750 0.18 Knowledge Universe Education co gtd Ser144A priv plmt 7.75% /2015 400,000 396,000 0.18 Rentech Nitrogen Finance secured Ser144A priv plmt 6.5% /2021 400,000 389,000 0.18 Sugarhouse HSP Gaming Prop Mezz sr secured Ser144A priv plmt 6.375% /2021 400,000 388,000 0.17 Armored Autogroup co gtd 9.25% /2018 400,000 387,500 0.17 ACMP Finance co gtd 4.875% /2023 400,000 387,006 0.17 Viasystems sr secured Ser144A priv plmt 7.875% /2019 350,000 380,187 0.17 Zachry Holdings sr nts Ser144A priv plmt 7.5% /2020 350,000 367,500 0.17 Logan’s Roadhouse secured 10.75% /2017 500,000 365,863 0.16 Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 122

Global Fixed Income Opportunities Fund

As at 31 December 2013, expressed in US dollars. United States of America (continued) Ahern Rentals secured Ser144A priv plmt Nominal in 9.5% /2018 250,000 271,875 0.12 US dollars Market % of net Freescale Semiconductor co gtd 8.05% /2020 250,000 270,000 0.12 Investments unless specified value assets Monitronics International co gtd 9.125% /2020 250,000 266,250 0.12 Bumble Bee Holdco sr nts Ser144A priv plmt Corporate Bonds (continued) PIK 9.625% /2018 (Luxembourg) (2) 250,000 264,375 0.12 GenOn Americas Generation sr unsecur United States of America (continued) 8.5% /2021 250,000 263,125 0.12 DynCorp International co gtd 10.375% /2017 350,000 359,959 0.16 Northern Tier Finance sr secured 7.125% /2020 250,000 262,500 0.12 Permian Holdings sr secured Ser144A Northern Oil and Gas co gtd 8% /2020 250,000 261,041 0.12 priv plmt 10.5% /2018 361,000 357,390 0.16 GXS Worldwide sr secured 9.75% /2015 250,000 258,750 0.12 Golden Nugget Escrow sr unsecur Ser144A Navios Maritime Finance II co gtd priv plmt 8.5% /2021 350,000 354,813 0.16 8.125% /2019 (Marshall Islands) (2) 250,000 257,500 0.12 Chester Downs & Marina sr secured Ser144A PC Nextco Holdings sr unsecur Ser144A priv plmt 9.25% /2020 350,000 352,625 0.16 priv plmt PIK 8.75% /2019 250,000 257,500 0.12 Freeport-McMoRan Copper & Gold co gtd Exopack Holdings co gtd Ser144A priv plmt 3.875% /2023 370,000 350,865 0.16 7.875% /2019 (Luxembourg) (2) 250,000 256,250 0.12 US Foods co gtd 8.5% /2019 320,000 350,400 0.16 Exide Technologies sr secured 8.625% /2018 350,000 249,627 0.11 Priceline.com sr unsecur Ser144A Compiler Finance Sub sr unsecur Ser144A priv plmt CV 0.35% /2020 306,000 347,904 0.16 priv plmt 7% /2021 250,000 249,375 0.11 HD Supply co gtd 7.5% /2020 300,000 324,750 0.15 Seminole Hard Rock Entertainment co gtd Kratos Defense & Security Solutions sr Ser144A priv plmt 5.875% /2021 250,000 246,875 0.11 secured 10% /2017 300,000 323,618 0.15 Crown Castle International sr unsecur JB Poindexter & Co sr unsecur Ser144A 5.25% /2023 250,000 246,250 0.11 priv plmt 9% /2022 300,000 321,750 0.15 Denbury Resources co gtd 4.625% /2023 250,000 227,024 0.10 NextEra Energy Pfd Stock CV 5.889% /2015 5,700 322,392 0.14 Infor US co gtd 9.375% /2019 200,000 226,000 0.10 Kindred Healthcare co gtd 8.25% /2019 300,000 320,871 0.14 Prince Mineral Holding sr secured Ser144A First Data co gtd Ser144A priv plmt 11.75% /2021 300,000 318,000 0.14 priv plmt 11.5% /2019 200,000 223,500 0.10 Pittsburgh Glass Works sr secured Crestwood Midstream Finance co gtd Ser144A priv plmt 8% /2018 300,000 317,250 0.14 7.75% /2019 200,000 218,000 0.10 Kenan Advantage Group sr unsecur Wolverine World Wide co gtd 6.125% /2020 200,000 215,250 0.10 Ser144A priv plmt 8.375% /2018 300,000 317,250 0.14 Jaguar Holding I sr unsecur Ser144A RSI Home Products secured Ser144A priv plmt PIK 9.375% /2017 200,000 212,500 0.10 priv plmt 6.875% /2018 300,000 315,750 0.14 Jefferies Group sr unsecur CV 3.875% /2029 196,000 209,895 0.09 Iconix Brand Group sr subord CV 2.5% /2016 228,000 315,163 0.14 Sabine Pass LNG sr secured 6.5% /2020 200,000 208,500 0.09 CCM Merger co gtd Ser144A priv plmt United States Steel sr unsecur CV 4% 9.125% /2019 300,000 315,000 0.14 15/05/2014 193,000 206,717 0.09 Continental Airlines 2012-3 Class C CCO Holdings Capital co gtd 6.5% /2021 200,000 205,736 0.09 Pass Through Certificates 6.125% /2018 300,000 314,552 0.14 Martin Midstream Finance co gtd 7.25% /2021 200,000 205,000 0.09 Rivers Pittsburgh Borrower Finance sr Tekni-Plex sr secured Ser144A priv plmt secured Ser144A priv plmt 9.5% /2019 285,000 314,213 0.14 9.75% /2019 180,000 204,750 0.09 PetroQuest Energy co gtd 10% /2017 300,000 313,721 0.14 Intel jr subord CV 2.95% /2035 179,000 200,686 0.09 Jarden co gtd CV 1.875% /2018 223,000 313,594 0.14 Allegheny Technologies sr unsecur CV Hockey Merger Sub 2 sr unsecur Ser144A 4.25% 01/06/2014 187,000 193,107 0.09 priv plmt 7.875% /2021 300,000 310,500 0.14 Hecla Mining co gtd Ser144A priv plmt Michael Baker International sr secured 6.875% /2021 200,000 193,000 0.09 Ser144A priv plmt 8.25% /2018 300,000 309,375 0.14 PPL Pfd Stock CV 8.75% 01/05/2014 3,650 191,369 0.09 Cequel Communications Holdings sr unsecur International Game Technology sr Ser144A priv plmt 6.375% /2020 300,000 309,000 0.14 unsecur CV 3.25% 01/05/2014 180,000 190,942 0.09 Sequa co gtd Ser144A priv plmt 7% /2017 300,000 303,000 0.14 General Cable subord CV step cpn 5% /2029 162,000 173,846 0.08 Empire Today Finance sr secured Ser144A Salesforce.com sr unsecur Ser144A priv plmt 11.375% /2017 300,000 303,000 0.14 priv plmt CV 0.25% /2018 159,000 172,740 0.08 Provident Funding Associates co gtd Nuance Communications sr unsecur CV Ser144A priv plmt 6.75% /2021 300,000 300,000 0.13 2.75% /2031 173,000 168,412 0.08 Illumina sr unsecur Ser144A priv plmt CV Cobalt International Energy sr unsecur CV 0.25% /2016 215,000 297,615 0.13 2.625% /2019 182,000 160,615 0.07 SanDisk sr unsecur Ser144A priv plmt CV IMS Health sr unsecur Ser144A priv plmt 0.5% /2020 300,000 297,188 0.13 6% /2020 150,000 159,000 0.07 TTM Technologies sr unsecur CV 1.75% /2020 274,000 295,920 0.13 Scientific Games International co gtd 6.25% /2020 150,000 154,500 0.07 BioMarin Pharmaceutical sr subord CV 1.5% /2020 275,000 294,352 0.13 Quality Distribution Capital secured 9.875% /2018 135,000 149,850 0.07 Nuverra Environmental Solutions co gtd Ares Capital sr unsecur Ser144A 9.875% /2018 300,000 294,000 0.13 priv plmt CV 4.375% /2019 143,000 148,988 0.07 American Gilsonite sr secured Ser144A Trinity Industries subord nts CV 3.875% /2036 111,000 148,112 0.07 priv plmt 11.5% /2017 300,000 291,750 0.13 United Technologies Pfd Stock CV 7.5% /2015 2,250 147,173 0.07 Atkore International sr secured 9.875% /2018 270,000 291,600 0.13 Lam Research sr unsecur CV 1.25% /2018 110,000 134,406 0.06 Graton Economic Development Authority sr Annaly Capital Management sr unsecur CV secured Ser144A priv plmt 9.625% /2019 250,000 291,250 0.13 5% /2015 123,000 124,614 0.06 Burlington Coat Factory Warehouse co gtd Harron Communications sr unsecur 10% /2019 250,000 282,813 0.13 Ser144A priv plmt 9.125% /2020 100,000 111,250 0.05 First Data co gtd Ser144A priv plmt 11.25% /2021 250,000 277,188 0.12 Wells Fargo & Co Pfd Stock SerL CV 7.5% perpetual 66 73,053 0.03 Diamond Resorts sr secured 12% /2018 250,000 276,494 0.12 Kennedy-Wilson co gtd 8.75% /2019 250,000 275,625 0.12 Total for United States of America 19.07

The accompanying notes are an integral part of these financial statements. 123 Morgan Stanley Investment Funds 31 December 2013

Global Fixed Income Opportunities Fund

Statement of investments (continued) Nominal in US dollars Market % of net Investments unless specified value assets Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. Corporate Bonds (continued) As at 31 December 2013, expressed in US dollars. Russia Gazprombank ViaB Eurobond Finance sr Nominal in unsecur RegS 7.875% /2016 (Ireland) (2) (RUB) 36,000,000 1,076,796 0.48 US dollars Market % of net Vnesheconombank Via VEB Finance sr Investments unless specified value assets unsecur Ser144A priv plmt 6.025% /2022 (Ireland) (2) 800,000 823,328 0.37 Corporate Bonds (continued) Vnesheconombank Via VEB Finance sr unsecur Ser144A priv plmt Germany 5.942% /2023 (Ireland) (2) 600,000 599,943 0.27 KfW - Kreditanstalt fuer Wiederaufbau Credit Bank of Moscow Via CBOM Finance govt gtd SerMTN 3.75% /2018 (AUD) 5,050,000 4,485,791 2.02 subord Ser144A priv plmt 8.7% /2018 Deutsche Bank subord nts (Ireland) (2) 500,000 471,250 0.21 4.296% /2028 (5) 925,000 839,521 0.38 TMK Via TMK Capital sr unsecur RegS Allianz Finance II co gtd SerEMTN 6.75% /2020 (Luxembourg) (2) 400,000 388,598 0.18 5.75% /2041 (Netherlands) (2) (5) (EUR) 300,000 464,068 0.21 Vimpel Communications Via VIP Finance RWE jr subord 7% perpetual (5) (GBP) 200,000 350,704 0.16 Ireland sr unsecur RegS LPN 7.748% /2021 Aabar Investments sr unsecur RegS CV (Ireland) (2) 205,000 222,748 0.10 4% /2016 (United Arab Emirates) (2) (EUR) 200,000 326,586 0.15 Lukoil International Finance co gtd CV Muenchener Rueckversicherungs subord 2.625% /2015 (Netherlands) (2) 100,000 108,077 0.05 SerEMTN 6.25% /2042 (5) (EUR) 200,000 324,238 0.14 Commerzbank subord SerEMTN Total for Russia 1.66 7.75% /2021 (EUR) 200,000 316,758 0.14 Allianz subord 4.75% perpetual (5) (EUR) 200,000 282,597 0.13 Celesio Finance co gtd SerEMTN Spain 4% /2016 (Netherlands) (2) (EUR) 145,000 210,040 0.09 Telefonica Emisiones co gtd SerEMTN Brenntag Finance co gtd 5.5% /2018 4.71% /2020 (1) (EUR) 500,000 763,422 0.34 (Netherlands) (2) (EUR) 100,000 154,593 0.07 Nara Cable Funding sr secured Ser144@ 8.875% /2018 (Ireland) (2) 500,000 535,000 0.24 Total for Germany 3.49 Santander International Debt bnk gtd SerEMTN 4.625% /2016 (EUR) 300,000 441,398 0.20 Banco Bilbao Vizcaya Argentaria covered Italy 3.625% /2017 (EUR) 300,000 439,809 0.20 Wind Acquisition Finance sr secured RegS Telefonica Europe co gtd 6.5% perpetual 7.375% /2018 (Luxembourg) (2) (EUR) 700,000 1,021,161 0.46 (Netherlands) (2) (5) (EUR) 300,000 442,837 0.20 Intesa Sanpaolo sr unsecur Ser144A Red Electrica Financiaciones co gtd priv plmt 6.5% /2021 875,000 958,562 0.43 SerEMTN 2.375% /2019 (EUR) 300,000 414,807 0.19 Assicurazioni Generali subord SerEMTN Prosegur Cia de Seguridad sr unsecur 10.125% /2042 (5) (EUR) 400,000 712,055 0.32 2.75% /2018 (EUR) 200,000 279,902 0.13 Enel jr subord 6.5% /2074 (1) (5) (EUR) 450,000 666,339 0.30 Ferrovial Emisiones co gtd RegS Enel Finance International co gtd Ser144A 3.375% /2021 (EUR) 200,000 277,008 0.12 priv plmt 5.125% /2019 (Netherlands) (2) 465,000 497,064 0.22 UniCredit sr unsecur SerEMTN Total for Spain 1.62 4.875% /2017 (EUR) 300,000 448,385 0.20 Telecom Italia Finance co gtd SerEMTN 7.75% /2033 (Luxembourg) (2) (EUR) 200,000 303,164 0.14 France Davide Campari-Milano sr unsecur Europcar Groupe subord RegS 4.5% /2019 (EUR) 200,000 291,895 0.13 9.375% /2018 (1) (EUR) 725,000 1,070,305 0.48 Intesa Sanpaolo co gtd 3.875% /2019 290,000 290,061 0.13 La Financiere Atalian sr unsecur RegS Eni sr unsecur SerGALP CV 0.25% /2015 (EUR) 200,000 284,755 0.13 7.25% /2020 (EUR) 650,000 947,643 0.43 Intesa Sanpaolo sr unsecur 3.875% /2018 230,000 234,219 0.11 Crédit Agricole subord SerEMTN 5.875% /2019 (EUR) 300,000 476,876 0.22 Total for Italy 2.57 AXA subord SerEMTN 5.25% /2040 (5) (EUR) 300,000 442,459 0.20 Société Générale jr subord SerEMTN 8.25% perpetual (1) (5) 275,000 295,056 0.13 United Kingdom AXA subord SerEMTN 5.125% /2043 (5) (EUR) 150,000 217,575 0.10 Voyage Care Bondco sr secured RegS 6.5% /2018 (GBP) 700,000 1,193,187 0.54 Total for France 1.56 Royal Bank of Scotland Group subord 6% /2023 740,000 746,752 0.34 Lloyds Bank subord SerEMTN 6.5% /2020 (EUR) 425,000 679,598 0.30 Switzerland CEVA Group sr secured Ser144A Credit Suisse subord Ser144A priv plmt 8.375% /2017 550,000 577,500 0.26 priv plmt 6.5% /2023 1,275,000 1,357,958 0.61 Barclays Bank subord SerEMTN 6% /2021 (EUR) 300,000 469,564 0.21 Credit Suisse Group jr subord Ser144A Nationwide Building Society subord priv plmt 7.5% perpetual (5) 1,130,000 1,195,975 0.54 SerEMTN 4.125% /2023 (5) (EUR) 300,000 429,890 0.19 Cloverie for Zurich Insurance subord NGG Finance co gtd SerGBP SerEMTN 7.5% /2039 (Ireland) (2) (5) (EUR) 200,000 329,453 0.15 5.625% /2073 (5) (GBP) 250,000 418,505 0.19 Aquarius and Investments for Zurich Standard Chartered subord SerEMTN Insurance unsecur SerEMTN 3.625% /2022 (EUR) 150,000 201,522 0.09 4.25% /2043 (Ireland) (2) (5) (EUR) 100,000 137,865 0.06 INEOS Group Holdings co gtd Ser144A priv plmt 6.125% /2018 (Luxembourg) (2) 200,000 201,250 0.09 Total for Switzerland 1.36

Total for United Kingdom 2.21

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 124

Global Fixed Income Opportunities Fund

Brazil Caixa Economica Federal sr unsecur RegS South Africa 3.5% /2022 2,500,000 2,039,187 0.92 Eskom Holdings sr unsecur Ser144A Odebrecht Finance co gtd RegS priv plmt 5.75% /2021 1,700,000 1,694,336 0.76 5.125% /2022 (Cayman Islands) (1) (2) 500,000 489,043 0.22 JBS Investments co gtd Ser144A Total for South Africa 0.76 priv plmt 7.75% /2020 (Austria) (2) 415,000 423,325 0.19 Turkey Total for Brazil 1.33 Turkiye Is Bankasi subord Ser144A priv plmt 7.85% /2023 1,100,000 1,099,010 0.50 Luxembourg Finansbank sr unsecur RegS 5.5% /2016 550,000 551,862 0.25 Bormioli Rocco Holdings sr secured RegS 10% /2018 (EUR) 700,000 1,057,930 0.48 Total for Turkey 0.75 ArcelorMittal sr unsecur 10.35% /2019 380,000 482,387 0.22 APERAM sr unsecur Ser144A priv plmt Chile 7.75% /2018 400,000 413,000 0.18 Corpbanca sr unsecur 3.125% /2018 1,125,000 1,077,772 0.49 Accudyne Industries Borrower co gtd ENTEL Chile sr unsecur Ser144A Ser144A priv plmt 7.75% /2020 300,000 318,750 0.14 priv plmt 4.875% /2024 395,000 386,798 0.17 DH Services Luxembourg co gtd Ser144A priv plmt 7.75% /2020 250,000 266,250 0.12 Total for Chile 0.66 Glencore Finance Europe co gtd CV 5% /2014 200,000 224,308 0.10

Total for Luxembourg 1.24 China CITIC Pacific sr unsecur SerEMTN 6.375% /2020 (Hong Kong) (2) 400,000 391,172 0.18 Indonesia ENN Energy Holdings sr unsecur CV Perusahaan Listrik Negara sr unsecur 0% /2018 (Cayman Islands) (2) 250,000 321,919 0.15 RegS 5.5% /2021 1,000,000 964,260 0.43 Tong Jie co gtd Ser363 CV 0% /2018 Pertamina Persero sr unsecur (British Virgin Islands) (2) (HKD) 2,000,000 270,355 0.12 Ser144A priv plmt 4.875% /2022 800,000 733,720 0.33 Wharf Finance 2014 co gtd CV Indo Energy Finance sr secured 2.3% 07/06/2014 RegS 6.375% /2023 (Netherlands) (2) 750,000 621,832 0.28 (British Virgin Islands) (2) (HKD) 2,000,000 258,864 0.12 Billion Express Investments co gtd CV Total for Indonesia 1.04 0.75% /2015 (British Virgin Islands) (2) 200,000 205,937 0.09

Canada Total for China 0.66 Goldcorp sr unsecur 3.7% /2023 725,000 650,441 0.29 Air Canada sr secured Ser144A priv plmt Kazakhstan 6.75% /2019 400,000 421,000 0.19 KazMunayGas National sr unsecur Lightstream Resources sr unsecur Ser144A priv plmt 5.75% /2043 750,000 656,171 0.30 Ser144A priv plmt 8.625% /2020 400,000 405,000 0.18 KazMunayGas National sr unsecur Barrick Gold sr unsecur 4.1% /2023 385,000 350,733 0.16 RegS 6.375% /2021 600,000 652,575 0.29 Tervita sr secured Ser144A priv plmt 8% /2018 250,000 259,375 0.12

Total for Kazakhstan 0.59 Total for Canada 0.94

Australia India Santos Finance co gtd SerEMTN Bharti Airtel International co gtd 4% /2018 8.25% /2070 (5) (EUR) 600,000 931,403 0.42 (Netherlands) (2) (EUR) 800,000 1,108,511 0.50 QBE Capital Funding III co gtd Ser144A Bharat Petroleum sr unsecur priv plmt 7.25% /2041 (Jersey) (2) (5) 350,000 362,835 0.16 4.625% /2022 (1) 400,000 360,880 0.16 Vedanta Resources sr unsecur Total for Australia 0.58 Ser144A priv plmt 7.125% /2023 (United Kingdom) (2) 370,000 339,976 0.15 Bharti Airtel International co gtd Ser144A Netherlands priv plmt 5.125% /2023 (Netherlands) (2) 210,000 194,545 0.09 ABN Amro Bank subord SerEMTN 6.375% /2021 (EUR) 300,000 478,658 0.22 Total for India 0.90 Cooperatieve Centrale Raiffeisen- Boerenleenbank bnk gtd 5.75% /2043 360,000 381,420 0.17 Playa Resorts Holding sr unsecur Mexico Ser144A priv plmt 8% /2020 300,000 319,875 0.14 Petroleos Mexicanos co gtd 4.875% /2022 1,800,000 1,851,201 0.83

Total for Netherlands 0.53 Total for Mexico 0.83

The accompanying notes are an integral part of these financial statements. 125 Morgan Stanley Investment Funds 31 December 2013

Global Fixed Income Opportunities Fund

South Korea Norway Korea Finance sr unsecur 4.625% /2021 600,000 633,843 0.29 Siem Industries sr secured SerSUBC CV SK Hynix sr unsecur CV 2.65% /2015 200,000 247,216 0.11 1% /2019 (Cayman Islands) (2) 200,000 200,852 0.09

Total for South Korea 0.40 Total for Norway 0.09

Thailand United Arab Emirates PTT Global Chemical sr unsecur RegS 4.25% /2022 500,000 469,682 0.21 ADCB Finance Cayman bnk gtd SerGMTN PTT sr unsecur Ser144A priv plmt 3.375% /2022 400,000 359,612 0.16 2.5% /2018 (Cayman Islands) (2) 200,000 197,900 0.09

Total for Thailand 0.37 Total for United Arab Emirates 0.09

Singapore Belgium Global A&T Electronics sr secured LBC Tank Terminals Holding Netherlands co gtd Ser144A priv plmt 10% /2019 (Cayman Islands) (2) 400,000 347,000 0.16 Ser144A priv plmt 6.875% /2023 (Netherlands) (2) 150,000 156,750 0.07 Olam International sr unsecur CV 6% /2016 200,000 197,961 0.09 Golden Agri-Resources sr unsecur RegS CV Total for Belgium 0.07 2.5% /2017 (Mauritius) (2) 200,000 189,178 0.08 Total for Corporate Bonds 48.23 Total for Singapore 0.33 Government Bonds Venezuela Petroleos de Venezuela co gtd RegS 8.5% /2017 800,000 665,804 0.30 Portugal Portugal Obrigacoes do Tesouro OT sr unsecur Total for Venezuela 0.30 5.65% /2024 (EUR) 4,000,000 5,307,243 2.39

Total for Portugal 2.39 Jersey Derwent London Capital No 2 Jersey co gtd SerDLN CV 1.125% /2019 (GBP) 400,000 664,497 0.30 Spain Government of Spain sr unsecur Total for Jersey 0.30 4.4% /2023 (EUR) 3,000,000 4,219,156 1.90 Government of Spain sr unsecur 4.2% /2037 (EUR) 600,000 750,898 0.34 Greece DryShips sr unsecur CV Total for Spain 2.24 5% /2014 (Marshall Islands) (2) 325,000 325,813 0.15 FAGE USA Dairy Industry co gtd RegS 9.875% /2020 250,000 264,135 0.12 Australia Government of Australia sr unsecur Total for Greece 0.27 Ser124 5.75% /2021 (AUD) 4,500,000 4,506,006 2.03

Total for Australia 2.03 Austria Atrium European Real Estate sr unsecur 4% /2020 (Jersey) (2) (EUR) 425,000 586,373 0.26 Mexico Mexican Bonos SerM 5% /2017 (MXN) 29,000,000 2,236,718 1.01 Total for Austria 0.26 Mexican Bonos SerM 20 7.5% /2027 (MXN) 26,000,000 2,120,904 0.95

Total for Mexico 1.96 Japan Nomura Research Institute sr unsecur Ser1 CV 0% 31/03/2014 (JPY) 59,000,000 565,848 0.25 Ireland Government of Ireland 3.9% /2023 (EUR) 2,800,000 3,997,407 1.80 Total for Japan 0.25 Total for Ireland 1.80 Ukraine MHP co gtd RegS 8.25% /2020 (Luxembourg) (2) 400,000 356,434 0.16 Germany Bundesrepublik Deutschland Ser03 Total for Ukraine 0.16 4.75% /2034 (EUR) 1,200,000 2,182,478 0.98 Bundesrepublik Deutschland Ser2007 4.25% /2039 (EUR) 1,000,000 1,753,958 0.79

Total for Germany 1.77

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 126

Global Fixed Income Opportunities Fund

As at 31 December 2013, expressed in US dollars. Russia Russian Federal Bond - OFZ Ser6207 Nominal in 8.15% /2027 (1) (RUB) 15,000,000 472,037 0.21 US dollars Market % of net Investments unless specified value assets Total for Russia 0.21 Government Bonds (continued) Total for Government Bonds 24.77

Sweden Swedish Government Ser1057 Mortgage and Asset Backed Securities 1.5% /2023 (SEK) 26,100,000 3,700,703 1.66 United States of America Total for Sweden 1.66 Banc of America Alternative Loan Trust 2006-7 A5 step cpn 6.226% /2036 2,666,789 2,009,868 0.90 Countrywide Alternative Loan United Kingdom Trust 2005-J1 1A1 0.565% /2035 (5) 1,773,799 1,655,639 0.75 UK Treasury 4.25% /2039 (GBP) 1,800,000 3,294,709 1.48 RALI Trust 2006-QA10 A2 0.345% /2036 (5) 2,047,463 1,432,626 0.64 STARM Mortgage Loan Trust 2007-4 3A1 Total for United Kingdom 1.48 5.593% /2037 (5) 1,286,907 1,197,153 0.54 BCAP Trust 2007-AA3 1A1B 0.305% /2037 (5) 1,112,564 948,559 0.43 United States of America RALI Trust 2006-QS8 A1 6% /2036 1,193,838 909,023 0.41 US Treasury 3.5% /2039 3,450,000 3,270,492 1.47 Banc of America Funding 2006-G 2A4 Trust 0.457% /2036 (5) 1,005,000 882,145 0.40 Total for United States of America 1.47 JP Morgan Mortgage Trust 2006-S4 A8 0.545% /2037 (5) 1,259,201 833,228 0.37 WaMu Mortgage Pass Through Certificates Italy 2005-AR4 A5 2.425% /2035 (5) 885,000 830,970 0.37 Italy Buoni Poliennali Del Tesoro Countrywide Alternative Loan Trust 5.5% /2022 (EUR) 2,100,000 3,256,688 1.46 2005-46CB A2 5.5% /2035 912,447 822,520 0.37 Indymac Index Mortgage Loan Trust Total for Italy 1.46 2005-AR23 2A1 2.378% /2035 (5) 1,002,328 813,377 0.37 First Horizon Alternative Mortgage Greece Securities Trust 2006-FA4 1A1 6% /2036 863,859 756,984 0.34 Republic of Greece SerPSI step cpn RALI Trust 2006-QS16 A7 6% /2036 982,570 754,336 0.34 2% /2025 (EUR) 3,480,000 3,035,863 1.37 Merrill Lynch Mortgage Investors Trust Series MLCC 2005-3 3A 2.144% /2035 (5) 773,576 735,376 0.33 Total for Greece 1.37 Banc of America Funding 2006 8T2 A6 Trust step cpn 6.049% /2036 867,926 714,725 0.32 Washington Mutual Mortgage Pass-Through Canada Certificates WMALT Series 2007-OC2 A1 Government of Canada 1.5% /2023 (CAD) 3,500,000 2,952,903 1.33 Trust 0.265% /2037 (5) 947,065 706,170 0.32 Banc of America Funding 2006-G 2A1 Total for Canada 1.33 Trust 0.387% /2036 (5) 766,519 701,717 0.32 CSMC Mortgage-Backed Trust 2007-3 1A3A Poland 5.746% /2037 (5) 1,172,514 688,600 0.31 Government of Poland Ser1019 Banc of America Alternative Loan 5.5% /2019 (PLN) 8,000,000 2,879,426 1.30 Trust 2005-10 1CB1 0.565% /2035 (5) 830,647 636,559 0.29 Countrywide Alternative Loan Total for Poland 1.30 Trust 2006-6CB 1A10 5.5% /2036 690,058 609,943 0.27 GS Mortgage Securities II 2013-KYO E 3.768% /2029 (5) 600,000 600,707 0.27 Hungary CSMC Mortgage-Backed Republic of Hungary sr unsecur 5.75% /2023 1,700,000 1,707,993 0.77 Trust 2007-3 1A1A 5.837% /2037 (5) 1,007,501 595,036 0.27 GSAA Home Equity Trust 2004-5 AF4 Total for Hungary 0.77 4.772% /2034 (5) 528,418 561,928 0.25 Opteum Mortgage Acceptance Bermuda Trust 2006-1 1AC1 0.465% /2036 (5) 675,000 551,527 0.25 Bermuda Government International Bond sr WaMu Mortgage Pass Through unsecur RegS 4.854% /2024 1,430,000 1,435,491 0.65 Certificates 2007-OA4 1A 0.909% /2047 (5) 621,929 540,673 0.24 GNMA 2012-138 AI 4% /2042 1,957,829 528,750 0.24 Total for Bermuda 0.65 WaMu Mortgage Pass Through Certificates 2007-HY4 5A1 2.259% /2036 (5) 622,271 523,371 0.24 Countrywide Alternative Loan Brazil Trust 2005-48T1 A5 5.5% /2035 577,805 499,378 0.22 Brazil Notas do Tesouro Nacional Citigroup Mortgage Loan Serie F sr nts SerNTNF 10% /2017 (BRL) 260,000 1,094,721 0.49 Trust 2005-WF1 A4 step cpn 5.53% /2034 480,000 496,645 0.22 Commercial Mortgage Trust 2013-CR9 C Total for Brazil 0.49 4.261% /2045 (5) 507,000 477,217 0.21 JP Morgan Alternative Loan Slovenia Trust 2006-S3 A3A step cpn 6% /2036 519,948 468,899 0.21 Republic of Slovenia Ser144A priv plmt Chase Mortgage Finance 2007-A1 11A4 5.85% /2023 860,000 878,877 0.39 2.663% /2037 (5) 492,555 453,470 0.20 Harborview Mortgage Loan Trust 2006-7 2A1A 0.366% /2046 (5) 581,390 448,389 0.20 Total for Slovenia 0.39

The accompanying notes are an integral part of these financial statements. 127 Morgan Stanley Investment Funds 31 December 2013

Global Fixed Income Opportunities Fund

Statement of investments (continued) Nominal in US dollars Market % of net Investments unless specified value assets Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. Mortgage and Asset Backed Securities (continued) As at 31 December 2013, expressed in US dollars. United States of America (continued) RALI Trust 2007-QS4 5A2 5.5% /2022 137,478 140,012 0.06 Nominal in Wells Fargo Mortgage Backed Securities US dollars Market % of net 2006-AR10 5A6 Trust 2.612% /2036 (5) 145,221 139,537 0.06 Investments unless specified value assets Countrywide Alternative Loan Trust 2006-36T2 2A5 6% /2036 175,380 132,539 0.06 Mortgage and Asset Backed Securities (continued) Citigroup Mortgage Loan Trust 2006-AR1 2A1 2.527% /2036 (5) 141,699 130,361 0.06 United States of America (continued) RALI Trust 2006-QS8 A3 6% /2036 167,750 127,728 0.06 Washington Mutual Alternative Mortgage JP Morgan Alternative Loan Pass-Through Certificates 2007-OA4 A1A Trust 2006-A1 4A4 2.277% /2036 (5) 164,216 126,156 0.06 0.888% /2047 (5) 608,003 439,678 0.20 Countrywide Alternative Loan JP Morgan Alternative Loan Trust 2007-16CB 4A1 0.565% /2037 (5) 165,986 123,050 0.06 Trust 2005-S1 2A9 6% /2035 478,549 425,896 0.19 Banc of America Funding 2007-5 3A1 Countrywide Alternative Loan 6% /2037 149,504 121,215 0.05 Trust 2007-5CB 1A12 6% /2037 543,679 422,427 0.19 GSR Mortgage Loan Trust 2005-AR3 6A1 RALI Trust 2006-QA10 A1 Trust 2.870% /2035 (5) 125,607 114,827 0.05 0.35% /2036 (5) 565,685 395,994 0.18 WaMu Mortgage Pass Through Countrywide Alternative Loan Certificates 2005-AR15 A1A2 0.445% /2045 (5) 128,285 113,959 0.05 Trust 2007-5CB 1A31 5.5% /2037 521,881 391,326 0.18 First Horizon Alternative Mortgage Securities Banc of America Alternative Loan Trust 2006-FA5 A3 6.25% /2036 128,564 109,363 0.05 Trust 2006-4 5CB1 6.5% /2046 489,606 390,862 0.18 Countrywide Alternative Loan Countrywide Alternative Loan Trust 2006-J3 1A4 6% /2036 126,965 105,305 0.05 Trust 2007-15CB A7 6% /2037 434,834 378,923 0.17 DBUBS Mortgage Trust 2011-LC3A A2 Countrywide Alternative Loan 3.642% /2044 90,000 94,678 0.04 Trust 2008-2R 4A1 6.25% /2037 497,474 377,422 0.17 RALI Trust 2006-QS4 A2 6% /2036 114,728 89,532 0.04 First Horizon Alternative Mortgage Securities Countrywide Alternative Loan Trust Trust 2006-FA3 A9 6% /2036 435,468 372,696 0.17 2006-4CB 1A1 6% /2036 107,115 89,040 0.04 First Horizon Alternative Mortgage Securities Countryywide Alternative Loan Trust 2006-FA3 A13 6% /2036 435,468 372,696 0.17 Trust 2006-43CB 1A4 6% /2037 109,211 87,304 0.04 First Horizon Alternative Mortgage Securities Washington Mutual Alternative Mortgage Trust 2006-FA3 A2 6% /2036 435,468 372,696 0.17 Pass-Through Certificates 2005-AR1 A1A CGBAM Commercial Mortgage 0.425% /2035 (5) 105,185 86,199 0.04 Trust 2013-BREH D 3.018% /2030 (5) 354,000 355,704 0.16 JP Morgan Mortgage Trust 2005-S3 1A21 Banc of America Alternative Loan 5.5% /2036 89,419 84,611 0.04 Trust 2005-8 2CB1 6% /2035 379,098 352,526 0.16 Structured Asset Mortgage Investments JP Morgan Alternative Loan 2006-AR6 1A2 0.395% /2046 (5) 276,275 78,395 0.04 Trust 2006-S1 1A19 6.5% /2036 374,891 331,539 0.15 RALI Trust 2007-QS2 A1 6% /2037 99,257 78,099 0.03 American Home Mortgage Investment Luminent Mortgage Trust 2006-6 A2A Trust 2007-A 13A1 step cpn 6.1% /2037 501,469 331,442 0.15 0.335% /2046 (5) 180,620 61,643 0.03 Washington Mutual Alternative Mortgage Countrywide Alternative Loan Trust Pass-Through Certificates 2007-OA5 A1A 2005-86CB A4 5.5% /2036 57,864 48,749 0.02 0.968% /2047 (5) 398,878 321,795 0.14 Structured Asset Mortgage Investments CHL Mortgage Pass-Through Trust 2006-9 A3 2006-AR6 2A2 0.395% /2046 (5) 141,559 45,518 0.02 6% /2036 348,305 318,451 0.14 Countrywide Alternative Loan Trust RALI Trust 2007-QS6 A45 5.75% /2037 379,769 300,285 0.13 2005-86CB A11 5.5% /2036 33,630 28,333 0.01 Lehman Mortgage Trust 2007-8 2A1 Luminent Mortgage Trust 2006-4 A1B 6.5% /2037 357,938 293,802 0.13 0.395% /2046 (5) 145,228 8,299 0.00 GSR Mortgage Loan Trust 2005-AR5 2A3 2.717% /2035 (5) 313,438 287,716 0.13 Total for United States of America 16.87 JP Morgan Mortgage Trust 2006-S3 1A30 6.5% /2036 318,572 280,703 0.13 Total for Mortgage and Asset Backed Securities 16.87 Citigroup Mortgage Loan Trust 2005-9 2A2 5.5% /2035 281,682 280,058 0.13 Total Investment Securities 199,713,285 89.87 JP Morgan Mortgage Trust 2007-A4 2A3 5.321% /2037 (5) 319,694 278,866 0.13 Countrywide Alternative Loan Trust 2006-14CB A7 6% /2036 336,774 278,587 0.13 Fannie Mae REMICS 2012-63 HS 6.385% /2041 (5) 1,057,408 251,740 0.11 RALI Trust 2006-QS16 A10 6% /2036 312,339 239,788 0.11 Washington Mutual Alternative Mortgage Pass-Through Certificates 2007-OA3 4A1 0.909% /2047 (5) 270,227 212,055 0.10 JP Morgan Alternative Loan Trust 2005-S1 2A11 6% /2035 222,179 197,734 0.09 Merrill Lynch Mortgage Investors Trust Series MLCC 2005-1 2A2 2.124% /2035 (5) 173,814 166,829 0.07 Countrywide Alternative Loan Trust 2006-41CB 1A5 6% /2037 195,308 161,480 0.07 Washington Mutual Alternative Mortgage Pass-Through Certificates 2005-10 2A6 5.5% /2035 187,990 151,743 0.07

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 128

Global Fixed Income Opportunities Fund

DERIVATIVES Forward Foreign Currency Exchange Contracts (continued)

Financial Futures Contracts 09/01/2014 4,600,000 MXN 353,603 USD Deutsche Bank (1,738) 0.00 09/01/2014 3,192,604 USD 3,400,000 CAD RBC (7,018) 0.00 Net unrealised 09/01/2014 3,285,671 USD 43,170,000 MXN State Street (16,501) (0.01) gain/(loss) as at 10/01/2014 1,615,972 USD 1,190,000 EUR State Street (23,312) (0.01) Maturity Number of Notional 31 December % of net 14/01/2014 982,137 USD 1,100,000 AUD Commonwealth Bank (1,354) 0.00 Description date contracts commitments Counterparty assets 2013 15/01/2014 1,771,327 USD 5,450,000 PLN Deutsche Bank (36,003) (0.02) 16/01/2014 1,084,739 USD 7,140,000 SEK Deutsche Bank (24,727) (0.01) Euro Bund Future 03/2014 (39) (7,476,886) Goldman Sachs 115,357 0.05 16/01/2014 2,589,201 USD 16,865,000 SEK Westpac Bank (31,408) (0.01) FTSE KLCI Index Future 03/2014 9 1,423,543 Goldman Sachs 496 0.00 24/01/2014 1,325,000 BRL 563,950 USD J.P. Morgan (6,214) 0.00 US 10yr T-note Future 03/2014 (64) (7,876,000) Goldman Sachs 106,608 0.05 24/01/2014 2,750,000 BRL 1,169,466 USD State Street (11,902) (0.01) 28/01/2014 712,000,000 JPY 6,918,465 USD State Street (131,330) (0.06) Unrealised Gain on Financial Futures Contracts 222,461 0.10 Unrealised Loss on Forward Foreign Currency Exchange Contracts (291,507) (0.13) Canada 10 Year Bond Future 03/2014 17 2,029,318 Goldman Sachs (16,965) (0.01) Euro BOBL Future 03/2014 13 2,228,327 Goldman Sachs (23,997) (0.01) EUR Hedged Share Class Long Gilt Future 03/2014 4 705,257 Goldman Sachs (8,405) 0.00 10/01/2014 452,479 EUR 624,321 USD J.P. Morgan (1,009) 0.00 US 2yr T-note Future 03/2014 105 23,077,031 Goldman Sachs (45,478) (0.02) US 5yr T-note Future 03/2014 57 6,800,812 Goldman Sachs (85,937) (0.04) Unrealised Loss on NAV Hedged Share Classes US Long Bond Future 03/2014 49 6,307,219 Goldman Sachs (88,047) (0.04) Forward Foreign Currency Exchange Contracts (1,009) 0.00 US Treasury Ultra Bond Future 03/2014 51 6,994,969 Goldman Sachs (62,435) (0.03) Total Unrealised Loss on Forward Foreign Currency Exchange Contracts (292,516) (0.13) Unrealised Loss on Financial Futures Contracts (331,264) (0.15) Net Unrealised Gain Net Unrealised Loss on Forward Foreign Currency Exchange Contracts 251,814 0.11 on Financial Futures Contracts 34,213,590 (108,803) (0.05)

Cash of USD 762,937 held as collateral by Goldman Sachs in relation to financial futures contracts. Cash of USD 45 paid as collateral to Goldman Sachs in relation to financial futures contracts.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

09/01/2014 570,000 CAD 536,062 USD RBC 345 0.00 09/01/2014 793,839 USD 10,300,000 MXN State Street 5,968 0.00 10/01/2014 1,600,000 EUR 2,171,152 USD Westpac Bank 32,928 0.01 10/01/2014 660,000 GBP 1,078,478 USD HSBC 13,509 0.01 14/01/2014 192,226 CAD 200,000 AUD Commonwealth Bank 2,057 0.00 14/01/2014 1,199,000 NZD 978,914 USD Westpac Bank 6,956 0.00 14/01/2014 11,662,628 USD 12,952,000 AUD Commonwealth Bank 82,469 0.04 14/01/2014 512,085 USD 3,970,000 HKD HSBC 97 0.00 15/01/2014 1,750,000 PLN 575,090 USD Deutsche Bank 5,245 0.00 23/01/2014 5,778,000 GBP 9,436,260 USD RBC 122,769 0.06 24/01/2014 2,190,000,000 KRW 2,079,278 USD HSBC 4,662 0.00 24/01/2014 3,063,894 USD 7,145,000 BRL J.P. Morgan 56,333 0.03 24/01/2014 1,610,164 USD 53,100,000 RUB Deutsche Bank 1,598 0.00

Unrealised Gain on Forward Foreign Currency Exchange Contracts 334,936 0.15

EUR Hedged Share Class 10/01/2014 83,066,607 EUR 114,219,006 USD J.P. Morgan 209,394 0.09

Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 209,394 0.09

Total Unrealised Gain on Forward Foreign Currency Exchange Contracts 544,330 0.24

The accompanying notes are an integral part of these financial statements. 129 Morgan Stanley Investment Funds 31 December 2013

Global Fixed Income Opportunities Fund

DERIVATIVES (continued) Interest Rate Swap Contracts

Over-the-counter (OTC) and exchange traded derivatives Net unrealised gain/(loss) as at as at 31 December 2013, expressed in US dollars. Notional Maturity 31 December % of net Description Currency amount date Counterparty 2013 assets Credit Default Swap Contracts Pay fixed rate 2.058% Receive floating rate Net unrealised USD LIBOR 3 months USD 4,480,000 06/02/2023 J.P. Morgan 263,944 0.13 gain/(loss) as at Risk Notional Maturity 31 December % of net Pay fixed rate 2.040% position Description Ccy amount date Counterparty 2013 assets Receive floating rate Buy Alcoa 5.72% USD LIBOR 3 months USD 2,240,000 13/02/2023 Bank of America 137,168 0.06 23/02/2019 USD 350,000 20/09/2018 Barclays Bank 9,113 0.00 Pay fixed rate 2.091% Buy Quest Diagnostics Receive floating rate 6.95% USD LIBOR 3 months USD 5,340,000 15/02/2023 J.P. Morgan 304,056 0.14 01/07/2037 USD 1,115,000 20/12/2018 Barclays Bank 11,569 0.00 Pay fixed rate 2.748% Sell CDX.NA.IG.20-V Receive floating rate 01/06/2018 USD 1,075,000 20/06/2018 J.P. Morgan 21,132 0.01 USD LIBOR 3 months USD 11,870,000 20/11/2023 Barclays Bank 219,287 0.10

Sell CDX.NA.IG.20-V Pay fixed rate 2.804% 01/06/2018 USD 1,115,000 20/06/2018 Barclays Bank 21,919 0.01 Receive floating rate USD LIBOR 3 months USD 1,600,000 01/05/2043 Barclays Bank 298,794 0.13 Sell CDX.NA.IG.21-V 01/12/2018 USD 1,025,000 20/12/2018 Barclays Bank 18,043 0.01 Pay fixed rate 2.903% Receive floating rate Sell iTraxx Europe Senior USD LIBOR 3 months USD 2,560,000 13/05/2043 UBS 432,875 0.19 Financials Series 20 01/12/2018 EUR 5,000,000 20/12/2018 Barclays Bank 42,837 0.02 Unrealised Gain on Interest Rate Swap Contracts 1,656,124 0.75

Unrealised Gain on Credit Default Swap Contracts 124,613 0.05 Pay fixed rate 0.478% Receive floating rate Buy Kohl’s 6.25% USD LIBOR 3 months USD 27,314,000 01/08/2015 Barclays Bank (85,581) (0.04) 15/12/2017 USD 875,00 20/06/2018 J.P. Morgan (340) 0.00 Unrealised Loss on Interest Rate Swap Contracts (85,581) (0.04) Buy Yum! Brands 6.25% 15/03/2018 USD 1,025,000 20/12/2018 Barclays Bank (27,848) (0.01) Net Unrealised Gain on Interest Rate Swap Contracts 1,570,543 0.71

Unrealised Loss on Credit Default Swap Contracts (28,188) (0.01) Cash of USD 585,544 paid as collateral by Barclays Bank in relation to OTC contracts. Cash of USD 290,000 paid as collateral by UBS in relation to OTC contracts. Net Unrealised Gain on Credit Default Swap Contracts 96,425 0.04

Total Derivatives 1,809,979 0.81

Other Assets less Liabilities 20,705,615 9.32

Total Net Asset Value 222,228,879 100.00

(1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. (5) Variable coupon rates are those quoted as of 31 December 2013.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 130

Global High Yield Bond Fund

Investment aim Statement of investments

To provide an attractive rate of return, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in US dollars, through investments As at 31 December 2013, expressed in US dollars. worldwide primarily in fixed income securities Nominal in US dollars Market % of net issued by corporations that are rated lower Investments unless specified value assets than “BBB-” by S&P or “Baa3” by Moody’s or Corporate Bonds United States of America similarly by another internationally recognised Consolidated Container Capital co gtd Ser144A priv plmt 10.125% /2020 2,050,000 2,183,249 0.86 rating service or determined to be of similar Kenan Advantage Group sr unsecur Ser144A priv plmt 8.375% /2018 1,850,000 1,956,375 0.77 creditworthiness by the Investment Adviser. Chassix Holdings sr unsecur Ser144A priv plmt PIK 10% /2018 1,900,000 1,900,000 0.75 Beverages & More sr secured Ser144A priv plmt 10% /2018 1,850,000 1,870,813 0.74 Exopack Holdings co gtd Ser144A priv plmt 7.875% /2019 (Luxembourg) (2) 1,700,000 1,742,500 0.69 IDQ Holdings sr secured Ser144A priv plmt 11.5% /2017 1,600,000 1,676,000 0.66 Sprint co gtd Ser144A priv plmt 7.125% /2024 1,650,000 1,674,750 0.66 Hexion US Finance sr secured 8.875% /2018 1,600,000 1,662,696 0.65 Ahern Rentals secured Ser144A priv plmt 9.5% /2018 1,500,000 1,631,249 0.64 Snoqualmie Entertainment Authority sr secured Ser144A priv plmt 9.125% /2015 1,641,000 1,627,667 0.64 Pretium Packaging Finance secured 11.5% /2016 1,500,000 1,608,750 0.63 Midcontinent Communications & Midcontinent Finance co gtd Ser144A priv plmt 6.25% /2021 1,577,000 1,596,713 0.63 Marquette Transportation Finance secured 10.875% /2017 1,500,000 1,590,000 0.63 Gibson Brands sr secured Ser144A priv plmt 8.875% /2018 1,500,000 1,590,000 0.63 Easton-Bell Sports sr secured 9.75% /2016 1,500,000 1,571,265 0.62 INTCOMEX secured 13.25% /2014 1,575,000 1,537,594 0.61 Michael Baker International sr secured Ser144A priv plmt 8.25% /2018 1,500,000 1,546,875 0.61 Sequa co gtd Ser144A priv plmt 7% /2017 1,500,000 1,515,000 0.60 Golden Nugget Escrow sr unsecur Ser144A priv plmt 8.5% /2021 1,500,000 1,520,625 0.60 Nuveen Investments sr unsecur Ser144A priv plmt 9.125% /2017 1,500,000 1,511,250 0.59 Allied Specialty Vehicles sr secured Ser144A priv plmt 8.5% /2019 1,450,000 1,493,500 0.59 Accuride sr secured 9.5% /2018 1,500,000 1,479,945 0.58 CTP Transportation Products sr secured Ser144A priv plmt 8.25% /2019 1,400,000 1,466,500 0.58 Chester Downs & Marina sr secured Ser144A priv plmt 9.25% /2020 1,450,000 1,460,875 0.57 Sugarhouse HSP Gaming Prop Mezz sr secured Ser144A priv plmt 6.375% /2021 1,500,000 1,455,000 0.57 JB Poindexter & Co sr unsecur Ser144A priv plmt 9% /2022 1,350,000 1,447,875 0.57 Salix Pharmaceuticals co gtd Ser144A priv plmt 6% /2021 1,400,000 1,438,500 0.57 Pittsburgh Glass Works sr secured Ser144A priv plmt 8% /2018 1,350,000 1,427,625 0.56 Associated Asphalt Finance sr secured Ser144A priv plmt 8.5% /2018 1,350,000 1,397,250 0.55 Compiler Finance Sub sr unsecur Ser144A priv plmt 7% /2021 1,375,000 1,371,563 0.54 Hecla Mining co gtd Ser144A priv plmt 6.875% /2021 1,400,000 1,351,000 0.53 Jefferies LoanCore / JLC Finance sr unsecur Ser144A priv plmt 6.875% /2020 1,350,000 1,343,250 0.53 Bumble Bee Holdco sr nts Ser144A priv plmt PIK 9.625% /2018 (Luxembourg) (2) 1,229,000 1,299,668 0.51 GenOn Americas Generation sr unsecur 8.5% /2021 1,200,000 1,263,000 0.50 Cenveo secured 8.875% /2018 1,250,000 1,256,913 0.50 Alion Science & Technology sr secured PIK 12% 01/11/2014 1,222,100 1,255,708 0.49 Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 131 Morgan Stanley Investment Funds 31 December 2013

Global High Yield Bond Fund

Statement of investments (continued) Nominal in US dollars Market % of net Investments unless specified value assets Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. Corporate Bonds (continued) As at 31 December 2013, expressed in US dollars. United States of America (continued) Dole Food sr secured Ser144A priv plmt Nominal in 7.25% /2019 950,000 946,438 0.37 US dollars Market % of net Zachry Holdings sr nts Ser144A priv plmt Investments unless specified value assets 7.5% /2020 900,000 945,000 0.37 CPG Merger Sub co gtd Ser144A priv plmt Corporate Bonds (continued) 8% /2021 900,000 940,500 0.37 T-Mobile USA co gtd 6.836% /2023 900,000 938,151 0.37 United States of America (continued) Service Corp International sr unsecur GXS Worldwide sr secured 9.75% /2015 1,145,000 1,185,075 0.47 Ser144A priv plmt 5.375% /2022 900,000 915,750 0.36 Navios Maritime Finance II co gtd BC Mountain Finance co gtd Ser144A 8.125% /2019 (Marshall Islands) (2) 1,150,000 1,184,500 0.47 priv plmt 7% /2021 900,000 913,500 0.36 Activision Blizzard co gtd Ser144A Pinnacle Operating secured Ser144A priv plmt 6.125% /2023 1,100,000 1,152,250 0.45 priv plmt 9% /2020 850,000 905,250 0.36 Prince Mineral Holding sr secured Brand Energy & Infrastructure Services Ser144A priv plmt 11.5% /2019 1,000,000 1,117,500 0.44 co gtd Ser144A priv plmt 8.5% /2021 900,000 916,875 0.36 Artesyn Escrow sr secured Ser144A Churchill Downs co gtd Ser144A priv plmt priv plmt 9.75% /2020 1,050,000 1,107,750 0.44 5.375% /2021 900,000 915,750 0.36 Diamond Resorts sr secured 12% /2018 987,000 1,091,597 0.43 Rite Aid co gtd 6.75% /2021 850,000 894,625 0.35 Kratos Defense & Security Solutions American Achievement secured Ser144A sr secured 10% /2017 1,000,000 1,078,725 0.42 priv plmt 10.875% /2016 850,000 894,625 0.35 Armored Autogroup co gtd 9.25% /2018 1,113,000 1,078,219 0.42 CCM Merger co gtd Ser144A priv plmt inVentiv Health sr secured Ser144A 9.125% /2019 850,000 892,500 0.35 priv plmt 9% /2018 1,020,000 1,073,550 0.42 ARAMARK co gtd Ser144A priv plmt 5.75% /2020 850,000 891,013 0.35 BOE Merger sr unsecur Ser144A Tenet Healthcare sr secured Ser144A priv plmt PIK 9.5% /2017 1,000,000 1,067,500 0.42 priv plmt 6% /2020 850,000 888,781 0.35 Ocean Rig UDW sr unsecur 9.5% /2016 Hockey Merger Sub 2 sr unsecur Ser144A (Marshall Islands) (2) 1,000,000 1,064,175 0.42 priv plmt 7.875% /2021 850,000 879,750 0.35 KCG Holdings sr secured Ser144A Rivers Pittsburgh Borrower Finance priv plmt 8.25% /2018 1,000,000 1,058,750 0.42 sr secured Ser144A priv plmt 9.5% /2019 769,000 847,823 0.33 KeHE Distributors secured Ser144A Nationstar Mortgage Capital co gtd 7.875% /2020 800,000 836,000 0.33 priv plmt 7.625% /2021 1,000,000 1,061,875 0.42 Supervalu sr unsecur 8% /2016 750,000 829,433 0.33 Bankrate co gtd Ser144A priv plmt Knowledge Universe Education co gtd 6.125% /2018 1,000,000 1,045,000 0.41 Ser144A priv plmt 7.75% /2015 833,000 824,670 0.32 Whiting Petroleum co gtd 5.75% /2021 1,000,000 1,041,230 0.41 BOE Intermediate Holding sr unsecur Hilton Worldwide Finance co gtd Ser144A priv plmt PIK 9% /2017 784,125 821,371 0.32 Ser144A priv plmt 5.625% /2021 1,000,000 1,039,375 0.41 Harland Clarke Holdings co gtd 6% /2015 (5) 800,000 802,000 0.32 BMC Software Finance sr unsecur Associated Materials sr secured 9.125% /2017 750,000 800,314 0.31 Ser144A priv plmt 8.125% /2021 1,000,000 1,035,000 0.41 RSI Home Products secured Ser144A syncreon Group sr unsecur Ser144A priv plmt 6.875% /2018 750,000 789,375 0.31 priv plmt 8.625% /2021 (Netherlands) (2) 1,000,000 1,040,000 0.41 Sanchez Energy co gtd Ser144A priv plmt DynCorp International co gtd 10.375% /2017 1,000,000 1,028,455 0.40 7.75% /2021 750,000 770,625 0.30 Visant co gtd 10% /2017 1,050,000 1,017,518 0.40 PC Nextco Holdings sr unsecur Ser144A L Brands co gtd 5.625% /2023 1,000,000 1,016,150 0.40 priv plmt PIK 8.75% /2019 750,000 772,500 0.30 Monitronics International co gtd 9.125% /2020 950,000 1,011,750 0.40 Empire Today Finance sr secured Ser144A American Builders & Contractors Supply priv plmt 11.375% /2017 750,000 757,500 0.30 sr unsecur Ser144A priv plmt 5.625% /2021 1,000,000 1,007,500 0.40 Hologic co gtd 6.25% /2020 700,000 742,000 0.29 Provident Funding Associates co gtd Safway Group Holding secured Ser144A Ser144A priv plmt 6.75% /2021 1,000,000 1,000,000 0.39 priv plmt 7% /2018 700,000 738,500 0.29 Leucadia National sr unsecur 5.5% /2023 1,000,000 999,830 0.39 Northern Oil and Gas co gtd 8% /2020 705,000 736,136 0.29 Jefferies Finance sr unsecur Ser144A Sabine Pass LNG sr secured 6.5% /2020 700,000 729,750 0.29 priv plmt 7.375% /2020 950,000 992,750 0.39 Approach Resources co gtd 7% /2021 700,000 721,000 0.28 Plastipak Holdings sr unsecur Ser144A CenturyLink sr unsecur SerW 6.75% /2023 700,000 710,969 0.28 priv plmt 6.5% /2021 950,000 988,000 0.39 Cleaver-Brooks sr secured Ser144A Seminole Hard Rock Entertainment co gtd priv plmt 8.75% /2019 650,000 708,500 0.28 Ser144A priv plmt 5.875% /2021 1,000,000 987,500 0.39 Viasystems sr secured Ser144A priv plmt RR Donnelley & Sons sr unsecur 7.875% /2021 890,000 986,877 0.39 7.875% /2019 650,000 706,063 0.28 US Foods co gtd 8.5% /2019 900,000 985,500 0.39 Kodiak Oil & Gas co gtd 5.5% /2021 (Canada) (2) 700,000 700,000 0.28 American Gilsonite sr secured Ser144A Neenah Paper co gtd Ser144A priv plmt priv plmt 11.5% /2017 1,000,000 972,500 0.38 5.25% /2021 700,000 684,250 0.27 Mustang Merger sr unsecur Ser144A Continental Airlines 2012-3 Class C Pass priv plmt 8.5% /2021 900,000 972,000 0.38 Through Certificates 6.125% /2018 650,000 681,528 0.27 Crestwood Midstream Finance co gtd 7.75% /2019 888,000 967,920 0.38 DuPont Fabros Technology co gtd 5.875% /2021 650,000 672,750 0.26 Crestview DS Merger Sub II secured Acadia Healthcare co gtd Ser144A Ser144A priv plmt 10% /2021 900,000 967,500 0.38 priv plmt 6.125% /2021 650,000 671,125 0.26 Chemtura co gtd 5.75% /2021 950,000 963,115 0.38 Post Holdings co gtd Ser144A priv plmt TMS International co gtd Ser144A 6.75% /2021 650,000 671,125 0.26 priv plmt 7.625% /2021 900,000 963,000 0.38 Permian Holdings sr secured Ser144A Kindred Healthcare co gtd 8.25% /2019 900,000 962,613 0.38 priv plmt 10.5% /2018 677,000 670,230 0.26 Denbury Resources co gtd 4.625% /2023 1,050,000 953,500 0.38 CCO Holdings Capital co gtd 5.75% /2024 700,000 663,471 0.26 Iracore International Holdings sr secured Interline Brands sr unsecur PIK 10% /2018 600,000 657,750 0.26 Ser144A priv plmt 9.5% /2018 900,000 949,500 0.37 Sonic Automotive co gtd 5% /2023 700,000 656,250 0.26 Neiman Marcus Group co gtd Ser144A US Coatings Acquisition co gtd Ser144A priv plmt PIK 8.75% /2021 900,000 947,250 0.37 priv plmt 7.375% /2021 600,000 642,000 0.25

