# EDGAR Filing Document

**Accession Number:** 0000882381
**File Stem:** 0001133228-25-006520
**Filing Date:** 2025-6
**Character Count:** 712497
**Document Hash:** ce1bc72c64ce41c7ff5c2dc28ed07ddb
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001133228-25-006520.hdr.sgml**: 20250623

**ACCESSION NUMBER**: 0001133228-25-006520

**CONFORMED SUBMISSION TYPE**: 497

**PUBLIC DOCUMENT COUNT**: 29

**FILED AS OF DATE**: 20250623

**DATE AS OF CHANGE**: 20250623

**EFFECTIVENESS DATE**: 20250623

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** MORGAN STANLEY INCOME OPPORTUNITIES FUND
- **CENTRAL INDEX KEY:** 0000882381

**ORGANIZATION NAME:**
- **EIN:** 133647664
- **STATE OF INCORPORATION:** MA
- **FISCAL YEAR END:** 1031

**FILING VALUES:**
- **FORM TYPE:** 497
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 033-44782
- **FILM NUMBER:** 251064898

**BUSINESS ADDRESS:**
- **STREET 1:** 1585 BROADWAY
- **CITY:** NEW YORK
- **STATE:** NY
- **ZIP:** 10036
- **BUSINESS PHONE:** 800-548-7786

**MAIL ADDRESS:**
- **STREET 1:** 1585 BROADWAY
- **CITY:** NEW YORK
- **STATE:** NY
- **ZIP:** 10036

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** MORGAN STANLEY GLOBAL FIXED INCOME OPPORTUNITIES FUND
- **DATE OF NAME CHANGE:** 20120307

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** MORGAN STANLEY FIXED INCOME OPPORTUNITIES FUND
- **DATE OF NAME CHANGE:** 20111220

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** MORGAN STANLEY FLEXIBLE INCOME TRUST
- **DATE OF NAME CHANGE:** 20030711

## Series and Classes Contracts Data

### Income Opportunities Fund (Series ID: S000002382)

---

|  |  |  |
|:---|:---|:---|
| Class Name | Ticker Symbol | Class ID   |
| A          | DINAX         | C000006295 |
| L          | DINCX         | C000006297 |
| I          | DINDX         | C000006298 |
| CLASS R6   | MGFOX         | C000126926 |
| Class C    | MSIPX         | C000155980 |
| Class IR   | MFIRX         | C000198830 |

---

## Series and Classes Contracts Data

### Income Opportunities Fund (Series ID: S000002382)

| Class ID   | Class Name   | Ticker Symbol   |
|:---|:---|:---|
| C000006295 | A            | DINAX           |
| C000006297 | L            | DINCX           |
| C000006298 | I            | DINDX           |
| C000126926 | CLASS R6     | MGFOX           |
| C000155980 | Class C      | MSIPX           |
| C000198830 | Class IR     | MFIRX           |

?xml version='1.0' encoding='ASCII'? 2025-03-01MSIncomeOpportunities_497C_PSP_February2025

![image](pr16994img002.jpg)

**Morgan Stanley Income Opportunities Fund**

------

**Prospectus** \| February 28, 2025, as amended June 23, 2025

---

| | |
|:---|:---|
| **Share Class** | **Ticker Symbol** |
| Class A | DINAX |
| Class L | DINCX |
| Class I | DINDX |
| Class C | MSIPX |
| Class R6 | MGFOX |

---

This Prospectus contains important information about the Fund. Please read it carefully and keep it for future reference.

![image](pr16994img001.jpg)

The Securities and Exchange Commission ("SEC") has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

**An investment in the Fund is not guaranteed or endorsed by a bank, is not a bank deposit or obligation thereof, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. An investment in the Fund involves investment risks, and you may lose money investing in the Fund.**

MSIOPRO 6/25

------

**Table of Contents**

---

| | |
|:---|:---|
|  | **Page** |
| [**Fund Summary**](#ref_chapter_2_16994)  | [1](#ref_chapter_2_16994)  |
| [**Details of the Fund**](#ref_chapter_3_16994)  | [11](#ref_chapter_3_16994)  |
| [**Additional Information about Fund Investment Strategies and Related Risks**](#ref_chapter_3-sect1_2_16994)  | [13](#ref_chapter_3-sect1_2_16994)  |
| [**Fund Management**](#ref_chapter_3-sect1_4_16994)  | [36](#ref_chapter_3-sect1_4_16994)  |
| [**Shareholder Information**](#ref_chapter_4_16994)  | [37](#ref_chapter_4_16994)  |
| [**Financial Highlights**](#ref_chapter_5_16994)  | [54](#ref_chapter_5_16994)  |
| [**Appendix A**](#ref_chapter_6_16994)  | [60](#ref_chapter_6_16994)  |

---

------

Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund

**Investment Objectives**

Morgan Stanley Income Opportunities Fund (the "Fund") seeks a high level of current income as its primary investment objective. As a secondary objective, the Fund seeks to maximize total return but only to the extent consistent with its primary objective.

**Fees and Expenses**

The table below describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund. **You may pay fees other than the fees and expenses of the Fund, such as brokerage commissions and other fees charged by financial intermediaries, which are not reflected in the tables and examples below.**

For purchases of Class A shares, you may qualify for a sales charge discount if the cumulative net asset value per share ("NAV") of Class A shares of the Fund being purchased in a single transaction, together with the NAV of any shares of the Fund and/or certain other Morgan Stanley Funds already held in Related Accounts (as defined in the section of the Prospectus entitled "Shareholder Information—Share Class Arrangements") as of the date of the transaction, amounts to $100,000 or more. More information about this combined purchase discount and other discounts is available from your authorized financial intermediary, on page 47 of the Prospectus in the section entitled "Shareholder Information—Share Class Arrangements" and in Appendix A attached to the Prospectus. In addition, Appendix A attached to the Prospectus contains more information regarding financial intermediary-specific sales charge waivers and discounts.

Class I shares may be available on brokerage platforms of firms that have agreements with the Fund's principal underwriter permitting such firms to (i) offer Class I shares solely when acting as an agent for the investor and (ii) impose on an investor transacting in Class I shares through such platforms a commission and/or other forms of compensation to the broker. Shares of the Fund are available in other share classes that have different fees and expenses.

**Shareholder Fees** (fees paid directly from your investment)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Class A** | **Class L** | **Class I** | **Class C** | **Class R6** |
| Maximum sales charge (load) imposed on purchases (as a percentage of offering price) | 3.25% |  |  |  |  |
| Maximum deferred sales charge (load) (as a percentage based on the lesser of the offering price or NAV at redemption) | None<sup>1</sup> |  |  | 1.00%<sup>2</sup> |  |

---

---

| | |
|:---|:---|
| 1 | Investments in Class A shares that are not subject to any sales charges at the time of purchase are subject to a contingent deferred sales charge ("CDSC") of 0.75% that will be imposed if you sell your shares within 12 months after purchase, except for certain specific circumstances. See "Shareholder Information—Share Class Arrangements" for further information about the CDSC waiver categories. |

---

2 The Class C CDSC is only applicable if you sell your shares within one year after the last day of the month of purchase. See "Shareholder Information—Share Class Arrangements" for a complete discussion of the CDSC.

**Annual Fund Operating Expenses** (expenses that you pay each year as a percentage of the value of your investment)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Class A** | **Class L** | **Class I** | **Class C** | **Class R6** |
| Advisory Fee | 0.32% | 0.32% | 0.32% | 0.32% | 0.32% |
| Distribution and/or Shareholder Service (12b-1) Fee | 0.25% | 0.50% |  | 1.00% |  |
| Other Expenses<sup>1</sup>  | 0.33% | 0.44% | 0.33% | 0.33% | 0.20% |
| Total Annual Fund Operating Expenses<sup>2</sup>  | 0.90% | 1.26% | 0.65% | 1.65% | 0.52% |
| Fee Waiver and/or Expense Reimbursement<sup>2</sup>  | 0.00% | 0.02% | 0.05% | 0.00% | 0.00% |
| Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement<sup>2</sup>  | 0.90% | 1.24% | 0.60% | 1.65% | 0.52% |

---

1 Other Expenses have been restated to reflect current fees.

---

| | |
|:---|:---|
| 2 | The Fund's "Adviser" and "Administrator," Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee, its administration fee and/or reimburse the Fund so that Total Annual Fund Operating Expenses, excluding acquired fund fees and expenses (as applicable), certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.95% for Class A, 1.24% for Class L, 0.60% for Class I, 1.70% for Class C and 0.57% for Class R6. The fee waivers and/or expense reimbursements will continue for at least one year from the date of this Prospectus or until such time as the Fund's Board of Trustees acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. Total Annual Fund Operating Expenses, Fee Waiver and/or Expense Reimbursement and Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement have been restated to reflect current fees. |

---

**Example**

The example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund, your investment has a 5% return each year and that the Fund's operating expenses remain the same (except that the example incorporates the fee waiver and/or expense reimbursement arrangement for only

**1**

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

the first year). After eight years, Class C shares of the Fund generally will convert automatically to Class A shares of the Fund. The example for Class C shares reflects the conversion to Class A shares after eight years. Please refer to the section of the Prospectus entitled "Shareholder Information—Conversion Features" for more information. Although your actual costs may be higher or lower, based on these assumptions your costs would be:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **If You SOLD Your Shares**  | **If You SOLD Your Shares**  | **If You SOLD Your Shares**  | **If You SOLD Your Shares**  | **If You SOLD Your Shares**  |
|  | **1 Year** | **3 Years** | **5 Years** | **10 Years** |
| Class A | $414 | $603 | $807 | $1397 |
| Class L | $126 | $398 | $690 | $1521 |
| Class I | $61 | $203 | $357 | $806 |
| Class C | $268 | $520 | $897 | $1754 |
| Class R6 | $53 | $167 | $291 | $653 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **If You HELD Your Shares**  | **If You HELD Your Shares**  | **If You HELD Your Shares**  | **If You HELD Your Shares**  | **If You HELD Your Shares**  |
|  | **1 Year** | **3 Years** | **5 Years** | **10 Years** |
| Class A | $414 | $603 | $807 | $1397 |
| Class L | $126 | $398 | $690 | $1521 |
| Class I | $61 | $203 | $357 | $806 |
| Class C | $168 | $520 | $897 | $1754 |
| Class R6 | $53 | $167 | $291 | $653 |

---

**Portfolio Turnover**

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 155% of the average value of its portfolio.

**Principal Investment Strategies**

The Fund's "Adviser," Morgan Stanley Investment Management Inc., will allocate the Fund's investments among the following asset classes or market segments: (1) corporate securities, (2) agency residential and commercial mortgage-backed securities, (3) non-agency residential and commercial mortgage-backed securities, (4) asset-backed securities, (5) emerging market securities, (6) convertible securities, (7) U.S. government securities and foreign sovereign debt, and (8) derivatives, including interest rate-related derivatives and currency derivatives. Securities may be rated either investment grade or below investment grade and denominated in any currency, hedged or un-hedged. The amount of the Fund's assets committed to any one asset class or market segment will fluctuate. Under normal circumstances, the Fund may invest up to 65% of its net assets in any one asset class or market segment. The Adviser has the flexibility to select any combination of at least two asset classes of the aforementioned groups depending upon market conditions and the current economic environment and, as a result, at any given time the Fund's assets may be invested in certain groups and not others.

The Fund's investment process incorporates information about environmental, social and governance issues (also referred to as ESG) via an integrated approach within the investment team's fundamental investment analysis framework. The Adviser may engage with management of certain issuers regarding corporate governance practices as well as what the Adviser deems to be materially important environmental and/or social issues facing a company.

The corporate securities in which the Fund will invest may include fixed-income securities issued by corporations located in or outside of the United States, certificates of deposit and bankers' acceptances issued or guaranteed by, or time deposits maintained at, banks, commercial paper and convertible securities.

The types of mortgage-backed securities in which the Fund may invest include mortgage pass-through securities, collateralized mortgage obligations ("CMOs"), stripped mortgage-backed securities ("SMBS") and commercial mortgage-backed securities ("CMBS"). Mortgage pass-through securities provide for monthly payments that are a "pass-through" of the monthly interest and principal payments made by the individual borrowers on the pooled mortgage loans. CMOs are debt obligations collateralized by mortgage loans or mortgage pass-through securities (collectively "Mortgage Assets"). CMOs are issued in multiple classes and each class has a fixed or floating rate and a stated maturity (when a debt security provides its final payment) or final distribution date. Certain classes will have more predictable cash flows than others. The Fund may invest in any class of CMO. SMBS are derivative multi-class mortgage-backed securities. A common type of SMBS will have one class receiving some of the interest and most of the principal from the Mortgage Assets, while the other class receives most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). CMBS are generally multi-class or pass-through securities backed by a mortgage loan or

**2**

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

a pool of mortgage loans secured by commercial property, such as industrial and warehouse properties, office buildings, retail space and shopping malls, multifamily properties and cooperative apartments. In addition, the Fund may invest in to-be-announced pass-through mortgage-backed securities, which settle on a delayed delivery basis ("TBAs").

Asset-backed securities represent an interest in a pool of assets such as, but not limited to, automobile loans, credit card receivables, student loans or home equity (prime and subprime) loans that have been securitized in pass-through structures similar to mortgage-backed securities.

The Fund may invest in fixed-income securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities or in fixed-income securities issued or guaranteed by foreign governments or supranational organizations or any of their instrumentalities, including debt obligations of governmental issuers located in emerging market or developing countries and sovereign debt. The Fund may also invest generally in foreign securities that are denominated in U.S. dollars or in currencies other than U.S. dollars.

In pursuit of its investment objectives, the Fund may regularly enter into currency derivatives, including, but not limited to, foreign currency forward exchange contracts, and currency and currency index futures and options contracts for hedging and non-hedging purposes. The use of these currency derivatives may allow the Fund to obtain net long or net negative (short) exposure to selected currencies. At times, the Fund may enter into "cross-currency" transactions involving currencies other than those in which securities held or proposed to be purchased are denominated.

In addition to its use of currency derivatives, the Fund may, but it is not required to, use derivatives and similar instruments for a variety of purposes, including hedging, risk management, portfolio management or to seek to earn income. The Fund's use of derivatives may involve the purchase and sale of derivative instruments such as futures, options, swaps and other similar instruments and techniques.

The Fund may invest in loan-related investments, such as public bank loans made by banks or other financial institutions and loan participations and assignments, which may be rated investment grade or below investment grade. The Fund may also invest in restricted and illiquid securities.

The Fund will maintain an average credit rating of at least investment grade (BBB- by S&P Global Ratings, a division of S&P Global Inc. ("S&P") or Fitch Ratings, Inc. ("Fitch"), or Baa3 by Moody's Investors Service, Inc. ("Moody's")). Although the Fund's average credit rating will be investment grade or higher, the Fund may invest in securities that are rated below investment grade (rated below BBB by either S&P or Fitch, or below Baa by Moody's) or in unrated securities considered to be of comparable quality by the Adviser (often referred to as "junk" instruments). If securities are rated differently by two or more rating agencies, the highest rating will be used.

**Principal Risks**

There is no assurance that the Fund will achieve its investment objective, and you can lose money investing in this Fund. Investments in the Fund involve risks and you should not rely on the Fund as a complete investment program. The relative significance of each risk factor summarized below may change over time and you should review each risk factor carefully because any one or more of these risks may result in losses to the Fund. The principal risks of investing in the Fund include:

• **Fixed-Income Securities.** Fixed-income securities are
 subject to the risk of the issuer's inability to meet principal and interest payments on its obligations (i.e., credit risk) and
 are subject to price volatility resulting from, among other things, interest rate sensitivity (i.e., interest rate risk), market perception
 of the creditworthiness of the issuer and general market liquidity (i.e., market risk). For example, a type of fixed-income securities
 in which the Fund may invest are corporate debt obligations. In addition to interest rate, credit and other risks, corporate debt obligations
 are also subject to factors directly related to the issuer, such as the credit rating of the corporation, the corporation's performance
 and perceptions of the corporation in the marketplace, and by factors not directly related to the issuer, such as general market liquidity,
 economic conditions and inflation. The Fund may face a heightened level of interest rate risk in times of monetary policy change and/or
 uncertainty, such as when the Federal Reserve Board adjusts a quantitative easing program and/or changes rates. A changing interest rate
 environment increases certain risks, including the potential for periods of volatility, increased redemptions, shortened durations (i.e.,
 prepayment risk) and extended durations (i.e., extension risk). The Fund is not limited as to the maturities (when a debt security provides
 its final payment) or durations (measure of interest rate sensitivity) of the securities in which it may invest. Securities
 with longer durations are likely to be more sensitive to changes in interest rates, generally making them more volatile than securities
 with shorter durations. Lower rated fixed-income securities have greater volatility because there is less certainty that principal and
 interest payments will be made as scheduled. The Fund may be subject to certain liquidity risks that may result from the lack of an active
 market and the reduced number and capacity of traditional market participants to make a market in fixed-income securities.

• **Convertible Securities.** To the extent that the Fund
 invests in convertible securities, and the convertible security's investment value is greater than its conversion value, its price
 will be likely to increase when interest rates fall and decrease when interest rates rise. If the conversion value exceeds the investment
 value, the price of the convertible security will tend to fluctuate directly with the price

**3**

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

of the underlying security. The Fund may be subject to certain liquidity risks that may result from the lack of an active market and the reduced number and capacity of traditional market participants to make a market in fixed-income securities.

• **Credit and Interest Rate Risk.** Credit risk refers
 to the possibility that the issuer or guarantor of a security, or counterparty to a transaction, will be unable or unwilling or perceived
 to be unable or unwilling to make interest payments and/or repay the principal on its debt or otherwise honor its obligations, including
 the risk of default. In such instances, the value of the Fund could decline and the Fund could lose money. If an issuer's, guarantor's
 or counterparty's financial condition worsens, the credit quality of the issuer, guarantor or counterparty may deteriorate. Credit
 ratings may not be an accurate assessment of financial condition, liquidity or credit risk. Although credit ratings may not accurately
 reflect the true credit risk of an instrument, a change in the credit rating of an instrument or an issuer, guarantor or counterparty,
 or the market's perception of the creditworthiness of an instrument or issuer, guarantor or counterparty can have a rapid, adverse
 effect on the instrument's value and liquidity and make it more difficult for the Fund to sell at an advantageous price or time.
 Interest rate risk refers to the decline in the value of a fixed-income security resulting from changes in the general level of interest
 rates. A wide variety of market and economic factors can cause interest rates to rise or fall, including central bank monetary policy,
 rising inflation, disinflation or deflation, and changes in general economic conditions. When the general level of interest rates goes
 up, the prices of most fixed-income securities go down. When the general level of interest rates goes down, the prices of most fixed-income
 securities go up but the yield or income from new issuances of fixed-income securities generally decreases. Securities with longer durations
 will generally be more sensitive to changes in interest rates than securities with shorter durations. Fluctuations in interest rates may
 also affect the liquidity of and income generated by fixed-income instruments held by the Fund. The Fund may invest in variable and floating
 rate loans and other variable and floating rate securities. Although the value of these instruments are generally less sensitive to interest
 rate changes than fixed rate instruments, the value of variable and floating rate loans and other securities may decline if their interest
 rates do not rise as quickly, or as much, as general interest rates. The Fund may face a heightened level of interest rate risk in times
 of monetary policy change and/or uncertainty, such as when the Federal Reserve Board adjusts a quantitative easing program and/or changes
 rates. Changing interest rates may have unpredictable effects on the markets and may detract from Fund performance. A changing interest
 rate environment increases certain risks, including the potential for periods of market volatility, increased redemptions, shortened durations
 (i.e., prepayment risk) and extended durations (i.e., extension risk).

• **Foreign and Emerging Market Securities.** Investments
 in foreign markets entail special risks such as currency, political (including geopolitical), economic and market risks and heightened
 risks, that may result in losses to the Fund. There also may be greater market volatility, less reliable financial information, less stringent
 investor protections and disclosure standards, higher transaction and custody costs and risks, decreased market liquidity and less government
 and exchange regulation associated with investments in foreign markets. In addition, investments in certain foreign markets that have
 historically been considered stable may become more volatile and subject to increased risk due to developments and changing conditions
 in such markets. Moreover, the growing interconnectivity of global economies and financial markets has increased the probability
 that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other
 countries or regions. Certain foreign markets may rely heavily on particular industries or foreign capital and are more vulnerable to
 diplomatic developments (including regional and global, military or other conflicts), the imposition of economic sanctions against a particular
 country or countries, organizations, companies, entities and/or individuals, changes in international trading patterns, trade barriers
 (including tariffs) and other protectionist or retaliatory measures. Investments in foreign markets may also be adversely affected by
 governmental interventions or other actions such as the imposition of capital controls, nationalization of companies or industries, expropriation
 of assets or the imposition of punitive taxes. The governments of certain countries may prohibit or impose substantial restrictions on
 foreign investing in their capital markets or in certain sectors or industries. In addition, a foreign government may limit or cause delay
 in the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments
 denominated in that currency. Certain foreign investments may become less liquid and decline in value in response to market developments
 or adverse investor perceptions, or become illiquid after purchase by the Fund, particularly during periods of market, economic, political
 and social turmoil. When the Fund holds illiquid investments, its portfolio may be harder to value. The risks of investing in emerging
 market countries are greater than the risks associated with investments in foreign developed countries. Emerging market countries may
 be subject to increased potential for market manipulation and to less stringent requirements regarding accounting, auditing,
 financial reporting and record keeping and therefore, material information related to an investment may not be available or reliable. In
 addition, the Fund is limited in its ability to exercise its legal rights or enforce a counterparty's legal obligations in certain
 jurisdictions outside of the United States, in particular, in emerging market countries. In addition, the Fund's investments in
 foreign issuers may be denominated in foreign currencies and therefore, to the extent unhedged, the value of those investments will fluctuate
 with U.S. dollar exchange rates. Economic sanctions or other similar measures may be, and have been, imposed against certain
 countries, organizations, companies, entities and/or individuals. Economic sanctions and other similar measures could, among other things,
 effectively restrict or eliminate the Fund's ability to purchase or sell securities (in the sanctioned country and other markets),
 negatively impact the value or liquidity of the Fund's investments, significantly delay or prevent the settlement of the Fund's
 securities transactions, force the Fund to sell or otherwise dispose of investments at inopportune times or prices, or impair the Fund's
 ability to meet its investment objective or invest in accordance with its investment strategies.

**4**

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• **Mortgage-Backed Securities.** Mortgage-backed securities
 entail prepayment risk, which generally increases during a period of falling interest rates. Rising interest rates tend to discourage
 refinancings, with the result that the average life and volatility of mortgage-backed securities will increase and market price will decrease.
 Rates of prepayment, faster or slower than expected by the Adviser, could reduce the Fund's yield, increase the volatility of the
 Fund and/or cause a decline in NAV per share. Mortgage-backed securities are also subject to extension risk, which is the risk that rising
 interest rates could cause mortgages or other obligations underlying the securities to be prepaid more slowly than expected, thereby lengthening
 the duration of such securities, increasing their sensitivity to interest rate changes and causing their prices to decline. Certain mortgage-backed
 securities may be more volatile and less liquid than other traditional types of debt securities. In addition, mortgage-backed securities
 are subject to credit risk. The Fund may invest in non-agency mortgage-backed securities offered by non-governmental issuers, such as
 commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers.
 Non-agency mortgage-backed securities are not subject to the same underwriting requirements for the underlying mortgages that are applicable
 to those mortgage-backed securities that have a government or government-sponsored entity guarantee. As a result, the mortgage loans underlying
 non-agency mortgage-backed securities may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics
 than government or government-sponsored mortgage-backed securities and have wider variances in a number of terms including interest rate,
 term, size, purpose and borrower characteristics. To the extent the Fund invests in non-agency mortgage-backed securities offered by non-governmental
 issuers, the Fund will be exposed to additional risks because, among other things, there are no direct or indirect government or agency
 guarantees of payments in pools underlying the securities. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool
 may adversely affect the value of a mortgage-backed security and could result in losses to the Fund. The risk of such defaults is generally
 higher in the case of mortgage pools that include subprime mortgages. Furthermore, mortgage-backed securities may be subject to risks
 associated with the assets underlying those securities, such as a decline in value. Investments in mortgage-backed securities may give
 rise to a form of leverage (indebtedness) and may cause the Fund's portfolio turnover rate to appear higher. Leverage may cause
 the Fund to be more volatile than if the Fund had not been leveraged. The risks associated with mortgage-backed securities typically become
 elevated during periods of distressed economic, market, health and labor conditions. In particular, increased levels of unemployment,
 delays and delinquencies in payments of mortgage and rent obligations, and uncertainty regarding the effects and extent of government
 intervention with respect to mortgage payments and other economic matters may adversely affect the Fund's investments in mortgage-backed
 securities. In addition, commercial mortgage-backed securities are also subject to risks associated with reduced demand for commercial
 and office space, tightening lending standards and increased interest and lending rates, and other developments adverse to the commercial
 real estate market.

• **Collateralized Mortgage Obligations.** CMOs are comprised
 of various tranches, the expected cash flows of which have varying degrees of predictability as compared with the underlying mortgage
 loans or mortgage pass-through entities. The less predictable the cash flow, the higher the yield and the greater the risk. In addition
 to the risks generally associated with mortgage-backed securities, if the collateral securing CMOs or any third-party guarantees is insufficient
 to make payments, the Fund could sustain a loss. Like other mortgage backed-securities, CMOs are subject to credit risk. The Fund invests
 in both agency and non-agency CMOs. Some agency CMOs have reduced credit risk as they are government guaranteed.

• **Stripped Mortgage-Backed Securities.** In addition
 to the risks generally associated with mortgage-backed securities, investments in each class of SMBS are extremely sensitive to changes
 in interest rates. The interest-only or "IO" class tends to decrease in value substantially if interest rates decline and
 prepayment rates become more rapid. The principal-only or "PO" class tends to decrease in value substantially if interest
 rates increase and the rate of prepayment decreases. If the Fund invests in SMBS and interest rates move in a manner not anticipated by
 Fund management, it is possible that the Fund could lose all or substantially all of its investment. Like other mortgage backed-securities,
 SMBS are subject to credit risk. The Fund invests in both agency and non-agency SMBS. Some agency SMBS have reduced credit risk as they
 are government guaranteed.

• **Commercial Mortgage-Backed Securities.** CMBS are
 subject to risks similar to those associated with mortgage-backed securities, including credit risk and prepayment risk. The values of,
 and income generated by, CMBS may also be adversely affected by, among other things, changing interest rates, tightening
 lending standards, and other developments impacting the commercial real estate market, such as population shifts and other demographic
 changes, increasing vacancies (potentially for extended periods) and reduced demand for commercial and office space as well as maintenance
 or tenant improvement costs and costs to convert properties for other uses.

• **When-Issued Securities, Delayed Delivery Securities, TBAs and Forward Commitments.** The
 Fund may purchase or sell securities that it is entitled to receive on a when-issued, delayed delivery or through a forward commitment
 basis. For example, the Fund may invest in TBAs, which settle on a delayed delivery basis. These investments may result in a form of leverage
 and may increase volatility in the Fund's share price. In a TBA transaction, the seller agrees to deliver the MBS for an agreed
 upon price on an agreed upon future date, but makes no guarantee as to which or how many securities are to be delivered. Accordingly,
 the Fund's investments in TBAs are subject to risks such as failure of the counterparty to perform its obligation to deliver the
 security, the characteristics of a security delivered to the Fund may be less favorable than expected and the security the Fund buys will
 lose value prior to its delivery. The Fund's purchase of other securities on a when-issued, delayed delivery or through a forward
 commitment basis are subject to similar risks. When the Fund has sold a security on a when-issued, delayed delivery, or forward

**5**

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

commitment basis, the Fund does not benefit if the value of the security appreciates above the sale price during the commitment period and the Fund is subject to failure of the counterparty to pay for the securities.

• **Asset-Backed Securities.** Asset-backed securities are
 subject to credit (such as a borrower's default on its mortgage obligation and the default or failure of a guarantee underlying
 the asset-backed security), interest rate and certain additional risks, including the risk that various federal and state consumer laws
 and other legal and economic factors may result in the collateral backing the securities being insufficient to support payment on the
 securities. To the extent the Fund invests in asset-backed securities issued by non-governmental issuers, such as commercial banks, savings
 and loan institutions, and other secondary market issuers, the Fund will be exposed to additional risks because, among other things, there
 are no direct or indirect government or agency guarantees of payments in the pools underlying the securities. Some asset-backed securities
 also entail prepayment risk and extension risk, which may vary depending on the type of asset. Due to these risks, asset-backed securities
 may become more volatile in certain interest rate environments.

• **High Yield Securities ("Junk Bonds").** The Fund's investments in high yield securities expose it to increased risks, including a substantial degree of credit and default
 risks. High yield securities may be issued by companies that are restructuring, are smaller and less creditworthy or are
 more highly leveraged or indebted than other companies or are financially distressed, and therefore they typically have more difficulty
 making scheduled payments of principal and interest than issuers of higher rated investments. High yield securities are subject to greater
 risk of loss (including substantial or total loss) of income and principal than higher rated securities and are considered speculative
 because of increased credit risk relative to higher rated fixed income investments. High yield securities are also subject to greater
 price volatility, including sudden and substantial decreases in price, and less liquidity than higher rated securities. High yield securities
 are particularly sensitive to adverse economic, market, industry or issuer-specific developments, which may result in an increased incidence
 of default. In the event of a default, the Fund may incur additional expenses to seek recovery or to negotiate new terms with a defaulting
 issuer.

• **Restricted Securities.** The Fund's
 investments may include restricted securities, which are generally subject to resale or transfer restrictions or prohibitions. Restricted
 securities may not be listed on an exchange and may have no active trading market. The Fund may be unable to dispose of restricted securities
 promptly or may be able to sell restricted securities only at disadvantageous times or prices, especially under adverse market or economic
 conditions or in the event of adverse changes in the financial condition of the issuer. There is no assurance that a liquid market will
 exist for restricted securities and these securities could have the effect of increasing the level of Fund illiquidity. In addition, the
 market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions.
 The illiquidity of the market, as well as the lack of publicly available information regarding these securities, including readily available
 market quotations, may also adversely affect the ability to arrive at a fair value for certain securities at certain times and could make
 it difficult for the Fund to sell certain securities. If the Fund is forced to sell an illiquid security to fund redemptions or for other
 cash needs, it may be forced to sell the security at a loss or for less than its fair value and may be unable to sell the security at
 all. In addition, restricted securities may involve a high degree of business and financial risk, which may result in substantial losses
 to the Fund.

• **Market and Geopolitical Risk.** The value of your
 investment in the Fund is based on the values of the Fund's investments, which change due to economic, geopolitical and other events
 that affect the U.S. and global markets generally, as well as those that affect or are perceived or expected to affect particular regions,
 countries, industries, companies, issuers, sectors, asset classes or governments. These types of events may be sudden and unexpected,
 and could adversely affect the value (or income generated by) and liquidity of the Fund's investments, which may in turn impact
 the Fund's ability to sell securities and/or its ability to meet redemptions. The risks associated with these developments may
 be magnified if certain social, political, economic and other conditions and events (such as war, natural disasters or events, epidemics
 and pandemics, terrorism, conflicts, social unrest, recessions, inflation, interest rate changes, supply chain disruptions and the threat
 or actual imposition of tariffs, trade barriers and other protectionist or retaliatory measures) adversely interrupt or otherwise affect
 the global economy and financial markets. It is difficult to predict when events affecting the U.S. or global financial markets
 or economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods).
 These types of events may negatively impact broad segments of businesses and populations and have a significant and rapid negative impact
 on the performance or value of the Fund's investments, adversely affect and increase the volatility of the Fund's
 share price and exacerbate pre-existing risks to the Fund. The frequency and magnitude of resulting changes in the value of the Fund's
 investments cannot be predicted.

• **U.S. Government Securities.** Different types
 of U.S. government securities are subject to different levels of credit risk, including the risk of default, depending on the nature of
 the particular government support for that security. For example, a U.S. government-sponsored entity, such as Federal National Mortgage
 Association or Federal Home Loan Mortgage Corporation, although chartered or sponsored by an Act of Congress, may issue securities that
 are neither insured nor guaranteed by the U.S. Treasury and, therefore, are not backed by the full faith and credit of the United States.
 With respect to U.S. government securities that are not backed by the full faith and credit of the United States, there is the risk that
 the U.S. government will not provide financial support to such U.S. government agencies, instrumentalities or sponsored enterprises if
 it is not obligated to do so by law. U.S. government securities are also subject to interest rate risks and can exhibit price fluctuations
 resulting from increases or decreases in interest rates.

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• **Sovereign Debt Securities.** Investing in sovereign
 debt securities will expose the Fund to the direct or indirect consequences of political, social or economic changes in the countries
 that issue the securities. The issuer or governmental authority that controls the repayment of sovereign debt may not be willing or able
 to repay the principal and/or pay interest when it becomes due, due to factors such as debt service burden, political constraints, cash
 flow problems and other national economic factors. In addition, foreign governments may default on their debt securities, which may require
 holders of such securities to participate in debt rescheduling or additional lending to defaulting governments. Moreover, there is no
 bankruptcy proceeding by which defaulted sovereign debt may be collected in whole or in part.

• **Currency Derivatives.** Investments in currency
 derivatives may substantially change the Fund's exposure to currency exchange rates and could result in losses to the Fund if currencies
 do not perform as the Adviser expects. Foreign currency forward exchange contracts and currency futures and options contracts create exposure
 to currencies in which the Fund's securities are not denominated. To the extent hedged by the use of foreign currency forward exchange
 contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will
 not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements
 in the value of those securities between the date on which the contract is entered into and the date it matures. There is additional risk
 that such transactions may reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite
 to the position taken and that foreign currency forward exchange contracts create exposure to currencies in which the Fund's securities
 are not denominated. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy
 of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms
 of the contract.

• **Loan Risks.** Investments in loans are subject
 to the risks generally associated with other debt obligations (such as credit and interest rate risk). Loans are also subject to additional
 risks, including subordination to other creditors, no collateral or limited rights in collateral, increased liquidity risks and lack of
 publicly available information. Loans are subject to the risk of default in the payment of interest or principal, which will result in
 a reduction of income or other losses to the Fund, and a potential decrease in the Fund's NAV. Loans are traded in a private, unregulated
 inter-dealer or inter-bank resale market and are generally subject to contractual restrictions that must be satisfied before a loan can
 be bought or sold. These restrictions may impede the Fund's ability to buy or sell loans (thus affecting their liquidity) and may
 negatively impact the transaction price. It also may take longer than seven days for transactions in loans to settle. Due to the possibility
 of an extended loan settlement process, the Fund may hold additional cash, sell investments or temporarily borrow from banks or other
 lenders to meet short-term liquidity needs. The types of covenants included in loan agreements generally vary depending on market conditions,
 the creditworthiness of the issuer, the nature of the collateral securing the loan and possibly other factors. Loans with
 fewer covenants that restrict activities of the borrower may provide the borrower with more flexibility to take actions that may be detrimental
 to the loan holders and provide fewer investor protections in the event of such actions or if covenants are breached. The Fund may experience
 relatively greater realized or unrealized losses or delays and expense in enforcing its rights with respect to loans with fewer restrictive
 covenants. Loans to entities located outside of the U.S. may have substantially different lender protections and covenants as compared
 to loans to U.S. entities and generally involve greater and additional risks. The Fund may have difficulties and incur expense
 enforcing its rights with respect to loans and non-U.S. loans could be subject to bankruptcy laws that are materially different
 than in the U.S. Loans may be structured such that they are not securities under securities laws, and in the event of fraud or misrepresentation
 by a borrower, lenders may not have the protection of the anti-fraud provisions of the federal securities laws. Loans are also subject
 to risks associated with other types of income investments, including credit risk and risks of lower rated investments. In addition, bank
 loans are subject to the risk of default in the payment of interest or principal on a loan, which will result in a reduction of income
 to the Fund, and a potential decrease in the Fund's NAV. The risk of default on loans will increase in the event of
 an economic downturn or a substantial increase in interest rates. Because some loans rank lower in priority of payment to other loans
 and other obligations, such loans present a greater degree of investment risk and may exhibit greater price volatility.

• **Liquidity.** The Fund may make investments that are less liquid, illiquid or restricted or that may become illiquid or less liquid in response to overall
 economic conditions or adverse investor perceptions, and which may entail greater risk than investments in other types of securities.
 These investments may be more difficult to value or sell, particularly in times of market turmoil, and there may be little trading in
 the secondary market available for particular securities. Liquidity risk may be magnified in a market where credit spread and interest
 rate volatility is rising and where investor redemptions from fixed-income mutual funds may be higher than normal. If the Fund is forced
 to sell an illiquid or restricted security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss
 or for less than its fair value and may be unable to sell the security at all.

• **Portfolio Turnover.** Consistent with its investment
 policies, the Fund will purchase and sell securities without regard to the effect on portfolio turnover. Higher portfolio turnover will
 cause the Fund to incur additional transaction costs.

• **Derivatives.** Derivatives and other similar instruments that create synthetic exposure often are subject to risks similar to those of the underlying
 asset or instrument, including market risk, and may be subject to additional risks, including imperfect correlation between the value
 of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred
 due to changes in the market value of the securities, instruments, indices or interest rates to which

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

the derivative instrument relates, risks that the transactions may not be liquid, risks arising from margin and payment requirements, risks arising from mispricing or valuation complexity and operational and legal risks. Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss.<br>

• **Active Management Risk.** In pursuing the Fund's
 investment objective, the Adviser has considerable leeway in deciding which investments to buy, hold or sell on a day-to-day basis, and
 which trading strategies to use. For example, the Adviser, in its discretion, may determine to use some permitted trading strategies while
 not using others. The success or failure of such decisions will affect the Fund's performance.

• **Corporate Debt Obligations.** Corporate debt obligations
 are fixed-income securities issued by corporations. The investment return of corporate debt obligations reflects interest earnings and
 changes in the market value of the security. The market value of a corporate debt obligation may be expected to rise and fall inversely
 with interest rates generally. There also exists the risk that the issuers of the securities may not be able to meet their obligations
 on interest or principal payments at the time called for by an instrument. Debtholders, as creditors, have a prior legal claim over common
 and preferred stockholders of the corporation as to both income and assets for the principal and interest due to the bondholder.

Please see "Additional Information About Fund Investment Strategies and Related Risks" in the Fund's prospectus for a more detailed description of risks of investing in the Fund. Shares of the Fund are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.

**Past Performance**

The bar chart and table below provide some indication of the risks of investing in the Fund by showing changes in the Fund's Class A shares' performance from year-to-year and by showing how the Fund's average annual total returns for the past one, five and 10 year periods and since inception compare with those of a broad measure of market performance and one or more additional indexes. The additional index(es) in the table provides a means to compare the Fund's average annual total returns to a benchmark that the Adviser believes is representative of the Fund's investment universe. The performance of the other classes, which is shown in the table below, will differ because the classes have different ongoing fees. The performance information in the bar chart does not reflect the deduction of sales charges; if these amounts were reflected, returns would be less than shown. The Fund's returns in the table include the maximum applicable sales charge for Class A and Class C and assume you sold your shares at the end of each period (unless otherwise noted). The Fund changed its name from Morgan Stanley Global Fixed Income Opportunities Fund to Morgan Stanley Income Opportunities Fund effective May 30, 2025. Additionally, effective May 30, 2025, the Fund changed its primary benchmark to the Bloomberg U.S. Aggregate Index because the Adviser believes it is a more appropriate benchmark for the Fund. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Updated performance information is available online at www.morganstanley.com/im or by calling toll-free 1-800-869-6397.

Effective May 30, 2025, the Fund's principal investment strategies changed. The performance information in the bar chart and table prior to that date reflects the Fund's prior principal investment strategies.

**Annual Total Returns—Calendar Years**

![image](pr16994img003.jpg)

---

| | | |
|:---|:---|:---|
| **High Quarter**  | 06/30/20 | 8.25% |
| **Low Quarter**  | 03/31/20  | -7.86% |

---

**Average Annual Total Returns**

(for the calendar periods ended December 31, 2024)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Past 1<br>Year** | **Past 5<br>Years** | **Past 10<br>Years** | **Since Inception** |
| **Class A<sup>1</sup>**  |  |  |  |  |
| Return Before Taxes | 2.97% | 1.56% | 2.79% | 3.67% |

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Past 1<br>Year** | **Past 5<br>Years** | **Past 10<br>Years** | **Since Inception** |
| Return After Taxes on Distributions<sup>2</sup>  | 0.80% | -0.19% | 1.13% | 1.46% |
| Return After Taxes on Distributions and Sale of Fund Shares | 1.72% | 0.42% | 1.40% | 1.77% |
| **Class L<sup>1</sup>**  |  |  |  |  |
| Return Before Taxes | 6.01% | 1.86% | 2.82% | 3.31% |
| **Class I<sup>1</sup>**  |  |  |  |  |
| Return Before Taxes | 6.76% | 2.50% | 3.43% | 4.08% |
| **Class C<sup>1</sup>**  |  |  |  |  |
| Return Before Taxes | 4.60% | 1.46% | 0.00% | 2.42%<sup>3</sup> |
| **Class R6<sup>1</sup>**  |  |  |  |  |
| Return Before Taxes | 6.87% | 2.59% | 3.50% | 3.94% |
| Bloomberg U.S. Aggregate Index (reflects no deduction for fees, expenses and taxes)<sup>4</sup>  | 1.25% | -0.33% | 1.35% | 4.03%<sup>5</sup> |
| Bloomberg Global Aggregate (Hedged USD) Index (reflects no deduction for fees, expenses or taxes)<sup>6</sup>  | 3.40% | 0.48% | 2.01% | 4.27%<sup>5</sup> |
| Income Opportunities Blend Index (reflects no deduction for fees, expenses and taxes)<sup>7</sup>  | 3.40% | 0.48% | 1.40% | 3.74%<sup>5</sup> |

---

1 Class A, L and I shares commenced operations on July 28, 1997. Class R6 shares commenced operations on September 13, 2013 and Class C shares commenced operations on April 30, 2015.

2 These returns do not reflect any tax consequences from a sale of your shares at the end of each period, but they do reflect any applicable sales charges on such a sale.

3 Class C shares will generally convert to Class A shares approximately eight years after the end of the calendar month in which the shares were purchased. Performance for periods greater than eight years reflects this conversion.

---

| | |
|:---|:---|
| 4 | The Bloomberg U.S. Aggregate Index tracks the performance of U.S. government agency and Treasury securities, investment-grade corporate debt securities, agency mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. It is not possible to invest directly in an index. Effective May 30, 2025, the Fund changed its primary benchmark from the Bloomberg Global Aggregate (Hedged USD) Index to the Bloomberg U.S. Aggregate Index because the Adviser believes the Bloomberg U.S. Aggregate Index is a more appropriate benchmark for the Fund. |

---

5 Since Inception reflects the inception date of Class A shares.

6 The Bloomberg Global Aggregate (Hedged USD) Index provides a broad-based measure of the global investment grade fixed-rate debt markets. Currency exposure is hedged to the U.S. dollar. It is not possible to invest directly in an index.

---

| | |
|:---|:---|
| 7 | The Income Opportunities Blend Index is a performance linked benchmark of the old benchmark represented by Bloomberg Global Aggregate Index (unhedged USD) (a benchmark that provides a broad-based measure of the global investment grade fixed rate debt markets with returns in unhedged USD) for the periods from the Fund's inception to December 31, 2016 to the prior benchmark represented by Bloomberg Global Aggregate (Hedged USD) Index for periods thereafter. It is not possible to invest directly in an index. |

---

The after-tax returns shown in the table above are calculated using the historical highest individual federal marginal income tax rates during the period shown and do not reflect the impact of state and local taxes. After-tax returns for the Fund's other classes will vary from the Class A shares' returns. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts ("IRAs"). After-tax returns may be higher than before-tax returns due to foreign tax credits and/or an assumed benefit from capital losses that would have been realized had Fund shares been sold at the end of the relevant periods, as applicable.

**Fund Management**

**Adviser.** Morgan Stanley Investment Management Inc.

**Portfolio Managers.** Information about the individuals jointly and primarily responsible for the day-to-day management of the Fund's portfolio is shown below:

---

| | | |
|:---|:---|:---|
| **Name** | **Title with Adviser** | **Date Began<br>Managing Fund** |
| Michael Kushma | Managing Director | April 2014 |
| Justin H. Bourgette, CFA | Managing Director | May 2025 |
| Andrew Szczurowski, CFA | Managing Director | May 2025 |
| Brian Shaw, CFA | Executive Director | May 2025 |

---

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

**Purchase and Sale of Fund Shares**

*The Fund has suspended offering Class L shares of the Fund for sale to all investors. The Class L shareholders of the Fund do not have the option of purchasing additional Class L shares. However, the existing Class L shareholders may invest in additional Class L shares through reinvestment of dividends and distributions.*

The minimum initial investment generally is $1 million for Class I shares and $1,000 for each of Class A and Class C shares of the Fund. To purchase Class R6 shares, an investor must meet a minimum initial investment of $5 million or be a defined contribution, defined benefit or other employer sponsored employee benefit plan, in each case provided that the plan trades through an intermediary that combines its clients' assets in a single omnibus account, whether or not such plan is qualified under the Internal Revenue Code of 1986, as amended (the "Code"), and in each case subject to the discretion of the Adviser. The minimum investment requirements may be waived for certain investments. For more information, please refer to the section of the Prospectus entitled "Shareholder Information—How to Buy Shares—Minimum Investment Amounts."

You can purchase or sell Fund shares on any day the New York Stock Exchange ("NYSE") is open for business directly from the Fund by mail (c/o SS&C Global Investor and Distribution Solutions, Inc., P.O. Box 219804, Kansas City, MO 64121- 9804), by telephone (1-800-869-6397) or by contacting your Morgan Stanley Financial Advisor or an authorized third-party, such as a broker-dealer or other financial intermediary that has entered into a selling agreement with the Fund's "Distributor," Morgan Stanley Distribution, Inc. (each, a "Financial Intermediary"). In addition, you can sell Fund shares at any time by enrolling in a systematic withdrawal plan. Your shares will be sold at the next price calculated after we receive your order to redeem. If you sell Class A or Class C shares, your net sale proceeds are reduced by the amount of any applicable CDSC. For more information, please refer to the sections of the Prospectus entitled "Shareholder Information—How To Buy Shares" and "—How To Sell Shares."

**Tax Information**

The Fund intends to make distributions that may be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an IRA.

**Payments to Broker-Dealers and Other Financial Intermediaries**

If you purchase Fund shares through a Financial Intermediary (such as a bank), the Adviser and/or the Distributor may pay the Financial Intermediary for the sale of Fund shares and related services. These payments, which may be significant in amount, may create a conflict of interest by influencing the Financial Intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your Financial Intermediary's web site for more information.

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Morgan Stanley Prospectus \| **Details of the Fund**

Income Opportunities Fund

**Investment Objectives**

Morgan Stanley Income Opportunities Fund seeks a high level of current income as its primary investment objective. As a secondary investment objective, the Fund seeks to maximize total return but only to the extent consistent with its primary objective.

**Principal Investment Strategies**

The Fund's "Adviser," Morgan Stanley Investment Management Inc., will allocate the Fund's investments among the following asset classes or market segments: (1) corporate securities, (2) agency residential and commercial mortgage-backed securities, (3) non-agency residential and commercial mortgage-backed securities, (4) asset-backed securities, (5) emerging market securities, (6) convertible securities, (7) U.S. government securities and foreign sovereign debt, and (8) derivatives, including interest rate-related derivatives and currency derivatives. Securities may be rated either investment grade or below investment grade and denominated in any currency, hedged or un-hedged. The amount of the Fund's assets committed to any one asset class or market segment will fluctuate. Under normal circumstances, the Fund may invest up to 65% of its net assets in any one asset class or market segment. The Adviser has the flexibility to select any combination of at least two asset classes of the aforementioned groups depending upon market conditions and the current economic environment and, as a result, at any given time the Fund's assets may be invested in certain groups and not others.

The Fund's investment process incorporates information about environmental, social and governance issues (also referred to as ESG) via an integrated approach within the investment team's fundamental investment analysis framework. The Adviser may engage with management of certain issuers regarding corporate governance practices as well as what the Adviser deems to be materially important environmental and/or social issues facing a company.

The corporate securities in which the Fund will invest may include fixed-income securities issued by corporations located in or outside of the United States, certificates of deposit and bankers' acceptances issued or guaranteed by, or time deposits maintained at, banks, commercial paper and convertible securities. The types of mortgage-backed securities in which the Fund may invest include mortgage pass-through securities, CMOs, SMBS and CMBS. Mortgage pass-through securities provide for monthly payments that are a "pass-through" of the monthly interest and principal payments made by the individual borrowers on the pooled mortgage loans. CMOs are debt obligations collateralized by Mortgage Assets. CMOs are issued in multiple classes and each class has a fixed or floating rate and a stated maturity (when a debt security provides its final payment) or final distribution date. Certain classes will have more predictable cash flows than others. The Fund may invest in any class of CMO. SMBS are derivative multi-class mortgage-backed securities. A common type of SMBS will have one class receiving some of the interest and most of the principal from the Mortgage Assets, while the other class receives most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). CMBS are generally multi-class or pass-through securities backed by a mortgage loan or a pool of mortgage loans secured by commercial property, such as industrial and warehouse properties, office buildings, retail space and shopping malls, multifamily properties and cooperative apartments. In addition, the Fund may invest in TBAs.

Asset-backed securities represent an interest in a pool of assets such as, but not limited to, automobile loans, credit card receivables, student loans or home equity (prime and subprime) loans that have been securitized in pass-through structures similar to mortgage-backed securities.

The Fund may invest in fixed-income securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities or in fixed-income securities issued or guaranteed by foreign governments or supranational organizations or any of their instrumentalities, including debt obligations of governmental issuers located in emerging market or developing countries and sovereign debt. The Fund may also invest generally in foreign securities that are denominated in U.S. dollars or in currencies other than U.S. dollars.

In pursuit of its investment objectives, the Fund may regularly enter into currency derivatives, including, but not limited to, foreign currency forward exchange contracts, and currency and currency index futures and options contracts for hedging and non-hedging purposes. The use of these currency derivatives may allow the Fund to obtain net long or net negative (short) exposure to selected currencies. At times, the Fund may enter into "cross-currency" transactions involving currencies other than those in which securities held or proposed to be purchased are denominated.

The Fund will maintain an average credit rating of at least investment grade (BBB- by S&P or Fitch, or Baa3 by Moody's). Although the Fund's average credit rating will be investment grade or higher, the Fund may invest in securities that are rated below investment grade (rated below BBB by either S&P or Fitch, or below Baa by Moody's) or in unrated securities considered to be of comparable quality by the Adviser (often referred to as "junk" instruments). If securities are rated differently by two or more rating agencies, the highest rating will be used. Fixed-income securities rated Baa3 or lower by Moody's, BBB- or lower by S&P, BBB- or lower by Fitch, or the equivalent by another NRSRO are considered speculative investments and are commonly known as "junk bonds." The securities in this group may include both convertible and non-convertible debt securities and preferred stock. They also may include "Rule 144A" securities, which are exempt from registration and may only be resold to qualified institutional buyers. The Fund does not have any minimum quality rating standard for this group of investments. Thus, the Fund may invest in fixed-income securities that may already be in default on payment of interest or principal.

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Morgan Stanley Prospectus \| **Details of the Fund**

Income Opportunities Fund (Con't)

Fixed-income securities are debt securities and can take the form of bonds, notes or commercial paper. The issuer of the debt security borrows money from the investor who buys the security. Most debt securities pay either fixed or adjustable rates of interest at regular intervals until they mature, at which point investors get their principal back.

The Fund may also invest generally in foreign securities. Securities of such foreign issuers may be denominated in U.S. dollars or in currencies other than U.S. dollars.

In addition to its use of currency derivatives, the Fund may, but it is not required to, use derivatives and similar instruments for a variety of purposes, including hedging, risk management, portfolio management or to seek to earn income. A derivative is a financial instrument the value of which is based, in part, on the value of an underlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, also affect the value of derivative instruments. The Fund's use of derivatives may involve the purchase and sale of derivative instruments such as futures, options, swaps and other similar instruments and techniques.

The Fund may invest in loan-related investments, such as public bank loans made by banks or other financial institutions and loan participations and assignments, which may be rated investment grade or below investment grade. To the extent these investments are second lien loans, which are lower in priority to senior loans, but have seniority in a company's capital structure to other liabilities, the company would be required to pay down these second lien loans prior to other lower-ranked claims on their assets.

The Fund may purchase certain non-publicly traded "restricted" securities, which may include Rule 144A securities. The Fund may invest in illiquid securities, including restricted securities that are illiquid. The Fund may invest an unlimited amount in restricted securities that are classified as liquid and otherwise are consistent with the Fund's investment policies.

The Fund may also invest in common stocks and other equity securities, inverse floaters and municipal securities.

In pursuing the Fund's investment objectives, the Adviser has considerable leeway in deciding which investments to buy, hold or sell on a day-to-day basis and which trading strategies to use. For example, the Adviser in its discretion may determine to use some permitted trading strategies while not using others.

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The percentage limitations relating to the composition of the Fund's portfolio apply at the time the Fund acquires an investment. Subsequent percentage changes that result from market fluctuations generally will not require the Fund to sell any portfolio security.

However, the Fund may be required to reduce its borrowings, if any, in response to fluctuations in the value of such holdings. The Fund may change its principal investment strategies at any time without shareholder approval; however, you would be notified of any changes as required by applicable law.

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund

Additional Information about Fund Investment Strategies and Related Risks

&nbsp;&nbsp;&nbsp; *This section discusses additional information relating to the Fund's investment strategies, other types of investments that the Fund may make and related risk factors. Fund investment practices and limitations are also described in more detail in the Statement of Additional Information ("SAI"), which is incorporated by reference and legally is a part of this Prospectus. For details on how to obtain a copy of the SAI and other reports and information, see the back cover of this Prospectus.*<br>

There is no assurance that the Fund will achieve its investment objectives. The Fund's share price and yield will fluctuate with changes in the market value and/or yield of the Fund's portfolio securities. Neither the value nor the yield of the U.S. government securities in which the Fund invests (or the value or yield of the Fund's shares) is guaranteed by the U.S. Government. When you sell Fund shares, they may be worth less than what you paid for them and, accordingly, you can lose money investing in this Fund.

Economies and financial markets worldwide have experienced periods of increased volatility, uncertainty, distress, government spending, inflation, tariffs and disruption to consumer demand, economic output and supply chains. To the extent these conditions exist or continue, the risks associated with an investment in the Fund, including those described below, could be heightened and the Fund's investments (and thus a shareholder's investment in the Fund) may be particularly susceptible to sudden and substantial losses, reduced yield or income or other adverse developments. The occurrence, duration and extent of these or other types of adverse economic and market conditions and uncertainty over the long term cannot be reasonably projected or estimated at this time.

**Fixed-Income Securities**

Fixed-income securities are securities that pay a fixed or a variable rate of interest until a stated maturity date. Fixed-income securities include U.S. government securities, securities issued by federal or federally sponsored agencies and instrumentalities, corporate bonds and notes, asset-backed securities, mortgage-backed securities, securities rated below investment grade (commonly referred to as "junk bonds" or "high yield/high risk securities"), municipal bonds, loan participations and assignments, zero coupon bonds, convertible securities, Eurobonds, Brady Bonds, Yankee Bonds, repurchase agreements, commercial paper and cash equivalents.

Fixed-income securities are subject to the risk of the issuer's inability to meet principal and interest payments on its obligations (i.e., credit risk) and are subject to price volatility resulting from, among other things, interest rate sensitivity (i.e., interest rate risk), market perception of the creditworthiness of the issuer and general market liquidity (i.e., market risk). For example, a type of fixed-income securities in which the Fund may invest are corporate debt obligations. In addition to interest rate, credit and other risks, corporate debt obligations are also subject to factors directly related to the issuer, such as the credit rating of the corporation, the corporation's performance and perceptions of the corporation in the marketplace, and by factors not directly related to the issuer, such as general market liquidity, economic conditions and inflation. The Fund may face a heightened level of interest rate risk in times of monetary policy change and/or uncertainty, such as when the Federal Reserve Board adjusts a quantitative easing program and/or changes rates. A changing interest rate environment increases certain risks, including the potential for periods of volatility, increased redemptions, shortened durations (i.e., prepayment risk) and extended durations (i.e., extension risk).

Fixed income and other debt instruments, including mortgage- and other asset-backed securities, are subject to prepayment risk, which is the risk that the principal of such obligation is paid earlier than expected, such as in the case of refinancing. This risk is increased during periods of declining interest rates and prepayments may reduce the Fund's yield or income as a result of reinvesting the income or other proceeds in lower yielding securities or instruments. These investments are also subject to extension risk, which is the risk that the principal of such obligation is paid slower or later than expected. This may negatively affect Fund returns, as the value of the investment decreases when principal payments are made later than expected. This risk is elevated during periods of increasing interest rates. In addition, because principal payments are made later than expected, the investment's duration may extend (and result in increased interest rate risk) and the Fund may be prevented from investing proceeds it would otherwise have received at the higher prevailing interest rates. Prepayments and extensions may result in a security or debt instrument offering less potential for gains during periods of declining interest rates or rising interest rates, respectively.

Securities with longer durations are likely to be more sensitive to changes in interest rates, generally making them more volatile than securities with shorter durations. Lower rated fixed-income securities have greater volatility because there is less certainty that principal and interest payments will be made as scheduled. The Fund may be subject to liquidity risk, which may result from the lack of an active market and the reduced number and capacity of traditional market participants to make a market in fixed-income securities. Fixed-income securities may be called (i.e., redeemed by the issuer) prior to final maturity. If a callable security is called, the Fund may have to reinvest the proceeds at a lower rate of interest.

**Credit and Interest Rate Risk**

Fixed-income securities, such as bonds, generally are subject to two primary types of risk: credit risk and interest rate risk. Credit risk refers to the possibility that the issuer or guarantor of a security, or counterparty to a transaction, will be unable or unwilling or perceived to be unable or unwilling to make interest payments and/or repay the principal on its debt or otherwise honor its obligations, including the risk of default. The risk of defaults across issuers, guarantors and/or counterparties increases in adverse

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

market and economic conditions, and the degree of credit risk depends on the financial condition of the issuer, guarantor or counterparty and terms of the obligation. Credit ratings may not be an accurate assessment of financial condition, volatility, liquidity or credit risk, as the ratings do not evaluate market risks or necessarily reflect the issuer's, guarantor's or counterparty's current financial condition or the volatility or liquidity of the security. Although credit quality may not accurately reflect the true credit risk of an instrument, a change in the credit rating of an instrument or an issuer, guarantor or counterparty, or the market's perception of the creditworthiness of an instrument or issuer, guarantor or counterparty, can have a rapid, adverse effect on the instrument's value and liquidity and make it more difficult for the Fund to sell at an advantageous price or time. In addition, under certain conditions, there may be an increasing amount of issuers that are unprofitable, have little cash on hand and/or are unable to pay the interest owed on their debt obligations and the number of such issuers may increase if demand for their goods and services falls, borrowing costs rise due to governmental action or inaction or other reasons. The Fund may also be subject to credit spread risk, which is the risk that economic and market conditions, or any actual or perceived credit deterioration, may lead to an increase in credit spreads (i.e., the difference in yield between two securities of similar maturity but different credit quality) and a decline in price of an issuer's securities.