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 132

Global High Yield Bond Fund

Statement of investments (continued) Nominal in US dollars Market % of net Investments unless specified value assets Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. Corporate Bonds (continued) As at 31 December 2013, expressed in US dollars. United States of America (continued) NOVA Chemicals sr unsecur Ser144A Nominal in priv plmt 5.25% /2023 (Canada) (2) 400,000 413,250 0.16 US dollars Market % of net Crestwood Midstream Finance co gtd Investments unless specified value assets Ser144A priv plmt 6.125% /2022 400,000 412,000 0.16 Graton Economic Development Authority Corporate Bonds (continued) sr secured Ser144A priv plmt 9.625% /2019 350,000 407,750 0.16 Continental Resources co gtd 4.5% /2023 400,000 405,518 0.16 United States of America (continued) Cablevision Systems sr unsecur 7.75% /2018 350,000 391,799 0.15 Oxford Finance sr unsecur Ser144A Kennedy-Wilson co gtd 8.75% /2019 300,000 330,750 0.13 priv plmt 7.25% /2018 600,000 636,000 0.25 Wolverine World Wide co gtd 6.125% /2020 300,000 322,875 0.13 First Data co gtd Ser144A priv plmt 11.75% /2021 600,000 636,000 0.25 Jaguar Holding I sr unsecur Ser144A Northern Tier Finance sr secured 7.125% /2020 600,000 630,000 0.25 priv plmt PIK 9.375% /2017 300,000 318,750 0.13 SM Energy sr unsecur Ser144A priv plmt Quality Capital secured 9.875% /2018 270,000 299,700 0.12 5% /2024 650,000 622,375 0.24 Kodiak Oil & Gas co gtd 5.5% /2022 (Canada) (2) 250,000 250,000 0.10 Cequel Communications Holdings Eagle Midco sr unsecur Ser144A sr unsecur Ser144A priv plmt 6.375% /2020 600,000 618,000 0.24 priv plmt 9% /2018 250,000 261,875 0.10 Tekni-Plex sr secured Ser144A priv plmt Burlington Holding Finance sr unsecur 9.75% /2019 541,000 615,388 0.24 Ser144A priv plmt PIK 9% /2018 236,000 243,080 0.10 Rentech Nitrogen Finance secured AES sr unsecur 7.375% /2021 200,000 224,926 0.09 Ser144A priv plmt 6.5% /2021 600,000 583,500 0.23 First Data co gtd Ser144A priv plmt Bonanza Creek Energy co gtd 6.75% /2021 544,000 572,560 0.23 10.625% /2021 200,000 217,750 0.09 Logan’s Roadhouse secured 10.75% /2017 800,000 585,380 0.23 CNO Financial Group sr secured Gibraltar Industries co gtd 6.25% /2021 550,000 568,563 0.22 Ser144A priv plmt 6.375% /2020 200,000 214,000 0.08 Chrysler Group/CG Co-Issuer secured Speedway Motorsports co gtd 6.75% /2019 200,000 213,500 0.08 8% /2019 500,000 554,413 0.22 Harland Clarke Holdings co gtd 9.5% /2015 212,000 213,193 0.08 First Data co gtd Ser144A priv plmt 11.25% /2021 500,000 554,375 0.22 IMS Health sr unsecur Ser144A Martin Midstream Finance co gtd 7.25% /2021 540,000 553,500 0.22 priv plmt 6% /2020 200,000 212,000 0.08 Halcon Resources co gtd Ser144A Exopack Holding co gtd 10% /2018 195,000 211,575 0.08 priv plmt 9.75% /2020 500,000 521,875 0.21 Burlington Coat Factory Warehouse Freescale Semiconductor co gtd 8.05% /2020 500,000 540,000 0.21 co gtd 10% /2019 183,000 207,019 0.08 VWR Funding co gtd 7.25% /2017 500,000 540,000 0.21 Sabra Health Care co gtd 5.375% /2023 200,000 195,250 0.08 Nuverra Environmental Solutions co gtd Infor US co gtd 9.375% /2019 100,000 113,000 0.05 9.875% /2018 550,000 539,000 0.21 Exide Technologies sr secured 8.625% /2018 750,000 534,915 0.21 Total for United States of America 62.94 Chassix sr secured Ser144A priv plmt 9.25% /2018 500,000 533,750 0.21 ADT sr unsecur Ser144A priv plmt 6.25% /2021 500,000 525,625 0.21 Luxembourg Energy XXI Gulf Coast co gtd Ser144A Altice Financing co gld Ser144A 6.5% /2022 (2) 1,600,000 1,620,000 0.64 priv plmt 7.5% /2021 500,000 523,750 0.21 Albea Beauty Holdings sr secured RegS DreamWorks Animation co gtd Ser144A 8.75% /2019 (EUR) 1,000,000 1,471,007 0.58 priv plmt 6.875% /2020 500,000 531,250 0.21 GCS Holdco Finance I sr secured RegS MetroPCS Wireless co gtd Ser144A 6.5% /2018 (EUR) 1,000,000 1,425,644 0.56 priv plmt 6.25% /2021 500,000 519,375 0.20 Matterhorn Financing & CY sr secured Caesars Entertainment Operating RegS PIK 9% /2019 (1) (EUR) 1,000,000 1,420,347 0.56 sr secured 11.25% /2017 500,000 508,885 0.20 Bormioli Rocco Holdings sr secured Wells Enterprises sr secured Ser144A RegS 10% /2018 (EUR) 750,000 1,133,496 0.45 priv plmt 6.75% /2020 500,000 508,750 0.20 APERAM sr unsecur Ser144A priv plmt Royal Caribbean Cruises sr unsecur 7.75% /2018 1,050,000 1,084,125 0.43 5.25% /2022 (Liberia) (2) 500,000 502,595 0.20 Geo Debt Finance sr secured RegS Atkore International sr secured 9.875% /2018 450,000 486,000 0.19 7.5% /2018 (EUR) 600,000 882,049 0.35 Spectrum Brands co gtd 6.75% /2020 450,000 486,000 0.19 DH Services Luxembourg co gtd Martin Midstream Finance co gtd 8.875% /2018 450,000 477,000 0.19 Ser144A priv plmt 7.75% /2020 800,000 852,000 0.33 SBA Telecommunications co gtd 5.75% /2020 450,000 471,375 0.19 INEOS Group Holdings co gtd RegS AES sr unsecur 4.875% /2023 500,000 469,698 0.18 6.5% /2018 (EUR) 600,000 849,129 0.33 JC Penney co gtd SerMTNA 6.875% /2015 500,000 457,375 0.18 Spie BondCo 3 co gtd RegS 11% /2019 (1) (EUR) 500,000 787,338 0.31 WMG Acquisition sr secured RegS Accudyne Industries Borrower co gtd 6.25% /2021 (EUR) 315,000 456,713 0.18 Ser144A priv plmt 7.75% /2020 700,000 743,749 0.29 Harron Communications sr unsecur Mobile Challenger Intermediate Group Ser144A priv plmt 9.125% /2020 400,000 445,000 0.18 sr secured RegS PIK 8.75% /2019 (EUR) 500,000 720,870 0.28 JC Penney co gtd 7.65% /2016 500,000 438,643 0.17 Intelsat Luxembourg co gtd Ser144A Wise Metals Group sr secured Ser144A priv plmt 6.75% /2018 650,000 693,875 0.27 priv plmt 8.75% /2018 400,000 423,000 0.17 Numericable Finance & Co sr secured Crown Castle International sr unsecur RegS 8.75% /2019 (EUR) 368,372 575,034 0.23 5.25% /2023 450,000 443,250 0.17 Gategroup Finance Luxembourg co gtd Post Holdings co gtd Ser144A priv plmt RegS 6.75% /2019 (EUR) 350,000 511,786 0.20 7.375% /2022 400,000 430,000 0.17 Altice Financing sr secured T-Mobile USA sr unsecur Ser144A RegS 6.5% /2022 (2) (EUR) 250,000 347,238 0.13 priv plmt 5.25% /2018 400,000 422,500 0.17 Darling Escrow sr unsecur Ser144A Total for Luxembourg 5.94 priv plmt 5.375% /2022 400,000 402,500 0.16 Snoqualmie Entertainment Authority sr secured Ser144A priv plmt 4.147% 01/02/2014 (5) 418,000 415,910 0.16

The accompanying notes are an integral part of these financial statements. 133 Morgan Stanley Investment Funds 31 December 2013

Global High Yield Bond Fund

United Kingdom Hastings Insurance Group Finance Canada sr secured RegS 8% /2020 (Jersey) (2) (GBP) 750,000 1,286,865 0.51 Lightstream Resources sr unsecur Ashtead Capital secured Ser144A priv plmt Ser144A priv plmt 8.625% /2020 1,380,000 1,397,249 0.54 6.5% /2022 (United States of America) (2) 1,000,000 1,068,749 0.42 Air Canada sr secured Ser144A CEVA Group sr secured Ser144A priv plmt 6.75% /2019 1,150,000 1,210,375 0.48 priv plmt 8.375% /2017 1,000,000 1,050,000 0.41 MDC Partners co gtd Ser144A Priory Group No 3 co gtd RegS priv plmt 6.75% /2020 1,000,000 1,051,250 0.41 8.875% /2019 (GBP) 600,000 1,025,943 0.40 Tervita sr secured Ser144A priv plmt Voyage Care Bondco secured RegS 8% /2018 1,000,000 1,037,500 0.41 11% /2019 (GBP) 500,000 901,549 0.35 Seven Generations Energy sr nts Grainger sr secured 5% /2020 (GBP) 500,000 844,036 0.33 Ser144A priv plmt 8.25% /2020 700,000 759,500 0.30 Ineos Group Holdings secured RegS Eldorado Gold sr unsecur Ser144A 7.875% /2016 (Luxembourg) (2) (EUR) 505,243 702,593 0.28 priv plmt 6.125% /2020 750,000 727,500 0.29 Voyage Care Bondco sr secured RegS 6.5% /2018 (GBP) 400,000 681,821 0.27 Total for Canada 2.43 Anglian Water Osprey Financing sr secured SerEMTN 7% /2018 (GBP) 250,000 448,465 0.18 Italy Barclays jr subord 8% perpetual (5) (EUR) 300,000 426,652 0.17 Wind Acquisition Finance secured RegS Kelda Finance No 3 sr secured RegS 11.75% /2017 (Luxembourg) (2) (EUR) 1,000,000 1,466,633 0.58 5.75% /2020 (GBP) 200,000 342,171 0.13 Sisal Holding Istituto di Pagamento William Hill co gtd 4.25% /2020 (GBP) 200,000 322,647 0.13 sr secured RegS 7.25% /2017 (1) (EUR) 1,000,000 1,411,159 0.55 Enel subord Ser144A priv plmt Total for United Kingdom 3.58 8.75% /2073 (5) 1,040,000 1,134,843 0.45 Fiat Finance & Trade co gtd SerGMTN France 6.75% /2019 (Luxembourg) (1) (2) (EUR) 570,000 850,978 0.33 Oberthur Technologies Holding sr secured Enel jr subord 6.5% /2074 (1) (5) (EUR) 325,000 481,245 0.19 RegS 9.25% /2020 (EUR) 1,000,000 1,454,015 0.57 La Financiere Atalian sr unsecur RegS Total for Italy 2.10 7.25% /2020 (EUR) 1,000,000 1,457,913 0.57 Europcar Groupe subord RegS Spain 9.375% /2018 (1) (EUR) 750,000 1,107,212 0.43 Ono Finance II co gtd RegS Elior Finance & Co sr secured RegS 11.125% /2019 (Ireland) (2) (EUR) 850,000 1,294,675 0.51 6.5% /2020 (Luxembourg) (1) (2) (EUR) 500,000 752,547 0.30 AG Spring Finance II sr secured RegS SMCP SAS sr secured RegS 8.875% /2020 (EUR) 500,000 751,631 0.30 9.5% /2019 (Ireland) (2) (EUR) 750,000 1,070,829 0.42 Loxam sr subord RegS 7.375% /2020 (1) (EUR) 500,000 737,935 0.29 Abengoa Finance sr unsecur Ser144A Faurecia sr unsecur SerEMTN 8.75% /2019 (EUR) 450,000 713,067 0.28 priv plmt 7.75% /2020 1,000,000 1,036,249 0.41 Picard Groupe SAS sr secured RegS Bilbao Luxembourg unsecur RegS PIK 4.48% /2019 (5) (EUR) 500,000 702,828 0.28 10.5% /2018 (Luxembourg) (1) (2) (EUR) 750,000 1,016,815 0.40 Banco Popular Espanol jr subord Total for France 3.02 SerEMTN 11.5% perpetual (5) (EUR) 300,000 454,630 0.18 Nara Cable Funding sr secured Ser144@ China 8.875% /2018 (Ireland) (2) 350,000 374,500 0.15 Yingde Gases Investment co gtd RegS 8.125% /2018 (British Virgin Islands) (2) 850,000 887,591 0.35 Total for Spain 2.07 Sound Global sr unsecur 11.875% /2017 (Singapore) (2) 750,000 815,267 0.32 Ireland Powerlong Real Estate Holdings co gtd Ardagh Glass Finance co gtd RegS SerEMTN 11.25% /2018 (Cayman Islands) (2) 750,000 763,980 0.30 8.75% /2020 (1) (EUR) 1,000,000 1,467,101 0.58 CIFI Holdings Group co gtd 12.25% /2018 Altice Finco co gtd RegS 9% /2023 (Cayman Islands) (1) (2) 650,000 739,716 0.29 (Luxembourg) (2) (EUR) 750,000 1,134,612 0.45 Kaisa Group Holdings co gtd RegS Rottapharm co gtd RegS 8.875% /2018 (Cayman Islands) (2) 500,000 513,523 0.20 6.125% /2019 (1) (EUR) 750,000 1,074,052 0.42 Fantasia Holdings Group co gtd RegS Altice Finco co gtd Ser144A priv plmt 10.75% /2020 (Cayman Islands) (1) (2) 500,000 505,798 0.20 8.125% /2024 (Luxembourg) (2) 800,000 828,000 0.33 Country Garden Holdings co gtd RegS Nara Cable Funding II sr secured RegS 7.25% /2021 (Cayman Islands) (2) 500,000 497,883 0.20 8.5% /2020 (1) (EUR) 450,000 722,750 0.28 KWG Property Holding co gtd RegS 8.625% /2020 (Cayman Islands) (2) 500,000 496,860 0.20 Total for Ireland 2.06 Kaisa Group Holdings co gtd RegS 10.25% /2020 (Cayman Islands) (2) 350,000 361,338 0.14

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 134

Global High Yield Bond Fund

Total for Singapore 1.52 Brazil ESAL co gtd RegS 6.25% /2023 (Austria) (2) 600,000 540,204 0.21 Netherlands JBS Investments co gtd Ser144A priv plmt Playa Resorts Holding sr unsecur 7.75% /2020 (Austria) (2) 405,000 413,124 0.16 Ser144A priv plmt 8% /2020 1,000,000 1,066,250 0.42 Minerva Luxembourg co gtd RegS Refresco Group sr secured RegS 7.75% /2023 (Luxembourg) (2) 200,000 199,810 0.08 7.375% /2018 (EUR) 500,000 739,292 0.29 UPC Holding secured RegS Total for Brazil 0.45 6.375% /2022 (1) (EUR) 400,000 565,747 0.22 Switzerland Total for Netherlands 0.93 Aguila 3 sr secured Ser144A priv plmt 7.875% /2018 (Luxembourg) (2) 1,000,000 1,065,000 0.42 Belgium LBC Tank Terminals Holding Netherlands Total for Switzerland 0.42 co gtd Ser144A priv plmt 6.875% /2023 (Netherlands) (2) 1,000,000 1,045,000 0.41 Poland Ontex IV co gtd RegS 9% /2019 TVN Finance III co gtd RegS 7.375% /2020 (Luxembourg) (2) (EUR) 600,000 898,858 0.35 (Sweden) (1) (2) (EUR) 500,000 743,451 0.29

Total for Belgium 0.76 Total for Poland 0.29

Germany Slovenia Hellenic Petroleum Finance co gtd SerEMTN Adria Bidco sr secured RegS 7.875% /2020 8% /2017 (United Kingdom) (2) (EUR) 500,000 733,034 0.29 (Netherlands) (2) (EUR) 425,000 592,161 0.23 KION Finance sr secured RegS 6.75% /2020 (Luxembourg) (1) (2) (EUR) 400,000 603,603 0.24 Total for Slovenia 0.23 Schaeffler Holding Finance sr secured Ser144A priv plmt PIK 6.875% /2018 (Netherlands) (2) 500,000 532,500 0.21 Macau Total for Germany 0.74 Studio City Finance co gtd RegS 8.5% /2020 (British Virgin Islands) (1) (2) 500,000 556,045 0.23

Greece Total for Macau 0.23 DryShips sr unsecur CV 5% /2014 (Marshall Islands) (2) 1,300,000 1,303,250 0.51 FAGE USA Dairy Industry co gtd Australia RegS 9.875% /2020 350,000 369,789 0.15 FMG Resources August 2006 Proprietary co gtd Ser144A priv plmt 6.375% /2016 500,000 518,749 0.21 Total for Greece 0.66 Total for Australia 0.21 Portugal Brisa Concessao Rodoviaria sr secured Indonesia SerEMTN 6.875% /2018 (EUR) 1,000,000 1,528,946 0.60 Jababeka International co gtd RegS 11.75% /2017 (Netherlands) (2) 500,000 518,305 0.20 Total for Portugal 0.60 Total for Indonesia 0.20 India Vedanta Resources sr unsecur Ser144A Russia priv plmt 7.125% /2023 (United Kingdom) (2) 750,000 689,141 0.27 Credit Bank of Moscow Via CBOM Finance subord Bharti Airtel International co gtd 4% /2018 Ser144A priv plmt 8.7% /2018 (Ireland) (2) 430,000 405,275 0.16 (Netherlands) (2) (EUR) 450,000 623,538 0.25 Total for Russia 0.16 Total for India 0.52 Total for Corporate Bonds 95.50

The accompanying notes are an integral part of these financial statements. 135 Morgan Stanley Investment Funds 31 December 2013

Global High Yield Bond Fund

Statement of investments (continued) Forward Foreign Currency Exchange Contracts (continued)

Transferable securities and money market instruments admitted Unrealised Maturity Amount Amount gain/(loss) % of net to official exchange listing or dealt in on another regulated market. date bought Ccy sold Ccy Counterparty USD assets

As at 31 December 2013, expressed in US dollars. EUR Hedged Share Class Nominal in 10/01/2014 89,244,593 EUR 122,707,632 USD J.P. Morgan 231,253 0.09 US dollars Market % of net Investments unless specified value assets SEK Hedged Share Class 10/01/2014 7,186,471 SEK 1,097,886 USD J.P. Morgan 18,921 0.01 Mortgage and Asset Backed Securities Unrealised Gain on NAV Hedged Share Classes United States of America Forward Foreign Currency Exchange Contracts 250,174 0.10 American Airlines 2013-1 Class B Pass Through Trust Ser144A priv plmt 5.625% /2021 300,000 301,500 0.12 Total Unrealised Gain on Forward Foreign Currency Exchange Contracts 349,867 0.14 Total for United States of America 0.12 10/01/2014 590,000 EUR 813,561 USD Westpac Bank (807) 0.00 Total for Mortgage and Asset Backed Securities 0.12 10/01/2014 272,154 USD 200,000 EUR State Street (3,356) 0.00 10/01/2014 2,344,430 USD 1,725,000 EUR Westpac Bank (31,843) (0.02) Total Investment Securities 242,987,698 95.62 Unrealised Loss on Forward Foreign Currency Exchange Contracts (36,006) (0.02) DERIVATIVES EUR Hedged Share Class Over-the-counter (OTC) and exchange traded derivatives 10/01/2014 2,034,199 EUR 2,806,401 USD J.P. Morgan (4,191) 0.00 as at 31 December 2013, expressed in US dollars. Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (4,191) 0.00 Financial Futures Contracts Total Unrealised Loss Net unrealised on Forward Foreign Currency Exchange Contracts (40,197) (0.02) gain/(loss) as at Maturity Number of Notional 31 December % of net Net Unrealised Gain Description date contracts commitments Counterparty 2013 assets on Forward Foreign Currency Exchange Contracts 309,670 0.12

Duration Hedged Share Class Total Derivatives 316,342 0.12 Euro SCHATZ Future 03/2014 (2) (303,890) Goldman Sachs 380 0.00 US 2yr T-note Future 03/2014 (2) (439,562) Goldman Sachs 846 0.00 Other Assets less Liabilities 10,816,833 4.26 US 5yr T-note Future 03/2014 (2) (238,625) Goldman Sachs 3,125 0.00 US 10yr T-note Future 03/2014 (1) (123,063) Goldman Sachs 2,321 0.00 Total Net Asset Value 254,120,873 100.00

Unrealised Gain on Duration Hedged Financial Futures Contracts 6,672 0.00 (1) All or part of this position is out on loan. (2) The country in brackets represents the country of incorporation of this security. Net Unrealised Gain (5) Variable coupon rates are those quoted as of 31 December 2013. on Financial Futures Contracts (1,105,140) 6,672 0.00

Cash of USD 9,922 held as collateral by Goldman Sachs in relation to financial futures contracts. Cash of USD 2 paid as collateral to Goldman Sachs in relation to financial futures contracts.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

10/01/2014 2,500,000 EUR 3,411,808 USD Commonwealth Bank 32,067 0.01 22/01/2014 2,060,000 EUR 2,817,847 USD Westpac Bank 19,895 0.01 22/01/2014 550,000 USD 398,963 EUR Westpac Bank 411 0.00 23/01/2014 400,000 GBP 653,847 USD HSBC 7,906 0.00 23/01/2014 1,855,000 GBP 3,029,467 USD RBC 39,414 0.02

Unrealised Gain on Forward Foreign Currency Exchange Contracts 99,693 0.04

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 136

Global Mortgage Securities Fund

Investment aim Statement of investments

To provide an attractive rate of return, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in US dollars, through investment in As at 31 December 2013, expressed in US dollars. a portfolio of mortgages and securitised debt Nominal in US dollars Market % of net instruments issued by government agencies Investments unless specified value assets and private institutions (“non-agency”) including Mortgage and Asset Backed Securities United States of America mortgage-backed securities, asset-backed Washington Mutual Alternative Mortgage Pass-Through Certificates 2007-OA5 A1A securities, collateralised mortgage obligations 0.968% /2047 (5) 8,352,792 6,738,623 2.34 RAMP Trust 2005-EFC4 Trust 0.755% /2035 (5) 8,731,000 6,417,861 2.23 and commercial mortgage-backed securities. BCAP Trust 2007-AA3 1A1B 0.305% /2037 (5) 6,445,198 5,495,098 1.91 FHLMC Multifamily Structured Pass Through Certificates K030 A2 3.25% /2023 (5) 5,000,000 4,939,280 1.71 Wells Fargo Mortgage Backed Securities 2007-15 A1 Trust 6% /2037 5,022,125 4,892,951 1.70 JP Morgan Chase Commercial Mortgage Securities Trust 2007-LDPX AM 5.464% /2049 (5) 4,640,000 4,813,596 1.67 RAMP Trust 2006-RZ2 A3 0.435% /2036 (5) 5,175,000 4,474,036 1.55 GNMA 2013-182 NS 5.973% /2043 (5) 20,084,461 4,362,094 1.51 Banc of America Funding 2007-A 2A5 Trust 0.397% /2047 (5) 5,395,000 4,359,343 1.51 Home Equity Asset Trust 2005-5 M3 0.695% /2035 (5) 5,465,000 4,338,756 1.51 GNMA 2013-71 IG 3.5% /2043 18,254,600 4,282,020 1.49 JP Morgan Alternative Loan Trust 2006-A6 2A6 2.963% /2036 (5) 5,985,337 4,218,962 1.47 JP Morgan Alternative Loan Trust 2006-A5 1A1 0.325% /2036 (5) 5,479,971 4,200,359 1.46 FHLMC Multifamily Structured Pass Through Certificates K032 A2 3.31% /2023 (5) 4,000,000 3,957,292 1.37 Structured Asset Securities Trust 2005-10 1A1 5.75% /2035 3,882,109 3,822,928 1.33 WaMu Mortgage Pass Through Certificates 2005-AR16 1A3 2.363% /2035 (5) 4,140,547 3,809,320 1.32 Wells Fargo Mortgage Backed Securities 2006-AR19 A1 Trust 5.375% /2036 (5) 3,843,377 3,785,517 1.32 Freddie Mac REMICS 4286 SB 11.551% /2043 (5) 3,700,000 3,710,406 1.29 Countrywide Alternative Loan Trust 2005-J1 1A1 0.565% /2035 (5) 3,629,385 3,387,617 1.18 RAMP Series 2006-RZ5 A3 Trust 0.415% /2046 (5) 4,000,000 3,360,904 1.17 GNMA 2012-138 AI 4% /2042 12,264,971 3,312,397 1.15 Deutsche Alt-A Securities Mortgage Loan Trust 2005-1 1A1 0.665% /2035 (5) 3,598,614 3,310,664 1.15 Fannie Mae REMICS 2012-80 SM 5.835% /2042 (5) 15,470,326 3,098,083 1.08 WaMu Mortgage Pass-Through Certificates 2006-AR5 1.118% /2046 (5) 3,532,891 3,038,449 1.06 GS Mortgage Securities II 2012-BWTR A 2.954% /2034 3,230,000 3,011,258 1.05 Encore Credit Receivables Trust 2005-3 M3 0.675% /2035 (5) 3,745,000 2,982,305 1.04 GS Mortgage Securities Trust 2012-ALOH A 3.551% /2034 3,000,000 2,970,317 1.03 Opteum Mortgage Acceptance Trust 2006-1 1AC1 0.465% /2036 (5) 3,540,165 2,892,587 1.00 Freddie Mac REMICS 4259 SB 7.583% /2043 (5) 3,188,852 2,837,498 0.99 Bear Stearns ALT-A Trust 2004-6 1A 0.805% /2034 (5) 2,932,387 2,803,341 0.97 Home Equity Asset Trust 2006-3 M1 0.555% /2036 (5) 3,900,000 2,782,822 0.97 Credit Suisse First Boston Mortgage Securities 2004-AR7 4A1 2.548% /2034 (5) 2,734,115 2,778,297 0.97 Home Equity Mortgage Loan Asset-Backed Trust 2006-E 2A2 0.285% /2037 (5) 3,627,846 2,745,822 0.95

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 137 Morgan Stanley Investment Funds 31 December 2013

Global Mortgage Securities Fund

Statement of investments (continued) Nominal in US dollars Market % of net Investments unless specified value assets Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. Mortgage and Asset Backed Securities (continued) As at 31 December 2013, expressed in US dollars. United States of America (continued) CSMC Mortgage-Backed Trust 2007-3 1A3A Nominal in 5.746% /2037 (5) 2,397,409 1,407,963 0.49 US dollars Market % of net Commercial Mortgage Pass Through Investments unless specified value assets Certificates 2013-CR13 D 4.757% /2046 (5) 1,618,000 1,398,801 0.49 JPMBB Commercial Mortgage Securities Mortgage and Asset Backed Securities (continued) Trust 2013-C17 XA 1.102% /2047 (5) 19,900,301 1,389,718 0.48 GNMA 2012-122 PI 4% /2042 7,434,466 1,374,930 0.48 United States of America (continued) GS Mortgage Securities Trust 2013-GC14 D RBSSP Resecuritization Trust 2009-6 3A2 4.777% /2046 (5) 1,530,000 1,358,495 0.47 5.120% /2036 (5) 3,244,480 2,733,208 0.95 GNMA 2012-97 LS 6.533% /2042 (5) 5,457,049 1,334,881 0.46 Freddie Mac REMICS 4225 BS American Home Mortgage Investment Trust 11.427% /2040 (5) 2,657,394 2,649,448 0.92 2005-1 8A2 step cpn 5.5% /2035 1,847,000 1,332,555 0.46 GNMA 2013-41 LI 4% /2041 15,010,131 2,611,472 0.91 Washington Mutual Mortgage Pass-Through RALI Trust 2004-QS16 1A5 5.5% /2034 2,351,290 2,274,609 0.79 Certificates WMALT Series 2007-OC2 A1 Trust Banc of America Funding 2006-G 2A1 0.265% /2037 (5) 1,768,246 1,318,475 0.46 Trust 0.387% /2036 (5) 2,443,094 2,236,554 0.78 Countrywide Alternative Loan Trust 2005-46CB Washington Mutual Mortgage Pass-Through A14 5.5% /2035 1,447,046 1,304,416 0.45 Certificates 2006-AR6 2A 1.088% /2046 (5) 3,327,121 2,235,310 0.78 Banc of America Funding 2007-4 TA7 FREMF Mortgage Trust 2013-K30 C 0.565% /2037 (5) 1,838,999 1,280,585 0.44 3.555% /2045 (5) 2,550,000 2,120,391 0.74 ChaseFlex Trust Series 2007-2 A1 JP Morgan Chase Commercial Mortgage 0.445% /2037 (5) 1,404,047 1,251,406 0.43 Securities Trust 2006-LDP9 AM 5.372% /2047 2,000,000 2,119,480 0.74 Banc of America Funding 2006-G 2A4 Trust Merrill Lynch Mortgage Investors Trust 0.457% /2036 (5) 1,395,000 1,224,470 0.43 Series MLCC 2005-3 3A 2.144% /2035 (5) 2,227,173 2,117,196 0.74 Banc of America Alternative Loan Trust GNMA 2013-135 SM 6.133% /2043 (5) 12,521,472 2,073,707 0.72 2005-10 1CB1 0.565% /2035 (5) 1,541,217 1,181,098 0.41 First Franklin Mortgage Loan Trust JP Morgan Mortgage Trust 2005-A8 1A1 2005-FF3 M4 0.765% /2035 (5) 2,386,000 2,065,839 0.72 5.1% /2035 (5) 1,232,060 1,178,235 0.41 GNMA 2013-117 QS 11.555% /2043 (5) 2,038,391 2,056,973 0.71 Commercial Mortgage Trust 2013-LC13 Banc of America Alternative Loan Trust 5.05% /2046 (5) 1,270,000 1,146,404 0.40 2006-7 A5 step cpn 6.226% /2036 2,702,269 2,036,608 0.71 WFRBS Commercial Mortgage Trust 2013-C16 GNMA 2013-18 GI 3.5% /2041 12,544,350 2,020,920 0.70 D 4.985% /2046 (5) 1,285,000 1,141,583 0.40 Invitation Homes Trust 2013-SFR1 A FREMF Mortgage Trust 2013-K32 C 1.314% /2030 (5) 1,995,000 2,000,067 0.69 3.536% /2046 (5) 1,335,000 1,096,584 0.38 WaMu Mortgage Pass Through Certificates GS Mortgage Securities Trust 2012-GC6 AS 2005-AR4 A5 2.425% /2035 (5) 2,116,000 1,986,816 0.69 4.948% /2045 1,000,000 1,083,792 0.38 Alternative Loan Trust 2005-7CB 2A5 GNMA 2006-49 SA 6.293% /2036 (5) 8,729,682 1,063,043 0.37 0.615% /2035 (5) 2,637,036 1,939,484 0.67 Lehman XS Trust Series 2005-1 3A3A RALI Trust 2006-QS5 A6 6% /2036 2,393,348 1,910,602 0.66 step cpn 5.11% /2035 1,192,924 1,036,546 0.36 GNMA 2013-71 IN 3.5% /2043 7,975,479 1,899,923 0.66 CHL Mortgage Pass-Through Trust Commercial Mortgage Trust 2013-SFS A2 Resecuritization 2008-2R A1 6% /2036 1,088,796 1,024,191 0.36 2.987% /2035 (5) 2,000,000 1,855,496 0.64 NovaStar Mortgage Funding Trust 2003-4 Fannie Mae REMICS 2013-125 SB A1 0.905% /2034 (5) 1,068,925 1,008,279 0.35 9.67% /2043 (5) 1,905,879 1,811,723 0.63 DBUBS Mortgage Trust 2011-LC3A PM3 FREMF Mortgage Trust 2013-K35 C 5.098% /2044 (5) 1,000,000 1,000,000 0.35 3.947% /2023 (5) 2,120,000 1,794,012 0.62 GS Mortgage Securities II 2013-KYO B Amortizing Residential Collateral Trust 1.618% /2029 (5) 1,000,000 998,689 0.35 2002-BC6 A2 0.865% /2032 (5) 1,990,528 1,779,775 0.62 Citigroup Commercial Mortage Trust Fannie Mae REMICS 2012-19 SG 2.738% /2018 1,000,000 994,375 0.35 5.835% /2039 (5) 10,506,975 1,751,337 0.61 Invitation Homes Trust 2013-SFR1 D GNMA 2011-136 IG 4.5% /2040 9,197,987 1,718,945 0.60 2.314% /2030 (5) 990,000 992,525 0.34 GNMA 2013-41 PI 3.5% /2040 10,958,461 1,692,327 0.59 Countrywide Alternative Loan Trust Merrill Lynch Mortgage Investors Trust 2005-21CB A7 5.5% /2035 1,097,407 960,571 0.33 Series MLCC 2006-1 2A1 2.137% /2036 (5) 1,728,186 1,653,233 0.58 Freddie Mac REMICS 2962 BS Freddie Mac REMICS 4265 ST 6.483% /2035 (5) 7,078,142 960,150 0.33 5.833% /2043 (5) 12,273,478 1,629,427 0.57 JPMBB Commercial Mortgage Securities JP Morgan Mortgage Trust 2005-A3 6A2 Trust 2013-C12 AS 4.026% /2045 (5) 945,000 952,612 0.33 2.761% /2035 (5) 1,623,000 1,615,146 0.56 VNDO Mortgage Trust 2012-6AVE A HarborView Mortgage Loan Trust 2006-7 2.996% /2030 1,000,000 938,871 0.33 0.366% /2046 (5) 2,067,545 1,594,567 0.55 Commercial Mortgage Trust 2013-CR10 D Commercial Mortgage Trust 2007-GG9 4.798% /2046 (5) 1,060,000 930,898 0.32 AM 5.475% /2039 1,410,000 1,505,146 0.52 WFRBS Commercial Mortgage Trust GNMA 2010-157 PS 5.883% /2040 (5) 10,989,520 1,502,124 0.52 2013-C15 D 4.486% /2046 (5) 1,084,000 928,733 0.32 RALI Trust 2006-QA10 A2 0.345% /2036 (5) 2,117,717 1,481,784 0.51 Citigroup Mortgage Loan Trust 2006-4 2A1A Hertz Fleet Lease Funding 2013-3 A 6% /2035 (5) 948,997 916,327 0.32 0.716% /2027 (5) 1,475,000 1,475,266 0.51 GNMA 2013-60 IO 3.5% /2043 3,823,018 908,327 0.32 GNMA 2013-152 SG 5.983% /2043 (5) 8,819,944 1,469,403 0.51 Washington Mutual Alternative Mortgage Pass- Long Beach Mortgage Loan Trust 2004-2 Through Certificates 2005-5 CB4 5.5% /2035 876,997 856,439 0.30 A1 0.605% /2034 (5) 1,616,828 1,465,732 0.51 Chase Mortgage Finance Trust 2005-A1 2A2 ChaseFlex Trust Series 2006-2 A4 2.536% /2035 (5) 945,341 850,807 0.30 6.34% /2036 (5) 1,504,880 1,465,013 0.51

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 138

Global Mortgage Securities Fund

Statement of investments (continued) Nominal in US dollars Market % of net Investments unless specified value assets Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. Mortgage and Asset Backed Securities (continued) As at 31 December 2013, expressed in US dollars. United States of America (continued) GNMA 2013-41 IC 3.5% /2043 1,851,984 405,025 0.14 Nominal in GreenPoint MTA Trust 2005-AR1 A3 US dollars Market % of net 0.445% /2045 (5) 855,434 389,150 0.14 Investments unless specified value assets RALI Trust 2006-QS4 A9 6% /2036 483,233 377,109 0.13 Prime Mortgage Trust 2006-2 1A14 Mortgage and Asset Backed Securities (continued) 6.25% /2036 378,247 374,167 0.13 Freddie Mac REMICS 4259 IA 5% /2041 1,669,057 373,680 0.13 United States of America (continued) JP Morgan Alternative Loan Trust 2006-A3 Nationstar Agency Advance Funding Trust 2A1 2.672% /2036 (5) 483,304 363,049 0.13 2013-T2A AT2 1.892% /2048 850,000 828,419 0.29 BWAY 2013-1515 A1 Mortgage Trust FREMF Mortgage Trust 2013-K31 C 2.809% /2033 377,339 362,141 0.13 3.625% /2046 (5) 988,000 828,386 0.29 Impac CMB Trust Series 2004-5 1M1 WaMu Mortgage Pass Through Certificates 0.96% /2034 (5) 381,081 355,389 0.12 2006-AR7 2A 1.119% /2046 (5) 970,838 803,850 0.28 JP Morgan Alternative Loan Trust 2006-S1 Impac CMB Trust Series 2004-11 2A1 1A16 6% /2036 402,198 349,244 0.12 0.825% /2035 (5) 845,200 761,079 0.26 American Home Mortgage Investment Trust Hilton USA Trust 2013-HLF AFL 1.169% /2030 (5) 740,000 743,256 0.26 2007-A 13A1 step cpn 6.1% /2037 523,757 346,173 0.12 FREMF Mortgage Trust 2013-K33 C JP Morgan Mortgage Trust 2007-A2 3A2 3.504% /2046 (5) 880,000 717,333 0.25 3.948% /2037 (5) 386,835 345,126 0.12 Springleaf Mortgage Loan Trust 2013-1A M1 FHLMC Multifamily Structured Pass Through 2.31% /2058 (5) 720,000 700,441 0.24 Certificates K502 X1A 1.739% /2017 (5) 7,750,509 340,895 0.12 Adjustable Rate Mortgage Trust 2005-7 7A21 Banc of America Funding 2007-2 1A7 0.415% /2035 (5) 765,818 690,177 0.24 5.75% /2037 378,907 332,804 0.12 GS Mortgage Securities II 2013-KYO D Citicorp Mortgage Securities Trust 2006-6 A4 2.768% /2029 (5) 690,000 688,251 0.24 6% /2036 317,368 330,595 0.11 IndyMac INDX Mortgage Loan Trust WaMu Mortgage Pass Through Certificates 2004-AR11 2A 2.503% /2034 (5) 742,573 684,878 0.24 2005-AR7 A3 2.411% /2035 (5) 340,000 328,874 0.11 GNMA 2011-94 SU 5.933% /2041 (5) 4,036,127 651,107 0.23 Wells Fargo Mortgage Backed Securities Banc of America Mortgage Trust 2006-AR11 A6 Trust 2.616% /2036 (5) 347,000 327,651 0.11 2005-10 1A6 5.5% /2035 617,962 617,652 0.22 Citigroup Commercial Mortgage Trust Chase Mortgage Finance Trust Series 2.11% /2018 323,544 325,107 0.11 2007-S1 A4 0.765% /2037 (5) 796,370 611,939 0.21 GNMA 2012-57 NI 5% /2040 1,692,035 323,008 0.11 Countrywide Alternative Loan Trust Wells Fargo Mortgage Backed Securities 2004-29CB A10 0.665% /2035 (5) 659,535 602,878 0.21 2007-11 A85 Trust 6% /2037 336,833 319,819 0.11 GNMA 2012-140 IC 3.5% /2042 2,479,273 595,715 0.21 Banc of America Funding 2006-3 5A5 Trust GNMA 2013-71 MI 3.5% /2041 3,225,583 557,995 0.19 5.5% /2036 321,167 313,165 0.11 Deutsche Mortgage Securities Re-REMIC Commercial Mortgage Trust 2013-SFS A1 Trust Certificates Series 2005-WF1 1.873% /2035 315,756 303,997 0.11 5.230% /2035 (5) 553,442 557,994 0.19 Alternative Loan Trust 2006-28CB A19 RALI Trust 2006-QA10 A1 Trust 0.35% /2036 (5) 795,913 557,160 0.19 0.565% /2036 (5) 535,094 302,943 0.11 Impac CMB Trust Series 2003-4 3M2 Countrywide Alternative Loan Trust 2008-2R step cpn 5.228% /2033 548,431 535,066 0.19 4A1 6.25% /2037 395,241 299,860 0.10 Banc of America Alternative Loan Trust Countrywide Alternative Loan Trust 2005-85CB 2005-8 2CB1 6% /2035 568,647 528,790 0.18 2A2 5.5% /2036 313,637 282,461 0.10 Springleaf Mortgage Loan Trust 2013-1A Fannie Mae REMICS 2012-29 SJ M2 3.14% /2058 (5) 540,000 527,723 0.18 6.285% /2042 (5) 1,223,235 279,755 0.10 JP Morgan Mortgage Trust 2006-A3 3A4 Washington Mutual Alternative Mortgage Pass- 2.734% /2036 (5) 558,288 509,128 0.18 Through Certificates 2006-5 2CB1 6% /2036 360,501 266,724 0.09 JP Morgan Mortgage Trust Series 2008-R2 Residential Asset Securitization Trust 2005-A12 1A1 2.430% /2037 (5) 589,592 507,049 0.18 A10 0.615% /2035 (5) 319,669 260,510 0.09 FHLMC Multifamily Structured Pass Through Wells Fargo Mortgage Backed Securities Certificates K712 X1 1.394% /2019 (5) 7,113,516 470,143 0.16 2007-7 A6 Trust 6% /2037 266,165 260,273 0.09 Impac CMB Trust Series 2004-5 1A1 Nationstar Agency Advance Funding Trust 0.885% /2034 (5) 484,076 462,608 0.16 2013-T2A CT2 3.228% /2048 250,000 253,565 0.09 Residential Asset Securitization Trust WaMu Mortgage Pass Through Certificates 2006-A14C 1A2 6.25% /2036 539,251 453,062 0.16 2007-OA4 1A 0.909% /2047 (5) 284,310 247,165 0.09 JP Morgan Mortgage Trust 2005-A6 1A2 Merrill Lynch Mortgage Investors Trust 2.735% /2035 (5) 459,047 446,807 0.16 Series MLCC 2005-1 2A2 2.124% /2035 (5) 250,256 240,199 0.08 Fannie Mae REMICS 2012-131 PS WaMu Mortgage Pass Through Certificates 5.485% /2041 (5) 2,141,520 439,341 0.15 2006-AR8 1A1 2.402% /2046 (5) 249,785 217,478 0.08 GNMA 2013-41 IB 4% /2043 1,702,960 433,497 0.15 Lehman Mortgage Trust 2006-1 3A5 JP Morgan Alternative Loan Trust 2006-S4 5.5% /2036 215,034 212,422 0.07 A4 step cpn 5.96% /2036 515,000 431,550 0.15 Wells Fargo Mortgage Backed Securities Countrywide Alternative Loan Trust 2005-J5 2005-AR8 2A1 Trust 2.659% /2035 (5) 199,503 202,801 0.07 5.5% /2035 483,088 421,237 0.15 Fannie Mae REMICS 2013-12 SI RFMSI Series 2007-S4 A5 Trust 6% /2037 (5) 465,976 420,082 0.15 5.985% /2043 (5) 884,236 201,846 0.07 Countrywide Alternative Loan Trust 2005-21 JP Morgan Mortgage Acquisition Trust CB A3 5.25% /2035 483,057 417,739 0.15 2006-CH2 AF4 step cpn 5.763% /2036 250,000 200,884 0.07 STARM Mortgage Loan Trust 2007-4 3A1 Wells Fargo Mortgage Backed Securities 5.593% /2037 (5) 437,368 406,865 0.14 2006-AR10 5A6 Trust 2.612% /2036 (5) 208,277 200,126 0.07

The accompanying notes are an integral part of these financial statements. 139 Morgan Stanley Investment Funds 31 December 2013

Global Mortgage Securities Fund

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 140

Global Mortgage Securities Fund

DERIVATIVES

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in US dollars.

Financial Futures Contracts

Net unrealised gain/(loss) as at Maturity Number of Notional 31 December % of net Description date contracts commitments Counterparty assets 2013

US 5yr T-note Future 03/2014 594 70,871,625 Goldman Sachs (918,919) (0.32) US 10yr T-note Future 03/2014 148 18,213,250 Goldman Sachs (296,710) (0.10) US Long Bond Future 03/2014 46 5,921,063 Goldman Sachs (82,656) (0.03)

Unrealised Loss on Financial Futures Contracts (1,298,285) (0.45)

Net Unrealised Loss on Financial Futures Contracts 95,005,938 (1,298,285) (0.45)

Cash of USD 2,378,695 held as collateral by Goldman Sachs in relation to financial futures contracts.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

EUR Hedged Share Class 10/01/2014 148,330,441 EUR 203,962,958 USD J.P. Morgan 369,635 0.13 10/01/2014 471,876 USD 342,052 EUR J.P. Morgan 683 0.00

Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 370,318 0.13

EUR Hedged Share Class 10/01/2014 440,402 USD 320,835 EUR J.P. Morgan (1,566) 0.00

Unrealised Loss on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts (1,566) 0.00

Net Unrealised Gain on Forward Foreign Currency Exchange Contracts 368,752 0.13

Total Derivatives (929,533) (0.32)

Other Assets less Liabilities 9,948,635 3.45

Total Net Asset Value 287,929,869 100.00

(5) Variable coupon rates are those quoted as of 31 December 2013.

The accompanying notes are an integral part of these financial statements. 141 Morgan Stanley Investment Funds 31 December 2013

Global Premier Credit Fund

Investment aim Statement of investments

To provide an attractive rate of return, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. measured in US dollars, primarily through As at 31 December 2013, expressed in US dollars. investment in a concentrated portfolio of fixed Nominal in US dollars Market % of net income securities of high quality issued by Investments unless specified value assets corporations and non-government related Corporate Bonds United States of America issuers organised or operating in both Procter & Gamble sr unsecur 4.875% /2027 (EUR) 100,000 164,711 1.58 developed and emerging markets and Google sr unsecur 2.125% /2016 150,000 155,008 1.48 Philip Morris International sr unsecur denominated in global currencies. SerEMTN 5.75% /2016 (EUR) 100,000 152,758 1.46 PNC Funding bnk gtd 3.3% /2022 150,000 147,275 1.41 McDonald’s sr unsecur SerMTN 2.625% /2022 150,000 143,027 1.37 National Grid Holdings unsecur SerEMTN 1.75% /2018 (EUR) 100,000 139,005 1.33 Oracle sr unsecur SerEMTN 2.25% /2021 (EUR) 100,000 138,727 1.33 JPMorgan Chase & Co sr unsecur SerEMTN 2.875% /2028 (EUR) 100,000 133,040 1.27 Wal-Mart Stores sr unsecur 6.5% /2037 100,000 125,984 1.21 Wells Fargo & Co sr unsecur SerMTN 3.5% /2022 125,000 125,309 1.20 International Business Machines sr unsecur 7.625% /2018 100,000 125,059 1.20 Coca-Cola sr unsecur 1.65% /2018 125,000 124,719 1.19 General Mills sr unsecur 3.15% /2021 125,000 122,330 1.17 Virginia Electric and Power sr unsecur 2.95% /2022 125,000 121,414 1.16 Norfolk Southern sr unsecur 4.837% /2041 125,000 120,434 1.15 CSX sr unsecur 4.75% /2042 125,000 120,107 1.15 Target sr unsecur 2.9% /2022 125,000 119,965 1.15 PepsiCo sr unsecur 2.75% /2022 125,000 118,588 1.14 Verizon Communications sr unsecur 6.55% /2043 100,000 117,983 1.13 Pacific Gas & Electric sr unsecur 4.45% /2042 125,000 117,902 1.13 Enterprise Products Operating co gtd SerN 6.5% /2019 100,000 117,572 1.12 Praxair sr unsecur 2.7% /2023 125,000 115,834 1.11 Colgate-Palmolive sr unsecur SerMTN 2.3% /2022 125,000 115,381 1.10 Burlington Northern Santa Fe sr unsecur 6.15% /2037 100,000 114,766 1.10 Apple sr unsecur 2.4% /2023 125,000 112,479 1.08 AT&T sr unsecur 6.3% /2038 100,000 111,226 1.06 Home Depot sr unsecur 5.4% /2016 100,000 109,909 1.05 NBCUniversal Media co gtd 4.375% /2021 100,000 106,075 1.01 Travelers sr unsecur 3.9% /2020 100,000 105,420 1.01 CVS Caremark sr unsecur 4.125% /2021 100,000 104,143 1.00 United Parcel Service sr unsecur 3.125% /2021 100,000 101,181 0.97 Johnson & Johnson sr unsecur 4.5% /2040 100,000 100,029 0.96 State Street sr unsecur 3.7% /2023 100,000 99,253 0.95 American Express sr unsecur 8.125% /2019 75,000 96,145 0.92 MetLife sr unsecur 7.717% /2019 75,000 93,178 0.89 Hershey sr unsecur 2.625% /2023 100,000 92,474 0.88 Intel sr unsecur 2.7% /2022 100,000 92,445 0.88 Simon Property Group sr unsecur 2.75% /2023 100,000 91,806 0.88 Union Pacific sr unsecur 4.3% /2042 100,000 91,132 0.87 Microsoft sr unsecur 2.375% /2023 100,000 91,127 0.87 NIKE sr unsecur 2.25% /2023 100,000 89,989 0.86 General Electric Capital sr unsecur SerMTN 5.875% /2038 75,000 85,716 0.82 Time Warner co gtd 4.75% /2021 75,000 80,625 0.77 Bristol-Myers Squibb sr unsecur 3.25% /2042 100,000 78,504 0.75 Pfizer sr unsecur SerINTL 4.55% /2017 (EUR) 50,000 76,819 0.74 Merck & Co sr unsecur 1.1% /2018 75,000 73,142 0.70 US Bancorp subord SerMTN 2.95% /2022 75,000 69,819 0.67 3M sr unsecur SerMTN 2% /2022 75,000 68,793 0.66 Verizon Communications sr unsecur 6.35% /2019 50,000 58,886 0.56

Global Premier Credit Fund

United States of America (continued) Canada Amazon.com sr unsecur 1.2% /2017 50,000 49,344 0.47 Royal Bank of Canada sr unsecur SerGMTN Omnicom Group co gtd 3.625% /2022 50,000 48,609 0.47 2.2% /2018 100,000 100,402 0.96 Chevron sr unsecur 3.191% /2023 50,000 48,193 0.46 Toronto-Dominion Bank sr unsecur SerMTN Merck & Co sr unsecur 2.8% /2023 50,000 46,504 0.44 1.4% /2018 75,000 73,173 0.70 Verizon Communications sr unsecur Toronto-Dominion Bank sr unsecur SerMTN 3.85% /2042 25,000 20,535 0.20 2.625% /2018 50,000 51,121 0.49

Total for United States of America 53.49 Total for Canada 2.15

United Kingdom Taiwan Imperial Tobacco Finance co gtd SerEMTN TSMC Global co gtd Ser144A priv plmt 7.75% /2019 (GBP) 75,000 150,093 1.44 1.625% /2018 (British Virgin Islands) (2) 200,000 192,216 1.84 BAT International Finance co gtd SerEMTN 3.625% /2021 (EUR) 100,000 148,806 1.42 Total for Taiwan 1.84 Standard Chartered sr unsecur SerEMTN 1.75% /2017 (EUR) 100,000 138,782 1.33 China Rolls-Royce co gtd SerEMTN 2.125% /2021 (EUR) 100,000 135,904 1.30 Want Want China Finance co gtd Ser144A HSBC Holdings sr unsecur 4% /2022 125,000 128,215 1.23 priv plmt 1.875% /2018 (Cayman Islands) (2) 200,000 191,267 1.83 GlaxoSmithKline Capital co gtd 2.85% /2022 125,000 118,976 1.14 Barclays Bank sr unsecur 5.125% /2020 100,000 111,020 1.06 Diageo Capital co gtd 1.5% /2017 100,000 100,109 0.96 Total for China 1.83 GlaxoSmithKline Capital co gtd 4.2% /2043 (United States of America) (2) 75,000 69,246 0.66 Norway DNB Bank sr unsecur RegS 4.375% /2021 (EUR) 100,000 155,450 1.49 Total for United Kingdom 10.54 Total for Norway 1.49 France Danone sr unsecur SerEMTN 1.25% /2018 (EUR) 100,000 136,828 1.31 Australia Sanofi sr unsecur 4% /2021 125,000 131,255 1.25 Commonwealth Bank of Australia sr unsecur Orange sr unsecur SerEMTN 5% /2016 (GBP) 70,000 123,984 1.19 SerEMTN 4.25% /2018 (EUR) 100,000 153,098 1.46 GDF Suez sr unsecur SerEMTN 6.125% /2021 (GBP) 50,000 97,311 0.93 Total for Australia 1.46 BNP Paribas bnk gtd SerBKNT 5% /2021 75,000 82,372 0.79 LVMH Moet Hennessy Louis Vuitton sr unsecur SerEMTN 1.75% /2020 (EUR) 50,000 67,524 0.65 Sweden Nordea Bank sr unsecur SerEMTN Total for France 6.12 4% /2019 (EUR) 100,000 152,773 1.46

Total for Sweden 1.46 Germany RWE Finance co gtd SerEMTN 6.625% /2019 (Netherlands) (2) (EUR) 100,000 167,865 1.61 Belgium Siemens Financieringsmaatschappij co gtd Anheuser-Busch InBev co gtd SerEMTN SerEMTN 1.75% /2021 (Netherlands) (2) (EUR) 100,000 134,093 1.28 8.625% /2017 (EUR) 75,000 126,667 1.21 Linde Finance co gtd SerEMTN 5.875% /2023 (Netherlands) (2) (GBP) 50,000 96,973 0.93 Total for Belgium 1.21 SAP sr unsecur SerEMTN 2.125% /2019 (EUR) 50,000 69,134 0.66 Netherlands Total for Germany 4.48 Unilever Capital co gtd 4.25% /2021 (United States of America) (2) 100,000 107,446 1.03 Switzerland Nestle Finance International co gtd SerEMTN Total for Netherlands 1.03 1.5% /2019 (EUR) 100,000 138,321 1.32 Roche Holdings co gtd SerEMTN 6.5% /2021 Total for Corporate Bonds 93.63 (United States of America) (2) (EUR) 75,000 132,913 1.27 Novartis Capital co gtd 4.4% /2020 Total Investment Securities 9,785,291 93.63 (United States of America) (2) 100,000 109,365 1.05

Total for Switzerland 3.64

The accompanying notes are an integral part of these financial statements. 143 Morgan Stanley Investment Funds 31 December 2013

Global Premier Credit Fund

DERIVATIVES Interest Rate Swap Contracts

Over-the-counter (OTC) and exchange traded derivatives Net unrealised gain/(loss) as at as at 31 December 2013, expressed in US dollars. Notional Maturity 31 December % of net Description Currency amount date Counterparty 2013 assets Financial Futures Contracts Pay fixed rate 2.044% Net unrealised Receive floating rate Royal Bank gain/(loss) as at USD LIBOR 3 months USD 1,100,000 14/05/2023 of Scotland 78,235 0.75 Maturity Number of Notional 31 December % of net Description date contracts commitments Counterparty assets 2013 Pay fixed rate 3.030% Receive floating rate Royal Bank Euro Bund Future 03/2014 (3) (575,145) Goldman Sachs 9,712 0.09 USD LIBOR 3 months USD 510,000 14/05/2043 of Scotland 74,013 0.71 US 5yr T-note Future 03/2014 (3) (357,938) Goldman Sachs 4,687 0.05 US 10yr T-note Future 03/2014 (1) (123,062) Goldman Sachs 2,321 0.02 Unrealised Gain on Interest Rate Swap Contracts 152,248 1.46 US Long Bond Future 03/2014 (1) (128,719) Goldman Sachs 1,797 0.02

Pay fixed rate 0.478% Unrealised Gain on Financial Futures Contracts 18,517 0.18 Receive floating rate USD LIBOR 3 months USD 1,322,000 01/08/2015 Barclays Capital (4,142) (0.04) Canada 10 Year Bond Future 03/2014 1 119,372 Goldman Sachs (998) (0.01) Unrealised Loss on Interest Rate Swap Contracts (4,142) (0.04) Long Gilt Future 03/2014 2 352,628 Goldman Sachs (7,082) (0.07) US 2yr T-note Future 03/2014 4 879,125 Goldman Sachs (1,725) (0.02) Net Unrealised Gain on Interest Rate Swap Contracts 148,106 1.42 US Treasury Ultra Bond Future 03/2014 4 548,625 Goldman Sachs (4,841) (0.04) Total Derivatives 150,534 1.45

Unrealised Loss on Financial Futures Contracts (14,646) (0.14) Other Assets less Liabilities 515,688 4.92

Net Unrealised Gain Total Net Asset Value 10,451,513 100.00 on Financial Futures Contracts 714,886 3,871 0.04

Cash of EUR 47,392 held as collateral by the Goldman Sachs in relation to financial futures contracts. (2) The country in brackets represents the country of incorporation of this security.