Interest rate risk refers to fluctuations (such as a decline) in the value of a fixed-income security resulting from changes in the general level of interest rates. A wide variety of market and economic factors can cause interest rates to rise or fall, including central bank monetary policy, rising inflation, disinflation or deflation, and changes in general economic conditions. When the general level of interest rates goes up, the prices of most fixed-income securities go down. When the general level of interest rates goes down, the prices of most fixed-income securities go up but the yield or income from new issuances of fixed-income securities generally decreases. Duration measures the time-weighted expected cash flows of a fixed-income security. Securities with longer durations will generally be more sensitive to changes in interest rates than securities with shorter durations. Thus, the Fund's susceptibility to interest rate risk will increase to the extent it has a longer average portfolio duration. The proceeds from prepaid or maturing instruments may have to be reinvested at a lower interest rate or on other less advantageous terms during a declining interest rate environment. In a rising interest rate environment, the duration of fixed-income securities may be extended, thus potentially reducing income and increasing interest rate risk. The Fund may face a heightened level of interest rate risk in times of monetary policy change and/or uncertainty, such as when the Federal Reserve Board adjusts a quantitative easing program and/or changes rates, which may occur at any time based on a range of factors and may be sudden, frequent and significant. For example, during periods when interest rates are low, the Fund's yield (and total return) also may be low or otherwise adversely affected or the Fund may be unable to maintain positive returns, minimize the volatility of the Fund's NAV or pay Fund expenses out of current income. Monetary policies, and market interest rates, are subject to change at any time and potentially frequently based on a variety of market and economic conditions. It is difficult to accurately predict the pace at which the Federal Reserve Board will change interest rates, or the timing, frequency or magnitude of such changes. The impact on fixed income and other debt instruments and market conditions from interest rate changes, regardless of the cause, could be significant and could adversely affect the Fund and its investments.

Governmental authorities and regulators may enact significant fiscal and monetary policy changes, including providing direct capital infusions into companies, creating new monetary programs and changing interest rates considerably. These actions present heightened risks to debt instruments, and such risks could be even further heightened if these actions are unexpectedly or suddenly reversed or are ineffective in achieving their desired outcomes.

**Market and Geopolitical Risk**

The value of your investment in the Fund is based on the values of the Fund's investments, which change due to economic and other events that affect the U.S. and global markets generally, as well as those that affect or are perceived or expected to affect particular regions, countries, industries, companies, issuers, sectors, asset classes or governments. Price movements, sometimes called volatility, may be greater or less depending on the types of securities the Fund owns and the markets in which the securities trade. Volatility and disruption in financial markets and economies may be sudden and unexpected, expose the Fund to greater risk, including risks associated with reduced market liquidity and fair valuation, and adversely affect the Fund's operations. For example, the Adviser potentially will be prevented from executing investment decisions at an advantageous time or price as a result of any domestic or global market disruptions and reduced market liquidity may impact the Fund's ability to sell securities to meet redemptions (i.e., increase the risk that the Fund will not be able to pay redemption proceeds within the allowable time period). In addition, no active trading market may exist for certain investments held by the Fund, which may impair the ability of the Fund to sell or to realize the current valuation of such investments in the event of the need to liquidate such assets.

The increasing interconnectivity between global economies and markets increases the likelihood that events or conditions in one region or market, or with respect to one company, may adversely impact other companies and other issuers, including those in a different country, region, sector, industry or market. For example, adverse developments in the banking or financial services sector could impact companies operating in various sectors or industries and adversely impact the Fund's investments. Securities in the Fund's portfolio may underperform or otherwise be adversely affected due to inflation (or expectations for inflation), deflation (or expectations for deflation), interest rates (or changes in interest rates), global demand for particular products or resources, market or financial system instability or uncertainty, embargoes, the threat or actual imposition of tariffs, sanctions and other trade barriers, natural disasters and extreme weather events, health emergencies (such as epidemics and pandemics), terrorism, regulatory events and

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

governmental or quasi-governmental actions. The occurrence of global events, such as terrorist attacks, natural disasters, health emergencies, social and political (including geopolitical) discord and tensions or debt crises and downgrades, among others, may result in increased market volatility and may have long term effects on both the U.S. and global financial markets. Inflation rates may change frequently and significantly because of various factors, including unexpected shifts in the domestic or global economy and changes in monetary or economic policies (or expectations that these policies may change). Changes in inflation rates or expected inflation rates may adversely affect market and economic conditions, an issuer's financial condition, the Fund's investments and an investment in the Fund. The market price of debt securities generally falls as inflation increases because the purchasing power of the future income and repaid principal is expected to be worth less when received by the Fund. The risk of inflation is greater for debt instruments with longer maturities and especially those that pay a fixed rather than variable interest rate. Other financial, economic and other global market and social developments or disruptions may result in similar adverse circumstances, and it is difficult to predict when similar events affecting the U.S. or global financial markets or economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods). In general, the securities or other instruments that the Adviser believes represent an attractive investment opportunity or in which the Fund seeks to invest may be unavailable entirely or in the specific quantities sought by the Fund. As a result, the Fund may need to obtain the desired exposure through a less advantageous investment, forgo the investment at the time or seek to replicate the desired exposure through a derivative transaction or investment in another investment vehicle. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund's portfolio. There is a risk that you may lose money by investing in the Fund.

Social, political, economic and other conditions and events, such as war, natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts, social unrest, recessions, inflation, interest rate changes, the imposition of tariffs, trade restrictions or similar actions by the U.S. or foreign governments (or retaliatory measures taken in response to such actions) and supply chain disruptions could reduce consumer demand or economic output, result in market closures, travel restrictions or quarantines, and generally have a significant impact on economies, financial markets, issuers and the Adviser's investment advisory activities and services of other service providers, which in turn could adversely affect the Fund's investments and other operations.

Government and other public debt, including municipal obligations, can be adversely affected by changes in local and global economic conditions, including those that result in increased debt levels. Although high levels of government and other public debt do not necessarily indicate or cause economic problems, high levels of debt may create certain systemic risks if sound debt management practices are not implemented. A high debt level may increase market pressures to meet an issuer's funding needs, which may increase borrowing costs and cause a government or public or municipal entity to issue additional debt, thereby increasing the risk of refinancing. A high debt level also raises concerns that the issuer may be unable or unwilling to repay the principal or interest on its debt, which may adversely impact instruments held by the Fund that rely on such payments.

Governmental and quasi-governmental responses to certain economic or other conditions may lead to increasing government and other public debt, particularly when such responses are unprecedented, which heighten these risks. Unsustainable debt levels can lead to declines in the value of currency, and can prevent a government from implementing effective counter-cyclical fiscal policy during economic downturns, can generate or contribute to an economic downturn or cause other adverse economic or market developments, such as increases in inflation or volatility. Increasing government and other public debt may adversely affect issuers, obligors, guarantors or instruments across a variety of asset classes.

Global events may negatively impact broad segments of businesses and populations, cause a significant negative impact on the price and performance of the Fund's investments, reduce market liquidity, adversely affect and increase the volatility of markets and the Fund's share price, exacerbate pre-existing political, social, financial and economic risks to the Fund and cause overall declines in the U.S. and global markets. The Fund's operations may be interrupted as a result, which may contribute to the negative impact on investment performance. In addition, governments, their regulatory agencies, or self-regulatory organizations may take actions (including monetary and/or fiscal actions intended to stimulate or stabilize the global economy) that affect the instruments in which the Fund invests, or the issuers of such instruments, in ways that could have a significant negative impact on the Fund's investment performance. Monetary and/or fiscal actions taken by U.S. or foreign governments may not be effective and could lead to increased market volatility. In addition, government actions (such as changes to interest rates) could have unintended economic and market consequences that adversely affect the Fund's investments. The frequency and magnitude of resulting changes in the value of the Fund's investments cannot be predicted.

**Convertible Securities**

A convertible security is a bond, debenture, note, preferred stock, right, warrant or other security that may be converted into or exchanged for a prescribed amount of common stock or other security of the same or a different issuer or into cash within a particular period of time at a specified price or formula. A convertible security generally entitles the holder to receive interest paid or accrued on debt securities or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities generally have characteristics similar to both debt and equity securities. The prices of convertible securities are affected by changes similar to those of equity and fixed-income securities. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities. Convertible securities ordinarily provide a stream of income with generally higher yields than those of common

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

stock of the same or similar issuers. Convertible securities generally rank senior to common stock in a corporation's capital structure but are usually subordinated to other comparable nonconvertible fixed-income securities in such capital structure. Convertible securities generally do not participate directly in any dividend increases or decreases of the underlying securities although the market prices of convertible securities may be affected by any dividend changes or other changes in the underlying securities.

**Foreign Securities**

Investing in foreign securities (including depositary receipts) involves certain special and heightened risks, which are not typically associated with investments in the securities of U.S. issuers, that can increase the chances that the Fund will lose money. Foreign issuers generally are subject to different corporate governance, accounting, auditing and financial reporting standards than U.S. issuers. There may be less information available to the public about foreign issuers. Securities of foreign issuers can be less liquid, experience greater price movements, and may be subject to foreign withholding taxes and/or other taxes, which decreases the yield and/or return of these securities. The Fund may experience losses if the Fund's claim to recover foreign withholding taxes is not successful. In addition, the prices of foreign securities may be susceptible to influence by large traders due to the limited size of many foreign securities markets. Moreover, investments in certain foreign markets that have historically been considered stable may become more volatile and subject to increased risk due to developments and changing conditions in such markets. Also, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions. In some foreign countries, there is also the risk of government expropriation, excessive or confiscatory taxation, political or social instability, the imposition of currency controls or diplomatic developments that could affect the Fund's investments. There also can be difficulty obtaining and enforcing judgments against issuers in foreign countries. Foreign stock exchanges, broker-dealers and listed issuers may be subject to less government regulation and oversight. Securities registration, custody, and settlement may be subject to delays and legal and administrative uncertainties. If the Fund cannot settle or is delayed in settling a purchase of securities, it may miss attractive investment opportunities and experience other adverse consequences. In some non-U.S. securities markets, custody arrangements for securities provide significantly less protection than custody arrangements in U.S. securities markets, and prevailing custody and trade settlement practices (e.g., the requirement to pay for securities prior to receipt) expose the Fund to credit and other risks it does not have in the United States. In addition, in certain markets the Fund may not receive timely payment for securities or other instruments it has delivered or receive delivery of securities paid for and may be subject to increased risk that the counterparty will fail to make payments or delivery when due or default completely. The cost of investing in foreign securities, including brokerage commissions and custodial expenses, can be higher than the cost of investing in domestic securities. Foreign market trading hours, clearance and settlement procedures, and holiday schedules may also limit the Fund's ability to buy and sell securities during certain periods.

The economies of certain foreign markets may not compare favorably with the economy of the United States with respect to such issues as growth of gross national product, reinvestment of capital, resources and balance of payments position. Certain foreign markets may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments (including regional and global, military or other conflicts), the imposition of economic sanctions against a particular country or countries, organizations, companies, entities and/or individuals, changes in international trading patterns, tariffs, trade barriers and other protectionist or retaliatory measures. International trade barriers or economic sanctions against foreign countries, organizations, companies, entities and/or individuals may adversely affect the Fund's foreign holdings or exposures. Investments in foreign markets may also be adversely affected by less stringent investor protections and disclosure standards, and governmental interventions or other actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets or the imposition of punitive taxes. Governmental actions can have a significant effect on the economic conditions in foreign countries, which also may adversely affect the value and liquidity of the Fund's investments. Foreign investment in the securities markets of certain foreign countries is restricted or controlled to varying degrees. For example, the governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain sectors or industries. In addition, a foreign government may limit or cause delay in the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. The value of holdings traded outside the United States (and any hedging transactions in foreign currencies) will be affected by changes in currency exchange rates. Moreover, if a deterioration occurs in a country's balance of payments, the country could impose temporary restrictions on foreign capital remittances. The Fund could also be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation, as well as by the application to it of other restrictions on investment. Any of these actions could severely affect security prices, which could result in losses to the Fund and increased transaction costs, impair the Fund's ability to purchase or sell foreign securities (or force the Fund to sell foreign securities) or transfer the Fund's assets back into the United States, or otherwise adversely affect the Fund's operations. Certain foreign investments may become less liquid and decline in value in response to market developments or adverse investor perceptions, or become illiquid after purchase by the Fund, particularly during periods of market, economic, political and social turmoil. Certain foreign investments may become illiquid when, for instance, there are few, if any, interested buyers and sellers or when dealers are unwilling to make a market for certain securities. When the Fund holds illiquid investments, its portfolio may be harder to value.

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Income Opportunities Fund (Con't)

Economic sanctions or other similar measures may be, and have been, imposed against certain countries, organizations, companies, entities and/or individuals. The Fund's investments in foreign securities are subject to trade laws of and potential economic sanctions by the United States and other jurisdictions. These laws and related governmental actions, including counter-sanctions and other retaliatory measures, can, from time to time, prevent or prohibit the Fund from investing in certain foreign securities. In addition, economic sanctions could prohibit the Fund from transacting with particular countries, organizations, companies, entities and/or individuals by banning them from global payment systems that facilitate cross-border payments, restricting their ability to settle securities transactions, and freezing their assets. The imposition of sanctions and other similar measures also could, among other things, cause a decline in the value of securities issued by the sanctioned country or companies located in, or economically linked to, the sanctioned country, downgrades in the credit ratings of the sanctioned country or companies located in, or economically linked to, the sanctioned country, devaluation of the sanctioned country's currency, and increased market volatility and disruption in the sanctioned country and throughout the world. In addition, economic sanctions or other similar measures could, among other things, effectively restrict or eliminate the Fund's ability to purchase or sell securities, negatively impact the value or liquidity of the Fund's investments, significantly delay or prevent the settlement of the Fund's securities transactions, force the Fund to sell or otherwise dispose of investments at inopportune times or prices, increase the Fund's transaction costs, make the Fund's investments more difficult to value or impair the Fund's ability to meet its investment objective or invest in accordance with its investment strategies. These conditions may be in place for a substantial period of time and enacted with limited advance notice to the Fund.

Even if the Fund does not have significant investments in securities affected by sanctions, sanctions or the threat of sanctions may cause volatility in regional and global markets and may negatively impact the performance of various sectors and industries, as well as companies in other countries, including through global supply chain disruptions, increased inflationary pressures, and reduced economic activity, which could have a negative effect on the Fund's performance. In addition, trade disputes and changes in tariffs may affect investor and consumer confidence and adversely affect financial markets and the broader economy, perhaps suddenly and to a significant degree. The type and severity of sanctions and other similar measures, including counter sanctions and other retaliatory actions, that may be imposed could vary broadly in scope, and their impact is difficult to predict.

In addition, the Holding Foreign Companies Accountable Act (the "HFCAA") could cause securities of a foreign (non-U.S.) company, including American Depositary Receipts, to be delisted from U.S. stock exchanges if the company does not allow the U.S. government to oversee the auditing of its financial information. Although the requirements of the HFCAA apply to securities of all foreign (non-U.S.) issuers, the SEC has thus far limited its enforcement efforts to securities of Chinese companies. If securities are delisted, the Fund's ability to transact in such securities will be impaired, and the liquidity and market price of the securities would likely decline. The Fund may also need to seek other markets in which to transact in such securities, which could increase the Fund's costs.

**Foreign Currency**

Investments in foreign securities may be denominated in foreign currencies. The value of foreign currencies may fluctuate relative to the value of the U.S. dollar or other applicable foreign currency. Since the Fund may invest in non-U.S. dollar-denominated securities, and therefore may convert the value of such securities into U.S. dollars, changes in currency exchange rates can increase or decrease the U.S. dollar value of the Fund's assets. Currency exchange rates may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates and the overall economic health of the issuer. Devaluation of a currency by a country's government or banking authority also will have a significant impact on the value of any investments denominated in that currency. The Adviser may use derivatives to seek to reduce this risk. The Adviser may in its discretion choose not to hedge against currency risk. In addition, certain market conditions may make it impossible or uneconomical to hedge against currency risk.

**Foreign Currency Forward Exchange Contracts**

In connection with its investments in foreign securities, the Fund also may enter into contracts with banks, brokers or dealers to purchase or sell securities or foreign currencies at a future date. A foreign currency forward exchange contract is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the contract. Foreign currency forward exchange contracts may be used to seek to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. In addition, the Fund may use cross currency hedging or proxy hedging with respect to currencies in which the Fund has or expects to have portfolio or currency exposure. Cross currency and proxy hedges involve the sale of one currency against the positive exposure to a different currency and may be used for hedging purposes or to establish an active exposure to the exchange rate between any two currencies.

Investments in foreign currency forward exchange contracts may substantially change the Fund's exposure to currency exchange rates and could result in losses to the Fund if currencies do not perform as the Adviser expect. The Adviser's success in these transactions will depend principally on its ability to predict accurately the future exchange rates between foreign currencies and the U.S. dollar. Foreign currency forward exchange contracts may be used for non-hedging purposes in seeking to meet the Fund's investment objectives, such as when the Adviser anticipate that particular non-U.S. currencies will appreciate or depreciate in value, even though securities denominated in those currencies are not then held in the Fund's investment portfolios. Investing in foreign currency forward exchange contracts for purposes of gaining from projected changes in exchange rates, as opposed to hedging currency risks

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

applicable to the Fund's holdings, further increases the Fund's exposure to foreign securities losses. There is no assurance that the Adviser's use of currency derivatives will benefit the Fund or that they will be, or can be, used at appropriate times.

**Depositary Receipts**

A depositary receipt is generally issued by a bank or financial institution and represents the common stock or other equity securities of a foreign company. Depositary receipts involve many of the same risks as those associated with direct investment in foreign securities. In addition, the underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts, are under no obligation to distribute shareholder communications to the holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities.

**Emerging Market Securities**

The Fund may invest in emerging market or developing countries, which are countries that major international financial institutions generally consider to be less economically mature than developed nations (such as the United States or most nations in Western Europe). Emerging market or developing countries may be more likely to experience political turmoil or rapid changes in economic conditions than more developed countries, and the financial condition of issuers in emerging market or developing countries may be more precarious than in other countries. Certain emerging market countries may be subject to less stringent requirements regarding accounting, auditing, financial reporting and record keeping and therefore, material information related to an investment may not be available or reliable. Such emerging market countries could also subject the Fund to greater risk associated with the custody of its securities than developed markets, which may adversely affect the Fund. In addition, the Fund's investments (including the companies in which the Fund may invest) in emerging market or developing countries may be subject to expropriation, nationalization and confiscation of assets and property. Furthermore, the Fund is limited in its ability to exercise its legal rights or enforce a counterparty's legal obligations in certain jurisdictions outside of the United States, in particular, in emerging markets countries. In addition, due to jurisdictional limitations, U.S. authorities (e.g., SEC and the U.S. Department of Justice) may be limited in their ability to enforce regulatory or legal obligations in emerging market countries. In addition, emerging market securities generally are less liquid and subject to increased potential for market manipulation and wider price and currency fluctuations than securities issued in more developed countries. These characteristics result in greater risk of price volatility in emerging market or developing countries, which may be heightened by currency fluctuations relative to the U.S. dollar.

A portion of the Fund's investments in emerging market securities may include investments in microfinance loans. Microfinance loans are typically very small loans (microcredit) made for providing the means for people who are not served by traditional banking systems to expand their businesses or finance their families' basic needs by providing access to affordable credit. Microfinance loans carry many of the same risks associated with investing in emerging markets countries, but because some of the microfinance loans may be used to fund crop growing and livestock, microfinance loans may also be subject to climate and geography risk. In addition, most micro-clients have low incomes and little or no previous credit history. As a result, there is no assurance that micro-clients will be able to repay the microfinance loans.

**Mortgage-Backed Securities**

Mortgage-backed securities are fixed-income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed-income securities due to the possibility of prepayment of the underlying mortgage loans (i.e., when a borrower pays back the principal of a debt obligation earlier than expected). As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase and its market price will decrease. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because additional mortgage prepayments must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of a portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio.

The Fund may invest in mortgage-backed securities that are issued or guaranteed by the U.S. Government, its agencies or instrumentalities. These securities are either direct obligations of the U.S. Government or the issuing agency or instrumentality has the right to borrow from the U.S. Treasury to meet its obligations although it is not legally required to extend credit to the agency or instrumentality. Certain of these mortgage-backed securities purchased by the Fund, such as those issued by the Government National Mortgage Association and the Federal Housing Administration, are backed by the full faith and credit of the United States. Other of these mortgage-backed securities purchased by the Fund, such as those issued by the Federal National Mortgage Association ("Fannie Mae") and Federal Home Loan Mortgage Corporation ("Freddie Mac"), are not backed by the full faith and credit of the United States and there is a risk that the U.S. Government will not provide financial support to these agencies if it is not obligated to do so by law. The maximum potential liability of the issuers of some of the mortgage-backed securities held by the Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.

To the extent the Fund invests in mortgage-backed securities issued by non-governmental issuers, such as commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers, the Fund may be

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Income Opportunities Fund (Con't)

Non-agency mortgage-backed securities are not traded on an exchange and there may be a limited market for the securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. Without an active trading market, mortgage-related securities held in the Fund's portfolio may be particularly difficult to value because of the complexities involved in assessing the value of the underlying mortgage loans or to sell. Non-agency mortgage-backed securities include securities that reflect an interest in, and are secured by, mortgage loans on commercial real property. Many of the risks of investing in CMBS reflect the risks of investing in the real estate securing the underlying mortgage loans. These risks reflect the effects of local and other economic conditions on real estate markets, the ability of tenants to make loan payments, and the ability of a property to attract and retain tenants.

The risks associated with mortgage-backed securities are elevated in distressed economic, market, health and labor conditions, notably, increased levels of unemployment, delays and delinquencies in payments of mortgage and rent obligations, and uncertainty regarding the effects and extent of government intervention with respect to mortgage payments and other economic matters.

Delinquencies, defaults and losses on residential mortgage loans may increase substantially over certain periods, which may affect the performance of the mortgage-backed securities in which the Fund may invest. Mortgage loans backing non-agency mortgage-backed securities are more sensitive to economic factors that could affect the ability of borrowers to pay their obligations under the mortgage loans backing these securities. In addition, housing prices and appraisal values in many states and localities over certain periods have declined or stopped appreciating. A sustained decline or an extended flattening of those values may result in additional increases in delinquencies and losses on mortgage-backed securities generally (including the mortgaged-backed securities that the Fund may invest in as described above). Adverse changes in market conditions and regulatory climate may reduce the cash flow which the Fund, to the extent it invests in mortgage-backed securities or other asset-backed securities, receives from such securities and increase the incidence and severity of credit events and losses in respect of such securities. In the event that interest rate spreads for mortgage-backed securities and other asset-backed securities widen following the purchase of such assets by the Fund, the market value of such securities is likely to decline and, in the case of a substantial spread widening, could decline by a substantial amount. Furthermore, adverse changes in market conditions may result in reduced liquidity in the market for mortgage-backed securities and other asset-backed securities (including the mortgage-backed securities and other asset-backed securities in which the Fund may invest) and an unwillingness by banks, financial institutions and investors to extend credit to servicers, originators and other participants in the market for mortgage-backed and other asset-backed securities. As a result, the liquidity and/or the market value of any mortgage-backed or asset-backed securities that are owned by the Fund may experience declines after they are purchased by the Fund.

*Collateralized Mortgage Obligations*. CMOs are debt obligations collateralized by Mortgage Assets. Payments of principal and interest on the Mortgage Assets and any reinvestment income are used to make payments on the CMOs. CMOs are issued in multiple classes. Each class has a fixed or floating rate and a stated maturity or final distribution date. The principal and interest on the Mortgage Assets may be allocated among the classes in a number of different ways. Certain classes will, as a result of the allocation, have more predictable cash flows than others. As a general matter, the more predictable the cash flow, the lower the yield relative to other Mortgage Assets. The less predictable the cash flow, the higher the yield and the greater the risk. The Fund may invest in any class of CMO, including classes that vary inversely with interest rates and may be more volatile and sensitive to prepayment rates.

The principal and interest on the Mortgage Assets comprising a CMO may be allocated among the several classes of a CMO in many ways. The general goal in allocating cash flows on Mortgage Assets to the various classes of a CMO is to create certain tranches on which the expected cash flows have a higher degree of predictability than do the underlying Mortgage Assets. As a general matter, the more predictable the cash flow is on a particular CMO tranche, the lower the anticipated yield on that tranche at the time of issue will be relative to the prevailing market yields on the Mortgage Assets. As part of the process of creating more predictable cash flows

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Income Opportunities Fund (Con't)

on certain tranches of a CMO, one or more tranches generally must be created that absorb most of the changes in the cash flows on the underlying Mortgage Assets. The yields on these tranches are generally higher than prevailing market yields on other mortgage related securities with similar average lives. Principal prepayments on the underlying Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates. Because of the uncertainty of the cash flows on these tranches, the market prices and yields of these tranches are more volatile and may increase or decrease in value substantially with changes in interest rates and/or the rates of prepayment relative to other tranches. Due to the possibility that prepayments (on home mortgages and other collateral) will alter the cash flow on CMOs, it is not possible to determine in advance the final maturity date or average life. Faster prepayment will shorten the average life and slower prepayments will lengthen it. In addition, if the collateral securing CMOs or any third party guarantees are insufficient to make payments, the Fund could sustain a loss.

*Stripped Mortgage-Backed Securities*. SMBS are derivative multi-class mortgage-backed securities. SMBS may be issued by agencies or instrumentalities of the U.S. Government, or by private originators. A common type of SMBS will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class receives most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest only or "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). Investments in each class of SMBS are extremely sensitive to changes in interest rates. IOs tend to decrease in value substantially if interest rates decline and prepayment rates become more rapid. POs tend to decrease in value substantially if interest rates increase and the rate of prepayment decreases. If the Fund invests in SMBS and interest rates move in a manner not anticipated by management, it is possible that the Fund could lose all or substantially all of its investment.

*Commercial Mortgage-Backed Securities*. CMBS are generally multi-class or pass-through securities backed by a mortgage loan or a pool of mortgage loans secured by commercial property, such as industrial and warehouse properties, office buildings, retail space and shopping malls, multifamily properties and cooperative apartments. The commercial mortgage loans that underlie CMBS are generally not amortizing or not fully amortizing. That is, at their maturity date, repayment of their remaining principal balance or "balloon" is due and is repaid through the attainment of an additional loan or sale of the property. An extension of a final payment on commercial mortgages will increase the average life of the CMBS, generally resulting in a lower yield for discount bonds and a higher yield for premium bonds.

CMBS are subject to credit risk and prepayment risk, among other risks.

The values of, and income generated by, CMBS may be adversely affected by, among other things, changing interest rates, tightening lending standards, and other developments impacting the commercial real estate market, such as population shifts and other demographic changes, increasing vacancies (potentially for extended periods) and reduced demand for commercial and office space as well as maintenance or tenant improvement costs and costs to convert properties for other uses. These developments could result from, among other things, changing tastes and preferences (such as remote work arrangements) as well as cultural, technological, global or local economic and market developments. In addition, changing interest rate environments and associated changes in lending standards and higher refinancing rates may adversely affect the commercial real estate and CMBS markets. The occurrence of any of the foregoing or similar developments would likely increase default risk for the properties and loans underlying these investments as well as impact the value of, and income generated by, these investments. These developments could also result in reduced liquidity for CMBS.

**When-Issued Securities, Delayed Delivery Securities, TBAs and Forward Commitments**

The Fund may purchase or sell securities that it is entitled to receive on a when-issued basis. The Fund may also purchase or sell securities on a delayed delivery basis or through a forward commitment (including on a TBA (to be announced) basis). These transactions involve the purchase or sale of securities by the Fund at an established price with payment and delivery taking place in the future. The Fund enters into these transactions to obtain what is considered an advantageous price to the Fund at the time of entering into the transaction. Such transactions entered into by the Fund will be counted towards the Fund's exposure in the types of securities listed herein to the extent they have economic characteristics similar to such securities. For example, the Fund may invest in TBAs, which settle on a delayed delivery basis. In a TBA transaction, the seller agrees to deliver the MBS for an agreed upon price on an agreed upon future date, but makes no guarantee as to which or how many securities are to be delivered. Accordingly, the Fund's investments in TBAs are subject to risks such as failure of the counterparty to perform its obligation to deliver the security, the characteristics of a security delivered to the Fund may be less favorable than expected and the security the Fund buys will lose value prior to its delivery. Investments in TBAs may give rise to a form of leverage. Leverage may cause the Fund to be more volatile than if the Fund had not been leveraged and may increase the impact that gains (losses) have on the Fund. Further, TBAs may increase the Fund's portfolio turnover rate. FINRA rules include mandatory margin requirements that will require the Fund to post collateral in connection with its TBA transactions, which could increase the cost of TBA transactions to the Fund and impose added operational complexity.

The Fund's purchase of other securities on a when-issued, delayed delivery or through a forward commitment basis are subject to similar risks, including counterparty risk and that the value of securities in these transactions on the delivery date may be less than the price paid by the Fund to purchase the securities. In addition, there can be no assurance that a security purchased on a when-issued

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basis will be issued. When the Fund has sold a security on a when-issued, delayed delivery, or forward commitment basis, the Fund does not benefit if the value of the security appreciates above the sale price during the commitment period and the Fund is subject to failure of the counterparty to pay for the securities.

**U.S. Government Securities**

Different types of U.S. government securities are subject to different levels of credit risk, including the risk of default, depending on the nature of the particular government support for that security. For example, a U.S. government-sponsored entity, such as Federal National Mortgage Association or Federal Home Loan Mortgage Corporation, although chartered or sponsored by an Act of Congress, may issue securities that are neither insured nor guaranteed by the U.S. Treasury and, therefore, are not backed by the full faith and credit of the United States. With respect to U.S. government securities that are not backed by the full faith and credit of the United States, there is the risk that the U.S. government will not provide financial support to such U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. U.S. government securities are also subject to interest rate risks and can exhibit price fluctuations resulting from increases or decreases in interest rates. The U.S. government securities in which the Fund may invest may pay fixed, floating, variable or adjustable interest rates. For more information about interest rate risks associated with the Fund's investments in U.S. government securities, see "Credit and Interest Rate Risk".

The U.S. government securities that the Fund may purchase include U.S. Treasury bills, notes and bonds, all of which are direct obligations of the U.S. government and may differ in their interest rates, maturities and times of issuance. In addition, the Fund may purchase securities issued or guaranteed by agencies and instrumentalities of the U.S. government which are backed by the full faith and credit of the United States. Among the agencies and instrumentalities issuing these obligations are the Government National Mortgage Association and the Federal Housing Administration. Securities issued by the U.S. Treasury and agencies and instrumentalities of the U.S. government generally provide a lower current return than obligations of other issuers. The Fund may also purchase securities issued by agencies and instrumentalities which are not backed by the full faith and credit of the United States, but whose issuing agency or instrumentality has the right to borrow, to meet its obligations, from the U.S. Treasury. Among these agencies and instrumentalities are Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Further, the Fund may purchase securities issued by agencies and instrumentalities which are backed solely by the credit of the issuing agency or instrumentality. Among these agencies and instrumentalities is the Federal Farm Credit System. With respect to U.S. government securities not backed by the full faith and credit of the United States, there is a risk that the U.S. government will not provide financial support to these agencies if it is not obligated to do so by law, and therefore these U.S. government securities involve greater credit risk than U.S. government securities backed by the full faith and credit of the U.S. government. The maximum potential liability of the issuers of some U.S. government securities held by the Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future. The interest from U.S. government securities generally is not subject to state and local taxation. In addition, uncertainty regarding the status of negotiations in the U.S. government to increase the statutory debt ceiling could increase the risk that the U.S. government may default on payments on U.S. government securities and may cause the credit rating of the U.S. government to be downgraded. Any uncertainty regarding the ability of the United States to repay its debt obligations, and any default by the U.S. government, would have a negative impact on the Fund's investments in U.S. government securities. U.S. government securities generally have a lower return than other obligations.

**Sovereign Debt Obligations**

The Fund may invest in debt obligations known as "sovereign debt," which are obligations of governmental issuers in emerging market or developing countries and industrialized countries. Certain emerging market or developing countries are among the largest debtors to commercial banks and foreign governments. The issuer or governmental authority that controls the repayment of sovereign debt may not be willing or able to repay the principal and/or pay interest when due in accordance with the terms of such obligations. Uncertainty surrounding the level and sustainability of sovereign debt of certain countries has at times increased volatility in the financial markets. In addition, a number of Latin American countries are among the largest debtors of developing countries and have a long history of reliance on foreign debt. Additional factors that may influence the ability or willingness to service debt include, but are not limited to, a country's cash flow situation, the availability of sufficient foreign exchange on the date a payment is due, the relative size of its debt service burden to the economy as a whole and its government's policy towards the International Monetary Fund, the World Bank and other multilateral agencies. A country whose exports are concentrated in a few commodities or whose economy depends on certain strategic imports could be vulnerable to fluctuations in international prices of these commodities or imports. If a foreign sovereign obligor cannot generate sufficient earnings from foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments, commercial banks and multilateral organizations, and inflows of foreign investment. The commitment on the part of these foreign governments, multilateral organizations and others to make such disbursements may be conditioned on the government's implementation of economic reforms and/or economic performance and the timely service of its obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such third-parties' commitments to lend funds, which may further impair the foreign sovereign obligor's ability or willingness to timely service its debts. In addition, there is no legal process for collecting on a sovereign debt that a government does not pay or bankruptcy proceeding by which all or part of the sovereign debt that a government entity has not repaid may be collected.

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**Currency Derivatives**

Investments in currency derivatives may substantially change the Fund's exposure to currency exchange rates and could result in losses to the Fund if currencies do not perform as the Adviser expects. In addition, investments in currency derivatives, to the extent that they reduce the Fund's exposure to currency risks, may also reduce the Fund's ability to benefit from favorable changes in currency exchange rates. The Fund is not required to hedge any portfolio holding with the use of currency derivatives. Accordingly, Fund shareholders would bear the risk of currency fluctuations with respect to unhedged portfolio positions.

Foreign currency derivatives may involve, for example, the purchase of foreign currencies for U.S. dollars or the maintenance of short positions in foreign currencies. Foreign currency derivatives may involve the Fund agreeing to exchange an amount of a currency it does not currently own for another currency at a future date. The Fund would typically engage in such a transaction in anticipation of a decline in the value of the currency it sells relative to the currency that the Fund has contracted to receive in the exchange. The Adviser's success in these transactions will depend principally on its ability to predict accurately the future exchange rates between foreign currencies and the U.S. dollar.

The Fund may enter into foreign currency forward exchange contracts, and currency and currency index futures and options contracts for hedging and non-hedging purposes in pursuing its investment objectives. Foreign currency forward exchange contracts are transactions involving the Fund's obligation to purchase or sell a specific currency at a future date at a specified price. Foreign currency forward exchange contracts may be used by the Fund for hedging purposes to protect against uncertainty in the level of future non-U.S. currency exchange rates, such as when the Fund anticipates purchasing or selling a non-U.S. security. This technique would allow the Fund to "lock in" the U.S. dollar price of the security. Foreign currency forward exchange contracts may also be used to attempt to protect the value of the Fund's existing holdings of non-U.S. securities. Imperfect correlation may exist, however, between the Fund's non-U.S. securities holdings and the foreign currency forward exchange contracts entered into with respect to those holdings. To the extent hedged by the use of foreign currency forward exchange contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. Currency futures contracts are similar to foreign currency forward exchange contracts, except that they are traded on an exchange and standardized as to contract size and delivery date. Most currency futures contracts call for payment or delivery in U.S. dollars. The value of a foreign currency option is dependent upon the value of the underlying foreign currency relative to the U.S. dollar. The price of the option may vary with changes in the value of either or both currencies and has no relationship to the investment merits of a foreign security. Options on foreign currencies are affected by all of those factors which influence foreign exchange rates and foreign investment generally. Unanticipated changes in currency prices may result in losses to the Fund and poorer overall performance for the Fund than if it had not entered into such contracts. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

Foreign currency forward exchange contracts and currency futures and options contracts may be used for non-hedging purposes in seeking to meet the Fund's investment objectives, such as when the Adviser anticipates that particular non-U.S. currencies will appreciate or depreciate in value, even though securities denominated in those currencies are not then held in the Fund's investment portfolio. Investing in foreign currencies for purposes of gaining from projected changes in exchange rates, as opposed to hedging currency risks applicable to the Fund's holdings, further increases the Fund's exposure to foreign securities losses. There is no assurance that the Adviser's use of currency derivatives will benefit the Fund or that they will be, or can be, used at appropriate times.

**Asset-Backed Securities**

Asset-backed securities apply the securitization techniques used to develop mortgage-backed securities to a broad range of other assets. Various types of assets, primarily automobile and credit card receivables and home equity loans, are pooled and securitized in pass-through structures similar to pass-through structures developed with respect to mortgage securitizations. Asset-backed securities have risk characteristics similar to mortgage-backed securities. Like mortgage-backed securities, they generally decrease in value as a result of interest rate increases, but may benefit less than other fixed-income securities from declining interest rates, principally because of prepayments (*i.e.*, when a borrower pays back the principal of a debt obligation earlier than expected). Also, as in the case of mortgage-backed securities, prepayments generally increase during a period of declining interest rates, although other factors, such as changes in credit use and payment patterns, may also influence prepayment rates. Asset-backed securities also involve the risk that various federal and state consumer laws and other legal and economic factors may result in the collateral backing the securities being insufficient to support payment on the securities.

To the extent the Fund invests in asset-backed securities issued by non-governmental issuers, such as commercial banks, savings and loan institutions, and other secondary market issuers, the Fund will be exposed to additional risks because, among other things, there are no direct or indirect government or agency guarantees of payments in the pools underlying the securities. Privately-issued asset-backed securities may be less readily marketable, subject to heightened credit risk and the market for such securities is typically smaller and less liquid than other asset-backed securities.

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The Fund may invest in other asset-backed or similarly structured securities, such as collateralized debt obligations ("CDOs"), collateralized bond obligations ("CBOs"), and collateralized loan obligations ("CLOs"). These investments are subject to many of the same risks as other forms of asset-backed securities, including interest rate risk, credit risk and default risk, and are also subject to additional risks, including but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the risk that the collateral may default or decline in value or be downgraded, if rated by a nationally recognized statistical rating organization; (iii) the Fund may invest in tranches of CDOs that are subordinate to other tranches; (iv) the structure and complexity of the transaction and the legal documents could lead to disputes among investors regarding the characterization of proceeds; (v) the investment return achieved by the Fund could be significantly different than those predicted by financial models; (vi) the lack of a readily available secondary market for CDOs; (vii) the risk of forced "fire sale" liquidation due to technical defaults such as coverage test failures; and (viii) the CDO's manager may perform poorly. Investments in CDOs, CBOs and CLOs are also subject to risks particular to their respective asset class and structure.

For example, because CLOs are backed primarily by commercial loans, CLOs also bear many of the same risks as investing in loans directly. However, in addition to the risks associated with investing in commercial loans, the complex structure and highly leveraged nature of a CLO poses additional risks. CLOs may experience substantial losses attributable to loan defaults or trading losses. Such losses on the underlying assets are borne first by the holders of subordinate tranches. In addition, the Fund's investments in CLOs may decrease in market value when the CLO's assets experience loan defaults or credit impairment, losses that exceed the most subordinate tranches, or market anticipation of loan defaults and investor aversion to CLO securities as a class. CDOs are structured similarly to CLOs and bear many of the same risks as CLOs as well as additional risks because they are backed by pools of assets other than commercial loans, including securities (such as other asset-backed securities), synthetic instruments or bonds, and may be highly leveraged. Like CLOs, losses incurred by a CDO are borne first by holders of the most subordinate tranches. Accordingly, the risks of CDOs depend largely on the type of underlying collateral and the tranche of CDOs in which the Fund invests. Moreover, CDOs that obtain their exposure through synthetic investments are exposed to risks associated with derivative instruments.

**High Yield Securities**

Fixed-income securities that are not investment grade are commonly referred to as "junk bonds" or high yield, high risk securities. These securities generally offer a higher yield than higher rated securities (including those of a similar maturity), but they carry a greater degree of risk, including substantial credit and default risks. High yield securities are subject to greater risk of loss (including substantial or total loss) of income and principal than higher rated securities and are considered speculative by the major credit rating agencies because of increased credit risk relative to higher rated fixed income investments. High yield securities are also subject to other increased risks, including greater sensitivity to real or perceived economic changes, increased price volatility, valuation difficulties, lack of a regular trading market and greater potential illiquidity. High yield securities are particularly susceptible to default risk during periods of adverse market, industry or economic conditions or issuer-specific developments and a high yield security may lose significant value before a default occurs. In the event of a default, the Fund may incur additional expenses to seek recovery or to negotiate new terms with a defaulting issuer.

In addition, the Fund's investments in high yield securities are subject to the risk of subordination to other creditors. Accordingly, in the event of an issuer's bankruptcy, claims of other creditors may have priority over the claims of holders of these securities, leaving few or no assets available to repay high yield securities holders, such as the Fund. High yield securities may be issued by companies that are restructuring, are smaller and less creditworthy or are more highly leveraged or indebted than other companies or are financially distressed. This means that they typically have more difficulty making scheduled payments of principal and interest and a higher risk of non-payment. An issuer's ability to pay its debt obligations may also be reduced by financial stress, specific issuer developments or the unavailability of additional financing. Changes in the value of high yield securities are typically influenced more by changes in the financial and business position of the issuing company than by changes in interest rates when compared to investment grade securities.

In addition, high yield securities are subject to increased call risk, also known as prepayment risk, which is the risk that an issuer may exercise its right to redeem a fixed income security earlier than expected (a call). Issuers may call outstanding securities prior to their maturity for a number of reasons (e.g., declining interest rates, changes in credit spreads and improvements in the issuer's credit quality). If an issuer calls a security in which the Fund has invested, the Fund may not recoup the full amount of its initial investment (including any premiums paid) or may not realize the full anticipated earnings from the investment and may be forced to reinvest in lower-yielding securities, securities with greater credit risks or securities with other, less favorable features.

In recent years, there has been a broad trend of weaker or less restrictive covenant protections in the high yield market. Among other things, under such weaker or less restrictive covenants, borrowers might be able to exercise more flexibility with respect to certain activities than borrowers who are subject to stronger or more protective covenants. For example, borrowers might be able to incur more debt, including secured debt, return more capital to shareholders, remove or reduce assets that are designated as collateral securing high yield securities, increase the claims against assets that are permitted against collateral securing high yield securities or otherwise manage their business in ways that could impact creditors negatively. In addition, certain privately held borrowers might be permitted to file or provide less frequent, less detailed or less timely financial reporting or other information, which could negatively

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Income Opportunities Fund (Con't)

impact the value of the high yield securities issued by such borrowers. Each of these factors might negatively impact the high yield securities held by the Fund.

**Restricted Securities**

The Fund's investments may include restricted securities, which are generally subject to resale or transfer restrictions or prohibitions as a matter of contract and/or under applicable U.S. federal securities laws, including Rule 144A under the Securities Act of 1933, as amended. Restricted securities may not be listed on an exchange and may have no active trading market. Because there may be relatively few potential or interested purchasers for privately placed or restricted securities, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the Fund may be unable to dispose of such securities promptly or may be able to sell privately placed securities only at disadvantageous times or prices.

There is no assurance that a liquid market will exist for restricted securities and these securities could have the effect of increasing the level of Fund illiquidity. In addition, the market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. The illiquidity of the market, as well as the lack of publicly available information regarding these securities, including readily available market quotations, may also adversely affect the ability to arrive at a fair value for certain securities at certain times and could make it difficult for the Fund to sell certain securities. Additionally, the Fund may be unable to sell a privately placed or restricted security if the Adviser or its affiliates receive material non-public information about the security's issuer. If the Fund is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss or for less than its fair value and may be unable to sell the security at all. There is typically less information available about issuers of private placements and restricted securities and there is no assurance that the information obtained by the Adviser is reliable. In addition, private placements and restricted securities may involve a high degree of business and financial risk, which may result in substantial losses to the Fund.

**Loans**

Loans may be primary, direct investments or investments in loan assignments or participation interests. A loan assignment represents a portion or the entirety of a loan and a portion or the entirety of a position previously attributable to a different lender. The purchaser of an assignment typically succeeds to all the rights and obligations under the loan agreement and has the same rights and obligations as the assigning investor. However, assignments through private negotiations may cause the purchaser of an assignment to have different and more limited rights than those held by the assigning investor. Loan participation interests are interests issued by a lender or other entity and represent a fractional interest in a loan. The Fund typically will have a contractual relationship only with the financial institution that issued the participation interest. As a result, the Fund may have the right to receive payments of principal, interest and any fees to which it is entitled only from the financial institution and only upon receipt by such entity of such payments from the borrower. In connection with purchasing a participation interest, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights with respect to any funds acquired by other investors through set-off against the borrower and the Fund may not directly benefit from the collateral supporting the loan in which it has purchased the participation interest. As a result, the Fund would generally assume the credit risk of both the borrower and the financial institution issuing the participation interest. In the event of the insolvency of the entity issuing a participation interest, the Fund may be treated as a general creditor of such entity. Most loans are rated below investment grade or, if unrated, are of similar credit quality. Certain loans are illiquid, meaning the Fund may be unable to sell them at an advantageous time or price. Illiquid securities are also difficult to value.

Loan investments may be made at par or at a discount or premium to par. The interest payable on a loan may be fixed or floating rate, and paid in cash or in-kind. In connection with transactions in loans, the Fund may be subject to facility or other fees. Loans may be secured by specific collateral or other assets of the borrower, guaranteed by a third party, unsecured or subordinated. During the term of a loan, the value of any collateral securing the loan may decline in value, causing the loan to be under collateralized. Collateral may consist of assets that may not be readily liquidated, and there is no assurance that the collateral will be available and liquidation of such assets would satisfy fully a borrower's obligations under the loan. In addition, if a loan is foreclosed, the Fund could become part owner of the collateral and would bear the costs and liabilities associated with owning and disposing of such collateral.

Certain loans ("senior loans") hold a senior position in the capital structure of a business entity, are typically secured with specific collateral and have a claim on the assets and/or stock of the borrower that is senior to that held by subordinated debtholders and stockholders of the borrower. Junior loans may be secured or unsecured subordinated loans, second lien loans and subordinated bridge loans, and typically carry greater risks. For example, second lien loans are lower in priority to senior loans, but have seniority in a company's capital structure to other liabilities and a company is required to pay down these second lien loans prior to other lower-ranked claims on their assets. Floating-rate loans typically have rates of interest which are re-determined daily, monthly, quarterly or semi-annually by reference to a base lending rate, plus a premium. Floating-rate loans held by the Fund typically have a dollar-weighted average period until the next interest rate adjustment of approximately 90 days or less.

A lender's repayment and other rights primarily are determined by governing loan, assignment or participation documents, which (among other things) typically establish the priority of payment on the loan relative to other indebtedness and obligations of the

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Income Opportunities Fund (Con't)

borrower. A borrower typically is required to comply with certain covenants contained in a loan agreement between the borrower and the holders of the loan. Covenants contained in loan documentation are intended to protect lenders and investors by imposing certain restrictions and other limitations on a borrower's operations or assets and by providing certain information and consent rights to lenders. The types of covenants included in loan agreements generally vary depending on market conditions, the creditworthiness of the issuer, and the nature of the collateral securing the loan. Loans also known as "covenant lite" loans may contain fewer covenants that restrict activities of the borrower or that might enable the Fund to, among other things, proactively enforce financial covenants or prevent undesired actions by the borrower. As a result, "covenant lite" loans may provide the borrower with more flexibility to take actions that may otherwise be limited or prohibited under similar loan obligations that are not covenant lite or that may be detrimental to the loan holders and provide fewer investor protections in the event covenants are breached. The Fund may experience relatively greater realized or unrealized losses or delays and expense in enforcing its rights with respect to loans with fewer restrictive covenants than its holdings of loans or securities with more traditional financial covenants. In addition, the Fund may receive less or less frequent financial reporting from a borrower under a "covenant lite" loan or obligation, which may result in more limited access to financial information, difficulty evaluating the borrower's financial performance over time and delays in exercising rights and remedies. During certain market conditions, many new, restructured or reissued loans and similar debt obligations may not feature traditional financial maintenance covenants.

Loans to entities located outside of the U.S. may have substantially different lender protections and covenants as compared to loans to U.S. entities and generally involve greater and additional risks. In the event of bankruptcy, applicable law may impact a lender's ability to enforce its rights. Bankruptcy laws in foreign jurisdictions, including emerging markets, may differ significantly from U.S. bankruptcy law and the Fund's rights with respect to a loan governed by the laws of a foreign jurisdiction may be more limited.

Loans may be originated by a lending agent, such as a financial institution or other entity, on behalf of a group or "syndicate" of loan investors (the "Loan Investors"). In such a case, the agent administers the terms of the loan agreement and is responsible for the collection of principal, and interest payments from the borrower and the apportionment of these payments to the Loan Investors. Failure by the agent to fulfill its obligations may delay or adversely affect receipt of payment by the Fund. Furthermore, unless under the terms of a loan agreement or participation (as applicable) the Fund has direct recourse against the borrower, the Fund must rely on the agent and the other Loan Investors to pursue appropriate remedies against the borrower.

Although the overall size and number of participants in the market for many loans has grown over the past decade, such loans continue to trade in a private, unregulated inter-dealer or inter-bank secondary market and the amount of available public information about loans may be less extensive than that available for registered or exchange listed securities. Liquidity and valuation risk is more pronounced for the Fund than for funds that invest primarily in other types of fixed-income instruments or equity securities. With limited exceptions, the Adviser will seek to take steps intended to ensure that it does not receive material nonpublic information about the issuers of loans that also issue publicly traded securities. Therefore, the Adviser may have less information than other investors about certain of the loans in which it seeks to invest. Purchases and sales of loans are generally subject to contractual restrictions that must be satisfied before a loan can be bought or sold. These restrictions may (i) impede the Fund's ability to buy or sell loans, (ii) negatively impact the transaction price, (iii) impact the counterparty and/or credit risks borne by the Fund, (iv) impede the Fund's ability to timely vote or otherwise act with respect to loans, (v) expose the Fund to adverse tax or regulatory consequences and/or (vi) result in delayed settlement of loan transactions. It may take longer than seven days for a transaction in loans to settle, which may impact the Fund's process and ability to meet redemptions. This is partly due to the nature or manner in which loans trade and the contractual restrictions noted above, which require a written assignment agreement and various ancillary documents for each transfer, and frequently require discretionary consents from both the borrower and the administrative agent. As a result, sale proceeds related to the sale of loans may not be available to make additional investments or to meet the Fund's redemption or other obligations for a period after the sale of the loans and, as a result, the Fund may have to hold additional cash, sell other investments or engage in borrowing transactions, such as borrowing from a credit facility, if necessary to raise cash to meet its obligations.

Assignments of loans through private negotiations may cause the purchaser of an assignment to have different and more limited rights than those held by the assigning investor. In connection with purchasing a participation interest, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement. In the event the borrower defaults, the Fund may not directly benefit from the collateral supporting the loan (if any) in which it has purchased the participation interest. As a result, the Fund would generally assume the credit risk of both the borrower and the financial institution issuing the participation interest, subjecting the Fund to additional credit risk (including the creditworthiness of the agent lender), and the Fund may be subject to greater delays, expenses and risks than if the Fund had purchased a direct obligation of the borrower. No active trading market may exist for certain loans, which may impair the ability of the Fund to realize full value in the event of the need to sell a loan and which may make it difficult to value the loan. To the extent that a secondary market does exist for certain loans, the market may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods.

In addition to the risks generally associated with debt instruments, such as credit, market, interest rate and liquidity risks, loans are also subject to the risk that the value of any collateral securing a loan may decline, be unavailable or insufficient to meet the obligations of the borrower or be difficult to liquidate. The specific collateral used to secure a loan may decline in value or become illiquid, which would adversely affect the loan's value. The Fund's access to collateral may be limited by bankruptcy, other insolvency

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laws or by the type of loan the Fund has purchased. For example, if the Fund purchases a participation instead of an assignment, it would not have direct access to collateral of the borrower. As a result, a floating-rate loan may not be fully collateralized and can decline significantly in value. Additionally, collateral on loan instruments may not be readily liquidated, and there is no assurance that the liquidation of such assets will satisfy a borrower's obligations under the investment.

Loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate a loan to presently existing or future indebtedness of the borrower, or take other action detrimental to the holders of a loan including, in certain circumstances, invalidating a loan or causing interest previously paid to be refunded to the borrower. Any such actions by a court could negatively affect the Fund's performance. Loans that are secured and senior to other debtholders of a borrower tend to have more favorable loss recovery rates as compared to more junior types of below investment grade debt obligations. Due to their lower place in the borrower's capital structure and, in some cases, their unsecured status, junior loans involve a higher degree of overall risk than senior loans of the same borrower.

Investing in loans involves the risk of default in the payment of interest or principal by the borrower or other party obligated to repay the loan, which would result in a reduction of income to the Fund or in other losses and a potential decrease in the Fund's NAV. The risk of default will increase in the event of an economic downturn or a substantial increase in interest rates. In the event of insolvency of the borrower or other obligated party, the Fund may be treated as a general creditor of such entity unless it has rights that are senior to that of other creditors or secured by specific collateral or assets of the borrower. Fixed rate loans are also subject to the risk that their value will decline in a rising interest rate environment. This risk is mitigated for floating-rate loans, where the interest rate payable on the loan resets periodically by reference to a base lending rate.

Loans that are rated below investment grade are also subject to the risks of other below investment grade securities. Because loans in which the Fund may invest could rank lower in priority of payment to senior loans, they present greater degree of investment risk due to the fact that the cash flow or other property of the borrower securing the loan may be insufficient to meet scheduled payments after meeting the senior secured payment obligations of the borrower. These loans may also exhibit greater price volatility as well.

U.S. federal securities laws afford certain protections against fraud and misrepresentation in connection with the offering or sale of a security, as well as against manipulation of trading markets for securities. The typical practice of a lender in relying exclusively or primarily on reports from the borrower may involve the risk of fraud, misrepresentation, or market manipulation by the borrower. It is unclear whether U.S. federal securities laws protections are available to an investment in a loan. In certain circumstances, loans may not be deemed to be securities, and in the event of fraud or misrepresentation by a borrower, lenders may not have the protection of the anti-fraud provisions of the federal securities laws. However, contractual provisions in the loan documents may offer some protections, and lenders may also avail themselves of common-law fraud protections under applicable state law.

**Covenant Lite Investments**

Some of the loans or other obligations in which the Fund may invest or obtain exposure to may be "covenant lite" loans or other obligations. Certain financial institutions may define "covenant lite" loans or securities differently. Covenants contained in loan documentation are intended to protect lenders and investors by imposing certain restrictions and other limitations on a borrower's operations or assets and by providing certain information and consent rights to lenders. Covenant lite loans or securities, which have varied terms and conditions, may contain fewer or no restrictive covenants compared to other loans that might enable the Fund to, among other things, proactively enforce financial covenants or prevent undesired actions by the borrower. As a result, covenant lite loans generally carry greater risks because they allow borrowers to exercise more flexibility with respect to certain activities that may otherwise be limited or prohibited under similar loan obligations that are not covenant lite. In addition, the Fund may receive less or less frequent financial reporting from a borrower under a covenant-lite obligation, which may result in more limited access to financial information, difficulty evaluating the borrower's financial performance over time and delays in exercising rights and remedies in the event of a significant financial decline. The Fund may experience relatively greater difficulty or delays in enforcing its rights on its holdings of certain covenant lite loans and other similar obligations than its holdings of loans or securities with more traditional financial covenants, which may result in losses to the Fund. Many loans and similar debt obligations may not feature traditional financial maintenance covenants, which are intended to protect lenders and investors by imposing certain restrictions and other limitations on a borrower's operations or assets and by providing certain information and consent rights to lenders.

**Liquidity**

The Fund may make investments that are less liquid, illiquid or restricted or that may become illiquid or less liquid in response to, among other developments, overall economic conditions or adverse investor perceptions, and which may entail greater risk than investments in other types of securities. Illiquidity can also be caused by, among other things, a drop in overall market trading volume, an inability to find a willing buyer, or legal restrictions on the securities' resale. These investments may be more difficult to value or sell, particularly in times of market turmoil, and there may be little trading in the secondary market available for particular securities. Liquidity risk may be magnified in a market where credit spread and interest rate volatility is rising and where investor redemptions from fixed-income mutual funds may be higher than normal. If the Fund is forced to sell an illiquid or restricted security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss or for less than its fair value and may be unable to sell the security at all.

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Certain CLO securities may have limited liquidity in various market conditions, and in such instances will be less liquid than more senior or higher-rated CLOs. The price of CLO securities may rapidly decline if a large number of holders of the CLO securities decide to sell. The CLO market is smaller relative to other fixed-income instrument markets. Historic liquidity measures of CLOs may or may not be predictive of the liquidity of CLOs in the future. During adverse market conditions, there may be instances in which the market for trading CLOs becomes thin, or in extreme circumstances, particularly with respect to subordinate or lower-rated CLO tranches, may cease to exist during such period.

**Derivatives**

The Fund may, but is not required to, use derivatives and other similar instruments for a variety of purposes, including hedging, risk management, portfolio management or to seek to earn income. Derivative instruments used by the Fund will be counted towards the Fund's exposure in the types of securities listed herein to the extent they have economic characteristics similar to such securities. A derivative is a financial instrument whose value is based, in part, on the value of an underlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, also affect the value of derivative instruments. Derivatives and other similar instruments that create synthetic exposure often are subject to risks similar to those of the underlying asset or instrument and may be subject to additional risks, including imperfect correlation between the value of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates, risks that the transactions may not be liquid, risks arising from margin and payment requirements, risks arising from mispricing or valuation complexity and operational and legal risks. The use of derivatives involves risks that are different from, and possibly greater than, the risks associated with other portfolio investments. Derivatives may involve the use of highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments.

Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss. Leverage associated with derivative transactions may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or may cause the Fund to be more volatile than if the Fund had not been leveraged. Although the Adviser seeks to use derivatives to further the Fund's investment objective, there is no assurance that the use of derivatives will achieve this result.

The derivative instruments and techniques that the Fund may use include:

*Futures.* A futures contract is a standardized, exchange-traded agreement to buy or sell a specific quantity of an underlying asset, reference rate or index at a specific price at a specific future time. While the value of a futures contract tends to increase or decrease in tandem with the value of the underlying instrument, differences between the futures market and the market for the underlying asset may result in an imperfect correlation. Depending on the terms of the particular contract, futures contracts are settled through either physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. A decision as to whether, when and how to use futures contracts involves the exercise of skill and judgment and even a well-conceived futures transaction may be unsuccessful because of market behavior or unexpected events. In addition to the derivatives risks discussed above, the prices of futures contracts can be highly volatile, using futures contracts can lower total return, and the potential loss from futures contracts can exceed the Fund's initial investment in such contracts. No assurance can be given that a liquid market will exist for any particular futures contract at any particular time. There is also the risk of loss by the Fund of margin deposits in the event of bankruptcy of a broker with which the Fund has open positions in the futures contract.

*Options.* If the Fund buys an option, it buys a legal contract giving it the right to buy or sell a specific amount of the underlying instrument, foreign currency or contract, such as a swap agreement or futures contract, on the underlying instrument or foreign currency at an agreed-upon price during a period of time or on a specified date typically in exchange for a premium paid by the Fund. If the Fund sells an option, it sells to another person the right to buy from or sell to the Fund a specific amount of the underlying instrument, swap, foreign currency, or futures contract on the underlying instrument or foreign currency at an agreed-upon price during a period of time or on a specified date typically in exchange for a premium received by the Fund. When options are purchased over-the-counter ("OTC"), the Fund bears the risk that the counterparty that wrote the option will be unable or unwilling to perform its obligations under the option contract. Options may also be illiquid and the Fund may have difficulty closing out its position. A decision as to whether, when and how to use options involves the exercise of skill and judgment and even a well-conceived option transaction may be unsuccessful because of market behavior or unexpected events. The prices of options can be highly volatile and the use of options can lower total returns.

Investments in foreign currency options may substantially change the Fund's exposure to currency exchange rates and could result in losses to the Fund if currencies do not perform as the Adviser expects. There is a risk that such transactions may reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. The value of a foreign currency option is dependent upon the value of the underlying foreign currency relative to the U.S. dollar or other applicable foreign currency. The price of the option may vary with changes in the value of either or both currencies and has no relationship to the investment merits of a foreign security. Options on foreign currencies are affected by all of those factors that influence foreign exchange rates and foreign investment generally. Unanticipated changes in currency prices may result in losses to the Fund and

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poorer overall performance for the Fund than if it had not entered into such contracts. Options on foreign currencies are traded primarily in the OTC market, but may also be traded on U.S. and foreign exchanges.

Foreign currency options contracts may be used for hedging purposes or non-hedging purposes in pursuing the Fund's investment objective, such as when the Adviser anticipates that particular non-U.S. currencies will appreciate or depreciate in value, even though securities denominated in those currencies are not then held in the Fund's investment portfolio. Investing in foreign currencies for purposes of gaining from projected changes in exchange rates, as opposed to only hedging currency risks applicable to the Fund's holdings, further increases the Fund's exposure to foreign securities losses. There is no assurance that the Adviser's use of currency derivatives will benefit the Fund or that they will be, or can be, used at appropriate times.

*Swaps.* The Fund may enter into OTC swap contracts or cleared swap transactions. An OTC swap contract is an agreement between two parties pursuant to which the parties exchange payments at specified dates on the basis of a specified notional amount, with the payments calculated by reference to specified securities, indices, reference rates, currencies or other instruments. Typically swap agreements provide that when the period payment dates for both parties are the same, the payments are made on a net basis (i.e., the two payment streams are netted out, with only the net amount paid by one party to the other). The Fund's obligations or rights under a swap contract entered into on a net basis will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each party. Cleared swap transactions may help reduce counterparty credit risk. In a cleared swap, the Fund's ultimate counterparty is a clearinghouse rather than a swap dealer, bank or other financial institution. OTC swap agreements are not entered into or traded on exchanges and often there is no central clearing or guaranty function for swaps. These OTC swaps are often subject to credit risk or the risk of default or non-performance by the counterparty. Certain swaps have begun trading on exchanges or swap execution facilities. Exchange trading is expected to increase liquidity of swaps trading. Both OTC and cleared swaps could result in losses if interest rates, foreign currency exchange rates or other factors are not correctly anticipated by the Fund or if the reference index, security or investments do not perform as expected. The Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulatory developments require the clearing of certain standardized swap transactions. Swaps subject to mandatory central clearing must be traded on an exchange or swap execution facility unless no exchange or swap execution facility "makes the swap available to trade." The Fund may pay fees or incur costs each time it enters into, amends or terminates a swap agreement.

The Fund's use of swaps may include those based on the credit of an underlying security, commonly referred to as "credit default swaps." Where the Fund is the buyer of a credit default swap contract, it would typically be entitled to receive the par (or other agreed-upon) value of a referenced debt obligation from the counterparty to the contract only in the event of a default or similar event by a third-party on the debt obligation. If no default occurs, the Fund would have paid to the counterparty a periodic stream of payments over the term of the contract. When the Fund is the seller of a credit default swap contract, it typically receives the stream of payments but is obligated to pay an amount equal to the par (or other agreed-upon) value of a referenced debt obligation upon the default or similar event of the issuer of the referenced debt obligation.

**Collateralized Loan Obligations**

A CLO is an asset-backed security typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. The key feature of the CLO structure is the prioritization of the cash flows from a pool of debt securities among the several classes or tranches of CLO holders, thereby creating a series of obligations with varying rates and maturities appealing to a wide range of investors. The Fund and other investors in CLOs ultimately bear the credit and interest rate risks of the underlying collateral.

CLOs issue classes or "tranches" that offer various maturity, risk and yield characteristics. Tranches are categorized as senior, mezzanine and subordinated/equity, according to their degree of risk. The risks of an investment in a CLO depend largely on the type of the collateral securities and the class or tranche of the instrument in which the Fund invests. To the extent that the Fund invests in tranches of CLOs that are rated below investment grade, the risks of investing in CLOs will be greater. Below investment grade securities may be subject to additional risks, including those associated with high yield securities. In addition, to the extent that the Fund invests in unrated CLO tranches, the Fund's ability to achieve its investment objective will be more dependent on the Adviser's credit analysis than would be the case if the Fund were to invest in rated CLO tranches.

Interest on a CLO may be paid in kind or deferred and capitalized (paid in the form of obligations of the same type rather than cash), which involves continued exposure to default risk with respect to such payments.

In the event of sufficient early prepayments on such debt instruments, the class or series of CLO first to mature generally will be retired prior to maturity. Therefore, although in most cases the issuer of CLOs will not supply additional collateral in the event of such prepayments, there will be sufficient collateral to secure their priority with respect to other CLO tranches that remain outstanding. If there are defaults or the relevant collateral otherwise underperforms, scheduled payments to senior tranches of the CLOs take precedence over those of mezzanine tranches and scheduled payments to mezzanine tranches take precedence over those to subordinated/equity tranches. Because it is partially protected from defaults, a senior tranche of a CLO typically has higher credit

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ratings and lower yields than its underlying collateral and may be rated investment grade. However, it is possible that a senior tranche of a CLO could experience losses, particularly in stressed market conditions, due to defaults, downgrades of the underlying collateral by rating agencies, forced liquidation of the collateral pool, increased sensitivity to defaults due to collateral default, market anticipation of defaults and investor aversion to CLO securities as an asset class. If a CLO triggers an event of default as a result of failing to make payments when due or for other reasons, the CLO would be subject to the possibility of liquidation, which could result in full loss of value to the CLO equity or junior debt investors.

The underlying assets (e.g., loans) are subject to prepayments which shorten the securities' weighted average maturity and may lower their return. If the credit support or enhancement is exhausted, losses or delays in payment may result if the required payments of principal and interest are not made. The value of these securities also may change because of changes in market value, which may be caused by, among other things, changes in the market's perception of the creditworthiness of the servicing agent for the pool, the originator of the pool, or the financial institution or fund providing the credit support or enhancement.

CLOs, and their underlying loan obligations, are typically not registered for sale to the public and therefore are subject to certain restrictions on transfer and sale, potentially making them less liquid than other types of securities. Additionally, when the Fund purchases a newly issued CLO security in the primary market (rather than from the secondary market), there often may be a delayed settlement period during which the liquidity of the CLO may be further reduced. As a result, the proceeds from the sale of CLO securities may not be readily available to meet the Fund's redemption or other obligations and the Fund may be unable to acquire or dispose of the securities at a price and time the Fund deems advantageous. There is no guarantee that an active secondary market will exist or be maintained for any given CLO.

CLOs in which the Fund invests may be managed by investment advisers not affiliated with the Adviser. CLO managers are responsible for selecting, managing and replacing the underlying bank loans within a CLO. CLO managers may have limited operating histories, may be subject to conflicts of interests, including managing the assets of other clients or other investment vehicles, or receiving fees that incentivize maximizing the yield, and indirectly the risk, of a CLO. Adverse developments with respect to a CLO manager, such as personnel and resource constraints, regulatory issues or other developments that may impact the ability and/or performance of the CLO manager, may adversely impact the performance of the CLO securities in which the Fund invests. In addition, the Fund will indirectly bear any management fees and expenses incurred by a CLO.

**Repurchase Agreements**

Repurchase agreements are transactions in which the Fund purchases a security or basket of securities and simultaneously commits to resell that security or basket to the seller (a bank, broker or dealer) at a mutually agreed-upon date and price. The resale price reflects the purchase price plus an agreed-upon market rate of interest which is unrelated to the coupon rate or date of maturity of the purchased security. The term of these agreements usually ranges from overnight to one week, and never exceeds one year. Repurchase agreements with a term of over seven days are considered illiquid.

In these transactions, the Fund receives securities that have a market value at least equal to the purchase price (including accrued interest) of the repurchase agreement, and this value is maintained during the term of the agreement. These securities are held by State Street Bank and Trust Company (the "Custodian") or an approved third-party for the benefit of the Fund until repurchased. Repurchase agreements permit the Fund to remain fully invested while retaining overnight flexibility to pursue investments of a longer-term nature. If the seller defaults and the value of the repurchased securities declines, the Fund might incur a loss. If bankruptcy proceedings are commenced with respect to the seller, the Fund's realization upon the collateral may be delayed.

While repurchase agreements involve certain risks not associated with direct investments in debt securities, the Fund follows procedures approved by the Trustees that are designed to minimize such risks. These procedures include effecting repurchase transactions only with large, well-capitalized and well-established financial institutions whose financial condition will be continually monitored by the Adviser. In addition, as described above, the value of the collateral underlying the repurchase agreement will be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, the Fund will seek to liquidate such collateral. However, the exercising of the Fund's right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, the Fund could suffer a loss.

The Fund's investments in repurchase agreements may at times be substantial when, for example, in the view of the Fund's Adviser, liquidity or other conditions warrant.

**Short Sales**

A short sale is a transaction in which the Fund sells securities that it owns or has the right to acquire at no added cost (i.e., "against the box") or does not own (but has borrowed) in anticipation of a decline in the market price of the securities. To deliver the securities to the buyer, the Fund arranges through a broker to borrow the securities and, in so doing, the Fund becomes obligated to replace the securities borrowed at their market price at the time of replacement. When selling short, the Fund intends to replace the securities at a lower price and therefore, profit from the difference between the cost to replace the securities and the proceeds received

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from the sale of the securities. When the Fund makes a short sale, the proceeds it receives from the sale will be held on behalf of a broker until the Fund replaces the borrowed securities. The Fund may have to pay a premium to borrow the securities and must pay any dividends or interest payable on the securities until they are replaced.

The Fund's obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker that consists of cash or other liquid securities. Short sales by the Fund involve certain risks and special considerations. If the Adviser incorrectly predicts that the price of the borrowed security will decline, the Fund will have to replace the securities with securities with a greater value than the amount received from the sale. As a result, losses from short sales differ from losses that could be incurred from a purchase of a security, because losses from short sales may be unlimited, whereas losses from purchases can equal only the total amount invested.

**Money Market Instruments**

Money market instruments may be adversely affected by market and economic events, such as a change in prevailing short-term interest rates; adverse developments in the banking industry, which issues or guarantees many money market instruments; adverse economic, political or other developments affecting issuers of money market instruments; changes in the credit quality of issuers; and default by a counterparty or an issuer. These instruments may be subject to federal income, state income and/or other taxes. Instead of investing in money market instruments directly, the Fund may invest money market funds, including those advised by the Adviser or its affiliates. These instruments may be adversely affected by changes to interest rates, which may be sudden and significant. During unusual market conditions, the Fund may invest up to 100% of its assets in cash or cash equivalents temporarily, which may be inconsistent with its investment objective(s) and other policies.

**Preferred Securities**

Preferred securities are subject to risks applicable generally to equity securities. In addition, a company's preferred securities generally pay dividends only after the company makes required payments to holders of its bonds and other debt, so the value of preferred securities will usually react more strongly than bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Preferred securities may pay fixed or adjustable rates of return. Like fixed-income securities, preferred stock generally decreases in value if interest rates rise and increases in value if interest rates fall.

**Distressed and Defaulted Securities**

Distressed and defaulted securities are speculative and involve substantial risks in addition to the risks of investing in high yield securities. The Fund will generally not receive interest payments on the distressed securities and the repayment of principal may also be at risk. These securities may present a substantial risk of default or may be in default at the time of investment. The repayment of defaulted securities is also subject to significant uncertainties. The Fund may incur substantial expenses in seeking recovery upon a default in the payment of principal of or interest on its portfolio holdings. If the portfolio company is forced to reorganize or liquidate, the Fund may lose its entire investment or may be required to accept cash or securities with a value less than its original investment. Distressed securities and any securities received in an exchange for such securities may be subject to restrictions on resale.

**Foreign Investing**

To the extent that the Fund invests in foreign issuers, there is the risk that news and events unique to a country or region will affect those markets and their issuers. These same events will not necessarily have an effect on the U.S. economy or similar issuers located in the United States. In addition, some of the Fund's securities, including underlying securities represented by depositary receipts, may be denominated in foreign currencies. As a result, changes in the value of a country's currency compared to the U.S. dollar may affect the value of the Fund's investments. These changes may happen separately from, and in response to, events that do not otherwise affect the value of the security in the issuer's home country. These risks may be intensified for the Fund's investments in securities of issuers located in emerging market or developing countries.

**LIBOR Discontinuance or Unavailability Risk**

The Fund's investments, payment obligations and financing terms may be based on floating rates, such as the London Interbank Offered Rates (collectively, "LIBOR"), Euro Interbank Offered Rate, Secured Overnight Financing Rate ("SOFR") and other similar types of reference rates (each, a "Reference Rate"). These Reference Rates are generally intended to represent the rate at which contributing banks may obtain short-term borrowings from each other within certain financial markets. London Interbank Offered Rate ("LIBOR") was the basic rate of interest used in lending transactions between banks on the London interbank market and has been widely used as a reference for setting the interest rate on loans globally. As a result of benchmark reforms, publication of most LIBOR settings has ceased. Certain regulators and industry groups have taken actions to establish alternative reference rates (e.g., the SOFR, which measures the cost of overnight borrowings through repurchase agreement transactions collateralized with U.S. Treasury securities and is intended to replace U.S. dollar LIBORs with certain adjustments). These developments could negatively impact financial markets in general and present heightened risks, including with respect to the Fund's investments. As a result of the uncertainty and developments relating to the transition process, performance, price volatility, liquidity and value of the Fund and its assets may be adversely affected.

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Income Opportunities Fund (Con't)

**Securities Lending**

The Fund may lend its portfolio securities to broker-dealers and other institutional borrowers. During the existence of a loan, the Fund will continue to receive the equivalent of the interest paid by the issuer on the securities loaned, or all or a portion of the interest on investment of the collateral, if any. The Fund may pay lending fees to such borrowers. Loans will only be made to firms that have been approved by the Adviser, and the Adviser or the securities lending agent will periodically monitor the financial condition of such firms while such loans are outstanding. Securities loans will only be made when the Adviser believes that the expected returns, net of expenses, justify the attendant risks. Securities loans currently are required to be secured continuously by collateral in cash, cash equivalents (such as money market instruments) or other liquid securities held by the custodian and maintained in an amount at least equal to the market value of the securities loaned. The Fund may engage in securities lending to seek to generate income. Upon return of the loaned securities, the Fund would be required to return the related collateral to the borrower and may be required to liquidate portfolio securities in order to do so. The Fund may lend up to one-third of the value of its total assets or such other amount as may be permitted by law.

As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the securities loaned if the borrower of the securities fails financially. To the extent that the portfolio securities acquired with such collateral have decreased in value, it may result in the Fund realizing a loss at a time when it would not otherwise do so. As such, securities lending may introduce leverage into the Fund. The Fund also may incur losses if the returns on securities that it acquires with cash collateral are less than the applicable rebate rates paid to borrowers and related administrative costs.

**Investment Company Securities**

Subject to the limitations set forth in the Investment Company Act of 1940, as amended (the "1940 Act"), or as otherwise permitted by the SEC, the Fund may acquire shares in other investment companies, including foreign investment companies, closed-end funds, ETFs and money market funds which may be managed by the Adviser or its affiliates. The market value of the shares of other investment companies may differ from the NAV of the Fund. The shares of certain investment companies, principally closed-end investment companies, frequently trade at a discount to their NAV. As a shareholder in an investment company, the Fund would bear its ratable share of that entity's expenses, including its investment advisory and administration fees and be subject to the associated risks. At the same time, the Fund would continue to pay its own advisory and administration fees and other expenses. As a result, the Fund and its shareholders will directly bear the expenses of their investment in the Fund and indirectly bear the expenses of the Fund's investments in other investment companies.

**ESG Investment Risk.** The Fund's incorporation of ESG information and application of related analyses when selecting investment may affect the Fund's performance, and there is no guarantee that the incorporation of ESG information will result in better performance. Socially responsible norms differ by country and region, and a company's ESG practices or the Adviser's assessment of such may change over time. The Fund may invest in companies or issuers that do not reflect the beliefs and values of any particular investor. Additionally, the Adviser's incorporation of ESG-related information in connection with identifying and selecting investments may require subjective analysis based on qualitative assessments and may be impacted by data availability for a particular company or issuer, including if the data is inaccurate, incomplete, unavailable or based on estimates. The Fund's investments in certain companies may be susceptible to various factors that may impact their businesses or operations, including costs associated with government budgetary constraints that impact publicly funded projects and clean energy initiatives, the effects of general economic conditions throughout the world, increased competition from other providers of services, unfavorable tax laws or accounting policies and high leverage. ESG considerations within the Adviser's investment process for the Fund may vary across asset classes, industries and sectors. Other factors are also considered by the Adviser and no one factor or consideration is determinative. ESG considerations with respect to the Fund's investments are not the sole determinant of whether or not an investment can be made or a holding can remain in the Fund's portfolio.

**Other Risks.** The performance of the Fund also will depend on whether or not the Adviser is successful in applying the Fund's investment strategies. The Fund is also subject to other risks from its permissible investments, including the risks associated with its investments in common stock and other equity securities, inverse floaters and municipal securities. For more information about these risks, see "Additional Risk Information."

**Additional Risk Information**

This section provides additional information relating to the risks of investing in the Fund.

**Equity Securities**

Equity securities may include common and preferred stocks, convertible securities and equity-linked securities, rights and warrants to purchase common stocks, depositary receipts, shares of investment companies, limited partnership interests and other specialty securities having equity features. Many factors affect the value of equity securities, including earnings, earnings forecasts, corporate events and factors impacting the issuer's financial condition, sector, industry and the market generally, such as labor shortages or an increase in production costs and competitive conditions within an industry. The value of the equity securities held by the Fund may fluctuate rapidly and unpredictably, and these fluctuations may be frequent and significant. In addition, the Fund cannot accurately

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Income Opportunities Fund (Con't)

predict the income it might receive from equity securities because issuers generally have discretion as to the payment of dividends or distributions, and the common stock of an issuer in the Fund's portfolio may decline in price if, for example, the issuer fails to make anticipated dividend payments because of a decline in the issuer's financial condition. The Fund may invest in equity securities that are publicly traded on securities exchanges or OTC or in equity securities that are not publicly traded. Equity securities are subject to the risk that stock prices in general (or in particular, the prices of the types of securities in which the Fund invests) may decline over short or extended periods of time. Equity securities that are not publicly traded may be more difficult to value or sell and their value may fluctuate more dramatically than publicly traded equity securities.

The value of equity securities and related instruments decline in response to perceived or actual adverse changes in the economy, economic outlook or the financial markets; deterioration in investor sentiment; inflation, interest rate, currency, and commodity price fluctuations; adverse geopolitical, social or environmental developments; issuer- and sector-specific considerations; unexpected trading activity among retail investors; and other factors. Market conditions affect certain types of equity securities to a greater extent than other types of equity securities. In addition, holders of an issuer's common stock may be subject to greater risks than holders of its preferred stock and debt securities because common stockholders' claims are subordinated to those of holders of preferred stocks and debt securities upon the bankruptcy of an issuer. If the stock market declines, the value of the Fund's equity securities will also likely decline, which will result in a decrease in the value of your investment in the Fund. Although stock prices can rebound, there is no assurance that values of the Fund's equity securities will return to previous levels.

U.S. and foreign stock markets, and equity securities of individual issuers, have experienced periods of substantial price volatility in the past and it is possible that they will do so again in the future. During periods when equity securities experience heightened volatility, such as during periods of market, economic or financial uncertainty or distress, the Fund's investments in equity securities are subject to heightened risks. In addition, the price of equity securities of an issuer may be particularly sensitive to general movements in the stock market and a drop in the stock market may depress the price of most or all of the common stocks and other equity securities held by the Fund.

**Inverse Floaters**

Inverse floaters are obligations which pay interest at rates that vary inversely with changes in market rates of interest. Because the interest rate paid to holders of such obligations is generally determined by subtracting a variable or floating rate from a predetermined amount, the interest rate paid to holders of such obligations will decrease as such variable or floating rate increases and increase as such variable or floating rate decreases.

Like most other fixed-income securities, the value of inverse floaters will decrease as interest rates increase. They are more volatile, however, than most other fixed-income securities because the coupon rate on an inverse floater typically changes at a multiple of the change in the relevant index rate. Thus, any rise in the index rate (as a consequence of an increase in interest rates) causes a correspondingly greater drop in the coupon rate of an inverse floater while a drop in the index rate causes a correspondingly greater increase in the coupon of an inverse floater. Some inverse floaters may also increase or decrease substantially because of changes in the rate of prepayments.

**Loans of Portfolio Securities**

The Fund may lend its portfolio securities to brokers, dealers, banks and other institutional investors. By lending its portfolio securities, the Fund attempts to increase its net investment income through the receipt of interest on the cash collateral with respect to the loan or fees received from the borrower in connection with the loan. Any gain or loss in the market price of the securities loaned that might occur during the term of the loan would be for the account of the Fund. The Fund employs an agent to implement the securities lending program and the agent receives a fee from the Fund for its services. The Fund will not lend more than 33⅓% of the value of its total assets.

The Fund may lend its portfolio securities so long as the terms, structure and the aggregate amount of such loans are not inconsistent with the 1940 Act or the rules and regulations or interpretations of the SEC thereunder, which currently require that (i) the borrower pledge and maintain with the Fund collateral consisting of liquid, unencumbered assets having a value not less than 100% of the value of the securities loaned; (ii) the borrower adds to such collateral whenever the price of the securities loaned rises (i.e., the borrower "marks-to-market" on a daily basis); (iii) the loan be made subject to termination by the Fund at any time; and (iv)the Fund receives a reasonable return on the loan (which may include the Fund investing any cash collateral in interest bearing short-term investments), any distributions on the loaned securities and any increase in their market value. In addition, voting rights may pass with the loaned securities, but the Fund will retain the right to call any security in anticipation of a vote that the Adviser deems material to the security on loan.

Loans of securities involve a risk that the borrower may fail to return the securities or may fail to maintain the proper amount of collateral, which may result in a loss of money by the Fund. There may be risks of delay and costs involved in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. These delays and costs could be greater for foreign securities. However, loans will be made only to borrowers deemed by the Adviser to be creditworthy and when, in the judgment of the Adviser, the income that can be earned from such securities loans justifies the attendant risk. All relevant facts and

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Income Opportunities Fund (Con't)

circumstances, including the creditworthiness of the broker, dealer, bank or institution, will be considered in making decisions with respect to the lending of securities, subject to review by the Trust's Board of Trustees. The Fund also bears the risk that the reinvestment of collateral will result in a principal loss. Finally, there is the risk that the price of the securities will increase while they are on loan and the collateral will not be adequate to cover their value.

**Municipals**

Municipal securities (also referred to as municipal obligations) include debt obligations of states, territories or possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, such as local or regional governments. The interest on municipal securities is generally exempt from federal income tax at the time of issuance, in the opinion of bond counsel or other counsel to the issuers of such securities. However, the Fund may purchase municipal securities that pay interest that is subject to the federal alternative minimum tax, and municipal securities on which the interest payments are taxable. Municipal securities typically are "general obligation" or "revenue" bonds, notes or commercial paper, including participations in lease obligations and installment purchase contracts of municipalities. General obligation bonds are secured by the issuer's full faith and credit including its taxing power for payment of principal and interest. Revenue bonds, however, are generally payable from a specific revenue source. Revenue bonds are issued for a wide variety of projects such as financing public utilities, hospitals, housing, airports, highways and educational facilities. These types of bonds involve the risk that the tax or other revenues so derived will not be sufficient to meet interest and/or principal payment obligations. Municipal obligations may have fixed, variable or floating rates.

Because the Fund may invest in municipal securities, the Fund may be affected significantly by the economic, regulatory, legislative, tax or political developments affecting the ability of issuers of municipal securities to pay interest or repay principal. The risks of municipal securities generally depend on the financial and credit status of the issuer and may rely on a specific stream of revenue associated with a project or other revenue source. Thus, adverse developments related to a municipality's ability to raise revenue, including through its taxing authority, or the failure of specific revenues to materialize would negatively impact such investments. These factors, which may also impact other municipal obligations, include, among others, changing demographic trends, such as population shifts or changing tastes and values, or increasing vacancies or declining rents resulting from legal, cultural, technological, global or local economic developments, as well as reduced demand for properties, revenues or goods. Changes in the financial health of an issuer of municipal securities may make it difficult for the issuer to make interest and principal payments when due. Some municipalities or issuers of municipal securities have had significant financial problems recently, and these and other municipalities or issuers of municipal securities could, potentially, continue to experience significant financial problems resulting from lower tax or other revenues and/or decreased aid from state and local governments in the event of an economic downturn. In addition, adverse legislative, tax, regulatory, demographic or political changes may negatively impact the Fund's investments in municipal securities. These events could decrease the Fund's income and/or adversely affect the Fund's performance and investments. Municipal securities also involve the risk that an issuer may call securities for redemption, which could force the Fund to reinvest the proceeds at a lower rate of interest, and the value of municipal securities may be affected by the rights of municipal security holders.

Municipal securities may be more susceptible to downgrades, defaults or loss of tax or other revenue during recessions or similar periods of economic stress. Factors contributing to the financial stress on municipalities and issuers of municipal securities may include, among other developments, lower property tax collections as a result of lower home values, lower sales tax revenue as a result of consumers cutting back spending and lower income tax revenue as a result of a higher unemployment rate. In addition, because some municipal obligations may be secured or guaranteed by banks and other institutions, the risk to the Fund associated with investments in such municipal securities could increase if the banking or financial sector suffers an economic downturn and/or if the credit ratings of the institutions issuing the guarantee are downgraded or at risk of being downgraded by a national rating organization. If such events occur, the value of the security could decrease or the value could be lost entirely, and it may be difficult or impossible for the Fund to sell the security at the time and the price that normally prevails in the market.

For example, recent public health emergencies have significantly stressed the financial resources of many municipalities and other issuers of municipal securities, which may impair their ability to meet their financial obligations and may harm the value or liquidity of the Fund's investments in municipal securities (or the income generated by such investments). In particular, responses by municipalities to recent public health emergencies have caused disruptions in business activities. These and other effects of recent public health emergencies, such as increased unemployment levels, have impacted tax and other revenues of municipalities and other issuers of municipal securities and the financial conditions of such issuers. As a result, there is an increased budgetary and financial pressure on municipalities and other issuers of municipal securities and heightened risk of default or other adverse credit or similar events for issuers of municipal securities, which would adversely impact the Fund's investments.

In addition, the ability of an issuer to make payments or repay interest may be affected by litigation or bankruptcy. In the event of bankruptcy of such an issuer, the Fund investing in the issuer's securities could experience delays in collecting principal and interest, and the Fund may not, in all circumstances, be able to collect all principal and interest to which it is entitled. To enforce its rights in the event of a default in the payment of interest or repayment of principal, or both, the Fund may, in some instances, take possession of, and manage, the assets securing the issuer's obligations on such securities, which may increase the Fund's operating expenses. Any income derived from the Fund's ownership or operation of such assets may not be tax-exempt. Municipal securities are subject to, among other risks, credit and interest rate risk, liquidity risk and market and geopolitical risk.

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Income Opportunities Fund (Con't)

Because many municipal securities are issued to finance similar projects (such as those relating to education, health care, housing, transportation, and utilities), conditions in those sectors, similar projects or particular states or geographic regions may particularly affect the overall municipal securities market. In addition, changes in the financial condition of an individual municipal issuer can affect the overall municipal market. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the discontinuance of the supporting taxation or the inability to collect revenues for the specific project or specific assets. Moreover, as a result of various economic, market and other factors, there could be reduced tax or other revenue available to issuers of municipal obligations and, in turn, increased budgetary and financial pressure on municipalities and other issuers of municipal obligations, which could adversely impact the risks associated with municipal obligations of such issuer. As a result, the Fund's investments in municipal obligations may be subject to heightened risks relating to the occurrence of such developments.

Some municipal securities are subject to the risk that the U.S. Internal Revenue Service ("IRS") may determine that an issuer has not complied with applicable tax requirements (or the occurrence of other adverse tax developments) and that interest from the municipal security is taxable, which may result in a significant decline in the value of the security. In addition, interest on municipal obligations, while generally exempt from federal income tax, may not be exempt from the federal alternative minimum tax. Municipal securities may be less liquid than taxable bonds and there may be less publicly available information on the financial condition of municipal security issuers than for issuers of other securities, and the investment performance of the Fund investing in municipal securities may therefore be more dependent on the analytical abilities of the Adviser than if the Fund held other types of investments such as stocks or taxable bonds. The secondary market for municipal securities also tends to be less well developed or liquid than many other securities markets, which may adversely affect the Fund's ability to sell municipal securities it holds at attractive prices or value municipal securities. In addition, the demand for municipal securities is strongly influenced by the value of tax-exempt income to investors and lower income tax rates could reduce the advantage of owning municipal securities, which may also adversely affect the value and liquidity of municipal securities.

**Large Transactions Risk**

The Fund may experience adverse effects when large shareholders, or a number of shareholders collectively purchase or redeem large amounts of shares of the Fund ("large shareholder transactions"). Such larger than normal redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund's NAV and liquidity. Similarly, large Fund share purchases may adversely affect the Fund's performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would. Large shareholder transactions may also result in taxable income and/or gains for the Fund, which may increase taxable distributions to shareholders, and may also increase transaction costs. The effects of taxable income and/or gains resulting from large shareholder transactions would particularly impact non-redeeming shareholders who do not hold their Fund shares in an IRA, 401(k) plan or other tax-advantaged investment plans. To the extent that such transactions result in short-term capital gains, such gains when distributed by the Fund will generally be taxed at the ordinary income tax rate for individual shareholders who hold Fund shares in a taxable account. In addition, a large redemption could result in the Fund's current expenses being allocated over a smaller asset base, leading to an increase in the Fund's expense ratio. A number of circumstances may cause the Fund to experience large redemptions, including, but not limited to, the occurrence of significant events affecting investor demand for securities or asset classes in which the Fund invests; changes in the eligibility criteria for the Fund or share class of the Fund; liquidation, reorganization, repositioning, or other announced Fund event; or changes in investment objectives, strategies, policies, risks, or investment personnel. Although large shareholder transactions may be more frequent under certain circumstances, the Fund is generally subject to the risk that shareholders can purchase or redeem a significant percentage of Fund shares at any time.

**Active Management Risk**

In pursuing the Fund's investment objective, the Adviser has considerable leeway in deciding which investments to buy, hold or sell on a day-to-day basis, and which trading strategies to use. For example, the Adviser, in its discretion, may determine to use some permitted trading strategies while not using others. The success or failure of such decisions will affect the Fund's performance.

In addition, it is expected that confidential or material non-public information regarding an investment or potential investment opportunity may become available to the Adviser. If such information becomes available, the Adviser may be precluded (including by applicable law or internal policies or procedures) from pursuing an investment or disposition opportunity with respect to such investment or investment opportunity and the Adviser may be restricted in its ability to cause the Fund to buy or sell securities of an issuer for substantial periods of time when the Fund otherwise could realize profit or avoid loss. This may adversely affect the Fund's flexibility with respect to buying or selling securities and may impair the Fund's liquidity.

**Corporate Debt Obligations**

Corporate debt obligations are fixed-income securities issued by private corporations. The investment return of corporate debt obligations reflects interest earnings and changes in the market value of the security. The market value of a corporate debt obligation may be expected to rise and fall inversely with interest rates generally. There also exists the risk that the issuers of the securities may not be able to meet their obligations on interest or principal payments at the time called for by an instrument or at all. Debtholders,

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Income Opportunities Fund (Con't)

as creditors, have a prior legal claim over common and preferred stockholders of the corporation as to both income and assets for the principal and interest due to the bondholder.

**Temporary Investments**

Under adverse or unstable market conditions or abnormal circumstances or when the Adviser believes that changes in market, economic, political or other conditions warrant, the Fund may, in the discretion of the Adviser, take temporary positions that are inconsistent with the Fund's principal investment strategies in attempting to respond to such conditions or circumstances. For example, the Fund may invest without limit in cash, cash equivalents or other fixed-income instruments, derivatives, repurchase agreements or securities of other investment companies, including money market funds, for temporary purposes. If the Adviser incorrectly predicts the effects of these changes, or during periods of temporary defensive or other temporary positions, such temporary investments may adversely affect the Fund's performance and the Fund may not achieve its investment objective.

**Portfolio Turnover**

Consistent with its investment policies, the Fund will purchase and sell securities without regard to the effect on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year) will cause the Fund to incur additional transaction costs and may result in taxable gains being passed through to shareholders. The Fund may engage in frequent trading of securities to achieve its investment objective.

**Regulatory and Legal Risk**

U.S. and non-U.S. governmental agencies and other regulators regularly implement additional regulations and legislators pass new laws that affect the investments held by the Fund, the strategies used by the Fund or the level of regulation or taxation applying to the Fund (such as regulations related to investments in derivatives and other transactions). These regulations and laws impact the investment strategies, performance, costs and operations of the Fund or taxation of shareholders.

The SEC has proposed amendments to Rule 22e-4 of the 1940 Act that, if adopted, would result in changes to the Fund's liquidity classification framework and could potentially increase the percentage of the Fund's investments classified as illiquid. In addition, the Fund's operations and investment strategies may be adversely impacted if the proposed amendments are adopted.

**Cybersecurity Risk**

With the increased use of technologies such as the internet to conduct business, the Fund, the Adviser, authorized participants, service providers and the relevant listing exchange are susceptible to operational, information security and related "cyber" risks both directly and through the service providers. Similar types of cybersecurity risks are also present for issuers of securities in which the Fund invests, which could result in material adverse consequences for such issuers and may cause the Fund's investment in such issuers to lose value. In general, cyber incidents can result from deliberate attacks or unintentional events. Cyber incidents include, but are not limited to, gaining unauthorized access to digital systems (e.g., through "hacking" or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyberattacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites (i.e., efforts to make network services unavailable to intended users). Recently, geopolitical tensions may have increased the scale and sophistication of deliberate attacks, particularly those from nation-states or from entities with nation-state backing.

Cybersecurity failures by, or breaches of, the systems of the Adviser, distributor and other service providers (including, but not limited to, index and benchmark providers, fund accountants, custodians, transfer agents and administrators), exchanges, market participants, market makers, authorized participants or the issuers of securities in which the Fund invests have the ability to cause disruptions and impact business operations, potentially resulting in: financial losses, interference with the Fund's ability to calculate its NAV, disclosure of confidential trading information, impediments to trading, submission of erroneous trades or erroneous creation or redemption orders, the inability of the Fund or its service providers to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs. In addition, cyberattacks may render records of Fund assets and transactions, shareholder ownership of Fund shares, and other data integral to the functioning of the Fund inaccessible, inaccurate or incomplete. Substantial costs may be incurred by the Fund in order to resolve or prevent cyber incidents in the future. While the Fund has established business continuity plans in the event of, and risk management systems to prevent, such cyber incidents, there are inherent limitations in such plans and systems, including the possibility that certain risks have not been identified, that prevention and remediation efforts will not be successful or that cyberattacks will go undetected. Furthermore, the Fund cannot control the cybersecurity plans and systems put in place by service providers to the Fund, issuers in which the Fund invests, market makers or authorized participants. The Fund and its shareholders could be negatively impacted as a result.

Portfolio Holdings

A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Fund's SAI.

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

Fund Management

The Fund has retained the Adviser—Morgan Stanley Investment Management Inc.—to provide investment advisory services. The Adviser is a wholly-owned subsidiary of Morgan Stanley (NYSE: "MS"), a preeminent global financial services firm engaged in securities trading and brokerage activities, as well as providing investment banking, research and analysis, financing and financial advisory services. The Adviser, together with its affiliated asset management companies, had approximately $1.7 trillion in assets under management or supervision as of December 31, 2024. The Adviser's address is 1585 Broadway, New York, NY 10036.

The Fund is managed by members of the Fixed Income team. The team consists of portfolio managers, analysts and traders. Current members of the team jointly and primarily responsible for the day-to-day implementation of the Fund's overall strategy and portfolio construction are Michael Kushma, Justin Bourgette, CFA, Andrew Szczurowski, CFA and Brian Shaw, CFA.

Mr. Kushma is the Chief Investment Officer of the Broad Markets team for the Adviser. He joined Morgan Stanley in 1987 and the Adviser in 1994. Mr. Szczurowski and Mr. Bourgette are Managing Directors of the Adviser, manage other funds, and have been employed by the Morgan Stanley organization for more than five years. Mr. Shaw is an Executive Director of the Adviser, manages other funds, and has been employed by the Morgan Stanley organization for more than five years.

Members of the team collaborate to manage the assets of the Fund. Each member is responsible for specific sectors. All team members are responsible for the execution of the overall strategy of the Fund.

The Fund's SAI provides additional information about the portfolio managers' compensation structure, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in the Fund.

The composition of the team may change from time to time.

The Fund pays the Adviser a monthly advisory fee as full compensation for the services and facilities furnished to the Fund, and for Fund expenses assumed by the Adviser. The fee is based on the Fund's daily net assets. For the fiscal year ended October 31, 2024, the Fund paid total investment advisory compensation (net of fee waivers, if applicable) amounting to 0.31% of the Fund's average daily net assets.

Morgan Stanley Investment Management Inc., as the Adviser and the Administrator, has agreed to reduce its advisory fee, its administration fee, and/or reimburse the Fund, if necessary, if such fees would cause the total annual operating expenses of the Fund to exceed 0.95% for Class A, 1.24% for Class L, 0.60% for Class I, 1.70% for Class C and 0.57% for Class R6. In determining the actual amount of fee waiver and/or expense reimbursement for the Fund, if any, the Adviser and Administrator exclude from total annual operating expenses, acquired fund fees and expenses (as applicable), certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation). The fee waivers and/or expense reimbursements will continue for at least one year from the date of this Prospectus or until such time as the Fund's Board of Trustees acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. The Adviser and Administrator may make additional voluntary fee waivers and/or expense reimbursements. The Adviser and Administrator may discontinue these voluntary fee waivers and/or expense reimbursements at any time in the future.

The Fund's annual operating expenses may vary throughout the period and from year to year. The Fund's actual expenses may be different than the expenses listed in the Fund's fee and expense table based upon the extent and amount of a fee waiver and/or expense reimbursement.

A discussion regarding the basis for the Board of Trustees' approval of the investment advisory agreement is available in the Fund's report filed on Form N-CSR for the fiscal year ended October 31, 2024.

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information

**Pricing Fund Shares**

The NAV of the Fund (excluding sales charges) is based on the value of the Fund's portfolio securities. While the assets of each class are invested in a single portfolio of securities, the NAV of each class will differ because the classes have different ongoing fees.

The NAV of the Fund is determined once daily on each business day as of the close of regular trading on the NYSE (normally 4:00 p.m. Eastern time) or such other times as the NYSE may officially close (the "Pricing Time"). Orders to purchase or sell (redeem) shares of the Fund must be received by the Fund or a Financial Intermediary prior to 4:00 p.m. Eastern time. Shares generally will not be priced on any day that the NYSE is closed, although Fund shares may be priced on such days if the Securities Industry and Financial Markets Association ("SIFMA") recommends that the bond markets remain open for all or part of the day. On any business day when SIFMA recommends that the bond markets close early, the Fund reserves the right to close at or prior to the SIFMA recommended closing time. If the Fund does so, it will cease granting same day credit for purchase and redemption orders received after the Fund's closing time and credit will be given on the next business day. If the NYSE is closed due to inclement weather, technology problems or any other reason on a day it would normally be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the Fund reserves the right to treat such day as a business day and accept purchase and redemption orders until, and calculate its NAV as of, the normally scheduled close of regular trading on the NYSE for that day, so long as the Adviser believes there generally remains an adequate market to obtain reliable and accurate market quotations. The Fund may also elect to remain open and price its shares on days when the NYSE is closed but the primary securities markets on which the Fund's securities trade remain open. Trading of securities that are primarily listed on foreign exchanges may take place on weekends and other days when the Fund does not price its shares. Therefore, to the extent, if any, that the Fund invests in securities primarily listed on foreign exchanges, the value of the Fund's portfolio securities may change on days when you will not be able to purchase or sell your shares.

The Fund relies on various sources to calculate its NAV. The ability of the Fund's provider of administrative services to calculate the NAV per share of the Fund is subject to operational risks associated with processing or human errors, systems or technology failures, cyber attacks and errors caused by third party service providers, data sources, or trading counterparties. Such failures may result in delays in the calculation of the Fund's NAV and/or the inability to calculate NAV over extended time periods. The Fund may be unable to recover any losses associated with such failures. In addition, if the third party service providers and/or data sources upon which the Fund directly or indirectly relies to calculate its NAV or price individual securities are unavailable or otherwise unable to calculate the NAV correctly, it may be necessary for alternative procedures to be utilized to price the securities at the time of determining the Fund's NAV.

The value of the Fund's portfolio securities is based on the securities' market price when available. With respect to investments that do not have readily available market quotations, the Board of Trustees has designated the Adviser as the valuation designee to perform fair value determinations pursuant to Rule 2a-5 under the 1940 Act. When no market quotations are readily available for a security or other asset, including as a result of the occurrence of a significant event or circumstances under which the Adviser determines that a market quotation is not accurate or reliable, fair value for the security or other asset will be determined in good faith using procedures approved by the Fund's Board of Trustees.

In addition, with respect to securities that primarily are listed on foreign exchanges, when an event occurs after the close of such exchanges that is likely to have changed the value of the securities (e.g., a percentage change in value of one or more U.S. securities indices in excess of specified thresholds), such securities will be valued at their fair value, as determined using methods approved by the Fund's Board of Trustees. Securities also may be fair valued in the event of a significant development affecting a country or region or an issuer-specific development that is likely to have changed the value of the security.

In these cases, the Fund's NAV will reflect certain portfolio securities' fair value rather than their market price. Fair value pricing involves subjective judgment and it is possible that the fair value determined for a security or other asset is materially different than the value that could be realized upon the sale of that security or asset.

To the extent the Fund invests in open-end management companies (other than exchange-traded funds) that are registered under the 1940 Act, the Fund's NAV is calculated based in relevant part upon the NAV of such funds. The prospectuses for such funds explain the circumstances under which they will use fair value pricing and its effects.

&nbsp;&nbsp;&nbsp; ***Contacting a Morgan Stanley Financial Advisor***<br> *If you are new to the Morgan Stanley Funds and would like to contact a Morgan Stanley Financial Advisor, access our office locator on our Internet site at: www.morganstanley.com*<br>

**How to Buy Shares**

*The Fund has suspended offering Class L shares of the Fund for sale to all investors. The Class L shareholders of the Fund do not have the option of purchasing additional Class L shares. However, the existing Class L shareholders may invest in additional Class L shares through reinvestment of dividends and distributions.*

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

Because every investor has different immediate financial needs and long-term investment goals, the Fund currently offers investors five classes of shares: Classes A, I, C, R6 and IR. This Prospectus offers Class A, Class I, Class C and Class R6 shares of the Fund. The Fund offers Class IR shares through a separate prospectus. Class I and Class R6 shares are only offered to a limited group of investors. Each class of shares offers a distinct structure of sales charges, distribution and service fees, and other features that are designed to address a variety of needs. Your Financial Intermediary can help you decide which class may be most appropriate for you. When purchasing Fund shares, you must specify which class of shares you wish to purchase.

**Minimum Investment Amounts.** The minimum investment amounts for Class A shares and Class C shares are as follows:

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| | | |
|:---|:---|:---|
|  | **Minimum Investment** | **Minimum Investment** |
| **Investment Options** | **Initial** | **Additional** |
| Regular Account | $1000 | $100 |
| Individual Retirement Account | $1000 | $100 |

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The minimum investment amount is generally $1 million for Class I shares. To be eligible to purchase Class I shares, you must qualify under one of the investor categories specified in the "Shareholder Information—Share Class Arrangements" section of this Prospectus.

The Fund no longer accepts direct purchases of Class C shares by accounts for which no broker-dealer or other Financial Intermediary is specified. Any direct purchase received by the Fund's Transfer Agent (as defined below) for Class C shares for such accounts will automatically be invested in Class A shares of the Fund.

The minimum initial investment amounts may be waived for Class A, Class I and Class C by the Adviser for the following categories: (1) sales through banks, broker-dealers and other financial institutions (including registered investment advisers and financial planners) purchasing shares on behalf of their clients in (i) discretionary and non-discretionary advisory programs, (ii) asset allocation programs, (iii) other programs in which the client pays an asset-based fee for advice or for executing transactions in Fund shares or for otherwise participating in the program or (iv) certain other investment programs that do not charge an asset-based fee, as outlined in an agreement between the Distributor and such financial institution; (2) sales through a Financial Intermediary that has entered into an agreement with the Distributor to offer Fund shares to self-directed investment brokerage accounts, which may or may not charge a transaction fee; (3) qualified state tuition plans described in Section 529 of the Code (subject to all applicable terms and conditions); (4) defined contribution, defined benefit and other employer-sponsored employee benefit plans, whether or not qualified under the Code, where such plans purchase Class A, Class I and/or Class C shares through a plan-level or omnibus account sponsored or serviced by a Financial Intermediary that has entered into an agreement with the Fund, the Distributor and/or the Adviser pursuant to which such Class A, Class I and/or Class C shares are available to such plans; (5) certain retirement and deferred compensation programs established by Morgan Stanley Investment Management or its affiliates for their employees or the Fund's Trustees; (6) current or retired directors, officers and employees of Morgan Stanley and any of its subsidiaries, such persons' spouses, and children under the age of 21, and trust accounts for which any of such persons is a beneficiary; (7) current or retired Directors or Trustees of the Morgan Stanley Funds, such persons' spouses, and children under the age of 21, and trust accounts for which any of such persons is a beneficiary; (8) certain other registered open-end investment companies whose shares are distributed by the Distributor; (9) investments made in connection with certain mergers and/or reorganizations as approved by the Adviser; (10) the reinvestment of dividends from Class A, Class I or Class C shares of the Fund in additional shares of the same class of the Fund; or (11) certain other institutional investors based on assets under management or other considerations at the discretion of the Adviser.

Certain waivers may not be available depending on the policies at certain Financial Intermediaries. Each Financial Intermediary may also have its own rules about minimum initial investment amounts, minimum account balances, share transactions and limits on the number of share transactions you are permitted to make in a given time period. When purchasing shares through a Financial Intermediary, you may not benefit from certain policies and procedures of the Fund as your eligibility may be dependent upon the policies and procedures of your Financial Intermediary, including those regarding reductions of sales charges. Please consult your Financial Intermediary for more information.

To purchase Class R6 shares, an investor must meet a minimum initial investment of $5 million or be a defined contribution, defined benefit or other employer sponsored employee benefit plan, in each case provided that the plan trades through an intermediary that combines its clients' assets in a single omnibus account, whether or not such plan is qualified under the Code and in each case subject to the discretion of the Adviser. Omnibus trades of $5 million or more shall be accepted from certain platforms, including: (i) banks and trust companies; (ii) insurance companies; and (iii) registered investment advisory firms. The $5 million minimum initial investment amount may be waived for Class R6 shares purchased by or through: (1) certain registered open-end investment companies whose shares are distributed by the Distributor; or (2) investments made in connection with certain mergers and/or reorganizations as approved by the Adviser.

The Adviser, in its sole discretion, may waive a minimum initial investment amount in certain cases.

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

**Purchasing Shares Through a Financial Intermediary.** You may open a new account and purchase Fund shares through your Financial Intermediary. Your Financial Intermediary will assist you with the procedures to invest in shares of the Fund. Your Financial Intermediary may charge transaction-based or other fees in connection with the purchase or sale of Fund shares. Please consult your Financial Intermediary for more information regarding any such fees and for purchase instructions.

With respect to sales through Financial Intermediaries, no offers or sales of Fund shares may be made in any foreign jurisdiction, except with the consent of the Distributor.

**Purchasing Shares Directly from the Fund.**

Initial Purchase

You may open a new account, subject to acceptance by the Fund, and purchase shares of the Fund by completing and signing a New Account Application provided by SS&C Global Investor and Distribution Solutions, Inc. (the "Transfer Agent"), or Eaton Vance Management, the Fund's co-transfer agent (the "Co-Transfer Agent"), which you can obtain by calling Morgan Stanley Shareholder Services and Eaton Vance Management at 1-800-869-6397 (our automated telephone system (which is generally accessible 24 hours a day, seven days a week)) and mailing it to Morgan Stanley Income Opportunities Fund, c/o SS&C Global Investor and Distribution Solutions, Inc., P.O. Box 219804, Kansas City, MO 64121-9804.

After submitting a completed New Account Application to the Transfer Agent, you may wire Federal Funds (monies credited by a Federal Reserve Bank) to State Street Bank and Trust Company (the "Custodian"). You should instruct your bank to send a Federal Funds wire in a specified amount to the Custodian using the following wire instructions:

State Street Bank and Trust Company

One Congress Street,

Boston, MA 02114-2016

ABA #011000028

DDA #99060238

Attn: Morgan Stanley Funds Subscription Account

Ref: (Fund Name, Account Number, Account Name)

The Fund no longer accepts direct purchases of Class C shares by accounts for which no broker-dealer or other Financial Intermediary is specified (i.e., such purchasers are not eligible investors for Class C shares). Any direct purchase received by the Transfer Agent for Class C shares for such accounts will automatically be invested in Class A shares of the Fund. In addition, Class C shares held in an account for which no broker-dealer or other Financial Intermediary is specified and which are not subject to a CDSC will periodically be converted to Class A shares of the Fund.

**Additional Investments.** You may purchase additional Fund shares for your account at any time by contacting your Financial Intermediary or by contacting the Fund directly. For additional purchases directly from the Fund, you should write a "letter of instruction" that includes your account name, account number, the Fund name and the class selected, signed by the account owner(s), to assure proper crediting to your account. After mailing a "letter of instruction," you may wire Federal Funds by following the instructions under "Initial Purchase."

**General.** To help the U.S. Government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. What this means to you: when you open an account, we will ask your name, address, date of birth and other information that will allow us to identify you. If we are unable to verify your identity, we reserve the right to restrict additional transactions and/or liquidate your account at the next calculated NAV after your account is closed (less any applicable sales/account charges and/or tax penalties) or take any other action required by law. In accordance with federal law requirements, the Fund has implemented an anti-money laundering compliance program, which includes the designation of an anti-money laundering compliance officer.

When you buy Fund shares, the shares (plus any applicable sales charge) will be purchased at the next share price calculated after we receive your purchase order in good order. Purchase orders not received in good order prior to Pricing Time will be executed at the NAV next determined after the purchase order is received in good order. Certain institutional investors and financial institutions have entered into arrangements with the Fund, the Adviser and/or the Distributor pursuant to which they may place orders prior to the Pricing Time, but make payment in Federal Funds for those shares up to three days after the purchase order is placed, depending on the arrangement. We reserve the right to reject any order for the purchase of Fund shares for any reason.

The Fund may suspend the offering of shares, or any class of shares, or reject any purchase orders when we think it is in the best interest of the Fund.

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

**How to Exchange Shares**

**Permissible Fund Exchanges.** You may exchange shares of any class of the Fund for the same class of shares of any mutual fund (excluding money market funds) sponsored and advised by the Adviser (each, a "Morgan Stanley Multi-Class Fund"), if available, without the imposition of an exchange fee. Class L shares of the Fund may be exchanged for Class L shares of any Morgan Stanley Multi-Class Fund, even though Class L shares are closed to investors. In addition, you may exchange shares of any class of the Fund for shares of Morgan Stanley U.S. Government Money Market Trust (a "Morgan Stanley Money Market Fund" and, together with the Morgan Stanley Multi-Class Funds, the "Morgan Stanley Funds"), if available, without the imposition of an exchange fee. Because purchases of Class A shares of Morgan Stanley Institutional Fund Trust Ultra-Short Income Portfolio are not subject to a sales charge, you may be subject to the payment of a sales charge by your Financial Intermediary, at time of exchange into Class A shares of a Morgan Stanley Fund, based on the amount that you would have owed if you directly purchased Class A shares of that Morgan Stanley Fund (less any sales charge previously paid in connection with shares exchanged for such shares of Morgan Stanley Institutional Fund Trust Ultra-Short Income Portfolio). Class L shares of the Fund that are exchanged for shares of a Morgan Stanley Money Market Fund may be subsequently re-exchanged for Class L shares of the Fund or any other Morgan Stanley Multi-Class Fund (even though Class L shares are closed to investors).

Exchanges are effected based on the respective NAVs of the applicable Morgan Stanley Fund (subject to any applicable redemption fee) and in accordance with the eligibility requirements of such Fund. To obtain a prospectus for another Morgan Stanley Fund, contact your Financial Intermediary or call Morgan Stanley Shareholder Services at 1-800-869-6397. If you purchased Fund shares through a Financial Intermediary, certain Morgan Stanley Funds may be unavailable for exchange. Contact your Financial Intermediary for more information regarding the exchange privilege and to determine which Morgan Stanley Funds are available for exchange. The current prospectus for each Morgan Stanley Fund describes its investment objective(s), policies, investment minimums and applicable sales charges, and should be read before investing. Since exchanges are available only into continuously offered Morgan Stanley Funds, exchanges are generally not available into Morgan Stanley Funds or classes of Morgan Stanley Funds that are not currently being offered for purchase (except with respect to exchanges of Class L shares as noted above).

There are special considerations when you exchange Class A and Class C shares of the Fund that are subject to a CDSC. When determining the length of time you held the Class A or Class C shares, any period (starting at the end of the month) during which you held such shares will be counted. In addition, any period (starting at the end of the month) during which you held (i) Class A or Class C shares of a Morgan Stanley Multi-Class Fund or (ii) shares of a Morgan Stanley Money Market Fund, any of which you acquired in an exchange from such Class A or Class C shares of the applicable Fund, will also be counted; however, if you sell shares of (a) the Morgan Stanley Multi-Class Fund or (b) the Morgan Stanley Money Market Fund, before the expiration of the CDSC "holding period," you will be charged the CDSC applicable to such shares.

You will be subject to the same minimum initial investment and account size as an initial purchase. Your exchange price will be the price calculated at the next Pricing Time after the Morgan Stanley Fund receives your exchange order. The Morgan Stanley Fund, in its sole discretion, may waive the minimum initial investment amount in certain cases. The Fund may terminate or revise the exchange privilege upon required notice or in certain cases without notice. The Fund reserves the right to reject an exchange order for any reason.

**Exchange Procedures.** You can process an exchange by contacting your Financial Intermediary. You may also call the Co-Transfer Agent toll-free at 1-800-869-6397 to place an exchange order.

Exchange requests received on a business day (prior to the time shares of the funds involved in the request are priced) will be processed on the date of receipt. "Processing" a request means that shares of the Fund that you are exchanging will be redeemed and shares of the Morgan Stanley Fund that you are purchasing will be purchased at the NAV next determined on the date of receipt. Exchange requests received on a business day after the time that shares of the funds involved in the request are priced will be processed on the next business day in the manner described herein.

The Fund may terminate or revise the exchange privilege upon required notice or in certain cases without notice. See "Limitations on Exchanges." For direct accounts, the check writing privilege is not available for Morgan Stanley Money Market Fund shares you acquire in an exchange from a non-money market fund. If you are investing through a financial advisor, check with your advisor regarding the availability of check writing privileges.

**Telephone Exchanges.** Morgan Stanley (and its subsidiaries) and the Fund employ procedures considered by them to be reasonable to confirm that instructions communicated by telephone are genuine. Such procedures may include requiring certain personal identification information prior to acting upon telephone instructions, tape-recording telephone communications and providing written confirmation of instructions communicated by telephone. If reasonable procedures are employed, neither Morgan Stanley (or its affiliates) nor the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. Telephone exchanges may not be available if you cannot reach Morgan Stanley Shareholder Services by telephone, whether because all telephone

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

lines are busy or for any other reason; in such case, a shareholder would have to use the Fund's other exchange procedures described in this section.

Telephone instructions will be accepted if received by Morgan Stanley Shareholder Services between 9:00 a.m. and 4:00 p.m. Eastern time on any day the NYSE is open for business. On any business day that the NYSE closes early, or when SIFMA recommends that the securities markets close early, the Fund may close early and purchase orders received after such earlier closing times will be processed the following business day. During periods of drastic economic or market changes, it is possible that the telephone exchange procedures may be difficult to implement, although this has not been the case with the Fund in the past.

You automatically have the telephone exchange privilege unless you indicate otherwise by checking the applicable box on the New Account Application. You may also opt out of telephone privileges at any time by contacting Morgan Stanley Shareholder Services at 1-800-869-6397. If you hold share certificates, no exchanges may be processed until we have received all applicable share certificates.

**Margin Accounts.** If you have pledged your Fund shares in a margin account, contact your Financial Intermediary regarding restrictions on the exchange of such shares.

**Tax Considerations of Exchanges.** If you exchange shares of the Fund for shares of another Morgan Stanley Fund, there are important tax considerations. For tax purposes, the exchange out of the Fund is considered a sale of Fund shares and the exchange into the other fund is considered a purchase. As a result, you may realize a capital gain or loss.

You should review the "Shareholder Information—Taxes" section and consult your own tax professional about the tax consequences of an exchange.

**Limitations on Exchanges.** Certain patterns of past exchanges and/or purchase or sale transactions involving the Fund or other Morgan Stanley Funds may result in the Fund rejecting, limiting or prohibiting, at its sole discretion, and without prior notice, additional purchases and/or exchanges and may result in a shareholder's account being closed. Determinations in this regard may be based on the frequency or dollar amount of previous exchanges or purchase or sale transactions. The Fund reserves the right to reject an exchange request for any reason.

**CDSC Calculations on Exchanges.** See the "Shareholder Information—Share Class Arrangements" section of this Prospectus for a discussion of how applicable CDSCs are calculated for shares of one Morgan Stanley Fund that are exchanged for shares of another.

For further information regarding exchange privileges, you should contact your Financial Intermediary or call toll-free 1-800-869-6397.

**How to Sell Shares**

You can sell some or all of your Fund shares at any time. If you sell Class A or Class C shares, your net sale proceeds are reduced by the amount of any applicable CDSC. Your shares will be sold at the next price calculated after we receive your order to sell as described below.