Forward Foreign Currency Exchange Contracts

Unrealised Maturity Amount Amount gain/(loss) % of net date bought Ccy sold Ccy Counterparty USD assets

09/01/2014 155,000 CAD 145,771 USD RBC 94 0.00 14/01/2014 135,068 USD 150,000 AUD Commonwealth Bank 955 0.01 16/01/2014 330,000 NOK 53,418 USD Deutsche Bank 880 0.01 23/01/2014 249,000 GBP 406,651 USD RBC 5,291 0.05

Unrealised Gain on Forward Foreign Currency Exchange Contracts 7,220 0.07

EUR Hedged Share Class 10/01/2014 271,534 EUR 373,378 USD J.P. Morgan 673 0.01

Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 673 0.01

Total Unrealised Gain on Forward Foreign Currency Exchange Contracts 7,893 0.08

16/01/2014 37,338 EUR 315,000 NOK Deutsche Bank (395) 0.00 28/01/2014 21,700,000 JPY 210,858 USD State Street (4,003) (0.04) 10/01/2014 325,673 USD 240,000 EUR Westpac Bank (4,938) (0.05)

Unrealised Loss on Forward Foreign Currency Exchange Contracts (9,336) (0.09)

Net Unrealised Loss on Forward Foreign Currency Exchange Contracts (1,443) (0.01)

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 144

Short Maturity Euro Bond Fund

Investment aim Statement of investments

Total for France 9.55

United States of America Citigroup sr unsecur SerEMTN 4% /2015 4,000,000 4,229,562 0.76 Merrill Lynch & Co sr unsecur SerEMTN 0.53% 30/05/2014 (5) 4,000,000 4,000,200 0.72 Philip Morris International sr unsecur SerEMTN 5.875% /2015 3,500,000 3,800,370 0.68 Goldman Sachs Group sr unsecur RegS 4.5% /2016 3,500,000 3,761,690 0.68 Mondelez International sr unsecur 1.125% /2017 3,750,000 3,745,013 0.67 Bank of America sr unsecur SerEMTN 4.625% /2017 2,600,000 2,875,547 0.52 Bank of America sr unsecur SerEMTN 1.875% /2019 2,750,000 2,732,550 0.49 JPMorgan Chase & Co sr unsecur SerEMTN 3.75% /2016 2,250,000 2,400,495 0.43 Caterpillar International Finance co gtd SerEMTN 0.517% /2016 (Ireland) (2) (5) 2,000,000 2,002,290 0.36

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 145 Morgan Stanley Investment Funds 31 December 2013

Short Maturity Euro Bond Fund

Statement of investments (continued) Nominal in Euro unless Market % of net Investments specified value assets Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. Corporate Bonds (continued) As at 31 December 2013, expressed in Euro. Spain Instituto de Credito Oficial govt gtd Nominal in SerGMTN 2.375% /2015 5,800,000 5,885,840 1.06 Euro unless Market % of net Fondo de Reestructuracion Ordenada Bancaria Investments specified value assets govt gtd 4.5% 03/02/2014 3,800,000 3,810,640 0.69 Corporate Bonds (continued) Gas Natural Capital Markets co gtd Ser8 3.375% /2015 (1) 3,000,000 3,076,842 0.55 CaixaBank sr unsecur SerEMTN 2.5% /2017 3,000,000 3,048,692 0.55 United States of America (continued) Banco Popular Espanol covered SerEMTN Wells Fargo & Co sr unsecur SerEMTN 3.5% /2017 2,900,000 3,010,447 0.54 4.375% /2016 1,750,000 1,900,532 0.34 Santander Consumer Finance sr unsecur SES Global Americas Holdings co gtd 1.625% /2015 2,900,000 2,915,715 0.52 SerEMTN 4.875% 09/07/2014 1,800,000 1,838,214 0.33 Mapfre sr unsecur 5.125% /2015 2,700,000 2,867,643 0.51 JPMorgan Chase & Co sr unsecur SerEMTN Telefonica Emisiones co gtd SerEMTN 6.125% 01/04/2014 1,800,000 1,823,472 0.33 4.967% /2016 2,500,000 2,689,124 0.48 John Deere Bank co gtd SerEMTN BBVA Senior Finance bnk gtd SerGMTN 3.25% /2016 (Luxembourg) (2) 1,600,000 1,692,704 0.31 3.25% /2016 2,500,000 2,596,911 0.47 CRH Finance co gtd SerEMTN BBVA Senior Finance bnk gtd SerEMTN 7.375% 28/05/2014 (Ireland) (2) 1,650,000 1,692,389 0.31 3.625% 03/10/2014 2,500,000 2,549,700 0.46 PACCAR Financial Europe sr unsecur Amadeus Capital Markets co gtd SerEMTN SerEMTN 3% 19/05/2014 (Netherlands) (2) 1,500,000 1,513,928 0.27 4.875% /2016 1,775,000 1,932,414 0.35 National Grid Holdings unsecur SerEMTN Ferrovial Emisiones co gtd RegS 3.375% /2018 1,750,000 1,825,612 0.33 1.75% /2018 1,500,000 1,513,600 0.27 Prosegur Cia de Seguridad sr unsecur GE Capital European Funding co gtd SerEMTN 2.75% /2018 (1) 700,000 711,154 0.13 1.25% /2015 (Ireland) (2) 1,500,000 1,511,168 0.27 SES Global Americas Holdings co gtd SerEMTN Total for Spain 6.64 1.875% /2018 1,000,000 994,116 0.18 PACCAR Financial Europe sr unsecur SerEMTN 0.672% /2016 (Netherlands) (2) (5) 900,000 900,320 0.16 Italy Intesa Sanpaolo sr unsecur SerEMTN Total for United States of America 8.08 3% /2019 (1) 3,200,000 3,228,317 0.58 FGA Capital Ireland co gtd SerEMTN 5.25% 28/02/2014 (Ireland) (2) 3,000,000 3,020,865 0.54 United Kingdom UniCredit sr unsecur SerEMTN Nationwide Building Society sr unsecur 5.25% 14/01/2014 3,000,000 3,003,030 0.54 SerEMTN 3.75% /2015 6,000,000 6,184,698 1.11 Banco Popolare covered RegS 4.75% /2016 2,300,000 2,415,656 0.43 BP Capital Markets co gtd SerEMTN Banca Monte dei Paschi di Siena covered 3.472% /2016 5,300,000 5,625,309 1.01 SerEMTN 4.875% /2016 2,200,000 2,318,184 0.42 Abbey National Treasury Services covered Snam sr unsecur SerEMTN 4.375% /2016 1,700,000 1,831,049 0.33 SerEMTN 3.625% /2016 4,000,000 4,316,170 0.78 Luxottica Group co gtd 4% /2015 1,600,000 1,689,850 0.30 Yorkshire Building Society covered Enel Finance International co gtd SerGMTN SerEMTN 3.25% /2015 3,000,000 3,136,892 0.56 4.625% /2015 (Netherlands) (2) 1,600,000 1,680,701 0.30 Standard Chartered sr unsecur 3.875% /2016 2,800,000 3,009,887 0.54 Enel Finance International co gtd SerEMTN HSBC Bank sr unsecur RegS 3.25% /2015 2,850,000 2,932,232 0.53 4.125% /2017 (Netherlands) (1) (2) 1,500,000 1,612,982 0.29 Lloyds Bank sr unsecur SerEMTN 3.75% /2015 2,750,000 2,884,404 0.52 UniCredit sr unsecur SerEMTN 2.25% /2016 1,500,000 1,516,005 0.27 British American Tobacco Holdings co gtd Banca Monte dei Paschi di Siena sr unsecur SerEMTN 4.375% 15/09/2014 (Netherlands) (2) 2,800,000 2,874,690 0.52 SerEMTN 4.5% 07/03/2014 1,200,000 1,201,860 0.22 FCE Bank sr unsecur SerEMTN Intesa Sanpaolo Vita subord 5.35% /2018 1,000,000 1,056,330 0.19 9.375% 17/01/2014 2,750,000 2,757,068 0.50 Telecom Italia sr unsecur SerEMTN Anglo American Capital co gtd SerEMTN 4.625% /2015 1,000,000 1,036,990 0.19 4.375% /2016 2,000,000 2,165,934 0.39 Snam sr unsecur SerEMTN 2.375% /2017 650,000 669,052 0.12 Royal Bank of Scotland Group sr unsecur Snam sr unsecur SerEMTN 2% /2015 650,000 661,504 0.12 SerEMTN 1.5% /2016 (1) 1,850,000 1,859,354 0.33 Telecom Italia sr unsecur SerEMTN 4.5% /2017 500,000 523,293 0.09 Barclays Bank sr unsecur SerEMTN Telecom Italia sr unsecur RegS 5.125% /2016 400,000 422,190 0.08 4.125% /2016 1,700,000 1,817,073 0.33 Telecom Italia sr unsecur SerEMTN 7% /2017 350,000 391,906 0.07 Co-operative Bank sr unsecur SerEMTN 2.375% /2015 1,500,000 1,457,048 0.26 Total for Italy 5.08 SABMiller sr unsecur SerEMTN 4.5% /2015 1,100,000 1,144,036 0.21 Royal Bank of Scotland sr unsecur SerEMTN 5.75% 21/05/2014 1,100,000 1,121,417 0.20 Netherlands National Grid USA sr unsecur SerEMTN Achmea Hypotheekbank sr unsecur SerEMTN 3.25% /2015 (United States of America) (2) 600,000 620,930 0.11 2% /2018 3,400,000 3,393,132 0.61 Rentokil Initial co gtd SerEMTN Cooperatieve Centrale Raiffeisen-Boerenleenbank 4.625% 27/03/2014 450,000 453,762 0.08 sr unsecur SerGMTN 0.567% /2016 (5) 3,000,000 3,000,195 0.54 Royal Bank of Scotland sr unsecur SerEMTN Cooperatieve Centrale Raiffeisen-Boerenleenbank 5.375% /2019 200,000 231,143 0.04 sr unsecur SerEMTN 3.875% /2016 2,350,000 2,507,068 0.45 Standard Chartered sr unsecur SerEMTN ABN AMRO Bank sr unsecur SerEMTN 1.75% /2017 (1) 225,000 226,675 0.04 4.25% /2016 2,000,000 2,148,240 0.39 LeasePlan sr unsecur SerEMTN 2.375% /2019 1,000,000 1,004,864 0.18 Total for United Kingdom 8.06 Fortis Bank Nederland sr unsecur SerEMTN 4.625% 09/07/2014 900,000 918,953 0.16 ING Bank sr unsecur SerEMTN 2.125% /2015 900,000 917,981 0.17

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 146

Short Maturity Euro Bond Fund

Netherlands (continued) Total for Switzerland 1.30 LeasePlan sr unsecur SerEMTN 4.125% /2015 800,000 826,867 0.15 Nederlandse Gasunie sr unsecur SerEMTN 0.875% /2015 625,000 627,709 0.11 Sweden Allianz Finance II co gtd SerEMTN Nordea Bank sr unsecur RegS 3.625% /2016 2,500,000 2,646,725 0.48 1.375% /2018 (1) 600,000 602,186 0.11 Swedbank sr unsecur SerEMTN 3.375% /2017 1,000,000 1,066,666 0.19 Paccar Financial Europe sr unsecur SerEMTN Swedbank sr unsecur SerGMTN 2.375% /2016 1,000,000 1,033,001 0.18 1.375% /2015 550,000 555,764 0.10 Svenska Handelsbanken sr unsecur SerEMTN 1.5% /2015 1,000,000 1,013,843 0.18 Total for Netherlands 2.97 Total for Sweden 1.03

Germany RWE Finance co gtd SerEMTN 5.125% /2018 Belgium (Netherlands) (1) (2) 4,100,000 4,708,274 0.85 Anheuser-Busch InBev co gtd SerEMTN BMW Finance co gtd SerEMTN 0.459% /2016 8.625% /2017 2,500,000 3,065,009 0.55 (Netherlands) (2) (5) 2,800,000 2,801,008 0.50 Elia System Operator sr unsecur Deutsche Annington Finance co gtd 5.625% /2016 1,550,000 1,718,786 0.31 2.125% /2016 (Netherlands) (2) 2,700,000 2,746,306 0.50 O2 Telefonica Deutschland Finanzierungs Total for Belgium 0.86 co gtd 1.875% /2018 1,625,000 1,619,373 0.29 SAP sr unsecur SerEMTN 1% /2015 1,375,000 1,381,358 0.25 United Arab Emirates Volkswagen International Finance co gtd IPIC GMTN co gtd RegS 4.875% /2016 SerEMTN 3.5% /2015 (Netherlands) (2) 1,200,000 1,236,734 0.22 (Cayman Islands) (2) 1,500,000 1,628,531 0.29 MAN sr unsecur SerEMTN 1% /2015 900,000 906,035 0.16 Xstrata Finance Dubai co gtd SerEMTN 1.75% /2016 2,450,000 2,473,292 0.45 Total for Germany 2.77 Total for United Arab Emirates 0.74 Australia Commonwealth Bank of Australia covered South Korea SerEMTN 2.625% /2017 3,150,000 3,323,826 0.60 Korea Gas sr unsecur SerGMTN 2.375% /2019 2,550,000 2,563,796 0.46 Westpac Banking sr unsecur SerEMTN Industrial Bank of Korea sr unsecur SerGMTN 0.544% /2016 (5) 3,000,000 2,998,608 0.54 2% /2018 1,400,000 1,387,197 0.26 National Australia Bank sr unsecur SerEMTN 0.524% /2016 (5) 3,000,000 2,996,409 0.54 Total for South Korea 0.72 Macquarie Bank sr unsecur SerEMTN 2.5% /2018 1,700,000 1,741,906 0.31 Australia & New Zealand Banking Group Czech Republic sr unsecur SerEMTN 0.555% /2016 (5) 1,500,000 1,499,003 0.27 CEZ sr unsecur 3.625% /2016 2,000,000 2,126,122 0.38 Commonwealth Bank of Australia sr unsecur SerEMTN 0.554% /2016 (5) 1,200,000 1,198,615 0.21 Total for Czech Republic 0.38

Total for Australia 2.47 Ireland Allied Irish Banks sr unsecur SerEMTN New Zealand 2.875% /2016 1,800,000 1,795,734 0.32 Westpac Securities covered SerEMTN 3.5% /2016 4,200,000 4,487,496 0.81 Total for Ireland 0.32 ANZ New Zealand International bnk gtd SerEMTN 0.709% /2016 (5) 4,100,000 4,100,730 0.74 BNZ International Funding covered SerEMTN Russia 2.375% /2015 1,900,000 1,948,496 0.35 Gazprom Via Gaz Capital sr unsecur SerEMTN BNZ International Funding bnk gtd SerGMTN 3.7% /2018 (Luxembourg) (1) (2) 1,500,000 1,554,800 0.28 1.25% /2018 (1) 1,050,000 1,032,875 0.18 Total for Russia 0.28 Total for New Zealand 2.08 Luxembourg Norway ITW Finance Europe co gtd 5.25% 01/10/2014 1,200,000 1,241,651 0.22 DNB Boligkreditt covered SerEMTN 2.5% /2016 4,250,000 4,460,757 0.80 Statkraft sr unsecur SerEMTN 5.5% /2015 2,750,000 2,915,645 0.53 Total for Luxembourg 0.22 Sparebank 1 SR Bank sr unsecur 3.625% /2015 2,700,000 2,794,991 0.50

Total for Norway 1.83

The accompanying notes are an integral part of these financial statements. 147 Morgan Stanley Investment Funds 31 December 2013

Short Maturity Euro Bond Fund

Corporate Bonds (continued) Poland Government of Poland sr unsecur India 5.875% 03/02/2014 3,000,000 3,013,935 0.54 Bharti Airtel International co gtd 4% /2018 (Netherlands) (2) 1,000,000 1,005,865 0.18 Total for Poland 0.54

Total for India 0.18 Total for Government Bonds 36.75

Finland Supra-National Bonds Pohjola Bank sr unsecur SerEMTN 1.25% /2018 460,000 454,639 0.08 European Investment Bank sr unsecur Total for Finland 0.08 SerEMTN 0.277% /2016 (5) 6,000,000 6,010,320 1.08 European Union sr unsecur SerEMTN 2.5% /2015 5,500,000 5,737,270 1.03 Poland European Union nts SerEMTN 2.75% /2016 5,000,000 5,280,868 0.95 TPSA Eurofinance France co gtd SerEMTN 6% 22/05/2014 (France) (2) 250,000 254,915 0.04 Total for Supra-National Bonds 3.06 Total for Poland 0.04 Mutual Fund Total for Corporate Bonds 55.68 Morgan Stanley Liquidity Funds - Government Bonds Euro Liquidity Fund MS Reserve EUR Dist. (Luxembourg) (2) (4) 9,701,598 9,701,598 1.74

Italy Total for Mutual Fund 1.74 Italy Buoni Poliennali Del Tesoro 3.75% /2015 21,800,000 22,664,850 4.07 Italy Buoni Poliennali Del Tesoro 4.25% /2015 21,800,000 22,569,649 4.06 Italy Buoni Poliennali Del Tesoro 3% /2015 19,100,000 19,581,854 3.52 Mortgage and Asset Backed Securities Italy Buoni Poliennali Del Tesoro 3% /2015 13,000,000 13,348,348 2.40 Italy Buoni Poliennali Del Tesoro 4.5% /2015 10,450,000 10,974,668 1.97 Germany Italy Buoni Poliennali Del Tesoro German Residential Funding 1.377% /2024 (5) 2,169,955 2,197,168 0.39 4.25% 01/08/2014 9,000,000 9,173,249 1.65 Total for Germany 0.39 Total for Italy 17.67

United Kingdom Spain Taurus 2013-GMF1 A 1.268% /2024 (5) 1,293,420 1,300,856 0.24 Government of Spain 4% /2015 14,900,000 15,525,681 2.79 Granite Master Issuer 2006-4 A7 Government of Spain 3% /2015 10,200,000 10,444,300 1.88 0.465% /2054 (5) 386,488 383,473 0.07 Government of Spain sr unsecur 5.5% /2017 4,300,000 4,774,875 0.86 Leek Finance 17X A2C 0.573% /2037 (5) 208,512 216,884 0.04 Government of Spain 4.25% /2016 4,300,000 4,570,694 0.82 Government of Spain 3.3% 31/10/2014 4,000,000 4,075,400 0.73 Total for United Kingdom 0.35

Total for Spain 7.08 Total for Mortgage and Asset Backed Securities 0.74

Germany Total Investment Securities 545,013,195 97.97 Bundesrepublik Deutschland Ser05 3.5% /2016 (1) 16,000,000 17,049,984 3.07 Bundesrepublik Deutschland Ser160 2.75% /2016 11,000,000 11,592,565 2.08

Total for Germany 5.15

France Government of France OAT 3% /2015 17,500,000 18,370,091 3.30 French Treasury Note BTAN nts 2% /2015 7,000,000 7,188,920 1.29

Total for France 4.59

Belgium Kingdom of Belgium Ser59 2.75% /2016 3,000,000 3,156,353 0.57 Kingdom of Belgium sr unsecur Ser56 3.5% /20153,000,000 3,120,947 0.56

Total for Belgium 1.13

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 148

Short Maturity Euro Bond Fund

DERIVATIVES

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in Euro.

Financial Futures Contracts

Net unrealised gain/(loss) as at Maturity Number of Notional 31 December % of net Description date contracts commitments Counterparty 2013 assets

Euro BOBL Future 03/2014 (713) (88,718,590) Goldman Sachs 937,910 0.17

Unrealised Gain on Financial Futures Contracts 937,910 0.17

Euro SCHATZ Future 03/2014 1,645 181,443,500 Goldman Sachs (378,880) (0.07)

Unrealised Loss on Financial Futures Contracts (378,880) (0.07)

Net Unrealised Gain on Financial Futures Contracts 92,724,910 559,030 0.10

Cash of EUR 617,563 held as collateral by Goldman Sachs in relation to financial futures contracts.

Total Derivatives 559,030 0.10

Other Assets less Liabilities 10,720,386 1.93

Total Net Asset Value 556,292,611 100.00

The accompanying notes are an integral part of these financial statements. 149 Morgan Stanley Investment Funds 31 December 2013

Euro Liquidity Fund

Investment aim Statement of investments

To provide liquidity and high current income, Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. to the extent consistent with the preservation As at 31 December 2013, expressed in Euro. of capital, primarily by investing in high quality Nominal in Euro unless Market % of net short-term transferable debt securities that Investments specified value assets are denominated in Euro, provided that, Commercial Paper

Germany at the time of acquisition, their initial or DZ Privatbank 0% 06/01/2014 5,000,000 4,999,939 3.28 FMS Wertmanagement 0% 20/01/2014 5,000,000 4,999,800 3.28 residual maturity does not exceed 397 days. BMW Malta Finance 0% 24/02/2014 4,000,000 3,999,176 2.63 Deutsche Bank 0% 28/02/2014 4,000,000 3,998,417 2.63 The Fund may also hold up to 49% of its net Landeskredit Bank 0% 06/01/2014 2,000,000 1,999,967 1.31 assets in cash and cash equivalents. Total for Germany 13.13

Japan Toyota Motor 0% 13/01/2014 5,000,000 4,999,710 3.28 Sumitomo Mitsui Banking 0% 02/04/2014 4,000,000 3,997,502 2.63

Total for Japan 5.91

Sweden Nordea Bank 0% 06/02/2014 4,000,000 3,999,456 2.63 Skandinaviska Enskilda Banken 0% 24/02/2014 4,000,000 3,999,235 2.63

Total for Sweden 5.26

United States of America PACCAR Financial Europe 0% 10/01/2014 4,000,000 3,999,893 2.63 GE Capital European Funding 0% 18/03/2014 1,000,000 999,584 0.65

Total for United States of America 3.28

Australia Macquarie Bank 0% 20/01/2014 4,000,000 3,999,360 2.63

Total for Australia 2.63

France Banque Federative du Credit Mutuel 0% 03/03/2014 4,000,000 3,998,534 2.63

Total for France 2.63

Singapore DBS Bank 0% 31/01/2014 3,000,000 2,999,662 1.97

Total for Singapore 1.97

Total for Commercial Paper 34.81

Certificates of Deposit

Canada Bank of Montreal 0.17% 13/01/2014 5,000,000 5,000,000 3.28 Toronto-Dominion Bank 0% 15/01/2014 4,000,000 3,999,855 2.63

Total for Canada 5.91

France Société Générale 0% 17/01/2014 4,000,000 3,999,767 2.63 Banque Fédérative du Crédit Mutuel 0% 07/02/2014 3,000,000 2,999,460 1.97

Total for France 4.60

Euro Liquidity Fund

Total for Norway 2.63 Total Net Asset Value 152,237,521 100.00

Japan (2) The country in brackets represents the country of incorporation of this security. Mizuho Corporate Bank 0% 10/01/2014 2,000,000 1,999,924 1.32 (4) Managed by an affiliate of the Investment Adviser. Mizuho Corporate Bank 0% 07/02/2014 2,000,000 1,999,670 1.31 (5) Variable coupon rates are those quoted as of 31 December 2013.

Total for Japan 2.63

Singapore Oversea-Chinese Banking 0% 07/01/2014 3,000,000 2,999,946 1.97

Total for Singapore 1.97

Sweden Svenska Handelsbanken 0.18% 09/01/2014 1,000,000 1,000,012 0.66

Total for Sweden 0.66

Total for Certificates of Deposit 18.40

Floating Rate Notes

Netherlands ABN AMRO Bank sr unsecur SerEMTN 1.727% 10/01/2014 (5) 4,000,000 4,001,347 2.63 Cooperatieve Centrale Raiffeisen-Boerenleenbank sr unsecur SerEMTN 0.305% 17/04/2014 (5) 2,500,000 2,500,167 1.64 Cooperatieve Centrale Raiffeisen-Boerenleenbank sr unsecur SerEMTN 0.927% 13/01/2014 (5) 2,000,000 2,000,477 1.31

Total for Netherlands 5.58

Germany FMS Wertmanagement govt gtd SerEMTN 0.284% 20/01/2014 (5) 2,000,000 2,000,173 1.31

Total for Germany 1.31

Total for Floating Rate Notes 6.89

Mutual Fund

Morgan Stanley Liquidity Funds - Euro Liquidity Fund MS Reserve EUR Dist. (Luxembourg) (2) (4) 7,289,205 7,289,205 4.79

Total for Mutual Fund 4.79

The accompanying notes are an integral part of these financial statements. 151 Morgan Stanley Investment Funds 31 December 2013

US Dollar Liquidity Fund

Investment aim* Statement of investments

The US Dollar Liquidity Fund (the “Feeder Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. Fund”) is a feeder fund of the Morgan Stanley As at 31 December 2013, expressed in US dollars.

Liquidity Funds - US Dollar Liquidity Fund (the Market % of net Investments Holdings value assets “Master Fund”). The Feeder Fund will at all Mutual Fund times invest at least 85% of it’s assets in Morgan Stanley Liquidity Funds - US Dollar Liquidity Fund MS Reserve USD Dist. shares of the Master Fund whilst it may hold (Luxembourg) (2) (4) 4,217,821,115 4,217,821,115 100.00 up to 15% of it’s assets in ancillary liquid Total for Mutual Fund 100.00 assets, including cash, cash equivalents and Total Investment Securities 4,217,821,115 100.00 short term bank deposits. Other Assets less Liabilities 8,814 0.00

Total Net Asset Value 4,217,829,929 100.00 * As from 9 September 2013, the investment objective changed. The former investment aim was as follows: To provide liquidity and high current income, to the extent consistent with the preservation of capital, primarily by investing in high quality short-term transferable debt (2) The country in brackets represents the country of incorporation of this security. securities that are denominated in US dollars, provided that, at the time of acquisition, their (4) Managed by an affiliate of the Investment Adviser. initial or residual maturity does not exceed 397 days. The Fund may also hold up to 49% of its net assets in cash and cash equivalents.

Diversified Alpha Plus Fund

Investment aim Statement of investments

To seek to provide an absolute return while Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. actively managing total portfolio risk. The Fund As at 31 December 2013, expressed in Euro. will invest in baskets of stocks, ETFs, bonds Nominal in Euro unless Market % of net and derivatives, with the asset allocation based Investments specified value assets on a top-down investment approach focusing Government Bonds

Portugal on asset class, sector, region and country Portugal Obrigacoes do Tesouro OT sr unsecur 4.95% /2023 228,475,000 211,197,720 6.13 selection. The Fund aims to manage downside Portugal Obrigacoes do Tesouro OT sr unsecur 3.6% 15/10/2014 173,224,000 175,307,018 5.10 risk and targets below market volatility. Portugal Obrigacoes do Tesouro OT sr unsecur 3.35% /2015 130,122,000 131,164,928 3.81 Portugal Obrigacoes do Tesouro OT sr unsecur 5.65% /2024 78,267,000 75,383,644 2.19

Total for Portugal 17.23

France France Treasury Bill BTF 0% 13/03/2014 100,000,000 99,960,948 2.90 France Treasury Bill BTF 0% 30/01/2014 75,000,000 74,995,825 2.18 France Treasury Bill BTF 0% 23/01/2014 75,000,000 74,995,386 2.18 France Treasury Bill BTF 0% 16/01/2014 65,000,000 64,997,596 1.89 France Treasury Bill BTF 0% 13/02/2014 40,000,000 39,993,625 1.16 France Treasury Bill BTF 0% 02/01/2014 25,000,000 24,999,843 0.73

Total for France 11.04

Germany German Treasury Bill 0% 12/02/2014 114,800,000 114,794,265 3.34 German Treasury Bill 0% 15/01/2014 100,000,000 99,998,842 2.90 German Treasury Bill 0% 12/03/2014 90,000,000 89,992,055 2.61

Total for Germany 8.85

Netherlands Dutch Treasury Certificate 0% 31/01/2014 100,000,000 99,995,222 2.91 Dutch Treasury Certificate 0% 28/02/2014 100,000,000 99,985,845 2.90 Dutch Treasury Certificate 0% 31/03/2014 100,000,000 99,977,118 2.90

Total for Netherlands 8.71

Belgium Belgium Treasury Bill 0% 16/01/2014 75,000,000 74,997,813 2.18 Belgium Treasury Bill 0% 13/02/2014 50,000,000 49,996,673 1.45 Belgium Treasury Bill 0% 13/03/2014 25,000,000 24,994,573 0.73

Total for Belgium 4.36

Greece Republic of Greece SerPSI step cpn 2% /2023 17,440,000 11,816,472 0.34 Republic of Greece SerPSI step cpn 2% /2024 17,440,000 11,425,816 0.34 Republic of Greece SerPSI step cpn 2% /2025 17,440,000 11,044,316 0.32 Republic of Greece SerPSI step cpn 2% /2026 17,440,000 10,736,064 0.31 Republic of Greece SerPSI step cpn 2% /2027 17,440,000 10,451,792 0.30 Republic of Greece SerPSI step cpn 2% /2028 17,440,000 10,211,120 0.30

Total for Greece 1.91

Spain Government of Spain 3.75% /2015 23,550,000 24,545,046 0.71

Total for Spain 0.71

Total for Government Bonds 52.81

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 153 Morgan Stanley Investment Funds 31 December 2013

Diversified Alpha Plus Fund

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Equities (continued) to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in Euro. United States of America (continued) CR Bard 24,915 2,419,951 0.07 World Fuel Services 77,855 2,417,780 0.07 Market % of net Cabot Oil & Gas 85,821 2,412,851 0.07 Investments Holdings value assets Cimarex Energy 32,045 2,410,191 0.07 FEI 37,108 2,404,709 0.07 Equities Brunswick 72,451 2,401,955 0.07 Wabtec 44,550 2,400,906 0.07 United States of America Lindsay 39,920 2,398,863 0.07 Procter & Gamble 193,598 11,449,541 0.33 McKesson 20,473 2,397,355 0.07 Coca-Cola 283,312 8,440,376 0.25 QEP Resources 107,939 2,395,319 0.07 Philip Morris International 118,589 7,463,680 0.22 DENTSPLY International 68,028 2,389,148 0.07 Wal-Mart Stores 121,285 6,899,958 0.20 Arkansas Best 96,360 2,361,504 0.07 PepsiCo 109,065 6,538,073 0.19 Pioneer Natural Resources 17,530 2,327,475 0.07 CVS Caremark 90,072 4,681,578 0.14 Sonic Automotive ‘A’ 130,943 2,325,979 0.07 Altria Group 144,224 4,014,016 0.12 Power Integrations 56,456 2,285,190 0.07 Whole Foods Market 80,926 3,393,751 0.10 Perrigo (Ireland) (2) 18,320 2,037,388 0.07 Colgate-Palmolive 68,310 3,225,678 0.09 Cathay General Bancorp 103,380 2,026,235 0.06 Mondelez International ‘A’ 122,064 3,101,310 0.09 Titan International 154,004 2,012,306 0.06 Tyson Foods ‘A’ 116,627 2,861,576 0.08 Kimberly-Clark 26,236 2,000,896 0.06 Bank of America 248,150 2,799,334 0.08 Franklin Electric 59,010 1,945,210 0.06 Costco Wholesale 31,819 2,746,824 0.08 Minerals Technologies 42,791 1,883,033 0.06 Walgreen 63,459 2,653,415 0.08 Cantel Medical 68,563 1,692,723 0.06 Citigroup 70,073 2,644,600 0.08 Kraft Foods Group 42,063 1,646,721 0.05 Danaher 47,233 2,640,818 0.08 General Mills 44,523 1,605,344 0.05 KB Home 199,624 2,628,691 0.08 Analogic 24,710 1,577,246 0.05 Ryland Group 82,608 2,594,168 0.08 Cubic 39,905 1,523,131 0.05 Mastercard ‘A’ 4,282 2,591,189 0.08 Heartland Express 106,419 1,519,543 0.05 Heartland Payment Systems 70,599 2,572,715 0.08 Cash America International 53,971 1,507,204 0.04 Lennar ‘A’ 88,764 2,561,318 0.07 Archer-Daniels-Midland 45,491 1,441,449 0.04 Visa ‘A’ 15,816 2,542,620 0.07 CIRCOR International 23,657 1,389,992 0.04 Eagle Materials 45,125 2,539,993 0.07 Stewart Information Services 58,575 1,371,722 0.04 Allergan 31,687 2,531,169 0.07 Interface 84,597 1,363,319 0.04 Global Payments 53,452 2,515,918 0.07 Balchem 29,775 1,287,996 0.04 UTi Worldwide (British Virgin Islands) (2) 195,703 2,514,550 0.07 Callaway Golf 180,491 1,095,346 0.04 Cytec Industries 36,942 2,511,947 0.07 Cal-Maine Foods 24,328 1,078,156 0.04 EOG Resources 20,586 2,508,917 0.07 Ensign Group 32,869 1,072,759 0.03 EMCOR Group 81,563 2,503,919 0.07 Sysco 40,483 1,063,532 0.03 Fair Isaac 54,660 2,503,339 0.07 Kroger 34,067 979,801 0.03 La-Z-Boy 110,775 2,489,615 0.07 Lorillard 26,217 965,657 0.03 Vulcan Materials 57,519 2,488,136 0.07 Estee Lauder ‘A’ 16,526 904,182 0.03 Tractor Supply 44,388 2,485,297 0.07 Invacare 54,025 898,482 0.03 Roper Industries 24,547 2,477,045 0.07 Encore Wire 21,958 862,820 0.03 CST Brands 93,034 2,473,820 0.07 Mead Johnson Nutrition 14,113 852,480 0.03 Acuity Brands 31,041 2,472,581 0.07 Reynolds American 22,832 828,380 0.03 Range Resources 40,203 2,471,319 0.07 Kellogg 17,907 796,453 0.02 UniFirst 31,803 2,470,252 0.07 United Technologies 9,400 772,575 0.02 PolyOne 96,473 2,465,119 0.07 AAON 32,615 762,601 0.02 Aaron’s 115,281 2,464,521 0.07 Hershey 10,805 761,690 0.02 Valmont Industries 22,709 2,463,840 0.07 Standex International 16,128 736,295 0.02 Financial Engines 48,795 2,462,490 0.07 ConAgra Foods 28,903 703,503 0.02 PVH 25,102 2,460,527 0.07 International Speedway ‘A’ 25,677 657,787 0.02 EQT 37,674 2,459,985 0.07 Apple 1,500 608,641 0.02 Jones Lang LaSalle 32,937 2,455,045 0.07 Clorox 8,997 608,243 0.02 AGCO 57,519 2,452,645 0.07 Bunge (Bermuda) (2) 10,242 607,951 0.02 Landstar System 58,533 2,450,418 0.07 Coca-Cola Enterprises 18,011 577,896 0.02 Triumph Group 44,472 2,450,292 0.07 Constellation Brands ‘A’ 11,328 574,969 0.02 AMETEK 64,003 2,449,896 0.07 JM Smucker 7,516 565,790 0.02 Cooper 26,817 2,448,758 0.07 Green Mountain Coffee Roasters 9,540 522,652 0.02 Zions Bancorporation 112,519 2,447,947 0.07 Deltic Timber 9,960 499,461 0.02 FedEx 23,536 2,447,467 0.07 Dr Pepper Snapple Group 14,090 498,933 0.01 SM Energy 40,302 2,446,686 0.07 Beam 10,090 496,897 0.01 Thermo Fisher Scientific 30,398 2,442,547 0.07 Monster Beverage 9,797 479,268 0.01 PrivateBancorp 116,424 2,441,628 0.07 Brown-Forman ‘B’ 8,552 467,282 0.01 CF Industries Holdings 14,419 2,441,337 0.07 Church & Dwight 9,474 455,420 0.01 Precision Castparts 12,459 2,438,511 0.07 Campbell Soup 14,170 446,220 0.01 Universal Health Services ‘B’ 41,607 2,436,207 0.07 Halliburton 11,800 433,861 0.01 PerkinElmer 81,281 2,435,669 0.07 Molson Coors Brewing vtg ‘B’ 10,402 424,746 0.01 Advance Auto Parts 30,330 2,434,441 0.07 McCormick & Co non-vtg 8,339 418,173 0.01 Cigna 38,535 2,429,208 0.07 Safeway 16,721 396,917 0.01 MAXIMUS 76,390 2,428,292 0.07 Avon Products 29,629 370,803 0.01 Loews 69,554 2,425,574 0.07 Exxon Mobil 5,000 366,264 0.01 Actuant ‘A’ 90,949 2,424,981 0.07 Herbalife (Cayman Islands) (2) 6,077 343,782 0.01 Belden 47,259 2,422,369 0.07 Chevron 3,800 343,268 0.01 Wintrust Financial 71,912 2,421,149 0.07

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 154

Diversified Alpha Plus Fund

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Equities (continued) to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in Euro. United States of America (continued) Deere & Co 1,500 99,056 0.00 Anadarko Petroleum 1,600 92,047 0.00 Market % of net National Oilwell Varco 1,600 91,780 0.00 Investments Holdings value assets Merck & Co. 2,500 90,214 0.00 EMC 4,900 89,601 0.00 Equities (continued) Yum! Brands 1,600 87,656 0.00 Priceline.com 100 84,026 0.00 United States of America (continued) Lowe’s Cos 2,200 78,686 0.00 Energizer Holdings 4,306 335,556 0.01 American International Group 2,100 78,173 0.00 Microsoft 12,300 333,313 0.01 Union Pacific 600 72,729 0.00 General Electric 16,300 330,127 0.01 Monsanto 800 67,522 0.00 Hormel Foods 10,051 329,790 0.01 Freeport-McMoRan Copper & Gold 2,300 63,095 0.00 American Express 4,900 322,052 0.01 Bristol-Myers Squibb 1,600 61,186 0.00 Texas Instruments 9,000 287,399 0.01 eBay 1,500 59,170 0.00 Olympic Steel 13,195 277,586 0.01 TJX Companies 1,200 55,315 0.00 Wells Fargo & Co 8,400 276,654 0.01 Target 1,200 54,488 0.00 Dominion Resources 5,500 256,962 0.01 Zoetis 2,270 53,555 0.00 Bank of New York Mellon 10,000 251,895 0.01 American Tower 800 46,169 0.00 Johnson & Johnson 3,782 251,509 0.01 Exelon 1,900 38,012 0.00 Google ‘A’ 300 241,159 0.01 Eli Lilly & Co 1,000 37,073 0.00 Verizon Communications 6,600 235,194 0.01 Berkshire Hathaway ‘B’ 400 34,252 0.00 Automatic Data Processing 3,800 223,135 0.01 News ‘A’ 1,100 14,357 0.00 AbbVie 5,800 221,127 0.01 Home Depot 3,700 220,083 0.01 Total for United States of America 8.86 International Business Machines 1,600 217,254 0.01 Comcast ‘A’ 5,700 214,749 0.01 Oracle 7,600 210,584 0.01 France Qualcomm 3,800 203,881 0.01 Peugeot 4,008,193 37,829,326 1.10 ConocoPhillips 4,000 203,606 0.01 BNP Paribas 537,943 30,474,471 0.88 AT&T 7,800 199,196 0.01 Société Générale 380,787 16,076,827 0.47 United Parcel Service ‘B’ 2,600 198,327 0.01 Total 229,835 10,234,553 0.30 EI du Pont de Nemours & Co. 4,200 196,865 0.01 AXA 486,614 9,834,469 0.28 MetLife 5,000 194,438 0.01 CGG 740,768 9,318,861 0.27 PNC Financial Services Group 3,400 191,576 0.01 GDF Suez 536,731 9,175,416 0.27 McDonald’s 2,700 189,550 0.01 Bouygues 334,102 9,161,077 0.26 Honeywell International 2,800 185,148 0.01 Veolia Environnement 765,405 9,073,876 0.26 Schlumberger (Curacao) (2) 2,800 182,526 0.01 Orange 1,004,405 9,039,645 0.26 Starbucks 3,200 181,562 0.01 Alstom 339,940 8,999,912 0.26 Occidental Petroleum 2,600 179,170 0.01 Renault 151,035 8,827,996 0.26 Gilead Sciences 3,200 173,269 0.01 EDF 342,570 8,798,910 0.26 3M 1,700 172,930 0.01 STMicroelectronics (Netherlands) (2) 1,440,635 8,413,308 0.24 Amazon.com 600 171,865 0.01 Casino Guichard Perrachon 89,137 7,467,006 0.22 Medtronic 4,100 170,809 0.01 Suez Environnement 456,933 5,951,552 0.17 Goldman Sachs Group 1,300 166,817 0.00 Crédit Agricole 542,698 5,049,805 0.15 Dow Chemical 5,100 165,081 0.00 L’Oréal 24,216 3,092,383 0.09 Duke Energy 3,300 164,837 0.00 Lagardere 112,912 3,050,882 0.09 Apache 2,600 161,901 0.00 Danone 58,292 3,049,837 0.09 Abbott Laboratories 5,800 161,046 0.00 CNP Assurances 160,062 2,384,924 0.07 Pfizer 7,206 160,434 0.00 Sanofi 26,945 2,077,998 0.06 Caterpillar 2,400 158,367 0.00 Natixis 484,509 2,070,791 0.06 Cisco Systems 9,700 156,461 0.00 Pernod-Ricard 20,392 1,688,662 0.05 JPMorgan Chase & Co. 3,600 152,069 0.00 Carrefour 57,732 1,663,259 0.05 Praxair 1,600 150,980 0.00 Schneider Electric 11,498 728,973 0.02 Walt Disney 2,700 149,116 0.00 Airbus Group (Netherlands) (2) 12,753 711,745 0.02 Celgene 1,200 147,034 0.00 LVMH Moet Hennessy Louis Vuitton 5,133 680,636 0.02 Capital One Financial 2,600 143,725 0.00 Air Liquide 5,939 610,529 0.02 UnitedHealth Group 2,600 141,479 0.00 Vinci 11,865 566,198 0.02 DIRECTV 2,800 139,659 0.00 Vivendi 27,373 524,330 0.02 Boeing 1,400 138,612 0.00 Compagnie de Saint-Gobain 9,589 383,320 0.01 Nike ‘B’ 2,400 136,903 0.00 Unibail-Rodamco 2,041 380,136 0.01 US Bancorp 4,600 134,905 0.00 Essilor International 4,786 369,862 0.01 Baxter International 2,600 130,929 0.00 Kering 2,325 357,236 0.01 Intel 6,600 124,616 0.00 Compagnie Generale des Etablissements Michelin 4,018 310,391 0.01 Ford Motor 11,000 122,412 0.00 Hermes International 1,040 274,040 0.01 Emerson Electric 2,300 117,391 0.00 Lafarge 4,683 255,083 0.01 Amgen 1,400 116,792 0.00 Remy Cointreau 1,982 120,882 0.00 Express Scripts Holding 2,200 112,479 0.00 Vallourec 2,703 107,039 0.00 Twenty-First Century Fox ‘A’ 4,400 112,335 0.00 Alcatel-Lucent 5,539 18,046 0.00 Time Warner Cable 1,100 107,783 0.00 Christian Dior 100 13,735 0.00 Southern 3,500 103,992 0.00 Sodexo 183 13,476 0.00 Biogen Idec 500 101,792 0.00 AtoS 191 12,566 0.00 Time Warner 2,000 101,484 0.00 Safran 236 11,920 0.00 Accenture ‘A’ (Ireland) (2) 1,700 101,366 0.00 Thales 254 11,887 0.00 Simon Property Group 900 100,436 0.00 Publicis Groupe 168 11,174 0.00

The accompanying notes are an integral part of these financial statements. 155 Morgan Stanley Investment Funds 31 December 2013

Diversified Alpha Plus Fund

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Equities (continued) to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in Euro. Germany (continued) Deutsche Boerse 6,918 416,464 0.01 Fresenius Medical Care & Co 4,416 228,440 0.01 Market % of net Investments Holdings value assets Infineon Technologies 23,700 183,912 0.01 ThyssenKrupp 5,904 104,442 0.00 Equities (continued) OSRAM Licht 1,652 67,732 0.00 K+S Regd 2,897 64,820 0.00 Continental 136 21,678 0.00 France (continued) Fresenius 170 18,972 0.00 SES (Luxembourg) (2) 422 9,930 0.00 Merck 96 12,504 0.00 Accor 284 9,741 0.00 Celesio 482 11,086 0.00 Groupe Eurotunnel Regd 1,234 9,428 0.00 TUI 823 9,855 0.00 Société Télévision Française 1 671 9,401 0.00 ProSiebenSat.1 Media Regd 220 7,920 0.00 Bureau Veritas 432 9,178 0.00 Qiagen (Netherlands) (2) 462 7,824 0.00 Legrand 203 8,132 0.00 Lanxess 155 7,514 0.00 JC Decaux 266 7,972 0.00 Fraport Frankfurt Airport Services Worldwide 131 7,125 0.00 Technip 111 7,754 0.00 Axel Springer 59 2,755 0.00 Gecina 75 7,202 0.00 Salzgitter 72 2,232 0.00 Foncière des Regions 107 6,714 0.00 Cap Gemini 133 6,534 0.00 Total for Germany 3.36 Aeroports de Paris 72 5,940 0.00 Société BIC 59 5,255 0.00 Klepierre 150 5,053 0.00 Spain Dassault Systèmes 55 4,963 0.00 Banco Santander 5,963,129 38,796,117 1.13 Edenred 168 4,087 0.00 Banco Bilbao Vizcaya Argentaria 2,926,844 26,189,400 0.76 Eutelsat Communications 128 2,901 0.00 ACS Actividades de Construccion y Servicios 369,981 9,256,925 0.27 ICADE 42 2,842 0.00 Iberdrola 1,898,079 8,797,596 0.25 Repsol 468,833 8,589,021 0.25 Total for France 6.66 Banco de Sabadell 1,776,365 3,367,988 0.10 Banco Popular Espanol 671,694 2,945,378 0.08 Bankia 2,151,691 2,655,187 0.08 Italy CaixaBank 628,041 2,379,019 0.07 UniCredit 10,699,250 57,561,965 1.67 EDP Renovaveis 308,137 1,189,717 0.03 Intesa Sanpaolo 28,586,657 51,284,463 1.49 Distribuidora Internacional de Alimentacion 47,349 307,769 0.01 Fiat 1,603,020 9,529,954 0.28 Repsol Rights 09/01/2014 468,833 232,541 0.01 ENI 517,794 9,056,217 0.26 Telecom Italia 12,522,861 9,028,983 0.26 Total for Spain 3.04 Enel 2,774,258 8,805,495 0.26 Exor 163,579 4,729,069 0.14 Telecom Italia ‘RSP’ 6,600,813 3,755,863 0.11 United Kingdom Unione di Banche Italiane 447,758 2,210,133 0.06 British American Tobacco 171,929 6,686,648 0.19 Banca Monte dei Paschi di Siena 3,343,524 586,454 0.02 Diageo 225,599 5,419,381 0.16 Unilever 114,533 3,414,404 0.10 Total for Italy 4.55 Reckitt Benckiser Group 59,087 3,401,589 0.10 Tesco 717,254 2,880,427 0.08 Imperial Tobacco Group 89,259 2,506,565 0.07 Germany Vodafone Group 504,285 1,435,512 0.04 Daimler Regd 161,990 10,189,171 0.30 HSBC Holdings 168,713 1,342,306 0.04 Volkswagen Pfd 46,686 9,530,947 0.28 BP 162,918 955,028 0.03 E.ON 690,558 9,263,836 0.27 Royal Dutch Shell ‘A’ 36,585 950,478 0.03 Metro 257,656 9,069,491 0.26 GlaxoSmithKline 48,843 945,399 0.03 RWE 338,562 9,007,442 0.26 Associated British Foods 28,170 827,272 0.02 Volkswagen 45,435 8,946,152 0.26 Royal Dutch Shell ‘B’ 28,415 778,153 0.02 Porsche Automobil Holding Pfd 117,366 8,879,912 0.26 WPP (Jersey) (2) 40,282 667,687 0.02 HeidelbergCement 160,613 8,857,807 0.26 WM Morrison Supermarkets 204,153 639,998 0.02 Deutsche Lufthansa Regd 561,497 8,658,284 0.25 Rio Tinto 14,964 612,803 0.02 Commerzbank 506,138 5,926,876 0.17 AstraZeneca 13,880 595,919 0.02 Hochtief 92,008 5,710,016 0.17 BHP Billiton 24,964 560,410 0.02 Suedzucker 230,400 4,520,448 0.13 BG Group 35,080 546,700 0.02 Siemens Regd 16,526 1,640,867 0.05 Barclays 166,890 545,132 0.02 Bayer Regd 15,875 1,618,456 0.05 Prudential 26,836 431,922 0.01 Henkel & Co Pfd 18,890 1,592,616 0.05 J Sainsbury 97,497 427,432 0.01 Bayerische Motoren Werke Pfd 24,715 1,534,554 0.04 BT Group 90,465 412,250 0.01 BASF 18,490 1,432,790 0.04 Rolls-Royce Holdings 26,795 410,342 0.01 Allianz Regd 9,187 1,197,525 0.03 Standard Chartered 23,179 378,631 0.01 SAP 18,120 1,129,057 0.03 Lloyds Banking Group 388,162 367,758 0.01 Henkel & Co 10,351 782,950 0.03 Tate & Lyle 36,018 349,986 0.01 Deutsche Telekom Regd 60,150 747,665 0.02 Compass Group 25,689 298,679 0.01 Deutsche Bank Regd 21,126 732,544 0.02 SSE 16,362 269,240 0.01 Muenchener Rueckversicherungs Regd 4,276 684,801 0.02 Glencore Xstrata (Jersey) (2) 70,872 266,186 0.01 Linde 4,026 612,153 0.02 Experian (Jersey) (2) 17,693 236,739 0.01 Bayerische Motoren Werke 7,025 598,671 0.02 Reed Elsevier 21,175 228,647 0.01 Beiersdorf 7,983 587,868 0.02 Kingfisher 49,357 228,062 0.01 Deutsche Post Regd 18,499 490,224 0.01 Anglo American 13,981 221,664 0.01 Adidas 4,604 426,515 0.01 National Grid 23,217 219,743 0.01

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 156

Diversified Alpha Plus Fund

United Kingdom (continued) Total for Portugal 0.83 Centrica 51,067 213,269 0.01 BAE Systems 31,169 162,853 0.01 Pearson 9,996 161,004 0.01 Finland British Sky Broadcasting 14,579 147,793 0.00 UPM-Kymmene 713,345 8,759,877 0.26 Shire (Jersey) (2) 4,302 147,368 0.00 Stora Enso ‘R’ 1,132,376 8,260,683 0.24 Legal & General Group 51,516 137,799 0.00 Neste Oil 525,151 7,546,420 0.22 Aviva 23,720 128,121 0.00 Kesko ‘B’ 5,022 134,590 0.00 Old Mutual 56,320 127,919 0.00 Marks & Spencer Group 20,274 105,344 0.00 Total for Finland 0.72 Tullow Oil 9,055 92,990 0.00 Royal Bank of Scotland Group 22,881 92,919 0.00 Japan ARM Holdings 1,655 21,846 0.00 Japan Tobacco 144,600 3,421,571 0.10 Standard Life 4,829 20,857 0.00 Seven & I Holdings 100,100 2,894,953 0.08 Next 299 19,573 0.00 Kao 70,400 1,612,248 0.05 Wolseley (Jersey) (2) 413 16,990 0.00 Kirin Holdings 116,000 1,214,306 0.04 Smith & Nephew 1,614 16,691 0.00 Asahi Group Holdings 51,300 1,052,027 0.03 Capita 1,334 16,632 0.00 Ajinomoto 81,000 852,964 0.02 Whitbread 369 16,625 0.00 Aeon 83,300 821,280 0.02 Aggreko 716 14,697 0.00 Unicharm 14,800 614,390 0.02 Johnson Matthey 367 14,458 0.00 Shiseido 48,700 569,776 0.02 Land Securities Group 1,199 13,876 0.00 Toyota Motor 10,900 484,164 0.01 Smiths Group 773 13,741 0.00 Lawson 8,300 451,943 0.01 Intercontinental Hotels Group 560 13,540 0.00 Yakult Honsha 11,100 407,801 0.01 Intertek Group 350 13,234 0.00 MEIJI Holdings 7,900 369,492 0.01 Resolution (Guernsey) (2) 3,104 13,198 0.00 Suntory Beverage & Food 15,800 366,759 0.01 Babcock International Group 800 13,020 0.00 Sumitomo Mitsui Financial Group 8,100 303,749 0.01 ITV 5,153 12,007 0.00 Nippon Meat Packers 21,000 262,403 0.01 Carnival 370 11,115 0.00 Toyo Suisan Kaisha 12,000 262,361 0.01 Burberry Group 590 10,743 0.00 Kikkoman 19,000 261,074 0.01 British Land 1,405 10,615 0.00 FamilyMart 7,500 249,337 0.01 G4S 3,113 9,815 0.00 Nissin Foods Holdings 7,500 230,396 0.01 3i Group 1,953 9,034 0.00 Softbank 3,500 222,786 0.01 Weir Group 338 8,655 0.00 Nisshin Seifun Group 26,600 200,052 0.01 RSA Insurance Group 7,734 8,491 0.00 Honda Motor 6,400 191,734 0.01 Inmarsat 931 8,454 0.00 Tokio Marine Holdings 7,300 177,533 0.01 Schroders 237 7,396 0.00 KDDI 3,800 170,106 0.01 Randgold Resources (Jersey) (2) 161 7,329 0.00 Calbee 9,500 167,937 0.01 TUI Travel 1,461 7,249 0.00 Sumitomo Electric Industries 13,700 166,258 0.01 Rexam 1,093 6,964 0.00 Nippon Steel & Sumitomo Metal 68,170 166,023 0.01 Hammerson 1,112 6,705 0.00 Sumitomo Realty & Development 4,000 144,741 0.00 Serco Group 1,093 6,554 0.00 Mizuho Financial Group 87,900 138,661 0.01 Sage Group 1,167 5,659 0.00 Takeda Pharmaceutical 4,000 133,533 0.01 Cairn Energy 1,714 5,554 0.00 Mitsui Fudosan 5,000 130,938 0.01 Investec 1,033 5,430 0.00 Mitsubishi Estate 6,000 130,558 0.01 Admiral Group 343 5,397 0.00 Denso 3,400 130,558 0.01 Petrofac (Jersey) (2) 359 5,278 0.00 Hitachi 23,000 126,670 0.01 Severn Trent 241 4,935 0.00 Coca-Cola West 7,900 121,725 0.01 AMEC 374 4,887 0.00 Nippon Telegraph & Telephone 3,100 121,397 0.01 Segro 1,171 4,698 0.00 Kubota 10,000 120,318 0.01 ICAP 862 4,676 0.00 Mitsubishi Heavy Industries 25,000 112,604 0.01 Man Group 3,281 3,350 0.00 Yamazaki Baking 15,000 111,981 0.01 Intu Properties 874 3,253 0.00 Daiwa Securities Group 15,000 108,971 0.01 Rolls-Royce Holdings Pfd ‘C’ 2,304,370 2,768 0.00 Astellas Pharma 2,500 107,760 0.01 Vedanta Resources 234 2,624 0.00 Canon 4,500 103,678 0.00 Lonmin 289 1,071 0.00 East Japan Railway 1,700 98,565 0.00 NTT DoCoMo 8,100 96,673 0.00 Total for United Kingdom 1.23 Fanuc 700 93,231 0.00 Mitsubishi Electric 10,000 91,328 0.00 Portugal Central Japan Railway 1,000 85,655 0.00 EDP - Energias de Portugal 3,067,979 8,191,504 0.24 Asahi Kasei 15,000 85,516 0.00 Portugal Telecom SGPS Regd 2,338,746 7,390,437 0.21 Nomura Holdings 14,300 80,042 0.00 Banco Espirito Santo Regd 3,995,552 4,151,379 0.12 Murata Manufacturing 1,200 77,546 0.00 Banco Comercial Portugues 20,899,176 3,477,623 0.10 Dai Nippon Printing 10,000 77,214 0.00 Galp Energia SGPS 269,176 3,207,232 0.09 Bridgestone 2,800 77,103 0.00 Banco BPI Regd 489,823 595,625 0.02 Panasonic 8,900 75,371 0.00

The accompanying notes are an integral part of these financial statements. 157 Morgan Stanley Investment Funds 31 December 2013

Diversified Alpha Plus Fund

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Equities (continued) to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in Euro. Japan (continued) Tokyo Electric Power 5,800 20,747 0.00 Chubu Electric Power 2,200 20,686 0.00 Market % of net Daito Trust Construction 300 20,404 0.00 Investments Holdings value assets Tokyo Electron 500 19,926 0.00 Omron 600 19,283 0.00 Equities (continued) Sumitomo Metal Mining 2,000 19,054 0.00 Mazda Motor 5,000 18,819 0.00 Japan (continued) NTT Data 700 18,791 0.00 SMC 400 73,339 0.00 Mitsubishi Motors 2,400 18,747 0.00 Sumitomo Mitsui Trust Holdings 18,860 72,291 0.00 Inpex 2,000 18,653 0.00 Osaka Gas 25,000 71,437 0.00 Mitsubishi Chemical Holdings 5,500 18,494 0.00 Keyence 220 68,496 0.00 Olympus 800 18,432 0.00 Mitsui & Co. 6,500 65,884 0.00 Keikyu 3,000 17,996 0.00 Nissan Motor 10,600 64,832 0.00 Chugai Pharmaceutical 1,100 17,695 0.00 Suzuki Motor 3,200 62,612 0.00 Toppan Printing 3,000 17,456 0.00 Komatsu 4,200 62,099 0.00 Mitsui OSK Lines 5,000 16,398 0.00 Fast Retailing 200 60,055 0.00 Nippon Yusen 7,000 16,273 0.00 Kyocera 1,600 58,118 0.00 Bank of Yokohama 4,000 16,218 0.00 Toshiba 19,000 58,104 0.00 Nikon 1,100 15,290 0.00 Mitsubishi 4,100 57,216 0.00 Electric Power Development 700 14,844 0.00 Sony 4,400 55,588 0.00 Chiba Bank 3,000 14,716 0.00 Toray Industries 11,000 55,406 0.00 Keio 3,000 14,550 0.00 Daikin Industries 1,200 54,382 0.00 Tokyu 3,000 14,135 0.00 FUJIFILM Holdings 2,600 53,625 0.00 Nippon Express 4,000 14,087 0.00 Secom 1,200 52,638 0.00 Sharp 6,000 13,865 0.00 Shin-Etsu Chemical 1,200 50,978 0.00 NGK Insulators 1,000 13,824 0.00 Nintendo 500 48,466 0.00 Kuraray 1,500 13,004 0.00 Tohoku Electric Power 5,800 47,473 0.00 Ono Pharmaceutical 200 12,744 0.00 Kyushu Electric Power 5,100 47,354 0.00 Nitto Denko 400 12,274 0.00 Tokyo Gas 13,000 46,591 0.00 Shikoku Electric Power 1,100 11,987 0.00 Daiichi Sankyo 3,500 46,567 0.00 Makita 300 11,458 0.00 Orix 3,600 46,005 0.00 OJI Holdings 3,000 11,188 0.00 MS&AD Insurance Group Holdings 2,300 44,907 0.00 Rohm 300 10,627 0.00 Itochu 4,900 44,039 0.00 Isetan Mitsukoshi Holdings 1,000 10,344 0.00 NEC 26,000 42,634 0.00 Nippon Building Fund 2 8,469 0.00 Daiwa House Industry 3,000 42,239 0.00 Hokkaido Electric Power 1,000 8,365 0.00 Oriental Land 400 41,983 0.00 Japan Real Estate Investment 2 7,804 0.00 Fujitsu 11,000 41,402 0.00 Trend Micro 300 7,638 0.00 Terumo 1,100 38,586 0.00 Konica Minolta Holdings 1,000 7,258 0.00 Sumitomo Chemical 13,000 37,057 0.00 Yamada Denki 3,000 7,140 0.00 Eisai 1,200 33,833 0.00 JSR 500 7,043 0.00 Toyota Industries 1,000 32,830 0.00 Chugoku Electric Power 600 6,792 0.00 Dai-ichi Life Insurance 2,700 32,822 0.00 SBI Holdings 610 6,711 0.00 JX Holdings 8,610 32,228 0.00 Resona Holdings 1,800 6,675 0.00 Hamamatsu Photonics 1,100 32,003 0.00 Kurita Water Industries 400 6,039 0.00 TDK 900 31,384 0.00 Benesse Holdings 200 5,846 0.00 Marubeni 6,000 31,384 0.00 Hokuriku Electric Power 500 4,937 0.00 Rakuten 2,900 31,381 0.00 Ibiden 300 4,081 0.00 Sumitomo 3,400 31,075 0.00 Japan Steel Works 1,000 4,068 0.00 Ricoh 4,000 30,941 0.00 Nippon Electric Glass 1,000 3,819 0.00 Yahoo Japan 7,600 30,761 0.00 Advantest 400 3,617 0.00 Sekisui House 3,000 30,512 0.00 Kawasaki Heavy Industries 10,000 30,512 0.00 Total for Japan 0.70 JGC 1,000 28,540 0.00 Nidec 400 28,505 0.00 Kansai Electric Power 3,400 28,440 0.00 Belgium Tobu Railway 8,000 28,229 0.00 Delhaize Group 192,451 8,313,883 0.24 Kintetsu 11,000 28,083 0.00 KBC Groep 119,866 4,944,473 0.14 Yamato Holdings 1,900 27,948 0.00 Anheuser-Busch InBev 62,613 4,837,480 0.14 LIXIL Group 1,400 27,926 0.00 Colruyt 5,971 242,303 0.01 Hankyu Hanshin Holdings 7,000 27,509 0.00 Viohalco 51,849 192,360 0.01 NSK 3,000 27,149 0.00 Odakyu Electric Railway 4,000 26,319 0.00 Total for Belgium 0.54 NKSJ Holdings 1,225 24,782 0.00 Hoya 1,200 24,260 0.00 Switzerland Shionogi & Co 1,500 23,662 0.00 Nestlé Regd 258,680 13,762,816 0.40 Aisin Seiki 800 23,635 0.00 Coca-Cola 49,058 1,032,685 0.03 Shizuoka Bank 3,000 23,289 0.00 Aryzta 6,760 376,733 0.01 Asahi Glass 5,000 22,625 0.00 Lindt & Spruengli Regd 8 313,521 0.01 JFE Holdings 1,300 22,504 0.00 Lindt & Spruengli 66 216,227 0.01 T&D Holdings 2,200 22,360 0.00 Roche Holding ‘Genusschein’ 1,051 213,394 0.01 West Japan Railway 700 22,085 0.00 Novartis Regd 3,549 205,881 0.01 Kobe Steel 17,000 21,172 0.00 Barry Callebaut Regd 170 154,854 0.01 Dentsu 700 20,826 0.00

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 158

Diversified Alpha Plus Fund

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Equities (continued) to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in Euro. Greece (continued) Diagnostic & Therapeutic Center of Athens Hygeia 32,210 12,208 0.00 Elval - Hellenic Aluminium Industry 5,526 10,555 0.00 Market % of net Investments Holdings value assets Total for Greece 0.40 Equities (continued) Austria Switzerland (continued) OMV 129,170 4,493,824 0.13 UBS Regd 5,206 71,769 0.00 Voestalpine 100,577 3,513,155 0.10 ABB Regd 3,652 69,865 0.00 Erste Group Bank 134,739 3,412,939 0.10 Zurich Insurance Group 277 58,341 0.00 Raiffeisen Bank International 80,252 2,056,056 0.06 Compagnie Financiere Richemont Regd 701 50,718 0.00 Credit Suisse Group Regd 2,163 48,059 0.00 Total for Austria 0.39 Swiss Re 705 47,130 0.00 Swisscom Regd 111 42,588 0.00 Australia Syngenta Regd 146 42,253 0.00 BHP Billiton 26,326 649,592 0.03 Geberit Regd 100 22,039 0.00 Australia & New Zealand Banking Group 26,161 547,647 0.02 Swatch Group ‘Bearer’ 45 21,614 0.00 Commonwealth Bank of Australia 10,683 539,833 0.02 SGS Regd 12 20,063 0.00 National Australia Bank 21,702 490,953 0.01 Transocean 563 19,926 0.00 Westpac Banking 21,754 457,512 0.01 Holcim Regd 315 17,131 0.00 Wesfarmers 10,539 301,462 0.01 Adecco Regd 273 15,704 0.00 Woolworths 9,500 208,866 0.01 Givaudan Regd 15 15,570 0.00 CSL 4,308 192,956 0.01 Kuehne & Nagel International Regd 124 11,831 0.00 Rio Tinto 3,464 153,399 0.01 Schindler Holding ‘PC’ 107 11,447 0.00 Woodside Petroleum 5,405 136,563 0.01 Julius Baer Group 325 11,344 0.00 Westfield 19,818 129,878 0.01 Swiss Life Holding Regd 65 9,808 0.00 Telstra 35,757 121,929 0.01 Sonova Holding Regd 99 9,679 0.00 Suncorp Group 14,302 121,690 0.00 Actelion Regd 157 9,639 0.00 AMP 38,247 109,056 0.00 GAM Holding 453 6,404 0.00 QBE Insurance Group 14,514 108,505 0.00 Lonza Group Regd 78 5,376 0.00 Macquarie Group 3,039 108,503 0.00 Insurance Australia Group 23,925 90,440 0.00 Total for Switzerland 0.49 Santos 9,490 90,177 0.00 Origin Energy 9,770 89,284 0.00 Netherlands Amcor 11,797 80,837 0.00 Aegon 1,353,662 9,288,829 0.27 Orica 5,163 80,013 0.00 Unilever ‘CVA’ 127,493 3,732,357 0.11 Stockland 32,327 75,798 0.00 Koninklijke Ahold 79,364 1,035,700 0.03 Brambles 11,986 71,233 0.00 Heineken 18,137 890,164 0.02 GPT Group 26,088 57,611 0.00 Heineken Holding 7,914 363,925 0.01 Transurban Group 12,845 57,066 0.00 ArcelorMittal (Luxembourg) (2) 15,929 206,599 0.01 Fortescue Metals Group 14,014 52,975 0.00 Mirvac Group 47,147 51,446 0.00 ASX 1,928 46,033 0.00 Total for Netherlands 0.45 Asciano 10,824 40,494 0.00 Westfield Retail Trust 19,818 38,230 0.00 Greece AGL Energy 3,065 29,921 0.00 Public Power 341,859 3,692,077 0.11 Incitec Pivot 17,164 29,877 0.00 Hellenic Telecommunications Organization 177,112 1,712,673 0.05 Newcrest Mining 5,885 29,814 0.00 OPAP 151,691 1,466,852 0.04 Treasury Wine Estates 5,474 17,137 0.00 Piraeus Bank 674,406 1,031,841 0.03 Leighton Holdings 1,574 16,470 0.00 National Bank of Greece 234,829 904,092 0.03 Orora 11,797 8,888 0.00 Titan Cement 40,200 795,960 0.02 Sydney Airport 3,221 7,950 0.00 Alpha Bank AE 888,350 560,549 0.02 Recall Holdings 2,397 6,321 0.00 Folli Follie 22,554 527,764 0.02 Coca-Cola Amatil 528 4,125 0.00 Hellenic Exchanges - Athens Stock Exchange Holding 53,195 425,560 0.01 Shopping Centres Australasia Property Group 1,900 1,907 0.00 JUMBO 25,386 294,478 0.01 Mytilineos Holdings 48,569 275,872 0.01 Total for Australia 0.16 GEK Terna Holding Real Estate Construction 80,219 266,327 0.01 Intralot SA-Integrated Lottery Systems & Services 138,763 255,324 0.01 Motor Oil Hellas Corinth Refineries 28,845 237,106 0.01 South Africa Metka 18,364 210,451 0.01 SABMiller (United Kingdom) (2) 90,652 3,376,460 0.10 Ellaktor 66,107 210,220 0.01 Hellenic Petroleum 22,200 168,276 0.00 Total for South Africa 0.10 Marfin Investment Group Holdings 375,886 143,213 0.00 Terna Energy 26,218 100,415 0.00 Ireland Fourlis Holdings 20,165 82,475 0.00 Bank of Ireland 11,024,718 2,778,229 0.08 Athens Water Supply & Sewage 10,145 78,624 0.00 Kerry Group ‘A’ 11,686 590,026 0.02 Piraeus Port Authority 3,347 58,104 0.00 Frigoglass 9,865 50,410 0.00 Total for Ireland 0.10 Sidenor Steel Products Manufacturing 24,053 43,536 0.00 Intracom Holdings Regd 73,354 38,291 0.00 Thessaloniki Port Authority 1,079 23,846 0.00 Poland MLS Multimedia 6,155 20,188 0.00 Jeronimo Martins (Portugal) (2) 222,253 3,159,326 0.09 Aegean Airlines 2,743 16,047 0.00 Total for Poland 0.09 The accompanying notes are an integral part of these financial statements. 159 Morgan Stanley Investment Funds 31 December 2013

Diversified Alpha Plus Fund

Statement of investments (continued) Market % of net Investments Holdings value assets Transferable securities and money market instruments admitted Mutual Fund to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in Euro. Morgan Stanley Liquidity Funds - Euro Liquidity Fund MS Reserve EUR Dist. (Luxembourg) (2) (4) 17,008,778 17,008,778 0.49 Market % of net Investments Holdings value assets Total for Mutual Fund 0.49 Equities (continued) Total Investment Securities 2,962,549,004 86.05

Sweden Svenska Cellulosa ‘B’ 45,976 1,027,073 0.03 Swedish Match 15,904 370,896 0.01 DERIVATIVES Telefonaktiebolaget LM Ericsson ‘B’ 6,549 58,003 0.01 Hennes & Mauritz ‘B’ 1,643 54,907 0.00 Atlas Copco ‘A’ 1,154 23,215 0.00 Over-the-counter (OTC) and exchange traded derivatives Volvo ‘B’ 2,335 22,248 0.00 as at 31 December 2013, expressed in Euro. Assa Abloy ‘B’ 560 21,469 0.00 Investor ‘B’ 834 20,823 0.00 Financial Futures Contracts Sandvik 1,677 17,161 0.00 Alfa Laval 709 13,199 0.00 Net unrealised Atlas Copco ‘B’ 691 12,723 0.00 gain/(loss) as at SKF ‘B’ 601 11,439 0.00 Maturity Number of Notional 31 December % of net Getinge ‘B’ 370 9,184 0.00 Description date contracts commitments Counterparty 2013 assets Hexagon ‘B’ 350 8,028 0.00 Securitas ‘B’ 1,030 7,943 0.00 AMX Index Future 01/2014 11 885,170 Goldman Sachs 45,430 0.00 Scania ‘B’ 529 7,514 0.00 Australia 10 Year Skanska ‘B’ 496 7,353 0.00 Bond Future 03/2014 444 33,066,909 Goldman Sachs 290,468 0.01 Husqvarna ‘B’ 1,650 7,208 0.00 DJ Euro Stoxx 50 Modern Times Group ‘B’ 181 6,804 0.00 Index Future 03/2014 16,661 517,823,880 Goldman Sachs 23,600,661 0.68 Electrolux ‘B’ 336 6,388 0.00 Euro Bund Future 03/2014 (8,478) (1,179,883,260) Goldman Sachs 17,804,360 0.52 Boliden 371 4,121 0.00 FTSE 100 Index Future 03/2014 420 33,786,602 Goldman Sachs 933,774 0.03 Millicom International Cellular SDR (Luxembourg) (2) 42 3,035 0.00 FTSE KLCI Index Future 03/2014 315 36,168,300 Goldman Sachs 25,154 0.00 Tele2 ‘B’ 177 1,455 0.00 IBEX 35 Index Future 01/2014 482 47,570,508 Goldman Sachs 2,407,387 0.07 MINI MSCI Emerging Total for Sweden 0.05 Markets Index Future 03/2014 22 806,339 Goldman Sachs 12,230 0.00 S&P 500 EMINI Future 03/2014 12,615 841,802,826 Goldman Sachs 21,960,435 0.64 FTSE MIB Index Future 03/2014 486 46,230,750 Goldman Sachs 1,886,572 0.05 Denmark SPI 200 Future 03/2014 140 12,089,343 Goldman Sachs 663,701 0.02 Carlsberg ‘B’ 8,514 684,844 0.02 Yen Nikkei 225 Index Future 03/2014 2,122 119,472,402 Goldman Sachs 5,444,375 0.16 Total for Denmark 0.02

Unrealised Gain on Financial Futures Contracts 75,074,547 2.18 Norway Orkla 59,859 338,487 0.01 CAC40 10 Euro Future 01/2014 (293) (12,594,605) Goldman Sachs (669,505) (0.02) DAX Index Future 03/2014 (61) (14,648,388) Goldman Sachs (654,225) (0.02) Total for Norway 0.01 Euro OAT Future 03/2014 360 47,318,400 Goldman Sachs (475,091) (0.01) Long Gilt Future 03/2014 214 27,389,903 Goldman Sachs (593,756) (0.02) Chile Topix Index Future 03/2014 (1,586) (142,926,294) Goldman Sachs (5,530,507) (0.16) Antofagasta (United Kingdom) (2) 7,709 76,297 0.00 US 10yr T-note Future 03/2014 12,785 1,142,131,085 Goldman Sachs (21,347,730) (0.62)

Total for Chile 0.00 Unrealised Loss on Financial Futures Contracts (29,270,814) (0.85)

Net Unrealised Gain Luxembourg on Financial Futures Contracts 1,556,489,870 45,803,733 1.33 APERAM 400 5,370 0.00

Total for Luxembourg 0.00 Cash of EUR 138,008,717 held as collateral by Goldman Sachs in relation to financial futures contracts. Cash of EUR 93,106 paid as collateral to Goldman Sachs in relation to financial futures contracts.