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| | |
|:---|:---|
| **Options** | **Procedures** |
| Contact Your Morgan Stanley Financial Advisor/Financial Intermediary | To sell your shares, simply call your Financial Intermediary. Payment will be sent to the address to which the account is registered or deposited in your brokerage account. Your Financial Intermediary may charge transaction-based or other fees in connection with the purchase or sale of the Fund's shares. Please contact your Financial Intermediary for more information regarding any such fees. |
| Contact the Fund By Telephone | You can also sell your shares by telephone and have the proceeds sent to the address of record or wired to your bank account on record. You automatically have the telephone redemption privilege unless you indicate otherwise by checking the applicable box on the New Account Application. You may also opt out of telephone privileges at any time by contacting Morgan Stanley Shareholder Services at 1-800-869-6397.<br> Before processing a telephone redemption, keep the following information in mind:<br> • You can establish this option at the time you open the account by completing the New Account Application or subsequently by calling toll-free 1-800-869-6397.<br>• Call toll-free 1-800-869-6397 to process a telephone redemption using our automated telephone system which is generally accessible 24 hours a day, seven days a week.<br>• Your request must be received prior to market close, generally 4:00 p.m. Eastern time.<br>• If your account has multiple owners, Morgan Stanley Shareholder Services may rely on the instructions of any one owner.<br>• Proceeds must be made payable to the name(s) and address in which the account is registered.<br>• You may redeem amounts of $50,000 or less daily if the proceeds are to be paid by check or by Automated Clearing House.<br>• This privilege is not available if the address on your account has changed within 15 calendar days prior to your telephone redemption request.<br>• Telephone redemption is available for most accounts other than accounts with shares represented by certificates. |

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

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| | |
|:---|:---|
| **Options** | **Procedures** |
| Contact the Fund By Telephone (continued) | If you request to sell shares that were recently purchased by check, the proceeds of that sale may not be sent to you until it has been verified that the check has cleared, which may take up to 15 calendar days from the date of purchase.<br> Morgan Stanley (and its subsidiaries) and the Fund employ procedures considered by them to be reasonable to confirm that instructions communicated by telephone are genuine. Such procedures may include requiring certain personal identification information prior to acting upon telephone instructions, tape-recording telephone communications and providing written confirmation of instructions communicated by telephone. If reasonable procedures are employed, neither Morgan Stanley (or its affiliates) nor the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. Telephone redemptions may not be available if a shareholder cannot reach Morgan Stanley Shareholder Services by telephone, whether because all telephone lines are busy or for any other reason; in such case, a shareholder would have to use the Fund's other redemption procedures described in this section. |
| Contact the Fund By Letter | You can also sell your shares by writing a "letter of instruction" that includes:<br>• the name on your account and account number;<br>• the name of the Fund;<br>• the dollar amount or the number of shares you wish to sell;<br>• the class of shares you wish to sell;<br>• the signature of each owner as it appears on the account; and<br>• whether you wish to receive the redemption proceeds by check or by wire to the bank account we have on file for you.<br> If you are requesting payment to anyone other than the registered owner(s) or that payment be sent to any address other than the address of the registered owner(s) or pre-designated bank account, you will need a signature guarantee. You can obtain a signature guarantee from an eligible guarantor acceptable to the Transfer Agent. (You should contact Morgan Stanley Shareholder Services toll-free at 1-800-869-6397 for a determination as to whether a particular institution is an eligible guarantor.) A notary public cannot provide a signature guarantee. Additional documentation may be required for shares held by a corporation, partnership, trustee or executor.<br> Mail the letter to SS&C Global Investor and Distribution Solutions, Inc. at P.O. Box 219804, Kansas City, MO 64121-9804. If you hold share certificates, you must return the certificates, along with the letter and any required additional documentation. A check or wire will be sent according to your instructions. |
| Systematic<br>Withdrawal Plan | If your investment in all of the Morgan Stanley Funds has a total market value of at least $10,000, you may elect to withdraw amounts of $25 or more, or in any whole percentage of a fund's balance (provided the amount is at least $25), on a monthly, quarterly, semi-annual or annual basis, from any fund with a balance of at least $1,000. Each time you add a fund to the plan, you must meet the plan requirements.<br> Amounts withdrawn are subject to any applicable CDSC. A CDSC may be waived under certain circumstances. See the Class A and Class C waiver categories listed in the "Shareholder Information—Share Class Arrangements" section of this Prospectus.<br> To sign up for the systematic withdrawal plan, contact your Morgan Stanley Financial Advisor or call toll-free 1-800-869-6397. You may terminate or suspend your plan at any time. Please remember that withdrawals from the plan are sales of shares, not Fund "distributions," and ultimately may exhaust your account balance. The Fund may terminate or revise the plan at any time. |

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**Payment for Sold Shares.** The Fund typically expects to pay redemption proceeds to you within two business days following receipt of your redemption request for those payments made to your brokerage account held with a Financial Intermediary. For redemption proceeds that are paid directly to you by the Fund, the Fund typically expects to pay redemption proceeds by check or by wire to you within one business day, following receipt of your redemption request; however, in all cases, it may take up to seven calendar days to pay redemption proceeds.

The Fund typically expects to meet redemption requests by using a combination of sales of securities held by the Fund and/or holdings of cash and cash equivalents. On a less regular basis, the Fund also reserves the right to use borrowings to meet redemption requests, and the Fund may use these methods during both normal and stressed market conditions.

Payment may be postponed or the right to sell your shares suspended under unusual circumstances. If you request to sell shares that were recently purchased by check, the proceeds of the sale may not be sent to you until it has been verified that the check has cleared, which may take up to 15 calendar days from the date of purchase.

**Payments-in-Kind.** If we determine that it is in the best interest of the Fund not to pay redemption proceeds in cash, we may pay you partly or entirely by distributing to you securities held by the Fund. If the Fund redeems your shares in-kind, you will bear any market risks associated with the securities paid as redemption proceeds. Such in-kind securities may be illiquid and difficult or impossible for a shareholder to sell at a time and at a price that a shareholder would like. Redemptions paid in such securities generally will give rise to income, gain or loss for income tax purposes in the same manner as redemptions paid in cash. In addition, you may incur brokerage costs and a further gain or loss for income tax purposes when you ultimately sell the securities.

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

**Tax Considerations.** Normally, your sale of Fund shares is subject to federal and state income tax. You should review the "Shareholder Information—Taxes" section of this Prospectus and consult your own tax professional about the tax consequences of a sale.

**Conversion to a New Share Class.** If the value of an account containing Class I or Class R6 shares falls below the applicable investment minimum because of shareholder redemption(s) or the failure to meet one of the waiver criteria set forth under "How to Buy Shares—Minimum Investment Amounts" above and, if the account value remains below such investment minimum, the shares in such account may, at the Adviser's discretion, convert to another class of shares offered by the Fund, if an account meets the minimum investment amount for such class, and will be subject to the shareholder services fee and other features applicable to such shares. Conversion to another class of shares will result in holding a share class with higher fees. The Fund will not convert to another class of shares based solely upon changes in the market that reduce the NAV. Under current tax law, conversion between share classes is not a taxable event to the shareholder. Shareholders will be notified prior to any such conversion.

**Reinstatement Privilege.** If you redeem shares, you may reinvest at net asset value all or any portion of the redemption proceeds in the same account and in the same class of shares of the Fund you redeemed from or another Morgan Stanley Multi-Class Fund, provided that the reinvestment occurs within 90 days of the redemption, the privilege has not been used more than once in the prior 12 months, the redeemed shares were subject to a front-end sales charge or CDSC and that you are otherwise eligible to invest in that class. Under these circumstances your account will be credited with any CDSC paid in connection with the redemption. Any CDSC period applicable to the shares you acquire upon reinvestment will run from the date of your original share purchase. For requests for reinvestment sent to the Fund's transfer agent, the request must be in writing. At the time of a reinvestment, you or your financial intermediary must notify the Fund or the transfer agent that you are reinvesting redemption proceeds in accordance with this privilege. If you reinvest, your purchase will be at the next determined net asset value following receipt of your request.

**Involuntary Sales.** If the value of an account falls below the investment minimum for a particular share class of the Fund because of shareholder redemption(s) or you no longer meet one of the waiver criteria set forth under "How to Buy Shares—Minimum Investment Amounts" above and, if the account value remains below such investment minimums, the shares in such account may be subject to redemption by the Fund. The Fund will not redeem shares based solely upon changes in the market that reduce the NAV of shares. However, before the Fund sells your shares in this manner, we will notify you and allow you 60 days to make an additional investment in an amount that will increase the value of your account to at least the required amount before the sale is processed. No CDSC will be imposed on any involuntary sale.

**Margin Accounts.** If you have pledged your Fund shares in a margin account, contact your Financial Intermediary regarding restrictions on the sale of such shares.

&nbsp;&nbsp;&nbsp; ***Targeted Dividends*<sup>*SM*</sup>** <br>*You may select to have your Fund distributions automatically invested in other classes of Fund shares or classes of another Morgan Stanley Fund that you own. Contact your financial advisor for further information about this service.*<br>

**Distributions**

The Fund passes substantially all of its earnings from income and capital gains along to its investors as "distributions." The Fund earns income from stocks and interest from fixed-income investments. These amounts are passed along to Fund shareholders as "income dividend distributions." The Fund realizes capital gains whenever it sells securities for a higher price than it paid for them. These amounts may be passed along as "capital gain distributions."

The Fund declares income dividends separately for each class. Distributions paid on Class A, Class I and Class R6 shares usually will be higher than for Class L and Class C shares because distribution fees that Class L and Class C shares pay are higher. Normally, income dividends are declared and distributed to shareholders monthly. Capital gains, if any, are usually distributed in December. The Fund, however, may retain and reinvest any long-term capital gains. The Fund may at times make payments from sources other than income or capital gains that represent a return of a portion of your investment. These payments would not be taxable to you as a shareholder, but would have the effect of reducing your basis in the Fund.

Distributions are reinvested automatically in additional shares of the same class and automatically credited to your account, unless you request in writing that all distributions be paid in cash. If you elect the cash option, the Fund will mail a check to you no later than seven business days after the distribution is declared. However, if you purchase Fund shares through a Financial Intermediary within three business days prior to the record date for the distribution, the distribution will automatically be paid to you in cash, even if you did not request to receive all distributions in cash. No interest will accrue on uncashed checks. If you wish to change how your distributions are paid, your request should be received by the Transfer Agent at least five business days prior to the record date of the distributions. If any distribution check remains uncashed for six months, Morgan Stanley reserves the right to invest the amount represented by the check in Fund shares at the then-current net asset value of the Fund and all future distributions will be reinvested.

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

For accounts held directly with the Transfer Agent for which the shareholder has elected to receive distributions via check, any distribution (dividend or capital gain) under $10.00 is automatically reinvested in additional shares regardless of your elected distribution option.

**Frequent Purchases and Redemptions of Shares**

Frequent purchases and redemptions of Fund shares by Fund shareholders are referred to as "market-timing" or "short-term trading" and may present risks for other shareholders of the Fund, which may include, among other things, dilution in the value of Fund shares held by long-term shareholders, interference with the efficient management of the Fund's portfolio, increased brokerage and administrative costs, incurring unwanted taxable gains and forcing the Fund to hold excess levels of cash.

In addition, the Fund is subject to the risk that market-timers and/or short-term traders may take advantage of time zone differences between the foreign markets on which the Fund's portfolio securities trade and the time the Fund's NAV is calculated ("time-zone arbitrage"). For example, a market-timer may purchase shares of the Fund based on events occurring after foreign market closing prices are established, but before the Fund's NAV calculation, that are likely to result in higher prices in foreign markets the following day. The market-timer would redeem the Fund's shares the next day, when the Fund's share price would reflect the increased prices in foreign markets, for a quick profit at the expense of long-term Fund shareholders.

Investments in other types of securities also may be susceptible to short-term trading strategies. These investments include securities that are, among other things, thinly traded, traded infrequently or relatively illiquid, which have the risk that the current market price for the securities may not accurately reflect current market values. A shareholder may seek to engage in short-term trading to take advantage of these pricing differences (referred to as "price arbitrage"). Investments in certain fixed-income securities may be adversely affected by price arbitrage trading strategies.

The Fund's policies with respect to valuing portfolio securities are described in "Shareholder Information—Pricing Fund Shares."

The Fund discourages and does not accommodate frequent purchases and redemptions of Fund shares by Fund shareholders and the Fund's Board of Trustees has adopted policies and procedures with respect to such frequent purchases and redemptions. The Fund's policies with respect to purchases, redemptions and exchanges of Fund shares are described in the "Shareholder Information—How to Buy Shares," "—How to Sell Shares" and "—How to Exchange Shares" sections of this Prospectus. Except as described in each of these sections, and with respect to trades that occur through omnibus accounts at Financial Intermediaries, as described below, the Fund's policies regarding frequent trading of Fund shares are applied uniformly to all shareholders. With respect to trades that occur through omnibus accounts at Financial Intermediaries, such as investment managers, broker-dealers, transfer agents and third-party administrators, the Fund (i) requests assurance that such Financial Intermediaries currently selling Fund shares have in place internal policies and procedures reasonably designed to address market-timing concerns and has instructed such Financial Intermediaries to notify the Fund immediately if they are unable to comply with such policies and procedures, and (ii) requires all prospective intermediaries to agree to cooperate in enforcing the Fund's policies (or, upon prior written approval only, a Financial Intermediary's own policies) with respect to frequent purchases, redemptions and exchanges of Fund shares.

Omnibus accounts generally do not identify customers' trading activity to the Fund on an individual ongoing basis. Therefore, with respect to trades that occur through omnibus accounts at Financial Intermediaries, to some extent, the Fund relies on the Financial Intermediary to monitor frequent short-term trading within the Fund by the Financial Intermediary's customers. However, the Fund or the Distributor has entered into agreements with Financial Intermediaries whereby Financial Intermediaries are required to provide certain customer identification and transaction information upon the Fund's request. The Fund may use this information to help identify and prevent market-timing activity in the Fund. There can be no assurance that the Fund will be able to identify or prevent all market-timing activities.

**Inactive Accounts and Risk of Escheatment**

In accordance with state "unclaimed property" laws, your Fund shares may legally be considered abandoned and required to be transferred to the relevant state (also known as "escheatment") under various circumstances. These circumstances, which vary by state, can include inactivity (e.g., no owner-initiated contact for a certain period), returned mail (e.g., when mail sent to a shareholder is returned by the post office as undeliverable), uncashed checks or a combination of these. An incorrect address may cause a shareholder's account statements and other mailings to be returned to the Fund or your Financial Intermediary. Since states' statutory requirements regarding inactivity differ, it is important to regularly contact your Financial Intermediary or the Fund's transfer agent. The process described above, and the application of state escheatment laws, may vary by state and/or depending on how shareholders hold their shares in the Fund. Escheatment with respect to a retirement account is subject to a 10% federal withholding on the account.

It is your responsibility to ensure that you maintain a valid mailing address for your account, keep your account active by contacting your Financial Intermediary or the Fund's transfer agent (e.g., by mail or telephone), and promptly cash all checks for dividends,

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

capital gains and redemptions. Neither the Fund nor the Adviser will be liable to shareholders or their representatives for good faith compliance with escheatment laws.

For more information, please contact us at 1-800-869-6397.

**Taxes**

As with any investment, you should consider how your Fund investment will be taxed. The tax information in this Prospectus is provided as general information. You should consult your own tax professional about the tax consequences of an investment in the Fund.

Unless your investment in the Fund is through a tax-deferred retirement account, such as a 401(k) plan or IRA, you need to be aware of the possible tax consequences when:

• The
 Fund makes distributions; and

• You
 sell Fund shares, including an exchange to another Morgan Stanley Fund.

Your distributions are normally subject to federal income tax when they are paid, whether you take them in cash or reinvest them in Fund shares. A distribution also may be subject to state and local income tax. Depending on your state's rules, however, dividends attributable to interest earned on direct obligations of the U.S. Government may be exempt from state and local taxes. Any income dividend distributions and any short-term capital gain distributions are taxable to you as ordinary income. Any long-term capital gain distributions are taxable as long-term capital gains, no matter how long you have owned shares in the Fund. The Fund does not anticipate that it will make distributions eligible for the reduced rate of taxation applicable to qualified dividend income or for the corporate dividends-received deduction.

If more than 50% of the Fund's assets are invested in foreign securities at the end of any fiscal year, the Fund may elect to permit shareholders to take a credit (subject to certain limitations) or deduction on their federal income tax return for foreign taxes paid by the Fund. If the Fund makes such an election, the shareholders would also include the amount of such foreign taxes in their income.

If you buy shares of the Fund before a distribution, you will be subject to tax on the entire amount of the taxable distribution you receive. Distributions are taxable to you even if they are paid from income or gain earned by the Fund before your investment (and thus were included in the price you paid for your Fund shares).

You will be sent a statement (U.S. Internal Revenue Service ("IRS") Form 1099-DIV) by February of each year showing the taxable distributions paid to you in the previous year. The statement provides information on your dividends and any capital gains for tax purposes.

Your sale of Fund shares normally is subject to federal and state income tax and may result in a taxable gain or loss to you. A sale also may be subject to local income tax. Your exchange of Fund shares for shares of another Morgan Stanley Fund is treated for tax purposes like a sale of your original shares and a purchase of your new shares. Thus, the exchange may, like a sale, result in a taxable gain or loss to you and will give you a new tax basis for your new shares.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds certain threshold amounts.

Shareholders who are not citizens or residents of the United States and certain foreign entities will generally be subject to withholding of U.S. tax of 30% on distributions made by the Fund of investment income.

Dividends paid by the Fund to shareholders who are nonresident aliens or foreign entities that are derived from short-term capital gains and qualifying U.S. source net interest income (including income from original issue discount and market discount), and that are reported by the Fund as "interest-related dividends" or "short-term capital gain dividends," will generally not be subject to U.S. withholding tax, provided that the income would not be subject to U.S. federal income tax if earned directly by the foreign shareholder. However, depending on the circumstances, the Fund may report all, some or none of the Fund's potentially eligible dividends as exempt.

The Fund is required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the Fund to enable the Fund to determine whether withholding is required.

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

The Fund (or its administrative agent) is required to report to the IRS and furnish to Fund shareholders the cost basis information for sale transactions of shares purchased on or after January 1, 2012. Shareholders may elect to have one of several cost basis methods applied to their account when calculating the cost basis of shares sold, including average cost, FIFO ("first-in, first-out") or some other specific identification method. Unless you instruct otherwise, the Fund will use average cost as its default cost basis method, and will treat sales as first coming from shares purchased prior to January 1, 2012. If average cost is used for the first sale of Fund shares covered by these rules, the shareholder may only use an alternative cost basis method for shares purchased prospectively. Fund shareholders should consult with their tax advisors to determine the best cost basis method for their tax situation.

When you open your Fund account, you should provide your social security or tax identification number on your investment application. By providing this information, you will avoid being subject to federal backup withholding tax on taxable distributions and redemption proceeds at a rate of 24%. Any withheld amount would be sent to the IRS as an advance payment of your taxes due on your income.

**Share Class Arrangements**

The Fund offers several classes of shares having different distribution arrangements designed to provide you with different purchase options according to your investment needs. Your Financial Intermediary can help you decide which class may be appropriate for you.

The general public is offered two classes: Class A shares and Class C shares, which differ principally in terms of sales charges and ongoing expenses. Class L shares are closed to new investments. Class L shareholders of the Fund do not have the option of purchasing additional Class L shares. However, the existing Class L shareholders may invest in additional shares of their respective class through reinvestment of dividends and distributions. A fourth class, Class I shares, is offered only to a limited category of investors. The Fund offers a fifth class, Class R6 shares, which is offered only to eligible investors meeting certain minimum investment requirements. The Fund also offers a sixth class, Class IR shares, through a separate Prospectus. Shares that you acquire through reinvested distributions will not be subject to any front-end sales charge or CDSC.

In addition, the Adviser may in its sole discretion permit a conversion of one share class to another share class of the same Fund in certain circumstances, provided that the Fund's eligibility requirements are met, and subject to the shareholder's consent. Such conversions will be on the basis of the relative NAVs and without the imposition of any redemption fee or other charge.

A conversion of shares of one class directly for shares of another class of the same Fund normally should not be taxable for federal income tax purposes.

Please ask your financial advisor if you are eligible for converting a class of shares pursuant to the conversion features described in this Prospectus. A conversion feature's availability will be subject to the applicable classes being offered on a Financial Intermediary's platform. Shareholders should carefully review information in this Prospectus regarding share class features, including conversions and exchanges, or contact their financial advisor for more information. You should talk to your tax advisor before making a conversion.

Sales personnel may receive different compensation for selling each class of shares. The sales charges applicable to each class provide for the distribution financing of shares of that class.

The chart below compares the sales charge and annual 12b-1 fee applicable to each class:

---

| | | |
|:---|:---|:---|
| **Class** | **Sales Charge** | **Maximum Annual 12b-1 Fee** |
| A | Maximum 3.25% initial sales charge reduced for purchases of $100,000 or more; shares purchased without an initial sales charge are generally subject to a 0.75% CDSC if sold during the first 12 months (for Class A shares purchased without an initial sales charge prior to April 29, 2022, such shares are generally subject to a 0.50% CDSC if sold during the first 12 months) | 0.25% |
| L |  | 0.50% |
| I |  |  |
| C | Maximum 1.00% CDSC on sales made within one year after the last day of the month of purchase | 1.00% |
| R6 |  |  |

---

While Class L and Class C shares do not have any front-end sales charges, their higher ongoing annual expenses (due to higher 12b-1 fees) mean that over time you could end up paying more for these shares than if you were to pay front-end sales charges for Class A shares.

Certain shareholders may be eligible for reduced sales charges (i.e., breakpoint discounts), CDSC waivers and eligibility minimums. Please see the information for each class set forth below for specific eligibility requirements. You must notify your Financial Intermediary (or the Transfer Agent or Co-Transfer Agent if you purchase shares directly through the Fund) at the time a purchase

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

order (or in the case of Class C, a redemption order) is placed, that the purchase (or redemption) qualifies for a reduced sales charge (i.e., breakpoint discount), CDSC waiver or eligibility minimum. Similar notification must be made in writing when an order is placed by mail. The reduced sales charge, CDSC waiver or eligibility minimum will not be granted if: (i) notification is not furnished at the time of order; or (ii) a review of the records of your Financial Intermediary or the Transfer Agent or Co-Transfer Agent does not confirm your represented holdings.

The availability of sales charge waivers and discounts may depend on whether you purchase Fund shares directly from the Fund (or the Distributor) or a Financial Intermediary. More information regarding sales charge discounts and waivers is summarized below. The Fund's sales charge waivers (and discounts) disclosed in this Prospectus are available for qualifying purchases made directly from the Fund (or the Distributor) and are generally available through Financial Intermediaries. The sales charge waivers (and discounts) available through certain other Financial Intermediaries are set forth in Appendix A to this Prospectus (Intermediary-Specific Sales Charge Waivers and Discounts), which may differ from those available for purchases made directly from the Fund (or the Distributor). Please contact your Financial Intermediary regarding applicable sales charge waivers (and discounts) and for information regarding the Financial Intermediary's related policies and procedures.

In order to obtain a reduced sales charge (i.e., breakpoint discount) or to meet an eligibility minimum, it may be necessary at the time of purchase for you to inform your Financial Intermediary (or the Transfer Agent or Co-Transfer Agent if you purchase shares directly through the Fund) of the existence of other accounts in which there are holdings eligible to be aggregated to meet the sales load breakpoints or eligibility minimums. In order to verify your eligibility, you may be required to provide account statements and/or confirmations regarding shares of the Fund or other Morgan Stanley Funds held in all related accounts described below at your Financial Intermediary, as well as shares held by related parties, such as members of the same family or household, in order to determine whether you have met a sales load breakpoint or eligibility minimum. The Fund makes available, in a clear and prominent format, free of charge, on its web site, www.morganstanley.com/im, information regarding applicable sales loads, reduced sales charges (i.e., breakpoint discounts), sales load waivers and eligibility minimums. The web site includes hyperlinks that facilitate access to the information.

&nbsp;&nbsp;&nbsp; ***Front-End Sales Charge or FSC***<br> *An initial sales charge you pay when purchasing Class A shares that is based on a percentage of the offering price. The percentage declines based upon the dollar value of Class A shares you purchase. We offer three ways to reduce your Class A sales charges—the Combined Purchase Privilege, Right of Accumulation and Letter of Intent.*<br>

**CLASS A SHARES** Class A shares are sold at NAV plus an initial sales charge of up to 3.25% of the public offering price. The initial sales charge is reduced for purchases of $100,000 or more according to the schedule below. Investments of $500,000 or more are not subject to an initial sales charge, but are generally subject to a CDSC of 0.75% on sales made within 12 months after purchase (for Class A shares purchased without an initial sales charge prior to April 29, 2022, such shares are generally subject to a 0.50% CDSC if sold during the first 12 months). The CDSC will be assessed in the same manner and with the same CDSC waivers as with Class C shares. See "Class C—CDSC Waivers" section of this Prospectus for a discussion of the applicable CDSC waivers. In addition, the CDSC on Class A shares will be waived in connection with sales of Class A shares for which no commission or transaction fee was paid by the Distributor or Financial Intermediary at the time of purchase of such shares. Class A shares are also subject to an annual distribution and shareholder services (12b-1) fee of up to 0.25% of the average daily net assets of the class. The maximum annual 12b-1 fee payable by Class A shares is lower than the maximum annual 12b-1 fee payable by Class L or Class C shares.

The offering price of Class A shares includes a sales charge (expressed as a percentage of the public offering price) on a single transaction as shown in the following table:

---

| | | | |
|:---|:---|:---|:---|
|  | **Front-End Sales Charge** | **Front-End Sales Charge** | **Front-End Sales Charge** |
| **Amount of Single Transaction** | **Percentage of Public Offering Price** | **Approximate Percentage of Net Amount Invested** | **Dealer Commission as a Percentage of Offering Price** |
| Less than $100,000 | 3.25% | 3.36% | 2.75% |
| $100,000 but less than $250,000 | 2.00% | 2.04% | 1.50% |
| $250,000 but less than $500,000 | 1.00% | 1.01% | 0.50% |
| $500,000 and over<sup>1</sup>  | 0.00% | 0.00% | 0.00% |

---

---

| | |
|:---|:---|
| 1 | The Distributor may pay a commission of up to 0.75% to a Financial Intermediary for purchase amounts of $500,000 or more. |

---

You may benefit from a reduced sales charge schedule (i.e., breakpoint discount) for purchases of Class A shares of the Fund, by combining, in a single transaction, your purchase with purchases of Class A shares of the Fund by the following related accounts ("Related Accounts"):

• A
 single account (including an individual, a joint account, a trust or fiduciary account).

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Shareholder Information (Con't)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

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

• An
 UGMA/UTMA (Uniform Gifts to Minors Act/Uniform Transfers to Minors Act) account.

• An
 IRA.

Investments made through employer-sponsored retirement plan accounts will not be aggregated with individual accounts.

**Combined Purchase Privilege.** You will have the benefit of a reduced sales charge by combining your purchase of Class A shares of the Fund in a single transaction with your purchase of Class A shares of any other Morgan Stanley Multi-Class Fund for any Related Account except for purchases of shares of Morgan Stanley Institutional Fund Trust Ultra-Short Income Portfolio.

**Right of Accumulation.** Your sales charge may be reduced if you invest $100,000 or more in a single transaction, calculated as follows: the NAV of Class A shares of the Fund being purchased plus the total of the NAV of any shares of the Fund and any other Morgan Stanley Multi-Class Fund held in Related Accounts as of the transaction date.

For purposes of this calculation, holdings of the following Morgan Stanley Funds are excluded: Morgan Stanley Institutional Fund Trust Ultra-Short Income Portfolio and Morgan Stanley Money Market Funds (as defined herein). Shares of Morgan Stanley Money Market Funds that you acquired in a prior exchange of shares of the Fund or shares of another Morgan Stanley Multi-Class Fund (other than Morgan Stanley Institutional Fund Trust Ultra-Short Income Portfolio) are included in the Class A share right of accumulation.

**Notification.** You must notify your Financial Intermediary (or the Transfer Agent or Co-Transfer Agent, if you purchase shares directly through the Fund) at the time a purchase order is placed that the purchase qualifies for a reduced sales charge under any of the privileges discussed above. Similar notification must be made in writing when an order is placed by mail. The reduced sales charge will not be granted if: (i) notification is not furnished at the time of the order; or (ii) a review of the records of your Financial Intermediary or the Transfer Agent or Co-Transfer Agent does not confirm your represented holdings. Certain waivers may not be available depending on the policies at certain Financial Intermediaries. Please consult your Financial Intermediary for more information.

In order to obtain a reduced sales charge for Class A shares of the Fund under any of the privileges discussed above, it may be necessary at the time of purchase for you to inform your Financial Intermediary (or the Transfer Agent, if you purchase shares directly through the Fund) of the existence of any Related Accounts in which there are holdings eligible to be aggregated to meet the sales load breakpoint and/or right of accumulation threshold. In order to verify your eligibility, you may be required to provide account statements and/or confirmations regarding your purchases and/or holdings of any Class A shares of the Fund or any other Morgan Stanley Multi-Class Fund (including shares of Morgan Stanley Money Market Funds that you acquired in a prior exchange from Class A shares of the Fund or any other Morgan Stanley Multi-Class Fund except Morgan Stanley Institutional Fund Trust Ultra-Short Income Portfolio and Morgan Stanley Money Market Funds) held in all Related Accounts at your Financial Intermediary, in order to determine whether you have met the sales load breakpoint and/or right of accumulation threshold.

**Letter of Intent.** The above schedule of reduced sales charges for larger purchases also will be available to you if you enter into a written "Letter of Intent." A Letter of Intent provides for the purchase of Class A shares of the Fund and Class A shares of other Morgan Stanley Multi-Class Funds, except Morgan Stanley Institutional Fund Trust Ultra-Short Income Portfolio and Morgan Stanley Money Market Funds, within a 13-month period. The initial purchase of Class A shares of the Fund under a Letter of Intent must be at least 5% of the stated investment goal. The Letter of Intent does not preclude the Fund (or any other Morgan Stanley Multi-Class Fund) from discontinuing sales of its shares. To determine the applicable sales charge reduction, you may also include (1) the cost of Class A shares of the Fund or any other Morgan Stanley Multi-Class Fund that were previously purchased at a price including a front-end sales charge during the 90-day period prior to the Distributor receiving the Letter of Intent and (2) the historical cost of shares of any Morgan Stanley Money Market Fund that you acquired in an exchange from Class A shares of the Fund or any other Morgan Stanley Multi-Class Fund purchased during that period at a price including a front-end sales charge. You may also combine purchases and exchanges by any Related Accounts during such 90-day period.

You should retain any records necessary to substantiate historical costs because the Fund, the Transfer Agent and your Financial Intermediary may not maintain this information. You can obtain a Letter of Intent by contacting your Financial Intermediary or by calling toll-free 1-800-869-6397. If you do not achieve the stated investment goal within the 13-month period, you are required to pay the difference between the sales charges otherwise applicable and sales charges actually paid, which may be deducted from your investment. Shares acquired through reinvestment of distributions are not aggregated to achieve the stated investment goal.

**Other Sales Charge Waivers.** In addition to investments of $500,000 or more, your purchase of Class A shares is not subject to a front-end sales charge if your account qualifies under one of the following categories:

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• Sales
 through banks, broker-dealers and other financial institutions (including registered investment advisers and financial planners) purchasing
 shares on behalf of their clients in (i) discretionary and non-discretionary advisory programs, (ii) asset allocation programs, (iii)
 other programs in which the client pays an asset-based fee for advice or for executing transactions in Fund shares or for otherwise participating
 in the program or (iv) certain other investment programs that do not charge an asset-based fee, as outlined in an agreement between the
 Distributor and such financial institution.

• Sales
 through Financial Intermediaries who have entered into an agreement with the Distributor to offer Fund shares to self-directed investment
 brokerage accounts, which may or may not charge a transaction fee.

• Qualified
 state tuition plans described in Section 529 of the Code (subject to all applicable terms and conditions).

• Defined
 contribution, defined benefit and other employer-sponsored employee benefit plans, whether or not qualified under the Code, where such
 plans purchase Class A shares through a plan-level or omnibus account sponsored or serviced by a Financial Intermediary that has an agreement
 with the Fund, the Distributor and/or the Adviser pursuant to which Class A shares are available to such plans without an initial sales
 charge.

• Certain
 retirement and deferred compensation programs established by Morgan Stanley Investment Management or its affiliates for their employees
 or the Fund's Trustees.

• Current
 or retired Directors or Trustees of the Morgan Stanley Funds, such persons' spouses, and children under the age of 21, and trust
 accounts for which any of such persons is a beneficiary.

• Current
 or retired directors, officers and employees of Morgan Stanley and any of its subsidiaries, such persons' spouses, and children
 under the age of 21, and trust accounts for which any of such persons is a beneficiary.

• Certain
 other registered open-end investment companies whose shares are distributed by the Distributor.

• Investments
 made in connection with certain mergers and/or reorganizations as approved by the Adviser.

• The
 reinvestment of dividends from Class A shares in additional Class A shares of the Fund.

• Current
 employees of financial intermediaries or their affiliates that have executed a selling agreement with the Distributor, such persons'
 spouses, children under the age of 21, and trust accounts for which any such person is a beneficiary, as permitted by internal policies
 of their employer.

• Investment
 and institutional clients of the Adviser and its affiliates.

• Direct
 purchases of shares by accounts where no Financial Intermediary is specified.

Class A shares also are offered at net asset value to investment and institutional clients of the Adviser and its affiliates and direct purchases of shares by accounts where no Financial Intermediary is specified.

Certain waivers may not be available depending on the policies at certain Financial Intermediaries. Please consult your Financial Intermediary for more information. For specific information with respect to sales charge waivers and discounts available through a specific Financial Intermediary, please refer to Appendix A attached to this Prospectus.

**Conversion Feature.** A shareholder currently holding Class A shares of the Fund in a fee-based advisory program ("Advisory Program") account or currently holding Class A shares in a brokerage account, but wishing to transfer into an Advisory Program account may convert such shares to Class I shares of the Fund within the Advisory Program at any time. Such conversions will be on the basis of the relative NAVs, without requiring any investment minimum to be met and without the imposition of any redemption fee or other charge. If a CDSC is applicable to such Class A shares, then the conversion may not occur until after the shareholder has held the shares for a 12-month period. Please ask your financial advisor if you are eligible for converting your Class A shares to Class I shares pursuant to these conversion features. In addition, Class C shares held in an account for which no broker-dealer or other Financial Intermediary is specified and which are not subjected to a CDSC will periodically be converted to Class A shares of the Fund.

&nbsp;&nbsp;&nbsp; ***Contingent Deferred Sales Charge or CDSC***<br> *A fee you pay when you sell shares of certain Morgan Stanley Funds purchased without an initial sales charge. This fee declines the longer you hold your shares as set forth in the table.*<br>

**CLASS L SHARES** *The Fund has suspended offering Class L shares of the Fund for sale to all investors. The Class L shareholders of the Fund do not have the option of purchasing additional Class L shares. However, the existing Class L shareholders may invest in additional Class L shares through reinvestment of dividends and distributions.*

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Shareholder Information (Con't)

**Distribution Fee.** Class L shares are subject to an annual distribution and shareholder services (12b-1) fee of up to 0.50% of the average daily net assets of that class. The maximum annual 12b-1 fee payable by Class L shares is higher than the maximum annual 12b-1 fee payable by Class A shares.

**Conversion Feature.** A shareholder holding Class L shares of the Fund through a brokerage account or an Advisory Program account may convert such shares to either Class A or Class I shares of the Fund within an Advisory Program at any time. Such conversions will be on the basis of the relative NAVs, without requiring any investment minimum to be met and without the imposition of any redemption fee or other charge. Please ask your financial advisor if you are eligible for converting your Class L shares to Class I shares pursuant to these conversion features.

**CLASS I SHARES** Class I shares are sold at NAV without any sales charge on purchases or sales and without any distribution and shareholder services (12b-1) fee. Class I shares are offered only to investors meeting an initial investment minimum of $1 million and the following categories:

• Sales
 through banks, broker-dealers and other financial institutions (including registered investment advisers and financial planners) purchasing
 shares on behalf of their clients in (i) discretionary and non-discretionary advisory programs, (ii) fund supermarkets, (iii) asset allocation
 programs, (iv) other programs in which the client pays an asset-based fee for advice or for executing transactions in Fund shares or for
 otherwise participating in the program or (v) certain other investment programs that do not charge an asset-based fee.

• Qualified
 state tuition plans described in Section 529 of the Code and donor-advised charitable gift funds (subject to all applicable terms and
 conditions).

• Defined
 contribution, defined benefit and other employer-sponsored employee benefit plans, whether or not qualified under the Code.

• Certain
 other registered open-end investment companies whose shares are distributed by the Distributor.

• Investors
 who were shareholders of the Dean Witter Retirement Series on September 11, 1998 for additional purchases for their former Dean Witter
 Retirement Series accounts.

• Certain
 retirement and deferred compensation programs established by Morgan Stanley Investment Management or its affiliates for their employees
 or the Fund's Trustees.

• Current
 or retired directors, officers and employees of Morgan Stanley and any of its subsidiaries, such persons' spouses, and children
 under the age of 21, and trust accounts for which any of such persons is a beneficiary.

• Current
 or retired Directors or Trustees of the Morgan Stanley Funds, such persons' spouses, and children under the age of 21, and trust
 accounts for which any of such persons is a beneficiary.

• Investments
 made in connection with certain mergers and/or reorganizations as approved by the Adviser.

• The
 reinvestment of dividends from Class I shares in additional Class I shares of the Fund.

**Meeting Class I Eligibility Minimums.** To meet the $1 million initial investment to qualify to purchase Class I shares you may combine: (1) purchases in a single transaction of Class I shares of the Fund and other Morgan Stanley Multi-Class Funds; and/or (2) previous purchases of Class A and Class I shares of Morgan Stanley Multi-Class Funds you currently own, along with shares of Morgan Stanley Funds you currently own that you acquired in exchange for those shares. Shareholders cannot combine purchases made by family members or a shareholder's other Related Accounts in a single transaction for purposes of meeting the $1 million initial investment minimum requirement to qualify to purchase Class I shares.

**CLASS C SHARES** Class C shares are sold at NAV with no initial sales charge, but are subject to a CDSC of 1.00% on sales made within one year after the last day of the month of purchase.

Financial Intermediaries may impose a limit on the dollar value of a Class C share purchase order that they will accept. You should discuss with your Financial Intermediary which share class is most appropriate for you based on the size of your investment, your expected time horizon for holding the shares and other factors, bearing in mind the availability of reduced sales loads on Class A share purchases that qualify for such reduction under the combined purchase privilege or right of accumulation privilege available on Class A share purchases.

With respect to Class C shares, the CDSC is assessed on an amount equal to the lesser of the then market value of the shares or the historical cost of the shares (which is the amount actually paid for the shares at the time of original purchase) being redeemed. Accordingly, no sales charge is imposed on increases in NAV above the initial purchase price. In determining whether a CDSC applies to a redemption, it is assumed that the shares being redeemed first are any shares in the shareholder's account that are not

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

subject to a CDSC, followed by shares held the longest in the shareholder's account. A CDSC may be waived under certain circumstances. See the Class C CDSC waiver categories listed below.

**CDSC Waivers.** The CDSC on Class C shares will be waived in connection with the sale of Class C shares for which no commission or transaction fee was paid by the Distributor or Financial Intermediary at the time of purchase of such shares. In addition, a CDSC, if otherwise applicable, will be waived in the case of:

• Sales
 of shares held at the time you die or become disabled (within the definition in Section 72(m)(7) of the Code which relates to the ability
 to engage in gainful employment), if the shares are: (i) registered either in your individual name or in the names of you and your spouse
 as joint tenants with right of survivorship; (ii) registered in the name of a trust of which (a) you are the settlor and that is revocable
 by you (i.e., a "living trust") or (b) you and your spouse are the settlors and that is revocable by you or your spouse
 (i.e., a "joint living trust"); or (iii) held in a qualified corporate or self-employed retirement plan, IRA or 403(b) Custodial
 Account; provided in either case that the sale is requested within one year after your death or initial determination of disability.

• Sales
 in connection with the following retirement plan "distributions": (i) lump-sum or other distributions from a qualified corporate
 or self-employed retirement plan following retirement (or, in the case of a "key employee" of a "top heavy"
 plan, following attainment of age 59 1/2); (ii) required minimum distributions and certain other distributions (such as those following
 attainment of age 59 1/2) from an IRA or 403(b) Custodial Account; or (iii) a tax-free return of an excess IRA contribution (a distribution
 does not include a direct transfer of IRA, 403(b) Custodial Account or retirement plan assets to a successor custodian or trustee).

• Sales
 of shares in connection with the systematic withdrawal plan of up to 12% annually of the value of each fund from which plan sales are
 made. The percentage is determined on the date you establish the systematic withdrawal plan and based on the next calculated share price.
 You may have this CDSC waiver applied in amounts up to 1% per month, 3% per quarter, 6% semi-annually or 12% annually. Shares with no
 CDSC will be sold first, followed by those with the lowest CDSC. As such, the waiver benefit will be reduced by the amount of your shares
 that are not subject to a CDSC. If you suspend your participation in the plan, you may later resume plan payments without requiring a
 new determination of the account value for the 12% CDSC waiver.

The Distributor may require confirmation of your entitlement before granting a CDSC waiver. If you believe you are eligible for a CDSC waiver, please contact your Financial Intermediary or call toll-free 1-800-869-6397.

**Distribution Fee.** Class C shares are also subject to an annual distribution and shareholder services (12b-1) fee of up to 1.00% of the average daily net assets of that class. The Fund pays the Distributor (i) a shareholder services fee of up to 0.25% of the average daily net assets of the Class C shares on an annualized basis and (ii) a distribution fee of up to 0.75% of the average daily net assets of the Class C shares on an annualized basis. The maximum annual 12b-1 fee payable by Class C shares is higher than the maximum annual 12b-1 fee payable by Class A and Class L shares.

**Conversion Feature.** A shareholder holding Class C shares of the Fund through a brokerage account or an Advisory Program account may convert such shares to either Class A or Class I shares of the Fund within an Advisory Program at any time. Such conversions will be on the basis of the relative NAVs, without requiring any investment minimum to be met and without the imposition of any redemption fee or other charge. If a CDSC is applicable to such Class C shares, then the conversion may not occur until after the shareholder has held the shares for a 12-month period. Please ask your financial advisor if you are eligible for converting your Class C shares to Class I shares pursuant to these conversion features.

After eight years, Class C shares of the Fund generally will convert automatically to Class A shares of the Fund with no initial sales charge, provided that the Fund or the Financial Intermediary through which a shareholder purchased or holds Class C shares has records verifying that the Class C shares have been held for at least eight years. The automatic conversion of Class C shares to Class A shares will not apply to shares held through group retirement plan recordkeeping platforms of certain Financial Intermediaries who hold such shares in an omnibus account and do not track participant level share lot aging to facilitate such a conversion. The eight-year period runs from the last day of the month in which the shares were purchased or, in the case of Class C shares acquired through an exchange, from the last day of the month in which the original Class C shares were purchased; the shares will convert to Class A shares based on their relative NAVs in the month following the eight-year period. At the same time, an equal proportion of Class C shares acquired through automatically reinvested distributions will convert to Class A shares on the same basis. A conversion of shares of one class directly for shares of another class of the same Fund normally should not be taxable for federal income tax purposes.

**CLASS R6 SHARES** Class R6 shares are offered at NAV without any sales charge on purchases or sales. In addition, no distribution (12b-1) or shareholder services fees, sub-accounting or other similar fees, or any finder's fee payments are charged or paid on Class R6 shares. To purchase Class R6 shares, an investor must meet a minimum initial investment of $5 million or be a defined contribution, defined benefit or other employer sponsored employee benefit plan, in each case provided that the plan trades on an omnibus level, whether or not qualified under the Code and in each case subject to the discretion of the Adviser. Omnibus trades of

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

$5 million or more shall be accepted from certain platforms, including; (i) banks and trust companies; (ii) insurance companies; and (iii) registered investment advisory firms. The $5 million minimum initial investment amount may be waived for Fund shares purchased by or through: (1) certain registered open-end investment companies whose shares are distributed by the Distributor; or (2) investments made in connection with certain mergers and/or reorganizations as approved by the Adviser.

**NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS** If you receive a cash payment representing an ordinary dividend or capital gain and you reinvest that amount in the applicable class of shares by returning the check within 30 days of the payment date, the purchased shares would not be subject to an initial sales charge or CDSC.

**PLAN OF DISTRIBUTION (RULE 12b-1 FEES)** The Fund has adopted a Plan of Distribution (the "Plan") in accordance with Rule 12b-1 under the 1940 Act with respect to the Class A, Class L and Class C shares (Class I and Class R6 shares are offered without any 12b-1 fee). The Plan allows the Fund to pay distribution fees for the sale and distribution of these shares. It also allows the Fund to pay for services to shareholders of Class A, Class L and Class C shares. Because these fees are paid out of the Fund's assets on an ongoing basis, over time, these fees will increase the cost of your investment and reduce your return in these classes and may cost you more than paying other types of sales charges.

**Potential Conflicts of Interest**

As a diversified global financial services firm, Morgan Stanley, the parent company of the Adviser, engages in a broad spectrum of activities, including financial advisory services, investment management activities, lending, commercial banking, sponsoring and managing private investment funds, engaging in broker-dealer transactions and principal securities, commodities and foreign exchange transactions, research publication and other activities. In the ordinary course of its business, Morgan Stanley is a full-service investment banking and financial services firm and therefore engages in activities where Morgan Stanley's interests or the interests of its clients may conflict with the interests of the Fund. These activities could cause Morgan Stanley to have an interest that is different from, and potentially adverse to, that of the Fund, which may impede the Fund from participating in certain opportunities. Morgan Stanley advises clients and sponsors, manages or advises other investment funds and investment programs, accounts and businesses (collectively, together with any new or successor funds, programs, accounts or businesses sponsored, managed, or advised by the Adviser or one of its investment adviser affiliates, the "Affiliated Investment Accounts") with a wide variety of investment objectives that in some instances may overlap or conflict with the Fund's investment objectives and present conflicts of interest. In addition, Morgan Stanley, the Adviser and/or the Adviser's investment adviser affiliates may also from time to time create new or successor Affiliated Investment Accounts that may compete with the Fund and present similar conflicts of interest. The discussion below enumerates certain actual, apparent and potential conflicts of interest. There is no assurance that conflicts of interest will be resolved in favor of Fund shareholders and, in fact, they may not be.

The conflicts summarized herein do not purport to be a complete list or explanation of the conflicts associated with the financial or other interests the Adviser or its affiliates may have now or in the future. For more information about conflicts of interest, see the section entitled "Potential Conflicts of Interest" in the SAI. Conflicts of interest not described below or in the SAI may also exist. References to the Adviser in this section include the Fund's affiliated sub-adviser (if any) unless otherwise noted.

*Material Nonpublic and Other Information.* It is expected that confidential or material nonpublic information regarding an investment or potential investment opportunity may become available to the Adviser. If such information becomes available, the Adviser may be precluded (including by applicable law or internal policies or procedures) from pursuing an investment or disposition opportunity with respect to such investment or disposition opportunity, including for an extended period of time. This inability to buy or sell an investment could have an adverse effect on the Fund's portfolio due to, among other things, changes in an investment's value during the period its trading is restricted. Morgan Stanley has established certain information barriers and other policies designed to address the sharing of information between different businesses within Morgan Stanley. As a result of information barriers, the Adviser, in certain instances, will not have access, or will have limited access, to certain information and personnel in other areas of Morgan Stanley and, in such instances, will not manage the Fund with the benefit of the information held by such other areas. In other instances, Morgan Stanley personnel, including personnel of the Adviser, will have access to information and personnel of its affiliates. In managing conflicts of interest that arise because of the foregoing, the Adviser generally will be subject to fiduciary requirements. The Adviser also may implement internal information barriers or ethical walls or other internal information sharing protocols, and the conflicts described herein with respect to information barriers and otherwise with respect to Morgan Stanley and the Adviser will also apply internally within the Adviser. Information sharing may limit or restrict the ability of the Adviser to engage in or otherwise effect transactions on behalf of the Fund (including purchasing or selling securities that the Adviser may otherwise have purchased or sold for the Fund in the absence of the sharing of information). The Adviser may face conflicts of interest in determining whether to engage in the sharing of information with its affiliates.

*Investments by Morgan Stanley and its Affiliated Investment Accounts.* In serving in multiple capacities to Affiliated Investment Accounts, Morgan Stanley, including the Adviser and its investment teams, may have obligations to other clients or investors in Affiliated Investment Accounts, the fulfillment of which may not be in the best interests of the Fund or its shareholders. An investment team may have obligations to Affiliated Investment Accounts managed by both the Adviser and one or more of the

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

Adviser's investment adviser affiliates. The Fund's investment objectives may overlap with the investment objectives of certain Affiliated Investment Accounts. As a result, the members of an investment team may face conflicts in the allocation of investment opportunities among the Fund and other investment funds, programs, accounts and businesses advised by or affiliated with the Adviser or its investment adviser affiliates. Certain Affiliated Investment Accounts may provide for higher management or incentive fees or greater expense reimbursements or overhead allocations, all of which may contribute to this conflict of interest and create an incentive for the Adviser to favor such other accounts. To seek to reduce potential conflicts of interest and to attempt to allocate such investment opportunities in a fair and equitable manner, the Adviser has implemented allocation policies and procedures. These policies and procedures are intended to give all clients of the Adviser, including the Fund, fair access to investment opportunities consistent with the requirements of organizational documents, investment strategies, applicable laws and regulations, and the fiduciary duties of the Adviser.

*Payments to Broker-Dealers and Other Financial Intermediaries.* The Adviser, Distributor and/or their affiliates may pay compensation, out of their own funds and not as an expense of the Fund, to certain Financial Intermediaries (which may include affiliates of the Adviser and the Distributor), including recordkeepers and administrators of various deferred compensation plans, in connection with the sale, distribution, marketing and retention of shares of the Fund and/or shareholder servicing. The prospect of receiving, or the receipt of, additional compensation, as described above, by Financial Intermediaries may provide such Financial Intermediaries and their financial advisors and other salespersons with an incentive to favor sales of shares of the Fund over other investment options with respect to which these Financial Intermediaries do not receive additional compensation (or receives lower levels of additional compensation). These payment arrangements, however, will not change the price that an investor pays for shares of the Fund or the amount that the Fund receives to invest on behalf of an investor. Investors may wish to take such payment arrangements into account when considering and evaluating any recommendations relating to Fund shares and should review carefully any disclosures provided by Financial Intermediaries as to their compensation. In addition, in certain circumstances, the Adviser restricts, limits or reduces the amount of the Fund's investment, or restricts the type of governance or voting rights it acquires or exercises, where the Fund (potentially together with Morgan Stanley) exceeds a certain ownership interest, or possesses certain degrees of voting or control or has other interests.

*Morgan Stanley Trading and Principal Investing Activities.* Notwithstanding anything to the contrary herein, Morgan Stanley will generally conduct its sales and trading businesses, publish research and analysis, and render investment advice without regard for the Fund's holdings, although these activities could have an adverse impact on the value of one or more of the Fund's investments, or could cause Morgan Stanley to have an interest in one or more portfolio investments that is different from, and potentially adverse to, that of the Fund.

*Morgan Stanley's Investment Banking and Other Commercial Activities.* Morgan Stanley advises clients on a variety of mergers, acquisitions, restructuring, bankruptcy and financing transactions. Morgan Stanley may act as an advisor to clients, including other investment funds that may compete with the Fund and with respect to investments that the Fund may hold. Morgan Stanley may give advice and take action with respect to any of its clients or proprietary accounts that may differ from the advice given, or may involve an action of a different timing or nature than the action taken, by the Fund. Morgan Stanley may give advice and provide recommendations to persons competing with the Fund and/or any of the Fund's investments that are contrary to the Fund's best interests and/or the best interests of any of its investments. Morgan Stanley's activities on behalf of its clients (such as engagements as an underwriter or placement agent) may restrict or otherwise limit investment opportunities that may otherwise be available to the Fund.

Morgan Stanley may be engaged to act as a financial advisor to a company in connection with the sale of such company, or subsidiaries or divisions thereof, may represent potential buyers of businesses through its mergers and acquisition activities and may provide lending and other related financing services in connection with such transactions. Morgan Stanley's compensation for such activities is usually based upon realized consideration and is usually contingent, in substantial part, upon the closing of the transaction. Under these circumstances, the Fund may be precluded from participating in a transaction with or relating to the company being sold or participating in any financing activity related to a merger or an acquisition.

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Morgan Stanley Prospectus \| **Financial Highlights**

Financial Highlights

The financial highlights tables that follow are intended to help you understand the financial performance of the Class A, Class L, Class I, Class C and Class R6 shares of the Fund for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions).

The ratio of expenses to average net assets listed in the tables below for each class of shares of the Fund are based on the average net assets of the Fund for each of the periods listed in the tables. To the extent that the Fund's average net assets decrease over the Fund's next fiscal year, such expense ratios can be expected to increase, potentially significantly, because certain fixed costs will be spread over a smaller amount of assets.

The information below has been derived from the financial statements audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Ernst & Young LLP's report, along with the Fund's financial statements, are incorporated by reference into the Fund's SAI. The Fund's financial statements and additional information included in the Fund's report filed on Form N-CSR and SAI are available at no cost from the Fund at the toll-free number noted on the back cover to this Prospectus.