Kazakhstan Kazakhmys (United Kingdom) (2) 1,066 2,799 0.00

Total for Kazakhstan 0.00

Hong Kong Henderson Land Development 242 1,002 0.00

Total for Hong Kong 0.00

Total for Equities 32.75

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 160

Diversified Alpha Plus Fund

DERIVATIVES (continued) Forward Foreign Currency Exchange Contracts (continued)

Over-the-counter (OTC) and exchange traded derivatives Unrealised Maturity Amount Amount gain/(loss) % of net as at 31 December 2013, expressed in Euro. date bought Ccy sold Ccy Counterparty EUR assets

Forward Foreign Currency Exchange Contracts 16/01/2014 10,051,934 CAD 9,471,252 USD UBS (9,748) 0.00 16/01/2014 10,892,036 CHF 8,934,211 EUR State Street (58,773) 0.00 Unrealised 16/01/2014 45,661,829 CHF 51,422,194 USD Citibank (121,001) 0.00 Maturity Amount Amount gain/(loss) % of net 16/01/2014 6,334,380 CHF 7,133,391 USD Deutsche Bank (16,722) 0.00 date bought Ccy sold Ccy Counterparty EUR assets 16/01/2014 9,671,261 CHF 10,890,839 USD State Street (25,281) 0.00

16/01/2014 28,444,084 CHF 32,032,348 USD UBS (75,349) 0.00 16/01/2014 16,268,021 CHF 18,155,463 USD UBS 76,534 0.00 16/01/2014 1,804,238 EUR 2,792,072 AUD State Street (7,671) 0.00 16/01/2014 7,166,389 DKK 1,319,485 USD J.P. Morgan 2,990 0.00 16/01/2014 19,351,149 EUR 16,360,545 GBP Bank of Montreal (298,168) (0.01) 16/01/2014 1,515,558 EUR 2,208,328 CAD State Street 7,220 0.00 16/01/2014 12,001,870 EUR 17,386,508,979 KRW Deutsche Bank (14,893) 0.00 16/01/2014 140,754,709 EUR 193,246,221 USD Bank of Montreal 471,892 0.02 16/01/2014 36,234,713 HKD 3,404,407 EUR State Street (12,151) 0.00 16/01/2014 69,414,582 EUR 95,299,280 USD Citibank 234,179 0.01 16/01/2014 315,648,098 HKD 40,716,125 USD State Street (6,319) 0.00 16/01/2014 207,890,310 EUR 285,414,685 USD Commonwealth Bank 699,837 0.02 16/01/2014 446,554,814 JPY 3,167,068 EUR UBS (77,259) 0.00 16/01/2014 91,329,711 EUR 125,234,037 USD Deutsche Bank 418,835 0.01 16/01/2014 1,230,688,445 JPY 11,982,926 USD UBS (183,343) (0.02) 16/01/2014 10,535,278 EUR 14,425,114 USD Goldman Sachs 63,686 0.00 16/01/2014 195,099,921 USD 219,917,129 AUD Commonwealth Bank (1,086,324) (0.03) 16/01/2014 5,996,614 EUR 8,232,769 USD J.P. Morgan 20,217 0.00 16/01/2014 6,521,922 USD 7,351,461 AUD Deutsche Bank (36,271) 0.00 16/01/2014 119,481,974 EUR 163,990,290 USD State Street 436,854 0.01 16/01/2014 31,424,941 USD 22,936,947 EUR Goldman Sachs (124,706) 0.00 16/01/2014 20,446,160 EUR 28,018,223 USD UBS 106,952 0.00 16/01/2014 20,503,511 USD 14,884,798 EUR State Street (728) 0.00 16/01/2014 93,478,018 GBP 151,799,794 USD Bank of Montreal 2,073,125 0.06 16/01/2014 5,904,928 USD 3,636,286 GBP UBS (80,695) 0.00 16/01/2014 10,600,211 GBP 17,213,471 USD State Street 235,311 0.01 16/01/2014 19,574,416 USD 1,224,575,491 INR J.P. Morgan (77,566) 0.00 16/01/2014 9,891,343 GBP 16,205,630 USD UBS 115,567 0.00 16/01/2014 1,433,717 USD 4,372,223 PLN J.P. Morgan (11,690) 0.00 16/01/2014 29,103,223,404 KRW 27,561,305 USD UBS 107,304 0.00 16/01/2014 321,267,862 USD 10,778,028,277 RUB Bank of America (4,134,125) (0.12) 16/01/2014 887,919 PLN 212,070 EUR State Street 1,667 0.00 16/01/2014 38,054,755 USD 1,290,341,603 RUB UBS (790,618) (0.02) 16/01/2014 10,778,028,277 RUB 320,107,760 USD Bank of America 4,976,276 0.15 16/01/2014 21,155,404 USD 139,305,159 SEK State Street (356,333) (0.01) 16/01/2014 1,290,341,603 RUB 38,345,961 USD UBS 579,223 0.02 20/02/2014 38,136,071 USD 1,290,341,603 RUB UBS (566,340) (0.02) 16/01/2014 30,269,519 SEK 3,348,198 EUR State Street 66,206 0.00 20/02/2014 342,697,675 USD 11,611,339,524 RUB Bank of America (5,441,622) (0.16) 16/01/2014 172,801,648 SEK 26,243,223 USD J.P. Morgan 441,349 0.01 20/03/2014 385,498,801 USD 12,901,681,127 RUB Bank of America (1,393,545) (0.04) 16/01/2014 175,000,010 SEK 26,577,772 USD UBS 446,466 0.01 20/03/2014 12,382,373,462 RUB 372,662,332 USD Bank of America (608,278) (0.02) 16/01/2014 9,051,801 USD 21,311,560 BRL RBS 44,344 0.00 16/01/2014 10,796,905 USD 9,587,652 CHF J.P. Morgan 25,221 0.00 Unrealised Loss 16/01/2014 9,378,995 USD 72,710,986 HKD J.P. Morgan 1,346 0.00 on Forward Foreign Currency Exchange Contracts (15,615,519) (0.45) 16/01/2014 18,859,981 USD 228,243,485,329 IDR Citibank 202,135 0.01 16/01/2014 141,962,339 USD 14,580,284,566 JPY Bank of Montreal 2,170,306 0.06 CHF Hedged Share Class 16/01/2014 24,000,055 USD 2,465,045,648 JPY Deutsche Bank 366,130 0.01 10/01/2014 2,411,251 CHF 1,976,917 EUR J.P. Morgan (12,205) 0.00 16/01/2014 16,731,884 USD 1,718,419,701 JPY J.P. Morgan 256,027 0.01 16/01/2014 3,642,657 USD 47,339,420 MXN RBS 17,141 0.00 USD Hedged Share Class 16/01/2014 19,106,470 USD 39,210,106 TRY Bank of Montreal 680,717 0.02 10/01/2014 358,855,609 USD 260,988,990 EUR J.P. Morgan (486,197) (0.02) 16/01/2014 1,428,533 USD 42,221,731 TWD Deutsche Bank 8,833 0.00 16/01/2014 18,938,344 USD 196,990,330 ZAR J.P. Morgan 192,106 0.01 Unrealised Loss on NAV Hedged Share Classes 20/02/2014 12,901,681,127 RUB 387,205,316 USD Bank of America 1,382,638 0.04 Forward Foreign Currency Exchange Contracts (498,402) (0.02) 20/03/2014 519,307,665 RUB 15,586,634 USD Bank of America 5,379 0.00

Total Unrealised Loss Unrealised Gain on Forward Foreign Currency Exchange Contracts (16,113,921) (0.47) on Forward Foreign Currency Exchange Contracts 16,934,013 0.49

Net Unrealised Gain GBP Hedged Share Class on Forward Foreign Currency Exchange Contracts 9,185,221 0.26 10/01/2014 446,713,187 GBP 528,184,744 EUR J.P. Morgan 8,346,179 0.24

USD Hedged Share Class 10/01/2014 606,234 EUR 830,392 USD J.P. Morgan 3,430 0.00 10/01/2014 16,966,499 USD 12,300,911 EUR J.P. Morgan 15,520 0.00

Unrealised Gain on NAV Hedged Share Classes Forward Foreign Currency Exchange Contracts 8,365,129 0.24

Total Unrealised Gain on Forward Foreign Currency Exchange Contracts 25,299,142 0.73

The accompanying notes are an integral part of these financial statements. 161 Morgan Stanley Investment Funds 31 December 2013

Diversified Alpha Plus Fund

DERIVATIVES (continued)

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in Euro.

Total Return Swap Contracts Net unrealised gain/(loss) as at % of net Payment Made by the Fund Payment Received by the Fund Currency Notional amount Counterparty Maturity date 31 December 2013 assets

Total Return on Barclays EM Consumer Staples Custom basket USD/LIBOR/3M + -65.00bp USD (177,695,449) Barclays Bank 18/10/2014 1,417,765 0.04 Total Return on Goldman Sachs China Property Custom basket HKD/HIBOR/3M + -65.00bp HKD (407,049,284) Goldman Sachs 10/12/2014 1,380,079 0.04 Total Return on Goldman Sachs US Retail Custom basket USD/LIBOR/3M + -28.00bp USD (232,938,423) Goldman Sachs 16/08/2014 80,953 0.00 Total Return on MSCI China Banks HKD/HIBOR/3M + -25.00bp HKD (380,200,817) J.P. Morgan 21/11/2014 1,500,244 0.04 Total Return on MSCI US REIT INDEX USD/LIBOR/3M + -28.00bp USD (48,658,245) J.P. Morgan 08/07/2014 1,153,507 0.04

Unrealised Gain on Total Return Swap Contracts 5,532,548 0.16

Total Return on Bank of America Real Estate Investment Trust Custom basket USD/LIBOR/3M + -15.00bp USD (49,779,583) Bank of America 08/07/2014 (204,079) (0.01) Total Return on Bank of America Real Estate Investment Trust Custom basket USD/LIBOR/3M + -10.00bp USD (142,415,030) Bank of America 08/07/2014 (583,853) (0.02) Total Return on Bank of America EMU Quant Custom basket EUR/EURIBOR/3M + -28.00bp EUR (327,278,344) Bank of America 20/12/2014 (8,971,984) (0.26) Total Return on Barclays EM Consumer Staples Custom basket USD/LIBOR/3M + -65.00bp USD (49,599,869) Barclays Bank 18/10/2014 (803,058) (0.02) Total Return on Goldman Sachs Metals & Mining Custom basket USD/LIBOR/3M + -51.00bp USD (57,864,868) Goldman Sachs 21/11/2014 (710,716) (0.02) Total Return on Goldman Sachs EU Chemicals Custom basket EUR/EURIBOR/3M + -20.00bp EUR (23,655,789) Goldman Sachs 08/10/2014 (1,076,502) (0.03) Total Return on Goldman Sachs EU Chemicals Custom basket EUR/EURIBOR/3M + -10.00bp EUR (136,638,564) Goldman Sachs 08/10/2014 (10,677,903) (0.31) Total Return on Goldman Sachs India Banks Custom basket USD/LIBOR/3M + -45.00bp USD (88,675,116) Goldman Sachs 18/12/2014 (978,555) (0.03) Total Return on Goldman Sachs US Retail Custom basket USD/LIBOR/3M + -28.00bp USD (41,269,088) Goldman Sachs 16/08/2014 (490,101) (0.01) Total Return on Goldman Sachs US Dividend Custom basket USD/LIBOR/3M + -19.00bp USD (271,401,607) Goldman Sachs 19/11/2014 (2,360,980) (0.07) Total Return on JP Morgan Australian Banks Custom basket AUD/BBR/3M + -17.00bp AUD (129,518,581) J.P. Morgan 24/11/2014 (1,227,539) (0.03) Total Return on JP Morgan Global Machinery Custom basket USD/LIBOR/3M + -28.00bp USD (86,546,312) J.P. Morgan 21/11/2014 (2,443,176) (0.07) Total Return on MSCI China Banks HKD/HIBOR/3M + -25.00bp HKD (66,401,830) J.P. Morgan 21/11/2014 (51,877) 0.00 Total Return on MSCI Daily TR Europe Net Food Beverage & Tobacco USD/LIBOR/3M + -27.00bp USD (62,125,987) Bank of America 19/12/2014 (1,439,088) (0.04) Total Return on MSCI Daily TR Europe Net Food Beverage & Tobacco USD/LIBOR/3M + -22.00bp USD (347,179,934) J.P. Morgan 13/08/2014 (5,611,859) (0.16) Total Return on MSCI Daily TR Europe Net Household & Personal Products USD/LIBOR/3M + -39.00bp USD (38,337,494) J.P. Morgan 13/08/2014 (1,667,531) (0.06) Total Return on MSCI US REIT INDEX USD/LIBOR/3M + -20.00bp USD (16,405,871) J.P. Morgan 08/07/2014 (96,417) 0.00 Total Return on MSCI US REIT INDEX USD/LIBOR/3M + -28.00bp USD (37,884,141) J.P. Morgan 08/07/2014 (172,369) (0.01) Total Return on MSCI US REIT INDEX USD/LIBOR/3M + -32.00bp USD (44,341,239) J.P. Morgan 08/07/2014 (479,293) (0.01)

Unrealised Loss on Total Return Swap Contracts (40,046,880) (1.16)

Net Unrealised Loss on Total Return Swap Contracts (34,514,332) (1.00)

Cash of EUR 820,000 held as collateral by UBS in relation to OTC contracts. Cash of EUR 320,000 paid as collateral by Citibank in relation to OTC contracts. Cash of EUR 834,000 paid as collateral by Deutsche Bank in relation to OTC contracts. Cash of EUR 12,776,000 held as collateral by Goldman Sachs in relation to OTC contracts. Cash of EUR 14,203,000 held as collateral by Bank of America in relation to OTC contracts. Cash of EUR 221,000 paid as collateral by RBS in relation to OTC contracts. Cash of EUR 1,903,000 paid as collateral by Barclays Bank in relation to OTC contracts. Cash of EUR 2,577,736 held as collateral by J.P. Morgan in relation to OTC contracts.

Total Derivatives 20,474,622 0.59

Other Assets less Liabilities 459,737,326 13.36

Total Net Asset Value 3,442,760,952 100.00

(2) The country in brackets represents the country of incorporation of this security. (4) Managed by an affiliate of the Investment Adviser.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 162

Global Balanced Risk Control Fund of Funds

Investment aim Statement of investments

UCIs (including the Company’s Funds), ETFs, Market % of net Investments Holdings value assets futures, investment funds managed by the Mutual Funds - Equity Funds investment adviser or its affiliates and other Luxembourg Morgan Stanley Investment Funds - collective investment schemes. US Growth Fund ‘ZH’ (4) 1,801,216 75,452,957 9.98 Morgan Stanley Investment Funds - US Advantage Fund ‘Z’ (4) 1,566,832 56,468,617 7.47 Morgan Stanley Investment Funds - Eurozone Equity Alpha Fund ‘Z’ (4) 1,274,697 45,685,144 6.04 Morgan Stanley Investment Funds - European Equity Alpha Fund ‘Z’ (4) 1,030,954 38,238,072 5.06 Morgan Stanley Investment Funds - Asian Equity Fund ‘Z’ (4) 1,442,274 30,460,823 4.03 Morgan Stanley Investment Funds - Global Infrastructure Fund ‘Z’ (4) 776,868 26,390,196 3.49 Morgan Stanley Investment Funds - Global Property Fund ‘Z’ (4) 973,659 22,627,832 2.99 Morgan Stanley Investment Funds - Japanese Equity Fund ‘Z’ (4) 854,858 22,576,796 2.98 Morgan Stanley Investment Funds - Emerging Markets Equity Fund ‘Z’ (4) 854,495 15,218,563 2.01 Morgan Stanley Investment Funds - Emerging Europe Middle East and Africa Equity Fund ‘Z’ (4) 320,005 7,478,512 0.99

Total for Mutual Funds - Equity Funds 45.04

Mutual Funds - Bond Funds

Luxembourg Morgan Stanley Investment Funds - Short Maturity Euro Bond Fund ‘Z’ (4) 3,390,949 101,965,823 13.48 Morgan Stanley Investment Funds - Euro Corporate Bond Fund ‘ZD’ (4) 2,696,558 75,557,562 9.99 Morgan Stanley Investment Funds - Euro Strategic Bond Fund ‘ZD’ (4) 1,435,405 37,808,575 5.00 Morgan Stanley Investment Funds - Euro Corporate Bond Fund ‘Z’ (4) 815,804 30,266,341 4.00 Morgan Stanley Investment Funds - Emerging Markets Corporate Debt Fund ‘Z’ (4) 1,048,186 22,693,226 3.00 Morgan Stanley Investment Funds - Euro Bond Fund ‘Z’ (4) 550,159 18,908,953 2.50 Morgan Stanley Investment Funds - Global Fixed Income Opportunities Fund ‘Z’ (4) 701,997 15,156,111 2.01 Morgan Stanley Investment Funds - Global High Yield Bond Fund ‘Z’ (4) 594,287 15,136,495 2.00 Morgan Stanley Investment Funds - European Currencies High Yield Bond Fund ‘Z’ (4) 324,152 14,862,376 1.97

Total for Mutual Funds - Bond Funds 43.95

Mutual Funds - Liquidity Funds

Luxembourg Morgan Stanley Investment Funds - Euro Liquidity Fund ‘Z’ (4) 1,092,735 28,157,589 3.72

Total for Mutual Funds - Liquidity Funds 3.72

Please refer to the full prospectus for the Fund’s investment objective and policy. The accompanying notes are an integral part of these financial statements. 163 Morgan Stanley Investment Funds 31 December 2013

Global Balanced Risk Control Fund of Funds

Statement of investments (continued)

Transferable securities and money market instruments admitted to official exchange listing or dealt in on another regulated market. As at 31 December 2013, expressed in Euro.

Market % of net Investments Holdings value assets Mutual Funds - Exchange Traded Funds

Ireland iShares MSCI Korea 502,225 14,901,016 1.97

Total for Mutual Funds - Exchange Traded Funds 1.97

Total Investment Securities 716,011,579 94.68

DERIVATIVES

Over-the-counter (OTC) and exchange traded derivatives as at 31 December 2013, expressed in Euro.

Financial Futures Contracts

Net unrealised gain/(loss) as at Maturity Number of Notional 31 December % of net Description date contracts commitments Counterparty 2013 assets

S&P 500 EMINI Future 03/2014 168 11,218,186 Goldman Sachs 208,280 0.03 MINI MSCI Emerging Markets Index Future 03/2014 306 11,231,141 Goldman Sachs 245,723 0.03 Nikkei 225 Index Future 03/2014 473 26,543,690 Goldman Sachs 1,437,297 0.19

Unrealised Gain on Financial Futures Contracts 1,891,300 0.25

DJ Euro Stoxx 50 Index Future 03/2014 (122) (3,791,760) Goldman Sachs (183,000) (0.02)

Unrealised Loss on Financial Futures Contracts (183,000) (0.02)

Net Unrealised Gain on Financial Futures Contracts 45,201,257 1,708,300 0.23

Cash of EUR 2,960,591 held as collateral by Goldman Sachs in relation to financial futures contracts. Cash of EUR 105,417 paid as collateral to Goldman Sachs in relation to financial futures contracts.

Total Derivatives 1,708,300 0.23

Other Assets less Liabilities 38,502,713 5.09

Total Net Asset Value 756,222,592 100.00

(4) Managed by an affiliate of the Investment Adviser.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 164

Statement of assets and liabilities As at 31 December 2013

Emerging Europe, Asian Asia-Pacific Asian Middle East and Combined Equity Equity Property Africa Equity totals of all Fund Fund Fund Fund funds +

USD USD USD EUR USD

Assets Investment securities - at cost 247,467,760 103,471,040 345,926,751 158,739,342 36,020,541,785 Unrealised appreciation/(depreciation) 24,755,670 11,222,526 55,808,182 35,005,351 4,695,298,206

Investment securities 272,223,430 114,693,566 401,734,933 193,744,693 40,715,839,991

Cash at banks 101,027 490,964 324,224 3,457,198 937,040,744 Receivables for subscriptions 659,568 - 146,943 205,551 233,090,446 Time deposits - - - - 138,636,486 Unrealised gain on financial futures contracts - - - - 122,492,511 Receivables for investments sold 278,027 169,110 3,153,605 415,292 74,264,790 Unrealised gain on forward foreign currency exchange contracts 29,289 16,026 - - 50,317,617 Repurchase agreements - - - - 35,816,559 Unrealised gain on interest rate swap contracts - - - - 32,025,274 Options at market value - - - - 8,718,910 Unrealised gain on total return swap contracts - - - - 7,621,417 Unrealised gain on credit default swap contracts - - - - 6,147,032 Accrued income and other receivables 445,440 185,782 1,610,963 163,361 184,203,992

Total assets 273,736,781 115,555,448 406,970,668 197,986,095 42,546,215,769

Liabilities Payables for investments purchased 169,973 123,598 1,299,298 335,660 297,367,723 Payables for redemptions 126,075 1,365 826,321 465,289 84,974,767 Bank overdrafts - - - 32,389 68,457,376 Unrealised loss on total return swap contracts - - - - 55,166,979 Unrealised loss on financial futures contracts - - - - 49,371,718 Unrealised loss on forward foreign currency exchange contracts - 3 - - 27,484,243 Unrealised loss on interest rate swap contracts - - - - 6,387,727 Unrealised loss on credit default swap contracts - - - - 128,024 Distributions payable - - - - 32,687 Other payables and accrued expenses 468,553 174,264 700,717 530,727 56,290,940

Total liabilities 764,601 299,230 2,826,336 1,364,065 645,662,184

Net asset value 272,972,180 115,256,218 404,144,332 196,622,030 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. 165 Morgan Stanley Investment Funds 31 December 2013

Statement of assets and liabilities (continued) As at 31 December 2013

Emerging Emerging European Leaders Markets Equity European Combined Equity Equity Alpha Property totals of all Fund Fund Fund Fund funds +

USD USD EUR EUR USD

Assets Investment securities - at cost 212,048,038 1,480,397,781 687,933,205 163,855,795 36,020,541,785 Unrealised appreciation/(depreciation) (3,036,160) 149,565,400 168,426,741 6,415,494 4,695,298,206

Investment securities 209,011,878 1,629,963,181 856,359,946 170,271,289 40,715,839,991

Cash at banks 363,004 5,993,692 678,175 3,116,406 937,040,744 Receivables for subscriptions 1,960,010 946,808 2,429,285 321,765 233,090,446 Time deposits - - - - 138,636,486 Unrealised gain on financial futures contracts - - - - 122,492,511 Receivables for investments sold - 2,741,157 - 234,503 74,264,790 Unrealised gain on forward foreign currency exchange contracts 108,719 128,267 - - 50,317,617 Repurchase agreements - - - - 35,816,559 Unrealised gain on interest rate swap contracts - - - - 32,025,274 Options at market value - - - - 8,718,910 Unrealised gain on total return swap contracts - - - - 7,621,417 Unrealised gain on credit default swap contracts - - - - 6,147,032 Accrued income and other receivables 401,849 2,932,101 1,618,660 450,210 184,203,992

Total assets 211,845,460 1,642,705,206 861,086,066 174,394,173 42,546,215,769

Liabilities Payables for investments purchased - 4,754,659 564,256 - 297,367,723 Payables for redemptions 780,214 444,094 214,272 193,027 84,974,767 Bank overdrafts - 1,758,666 - - 68,457,376 Unrealised loss on total return swap contracts - - - - 55,166,979 Unrealised loss on financial futures contracts - - - - 49,371,718 Unrealised loss on forward foreign currency exchange contracts 1,182 - 9,827 - 27,484,243 Unrealised loss on interest rate swap contracts - - - - 6,387,727 Unrealised loss on credit default swap contracts - - - - 128,024 Distributions payable - - - - 32,687 Other payables and accrued expenses 539,750 2,730,064 935,366 334,138 56,290,940

Total liabilities 1,321,146 9,687,483 1,723,721 527,165 645,662,184

Net asset value 210,524,314 1,633,017,723 859,362,345 173,867,008 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 166

Statement of assets and liabilities (continued) As at 31 December 2013

Eurozone Frontier Emerging Equity Markets Global Global Combined Alpha Equity Advantage Brands totals of all Fund Fund (1) fund (2) Fund funds +

EUR USD USD USD USD

Assets Investment securities - at cost 229,284,088 38,211,553 3,408,246 7,044,947,772 36,020,541,785 Unrealised appreciation/(depreciation) 50,903,424 2,412,244 454,870 1,901,387,849 4,695,298,206

Investment securities 280,187,512 40,623,797 3,863,116 8,946,335,621 40,715,839,991

Cash at banks 679,591 2,079,074 118,978 7,617,068 937,040,744 Receivables for subscriptions 878,150 1,158,844 17,104 24,022 233,090,446 Time deposits - - - - 138,636,486 Unrealised gain on financial futures contracts - - - - 122,492,511 Receivables for investments sold - 532 - 18,450,187 74,264,790 Unrealised gain on forward foreign currency exchange contracts 117 38,520 - 5,856,110 50,317,617 Repurchase agreements - - - - 35,816,559 Unrealised gain on interest rate swap contracts - - - - 32,025,274 Options at market value - - 2,050 - 8,718,910 Unrealised gain on total return swap contracts - - - - 7,621,417 Unrealised gain on credit default swap contracts - - - - 6,147,032 Accrued income and other receivables 364,113 61,739 21,899 12,084,471 184,203,992

Total assets 282,109,483 43,962,506 4,023,147 8,990,367,479 42,546,215,769

Liabilities Payables for investments purchased - 935,709 6,314 - 297,367,723 Payables for redemptions 86,413 1,338 - 29,226,397 84,974,767 Bank overdrafts 227,257 198,701 - - 68,457,376 Unrealised loss on total return swap contracts - - - - 55,166,979 Unrealised loss on financial futures contracts - - - - 49,371,718 Unrealised loss on forward foreign currency exchange contracts 12,453 1,882 - 258,226 27,484,243 Unrealised loss on interest rate swap contracts - - - - 6,387,727 Unrealised loss on credit default swap contracts - - - - 128,024 Distributions payable - - - - 32,687 Other payables and accrued expenses 389,558 117,708 37,649 11,550,657 56,290,940

Total liabilities 715,681 1,255,338 43,963 41,035,280 645,662,184

Net asset value 281,393,802 42,707,168 3,979,184 8,949,332,199 41,900,553,585

(1) Fund commenced operations on 28 March 2013. (2) Fund commenced operations on 31 January 2013. + Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. 167 Morgan Stanley Investment Funds 31 December 2013

Statement of assets and liabilities (continued) As at 31 December 2013

Global Equity Global Global Global Combined Allocation Infrastructure Opportunity Property totals of all Fund Fund Fund Fund funds +

USD USD USD USD USD

Assets Investment securities - at cost 16,535,449 406,584,559 83,194,891 901,610,528 36,020,541,785 Unrealised appreciation/(depreciation) 3,627,041 55,449,853 21,482,501 81,481,279 4,695,298,206

Investment securities 20,162,490 462,034,412 104,677,392 983,091,807 40,715,839,991

Cash at banks 2,281,809 215,136 748,433 5,417,455 937,040,744 Receivables for subscriptions 130,882 919,763 465,418 1,788,612 233,090,446 Time deposits - - - - 138,636,486 Unrealised gain on financial futures contracts 154,946 - - - 122,492,511 Receivables for investments sold 50,909 913,417 459,292 2,568,668 74,264,790 Unrealised gain on forward foreign currency exchange contracts 22,751 191,336 17,790 19,430 50,317,617 Repurchase agreements - - - - 35,816,559 Unrealised gain on interest rate swap contracts - - - - 32,025,274 Options at market value - - 51,714 - 8,718,910 Unrealised gain on total return swap contracts - - - - 7,621,417 Unrealised gain on credit default swap contracts - - - - 6,147,032 Accrued income and other receivables 35,217 1,498,095 37,064 2,923,083 184,203,992

Total assets 22,839,004 465,772,159 106,457,103 995,809,055 42,546,215,769

Liabilities Payables for investments purchased 49,797 5,942,320 4,820,261 487,858 297,367,723 Payables for redemptions 50,365 1,067,774 - 1,509,434 84,974,767 Bank overdrafts - - - - 68,457,376 Unrealised loss on total return swap contracts - - - - 55,166,979 Unrealised loss on financial futures contracts 928 - - - 49,371,718 Unrealised loss on forward foreign currency exchange contracts 2,844 874 333 162 27,484,243 Unrealised loss on interest rate swap contracts - - - - 6,387,727 Unrealised loss on credit default swap contracts - - - - 128,024 Distributions payable - - - - 32,687 Other payables and accrued expenses 111,095 792,733 249,640 1,218,393 56,290,940

Total liabilities 215,029 7,803,701 5,070,234 3,215,847 645,662,184

Net asset value 22,623,975 457,968,458 101,386,869 992,593,208 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 168

Statement of assets and liabilities (continued) As at 31 December 2013

Latin Global Indian Japanese American Combined Quality Equity Equity Equity totals of all Fund (1) Fund Fund Fund funds +

USD USD JPY000’s USD USD

Assets Investment securities - at cost 500,762,587 105,210,511 12,383,425 525,899,418 36,020,541,785 Unrealised appreciation/(depreciation) 27,381,874 8,019,379 3,481,432 40,651,928 4,695,298,206

Investment securities 528,144,461 113,229,890 15,864,857 566,551,346 40,715,839,991

Cash at banks 12,139,311 3,784,467 379,078 277,400 937,040,744 Receivables for subscriptions 6,199,855 35,975 25,614 298,828 233,090,446 Time deposits - - - - 138,636,486 Unrealised gain on financial futures contracts - - - - 122,492,511 Receivables for investments sold - - - 120,830 74,264,790 Unrealised gain on forward foreign currency exchange contracts 44,843 - 2,120 - 50,317,617 Repurchase agreements - - - - 35,816,559 Unrealised gain on interest rate swap contracts - - - - 32,025,274 Options at market value - - - - 8,718,910 Unrealised gain on total return swap contracts - - - - 7,621,417 Unrealised gain on credit default swap contracts - - - - 6,147,032 Accrued income and other receivables 236,961 55,702 10,781 1,591,188 184,203,992

Total assets 546,765,431 117,106,034 16,282,450 568,839,592 42,546,215,769

Liabilities Payables for investments purchased 6,672,216 - - 1,258,824 297,367,723 Payables for redemptions 165,555 1,617,415 - 2,092,947 84,974,767 Bank overdrafts - 12,203 - - 68,457,376 Unrealised loss on total return swap contracts - - - - 55,166,979 Unrealised loss on financial futures contracts - - - - 49,371,718 Unrealised loss on forward foreign currency exchange contracts 1,537 - 16 - 27,484,243 Unrealised loss on interest rate swap contracts - - - - 6,387,727 Unrealised loss on credit default swap contracts - - - - 128,024 Distributions payable - - - - 32,687 Other payables and accrued expenses 668,312 333,460 23,808 1,225,500 56,290,940

Total liabilities 7,507,620 1,963,078 23,824 4,577,271 645,662,184

Net asset value 539,257,811 115,142,956 16,258,626 564,262,321 41,900,553,585

(1) Fund commenced operations on 1 August 2013. + Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. 169 Morgan Stanley Investment Funds 31 December 2013

Statement of assets and liabilities (continued) As at 31 December 2013

Emerging US US US Markets Combined Advantage Growth Property Corporate Debt totals of all Fund Fund Fund Fund funds +

USD USD USD USD USD

Assets Investment securities - at cost 3,316,914,615 1,140,678,785 454,310,451 369,336,729 36,020,541,785 Unrealised appreciation/(depreciation) 1,119,179,877 497,022,694 12,478,110 (6,511,730) 4,695,298,206

Investment securities 4,436,094,492 1,637,701,479 466,788,561 362,824,999 40,715,839,991

Cash at banks - 191,489 211,560 349,300 937,040,744 Receivables for subscriptions 23,017,044 11,967,779 811,883 1,761,917 233,090,446 Time deposits - - - - 138,636,486 Unrealised gain on financial futures contracts - - - - 122,492,511 Receivables for investments sold - - 830,804 - 74,264,790 Unrealised gain on forward foreign currency exchange contracts 1,812,656 741,273 - 218,824 50,317,617 Repurchase agreements - - - - 35,816,559 Unrealised gain on interest rate swap contracts - - - - 32,025,274 Options at market value 2,269,005 823,419 - - 8,718,910 Unrealised gain on total return swap contracts - - - - 7,621,417 Unrealised gain on credit default swap contracts - - - - 6,147,032 Accrued income and other receivables 2,481,040 277,323 3,026,854 5,243,973 184,203,992

Total assets 4,465,674,237 1,651,702,762 471,669,662 370,399,013 42,546,215,769

Liabilities Payables for investments purchased 91,143,180 28,527,577 - - 297,367,723 Payables for redemptions 6,296,778 1,778,360 2,654,901 965,662 84,974,767 Bank overdrafts 2,531,994 1,008,244 - - 68,457,376 Unrealised loss on total return swap contracts - - - - 55,166,979 Unrealised loss on financial futures contracts - - - - 49,371,718 Unrealised loss on forward foreign currency exchange contracts 7,993 3,597 - 14,738 27,484,243 Unrealised loss on interest rate swap contracts - - - - 6,387,727 Unrealised loss on credit default swap contracts - - - - 128,024 Distributions payable - - - - 32,687 Other payables and accrued expenses 5,205,955 2,047,788 768,619 758,272 56,290,940

Total liabilities 105,185,900 33,365,566 3,423,520 1,738,672 645,662,184

Net asset value 4,360,488,337 1,618,337,196 468,246,142 368,660,341 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 170

Statement of assets and liabilities (continued) As at 31 December 2013

Euro Emerging Emerging Corporate Markets Markets Euro Bond Combined Debt Domestic Debt Bond (ex Financials) totals of all Fund Fund Fund Fund funds +

USD USD EUR EUR USD

Assets Investment securities - at cost 519,110,451 481,202,629 228,498,081 65,317,107 36,020,541,785 Unrealised appreciation/(depreciation) (18,570,063) (45,460,193) 10,254,217 1,623,719 4,695,298,206

Investment securities 500,540,388 435,742,436 238,752,298 66,940,826 40,715,839,991

Cash at banks 583,492 973,402 630,858 537,431 937,040,744 Receivables for subscriptions 674,192 365,981 978,042 - 233,090,446 Time deposits - - - - 138,636,486 Unrealised gain on financial futures contracts 612,016 981,094 91,120 102,822 122,492,511 Receivables for investments sold - 879,747 - - 74,264,790 Unrealised gain on forward foreign currency exchange contracts 866,479 260,127 - 1,544 50,317,617 Repurchase agreements - - - - 35,816,559 Unrealised gain on interest rate swap contracts - - - - 32,025,274 Options at market value - - - - 8,718,910 Unrealised gain on total return swap contracts - - - - 7,621,417 Unrealised gain on credit default swap contracts - - 80,850 - 6,147,032 Accrued income and other receivables 7,238,826 7,598,342 4,228,005 1,399,982 184,203,992

Total assets 510,515,393 446,801,129 244,761,173 68,982,605 42,546,215,769

Liabilities Payables for investments purchased - - - - 297,367,723 Payables for redemptions 3,269,544 2,424,548 92,398 - 84,974,767 Bank overdrafts 88,357 65,039 - - 68,457,376 Unrealised loss on total return swap contracts - - - - 55,166,979 Unrealised loss on financial futures contracts - - 206,820 17,800 49,371,718 Unrealised loss on forward foreign currency exchange contracts 5,328 324,773 - 21,605 27,484,243 Unrealised loss on interest rate swap contracts - - - - 6,387,727 Unrealised loss on credit default swap contracts - - - - 128,024 Distributions payable - - - - 32,687 Other payables and accrued expenses 1,042,210 1,119,580 375,641 80,029 56,290,940

Total liabilities 4,405,439 3,933,940 674,859 119,434 645,662,184

Net asset value 506,109,954 442,867,189 244,086,314 68,863,171 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. 171 Morgan Stanley Investment Funds 31 December 2013

Statement of assets and liabilities (continued) As at 31 December 2013

Euro Euro European Corporate Strategic Currencies High Global Combined Bond Bond Yield Bond Bond totals of all Fund Fund Fund Fund funds +

EUR EUR EUR USD USD

Assets Investment securities - at cost 1,938,971,822 490,608,102 660,260,650 457,983,655 36,020,541,785 Unrealised appreciation/(depreciation) 82,305,633 13,179,262 31,618,226 2,674,913 4,695,298,206

Investment securities 2,021,277,455 503,787,364 691,878,876 460,658,568 40,715,839,991

Cash at banks 87,966,801 4,233,784 29,854,091 3,721,904 937,040,744 Receivables for subscriptions 22,089,939 2,089,799 3,379,682 347,855 233,090,446 Time deposits - - - 92,452,566 138,636,486 Unrealised gain on financial futures contracts 6,315,244 1,884,723 636,119 666,639 122,492,511 Receivables for investments sold - - - 33,898,952 74,264,790 Unrealised gain on forward foreign currency exchange contracts 64,678 247,646 - 1,260,935 50,317,617 Repurchase agreements - - - - 35,816,559 Unrealised gain on interest rate swap contracts 13,284,234 4,488,878 - 5,272,595 32,025,274 Options at market value - - - - 8,718,910 Unrealised gain on total return swap contracts - - - - 7,621,417 Unrealised gain on credit default swap contracts 1,272,662 - 2,645,940 484,511 6,147,032 Accrued income and other receivables 33,284,995 8,564,375 13,031,220 5,512,971 184,203,992

Total assets 2,185,556,008 525,296,569 741,425,928 604,277,496 42,546,215,769

Liabilities Payables for investments purchased - - - 55,514,609 297,367,723 Payables for redemptions 4,745,915 708,927 1,608,078 1,079,437 84,974,767 Bank overdrafts - 3,692,002 145,185 49,172,457 68,457,376 Unrealised loss on total return swap contracts - - - - 55,166,979 Unrealised loss on financial futures contracts 2,560,465 1,317,712 - 852,483 49,371,718 Unrealised loss on forward foreign currency exchange contracts 530,291 313,526 975,060 1,108,531 27,484,243 Unrealised loss on interest rate swap contracts 4,214,548 192,512 - 198,841 6,387,727 Unrealised loss on credit default swap contracts - 17,864 - 65,538 128,024 Distributions payable - - - - 32,687 Other payables and accrued expenses 1,968,390 751,464 923,475 637,715 56,290,940

Total liabilities 14,019,609 6,994,007 3,651,798 108,629,611 645,662,184

Net asset value 2,171,536,399 518,302,562 737,774,130 495,647,885 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 172

Statement of assets and liabilities (continued) As at 31 December 2013

Global Global Convertible Global Fixed Income Global High Combined Bond Credit Opportunities Yield Bond totals of all Fund Fund Fund Fund funds +

USD USD USD USD USD

Assets Investment securities - at cost 904,947,501 69,452,111 196,000,466 235,826,524 36,020,541,785 Unrealised appreciation/(depreciation) 32,577,693 740,353 3,712,819 7,161,174 4,695,298,206

Investment securities 937,525,194 70,192,464 199,713,285 242,987,698 40,715,839,991

Cash at banks 168,348 3,096,339 16,986,415 6,263,196 937,040,744 Receivables for subscriptions 5,553,210 - 1,684,727 4,399,884 233,090,446 Time deposits - - - - 138,636,486 Unrealised gain on financial futures contracts - 72,567 222,461 6,672 122,492,511 Receivables for investments sold 7,379,589 - - 1,474,832 74,264,790 Unrealised gain on forward foreign currency exchange contracts 2,030,400 77,614 544,330 349,867 50,317,617 Repurchase agreements - - - - 35,816,559 Unrealised gain on interest rate swap contracts - 460,779 1,656,124 - 32,025,274 Options at market value 5,572,722 - - - 8,718,910 Unrealised gain on total return swap contracts - - - - 7,621,417 Unrealised gain on credit default swap contracts - 28,423 124,613 - 6,147,032 Accrued income and other receivables 4,318,202 1,093,023 2,802,009 4,611,267 184,203,992

Total assets 962,547,665 75,021,209 223,733,964 260,093,416 42,546,215,769

Liabilities Payables for investments purchased - - - 5,330,938 297,367,723 Payables for redemptions 1,437,032 - 293,660 108,825 84,974,767 Bank overdrafts 6,123,603 - - - 68,457,376 Unrealised loss on total return swap contracts - - - - 55,166,979 Unrealised loss on financial futures contracts - 125,832 331,264 - 49,371,718 Unrealised loss on forward foreign currency exchange contracts 581,497 63,020 292,516 40,197 27,484,243 Unrealised loss on interest rate swap contracts - 28,174 85,581 - 6,387,727 Unrealised loss on credit default swap contracts - 9,689 28,188 - 128,024 Distributions payable - - - - 32,687 Other payables and accrued expenses 1,156,849 123,320 473,876 492,583 56,290,940

Total liabilities 9,298,981 350,035 1,505,085 5,972,543 645,662,184

Net asset value 953,248,684 74,671,174 222,228,879 254,120,873 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. 173 Morgan Stanley Investment Funds 31 December 2013

Statement of assets and liabilities (continued) As at 31 December 2013

Global Global Mortgage Premier Short Maturity Euro Combined Securities Credit Euro Bond Liquidity totals of all Fund Fund Fund Fund funds +

USD USD EUR EUR USD

Assets Investment securities - at cost 277,561,289 10,223,814 540,418,389 100,779,856 36,020,541,785 Unrealised appreciation/(depreciation) 1,349,478 (438,523) 4,594,806 - 4,695,298,206

Investment securities 278,910,767 9,785,291 545,013,195 100,779,856 40,715,839,991

Cash at banks 18,850,241 433,317 846,234 11,991 937,040,744 Receivables for subscriptions 180,083 - 3,448,243 - 233,090,446 Time deposits - - - 33,525,887 138,636,486 Unrealised gain on financial futures contracts - 18,517 937,910 - 122,492,511 Receivables for investments sold - - - - 74,264,790 Unrealised gain on forward foreign currency exchange contracts 370,318 7,893 - - 50,317,617 Repurchase agreements - - - 26,000,000 35,816,559 Unrealised gain on interest rate swap contracts - 152,248 - - 32,025,274 Options at market value - - - - 8,718,910 Unrealised gain on total return swap contracts - - - - 7,621,417 Unrealised gain on credit default swap contracts - - - - 6,147,032 Accrued income and other receivables 1,101,355 158,227 8,270,647 89,108 184,203,992

Total assets 299,412,764 10,555,493 558,516,229 160,406,842 42,546,215,769

Liabilities Payables for investments purchased 9,201,414 - - 7,995,919 297,367,723 Payables for redemptions 633,464 - 1,202,268 - 84,974,767 Bank overdrafts - - - - 68,457,376 Unrealised loss on total return swap contracts - - - - 55,166,979 Unrealised loss on financial futures contracts 1,298,285 14,646 378,880 - 49,371,718 Unrealised loss on forward foreign currency exchange contracts 1,566 9,336 - - 27,484,243 Unrealised loss on interest rate swap contracts - 4,142 - - 6,387,727 Unrealised loss on credit default swap contracts - - - - 128,024 Distributions payable - - - - 32,687 Other payables and accrued expenses 348,166 75,856 642,470 173,402 56,290,940

Total liabilities 11,482,895 103,980 2,223,618 8,169,321 645,662,184

Net asset value 287,929,869 10,451,513 556,292,611 152,237,521 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 174

Statement of assets and liabilities (continued) As at 31 December 2013

Global Absolute US Dollar Diversified Balanced Return Combined Liquidity Alpha Plus Risk Control Currency totals of all Fund Fund Fund of Funds Fund (1) funds +

USD EUR EUR EUR USD

Assets Investment securities - at cost 4,217,821,115 2,876,826,942 689,410,603 - 36,020,541,785 Unrealised appreciation/(depreciation) - 85,722,062 26,600,976 - 4,695,298,206

Investment securities 4,217,821,115 2,962,549,004 716,011,579 - 40,715,839,991

Cash at banks 244,548 438,128,544 39,153,139 29,068 937,040,744 Receivables for subscriptions - 76,911,898 8,731,733 - 233,090,446 Time deposits - - - - 138,636,486 Unrealised gain on financial futures contracts - 75,074,547 1,891,300 - 122,492,511 Receivables for investments sold - - - - 74,264,790 Unrealised gain on forward foreign currency exchange contracts - 25,299,142 - - 50,317,617 Repurchase agreements - - - - 35,816,559 Unrealised gain on interest rate swap contracts - - - - 32,025,274 Options at market value - - - - 8,718,910 Unrealised gain on total return swap contracts - 5,532,548 - - 7,621,417 Unrealised gain on credit default swap contracts - - - - 6,147,032 Accrued income and other receivables 2,023,750 9,792,281 403,581 - 184,203,992

Total assets 4,220,089,413 3,593,287,964 766,191,332 29,068 42,546,215,769

Liabilities Payables for investments purchased - 49,997,556 7,473,791 - 297,367,723 Payables for redemptions - 9,007,129 639,445 - 84,974,767 Bank overdrafts - 1,240,774 105,387 - 68,457,376 Unrealised loss on total return swap contracts - 40,046,880 - - 55,166,979 Unrealised loss on financial futures contracts - 29,270,814 183,000 - 49,371,718 Unrealised loss on forward foreign currency exchange contracts - 16,113,921 - - 27,484,243 Unrealised loss on interest rate swap contracts - - - - 6,387,727 Unrealised loss on credit default swap contracts - - - - 128,024 Distributions payable 32,687 - - - 32,687 Other payables and accrued expenses 2,226,797 4,849,938 1,567,117 29,068 56,290,940

Total liabilities 2,259,484 150,527,012 9,968,740 29,068 645,662,184

Net asset value 4,217,829,929 3,442,760,952 756,222,592 - 41,900,553,585

(1) Fund closed on 8 March 2013. + Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. 175 Morgan Stanley Investment Funds 31 December 2013

Statement of changes in number of shares For the year ended 31 December 2013

Shares at the start Number of shares Number of shares Shares at the end of the year issued redeemed of the year

Asian Equity Fund (USD) Share Class A 1,020,755 206,761 (369,503) 858,013 Share Class B 1,196,439 149,887 (515,869) 830,457 Share Class C 3,565 5,145 (56) 8,654 Share Class I 1,824,050 79,486 (380,593) 1,522,943 Share Class Z 2,449,668 5,252,590 (3,201,236) 4,501,022

Asia-Pacific Equity Fund (USD) Share Class A 6,360 19,375 (11,846) 13,889 Share Class AH (EUR) 1,571 6,968 (8,539) - Share Class B 79,562 78,251 (46,521) 111,292 Share Class BH (EUR) 53,156 13,515 (15,360) 51,311 Share Class C 400 - - 400 Share Class N 4,353,751 - - 4,353,751 Share Class Z 400 - - 400

Asian Property Fund (USD) Share Class A 12,667,435 5,204,220 (8,596,995) 9,274,660 Share Class AX 332,937 93,518 (209,822) 216,633 Share Class B 2,171,293 414,894 (1,133,157) 1,453,030 Share Class I 10,889,607 2,407,554 (6,055,639) 7,241,522 Share Class IX 1,644,269 48,108 (187,444) 1,504,933 Share Class Z 788,731 344,668 (820,389) 313,010

Emerging Europe, Middle East and Africa Equity Fund (EUR) Share Class A 1,867,196 225,427 (637,659) 1,454,964 Share Class AX 42,842 5,324 (4,784) 43,382 Share Class B 1,528,346 105,996 (488,416) 1,145,926 Share Class C 24,497 5,411 (12,029) 17,879 Share Class I 51,439 3,853 (15,260) 40,032 Share Class Z 153,700 1,832,643 (923,537) 1,062,806

Emerging Leaders Equity Fund (USD) Share Class A 119,719 2,489,454 (850,781) 1,758,392 Share Class AH (EUR) 97,872 665,483 (208,195) 555,160 Share Class AX* - 164,829 - 164,829 Share Class B 235,022 891,597 (147,953) 978,666 Share Class BH (EUR) 217,353 749,217 (192,682) 773,888 Share Class C 16,224 418,267 (57,470) 377,021 Share Class CH (EUR) 320 101,496 (12,732) 89,084 Share Class I 4,000 518,588 (61,649) 460,939 Share Class Z 945,597 1,312,417 (512,301) 1,745,713 Share Class ZH (EUR)* - 260,628 (32,178) 228,450

Emerging Markets Equity Fund (USD) Share Class A 2,465,045 989,991 (950,360) 2,504,676 Share Class B 2,419,397 412,253 (982,213) 1,849,437 Share Class C 40,802 53,562 (44,230) 50,134 Share Class I 6,342,992 474,198 (1,386,687) 5,430,503 Share Class N 9,678,020 3,431,941 (628,798) 12,481,163 Share Class Z 18,505,260 19,316,276 (13,661,862) 24,159,674

European Equity Alpha Fund (EUR) Share Class A 3,817,958 1,566,500 (1,177,559) 4,206,899 Share Class AH (USD)* - 268,694 (1,473) 267,221 Share Class AX 308 - (308) - Share Class B 1,148,616 748,749 (501,061) 1,396,304 Share Class C 36,142 64,809 (14,808) 86,143 Share Class I 626,375 1,458,926 (552,513) 1,532,788 Share Class Z 10,244,379 9,396,664 (6,618,307) 13,022,736 Share Class Z (GBP)* - 2,759,601 (76,628) 2,682,973 Share Class ZH (GBP) 2,298,263 5,129 (2,303,392) -

European Property Fund (EUR) Share Class A 4,378,240 3,315,603 (4,107,265) 3,586,578 Share Class AX* - 224,529 (91,542) 132,987 Share Class B 768,798 198,366 (370,692) 596,472 Share Class I 1,595,765 849,969 (1,394,502) 1,051,232 Share Class IX 39,251 - (39,251) - Share Class Z 2,575,638 331,491 (1,524,188) 1,382,941

* Share Class was launched during the year. Morgan Stanley Investment Funds 31 December 2013 176

Statement of changes in number of shares (continued) For the year ended 31 December 2013

Shares at the start Number of shares Number of shares Shares at the end of the year issued redeemed of the year

Eurozone Equity Alpha Fund (EUR) Share Class A 5,307,501 3,247,301 (4,297,694) 4,257,108 Share Class AH (USD)* - 228,349 (400) 227,949 Share Class B 1,843,357 2,383,720 (828,292) 3,398,785 Share Class I 300,722 3,582,937 (3,047,763) 835,896 Share Class Z 3,150,305 5,530,160 (3,334,675) 5,345,790

Frontier Emerging Markets Equity Fund (USD) (1) Share Class A - 38,862 (6,573) 32,289 Share Class AH (EUR) - 34,601 - 34,601 Share Class B - 52,066 (480) 51,586 Share Class BH (EUR) - 228,364 - 228,364 Share Class C - 16,804 - 16,804 Share Class CH (EUR) - 14,089 - 14,089 Share Class I - 55,069 (808) 54,261 Share Class Z - 882,719 (1,120) 881,599

Global Advantage Fund (USD) (2) Share Class A - 12,385 - 12,385 Share Class B - 40,586 - 40,586 Share Class C - 8,108 - 8,108 Share Class I - 4,085 - 4,085 Share Class Z - 64,000 - 64,000

Global Brands Fund (USD) Share Class A 35,211,629 111,357 (12,138,972) 23,184,014 Share Class AH (CHF) 1,677,332 - (497,616) 1,179,716 Share Class AH (EUR) 7,459,567 38,783 (2,350,335) 5,148,015 Share Class AHX (EUR) 756,434 147 (42,826) 713,755 Share Class AX 4,333,716 4,024 (1,651,597) 2,686,143 Share Class B 7,825,135 63,961 (1,523,708) 6,365,388 Share Class BH (EUR) 6,225,544 42,823 (1,295,981) 4,972,386 Share Class BHX (EUR) 498,011 4,141 (84,403) 417,749 Share Class BX 806,082 132 (121,869) 684,345 Share Class C 4,715,918 3,592 (409,496) 4,310,014 Share Class CH (EUR) 223,511 468 (72,191) 151,788 Share Class I 15,710,256 45,767 (5,273,283) 10,482,740 Share Class Z 63,711,831 41,071,999 (38,897,358) 65,886,472 Share Class ZH (EUR) 9,084,794 8,060,827 (5,680,584) 11,465,037 Share Class ZH (GBP) 3,633,527 524,605 (983,472) 3,174,660 Share Class ZX 9,270,670 2,802,473 (4,880,469) 7,192,674

Global Equity Allocation Fund (USD) Share Class A 6,409 57,624 (30,609) 33,424 Share Class B 17,233 130,144 (14,310) 133,067 Share Class Z 472,000 1,087 - 473,087

Global Infrastructure Fund (USD) Share Class A 1,530,398 1,712,859 (763,855) 2,479,402 Share Class AH (EUR) 304,583 315,871 (161,069) 459,385 Share Class B 1,084,979 567,287 (330,630) 1,321,636 Share Class BH (EUR) 966,107 329,189 (339,880) 955,416 Share Class C 16,589 121,255 (29,518) 108,326 Share Class CH (EUR) 320 35,580 (1,760) 34,140 Share Class I 119,888 132,913 (97,402) 155,399 Share Class Z 1,278,166 4,198,616 (2,388,661) 3,088,121 Share Class ZH (EUR) 207,813 369,553 (132,247) 445,119 Share Class ZX* - 855,397 - 855,397

Global Opportunity Fund (USD) Share Class A 64,604 244,048 (111,975) 196,677 Share Class AH (EUR) 7,894 180,340 (84,131) 104,103 Share Class B 61,690 316,210 (99,295) 278,605 Share Class BH (EUR) 93,236 93,272 (79,972) 106,536 Share Class C 362 8,910 (682) 8,590 Share Class I 100,975 8,076 - 109,051 Share Class Z 1,808,622 655,110 (609,821) 1,853,911

(1) Fund commenced operations on 28 March 2013. (2) Fund commenced operations on 31 January 2013. * Share Class was launched during the year. 177 Morgan Stanley Investment Funds 31 December 2013

Statement of changes in number of shares (continued) For the year ended 31 December 2013

Shares at the start Number of shares Number of shares Shares at the end of the year issued redeemed of the year

Global Property Fund (USD) Share Class A 4,807,106 5,053,989 (3,934,774) 5,926,321 Share Class AH (EUR) 48,503 131,063 (67,456) 112,110 Share Class B 896,502 326,243 (419,524) 803,221 Share Class BH (EUR) 252,214 60,820 (169,417) 143,617 Share Class C 133,580 269,196 (147,522) 255,254 Share Class CH (EUR) 387 9,236 (2,362) 7,261 Share Class I 2,113,881 1,570,465 (1,662,029) 2,022,317 Share Class IX 151,764 88,557 (32,019) 208,302 Share Class Z 17,442,765 16,998,322 (11,194,961) 23,246,126

Global Quality Fund (USD) (1) Share Class A - 9,302,029 (116,272) 9,185,757 Share Class AH (EUR) - 242,238 (10,170) 232,068 Share Class AH (SGD) - 500 - 500 Share Class AX - 22,177 (400) 21,777 Share Class B - 557,359 (132,562) 424,797 Share Class BH (EUR) - 337,513 (119,291) 218,222 Share Class C - 391,649 (5,381) 386,268 Share Class CH (EUR) - 26,212 (3,011) 23,201 Share Class I - 2,187,136 (6,222) 2,180,914 Share Class Z - 7,064,211 (115,665) 6,948,546 Share Class ZH (EUR) - 54,759 - 54,759

Indian Equity Fund (USD) Share Class A 2,705,742 848,688 (1,662,909) 1,891,521 Share Class B 1,782,909 208,960 (689,044) 1,302,825 Share Class C 6,144 2,987 (2,814) 6,317 Share Class I 51,655 491,045 (245,485) 297,215 Share Class N* - 1,889,876 (738,284) 1,151,592 Share Class Z 166,829 243,835 (270,301) 140,363

Japanese Equity Fund (JPY) Share Class A 259,830 568,412 (535,865) 292,377 Share Class AH (USD)* - 11,887 (400) 11,487 Share Class B 55,801 201,843 (66,342) 191,302 Share Class C 2,308 6,092 (3,635) 4,765 Share Class I 63,958 12,391 (981) 75,368 Share Class Z 1,171,127 3,816,449 (1,318,369) 3,669,207 Share Class ZH (EUR) 969,342 237,935 (1,195,360) 11,917 Share Class ZH (USD)* - 400 (400) -

Latin American Equity Fund (USD) Share Class A 9,167,198 1,488,344 (2,793,251) 7,862,291 Share Class B 1,058,471 77,957 (498,169) 638,259 Share Class C 148,457 134,990 (163,920) 119,527 Share Class I 925,870 438,487 (706,038) 658,319 Share Class Z 1,508,348 821,353 (2,070,981) 258,720

US Advantage Fund (USD) Share Class A 29,834,271 20,328,485 (22,590,872) 27,571,884 Share Class AH (EUR) 7,540,744 3,480,832 (8,576,789) 2,444,787 Share Class B 3,816,296 2,199,800 (2,034,624) 3,981,472 Share Class BH (EUR) 938,924 532,228 (566,967) 904,185 Share Class C 1,331,465 937,564 (298,610) 1,970,419 Share Class I 7,091,667 7,833,400 (6,058,645) 8,866,422 Share Class N 2,167,667 - (2,167,667) - Share Class Z 38,920,658 19,703,878 (31,853,324) 26,771,212 Share Class ZH (EUR) 7,438,953 9,330,691 (7,476,294) 9,293,350

US Growth Fund (USD) Share Class A 8,864,821 6,650,059 (6,265,170) 9,249,710 Share Class AH (EUR) 1,356,491 708,381 (802,312) 1,262,560 Share Class AX 949,829 89,988 (534,984) 504,833 Share Class B 1,354,267 870,593 (511,964) 1,712,896 Share Class BH (EUR) 341,127 176,681 (330,795) 187,013 Share Class C 127,544 213,318 (33,522) 307,340 Share Class CH (EUR) 320 4,780 (1,267) 3,833 Share Class I 2,381,003 2,762,543 (2,451,950) 2,691,596 Share Class IX 1,303,731 455,506 (420,196) 1,339,041 Share Class Z 6,931,591 14,858,748 (14,576,272) 7,214,067 Share Class ZH (EUR) 343,498 10,337,180 (5,750,127) 4,930,551

(1) Fund commenced operations on 1 August 2013. * Share Class was launched during the year. Morgan Stanley Investment Funds 31 December 2013 178

Statement of changes in number of shares (continued) For the year ended 31 December 2013

Shares at the start Number of shares Number of shares Shares at the end of the year issued redeemed of the year

US Property Fund (USD) Share Class A 5,531,915 5,872,694 (5,349,278) 6,055,331 Share Class B 392,463 495,659 (377,868) 510,254 Share Class I 680,605 959,521 (833,124) 807,002 Share Class Z 2,271,130 2,196,035 (2,923,582) 1,543,583

Emerging Markets Corporate Debt Fund (USD) Share Class A 2,171,677 1,841,415 (2,072,873) 1,940,219 Share Class AH (EUR) 939,450 1,348,662 (907,998) 1,380,114 Share Class AHX (EUR) 109,543 113,324 (76,439) 146,428 Share Class AX 234,209 358,704 (117,969) 474,944 Share Class B 1,070,894 700,952 (668,096) 1,103,750 Share Class BH (EUR) 627,579 526,681 (524,511) 629,749 Share Class BHX (EUR) 784,213 609,053 (489,327) 903,939 Share Class BX 636,574 446,933 (320,566) 762,941 Share Class C 144,665 636,710 (133,240) 648,135 Share Class CH (EUR) 320 16,896 (4,178) 13,038 Share Class I* - 29,317 (3,756) 25,561 Share Class Z 910,469 7,265,711 (4,542,033) 3,634,147

Emerging Markets Debt Fund (USD) Share Class A 2,739,285 706,146 (2,160,379) 1,285,052 Share Class AH (EUR) 1,113,086 415,270 (1,162,519) 365,837 Share Class AHX (EUR) 67,743 43,717 (35,273) 76,187 Share Class ARM 3,216,800 1,562,105 (2,691,730) 2,087,175 Share Class AX 112,065 38,133 (48,824) 101,374 Share Class B 2,292,785 232,174 (1,205,449) 1,319,510 Share Class BH (EUR) 1,697,236 269,189 (981,372) 985,053 Share Class BHX (EUR) 527,046 289,963 (282,472) 534,537 Share Class BX 756,850 388,659 (342,109) 803,400 Share Class C 73,919 21,513 (44,376) 51,056 Share Class CH (EUR) 320 2,389 (504) 2,205 Share Class I 571,780 183,908 (272,669) 483,019 Share Class NH (EUR) 400,000 - - 400,000 Share Class S* - 948,482 (279,011) 669,471 Share Class Z 3,366,264 2,132,158 (4,100,388) 1,398,034 Share Class ZH (EUR) 432,752 303,075 (581,589) 154,238 Share Class ZHX (GBP) 830,787 183,583 (163,018) 851,352

Emerging Markets Domestic Debt Fund (USD) Share Class A 4,096,341 1,632,937 (3,184,135) 2,545,143 Share Class AH (EUR) 152,548 220,477 (266,145) 106,880 Share Class AHX (EUR) 26,526 90,585 (51,239) 65,872 Share Class ARM 159,757 689,541 (539,771) 309,527 Share Class AX 1,608,077 118,605 (1,522,282) 204,400 Share Class B 6,206,450 1,002,605 (2,954,062) 4,254,993 Share Class BH (EUR) 1,593,255 420,622 (876,685) 1,137,192 Share Class BHX (EUR) 380,770 427,880 (308,865) 499,785 Share Class BX 726,340 904,699 (364,179) 1,266,860 Share Class C 416,359 26,787 (256,176) 186,970 Share Class CH (EUR) 320 19,765 (18,818) 1,267 Share Class I 912,356 720,246 (1,531,238) 101,364 Share Class Z 3,962,267 4,010,090 (7,020,211) 952,146 Share Class ZH (EUR) 2,394,676 698,780 (2,779,462) 313,994 Share Class ZX 2,227,199 2,602,028 (1,292,113) 3,537,114

Euro Bond Fund (EUR) Share Class A 7,649,005 2,116,603 (5,995,235) 3,770,373 Share Class B 5,198,319 888,523 (2,509,673) 3,577,169 Share Class C 65,995 19,178 (10,872) 74,301 Share Class I 1,697,907 3,234,555 (1,986,006) 2,946,456 Share Class Z 15,139,156 5,301,420 (17,556,357) 2,884,219

Euro Corporate Bond (ex Financials) Fund (EUR) Share Class A 99,581 53,214 (95,371) 57,424 Share Class AX 2,549 9,639 (12,188) - Share Class N 2,878,893 - (562,000) 2,316,893 Share Class Z 1,064,518 37,239 (1,096,529) 5,228

* Share Class was launched during the year. 179 Morgan Stanley Investment Funds 31 December 2013

Statement of changes in number of shares (continued) For the year ended 31 December 2013

Shares at the start Number of shares Number of shares Shares at the end of the year issued redeemed of the year

Euro Corporate Bond Fund (EUR) Share Class A 9,643,090 4,504,744 (7,161,671) 6,986,163 Share Class AD 5,388,595 1,897,512 (5,678,119) 1,607,988 Share Class ADX 105,895 237,735 (70,264) 273,366 Share Class AX 2,891,474 577,840 (1,521,541) 1,947,773 Share Class B 4,560,189 940,875 (1,920,267) 3,580,797 Share Class BD 1,915,561 285,146 (784,974) 1,415,733 Share Class BDX 1,115,224 303,639 (356,261) 1,062,602 Share Class BH (USD)* - 1,049,358 (138,728) 910,630 Share Class BX 1,534,775 832,281 (564,407) 1,802,649 Share Class C 51,427 146,217 (55,818) 141,826 Share Class CD 7,579 22,541 (4,870) 25,250 Share Class I 4,234,770 2,256,132 (4,266,715) 2,224,187 Share Class ID* - 1,898,541 (33,164) 1,865,377 Share Class IX* - 584,680 (49,615) 535,065 Share Class NX 82,402 - (82,402) - Share Class S 2,691,278 829,295 - 3,520,573 Share Class Z 8,186,415 21,863,598 (9,670,799) 20,379,214 Share Class ZD 3,809,968 20,430,167 (9,317,043) 14,923,092 Share Class ZOX* - 1,398,257 (200,000) 1,198,257

Euro Strategic Bond Fund (EUR) Share Class A 2,873,420 926,410 (929,105) 2,870,725 Share Class AD 299,983 54,415 (138,542) 215,856 Share Class ADX 144,575 68,617 (54,291) 158,901 Share Class AX 2,446,052 2,162,584 (2,102,999) 2,505,637 Share Class B 3,405,565 867,386 (1,269,311) 3,003,640 Share Class BD 1,483,228 231,569 (626,196) 1,088,601 Share Class BDX 1,736,902 308,546 (575,755) 1,469,693 Share Class BX 1,436,470 612,638 (528,332) 1,520,776 Share Class C 5,786 26,582 (2,683) 29,685 Share Class CD 17,939 2,608 (6,625) 13,922 Share Class I 491,746 684,966 (944,625) 232,087 Share Class Z 944,414 1,637,345 (1,461,446) 1,120,313 Share Class ZD 487,803 2,534,517 (83,828) 2,938,492

European Currencies High Yield Bond Fund (EUR) Share Class A 5,618,866 6,817,713 (5,263,286) 7,173,293 Share Class AD 4,273 13,483 (17,756) - Share Class ADX 107,278 217,014 (36,891) 287,401 Share Class AX 57,610 139,469 (39,050) 158,029 Share Class B 8,256,712 2,354,417 (3,549,427) 7,061,702 Share Class BD 78,419 224,336 (44,648) 258,107 Share Class BDX 741,209 726,869 (215,463) 1,252,615 Share Class BX 996,190 1,700,997 (341,865) 2,355,322 Share Class C 147,213 85,702 (46,254) 186,661 Share Class CD 1,442 2,780 (1,000) 3,222 Share Class I 8,018,526 9,231,251 (11,008,911) 6,240,866 Share Class Z 3,865,801 4,673,783 (4,985,283) 3,554,301 Share Class ZX* - 1,565,996 - 1,565,996

Global Bond Fund (USD) Share Class A 2,817,455 830,404 (1,836,445) 1,811,414 Share Class AH (EUR) 161,497 40,221 (149,234) 52,484 Share Class AHX (EUR) 48,100 18,366 (10,866) 55,600 Share Class AX 113,767 14,688 (31,016) 97,439 Share Class B 3,987,745 239,737 (2,167,167) 2,060,315 Share Class BH (EUR) 1,566,710 111,055 (1,118,085) 559,680 Share Class BHX (EUR) 496,363 118,381 (346,560) 268,184 Share Class BX 712,702 279,043 (471,751) 519,994 Share Class C 71,232 9,324 (48,400) 32,156 Share Class CH (EUR) 320 1,024 (1,089) 255 Share Class I 1,727,170 552,558 (170,324) 2,109,404 Share Class Z 7,899,201 3,108,964 (4,248,267) 6,759,898

* Share Class was launched during the year. Morgan Stanley Investment Funds 31 December 2013 180

Statement of changes in number of shares (continued) For the year ended 31 December 2013

Shares at the start Number of shares Number of shares Shares at the end of the year issued redeemed of the year

Global Convertible Bond Fund (USD) Share Class A 1,989,402 4,387,687 (2,183,632) 4,193,457 Share Class AH (CHF) 380 12,234 (2,942) 9,672 Share Class AH (EUR) 1,522,500 1,607,360 (627,512) 2,502,348 Share Class B 841,235 1,241,999 (1,225,205) 858,029 Share Class BH (EUR) 1,417,487 1,294,502 (1,480,104) 1,231,885 Share Class CH (EUR) 18,699 99,861 (19,382) 99,178 Share Class I 409,387 2,921,392 (2,488,826) 841,953 Share Class IH (EUR) 1,996,429 1,590,045 (749,555) 2,836,919 Share Class S 16,460,941 19,975 (16,480,916) - Share Class Z 997,662 3,445,001 (587,839) 3,854,824 Share Class ZH (CHF) 380 - - 380 Share Class ZH (EUR) 2,442,808 4,859,454 (5,469,121) 1,833,141 Share Class ZHX (EUR) 2,529,519 600 - 2,530,119 Share Class ZX* - 1,743,797 - 1,743,797

Global Credit Fund (USD) Share Class A 4,000 409 - 4,409 Share Class B 4,000 3,889 (246) 7,643 Share Class C 4,000 2,008 (877) 5,131 Share Class I 4,000 5,466 - 9,466 Share Class Z 780,000 2,039,216 - 2,819,216 Share Class ZX 4,000 14 - 4,014

Global Fixed Income Opportunities Fund (USD) Share Class A 244,353 476,934 (297,798) 423,489 Share Class AH (EUR) 121,226 162,845 (120,062) 164,009 Share Class AHX (EUR) 240,739 293,309 (57,932) 476,116 Share Class AX 76,000 139,309 (141,729) 73,580 Share Class B 588,616 714,595 (352,629) 950,582 Share Class BH (EUR) 359,784 869,820 (357,933) 871,671 Share Class BHX (EUR) 562,036 1,287,043 (309,035) 1,540,044 Share Class BX 276,154 743,417 (206,271) 813,300 Share Class C 2,178 109,642 (29,193) 82,627 Share Class CH (EUR) 320 51,831 (33,258) 18,893 Share Class CHX (EUR) 320 25,797 (8,406) 17,711 Share Class Z 1,656,973 2,184,474 (2,475,915) 1,365,532 Share Class ZH (EUR)* - 118,730 (118,430) 300

Global High Yield Bond Fund (USD) Share Class A 92,178 433,669 (150,719) 375,128 Share Class AO (SEK)* - 283,418 (11,386) 272,032 Share Class AH (EUR) 21,191 751,677 (245,055) 527,813 Share Class AHX (EUR) 34,280 240,509 (34,255) 240,534 Share Class AX 17,882 113,057 (22,985) 107,954 Share Class B 150,355 716,492 (125,698) 741,149 Share Class BH (EUR) 77,861 576,104 (124,733) 529,232 Share Class BHX (EUR) 320,810 1,554,860 (239,787) 1,635,883 Share Class BX 141,251 1,054,434 (64,515) 1,131,170 Share Class C 33,718 59,059 (35,809) 56,968 Share Class CH (EUR) 320 22,674 (2,579) 20,415 Share Class I* - 4,969 - 4,969 Share Class Z 367,921 2,123,757 (1,103,059) 1,388,619 Share Class ZX 4,000 2,905 (3,281) 3,624

Global Mortgage Securities Fund (USD) Share Class A 4,000 2,048,054 (780,078) 1,271,976 Share Class AH (EUR) 3,080 84,422 (11,713) 75,789 Share Class AHR (EUR) 310 1,181 (313) 1,178 Share Class AHX (EUR) 3,080 850 (618) 3,312 Share Class AX* - 29,445 (20,156) 9,289 Share Class B 4,000 9,961 (9,166) 4,795 Share Class BH (EUR) 3,080 5,609 (4,841) 3,848 Share Class BHR (EUR) 310 5 - 315 Share Class BHX (EUR) 3,080 10,955 (3,400) 10,635 Share Class C 4,000 406,980 (174,844) 236,136 Share Class CH (EUR) 3,080 734 (734) 3,080 Share Class CHX (EUR) 3,080 2,493 (118) 5,455 Share Class CX* - 47,761 (35,689) 12,072 Share Class I 4,000 1,568,263 (1,294,975) 277,288 Share Class IH (EUR)* - 3,441,224 (260,842) 3,180,382 Share Class IHX (EUR)* - 2,834,522 (178,717) 2,655,805 Share Class Z 755,200 2,801,282 (2,071,425) 1,485,057 Share Class ZH (EUR)* - 267,071 (267,071) - Share Class ZX 4,000 - (4,000) -

* Share Class was launched during the year. 181 Morgan Stanley Investment Funds 31 December 2013

Statement of changes in number of shares (continued) For the year ended 31 December 2013

Shares at the start Number of shares Number of shares Shares at the end of the year issued redeemed of the year

Global Premier Credit Fund (USD) Share Class A 4,000 6,692 (6,692) 4,000 Share Class AH (EUR) 3,080 - - 3,080 Share Class B 4,000 21,184 (5,475) 19,709 Share Class BH (EUR) 3,080 1,864 - 4,944 Share Class C 4,000 1,940 (515) 5,425 Share Class CH (EUR) 3,080 301 (301) 3,080 Share Class I 4,000 - - 4,000 Share Class Z 368,000 - - 368,000 Share Class ZX 4,000 5 - 4,005

Short Maturity Euro Bond Fund (EUR) Share Class A 6,467,606 5,125,732 (6,126,359) 5,466,979 Share Class B 8,191,503 3,849,886 (5,765,483) 6,275,906 Share Class C 13,416 90,788 (21,999) 82,205 Share Class I 3,318,374 3,673,397 (3,982,650) 3,009,121 Share Class Z 4,182,217 11,952,369 (7,223,421) 8,911,165

Euro Liquidity Fund (EUR) Share Class A 3,499,465 2,483,923 (4,234,377) 1,749,011 Share Class B 3,454,016 108,089 (2,455,203) 1,106,902 Share Class C 3,657 15,492 (12,160) 6,989 Share Class I 987,341 154,071 (993,875) 147,537 Share Class Z 649,052 8,070,107 (4,279,438) 4,439,721

US Dollar Liquidity Fund (USD) Share Class A 15,975,043 16,991,420 (26,391,463) 6,575,000 Share Class AX 3,338,632,974 3,584,804,940 (2,884,198,356) 4,039,239,558 Share Class B 108,868 45,360 (154,228) - Share Class BX 1,065,186 1,214,918 (2,280,104) - Share Class I 3,395,358 5,326,446 (3,279,907) 5,441,897 Share Class Z 1,968,783 3,589,919 (4,791,097) 767,605

Diversified Alpha Plus Fund (EUR) Share Class A 3,659,340 19,167,820 (3,101,410) 19,725,750 Share Class AH (CHF)* - 7,620 (400) 7,220 Share Class AH (USD) 1,593,065 6,680,404 (606,668) 7,666,801 Share Class B 10,467,383 11,257,005 (3,069,928) 18,654,460 Share Class BH (USD) 80,659 77,185 (52,444) 105,400 Share Class C 128,773 1,639,959 (89,899) 1,678,833 Share Class I 330,007 2,167,116 (270,945) 2,226,178 Share Class IH (USD)* - 117,888 - 117,888 Share Class Z 4,495,592 33,300,354 (2,966,402) 34,829,544 Share Class ZH (CHF)* - 90,480 (234) 90,246 Share Class ZH (GBP) 3,563,874 11,408,511 (1,126,637) 13,845,748 Share Class ZH (USD) 42,450 3,612,175 (266,290) 3,388,335

Global Balanced Risk Control Fund of Funds (EUR) Share Class A 321,808 3,686,652 (413,211) 3,595,249 Share Class B 2,575,120 10,742,661 (983,575) 12,334,206 Share Class C 320 1,555,979 (73,672) 1,482,627 Share Class Z 3,843,807 4,351,661 (467,074) 7,728,394

Absolute Return Currency Fund (EUR) (1) Share Class A 180,369 228 (180,597) - Share Class A1 304 - (304) - Share Class AH (SEK) 33,948 - (33,948) - Share Class AH (USD) 87,849 758 (88,607) - Share Class B 596,527 1,116 (597,643) - Share Class I 2,468 - (2,468) - Share Class IH (USD) 1,117 - (1,117) - Share Class Z 10,000 - (10,000) -

(1) Fund closed on 8 March 2013. * Share Class was launched during the year. Morgan Stanley Investment Funds 31 December 2013 182

Statement of operations and changes in net assets For the year ended 31 December 2013

Emerging Europe, Asian Asia-Pacific Asian Middle East Combined Equity Equity Property and Africa totals of all Fund Fund Fund Equity Fund funds +

USD USD USD EUR USD

Income Dividends (net of withholding taxes) 3,830,889 2,702,412 13,502,344 4,973,139 465,622,467 Interest on bonds - - - - 423,903,671 Interest on swap transactions - - - - 4,374,528 Other income - 25,139 - - 4,625,777 Income from securities lending 190,613 93,618 - - 3,022,725 Bank interest 18 9 3 39 661,521

Total income 4,021,520 2,821,178 13,502,347 4,973,178 902,210,689

Expenses Investment advisory fees 2,101,587 64,371 5,507,193 3,058,332 349,830,590 Distribution fees 372,642 39,473 348,180 757,710 48,795,956 Shareholder service fees 224,575 6,428 589,212 282,861 38,707,457 Administration fees and transfer agent fees 146,015 103,860 377,610 204,798 18,215,088 Interest on swap transactions - - - - 12,602,609 Taxe d’abonnement 84,328 13,094 222,922 93,009 10,764,642 Depositary, custodian fees and transactions fees 331,452 272,809 168,386 177,288 8,513,732 Printing and publication fees 16,986 5,813 24,050 12,839 2,064,324 Legal fees 40,839 40,839 40,839 30,104 1,790,314 Audit and other related fees 23,168 21,907 24,118 19,897 1,061,923 Professional fees 18,021 16,880 10,432 7,511 567,562 Director fees, expenses and insurance 8,894 8,894 8,894 6,643 449,386 Bank interest 975 8 1,739 850 30,370 Tax charges (excluding Taxe d’abonnement) 3,133 5,521 4,402 2,279 1,518,482 Other fees 24,499 21,400 34,858 10,543 1,335,766

Total expenses 3,397,114 621,297 7,362,835 4,664,664 496,248,201

Plus fee waiver income 1,822 97,650 - 779 17,414,772

Net investment income/(loss) 626,228 2,297,531 6,139,512 309,293 423,377,260 Net realised gain/(loss) on sales of investments 12,816,458 (1,990,162) 66,388,697 7,449,987 1,404,948,770 Net realised gain/(loss) on financial futures contracts - - - - 108,315,377 Net realised gain/(loss) on credit default swap contracts - - - - 3,616,994 Net realised gain/(loss) on total return swap contracts - - - - (120,162,506) Net realised gain/(loss) on interest rate swap contracts - - - - 7,350,404 Net realised gain/(loss) on foreign exchange transactions 111,450 125,692 (183,656) (60,492) 209,787,250

Net realised profit/(loss) for the year 13,554,136 433,061 72,344,553 7,698,788 2,037,233,549 Net change in unrealised appreciation/(depreciation) on investments (10,715,348) 3,128,735 (59,443,891) 10,341,632 2,128,835,827 Net change in unrealised appreciation/(depreciation) on options - - - - (402,534) Net change in unrealised appreciation/(depreciation) on financial futures contracts - - - - 62,080,317 Net change in unrealised appreciation/(depreciation) on credit default swap contracts - - - - 8,070,252 Net change in unrealised appreciation/(depreciation) on total return swap contracts - - - - (39,852,852) Net change in unrealised appreciation/(depreciation) on interest rate swap contracts - - - - 35,294,371 Net change in unrealised appreciation/(depreciation) on foreign exchange transactions (3,888) 5,125 (1,589) - 21,156,755

Net change in net assets as a result of operations 2,834,900 3,566,921 12,899,073 18,040,420 4,252,415,685 Dividend distribution - - (574,333) (22,888) (50,798,524)

Proceeds received on subscription of shares 171,039,559 3,002,962 182,396,344 60,881,991 27,734,235,739 Net amount paid on redemption of shares (145,665,532) (2,143,151) (356,929,555) (88,355,533) (24,766,000,725)

Net change in net assets as a result of capital transactions 25,374,027 859,811 (174,533,211) (27,473,542) 2,968,235,014

Total increase/(decrease) in net assets 28,208,927 4,426,732 (162,208,471) (9,456,010) 7,169,852,175

Net assets at beginning of year 244,763,253 110,829,486 566,352,803 206,078,040 34,213,588,251 Translation difference - - - - 517,113,159

Net assets at end of year 272,972,180 115,256,218 404,144,332 196,622,030 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. 183 Morgan Stanley Investment Funds 31 December 2013

Statement of operations and changes in net assets (continued) For the year ended 31 December 2013

Emerging Emerging European Leaders Markets Equity European Combined Equity Equity Alpha Property totals of all Fund Fund Fund Fund funds +

USD USD EUR EUR USD

Income Dividends (net of withholding taxes) 2,922,689 28,381,251 19,999,241 6,149,410 465,622,467 Interest on bonds - - - - 423,903,671 Interest on swap transactions - - - - 4,374,528 Other income - 85,048 - - 4,625,777 Income from securities lending 32,580 456,554 524,535 98,917 3,022,725 Bank interest 123 54 376 429 661,521

Total income 2,955,392 28,922,907 20,524,152 6,248,756 902,210,689

Expenses Investment advisory fees 2,636,862 11,236,825 5,949,618 2,228,359 349,830,590 Distribution fees 409,480 735,349 380,605 133,180 48,795,956 Shareholder service fees 192,005 875,658 702,810 238,392 38,707,457 Administration fees and transfer agent fees 203,296 442,443 308,277 143,916 18,215,088 Interest on swap transactions - - - - 12,602,609 Taxe d’abonnement 58,670 319,441 160,068 74,267 10,764,642 Depositary, custodian fees and transactions fees 116,810 1,322,824 128,087 58,616 8,513,732 Printing and publication fees 11,943 87,916 40,717 11,625 2,064,324 Legal fees 43,976 40,839 30,104 30,104 1,790,314 Audit and other related fees 16,745 27,659 18,965 16,647 1,061,923 Professional fees 10,457 44,744 7,465 7,509 567,562 Director fees, expenses and insurance 9,277 8,894 6,643 6,643 449,386 Bank interest 25 3,029 3 - 30,370 Tax charges (excluding Taxe d’abonnement) 7,606 1,009,749 5,967 3,203 1,518,482 Other fees 18,711 49,541 27,833 13,273 1,335,766

Total expenses 3,735,863 16,204,911 7,767,162 2,965,734 496,248,201

Plus fee waiver income 200 - 299 479 17,414,772

Net investment income/(loss) (780,271) 12,717,996 12,757,289 3,283,501 423,377,260 Net realised gain/(loss) on sales of investments 3,559,611 13,240,711 16,418,951 8,253,230 1,404,948,770 Net realised gain/(loss) on financial futures contracts - - - - 108,315,377 Net realised gain/(loss) on credit default swap contracts - - - - 3,616,994 Net realised gain/(loss) on total return swap contracts - - - - (120,162,506) Net realised gain/(loss) on interest rate swap contracts - - - - 7,350,404 Net realised gain/(loss) on foreign exchange transactions 2,602,669 732,189 (3,415,641) (122,214) 209,787,250

Net realised profit/(loss) for the year 5,382,009 26,690,896 25,760,599 11,414,517 2,037,233,549 Net change in unrealised appreciation/(depreciation) on investments (4,006,087) (16,213,685) 118,467,906 1,196,028 2,128,835,827 Net change in unrealised appreciation/(depreciation) on options - - - - (402,534) Net change in unrealised appreciation/(depreciation) on financial futures contracts - - - - 62,080,317 Net change in unrealised appreciation/(depreciation) on credit default swap contracts - - - - 8,070,252 Net change in unrealised appreciation/(depreciation) on total return swap contracts - - - - (39,852,852) Net change in unrealised appreciation/(depreciation) on interest rate swap contracts - - - - 35,294,371 Net change in unrealised appreciation/(depreciation) on foreign exchange transactions 117,193 39,478 (56,631) (446) 21,156,755

Net change in net assets as a result of operations 1,493,115 10,516,689 144,171,874 12,610,099 4,252,415,685 Dividend distribution - - (8) (11,019) (50,798,524)

Proceeds received on subscription of shares 223,998,657 715,740,509 537,815,317 121,487,633 27,734,235,739 Net amount paid on redemption of shares (60,841,247) (487,563,644) (385,597,975) (184,971,757) (24,766,000,725)

Net change in net assets as a result of capital transactions 163,157,410 228,176,865 152,217,342 (63,484,124) 2,968,235,014

Total increase/(decrease) in net assets 164,650,525 238,693,554 296,389,208 (50,885,044) 7,169,852,175

Net assets at beginning of year 45,873,789 1,394,324,169 562,973,137 224,752,052 34,213,588,251 Translation difference - - - - 517,113,159

Net assets at end of year 210,524,314 1,633,017,723 859,362,345 173,867,008 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 184

Statement of operations and changes in net assets (continued) For the year ended 31 December 2013

Eurozone Frontier Equity Emerging Global Global Combined Alpha Markets Equity Advantage Brands totals of all Fund fund (1) fund (2) Fund funds +

EUR USD USD USD USD

Income Dividends (net of withholding taxes) 4,798,249 136,064 26,963 243,794,571 465,622,467 Interest on bonds - - - - 423,903,671 Interest on swap transactions - - - - 4,374,528 Other income - - - - 4,625,777 Income from securities lending 205,431 - - - 3,022,725 Bank interest 349 - 2 19,197 661,521

Total income 5,004,029 136,064 26,965 243,813,768 902,210,689

Expenses Investment advisory fees 1,906,231 116,545 23,718 98,277,418 349,830,590 Distribution fees 175,713 8,403 2,492 9,050,019 48,795,956 Shareholder service fees 203,714 7,466 2,068 10,360,325 38,707,457 Administration fees and transfer agent fees 136,788 59,141 26,487 3,390,747 18,215,088 Interest on swap transactions - - - - 12,602,609 Taxe d’abonnement 45,735 1,641 451 3,026,733 10,764,642 Depositary, custodian fees and transactions fees 57,813 36,990 10,822 1,150,634 8,513,732 Printing and publication fees 14,416 1,268 277 450,934 2,064,324 Legal fees 30,104 31,736 38,788 40,839 1,790,314 Audit and other related fees 16,494 16,792 14,326 32,541 1,061,923 Professional fees 7,509 11,272 5,811 76,166 567,562 Director fees, expenses and insurance 6,643 7,552 8,176 8,894 449,386 Bank interest - 2 - - 30,370 Tax charges (excluding Taxe d’abonnement) 3,862 3,323 3,893 70,078 1,518,482 Other fees 13,271 6,538 2,947 250,020 1,335,766

Total expenses 2,618,293 308,669 140,256 126,185,348 496,248,201

Plus fee waiver income - 146,361 105,020 - 17,414,772

Net investment income/(loss) 2,385,736 (26,244) (8,271) 117,628,420 423,377,260 Net realised gain/(loss) on sales of investments 10,652,776 (90,254) 96,590 634,337,311 1,404,948,770 Net realised gain/(loss) on financial futures contracts - - - - 108,315,377 Net realised gain/(loss) on credit default swap contracts - - - - 3,616,994 Net realised gain/(loss) on total return swap contracts - - - - (120,162,506) Net realised gain/(loss) on interest rate swap contracts - - - - 7,350,404 Net realised gain/(loss) on foreign exchange transactions (99,123) 38,761 (1,248) 58,763,050 209,787,250

Net realised profit/(loss) for the year 12,939,389 (77,737) 87,071 810,728,781 2,037,233,549 Net change in unrealised appreciation/(depreciation) on investments 40,659,461 2,412,244 454,870 901,534,012 2,128,835,827 Net change in unrealised appreciation/(depreciation) on options - - (1,606) - (402,534) Net change in unrealised appreciation/(depreciation) on financial futures contracts - - - - 62,080,317 Net change in unrealised appreciation/(depreciation) on credit default swap contracts - - - - 8,070,252 Net change in unrealised appreciation/(depreciation) on total return swap contracts - - - - (39,852,852) Net change in unrealised appreciation/(depreciation) on interest rate swap contracts - - - - 35,294,371 Net change in unrealised appreciation/(depreciation) on foreign exchange transactions (12,336) 36,638 - 6,751,036 21,156,755

Net change in net assets as a result of operations 53,586,514 2,371,145 540,335 1,719,013,829 4,252,415,685 Dividend distribution - - - (8,475,000) (50,798,524)

Proceeds received on subscription of shares 264,734,195 40,592,083 3,438,849 2,299,243,440 27,734,235,739 Net amount paid on redemption of shares (182,786,752) (256,060) - (4,152,327,843) (24,766,000,725)

Net change in net assets as a result of capital transactions 81,947,443 40,336,023 3,438,849 (1,853,084,403) 2,968,235,014

Total increase/(decrease) in net assets 135,533,957 42,707,168 3,979,184 (142,545,574) 7,169,852,175

Net assets at beginning of year 145,859,845 - - 9,091,877,773 34,213,588,251 Translation difference - - - - 517,113,159

Net assets at end of year 281,393,802 42,707,168 3,979,184 8,949,332,199 41,900,553,585

(1) Fund commenced operations on 28 March 2013. (2) Fund commenced operations on 31 January 2013. + Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. 185 Morgan Stanley Investment Funds 31 December 2013

Statement of operations and changes in net assets (continued) For the year ended 31 December 2013

Global Equity Global Global Global Combined Allocation Infrastructure Opportunity Property totals of all Fund Fund Fund Fund funds +

USD USD USD USD USD

Income Dividends (net of withholding taxes) 265,472 8,444,535 433,638 24,660,061 465,622,467 Interest on bonds - - - - 423,903,671 Interest on swap transactions - - - - 4,374,528 Other income - - - - 4,625,777 Income from securities lending - 270,117 - - 3,022,725 Bank interest 78 220 12 866 661,521

Total income 265,550 8,714,872 433,650 24,660,927 902,210,689

Expenses Investment advisory fees 132,340 4,241,635 666,911 9,052,961 349,830,590 Distribution fees 24,602 1,037,711 60,764 280,116 48,795,956 Shareholder service fees 17,016 415,384 60,131 862,914 38,707,457 Administration fees and transfer agent fees 53,334 306,233 106,703 406,910 18,215,088 Interest on swap transactions - - - - 12,602,609 Taxe d’abonnement 3,151 120,902 12,341 192,910 10,764,642 Depositary, custodian fees and transactions fees 44,586 77,315 28,938 260,392 8,513,732 Printing and publication fees 1,607 21,301 4,556 50,294 2,064,324 Legal fees 40,839 40,839 40,839 40,839 1,790,314 Audit and other related fees 19,094 25,212 23,512 25,445 1,061,923 Professional fees 10,199 10,169 11,575 10,124 567,562 Director fees, expenses and insurance 9,096 8,894 8,894 8,894 449,386 Bank interest 306 - 32 - 30,370 Tax charges (excluding Taxe d’abonnement) 8,949 5,631 20,948 9,048 1,518,482 Other fees 8,222 13,695 8,949 40,852 1,335,766

Total expenses 373,341 6,324,921 1,055,093 11,241,699 496,248,201

Plus fee waiver income 140,578 704 37,319 1,703 17,414,772

Net investment income/(loss) 32,787 2,390,655 (584,124) 13,420,931 423,377,260 Net realised gain/(loss) on sales of investments 619,265 17,629,585 3,520,632 43,562,667 1,404,948,770 Net realised gain/(loss) on financial futures contracts 699,017 - - - 108,315,377 Net realised gain/(loss) on credit default swap contracts - - - - 3,616,994 Net realised gain/(loss) on total return swap contracts - - - - (120,162,506) Net realised gain/(loss) on interest rate swap contracts - - - - 7,350,404 Net realised gain/(loss) on foreign exchange transactions 95,459 3,897,020 249,020 202,228 209,787,250

Net realised profit/(loss) for the year 1,446,528 23,917,260 3,185,528 57,185,826 2,037,233,549 Net change in unrealised appreciation/(depreciation) on investments 2,607,780 29,229,826 19,748,026 (8,457,032) 2,128,835,827 Net change in unrealised appreciation/(depreciation) on options - - (40,580) - (402,534) Net change in unrealised appreciation/(depreciation) on financial futures contracts 154,466 - - - 62,080,317 Net change in unrealised appreciation/(depreciation) on credit default swap contracts - - - - 8,070,252 Net change in unrealised appreciation/(depreciation) on total return swap contracts - - - - (39,852,852) Net change in unrealised appreciation/(depreciation) on interest rate swap contracts - - - - 35,294,371 Net change in unrealised appreciation/(depreciation) on foreign exchange transactions 4,579 249,138 21,876 30,088 21,156,755

Net change in net assets as a result of operations 4,213,353 53,396,224 22,914,850 48,758,882 4,252,415,685 Dividend distribution - - - (67,167) (50,798,524)

Proceeds received on subscription of shares 5,838,883 362,926,903 50,903,796 729,232,875 27,734,235,739 Net amount paid on redemption of shares (1,403,709) (183,467,173) (30,474,004) (516,790,029) (24,766,000,725)

Net change in net assets as a result of capital transactions 4,435,174 179,459,730 20,429,792 212,442,846 2,968,235,014

Total increase/(decrease) in net assets 8,648,527 232,855,954 43,344,642 261,134,561 7,169,852,175

Net assets at beginning of year 13,975,448 225,112,504 58,042,227 731,458,647 34,213,588,251 Translation difference - - - - 517,113,159

Net assets at end of year 22,623,975 457,968,458 101,386,869 992,593,208 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 186

Statement of operations and changes in net assets (continued) For the year ended 31 December 2013

Latin Global Indian Japanese American Combined Quality Equity Equity Equity totals of all fund (1) Fund Fund Fund funds +

USD USD JPY000’s USD USD

Income Dividends (net of withholding taxes) 936,602 1,799,805 177,403 14,810,064 465,622,467 Interest on bonds - - - - 423,903,671 Interest on swap transactions - - - - 4,374,528 Other income - - - - 4,625,777 Income from securities lending - - - 12,027 3,022,725 Bank interest - 79 15 42 661,521

Total income 936,602 1,799,884 177,418 14,822,133 902,210,689

Expenses Investment advisory fees 1,066,969 1,438,652 88,807 10,648,496 349,830,590 Distribution fees 24,444 347,869 4,431 451,247 48,795,956 Shareholder service fees 103,835 134,391 9,470 979,856 38,707,457 Administration fees and transfer agent fees 50,946 175,480 11,489 312,322 18,215,088 Interest on swap transactions - - - - 12,602,609 Taxe d’abonnement 29,898 46,797 1,658 330,032 10,764,642 Depositary, custodian fees and transactions fees 31,478 160,432 6,801 568,682 8,513,732 Printing and publication fees 7,869 6,996 819 37,283 2,064,324 Legal fees 18,091 40,839 4,009 40,839 1,790,314 Audit and other related fees 14,654 37,320 2,445 23,168 1,061,923 Professional fees 11,169 17,376 979 10,148 567,562 Director fees, expenses and insurance 3,460 75,693 837 8,894 449,386 Bank interest 88 160 - - 30,370 Tax charges (excluding Taxe d’abonnement) 2,783 42,159 442 3,322 1,518,482 Other fees 2,920 25,011 2,099 22,334 1,335,766

Total expenses 1,368,604 2,549,175 134,286 13,436,623 496,248,201

Plus fee waiver income 1,685 378,193 416 - 17,414,772

Net investment income/(loss) (430,317) (371,098) 43,548 1,385,510 423,377,260 Net realised gain/(loss) on sales of investments 735,797 (4,723,234) 1,372,351 6,467,332 1,404,948,770 Net realised gain/(loss) on financial futures contracts - - - - 108,315,377 Net realised gain/(loss) on credit default swap contracts - - - - 3,616,994 Net realised gain/(loss) on total return swap contracts - - - - (120,162,506) Net realised gain/(loss) on interest rate swap contracts - - - - 7,350,404 Net realised gain/(loss) on foreign exchange transactions (52,749) (348,216) 471,334 (486,998) 209,787,250

Net realised profit/(loss) for the year 252,731 (5,442,548) 1,887,233 7,365,844 2,037,233,549 Net change in unrealised appreciation/(depreciation) on investments 27,381,874 (6,656,473) 2,663,336 (95,544,679) 2,128,835,827 Net change in unrealised appreciation/(depreciation) on options - - - - (402,534) Net change in unrealised appreciation/(depreciation) on financial futures contracts - - - - 62,080,317 Net change in unrealised appreciation/(depreciation) on credit default swap contracts - - - - 8,070,252 Net change in unrealised appreciation/(depreciation) on total return swap contracts - - - - (39,852,852) Net change in unrealised appreciation/(depreciation) on interest rate swap contracts - - - - 35,294,371 Net change in unrealised appreciation/(depreciation) on foreign exchange transactions 43,306 - (65,841) - 21,156,755

Net change in net assets as a result of operations 27,677,911 (12,099,021) 4,484,728 (88,178,835) 4,252,415,685 Dividend distribution - - - - (50,798,524)

Proceeds received on subscription of shares 526,070,293 92,561,693 16,239,007 180,796,556 27,734,235,739 Net amount paid on redemption of shares (14,490,393) (87,885,912) (11,210,424) (377,074,686) (24,766,000,725)

Net change in net assets as a result of capital transactions 511,579,900 4,675,781 5,028,583 (196,278,130) 2,968,235,014

Total increase/(decrease) in net assets 539,257,811 (7,423,240) 9,513,311 (284,456,965) 7,169,852,175

Net assets at beginning of year - 122,566,196 6,745,315 848,719,286 34,213,588,251 Translation difference - - - - 517,113,159

Net assets at end of year 539,257,811 115,142,956 16,258,626 564,262,321 41,900,553,585

(1) Fund commenced operations on 1 August 2013. + Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. 187 Morgan Stanley Investment Funds 31 December 2013

Statement of operations and changes in net assets (continued) For the year ended 31 December 2013

Emerging US US US Markets Combined Advantage Growth Property Corporate Debt totals of all Fund Fund Fund Fund funds +

USD USD USD USD USD

Income Dividends (net of withholding taxes) 31,998,120 5,628,602 12,832,717 46,008 465,622,467 Interest on bonds - - - 20,300,589 423,903,671 Interest on swap transactions - - - - 4,374,528 Other income - - 868,184 - 4,625,777 Income from securities lending 10,357 4,359 - 18,000 3,022,725 Bank interest - - - 232 661,521

Total income 32,008,477 5,632,961 13,700,901 20,364,829 902,210,689

Expenses Investment advisory fees 39,264,866 12,255,851 6,868,506 5,297,859 349,830,590 Distribution fees 2,137,385 608,617 266,203 1,295,055 48,795,956 Shareholder service fees 4,260,143 1,334,856 735,387 522,363 38,707,457 Administration fees and transfer agent fees 1,764,818 590,469 312,216 391,422 18,215,088 Interest on swap transactions - - - - 12,602,609 Taxe d’abonnement 1,165,491 431,804 240,780 161,084 10,764,642 Depositary, custodian fees and transactions fees 372,935 122,632 67,022 84,231 8,513,732 Printing and publication fees 205,918 80,684 23,713 18,873 2,064,324 Legal fees 40,839 40,839 40,839 40,839 1,790,314 Audit and other related fees 25,135 27,954 22,838 30,451 1,061,923 Professional fees 10,153 4,806 10,149 11,152 567,562 Director fees, expenses and insurance 8,894 8,894 8,894 8,894 449,386 Bank interest 2,884 637 35 - 30,370 Tax charges (excluding Taxe d’abonnement) 34,907 5,215 6,661 8,321 1,518,482 Other fees 90,384 38,097 18,602 16,060 1,335,766

Total expenses 49,384,752 15,551,355 8,621,845 7,886,604 496,248,201

Plus fee waiver income - 1,460 - 2,736 17,414,772

Net investment income/(loss) (17,376,275) (9,916,934) 5,079,056 12,480,961 423,377,260 Net realised gain/(loss) on sales of investments 304,126,167 57,093,176 12,921,433 (10,318,606) 1,404,948,770 Net realised gain/(loss) on financial futures contracts - - - - 108,315,377 Net realised gain/(loss) on credit default swap contracts - - - - 3,616,994 Net realised gain/(loss) on total return swap contracts - - - - (120,162,506) Net realised gain/(loss) on interest rate swap contracts - - - - 7,350,404 Net realised gain/(loss) on foreign exchange transactions 29,361,990 5,125,640 19,460 5,400,786 209,787,250

Net realised profit/(loss) for the year 316,111,882 52,301,882 18,019,949 7,563,141 2,037,233,549 Net change in unrealised appreciation/(depreciation) on investments 888,890,350 404,967,133 (12,613,118) (18,583,450) 2,128,835,827 Net change in unrealised appreciation/(depreciation) on options (1,779,003) (646,112) - - (402,534) Net change in unrealised appreciation/(depreciation) on financial futures contracts - - - - 62,080,317 Net change in unrealised appreciation/(depreciation) on credit default swap contracts - - - - 8,070,252 Net change in unrealised appreciation/(depreciation) on total return swap contracts - - - - (39,852,852) Net change in unrealised appreciation/(depreciation) on interest rate swap contracts - - - - 35,294,371 Net change in unrealised appreciation/(depreciation) on foreign exchange transactions 2,236,272 802,551 - 279,873 21,156,755

Net change in net assets as a result of operations 1,205,459,501 457,425,454 5,406,831 (10,740,436) 4,252,415,685 Dividend distribution - - - (1,923,148) (50,798,524)

Proceeds received on subscription of shares 2,923,225,805 1,590,069,768 515,938,580 440,862,257 27,734,235,739 Net amount paid on redemption of shares (3,535,155,297) (1,319,128,565) (500,870,928) (307,530,588) (24,766,000,725)

Net change in net assets as a result of capital transactions (611,929,492) 270,941,203 15,067,652 133,331,669 2,968,235,014

Total increase/(decrease) in net assets 593,530,009 728,366,657 20,474,483 120,668,085 7,169,852,175

Net assets at beginning of year 3,766,958,328 889,970,539 447,771,659 247,992,256 34,213,588,251 Translation difference - - - - 517,113,159

Net assets at end of year 4,360,488,337 1,618,337,196 468,246,142 368,660,341 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 188

Statement of operations and changes in net assets (continued) For the year ended 31 December 2013

Euro Emerging Emerging Corporate Markets Markets Euro Bond Combined Debt Domestic Debt Bond (ex Financials) totals of all Fund Fund Fund Fund funds +

USD USD EUR EUR USD

Income Dividends (net of withholding taxes) 88,342 57,293 7,968 1,198 465,622,467 Interest on bonds 42,840,689 48,675,855 17,546,443 3,003,333 423,903,671 Interest on swap transactions - - 131,806 - 4,374,528 Other income - - - - 4,625,777 Income from securities lending 90,121 - 131,979 6,873 3,022,725 Bank interest 9 35 376 14 661,521

Total income 43,019,161 48,733,183 17,818,572 3,011,418 902,210,689

Expenses Investment advisory fees 8,894,234 9,111,289 2,723,499 29,594 349,830,590 Distribution fees 2,207,977 2,878,312 515,353 - 48,795,956 Shareholder service fees 921,550 927,417 492,590 5,474 38,707,457 Administration fees and transfer agent fees 742,156 552,085 228,412 53,295 18,215,088 Interest on swap transactions - - 61,829 - 12,602,609 Taxe d’abonnement 295,333 250,183 87,648 8,779 10,764,642 Depositary, custodian fees and transactions fees 112,009 432,478 76,394 16,254 8,513,732 Printing and publication fees 25,301 31,516 40,161 3,621 2,064,324 Legal fees 52,636 42,145 30,104 30,104 1,790,314 Audit and other related fees 35,501 33,287 15,564 14,910 1,061,923 Professional fees 10,418 16,217 2,141 7,520 567,562 Director fees, expenses and insurance 8,894 8,894 6,643 6,784 449,386 Bank interest 204 - - 122 30,370 Tax charges (excluding Taxe d’abonnement) 7,613 4,224 824 7,839 1,518,482 Other fees 28,523 28,456 14,449 2,516 1,335,766

Total expenses 13,342,349 14,316,503 4,295,611 186,812 496,248,201

Plus fee waiver income 1,755 1,531 - 3,426 17,414,772

Net investment income/(loss) 29,678,567 34,418,211 13,522,961 2,828,032 423,377,260 Net realised gain/(loss) on sales of investments (3,714,998) (72,479,783) 25,208,417 1,485,438 1,404,948,770 Net realised gain/(loss) on financial futures contracts 1,824,926 106,852 586,835 191,760 108,315,377 Net realised gain/(loss) on credit default swap contracts - - 188,142 - 3,616,994 Net realised gain/(loss) on total return swap contracts - - - - (120,162,506) Net realised gain/(loss) on interest rate swap contracts - - - - 7,350,404 Net realised gain/(loss) on foreign exchange transactions 3,165,451 312,673 3,646 167,180 209,787,250

Net realised profit/(loss) for the year 30,953,946 (37,642,047) 39,510,001 4,672,410 2,037,233,549 Net change in unrealised appreciation/(depreciation) on investments (106,770,650) (78,771,780) (35,085,793) (2,691,896) 2,128,835,827 Net change in unrealised appreciation/(depreciation) on options - - - - (402,534) Net change in unrealised appreciation/(depreciation) on financial futures contracts 612,016 981,094 (63,702) 107,756 62,080,317 Net change in unrealised appreciation/(depreciation) on credit default swap contracts - - 368,668 - 8,070,252 Net change in unrealised appreciation/(depreciation) on total return swap contracts - - - - (39,852,852) Net change in unrealised appreciation/(depreciation) on interest rate swap contracts - - - - 35,294,371 Net change in unrealised appreciation/(depreciation) on foreign exchange transactions 905,915 (378,895) - (52,613) 21,156,755

Net change in net assets as a result of operations (74,298,773) (115,811,628) 4,729,174 2,035,657 4,252,415,685 Dividend distribution (7,851,186) (7,687,986) - (2,554) (50,798,524)

Proceeds received on subscription of shares 320,724,758 445,694,964 269,973,036 2,660,142 27,734,235,739 Net amount paid on redemption of shares (677,883,644) (753,031,345) (739,016,376) (47,763,734) (24,766,000,725)

Net change in net assets as a result of capital transactions (357,158,886) (307,336,381) (469,043,340) (45,103,592) 2,968,235,014

Total increase/(decrease) in net assets (439,308,845) (430,835,995) (464,314,166) (43,070,489) 7,169,852,175

Net assets at beginning of year 945,418,799 873,703,184 708,400,480 111,933,660 34,213,588,251 Translation difference - - - - 517,113,159

Net assets at end of year 506,109,954 442,867,189 244,086,314 68,863,171 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. 189 Morgan Stanley Investment Funds 31 December 2013

Statement of operations and changes in net assets (continued) For the year ended 31 December 2013

Euro Euro European Corporate Strategic Currencies High Global Combined Bond Bond Yield Bond Bond totals of all Fund Fund Fund Fund funds +

EUR EUR EUR USD USD

Income Dividends (net of withholding taxes) 57,757 7,718 22,457 5,637 465,622,467 Interest on bonds 64,470,484 18,480,239 40,342,176 20,648,859 423,903,671 Interest on swap transactions 1,225,046 69,521 1,405,417 344,266 4,374,528 Other income - - - - 4,625,777 Income from securities lending 117,474 23,844 169,630 24,011 3,022,725 Bank interest 25 - 9 32,429 661,521

Total income 65,870,786 18,581,322 41,939,689 21,055,202 902,210,689

Expenses Investment advisory fees 10,427,338 3,632,348 4,327,678 3,375,438 349,830,590 Distribution fees 2,771,751 2,135,301 1,997,644 1,547,304 48,795,956 Shareholder service fees 1,891,087 676,366 729,245 618,621 38,707,457 Administration fees and transfer agent fees 648,975 295,638 312,767 441,198 18,215,088 Interest on swap transactions 2,796,437 553,003 - 775,878 12,602,609 Taxe d’abonnement 540,898 215,917 253,689 188,170 10,764,642 Depositary, custodian fees and transactions fees 208,614 92,960 91,936 141,947 8,513,732 Printing and publication fees 111,789 26,942 36,002 24,710 2,064,324 Legal fees 30,104 36,489 30,104 40,839 1,790,314 Audit and other related fees 23,360 22,502 23,632 28,220 1,061,923 Professional fees 7,598 7,483 7,475 10,158 567,562 Director fees, expenses and insurance 6,643 6,643 6,643 8,894 449,386 Bank interest 5,992 2,469 674 1,610 30,370 Tax charges (excluding Taxe d’abonnement) 10,137 5,082 7,258 7,061 1,518,482 Other fees 53,807 16,949 18,797 19,399 1,335,766

Total expenses 19,534,530 7,726,092 7,843,544 7,229,447 496,248,201

Plus fee waiver income 1,770 2,362 2,505 2,441 17,414,772

Net investment income/(loss) 46,338,026 10,857,592 34,098,650 13,828,196 423,377,260 Net realised gain/(loss) on sales of investments 26,635,340 7,751,827 10,398,016 (5,746,956) 1,404,948,770 Net realised gain/(loss) on financial futures contracts (9,918,800) (3,461,877) (295,030) (2,627,607) 108,315,377 Net realised gain/(loss) on credit default swap contracts 785,236 51,581 1,718,767 (326,666) 3,616,994 Net realised gain/(loss) on total return swap contracts - - - - (120,162,506) Net realised gain/(loss) on interest rate swap contracts 3,094,141 954,770 - 1,563,686 7,350,404 Net realised gain/(loss) on foreign exchange transactions 9,057,844 715,994 2,391,151 (11,112,781) 209,787,250

Net realised profit/(loss) for the year 75,991,787 16,869,887 48,311,554 (4,422,128) 2,037,233,549 Net change in unrealised appreciation/(depreciation) on investments (25,548,692) (12,573,456) 5,843,002 (20,792,780) 2,128,835,827 Net change in unrealised appreciation/(depreciation) on options - - - - (402,534) Net change in unrealised appreciation/(depreciation) on financial futures contracts 4,394,193 779,648 685,134 (250,530) 62,080,317 Net change in unrealised appreciation/(depreciation) on credit default swap contracts 2,936,977 (27,642) 2,495,068 224,550 8,070,252 Net change in unrealised appreciation/(depreciation) on total return swap contracts - - - - (39,852,852) Net change in unrealised appreciation/(depreciation) on interest rate swap contracts 16,295,617 4,534,757 - 5,425,055 35,294,371 Net change in unrealised appreciation/(depreciation) on foreign exchange transactions (2,415,722) (355,132) (1,297,770) 2,788,566 21,156,755

Net change in net assets as a result of operations 71,654,160 9,228,062 56,036,988 (17,027,267) 4,252,415,685 Dividend distribution (4,400,938) (3,086,655) (4,571,254) (579,338) (50,798,524)

Proceeds received on subscription of shares 1,946,817,516 304,632,535 690,922,000 181,430,722 27,734,235,739 Net amount paid on redemption of shares (1,431,341,173) (272,862,324) (619,288,128) (355,645,277) (24,766,000,725)

Net change in net assets as a result of capital transactions 515,476,343 31,770,211 71,633,872 (174,214,555) 2,968,235,014

Total increase/(decrease) in net assets 582,729,565 37,911,618 123,099,606 (191,821,160) 7,169,852,175

Net assets at beginning of year 1,588,806,834 480,390,944 614,674,524 687,469,045 34,213,588,251 Translation difference - - - - 517,113,159

Net assets at end of year 2,171,536,399 518,302,562 737,774,130 495,647,885 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 190

Statement of operations and changes in net assets (continued) For the year ended 31 December 2013

Global Global Convertible Global Fixed Income Global High Combined Bond Credit Opportunities Yield Bond totals of all Fund Fund Fund Fund funds +

USD USD USD USD USD

Income Dividends (net of withholding taxes) 2,547,011 - 52,748 - 465,622,467 Interest on bonds 22,260,689 2,108,350 9,532,132 9,860,713 423,903,671 Interest on swap transactions - 27,520 189,694 - 4,374,528 Other income - - - - 4,625,777 Income from securities lending - - 2,250 2,250 3,022,725 Bank interest 523 3 544 8 661,521

Total income 24,808,223 2,135,873 9,777,368 9,862,971 902,210,689

Expenses Investment advisory fees 7,075,941 223,320 1,733,702 1,234,801 349,830,590 Distribution fees 884,489 1,467 1,173,942 857,808 48,795,956 Shareholder service fees 943,016 39,577 262,951 181,688 38,707,457 Administration fees and transfer agent fees 715,947 78,920 290,166 206,415 18,215,088 Interest on swap transactions - 39,466 199,296 - 12,602,609 Taxe d’abonnement 280,285 5,122 81,477 56,427 10,764,642 Depositary, custodian fees and transactions fees 127,274 15,003 68,966 30,591 8,513,732 Printing and publication fees 57,135 4,070 10,958 11,691 2,064,324 Legal fees 40,839 71,370 40,839 40,839 1,790,314 Audit and other related fees 30,299 19,692 25,571 31,114 1,061,923 Professional fees 10,404 10,194 10,453 10,460 567,562 Director fees, expenses and insurance 8,894 8,873 9,096 9,110 449,386 Bank interest 243 130 323 - 30,370 Tax charges (excluding Taxe d’abonnement) 5,629 5,417 10,466 9,944 1,518,482 Other fees 34,922 7,747 11,526 4,870 1,335,766

Total expenses 10,215,317 530,368 3,929,732 2,685,758 496,248,201

Plus fee waiver income 3,527 98,347 6,116 9,119 17,414,772

Net investment income/(loss) 14,596,433 1,703,852 5,853,752 7,186,332 423,377,260 Net realised gain/(loss) on sales of investments 82,359,771 (284,469) (1,987,426) 2,032,912 1,404,948,770 Net realised gain/(loss) on financial futures contracts (25,599) (234,411) (1,491,481) (10,078) 108,315,377 Net realised gain/(loss) on credit default swap contracts - 4,547 294,073 - 3,616,994 Net realised gain/(loss) on total return swap contracts - - - - (120,162,506) Net realised gain/(loss) on interest rate swap contracts - - 407,740 - 7,350,404 Net realised gain/(loss) on foreign exchange transactions 26,110,822 79,123 2,734,702 3,679,784 209,787,250

Net realised profit/(loss) for the year 123,041,427 1,268,642 5,811,360 12,888,950 2,037,233,549 Net change in unrealised appreciation/(depreciation) on investments 28,064,602 466,219 (1,341,633) 5,314,745 2,128,835,827 Net change in unrealised appreciation/(depreciation) on options 2,064,767 - - - (402,534) Net change in unrealised appreciation/(depreciation) on financial futures contracts - (49,785) (116,356) 6,672 62,080,317 Net change in unrealised appreciation/(depreciation) on credit default swap contracts - 18,734 157,443 - 8,070,252 Net change in unrealised appreciation/(depreciation) on total return swap contracts - - - - (39,852,852) Net change in unrealised appreciation/(depreciation) on interest rate swap contracts - 432,605 1,615,453 - 35,294,371 Net change in unrealised appreciation/(depreciation) on foreign exchange transactions 2,598,903 125,950 592,637 404,612 21,156,755

Net change in net assets as a result of operations 155,769,699 2,262,365 6,718,904 18,614,979 4,252,415,685 Dividend distribution (2,111,053) (2,919) (1,989,338) (2,659,707) (50,798,524)

Proceeds received on subscription of shares 913,355,228 52,298,287 225,291,289 272,214,595 27,734,235,739 Net amount paid on redemption of shares (1,189,101,155) (28,243) (136,233,679) (75,552,260) (24,766,000,725)

Net change in net assets as a result of capital transactions (275,745,927) 52,270,044 89,057,610 196,662,335 2,968,235,014

Total increase/(decrease) in net assets (122,087,281) 54,529,490 93,787,176 212,617,607 7,169,852,175

Net assets at beginning of year 1,075,335,965 20,141,684 128,441,703 41,503,266 34,213,588,251 Translation difference - - - - 517,113,159

Net assets at end of year 953,248,684 74,671,174 222,228,879 254,120,873 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. 191 Morgan Stanley Investment Funds 31 December 2013

Statement of operations and changes in net assets (continued) For the year ended 31 December 2013

Global Global Mortgage Premier Short Maturity Euro Combined Securities Credit Euro Bond Liquidity totals of all Fund Fund Fund Fund funds +

USD USD EUR EUR USD

Income Dividends (net of withholding taxes) - - 11,965 4,370 465,622,467 Interest on bonds 5,726,071 353,937 16,336,333 68,665 423,903,671 Interest on swap transactions - 896 - - 4,374,528 Other income - - - - 4,625,777 Income from securities lending - - 78,781 - 3,022,725 Bank interest - - - 2,341 661,521

Total income 5,726,071 354,833 16,427,079 75,376 902,210,689

Expenses Investment advisory fees 1,354,436 51,380 3,131,798 366,987 349,830,590 Distribution fees 6,118 4,663 1,286,915 163,098 48,795,956 Shareholder service fees 204,590 8,948 573,169 58,183 38,707,457 Administration fees and transfer agent fees 314,535 97,069 225,222 89,537 18,215,088 Interest on swap transactions - 16,746 - - 12,602,609 Taxe d’abonnement 95,279 1,695 160,321 4,734 10,764,642 Depositary, custodian fees and transactions fees 37,915 6,361 71,485 86,751 8,513,732 Printing and publication fees 16,841 819 33,055 3,400 2,064,324 Legal fees 46,270 47,165 30,104 28,782 1,790,314 Audit and other related fees 9,418 17,329 16,697 14,842 1,061,923 Professional fees 10,447 10,199 7,477 7,693 567,562 Director fees, expenses and insurance 8,873 8,875 6,643 8,975 449,386 Bank interest 181 - 1 1,282 30,370 Tax charges (excluding Taxe d’abonnement) 6,565 4,710 3,751 8,539 1,518,482 Other fees 10,701 6,895 16,473 22,111 1,335,766

Total expenses 2,122,169 282,854 5,563,111 864,914 496,248,201

Plus fee waiver income 21,159 173,482 - 801,233 17,414,772

Net investment income/(loss) 3,625,061 245,461 10,863,968 11,695 423,377,260 Net realised gain/(loss) on sales of investments (1,535,827) (36,013) (1,298,619) - 1,404,948,770 Net realised gain/(loss) on financial futures contracts (1,955,166) (52,343) (36,974) - 108,315,377 Net realised gain/(loss) on credit default swap contracts - - - - 3,616,994 Net realised gain/(loss) on total return swap contracts - - - - (120,162,506) Net realised gain/(loss) on interest rate swap contracts - - - - 7,350,404 Net realised gain/(loss) on foreign exchange transactions 10,038,480 85,443 4,493 - 209,787,250

Net realised profit/(loss) for the year 10,172,548 242,548 9,532,868 11,695 2,037,233,549 Net change in unrealised appreciation/(depreciation) on investments 1,261,071 (454,207) (4,556,493) - 2,128,835,827 Net change in unrealised appreciation/(depreciation) on options - - - - (402,534) Net change in unrealised appreciation/(depreciation) on financial futures contracts (1,297,035) (1,956) 842,581 - 62,080,317 Net change in unrealised appreciation/(depreciation) on credit default swap contracts - - - - 8,070,252 Net change in unrealised appreciation/(depreciation) on total return swap contracts - - - - (39,852,852) Net change in unrealised appreciation/(depreciation) on interest rate swap contracts - 148,106 - - 35,294,371 Net change in unrealised appreciation/(depreciation) on foreign exchange transactions 369,239 34,414 - - 21,156,755

Net change in net assets as a result of operations 10,505,823 (31,095) 5,818,956 11,695 4,252,415,685 Dividend distribution (451,051) (2,035) - - (50,798,524)

Proceeds received on subscription of shares 393,899,571 809,403 608,755,113 243,654,285 27,734,235,739 Net amount paid on redemption of shares (136,099,310) (322,633) (526,229,406) (207,466,955) (24,766,000,725)

Net change in net assets as a result of capital transactions 257,800,261 486,770 82,525,707 36,187,330 2,968,235,014

Total increase/(decrease) in net assets 267,855,033 453,640 88,344,663 36,199,025 7,169,852,175

Net assets at beginning of year 20,074,836 9,997,873 467,947,948 116,038,496 34,213,588,251 Translation difference - - - - 517,113,159

Net assets at end of year 287,929,869 10,451,513 556,292,611 152,237,521 41,900,553,585

+ Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. Morgan Stanley Investment Funds 31 December 2013 192

Statement of operations and changes in net assets (continued) For the year ended 31 December 2013

Global Absolute US Dollar Diversified Balanced Return Combined Liquidity Alpha Plus Risk Control Currency totals of all Fund Fund fund of Funds fund (1) funds +

USD EUR EUR EUR USD

Income Dividends (net of withholding taxes) 2,027,653 10,540,757 - 16 465,622,467 Interest on bonds 4,466,485 18,246,344 - - 423,903,671 Interest on swap transactions - 37,726 - - 4,374,528 Other income - - 2,745,507 - 4,625,777 Income from securities lending - 9,392 - - 3,022,725 Bank interest 591,663 7,473 - 24 661,521

Total income 7,085,801 28,841,692 2,745,507 40 902,210,689

Expenses Investment advisory fees 18,420,324 20,286,278 7,062,957 15,034 349,830,590 Distribution fees 18,159 3,814,865 2,159,598 20,110 48,795,956 Shareholder service fees 1,874,606 1,826,378 552,626 4,576 38,707,457 Administration fees and transfer agent fees 598,236 787,721 174,108 33,928 18,215,088 Interest on swap transactions - 5,298,722 - - 12,602,609 Taxe d’abonnement 193,583 477,984 12,865 53 10,764,642 Depositary, custodian fees and transactions fees 257,955 328,226 94,108 5,034 8,513,732 Printing and publication fees 106,351 161,944 36,105 516 2,064,324 Legal fees 38,819 30,104 30,104 11,798 1,790,314 Audit and other related fees 20,203 21,654 15,205 11,197 1,061,923 Professional fees 12,016 7,586 7,484 9,742 567,562 Director fees, expenses and insurance 11,290 6,643 6,784 1,539 449,386 Bank interest 16 200 1,740 23 30,370 Tax charges (excluding Taxe d’abonnement) 70,510 21,959 11,968 2,299 1,518,482 Other fees 90,584 56,820 13,528 3,417 1,335,766

Total expenses 21,712,652 33,127,084 10,179,180 119,266 496,248,201

Plus fee waiver income 15,003,291 295 - 70,791 17,414,772

Net investment income/(loss) 376,440 (4,285,097) (7,433,673) (48,435) 423,377,260 Net realised gain/(loss) on sales of investments - 61,877,840 25,595,668 1,679 1,404,948,770 Net realised gain/(loss) on financial futures contracts - 100,692,849 (3,057,292) (334,691) 108,315,377 Net realised gain/(loss) on credit default swap contracts - - - - 3,616,994 Net realised gain/(loss) on total return swap contracts - (90,449,760) - - (120,162,506) Net realised gain/(loss) on interest rate swap contracts - - - - 7,350,404 Net realised gain/(loss) on foreign exchange transactions - 39,761,474 70,499 (139,663) 209,787,250

Net realised profit/(loss) for the year 376,440 107,597,306 15,175,202 (521,110) 2,037,233,549 Net change in unrealised appreciation/(depreciation) on investments - 74,074,277 21,442,274 - 2,128,835,827 Net change in unrealised appreciation/(depreciation) on options - - - - (402,534) Net change in unrealised appreciation/(depreciation) on financial futures contracts - 38,799,040 1,136,856 19,082 62,080,317 Net change in unrealised appreciation/(depreciation) on credit default swap contracts - - - - 8,070,252 Net change in unrealised appreciation/(depreciation) on total return swap contracts - (29,998,383) - - (39,852,852) Net change in unrealised appreciation/(depreciation) on interest rate swap contracts - - - - 35,294,371 Net change in unrealised appreciation/(depreciation) on foreign exchange transactions - 6,890,595 - 143,959 21,156,755

Net change in net assets as a result of operations 376,440 197,362,835 37,754,332 (358,069) 4,252,415,685 Dividend distribution (355,636) - - - (50,798,524)

Proceeds received on subscription of shares 3,969,900,604 2,905,921,883 589,962,350 42,695 27,734,235,739 Net amount paid on redemption of shares (3,396,528,965) (366,295,457) (56,687,020) (19,637,810) (24,766,000,725)

Net change in net assets as a result of capital transactions 573,371,639 2,539,626,426 533,275,330 (19,595,115) 2,968,235,014

Total increase/(decrease) in net assets 573,392,443 2,736,989,261 571,029,662 (19,953,184) 7,169,852,175

Net assets at beginning of year 3,644,437,486 705,771,691 185,192,930 19,953,184 34,213,588,251 Translation difference - - - - 517,113,159

Net assets at end of year 4,217,829,929 3,442,760,952 756,222,592 - 41,900,553,585

(1) Fund closed on 8 March 2013. + Represents the combined totals of all Morgan Stanley Investment Funds.