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Morgan Stanley Prospectus \| **Financial Highlights**

**Income Opportunities Fund**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Class A** | **Class A** | **Class A** | **Class A** | **Class A** |
| | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** |
| <br>**Selected Per Share Data:** | **2024** | **2023** | **2022** | **2021** | **2020** |
| **Net asset value, beginning of period** | $4.86 | $4.97 | $5.68 | $5.70 | $5.73 |
| **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** |
| &nbsp;&nbsp;&nbsp; Net investment income<sup>(1)</sup>  | 0.25 | 0.23 | 0.17 | 0.14 | 0.15 |
| &nbsp;&nbsp;&nbsp; Net realized and unrealized gain (loss)  | 0.29 | &nbsp;&nbsp;&nbsp; (0.02)<br>| &nbsp;&nbsp;&nbsp; (0.67)<br>| &nbsp;&nbsp;&nbsp; (0.01)<br>| &nbsp;&nbsp;&nbsp; (0.00)<br> <sup>(2)</sup> <br>|
| &nbsp;&nbsp;&nbsp;&nbsp; Total income (loss) from investment operations  | 0.54 | 0.21 | &nbsp;&nbsp;&nbsp; (0.50)<br>| 0.13 | 0.15 |
| **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** |
| &nbsp;&nbsp;&nbsp; Net investment income  | &nbsp;&nbsp;&nbsp; (0.22)<br>| &nbsp;&nbsp;&nbsp; (0.27)<br>| &nbsp;&nbsp;&nbsp; (0.21)<br>| &nbsp;&nbsp;&nbsp; (0.14)<br>| &nbsp;&nbsp;&nbsp; (0.18)<br>|
| &nbsp;&nbsp;&nbsp; Net realized gain  |  |  |  | &nbsp;&nbsp;&nbsp; (0.01)<br>|  |
| &nbsp;&nbsp;&nbsp; Paid-in-capital  | &nbsp;&nbsp;&nbsp; (0.04)<br>| &nbsp;&nbsp;&nbsp; (0.05)<br>|  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | &nbsp;&nbsp;&nbsp; (0.26)<br>| &nbsp;&nbsp;&nbsp; (0.32)<br>| &nbsp;&nbsp;&nbsp; (0.21)<br>| &nbsp;&nbsp;&nbsp; (0.15)<br>| &nbsp;&nbsp;&nbsp; (0.18)<br>|
| **Net asset value, end of period** | $5.14 | $4.86 | $4.97 | $5.68 | $5.70 |
| **Total Return** | 11.31<br> %<br> <sup>(3)(4)</sup> <br>| 4.26<br> %<br> <sup>(4)</sup> <br>| (8.91)%<br> <sup>(4)</sup> <br>| 2.26<br> %<br> <sup>(5)</sup> <br>| 2.79<br> %<br> <sup>(5)</sup> <br>|
| **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** |
| Net expenses | 0.82<br> %<br> <sup>(6)(7)</sup> <br>| 0.85<br> %<br> <sup>(6)</sup> <br>| 0.83<br> %<br> <sup>(6)</sup> <br>| 0.83<br> %<br> <sup>(6)</sup> <br>| 0.82<br> %<br> <sup>(6)</sup> <br>|
| Net expenses excluding interest expenses | N/A | N/A | 0.83<br> %<br> <sup>(6)</sup> <br>| N/A | 0.82<br> %<br> <sup>(6)</sup> <br>|
| Net investment income | 4.91<br> %<br> <sup>(6)(7)</sup> <br>| 4.56<br> %<br> <sup>(6)</sup> <br>| 3.18<br> %<br> <sup>(6)</sup> <br>| 2.52<br> %<br> <sup>(6)</sup> <br>| 2.71<br> %<br> <sup>(6)</sup> <br>|
| Rebate from Morgan Stanley affiliate | 0.01<br> %<br>| 0.01<br> %<br>| 0.00<br> %<br> <sup>(8)</sup> <br>| 0.00<br> %<br> <sup>(8)</sup> <br>| 0.01<br> %<br>|
| **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** |
| Net assets, end of period, in thousands | $57292 | $51476 | $61181 | $92889 | $112310 |
| Portfolio turnover rate | 155<br> %<br>| 118<br> %<br>| 62<br> %<br>| 115<br> %<br>| 106<br> %<br>|

---

---

| | | | |
|:---|:---|:---|:---|
| (1) | The per share amounts were computed using an average number of shares outstanding during the period. | The per share amounts were computed using an average number of shares outstanding during the period. | The per share amounts were computed using an average number of shares outstanding during the period. |
| (2) | Amount is less than $0.005 per share. | Amount is less than $0.005 per share. | Amount is less than $0.005 per share. |
| (3) | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class A shares. | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class A shares. | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class A shares. |
| (4) | Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. | Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. | Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. |
| (5) | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. Does not reflect the deduction of sales charge. | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. Does not reflect the deduction of sales charge. | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. Does not reflect the deduction of sales charge. |
| (6) | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." |
| (7) | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class A shares: | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class A shares: | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class A shares: |
|  | PERIOD ENDED | EXPENSE<br>RATIO | NET INVESTMENT<br>INCOME RATIO |
|  | October 31, 2024 | 0.84% | 4.89% |
| (8) | Amount is less than 0.005%. | Amount is less than 0.005%. | Amount is less than 0.005%. |

---

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Morgan Stanley Prospectus \| **Financial Highlights**

**Income Opportunities Fund**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Class L** | **Class L** | **Class L** | **Class L** | **Class L** |
| | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** |
| <br>**Selected Per Share Data:** | **2024** | **2023** | **2022** | **2021** | **2020** |
| **Net asset value, beginning of period** | $4.86 | $4.96 | $5.68 | $5.70 | $5.73 |
| **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** |
| &nbsp;&nbsp;&nbsp; Net investment income<sup>(1)</sup>  | 0.23 | 0.21 | 0.15 | 0.13 | 0.14 |
| &nbsp;&nbsp;&nbsp; Net realized and unrealized gain (loss)  | 0.29 | &nbsp;&nbsp;&nbsp; (0.01)<br>| &nbsp;&nbsp;&nbsp; (0.67)<br>| &nbsp;&nbsp;&nbsp; (0.01)<br>| &nbsp;&nbsp;&nbsp; (0.00)<br> <sup>(2)</sup> <br>|
| &nbsp;&nbsp;&nbsp;&nbsp; Total income (loss) from investment operations  | 0.52 | 0.20 | &nbsp;&nbsp;&nbsp; (0.52)<br>| 0.12 | 0.14 |
| **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** |
| &nbsp;&nbsp;&nbsp; Net investment income  | &nbsp;&nbsp;&nbsp; (0.20)<br>| &nbsp;&nbsp;&nbsp; (0.25)<br>| &nbsp;&nbsp;&nbsp; (0.20)<br>| &nbsp;&nbsp;&nbsp; (0.13)<br>| &nbsp;&nbsp;&nbsp; (0.17)<br>|
| &nbsp;&nbsp;&nbsp; Net realized gain  |  |  |  | &nbsp;&nbsp;&nbsp; (0.01)<br>|  |
| &nbsp;&nbsp;&nbsp; Paid-in-capital  | &nbsp;&nbsp;&nbsp; (0.04)<br>| &nbsp;&nbsp;&nbsp; (0.05)<br>|  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | &nbsp;&nbsp;&nbsp; (0.24)<br>| &nbsp;&nbsp;&nbsp; (0.30)<br>| &nbsp;&nbsp;&nbsp; (0.20)<br>| &nbsp;&nbsp;&nbsp; (0.14)<br>| &nbsp;&nbsp;&nbsp; (0.17)<br>|
| **Net asset value, end of period** | $5.14 | $4.86 | $4.96 | $5.68 | $5.70 |
| **Total Return** | 10.91<br> %<br> <sup>(3)(4)</sup> <br>| 4.09<br> %<br> <sup>(3)</sup> <br>| &nbsp;&nbsp;&nbsp; (9.37)%<br> <sup>(3)</sup> <br>| 1.96<br> %<br> <sup>(5)</sup> <br>| 2.53<br> %<br> <sup>(5)</sup> <br>|
| **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** |
| Net expenses | 1.18<br> %<br> <sup>(6)(7)</sup> <br>| 1.22<br> %<br> <sup>(6)</sup> <br>| 1.14<br> %<br> <sup>(6)</sup> <br>| 1.12<br> %<br> <sup>(6)</sup> <br>| 1.07<br> %<br> <sup>(6)</sup> <br>|
| Net expenses excluding interest expenses | N/A | N/A | 1.14<br> %<br> <sup>(6)</sup> <br>| N/A | 1.07<br> %<br> <sup>(6)</sup> <br>|
| Net investment income | 4.55<br> %<br> <sup>(6)(7)</sup> <br>| 4.19<br> %<br> <sup>(6)</sup> <br>| 2.90<br> %<br> <sup>(6)</sup> <br>| 2.23<br> %<br> <sup>(6)</sup> <br>| 2.47<br> %<br> <sup>(6)</sup> <br>|
| Rebate from Morgan Stanley affiliate | 0.01<br> %<br>| 0.01<br> %<br>| 0.00<br> %<br> <sup>(8)</sup> <br>| 0.00<br> %<br> <sup>(8)</sup> <br>| 0.01<br> %<br>|
| **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** |
| Net assets, end of period, in thousands | $2339 | $2410 | $3152 | $4125 | $4667 |
| Portfolio turnover rate | 155<br> %<br>| 118<br> %<br>| 62<br> %<br>| 115<br> %<br>| 106<br> %<br>|

---

---

| | | | |
|:---|:---|:---|:---|
| (1) | The per share amounts were computed using an average number of shares outstanding during the period. | The per share amounts were computed using an average number of shares outstanding during the period. | The per share amounts were computed using an average number of shares outstanding during the period. |
| (2) | Amount is less than $0.005 per share. | Amount is less than $0.005 per share. | Amount is less than $0.005 per share. |
| (3) | Calculated based on the net asset value as of the last business day of the period. | Calculated based on the net asset value as of the last business day of the period. | Calculated based on the net asset value as of the last business day of the period. |
| (4) | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class L shares. | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class L shares. | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class L shares. |
| (5) | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. |
| (6) | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." |
| (7) | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class L shares: | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class L shares: | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class L shares: |
|  | PERIOD ENDED | EXPENSE<br>RATIO | NET INVESTMENT<br>INCOME RATIO |
|  | October 31, 2024 | 1.20% | 4.53% |
| (8) | Amount is less than 0.005%. | Amount is less than 0.005%. | Amount is less than 0.005%. |

---

**56**

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[Back to **Table of Contents**](#TOC_16994)

Morgan Stanley Prospectus \| **Financial Highlights**

**Income Opportunities Fund**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Class I** | **Class I** | **Class I** | **Class I** | **Class I** |
| | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** |
| <br>**Selected Per Share Data:** | **2024** | **2023** | **2022** | **2021** | **2020** |
| **Net asset value, beginning of period** | $4.93 | $5.03 | $5.75 | $5.77 | $5.80 |
| **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** |
| &nbsp;&nbsp;&nbsp; Net investment income<sup>(1)</sup>  | 0.27 | 0.24 | 0.19 | 0.16 | 0.17 |
| &nbsp;&nbsp;&nbsp; Net realized and unrealized gain (loss)  | 0.29 | &nbsp;&nbsp;&nbsp; (0.01)<br>| &nbsp;&nbsp;&nbsp; (0.68)<br>| &nbsp;&nbsp;&nbsp; (0.01)<br>| &nbsp;&nbsp;&nbsp; (0.00)<br> <sup>(2)</sup> <br>|
| &nbsp;&nbsp;&nbsp;&nbsp; Total income (loss) from investment operations  | 0.56 | 0.23 | &nbsp;&nbsp;&nbsp; (0.49)<br>| 0.15 | 0.17 |
| **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** |
| &nbsp;&nbsp;&nbsp; Net investment income  | &nbsp;&nbsp;&nbsp; (0.23)<br>| &nbsp;&nbsp;&nbsp; (0.28)<br>| &nbsp;&nbsp;&nbsp; (0.23)<br>| &nbsp;&nbsp;&nbsp; (0.16)<br>| &nbsp;&nbsp;&nbsp; (0.20)<br>|
| &nbsp;&nbsp;&nbsp; Net realized gain  |  |  |  | &nbsp;&nbsp;&nbsp; (0.01)<br>|  |
| &nbsp;&nbsp;&nbsp; Paid-in-capital  | &nbsp;&nbsp;&nbsp; (0.04)<br>| &nbsp;&nbsp;&nbsp; (0.05)<br>|  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | &nbsp;&nbsp;&nbsp; (0.27)<br>| &nbsp;&nbsp;&nbsp; (0.33)<br>| &nbsp;&nbsp;&nbsp; (0.23)<br>| &nbsp;&nbsp;&nbsp; (0.17)<br>| &nbsp;&nbsp;&nbsp; (0.20)<br>|
| **Net asset value, end of period** | $5.22 | $4.93 | $5.03 | $5.75 | $5.77 |
| **Total Return** | 11.63<br> %<br> <sup>(3)(4)</sup> <br>| 4.68<br> %<br> <sup>(3)</sup> <br>| (8.74)%<br> <sup>(3)</sup> <br>| 2.51<br> %<br> <sup>(5)</sup> <br>| 3.03<br> %<br> <sup>(5)</sup> <br>|
| **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** |
| Net expenses | 0.57<br> %<br> <sup>(6)(7)(8)</sup> <br>| 0.59<br> %<br> <sup>(6)</sup> <br>| 0.56<br> %<br> <sup>(6)</sup> <br>| 0.55<br> %<br> <sup>(6)</sup> <br>| 0.55<br> %<br> <sup>(6)</sup> <br>|
| Net expenses excluding interest expenses | N/A | N/A | 0.56<br> %<br> <sup>(6)</sup> <br>| N/A | 0.55<br> %<br> <sup>(6)</sup> <br>|
| Net investment income | 5.16<br> %<br> <sup>(6)(7)(8)</sup> <br>| 4.82<br> %<br> <sup>(6)</sup> <br>| 3.42<br> %<br> <sup>(6)</sup> <br>| 2.79<br> %<br> <sup>(6)</sup> <br>| 2.97<br> %<br> <sup>(6)</sup> <br>|
| Rebate from Morgan Stanley affiliate | 0.01<br> %<br>| 0.01<br> %<br>| 0.00<br> %<br> <sup>(9)</sup> <br>| 0.00<br> %<br> <sup>(9)</sup> <br>| 0.01<br> %<br>|
| **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** |
| Net assets, end of period, in thousands | $455296 | $476677 | $419470 | $683692 | $635329 |
| Portfolio turnover rate | 155<br> %<br>| 118<br> %<br>| 62<br> %<br>| 115<br> %<br>| 106<br> %<br>|

---

---

| | | | |
|:---|:---|:---|:---|
| (1) | The per share amounts were computed using an average number of shares outstanding during the period. | The per share amounts were computed using an average number of shares outstanding during the period. | The per share amounts were computed using an average number of shares outstanding during the period. |
| (2) | Amount is less than $0.005. | Amount is less than $0.005. | Amount is less than $0.005. |
| (3) | Calculated based on the net asset value as of the last business day of the period. | Calculated based on the net asset value as of the last business day of the period. | Calculated based on the net asset value as of the last business day of the period. |
| (4) | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class I shares. | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class I shares. | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class I shares. |
| (5) | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. |
| (6) | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." |
| (7) | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class I shares: | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class I shares: | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class I shares: |
|  | PERIOD ENDED | EXPENSE<br>RATIO | NET INVESTMENT<br>INCOME RATIO |
|  | October 31, 2024 | 0.59% | 5.14% |
| (8) | If the Fund had borne all of its expenses that were waived by the Adviser/Administrator, the annualized expense and net investment income ratios would have been as follows: | If the Fund had borne all of its expenses that were waived by the Adviser/Administrator, the annualized expense and net investment income ratios would have been as follows: | If the Fund had borne all of its expenses that were waived by the Adviser/Administrator, the annualized expense and net investment income ratios would have been as follows: |
|  | PERIOD ENDED | EXPENSE<br>RATIO | NET INVESTMENT<br>INCOME RATIO |
|  | October 31, 2024 | 0.62% | 5.11% |
| (9) | Amount is less than 0.005%. | Amount is less than 0.005%. | Amount is less than 0.005%. |

---

**57**

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[Back to **Table of Contents**](#TOC_16994)

Morgan Stanley Prospectus \| **Financial Highlights**

**Income Opportunities Fund**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Class C** | **Class C** | **Class C** | **Class C** | **Class C** |
| | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** |
| <br>**Selected Per Share Data:** | **2024** | **2023** | **2022** | **2021** | **2020** |
| **Net asset value, beginning of period** | $4.85 | $4.96 | $5.67 | $5.69 | $5.72 |
| **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** |
| &nbsp;&nbsp;&nbsp; Net investment income<sup>(1)</sup>  | 0.21 | 0.19 | 0.13 | 0.10 | 0.11 |
| &nbsp;&nbsp;&nbsp; Net realized and unrealized gain (loss)  | 0.30 | &nbsp;&nbsp;&nbsp; (0.02)<br>| &nbsp;&nbsp;&nbsp; (0.67)<br>| &nbsp;&nbsp;&nbsp; (0.01)<br>| &nbsp;&nbsp;&nbsp; (0.00)<br> <sup>(2)</sup> <br>|
| &nbsp;&nbsp;&nbsp;&nbsp; Total income (loss) from investment operations  | 0.51 | 0.17 | &nbsp;&nbsp;&nbsp; (0.54)<br>| 0.09 | 0.11 |
| **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** |
| &nbsp;&nbsp;&nbsp; Net investment income  | &nbsp;&nbsp;&nbsp; (0.18)<br>| &nbsp;&nbsp;&nbsp; (0.23)<br>| &nbsp;&nbsp;&nbsp; (0.17)<br>| &nbsp;&nbsp;&nbsp; (0.10)<br>| &nbsp;&nbsp;&nbsp; (0.14)<br>|
| &nbsp;&nbsp;&nbsp; Net realized gain  |  |  |  | &nbsp;&nbsp;&nbsp; (0.01)<br>|  |
| &nbsp;&nbsp;&nbsp; Paid-in-capital  | &nbsp;&nbsp;&nbsp; (0.04)<br>| &nbsp;&nbsp;&nbsp; (0.05)<br>|  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | &nbsp;&nbsp;&nbsp; (0.22)<br>| &nbsp;&nbsp;&nbsp; (0.28)<br>| &nbsp;&nbsp;&nbsp; (0.17)<br>| &nbsp;&nbsp;&nbsp; (0.11)<br>| &nbsp;&nbsp;&nbsp; (0.14)<br>|
| **Net asset value, end of period** | $5.14 | $4.85 | $4.96 | $5.67 | $5.69 |
| **Total Return** | 10.70<br> %<br> <sup>(3)(4)</sup> <br>| 3.47<br> %<br> <sup>(4)</sup> <br>| &nbsp;&nbsp;&nbsp; (9.61)%<br> <sup>(4)</sup> <br>| 1.52<br> %<br> <sup>(5)</sup> <br>| 2.05<br> %<br> <sup>(5)</sup> <br>|
| **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** |
| Net expenses | 1.57<br> %<br> <sup>(6)(7)</sup> <br>| 1.61<br> %<br> <sup>(6)</sup> <br>| 1.57<br> %<br> <sup>(6)</sup> <br>| 1.56<br> %<br> <sup>(6)</sup> <br>| 1.55<br> %<br> <sup>(6)</sup> <br>|
| Net expenses excluding interest expenses | N/A | N/A | 1.57<br> %<br> <sup>(6)</sup> <br>| N/A | 1.55<br> %<br> <sup>(6)</sup> <br>|
| Net investment income | 4.16<br> %<br> <sup>(6)(7)</sup> <br>| 3.80<br> %<br> <sup>(6)</sup> <br>| 2.43<br> %<br> <sup>(6)</sup> <br>| 1.79<br> %<br> <sup>(6)</sup> <br>| 1.98<br> %<br> <sup>(6)</sup> <br>|
| Rebate from Morgan Stanley affiliate | 0.01<br> %<br>| 0.01<br> %<br>| 0.00<br> %<br> <sup>(8)</sup> <br>| 0.00<br> %<br> <sup>(8)</sup> <br>| 0.01<br> %<br>|
| **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** |
| Net assets, end of period, in thousands | $11535 | $13914 | $17957 | $28359 | $32395 |
| Portfolio turnover rate | 155<br> %<br>| 118<br> %<br>| 62<br> %<br>| 115<br> %<br>| 106<br> %<br>|

---

---

| | | | |
|:---|:---|:---|:---|
| (1) | The per share amounts were computed using an average number of shares outstanding during the period. | The per share amounts were computed using an average number of shares outstanding during the period. | The per share amounts were computed using an average number of shares outstanding during the period. |
| (2) | Amount is less than $0.005 per share. | Amount is less than $0.005 per share. | Amount is less than $0.005 per share. |
| (3) | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class C shares. | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class C shares. | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class C shares. |
| (4) | Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. | Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. | Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. |
| (5) | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. Does not reflect the deduction of sales charge. | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. Does not reflect the deduction of sales charge. | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. Does not reflect the deduction of sales charge. |
| (6) | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." |
| (7) | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class C shares: | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class C shares: | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class C shares: |
|  | PERIOD ENDED | EXPENSE<br>RATIO | NET INVESTMENT<br>INCOME RATIO |
|  | October 31, 2024 | 1.59% | 4.14% |
| (8) | Amount is less than 0.005%. | Amount is less than 0.005%. | Amount is less than 0.005%. |

---

**58**

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[Back to **Table of Contents**](#TOC_16994)

Morgan Stanley Prospectus \| **Financial Highlights**

**Income Opportunities Fund**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Class R6\*** | **Class R6\*** | **Class R6\*** | **Class R6\*** | **Class R6\*** |
| | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** |
| <br>**Selected Per Share Data:** | **2024** | **2023** | **2022** | **2021** | **2020** |
| **Net asset value, beginning of period** | $4.93 | $5.03 | $5.75 | $5.77 | $5.80 |
| **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** |
| &nbsp;&nbsp;&nbsp; Net investment income<sup>(1)</sup>  | 0.27 | 0.25 | 0.19 | 0.17 | 0.17 |
| &nbsp;&nbsp;&nbsp; Net realized and unrealized gain (loss)  | 0.30 | &nbsp;&nbsp;&nbsp; (0.01)<br>| &nbsp;&nbsp;&nbsp; (0.68)<br>| &nbsp;&nbsp;&nbsp; (0.02)<br>| &nbsp;&nbsp;&nbsp; (0.00)<br> <sup>(2)</sup> <br>|
| &nbsp;&nbsp;&nbsp;&nbsp; Total income (loss) from investment operations  | 0.57 | 0.24 | &nbsp;&nbsp;&nbsp; (0.49)<br>| 0.15 | 0.17 |
| **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** |
| &nbsp;&nbsp;&nbsp; Net investment income  | &nbsp;&nbsp;&nbsp; (0.24)<br>| &nbsp;&nbsp;&nbsp; (0.29)<br>| &nbsp;&nbsp;&nbsp; (0.23)<br>| &nbsp;&nbsp;&nbsp; (0.16)<br>| &nbsp;&nbsp;&nbsp; (0.20)<br>|
| &nbsp;&nbsp;&nbsp; Net realized gain  |  |  |  | &nbsp;&nbsp;&nbsp; (0.01)<br>|  |
| &nbsp;&nbsp;&nbsp; Paid-in-capital  | &nbsp;&nbsp;&nbsp; (0.04)<br>| &nbsp;&nbsp;&nbsp; (0.05)<br>|  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | &nbsp;&nbsp;&nbsp; (0.28)<br>| &nbsp;&nbsp;&nbsp; (0.34)<br>| &nbsp;&nbsp;&nbsp; (0.23)<br>| &nbsp;&nbsp;&nbsp; (0.17)<br>| &nbsp;&nbsp;&nbsp; (0.20)<br>|
| **Net asset value, end of period** | $5.22 | $4.93 | $5.03 | $5.75 | $5.77 |
| **Total Return** | 11.74<br> %<br> <sup>(3)(4)</sup> <br>| 4.78<br> %<br> <sup>(3)</sup> <br>| &nbsp;&nbsp;&nbsp; (8.66)%<br> <sup>(3)</sup> <br>| 2.59<br> %<br> <sup>(5)</sup> <br>| 3.11<br> %<br> <sup>(5)</sup> <br>|
| **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** |
| Net expenses | 0.46<br> %<br> <sup>(6)(7)</sup> <br>| 0.49<br> %<br> <sup>(6)</sup> <br>| 0.48<br> %<br> <sup>(6)</sup> <br>| 0.47<br> %<br> <sup>(6)</sup> <br>| 0.47<br> %<br> <sup>(6)</sup> <br>|
| Net expenses excluding interest expenses | N/A | N/A | 0.48<br> %<br> <sup>(6)</sup> <br>| N/A | 0.47<br> %<br> <sup>(6)</sup> <br>|
| Net investment income | 5.27<br> %<br> <sup>(6)(7)</sup> <br>| 4.92<br> %<br> <sup>(6)</sup> <br>| 3.55<br> %<br> <sup>(6)</sup> <br>| 2.87<br> %<br> <sup>(6)</sup> <br>| 3.07<br> %<br> <sup>(6)</sup> <br>|
| Rebate from Morgan Stanley affiliate | 0.01<br> %<br>| 0.01<br> %<br>| 0.00<br> %<br> <sup>(8)</sup> <br>| 0.00<br> %<br> <sup>(8)</sup> <br>| 0.01<br> %<br>|
| **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** |
| Net assets, end of period, in thousands | $262278 | $221499 | $187940 | $237872 | $189052 |
| Portfolio turnover rate | 155<br> %<br>| 118<br> %<br>| 62<br> %<br>| 115<br> %<br>| 106<br> %<br>|

---

---

| | | | |
|:---|:---|:---|:---|
| \* | Effective April 29, 2022, Class IS shares were renamed Class R6 shares. | Effective April 29, 2022, Class IS shares were renamed Class R6 shares. | Effective April 29, 2022, Class IS shares were renamed Class R6 shares. |
| (1) | The per share amounts were computed using an average number of shares outstanding during the period. | The per share amounts were computed using an average number of shares outstanding during the period. | The per share amounts were computed using an average number of shares outstanding during the period. |
| (2) | Amount is less than $0.005 per share. | Amount is less than $0.005 per share. | Amount is less than $0.005 per share. |
| (3) | Calculated based on the net asset value as of the last business day of the period. | Calculated based on the net asset value as of the last business day of the period. | Calculated based on the net asset value as of the last business day of the period. |
| (4) | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class R6 shares. | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class R6 shares. | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class R6 shares. |
| (5) | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. |
| (6) | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." |
| (7) | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class R6 shares: | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class R6 shares: | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class R6 shares: |
|  | PERIOD ENDED | EXPENSE<br>RATIO | NET INVESTMENT<br>INCOME RATIO |
|  | October 31, 2024 | 0.48% | 5.25% |
| (8) | Amount is less than 0.005%. | Amount is less than 0.005%. | Amount is less than 0.005%. |

---

**59**

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Morgan Stanley Prospectus \| **Appendix**

Appendix A

**Intermediary-Specific Sales Charge Waivers and Discounts**

The availability of certain sales charge waivers and discounts will depend on whether you purchase your shares directly from the Fund or through a Financial Intermediary. Financial Intermediaries may have different policies and procedures regarding the availability of front-end sales charge waivers or CDSC waivers, which are discussed below. In all instances, it is the purchaser's responsibility to notify the Fund or the purchaser's Financial Intermediary at the time of purchase of any relationship or other facts qualifying the purchaser for sales charge waivers or discounts. For waivers and discounts not available through a particular Financial Intermediary, shareholders will have to purchase Fund shares directly from the Fund (or the Distributor) or through another Financial Intermediary to receive these waivers or discounts. A Financial Intermediary's administration and implementation of its particular policies with respect to any variations, waivers and/or discounts is neither supervised nor verified by the Fund, the Adviser or the Distributor. The Fund and the Distributor do not provide investment advice or recommendations or any form of tax or legal advice to existing or potential shareholders with respect to investment transactions involving the Fund.

\*\*\*\*\*

**Merrill Lynch ("Merrill")**

Purchases or sales of front-end (i.e. Class A) or level-load (i.e., Class C) shares through a Merrill platform or account will be eligible only for the following sales load waivers (front-end, contingent deferred, or back-end waivers) and discounts, which differ from those disclosed elsewhere in this Fund's prospectus. Purchasers will have to buy mutual fund shares directly from the mutual fund company or through another intermediary to be eligible for waivers or discounts not listed below.

It is the client's responsibility to notify Merrill at the time of purchase or sale of any relationship or other facts that qualify the transaction for a waiver or discount. A Merrill representative may ask for reasonable documentation of such facts and Merrill may condition the granting of a waiver or discount on the timely receipt of such documentation.

Additional information on waivers and discounts is available in the Merrill Sales Load Waiver and Discounts Supplement (the "Merrill SLWD Supplement") and in the Mutual Fund Investing at Merrill pamphlet at ml.com/funds. Clients are encouraged to review these documents and speak with their financial advisor to determine whether a transaction is eligible for a waiver or discount.

**Front-end Load Waivers Available at Merrill**

• Shares
 of mutual funds available for purchase by employer-sponsored retirement, deferred compensation, and employee benefit plans (including
 health savings accounts) and trusts used to fund those plans provided the shares are not held in a commission-based brokerage account
 and shares are held for the benefit of the plan. For purposes of this provision, employer-sponsored retirement plans do not include SEP
 IRAs, Simple IRAs, SAR-SEPs or Keogh plans

• Shares
 purchased through a Merrill investment advisory program

• Brokerage
 class shares exchanged from advisory class shares due to the holdings moving from a Merrill investment advisory program to a Merrill brokerage
 account

• Shares
 purchased through the Merrill Edge Self-Directed platform

• Shares
 purchased through the systematic reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same
 mutual fund in the same account

• Shares
 exchanged from level-load shares to front-end load shares of the same mutual fund in accordance with the description in the Merrill SLWD
 Supplement

• Shares
 purchased by eligible employees of Merrill or its affiliates and their family members who purchase shares in accounts within the employee's
 Merrill Household (as defined in the Merrill SLWD Supplement)

• Shares
 purchased by eligible persons associated with the fund as defined in this prospectus (e.g. the fund's officers or trustees)

• Shares
 purchased from the proceeds of a mutual fund redemption in front-end load shares provided (1) the repurchase is in a mutual fund within
 the same fund family; (2) the repurchase occurs within 90 calendar days from the redemption trade date, and (3) the redemption and purchase
 occur in the same account (known as Rights of Reinstatement). Automated transactions (i.e. systematic purchases and withdrawals) and purchases
 made after shares are automatically sold to pay Merrill's account maintenance fees are not eligible for Rights of Reinstatement

**Contingent Deferred Sales Charge ("CDSC") Waivers on Front-end, Back-end, and Level Load Shares Available at Merrill**

• Shares
 sold due to the client's death or disability (as defined by Internal Revenue Code Section 22e(3))

• Shares
 sold pursuant to a systematic withdrawal program subject to Merrill's maximum systematic withdrawal limits as described in the
 Merrill SLWD Supplement

**60**

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Morgan Stanley Prospectus \| **Appendix**

Appendix A (Con't)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• Shares
 sold due to return of excess contributions from an IRA account

• Shares
 sold as part of a required minimum distribution for IRA and retirement accounts due to the investor reaching the qualified age based on
 applicable IRS regulation

• Front-end
 or level-load shares held in commission-based, non-taxable retirement brokerage accounts (e.g. traditional, Roth, rollover, SEP IRAs,
 Simple IRAs, SAR-SEPs or Keogh plans) that are transferred to fee-based accounts or platforms and exchanged for a lower cost share class
 of the same mutual fund

**Front-end Load Discounts Available at Merrill: Breakpoints, Rights of Accumulation & Letters of Intent**

• Breakpoint
 discounts, as described in this prospectus, where the sales load is at or below the maximum sales load that Merrill permits to be assessed
 to a front-end load purchase, as described in the Merrill SLWD Supplement

• Rights
 of Accumulation (ROA), as described in the Merrill SLWD Supplement, which entitle clients to breakpoint discounts based on the aggregated
 holdings of mutual fund family assets held in accounts in their Merrill Household

• Letters
 of Intent (LOI), which allow for breakpoint discounts on eligible new purchases based on anticipated future eligible purchases within
 a fund family at Merrill, in accounts within your Merrill Household, as further described in the Merrill SLWD Supplement.

**Morgan Stanley Wealth Management**

Shareholders purchasing Fund shares through a Morgan Stanley Wealth Management transactional brokerage account will be eligible only for the following front-end sales charge waivers with respect to Class A shares, which may differ from and may be more limited than those disclosed elsewhere in this Prospectus or SAI, except that such shareholders will continue to be eligible for front-end sales charge breakpoint discounts as described in the Prospectus.

**Front-end Sales Charge Waivers on Class A Shares available at Morgan Stanley Wealth Management**

• Employer-sponsored
 retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and
 defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, SIMPLE IRAs, SAR-SEPs
 or Keogh plans

• Morgan
 Stanley employee and employee-related accounts according to Morgan Stanley's account linking rules

• Shares
 purchased through reinvestment of dividends and capital gains distributions when purchasing shares of the same fund

• Shares
 purchased through a Morgan Stanley self-directed brokerage account

• Class
 C (i.e., level-load) shares that are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the
 same fund pursuant to Morgan Stanley Wealth Management's share class conversion program

• Shares
 purchased from the proceeds of redemptions within the same fund family, provided (i) the repurchase occurs within 90 days following the
 redemption, (ii) the redemption and purchase occur in the same account, and (iii) redeemed shares were subject to a front-end or deferred
 sales charge

**Raymond James & Associates, Inc., Raymond James Financial Services, Inc. and each entity's affiliates ("Raymond James")**

Shareholders purchasing fund shares through a Raymond James platform or account, or through an introducing broker-dealer or independent registered investment adviser for which Raymond James provides trade execution, clearance, and/or custody services, will be eligible only for the following load waivers (front-end sales charge waivers and contingent deferred, or back-end, sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this Fund's prospectus or SAI.

**Front-end Sales Load Waivers on Class A Shares available at Raymond James**

• Shares
 purchased in an investment advisory program

• Shares
 purchased within the same fund family through a systematic reinvestment of capital gains and dividend distributions

• Employees
 and registered representatives of Raymond James or its affiliates and their family members as designated by Raymond James

• Shares
 purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the
 redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred
 sales load (known as Rights of Reinstatement)

**61**

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Morgan Stanley Prospectus \| **Appendix**

Appendix A (Con't)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• A
 shareholder in the Fund's Class C shares will have their shares converted at net asset value to Class A shares (or the appropriate
 share class) of the Fund if the shares are no longer subject to a CDSC and the conversion is in line with the policies and procedures
 of Raymond James

**CDSC Waivers on Classes A and C shares available at Raymond James**

• Death
 or disability of the shareholder

• Shares
 sold as part of a systematic withdrawal plan as described in the Fund's Prospectus

• Return
 of excess contributions from an IRA Account

• Shares
 sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based
 on applicable IRS regulations as described in the Fund's Prospectus

• Shares
 sold to pay Raymond James fees but only if the transaction is initiated by Raymond James

• Shares
 acquired through a right of reinstatement

**Front-end load discounts available at Raymond James: breakpoints, rights of accumulation, and/or letters of intent**

• Breakpoints
 as described in this Prospectus

• Rights
 of accumulation which entitle shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding of
 fund family assets held by accounts within the purchaser's household at Raymond James. Eligible fund family assets not held at
 Raymond James may be included in the calculation of rights of accumulation only if the shareholder notifies his or her financial advisor
 about such assets

• Letters
 of intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible
 fund family assets not held at Raymond James may be included in the calculation of letters of intent only if the shareholder notifies
 his or her financial advisor about such assets

**Janney Montgomery Scott LLC ("Janney")**

If you purchase Fund shares through a Janney brokerage account, you are eligible for the following load waivers (front-end sales charge waivers and CDSC, or back-end sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this Prospectus or SAI.

**Front-end Sales Charge Waivers on Class A shares available at Janney**

• Shares
 purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not
 any other fund within the fund family)

• Shares
 purchased by employees and registered representatives of Janney or its affiliates and their family members as designated by Janney

• Shares
 purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the
 redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred
 sales load (i.e., right of reinstatement)

• Employer-sponsored
 retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and
 defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include SEP IRAs, SIMPLE IRAs, SAR-SEPs
 or Keogh plans

• Shares
 acquired through a right of reinstatement

• Class
 C shares that are no longer subject to a contingent deferred sales charge and are converted to Class A shares of the same fund pursuant
 to Janney's policies and procedures

**CDSC Waivers on Class A and C shares available at Janney**

• Shares
 sold upon the death or disability of the shareholder

• Shares
 sold as part of a systematic withdrawal plan as described in the Fund's Prospectus

• Shares
 purchased in connection with a return of excess contributions from an IRA account

• Shares
 sold as part of a required minimum distribution for IRA and other retirement accounts due to the shareholder reaching age 70½ as
 described in the Fund's Prospectus

• Shares
 sold to pay Janney fees but only if the transaction is initiated by Janney

**62**

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Morgan Stanley Prospectus \| **Appendix**

Appendix A (Con't)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• Shares
 acquired through a right of reinstatement

• Shares
 exchanged into the same share class of a different fund

**Front-end Sales Charge\* Discounts available at Janney: Breakpoints, Rights of Accumulation and/or Letters of Intent**

• Breakpoints
 as described in this Prospectus

• Rights
 of Accumulation (ROA), which entitle shareholders to breakpoint discounts, will be automatically calculated based on the aggregated holding
 of fund family assets held by accounts within the purchaser's household at Janney. Eligible fund family assets not held at Janney
 may be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets

• Letters
 of Intent which allow for breakpoint discounts based on anticipated purchases within a fund family, over a 13-month time period. Eligible
 fund family assets not held at Janney Montgomery Scott may be included in the calculation of letters of intent only if the shareholder
 notifies his or her financial advisor about such assets

\*Also referred to as an "initial sales charge."

**Oppenheimer & Co. Inc. ("OPCO")**

Shareholders purchasing Fund shares through an OPCO platform or account are eligible only for the following load waivers (front-end sales charge waivers and contingent deferred, or back-end, sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this Fund's prospectus or SAI.

**Front-end Sales Load Waivers on Class A Shares available at OPCO**

• Employer-sponsored
 retirement, deferred compensation and employee benefit plans (including health savings accounts) and trusts used to fund those plans,
 provided that the shares are not held in a commission-based brokerage account and shares are held for the benefit of the plan

• Shares
 purchased by or through a 529 Plan

• Shares
 purchased through an OPCO affiliated investment advisory program

• Shares
 purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not
 any other fund within the fund family

• Shares
 purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the
 redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred
 sales load (known as Rights of Restatement).

• A
 shareholder in the Fund's Class C shares will have their shares converted at net asset value to Class A shares (or the appropriate
 share class) of the Fund if the shares are no longer subject to a CDSC and the conversion is in line with the policies and procedures
 of OPCO

• Employees
 and registered representatives of OPCO or its affiliates and their family members

• Directors
 or Trustees of the Fund, and employees of the Fund's investment adviser or any of its affiliates, as described in this prospectus

**CDSC Waivers on A and C Shares available at OPCO**

• Death
 or disability of the shareholder

• Shares
 sold as part of a systematic withdrawal plan as described in the Fund's prospectus

• Return
 of excess contributions from an IRA Account

• Shares
 sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based
 on applicable IRS regulations as described in the prospectus

• Shares
 sold to pay OPCO fees but only if the transaction is initiated by OPCO

• Shares
 acquired through a right of reinstatement

**Front-end load Discounts Available at OPCO: Breakpoints, Rights of Accumulation & Letters of Intent**

• Breakpoints
 as described in this prospectus

**63**

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Morgan Stanley Prospectus \| **Appendix**

Appendix A (Con't)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• Rights
 of Accumulation (ROA) which entitle shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding
 of fund family assets held by accounts within the purchaser's household at OPCO. Eligible fund family assets not held at OPCO may
 be included in the ROA calculation only if the shareholder notifies his or her financial advisor about such assets

**Stifel, Nicolaus & Company, Incorporated ("Stifel")**

Shareholders purchasing or holding Fund shares, including existing fund shareholders, through a Stifel or affiliated platform that provides trade execution, clearance, and/or custody services, are eligible for the following sales charge load waivers (including front-end sales charge waivers and contingent deferred, or back-end, (CDSC) sales charge waivers) and discounts, which may differ from those disclosed elsewhere in this prospectus or the Fund's SAI.

**CLASS A SHARES**

As described elsewhere in this prospectus, Stifel may receive compensation out of the front-end sales charge if you purchase Class A shares through Stifel.

**Rights of accumulation**

Rights of accumulation (ROA) that entitle shareholders to breakpoint discounts on front-end sales charges will be calculated by Stifel based on the aggregated holding of eligible assets in the Fund held by accounts within the purchaser's household at Stifel. Ineligible assets include Money Market Funds not assessed a sales charge. Morgan Stanley Fund Family assets not held at Stifel may be included in the calculation of ROA only if the shareholder notifies his or her financial advisor about such assets.

The employer maintaining a SEP IRA plan and/or SIMPLE IRA plan may elect to establish or change ROA for the IRA accounts associated with the plan to a plan-level grouping as opposed to including all share classes at a shareholder or pricing group level.

**Front-end sales charge waivers on Class A shares available at Stifel**

• Class C
 shares that have been held for more than seven (7) years may be converted to Class A shares or other front-end share class(es) of the
 same fund pursuant to Stifel's policies and procedures. To the extent that this prospectus elsewhere provides for a waiver with
 respect to the exchange or conversion of such shares following a shorter holding period, those provisions shall continue to apply.

• Shares
 purchased by employees and registered representatives of Stifel or its affiliates and their family members as designated by Stifel.

• Shares
 purchased in a Stifel fee-based advisory program, often referred to as a "wrap" program.

• Shares
 purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the Fund.

• Shares
 purchased from the proceeds of redeemed shares of the Fund so long as the proceeds are from the sale of shares from an account with the
 same owner/beneficiary within 90 days of the purchase. For the absence of doubt, automated transactions (i.e. systematic purchases, including
 salary deferral transactions and withdrawals) and purchases made after shares are sold to cover Stifel Nicolaus' account maintenance
 fees are not eligible for rights of reinstatement.

• Shares
 from rollovers into Stifel from retirement plans to IRAs.

• Shares
 exchanged into Class A shares from another share class so long as the exchange is into the same fund and was initiated at the direction
 of Stifel. Stifel is responsible for any remaining CDSC due to the fund company, if applicable. Any future purchases are subject to the
 applicable sales charge as disclosed in this prospectus.

• Purchases
 of Class 529-A shares through a rollover from another 529 plan.

• Purchases
 of Class 529-A shares made for reinvestment of refunded amounts.

• Employer-sponsored
 retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit sharing and money purchase pension plans and
 defined benefit plans). For purposes of this provision, employer sponsored retirement plans do not include SEP IRAs, Simple IRAs or SAR-SEPs.

• Charitable
 organizations and foundations, notably 501(c)(3) organizations.

**Contingent Deferred Sales Charges Waivers on Class A and C Shares**

• Death
 or disability of the shareholder or, in the case of 529 plans, the account beneficiary.

• Shares
 sold as part of a systematic withdrawal plan not to exceed 12% annually.

**64**

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Morgan Stanley Prospectus \| **Appendix**

Appendix A (Con't)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• Return
 of excess contributions from an IRA Account.

• Shares
 sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based
 on applicable IRS regulations.

• Shares
 acquired through a right of reinstatement.

• Shares
 sold to pay Stifel fees or costs in such cases where the transaction is initiated by Stifel.

• Shares
 exchanged or sold in a Stifel fee-based program.

**Share Class Conversions in Advisory Accounts**

• Stifel
 continually looks to provide our clients with the lowest cost share class available based on account type. Stifel reserves the right to
 convert shares to the lowest cost share class available at Stifel upon transfer of shares into an advisory program.

**Robert W. Baird & Co. ("Baird")**

Shareholders purchasing fund shares through a Baird platform or account will only be eligible for the following sales charge waivers (front-end sales charge waivers and CDSC waivers) and discounts, which may differ from those disclosed elsewhere in this prospectus or the SAI.

**Front-End Sales Charge Waivers on A-shares Available at Baird**

• Shares
 purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund

• Shares
 purchased by employees and registered representatives of Baird or its affiliate and their family members as designated by Baird

• Shares
 purchased using the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the
 redemption, (2) the redemption and purchase occur in the same accounts, and (3) redeemed shares were subject to a front-end or deferred
 sales charge (known as rights of reinstatement)

• A
 shareholder in the Funds C Shares will have their share converted at net asset value to A shares of the same fund if the shares are no
 longer subject to CDSC and the conversion is in line with the policies and procedures of Baird

• Employer-sponsored
 retirement plans or charitable accounts in a transactional brokerage account at Baird, including 401(k) plans, 457 plans, employer-sponsored
 403(b) plans, profit sharing and money purchase pension plans and defined benefit plans. For purposes of this provision, employer-sponsored
 retirement plans do not include SEP IRAs, SIMPLE IRAs or SAR-SEPs

**CDSC Waivers on A and C shares Available at Baird**

• Shares
 sold due to death or disability of the shareholder

• Shares
 sold as part of a systematic withdrawal plan as described in the Fund's Prospectus

• Shares
 bought due to returns of excess contributions from an IRA Account

• Shares
 sold as part of a required minimum distribution for IRA and retirement accounts due to the shareholder reaching the qualified age based
 on applicable Internal Revenue Service regulations as described in the Fund's prospectus

• Shares
 sold to pay Baird fees but only if the transaction is initiated by Baird

• Shares
 acquired through a right of reinstatement

**Front-End Sales Charge Discounts Available at Baird: Breakpoints and/or Rights of Accumulations**

• Breakpoints
 as described in this prospectus

• Rights
 of accumulations which entitles shareholders to breakpoint discounts will be automatically calculated based on the aggregated holding
 of fund family assets held by accounts within the purchaser's household at Baird. Eligible fund family assets not held at Baird
 may be included in the rights of accumulations calculation only if the shareholder notifies his or her financial advisor about such assets

• Letters
 of Intent (LOI) allow for breakpoint discounts based on anticipated purchases within a fund family, through Baird, over a 13-month period
 of time

**65**

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Morgan Stanley Prospectus \| **Appendix**

Appendix A (Con't)

**Ameriprise Financial**

**Front-end sales charge reductions on Class A shares purchased through Ameriprise Financial**

Shareholders purchasing Class A shares of the fund through an Ameriprise Financial platform or account are eligible only for the following sales charge reductions, which may differ from those disclosed elsewhere in this prospectus or the SAI. Such shareholders can reduce their initial sales charge on the purchase of Class A shares as follows:

• *Transaction size breakpoints,* as described in this
 prospectus or the SAI.

• *Rights of accumulation (ROA),* as described in
 this prospectus or the SAI.

• *Letter of intent,* as described in this prospectus
 or the SAI.

**Front-end sales charge waivers on Class A shares purchased through Ameriprise Financial**

Shareholders purchasing Class A shares of the fund through an Ameriprise Financial platform or account are eligible only for the following sales charge waivers, which may differ from those disclosed elsewhere in this prospectus or the SAI. Such shareholders may purchase Class A shares at NAV without payment of a sales charge as follows:

• shares
 purchased by employer-sponsored retirement plans (e.g., 401(k) plans, 457 plans, employer- sponsored 403(b) plans, profit sharing and
 money purchase pension plans and defined benefit plans). For purposes of this provision, employer-sponsored retirement plans do not include
 SEP IRAs, Simple IRAs or SAR-SEPs.

• shares
 purchased through reinvestment of capital gains and dividend reinvestment when purchasing shares of the same fund (but not any other fund
 within the same fund family).

• shares
 exchanged from Class C shares of the same fund in the month of or following the seven-year anniversary of the purchase date.
 To the extent that this prospectus elsewhere provides for a waiver with respect to such shares following a shorter holding period, that
 waiver will apply to exchanges following such shorter period. To the extent that this prospectus elsewhere provides for a waiver with
 respect to exchanges of Class C shares for load waived shares, that waiver will also apply to such exchanges.

• shares
 purchased by employees and registered representatives of Ameriprise Financial or its affiliates and their immediate family
 members.

• shares
 purchased by or through qualified accounts (including IRAs, Coverdell Education Savings Accounts, 401(k)s, 403(b) TSCAs subject
 to ERISA and defined benefit plans) that are held by a covered family member, defined as an Ameriprise Financial advisor and/or the advisor's
 spouse, advisor's lineal ascendant (mother, father, grandmother, grandfather, great grandmother, great grandfather), advisor's
 lineal descendant (son, step-son, daughter, step-daughter, grandson, granddaughter, great grandson, great granddaughter) or any spouse
 of a covered family member who is a lineal descendant.

• shares
 purchased from the proceeds of redemptions within the same fund family, provided (1) the repurchase occurs within 90 days following the
 redemption, (2) the redemption and purchase occur in the same account, and (3) redeemed shares were subject to a front-end or deferred
 sales load (i.e. Rights of Reinstatement).

**CDSC waivers on Class A and C shares purchased through Ameriprise Financial**

Fund shares purchased through an Ameriprise Financial platform or account are eligible only for the following CDSC waivers, which may differ from those disclosed elsewhere in this prospectus or the SAI:

• redemptions
 due to death or disability of the shareholder

• shares
 sold as part of a systematic withdrawal plan as described in this prospectus or the SAI

• redemptions
 made in connection with a return of excess contributions from an IRA account

• shares
 purchased through a Right of Reinstatement (as defined above)

• redemptions
 made as part of a required minimum distribution for IRA and retirement accounts pursuant to the Internal Revenue Code

**Edward D. Jones & Co., L.P. ("Edward Jones")**

<u>**Policies Regarding Transactions Through Edward Jones**</u>

*The following information has been provided by Edward Jones:*

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Morgan Stanley Prospectus \| **Appendix**

Appendix A (Con't)

The following information supersedes prior information with respect to transactions and positions held in fund shares through an Edward Jones system. Clients of Edward Jones (also referred to as "shareholders") purchasing fund shares on the Edward Jones commission and fee-based platforms are eligible only for the following sales charge discounts (also referred to as "breakpoints") and waivers, which can differ from discounts and waivers described elsewhere in the mutual fund prospectus or statement of additional information or through another broker-dealer. In all instances, it is the shareholder's responsibility to inform Edward Jones at the time of purchase of any relationship, holdings of Morgan Stanley Funds, or other facts qualifying the purchaser for discounts or waivers. Edward Jones can ask for documentation of such circumstance. Shareholders should contact Edward Jones if they have questions regarding their eligibility for these discounts and waivers.

**Breakpoints**

• Breakpoint
 pricing, otherwise known as volume pricing, at dollar thresholds as described in the prospectus.

**Rights of Accumulation ("ROA")**

• The
 applicable sales charge on a purchase of Class A shares is determined by taking into account all share classes (except certain money market
 funds and any assets held in group retirement plans) of Morgan Stanley Funds held by the shareholder or in an account grouped by Edward
 Jones with other accounts for the purpose of providing certain pricing considerations ("pricing groups"). If grouping assets
 as a shareholder, this includes all share classes held on the Edward Jones platform and/or held on another platform. The inclusion of
 eligible fund family assets in the ROA calculation is dependent on the shareholder notifying Edward Jones of such assets at the time of
 calculation. Money market funds are included only if such shares were sold with a sales charge at the time of purchase or acquired in
 exchange for shares purchased with a sales charge.

• The
 employer maintaining a SEP IRA plan and/or SIMPLE IRA plan may elect to establish or change ROA for the IRA accounts associated
 with the plan to a plan-level grouping as opposed to including all share classes at a shareholder or pricing group level.

• ROA
 is determined by calculating the higher of cost minus redemptions or market value (current shares x NAV).

**Letter of Intent ("LOI")**

• Through
 a LOI, shareholders can receive the sales charge and breakpoint discounts for purchases shareholders intend to make over
 a 13-month period from the date Edward Jones receives the LOI. The LOI is determined by calculating the higher of cost or market value
 of qualifying holdings at LOI initiation in combination with the value that the shareholder intends to buy over a 13-month period to calculate
 the front-end sales charge and any breakpoint discounts. Each purchase the shareholder makes during that 13-month period will receive
 the sales charge and breakpoint discount that applies to the total amount. The inclusion of eligible fund family assets in the LOI calculation
 is dependent on the shareholder notifying Edward Jones of such assets at the time of calculation. Purchases made before the LOI is received
 by Edward Jones are not adjusted under the LOI and will not reduce the sales charge previously paid. Sales charges will be adjusted if
 LOI is not met.

• If
 the employer maintaining a SEP IRA plan and/or SIMPLE IRA plan has elected to establish or change ROA for the IRA accounts associated
 with the plan to a plan-level grouping, LOIs will also be at the plan-level and may only be established by the employer.

**Sales Charge Waivers**

Sales charges are waived for the following shareholders and in the following situations:

• Associates of Edward Jones and its affiliates and other accounts in the same pricing group (as determined by Edward Jones under its policies and procedures) as the associate. This waiver will continue for the remainder of the associate's life if the associate retires from Edward Jones in good-standing and remains in good standing pursuant to Edward Jones' policies and procedures.

• Shares purchased in an Edward Jones fee-based program.

• Shares purchased through reinvestment of capital gains distributions and dividend reinvestment.

• Shares purchased from the proceeds of redeemed shares of the same fund family so long as the following conditions are met: the proceeds are from the sale of shares within 60 days of the purchase, the sale and purchase are made from a share class that charges a front load and one of the following ("Right of Reinstatement"):

• The
 redemption and repurchase occur in the same account.

• The
 redemption proceeds are used to process an: IRA contribution, excess contributions, conversion, recharacterizing of contributions,
 or distribution, and the repurchase is done in an account within the same Edward Jones grouping for ROA.

**67**

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Morgan Stanley Prospectus \| **Appendix**

Appendix A (Con't)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

• The
 Right of Reinstatement excludes systematic or automatic transactions including, but not limited to, purchases made through payroll deductions,
 liquidations to cover account fees, and reinvestments from non-mutual fund products.

• Shares
 exchanged into Class A shares from another share class so long as the exchange is into the same fund and was initiated at the discretion
 of Edward Jones. Edward Jones is responsible for any remaining CDSC due to the fund company, if applicable. Any future purchases
 are subject to the applicable sales charge as disclosed in the prospectus.

• Exchanges
 from Class C shares to Class A shares of the same fund, generally, in the 84th month following the anniversary of the
 purchase date or earlier at the discretion of Edward Jones.

• Purchases
 of Class 529-A shares through a rollover from either another education savings plan or a security used for qualified distributions.

• Purchases
 of Class 529-A shares made for recontribution of refunded amounts.

**Contingent Deferred Sales Charge ("CDSC") Waivers**

If the shareholder purchases shares that are subject to a CDSC and those shares are redeemed before the CDSC is expired, the shareholder is responsible to pay the CDSC except in the following conditions:

• The death or disability of the shareholder.

• Systematic withdrawals with up to 10% per year of the account value.

• Return of excess contributions from an Individual Retirement Account (IRA).

• Shares redeemed as part of a required minimum distribution for IRA and retirement accounts if the redemption is taken in or after the year the shareholder reaches qualified age based on applicable IRS regulations.

• Shares redeemed to pay Edward Jones fees or costs in such cases where the transaction is initiated by Edward Jones.

• Shares exchanged in an Edward Jones fee-based program.

• Shares acquired through NAV reinstatement.

• Shares redeemed at the discretion of Edward Jones for Minimums Balances, as described below.

<u>**Other Important Information Regarding Transactions Through Edward Jones**</u>

**Minimum Purchase Amounts**

• Initial purchase minimum: $250

• Subsequent purchase minimum: none

**Minimum Balances**

• Edward Jones has the right to redeem at its discretion fund holdings with a balance of $250 or less. The following are examples of accounts that are not included in this policy:

• A fee-based account held on an Edward Jones platform

• A 529 account held on an Edward Jones platform

• An account with an active systematic investment plan or LOI

**Exchanging Share Classes**

• At any time it deems necessary, Edward Jones has the authority to exchange at NAV a shareholder's holdings in a fund to Class A shares of the same fund.

**J.P. Morgan Securities LLC**

If you purchase or hold fund shares through an applicable J.P. Morgan Securities LLC brokerage account, you will be eligible for the following sales charge waivers (front-end sales charge waivers and contingent deferred sales charge ("CDSC"), or back-end sales

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Morgan Stanley Prospectus \| **Appendix**

Appendix A (Con't)

charge, waivers), share class conversion policy and discounts, which may differ from those disclosed elsewhere in this fund's prospectus or Statement of Additional Information.

**Front-end sales charge waivers on Class A shares available at J.P. Morgan Securities LLC**

• Shares
 exchanged from Class C (i.e. level-load) shares that are no longer subject to a CDSC and are exchanged into Class A shares
 of the same fund pursuant to J.P. Morgan Securities LLC's share class exchange policy.

• Qualified
 employer-sponsored defined contribution and defined benefit retirement plans, nonqualified deferred compensation plans, other
 employee benefit plans and trusts used to fund those plans. For purposes of this provision, such plans do not include SEP IRAs, SIMPLE
 IRAs, SAR-SEPs or 501(c)(3) accounts.

• Shares
 of funds purchased through J.P. Morgan Securities LLC Self-Directed Investing accounts.

• Shares
 purchased through rights of reinstatement.

• Shares
 purchased through reinvestment of capital gains distributions and dividend reinvestment when purchasing shares of the same fund (but not
 any other fund within the fund family).

• Shares
 purchased by employees and registered representatives of J.P. Morgan Securities LLC or its affiliates and their spouse or
 financial dependent as defined by J.P. Morgan Securities LLC.

**Class C to Class A share conversion**

• A
 shareholder in the fund's Class C shares will have their shares converted at net asset value by J.P. Morgan Securities LLC to Class
 A shares (or the appropriate share class) of the same fund if the shares are no longer subject to a CDSC and the conversion is consistent
 with J.P. Morgan Securities LLC's policies and procedures.

**CDSC waivers on Class A and C shares available at J.P. Morgan Securities LLC**

• Shares
 sold upon the death or disability of the shareholder.

• Shares
 sold as part of a systematic withdrawal plan as described in the fund's prospectus.

• Shares
 purchased in connection with a return of excess contributions from an IRA account.

• Shares
 sold as part of a required minimum distribution for IRA and retirement accounts pursuant to the Internal Revenue Code.

• Shares
 acquired through a right of reinstatement.

**Front-end load discounts available at J.P. Morgan Securities LLC: breakpoints, rights of accumulation & letters of intent**

• Breakpoints
 as described in the prospectus.

• Rights
 of Accumulation ("ROA") which entitle shareholders to breakpoint discounts as described in the fund's prospectus
 will be automatically calculated based on the aggregated holding of fund family assets held by accounts within the purchaser's
 household at J.P. Morgan Securities LLC. Eligible fund family assets not held at J.P. Morgan Securities LLC (including 529 program holdings,
 where applicable) may be included in the ROA calculation only if the shareholder notifies their financial advisor about such assets.

• Letters
 of Intent ("LOI") which allow for breakpoint discounts based on anticipated purchases within a fund family, through J.P.
 Morgan Securities LLC, over a 13-month period of time (if applicable).

**69**

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Where to Find Additional Information

Additional information about the Fund's investments is available in the Fund's Shareholder Reports and Fund's financial statements and additional information. In the Fund's Annual Report, among other things, you will find a brief summary of the key factors that materially affected the Fund's performance during the reporting period. In the Fund's Form N-CSR, you will find the Fund's financial statements and additional information.

The Fund's SAI, dated February 28, 2025 (as may be supplemented from time to time) also provides additional information about the Fund. The SAI is incorporated herein by reference (legally is part of this Prospectus). For a free copy of the Fund's Shareholder Reports, SAI or financial statements and additional information included in the Fund's report filed on Form N-CSR, to request other information about the Fund or to make shareholder inquiries, please call toll-free **1-800-869-6397**. Free copies of these documents are also available from our Internet site at: **www.morganstanley.com/im/shareholderreports**.

You also may obtain information about the Fund by calling your Financial Intermediary or by visiting our Internet site.

Shareholder Reports and other information about the Fund, such as Fund financial statements, are available on the EDGAR Database on the SEC's Internet site at: http://www.sec.gov, and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov.

Morgan Stanley Distribution, Inc., member FINRA.

(THE FUND'S 1940 ACT FILE NO. IS 811-6515)© 2025 Morgan Stanley

MSIOPRO 6/25

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![image](pr16995img002.jpg)

**Morgan Stanley Income Opportunities Fund**

------

**Prospectus** \| February 28, 2025, as amended June 23, 2025

---

| | |
|:---|:---|
| **Share Class** | **Ticker Symbol** |
| Class IR | MFIRX |

---

This Prospectus contains important information about the Fund. Please read it carefully and keep it for future reference.

![image](pr16995img001.jpg)

The Securities and Exchange Commission ("SEC") has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

**An investment in the Fund is not guaranteed or endorsed by a bank, is not a bank deposit or obligation thereof, and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. An investment in the Fund involves investment risks, and you may lose money investing in the Fund.**

MSIOIRPRO 6/25

------

**Table of Contents**

---

| | |
|:---|:---|
|  | **Page** |
| [**Fund Summary**](#ref_chapter_2_16995)  | [1](#ref_chapter_2_16995)  |
| [**Fund Details**](#ref_chapter_3_16995)  | [10](#ref_chapter_3_16995)  |
| [**Additional Information about the Fund's Investment Objectives, Strategies and Risks**](#ref_chapter_3-sect1_2_16995)  | [12](#ref_chapter_3-sect1_2_16995)  |
| [**Fund Management**](#ref_chapter_3-sect1_4_16995)  | [36](#ref_chapter_3-sect1_4_16995)  |
| [**Shareholder Information**](#ref_chapter_4_16995)  | [37](#ref_chapter_4_16995)  |
| [**Financial Highlights**](#ref_chapter_5_16995)  | [47](#ref_chapter_5_16995)  |

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund

**Investment Objectives**

Morgan Stanley Income Opportunities Fund (the "Fund") seeks a high level of current income as its primary investment objective. As a secondary objective, the Fund seeks to maximize total return but only to the extent consistent with its primary objective.

**Fees and Expenses**

The table below describes the fees and expenses that you may pay if you buy, hold and sell Class IR shares of the Fund. The Fund does not charge any sales load or other fees when you purchase or redeem Class IR shares. **You may pay fees other than the fees and expenses of the Fund, such as brokerage commissions and other fees charged by financial intermediaries, which are not reflected in the tables and examples below.**

**Annual Fund Operating Expenses** (expenses that you pay each year as a percentage of the value of your investment)

---

| | |
|:---|:---|
|  | **Class IR** |
| Advisory Fee | 0.32% |
| Distribution and/or Shareholder Service (12b-1) Fee |  |
| Other Expenses<sup>1</sup>  | 15.59% |
| Total Annual Fund Operating Expenses<sup>2</sup>  | 15.91% |
| Fee Waiver and/or Expense Reimbursement<sup>2</sup>  | 15.34% |
| Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement<sup>2</sup>  | 0.57% |

---

1 Other Expenses have been restated to reflect current fees.

---

| | |
|:---|:---|
| 2 | The Fund's "Adviser" and "Administrator," Morgan Stanley Investment Management Inc., has agreed to reduce its advisory fee, its administration fee and/or reimburse the Fund so that Total Annual Fund Operating Expenses, excluding acquired fund fees and expenses (as applicable), certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.57% for Class IR. The fee waivers and/or expense reimbursements will continue for at least one year from the date of this Prospectus or until such time as the Fund's Board of Trustees acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. Total Annual Fund Operating Expenses, Fee Waiver and/or Expense Reimbursement and Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement have been restated to reflect current fees. |

---

**Example**

The example below is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund, your investment has a 5% return each year and that the Fund's operating expenses remain the same (except that the example incorporates the fee waiver and/or expense reimbursement arrangement for only the first year). Although your actual costs may be higher or lower, based on these assumptions your costs would be:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **If You SOLD Your Shares**  | **If You SOLD Your Shares**  | **If You SOLD Your Shares**  | **If You SOLD Your Shares**  | **If You SOLD Your Shares**  |
|  | **1 Year** | **3 Years** | **5 Years** | **10 Years** |
| Class IR | $58 | $3029 | $5386 | $9366 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **If You HELD Your Shares**  | **If You HELD Your Shares**  | **If You HELD Your Shares**  | **If You HELD Your Shares**  | **If You HELD Your Shares**  |
|  | **1 Year** | **3 Years** | **5 Years** | **10 Years** |
| Class IR | $58 | $3029 | $5386 | $9366 |

---

**Portfolio Turnover**

The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 155% of the average value of its portfolio.

**Principal Investment Strategies**

The Fund's "Adviser," Morgan Stanley Investment Management Inc., will allocate the Fund's investments among the following asset classes or market segments: (1) corporate securities, (2) agency residential and commercial mortgage-backed securities, (3) non-agency residential and commercial mortgage-backed securities, (4) asset-backed securities, (5) emerging market securities, (6) convertible securities, (7) U.S. government securities and foreign sovereign debt, and (8) derivatives, including interest rate-related derivatives and currency derivatives. Securities may be rated either investment grade or below investment grade and denominated in any currency, hedged or un-hedged. The amount of the Fund's assets committed to any one asset class or market segment will fluctuate. Under normal circumstances, the Fund may invest up to 65% of its net assets in any one asset class or market segment. The Adviser has the flexibility to select any combination of at least two asset classes of the aforementioned groups depending upon

**1**

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

market conditions and the current economic environment and, as a result, at any given time the Fund's assets may be invested in certain groups and not others.

The Fund's investment process incorporates information about environmental, social and governance issues (also referred to as ESG) via an integrated approach within the investment team's fundamental investment analysis framework. The Adviser may engage with management of certain issuers regarding corporate governance practices as well as what the Adviser deems to be materially important environmental and/or social issues facing a company.

The corporate securities in which the Fund will invest may include fixed-income securities issued by corporations located in or outside of the United States, certificates of deposit and bankers' acceptances issued or guaranteed by, or time deposits maintained at, banks, commercial paper and convertible securities.

The types of mortgage-backed securities in which the Fund may invest include mortgage pass-through securities, collateralized mortgage obligations ("CMOs"), stripped mortgage-backed securities ("SMBS") and commercial mortgage-backed securities ("CMBS"). Mortgage pass-through securities provide for monthly payments that are a "pass-through" of the monthly interest and principal payments made by the individual borrowers on the pooled mortgage loans. CMOs are debt obligations collateralized by mortgage loans or mortgage pass-through securities (collectively "Mortgage Assets"). CMOs are issued in multiple classes and each class has a fixed or floating rate and a stated maturity (when a debt security provides its final payment) or final distribution date. Certain classes will have more predictable cash flows than others. The Fund may invest in any class of CMO. SMBS are derivative multi-class mortgage-backed securities. A common type of SMBS will have one class receiving some of the interest and most of the principal from the Mortgage Assets, while the other class receives most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). CMBS are generally multi-class or pass-through securities backed by a mortgage loan or a pool of mortgage loans secured by commercial property, such as industrial and warehouse properties, office buildings, retail space and shopping malls, multifamily properties and cooperative apartments. In addition, the Fund may invest in to-be-announced pass-through mortgage-backed securities, which settle on a delayed delivery basis ("TBAs").

Asset-backed securities represent an interest in a pool of assets such as, but not limited to, automobile loans, credit card receivables, student loans or home equity (prime and subprime) loans that have been securitized in pass-through structures similar to mortgage-backed securities.

The Fund may invest in fixed-income securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities or in fixed-income securities issued or guaranteed by foreign governments or supranational organizations or any of their instrumentalities, including debt obligations of governmental issuers located in emerging market or developing countries and sovereign debt. The Fund may also invest generally in foreign securities that are denominated in U.S. dollars or in currencies other than U.S. dollars.

In pursuit of its investment objectives, the Fund may regularly enter into currency derivatives, including, but not limited to, foreign currency forward exchange contracts, and currency and currency index futures and options contracts for hedging and non-hedging purposes. The use of these currency derivatives may allow the Fund to obtain net long or net negative (short) exposure to selected currencies. At times, the Fund may enter into "cross-currency" transactions involving currencies other than those in which securities held or proposed to be purchased are denominated.

In addition to its use of currency derivatives, the Fund may, but it is not required to, use derivatives and similar instruments for a variety of purposes, including hedging, risk management, portfolio management or to seek to earn income. The Fund's use of derivatives may involve the purchase and sale of derivative instruments such as futures, options, swaps and other similar instruments and techniques.

The Fund may invest in loan-related investments, such as public bank loans made by banks or other financial institutions and loan participations and assignments, which may be rated investment grade or below investment grade. The Fund may also invest in restricted and illiquid securities.

The Fund will maintain an average credit rating of at least investment grade (BBB- by S&P Global Ratings, a division of S&P Global Inc. ("S&P") or Fitch Ratings, Inc. ("Fitch"), or Baa3 by Moody's Investors Service, Inc. ("Moody's")). Although the Fund's average credit rating will be investment grade or higher, the Fund may invest in securities that are rated below investment grade (rated below BBB by either S&P or Fitch, or below Baa by Moody's) or in unrated securities considered to be of comparable quality by the Adviser (often referred to as "junk" instruments). If securities are rated differently by two or more rating agencies, the highest rating will be used.

**Principal Risks**

There is no assurance that the Fund will achieve its investment objective, and you can lose money investing in this Fund. Investments in the Fund involve risks and you should not rely on the Fund as a complete investment program. The relative significance of each

**2**

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

risk factor summarized below may change over time and you should review each risk factor carefully because any one or more of these risks may result in losses to the Fund. The principal risks of investing in the Fund include:

• **Fixed-Income Securities.** Fixed-income securities are
 subject to the risk of the issuer's inability to meet principal and interest payments on its obligations (i.e., credit risk) and
 are subject to price volatility resulting from, among other things, interest rate sensitivity (i.e., interest rate risk), market perception
 of the creditworthiness of the issuer and general market liquidity (i.e., market risk). For example, a type of fixed-income securities
 in which the Fund may invest are corporate debt obligations. In addition to interest rate, credit and other risks, corporate debt obligations
 are also subject to factors directly related to the issuer, such as the credit rating of the corporation, the corporation's performance
 and perceptions of the corporation in the marketplace, and by factors not directly related to the issuer, such as general market liquidity,
 economic conditions and inflation. The Fund may face a heightened level of interest rate risk in times of monetary policy change and/or
 uncertainty, such as when the Federal Reserve Board adjusts a quantitative easing program and/or changes rates. A changing interest rate
 environment increases certain risks, including the potential for periods of volatility, increased redemptions, shortened durations (i.e.,
 prepayment risk) and extended durations (i.e., extension risk). The Fund is not limited as to the maturities (when a debt security provides
 its final payment) or durations (measure of interest rate sensitivity) of the securities in which it may invest. Securities with longer
 durations are likely to be more sensitive to changes in interest rates, generally making them more volatile than securities with shorter
 durations. Lower rated fixed-income securities have greater volatility because there is less certainty that principal and interest payments
 will be made as scheduled. The Fund may be subject to certain liquidity risks that may result from the lack of an active market and the
 reduced number and capacity of traditional market participants to make a market in fixed-income securities.

• **Convertible Securities.** To the extent that the Fund
 invests in convertible securities, and the convertible security's investment value is greater than its conversion value, its price
 will be likely to increase when interest rates fall and decrease when interest rates rise. If the conversion value exceeds the investment
 value, the price of the convertible security will tend to fluctuate directly with the price of the underlying security. The Fund may be
 subject to certain liquidity risks that may result from the lack of an active market and the reduced number and capacity of traditional
 market participants to make a market in fixed-income securities.

• **Credit and Interest Rate Risk.** Credit risk refers
 to the possibility that the issuer or guarantor of a security, or counterparty to a transaction, will be unable or unwilling or perceived
 to be unable or unwilling to make interest payments and/or repay the principal on its debt or otherwise honor its obligations, including
 the risk of default. In such instances, the value of the Fund could decline and the Fund could lose money. If an issuer's, guarantor's
 or counterparty's financial condition worsens, the credit quality of the issuer, guarantor or counterparty may deteriorate. Credit
 ratings may not be an accurate assessment of financial condition, liquidity or credit risk. Although credit ratings may not accurately
 reflect the true credit risk of an instrument, a change in the credit rating of an instrument or an issuer, guarantor or counterparty,
 or the market's perception of the creditworthiness of an instrument or issuer, guarantor or counterparty can have a rapid, adverse
 effect on the instrument's value and liquidity and make it more difficult for the Fund to sell at an advantageous price or time.
 Interest rate risk refers to the decline in the value of a fixed-income security resulting from changes in the general level of interest
 rates. A wide variety of market and economic factors can cause interest rates to rise or fall, including central bank monetary policy,
 rising inflation, disinflation or deflation, and changes in general economic conditions. When the general level of interest rates goes
 up, the prices of most fixed-income securities go down. When the general level of interest rates goes down, the prices of most fixed-income
 securities go up but the yield or income from new issuances of fixed-income securities generally decreases. Securities with longer durations
 will generally be more sensitive to changes in interest rates than securities with shorter durations. Fluctuations in interest rates may
 also affect the liquidity of and income generated by fixed-income instruments held by the Fund. The Fund may invest in variable and floating
 rate loans and other variable and floating rate securities. Although the value of these instruments are generally less sensitive to interest
 rate changes than fixed rate instruments, the value of variable and floating rate loans and other securities may decline if their interest
 rates do not rise as quickly, or as much, as general interest rates. The Fund may face a heightened level of interest rate risk in times
 of monetary policy change and/or uncertainty, such as when the Federal Reserve Board adjusts a quantitative easing program and/or changes
 rates. Changing interest rates may have unpredictable effects on the markets and may detract from Fund performance. A changing interest
 rate environment increases certain risks, including the potential for periods of market volatility, increased redemptions, shortened durations
 (i.e., prepayment risk) and extended durations (i.e., extension risk).

• **Foreign and Emerging Market Securities.** Investments
 in foreign markets entail special risks such as currency, political (including geopolitical), economic and market risks and heightened
 risks, that may result in losses to the Fund. There also may be greater market volatility, less reliable financial information, less stringent
 investor protections and disclosure standards, higher transaction and custody costs and risks, decreased market liquidity and less government
 and exchange regulation associated with investments in foreign markets. In addition, investments in certain foreign markets that have
 historically been considered stable may become more volatile and subject to increased risk due to developments and changing conditions
 in such markets. Moreover, the growing interconnectivity of global economies and financial markets has increased the probability
 that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other
 countries or regions. Certain foreign markets may rely heavily on particular industries or foreign capital and are more vulnerable to
 diplomatic developments (including regional and global, military or other conflicts), the imposition of economic sanctions against a particular
 country or countries, organizations, companies, entities and/or individuals, changes in international trading patterns, trade barriers
 (including tariffs) and other protectionist or retaliatory measures. Investments in foreign markets may also be adversely affected by

**3**

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

governmental interventions or other actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets or the imposition of punitive taxes. The governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain sectors or industries. In addition, a foreign government may limit or cause delay in the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. Certain foreign investments may become less liquid and decline in value in response to market developments or adverse investor perceptions, or become illiquid after purchase by the Fund, particularly during periods of market, economic, political and social turmoil. When the Fund holds illiquid investments, its portfolio may be harder to value. The risks of investing in emerging market countries are greater than the risks associated with investments in foreign developed countries. Emerging market countries may be subject to increased potential for market manipulation and to less stringent requirements regarding accounting, auditing, financial reporting and record keeping and therefore, material information related to an investment may not be available or reliable. In addition, the Fund is limited in its ability to exercise its legal rights or enforce a counterparty's legal obligations in certain jurisdictions outside of the United States, in particular, in emerging market countries. In addition, the Fund's investments in foreign issuers may be denominated in foreign currencies and therefore, to the extent unhedged, the value of those investments will fluctuate with U.S. dollar exchange rates. Economic sanctions or other similar measures may be, and have been, imposed against certain countries, organizations, companies, entities and/or individuals. Economic sanctions and other similar measures could, among other things, effectively restrict or eliminate the Fund's ability to purchase or sell securities (in the sanctioned country and other markets), negatively impact the value or liquidity of the Fund's investments, significantly delay or prevent the settlement of the Fund's securities transactions, force the Fund to sell or otherwise dispose of investments at inopportune times or prices, or impair the Fund's ability to meet its investment objective or invest in accordance with its investment strategies.<br>

• **Mortgage-Backed Securities.** Mortgage-backed securities
 entail prepayment risk, which generally increases during a period of falling interest rates. Rising interest rates tend to discourage
 refinancings, with the result that the average life and volatility of mortgage-backed securities will increase and market price will decrease.
 Rates of prepayment, faster or slower than expected by the Adviser, could reduce the Fund's yield, increase the volatility of the
 Fund and/or cause a decline in NAV per share. Mortgage-backed securities are also subject to extension risk, which is the risk that rising
 interest rates could cause mortgages or other obligations underlying the securities to be prepaid more slowly than expected, thereby lengthening
 the duration of such securities, increasing their sensitivity to interest rate changes and causing their prices to decline. Certain mortgage-backed
 securities may be more volatile and less liquid than other traditional types of debt securities. In addition, mortgage-backed securities
 are subject to credit risk. The Fund may invest in non-agency mortgage-backed securities offered by non-governmental issuers, such as
 commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers.
 Non-agency mortgage-backed securities are not subject to the same underwriting requirements for the underlying mortgages that are applicable
 to those mortgage-backed securities that have a government or government-sponsored entity guarantee. As a result, the mortgage loans underlying
 non-agency mortgage-backed securities may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics
 than government or government-sponsored mortgage-backed securities and have wider variances in a number of terms including interest rate,
 term, size, purpose and borrower characteristics. To the extent the Fund invests in non-agency mortgage-backed securities offered by non-governmental
 issuers, the Fund will be exposed to additional risks because, among other things, there are no direct or indirect government or agency
 guarantees of payments in pools underlying the securities. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool
 may adversely affect the value of a mortgage-backed security and could result in losses to the Fund. The risk of such defaults is generally
 higher in the case of mortgage pools that include subprime mortgages. Furthermore, mortgage-backed securities may be subject
 to risks associated with the assets underlying those securities, such as a decline in value. Investments in mortgage-backed securities
 may give rise to a form of leverage (indebtedness) and may cause the Fund's portfolio turnover rate to appear higher. Leverage
 may cause the Fund to be more volatile than if the Fund had not been leveraged. The risks associated with mortgage-backed securities typically
 become elevated during periods of distressed economic, market, health and labor conditions. In particular, increased levels of unemployment,
 delays and delinquencies in payments of mortgage and rent obligations, and uncertainty regarding the effects and extent of government
 intervention with respect to mortgage payments and other economic matters may adversely affect the Fund's investments in mortgage-backed
 securities. In addition, commercial mortgage-backed securities are also subject to risks associated with reduced demand for commercial
 and office space, tightening lending standards and increased interest and lending rates, and other developments adverse to the commercial
 real estate market.

• **Collateralized Mortgage Obligations.** CMOs are comprised
 of various tranches, the expected cash flows of which have varying degrees of predictability as compared with the underlying mortgage
 loans or mortgage pass-through entities. The less predictable the cash flow, the higher the yield and the greater the risk. In addition
 to the risks generally associated with mortgage-backed securities, if the collateral securing CMOs or any third-party guarantees is insufficient
 to make payments, the Fund could sustain a loss. Like other mortgage backed-securities, CMOs are subject to credit risk. The Fund invests
 in both agency and non-agency CMOs. Some agency CMOs have reduced credit risk as they are government guaranteed.

• **Stripped Mortgage-Backed Securities.** In addition
 to the risks generally associated with mortgage-backed securities, investments in each class of SMBS are extremely sensitive to changes
 in interest rates. The interest-only or "IO" class tends to decrease in value substantially if interest rates decline and
 prepayment rates become more rapid. The principal-only or "PO" class tends to decrease

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

in value substantially if interest rates increase and the rate of prepayment decreases. If the Fund invests in SMBS and interest rates move in a manner not anticipated by Fund management, it is possible that the Fund could lose all or substantially all of its investment. Like other mortgage backed-securities, SMBS are subject to credit risk. The Fund invests in both agency and non-agency SMBS. Some agency SMBS have reduced credit risk as they are government guaranteed.<br>

• **Commercial Mortgage-Backed Securities.** CMBS are
 subject to risks similar to those associated with mortgage-backed securities, including credit risk and prepayment risk. The values of,
 and income generated by, CMBS may also be adversely affected by, among other things, changing interest rates, tightening lending standards,
 and other developments impacting the commercial real estate market, such as population shifts and other demographic changes, increasing
 vacancies (potentially for extended periods) and reduced demand for commercial and office space as well as maintenance or tenant improvement
 costs and costs to convert properties for other uses.

• **When-Issued Securities, Delayed Delivery Securities, TBAs and Forward Commitments.** The
 Fund may purchase or sell securities that it is entitled to receive on a when-issued, delayed delivery or through a forward commitment
 basis. For example, the Fund may invest in TBAs, which settle on a delayed delivery basis. These investments may result in a form of leverage
 and may increase volatility in the Fund's share price. In a TBA transaction, the seller agrees to deliver the MBS for an agreed
 upon price on an agreed upon future date, but makes no guarantee as to which or how many securities are to be delivered. Accordingly,
 the Fund's investments in TBAs are subject to risks such as failure of the counterparty to perform its obligation to deliver the
 security, the characteristics of a security delivered to the Fund may be less favorable than expected and the security the Fund buys will
 lose value prior to its delivery. The Fund's purchase of other securities on a when-issued, delayed delivery or through a forward
 commitment basis are subject to similar risks. When the Fund has sold a security on a when-issued, delayed delivery, or forward commitment
 basis, the Fund does not benefit if the value of the security appreciates above the sale price during the commitment period and the Fund
 is subject to failure of the counterparty to pay for the securities.

• **Asset-Backed Securities.** Asset-backed securities are
 subject to credit (such as a borrower's default on its mortgage obligation and the default or failure of a guarantee underlying
 the asset-backed security), interest rate and certain additional risks, including the risk that various federal and state consumer laws
 and other legal and economic factors may result in the collateral backing the securities being insufficient to support payment on the
 securities. To the extent the Fund invests in asset-backed securities issued by non-governmental issuers, such as commercial banks, savings
 and loan institutions, and other secondary market issuers, the Fund will be exposed to additional risks because, among other things, there
 are no direct or indirect government or agency guarantees of payments in the pools underlying the securities. Some asset-backed securities
 also entail prepayment risk and extension risk, which may vary depending on the type of asset. Due to these risks, asset-backed securities
 may become more volatile in certain interest rate environments.

• **High Yield Securities ("Junk Bonds").** The Fund's investments in high yield securities expose it to increased risks, including a substantial degree of credit and default
 risks. High yield securities may be issued by companies that are restructuring, are smaller and less creditworthy or are
 more highly leveraged or indebted than other companies or are financially distressed, and therefore they typically have more difficulty
 making scheduled payments of principal and interest than issuers of higher rated investments. High yield securities are subject to greater
 risk of loss (including substantial or total loss) of income and principal than higher rated securities and are considered speculative
 because of increased credit risk relative to higher rated fixed income investments. High yield securities are also subject to greater
 price volatility, including sudden and substantial decreases in price, and less liquidity than higher rated securities. High yield securities
 are particularly sensitive to adverse economic, market, industry or issuer-specific developments, which may result in an increased incidence
 of default. In the event of a default, the Fund may incur additional expenses to seek recovery or to negotiate new terms with a defaulting
 issuer.

• **Restricted Securities.** The Fund's
 investments may include restricted securities, which are generally subject to resale or transfer restrictions or prohibitions. Restricted
 securities may not be listed on an exchange and may have no active trading market. The Fund may be unable to dispose of restricted securities
 promptly or may be able to sell restricted securities only at disadvantageous times or prices, especially under adverse market or economic
 conditions or in the event of adverse changes in the financial condition of the issuer. There is no assurance that a liquid market will
 exist for restricted securities and these securities could have the effect of increasing the level of Fund illiquidity. In addition, the
 market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions.
 The illiquidity of the market, as well as the lack of publicly available information regarding these securities, including readily available
 market quotations, may also adversely affect the ability to arrive at a fair value for certain securities at certain times and could make
 it difficult for the Fund to sell certain securities. If the Fund is forced to sell an illiquid security to fund redemptions or for other
 cash needs, it may be forced to sell the security at a loss or for less than its fair value and may be unable to sell the security at
 all. In addition, restricted securities may involve a high degree of business and financial risk, which may result in substantial losses
 to the Fund.

• **Market and Geopolitical Risk.** The value of your
 investment in the Fund is based on the values of the Fund's investments, which change due to economic, geopolitical and other events
 that affect the U.S. and global markets generally, as well as those that affect or are perceived or expected to affect particular regions,
 countries, industries, companies, issuers, sectors, asset classes or governments. These types of events may be sudden and unexpected,
 and could adversely affect the value (or income generated by) and liquidity of the Fund's investments, which may in turn impact
 the Fund's ability to sell securities and/or its ability to meet

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

redemptions. The risks associated with these developments may be magnified if certain social, political, economic and other conditions and events (such as war, natural disasters or events, epidemics and pandemics, terrorism, conflicts, social unrest, recessions, inflation, interest rate changes, supply chain disruptions and the threat or actual imposition of tariffs, trade barriers and other protectionist or retaliatory measures) adversely interrupt or otherwise affect the global economy and financial markets. It is difficult to predict when events affecting the U.S. or global financial markets or economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods). These types of events may negatively impact broad segments of businesses and populations and have a significant and rapid negative impact on the performance or value of the Fund's investments, adversely affect and increase the volatility of the Fund's share price and exacerbate pre-existing risks to the Fund. The frequency and magnitude of resulting changes in the value of the Fund's investments cannot be predicted.<br>

• **U.S. Government Securities.** Different types
 of U.S. government securities are subject to different levels of credit risk, including the risk of default, depending on the nature of
 the particular government support for that security. For example, a U.S. government-sponsored entity, such as Federal National Mortgage
 Association or Federal Home Loan Mortgage Corporation, although chartered or sponsored by an Act of Congress, may issue securities that
 are neither insured nor guaranteed by the U.S. Treasury and, therefore, are not backed by the full faith and credit of the United States.
 With respect to U.S. government securities that are not backed by the full faith and credit of the United States, there is the risk that
 the U.S. government will not provide financial support to such U.S. government agencies, instrumentalities or sponsored enterprises if
 it is not obligated to do so by law. U.S. government securities are also subject to interest rate risks and can exhibit price fluctuations
 resulting from increases or decreases in interest rates.

• **Sovereign Debt Securities.** Investing in sovereign
 debt securities will expose the Fund to the direct or indirect consequences of political, social or economic changes in the countries
 that issue the securities. The issuer or governmental authority that controls the repayment of sovereign debt may not be willing or able
 to repay the principal and/or pay interest when it becomes due, due to factors such as debt service burden, political constraints, cash
 flow problems and other national economic factors. In addition, foreign governments may default on their debt securities, which may require
 holders of such securities to participate in debt rescheduling or additional lending to defaulting governments. Moreover, there is no
 bankruptcy proceeding by which defaulted sovereign debt may be collected in whole or in part.

• **Currency Derivatives.** Investments in currency
 derivatives may substantially change the Fund's exposure to currency exchange rates and could result in losses to the Fund if currencies
 do not perform as the Adviser expects. Foreign currency forward exchange contracts and currency futures and options contracts create exposure
 to currencies in which the Fund's securities are not denominated. To the extent hedged by the use of foreign currency forward exchange
 contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will
 not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements
 in the value of those securities between the date on which the contract is entered into and the date it matures. There is additional risk
 that such transactions may reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite
 to the position taken and that foreign currency forward exchange contracts create exposure to currencies in which the Fund's securities
 are not denominated. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy
 of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms
 of the contract.

• **Loan Risks.** Investments in loans are subject
 to the risks generally associated with other debt obligations (such as credit and interest rate risk). Loans are also subject to additional
 risks, including subordination to other creditors, no collateral or limited rights in collateral, increased liquidity risks and lack of
 publicly available information. Loans are subject to the risk of default in the payment of interest or principal, which will result in
 a reduction of income or other losses to the Fund, and a potential decrease in the Fund's NAV. Loans are traded in a private, unregulated
 inter-dealer or inter-bank resale market and are generally subject to contractual restrictions that must be satisfied before a loan can
 be bought or sold. These restrictions may impede the Fund's ability to buy or sell loans (thus affecting their liquidity) and may
 negatively impact the transaction price. It also may take longer than seven days for transactions in loans to settle. Due to the possibility
 of an extended loan settlement process, the Fund may hold additional cash, sell investments or temporarily borrow from banks or other
 lenders to meet short-term liquidity needs. The types of covenants included in loan agreements generally vary depending on market conditions,
 the creditworthiness of the issuer, the nature of the collateral securing the loan and possibly other factors. Loans with
 fewer covenants that restrict activities of the borrower may provide the borrower with more flexibility to take actions that may be detrimental
 to the loan holders and provide fewer investor protections in the event of such actions or if covenants are breached. The Fund may experience
 relatively greater realized or unrealized losses or delays and expense in enforcing its rights with respect to loans with fewer restrictive
 covenants. Loans to entities located outside of the U.S. may have substantially different lender protections and covenants as compared
 to loans to U.S. entities and generally involve greater and additional risks. The Fund may have difficulties and incur expense
 enforcing its rights with respect to loans and non-U.S. loans could be subject to bankruptcy laws that are materially different
 than in the U.S. Loans may be structured such that they are not securities under securities laws, and in the event of fraud or misrepresentation
 by a borrower, lenders may not have the protection of the anti-fraud provisions of the federal securities laws. Loans are also subject
 to risks associated with other types of income investments, including credit risk and risks of lower rated investments. In addition, bank
 loans are subject to the risk of default in the payment of interest or principal on a loan, which will

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

result in a reduction of income to the Fund, and a potential decrease in the Fund's NAV. The risk of default on loans will increase in the event of an economic downturn or a substantial increase in interest rates. Because some loans rank lower in priority of payment to other loans and other obligations, such loans present a greater degree of investment risk and may exhibit greater price volatility.<br>

• **Liquidity.** The Fund may make investments that are less liquid, illiquid or restricted or that may become illiquid or less liquid in response to overall
 economic conditions or adverse investor perceptions, and which may entail greater risk than investments in other types of securities.
 These investments may be more difficult to value or sell, particularly in times of market turmoil, and there may be little trading in
 the secondary market available for particular securities. Liquidity risk may be magnified in a market where credit spread and interest
 rate volatility is rising and where investor redemptions from fixed-income mutual funds may be higher than normal. If the
 Fund is forced to sell an illiquid or restricted security to fund redemptions or for other cash needs, it may be forced to sell the security
 at a loss or for less than its fair value and may be unable to sell the security at all.

• **Portfolio Turnover.** Consistent with its investment
 policies, the Fund will purchase and sell securities without regard to the effect on portfolio turnover. Higher portfolio turnover will
 cause the Fund to incur additional transaction costs.

• **Derivatives.** Derivatives and other similar instruments that create synthetic exposure often are subject to risks similar to those of the underlying
 asset or instrument, including market risk, and may be subject to additional risks, including imperfect correlation between the value
 of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred
 due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates,
 risks that the transactions may not be liquid, risks arising from margin and payment requirements, risks arising from mispricing or valuation
 complexity and operational and legal risks. Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the
 potential for gain and the risk of loss.

• **Active Management Risk.** In pursuing the Fund's
 investment objective, the Adviser has considerable leeway in deciding which investments to buy, hold or sell on a day-to-day basis, and
 which trading strategies to use. For example, the Adviser, in its discretion, may determine to use some permitted trading strategies while
 not using others. The success or failure of such decisions will affect the Fund's performance.

• **Corporate Debt Obligations.** Corporate debt obligations
 are fixed-income securities issued by corporations. The investment return of corporate debt obligations reflects interest earnings and
 changes in the market value of the security. The market value of a corporate debt obligation may be expected to rise and fall inversely
 with interest rates generally. There also exists the risk that the issuers of the securities may not be able to meet their obligations
 on interest or principal payments at the time called for by an instrument. Debtholders, as creditors, have a prior legal claim over common
 and preferred stockholders of the corporation as to both income and assets for the principal and interest due to the bondholder.

Please see "Additional Information About Fund Investment Strategies and Related Risks" in the Fund's prospectus for a more detailed description of risks of investing in the Fund. Shares of the Fund are not bank deposits and are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.

**Past Performance**

The bar chart and table below provide some indication of the risks of investing in the Fund by showing changes in the Fund's Class IR shares' performance from year-to-year and by showing how the Fund's average annual total returns for the past one and five year periods and since inception compare with those of a broad measure of market performance. The Fund changed its name from Morgan Stanley Global Fixed Income Opportunities Fund to Morgan Stanley Income Opportunities Fund effective May 30, 2025. Additionally, effective May 30, 2025, the Fund changed its primary benchmark to the Bloomberg U.S. Aggregate Index because the Adviser believes it is a more appropriate benchmark for the Fund. The Fund's past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future. Updated performance information is available online at www.morganstanley.com/im or by calling toll-free 1-800-869-6397.

Effective May 30, 2025, the Fund's principal investment strategies changed. The performance information in the bar chart and table prior to that date reflects the Fund's prior principal investment strategies.

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

**Annual Total Returns—Calendar Years**

![image](pr16995img003.jpg)

---

| | | |
|:---|:---|:---|
| **High Quarter**  | 06/30/20 | 8.23% |
| **Low Quarter**  | 03/31/20  | -7.84% |

---

**Average Annual Total Returns**

(for the calendar periods ended December 31, 2024)

---

| | | | |
|:---|:---|:---|:---|
|  | **Past 1<br>Year** | **Past 5<br>Years** | **Since Inception** |
| **Class IR<sup>1</sup>**  |  |  |  |
| Return Before Taxes | 6.87% | 2.56% | 3.45% |
| Return After Taxes on Distributions<sup>2</sup>  | 4.51% | 0.67% | 1.51% |
| Return After Taxes on Distributions and Sale of Fund Shares | 4.02% | 1.12% | 1.79% |
| Bloomberg U.S. Aggregate Index (reflects no deduction for fees, expenses and taxes)<sup>3</sup>  | 1.25% | -0.33% | 1.34%<sup>4</sup> |
| Bloomberg Global Aggregate (Hedged USD) Index (reflects no deduction for fees, expenses or taxes)<sup>5</sup>  | 3.40% | 0.48% | 1.89%<sup>4</sup> |

---

1 Class IR shares commenced operations on June 15, 2018.

2 These returns do not reflect any tax consequences from a sale of your shares at the end of each period.

---

| | |
|:---|:---|
| 3 | The Bloomberg U.S. Aggregate Index tracks the performance of U.S. government agency and Treasury securities, investment-grade corporate debt securities, agency mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. It is not possible to invest directly in an index. Effective May 30, 2025, the Fund changed its primary benchmark from the Bloomberg Global Aggregate (Hedged USD) Index to the Bloomberg U.S. Aggregate Index because the Adviser believes the Bloomberg U.S. Aggregate Index is a more appropriate benchmark for the Fund. |

---

4 Since Inception reflects the inception date of Class IR shares.

5 The Bloomberg Global Aggregate (Hedged USD) Index provides a broad-based measure of the global investment grade fixed-rate debt markets. Currency exposure is hedged to the U.S. dollar. It is not possible to invest directly in an index.

The after-tax returns shown in the table above are calculated using the historical highest individual federal marginal income tax rates during the period shown and do not reflect the impact of state and local taxes. After-tax returns for the Fund's other classes will vary from the Class IR shares' returns. Actual after-tax returns depend on an investor's tax situation and may differ from those shown, and after-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts ("IRAs"). After-tax returns may be higher than before-tax returns due to foreign tax credits and/or an assumed benefit from capital losses that would have been realized had Fund shares been sold at the end of the relevant periods, as applicable.

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Morgan Stanley Prospectus \| **Fund Summary**

Income Opportunities Fund (Con't)

**Fund Management**

**Adviser.** Morgan Stanley Investment Management Inc.

**Portfolio Managers.** Information about the individuals jointly and primarily responsible for the day-to-day management of the Fund's portfolio is shown below:

---

| | | |
|:---|:---|:---|
| **Name** | **Title with Adviser** | **Date Began<br>Managing Fund** |
| Michael Kushma | Managing Director | April 2014 |
| Justin H. Bourgette, CFA | Managing Director | May 2025 |
| Andrew Szczurowski, CFA | Managing Director | May 2025 |
| Brian Shaw, CFA | Executive Director | May 2025 |

---

**Purchase and Sale of Fund Shares**

To purchase Class IR shares, an investor must meet a minimum initial investment of $5 million or be a defined contribution, defined benefit or other employer sponsored employee benefit plan, in each case provided that the plan trades through an intermediary that combines its clients' assets in a single omnibus account, whether or not such plan is qualified under the Internal Revenue Code of 1986, as amended (the "Code"), and in each case subject to the discretion of the Adviser. The minimum investment requirement may be waived for certain investments. For more information, please refer to the section of the Prospectus entitled "Shareholder Information—How to Buy Shares—Minimum Investment Amount."

You can purchase or sell Fund shares on any day the New York Stock Exchange ("NYSE") is open for business directly from the Fund by mail (c/o SS&C Global Investor and Distribution Solutions, Inc., P.O. Box 219804, Kansas City, MO 64121-9804), by telephone (1-800-869-6397) or by contacting your Morgan Stanley Financial Advisor or other authorized third-party, such as a broker-dealer or other financial intermediary that has entered into a selling agreement with the Fund's "Distributor," Morgan Stanley Distribution, Inc. (each, a "Financial Intermediary"). Your shares will be sold at the next price calculated after we receive your order to redeem. For more information, please refer to the sections of the Prospectus entitled "Shareholder Information—How To Buy Shares" and "—How To Sell Shares."

**Tax Information**

The Fund intends to make distributions that may be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an IRA.

**Payments to Broker-Dealers and Other Financial Intermediaries**

If you purchase Class IR shares through a Financial Intermediary (such as a bank), the Adviser and/or the Distributor may pay the Financial Intermediary for the sale of Class IR shares and related services. These payments, which may be significant in amount, may create a conflict of interest by influencing the Financial Intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your Financial Intermediary's web site for more information. For additional information about the Fund's revenue sharing arrangements for Class IR shares, see the section of the Statement of Additional Information ("SAI") entitled "Revenue Sharing."

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Morgan Stanley Prospectus \| **Fund Details**

Income Opportunities Fund

**Investment Objectives**

Morgan Stanley Income Opportunities Fund seeks a high level of current income as its primary investment objective. As a secondary investment objective, the Fund seeks to maximize total return but only to the extent consistent with its primary objective.

**Principal Investment Strategies**

The Fund's "Adviser," Morgan Stanley Investment Management Inc., will allocate the Fund's investments among the following asset classes or market segments: (1) corporate securities, (2) agency residential and commercial mortgage-backed securities, (3) non-agency residential and commercial mortgage-backed securities, (4) asset-backed securities, (5) emerging market securities, (6) convertible securities, (7) U.S. government securities and foreign sovereign debt, and (8) derivatives, including interest rate-related derivatives and currency derivatives. Securities may be rated either investment grade or below investment grade and denominated in any currency, hedged or un-hedged. The amount of the Fund's assets committed to any one asset class or market segment will fluctuate. Under normal circumstances, the Fund may invest up to 65% of its net assets in any one asset class or market segment. The Adviser has the flexibility to select any combination of at least two asset classes of the aforementioned groups depending upon market conditions and the current economic environment and, as a result, at any given time the Fund's assets may be invested in certain groups and not others.

The Fund's investment process incorporates information about environmental, social and governance issues (also referred to as ESG) via an integrated approach within the investment team's fundamental investment analysis framework. The Adviser may engage with management of certain issuers regarding corporate governance practices as well as what the Adviser deems to be materially important environmental and/or social issues facing a company.

The corporate securities in which the Fund will invest may include fixed-income securities issued by corporations located in or outside of the United States, certificates of deposit and bankers' acceptances issued or guaranteed by, or time deposits maintained at, banks, commercial paper and convertible securities. The types of mortgage-backed securities in which the Fund may invest include mortgage pass-through securities, CMOs, SMBS and CMBS. Mortgage pass-through securities provide for monthly payments that are a "pass-through" of the monthly interest and principal payments made by the individual borrowers on the pooled mortgage loans. CMOs are debt obligations collateralized by Mortgage Assets. CMOs are issued in multiple classes and each class has a fixed or floating rate and a stated maturity (when a debt security provides its final payment) or final distribution date. Certain classes will have more predictable cash flows than others. The Fund may invest in any class of CMO. SMBS are derivative multi-class mortgage-backed securities. A common type of SMBS will have one class receiving some of the interest and most of the principal from the Mortgage Assets, while the other class receives most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). CMBS are generally multi-class or pass-through securities backed by a mortgage loan or a pool of mortgage loans secured by commercial property, such as industrial and warehouse properties, office buildings, retail space and shopping malls, multifamily properties and cooperative apartments. In addition, the Fund may invest in TBAs.

Asset-backed securities represent an interest in a pool of assets such as, but not limited to, automobile loans, credit card receivables, student loans or home equity (prime and subprime) loans that have been securitized in pass-through structures similar to mortgage-backed securities.

The Fund may invest in fixed-income securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities or in fixed-income securities issued or guaranteed by foreign governments or supranational organizations or any of their instrumentalities, including debt obligations of governmental issuers located in emerging market or developing countries and sovereign debt. The Fund may also invest generally in foreign securities that are denominated in U.S. dollars or in currencies other than U.S. dollars.

In pursuit of its investment objectives, the Fund may regularly enter into currency derivatives, including, but not limited to, foreign currency forward exchange contracts, and currency and currency index futures and options contracts for hedging and non-hedging purposes. The use of these currency derivatives may allow the Fund to obtain net long or net negative (short) exposure to selected currencies. At times, the Fund may enter into "cross-currency" transactions involving currencies other than those in which securities held or proposed to be purchased are denominated.

The Fund will maintain an average credit rating of at least investment grade (BBB- by S&P or Fitch, or Baa3 by Moody's). Although the Fund's average credit rating will be investment grade or higher, the Fund may invest in securities that are rated below investment grade (rated below BBB by either S&P or Fitch, or below Baa by Moody's) or in unrated securities considered to be of comparable quality by the Adviser (often referred to as "junk" instruments). If securities are rated differently by two or more rating agencies, the highest rating will be used. Fixed-income securities rated Baa3 or lower by Moody's, BBB- or lower by S&P, BBB- or lower by Fitch, or the equivalent by another NRSRO are considered speculative investments and are commonly known as "junk bonds." The securities in this group may include both convertible and non-convertible debt securities and preferred stock. They also may include "Rule 144A" securities, which are exempt from registration and may only be resold to qualified institutional buyers. The Fund does not have any minimum quality rating standard for this group of investments. Thus, the Fund may invest in fixed-income securities that may already be in default on payment of interest or principal.

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Morgan Stanley Prospectus \| **Fund Details**

Income Opportunities Fund (Con't)

Fixed-income securities are debt securities and can take the form of bonds, notes or commercial paper. The issuer of the debt security borrows money from the investor who buys the security. Most debt securities pay either fixed or adjustable rates of interest at regular intervals until they mature, at which point investors get their principal back.

The Fund may also invest generally in foreign securities. Securities of such foreign issuers may be denominated in U.S. dollars or in currencies other than U.S. dollars.

In addition to its use of currency derivatives, the Fund may, but it is not required to, use derivatives and similar instruments for a variety of purposes, including hedging, risk management, portfolio management or to seek to earn income. A derivative is a financial instrument the value of which is based, in part, on the value of an underlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, also affect the value of derivative instruments. The Fund's use of derivatives may involve the purchase and sale of derivative instruments such as futures, options, swaps and other similar instruments and techniques.

The Fund may invest in loan-related investments, such as public bank loans made by banks or other financial institutions and loan participations and assignments, which may be rated investment grade or below investment grade. To the extent these investments are second lien loans, which are lower in priority to senior loans, but have seniority in a company's capital structure to other liabilities, the company would be required to pay down these second lien loans prior to other lower-ranked claims on their assets.

The Fund may purchase certain non-publicly traded "restricted" securities, which may include Rule 144A securities. The Fund may invest in illiquid securities, including restricted securities that are illiquid. The Fund may invest an unlimited amount in restricted securities that are classified as liquid and otherwise are consistent with the Fund's investment policies.

The Fund may also invest in common stocks and other equity securities, inverse floaters and municipal securities.

In pursuing the Fund's investment objectives, the Adviser has considerable leeway in deciding which investments to buy, hold or sell on a day-to-day basis and which trading strategies to use. For example, the Adviser in its discretion may determine to use some permitted trading strategies while not using others.

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The percentage limitations relating to the composition of the Fund's portfolio apply at the time the Fund acquires an investment. Subsequent percentage changes that result from market fluctuations generally will not require the Fund to sell any portfolio security.

However, the Fund may be required to reduce its borrowings, if any, in response to fluctuations in the value of such holdings. The Fund may change its principal investment strategies at any time without shareholder approval; however, you would be notified of any changes as required by applicable law.

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund

Additional Information about Fund Investment Strategies and Related Risks

&nbsp;&nbsp;&nbsp; *This section discusses additional information relating to the Fund's investment strategies, other types of investments that the Fund may make and related risk factors. Fund investment practices and limitations are also described in more detail in the Statement of Additional Information ("SAI"), which is incorporated by reference and legally is a part of this Prospectus. For details on how to obtain a copy of the SAI and other reports and information, see the back cover of this Prospectus.*<br>

There is no assurance that the Fund will achieve its investment objectives. The Fund's share price and yield will fluctuate with changes in the market value and/or yield of the Fund's portfolio securities. Neither the value nor the yield of the U.S. government securities in which the Fund invests (or the value or yield of the Fund's shares) is guaranteed by the U.S. Government. When you sell Fund shares, they may be worth less than what you paid for them and, accordingly, you can lose money investing in this Fund.

Economies and financial markets worldwide have experienced periods of increased volatility, uncertainty, distress, government spending, inflation, tariffs and disruption to consumer demand, economic output and supply chains. To the extent these conditions exist or continue, the risks associated with an investment in the Fund, including those described below, could be heightened and the Fund's investments (and thus a shareholder's investment in the Fund) may be particularly susceptible to sudden and substantial losses, reduced yield or income or other adverse developments. The occurrence, duration and extent of these or other types of adverse economic and market conditions and uncertainty over the long term cannot be reasonably projected or estimated at this time.

**Fixed-Income Securities**

Fixed-income securities are securities that pay a fixed or a variable rate of interest until a stated maturity date. Fixed-income securities include U.S. government securities, securities issued by federal or federally sponsored agencies and instrumentalities, corporate bonds and notes, asset-backed securities, mortgage-backed securities, securities rated below investment grade (commonly referred to as "junk bonds" or "high yield/high risk securities"), municipal bonds, loan participations and assignments, zero coupon bonds, convertible securities, Eurobonds, Brady Bonds, Yankee Bonds, repurchase agreements, commercial paper and cash equivalents.

Fixed-income securities are subject to the risk of the issuer's inability to meet principal and interest payments on its obligations (i.e., credit risk) and are subject to price volatility resulting from, among other things, interest rate sensitivity (i.e., interest rate risk), market perception of the creditworthiness of the issuer and general market liquidity (i.e., market risk). For example, a type of fixed-income securities in which the Fund may invest are corporate debt obligations. In addition to interest rate, credit and other risks, corporate debt obligations are also subject to factors directly related to the issuer, such as the credit rating of the corporation, the corporation's performance and perceptions of the corporation in the marketplace, and by factors not directly related to the issuer, such as general market liquidity, economic conditions and inflation. The Fund may face a heightened level of interest rate risk in times of monetary policy change and/or uncertainty, such as when the Federal Reserve Board adjusts a quantitative easing program and/or changes rates. A changing interest rate environment increases certain risks, including the potential for periods of volatility, increased redemptions, shortened durations (i.e., prepayment risk) and extended durations (i.e., extension risk).

Fixed income and other debt instruments, including mortgage- and other asset-backed securities, are subject to prepayment risk, which is the risk that the principal of such obligation is paid earlier than expected, such as in the case of refinancing. This risk is increased during periods of declining interest rates and prepayments may reduce the Fund's yield or income as a result of reinvesting the income or other proceeds in lower yielding securities or instruments. These investments are also subject to extension risk, which is the risk that the principal of such obligation is paid slower or later than expected. This may negatively affect Fund returns, as the value of the investment decreases when principal payments are made later than expected. This risk is elevated during periods of increasing interest rates. In addition, because principal payments are made later than expected, the investment's duration may extend (and result in increased interest rate risk) and the Fund may be prevented from investing proceeds it would otherwise have received at the higher prevailing interest rates. Prepayments and extensions may result in a security or debt instrument offering less potential for gains during periods of declining interest rates or rising interest rates, respectively.

Securities with longer durations are likely to be more sensitive to changes in interest rates, generally making them more volatile than securities with shorter durations. Lower rated fixed-income securities have greater volatility because there is less certainty that principal and interest payments will be made as scheduled. The Fund may be subject to liquidity risk, which may result from the lack of an active market and the reduced number and capacity of traditional market participants to make a market in fixed-income securities. Fixed-income securities may be called (i.e., redeemed by the issuer) prior to final maturity. If a callable security is called, the Fund may have to reinvest the proceeds at a lower rate of interest.

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

**Credit and Interest Rate Risk**

Fixed-income securities, such as bonds, generally are subject to two primary types of risk: credit risk and interest rate risk. Credit risk refers to the possibility that the issuer or guarantor of a security, or counterparty to a transaction, will be unable or unwilling or perceived to be unable or unwilling to make interest payments and/or repay the principal on its debt or otherwise honor its obligations, including the risk of default. The risk of defaults across issuers, guarantors and/or counterparties increases in adverse market and economic conditions, and the degree of credit risk depends on the financial condition of the issuer, guarantor or counterparty and terms of the obligation. Credit ratings may not be an accurate assessment of financial condition, volatility, liquidity or credit risk, as the ratings do not evaluate market risks or necessarily reflect the issuer's, guarantor's or counterparty's current financial condition or the volatility or liquidity of the security. Although credit quality may not accurately reflect the true credit risk of an instrument, a change in the credit rating of an instrument or an issuer, guarantor or counterparty, or the market's perception of the creditworthiness of an instrument or issuer, guarantor or counterparty, can have a rapid, adverse effect on the instrument's value and liquidity and make it more difficult for the Fund to sell at an advantageous price or time. In addition, under certain conditions, there may be an increasing amount of issuers that are unprofitable, have little cash on hand and/or are unable to pay the interest owed on their debt obligations and the number of such issuers may increase if demand for their goods and services falls, borrowing costs rise due to governmental action or inaction or other reasons. The Fund may also be subject to credit spread risk, which is the risk that economic and market conditions, or any actual or perceived credit deterioration, may lead to an increase in credit spreads (i.e., the difference in yield between two securities of similar maturity but different credit quality) and a decline in price of an issuer's securities.

Interest rate risk refers to fluctuations (such as a decline) in the value of a fixed-income security resulting from changes in the general level of interest rates. A wide variety of market and economic factors can cause interest rates to rise or fall, including central bank monetary policy, rising inflation, disinflation or deflation, and changes in general economic conditions. When the general level of interest rates goes up, the prices of most fixed-income securities go down. When the general level of interest rates goes down, the prices of most fixed-income securities go up but the yield or income from new issuances of fixed-income securities generally decreases. Duration measures the time-weighted expected cash flows of a fixed-income security. Securities with longer durations will generally be more sensitive to changes in interest rates than securities with shorter durations. Thus, the Fund's susceptibility to interest rate risk will increase to the extent it has a longer average portfolio duration. The proceeds from prepaid or maturing instruments may have to be reinvested at a lower interest rate or on other less advantageous terms during a declining interest rate environment. In a rising interest rate environment, the duration of fixed-income securities may be extended, thus potentially reducing income and increasing interest rate risk. The Fund may face a heightened level of interest rate risk in times of monetary policy change and/or uncertainty, such as when the Federal Reserve Board adjusts a quantitative easing program and/or changes rates, which may occur at any time based on a range of factors and may be sudden, frequent and significant. For example, during periods when interest rates are low, the Fund's yield (and total return) also may be low or otherwise adversely affected or the Fund may be unable to maintain positive returns, minimize the volatility of the Fund's NAV or pay Fund expenses out of current income. Monetary policies, and market interest rates, are subject to change at any time and potentially frequently based on a variety of market and economic conditions. It is difficult to accurately predict the pace at which the Federal Reserve Board will change interest rates, or the timing, frequency or magnitude of such changes. The impact on fixed income and other debt instruments and market conditions from interest rate changes, regardless of the cause, could be significant and could adversely affect the Fund and its investments.

Governmental authorities and regulators may enact significant fiscal and monetary policy changes, including providing direct capital infusions into companies, creating new monetary programs and changing interest rates considerably. These actions present heightened risks to debt instruments, and such risks could be even further heightened if these actions are unexpectedly or suddenly reversed or are ineffective in achieving their desired outcomes.

**Market and Geopolitical Risk**

The value of your investment in the Fund is based on the values of the Fund's investments, which change due to economic and other events that affect the U.S. and global markets generally, as well as those that affect or are perceived or expected to affect particular regions, countries, industries, companies, issuers, sectors, asset classes or governments. Price movements, sometimes called volatility, may be greater or less depending on the types of securities the Fund owns and the markets in which the securities trade. Volatility and disruption in financial markets and economies may be sudden and unexpected, expose the Fund to greater risk, including risks associated with reduced market liquidity and fair valuation, and adversely affect the Fund's operations. For example, the Adviser potentially will be prevented from executing investment decisions at an advantageous time or price as a result of any domestic or global market disruptions and reduced market liquidity may impact the Fund's ability to sell securities to meet redemptions (i.e., increase the risk that the Fund will not be able to pay redemption proceeds within the allowable time period). In addition, no active trading market may exist for certain investments held by the Fund, which may impair the ability of the Fund to sell or to realize the current valuation of such investments in the event of the need to liquidate such assets.

The increasing interconnectivity between global economies and markets increases the likelihood that events or conditions in one region or market, or with respect to one company, may adversely impact other companies and other issuers, including those in a different country, region, sector, industry or market. For example, adverse developments in the banking or financial services sector

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

could impact companies operating in various sectors or industries and adversely impact the Fund's investments. Securities in the Fund's portfolio may underperform or otherwise be adversely affected due to inflation (or expectations for inflation), deflation (or expectations for deflation), interest rates (or changes in interest rates), global demand for particular products or resources, market or financial system instability or uncertainty, embargoes, the threat or actual imposition of tariffs, sanctions and other trade barriers, natural disasters and extreme weather events, health emergencies (such as epidemics and pandemics), terrorism, regulatory events and governmental or quasi-governmental actions. The occurrence of global events, such as terrorist attacks, natural disasters, health emergencies, social and political (including geopolitical) discord and tensions or debt crises and downgrades, among others, may result in increased market volatility and may have long term effects on both the U.S. and global financial markets. Inflation rates may change frequently and significantly because of various factors, including unexpected shifts in the domestic or global economy and changes in monetary or economic policies (or expectations that these policies may change). Changes in inflation rates or expected inflation rates may adversely affect market and economic conditions, an issuer's financial condition, the Fund's investments and an investment in the Fund. The market price of debt securities generally falls as inflation increases because the purchasing power of the future income and repaid principal is expected to be worth less when received by the Fund. The risk of inflation is greater for debt instruments with longer maturities and especially those that pay a fixed rather than variable interest rate. Other financial, economic and other global market and social developments or disruptions may result in similar adverse circumstances, and it is difficult to predict when similar events affecting the U.S. or global financial markets or economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods). In general, the securities or other instruments that the Adviser believes represent an attractive investment opportunity or in which the Fund seeks to invest may be unavailable entirely or in the specific quantities sought by the Fund. As a result, the Fund may need to obtain the desired exposure through a less advantageous investment, forgo the investment at the time or seek to replicate the desired exposure through a derivative transaction or investment in another investment vehicle. Any such event(s) could have a significant adverse impact on the value and risk profile of the Fund's portfolio. There is a risk that you may lose money by investing in the Fund.

Social, political, economic and other conditions and events, such as war, natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts, social unrest, recessions, inflation, interest rate changes, the imposition of tariffs, trade restrictions or similar actions by the U.S. or foreign governments (or retaliatory measures taken in response to such actions) and supply chain disruptions could reduce consumer demand or economic output, result in market closures, travel restrictions or quarantines, and generally have a significant impact on economies, financial markets, issuers and the Adviser's investment advisory activities and services of other service providers, which in turn could adversely affect the Fund's investments and other operations.

Government and other public debt, including municipal obligations, can be adversely affected by changes in local and global economic conditions, including those that result in increased debt levels. Although high levels of government and other public debt do not necessarily indicate or cause economic problems, high levels of debt may create certain systemic risks if sound debt management practices are not implemented. A high debt level may increase market pressures to meet an issuer's funding needs, which may increase borrowing costs and cause a government or public or municipal entity to issue additional debt, thereby increasing the risk of refinancing. A high debt level also raises concerns that the issuer may be unable or unwilling to repay the principal or interest on its debt, which may adversely impact instruments held by the Fund that rely on such payments.

Governmental and quasi-governmental responses to certain economic or other conditions may lead to increasing government and other public debt, particularly when such responses are unprecedented, which heighten these risks. Unsustainable debt levels can lead to declines in the value of currency, and can prevent a government from implementing effective counter-cyclical fiscal policy during economic downturns, can generate or contribute to an economic downturn or cause other adverse economic or market developments, such as increases in inflation or volatility. Increasing government and other public debt may adversely affect issuers, obligors, guarantors or instruments across a variety of asset classes.

Global events may negatively impact broad segments of businesses and populations, cause a significant negative impact on the price and performance of the Fund's investments, reduce market liquidity, adversely affect and increase the volatility of markets and the Fund's share price, exacerbate pre-existing political, social, financial and economic risks to the Fund and cause overall declines in the U.S. and global markets. The Fund's operations may be interrupted as a result, which may contribute to the negative impact on investment performance. In addition, governments, their regulatory agencies, or self-regulatory organizations may take actions (including monetary and/or fiscal actions intended to stimulate or stabilize the global economy) that affect the instruments in which the Fund invests, or the issuers of such instruments, in ways that could have a significant negative impact on the Fund's investment performance. Monetary and/or fiscal actions taken by U.S. or foreign governments may not be effective and could lead to increased market volatility. In addition, government actions (such as changes to interest rates) could have unintended economic and market consequences that adversely affect the Fund's investments. The frequency and magnitude of resulting changes in the value of the Fund's investments cannot be predicted.

**Convertible Securities**

A convertible security is a bond, debenture, note, preferred stock, right, warrant or other security that may be converted into or exchanged for a prescribed amount of common stock or other security of the same or a different issuer or into cash within a particular period of time at a specified price or formula. A convertible security generally entitles the holder to receive interest paid or accrued on

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Income Opportunities Fund (Con't)

debt securities or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities generally have characteristics similar to both debt and equity securities. The prices of convertible securities are affected by changes similar to those of equity and fixed-income securities. The value of convertible securities tends to decline as interest rates rise and, because of the conversion feature, tends to vary with fluctuations in the market value of the underlying securities. Convertible securities ordinarily provide a stream of income with generally higher yields than those of common stock of the same or similar issuers. Convertible securities generally rank senior to common stock in a corporation's capital structure but are usually subordinated to other comparable nonconvertible fixed-income securities in such capital structure. Convertible securities generally do not participate directly in any dividend increases or decreases of the underlying securities although the market prices of convertible securities may be affected by any dividend changes or other changes in the underlying securities.

**Foreign Securities**

Investing in foreign securities (including depositary receipts) involves certain special and heightened risks, which are not typically associated with investments in the securities of U.S. issuers, that can increase the chances that the Fund will lose money. Foreign issuers generally are subject to different corporate governance, accounting, auditing and financial reporting standards than U.S. issuers. There may be less information available to the public about foreign issuers. Securities of foreign issuers can be less liquid, experience greater price movements, and may be subject to foreign withholding taxes and/or other taxes, which decreases the yield and/or return of these securities. The Fund may experience losses if the Fund's claim to recover foreign withholding taxes is not successful. In addition, the prices of foreign securities may be susceptible to influence by large traders due to the limited size of many foreign securities markets. Moreover, investments in certain foreign markets that have historically been considered stable may become more volatile and subject to increased risk due to developments and changing conditions in such markets. Also, the growing interconnectivity of global economies and financial markets has increased the probability that adverse developments and conditions in one country or region will affect the stability of economies and financial markets in other countries or regions. In some foreign countries, there is also the risk of government expropriation, excessive or confiscatory taxation, political or social instability, the imposition of currency controls or diplomatic developments that could affect the Fund's investments. There also can be difficulty obtaining and enforcing judgments against issuers in foreign countries. Foreign stock exchanges, broker-dealers and listed issuers may be subject to less government regulation and oversight. Securities registration, custody, and settlement may be subject to delays and legal and administrative uncertainties. If the Fund cannot settle or is delayed in settling a purchase of securities, it may miss attractive investment opportunities and experience other adverse consequences. In some non-U.S. securities markets, custody arrangements for securities provide significantly less protection than custody arrangements in U.S. securities markets, and prevailing custody and trade settlement practices (e.g., the requirement to pay for securities prior to receipt) expose the Fund to credit and other risks it does not have in the United States. In addition, in certain markets the Fund may not receive timely payment for securities or other instruments it has delivered or receive delivery of securities paid for and may be subject to increased risk that the counterparty will fail to make payments or delivery when due or default completely. The cost of investing in foreign securities, including brokerage commissions and custodial expenses, can be higher than the cost of investing in domestic securities. Foreign market trading hours, clearance and settlement procedures, and holiday schedules may also limit the Fund's ability to buy and sell securities during certain periods.

The economies of certain foreign markets may not compare favorably with the economy of the United States with respect to such issues as growth of gross national product, reinvestment of capital, resources and balance of payments position. Certain foreign markets may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments (including regional and global, military or other conflicts), the imposition of economic sanctions against a particular country or countries, organizations, companies, entities and/or individuals, changes in international trading patterns, tariffs, trade barriers and other protectionist or retaliatory measures. International trade barriers or economic sanctions against foreign countries, organizations, companies, entities and/or individuals may adversely affect the Fund's foreign holdings or exposures. Investments in foreign markets may also be adversely affected by less stringent investor protections and disclosure standards, and governmental interventions or other actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets or the imposition of punitive taxes. Governmental actions can have a significant effect on the economic conditions in foreign countries, which also may adversely affect the value and liquidity of the Fund's investments. Foreign investment in the securities markets of certain foreign countries is restricted or controlled to varying degrees. For example, the governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain sectors or industries. In addition, a foreign government may limit or cause delay in the convertibility or repatriation of its currency which would adversely affect the U.S. dollar value and/or liquidity of investments denominated in that currency. The value of holdings traded outside the United States (and any hedging transactions in foreign currencies) will be affected by changes in currency exchange rates. Moreover, if a deterioration occurs in a country's balance of payments, the country could impose temporary restrictions on foreign capital remittances. The Fund could also be adversely affected by delays in, or a refusal to grant, any required governmental approval for repatriation, as well as by the application to it of other restrictions on investment. Any of these actions could severely affect security prices, which could result in losses to the Fund and increased transaction costs, impair the Fund's ability to purchase or sell foreign securities (or force the Fund to sell foreign securities) or transfer the Fund's assets back into the United States, or otherwise adversely affect the Fund's operations. Certain foreign investments may become less liquid and decline in value in response to market developments or adverse investor perceptions, or become illiquid after purchase by the Fund, particularly during periods of market, economic, political and social

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

turmoil. Certain foreign investments may become illiquid when, for instance, there are few, if any, interested buyers and sellers or when dealers are unwilling to make a market for certain securities. When the Fund holds illiquid investments, its portfolio may be harder to value.