The accompanying notes are an integral part of these financial statements. 193 Morgan Stanley Investment Funds 31 December 2013

Statement of share and net assets statistics As at

31 December 2013 31 December 2012 31 December 2011

Asian Equity Fund (USD) - Net asset value per: Share Class A 43.43 42.94 36.25 Share Class B 36.77 36.72 31.31 Share Class C 27.41 27.33 23.28 Share Class I 48.59 47.68 39.95 Share Class Z 29.09 28.54 23.91

Net Assets 272,972,180 244,763,253 274,158,037

Asia-Pacific Equity Fund (USD) - Net asset value per: Share Class A 24.26 23.90 20.17 Share Class AH (EUR) - 23.37 19.93 Share Class B 23.61 23.48 20.03 Share Class BH (EUR) 22.98 22.97 19.78 Share Class C 23.73 23.56 20.05 Share Class N 25.41 24.61 20.43 Share Class Z 24.77 24.21 20.29

Net Assets 115,256,218 110,829,486 63,619,461

Asian Property Fund (USD) - Net asset value per: Share Class A 19.34 18.87 12.86 Share Class AX 18.12 17.86 12.35 Share Class B 17.22 16.97 11.68 Share Class I 21.61 20.93 14.16 Share Class IX 19.19 18.90 13.07 Share Class Z 33.37 32.32 21.85

Net Assets 404,144,332 566,352,803 446,050,223

Emerging Europe, Middle East and Africa Equity Fund (EUR) - Net asset value per: Share Class A 66.42 60.12 50.36 Share Class AX 62.26 56.90 48.06 Share Class B 60.34 55.15 46.66 Share Class C 24.41 22.29 18.84 Share Class I 71.69 64.52 53.76 Share Class Z 23.37 21.01 17.51

Net Assets 196,622,030 206,078,040 216,774,952

Emerging Leaders Equity Fund (USD) - Net asset value per: Share Class A 27.45 26.40 - Share Class AH (EUR) 27.24 26.33 - Share Class AX* 24.45 - - Share Class B 27.07 26.30 - Share Class BH (EUR) 26.87 26.23 - Share Class C 27.14 26.32 - Share Class CH (EUR) 27.10 26.42 - Share Class I 26.29 25.04 - Share Class Z 27.83 26.49 - Share Class ZH (EUR)* 25.47 - -

Net Assets 210,524,314 45,873,789 -

Emerging Markets Equity Fund (USD) - Net asset value per: Share Class A 38.47 38.56 32.60 Share Class B 33.18 33.59 28.68 Share Class C 24.54 24.84 21.20 Share Class I 42.33 42.18 35.44 Share Class N 52.19 51.37 42.64 Share Class Z 24.54 24.44 20.53

Net Assets 1,633,017,723 1,394,324,169 1,087,548,404

* Share Class was launched during the year. Morgan Stanley Investment Funds 31 December 2013 194

Statement of share and net assets statistics (continued) As at

31 December 2013 31 December 2012 31 December 2011

European Equity Alpha Fund (EUR) - Net asset value per: Share Class A 39.77 32.50 28.29 Share Class AH (USD)* 29.50 - - Share Class AX - 26.99 - Share Class B 33.73 27.84 24.49 Share Class C 34.07 28.06 24.65 Share Class I 43.97 35.73 30.93 Share Class Z 37.09 30.12 26.05 Share Class ZH (GBP) - 26.52 23.82 Share Class Z (GBP) 26.67 - -

Net Assets 859,362,345 562,973,137 453,605,063

European Property Fund (EUR) - Net asset value per: Share Class A 24.41 22.43 17.43 Share Class AX* 24.81 - 15.83 Share Class B 20.91 19.41 15.24 Share Class I 27.22 24.83 19.16 Share Class IX - 20.65 16.33 Share Class Z 30.32 27.64 21.32

Net Assets 173,867,008 224,752,052 157,109,233

Eurozone Equity Alpha Fund (EUR) - Net asset value per: Share Class A 10.40 8.09 6.64 Share Class AH (USD)* 30.94 - - Share Class B 9.08 7.13 5.91 Share Class I 11.37 8.78 7.16 Share Class Z 35.84 27.66 22.51

Net Assets 281,393,802 145,859,845 91,833,726

Frontier Emerging Markets Equity Fund (1) (USD) - Net asset value per: Share Class A 30.00 - - Share Class AH (EUR) 29.93 - - Share Class B 29.77 - - Share Class BH (EUR) 29.70 - - Share Class C 29.86 - - Share Class CH (EUR) 29.79 - - Share Class I 30.28 - - Share Class Z 30.30 - -

Net Assets 42,707,168 - -

Global Advantage Fund (2) (USD) - Net asset value per: Share Class A 30.79 - - Share Class B 30.51 - - Share Class C 30.56 - - Share Class I 31.01 - - Share Class Z 31.02 - -

Net Assets 3,979,184 - -

Global Brands Fund (USD) - Net asset value per: Share Class A 89.61 75.16 66.39 Share Class AH (CHF) 33.24 28.07 25.08 Share Class AH (EUR) 55.87 47.16 42.03 Share Class AHX (EUR) 35.07 29.84 26.84 Share Class AX 35.92 30.37 27.11 Share Class B 78.62 66.61 59.43 Share Class BH (EUR) 50.28 42.86 38.59 Share Class BHX (EUR) 34.52 29.52 26.69 Share Class BX 35.30 30.00 26.89 Share Class C 40.02 33.84 30.13 Share Class CH (EUR) 34.83 29.65 26.66 Share Class I 98.06 81.66 71.60 Share Class Z 42.08 35.03 30.70 Share Class ZH (EUR) 50.96 42.68 37.75 Share Class ZH (GBP) 34.72 28.88 25.42 Share Class ZX 61.76 52.19 46.61

Net Assets 8,949,332,199 9,091,877,773 5,072,244,032

(1) Fund commenced operations on 28 March 2013. (2) Fund commenced operations on 31 January 2013. * Share Class was launched during the year. 195 Morgan Stanley Investment Funds 31 December 2013

Statement of share and net assets statistics (continued) As at

31 December 2013 31 December 2012 31 December 2011

Global Equity Allocation Fund (USD) - Net asset value per: Share Class A 34.95 27.90 25.02 Share Class B 34.23 27.61 25.00 Share Class Z 35.72 28.22 25.04

Net Assets 22,623,975 13,975,448 12,018,704

Global Infrastructure Fund (USD) - Net asset value per: Share Class A 45.47 38.59 33.61 Share Class AH (EUR) 44.29 37.79 33.19 Share Class B 43.88 37.61 33.09 Share Class BH (EUR) 42.79 36.86 32.68 Share Class C 44.20 37.85 33.25 Share Class CH (EUR) 30.48 26.26 - Share Class I 29.44 24.82 - Share Class Z 46.79 39.40 34.05 Share Class ZH (EUR) 38.63 32.70 28.48 Share Class ZX* 27.97 - -

Net Assets 457,968,458 225,112,504 122,891,139

Global Opportunity Fund (USD) - Net asset value per: Share Class A 36.76 26.52 24.30 Share Class AH (EUR) 35.73 25.92 23.97 Share Class B 35.64 25.97 24.04 Share Class BH (EUR) 34.64 25.39 23.71 Share Class C 35.86 26.07 24.09 Share Class I 35.27 25.25 - Share Class Z 37.69 26.96 24.51

Net Assets 101,386,869 58,042,227 10,006,117

Global Property Fund (USD) - Net asset value per: Share Class A 25.66 24.23 18.57 Share Class AH (EUR) 28.74 27.35 21.22 Share Class B 23.85 22.75 17.62 Share Class BH (EUR) 27.86 26.77 20.99 Share Class C 29.16 27.76 21.48 Share Class CH (EUR) 28.00 26.89 21.04 Share Class I 27.00 25.31 19.26 Share Class IX 24.01 22.87 17.73 Share Class Z 32.01 30.00 22.81

Net Assets 992,593,208 731,458,647 466,418,210

Global Quality Fund (USD) (1) - Net asset value per: Share Class A 27.09 - - Share Class AH (EUR) 27.03 - - Share Class AH (SGD) 25.78 - - Share Class AX 26.90 - - Share Class B 26.98 - - Share Class BH (EUR) 26.94 - - Share Class C 27.00 - - Share Class CH (EUR) 26.95 - - Share Class I 27.19 - - Share Class Z 27.21 - - Share Class ZH (EUR) 25.58

Net Assets 539,257,811 - -

Indian Equity Fund (USD) - Net asset value per: Share Class A 24.44 26.51 20.67 Share Class B 22.77 24.96 19.66 Share Class C 17.27 18.95 14.94 Share Class I 25.80 27.77 21.49 Share Class N* 24.09 - - Share Class Z 26.60 28.63 22.14

Net Assets 115,142,956 122,566,196 105,876,962

(1) Fund commenced operations on 1 August 2013. * Share Class was launched during the year. Morgan Stanley Investment Funds 31 December 2013 196

Statement of share and net assets statistics (continued) As at

31 December 2013 31 December 2012 31 December 2011

Japanese Equity Fund (JPY) - Net asset value per: Share Class A 3,714.08 2,456.10 2,059.96 Share Class AH (USD)* 26.84 - - Share Class B 3,894.93 2,602.15 2,203.99 Share Class C 3,917.55 2,603.71 2,208.80 Share Class I 4,052.48 2,660.74 2,215.69 Share Class Z 3,817.01 2,503.81 2,084.30 Share Class ZH (EUR) 38.18 25.78 21.98

Net Assets 16,258,626** 6,745,315** 3,724,523 **

Latin American Equity Fund (USD) - Net asset value per: Share Class A 60.16 68.80 61.73 Share Class B 50.76 58.65 53.16 Share Class C 20.24 23.37 21.15 Share Class I 66.90 75.99 67.72 Share Class Z 47.95 54.44 48.50

Net Assets 564,262,321 848,719,286 777,483,594

US Advantage Fund (USD) - Net asset value per: Share Class A 49.28 36.45 32.36 Share Class AH (EUR) 35.59 26.47 23.68 Share Class B 45.48 33.97 30.47 Share Class BH (EUR) 59.74 44.87 40.57 Share Class C 47.33 35.28 31.58 Share Class I 52.35 38.42 33.84 Share Class N - 34.30 - Share Class Z 49.65 36.42 32.07 Share Class ZH (EUR) 57.79 42.62 37.83

Net Assets 4,360,488,337 3,766,958,328 1,819,704,199

US Growth Fund (USD) - Net asset value per: Share Class A 59.14 40.41 36.18 Share Class AH (EUR) 40.89 28.10 25.38 Share Class AX 59.14 40.41 36.18 Share Class B 50.23 34.67 31.35 Share Class BH (EUR) 39.85 27.68 25.25 Share Class C 41.91 28.87 26.07 Share Class CH (EUR) 38.26 26.57 - Share Class I 66.43 45.04 40.02 Share Class IX 66.30 44.94 39.93 Share Class Z 42.81 29.01 25.76 Share Class ZH (EUR) 41.89 28.54 25.57

Net Assets 1,618,337,196 889,970,539 1,181,309,388

US Property Fund (USD) - Net asset value per: Share Class A 54.25 53.05 47.39 Share Class AX - - 43.42 Share Class B 45.80 45.26 40.85 Share Class I 60.41 58.66 52.02 Share Class Z 43.82 42.53 37.70

Net Assets 468,246,142 447,771,659 198,052,321 197 Morgan Stanley Investment Funds 31 December 2013

Statement of share and net assets statistics (continued) As at

31 December 2013 31 December 2012 31 December 2011

Emerging Markets Corporate Debt Fund (USD) - Net asset value per: Share Class A 29.28 29.88 24.87 Share Class AH (EUR) 29.13 29.80 24.88 Share Class AHX (EUR) 26.99 28.55 24.75 Share Class AX 27.15 28.67 24.76 Share Class B 28.46 29.35 24.67 Share Class BH (EUR) 28.30 29.25 24.68 Share Class BHX (EUR) 26.92 28.48 24.71 Share Class BX 27.08 28.59 24.72 Share Class C 28.66 29.46 24.70 Share Class CH (EUR) 24.76 25.57 - Share Class I* 24.02 - - Share Class Z 29.82 30.25 25.02

Net Assets 368,660,341 247,992,256 45,470,150

* Share Class was launched during the year. ** JPY000’s.

Emerging Markets Debt Fund (USD) - Net asset value per: Share Class A 74.76 82.59 70.02 Share Class AH (EUR) 54.81 60.73 51.72 Share Class AHX (EUR) 24.66 28.47 25.07 Share Class ARM 22.87 26.82 - Share Class AX 53.12 61.20 54.44 Share Class B 63.45 70.78 60.60 Share Class BH (EUR) 26.67 29.84 25.67 Share Class BHX (EUR) 24.60 28.41 25.03 Share Class BX 24.79 28.55 25.04 Share Class C 32.59 36.28 31.01 Share Class CH (EUR) 22.89 25.59 - Share Class I 82.59 90.69 76.44 Share Class NH (EUR) 29.44 32.10 26.90 Share Class S 25.29 - - Share Class Z 35.22 38.66 32.56 Share Class ZH (EUR) 31.75 34.96 29.60 Share Class ZHX (GBP) 26.98 30.99 27.60

Net Assets 506,109,954 945,418,799 453,507,125

Emerging Markets Domestic Debt Fund (USD) - Net asset value per: Share Class A 33.72 38.87 33.97 Share Class AH (EUR) 25.55 29.60 26.09 Share Class AHX (EUR) 21.65 26.30 24.05 Share Class ARM 20.68 25.47 - Share Class AX 21.72 26.29 24.29 Share Class B 31.50 36.67 32.37 Share Class BH (EUR) 22.58 26.42 23.50 Share Class BHX (EUR) 21.60 26.25 24.01 Share Class BX 21.88 26.48 24.05 Share Class C 27.21 31.60 27.80 Share Class CH (EUR) 22.17 25.91 - Share Class I 35.06 40.22 34.94 Share Class Z 32.57 37.32 32.41 Share Class ZH (EUR) 24.15 27.82 24.34 Share Class ZX 22.15 26.82 24.83

Net Assets 442,867,189 873,703,184 699,073,456

Euro Bond Fund (EUR) - Net asset value per: Share Class A 14.28 14.06 12.57 Share Class B 12.18 12.12 10.94 Share Class C 32.65 32.40 29.19 Share Class I 15.31 15.03 13.37 Share Class IX - - 10.81 Share Class Z 34.37 33.70 29.98

Net Assets 244,086,314 708,400,480 717,920,038

Euro Corporate Bond (ex Financials) Fund (EUR) - Net asset value per: Share Class A 26.98 26.44 - Share Class AX - 26.02 - Share Class N 28.99 28.13 25.35 Share Class Z 27.01 26.54 -

Net Assets 68,863,171 111,933,660 32,998,669

* Share Class was launched during the year. Morgan Stanley Investment Funds 31 December 2013 198

Statement of share and net assets statistics (continued) As at

31 December 2013 31 December 2012 31 December 2011

Euro Corporate Bond Fund (EUR) - Net asset value per: Share Class A 44.04 42.24 35.22 Share Class AD 27.57 26.34 22.62 Share Class ADX 24.75 24.30 21.95 Share Class AX 29.01 28.63 25.10 Share Class B 38.96 37.75 31.79 Share Class BD 26.70 25.74 22.33 Share Class BDX 24.70 24.26 21.86 Share Class BH (USD)* 25.30 - - Share Class BX 27.18 26.82 23.48 Share Class C 34.72 33.54 28.18 Share Class CD 26.78 25.77 22.30 Share Class I 46.45 44.37 36.84 Share Class ID* 26.03 - - Share Class IX* 25.45 - - Share Class N - - 25.49 Share Class NX - 26.82 23.59 Share Class S 31.56 30.11 24.97 Share Class Z 37.10 35.42 29.40 Share Class ZD 28.02 26.63 22.76 Share Class ZOX* 25.52 - -

Net Assets 2,171,536,399 1,588,806,834 1,431,373,502

Euro Strategic Bond Fund (EUR) - Net asset value per: Share Class A 39.32 38.53 33.80 Share Class AD 25.91 25.19 23.05 Share Class ADX 23.88 23.83 22.38 Share Class AX 26.35 26.51 23.86 Share Class B 33.40 33.06 29.30 Share Class BD 25.10 24.65 22.77 Share Class BDX 23.82 23.77 22.33 Share Class BX 26.27 26.43 23.81 Share Class C 27.92 27.57 24.37 Share Class CD 25.15 24.64 22.70 Share Class I 42.22 41.22 36.00 Share Class Z 34.84 33.99 29.69 Share Class ZD 26.34 25.49 23.21

Net Assets 518,302,562 480,390,944 317,725,281

European Currencies High Yield Bond Fund (EUR) - Net asset value per: Share Class A 20.41 18.58 14.79 Share Class AD - 25.52 20.89 Share Class ADX 24.11 23.15 20.59 Share Class AX 30.19 29.05 24.50 Share Class B 17.45 16.04 12.90 Share Class BD 27.33 25.09 20.74 Share Class BDX 24.06 23.10 20.50 Share Class BX 30.12 28.98 24.46 Share Class C 43.12 39.51 31.66 Share Class CD 27.57 25.25 20.79 Share Class I 21.90 19.85 15.71 Share Class Z 45.85 41.54 32.90 Share Class ZD - - 20.96 Share Class ZX* 25.92 - -

Net Assets 737,774,130 614,674,524 323,549,460

Global Bond Fund (USD) - Net asset value per: Share Class A 39.49 40.47 37.69 Share Class AH (EUR) 25.58 26.37 24.70 Share Class AHX (EUR) 24.36 25.73 24.56 Share Class AX 32.58 34.27 32.75 Share Class B 33.38 34.55 32.49 Share Class BH (EUR) 24.86 25.86 24.44 Share Class BHX (EUR) 24.31 25.67 24.52 Share Class BX 24.55 25.81 24.54 Share Class C 30.30 31.29 29.36 Share Class CH (EUR) 24.29 25.21 - Share Class I 42.45 43.32 40.15 Share Class IX - - 16.17 Share Class Z 32.10 32.74 30.34

Net Assets 495,647,885 687,469,045 346,656,661

* Share Class was launched during the year. 199 Morgan Stanley Investment Funds 31 December 2013

Statement of share and net assets statistics (continued) As at

31 December 2013 31 December 2012 31 December 2011

Global Convertible Bond Fund (USD) - Net asset value per: Share Class A 40.94 35.99 33.24 Share Class AH (CHF) 28.89 25.51 - Share Class AH (EUR) 34.99 30.84 28.63 Share Class B 36.53 32.43 30.26 Share Class BH (EUR) 31.19 27.77 26.04 Share Class CH (EUR) 27.72 24.63 23.05 Share Class I 43.18 37.77 34.72 Share Class IH (EUR) 36.89 32.36 29.90 Share Class S - 31.31 28.74 Share Class Z 31.51 27.56 25.32 Share Class ZH (CHF) 29.06 25.53 - Share Class ZH (EUR) 39.10 34.30 31.67 Share Class ZHX (EUR) 35.92 32.07 30.31 Share Class ZX* 26.75 - -

Net Assets 953,248,684 1,075,335,965 954,768,322

Global Credit Fund (USD) - Net asset value per: Share Class A 26.07 25.16 - Share Class B 25.78 25.13 - Share Class C 25.88 25.14 - Share Class I 26.19 25.18 - Share Class Z 26.20 25.18 - Share Class ZX 25.43 25.18 -

Net Assets 74,671,174 20,141,684 -

Global Fixed Income Opportunities Fund (USD) - Net asset value per: Share Class A 29.31 28.79 24.93 Share Class AH (EUR) 27.67 27.31 - Share Class AHX (EUR) 27.18 27.78 24.91 Share Class AX 27.40 27.91 24.93 Share Class B 28.70 28.47 24.90 Share Class BH (EUR) 27.21 27.11 - Share Class BHX (EUR) 27.11 27.70 24.87 Share Class BX 27.34 27.83 24.89 Share Class C 25.84 25.52 - Share Class CH (EUR) 25.68 25.46 - Share Class CHX (EUR) 24.74 25.14 - Share Class Z 29.74 29.01 24.95 Share Class ZH (EUR)* 25.30 - -

Net Assets 222,228,879 128,441,703 20,668,023

Global High Yield Bond Fund (USD) - Net asset value per: Share Class A 34.71 30.62 25.58 Share Class AH (EUR) 31.40 27.80 - Share Class AHX (EUR) 30.87 28.98 25.56 Share Class AO (SEK)* 26.51 - - Share Class AX 31.07 29.09 25.58 Share Class B 33.99 30.28 25.55 Share Class BH (EUR) 30.87 27.60 - Share Class BHX (EUR) 30.79 28.90 25.53 Share Class BX 31.01 29.02 25.55 Share Class C 29.01 25.74 - Share Class CH (EUR) 28.87 25.72 - Share Class I* 25.49 - - Share Class Z 35.08 30.79 25.59 Share Class ZX 31.12 29.12 25.59

Net Assets 254,120,873 41,503,266 10,224,501

* Share Class was launched during the year. Morgan Stanley Investment Funds 31 December 2013 200

Statement of share and net assets statistics (continued) As at

31 December 2013 31 December 2012 31 December 2011

Global Mortgage Securities Fund (USD) - Net asset value per: Share Class A 25.58 25.07 - Share Class AH (EUR) 25.47 25.06 - Share Class AHR (EUR) 25.10 25.06 - Share Class AHX (EUR) 25.41 25.06 - Share Class AX* 25.33 - - Share Class B 25.28 25.05 - Share Class BH (EUR) 25.20 25.04 - Share Class BHR (EUR) 24.84 25.04 - Share Class BHX (EUR) 25.20 25.04 - Share Class C 25.41 25.06 - Share Class CH (EUR) 25.31 25.05 - Share Class CHX (EUR) 25.31 25.05 - Share Class CX* 25.26 - - Share Class I 25.74 25.08 - Share Class IH (EUR)* 24.91 - - Share Class IHX (EUR)* 24.77 - - Share Class Z 25.73 25.08 - Share Class ZH (EUR)* - - - Share Class ZX - 25.08 -

Net Assets 287,929,869 20,074,836 -

Global Premier Credit Fund (USD) - Net asset value per: Share Class A 24.78 24.98 - Share Class AH (EUR) 24.65 24.97 - Share Class B 24.53 24.96 - Share Class BH (EUR) 24.39 24.96 - Share Class C 24.61 24.97 - Share Class CH (EUR) 24.48 24.96 - Share Class I 24.89 24.98 - Share Class Z 24.90 24.98 - Share Class ZX 24.38 24.98 -

Net Assets 10,451,513 9,997,873 -

Short Maturity Euro Bond Fund (EUR) - Net asset value per: Share Class A 20.29 20.06 19.12 Share Class B 17.45 17.43 16.78 Share Class C 26.46 26.37 25.33 Share Class I 21.83 21.50 20.41 Share Class Z 30.07 29.60 28.09

Net Assets 556,292,611 467,947,948 442,711,262

Euro Liquidity Fund (EUR) - Net asset value per: Share Class A 12.89 12.89 12.88 Share Class B 11.90 11.90 11.90 Share Class C 25.03 25.02 25.02 Share Class I 13.19 13.19 13.19 Share Class Z 25.77 25.77 25.76

Net Assets 152,237,521 116,038,496 244,622,946

US Dollar Liquidity Fund (USD) - Net asset value per: Share Class A 13.03 13.03 13.03 Share Class AX 1.00 1.00 1.00 Share Class B - 12.55 12.55 Share Class BX - 1.00 1.00 Share Class I 13.55 13.54 13.54 Share Class IX - - 1.00 Share Class Z 25.02 25.02 25.02

Net Assets 4,217,829,929 3,644,437,486 508,834,865

* Share Class was launched during the year. 201 Morgan Stanley Investment Funds 31 December 2013

Statement of share and net assets statistics (continued) As at

31 December 2013 31 December 2012 31 December 2011

Diversified Alpha Plus Fund (EUR) - Net asset value per: Share Class A 33.55 28.94 26.86 Share Class AH (CHF)* 24.96 - - Share Class AH (USD) 35.27 30.36 28.02 Share Class B 31.75 27.66 25.93 Share Class BH (USD) 31.38 27.31 25.49 Share Class C 31.81 27.64 25.85 Share Class I 35.52 30.33 27.86 Share Class IH (USD)* 25.24 - - Share Class Z 35.48 30.28 27.80 Share Class ZH (CHF)* 25.02 - - Share Class ZH (GBP) 32.66 27.74 25.36 Share Class ZH (USD) 30.30 25.82 -

Net Assets 3,442,760,952 705,771,691 434,724,426

Global Balanced Risk Control Fund of Funds (EUR) - Net asset value per: Share Class A 30.71 28.04 25.34 Share Class B 30.08 27.74 25.30 Share Class C 27.82 25.60 - Share Class Z 30.22 27.25 -

Net Assets 756,222,592 185,192,930 458,513

Absolute Return Currency Fund (EUR) (1) - Net asset value per: Share Class A - 23.18 25.61 Share Class A1 - 22.61 24.91 Share Class AH (SEK) - 226.64 - Share Class AH (USD) - 22.81 25.25 Share Class B - 21.85 24.39 Share Class I - 24.25 26.50 Share Class IH (USD) - 23.70 25.96 Share Class Z - 23.08 25.17

Net Assets - 19,953,184 38,535,419

(1) Fund closed on 8 March 2013. * Share Class was launched during the year. Morgan Stanley Investment Funds 31 December 2013 202

Notes to the financial statements As at 31 December 2013

1 the Company The following significant changes were made in the year ended 31 December 2013: Morgan Stanley Investment Funds (“The Company”) was incorporated on 21 November 1988 under the laws of the Grand Launched Classes Duchy of Luxembourg as a “Société d’Investissement à Capital Variable” (“SICAV”) and is registered as an undertaking for Fund Name Share Class Date collective investment pursuant to Part 1 of the Law of European Currencies High Yield Bond Fund ZX 22 January 2013 Euro Corporate Bond Fund ID 23 January 2013 17 December 2010. The 2010 Law transposes the recast UCITS Emerging Leaders Equity Fund ZH (EUR) 25 January 2013 Directive (Directive 2009/65/EC), often referred to as UCITS IV, Global Fixed Income Opportunities Fund ZH (EUR) 25 January 2013 European Equity Alpha Fund AH (USD) 31 January 2013 into Luxembourg legislation. Eurozone Equity Alpha Fund AH (USD) 31 January 2013 Global Advantage Fund A 31 January 2013 The exclusive purpose of the Company is to invest the funds Global Advantage Fund B 31 January 2013 Global Advantage Fund C 31 January 2013 available to it in transferable securities and other assets permitted by Global Advantage Fund I 31 January 2013 law, with the purpose of spreading investment risks and affording Global Advantage Fund Z 31 January 2013 Global Mortgage Securities Fund AX 1 February 2013 its shareholders the results of the management of its assets. The Global Mortgage Securities Fund CX 1 February 2013 Euro Corporate Bond Fund ZOX 15 February 2013 Company is presently structured to provide both institutional and Indian Equity Fund N 1 March 2013 individual investors with a variety of Equity, Bond, Liquidity and Frontier Emerging Markets Equity Fund A 28 March 2013 Frontier Emerging Markets Equity Fund AH (EUR) 28 March 2013 Asset Allocation Funds. At the date of this report forty-three Funds Frontier Emerging Markets Equity Fund B 28 March 2013 are open for subscription. Frontier Emerging Markets Equity Fund BH (EUR) 28 March 2013 Frontier Emerging Markets Equity Fund C 28 March 2013 Frontier Emerging Markets Equity Fund CH (EUR) 28 March 2013 Fund Name Date of launch Frontier Emerging Markets Equity Fund I 28 March 2013 Frontier Emerging Markets Equity Fund Z 28 March 2013 Asian Equity Fund 8 October 1991 Emerging Leaders Equity Fund AX 3 April 2013 Asia-Pacific Equity Fund 25 March 2011 Global Mortgage Securities Fund ZH (EUR) 15 April 2013 Asian Property Fund 1 September 1997 Emerging Markets Corporate Debt Fund I 24 April 2013 Emerging Europe, Middle East and Africa Equity Fund 16 October 2000 Global Mortgage Securities Fund IH (EUR) 25 April 2013 Global Mortgage Securities Fund IHX (EUR) 25 April 2013 Emerging Leaders Equity Fund 17 August 2012 Euro Corporate Bond Fund BH (USD) 13 May 2013 Emerging Markets Equity Fund 27 July 1993 Global Convertible Bond Fund ZX 2 July 2013 European Equity Alpha Fund 5 March 1991 Global Infrastructure Fund ZX 2 July 2013 European Property Fund 1 September 1997 Global Quality Fund A 1 August 2013 Eurozone Equity Alpha Fund 3 April 2000 Global Quality Fund AH (EUR) 1 August 2013 Frontier Emerging Markets Equity Fund 28 March 2013 Global Quality Fund B 1 August 2013 Global Advantage Fund 31 January 2013 Global Quality Fund BH (EUR) 1 August 2013 Global Brands Fund 30 October 2000 Global Quality Fund C 1 August 2013 Global Equity Allocation Fund 1 December 2011 Global Quality Fund CH (EUR) 1 August 2013 Global Infrastructure Fund 14 June 2010 Global Quality Fund I 1 August 2013 Global Opportunity Fund 29 November 2010 Global Quality Fund Z 1 August 2013 Global Property Fund 31 October 2006 European Equity Alpha Fund Z (GBP) 16 August 2013 Global Quality Fund 1 August 2013 Global High Yield Bond Fund AO (SEK) 2 September 2013 Indian Equity Fund 30 November 2006 Emerging Markets Debt Fund S 17 September 2013 Global Quality Fund AX 17 September 2013 Japanese Equity Fund 14 June 2010 Japanese Equity Fund AH (USD) 27 September 2013 Latin American Equity Fund 2 August 1994 Japanese Equity Fund ZH (USD) 27 September 2013 US Advantage Fund 1 December 2005 Euro Corporate Bond Fund IX 8 October 2013 US Growth Fund 25 August 1992 Diversified Alpha Plus Fund AH (CHF) 21 October 2013 US Property Fund 9 January 1996 Diversified Alpha Plus Fund ZH (CHF) 21 October 2013 Emerging Markets Corporate Debt Fund 7 March 2011 Diversified Alpha Plus Fund IH (USD) 25 October 2013 Emerging Markets Debt Fund 11 April 1995 Global High Yield Bond Fund I 28 October 2013 Emerging Markets Domestic Debt Fund 28 February 2007 European Property Fund AX 4 November 2013 Euro Bond Fund 15 September 1992 Global Quality Fund AH (SGD) 11 November 2013 Euro Corporate Bond (ex Financials) Fund 23 November 2011 Global Quality Fund ZH (EUR) 22 November 2013 Euro Corporate Bond Fund 3 September 2001 Euro Strategic Bond Fund 25 February 1991 European Currencies High Yield Bond Fund 27 May 1997 Closed Classes Global Bond Fund 7 November 1989 Global Convertible Bond Fund 16 July 2002 Global Credit Fund 14 November 2012 Fund Name Share Class Date Global Fixed Income Opportunities Fund 7 November 2011 Global High Yield Bond Fund 18 November 2011 European Equity Alpha Fund AX 7 March 2013 Global Mortgage Securities Fund 3 December 2012 Absolute Return Currency Fund A 8 March 2013 Global Premier Credit Fund 10 December 2012 Absolute Return Currency Fund A1 8 March 2013 Short Maturity Euro Bond Fund 2 August 1994 Absolute Return Currency Fund AH (SEK) 8 March 2013 Euro Liquidity Fund 31 January 2000 Absolute Return Currency Fund AH (USD) 8 March 2013 US Dollar Liquidity Fund 1 April 1998 Absolute Return Currency Fund B 8 March 2013 Diversified Alpha Plus Fund 4 June 2008 Absolute Return Currency Fund I 8 March 2013 Global Balanced Risk Control Fund of Funds 2 November 2011 Absolute Return Currency Fund IH (USD) 8 March 2013 Absolute Return Currency Fund Z 8 March 2013 US Advantage Fund N 22 March 2013 Global Convertible Bond Fund S 20 June 2013 Each Class of Shares within each Fund has a different fee European Equity Alpha Fund ZH (GBP) 19 August 2013 structure but participates in the same pool of assets within Global Mortgage Securities Fund ZX 27 September 2013 Global Mortgage Securities Fund ZH (EUR) 15 October 2013 a given Fund. Euro Corporate Bond Fund NX 13 December 2013 European Currencies High Yield Bond Fund AD 16 December 2013 203 Morgan Stanley Investment Funds 31 December 2013

Notes to the financial statements (continued) As at 31 December 2013

Fund Name Share Class Date reasonably foreseeable sales price determined prudently and in

Asia-Pacific Equity Fund AH (EUR) 16 December 2013 good faith pursuant to procedures established by the Board of European Property Fund IX 16 December 2013 Directors. Euro Corporate Bond (Ex Financials) Fund AX 16 December 2013 US Dollar Liquidity Fund B 16 December 2013 Securities with a known short-term maturity date, are valued US Dollar Liquidity Fund BX 16 December 2013 Japanese Equity Fund ZH (USD) 20 December 2013 using an amortised cost method. This involves valuing an investment at its cost and thereafter assuming a constant amortisation to maturity of any discount or premium, Fund launches regardless of the impact of fluctuating interest rates on the • On 31 January 2013, Morgan Stanley Investment Funds market value of the investments. Global Advantage Fund commenced operations. Investments in other Undertakings for Collective Investments • On 28 March 2013, Morgan Stanley Investment Funds (“UCIs”) are valued at the last available net asset value for the Frontier Emerging Markets Equity Fund commenced UCI in question. operations. Events may occur between the determination of an investment’s last available price and the determination of the Fund’s Net Asset • On 1 August 2013, Morgan Stanley Investment Funds Global Value per Share at the valuation point that may, in the opinion Quality Fund commenced operations. of the Board of Directors, mean that the last available price does Fund closures not reflect the fair market value of the investment. In such circumstances the price of such investment shall be adjusted • On 8 March 2013, Morgan Stanley Investment Funds in accordance with the procedures adopted from time to time by Absolute Return Currency Fund closed. the Board of Directors in their discretion. As at the date of this Code of Conduct annual report, certain securities may be fair valued in accordance with these procedures. On 23 August 2011, the Board of Directors approved a Code of Conduct, designed to provide the Board with a framework of If since the time of determination of the net asset value there has been a material change in the quotations in the markets principles and best practice recommendations for the governance on which a substantial portion of the investments attributable of Company. to an available Fund are dealt in or quoted, the Company may, in order to safeguard the interests of the shareholders 2 Significant accounting policies and the Company, cancel the first valuation and carry out The financial statements are presented in accordance with further valuations as appropriate. generally accepted accounting principles applicable to UCITS b) Valuation of Interest rate swaps investment funds in Luxembourg and require management to an Interest Rate Swap (“IRS”) is a bilateral agreement in which make estimates and assumptions that affect the amounts each of the parties agree to exchange a series of interest payments reported in the financial statements and accompanying notes. (usually fixed/floating) based on a notional amount that serves Actual results could differ from those estimates. as a computation basis and that is usually not exchanged. a) Valuation of securities IRS contracts are valued by reference to service data Securities listed on a recognised stock exchange or dealt in on providers, market data and algorithms. any other regulated market are valued at their last available prices at the valuation point, or, in the event that there The unrealised gain/loss as at year end is recorded under should be several such markets, on the basis of their last “Unrealised gain/loss on interest rate swap contracts” in the available prices on the main market for the relevant security. Statement of assets and liabilities. The changes in such amounts are recorded under “Net change in unrealised appreciation/ In normal market conditions, fixed income securities (depreciation) on interest rate swap contracts” and the realised (including mortgage backed securities) are valued at mid gain/loss under “Net realised gain/(loss) on interest rate swap market price at the valuation point, based on data provided contracts” in the Statement of operations and changes in net assets. by pricing vendors. c) valuation of Credit default swaps In the event that the last available price or mid market price a Credit Default Swap (“CDS”) is a transaction in which two (fixed income) does not truly reflect the fair market value of parties enter into an agreement, whereby the buyer pays the the relevant securities, the value of such securities will be seller a periodic payment for the specified life of the based on the reasonably foreseeable sales price determined agreement. The seller makes no payments unless a credit prudently and in good faith pursuant to procedures event, relating to a predetermined reference asset, occurs. established by the Board of Directors. If such an event does occur, the seller will then make Securities not listed or traded on a stock exchange or not dealt a payment to the buyer, and the swap contract will terminate. on another regulated market are valued on the basis of the Morgan Stanley Investment Funds 31 December 2013 204

Notes to the financial statements (continued) As at 31 December 2013

CDS contracts are valued by reference to service data f) valuation of Forward foreign currency exchange providers, market data and algorithms. contracts a forward foreign currency exchange contract is an agreement The unrealised gain/loss as at year end is recorded under between two parties to exchange one currency for another at “Unrealised gain/loss on credit default swap contracts” in the a specific price and date in the future. Statement of assets and liabilities. The changes in such amounts are recorded under “Net change in unrealised Open forward contracts are valued by reference to the last appreciation/(depreciation) on credit default swap contracts” available currency rates prevailing at the relevant valuation point. and the realised gain/loss under “Net realised gain/(loss) on The unrealised gain/loss as at year end is recorded under credit default swap contracts” in the Statement of operations “Unrealised gain/loss on forward foreign currency exchange and changes in net assets. contracts” in the Statement of assets and liabilities. The The notional amount represents the highest potential liability changes in such amounts are recorded under “Net change in of a contract and is not shown in the Statement of assets and unrealised appreciation/(depreciation) on foreign exchange liabilities. transactions” and the realised gain/loss under “Net realised gain/(loss) on foreign exchange transactions” in the Statement d) valuation of Total return swaps of operations and changes in net assets. a total Return Swap (“TRS”) is a transaction in which the buyer receives the performance of an underlying asset and in g) Valuation of Financial futures contracts return the buyer pays funding costs and generally, an A financial futures contract is a contractual agreement, to arrangement fee. The underlying asset may be, but not buy or sell a particular commodity or financial instrument at limited to, a specific security, basket of securities, other a pre‑determined price in the future. Financial futures instruments and index. contracts detail the quality and quantity of the underlying asset and they are standardised to facilitate trading on tRS contracts are valued by reference to the mark to market a futures exchange. value based on the market value of the underlying asset. Futures contracts are valued at the last available prices, on The unrealised gain/loss as at year end is recorded under the exchanges for which the contracts are traded on, as at the “Unrealised gain/loss on total return swap contracts” in the valuation point. Statement of assets and liabilities. The changes in such amounts are recorded under “Net change in unrealised The unrealised gain/loss as at year end is recorded under appreciation/(depreciation) on total return swap contracts” “Unrealised gain/loss on financial futures contracts” in the and the realised gain/loss under “Net realised gain/(loss) on Statement of assets and liabilities. The changes in such amounts total return swap contracts” in the Statement of operations are recorded under “Net change in unrealised appreciation/ and changes in net assets. (depreciation) on financial futures contracts” and the realised e) Valuation of Options gain/loss under “Net realised gain/(loss) on financial futures Options are contractual agreements that convey the right, but contracts” in the Statement of operations and changes in not the obligation, for the purchaser either to buy or sell net assets. a specific amount of a financial instrument at a fixed price, either at the time the Fund enters into a financial futures contract at a fixed future date or at any time within a specified period. the Fund deposits and maintains with the broker as collateral Options are valued by reference to the expected future cash an initial margin as required by the exchange on which the flow based on the market implied performance, spot level transaction is affected. Pursuant to the contract, the Fund and the volatility of the underlying asset(s). agrees to receive from or pay to the broker an amount of cash When securities are acquired or delivered upon exercise of an equal to the daily fluctuation in the value of the contract. option, the acquisition cost or sale proceeds are adjusted by the Such receipts or payments are known as the variation margin amount of the premium paid. When an option is closed, the and are recorded by the Fund as unrealised appreciation/ difference between the premium and the cost to close the (depreciation) on financial futures contracts. When the position is recorded under “Net realised gain/(loss) on options” contract is closed, the Fund records a “Net realised gain/ in the Statement of operations and changes in net assets. When (loss) on financial futures contracts” equal to the difference an option expires, the premium is accounted for as a realised gain between the value of the contract at the time it was opened for options written or as a realised loss for options purchased. and the time it is closed.

The market value of options as at year end is recorded under h) income and securities transactions “Options at market value” in the Statement of assets and Dividend income is recorded on the ex‑dividend date. liabilities. The changes in unrealised gain/(loss) on options Interest income is accrued daily. Discounts and premiums are recorded under “Net change in unrealised appreciation/ are accreted and amortised as adjustments to interest income (depreciation) on options” in the Statement of operations for short-term money market instrument only. Income from and changes in net assets. securities lending is recorded on a cash receipts basis. 205 Morgan Stanley Investment Funds 31 December 2013

Notes to the financial statements (continued) As at 31 December 2013

Securities transactions are accounted for on a trade date operations and changes in net assets of the Indian Equity basis, on the date the securities are purchased or sold. Fund. All investments held by the Subsidiary are individually Realised gains or losses on the sale of securities are determined disclosed in the statement of investments of the Indian on the basis of the average cost method and are recorded Equity Fund. under “Net realised gain/(loss) on sales of investments” in The Subsidiary incurs and pays certain fees and expenses the Statement of operations and changes in net assets. relating to its investment activity in India. These fees and For the Global Mortgage Securities Fund, realised gains and expenses may include brokerage costs and commissions, losses on the sale of interest only mortgaged-backed securities transaction costs associated with converting currency to are determined on a First In First Out (FIFO) basis of cost and from Indian Rupee to US dollars, fees incurred by method and are recorded under “Net realised gain/(loss) on its standing proxy, corporate and registration fees and sales of investments” in the Statement of operations and taxes associated with the establishment and operation of changes in net assets. the Subsidiary.

i) valuation of Repurchase agreements 3 SECURITIES LENDING Under a repurchase agreement, the Company purchases securities and agrees to re-sell them at a mutually agreed Certain Fund’s may lend securities to qualified financial upon date and price. A repurchase agreement is collateralised institutions, such as broker-dealers, to earn additional income. by securities. Repurchase agreements are valued at cost with Any increase or decrease in the fair value of the securities loaned interest accrued from the date of purchase. that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in Repurchase agreements outstanding as at year end are the Fund. Funds that lend securities, receive securities as included in the Statement of assets and liabilities. Net collateral in an amount equal to or exceeding 100% of the repurchase agreements income is included under “Bank current fair value of the loaned securities. The collateral is interest” in the Statement of operations and changes in net marked to market daily, by the securities lending agent, to ensure assets. See note 11 for further details. that a minimum of 100% collateral coverage is maintained j) translation of foreign currencies throughout the term of the loan. Securities lending income is transactions in foreign currencies are translated into the generated as a result of securities on loan less compensation to currency of each Fund at the last available rate of exchange the administrative agent. Net securities lending income is prevailing in a recognised market at the date of the included in the Statement of operations and changes in net transactions. Assets and liabilities denominated in foreign assets. See note 4(b) for related party disclosure on securities currencies are translated into the currency of each Fund at lending transactions. the last available rate of exchange prevailing in a recognised The value of loaned securities, related collateral outstanding, market at the date of the Statement of assets and liabilities. identity of the counterparties, security lending income and The Combined statement of assets and liabilities is presented associated operational costs and fees as at 31 December 2013 are in US dollars at the last available rate of exchange prevailing as follows: in a recognised market at the date of the Statement of assets Lending Lending Lending and liabilities, while the combined Statement of operations Bonds Income (Gross) Agent fees Income (Net) and changes in net assets is presented in US dollars at the Collateral MV Fund in Fund in Fund in Fund Fund Name Value in USD in USD* Currency Currency Currency Currency average exchange rates ruling during the year. Asian Equity Fund 23,638,003 25,599,651 USD 216,219 25,606 190,613 The difference between opening net assets stated at exchange Asia-Pacific Equity Fund 10,000,411 10,828,726 USD 105,885 12,267 93,618 Emerging Leaders Equity Fund 9,883,186 10,431,697 USD 40,725 8,145 32,580 rates at the beginning of the year and their value at the end Emerging Markets Equity Fund 112,557,179 121,884,371 USD 514,169 57,615 456,554 of the year is shown as “Translation difference” in the European Equity Alpha Fund 107,670,876 115,786,609 EUR 589,655 65,120 524,535 European Property Fund 23,256,714 24,857,099 EUR 111,461 12,544 98,917 Statement of operations and changes in net assets. Eurozone Equity Alpha Fund 29,315,322 31,743,369 EUR 228,257 22,826 205,431 Global Infrastructure Fund 46,870,578 49,625,436 USD 337,646 67,529 270,117 k) Mauritian subsidiary Latin American Equity Fund 240,715 253,700 USD 15,034 3,007 12,027 US Advantage Fund 175,519,782 179,407,179 USD 12,946 2,589 10,357 The IndianE quity Fund currently invests through Morgan US Growth Fund 80,321,396 83,332,301 USD 5,449 1,090 4,359 Stanley Investment Holding Company (Mauritius) Limited Emerging Markets Corporate Debt Fund 26,533,645 29,383,075 USD 20,000 2,000 18,000 (formerly known as Morgan Stanley SICAV (Mauritius) Emerging Markets Debt Fund 27,355,091 30,292,735 USD 100,134 10,013 90,121 Limited) (“the Subsidiary”). The amendments of the Euro Bond Fund 17,811,929 18,168,167 EUR 146,643 14,664 131,979 Euro Corporate Bond Constitution of the Subsidiary were adopted by way of special (ex Financials) Fund 6,888,533 7,410,337 EUR 7,637 764 6,873 resolution dated 11 November 2013. All assets and liabilities, Euro Corporate Bond Fund 282,445,240 288,461,943 EUR 130,527 13,053 117,474 Euro Strategic Bond Fund 35,326,930 36,108,279 EUR 26,493 2,649 23,844 income and expenses of the Subsidiary are recorded in the European Currencies High Yield Statement of assets and liabilities and the Statement of Bond Fund 206,437,218 211,380,417 EUR 188,478 18,848 169,630 Morgan Stanley Investment Funds 31 December 2013 206

Notes to the financial statements (continued) As at 31 December 2013

Lending Lending Lending page 225. The Investment Adviser is entitled to receive from the Bonds Income (Gross) Agent fees Income (Net) Collateral MV Fund in Fund in Fund in Fund Company a fee payable monthly in arrears, and calculated on the Fund Name Value in USD in USD* Currency Currency Currency Currency basis of the average daily net assets (before deduction of the fee)

Global Bond Fund 12,137,892 12,498,961 USD 26,679 2,668 24,011 of each Fund attributable to each Class of Shares. Global Fixed Income Opportunities Fund 4,174,397 4,541,306 USD 2,500 250 2,250 all expenses are paid directly by the Company and fees paid to Global High Yield Bond Fund 14,824,172 16,002,262 USD 2,500 250 2,250 Short Maturity Euro Bond Fund 41,467,532 42,296,881 EUR 87,534 8,753 78,781 the Investment Adviser are at the following annual rates: Diversified Alpha Plus Fund – – EUR 10,436 1,044 9,392 Classes A, AD, Classes I, Total 1,294,676,741 1,350,294,501 ADX, AH, AHR, ID, IH, IHX, AHX, AO, ARM, Classes C, IX, Z, ZD, * Collateral is comprised of government bonds issued by the following countries: Austria, Belgium, AX, B, BD, BDX, CD, CH, ZH, ZHX, Germany, France, UK, Netherlands and USA. BH, BHR, BHX CHX, ZOX Fund Name and BX and CX and ZX Class S Fund Name Value in USD Collateral MV in USD Counterparty Asian Equity Fund 1.40% 2.20% 0.75% - Asian Equity Fund 23,638,003 25,599,651 Morgan Stanley & Co. International Asia-Pacific Equity Fund 1.50% 2.30% 0.85% - Asia-Pacific Equity Fund 10,000,411 10,828,726 Morgan Stanley & Co. International Asian Property Fund 1.40% 2.20% 0.75% - Emerging Leaders Equity Fund 241,303 254,670 Citigroup Global Markets Emerging Europe, Middle East Emerging Leaders Equity Fund 3,376,157 3,568,036 Credit Suisse Securities (Europe) and Africa Equity Fund 1.60% 2.40% 1.10% - Emerging Leaders Equity Fund 2,887,092 3,042,782 Deutsche Bank Emerging Leaders Equity Fund 2.00% 2.80% 1.10% - Emerging Leaders Equity Fund 176,944 191,602 Merrill Lynch International Emerging Markets Equity Fund 1.60% 2.40% 1.10% - Emerging Leaders Equity Fund 115,336,835 124,808,927 Morgan Stanley & Co. International European Equity Alpha Fund 1.20% 1.90% 0.70% - Emerging Markets Equity Fund 422,034 450,051 UBS European Property Fund 1.40% 2.20% 0.75% - European Equity Alpha Fund 76,163,132 82,471,397 Morgan Stanley & Co. International Eurozone Equity Alpha Fund 1.40% 2.20% 0.75% - European Equity Alpha Fund 31,507,744 33,315,212 Nomura International Frontier Emerging Markets Equity Fund1 2.40% 3.00% 1.20% - 2 European Property Fund 4,352,221 4,599,547 Credit Suisse Securities (Europe) Global Advantage Fund 1.60% 2.40% 0.90% - European Property Fund 1,071,327 1,129,100 Deutsche Bank Global Brands Fund 1.40% 2.20% 0.75% 0.75% European Property Fund 958,554 1,022,207 Merrill Lynch International Global Equity Allocation Fund 1.50% 2.30% 0.55% - European Property Fund 9,066,357 9,817,280 Morgan Stanley & Co. International Global Infrastructure Fund 1.50% 2.30% 0.85% - European Property Fund 2,344,054 2,495,688 Morgan Stanley Securities Limited Global Opportunity Fund 1.60% 2.40% 0.90% - Global Property Fund 1.50% 2.30% 0.85% 0.85% European Property Fund 3,732,004 3,946,093 Nomura International Global Quality Fund3 1.60% 2.40% 0.75% - European Property Fund 1,732,197 1,847,184 UBS Indian Equity Fund 1.60% 2.40% 0.90% - Eurozone Equity Alpha Fund 29,315,322 31,743,369 Morgan Stanley & Co. International Japanese Equity Fund 1.40% 2.20% 0.75% - Global Infrastructure Fund 32,916,390 34,878,604 Citigroup Global Markets Latin American Equity Fund 1.60% 2.40% 1.00% - Global Infrastructure Fund 13,836,818 14,623,133 Credit Suisse Securities (Europe) US Advantage Fund 1.40% 2.20% 0.70% - Global Infrastructure Fund 117,370 123,699 Deutsche Bank US Growth Fund 1.40% 2.20% 0.70% - Latin American Equity Fund 240,715 253,700 Morgan Stanley & Co. International US Property Fund 1.40% 2.20% 0.75% - US Advantage Fund 25,759,773 26,362,626 Citigroup Global Markets Emerging Markets Corporate Debt Fund 1.45% 2.15% 0.95% - US Advantage Fund 110,795,769 113,015,485 Credit Suisse Securities (USA) Emerging Markets Debt Fund 1.40% 2.10% 0.90% 0.60% US Advantage Fund 1,636,990 1,725,267 Deutsche Bank Emerging Markets Domestic Debt Fund 1.40% 2.10% 0.90% - US Advantage Fund 30,255,000 30,879,810 Goldman Sachs & Co. Euro Bond Fund 0.80% 1.45% 0.45% - US Advantage Fund 5,456,633 5,752,436 J.P. Morgan Securities Euro Corporate Bond (ex Financials) Fund 0.80% 1.45% 0.45% - US Advantage Fund 1,615,617 1,671,555 Merrill Lynch Pierce Fenner & Smith Euro Corporate Bond Fund 0.80% 1.45% 0.45% 0.40% US Growth Fund 5,215,962 5,371,350 Barclays Capital Euro Strategic Bond Fund 0.80% 1.45% 0.45% - US Growth Fund 8,862,624 9,070,035 Citigroup Global Markets European Currencies High Yield Bond Fund 0.85% 1.50% 0.50% - US Growth Fund 33,486,234 35,389,179 Credit Suisse Securities (Europe) Global Bond Fund 0.80% 1.45% 0.45% - US Growth Fund 32,756,576 33,501,737 J.P. Morgan Clearing Global Convertible Bond Fund 1.00% 1.60% 0.60% 0.55% Emerging Markets Corporate Debt Fund 26,533,645 29,383,075 Morgan Stanley & Co. International Global Credit Fund 0.80% 1.45% 0.45% - Emerging Markets Debt Fund 27,355,091 30,292,735 Morgan Stanley & Co. International Global Fixed Income Opportunities Fund 1.00% 1.45% 0.45% - Euro Bond Fund 17,811,929 18,168,167 Barclays Bank Global High Yield Bond Fund 1.00% 1.60% 0.60% - Euro Corporate Bond (ex Financials) Fund 6,888,533 7,410,337 Morgan Stanley & Co. International Global Mortgage Securities Fund 1.00% 1.60% 0.50% - Euro Corporate Bond Fund 282,445,240 288,461,943 Barclays Bank Global Premier Credit Fund 0.80% 1.45% 0.45% - Euro Strategic Bond Fund 35,326,930 36,108,279 Barclays Bank Short Maturity Euro Bond Fund 0.80% 1.45% 0.45% - European Currencies High Yield Bond Fund 206,437,218 211,380,417 Barclays Bank Euro Liquidity Fund 0.50% 0.85% 0.20% - Global Bond Fund 12,137,892 12,498,961 Barclays Bank US Dollar Liquidity Fund 0.50% 0.85% 0.20% - Global Fixed Income Opportunities Fund 4,174,397 4,541,306 Morgan Stanley & Co. International Diversified Alpha Plus Fund 1.75% 2.45% 0.80% - Global Balanced Risk Control Fund of Funds 2.00% 2.70% 0.80% - Global High Yield Bond Fund 14,824,172 16,002,262 Morgan Stanley & Co. International Short Maturity Euro Bond Fund 41,467,532 42,296,881 Barclays Bank 1 Fund commenced operations on 28 March 2013. 2 Fund commenced operations on 31 January 2013. Total 1,294,676,741 1,350,294,501 3 Fund commenced operations on 1 August 2013.

4 Related party transactions AND AFFILIATIONS Classes Classes A1 Classes Fund Name A and B and AH I and Z Class IH Class S Under the terms of an investment advisory agreement, Morgan Absolute Return Currency Fund1 2.00% 1.75% 1.00% 0.80% - Stanley Investment Management Limited has been appointed 1 Fund closed on 8 March 2013. Investment Adviser with responsibility for advising the Company No investment advisory fee is payable in respect of Class “N”, “NH” and “NX” Shares. within the scope of the day-to-day management of the various Funds. The Investment Adviser may delegate any of its In the case of any individual Fund or Class, the Investment responsibilities to any other party subject to approval by the Board Adviser may choose to waive or rebate all of its fee or any of Directors and the CSSF but the Investment Adviser shall portion thereof at its absolute discretion for an indefinite period, remain responsible for the proper performance by such party of in order to reduce the impact such fee may have on the those responsibilities. A full list of sub-advisers can be found on 207 Morgan Stanley Investment Funds 31 December 2013

Notes to the financial statements (continued) As at 31 December 2013

performance of the Fund or Class in instances where the net i) t ransactions in relation to an investment in respect of assets of the Fund or Class are of insufficient size. which an affiliated firm benefited from a commission, fee, mark up or mark down; or Where the Funds invest into Investment Funds that are managed by the Investment Adviser or its affiliates, the net management fee ii) transactions in relation to a placing and/or a new issue in and any shareholder services fee of the underlying Investment which the affiliated company was a member of the Funds are rebated to the sub-funds to avoid duplicated underwriting syndicate. Management fees otherwise known as “double dipping”. a ll the transactions executed on behalf of the Company were The Funds will be subject to a monthly Shareholder Service Fee entered into in the ordinary course of business and on at a maximum annual rate of 0.25% of the Funds’ aggregate normal commercial terms. average daily Net Asset Value attributable to all Classes of Shares The affiliations of the Board of Directors are as follows: of the Funds. The current fees charged by the Company are as follows: Mr. Andrew Mack acted as a consultant to Morgan Stanley Investment Management Limited until 31 December 2013.

A, A1, AD, ADX, AH, AHR, AHX, AO, ARM, AX, B, BD, BDX, BH, BHR, BHX, BX, C, a ll the Directors of Morgan Stanley Investment Funds are CD, CH, CHX, CX 0.15%+ I, ID, IH, IHX, IX, Z, ZD, ZH, ZHX, ZOX, ZX 0.08%+ also Directors of the Morgan Stanley Liquidity Funds. N, NH, NX Nil S 0.05% b) The total aggregate value of the transactions of the Company

+ Except for the Liquidity Funds which charge 0.05%. effected through affiliated firms is USD 1,115,110,372; such transactions represent 1.17% of the total transactions. Total The Shareholder Service Fee will remain in force for an brokerage commission paid to affiliated firms is USD 801,912 unlimited period and may be changed, subject to the maximum at an average rate of commission of 0.07%. noted above, by the Company upon no less than one month’s a dministration fees and transfer agent fees include prior written notice. operational costs of Morgan Stanley Investment Management The Shareholder Service Fee is paid to Morgan Stanley Limited amounting to USD 299,341 and of Morgan Stanley Investment Management Limited (the “Distributor”) as Investment Management Limited, Luxembourg Branch, compensation for providing certain services to shareholders. amounting to USD 1,257,052. The Distributor may choose to waive all of the shareholder The Company has entered into a securities lending contract with service fees or any portion thereof at its absolute discretion and Morgan Stanley & Co. International Limited, Morgan Stanley for an indefinite period. Securities Limited and Morgan Stanley & Co Incorporated For the Absolute Return Currency Fund Share Classes A1, which is under normal commercial terms. The arrangement is AH (USD), AH (SEK), BH, IH and Z, the Investment Adviser exclusive in relation to certain securities. may receive a performance fee (the “Performance Fee”) as defined Securities lending income is allocated to each Fund based on the by the prospectus. The Performance Fee will be calculated and demand of the securities of each Fund that may be loaned accrued daily and will become payable at 31 December each year. during the year. For the year under review, no performance fees have accrued and become payable. The following Funds received securities lending income from the above named affiliates: The Distributor is also paid a distribution fee for the Equity Funds, Bond Funds, Asset Allocation Funds and Alternative Investment Fund Name USD

Funds, accrued daily and paid monthly, at the annual rate of 1.00% Asian Equity Fund 158,742 of the average daily Net Asset Value of Classes B, BX, BH, BHX, Asia-Pacific Equity Fund 80,185 Emerging Markets Equity Fund 406,968 BD and BDX Shares as compensation for providing distribution- European Equity Alpha Fund 633,324 related services to the Funds with respect to such Shares. European Property Fund 117,992 Eurozone Equity Alpha Fund 273,387 Emerging Markets Corporate Debt Fund 18,000 The Liquidity Funds will pay the Distributor a distribution fee, Emerging Markets Debt Fund 90,121 accrued daily and paid monthly, at the annual rate of 0.75% Euro Corporate Bond (ex Financials) Fund 9,000 Global Fixed Income Opportunities Fund 2,250 of the average daily Net Asset Value for Classes B, BX, BH Global High Yield Bond Fund 2,250 and BHX Shares. 1,792,219 a) Morgan Stanley Investment Management Limited and the sub-advisers for the Company have entered into the following types of transactions in which a connected person had a material interest: Morgan Stanley Investment Funds 31 December 2013 208

Notes to the financial statements (continued) As at 31 December 2013

as at 31 December 2013, the following Funds invested in the 5 DIVIDEND POLICY Morgan Stanley Liquidity Funds - Euro Liquidity Fund MS Reserve The Company offers Accumulating Share Classes (Class A, A1, EUR Dist., advised by an affiliate of the Investment Adviser: AD, AH, AO, B, BD, BH, C, CD, CH, I, ID, IH, N, NH, S, Z, • European Equity Alpha Fund ZD and ZH), Distributing Share Classes (ADX, AHX, AX, BDX, • Eurozone Equity Alpha Fund BHX, BX, CHX, CX, IHX, IX, NX, ZHX, ZOX and ZX) and • Euro Bond Fund Discretionary Distributing Share Classes (AHR, ARM and BHR). • Euro Corporate Bond (ex Financials) Fund For the Distributing Share Classes of the Bond Funds, Equity Funds, • Euro Corporate Bond Fund Asset Allocation Funds and Alternative Investment Funds, the • Euro Strategic Bond Fund Company intends to declare dividends which will be equal to at least • European Currencies High Yield Bond Fund 85% of the net investment income attributable to such Classes. • Global Bond Fund • Short Maturity Euro Bond Fund For the Global Mortgage Securities Fund, net investment • Euro Liquidity Fund income is considered to include net gains and losses from • Diversified Alpha Plus Fund prepaid principal on mortgaged-backed and asset-backed securities for the purpose of the dividend policy. as at 31 December 2013, the following Funds invested in the Morgan Stanley Liquidity Funds - US Dollar Liquidity Fund MS For the Discretionary Distributing Share Classes of the Bond Reserve USD Dist., advised by an affiliate of the Investment Adviser: Funds, Equity Funds, Asset Allocation Funds and Alternative Investment Funds, the Company intends to declare dividends • Asian Equity Fund which will be set at the discretion of the Board of Directors. • Asia-Pacific Equity Fund The declared dividend for the Discretionary Distributing Share • Emerging Europe, Middle East & Africa Equity Fund Classes may be in excess of the net investment income attributable • Emerging Leaders Equity Fund to such Classes, if this is the case there will be a reduction of capital. • Emerging Markets Equity Fund • Frontier Emerging Markets Equity Fund In the case of the Distributing Share Classes AHX, AX, BHX, BX, • Latin American Equity Fund IX, ZX of the Equity, Asset Allocation Funds and Alternative • Emerging Markets Corporate Debt Fund Investment Funds, such dividends, if any, will be accrued on the last • Emerging Markets Debt Fund Dealing Day of June and December and declared on the next • Emerging Markets Domestic Debt Fund Dealing Day. as at 31 December 2013, the following Funds invested in the In the case of the Distributing Share Classes ADX, AHX, AHR, Morgan Stanley Liquidity Funds - US Dollar Treasury Liquidity AX, BDX, BHX, BHR, BX, CHX, CX, IHX, IX, NX, ZHX, Fund MS Reserve USD Dist., an affiliate of the Investment Adviser: ZOX, ZX of the Bond Funds, such dividends, if any, will be accrued on the last Dealing Day of March, June, September and • Asian Property Fund December and declared on the next Dealing Day. • Global Advantage Fund • Global Brands Fund In the case of the Distributing Share Classes ADM, AHM, AM, • Global Equity Allocation Fund ARM and AOM shares of the Bond Funds, such dividends, if • Global Infrastructure Fund any, will be accrued on the last Dealing Day of the month and • Global Opportunity Fund declare on the next Dealing Day. • Global Property Fund During the year ended 31 December 2013, the Fund paid • US Advantage Fund dividends as follows: • US Growth Fund • US Property Fund Share Record Dividend Fund Name Ccy Class Ex-Date Pay Date Date per Share The US Dollar Liquidity Fund (“the Feeder Fund”) is a feeder fund Equity Funds of the Morgan Stanley Liquidity Funds - US Dollar Liquidity Asian Property Fund USD AX 02/01/2013 07/01/2013 31/12/2012 0.086107 Fund (“the Master Fund”), under the provisions of UCITS IV. USD AX 01/07/2013 04/07/2013 28/06/2013 0.079641 USD IX 02/01/2013 07/01/2013 31/12/2012 0.157982 Please refer to note 16 on page 213/214 for further details. USD IX 01/07/2013 04/07/2013 28/06/2013 0.161075 Emerging Europe, Middle East and EUR AX 02/01/2013 07/01/2013 31/12/2012 0.039792 as at 31 December 2013, Morgan Stanley Investment Funds - Africa Equity Fund EUR AX 01/07/2013 04/07/2013 28/06/2013 0.480043 European Equity Alpha Fund EUR AX 02/01/2013 07/01/2013 31/12/2012 0.026510 Global Balanced Risk Control Fund of Funds invested in the European Property Fund EUR IX 02/01/2013 07/01/2013 31/12/2012 0.051514 Funds, advised by the Investment Adviser or an affiliate, detailed EUR IX 01/07/2013 04/07/2013 28/06/2013 0.376985 Global Brands Fund EUR AHX 01/07/2013 04/07/2013 28/06/2013 0.255682 in note 15 on page 213. USD AX 01/07/2013 04/07/2013 28/06/2013 0.265412 EUR BHX 01/07/2013 04/07/2013 28/06/2013 0.092231 The Company has entered into TO C swaps transactions to USD BX 01/07/2013 04/07/2013 28/06/2013 0.100735 which Morgan Stanley acts as counterparty. Bond Funds (continued)

Euro Corporate Bond Fund (continued)

209 Morgan Stanley Investment Funds 31 December 2013

Notes to the financial statements (continued) As at 31 December 2013

Share Record Dividend Share Record Dividend Fund Name Ccy Class Ex-Date Pay Date Date per Share Fund Name Ccy Class Ex-Date Pay Date Date per Share

Equity Funds (continued) Bond Funds (continued) Global Brands Fund (continued) USD ZX 02/01/2013 07/01/2013 31/12/2012 0.175514 Emerging Markets USD BX 02/04/2013 05/04/2013 28/03/2013 0.291399 USD ZX 01/07/2013 04/07/2013 28/06/2013 0.665795 Domestic Debt Fund (continued) USD BX 01/07/2013 04/07/2013 28/06/2013 0.186149 Global Property Fund USD IX 02/01/2013 07/01/2013 31/12/2012 0.116856 USD BX 01/10/2013 04/10/2013 30/09/2013 0.307555 USD IX 01/07/2013 04/07/2013 28/06/2013 0.232350 USD ZX 02/01/2013 07/01/2013 31/12/2012 0.258544 USD ZX 02/04/2013 05/04/2013 28/03/2013 0.397602 Bond Funds USD ZX 01/07/2013 04/07/2013 28/06/2013 0.293788 Emerging Markets Corporate EUR AHX 02/01/2013 07/01/2013 31/12/2012 0.218579 USD ZX 01/10/2013 04/10/2013 30/09/2013 0.410109 Debt Fund EUR AHX 02/04/2013 05/04/2013 28/03/2013 0.214520 Euro Corporate Bond EUR AX 02/01/2013 07/01/2013 31/12/2012 0.179205 EUR AHX 01/07/2013 04/07/2013 28/06/2013 0.221204 (ex Financials) Fund EUR AX 02/04/2013 05/04/2013 28/03/2013 0.173336 EUR AHX 01/10/2013 04/10/2013 30/09/2013 0.250741 EUR AX 01/07/2013 04/07/2013 28/06/2013 0.171766 USD AX 02/01/2013 07/01/2013 31/12/2012 0.226430 EUR AX 01/10/2013 04/10/2013 30/09/2013 0.174968 USD AX 02/04/2013 05/04/2013 28/03/2013 0.212159 Euro Corporate Bond Fund EUR ADX 02/01/2013 07/01/2013 31/12/2012 0.188508 USD AX 01/07/2013 04/07/2013 28/06/2013 0.228951 EUR ADX 02/04/2013 05/04/2013 28/03/2013 0.153384 USD AX 01/10/2013 04/10/2013 30/09/2013 0.263774 EUR ADX 01/07/2013 04/07/2013 28/06/2013 0.167366 EUR BHX 02/01/2013 07/01/2013 31/12/2012 0.155103 EUR ADX 01/10/2013 04/10/2013 30/09/2013 0.162863 EUR BHX 02/04/2013 05/04/2013 28/03/2013 0.147113 EUR AX 02/01/2013 07/01/2013 31/12/2012 0.231788 EUR BHX 01/07/2013 04/07/2013 28/06/2013 0.152743 EUR AX 02/04/2013 05/04/2013 28/03/2013 0.184433 EUR BHX 01/10/2013 04/10/2013 30/09/2013 0.185671 EUR AX 01/07/2013 04/07/2013 28/06/2013 0.200187 USD BX 02/01/2013 07/01/2013 31/12/2012 0.161714 EUR AX 01/10/2013 04/10/2013 30/09/2013 0.193928 USD BX 02/04/2013 05/04/2013 28/03/2013 0.144777 EUR BDX 02/01/2013 07/01/2013 31/12/2012 0.134412 USD BX 01/07/2013 04/07/2013 28/06/2013 0.155507 EUR BDX 02/04/2013 05/04/2013 28/03/2013 0.097814 USD BX 01/10/2013 04/10/2013 30/09/2013 0.194762 EUR BDX 01/07/2013 04/07/2013 28/06/2013 0.107476 Emerging Markets Debt Fund EUR AHX 02/01/2013 07/01/2013 31/12/2012 0.244065 EUR BDX 01/10/2013 04/10/2013 30/09/2013 0.101480 EUR AHX 02/04/2013 05/04/2013 28/03/2013 0.267742 EUR BX 02/01/2013 07/01/2013 31/12/2012 0.149126 EUR AHX 01/07/2013 04/07/2013 28/06/2013 0.273949 EUR BX 02/04/2013 05/04/2013 28/03/2013 0.109422 EUR AHX 01/10/2013 04/10/2013 30/09/2013 0.276233 EUR BX 01/07/2013 04/07/2013 28/06/2013 0.120064 USD ARM 02/01/2013 07/01/2013 31/12/2012 0.115239 EUR BX 01/10/2013 04/10/2013 30/09/2013 0.111216 USD ARM 01/02/2013 06/02/2013 31/01/2013 0.120201 EUR NX 02/01/2013 07/01/2013 31/12/2012 0.277431 USD ARM 01/03/2013 06/03/2013 28/02/2013 0.113768 EUR NX 02/04/2013 05/04/2013 28/03/2013 0.229663 USD ARM 02/04/2013 05/04/2013 28/03/2013 0.126224 EUR NX 01/07/2013 04/07/2013 28/06/2013 0.248323 USD ARM 02/05/2013 07/05/2013 30/04/2013 0.135493 EUR NX 01/10/2013 04/10/2013 30/09/2013 0.246531 USD ARM 03/06/2013 06/06/2013 31/05/2013 0.126578 EUR ZOX 02/04/2013 05/04/2013 28/03/2013 0.094387 USD ARM 01/07/2013 04/07/2013 28/06/2013 0.118256 EUR ZOX 01/07/2013 04/07/2013 28/06/2013 0.203905 USD ARM 01/08/2013 06/08/2013 31/07/2013 0.134180 EUR ZOX 01/10/2013 04/10/2013 30/09/2013 0.199803 USD ARM 02/09/2013 05/09/2013 30/08/2013 0.123387 Euro Strategic Bond Fund EUR ADX 02/01/2013 07/01/2013 31/12/2012 0.165998 USD ARM 01/10/2013 04/10/2013 30/09/2013 0.123813 EUR ADX 02/04/2013 05/04/2013 28/03/2013 0.139827 USD ARM 04/11/2013 07/11/2013 31/10/2013 0.123200 EUR ADX 01/07/2013 04/07/2013 28/06/2013 0.156802 USD ARM 02/12/2013 05/12/2013 29/11/2013 0.116162 EUR ADX 01/10/2013 04/10/2013 30/09/2013 0.139487 USD AX 02/01/2013 07/01/2013 31/12/2012 0.559962 EUR AX 02/01/2013 07/01/2013 31/12/2012 0.188518 USD AX 02/04/2013 05/04/2013 28/03/2013 0.570128 EUR AX 02/04/2013 05/04/2013 28/03/2013 0.162074 USD AX 01/07/2013 04/07/2013 28/06/2013 0.602306 EUR AX 01/07/2013 04/07/2013 28/06/2013 0.181660 USD AX 01/10/2013 04/10/2013 30/09/2013 0.626982 EUR AX 01/10/2013 04/10/2013 30/09/2013 0.160819 EUR BHX 02/01/2013 07/01/2013 31/12/2012 0.188550 EUR BDX 02/01/2013 07/01/2013 31/12/2012 0.108246 EUR BHX 02/04/2013 05/04/2013 28/03/2013 0.204643 EUR BDX 02/04/2013 05/04/2013 28/03/2013 0.087567 EUR BHX 01/07/2013 04/07/2013 28/06/2013 0.211814 EUR BDX 01/07/2013 04/07/2013 28/06/2013 0.101781 EUR BHX 01/10/2013 04/10/2013 30/09/2013 0.218546 EUR BDX 01/10/2013 04/10/2013 30/09/2013 0.086004 USD BX 02/01/2013 07/01/2013 31/12/2012 0.194815 EUR BX 02/01/2013 07/01/2013 31/12/2012 0.119987 USD BX 02/04/2013 05/04/2013 28/03/2013 0.202680 EUR BX 02/04/2013 05/04/2013 28/03/2013 0.098886 USD BX 01/07/2013 04/07/2013 28/06/2013 0.217191 EUR BX 01/07/2013 04/07/2013 28/06/2013 0.114141 USD BX 01/10/2013 04/10/2013 30/09/2013 0.231902 EUR BX 01/10/2013 04/10/2013 30/09/2013 0.092197 GBP ZHX 02/01/2013 07/01/2013 31/12/2012 0.326027 European Currencies High Yield EUR ADX 02/01/2013 07/01/2013 31/12/2012 0.319176 GBP ZHX 02/04/2013 05/04/2013 28/03/2013 0.337279 Bond Fund EUR ADX 02/04/2013 05/04/2013 28/03/2013 0.311956 GBP ZHX 01/07/2013 04/07/2013 28/06/2013 0.355928 EUR ADX 01/07/2013 04/07/2013 28/06/2013 0.304213 GBP ZHX 01/10/2013 04/10/2013 30/09/2013 0.342555 EUR ADX 01/10/2013 04/10/2013 30/09/2013 0.326457 Emerging Markets EUR AHX 02/01/2013 07/01/2013 31/12/2012 0.192632 EUR AX 02/01/2013 07/01/2013 31/12/2012 0.398644 Domestic Debt Fund EUR AHX 02/04/2013 05/04/2013 28/03/2013 0.348222 EUR AX 02/04/2013 05/04/2013 28/03/2013 0.388462 EUR AHX 01/07/2013 04/07/2013 28/06/2013 0.239151 EUR AX 01/07/2013 04/07/2013 28/06/2013 0.377490 EUR AHX 01/10/2013 04/10/2013 30/09/2013 0.340178 EUR AX 01/10/2013 04/10/2013 30/09/2013 0.411093 USD ARM 02/01/2013 07/01/2013 31/12/2012 0.108543 EUR BDX 02/01/2013 07/01/2013 31/12/2012 0.266393 USD ARM 01/02/2013 06/02/2013 31/01/2013 0.231017 EUR BDX 02/04/2013 05/04/2013 28/03/2013 0.258928 USD ARM 01/03/2013 06/03/2013 28/02/2013 0.105722 EUR BDX 01/07/2013 04/07/2013 28/06/2013 0.247522 USD ARM 02/04/2013 05/04/2013 28/03/2013 0.106408 EUR BDX 01/10/2013 04/10/2013 30/09/2013 0.268619 USD ARM 02/05/2013 07/05/2013 30/04/2013 0.128205 EUR BX 02/01/2013 07/01/2013 31/12/2012 0.335071 USD ARM 03/06/2013 06/06/2013 31/05/2013 0.114389 EUR BX 02/04/2013 05/04/2013 28/03/2013 0.325290 USD ARM 01/07/2013 04/07/2013 28/06/2013 0.104596 EUR BX 01/07/2013 04/07/2013 28/06/2013 0.309242 USD ARM 01/08/2013 06/08/2013 31/07/2013 0.250059 EUR BX 01/10/2013 04/10/2013 30/09/2013 0.340322 USD ARM 02/09/2013 05/09/2013 30/08/2013 0.100125 EUR ZX 02/04/2013 05/04/2013 28/03/2013 0.280521 USD ARM 01/10/2013 04/10/2013 30/09/2013 0.102233 EUR ZX 01/07/2013 04/07/2013 28/06/2013 0.359885 USD ARM 04/11/2013 07/11/2013 31/10/2013 0.086796 EUR ZX 01/10/2013 04/10/2013 30/09/2013 0.385938 USD ARM 02/12/2013 05/12/2013 29/11/2013 0.097220 Global Bond Fund EUR AHX 02/01/2013 07/01/2013 31/12/2012 0.156298 USD AX 02/01/2013 07/01/2013 31/12/2012 0.213025 EUR AHX 02/04/2013 05/04/2013 28/03/2013 0.155067 USD AX 02/04/2013 05/04/2013 28/03/2013 0.351702 EUR AHX 01/07/2013 04/07/2013 28/06/2013 0.151315 USD AX 01/07/2013 04/07/2013 28/06/2013 0.248646 EUR AHX 01/10/2013 04/10/2013 30/09/2013 0.127035 USD AX 01/10/2013 04/10/2013 30/09/2013 0.365774 USD AX 02/01/2013 07/01/2013 31/12/2012 0.221273 EUR BHX 02/01/2013 07/01/2013 31/12/2012 0.141397 USD AX 02/04/2013 05/04/2013 28/03/2013 0.210502 EUR BHX 02/04/2013 05/04/2013 28/03/2013 0.294471 USD AX 01/07/2013 04/07/2013 28/06/2013 0.211507 EUR BHX 01/07/2013 04/07/2013 28/06/2013 0.178977 USD AX 01/10/2013 04/10/2013 30/09/2013 0.182636 EUR BHX 01/10/2013 04/10/2013 30/09/2013 0.290127 EUR BHX 02/01/2013 07/01/2013 31/12/2012 0.099502 USD BX 02/01/2013 07/01/2013 31/12/2012 0.146743 Bond Funds (continued)

Euro Corporate Bond Fund (continued)

Morgan Stanley Investment Funds 31 December 2013 210

Notes to the financial statements (continued) As at 31 December 2013

Share Record Dividend For the AX, AHX, BX, BHX, CX, CHX, IX, IHX, NX, NHX, SX, Fund Name Ccy Class Ex-Date Pay Date Date per Share ZX and ZHX Classes of Shares of the Liquidity Funds, the Bond Funds (continued) Company intends to declare dividends which will be equal to the net Global Bond Fund (continued) EUR BHX 02/04/2013 05/04/2013 28/03/2013 0.102387 EUR BHX 01/07/2013 04/07/2013 28/06/2013 0.095983 investment income attributable to such Classes and realised capital EUR BHX 01/10/2013 04/10/2013 30/09/2013 0.069960 USD BX 02/01/2013 07/01/2013 31/12/2012 0.104315 gains, reduced by realised losses, if any. In the case of the Liquidity USD BX 02/04/2013 05/04/2013 28/03/2013 0.102814 Funds, such dividends, if any, will be declared on each Dealing Day USD BX 01/07/2013 04/07/2013 28/06/2013 0.101098 USD BX 01/10/2013 04/10/2013 30/09/2013 0.080333 and paid monthly on the first Dealing Day after month end. Global Convertible Bond Fund USD ZX 01/10/2013 04/10/2013 30/09/2013 0.111928 EUR ZHX 02/01/2013 07/01/2013 31/12/2012 0.148242 EUR ZHX 02/04/2013 05/04/2013 28/03/2013 0.143098 6 Taxation EUR ZHX 01/07/2013 04/07/2013 28/06/2013 0.160391 EUR ZHX 01/10/2013 04/10/2013 30/09/2013 0.148495 Under current law and practice, the Company is not liable to any Global Credit Fund USD ZX 02/01/2013 07/01/2013 31/12/2012 0.087697 USD ZX 02/04/2013 05/04/2013 28/03/2013 0.212727 Luxembourg income tax, or any Luxembourg capital gains tax on the USD ZX 01/07/2013 04/07/2013 28/06/2013 0.199996 realised capital appreciation of the assets of the Company nor are USD ZX 01/10/2013 04/10/2013 30/09/2013 0.227181 Global Fixed Income EUR AHX 02/01/2013 07/01/2013 31/12/2012 0.239761 dividends paid by the Company liable to any Luxembourg Opportunities Fund EUR AHX 02/04/2013 05/04/2013 28/03/2013 0.253806 withholding tax. The Company is, however, liable to annual EUR AHX 01/07/2013 04/07/2013 28/06/2013 0.233767 EUR AHX 01/10/2013 04/10/2013 30/09/2013 0.233910 subscription tax in Luxembourg (“taxe d’abonnement”) calculated at USD AX 02/01/2013 07/01/2013 31/12/2012 0.246078 the rate of 0.05% of the Net Asset Value of the funds (except the Euro USD AX 02/04/2013 05/04/2013 28/03/2013 0.244715 USD AX 01/07/2013 04/07/2013 28/06/2013 0.234011 Liquidity Fund for which the rate is 0.01% for all share class and Nil USD AX 01/10/2013 04/10/2013 30/09/2013 0.241268 for Z share class). Furthermore, the Company has sought the benefit EUR BHX 02/01/2013 07/01/2013 31/12/2012 0.170651 EUR BHX 02/04/2013 05/04/2013 28/03/2013 0.186819 of a reduced annual tax rate of 0.01% for Class Z, ZD, ZH, ZX, EUR BHX 01/07/2013 04/07/2013 28/06/2013 0.165117 ZHX, ZOX, S, SX, N, NH, NX and NHX Shares. Subscription tax EUR BHX 01/10/2013 04/10/2013 30/09/2013 0.165994 USD BX 02/01/2013 07/01/2013 31/12/2012 0.178908 is not payable on the value of the assets of the Funds represented by USD BX 02/04/2013 05/04/2013 28/03/2013 0.183691 USD BX 01/07/2013 04/07/2013 28/06/2013 0.164322 investments in other Luxembourg undertaking for collective USD BX 01/10/2013 04/10/2013 30/09/2013 0.177188 investment which are themselves subject to the subscription tax. This EUR CHX 02/01/2013 07/01/2013 31/12/2012 0.039950 EUR CHX 02/04/2013 05/04/2013 28/03/2013 0.197792 tax is payable quarterly on the basis of the net assets of the relevant EUR CHX 01/07/2013 04/07/2013 28/06/2013 0.180812 Funds, calculated at the end of the quarter to which the tax relates. EUR CHX 01/10/2013 04/10/2013 30/09/2013 0.180450 Global High Yield Bond Fund EUR AHX 02/01/2013 07/01/2013 31/12/2012 0.399793 No stamp or other tax will be payable in Luxembourg in connection EUR AHX 02/04/2013 05/04/2013 28/03/2013 0.426557 with the issue of Shares of the Company, except a once and for all tax EUR AHX 01/07/2013 04/07/2013 28/06/2013 0.430772 EUR AHX 01/10/2013 04/10/2013 30/09/2013 0.449777 of EUR 1,239.47 which was paid upon incorporation. USD AX 02/01/2013 07/01/2013 31/12/2012 0.413704 USD AX 02/04/2013 05/04/2013 28/03/2013 0.418826 The Company is exempt from subscription tax in respect of the USD AX 01/07/2013 04/07/2013 28/06/2013 0.435140 USD AX 01/10/2013 04/10/2013 30/09/2013 0.465889 portion of the US Dollar Liquidity Fund (“the Feeder Fund”) EUR BHX 02/01/2013 07/01/2013 31/12/2012 0.328105 invested in the Morgan Stanley Liquidity Funds - US Dollar EUR BHX 02/04/2013 05/04/2013 28/03/2013 0.354048 EUR BHX 01/07/2013 04/07/2013 28/06/2013 0.359480 Liquidity Fund (“the Master Fund”), which is itself subject to a EUR BHX 01/10/2013 04/10/2013 30/09/2013 0.379853 subscription tax of 0.01%. For Class Z and ZX shares of the USD BX 02/01/2013 07/01/2013 31/12/2012 0.340780 USD BX 02/04/2013 05/04/2013 28/03/2013 0.348289 Feeder Fund, any proportion of the assets of the Share Class which USD BX 01/07/2013 04/07/2013 28/06/2013 0.359744 is not invested in the Master Fund shall be subject to the USD BX 01/10/2013 04/10/2013 30/09/2013 0.395086 USD ZX 02/01/2013 07/01/2013 31/12/2012 0.452912 subscription tax at a rate of 0.01%. For all other Share Classes of USD ZX 02/04/2013 05/04/2013 28/03/2013 0.454891 the Feeder Fund any portion of the assets of the Share Class not USD ZX 01/07/2013 04/07/2013 28/06/2013 0.473901 USD ZX 01/10/2013 04/10/2013 30/09/2013 0.505180 invested in the Master Fund will be subject to the subscription tax Global Mortgage Securities Fund EUR AHR 02/01/2013 07/01/2013 31/12/2012 0.012347 of 0.05%. Please refer to note 16 for further details about the EUR AHR 02/04/2013 05/04/2013 28/03/2013 0.097376 EUR AHR 01/07/2013 04/07/2013 28/06/2013 0.113887 Feeder Fund and the Master Fund. EUR AHR 01/10/2013 04/10/2013 30/09/2013 0.138707 EUR AHX 02/04/2013 05/04/2013 28/03/2013 0.001107 EUR AHX 01/07/2013 04/07/2013 28/06/2013 0.013426 Dividends, interest and capital gains on securities held by the EUR AHX 01/10/2013 04/10/2013 30/09/2013 0.042627 USD AX 02/04/2013 05/04/2013 28/03/2013 0.001768 Company may be subject to non-recoverable withholding tax or USD AX 01/07/2013 04/07/2013 28/06/2013 0.016469 capital gains tax in the country of origin. USD AX 01/10/2013 04/10/2013 30/09/2013 0.046520 EUR BHR 02/01/2013 07/01/2013 31/12/2012 0.012347 EUR BHR 02/04/2013 05/04/2013 28/03/2013 0.097137 EUR BHR 01/07/2013 04/07/2013 28/06/2013 0.113389 EUR BHR 01/10/2013 04/10/2013 30/09/2013 0.137743 EUR IHX 01/07/2013 04/07/2013 28/06/2013 0.045846 EUR IHX 01/10/2013 04/10/2013 30/09/2013 0.085605 USD ZX 02/04/2013 05/04/2013 28/03/2013 0.040730 USD ZX 01/07/2013 04/07/2013 28/06/2013 0.056107 Global Premier Credit Fund USD ZX 02/01/2013 07/01/2013 31/12/2012 0.031522 USD ZX 02/04/2013 05/04/2013 28/03/2013 0.157765 USD ZX 01/07/2013 04/07/2013 28/06/2013 0.160661 USD ZX 01/10/2013 04/10/2013 30/09/2013 0.158299 211 Morgan Stanley Investment Funds 31 December 2013

Notes to the financial statements (continued) As at 31 December 2013

7 Rates of Exchange and also from the Paying Agents in countries where the company is registered to sell its Shares. The rates of exchange used for translation into US dollars of Statement of assets and liabilities and Statement of operations Please see list of Paying Agents on page 220. and changes in net assets, including securities and foreign currency holdings, as of 31 December 2013 were: 10 Overdraft facility

Currency The Company has access to a short-term credit extension facility with J.P. Morgan Bank Luxembourg S.A., primarily to facilitate AED 3.673 = $1.00 AUD 1.118 = $1.00 the clearance of securities and foreign exchange transactions. BDT 77.290 = $1.00 BRL 2.362 = $1.00 Should such credit be extended, the Custodian shall be entitled CAD 1.062 = $1.00 to charge the Funds at rates to be agreed upon from time to CHF 0.891 = $1.00 CLP 525.600 = $1.00 time. In addition to any other remedies available, the Custodian CNH 6.058 = $1.00 shall be entitled to a right of set-off against the property of the CNY 6.054 = $1.00 COP 1,930.500 = $1.00 Company to satisfy the repayment of, or reimbursement for CZK 19.873 = $1.00 accrued interest thereon and the Company has granted the DKK 5.415 = $1.00 EGP 6.949 = $1.00 Custodian a pledge, right of retention, lien charge and security EUR 0.726 = $1.00 interest in any and all property held by the Custodian for any EUR* 0.726 = $1.00 EUR** 0.753 = $1.00 amount owing to the Custodian from time to time under the GBP 0.604 = $1.00 credit extension facility. HKD 7.754 = $1.00 HUF 215.650 = $1.00 IDR 12,165.000 = $1.00 11 Repurchase Agreements ILS 3.464 = $1.00 INR 61.915 = $1.00 JPY 104.920 = $1.00 Details of the total repurchase agreements outstanding, market JPY** 97.630 = $1.00 value of related collateral, identity of counterparties and cost of KES 86.300 = $1.00 KRW 1,049.250 = $1.00 entering into the repurchase agreements at 31 December 2013 KWD 0.282 = $1.00 are as follows: LKR 130.787 = $1.00 MAD 8.165 = $1.00 MXN 13.068 = $1.00 Cost and MYR 3.279 = $1.00 fees of NGN 160.150 = $1.00 Market Value entering into NOK 6.075 = $1.00 Fund Repurchase of Collateral Repurchase NZD 1.215 = $1.00 Name Description Agreements CCY received CCY Agreements CCY OMR 0.385 = $1.00 PEN 2.797 = $1.00 Euro BNP Paribas 0.1% / 13,000,000 EUR 13,260,000 EUR – EUR PHP 44.410 = $1.00 Liquidity 02/01/2014 PKR 105.600 = $1.00 Fund PLN 3.013 = $1.00 Euro Citigroup 0.02% / 13,000,000 EUR 13,260,998 EUR – EUR QAR 3.642 = $1.00 Liquidity 02/01/2014 RON 3.247 = $1.00 Fund RUB 32.889 = $1.00 SEK 6.434 = $1.00 Total 26,000,000 EUR 26,520,998 EUR – EUR SGD 1.263 = $1.00 THB 32.695 = $1.00 The collateral received in respect of the repurchase agreements TRY 2.152 = $1.00 TWD 29.825 = $1.00 consists of the following transferable bonds: VND 21,080.000 = $1.00 ZAR 10.529 = $1.00 Market Value of Securities * Rates of exchange used to translate Global Balanced Risk Control Fund of Funds and Absolute Collateral Return Currency Fund into US dollars in the statement of assets and liabilities. Fund Collateral Description Counterparty received CCY ** Rates of exchange used to translate the Statement of operations and changes in net assets into US dollars. Euro Liquidity Fund Bundesrepublik Deutschland 0% /15/04/2016 BNP Paribas 1,208 EUR Euro Liquidity Fund Government of Netherlands 8 Soft commission arrangements 0% /15/01/2022 BNP Paribas 12,881,123 EUR Euro Liquidity Fund Government of Netherlands During the year the Company, its Investment Adviser or its 2.5% /15/01/2033 BNP Paribas 377,670 EUR Euro Liquidity Fund Bundesrepublik Deutschland Sub-Advisers did not enter into soft commission arrangements. 0% /29/01/2014 Citigroup 651,997 EUR Euro Liquidity Fund Bundesrepublik Deutschland 9 Statements of portfolio changes 0% /30/04/2014 Citigroup 119,948 EUR Euro Liquidity Fund Bundesrepublik Deutschland 0% /28/05/2014 Citigroup 199,908 EUR a statement giving the changes in the portfolio of investments Euro Liquidity Fund Bundesrepublik Deutschland for the year ended 31 December 2013 is available to shareholders, 0% /15/01/2014 Citigroup 124,999 EUR Euro Liquidity Fund Bundesrepublik Deutschland free of charge, on request from the Company’s registered office, 0% /23/07/2014 Citigroup 304,113 EUR Morgan Stanley Investment Funds 31 December 2013 212

Notes to the financial statements (continued) As at 31 December 2013

Market Value 14 TRANSACTION COSTS of Securities Collateral Fund Collateral Description Counterparty received CCY For the year ended 31 December 2013, the Fund incurred transaction costs namely, commission and taxes relating to Euro Liquidity Fund Bundesrepublik Deutschland 0% /12/02/2014 Citigroup 232,987 EUR purchases or sales of transferable securities, money market Euro Liquidity Fund Bundesrepublik Deutschland instruments, exchange traded derivatives or other eligible assets. 0% /12/03/2014 Citigroup 9,997 EUR Euro Liquidity Fund Bundesrepublik Deutschland They can include the bid-ask spread, fees and commissions paid 0% /12/06/2015 Citigroup 997 EUR to agents, advisers, brokers and dealers, transaction related taxes Euro Liquidity Fund Government of France OAT 0% /24/07/2014 Citigroup 7,290,438 EUR and other market charges. Euro Liquidity Fund Government of France OAT 0% /21/08/2014 Citigroup 134,854 EUR Total % Euro Liquidity Fund Government of France OAT Transaction of average 0% /30/01/2014 Citigroup 9,999 EUR Fund Name Currency Costs NAV Euro Liquidity Fund Government of France OAT 0% /27/02/2014 Citigroup 649,879 EUR Asian Equity Fund USD 861,794 0.40 Euro Liquidity Fund Government of France OAT Asia-Pacific Equity Fund USD 313,975 0.28 0% /17/04/2014 Citigroup 19,991 EUR Asian Property Fund USD 1,244,654 0.25 Euro Liquidity Fund Government of France OAT Emerging Europe, Middle East 0% /25/10/2037 Citigroup 209,674 EUR and Africa Equity Fund EUR 560,336 0.29 Euro Liquidity Fund Government of France OAT Emerging Leaders Equity Fund USD 458,572 0.31 1% /25/05/2018 Citigroup 893,793 EUR Emerging Markets Equity Fund USD 4,341,748 0.29 Euro Liquidity Fund Government of France OAT European Equity Alpha Fund EUR 880,561 0.12 1.75% /25/02/2017 Citigroup 954,940 EUR European Property Fund EUR 476,754 0.23 Euro Liquidity Fund Government of France OAT Eurozone Equity Alpha Fund EUR 348,133 0.17 3.75% /25/04/2021 Citigroup 1,154,490 EUR Frontier Emerging Markets Equity Fund1 USD 199,505 1.96 Euro Liquidity Fund Government of Netherlands Global Advantage Fund2 USD 6,121 0.26 0% /31/01/2014 Citigroup 202,997 EUR Global Brands Fund USD 6,974,963 0.07 Euro Liquidity Fund Government of Netherlands Global Equity Allocation USD 17,916 0.10 0% /28/02/2014 Citigroup 94,996 EUR Global Infrastructure Fund USD 420,649 0.13 Global Opportunity Fund USD 125,331 0.19 Total 26,520,998 EUR Global Property Fund USD 1,779,431 0.19 Global Quality Fund3 USD 1,060,497 0.47 Indian Equity Fund USD 436,522 0.37 net repurchase agreement income for the year ended Japanese Equity Fund JPY 18,020,521 0.17 31 December 2013 is as follows: Latin American Equity Fund USD 1,001,615 0.14 US Advantage Fund USD 2,802,301 0.07 US Growth Fund USD 735,741 0.06 euro Liquidity Fund 565 EUR US Property Fund USD 255,340 0.05 US Dollar Liquidity Fund 439,397 USD Emerging Markets Corporate Debt Fund USD - 0.00 Emerging Markets Debt Fund USD 5,641 0.00 Emerging Markets Domestic Debt Fund USD 4,822 0.00 12 Liability of THE COMPANY Euro Bond Fund EUR 10,809 0.00 Euro Corporate Bond (ex Financials) Fund EUR 2,902 0.00 The Board of Directors shall maintain for each Fund a separate Euro Corporate Bond Fund EUR 171,319 0.01 Euro Strategic Bond Fund EUR 45,772 0.01 pool of assets. As between Shareholders, each pool of assets is European Currencies High Yield Bond Fund EUR 7,649 0.00 Global Bond Fund USD 36,076 0.01 invested for the exclusive benefit of the relevant Fund. Global Convertible Bond Fund USD 39,362 0.00 Global Credit Fund USD 2,203 0.00 The assets of the Company have been segregated on a Fund by Global Fixed Income Opportunities Fund USD 8,663 0.00 Fund basis with third party creditors only having recourse to the Global High Yield Bond Fund USD 49 0.00 Global Mortgage Securities Fund USD 20,724 0.01 assets of the relevant Fund. Global Premier Credit Fund USD 354 0.00 Short Maturity Euro Bond Fund EUR 29,467 0.01 Euro Liquidity Fund EUR 3 0.00 13 Broker Accounts US Dollar Liquidity Fund USD - 0.00 Diversified Alpha Plus Fund EUR 4,369,327 0.27 all derivative instruments, as listed within the Statements Global Balanced Risk Control Fund of Funds EUR 42,445 0.01 Absolute Return Currency Fund4 EUR 1,834 0.01 of Investments, on pages 2 to 163, all time deposits and 1 Fund commenced its operations on 28 March 2013. repurchase agreements included in the Statement of assets and 2 Fund commenced its operations on 31 January 2013. liabilities on pages 164 to 174, are transacted through third 3 Fund commenced its operations on 1 August 2013. 4 Fund closed on 8 March 2013. party brokers. There are no brokerage fees charged separately for transactions In addition these brokers hold the collateral described in the on fixed income instruments and derivatives (except for futures). above mentioned statements as applicable. The Funds are exposed The transaction costs are included in the transaction price, to counter-party risk in respect of all amounts including collateral which is known as “marked up”. due to them from such brokers. Payments of income and settlement proceeds are at the risk of the Funds. 213 Morgan Stanley Investment Funds 31 December 2013

Notes to the financial statements (continued) As at 31 December 2013

15 CROSS INVESTMENT BETWEEN FUNDS 16 Morgan Stanley Liquidity Funds - US Dollar Liquidity Fund (“the MASTER Fund”) and MORGAN The Company is permitted to engage in cross investment STANLEY INVESTMENT FUNDS - US Dollar Liquidity between Funds within the umbrella structure. The following Fund (“the Feeder Fund”) information pertains to the cross-investment between Funds within the Company during the year. The US Dollar Liquidity Fund (“the Feeder Fund”) is a feeder fund of the Morgan Stanley Liquidity Funds - US Dollar as at 31 December 2013, Morgan Stanley Investment Funds - Liquidity Fund (“the Master Fund”), under the provisions of Global Balanced Risk Control Fund of Funds holds the UCITS IV. The Feeder Fund will at all times invest at least 85% following shares of other Funds of the Company: of it’s assets in shares of the Master Fund (Master Share Class) Market Unrealised Fund and Share Class Name Shares Cost Value Gain/(Loss) whilst it may hold up to 15% of it’s assets in ancillary liquid assets, including cash, cash equivalents and short term bank deposits. Morgan Stanley Investment Funds - US Growth Fund ‘ZH’ 1,801,216 69,230,859 75,452,957 6,222,098 The investment objective of the Feeder Fund is to provide Morgan Stanley Investment Funds - liquidity and high current income, to the extent consistent with US Advantage Fund ‘Z’ 1,566,832 53,880,993 56,468,617 2,587,624 the preservation of capital. The Feeder Fund seeks to achieve its Morgan Stanley Investment Funds - Eurozone Equity Alpha Fund ‘Z’ 1,274,697 38,578,142 45,685,144 7,107,002 investment objective by investing substantially all of it’s assets in

Morgan Stanley Investment Funds - shares of the Master Fund shares. The Feeder Fund does not European Equity Alpha Fund ‘Z’ 1,030,954 34,328,304 38,238,072 3,909,768 invest in money market instruments directly and will only Morgan Stanley Investment Funds - obtain its exposure to money market instruments through its Asian Equity Fund ‘Z’ 1,442,274 30,841,560 30,460,823 (380,737) investment in the Master Fund. Morgan Stanley Investment Funds - Global Infrastructure Fund ‘Z’ 776,868 25,344,526 26,390,196 1,045,670 The Master Fund’s investment objective is to provide liquidity and an Morgan Stanley Investment Funds - Global Property Fund ‘Z’ 973,659 22,542,392 22,627,832 85,440 attractive rate of income, to the extent consistent with the preservation

Morgan Stanley Investment Funds - of capital. The Master Fund will seek to achieve its investment Japanese Equity Fund ‘Z’ 854,858 21,050,227 22,576,796 1,526,569 objective primarily by investing in high quality short-term Money Morgan Stanley Investment Funds - Market Instruments comprising transferable debt securities (which Emerging Markets Equity Fund ‘Z’ 854,495 15,582,653 15,218,563 (364,090) may include by way of example fixed or floating rate instruments Morgan Stanley Investment Funds - including without limitation commercial paper, certificates of Emerging Europe Middle East and Africa Equity Fund ‘Z’ 320,005 7,263,568 7,478,512 214,944 deposit, freely transferable promissory notes, government and Morgan Stanley Investment Funds - corporate bonds and asset-backed securities) that are denominated in Short Maturity Euro Bond Fund ‘Z’ 3,390,949 101,061,249 101,965,823 904,574 US Dollars, provided that, at the time of acquisition, their initial or Morgan Stanley Investment Funds - residual maturity does not exceed 397 days. Euro Corporate Bond Fund ‘ZD’ 2,696,558 73,917,800 75,557,562 1,639,762 Morgan Stanley Investment Funds - These financial statements should be read in conjunction with Euro Strategic Bond Fund ‘ZD’ 1,435,405 37,183,426 37,808,575 625,149 the financial statements of the Master Fund. Morgan Stanley Investment Funds - Euro Corporate Bond Fund ‘Z’ 815,804 29,590,470 30,266,341 675,871 The audited annual report and the unaudited semi-annual Morgan Stanley Investment Funds - report of the Master Fund are available to the Shareholders free Emerging Markets Corporate Debt Fund ‘Z’ 1,048,186 23,091,090 22,693,226 (397,864) of charge upon request at the registered office of the Morgan Morgan Stanley Investment Funds - Stanley Liquidity Funds - US Dollar Liquidity Fund (“the Euro Bond Fund ‘Z’ 550,159 18,641,266 18,908,953 267,687 Master Fund”): 6B, route de Trèves, L-2633 Senningerberg, Morgan Stanley Investment Funds - Grand Duchy of Luxembourg. The Master Fund’s accounting Global Fixed Income Opportunities Fund ‘Z’ 701,997 15,335,528 15,156,111 (179,417) year begins on 1 April and ends on 31 March of each year. Morgan Stanley Investment Funds - Global High Yield Bond Fund ‘Z’ 594,287 15,152,476 15,136,495 (15,981) The first audited annual report was published for the period

Morgan Stanley Investment Funds - ending on 31 March 2013. The first unaudited semi-annual European Currencies High Yield report was published for the period ending on 30 September 2013. Bond Fund ‘Z’ 324,152 14,073,999 14,862,376 788,377 Morgan Stanley Investment Funds - as of 31 December 2013, the Feeder Fund holds 39.83% of the net Euro Liquidity Fund ‘Z’ 1,092,735 28,155,454 28,157,589 2,135 asset value of the Master Fund, and 100% of the Master Share Class. EUR 701,110,563 For the period from 9 September 2013 (launch of the Master USD* 966,228,493 Share Class) to 31 December 2013, the aggregated total expenses

* The impact of the above cross-investment transactions has been eliminated from the combined of the Feeder Fund and the Master Fund are USD 6,835,521. totals column in the statement of assets and liabilities and the statement of operations and changes in net assets. Morgan Stanley Investment Funds 31 December 2013 214

Notes to the financial statements (continued) As at 31 December 2013

The synthetic expense ratio of each Class of the Feeder Fund is Unrealised gain/(loss) % of net detailed in Appendix 1 on page 221. The total expense ratio of Country Currency in EUR assets the Master Fund (Master Share Class) is 0.01%. Cayman Islands HKD 683,325 0.03 Hong Kong HKD 648,571 0.01 17 SWING PRICING China HKD 48,183 0.00

to the extent that the Board of Directors consider that it is in 1,380,079 0.04 the best interests of Shareholders, taking into account factors including the prevailing market conditions, the level of 3) The Sub-fund exchanges the performance of USD/ subscriptions and redemptions in a particular Fund and the size LIBOR/3M -28.00bp against the total performance of Goldman of the Fund, the Board of Directors may decide to adjust the Sachs US Retail Custom basket. Net Asset Value of a Fund to reflect the estimated dealing as of 31 December 2013, Goldman Sachs US Retail Custom spreads, costs and charges (“Swing Factor”) to be incurred by the basket consists of equities with the following geographical Fund in liquidating or purchasing investments to satisfy the net allocation: transactions received in respect of a particular day. Unrealised gain/(loss) % of net Under normal market circumstances, the Swing Factor shall not Country Currency in EUR assets exceed 1% of the Net Asset Value of the relevant Fund on the United States of America USD (409,148) (0.01) relevant day. When net subscriptions in a Fund exceed a certain threshold on a given day, the Net Asset Value is adjusted upwards (409,148) (0.01) by the Swing Factor. Similarly, when net redemptions in a Fund exceed a certain threshold on a given day, the Net Asset Value of 4) The Sub-fund exchanges the performance of USD/ the Fund is adjusted downwards by the Swing Factor. LIBOR/3M -10.00bp and of USD/LIBOR/3M -15.00bp against the total performance basket of Bank of America Real Estate 18 Diversified Alpha Plus Fund - Investment Trust Custom basket. Total Return Basket Swaps as of 31 December 2013, Bank of America Real Estate as of 31 December 2013, the Diversified Alpha Plus Fund held Investment Trust Custom basket consists of equities with the the following basket swaps: following geographical allocation: Unrealised 1) The Sub-fund exchanges the performance of USD/ gain/(loss) % of net LIBOR/3M -65.00bp against the total performance of Barclays Country Currency in EUR assets

EM Consumer Staples Custom basket. United States of America USD (787,932) (0.03)

as of 31 December 2013, Barclays EM Consumer Staples (787,932) (0.03) Custom basket consists of equities with the following geographical allocation: 5) The Sub-fund exchanges the performance of EUR/ EURIBOR/3M -28.00bp against the total performance of Bank Unrealised gain/(loss) % of net of America EMU Quant Custom basket. Country Currency in EUR assets as of 31 December 2013, Bank of America EMU Quant Custom Mexico USD 112,171 0.01 Mexico MXN 80,693 0.00 basket consists of equities with the following geographical Brazil USD 143,645 0.01 allocation: Brazil BRL 24,521 0.00 Cayman Islands HKD 109,848 0.00 Unrealised Russia USD 97,011 0.00 gain/(loss) % of net Country Currency in EUR assets Taiwan TWD 46,818 0.00

France EUR (1,876,240) (0.05) 614,707 0.02 Spain EUR (1,866,038) (0.05) Netherlands EUR (1,434,627) (0.04) Germany EUR (1,224,577) (0.04) 2) The Sub-fund exchanges the performance of HKD/ Italy EUR (1,094,368) (0.03) HIBOR/3M -65.00bp against the total performance of Goldman Ireland EUR (413,740) (0.01) Portugal EUR (366,293) (0.01) Sachs China Property Custom basket. Belgium EUR (359,752) (0.01) Finland EUR (263,754) (0.01) as of 31 December 2013, Goldman Sachs China Property Custom Austria EUR (72,595) 0.00 basket consists of equities with the following geographical (8,971,984) (0.26) allocation: 215 Morgan Stanley Investment Funds 31 December 2013

Notes to the financial statements (continued) As at 31 December 2013

6) The Sub-fund exchanges the performance of USD/ 10) The Sub-fund exchanges the performance of AUD/ LIBOR/3M -51.00bp against the total performance of Goldman BBR/3M -17.00bp against the total performance of JP Morgan Sachs Metals & Mining Custom basket. Australian Banks Custom basket. as of 31 December 2013, Goldman Sachs Metals & Mining Custom as of 31 December 2013, JP Morgan Australian Banks Custom basket consists of equities with the following geographical allocation: basket consists of equities with the following geographical

Unrealised allocation: gain/(loss) % of net Country Currency in EUR assets Unrealised gain/(loss) % of net Country Currency in EUR assets Australia USD (333,393) (0.01) Australia AUD (29,200) 0.00 Australia AUD (1,227,539) (0.03) United Kingdom USD (201,322) (0.01) Brazil USD (146,801) 0.00 (1,227,539) (0.03) (710,716) (0.02) 11) The Sub-fund exchanges the performance of USD/ 7) The Sub-fund exchanges the performance ofE UR/ LIBOR/3M -28.00bp against the total performance of JP Morgan EURIBOR/3M -10.00bp and of EUR/EURIBOR/3M -20.00bp Global Machinery Custom basket. against the total performance of Goldman Sachs EU Chemicals as of 31 December 2013, JP Morgan Global Machinery Custom Custom basket. basket consists of equities with the following geographical allocation:

as of 31 December 2013, Goldman Sachs EU Chemicals Custom Unrealised basket consists of equities with the following geographical allocation: gain/(loss) % of net Country Currency in EUR assets Unrealised gain/(loss) % of net United States of America USD (993,061) (0.04) Country Currency in EUR assets Sweden SEK (837,307) (0.02) Japan JPY (360,700) (0.01) Germany EUR (6,695,047) (0.19) Finland EUR (252,108) 0.00 Netherlands EUR (1,962,718) (0.06) Belgium EUR (1,664,606) (0.05) (2,443,176) (0.07) France EUR (1,432,034) (0.04)

(11,754,405) (0.34) 19 Indemnifications

The Company has arrangements in place for the indemnification 8) The Sub-fund exchanges the performance of USD/ of the members of its Board of Directors, and of its service LIBOR/3M -45.00bp against the total performance of Goldman providers (the “Indemnified Parties”) in certain circumstances, Sachs India Banks Custom basket. which exclude the Indemnified Parties’ own negligence, wilful as of 31 December 2013, Goldman Sachs India Banks Custom default, or fraud. The Company’s service providers include the basket consists of equities with the following geographical allocation: Investment Advisers, the Sub-Investment Advisers, the Custodian,

Unrealised the Administrator and Paying Agent, the Distributor and gain/(loss) % of net the Registrar and Transfer Agent of the Company. Country Currency in EUR assets

India USD (978,555) (0.03) 20 Directors’ remuneration

(978,555) (0.03) The Directors of the Company will be entitled to remuneration from the Fund, at a current rate of EUR 45,000 per annum, for 9) The Sub-fund exchanges the performance of USD/ their services as Directors. The Fund also bears reasonable out of LIBOR/3M -19.00bp against the total performance of Goldman pocket expenses and cost of Directors and Officers insurance. Sachs US Dividend Custom basket. These expenses are disclosed under Directors fees, expenses and as of 31 December 2013, Goldman Sachs US Dividend Custom insurance in the Statement of operations and changes in net assets. basket consists of equities with the following geographical allocation: 21 SUBSEQUENT EVENTS Unrealised gain/(loss) % of net Country Currency in EUR assets The following significant changes were made after year end:

United States of America USD (2,305,986) (0.06) Appointment of Morgan Stanley Investment Management Ireland USD (14,935) (0.01) (ACD) Limited as Management Company Panama USD (13,619) 0.00 United Kingdom USD (13,379) 0.00 Switzerland USD (13,061) 0.00 Effective 1 April 2014, Morgan Stanley Investment Management (2,360,980) (0.07) (ACD) Limited (MSIM ACD) was appointed to provide Morgan Stanley Investment Funds 31 December 2013 216

Notes to the financial statements (continued) As at 31 December 2013

collective portfolio management services to Morgan Stanley Investment Funds. MSIM ACD is authorised by the Financial Conduct Authority in the United Kingdom to provide these services. Simultaneously Morgan Stanley Investment Funds also transitioned to a fixed fee structure, from the current variable fee structure. The updated fee structure is described in full in Section 2.5 Charges and Expenses, in the April 2014 Prospectus. These changes were communicated to investors in the shareholder notices dated 27 February 2014.

Resignation

• Effective as of 24 February 2014, Laurence Magloire resigned as Dirigeant of the Company. • Effective as of 1 March 2014, Véronique Gillet was appointed as the second Dirigeant of the Company.

Fund launch

• On 31 March 2014, Morgan Stanley Investment Funds a Liquid Alpha Capture Fund commenced operations.

Class launches

Fund Name Share Class Date

European Currencies High Yield Bond Fund ZD 28 January 2014 Global Infrastructure Fund ZHX (EUR) 30 January 2014 Global Brands Fund S 31 January 2014 Emerging Markets Corporate Debt Fund ZH (EUR) 5 February 2014 Global Quality Fund AH (CHF) 19 February 2014 Global Quality Fund ZH (CHF) 19 February 2014 Global Quality Fund ZX 19 February 2014 Global Credit Fund ZH1 (CHF) 26 February 2014 Global Convertible Bond Fund ARM 28 February 2014 Global Convertible Bond Fund AH (AUD) 28 February 2014 European Equity Alpha Fund IH (USD) 3 March 2014 Eurozone Equity Alpha Fund IH (USD) 3 March 2014 European Currencies High Yield Bond Fund AH (USD) 3 March 2014 European Currencies High Yield Bond Fund IH (USD) 3 March 2014 Short Maturity Euro Bond Fund AH (USD) 3 March 2014 Short Maturity Euro Bond Fund IH (USD) 3 March 2014 European Equity Alpha Fund AR 5 March 2014 European Equity Alpha Fund BR 5 March 2014 European Equity Alpha Fund CR 5 March 2014 Eurozone Equity Alpha Fund AR 5 March 2014 Eurozone Equity Alpha Fund BR 5 March 2014 Eurozone Equity Alpha Fund CR 5 March 2014 Global Fixed Income Opportunities Fund AHR 5 March 2014 Global Fixed Income Opportunities Fund BHR 5 March 2014 Global Fixed Income Opportunities Fund CHR 5 March 2014 Global High Yield Bond Fund ZH (EUR) 21 March 2014 Liquid Alpha Capture Fund IH (GBP) 31 March 2014 Liquid Alpha Capture Fund N 31 March 2014 Liquid Alpha Capture Fund Z 31 March 2014 Liquid Alpha Capture Fund ZH (EUR) 31 March 2014 Diversified Alpha Plus Fund N 2 April 2014 Frontier Emerging Markets Equity Fund AX 3 April 2014 217 Morgan Stanley Investment Funds 31 December 2013

Independent Auditor’s Report

To the Shareholders Opinion of Morgan Stanley Investment Funds In our opinion, the financial statements give a true and fair view of the financial position of Morgan Stanley Investment Funds and of 6B, route de Trèves each of its sub-funds as of 31 December 2013 and of the results of L-2633 Senningerberg their operations and changes in their net assets for the year then ended in accordance with Luxembourg legal and regulatory requirements Luxembourg relating to the preparation and presentation of the financial statements.