Economic sanctions or other similar measures may be, and have been, imposed against certain countries, organizations, companies, entities and/or individuals. The Fund's investments in foreign securities are subject to trade laws of and potential economic sanctions by the United States and other jurisdictions. These laws and related governmental actions, including counter-sanctions and other retaliatory measures, can, from time to time, prevent or prohibit the Fund from investing in certain foreign securities. In addition, economic sanctions could prohibit the Fund from transacting with particular countries, organizations, companies, entities and/or individuals by banning them from global payment systems that facilitate cross-border payments, restricting their ability to settle securities transactions, and freezing their assets. The imposition of sanctions and other similar measures also could, among other things, cause a decline in the value of securities issued by the sanctioned country or companies located in, or economically linked to, the sanctioned country, downgrades in the credit ratings of the sanctioned country or companies located in, or economically linked to, the sanctioned country, devaluation of the sanctioned country's currency, and increased market volatility and disruption in the sanctioned country and throughout the world. In addition, economic sanctions or other similar measures could, among other things, effectively restrict or eliminate the Fund's ability to purchase or sell securities, negatively impact the value or liquidity of the Fund's investments, significantly delay or prevent the settlement of the Fund's securities transactions, force the Fund to sell or otherwise dispose of investments at inopportune times or prices, increase the Fund's transaction costs, make the Fund's investments more difficult to value or impair the Fund's ability to meet its investment objective or invest in accordance with its investment strategies. These conditions may be in place for a substantial period of time and enacted with limited advance notice to the Fund.

Even if the Fund does not have significant investments in securities affected by sanctions, sanctions or the threat of sanctions may cause volatility in regional and global markets and may negatively impact the performance of various sectors and industries, as well as companies in other countries, including through global supply chain disruptions, increased inflationary pressures, and reduced economic activity, which could have a negative effect on the Fund's performance. In addition, trade disputes and changes in tariffs may affect investor and consumer confidence and adversely affect financial markets and the broader economy, perhaps suddenly and to a significant degree. The type and severity of sanctions and other similar measures, including counter sanctions and other retaliatory actions, that may be imposed could vary broadly in scope, and their impact is difficult to predict.

In addition, the Holding Foreign Companies Accountable Act (the "HFCAA") could cause securities of a foreign (non-U.S.) company, including American Depositary Receipts, to be delisted from U.S. stock exchanges if the company does not allow the U.S. government to oversee the auditing of its financial information. Although the requirements of the HFCAA apply to securities of all foreign (non-U.S.) issuers, the SEC has thus far limited its enforcement efforts to securities of Chinese companies. If securities are delisted, the Fund's ability to transact in such securities will be impaired, and the liquidity and market price of the securities would likely decline. The Fund may also need to seek other markets in which to transact in such securities, which could increase the Fund's costs.

**Foreign Currency**

Investments in foreign securities may be denominated in foreign currencies. The value of foreign currencies may fluctuate relative to the value of the U.S. dollar or other applicable foreign currency. Since the Fund may invest in non-U.S. dollar-denominated securities, and therefore may convert the value of such securities into U.S. dollars, changes in currency exchange rates can increase or decrease the U.S. dollar value of the Fund's assets. Currency exchange rates may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates and the overall economic health of the issuer. Devaluation of a currency by a country's government or banking authority also will have a significant impact on the value of any investments denominated in that currency. The Adviser may use derivatives to seek to reduce this risk. The Adviser may in its discretion choose not to hedge against currency risk. In addition, certain market conditions may make it impossible or uneconomical to hedge against currency risk.

**Foreign Currency Forward Exchange Contracts**

In connection with its investments in foreign securities, the Fund also may enter into contracts with banks, brokers or dealers to purchase or sell securities or foreign currencies at a future date. A foreign currency forward exchange contract is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the contract. Foreign currency forward exchange contracts may be used to seek to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. In addition, the Fund may use cross currency hedging or proxy hedging with respect to currencies in which the Fund has or expects to have portfolio or currency exposure. Cross currency and proxy hedges involve the sale of one currency against the positive exposure to a different currency and may be used for hedging purposes or to establish an active exposure to the exchange rate between any two currencies.

Investments in foreign currency forward exchange contracts may substantially change the Fund's exposure to currency exchange rates and could result in losses to the Fund if currencies do not perform as the Adviser expect. The Adviser's success in these transactions will depend principally on its ability to predict accurately the future exchange rates between foreign currencies and the U.S. dollar.

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Income Opportunities Fund (Con't)

Foreign currency forward exchange contracts may be used for non-hedging purposes in seeking to meet the Fund's investment objectives, such as when the Adviser anticipate that particular non-U.S. currencies will appreciate or depreciate in value, even though securities denominated in those currencies are not then held in the Fund's investment portfolios. Investing in foreign currency forward exchange contracts for purposes of gaining from projected changes in exchange rates, as opposed to hedging currency risks applicable to the Fund's holdings, further increases the Fund's exposure to foreign securities losses. There is no assurance that the Adviser's use of currency derivatives will benefit the Fund or that they will be, or can be, used at appropriate times.

**Depositary Receipts**

A depositary receipt is generally issued by a bank or financial institution and represents the common stock or other equity securities of a foreign company. Depositary receipts involve many of the same risks as those associated with direct investment in foreign securities. In addition, the underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts, are under no obligation to distribute shareholder communications to the holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities.

**Emerging Market Securities**

The Fund may invest in emerging market or developing countries, which are countries that major international financial institutions generally consider to be less economically mature than developed nations (such as the United States or most nations in Western Europe). Emerging market or developing countries may be more likely to experience political turmoil or rapid changes in economic conditions than more developed countries, and the financial condition of issuers in emerging market or developing countries may be more precarious than in other countries. Certain emerging market countries may be subject to less stringent requirements regarding accounting, auditing, financial reporting and record keeping and therefore, material information related to an investment may not be available or reliable. Such emerging market countries could also subject the Fund to greater risk associated with the custody of its securities than developed markets, which may adversely affect the Fund. In addition, the Fund's investments (including the companies in which the Fund may invest) in emerging market or developing countries may be subject to expropriation, nationalization and confiscation of assets and property. Furthermore, the Fund is limited in its ability to exercise its legal rights or enforce a counterparty's legal obligations in certain jurisdictions outside of the United States, in particular, in emerging markets countries. In addition, due to jurisdictional limitations, U.S. authorities (e.g., SEC and the U.S. Department of Justice) may be limited in their ability to enforce regulatory or legal obligations in emerging market countries. In addition, emerging market securities generally are less liquid and subject to increased potential for market manipulation and wider price and currency fluctuations than securities issued in more developed countries. These characteristics result in greater risk of price volatility in emerging market or developing countries, which may be heightened by currency fluctuations relative to the U.S. dollar.

A portion of the Fund's investments in emerging market securities may include investments in microfinance loans. Microfinance loans are typically very small loans (microcredit) made for providing the means for people who are not served by traditional banking systems to expand their businesses or finance their families' basic needs by providing access to affordable credit. Microfinance loans carry many of the same risks associated with investing in emerging markets countries, but because some of the microfinance loans may be used to fund crop growing and livestock, microfinance loans may also be subject to climate and geography risk. In addition, most micro-clients have low incomes and little or no previous credit history. As a result, there is no assurance that micro-clients will be able to repay the microfinance loans.

**Mortgage-Backed Securities**

Mortgage-backed securities are fixed-income securities representing an interest in a pool of underlying mortgage loans. They are sensitive to changes in interest rates, but may respond to these changes differently from other fixed-income securities due to the possibility of prepayment of the underlying mortgage loans (i.e., when a borrower pays back the principal of a debt obligation earlier than expected). As a result, it may not be possible to determine in advance the actual maturity date or average life of a mortgage-backed security. Rising interest rates tend to discourage refinancings, with the result that the average life and volatility of the security will increase and its market price will decrease. When interest rates fall, however, mortgage-backed securities may not gain as much in market value because additional mortgage prepayments must be reinvested at lower interest rates. Prepayment risk may make it difficult to calculate the average maturity of a portfolio of mortgage-backed securities and, therefore, to assess the volatility risk of that portfolio.

The Fund may invest in mortgage-backed securities that are issued or guaranteed by the U.S. Government, its agencies or instrumentalities. These securities are either direct obligations of the U.S. Government or the issuing agency or instrumentality has the right to borrow from the U.S. Treasury to meet its obligations although it is not legally required to extend credit to the agency or instrumentality. Certain of these mortgage-backed securities purchased by the Fund, such as those issued by the Government National Mortgage Association and the Federal Housing Administration, are backed by the full faith and credit of the United States. Other of these mortgage-backed securities purchased by the Fund, such as those issued by the Federal National Mortgage Association ("Fannie Mae") and Federal Home Loan Mortgage Corporation ("Freddie Mac"), are not backed by the full faith and credit of the United States and there is a risk that the U.S. Government will not provide financial support to these agencies if it is not obligated to do so by law. The maximum potential liability of the issuers of some of the mortgage-backed securities held by the Fund may greatly

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.

Non-agency mortgage-backed securities are not traded on an exchange and there may be a limited market for the securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. Without an active trading market, mortgage-related securities held in the Fund's portfolio may be particularly difficult to value because of the complexities involved in assessing the value of the underlying mortgage loans or to sell. Non-agency mortgage-backed securities include securities that reflect an interest in, and are secured by, mortgage loans on commercial real property. Many of the risks of investing in CMBS reflect the risks of investing in the real estate securing the underlying mortgage loans. These risks reflect the effects of local and other economic conditions on real estate markets, the ability of tenants to make loan payments, and the ability of a property to attract and retain tenants.

The risks associated with mortgage-backed securities are elevated in distressed economic, market, health and labor conditions, notably, increased levels of unemployment, delays and delinquencies in payments of mortgage and rent obligations, and uncertainty regarding the effects and extent of government intervention with respect to mortgage payments and other economic matters.

Delinquencies, defaults and losses on residential mortgage loans may increase substantially over certain periods, which may affect the performance of the mortgage-backed securities in which the Fund may invest. Mortgage loans backing non-agency mortgage-backed securities are more sensitive to economic factors that could affect the ability of borrowers to pay their obligations under the mortgage loans backing these securities. In addition, housing prices and appraisal values in many states and localities over certain periods have declined or stopped appreciating. A sustained decline or an extended flattening of those values may result in additional increases in delinquencies and losses on mortgage-backed securities generally (including the mortgaged-backed securities that the Fund may invest in as described above). Adverse changes in market conditions and regulatory climate may reduce the cash flow which the Fund, to the extent it invests in mortgage-backed securities or other asset-backed securities, receives from such securities and increase the incidence and severity of credit events and losses in respect of such securities. In the event that interest rate spreads for mortgage-backed securities and other asset-backed securities widen following the purchase of such assets by the Fund, the market value of such securities is likely to decline and, in the case of a substantial spread widening, could decline by a substantial amount. Furthermore, adverse changes in market conditions may result in reduced liquidity in the market for mortgage-backed securities and other asset-backed securities (including the mortgage-backed securities and other asset-backed securities in which the Fund may invest) and an unwillingness by banks, financial institutions and investors to extend credit to servicers, originators and other participants in the market for mortgage-backed and other asset-backed securities. As a result, the liquidity and/or the market value of any mortgage-backed or asset-backed securities that are owned by the Fund may experience declines after they are purchased by the Fund.

*Collateralized Mortgage Obligations*. CMOs are debt obligations collateralized by Mortgage Assets. Payments of principal and interest on the Mortgage Assets and any reinvestment income are used to make payments on the CMOs. CMOs are issued in multiple classes. Each class has a fixed or floating rate and a stated maturity or final distribution date. The principal and interest on the Mortgage Assets may be allocated among the classes in a number of different ways. Certain classes will, as a result of the allocation, have more predictable cash flows than others. As a general matter, the more predictable the cash flow, the lower the yield relative to other Mortgage Assets. The less predictable the cash flow, the higher the yield and the greater the risk. The Fund may invest in any class of CMO, including classes that vary inversely with interest rates and may be more volatile and sensitive to prepayment rates.

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

The principal and interest on the Mortgage Assets comprising a CMO may be allocated among the several classes of a CMO in many ways. The general goal in allocating cash flows on Mortgage Assets to the various classes of a CMO is to create certain tranches on which the expected cash flows have a higher degree of predictability than do the underlying Mortgage Assets. As a general matter, the more predictable the cash flow is on a particular CMO tranche, the lower the anticipated yield on that tranche at the time of issue will be relative to the prevailing market yields on the Mortgage Assets. As part of the process of creating more predictable cash flows on certain tranches of a CMO, one or more tranches generally must be created that absorb most of the changes in the cash flows on the underlying Mortgage Assets. The yields on these tranches are generally higher than prevailing market yields on other mortgage related securities with similar average lives. Principal prepayments on the underlying Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates. Because of the uncertainty of the cash flows on these tranches, the market prices and yields of these tranches are more volatile and may increase or decrease in value substantially with changes in interest rates and/or the rates of prepayment relative to other tranches. Due to the possibility that prepayments (on home mortgages and other collateral) will alter the cash flow on CMOs, it is not possible to determine in advance the final maturity date or average life. Faster prepayment will shorten the average life and slower prepayments will lengthen it. In addition, if the collateral securing CMOs or any third party guarantees are insufficient to make payments, the Fund could sustain a loss.

*Stripped Mortgage-Backed Securities*. SMBS are derivative multi-class mortgage-backed securities. SMBS may be issued by agencies or instrumentalities of the U.S. Government, or by private originators. A common type of SMBS will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class receives most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest only or "IO" class), while the other class will receive all of the principal (the principal-only or "PO" class). Investments in each class of SMBS are extremely sensitive to changes in interest rates. IOs tend to decrease in value substantially if interest rates decline and prepayment rates become more rapid. POs tend to decrease in value substantially if interest rates increase and the rate of prepayment decreases. If the Fund invests in SMBS and interest rates move in a manner not anticipated by management, it is possible that the Fund could lose all or substantially all of its investment.

*Commercial Mortgage-Backed Securities*. CMBS are generally multi-class or pass-through securities backed by a mortgage loan or a pool of mortgage loans secured by commercial property, such as industrial and warehouse properties, office buildings, retail space and shopping malls, multifamily properties and cooperative apartments. The commercial mortgage loans that underlie CMBS are generally not amortizing or not fully amortizing. That is, at their maturity date, repayment of their remaining principal balance or "balloon" is due and is repaid through the attainment of an additional loan or sale of the property. An extension of a final payment on commercial mortgages will increase the average life of the CMBS, generally resulting in a lower yield for discount bonds and a higher yield for premium bonds.

CMBS are subject to credit risk and prepayment risk, among other risks.

The values of, and income generated by, CMBS may be adversely affected by, among other things, changing interest rates, tightening lending standards, and other developments impacting the commercial real estate market, such as population shifts and other demographic changes, increasing vacancies (potentially for extended periods) and reduced demand for commercial and office space as well as maintenance or tenant improvement costs and costs to convert properties for other uses. These developments could result from, among other things, changing tastes and preferences (such as remote work arrangements) as well as cultural, technological, global or local economic and market developments. In addition, changing interest rate environments and associated changes in lending standards and higher refinancing rates may adversely affect the commercial real estate and CMBS markets. The occurrence of any of the foregoing or similar developments would likely increase default risk for the properties and loans underlying these investments as well as impact the value of, and income generated by, these investments. These developments could also result in reduced liquidity for CMBS.

**When-Issued Securities, Delayed Delivery Securities, TBAs and Forward Commitments**

The Fund may purchase or sell securities that it is entitled to receive on a when-issued basis. The Fund may also purchase or sell securities on a delayed delivery basis or through a forward commitment (including on a TBA (to be announced) basis). These transactions involve the purchase or sale of securities by the Fund at an established price with payment and delivery taking place in the future. The Fund enters into these transactions to obtain what is considered an advantageous price to the Fund at the time of entering into the transaction. Such transactions entered into by the Fund will be counted towards the Fund's exposure in the types of securities listed herein to the extent they have economic characteristics similar to such securities. For example, the Fund may invest in TBAs, which settle on a delayed delivery basis. In a TBA transaction, the seller agrees to deliver the MBS for an agreed upon price on an agreed upon future date, but makes no guarantee as to which or how many securities are to be delivered. Accordingly, the Fund's investments in TBAs are subject to risks such as failure of the counterparty to perform its obligation to deliver the security, the characteristics of a security delivered to the Fund may be less favorable than expected and the security the Fund buys will lose value prior to its delivery. Investments in TBAs may give rise to a form of leverage. Leverage may cause the Fund to be more volatile than if the Fund had not been leveraged and may increase the impact that gains (losses) have on the Fund. Further, TBAs may increase the Fund's portfolio turnover rate. FINRA rules include mandatory margin requirements that will require the Fund to post collateral in

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

connection with its TBA transactions, which could increase the cost of TBA transactions to the Fund and impose added operational complexity.

The Fund's purchase of other securities on a when-issued, delayed delivery or through a forward commitment basis are subject to similar risks, including counterparty risk and that the value of securities in these transactions on the delivery date may be less than the price paid by the Fund to purchase the securities. In addition, there can be no assurance that a security purchased on a when-issued basis will be issued. When the Fund has sold a security on a when-issued, delayed delivery, or forward commitment basis, the Fund does not benefit if the value of the security appreciates above the sale price during the commitment period and the Fund is subject to failure of the counterparty to pay for the securities.

**U.S. Government Securities**

Different types of U.S. government securities are subject to different levels of credit risk, including the risk of default, depending on the nature of the particular government support for that security. For example, a U.S. government-sponsored entity, such as Federal National Mortgage Association or Federal Home Loan Mortgage Corporation, although chartered or sponsored by an Act of Congress, may issue securities that are neither insured nor guaranteed by the U.S. Treasury and, therefore, are not backed by the full faith and credit of the United States. With respect to U.S. government securities that are not backed by the full faith and credit of the United States, there is the risk that the U.S. government will not provide financial support to such U.S. government agencies, instrumentalities or sponsored enterprises if it is not obligated to do so by law. U.S. government securities are also subject to interest rate risks and can exhibit price fluctuations resulting from increases or decreases in interest rates. The U.S. government securities in which the Fund may invest may pay fixed, floating, variable or adjustable interest rates. For more information about interest rate risks associated with the Fund's investments in U.S. government securities, see "Credit and Interest Rate Risk".

The U.S. government securities that the Fund may purchase include U.S. Treasury bills, notes and bonds, all of which are direct obligations of the U.S. government and may differ in their interest rates, maturities and times of issuance. In addition, the Fund may purchase securities issued or guaranteed by agencies and instrumentalities of the U.S. government which are backed by the full faith and credit of the United States. Among the agencies and instrumentalities issuing these obligations are the Government National Mortgage Association and the Federal Housing Administration. Securities issued by the U.S. Treasury and agencies and instrumentalities of the U.S. government generally provide a lower current return than obligations of other issuers. The Fund may also purchase securities issued by agencies and instrumentalities which are not backed by the full faith and credit of the United States, but whose issuing agency or instrumentality has the right to borrow, to meet its obligations, from the U.S. Treasury. Among these agencies and instrumentalities are Fannie Mae, Freddie Mac and the Federal Home Loan Banks. Further, the Fund may purchase securities issued by agencies and instrumentalities which are backed solely by the credit of the issuing agency or instrumentality. Among these agencies and instrumentalities is the Federal Farm Credit System. With respect to U.S. government securities not backed by the full faith and credit of the United States, there is a risk that the U.S. government will not provide financial support to these agencies if it is not obligated to do so by law, and therefore these U.S. government securities involve greater credit risk than U.S. government securities backed by the full faith and credit of the U.S. government. The maximum potential liability of the issuers of some U.S. government securities held by the Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future. The interest from U.S. government securities generally is not subject to state and local taxation. In addition, uncertainty regarding the status of negotiations in the U.S. government to increase the statutory debt ceiling could increase the risk that the U.S. government may default on payments on U.S. government securities and may cause the credit rating of the U.S. government to be downgraded. Any uncertainty regarding the ability of the United States to repay its debt obligations, and any default by the U.S. government, would have a negative impact on the Fund's investments in U.S. government securities. U.S. government securities generally have a lower return than other obligations.

**Sovereign Debt Obligations**

The Fund may invest in debt obligations known as "sovereign debt," which are obligations of governmental issuers in emerging market or developing countries and industrialized countries. Certain emerging market or developing countries are among the largest debtors to commercial banks and foreign governments. The issuer or governmental authority that controls the repayment of sovereign debt may not be willing or able to repay the principal and/or pay interest when due in accordance with the terms of such obligations. Uncertainty surrounding the level and sustainability of sovereign debt of certain countries has at times increased volatility in the financial markets. In addition, a number of Latin American countries are among the largest debtors of developing countries and have a long history of reliance on foreign debt. Additional factors that may influence the ability or willingness to service debt include, but are not limited to, a country's cash flow situation, the availability of sufficient foreign exchange on the date a payment is due, the relative size of its debt service burden to the economy as a whole and its government's policy towards the International Monetary Fund, the World Bank and other multilateral agencies. A country whose exports are concentrated in a few commodities or whose economy depends on certain strategic imports could be vulnerable to fluctuations in international prices of these commodities or imports. If a foreign sovereign obligor cannot generate sufficient earnings from foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments, commercial banks and multilateral organizations, and inflows of foreign investment. The commitment on the part of these foreign governments, multilateral organizations and others to

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

make such disbursements may be conditioned on the government's implementation of economic reforms and/or economic performance and the timely service of its obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such third-parties' commitments to lend funds, which may further impair the foreign sovereign obligor's ability or willingness to timely service its debts. In addition, there is no legal process for collecting on a sovereign debt that a government does not pay or bankruptcy proceeding by which all or part of the sovereign debt that a government entity has not repaid may be collected.

**Currency Derivatives**

Investments in currency derivatives may substantially change the Fund's exposure to currency exchange rates and could result in losses to the Fund if currencies do not perform as the Adviser expects. In addition, investments in currency derivatives, to the extent that they reduce the Fund's exposure to currency risks, may also reduce the Fund's ability to benefit from favorable changes in currency exchange rates. The Fund is not required to hedge any portfolio holding with the use of currency derivatives. Accordingly, Fund shareholders would bear the risk of currency fluctuations with respect to unhedged portfolio positions.

Foreign currency derivatives may involve, for example, the purchase of foreign currencies for U.S. dollars or the maintenance of short positions in foreign currencies. Foreign currency derivatives may involve the Fund agreeing to exchange an amount of a currency it does not currently own for another currency at a future date. The Fund would typically engage in such a transaction in anticipation of a decline in the value of the currency it sells relative to the currency that the Fund has contracted to receive in the exchange. The Adviser's success in these transactions will depend principally on its ability to predict accurately the future exchange rates between foreign currencies and the U.S. dollar.

The Fund may enter into foreign currency forward exchange contracts, and currency and currency index futures and options contracts for hedging and non-hedging purposes in pursuing its investment objectives. Foreign currency forward exchange contracts are transactions involving the Fund's obligation to purchase or sell a specific currency at a future date at a specified price. Foreign currency forward exchange contracts may be used by the Fund for hedging purposes to protect against uncertainty in the level of future non-U.S. currency exchange rates, such as when the Fund anticipates purchasing or selling a non-U.S. security. This technique would allow the Fund to "lock in" the U.S. dollar price of the security. Foreign currency forward exchange contracts may also be used to attempt to protect the value of the Fund's existing holdings of non-U.S. securities. Imperfect correlation may exist, however, between the Fund's non-U.S. securities holdings and the foreign currency forward exchange contracts entered into with respect to those holdings. To the extent hedged by the use of foreign currency forward exchange contracts, the precise matching of the foreign currency forward exchange contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. Currency futures contracts are similar to foreign currency forward exchange contracts, except that they are traded on an exchange and standardized as to contract size and delivery date. Most currency futures contracts call for payment or delivery in U.S. dollars. The value of a foreign currency option is dependent upon the value of the underlying foreign currency relative to the U.S. dollar. The price of the option may vary with changes in the value of either or both currencies and has no relationship to the investment merits of a foreign security. Options on foreign currencies are affected by all of those factors which influence foreign exchange rates and foreign investment generally. Unanticipated changes in currency prices may result in losses to the Fund and poorer overall performance for the Fund than if it had not entered into such contracts. The use of foreign currency forward exchange contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract.

Foreign currency forward exchange contracts and currency futures and options contracts may be used for non-hedging purposes in seeking to meet the Fund's investment objectives, such as when the Adviser anticipates that particular non-U.S. currencies will appreciate or depreciate in value, even though securities denominated in those currencies are not then held in the Fund's investment portfolio. Investing in foreign currencies for purposes of gaining from projected changes in exchange rates, as opposed to hedging currency risks applicable to the Fund's holdings, further increases the Fund's exposure to foreign securities losses. There is no assurance that the Adviser's use of currency derivatives will benefit the Fund or that they will be, or can be, used at appropriate times.

**Asset-Backed Securities**

Asset-backed securities apply the securitization techniques used to develop mortgage-backed securities to a broad range of other assets. Various types of assets, primarily automobile and credit card receivables and home equity loans, are pooled and securitized in pass-through structures similar to pass-through structures developed with respect to mortgage securitizations. Asset-backed securities have risk characteristics similar to mortgage-backed securities. Like mortgage-backed securities, they generally decrease in value as a result of interest rate increases, but may benefit less than other fixed-income securities from declining interest rates, principally because of prepayments (*i.e.*, when a borrower pays back the principal of a debt obligation earlier than expected). Also, as in the case of mortgage-backed securities, prepayments generally increase during a period of declining interest rates, although other factors, such as changes in credit use and payment patterns, may also influence prepayment rates. Asset-backed securities also involve the risk that

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Income Opportunities Fund (Con't)

various federal and state consumer laws and other legal and economic factors may result in the collateral backing the securities being insufficient to support payment on the securities.

To the extent the Fund invests in asset-backed securities issued by non-governmental issuers, such as commercial banks, savings and loan institutions, and other secondary market issuers, the Fund will be exposed to additional risks because, among other things, there are no direct or indirect government or agency guarantees of payments in the pools underlying the securities. Privately-issued asset-backed securities may be less readily marketable, subject to heightened credit risk and the market for such securities is typically smaller and less liquid than other asset-backed securities.

The Fund may invest in other asset-backed or similarly structured securities, such as collateralized debt obligations ("CDOs"), collateralized bond obligations ("CBOs"), and collateralized loan obligations ("CLOs"). These investments are subject to many of the same risks as other forms of asset-backed securities, including interest rate risk, credit risk and default risk, and are also subject to additional risks, including but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the risk that the collateral may default or decline in value or be downgraded, if rated by a nationally recognized statistical rating organization; (iii) the Fund may invest in tranches of CDOs that are subordinate to other tranches; (iv) the structure and complexity of the transaction and the legal documents could lead to disputes among investors regarding the characterization of proceeds; (v) the investment return achieved by the Fund could be significantly different than those predicted by financial models; (vi) the lack of a readily available secondary market for CDOs; (vii) the risk of forced "fire sale" liquidation due to technical defaults such as coverage test failures; and (viii) the CDO's manager may perform poorly. Investments in CDOs, CBOs and CLOs are also subject to risks particular to their respective asset class and structure.

For example, because CLOs are backed primarily by commercial loans, CLOs also bear many of the same risks as investing in loans directly. However, in addition to the risks associated with investing in commercial loans, the complex structure and highly leveraged nature of a CLO poses additional risks. CLOs may experience substantial losses attributable to loan defaults or trading losses. Such losses on the underlying assets are borne first by the holders of subordinate tranches. In addition, the Fund's investments in CLOs may decrease in market value when the CLO's assets experience loan defaults or credit impairment, losses that exceed the most subordinate tranches, or market anticipation of loan defaults and investor aversion to CLO securities as a class. CDOs are structured similarly to CLOs and bear many of the same risks as CLOs as well as additional risks because they are backed by pools of assets other than commercial loans, including securities (such as other asset-backed securities), synthetic instruments or bonds, and may be highly leveraged. Like CLOs, losses incurred by a CDO are borne first by holders of the most subordinate tranches. Accordingly, the risks of CDOs depend largely on the type of underlying collateral and the tranche of CDOs in which the Fund invests. Moreover, CDOs that obtain their exposure through synthetic investments are exposed to risks associated with derivative instruments.

**High Yield Securities**

Fixed-income securities that are not investment grade are commonly referred to as "junk bonds" or high yield, high risk securities. These securities generally offer a higher yield than higher rated securities (including those of a similar maturity), but they carry a greater degree of risk, including substantial credit and default risks. High yield securities are subject to greater risk of loss (including substantial or total loss) of income and principal than higher rated securities and are considered speculative by the major credit rating agencies because of increased credit risk relative to higher rated fixed income investments. High yield securities are also subject to other increased risks, including greater sensitivity to real or perceived economic changes, increased price volatility, valuation difficulties, lack of a regular trading market and greater potential illiquidity. High yield securities are particularly susceptible to default risk during periods of adverse market, industry or economic conditions or issuer-specific developments and a high yield security may lose significant value before a default occurs. In the event of a default, the Fund may incur additional expenses to seek recovery or to negotiate new terms with a defaulting issuer.

In addition, the Fund's investments in high yield securities are subject to the risk of subordination to other creditors. Accordingly, in the event of an issuer's bankruptcy, claims of other creditors may have priority over the claims of holders of these securities, leaving few or no assets available to repay high yield securities holders, such as the Fund. High yield securities may be issued by companies that are restructuring, are smaller and less creditworthy or are more highly leveraged or indebted than other companies or are financially distressed. This means that they typically have more difficulty making scheduled payments of principal and interest and a higher risk of non-payment. An issuer's ability to pay its debt obligations may also be reduced by financial stress, specific issuer developments or the unavailability of additional financing. Changes in the value of high yield securities are typically influenced more by changes in the financial and business position of the issuing company than by changes in interest rates when compared to investment grade securities.

In addition, high yield securities are subject to increased call risk, also known as prepayment risk, which is the risk that an issuer may exercise its right to redeem a fixed income security earlier than expected (a call). Issuers may call outstanding securities prior to their maturity for a number of reasons (e.g., declining interest rates, changes in credit spreads and improvements in the issuer's credit quality). If an issuer calls a security in which the Fund has invested, the Fund may not recoup the full amount of its initial investment (including any premiums paid) or may not realize the full anticipated earnings from the investment and may be forced to reinvest in lower-yielding securities, securities with greater credit risks or securities with other, less favorable features.

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Income Opportunities Fund (Con't)

In recent years, there has been a broad trend of weaker or less restrictive covenant protections in the high yield market. Among other things, under such weaker or less restrictive covenants, borrowers might be able to exercise more flexibility with respect to certain activities than borrowers who are subject to stronger or more protective covenants. For example, borrowers might be able to incur more debt, including secured debt, return more capital to shareholders, remove or reduce assets that are designated as collateral securing high yield securities, increase the claims against assets that are permitted against collateral securing high yield securities or otherwise manage their business in ways that could impact creditors negatively. In addition, certain privately held borrowers might be permitted to file or provide less frequent, less detailed or less timely financial reporting or other information, which could negatively impact the value of the high yield securities issued by such borrowers. Each of these factors might negatively impact the high yield securities held by the Fund.

**Restricted Securities**

The Fund's investments may include restricted securities, which are generally subject to resale or transfer restrictions or prohibitions as a matter of contract and/or under applicable U.S. federal securities laws, including Rule 144A under the Securities Act of 1933, as amended. Restricted securities may not be listed on an exchange and may have no active trading market. Because there may be relatively few potential or interested purchasers for privately placed or restricted securities, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the Fund may be unable to dispose of such securities promptly or may be able to sell privately placed securities only at disadvantageous times or prices.

There is no assurance that a liquid market will exist for restricted securities and these securities could have the effect of increasing the level of Fund illiquidity. In addition, the market for certain investments deemed liquid at the time of purchase may become illiquid under adverse market or economic conditions. The illiquidity of the market, as well as the lack of publicly available information regarding these securities, including readily available market quotations, may also adversely affect the ability to arrive at a fair value for certain securities at certain times and could make it difficult for the Fund to sell certain securities. Additionally, the Fund may be unable to sell a privately placed or restricted security if the Adviser or its affiliates receive material non-public information about the security's issuer. If the Fund is forced to sell an illiquid security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss or for less than its fair value and may be unable to sell the security at all. There is typically less information available about issuers of private placements and restricted securities and there is no assurance that the information obtained by the Adviser is reliable. In addition, private placements and restricted securities may involve a high degree of business and financial risk, which may result in substantial losses to the Fund.

**Loans**

Loans may be primary, direct investments or investments in loan assignments or participation interests. A loan assignment represents a portion or the entirety of a loan and a portion or the entirety of a position previously attributable to a different lender. The purchaser of an assignment typically succeeds to all the rights and obligations under the loan agreement and has the same rights and obligations as the assigning investor. However, assignments through private negotiations may cause the purchaser of an assignment to have different and more limited rights than those held by the assigning investor. Loan participation interests are interests issued by a lender or other entity and represent a fractional interest in a loan. The Fund typically will have a contractual relationship only with the financial institution that issued the participation interest. As a result, the Fund may have the right to receive payments of principal, interest and any fees to which it is entitled only from the financial institution and only upon receipt by such entity of such payments from the borrower. In connection with purchasing a participation interest, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights with respect to any funds acquired by other investors through set-off against the borrower and the Fund may not directly benefit from the collateral supporting the loan in which it has purchased the participation interest. As a result, the Fund would generally assume the credit risk of both the borrower and the financial institution issuing the participation interest. In the event of the insolvency of the entity issuing a participation interest, the Fund may be treated as a general creditor of such entity. Most loans are rated below investment grade or, if unrated, are of similar credit quality. Certain loans are illiquid, meaning the Fund may be unable to sell them at an advantageous time or price. Illiquid securities are also difficult to value.

Loan investments may be made at par or at a discount or premium to par. The interest payable on a loan may be fixed or floating rate, and paid in cash or in-kind. In connection with transactions in loans, the Fund may be subject to facility or other fees. Loans may be secured by specific collateral or other assets of the borrower, guaranteed by a third party, unsecured or subordinated. During the term of a loan, the value of any collateral securing the loan may decline in value, causing the loan to be under collateralized. Collateral may consist of assets that may not be readily liquidated, and there is no assurance that the collateral will be available and liquidation of such assets would satisfy fully a borrower's obligations under the loan. In addition, if a loan is foreclosed, the Fund could become part owner of the collateral and would bear the costs and liabilities associated with owning and disposing of such collateral.

Certain loans ("senior loans") hold a senior position in the capital structure of a business entity, are typically secured with specific collateral and have a claim on the assets and/or stock of the borrower that is senior to that held by subordinated debtholders and stockholders of the borrower. Junior loans may be secured or unsecured subordinated loans, second lien loans and subordinated bridge loans, and typically carry greater risks. For example, second lien loans are lower in priority to senior loans, but have seniority

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Income Opportunities Fund (Con't)

in a company's capital structure to other liabilities and a company is required to pay down these second lien loans prior to other lower-ranked claims on their assets. Floating-rate loans typically have rates of interest which are re-determined daily, monthly, quarterly or semi-annually by reference to a base lending rate, plus a premium. Floating-rate loans held by the Fund typically have a dollar-weighted average period until the next interest rate adjustment of approximately 90 days or less.

A lender's repayment and other rights primarily are determined by governing loan, assignment or participation documents, which (among other things) typically establish the priority of payment on the loan relative to other indebtedness and obligations of the borrower. A borrower typically is required to comply with certain covenants contained in a loan agreement between the borrower and the holders of the loan. Covenants contained in loan documentation are intended to protect lenders and investors by imposing certain restrictions and other limitations on a borrower's operations or assets and by providing certain information and consent rights to lenders. The types of covenants included in loan agreements generally vary depending on market conditions, the creditworthiness of the issuer, and the nature of the collateral securing the loan. Loans also known as "covenant lite" loans may contain fewer covenants that restrict activities of the borrower or that might enable the Fund to, among other things, proactively enforce financial covenants or prevent undesired actions by the borrower. As a result, "covenant lite" loans may provide the borrower with more flexibility to take actions that may otherwise be limited or prohibited under similar loan obligations that are not covenant lite or that may be detrimental to the loan holders and provide fewer investor protections in the event covenants are breached. The Fund may experience relatively greater realized or unrealized losses or delays and expense in enforcing its rights with respect to loans with fewer restrictive covenants than its holdings of loans or securities with more traditional financial covenants. In addition, the Fund may receive less or less frequent financial reporting from a borrower under a "covenant lite" loan or obligation, which may result in more limited access to financial information, difficulty evaluating the borrower's financial performance over time and delays in exercising rights and remedies. During certain market conditions, many new, restructured or reissued loans and similar debt obligations may not feature traditional financial maintenance covenants.

Loans to entities located outside of the U.S. may have substantially different lender protections and covenants as compared to loans to U.S. entities and generally involve greater and additional risks. In the event of bankruptcy, applicable law may impact a lender's ability to enforce its rights. Bankruptcy laws in foreign jurisdictions, including emerging markets, may differ significantly from U.S. bankruptcy law and the Fund's rights with respect to a loan governed by the laws of a foreign jurisdiction may be more limited.

Loans may be originated by a lending agent, such as a financial institution or other entity, on behalf of a group or "syndicate" of loan investors (the "Loan Investors"). In such a case, the agent administers the terms of the loan agreement and is responsible for the collection of principal, and interest payments from the borrower and the apportionment of these payments to the Loan Investors. Failure by the agent to fulfill its obligations may delay or adversely affect receipt of payment by the Fund. Furthermore, unless under the terms of a loan agreement or participation (as applicable) the Fund has direct recourse against the borrower, the Fund must rely on the agent and the other Loan Investors to pursue appropriate remedies against the borrower.

Although the overall size and number of participants in the market for many loans has grown over the past decade, such loans continue to trade in a private, unregulated inter-dealer or inter-bank secondary market and the amount of available public information about loans may be less extensive than that available for registered or exchange listed securities. Liquidity and valuation risk is more pronounced for the Fund than for funds that invest primarily in other types of fixed-income instruments or equity securities. With limited exceptions, the Adviser will seek to take steps intended to ensure that it does not receive material nonpublic information about the issuers of loans that also issue publicly traded securities. Therefore, the Adviser may have less information than other investors about certain of the loans in which it seeks to invest. Purchases and sales of loans are generally subject to contractual restrictions that must be satisfied before a loan can be bought or sold. These restrictions may (i) impede the Fund's ability to buy or sell loans, (ii) negatively impact the transaction price, (iii) impact the counterparty and/or credit risks borne by the Fund, (iv) impede the Fund's ability to timely vote or otherwise act with respect to loans, (v) expose the Fund to adverse tax or regulatory consequences and/or (vi) result in delayed settlement of loan transactions. It may take longer than seven days for a transaction in loans to settle, which may impact the Fund's process and ability to meet redemptions. This is partly due to the nature or manner in which loans trade and the contractual restrictions noted above, which require a written assignment agreement and various ancillary documents for each transfer, and frequently require discretionary consents from both the borrower and the administrative agent. As a result, sale proceeds related to the sale of loans may not be available to make additional investments or to meet the Fund's redemption or other obligations for a period after the sale of the loans and, as a result, the Fund may have to hold additional cash, sell other investments or engage in borrowing transactions, such as borrowing from a credit facility, if necessary to raise cash to meet its obligations.

Assignments of loans through private negotiations may cause the purchaser of an assignment to have different and more limited rights than those held by the assigning investor. In connection with purchasing a participation interest, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement. In the event the borrower defaults, the Fund may not directly benefit from the collateral supporting the loan (if any) in which it has purchased the participation interest. As a result, the Fund would generally assume the credit risk of both the borrower and the financial institution issuing the participation interest, subjecting the Fund to additional credit risk (including the creditworthiness of the agent lender), and the Fund may be subject to greater delays, expenses and risks than if the Fund had purchased a direct obligation of the borrower. No active trading market may exist for certain loans, which may impair the ability of the Fund to realize full value in the event of the need to sell a loan

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Income Opportunities Fund (Con't)

and which may make it difficult to value the loan. To the extent that a secondary market does exist for certain loans, the market may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods.

In addition to the risks generally associated with debt instruments, such as credit, market, interest rate and liquidity risks, loans are also subject to the risk that the value of any collateral securing a loan may decline, be unavailable or insufficient to meet the obligations of the borrower or be difficult to liquidate. The specific collateral used to secure a loan may decline in value or become illiquid, which would adversely affect the loan's value. The Fund's access to collateral may be limited by bankruptcy, other insolvency laws or by the type of loan the Fund has purchased. For example, if the Fund purchases a participation instead of an assignment, it would not have direct access to collateral of the borrower. As a result, a floating-rate loan may not be fully collateralized and can decline significantly in value. Additionally, collateral on loan instruments may not be readily liquidated, and there is no assurance that the liquidation of such assets will satisfy a borrower's obligations under the investment.

Loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate a loan to presently existing or future indebtedness of the borrower, or take other action detrimental to the holders of a loan including, in certain circumstances, invalidating a loan or causing interest previously paid to be refunded to the borrower. Any such actions by a court could negatively affect the Fund's performance. Loans that are secured and senior to other debtholders of a borrower tend to have more favorable loss recovery rates as compared to more junior types of below investment grade debt obligations. Due to their lower place in the borrower's capital structure and, in some cases, their unsecured status, junior loans involve a higher degree of overall risk than senior loans of the same borrower.

Investing in loans involves the risk of default in the payment of interest or principal by the borrower or other party obligated to repay the loan, which would result in a reduction of income to the Fund or in other losses and a potential decrease in the Fund's NAV. The risk of default will increase in the event of an economic downturn or a substantial increase in interest rates. In the event of insolvency of the borrower or other obligated party, the Fund may be treated as a general creditor of such entity unless it has rights that are senior to that of other creditors or secured by specific collateral or assets of the borrower. Fixed rate loans are also subject to the risk that their value will decline in a rising interest rate environment. This risk is mitigated for floating-rate loans, where the interest rate payable on the loan resets periodically by reference to a base lending rate.

Loans that are rated below investment grade are also subject to the risks of other below investment grade securities. Because loans in which the Fund may invest could rank lower in priority of payment to senior loans, they present greater degree of investment risk due to the fact that the cash flow or other property of the borrower securing the loan may be insufficient to meet scheduled payments after meeting the senior secured payment obligations of the borrower. These loans may also exhibit greater price volatility as well.

U.S. federal securities laws afford certain protections against fraud and misrepresentation in connection with the offering or sale of a security, as well as against manipulation of trading markets for securities. The typical practice of a lender in relying exclusively or primarily on reports from the borrower may involve the risk of fraud, misrepresentation, or market manipulation by the borrower. It is unclear whether U.S. federal securities laws protections are available to an investment in a loan. In certain circumstances, loans may not be deemed to be securities, and in the event of fraud or misrepresentation by a borrower, lenders may not have the protection of the anti-fraud provisions of the federal securities laws. However, contractual provisions in the loan documents may offer some protections, and lenders may also avail themselves of common-law fraud protections under applicable state law.

**Covenant Lite Investments**

Some of the loans or other obligations in which the Fund may invest or obtain exposure to may be "covenant lite" loans or other obligations. Certain financial institutions may define "covenant lite" loans or securities differently. Covenants contained in loan documentation are intended to protect lenders and investors by imposing certain restrictions and other limitations on a borrower's operations or assets and by providing certain information and consent rights to lenders. Covenant lite loans or securities, which have varied terms and conditions, may contain fewer or no restrictive covenants compared to other loans that might enable the Fund to, among other things, proactively enforce financial covenants or prevent undesired actions by the borrower. As a result, covenant lite loans generally carry greater risks because they allow borrowers to exercise more flexibility with respect to certain activities that may otherwise be limited or prohibited under similar loan obligations that are not covenant lite. In addition, the Fund may receive less or less frequent financial reporting from a borrower under a covenant-lite obligation, which may result in more limited access to financial information, difficulty evaluating the borrower's financial performance over time and delays in exercising rights and remedies in the event of a significant financial decline. The Fund may experience relatively greater difficulty or delays in enforcing its rights on its holdings of certain covenant lite loans and other similar obligations than its holdings of loans or securities with more traditional financial covenants, which may result in losses to the Fund. Many loans and similar debt obligations may not feature traditional financial maintenance covenants, which are intended to protect lenders and investors by imposing certain restrictions and other limitations on a borrower's operations or assets and by providing certain information and consent rights to lenders.

**Liquidity**

The Fund may make investments that are less liquid, illiquid or restricted or that may become illiquid or less liquid in response to, among other developments, overall economic conditions or adverse investor perceptions, and which may entail greater risk than

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Income Opportunities Fund (Con't)

investments in other types of securities. Illiquidity can also be caused by, among other things, a drop in overall market trading volume, an inability to find a willing buyer, or legal restrictions on the securities' resale. These investments may be more difficult to value or sell, particularly in times of market turmoil, and there may be little trading in the secondary market available for particular securities. Liquidity risk may be magnified in a market where credit spread and interest rate volatility is rising and where investor redemptions from fixed-income mutual funds may be higher than normal. If the Fund is forced to sell an illiquid or restricted security to fund redemptions or for other cash needs, it may be forced to sell the security at a loss or for less than its fair value and may be unable to sell the security at all.

Certain CLO securities may have limited liquidity in various market conditions, and in such instances will be less liquid than more senior or higher-rated CLOs. The price of CLO securities may rapidly decline if a large number of holders of the CLO securities decide to sell. The CLO market is smaller relative to other fixed-income instrument markets. Historic liquidity measures of CLOs may or may not be predictive of the liquidity of CLOs in the future. During adverse market conditions, there may be instances in which the market for trading CLOs becomes thin, or in extreme circumstances, particularly with respect to subordinate or lower-rated CLO tranches, may cease to exist during such period.

**Derivatives**

The Fund may, but is not required to, use derivatives and other similar instruments for a variety of purposes, including hedging, risk management, portfolio management or to seek to earn income. Derivative instruments used by the Fund will be counted towards the Fund's exposure in the types of securities listed herein to the extent they have economic characteristics similar to such securities. A derivative is a financial instrument whose value is based, in part, on the value of an underlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, also affect the value of derivative instruments. Derivatives and other similar instruments that create synthetic exposure often are subject to risks similar to those of the underlying asset or instrument and may be subject to additional risks, including imperfect correlation between the value of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates, risks that the transactions may not be liquid, risks arising from margin and payment requirements, risks arising from mispricing or valuation complexity and operational and legal risks. The use of derivatives involves risks that are different from, and possibly greater than, the risks associated with other portfolio investments. Derivatives may involve the use of highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments.

Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss. Leverage associated with derivative transactions may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or may cause the Fund to be more volatile than if the Fund had not been leveraged. Although the Adviser seeks to use derivatives to further the Fund's investment objective, there is no assurance that the use of derivatives will achieve this result.

The derivative instruments and techniques that the Fund may use include:

*Futures*. A futures contract is a standardized, exchange-traded agreement to buy or sell a specific quantity of an underlying asset, reference rate or index at a specific price at a specific future time. While the value of a futures contract tends to increase or decrease in tandem with the value of the underlying instrument, differences between the futures market and the market for the underlying asset may result in an imperfect correlation. Depending on the terms of the particular contract, futures contracts are settled through either physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. A decision as to whether, when and how to use futures contracts involves the exercise of skill and judgment and even a well-conceived futures transaction may be unsuccessful because of market behavior or unexpected events. In addition to the derivatives risks discussed above, the prices of futures contracts can be highly volatile, using futures contracts can lower total return, and the potential loss from futures contracts can exceed the Fund's initial investment in such contracts. No assurance can be given that a liquid market will exist for any particular futures contract at any particular time. There is also the risk of loss by the Fund of margin deposits in the event of bankruptcy of a broker with which the Fund has open positions in the futures contract.

*Options.* If the Fund buys an option, it buys a legal contract giving it the right to buy or sell a specific amount of the underlying instrument, foreign currency or contract, such as a swap agreement or futures contract, on the underlying instrument or foreign currency at an agreed-upon price during a period of time or on a specified date typically in exchange for a premium paid by the Fund. If the Fund sells an option, it sells to another person the right to buy from or sell to the Fund a specific amount of the underlying instrument, swap, foreign currency, or futures contract on the underlying instrument or foreign currency at an agreed-upon price during a period of time or on a specified date typically in exchange for a premium received by the Fund. When options are purchased over-the-counter ("OTC"), the Fund bears the risk that the counterparty that wrote the option will be unable or unwilling to perform its obligations under the option contract. Options may also be illiquid and the Fund may have difficulty closing out its position. A decision as to whether, when and how to use options involves the exercise of skill and judgment and even a well-conceived option transaction may be unsuccessful because of market behavior or unexpected events. The prices of options can be highly volatile and the use of options can lower total returns.

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Income Opportunities Fund (Con't)

Investments in foreign currency options may substantially change the Fund's exposure to currency exchange rates and could result in losses to the Fund if currencies do not perform as the Adviser expects. There is a risk that such transactions may reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. The value of a foreign currency option is dependent upon the value of the underlying foreign currency relative to the U.S. dollar or other applicable foreign currency. The price of the option may vary with changes in the value of either or both currencies and has no relationship to the investment merits of a foreign security. Options on foreign currencies are affected by all of those factors that influence foreign exchange rates and foreign investment generally. Unanticipated changes in currency prices may result in losses to the Fund and poorer overall performance for the Fund than if it had not entered into such contracts. Options on foreign currencies are traded primarily in the OTC market, but may also be traded on U.S. and foreign exchanges.

Foreign currency options contracts may be used for hedging purposes or non-hedging purposes in pursuing the Fund's investment objective, such as when the Adviser anticipates that particular non-U.S. currencies will appreciate or depreciate in value, even though securities denominated in those currencies are not then held in the Fund's investment portfolio. Investing in foreign currencies for purposes of gaining from projected changes in exchange rates, as opposed to only hedging currency risks applicable to the Fund's holdings, further increases the Fund's exposure to foreign securities losses. There is no assurance that the Adviser's use of currency derivatives will benefit the Fund or that they will be, or can be, used at appropriate times.

*Swaps.* The Fund may enter into OTC swap contracts or cleared swap transactions. An OTC swap contract is an agreement between two parties pursuant to which the parties exchange payments at specified dates on the basis of a specified notional amount, with the payments calculated by reference to specified securities, indices, reference rates, currencies or other instruments. Typically swap agreements provide that when the period payment dates for both parties are the same, the payments are made on a net basis (i.e., the two payment streams are netted out, with only the net amount paid by one party to the other). The Fund's obligations or rights under a swap contract entered into on a net basis will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each party. Cleared swap transactions may help reduce counterparty credit risk. In a cleared swap, the Fund's ultimate counterparty is a clearinghouse rather than a swap dealer, bank or other financial institution. OTC swap agreements are not entered into or traded on exchanges and often there is no central clearing or guaranty function for swaps. These OTC swaps are often subject to credit risk or the risk of default or non-performance by the counterparty. Certain swaps have begun trading on exchanges or swap execution facilities. Exchange trading is expected to increase liquidity of swaps trading. Both OTC and cleared swaps could result in losses if interest rates, foreign currency exchange rates or other factors are not correctly anticipated by the Fund or if the reference index, security or investments do not perform as expected. The Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulatory developments require the clearing of certain standardized swap transactions. Swaps subject to mandatory central clearing must be traded on an exchange or swap execution facility unless no exchange or swap execution facility "makes the swap available to trade." The Fund may pay fees or incur costs each time it enters into, amends or terminates a swap agreement.

The Fund's use of swaps may include those based on the credit of an underlying security, commonly referred to as "credit default swaps." Where the Fund is the buyer of a credit default swap contract, it would typically be entitled to receive the par (or other agreed-upon) value of a referenced debt obligation from the counterparty to the contract only in the event of a default or similar event by a third-party on the debt obligation. If no default occurs, the Fund would have paid to the counterparty a periodic stream of payments over the term of the contract. When the Fund is the seller of a credit default swap contract, it typically receives the stream of payments but is obligated to pay an amount equal to the par (or other agreed-upon) value of a referenced debt obligation upon the default or similar event of the issuer of the referenced debt obligation.

**Collateralized Loan Obligations**

A CLO is an asset-backed security typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. The key feature of the CLO structure is the prioritization of the cash flows from a pool of debt securities among the several classes or tranches of CLO holders, thereby creating a series of obligations with varying rates and maturities appealing to a wide range of investors. The Fund and other investors in CLOs ultimately bear the credit and interest rate risks of the underlying collateral.

CLOs issue classes or "tranches" that offer various maturity, risk and yield characteristics. Tranches are categorized as senior, mezzanine and subordinated/equity, according to their degree of risk. The risks of an investment in a CLO depend largely on the type of the collateral securities and the class or tranche of the instrument in which the Fund invests. To the extent that the Fund invests in tranches of CLOs that are rated below investment grade, the risks of investing in CLOs will be greater. Below investment grade securities may be subject to additional risks, including those associated with high yield securities. In addition, to the extent that the Fund invests in unrated CLO tranches, the Fund's ability to achieve its investment objective will be more dependent on the Adviser's credit analysis than would be the case if the Fund were to invest in rated CLO tranches.

Interest on a CLO may be paid in kind or deferred and capitalized (paid in the form of obligations of the same type rather than cash), which involves continued exposure to default risk with respect to such payments.

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In the event of sufficient early prepayments on such debt instruments, the class or series of CLO first to mature generally will be retired prior to maturity. Therefore, although in most cases the issuer of CLOs will not supply additional collateral in the event of such prepayments, there will be sufficient collateral to secure their priority with respect to other CLO tranches that remain outstanding. If there are defaults or the relevant collateral otherwise underperforms, scheduled payments to senior tranches of the CLOs take precedence over those of mezzanine tranches and scheduled payments to mezzanine tranches take precedence over those to subordinated/equity tranches. Because it is partially protected from defaults, a senior tranche of a CLO typically has higher credit ratings and lower yields than its underlying collateral and may be rated investment grade. However, it is possible that a senior tranche of a CLO could experience losses, particularly in stressed market conditions, due to defaults, downgrades of the underlying collateral by rating agencies, forced liquidation of the collateral pool, increased sensitivity to defaults due to collateral default, market anticipation of defaults and investor aversion to CLO securities as an asset class. If a CLO triggers an event of default as a result of failing to make payments when due or for other reasons, the CLO would be subject to the possibility of liquidation, which could result in full loss of value to the CLO equity or junior debt investors.

The underlying assets (e.g., loans) are subject to prepayments which shorten the securities' weighted average maturity and may lower their return. If the credit support or enhancement is exhausted, losses or delays in payment may result if the required payments of principal and interest are not made. The value of these securities also may change because of changes in market value, which may be caused by, among other things, changes in the market's perception of the creditworthiness of the servicing agent for the pool, the originator of the pool, or the financial institution or fund providing the credit support or enhancement.

CLOs, and their underlying loan obligations, are typically not registered for sale to the public and therefore are subject to certain restrictions on transfer and sale, potentially making them less liquid than other types of securities. Additionally, when the Fund purchases a newly issued CLO security in the primary market (rather than from the secondary market), there often may be a delayed settlement period during which the liquidity of the CLO may be further reduced. As a result, the proceeds from the sale of CLO securities may not be readily available to meet the Fund's redemption or other obligations and the Fund may be unable to acquire or dispose of the securities at a price and time the Fund deems advantageous. There is no guarantee that an active secondary market will exist or be maintained for any given CLO.

CLOs in which the Fund invests may be managed by investment advisers not affiliated with the Adviser. CLO managers are responsible for selecting, managing and replacing the underlying bank loans within a CLO. CLO managers may have limited operating histories, may be subject to conflicts of interests, including managing the assets of other clients or other investment vehicles, or receiving fees that incentivize maximizing the yield, and indirectly the risk, of a CLO. Adverse developments with respect to a CLO manager, such as personnel and resource constraints, regulatory issues or other developments that may impact the ability and/or performance of the CLO manager, may adversely impact the performance of the CLO securities in which the Fund invests. In addition, the Fund will indirectly bear any management fees and expenses incurred by a CLO.

**Repurchase Agreements**

Repurchase agreements are transactions in which the Fund purchases a security or basket of securities and simultaneously commits to resell that security or basket to the seller (a bank, broker or dealer) at a mutually agreed-upon date and price. The resale price reflects the purchase price plus an agreed-upon market rate of interest which is unrelated to the coupon rate or date of maturity of the purchased security. The term of these agreements usually ranges from overnight to one week, and never exceeds one year. Repurchase agreements with a term of over seven days are considered illiquid.

In these transactions, the Fund receives securities that have a market value at least equal to the purchase price (including accrued interest) of the repurchase agreement, and this value is maintained during the term of the agreement. These securities are held by State Street Bank and Trust Company (the "Custodian") or an approved third-party for the benefit of the Fund until repurchased. Repurchase agreements permit the Fund to remain fully invested while retaining overnight flexibility to pursue investments of a longer-term nature. If the seller defaults and the value of the repurchased securities declines, the Fund might incur a loss. If bankruptcy proceedings are commenced with respect to the seller, the Fund's realization upon the collateral may be delayed.

While repurchase agreements involve certain risks not associated with direct investments in debt securities, the Fund follows procedures approved by the Trustees that are designed to minimize such risks. These procedures include effecting repurchase transactions only with large, well-capitalized and well-established financial institutions whose financial condition will be continually monitored by the Adviser. In addition, as described above, the value of the collateral underlying the repurchase agreement will be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, the Fund will seek to liquidate such collateral. However, the exercising of the Fund's right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, the Fund could suffer a loss.

The Fund's investments in repurchase agreements may at times be substantial when, for example, in the view of the Fund's Adviser, liquidity or other conditions warrant.

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Income Opportunities Fund (Con't)

**Short Sales**

A short sale is a transaction in which the Fund sells securities that it owns or has the right to acquire at no added cost (i.e., "against the box") or does not own (but has borrowed) in anticipation of a decline in the market price of the securities. To deliver the securities to the buyer, the Fund arranges through a broker to borrow the securities and, in so doing, the Fund becomes obligated to replace the securities borrowed at their market price at the time of replacement. When selling short, the Fund intends to replace the securities at a lower price and therefore, profit from the difference between the cost to replace the securities and the proceeds received from the sale of the securities. When the Fund makes a short sale, the proceeds it receives from the sale will be held on behalf of a broker until the Fund replaces the borrowed securities. The Fund may have to pay a premium to borrow the securities and must pay any dividends or interest payable on the securities until they are replaced.

The Fund's obligation to replace the securities borrowed in connection with a short sale will be secured by collateral deposited with the broker that consists of cash or other liquid securities. Short sales by the Fund involve certain risks and special considerations. If the Adviser incorrectly predicts that the price of the borrowed security will decline, the Fund will have to replace the securities with securities with a greater value than the amount received from the sale. As a result, losses from short sales differ from losses that could be incurred from a purchase of a security, because losses from short sales may be unlimited, whereas losses from purchases can equal only the total amount invested.