We have audited the accompanying financial statements of Morgan Other matter Stanley Investment Funds (the “SICAV”) and of each of its sub- Supplementary information included in the annual report has been funds, which comprise the statement of assets and liabilities and the reviewed in the context of our mandate but has not been subject to statement of investments as at 31 December 2013 and the statement specific audit procedures carried out in accordance with the standards of operations and changes in net assets for the year then ended, and described above. Consequently, we express no opinion on such a summary of significant accounting policies and other notes to the information. However, we have no observation to make concerning financial statements. such information in the context of the financial statements taken as a Responsibility of the Board of Directors of the SICAV for the financial whole. statements ERNST & YOUNG The Board of Directors of the SICAV is responsible for the Société Anonyme preparation and fair presentation of these financial statements in Cabinet de révision agréé accordance with Luxembourg legal and regulatory requirements Michael Ferguson relating to the preparation and presentation of the financial statements and for such internal control as the Board of Directors of the SICAV Luxembourg, 11 April 2014 determines is necessary to enable the preparation and presentation of financial statements that are free from material misstatement, whether due to fraud or error. Responsibility of the “reviseur d’entreprises agree”

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier”. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the judgement of the “reviseur d’entreprises agree”, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the “reviseur d’entreprises agree” considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors of the SICAV, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Morgan Stanley Investment Funds 31 December 2013 218

Directors and service providers

DIRECTORS Michael Griffin Morgan Stanley Investment (from 18 October 2013) Management Company Michael Griffin Non-executive Director 23 Church Street Non-executive Director Dublin 16-01 Capital Square Dublin Ireland Singapore, 049481 Ireland Andrew Mack REGISTERED OFFICE William Jones Non-executive Director Non-executive Director 6B, route de Trèves London Luxembourg 2633 Senningerberg United Kingdom Luxembourg Henry Kelly Laurence Magloire Non-executive Director DISTRIBUTOR (until 18 October 2013) Luxembourg Non-executive Director Morgan Stanley Investment Management Limited Andrew Mack Morgan Stanley Investment Non-executive Director Management Limited 25 Cabot Square London Luxembourg Canary Wharf United Kingdom London E14 4QA Abdool Azize Owasil United Kingdom DIRIGEANTS (until 24 October 2013) Director CUSTODIAN BANK Bryan Greener Fund Administration J.P. Morgan Bank Executive Director CIM Global Business Companies Luxembourg S.A. Morgan Stanley Investment Republic of Mauritius Management Limited European Bank London Ashraf Ramtoola and Business Centre United Kingdom (from 24 October 2013) 6C, route de Trèves Director 2633 Senningerberg Laurence Magloire Fund Administration Luxembourg Executive Director CIM Global Business Companies Administrator Morgan Stanley Investment Republic of Mauritius and Paying Agent Management Limited Luxembourg INVESTMENT ADVISER J.P. Morgan Bank Luxembourg S.A. Morgan Stanley Investment Directors of Management Limited European Bank MORGAN STANLEY 25 Cabot Square and Business Centre INVESTMENT HOLDING 6C, route de Trèves COMPANY (MAURITIUS) Canary Wharf London E14 4QA 2633 Senningerberg LIMITED (formerly known Luxembourg as Morgan Stanley SICAV United Kingdom (Mauritius) Limited) Domiciliary Agent Morgan Stanley & Co. Deven Coopoosamy International plc Morgan Stanley Investment Director 25 Cabot Square Management Limited, Business Development Canary Wharf Luxembourg Branch CIM Global Business Companies London E14 4QA European Bank Republic of Mauritius United Kingdom and Business Centre 6B, route de Trèves William Jones INVESTMENT SUB-ADVISERS 2633 Senningerberg Non-executive Director Morgan Stanley Luxembourg Luxembourg Investment Management Inc. 522 Fifth Avenue New York, NY 10036 USA 219 Morgan Stanley Investment Funds 31 December 2013

Directors and service providers (continued)

ADMINISTRATOR OF THE SUBSIDIARY

CIM Fund Services Ltd. 33 Edith Cavell Street Port Louis Republic of Mauritius

REGISTRAR AND TRANSFER AGENT RBC Investor Services Bank S.A. 14 rue Porte de France 4360 Esch-sur-Alzette Luxembourg

Independent auditor

Ernst & Young S.A. 7 rue Gabriel Lippmann Parc d’Activité Syrdall 2 5365 Munsbach Luxembourg

AUDITOR OF THE SUBSIDIARY

Ernst & Young 9th Floor NexTeracom Tower I Cybercity Ebene Republic of Mauritius

LEGAL ADVISER

Arendt & Medernach 14 rue Erasme 2082 Luxembourg Luxembourg Morgan Stanley Investment Funds 31 December 2013 220

Paying and information agents

Copies of the Financial Reports of the Company can be obtained from the following Paying and Information Agents.

AUSTRIA IRELAND BNP Paribas Securities Services Succursale di Milano Meinl Bank Aktiengesellschaft J.P. Morgan Administration Via Ansperto, 5 Bauernmarkt 2 Services (Ireland) Limited 20123 Milan Postfach 99 JP Morgan House Italy 1014 Vienna International Financial Austria Services Centre All Funds Bank S.A. Dublin 1 Italian Branch Belgium Ireland Via Santa Margherita, 7 RBC Investor Services 20121 Milan ITALY Belgium S.A. Italy 11, Place Rogier RBC Investor Services SPAIN 1210 Brussels Italia S.p.A. Belgium Via Vittor Pisani, 26 Every distributor registered in 20124 Milan Spain acts as paying agent for Denmark Italy the Company and a list of them are available at www.cnmv.com Nordea Bank Denmark A/S Banca Sella Holding S.p.A. Strandgade 3 Piazza Gaudenzio Sella, 1 SWITZERLAND 0900 Copenhagen C 13900 Biella Denmark Italy RBC Investor Services Bank S.A. France Iccrea Banca S.p.A. Esch-sur-Alzette Caceis Via Lucrezia Romana, 41-47 Zurich Branch 1/3 Place Valhubert 00178 Rome Badenerstrasse 567 75013 Paris Italy 8048 Zurich France Switzerland State Street Bank S.p.A.

GERMANY Via Ferrante Aporti, 10 Morgan Stanley & Co 20125 Milan International PLC London Morgan Stanley Bank AG Italy Zurich Branch Junghofstrasse 13-15 Bahnhofstrasse 92 Société Générale 60311 Frankfurt am Main 8001 Zurich Securities Services S.p.A. Germany Switzerland MAC 2 GREECE Via Benigno Crespi, 19/A UNITED KINGDOM 20159 Milan Alpha Bank Italy Morgan Stanley Investment 40, Stadiou Street Management Limited 102 52 Athens Allianz Bank 25 Cabot Square Greece Financial Advisors S.p.A. London E14 4QA Piazzale Lodi, 3 United Kingdom HONG KONG 20137 Milan Morgan Stanley Italy Asia Limited Monte dei Paschi di Siena S.p.A. 30th Floor (functions performed out of Three Exchange Square the office located in Mantova, Central Via L. Grossi, 3) Hong Kong Piazza Salimbeni, 3 53100 Siena Italy 221 Morgan Stanley Investment Funds 31 December 2013

Appendix 1: Fund expense ratios (audited) As at 31 December 2013

The following figures show the total expenses charged to each Class of each Fund open as at 31 December 2013, calculated net of any fee waivers and expressed as a percentage of average net assets for the year. For further information in relation to the expenses charged to the Funds, please refer to pages 182 to 192. For details of changes to the Investment Advisory Fees during the year, please refer to note 4.

Fund Name Total Expense Ratio (%) Fund Name Total Expense Ratio (%)

Asian Equity Fund A - USD 1.91 Global Brands Fund BHX - EUR 2.72 Asian Equity Fund B - USD 2.91 Global Brands Fund BX - USD 2.66 Asian Equity Fund C - USD 2.75 Global Brands Fund C - USD 2.45 Asian Equity Fund I - USD 1.16 Global Brands Fund CH - EUR 2.54 Asian Equity Fund Z - USD 1.10 Global Brands Fund I - USD 0.92 Asia-Pacific Equity Fund A - USD 2.05 Global Brands Fund Z - USD 0.88 Asia-Pacific Equity Fund B - USD 3.05 Global Brands Fund ZH - EUR 0.94 Asia-Pacific Equity Fund BH - EUR 3.15 Global Brands Fund ZH - GBP 0.94 Asia-Pacific Equity Fund C - USD 2.85 Global Brands Fund ZX - USD 0.89 Asia-Pacific Equity Fund N - USD 0.36 Global Equity Allocation Fund A - USD 2.00 Asia-Pacific Equity Fund Z - USD 1.29 Global Equity Allocation Fund B - USD 3.00 Asian Property Fund A - USD 1.74 Global Equity Allocation Fund Z - USD 0.94 Asian Property Fund AX - USD 1.79 Global Infrastructure Fund A - USD 1.83 Asian Property Fund B - USD 2.75 Global Infrastructure Fund AH - EUR 1.92 Asian Property Fund I - USD 1.00 Global Infrastructure Fund B - USD 2.84 Asian Property Fund IX - USD 1.00 Global Infrastructure Fund BH - EUR 2.90 Asian Property Fund Z - USD 0.99 Global Infrastructure Fund C - USD 2.71 Emerging Europe, Middle East and Africa Equity Fund A - EUR 2.05 Global Infrastructure Fund CH - EUR 2.90 Emerging Europe, Middle East and Africa Equity Fund AX - EUR 2.08 Global Infrastructure Fund I - USD 1.17 Emerging Europe, Middle East and Africa Equity Fund B - EUR 3.03 Global Infrastructure Fund Z - USD 1.06 Emerging Europe, Middle East and Africa Equity Fund C - EUR 2.95 Global Infrastructure Fund ZH - EUR 1.13 Emerging Europe, Middle East and Africa Equity Fund I - EUR 1.48 Global Infrastructure Fund ZX - USD1 1.08 Emerging Europe, Middle East and Africa Equity Fund Z - EUR 1.41 Global Opportunity Fund A - USD 2.10 Emerging Leaders Equity Fund A - USD 2.46 Global Opportunity Fund AH - EUR 2.20 Emerging Leaders Equity Fund AH - EUR 2.55 Global Opportunity Fund B - USD 3.10 Emerging Leaders Equity Fund AX - USD1 2.51 Global Opportunity Fund BH - EUR 3.20 Emerging Leaders Equity Fund B - USD 3.49 Global Opportunity Fund C - USD 2.90 Emerging Leaders Equity Fund BH - EUR 3.54 Global Opportunity Fund I - USD 1.33 Emerging Leaders Equity Fund C - USD 3.28 Global Opportunity Fund Z - USD 1.29 Emerging Leaders Equity Fund CH - EUR 3.45 Global Property Fund A - USD 1.81 Emerging Leaders Equity Fund I - USD 1.52 Global Property Fund AH - EUR 2.00 Emerging Leaders Equity Fund Z - USD 1.46 Global Property Fund B - USD 2.82 Emerging Leaders Equity Fund ZH - EUR1 1.60 Global Property Fund BH - EUR 2.95 Emerging Markets Equity Fund A - USD 1.96 Global Property Fund C - USD 2.62 Emerging Markets Equity Fund B - USD 2.96 Global Property Fund CH - EUR 2.90 Emerging Markets Equity Fund C - USD 2.93 Global Property Fund I - USD 1.07 Emerging Markets Equity Fund I - USD 1.37 Global Property Fund IX - USD 1.14 Emerging Markets Equity Fund N - USD 0.14 Global Property Fund Z - USD 1.03 Emerging Markets Equity Fund Z - USD 1.32 Global Quality Fund A - USD1, 4 1.94 European Equity Alpha Fund A - EUR 1.48 Global Quality Fund AH - EUR1, 4 2.12 European Equity Alpha Fund AH - USD1 1.63 Global Quality Fund AH - SGD1, 4 2.20 European Equity Alpha Fund B - EUR 2.49 Global Quality Fund AX - USD1, 4 2.15 European Equity Alpha Fund C - EUR 2.26 Global Quality Fund B - USD1, 4 3.00 European Equity Alpha Fund I - EUR 0.91 Global Quality Fund BH - EUR1, 4 3.10 European Equity Alpha Fund Z - EUR 0.86 Global Quality Fund C - USD1, 4 2.79 European Equity Alpha Fund Z - GBP1 0.86 Global Quality Fund CH - EUR1, 4 2.97 European Property Fund A - EUR 1.75 Global Quality Fund I - USD1, 4 1.02 European Property Fund AX - EUR1 1.74 Global Quality Fund Z - USD1, 4 0.99 European Property Fund B - EUR 2.76 Global Quality Fund ZH - EUR1, 4 1.24 European Property Fund I - EUR 1.01 Indian Equity Fund A - USD 1.95 European Property Fund Z - EUR 0.96 Indian Equity Fund B - USD 2.95 Eurozone Equity Alpha Fund A - EUR 1.76 Indian Equity Fund C - USD 3.05 Eurozone Equity Alpha Fund AH - USD1 1.94 Indian Equity Fund I - USD 1.18 Eurozone Equity Alpha Fund B - EUR 2.76 Indian Equity Fund N - USD1 0.16 Eurozone Equity Alpha Fund I - EUR 1.04 Indian Equity Fund Z - USD 1.14 Eurozone Equity Alpha Fund Z - EUR 0.97 Japanese Equity Fund A - JPY 1.90 Frontier Emerging Markets Equity Fund A - USD1, 2 2.95 Japanese Equity Fund AH - USD1 2.00 Frontier Emerging Markets Equity Fund AH - EUR1, 2 3.05 Japanese Equity Fund B - JPY 2.90 Frontier Emerging Markets Equity Fund B - USD1, 2 3.95 Japanese Equity Fund C - JPY 2.70 Frontier Emerging Markets Equity Fund BH - EUR1, 2 4.05 Japanese Equity Fund I - JPY 1.18 Frontier Emerging Markets Equity Fund C - USD1, 2 3.55 Japanese Equity Fund Z - JPY 1.10 Frontier Emerging Markets Equity Fund CH - EUR1, 2 3.65 Japanese Equity Fund ZH - EUR 1.18 Frontier Emerging Markets Equity Fund I - USD1, 2 1.68 Latin American Equity Fund A - USD 1.94 Frontier Emerging Markets Equity Fund Z - USD1, 2 1.64 Latin American Equity Fund B - USD 2.97 Global Advantage Fund A - USD1, 3 2.10 Latin American Equity Fund C - USD 2.79 Global Advantage Fund B - USD1, 3 3.10 Latin American Equity Fund I - USD 1.27 Global Advantage Fund C - USD1, 3 2.90 Latin American Equity Fund Z - USD 1.24 Global Advantage Fund I - USD1, 3 1.33 US Advantage Fund A - USD 1.66 Global Advantage Fund Z - USD1, 3 1.29 US Advantage Fund AH - EUR 1.71 Global Brands Fund A - USD 1.65 US Advantage Fund B - USD 2.66 Global Brands Fund AH - CHF 1.72 US Advantage Fund BH - EUR 2.72 Global Brands Fund AH - EUR 1.70 US Advantage Fund C - USD 2.46 Global Brands Fund AHX - EUR 1.70 US Advantage Fund I - USD 0.88 Global Brands Fund AX - USD 1.65 US Advantage Fund Z - USD 0.84 Global Brands Fund B - USD 2.65 US Advantage Fund ZH - EUR 0.89 Global Brands Fund BH - EUR 2.70 US Growth Fund A - USD 1.68 Morgan Stanley Investment Funds 31 December 2013 222

Appendix 1: Fund expense ratios (audited) (continued) As at 31 December 2013

Fund Name Total Expense Ratio (%) Fund Name Total Expense Ratio (%)

US Growth Fund AH - EUR 1.73 Euro Corporate Bond Fund ZD - EUR 0.60 US Growth Fund AX - USD 1.68 Euro Corporate Bond Fund ZOX - EUR1 0.60 US Growth Fund B - USD 2.69 Euro Strategic Bond Fund A - EUR 1.10 US Growth Fund BH - EUR 2.78 Euro Strategic Bond Fund AD - EUR 1.13 US Growth Fund C - USD 2.50 Euro Strategic Bond Fund ADX - EUR 1.17 US Growth Fund CH - EUR 2.80 Euro Strategic Bond Fund AX - EUR 1.10 US Growth Fund I - USD 0.91 Euro Strategic Bond Fund B - EUR 2.10 US Growth Fund IX - USD 0.90 Euro Strategic Bond Fund BD - EUR 2.11 US Growth Fund Z - USD 0.86 Euro Strategic Bond Fund BDX - EUR 2.11 US Growth Fund ZH - EUR 0.88 Euro Strategic Bond Fund BX - EUR 2.11 US Property Fund A - USD 1.69 Euro Strategic Bond Fund C - EUR 1.85 US Property Fund B - USD 2.72 Euro Strategic Bond Fund CD - EUR 1.85 US Property Fund I - USD 0.96 Euro Strategic Bond Fund I - EUR 0.69 US Property Fund Z - USD 0.92 Euro Strategic Bond Fund Z - EUR 0.65 Emerging Markets Corporate Debt Fund A - USD 1.78 Euro Strategic Bond Fund ZD - EUR 0.64 Emerging Markets Corporate Debt Fund AH - EUR 1.84 European Currencies High Yield Bond Fund A - EUR 1.14 Emerging Markets Corporate Debt Fund AHX - EUR 1.89 European Currencies High Yield Bond Fund ADX - EUR 1.19 Emerging Markets Corporate Debt Fund AX - USD 1.81 European Currencies High Yield Bond Fund AX - EUR 1.20 Emerging Markets Corporate Debt Fund B - USD 2.79 European Currencies High Yield Bond Fund B - EUR 2.14 Emerging Markets Corporate Debt Fund BH - EUR 2.86 European Currencies High Yield Bond Fund BD - EUR 2.18 Emerging Markets Corporate Debt Fund BHX - EUR 2.84 European Currencies High Yield Bond Fund BDX - EUR 2.15 Emerging Markets Corporate Debt Fund BX - USD 2.80 European Currencies High Yield Bond Fund BX - EUR 2.14 Emerging Markets Corporate Debt Fund C - USD 2.50 European Currencies High Yield Bond Fund C - EUR 1.81 Emerging Markets Corporate Debt Fund CH - EUR 2.75 European Currencies High Yield Bond Fund CD - EUR 1.90 Emerging Markets Corporate Debt Fund I - USD1 1.38 European Currencies High Yield Bond Fund I - EUR 0.71 Emerging Markets Corporate Debt Fund Z - USD 1.17 European Currencies High Yield Bond Fund Z - EUR 0.67 Emerging Markets Debt Fund A - USD 1.74 European Currencies High Yield Bond Fund ZX - EUR1 0.67 Emerging Markets Debt Fund AH - EUR 1.80 Global Bond Fund A - USD 1.14 Emerging Markets Debt Fund AHX - EUR 1.86 Global Bond Fund AH - EUR 1.30 Emerging Markets Debt Fund ARM - USD 1.70 Global Bond Fund AHX - EUR 1.33 Emerging Markets Debt Fund AX - USD 1.79 Global Bond Fund AX - USD 1.20 Emerging Markets Debt Fund B - USD 2.72 Global Bond Fund B - USD 2.12 Emerging Markets Debt Fund BH - EUR 2.78 Global Bond Fund BH - EUR 2.20 Emerging Markets Debt Fund BHX - EUR 2.80 Global Bond Fund BHX - EUR 2.22 Emerging Markets Debt Fund BX - USD 2.73 Global Bond Fund BX - USD 2.15 Emerging Markets Debt Fund C - USD 2.54 Global Bond Fund C - USD 1.90 Emerging Markets Debt Fund CH - EUR 2.70 Global Bond Fund CH - EUR 2.00 Emerging Markets Debt Fund I - USD 1.14 Global Bond Fund I - USD 0.69 Emerging Markets Debt Fund NH - EUR 0.19 Global Bond Fund Z - USD 0.65 Emerging Markets Debt Fund S - USD 0.76 Global Convertible Bond Fund A - USD 1.29 Emerging Markets Debt Fund Z - USD 1.10 Global Convertible Bond Fund AH - CHF 1.55 Emerging Markets Debt Fund ZH - EUR 1.21 Global Convertible Bond Fund AH - EUR 1.34 Emerging Markets Debt Fund ZHX - GBP 1.20 Global Convertible Bond Fund B - USD 2.30 Emerging Markets Domestic Debt Fund A - USD 1.75 Global Convertible Bond Fund BH - EUR 2.34 Emerging Markets Domestic Debt Fund AH - EUR 1.82 Global Convertible Bond Fund CH - EUR 2.07 Emerging Markets Domestic Debt Fund AHX - EUR 1.92 Global Convertible Bond Fund I - USD 0.80 Emerging Markets Domestic Debt Fund ARM - USD 1.79 Global Convertible Bond Fund IH - EUR 0.86 Emerging Markets Domestic Debt Fund AX - USD 1.74 Global Convertible Bond Fund Z - USD 0.76 Emerging Markets Domestic Debt Fund B - USD 2.74 Global Convertible Bond Fund ZH - CHF 1.04 Emerging Markets Domestic Debt Fund BH - EUR 2.80 Global Convertible Bond Fund ZH - EUR 0.82 Emerging Markets Domestic Debt Fund BHX - EUR 2.83 Global Convertible Bond Fund ZHX - EUR 0.81 Emerging Markets Domestic Debt Fund BX - USD 2.76 Global Convertible Bond Fund ZX - USD1 0.77 Emerging Markets Domestic Debt Fund C - USD 2.46 Global Credit Fund A - USD 1.25 Emerging Markets Domestic Debt Fund CH - EUR 2.70 Global Credit Fund B - USD 2.25 Emerging Markets Domestic Debt Fund I - USD 1.17 Global Credit Fund C - USD 1.90 Emerging Markets Domestic Debt Fund Z - USD 1.13 Global Credit Fund I - USD 0.83 Emerging Markets Domestic Debt Fund ZH - EUR 1.17 Global Credit Fund Z - USD 0.79 Emerging Markets Domestic Debt Fund ZX - USD 1.13 Global Credit Fund ZX - USD 0.84 Euro Bond Fund A - EUR 1.08 Global Fixed Income Opportunities Fund A - USD 1.43 Euro Bond Fund B - EUR 2.09 Global Fixed Income Opportunities Fund AH - EUR 1.53 Euro Bond Fund C - EUR 1.81 Global Fixed Income Opportunities Fund AHX - EUR 1.47 Euro Bond Fund I - EUR 0.68 Global Fixed Income Opportunities Fund AX - USD 1.47 Euro Bond Fund Z - EUR 0.61 Global Fixed Income Opportunities Fund B - USD 2.42 Euro Corporate Bond (ex Financials) Fund A - EUR 1.20 Global Fixed Income Opportunities Fund BH - EUR 2.48 Euro Corporate Bond (ex Financials) Fund N - EUR 0.19 Global Fixed Income Opportunities Fund BHX - EUR 2.47 Euro Corporate Bond (ex Financials) Fund Z - EUR 0.74 Global Fixed Income Opportunities Fund BX - USD 2.42 Euro Corporate Bond Fund A - EUR 1.06 Global Fixed Income Opportunities Fund C - USD 1.90 Euro Corporate Bond Fund AD - EUR 1.09 Global Fixed Income Opportunities Fund CH - EUR 2.00 Euro Corporate Bond Fund ADX - EUR 1.10 Global Fixed Income Opportunities Fund CHX - EUR 2.00 Euro Corporate Bond Fund AX - EUR 1.06 Global Fixed Income Opportunities Fund Z - USD 0.74 Euro Corporate Bond Fund B - EUR 2.07 Global Fixed Income Opportunities Fund ZH - EUR1 0.85 Euro Corporate Bond Fund BD - EUR 2.06 Global High Yield Bond Fund A - USD 1.45 Euro Corporate Bond Fund BDX - EUR 2.08 Global High Yield Bond Fund AH - EUR 1.52 Euro Corporate Bond Fund BH - USD1 2.15 Global High Yield Bond Fund AHX - EUR 1.52 Euro Corporate Bond Fund BX - EUR 2.08 Global High Yield Bond Fund AO - SEK1 1.55 Euro Corporate Bond Fund C - EUR 1.77 Global High Yield Bond Fund AX - USD 1.50 Euro Corporate Bond Fund CD - EUR 1.85 Global High Yield Bond Fund B - USD 2.43 Euro Corporate Bond Fund I - EUR 0.64 Global High Yield Bond Fund BH - EUR 2.49 Euro Corporate Bond Fund ID - EUR1 0.65 Global High Yield Bond Fund BHX - EUR 2.48 Euro Corporate Bond Fund IX - EUR1 0.65 Global High Yield Bond Fund BX - USD 2.43 Euro Corporate Bond Fund S - EUR 0.52 Global High Yield Bond Fund C - USD 2.05 Euro Corporate Bond Fund Z - EUR 0.60 Global High Yield Bond Fund CH - EUR 2.15 223 Morgan Stanley Investment Funds 31 December 2013

Appendix 1: Fund expense ratios (audited) (continued) As at 31 December 2013

Fund Name Total Expense Ratio (%) Fund Name Total Expense Ratio (%)

Global High Yield Bond Fund I - USD1 0.98 Short Maturity Euro Bond Fund B - EUR 2.08 Global High Yield Bond Fund Z - USD 0.92 Short Maturity Euro Bond Fund C - EUR 1.85 Global High Yield Bond Fund ZX - USD 0.99 Short Maturity Euro Bond Fund I - EUR 0.66 Global Mortgage Securities Fund A - USD 1.36 Short Maturity Euro Bond Fund Z - EUR 0.61 Global Mortgage Securities Fund AH - EUR 1.51 Euro Liquidity Fund A - EUR 0.05 Global Mortgage Securities Fund AHR - EUR 1.55 Euro Liquidity Fund B - EUR 0.04 Global Mortgage Securities Fund AHX - EUR 1.55 Euro Liquidity Fund C - EUR 0.05 Global Mortgage Securities Fund AX - USD1 1.50 Euro Liquidity Fund I - EUR 0.04 Global Mortgage Securities Fund B - USD 2.45 Euro Liquidity Fund Z - EUR 0.05 Global Mortgage Securities Fund BH - EUR 2.55 US Dollar Liquidity Fund A - USD 0.18* Global Mortgage Securities Fund BHR - EUR 2.55 US Dollar Liquidity Fund AX - USD 0.19* Global Mortgage Securities Fund BHX - EUR 2.55 US Dollar Liquidity Fund I - USD 0.18* Global Mortgage Securities Fund C - USD 2.01 US Dollar Liquidity Fund Z - USD 0.18* Global Mortgage Securities Fund CH - EUR 2.15 Diversified Alpha Plus Fund A - EUR 2.03 Global Mortgage Securities Fund CHX - EUR 2.15 Diversified Alpha Plus Fund AH - CHF1 2.35 Global Mortgage Securities Fund CX - USD1 2.10 Diversified Alpha Plus Fund AH - USD 2.07 Global Mortgage Securities Fund I - USD 0.78 Diversified Alpha Plus Fund B - EUR 3.02 Global Mortgage Securities Fund IH - EUR1 0.83 Diversified Alpha Plus Fund BH - USD 3.15 Global Mortgage Securities Fund IHX - EUR1 0.84 Diversified Alpha Plus Fund C - EUR 2.75 Global Mortgage Securities Fund Z - USD 0.84 Diversified Alpha Plus Fund I - EUR 1.01 Global Premier Credit Fund A - USD 1.25 Diversified Alpha Plus Fund IH - USD1 1.23 Global Premier Credit Fund AH - EUR 1.35 Diversified Alpha Plus Fund Z - EUR 0.97 Global Premier Credit Fund B - USD 2.25 Diversified Alpha Plus Fund ZH - CHF1 1.26 Global Premier Credit Fund BH - EUR 2.35 Diversified Alpha Plus Fund ZH - GBP 1.01 Global Premier Credit Fund C - USD 1.90 Diversified Alpha Plus Fund ZH - USD 1.02 Global Premier Credit Fund CH - EUR 2.00 Global Balanced Risk Control Fund of Funds A - EUR 1.72* Global Premier Credit Fund I - USD 0.83 Global Balanced Risk Control Fund of Funds B - EUR 2.98* Global Premier Credit Fund Z - USD 0.79 Global Balanced Risk Control Fund of Funds C - EUR 2.36* Global Premier Credit Fund ZX - USD 0.84 Global Balanced Risk Control Fund of Funds Z - EUR 0.60* Short Maturity Euro Bond Fund A - EUR 1.09

1 Annualised Total Expense Ratio from date of launch to 31 December 2013. See note 1 for further details regarding the launch date of the Share Class. 2 Fund commenced operations on 28 March 2013. 3 Fund commenced operations on 31 January 2013. 4 Fund commenced operations on 1 August 2013. * Synthetic TER. Morgan Stanley Investment Funds 31 December 2013 224

Appendix 2: Portfolio turnover rate (unaudited) As at 31 December 2013

Fund Name Portfolio turnover rate (%)* Fund Name Portfolio turnover rate (%)*

Equity Funds Bond Funds Asian Equity Fund 191.22 Emerging Markets Corporate Debt Fund 374.60 Asia-Pacific Equity Fund 156.19 Emerging Markets Debt Fund 163.66 Asian Property Fund 87.62 Emerging Markets Domestic Debt Fund 161.37 Emerging Europe, Middle East and Africa Equity Fund 139.57 Euro Bond Fund (13.31) Emerging Leaders Equity Fund 212.13 Euro Corporate Bond (ex Financials) Fund 88.26 Emerging Markets Equity Fund 139.78 Euro Corporate Bond Fund (54.03) European Equity Alpha Fund (2.05) Euro Strategic Bond Fund 48.18 European Property Fund (29.12) European Currencies High Yield Bond Fund (57.99) Eurozone Equity Alpha Fund 37.72 Global Bond Fund 285.17 Frontier Emerging Markets Equity Fund (1) 6.18 Global Convertible Bond Fund 167.11 Global Advantage Fund (2) 174.51 Global Credit Fund 111.87 Global Brands Fund 39.57 Global Fixed Income Opportunities Fund 40.95 Global Equity Allocation Fund 77.32 Global High Yield Bond Fund 83.52 Global Infrastructure Fund 79.16 Global Mortgage Securities Fund 731.08 Global Opportunity Fund 163.73 Global Premier Credit Fund 62.48 Global Property Fund 35.24 Short Maturity Euro Bond Fund (62.86) Global Quality Fund (3) (7.80) Indian Equity Fund 5.00 Liquidity Funds Japanese Equity Fund (64.19) Euro Liquidity Fund (366.94) Latin American Equity Fund 47.53 US Dollar Liquidity Fund (23.53) US Advantage Fund 42.04 US Growth Fund (12.39) Asset Allocation Funds US Property Fund (11.62) Diversified Alpha Plus Fund 166.43 Global Balanced Risk Control Fund of Funds 2.86

(1) Fund commenced operations on 28 March 2013. (2) Fund commenced operations on 31 January 2013. (3) Fund commenced operations on 1 August 2013.

The portfolio turnover data has been computed as follows:

Total of Securities transactions (purchases and sales)*– Total transactions of funds units (subscriptions and redemptions) x 100 Average net assets

* Purchases and sales exclude securities having maturity dates at acquisition of one year or less. 225 Morgan Stanley Investment Funds 31 December 2013

Appendix 3: Sub-Advisers As at 31 December 2013

List of Sub-Advisers (to be read in conjunction with the prospectus dated July 2013). Morgan Stanley Investment Management Limited acts as Investment Adviser to the Funds, with the exception of the Liquidity Funds, where the Investment Adviser is Morgan Stanley & Co. International plc. Where the Investment Adviser has delegated any of its responsibilities, the Funds are advised by the following Sub-Advisers.

Fund Name Sub-Adviser

Equity Funds Morgan Stanley Investment Funds Asian Equity Fund Morgan Stanley Investment Management Company Morgan Stanley Investment Funds Asia-Pacific Equity Fund Morgan Stanley Investment Management Company Morgan Stanley Investment Funds Asian Property Fund Morgan Stanley Investment Management Company Morgan Stanley Investment Funds Emerging Europe, Middle East and Africa Equity Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Emerging Leaders Equity Fund Morgan Stanley Investment Management Company Morgan Stanley Investment Funds Emerging Markets Equity Fund Morgan Stanley Investment Management Company & Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds European Equity Alpha Fund None Morgan Stanley Investment Funds European Property Fund None Morgan Stanley Investment Funds Eurozone Equity Alpha Fund None Morgan Stanley Investment Funds Frontier Emerging Markets Equity Fund (1) Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global Advantage Fund (2) Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global Brands Fund None Morgan Stanley Investment Funds Global Equity Allocation Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global Infrastructure Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global Opportunity Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global Property Fund Morgan Stanley Investment Management Company & Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global Quality Fund (3) None Morgan Stanley Investment Funds Indian Equity Fund Morgan Stanley Investment Management Inc. & Morgan Stanley Investment Management Company Morgan Stanley Investment Funds Japanese Equity Fund None Morgan Stanley Investment Funds Latin American Equity Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds US Advantage Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds US Growth Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds US Property Fund Morgan Stanley Investment Management Inc.

Bond Funds Morgan Stanley Investment Funds Emerging Markets Corporate Debt Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Emerging Markets Debt Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Emerging Markets Domestic Debt Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Euro Bond Fund None Morgan Stanley Investment Funds Euro Corporate Bond (ex Financials) Fund None Morgan Stanley Investment Funds Euro Corporate Bond Fund None Morgan Stanley Investment Funds Euro Strategic Bond Fund None Morgan Stanley Investment Funds European Currencies High Yield Bond Fund None Morgan Stanley Investment Funds Global Bond Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global Convertible Bond Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global Credit Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global Fixed Income Opportunities Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global High Yield Bond Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global Mortgage Securities Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global Premier Credit Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Short Maturity Euro Bond Fund None

Liquidity Funds Morgan Stanley Investment Funds Euro Liquidity Fund None Morgan Stanley Investment Funds US Dollar Liquidity Fund Morgan Stanley Investment Management Inc.

Asset Allocation Funds Morgan Stanley Investment Funds Diversified Alpha Plus Fund Morgan Stanley Investment Management Inc. Morgan Stanley Investment Funds Global Balanced Risk Control Fund of Funds None

Alternative Investment Funds Morgan Stanley Investment Funds Absolute Return Currency Fund (4) Morgan Stanley Investment Management Inc.

(1) Fund commenced operations on 28 March 2013. (2) Fund commenced operations on 31 January 2013. (3) Fund commenced operations on 1 August 2013. (4) Fund closed on 8 March 2013. Morgan Stanley Investment Funds 31 December 2013 226

Appendix 4: Hedged Share Classes As at 31 December 2013

The Board of Directors may decide from time to time for some or all of the Funds to issue Currency Hedged Share Classes and for some other or all of the Bond Funds to issue Duration Hedged Share Classes. Currency Hedged Share Classes can be issued in relation to any type of available Share Class and is indicated by an “H” after the Share Class indicator, as follows: AH, AHR, AHX, BH, BHR, BHX, CH, CHX, IH, IHX, NH, NHX, ZH and/or ZHX. The hedging of Duration Hedged Share Classes is distinct from any hedging strategies that the Investment Adviser may implement at the Fund level. The Duration Hedged Share Class is indicated by a “D” after the Share Class indicator, as follows: AD, ADX, BD, BDX, CD, ID and ZD. Share Classes may undertake both currency and duration hedging and is indicated by “O” after the share class indicator, as follows: AO, AOM, AOX, BO, BOX, CO, COX, IO, IOX, NO, NOX, ZO and ZOX. Currency Hedged Share Classes seek to reduce the currency exposure of the Shareholder to currencies other than the currency in which the Currency Hedged Share Class is denominated (the “Hedged Share Class Currency”). The hedging process will vary depending on the type of fund for which the Currency Hedged Share Class is issued and the hedging strategy adopted for all the Currency Hedged Share Classes in that particular Fund, as defined by the prospectus. Duration Hedged Share Classes utilise hedging strategies to seek to limit a share class’ exposure to interest rate movements. The hedging strategies adopted at the year end are as follows:

Fund Name Hedged Share Class(es) Hedging Strategy

Asia-Pacific Equity Fund BH (EUR) NAV Currency Hedged Share Classes Emerging Leaders Equity Fund AH (EUR), BH (EUR), CH (EUR), ZH (EUR) NAV Currency Hedged Share Classes European Equity Alpha Fund AH (USD) NAV Currency Hedged Share Classes Eurozone Equity Alpha Fund AH (USD) NAV Currency Hedged Share Classes Frontier Emerging Markets Equity Fund (1) AH (EUR), BH (EUR), CH (EUR) NAV Currency Hedged Share Classes Global Brands Fund AH (EUR), AH (CHF), AHX (EUR), BH (EUR), BHX (EUR), CH (EUR), ZH (EUR), ZH (GBP) NAV Currency Hedged Share Classes Global Infrastructure Fund AH (EUR), BH (EUR), CH ( EUR), ZH (EUR) NAV Currency Hedged Share Classes Global Opportunity Fund AH (EUR), BH (EUR) NAV Currency Hedged Share Classes Global Property Fund AH (EUR), BH (EUR), CH (EUR) NAV Currency Hedged Share Classes Global Quality Fund (2) AH (EUR), AH (SDG), BH (EUR), CH (EUR), ZH (EUR) NAV Currency Hedged Share Classes Japanese Equity Fund AH (USD), ZH (EUR) NAV Currency Hedged Share Classes US Advantage Fund AH (EUR), BH (EUR), ZH (EUR) NAV Currency Hedged Share Classes US Growth Fund AH (EUR), BH (EUR), CH (EUR), ZH (EUR) NAV Currency Hedged Share Classes Emerging Markets Corporate Debt Fund AH (EUR), AHX (EUR), BH (EUR), BHX (EUR), CH (EUR) NAV Currency Hedged Share Classes Emerging Markets Debt Fund AH (EUR), AHX (EUR), BH (EUR), BHX (EUR), CH (EUR), NH (EUR), ZH (EUR), ZHX (GBP) NAV Currency Hedged Share Classes Emerging Markets Domestic Debt Fund AH (EUR), AHX (EUR), BH (EUR), BHX (EUR), CH (EUR), ZH (EUR) NAV Currency Hedged Share Classes Euro Corporate Bond Fund BH (USD) NAV Currency Hedged Share Classes Euro Corporate Bond Fund AD, ADX, BD, BDX, CD, ID, ZD Duration Hedged Share Classes Euro Corporate Bond Fund ZOX NAV Currency and Duration Euro Strategic Bond Fund AD, ADX, BD, BDX, CD, ZD Duration Hedged Share Classes European Currencies High Yield Bond Fund ADX, BD, BDX, CD Duration Hedged Share Classes Global Bond Fund AH (EUR), AHX (EUR), BH (EUR), BHX (EUR), CH (EUR) NAV Currency Hedged Share Classes Global Convertible Bond Fund AH (CHF), AH (EUR), BH (EUR), CH (EUR), IH (EUR), ZH (CHF), ZH (EUR), ZHX (EUR) NAV Currency Hedged Share Classes Global Fixed Income Opportunities Fund AH (EUR), AHX (EUR), BH (EUR), BHX (EUR), CH (EUR), CHX (EUR), ZH (EUR) NAV Currency Hedged Share Classes Global High Yield Bond Fund AH (EUR), AHX (EUR), BH (EUR), BHX (EUR), CH (EUR) NAV Currency Hedged Share Classes Global High Yield Bond Fund AO (SEK) NAV Currency and Duration Global Mortgage Securities Fund AH (EUR), AHR (EUR), AHX (EUR), BH (EUR), BHR (EUR), BHX (EUR), CH (EUR), CHX (EUR), IH (EUR), IHX (EUR) NAV Currency Hedged Share Classes Global Premier Credit Fund AH (EUR), BH (EUR), CH (EUR) NAV Currency Hedged Share Classes Diversified Alpha Plus Fund AH (CHF), AH (USD), BH (USD), IH (USD), ZH (CHF), ZH (GBP), ZH (USD) NAV Currency Hedged Share Classes Absolute Return Currency Fund (3) AH (SEK), AH (USD), IH (USD) NAV Currency Hedged Share Classes

(1) Fund commenced operations on 28 March 2013. (2) Fund commenced operations on 1 August 2013. (3) Fund closed on 8 March 2013. 227 Morgan Stanley Investment Funds 31 December 2013

Appendix 5: Performance Summary (unaudited) As at 31 December 2013

Share 31 Dec 2013 31 Dec 2012 31 Dec 2011 Share 31 Dec 2013 31 Dec 2012 31 Dec 2011 Class Year to Date % Year to Date % Year to Date % Class Year to Date % Year to Date % Year to Date %

Asian Equity Fund A 1.14 18.46 (18.00) Global Brands Fund A 19.23 13.21 8.32 B 0.14 17.28 (18.84) AH (CHF) 18.40 11.94 0.33 C 0.29 17.40 (18.74) AH (EUR) 18.47 12.20 7.58 I 1.91 19.35 (17.41) AHX (EUR) 18.48 12.12 7.29 Z 1.93 19.36 (17.35) AX 19.23 13.22 8.25 Asia-Pacific Equity Fund A 1.51 18.49 (19.32) B 18.03 12.08 7.26 AH (EUR) n/a 17.25 (20.28) BH (EUR) 17.31 11.07 6.54 B 0.55 17.22 (19.88) BHX (EUR) 17.29 11.05 6.42 BH (EUR) 0.06 16.11 (20.90) BX 18.03 12.04 7.08 C 0.72 17.51 (19.80) C 18.26 12.31 7.45 N 3.25 20.46 (18.28) CH (EUR) 17.49 11.20 6.61 Z 2.31 19.32 (18.84) I 20.08 14.05 9.11 Asian Property Fund A 2.49 46.73 (23.18) Z 20.13 14.10 9.14 AX 2.40 46.73 (23.26) ZH (EUR) 19.40 13.06 8.44 B 1.47 45.29 (23.96) ZH (GBP) 20.22 13.61 1.66 I 3.25 47.81 (22.62) ZX 20.13 14.08 9.14 IX 3.27 47.83 (22.68) Global Equity Allocation A 25.27 11.51 0.08 Z 3.25 47.92 (22.65) Fund B 23.98 10.44 n/a Emerging Europe, Middle A 10.48 19.38 (24.33) Z 26.58 12.70 0.16 East and Africa Equity Fund AX 10.44 19.30 (24.42) Global Infrastructure Fund A 17.83 14.82 15.10 B 9.41 18.20 (25.07) AH (EUR) 17.21 13.85 14.36 C 9.51 18.31 (24.82) B 16.67 13.66 13.91 I 11.11 20.01 (23.83) BH (EUR) 16.08 12.80 13.24 Z 11.23 19.99 (23.97) C 16.78 13.83 14.30 Emerging Leaders Equity A 3.98 5.60 n/a CH (EUR) 16.05 5.06 n/a Fund AH (EUR) 3.48 5.30 n/a I 18.61 (0.72) n/a AX* (2.20) n/a n/a Z 18.76 15.71 16.05 B 2.93 5.20 n/a ZH (EUR) 18.13 14.83 13.92 BH (EUR) 2.45 4.91 n/a ZX* 11.88 n/a n/a C 3.12 5.28 n/a Global Opportunity Fund A 38.61 9.14 (6.47) CH (EUR) 2.56 5.69 n/a AH (EUR) 37.87 8.12 (7.54) I 4.99 0.16 n/a B 37.24 8.03 (7.40) Z 5.06 5.96 n/a BH (EUR) 36.45 7.07 (8.48) ZH (EUR)* 1.88 n/a n/a C 37.55 8.22 (7.20) Emerging Markets Equity A (0.23) 18.28 (18.56) I 39.68 1.00 n/a Fund B (1.22) 17.12 (19.39) Z 39.80 10.00 (5.69) C (1.21) 17.17 (19.24) Global Property Fund A 5.90 30.48 (12.53) I 0.36 19.02 (18.10) AH (EUR) 5.07 28.91 (13.69) N 1.60 20.47 (17.08) B 4.84 29.11 (13.42) Z 0.41 19.05 (18.04) BH (EUR) 4.07 27.54 (14.52) European Equity Alpha Fund A 22.37 14.88 (7.55) C 5.04 29.24 (13.32) AH (USD)* 18.00 n/a n/a CH (EUR) 4.12 27.82 (14.30) AX n/a 8.36 n/a I 6.68 31.41 (11.85) B 21.16 13.68 (8.45) IX 6.59 31.30 (11.94) C 21.42 13.83 (8.36) Z 6.70 31.52 (11.86) I 23.06 15.52 (6.98) Global Quality Fund (3) A* 8.36 n/a n/a Z 23.14 15.62 (6.96) AH (EUR)* 8.12 n/a n/a Z (GBP)* 6.68 n/a n/a AH (SGD)* 3.12 n/a n/a ZH (GBP) n/a 11.34 (4.72) AX* 7.60 n/a n/a European Property Fund A 8.83 28.69 (11.93) B* 7.92 n/a n/a AX* (0.76) n/a (12.25) BH (EUR)* 7.76 n/a n/a B 7.73 27.36 (12.86) C* 8.00 n/a n/a I 9.63 29.59 (11.30) CH (EUR)* 7.80 n/a n/a IX n/a 29.32 (11.58) I* 8.76 n/a n/a Z 9.70 29.64 (11.24) Z* 8.84 n/a n/a Eurozone Equity Alpha Fund A 28.55 21.84 (15.52) ZH (EUR)* 2.32 n/a n/a AH (USD)* 23.76 n/a n/a Indian Equity Fund A (7.81) 28.25 (38.22) B 27.35 20.64 (16.41) B (8.77) 26.96 (38.81) I 29.50 22.63 (14.96) C (8.87) 26.84 (38.90) Z 29.57 22.88 (14.90) I (7.09) 29.22 (37.71) Frontier Emerging Markets A* 20.00 n/a n/a N* (3.64) n/a n/a Equity Fund (1) AH (EUR)* 19.72 n/a n/a Z (7.09) 29.31 (37.70) B* 19.08 n/a n/a Japanese Equity Fund A 51.22 19.23 (20.34) BH (EUR)* 18.80 n/a n/a AH (USD)* 7.36 n/a n/a C* 19.44 n/a n/a B 49.68 18.07 (21.12) CH (EUR)* 19.16 n/a n/a C 50.46 17.88 (20.97) I* 21.12 n/a n/a I 52.31 20.09 (11.37) Z* 21.20 n/a n/a Z 52.45 20.13 (19.73) Global Advantage Fund (2) A* 23.16 n/a n/a ZH (EUR) 48.09 17.29 (21.13) B* 22.04 n/a n/a ZH (USD)* n/a n/a n/a C* 22.24 n/a n/a Latin American Equity Fund A (12.56) 11.45 (21.54) I* 24.04 n/a n/a B (13.45) 10.33 (22.37) Z* 24.08 n/a n/a C (13.39) 10.50 (22.21) I (11.96) 12.21 (21.03) Z (11.92) 12.25 (21.07) Morgan Stanley Investment Funds 31 December 2013 228

Appendix 5: Performance Summary (unaudited) (continued) As at 31 December 2013

Share 31 Dec 2013 31 Dec 2012 31 Dec 2011 Share 31 Dec 2013 31 Dec 2012 31 Dec 2011 Class Year to Date % Year to Date % Year to Date % Class Year to Date % Year to Date % Year to Date %

US Advantage Fund A 35.20 12.64 4.66 Euro Corporate Bond A 2.04 5.76 n/a AH (EUR) 34.46 11.78 3.91 (ex Financials) Fund AX n/a 5.69 n/a B 33.88 11.49 3.60 N 3.06 10.97 1.40 BH (EUR) 33.13 10.61 2.89 Z 1.77 6.16 n/a C 34.16 11.72 3.81 Euro Corporate Bond Fund A 4.26 19.93 (3.14) I 36.26 13.53 5.45 AD 4.67 16.45 (9.27) N n/a 3.75 n/a ADX 4.72 16.26 (9.42) Z 36.33 13.56 5.49 AX 4.26 19.94 (3.07) ZH (EUR) 35.60 12.66 4.80 B 3.21 18.75 (4.07) US Growth Fund A 46.35 11.69 (4.08) BD 3.73 15.27 (10.18) AH (EUR) 45.50 10.73 (4.99) BDX 3.69 15.27 (10.24) AX 46.35 11.69 (4.08) BH (USD)* 1.20 n/a n/a B 44.88 10.59 (5.09) BX 3.22 18.74 (5.72) BH (EUR) 43.97 9.62 (5.98) C 3.52 19.02 (3.86) C 45.17 10.74 (4.92) CD 3.92 15.56 (9.97) CH (EUR) 43.97 6.30 n/a I 4.69 20.44 (2.67) I 47.49 12.54 (3.33) ID* 4.12 n/a n/a IX 47.53 12.55 (3.39) IX* 1.80 n/a n/a Z 47.57 12.62 (3.30) N n/a n/a (2.11) ZH (EUR) 46.77 11.62 (4.20) NX n/a 21.04 (2.09) US Property Fund A 2.26 11.94 4.66 S 4.82 20.58 (2.54) AX n/a n/a 4.34 Z 4.74 20.48 (2.65) B 1.19 10.80 3.52 ZD 5.22 17.00 (8.85) I 2.98 12.76 5.45 ZOX* 2.08 n/a n/a Z 3.03 12.81 5.45 Euro Strategic Bond Fund A 2.05 13.99 0.54 Emerging Markets A (2.01) 20.14 (0.52) AD 2.86 9.28 (7.80) Corporate Debt Fund AH (EUR) (2.26) 19.79 (0.47) ADX 2.80 9.28 (7.81) AHX (EUR) (2.30) 19.66 (0.99) AX 2.06 13.92 0.32 AX (2.06) 20.12 (0.96) B 1.03 12.83 (0.44) B (3.03) 18.97 (1.32) BD 1.83 8.26 (8.70) BH (EUR) (3.26) 18.53 (1.30) BDX 1.88 8.22 (8.67) BHX (EUR) (3.25) 18.57 (1.14) BX 1.03 12.82 (0.45) BX (3.00) 18.98 (1.12) C 1.27 13.13 (0.29) C (2.72) 19.27 (1.20) CD 2.07 8.55 (8.43) CH (EUR) (3.16) 2.27 n/a I 2.43 14.50 0.98 I* (3.92) n/a n/a Z 2.50 14.48 1.02 Z (1.42) 20.90 0.08 ZD 3.33 9.82 (7.35) Emerging Markets Debt A (9.48) 17.95 6.80 European Currencies High A 9.85 25.63 (5.92) Fund AH (EUR) (9.75) 17.42 7.05 Yield Bond Fund AD n/a 22.16 (16.44) AHX (EUR) (9.80) 17.16 0.27 ADX 10.00 22.19 (16.46) ARM (9.44) 7.28 n/a AX 9.75 25.56 (2.00) AX (9.50) 17.85 6.65 B 8.79 24.34 (6.86) B (10.36) 16.80 5.72 BD 8.93 20.97 (17.04) BH (EUR) (10.63) 16.26 5.98 BDX 8.97 21.04 (17.03) BHX (EUR) (10.63) 16.19 0.12 BX 8.76 24.40 (2.16) BX (10.34) 16.72 0.16 C 9.14 24.79 (6.61) C (10.17) 16.99 5.94 CD 9.19 21.45 (16.84) CH (EUR) (10.56) 2.37 n/a I 10.33 26.35 (5.48) I (8.93) 18.64 7.43 Z 10.38 26.26 (5.49) NH (EUR) (8.28) 19.32 8.78 ZD n/a n/a (16.16) S* 1.16 n/a n/a ZX* 3.68 n/a n/a Z (8.90) 18.73 7.46 Global Bond Fund A (2.42) 7.38 2.59 ZH (EUR) (9.19) 18.12 8.14 AH (EUR) (3.00) 6.76 2.31 ZHX (GBP) (8.71) 18.61 7.50 AHX (EUR) (3.02) 6.69 (1.76) Emerging Markets Domestic A (13.25) 14.42 (3.90) AX (2.51) 7.28 2.36 Debt Fund AH (EUR) (13.68) 13.46 (4.52) B (3.39) 6.34 1.56 AHX (EUR) (13.78) 13.33 (3.79) BH (EUR) (3.88) 5.83 1.43 ARM (13.26) 1.88 n/a BHX (EUR) (3.89) 5.77 (1.91) AX (13.25) 14.47 (3.91) BX (3.38) 6.29 (1.84) B (14.10) 13.28 (4.85) C (3.16) 6.57 1.91 BH (EUR) (14.55) 12.44 (5.45) CH (EUR) (3.66) 0.85 n/a BHX (EUR) (14.56) 12.40 (3.95) I (2.01) 7.90 3.05 BX (14.14) 13.28 (3.80) IX n/a n/a 2.83 C (13.89) 13.67 (4.60) Z (1.95) 7.91 3.02 CH (EUR) (14.43) 3.64 n/a Global Convertible Bond A 13.75 8.27 (6.21) I (12.83) 15.11 (3.32) Fund AH (CHF) 13.25 2.04 n/a Z (12.73) 15.15 (3.31) AH (EUR) 13.45 7.72 (6.35) ZH (EUR) (13.18) 14.28 (3.92) B 12.64 7.17 (7.15) ZX (12.72) 15.14 (3.37) BH (EUR) 12.32 6.64 (7.30) Euro Bond Fund A 1.56 11.85 1.62 CH (EUR) 12.54 6.86 (6.94) B 0.50 10.79 0.64 I 14.32 8.78 (5.75) C 0.77 11.00 0.90 IH (EUR) 13.99 8.23 (5.89) I 1.86 12.42 2.06 S n/a 8.94 (5.62) IX n/a n/a 1.95 Z 14.33 8.85 (5.70) Z 1.99 12.41 2.15 ZH (CHF) 13.84 2.11 n/a 229 Morgan Stanley Investment Funds 31 December 2013

Appendix 5: Performance Summary (unaudited) (continued) As at 31 December 2013

Share 31 Dec 2013 31 Dec 2012 31 Dec 2011 Share 31 Dec 2013 31 Dec 2012 31 Dec 2011 Class Year to Date % Year to Date % Year to Date % Class Year to Date % Year to Date % Year to Date %

Global Convertible Bond ZH (EUR) 14.00 8.30 (5.88) US Dollar Liquidity Fund A 0.01 0.01 0.01 Fund (continued) ZHX (EUR) 14.04 8.31 (5.77) AX 0.01 0.01 0.01 ZX* 7.00 n/a n/a B n/a 0.01 0.01 Global Credit Fund A 3.62 0.64 n/a BX n/a 0.01 0.01 B 2.59 0.52 n/a I 0.01 0.01 0.01 C 2.94 0.56 n/a IX n/a n/a 0.01 I 4.01 0.72 n/a Z 0.01 0.01 0.01 Z 4.05 0.72 n/a Diversified Alpha Plus Fund A 15.93 7.74 (1.72) ZX 3.99 0.72 n/a AH (CHF)* (0.16) 8.37 (2.22) Global Fixed Income A 1.81 15.48 (0.28) AH (USD) 16.15 n/a n/a Opportunities Fund AH (EUR) 1.32 9.23 n/a B 14.79 6.67 (2.67) AHX (EUR) 1.39 14.90 (0.37) BH (USD) 14.90 7.14 (3.18) AX 1.72 15.46 (0.28) C 15.09 6.92 (2.42) B 0.81 14.34 (0.40) I 17.11 8.87 (0.68) BH (EUR) 0.36 8.45 n/a IH (USD)* 0.96 n/a n/a BHX (EUR) 0.39 13.78 (0.53) Z 17.17 8.92 (0.68) BX 0.82 14.29 (0.44) ZH (CHF)* 0.08 n/a n/a C 1.25 2.08 n/a ZH (GBP) 17.73 9.39 (1.07) CH (EUR) 0.85 1.85 n/a ZH (USD) 17.36 3.27 n/a CHX (EUR) 0.86 0.55 n/a Global Balanced Risk A 9.52 10.66 1.36 Z 2.52 16.27 (0.20) Control Fund of Funds B 8.44 9.64 1.20 ZH (EUR)* 1.20 n/a n/a C 8.67 2.40 n/a Global High Yield Bond Fund A 13.36 19.70 2.32 Z 10.90 9.00 n/a AH (EUR) 12.95 11.20 n/a Absolute Return Currency A n/a (9.49) (0.85) AHX (EUR) 12.92 19.19 2.25 Fund (4) A1 n/a (9.23) (0.36) AO (SEK)* 6.04 n/a n/a AH (SEK) n/a (9.35) n/a AX 13.29 19.64 2.32 AH (USD) n/a (9.68) (1.95) B 12.25 18.51 2.20 B n/a (10.41) (1.85) BH (EUR) 11.83 10.41 n/a I n/a (8.49) 0.15 BHX (EUR) 11.86 18.00 2.12 IH (USD) n/a (8.70) (1.14) BX 12.24 18.65 2.20 Z n/a (8.30) 0.68 C 12.70 2.96 n/a (1) Fund commenced operations on 28 March 2013. CH (EUR) 12.25 2.88 n/a (2) Fund commenced operations on 31 January 2013. I* 1.96 n/a n/a (3) Fund commenced operations on 1 August 2013. Z 13.93 20.32 2.36 (4) Fund closed on 8 March 2013. ZX 13.94 19.69 2.36 * See note 1 for further details regarding the launch date of Share Class. Global Mortgage Securities A 2.03 0.28 n/a Fund AH (EUR) 1.63 0.25 n/a AHR (EUR) 1.61 0.25 n/a AHX (EUR) 1.62 0.25 n/a AX* 1.32 n/a n/a B 0.92 0.20 n/a BH (EUR) 0.64 0.16 n/a BHR (EUR) 0.65 0.16 n/a BHX (EUR) 0.64 0.16 n/a C 1.40 0.24 n/a CH (EUR) 1.05 0.19 n/a CHX (EUR) 1.05 0.19 n/a CX* 1.04 n/a n/a I 2.63 0.32 n/a IH (EUR)* (0.36) n/a n/a IHX (EUR)* (0.92) n/a n/a Z 2.59 0.32 n/a ZH (EUR)* n/a n/a n/a ZX n/a 0.32 n/a Global Premier Credit Fund A (0.80) (0.08) n/a AH (EUR) (1.29) (0.12) n/a B (1.72) (0.16) n/a BH (EUR) (2.27) (0.18) n/a C (1.44) (0.12) n/a CH (EUR) (1.94) (0.15) n/a I (0.36) (0.08) n/a Z (0.32) (0.08) n/a ZX (0.35) (0.08) n/a Short Maturity Euro Bond A 1.15 4.92 0.58 Fund B 0.11 3.87 (0.42) C 0.34 4.11 (0.16) I 1.53 5.34 1.09 Z 1.59 5.38 1.08 Euro Liquidity Fund A 0.01 0.03 0.33 B 0.01 0.03 0.02 C 0.01 0.03 0.05 I 0.01 0.04 0.66 Z 0.01 0.04 0.56 Morgan Stanley Investment Funds 31 December 2013 230

Appendix 6: Risk Measurement and Global Exposure (unaudited) As at 31 December 2013

As per ESMA/10-788 “Guidelines on Risk Measurement and the Calculation of Global Exposure and Counterparty Risk for UCITS” on annual report disclosure requirements, the Global Exposure table below outlines the following information: • Each Fund’s approach to measuring global exposure. • Where the Fund is using relative VaR to measure global exposure the reference portfolio is provided. • Lowest, average and highest relative VaR or absolute VaR for each Fund measuring global exposure on the VaR approach (note these numbers are actual VaR and relative VaR numbers and do not represent utilisation levels of the regulatory limit). • Relevant regulatory limit for the Funds global exposure approach for Funds using VaR approach. • Average leverage is given at the Fund level where the Fund uses the VaR approach to measure global exposure. • Leverage is calculated using the sum of the notionals approach and the commitment approach.

Global Exposure Average Average Global Leverage Leverage Asset Class Risk Exposure Regulatory (Sum of (Commitment Fund Name Model Type Methodology Reference Portfolio Limit Lowest Average Highest Notionals) Approach)

Emerging Markets Corporate Debt Fixed Income Relative VaR JPM CEMBI Broad Diversified 200% 97% 119% 140% 10% 6% Fund

Emerging Markets Debt Fund Fixed Income Relative VaR JPM EM Bond Index Global 200% 91% 110% 123% 10% 8%

Emerging Markets Domestic Debt Fund Fixed Income Relative VaR JPM GBI – EM Global Diversified 200% 92% 107% 125% 20% 13%

Euro Bond Fund Fixed Income Relative VaR Barclays Capital Euro-Aggregate 200% 87% 94% 105% 13% 13% Index

Euro Corporate Bond (ex Financials) Fixed Income Relative VaR Barclays Capital Euro-Aggregate 200% 84% 94% 102% 27% 19% Fund Corporates ex Financials Index

Euro Corporate Bond Fund Fixed Income Relative VaR Barclays Capital Euro-Aggregate 200% 99% 107% 117% 71% 53% Corporates Index

Euro Strategic Bond Fund Fixed Income Relative VaR Barclays Capital Euro-Aggregate 200% 95% 104% 114% 85% 64% Index

European Currencies High Yield Bond Fixed Income Relative VaR BofA ML European Currency 200% 113% 119% 131% 27% 10% Fund High Yield 3% Constrained Ex-Sub Financials Index

Global Bond Fund Fixed Income Relative VaR Barclays Global Aggregate 200% 98% 107% 115% 137% 99% Index

Global Convertible Bond Fund* Fixed Income Relative VaR UBS Convertible Focus (USD hedged) 200% 79% 97% 164% 103% 48% Index

Global Credit Fund Fixed Income Relative VaR Barclays Global Credit Index 200% 76% 108% 117% 77% 52%

Global Fixed Income Opportunities Fixed Income Relative VaR Barclays Capital Global Aggregate 200% 90% 109% 131% 106% 73% Fund Index

Global High Yield Bond Fund Fixed Income Relative VaR Barclays Global HY Corp 200% 90% 113% 124% 22% 9%

Global Mortgage Securities Fund Fixed Income Absolute VaR - 20% 1% 3% 4% 49% 48%

Global Premier Credit Fund Fixed Income Relative VaR Barclays Global Credit Index 200% 82% 97% 114% 65% 51%

Short Maturity Euro Bond Fund Fixed Income Relative VaR Barclays Capital Euro-Aggregate: 200% 73% 82% 97% 33% 33% Treasury 1-3 Years

Diversified Alpha Plus Fund Alternative Absolute VaR - 20% 1% 5% 9% 359% 201%

Global Balanced Risk Control Fund Alternative Absolute VaR - 20% 2% 4% 8% 9% 9% of Funds

* The average leverages have been proxied using the last 4 months of the year. 231 Morgan Stanley Investment Funds 31 December 2013

Appendix 6: Risk Measurement and Global Exposure (unaudited) (continued) As at 31 December 2013

The Risk Criteria table below indicates the risk model type and inputs for theV aR calculation based on asset class, which is also displayed in the Global Exposure table above:

Asset Class Calculation Model Confidence Interval Holding Period Length of Data History

Fixed Income Parametric 99% 20 days Weekly observations exponentially weighted with a 6-month half-life using 24 months of data

Alternative Parametric 99% 20 days Weekly observations exponentially weighted with a 26-week (6 months) half-life using 2 years of data www.morganstanleyinvestmentfunds.com 13 CN AR SICAV