**Money Market Instruments**

Money market instruments may be adversely affected by market and economic events, such as a change in prevailing short-term interest rates; adverse developments in the banking industry, which issues or guarantees many money market instruments; adverse economic, political or other developments affecting issuers of money market instruments; changes in the credit quality of issuers; and default by a counterparty or an issuer. These instruments may be subject to federal income, state income and/or other taxes. Instead of investing in money market instruments directly, the Fund may invest money market funds, including those advised by the Adviser or its affiliates. These instruments may be adversely affected by changes to interest rates, which may be sudden and significant. During unusual market conditions, the Fund may invest up to 100% of its assets in cash or cash equivalents temporarily, which may be inconsistent with its investment objective(s) and other policies.

**Preferred Securities**

Preferred securities are subject to risks applicable generally to equity securities. In addition, a company's preferred securities generally pay dividends only after the company makes required payments to holders of its bonds and other debt, so the value of preferred securities will usually react more strongly than bonds and other debt to actual or perceived changes in the company's financial condition or prospects. Preferred securities may pay fixed or adjustable rates of return. Like fixed-income securities, preferred stock generally decreases in value if interest rates rise and increases in value if interest rates fall.

**Distressed and Defaulted Securities**

Distressed and defaulted securities are speculative and involve substantial risks in addition to the risks of investing in high yield securities. The Fund will generally not receive interest payments on the distressed securities and the repayment of principal may also be at risk. These securities may present a substantial risk of default or may be in default at the time of investment. The repayment of defaulted securities is also subject to significant uncertainties. The Fund may incur substantial expenses in seeking recovery upon a default in the payment of principal of or interest on its portfolio holdings. If the portfolio company is forced to reorganize or liquidate, the Fund may lose its entire investment or may be required to accept cash or securities with a value less than its original investment. Distressed securities and any securities received in an exchange for such securities may be subject to restrictions on resale.

**Foreign Investing**

To the extent that the Fund invests in foreign issuers, there is the risk that news and events unique to a country or region will affect those markets and their issuers. These same events will not necessarily have an effect on the U.S. economy or similar issuers located in the United States. In addition, some of the Fund's securities, including underlying securities represented by depositary receipts, may be denominated in foreign currencies. As a result, changes in the value of a country's currency compared to the U.S. dollar may affect the value of the Fund's investments. These changes may happen separately from, and in response to, events that do not otherwise affect the value of the security in the issuer's home country. These risks may be intensified for the Fund's investments in securities of issuers located in emerging market or developing countries.

**LIBOR Discontinuance or Unavailability Risk**

The Fund's investments, payment obligations and financing terms may be based on floating rates, such as the London Interbank Offered Rates (collectively, "LIBOR"), Euro Interbank Offered Rate, Secured Overnight Financing Rate ("SOFR") and other similar types of reference rates (each, a "Reference Rate"). These Reference Rates are generally intended to represent the rate at which contributing banks may obtain short-term borrowings from each other within certain financial markets. London Interbank Offered Rate ("LIBOR") was the basic rate of interest used in lending transactions between banks on the London interbank market and has been widely used as a reference for setting the interest rate on loans globally. As a result of benchmark reforms, publication of most LIBOR settings has ceased. Certain regulators and industry groups have taken actions to establish alternative reference rates (e.g., the SOFR, which measures the cost of overnight borrowings through repurchase agreement transactions collateralized with U.S. Treasury

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

securities and is intended to replace U.S. dollar LIBORs with certain adjustments). These developments could negatively impact financial markets in general and present heightened risks, including with respect to the Fund's investments. As a result of the uncertainty and developments relating to the transition process, performance, price volatility, liquidity and value of the Fund and its assets may be adversely affected.

**Securities Lending**

The Fund may lend its portfolio securities to broker-dealers and other institutional borrowers. During the existence of a loan, the Fund will continue to receive the equivalent of the interest paid by the issuer on the securities loaned, or all or a portion of the interest on investment of the collateral, if any. The Fund may pay lending fees to such borrowers. Loans will only be made to firms that have been approved by the Adviser, and the Adviser or the securities lending agent will periodically monitor the financial condition of such firms while such loans are outstanding. Securities loans will only be made when the Adviser believes that the expected returns, net of expenses, justify the attendant risks. Securities loans currently are required to be secured continuously by collateral in cash, cash equivalents (such as money market instruments) or other liquid securities held by the custodian and maintained in an amount at least equal to the market value of the securities loaned. The Fund may engage in securities lending to seek to generate income. Upon return of the loaned securities, the Fund would be required to return the related collateral to the borrower and may be required to liquidate portfolio securities in order to do so. The Fund may lend up to one-third of the value of its total assets or such other amount as may be permitted by law.

As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the securities loaned if the borrower of the securities fails financially. To the extent that the portfolio securities acquired with such collateral have decreased in value, it may result in the Fund realizing a loss at a time when it would not otherwise do so. As such, securities lending may introduce leverage into the Fund. The Fund also may incur losses if the returns on securities that it acquires with cash collateral are less than the applicable rebate rates paid to borrowers and related administrative costs.

**Investment Company Securities**

Subject to the limitations set forth in the Investment Company Act of 1940, as amended (the "1940 Act"), or as otherwise permitted by the SEC, the Fund may acquire shares in other investment companies, including foreign investment companies, closed-end funds, ETFs and money market funds which may be managed by the Adviser or its affiliates. The market value of the shares of other investment companies may differ from the NAV of the Fund. The shares of certain investment companies, principally closed-end investment companies, frequently trade at a discount to their NAV. As a shareholder in an investment company, the Fund would bear its ratable share of that entity's expenses, including its investment advisory and administration fees and be subject to the associated risks. At the same time, the Fund would continue to pay its own advisory and administration fees and other expenses. As a result, the Fund and its shareholders will directly bear the expenses of their investment in the Fund and indirectly bear the expenses of the Fund's investments in other investment companies.

**ESG Investment Risk.** The Fund's incorporation of ESG information and application of related analyses when selecting investment may affect the Fund's performance, and there is no guarantee that the incorporation of ESG information will result in better performance. Socially responsible norms differ by country and region, and a company's ESG practices or the Adviser's assessment of such may change over time. The Fund may invest in companies or issuers that do not reflect the beliefs and values of any particular investor. Additionally, the Adviser's incorporation of ESG-related information in connection with identifying and selecting investments may require subjective analysis based on qualitative assessments and may be impacted by data availability for a particular company or issuer, including if the data is inaccurate, incomplete, unavailable or based on estimates. The Fund's investments in certain companies may be susceptible to various factors that may impact their businesses or operations, including costs associated with government budgetary constraints that impact publicly funded projects and clean energy initiatives, the effects of general economic conditions throughout the world, increased competition from other providers of services, unfavorable tax laws or accounting policies and high leverage. ESG considerations within the Adviser's investment process for the Fund may vary across asset classes, industries and sectors. Other factors are also considered by the Adviser and no one factor or consideration is determinative. ESG considerations with respect to the Fund's investments are not the sole determinant of whether or not an investment can be made or a holding can remain in the Fund's portfolio.

**Other Risks.** The performance of the Fund also will depend on whether or not the Adviser is successful in applying the Fund's investment strategies. The Fund is also subject to other risks from its permissible investments, including the risks associated with its investments in common stock and other equity securities, inverse floaters and municipal securities. For more information about these risks, see "Additional Risk Information."

**Additional Risk Information**

This section provides additional information relating to the risks of investing in the Fund.

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

**Equity Securities**

Equity securities may include common and preferred stocks, convertible securities and equity-linked securities, rights and warrants to purchase common stocks, depositary receipts, shares of investment companies, limited partnership interests and other specialty securities having equity features. Many factors affect the value of equity securities, including earnings, earnings forecasts, corporate events and factors impacting the issuer's financial condition, sector, industry and the market generally, such as labor shortages or an increase in production costs and competitive conditions within an industry. The value of the equity securities held by the Fund may fluctuate rapidly and unpredictably, and these fluctuations may be frequent and significant. In addition, the Fund cannot accurately predict the income it might receive from equity securities because issuers generally have discretion as to the payment of dividends or distributions, and the common stock of an issuer in the Fund's portfolio may decline in price if, for example, the issuer fails to make anticipated dividend payments because of a decline in the issuer's financial condition. The Fund may invest in equity securities that are publicly traded on securities exchanges or OTC or in equity securities that are not publicly traded. Equity securities are subject to the risk that stock prices in general (or in particular, the prices of the types of securities in which the Fund invests) may decline over short or extended periods of time. Equity securities that are not publicly traded may be more difficult to value or sell and their value may fluctuate more dramatically than publicly traded equity securities.

The value of equity securities and related instruments decline in response to perceived or actual adverse changes in the economy, economic outlook or the financial markets; deterioration in investor sentiment; inflation, interest rate, currency, and commodity price fluctuations; adverse geopolitical, social or environmental developments; issuer- and sector-specific considerations; unexpected trading activity among retail investors; and other factors. Market conditions affect certain types of equity securities to a greater extent than other types of equity securities. In addition, holders of an issuer's common stock may be subject to greater risks than holders of its preferred stock and debt securities because common stockholders' claims are subordinated to those of holders of preferred stocks and debt securities upon the bankruptcy of an issuer. If the stock market declines, the value of the Fund's equity securities will also likely decline, which will result in a decrease in the value of your investment in the Fund. Although stock prices can rebound, there is no assurance that values of the Fund's equity securities will return to previous levels.

U.S. and foreign stock markets, and equity securities of individual issuers, have experienced periods of substantial price volatility in the past and it is possible that they will do so again in the future. During periods when equity securities experience heightened volatility, such as during periods of market, economic or financial uncertainty or distress, the Fund's investments in equity securities are subject to heightened risks. In addition, the price of equity securities of an issuer may be particularly sensitive to general movements in the stock market and a drop in the stock market may depress the price of most or all of the common stocks and other equity securities held by the Fund.

**Inverse Floaters**

Inverse floaters are obligations which pay interest at rates that vary inversely with changes in market rates of interest. Because the interest rate paid to holders of such obligations is generally determined by subtracting a variable or floating rate from a predetermined amount, the interest rate paid to holders of such obligations will decrease as such variable or floating rate increases and increase as such variable or floating rate decreases.

Like most other fixed-income securities, the value of inverse floaters will decrease as interest rates increase. They are more volatile, however, than most other fixed-income securities because the coupon rate on an inverse floater typically changes at a multiple of the change in the relevant index rate. Thus, any rise in the index rate (as a consequence of an increase in interest rates) causes a correspondingly greater drop in the coupon rate of an inverse floater while a drop in the index rate causes a correspondingly greater increase in the coupon of an inverse floater. Some inverse floaters may also increase or decrease substantially because of changes in the rate of prepayments.

**Loans of Portfolio Securities**

The Fund may lend its portfolio securities to brokers, dealers, banks and other institutional investors. By lending its portfolio securities, the Fund attempts to increase its net investment income through the receipt of interest on the cash collateral with respect to the loan or fees received from the borrower in connection with the loan. Any gain or loss in the market price of the securities loaned that might occur during the term of the loan would be for the account of the Fund. The Fund employs an agent to implement the securities lending program and the agent receives a fee from the Fund for its services. The Fund will not lend more than 33⅓% of the value of its total assets.

The Fund may lend its portfolio securities so long as the terms, structure and the aggregate amount of such loans are not inconsistent with the 1940 Act or the rules and regulations or interpretations of the SEC thereunder, which currently require that (i) the borrower pledge and maintain with the Fund collateral consisting of liquid, unencumbered assets having a value not less than 100% of the value of the securities loaned; (ii) the borrower adds to such collateral whenever the price of the securities loaned rises (i.e., the borrower "marks-to-market" on a daily basis); (iii) the loan be made subject to termination by the Fund at any time; and (iv)the Fund receives a reasonable return on the loan (which may include the Fund investing any cash collateral in interest bearing short-term investments), any distributions on the loaned securities and any increase in their market value. In addition, voting rights may

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

pass with the loaned securities, but the Fund will retain the right to call any security in anticipation of a vote that the Adviser deems material to the security on loan.

Loans of securities involve a risk that the borrower may fail to return the securities or may fail to maintain the proper amount of collateral, which may result in a loss of money by the Fund. There may be risks of delay and costs involved in recovery of securities or even loss of rights in the collateral should the borrower of the securities fail financially. These delays and costs could be greater for foreign securities. However, loans will be made only to borrowers deemed by the Adviser to be creditworthy and when, in the judgment of the Adviser, the income that can be earned from such securities loans justifies the attendant risk. All relevant facts and circumstances, including the creditworthiness of the broker, dealer, bank or institution, will be considered in making decisions with respect to the lending of securities, subject to review by the Trust's Board of Trustees. The Fund also bears the risk that the reinvestment of collateral will result in a principal loss. Finally, there is the risk that the price of the securities will increase while they are on loan and the collateral will not be adequate to cover their value.

**Municipals**

Municipal securities (also referred to as municipal obligations) include debt obligations of states, territories or possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities, such as local or regional governments. The interest on municipal securities is generally exempt from federal income tax at the time of issuance, in the opinion of bond counsel or other counsel to the issuers of such securities. However, the Fund may purchase municipal securities that pay interest that is subject to the federal alternative minimum tax, and municipal securities on which the interest payments are taxable. Municipal securities typically are "general obligation" or "revenue" bonds, notes or commercial paper, including participations in lease obligations and installment purchase contracts of municipalities. General obligation bonds are secured by the issuer's full faith and credit including its taxing power for payment of principal and interest. Revenue bonds, however, are generally payable from a specific revenue source. Revenue bonds are issued for a wide variety of projects such as financing public utilities, hospitals, housing, airports, highways and educational facilities. These types of bonds involve the risk that the tax or other revenues so derived will not be sufficient to meet interest and/or principal payment obligations. Municipal obligations may have fixed, variable or floating rates.

Because the Fund may invest in municipal securities, the Fund may be affected significantly by the economic, regulatory, legislative, tax or political developments affecting the ability of issuers of municipal securities to pay interest or repay principal. The risks of municipal securities generally depend on the financial and credit status of the issuer and may rely on a specific stream of revenue associated with a project or other revenue source. Thus, adverse developments related to a municipality's ability to raise revenue, including through its taxing authority, or the failure of specific revenues to materialize would negatively impact such investments. These factors, which may also impact other municipal obligations, include, among others, changing demographic trends, such as population shifts or changing tastes and values, or increasing vacancies or declining rents resulting from legal, cultural, technological, global or local economic developments, as well as reduced demand for properties, revenues or goods. Changes in the financial health of an issuer of municipal securities may make it difficult for the issuer to make interest and principal payments when due. Some municipalities or issuers of municipal securities have had significant financial problems recently, and these and other municipalities or issuers of municipal securities could, potentially, continue to experience significant financial problems resulting from lower tax or other revenues and/or decreased aid from state and local governments in the event of an economic downturn. In addition, adverse legislative, tax, regulatory, demographic or political changes may negatively impact the Fund's investments in municipal securities. These events could decrease the Fund's income and/or adversely affect the Fund's performance and investments. Municipal securities also involve the risk that an issuer may call securities for redemption, which could force the Fund to reinvest the proceeds at a lower rate of interest, and the value of municipal securities may be affected by the rights of municipal security holders.

Municipal securities may be more susceptible to downgrades, defaults or loss of tax or other revenue during recessions or similar periods of economic stress. Factors contributing to the financial stress on municipalities and issuers of municipal securities may include, among other developments, lower property tax collections as a result of lower home values, lower sales tax revenue as a result of consumers cutting back spending and lower income tax revenue as a result of a higher unemployment rate. In addition, because some municipal obligations may be secured or guaranteed by banks and other institutions, the risk to the Fund associated with investments in such municipal securities could increase if the banking or financial sector suffers an economic downturn and/or if the credit ratings of the institutions issuing the guarantee are downgraded or at risk of being downgraded by a national rating organization. If such events occur, the value of the security could decrease or the value could be lost entirely, and it may be difficult or impossible for the Fund to sell the security at the time and the price that normally prevails in the market.

For example, recent public health emergencies have significantly stressed the financial resources of many municipalities and other issuers of municipal securities, which may impair their ability to meet their financial obligations and may harm the value or liquidity of the Fund's investments in municipal securities (or the income generated by such investments). In particular, responses by municipalities to recent public health emergencies have caused disruptions in business activities. These and other effects of recent public health emergencies, such as increased unemployment levels, have impacted tax and other revenues of municipalities and other issuers of municipal securities and the financial conditions of such issuers. As a result, there is an increased budgetary and financial pressure on municipalities and other issuers of municipal securities and heightened risk of default or other adverse credit or similar events for issuers of municipal securities, which would adversely impact the Fund's investments.

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

In addition, the ability of an issuer to make payments or repay interest may be affected by litigation or bankruptcy. In the event of bankruptcy of such an issuer, the Fund investing in the issuer's securities could experience delays in collecting principal and interest, and the Fund may not, in all circumstances, be able to collect all principal and interest to which it is entitled. To enforce its rights in the event of a default in the payment of interest or repayment of principal, or both, the Fund may, in some instances, take possession of, and manage, the assets securing the issuer's obligations on such securities, which may increase the Fund's operating expenses. Any income derived from the Fund's ownership or operation of such assets may not be tax-exempt. Municipal securities are subject to, among other risks, credit and interest rate risk, liquidity risk and market and geopolitical risk.

Because many municipal securities are issued to finance similar projects (such as those relating to education, health care, housing, transportation, and utilities), conditions in those sectors, similar projects or particular states or geographic regions may particularly affect the overall municipal securities market. In addition, changes in the financial condition of an individual municipal issuer can affect the overall municipal market. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the discontinuance of the supporting taxation or the inability to collect revenues for the specific project or specific assets. Moreover, as a result of various economic, market and other factors, there could be reduced tax or other revenue available to issuers of municipal obligations and, in turn, increased budgetary and financial pressure on municipalities and other issuers of municipal obligations, which could adversely impact the risks associated with municipal obligations of such issuer. As a result, the Fund's investments in municipal obligations may be subject to heightened risks relating to the occurrence of such developments.

Some municipal securities are subject to the risk that the U.S. Internal Revenue Service ("IRS") may determine that an issuer has not complied with applicable tax requirements (or the occurrence of other adverse tax developments) and that interest from the municipal security is taxable, which may result in a significant decline in the value of the security. In addition, interest on municipal obligations, while generally exempt from federal income tax, may not be exempt from the federal alternative minimum tax. Municipal securities may be less liquid than taxable bonds and there may be less publicly available information on the financial condition of municipal security issuers than for issuers of other securities, and the investment performance of the Fund investing in municipal securities may therefore be more dependent on the analytical abilities of the Adviser than if the Fund held other types of investments such as stocks or taxable bonds. The secondary market for municipal securities also tends to be less well developed or liquid than many other securities markets, which may adversely affect the Fund's ability to sell municipal securities it holds at attractive prices or value municipal securities. In addition, the demand for municipal securities is strongly influenced by the value of tax-exempt income to investors and lower income tax rates could reduce the advantage of owning municipal securities, which may also adversely affect the value and liquidity of municipal securities.

In purchasing municipal obligations, the Fund intends to rely on opinions of bond counsel or counsel to the issuers for each issue as to the excludability of interest on such obligations from gross income for federal income tax purposes. The Fund will not undertake independent investigations concerning the tax-exempt status of such obligations, nor does it guarantee or represent that bond counsels' opinions are correct. Bond counsels' opinions will generally be based in part upon covenants by the issuers and related parties regarding continuing compliance with federal tax requirements. Tax laws contain numerous and complex requirements that must be satisfied on a continuing basis in order for bonds to be and remain tax-exempt. If the issuer of a bond or a user of a bond financed facility fails to comply with such requirements at any time, interest on the bond could become taxable, retroactive to the date the obligation was issued. In that event, a portion of the Fund's distributions attributable to interest the Fund received on such bond for the current year and for prior years could be characterized or recharacterized as taxable income.

**Large Transactions Risk**

The Fund may experience adverse effects when large shareholders, or a number of shareholders collectively purchase or redeem large amounts of shares of the Fund ("large shareholder transactions"). Such larger than normal redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Fund's NAV and liquidity. Similarly, large Fund share purchases may adversely affect the Fund's performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would. Large shareholder transactions may also result in taxable income and/or gains for the Fund, which may increase taxable distributions to shareholders, and may also increase transaction costs. The effects of taxable income and/or gains resulting from large shareholder transactions would particularly impact non-redeeming shareholders who do not hold their Fund shares in an IRA, 401(k) plan or other tax-advantaged investment plans. To the extent that such transactions result in short-term capital gains, such gains when distributed by the Fund will generally be taxed at the ordinary income tax rate for individual shareholders who hold Fund shares in a taxable account. In addition, a large redemption could result in the Fund's current expenses being allocated over a smaller asset base, leading to an increase in the Fund's expense ratio. A number of circumstances may cause the Fund to experience large redemptions, including, but not limited to, the occurrence of significant events affecting investor demand for securities or asset classes in which the Fund invests; changes in the eligibility criteria for the Fund or share class of the Fund; liquidation, reorganization, repositioning, or other announced Fund event; or changes in investment objectives, strategies, policies, risks, or investment personnel. Although large shareholder transactions may be more frequent under certain circumstances, the Fund is generally subject to the risk that shareholders can purchase or redeem a significant percentage of Fund shares at any time.

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

**Active Management Risk**

In pursuing the Fund's investment objective, the Adviser has considerable leeway in deciding which investments to buy, hold or sell on a day-to-day basis, and which trading strategies to use. For example, the Adviser, in its discretion, may determine to use some permitted trading strategies while not using others. The success or failure of such decisions will affect the Fund's performance.

In addition, it is expected that confidential or material non-public information regarding an investment or potential investment opportunity may become available to the Adviser. If such information becomes available, the Adviser may be precluded (including by applicable law or internal policies or procedures) from pursuing an investment or disposition opportunity with respect to such investment or investment opportunity and the Adviser may be restricted in its ability to cause the Fund to buy or sell securities of an issuer for substantial periods of time when the Fund otherwise could realize profit or avoid loss. This may adversely affect the Fund's flexibility with respect to buying or selling securities and may impair the Fund's liquidity.

**Corporate Debt Obligations**

Corporate debt obligations are fixed-income securities issued by private corporations. The investment return of corporate debt obligations reflects interest earnings and changes in the market value of the security. The market value of a corporate debt obligation may be expected to rise and fall inversely with interest rates generally. There also exists the risk that the issuers of the securities may not be able to meet their obligations on interest or principal payments at the time called for by an instrument or at all. Debtholders, as creditors, have a prior legal claim over common and preferred stockholders of the corporation as to both income and assets for the principal and interest due to the bondholder.

**Temporary Investments**

Under adverse or unstable market conditions or abnormal circumstances or when the Adviser believes that changes in market, economic, political or other conditions warrant, the Fund may, in the discretion of the Adviser, take temporary positions that are inconsistent with the Fund's principal investment strategies in attempting to respond to such conditions or circumstances. For example, the Fund may invest without limit in cash, cash equivalents or other fixed-income instruments, derivatives, repurchase agreements or securities of other investment companies, including money market funds, for temporary purposes. If the Adviser incorrectly predicts the effects of these changes, or during periods of temporary defensive or other temporary positions, such temporary investments may adversely affect the Fund's performance and the Fund may not achieve its investment objective.

**Portfolio Turnover**

Consistent with its investment policies, the Fund will purchase and sell securities without regard to the effect on portfolio turnover. Higher portfolio turnover (e.g., over 100% per year) will cause the Fund to incur additional transaction costs and may result in taxable gains being passed through to shareholders. The Fund may engage in frequent trading of securities to achieve its investment objective.

**Regulatory and Legal Risk**

U.S. and non-U.S. governmental agencies and other regulators regularly implement additional regulations and legislators pass new laws that affect the investments held by the Fund, the strategies used by the Fund or the level of regulation or taxation applying to the Fund (such as regulations related to investments in derivatives and other transactions). These regulations and laws impact the investment strategies, performance, costs and operations of the Fund or taxation of shareholders.

The SEC has proposed amendments to Rule 22e-4 of the 1940 Act that, if adopted, would result in changes to the Fund's liquidity classification framework and could potentially increase the percentage of the Fund's investments classified as illiquid. In addition, the Fund's operations and investment strategies may be adversely impacted if the proposed amendments are adopted.

**Cybersecurity Risk**

With the increased use of technologies such as the internet to conduct business, the Fund, the Adviser, authorized participants, service providers and the relevant listing exchange are susceptible to operational, information security and related "cyber" risks both directly and through the service providers. Similar types of cybersecurity risks are also present for issuers of securities in which the Fund invests, which could result in material adverse consequences for such issuers and may cause the Fund's investment in such issuers to lose value. In general, cyber incidents can result from deliberate attacks or unintentional events. Cyber incidents include, but are not limited to, gaining unauthorized access to digital systems (e.g., through "hacking" or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyberattacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites (i.e., efforts to make network services unavailable to intended users). Recently, geopolitical tensions may have increased the scale and sophistication of deliberate attacks, particularly those from nation-states or from entities with nation-state backing.

Cybersecurity failures by, or breaches of, the systems of the Adviser, distributor and other service providers (including, but not limited to, index and benchmark providers, fund accountants, custodians, transfer agents and administrators), exchanges, market participants, market makers, authorized participants or the issuers of securities in which the Fund invests have the ability to cause disruptions and impact business operations, potentially resulting in: financial losses, interference with the Fund's ability to calculate

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Morgan Stanley Prospectus \| **Additional Information About Fund Investment Strategies and Related Risks**

Income Opportunities Fund (Con't)

its NAV, disclosure of confidential trading information, impediments to trading, submission of erroneous trades or erroneous creation or redemption orders, the inability of the Fund or its service providers to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs. In addition, cyberattacks may render records of Fund assets and transactions, shareholder ownership of Fund shares, and other data integral to the functioning of the Fund inaccessible, inaccurate or incomplete. Substantial costs may be incurred by the Fund in order to resolve or prevent cyber incidents in the future. While the Fund has established business continuity plans in the event of, and risk management systems to prevent, such cyber incidents, there are inherent limitations in such plans and systems, including the possibility that certain risks have not been identified, that prevention and remediation efforts will not be successful or that cyberattacks will go undetected. Furthermore, the Fund cannot control the cybersecurity plans and systems put in place by service providers to the Fund, issuers in which the Fund invests, market makers or authorized participants. The Fund and its shareholders could be negatively impacted as a result.

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Morgan Stanley Prospectus \| **Fund Details**

Income Opportunities Fund (Con't)

Portfolio Holdings

A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio securities is available in the Fund's SAI.

Fund Management

The Fund has retained the Adviser—Morgan Stanley Investment Management Inc.—to provide investment advisory services. The Adviser is a wholly-owned subsidiary of Morgan Stanley (NYSE: "MS"), a preeminent global financial services firm engaged in securities trading and brokerage activities, as well as providing investment banking, research and analysis, financing and financial advisory services. The Adviser, together with its affiliated asset management companies, had approximately $1.7 trillion in assets under management or supervision as of December 31, 2024. The Adviser's address is 1585 Broadway, New York, NY 10036.

The Fund is managed by members of the Fixed Income team. The team consists of portfolio managers, analysts and traders. Current members of the team jointly and primarily responsible for the day-to-day implementation of the Fund's overall strategy and portfolio construction are Michael Kushma, Justin Bourgette, CFA, Andrew Szczurowski, CFA and Brian Shaw, CFA.

Mr. Kushma is the Chief Investment Officer of the Broad Markets team for the Adviser. He joined Morgan Stanley in 1987 and the Adviser in 1994. Mr. Szczurowski and Mr. Bourgette are Managing Directors of the Adviser, manage other funds, and have been employed by the Morgan Stanley organization for more than five years. Mr. Shaw is an Executive Director of the Adviser, manages other funds, and has been employed by the Morgan Stanley organization for more than five years.

Members of the team collaborate to manage the assets of the Fund. Each member is responsible for specific sectors. All team members are responsible for the execution of the overall strategy of the Fund.

The Fund's SAI provides additional information about the portfolio managers' compensation structure, other accounts managed by the portfolio managers and the portfolio managers' ownership of securities in the Fund.

The composition of the team may change from time to time.

The Fund pays the Adviser a monthly advisory fee as full compensation for the services and facilities furnished to the Fund, and for Fund expenses assumed by the Adviser. The fee is based on the Fund's daily net assets. For the fiscal year ended October 31, 2024, the Fund paid total investment advisory compensation (net of fee waivers, if applicable) amounting to 0.31% of the Fund's average daily net assets.

Morgan Stanley Investment Management Inc., as the Adviser and the Administrator, has agreed to reduce its advisory fee, its administration fee, and/or reimburse the Fund, if necessary, if such fees would cause the total annual operating expenses of the Fund to exceed 0.57% for Class IR. In determining the actual amount of fee waiver and/or expense reimbursement for the Fund, if any, the Adviser and Administrator exclude from total annual operating expenses, acquired fund fees and expenses (as applicable), certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation). The fee waivers and/or expense reimbursements will continue for at least one year from the date of this Prospectus or until such time as the Fund's Board of Trustees acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate. The Adviser and Administrator may make additional voluntary fee waivers and/or expense reimbursements. The Adviser and Administrator may discontinue these voluntary fee waivers and/or expense reimbursements at any time in the future.

The Fund's annual operating expenses may vary throughout the period and from year to year. The Fund's actual expenses may be different than the expenses listed in the Fund's fee and expense table based upon the extent and amount of a fee waiver and/or expense reimbursement.

A discussion regarding the basis for the Board of Trustees' approval of the investment advisory agreement is available in the Fund's report filed on Form N-CSR for the fiscal year ended October 31, 2024.

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information

**Pricing Fund Shares**

The NAV of the Fund (excluding sales charges) is based on the value of the Fund's portfolio securities. While the assets of each class are invested in a single portfolio of securities, the NAV of each class will differ because the classes have different ongoing fees.

The NAV of the Fund is determined once daily on each business day as of the close of regular trading on the NYSE (normally 4:00 p.m. Eastern time) or such other times as the NYSE may officially close (the "Pricing Time"). Orders to purchase or sell (redeem) shares of the Fund must be received by the Fund or a Financial Intermediary prior to 4:00 p.m. Eastern time. Shares generally will not be priced on any day that the NYSE is closed, although Fund shares may be priced on such days if the Securities Industry and Financial Markets Association ("SIFMA") recommends that the bond markets remain open for all or part of the day. On any business day when SIFMA recommends that the bond markets close early, the Fund reserves the right to close at or prior to the SIFMA recommended closing time. If the Fund does so, it will cease granting same day credit for purchase and redemption orders received after the Fund's closing time and credit will be given on the next business day. If the NYSE is closed due to inclement weather, technology problems or any other reason on a day it would normally be open for business, or the NYSE has an unscheduled early closing on a day it has opened for business, the Fund reserves the right to treat such day as a business day and accept purchase and redemption orders until, and calculate its NAV as of, the normally scheduled close of regular trading on the NYSE for that day, so long as the Adviser believes there generally remains an adequate market to obtain reliable and accurate market quotations. The Fund may also elect to remain open and price its shares on days when the NYSE is closed but the primary securities markets on which the Fund's securities trade remain open. Trading of securities that are primarily listed on foreign exchanges may take place on weekends and other days when the Fund does not price its shares. Therefore, to the extent, if any, that the Fund invests in securities primarily listed on foreign exchanges, the value of the Fund's portfolio securities may change on days when you will not be able to purchase or sell your shares.

The Fund relies on various sources to calculate its NAV. The ability of the Fund's provider of administrative services to calculate the NAV per share of the Fund is subject to operational risks associated with processing or human errors, systems or technology failures, cyber attacks and errors caused by third party service providers, data sources, or trading counterparties. Such failures may result in delays in the calculation of the Fund's NAV and/or the inability to calculate NAV over extended time periods. The Fund may be unable to recover any losses associated with such failures. In addition, if the third party service providers and/or data sources upon which the Fund directly or indirectly relies to calculate its NAV or price individual securities are unavailable or otherwise unable to calculate the NAV correctly, it may be necessary for alternative procedures to be utilized to price the securities at the time of determining the Fund's NAV.

The value of the Fund's portfolio securities is based on the securities' market price when available. With respect to investments that do not have readily available market quotations, the Board of Trustees has designated the Adviser as the valuation designee to perform fair value determinations pursuant to Rule 2a-5 under the 1940 Act. When no market quotations are readily available for a security or other asset, including as a result of the occurrence of a significant event or circumstances under which the Adviser determines that a market quotation is not accurate or reliable, fair value for the security or other asset will be determined in good faith using procedures approved by the Fund's Board of Trustees.

In addition, with respect to securities that primarily are listed on foreign exchanges, when an event occurs after the close of such exchanges that is likely to have changed the value of the securities (e.g., a percentage change in value of one or more U.S. securities indices in excess of specified thresholds), such securities will be valued at their fair value, as determined using methods approved by the Fund's Board of Trustees. Securities also may be fair valued in the event of a significant development affecting a country or region or an issuer-specific development that is likely to have changed the value of the security.

In these cases, the Fund's NAV will reflect certain portfolio securities' fair value rather than their market price. Fair value pricing involves subjective judgment and it is possible that the fair value determined for a security or other asset is materially different than the value that could be realized upon the sale of that security or asset.

To the extent the Fund invests in open-end management companies (other than exchange-traded funds) that are registered under the 1940 Act, the Fund's NAV is calculated based in relevant part upon the NAV of such funds. The prospectuses for such funds explain the circumstances under which they will use fair value pricing and its effects.

&nbsp;&nbsp;&nbsp; ***Contacting a Morgan Stanley Financial Advisor***<br> *If you are new to the Morgan Stanley Funds and would like to contact a Morgan Stanley Financial Advisor, access our office locator on our Internet site at: www.morganstanley.com*<br>

**How to Buy Shares**

This Prospectus offers Class IR shares of the Fund. The Fund also offers Class A, Class L, Class I, Class C and Class R6 shares through a separate prospectus. The Class L shares of the Fund are currently closed to all investors except in the limited circumstances set forth in such prospectus. Each class of shares offers a distinct structure of sales charges, distribution and service fees, and other

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features that are designed to address a variety of needs. Your Financial Intermediary can help you decide which class may be most appropriate for you. When purchasing Fund shares, you must specify which class of shares you wish to purchase.

**Minimum Investment Amount.** Class IR shares are offered only to eligible investors meeting certain minimum investment requirements. To purchase Class IR shares, an investor must meet a minimum initial investment of $5 million or be a defined contribution, defined benefit or other employer sponsored employee benefit plan, in each case provided that the plan trades through an intermediary that combines its clients' assets in a single omnibus account, whether or not such plan is qualified under the Code and in each case subject to the discretion of the Adviser. Omnibus trades of $5 million or more shall be accepted from certain platforms, including: (i) banks and trust companies; (ii) insurance companies; and (iii) registered investment advisory firms. The $5 million minimum initial investment amount may be waived for Class IR shares purchased by or through: (1) certain registered open-end investment companies whose shares are distributed by the Distributor; or (2) investments made in connection with certain mergers and/or reorganizations as approved by the Adviser.

The Adviser, in its sole discretion, may waive a minimum initial investment amount in certain cases.

**Purchasing Shares Through a Financial Intermediary.** You may open a new account and purchase Fund shares through your Financial Intermediary. Your Financial Intermediary will assist you with the procedures to invest in shares of the Fund. Your Financial Intermediary may charge transaction-based or other fees in connection with the purchase or sale of Fund shares. Please consult your Financial Intermediary for more information regarding any such fees and for purchase instructions.

With respect to sales through Financial Intermediaries, no offers or sales of Fund shares may be made in any foreign jurisdiction, except with the consent of the Distributor.

**Purchasing Shares Directly from the Fund.**

Initial Purchase

You may open a new account, subject to acceptance by the Fund, and purchase shares of the Fund by completing and signing a New Account Application provided by SS&C Global Investor and Distribution Solutions, Inc. (the "Transfer Agent"), or Eaton Vance Management, the Fund's co-transfer agent (the "Co-Transfer Agent"), which you can obtain by calling Morgan Stanley Shareholder Services and Eaton Vance Management at 1-800-869-6397 (our automated telephone system (which is generally accessible 24 hours a day, seven days a week)) and mailing it to Morgan Stanley Income Opportunities Fund, c/o SS&C Global Investor and Distribution Solutions, Inc., P.O. Box 219804, Kansas City, MO 64121-9804.

After submitting a completed New Account Application to the Transfer Agent, you may wire Federal Funds (monies credited by a Federal Reserve Bank) to State Street Bank and Trust Company (the "Custodian"). You should instruct your bank to send a Federal Funds wire in a specified amount to the Custodian using the following wire instructions:

State Street Bank and Trust Company

One Congress Street,

Boston, MA 02114-2016

ABA #011000028

DDA #99060238

Attn: Morgan Stanley Funds Subscription Account

Ref: (Fund Name, Account Number, Account Name)

**Additional Investments.** You may purchase additional Fund shares for your account at any time by contacting your Financial Intermediary or by contacting the Fund directly. For additional purchases directly from the Fund, you should write a "letter of instruction" that includes your account name, account number, the Fund name and the class selected, signed by the account owner(s), to assure proper crediting to your account. After mailing a "letter of instruction," you may wire Federal Funds by following the instructions under "Initial Purchase."

**General.** To help the U.S. Government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. What this means to you: when you open an account, we will ask your name, address, date of birth and other information that will allow us to identify you. If we are unable to verify your identity, we reserve the right to restrict additional transactions and/or liquidate your account at the next calculated NAV after your account is closed (less any applicable sales/account charges and/or tax penalties) or take any other action required by law. In accordance with federal law requirements, the Fund has implemented an anti-money laundering compliance program, which includes the designation of an anti-money laundering compliance officer.

When you buy Fund shares, the shares (plus any applicable sales charge) will be purchased at the next share price calculated after we receive your purchase order in good order. Purchase orders not received in good order prior to Pricing Time will be executed at the

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NAV next determined after the purchase order is received in good order. Certain institutional investors and financial institutions have entered into arrangements with the Fund, the Adviser and/or the Distributor pursuant to which they may place orders prior to the Pricing Time, but make payment in Federal Funds for those shares up to three days after the purchase order is placed, depending on the arrangement. We reserve the right to reject any order for the purchase of Fund shares for any reason.

The Fund may suspend the offering of shares, or any class of shares, or reject any purchase orders when we think it is in the best interest of the Fund.

**How to Exchange Shares**

**Permissible Fund Exchanges.**You may exchange shares of any class of the Fund for the same class of shares of any mutual fund (excluding money market funds) sponsored and advised by the Adviser (a "Morgan Stanley Multi-Class Fund"), if available, without the imposition of an exchange fee. In addition, you may exchange shares of any class of the Fund for shares of Morgan Stanley U.S. Government Money Market Trust (each, a "Morgan Stanley Money Market Fund" and, together with the Morgan Stanley Multi-Class Funds, the "Morgan Stanley Funds"), if available, without the imposition of an exchange fee.

Exchanges are effected based on the respective NAVs of the applicable Morgan Stanley Fund (subject to any applicable redemption fee) and in accordance with the eligibility requirements of such Fund. To obtain a prospectus for another Morgan Stanley Fund, contact your Financial Intermediary or call Morgan Stanley Shareholder Services at 1-800-869-6397. If you purchased Fund shares through a Financial Intermediary, certain Morgan Stanley Funds may be unavailable for exchange. Contact your Financial Intermediary for more information regarding the exchange privilege and to determine which Morgan Stanley Funds are available for exchange. The current prospectus for each Morgan Stanley Fund describes its investment objective(s), policies, investment minimums and applicable sales charges, and should be read before investing. Since exchanges are available only into continuously offered Morgan Stanley Funds, exchanges are generally not available into Morgan Stanley Funds or classes of Morgan Stanley Funds that are not currently being offered for purchase.

You will be subject to the same minimum initial investment and account size as an initial purchase. Your exchange price will be the price calculated at the next Pricing Time after the Morgan Stanley Fund receives your exchange order. The Morgan Stanley Fund, in its sole discretion, may waive the minimum initial investment amount in certain cases. The Fund may terminate or revise the exchange privilege upon required notice or in certain cases without notice. The Fund reserves the right to reject an exchange order for any reason.

**Exchange Procedures.** You can process an exchange by contacting your Financial Intermediary. You may also call the Co-Transfer Agent toll-free at 1-800-869-6397 to place an exchange order.

Exchange requests received on a business day (prior to the time shares of the funds involved in the request are priced) will be processed on the date of receipt. "Processing" a request means that shares of the Fund that you are exchanging will be redeemed and shares of the Morgan Stanley Fund that you are purchasing will be purchased at the NAV next determined on the date of receipt. Exchange requests received on a business day after the time that shares of the funds involved in the request are priced will be processed on the next business day in the manner described herein.

The Fund may terminate or revise the exchange privilege upon required notice or in certain cases without notice. See "Limitations on Exchanges." For direct accounts, the check writing privilege is not available for Morgan Stanley Money Market Fund shares you acquire in an exchange from a non-money market fund. If you are investing through a financial advisor, check with your advisor regarding the availability of check writing privileges.

**Telephone Exchanges.** Morgan Stanley (and its subsidiaries) and the Fund employ procedures considered by them to be reasonable to confirm that instructions communicated by telephone are genuine. Such procedures may include requiring certain personal identification information prior to acting upon telephone instructions, tape-recording telephone communications and providing written confirmation of instructions communicated by telephone. If reasonable procedures are employed, neither Morgan Stanley (or its affiliates) nor the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. Telephone exchanges may not be available if you cannot reach Morgan Stanley Shareholder Services by telephone, whether because all telephone lines are busy or for any other reason; in such case, a shareholder would have to use the Fund's other exchange procedures described in this section.

Telephone instructions will be accepted if received by Morgan Stanley Shareholder Services between 9:00 a.m. and 4:00 p.m. Eastern time on any day the NYSE is open for business. On any business day that the NYSE closes early, or when SIFMA recommends that the securities markets close early, the Fund may close early and purchase orders received after such earlier closing times will be processed the following business day. During periods of drastic economic or market changes, it is possible that the telephone exchange procedures may be difficult to implement, although this has not been the case with the Fund in the past.

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You automatically have the telephone exchange privilege unless you indicate otherwise by checking the applicable box on the New Account Application. You may also opt out of telephone privileges at any time by contacting Morgan Stanley Shareholder Services at 1-800-869-6397. If you hold share certificates, no exchanges may be processed until we have received all applicable share certificates.

**Margin Accounts.** If you have pledged your Fund shares in a margin account, contact your Financial Intermediary regarding restrictions on the exchange of such shares.

**Tax Considerations of Exchanges.** If you exchange shares of the Fund for shares of another Morgan Stanley Fund, there are important tax considerations. For tax purposes, the exchange out of the Fund is considered a sale of Fund shares and the exchange into the other fund is considered a purchase. As a result, you may realize a capital gain or loss.

You should review the "Shareholder Information—Taxes" section and consult your own tax professional about the tax consequences of an exchange.

**Limitations on Exchanges.** Certain patterns of past exchanges and/or purchase or sale transactions involving the Fund or other Morgan Stanley Funds may result in the Fund rejecting, limiting or prohibiting, at its sole discretion, and without prior notice, additional purchases and/or exchanges and may result in a shareholder's account being closed. Determinations in this regard may be based on the frequency or dollar amount of previous exchanges or purchase or sale transactions. The Fund reserves the right to reject an exchange request for any reason.

**How to Sell Shares**

You can sell some or all of your Fund shares at any time. Your shares will be sold at the next price calculated after we receive your order to sell as described below.

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| | |
|:---|:---|
| **Options** | **Procedures** |
| Contact Your Morgan Stanley Financial Advisor/Financial Intermediary | To sell your shares, simply call your Financial Intermediary. Payment will be sent to the address to which the account is registered or deposited in your brokerage account. Your Financial Intermediary may charge transaction-based or other fees in connection with the purchase or sale of the Fund's shares. Please contact your Financial Intermediary for more information regarding any such fees. |
| Contact the Fund By Telephone | You can also sell your shares by telephone and have the proceeds sent to the address of record or wired to your bank account on record. You automatically have the telephone redemption privilege unless you indicate otherwise by checking the applicable box on the New Account Application. You may also opt out of telephone privileges at any time by contacting Morgan Stanley Shareholder Services at 1-800-869-6397.<br> Before processing a telephone redemption, keep the following information in mind:<br> • You can establish this option at the time you open the account by completing the New Account Application or subsequently by calling toll-free 1-800-869-6397.<br>• Call toll-free 1-800-869-6397 to process a telephone redemption using our automated telephone system which is generally accessible 24 hours a day, seven days a week.<br>• Your request must be received prior to market close, generally 4:00 p.m. Eastern time.<br>• If your account has multiple owners, Morgan Stanley Shareholder Services may rely on the instructions of any one owner.<br>• Proceeds must be made payable to the name(s) and address in which the account is registered.<br>• You may redeem amounts of $50,000 or less daily if the proceeds are to be paid by check or by Automated Clearing House.<br>• This privilege is not available if the address on your account has changed within 15 calendar days prior to your telephone redemption request.<br>• Telephone redemption is available for most accounts other than accounts with shares represented by certificates. |
| Contact the Fund By Telephone (continued) | If you request to sell shares that were recently purchased by check, the proceeds of that sale may not be sent to you until it has been verified that the check has cleared, which may take up to 15 calendar days from the date of purchase.<br> Morgan Stanley (and its subsidiaries) and the Fund employ procedures considered by them to be reasonable to confirm that instructions communicated by telephone are genuine. Such procedures may include requiring certain personal identification information prior to acting upon telephone instructions, tape-recording telephone communications and providing written confirmation of instructions communicated by telephone. If reasonable procedures are employed, neither Morgan Stanley (or its affiliates) nor the Fund will be liable for following telephone instructions which it reasonably believes to be genuine. Telephone redemptions may not be available if a shareholder cannot reach Morgan Stanley Shareholder Services by telephone, whether because all telephone lines are busy or for any other reason; in such case, a shareholder would have to use the Fund's other redemption procedures described in this section. |

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| | |
|:---|:---|
| **Options** | **Procedures** |
| Contact the Fund By Letter | You can also sell your shares by writing a "letter of instruction" that includes:<br>• the name on your account and account number;<br>• the name of the Fund;<br>• the dollar amount or the number of shares you wish to sell;<br>• the class of shares you wish to sell;<br>• the signature of each owner as it appears on the account; and<br>• whether you wish to receive the redemption proceeds by check or by wire to the bank account we have on file for you.<br> If you are requesting payment to anyone other than the registered owner(s) or that payment be sent to any address other than the address of the registered owner(s) or pre-designated bank account, you will need a signature guarantee. You can obtain a signature guarantee from an eligible guarantor acceptable to the Transfer Agent. (You should contact Morgan Stanley Shareholder Services toll-free at 1-800-869-6397 for a determination as to whether a particular institution is an eligible guarantor.) A notary public cannot provide a signature guarantee. Additional documentation may be required for shares held by a corporation, partnership, trustee or executor.<br> Mail the letter to SS&C Global Investor and Distribution Solutions, Inc. at P.O. Box 219804, Kansas City, MO 64121-9804. If you hold share certificates, you must return the certificates, along with the letter and any required additional documentation. A check or wire will be sent according to your instructions. |

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**Payment for Sold Shares.** The Fund typically expects to pay redemption proceeds to you within two business days following receipt of your redemption request for those payments made to your brokerage account held with a Financial Intermediary. For redemption proceeds that are paid directly to you by the Fund, the Fund typically expects to pay redemption proceeds by check or by wire to you within one business day, following receipt of your redemption request; however, in all cases, it may take up to seven calendar days to pay redemption proceeds.

The Fund typically expects to meet redemption requests by using a combination of sales of securities held by the Fund and/or holdings of cash and cash equivalents. On a less regular basis, the Fund also reserves the right to use borrowings to meet redemption requests, and the Fund may use these methods during both normal and stressed market conditions.

Payment may be postponed or the right to sell your shares suspended under unusual circumstances. If you request to sell shares that were recently purchased by check, the proceeds of the sale may not be sent to you until it has been verified that the check has cleared, which may take up to 15 calendar days from the date of purchase.

**Payments-in-Kind.** If we determine that it is in the best interest of the Fund not to pay redemption proceeds in cash, we may pay you partly or entirely by distributing to you securities held by the Fund. If the Fund redeems your shares in-kind, you will bear any market risks associated with the securities paid as redemption proceeds. Such in-kind securities may be illiquid and difficult or impossible for a shareholder to sell at a time and at a price that a shareholder would like. Redemptions paid in such securities generally will give rise to income, gain or loss for income tax purposes in the same manner as redemptions paid in cash. In addition, you may incur brokerage costs and a further gain or loss for income tax purposes when you ultimately sell the securities.

**Tax Considerations.** Normally, your sale of Fund shares is subject to federal and state income tax. You should review the "Shareholder Information—Taxes" section of this Prospectus and consult your own tax professional about the tax consequences of a sale.

**Conversion to a New Share Class.** If the value of an account containing Class IR shares falls below the Class IR investment minimum because of shareholder redemption(s) or the failure to meet one of the waiver criteria set forth under "How to Buy Shares—Minimum Investment Amount" above and, if the account value remains below such investment minimum, the shares in such account may, at the Adviser's discretion, convert to another class of shares offered by the Fund, if an account meets the minimum investment amount for such class, and will be subject to the shareholder services fee and other features applicable to such shares. Conversion to another class of shares will result in holding a share class with higher fees. The Fund will not convert to another class of shares based solely upon changes in the market that reduce the NAV. Under current tax law, conversion between share classes is not a taxable event to the shareholder. Shareholders will be notified prior to any such conversion.

**Involuntary Sales.** If the value of an account falls below the investment minimum for a particular share class of the Fund because of shareholder redemption(s) or you no longer meet one of the waiver criteria set forth under "How to Buy Shares—Minimum Investment Amount" above and, if the account value remains below such investment minimums, the shares in such account may be subject to redemption by the Fund. The Fund will not redeem shares based solely upon changes in the market that reduce the NAV of shares. However, before the Fund sells your shares in this manner, we will notify you and allow you 60 days to make an additional investment in an amount that will increase the value of your account to at least the required amount before the sale is processed. If redeemed, redemption proceeds will be promptly paid to the shareholder.

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**Margin Accounts.** If you have pledged your Fund shares in a margin account, contact your Financial Intermediary regarding restrictions on the sale of such shares.

&nbsp;&nbsp;&nbsp; ***Targeted Dividends*<sup>*SM*</sup>** <br>*You may select to have your Fund distributions automatically invested in other classes of Fund shares or classes of another Morgan Stanley Fund that you own. Contact your financial advisor for further information about this service.*<br>

**Distributions**

The Fund passes substantially all of its earnings from income and capital gains along to its investors as "distributions." The Fund earns income from stocks and interest from fixed-income investments. These amounts are passed along to Fund shareholders as "income dividend distributions." The Fund realizes capital gains whenever it sells securities for a higher price than it paid for them. These amounts may be passed along as "capital gain distributions."

The Fund declares income dividends separately for each class. Normally, income dividends are declared and distributed to shareholders monthly. Capital gains, if any, are usually distributed in December. The Fund, however, may retain and reinvest any long-term capital gains. The Fund may at times make payments from sources other than income or capital gains that represent a return of a portion of your investment. These payments would not be taxable to you as a shareholder, but would have the effect of reducing your basis in the Fund.

Distributions are reinvested automatically in additional shares of the same class and automatically credited to your account, unless you request in writing that all distributions be paid in cash. If you elect the cash option, the Fund will mail a check to you no later than seven business days after the distribution is declared. However, if you purchase Fund shares through a Financial Intermediary within three business days prior to the record date for the distribution, the distribution will automatically be paid to you in cash, even if you did not request to receive all distributions in cash. No interest will accrue on uncashed checks. If you wish to change how your distributions are paid, your request should be received by the Transfer Agent at least five business days prior to the record date of the distributions. If any distribution check remains uncashed for six months, Morgan Stanley reserves the right to invest the amount represented by the check in Fund shares at the then-current net asset value of the Fund and all future distributions will be reinvested. For accounts held directly with the Transfer Agent for which the shareholder has elected to receive distributions via check, any distribution (dividend or capital gain) under $10.00 is automatically reinvested in additional shares regardless of your elected distribution option.

**Frequent Purchases and Redemptions of Shares**

Frequent purchases and redemptions of Fund shares by Fund shareholders are referred to as "market-timing" or "short-term trading" and may present risks for other shareholders of the Fund, which may include, among other things, dilution in the value of Fund shares held by long-term shareholders, interference with the efficient management of the Fund's portfolio, increased brokerage and administrative costs, incurring unwanted taxable gains and forcing the Fund to hold excess levels of cash.

In addition, the Fund is subject to the risk that market-timers and/or short-term traders may take advantage of time zone differences between the foreign markets on which the Fund's portfolio securities trade and the time the Fund's NAV is calculated ("time-zone arbitrage"). For example, a market-timer may purchase shares of the Fund based on events occurring after foreign market closing prices are established, but before the Fund's NAV calculation, that are likely to result in higher prices in foreign markets the following day. The market-timer would redeem the Fund's shares the next day, when the Fund's share price would reflect the increased prices in foreign markets, for a quick profit at the expense of long-term Fund shareholders.

Investments in other types of securities also may be susceptible to short-term trading strategies. These investments include securities that are, among other things, thinly traded, traded infrequently or relatively illiquid, which have the risk that the current market price for the securities may not accurately reflect current market values. A shareholder may seek to engage in short-term trading to take advantage of these pricing differences (referred to as "price arbitrage"). Investments in certain fixed-income securities may be adversely affected by price arbitrage trading strategies.

The Fund's policies with respect to valuing portfolio securities are described in "Shareholder Information—Pricing Fund Shares."

The Fund discourages and does not accommodate frequent purchases and redemptions of Fund shares by Fund shareholders and the Fund's Board of Trustees has adopted policies and procedures with respect to such frequent purchases and redemptions. The Fund's policies with respect to purchases, redemptions and exchanges of Fund shares are described in the "Shareholder Information—How to Buy Shares," "—How to Sell Shares" and "—How to Exchange Shares" sections of this Prospectus. Except as described in each of these sections, and with respect to trades that occur through omnibus accounts at Financial Intermediaries, as described below, the Fund's policies regarding frequent trading of Fund shares are applied uniformly to all shareholders. With respect to trades that occur through omnibus accounts at Financial Intermediaries, such as investment managers, broker-dealers, transfer agents and third-party administrators, the Fund (i) requests assurance that such Financial Intermediaries currently selling Fund shares have in place internal

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policies and procedures reasonably designed to address market-timing concerns and has instructed such Financial Intermediaries to notify the Fund immediately if they are unable to comply with such policies and procedures, and (ii) requires all prospective intermediaries to agree to cooperate in enforcing the Fund's policies (or, upon prior written approval only, a Financial Intermediary's own policies) with respect to frequent purchases, redemptions and exchanges of Fund shares.

Omnibus accounts generally do not identify customers' trading activity to the Fund on an individual ongoing basis. Therefore, with respect to trades that occur through omnibus accounts at Financial Intermediaries, to some extent, the Fund relies on the Financial Intermediary to monitor frequent short-term trading within the Fund by the Financial Intermediary's customers. However, the Fund or the Distributor has entered into agreements with Financial Intermediaries whereby Financial Intermediaries are required to provide certain customer identification and transaction information upon the Fund's request. The Fund may use this information to help identify and prevent market-timing activity in the Fund. There can be no assurance that the Fund will be able to identify or prevent all market-timing activities.

**Inactive Accounts and Risk of Escheatment**

In accordance with state "unclaimed property" laws, your Fund shares may legally be considered abandoned and required to be transferred to the relevant state (also known as "escheatment") under various circumstances. These circumstances, which vary by state, can include inactivity (e.g., no owner-initiated contact for a certain period), returned mail (e.g., when mail sent to a shareholder is returned by the post office as undeliverable), uncashed checks or a combination of these. An incorrect address may cause a shareholder's account statements and other mailings to be returned to the Fund or your Financial Intermediary. Since states' statutory requirements regarding inactivity differ, it is important to regularly contact your Financial Intermediary or the Fund's transfer agent. The process described above, and the application of state escheatment laws, may vary by state and/or depending on how shareholders hold their shares in the Fund. Escheatment with respect to a retirement account is subject to a 10% federal withholding on the account.

It is your responsibility to ensure that you maintain a valid mailing address for your account, keep your account active by contacting your Financial Intermediary or the Fund's transfer agent (e.g., by mail or telephone), and promptly cash all checks for dividends, capital gains and redemptions. Neither the Fund nor the Adviser will be liable to shareholders or their representatives for good faith compliance with escheatment laws.

For more information, please contact us at 1-800-869-6397.

**Taxes**

As with any investment, you should consider how your Fund investment will be taxed. The tax information in this Prospectus is provided as general information. You should consult your own tax professional about the tax consequences of an investment in the Fund.

Unless your investment in the Fund is through a tax-deferred retirement account, such as a 401(k) plan or IRA, you need to be aware of the possible tax consequences when:

• The
 Fund makes distributions; and

• You
 sell Fund shares, including an exchange to another Morgan Stanley Fund.

Your distributions are normally subject to federal income tax when they are paid, whether you take them in cash or reinvest them in Fund shares. A distribution also may be subject to state and local income tax. Depending on your state's rules, however, dividends attributable to interest earned on direct obligations of the U.S. Government may be exempt from state and local taxes. Any income dividend distributions and any short-term capital gain distributions are taxable to you as ordinary income. Any long-term capital gain distributions are taxable as long-term capital gains, no matter how long you have owned shares in the Fund. The Fund does not anticipate that it will make distributions eligible for the reduced rate of taxation applicable to qualified dividend income or for the corporate dividends-received deduction.

If more than 50% of the Fund's assets are invested in foreign securities at the end of any fiscal year, the Fund may elect to permit shareholders to take a credit (subject to certain limitations) or deduction on their federal income tax return for foreign taxes paid by the Fund. If the Fund makes such an election, the shareholders would also include the amount of such foreign taxes in their income.

If you buy shares of the Fund before a distribution, you will be subject to tax on the entire amount of the taxable distribution you receive. Distributions are taxable to you even if they are paid from income or gain earned by the Fund before your investment (and thus were included in the price you paid for your Fund shares).

You will be sent a statement (U.S. Internal Revenue Service ("IRS") Form 1099-DIV) by February of each year showing the taxable distributions paid to you in the previous year. The statement provides information on your dividends and any capital gains for tax purposes.

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

Your sale of Fund shares normally is subject to federal and state income tax and may result in a taxable gain or loss to you. A sale also may be subject to local income tax. Your exchange of Fund shares for shares of another Morgan Stanley Fund is treated for tax purposes like a sale of your original shares and a purchase of your new shares. Thus, the exchange may, like a sale, result in a taxable gain or loss to you and will give you a new tax basis for your new shares.

An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such person's "modified adjusted gross income" (in the case of an individual) or "adjusted gross income" (in the case of an estate or trust) exceeds certain threshold amounts.

Shareholders who are not citizens or residents of the United States and certain foreign entities will generally be subject to withholding of U.S. tax of 30% on distributions made by the Fund of investment income.

Dividends paid by the Fund to shareholders who are nonresident aliens or foreign entities that are derived from short-term capital gains and qualifying U.S. source net interest income (including income from original issue discount and market discount), and that are reported by the Fund as "interest-related dividends" or "short-term capital gain dividends," will generally not be subject to U.S. withholding tax, provided that the income would not be subject to U.S. federal income tax if earned directly by the foreign shareholder. However, depending on the circumstances, the Fund may report all, some or none of the Fund's potentially eligible dividends as exempt.

The Fund is required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive reporting and withholding requirements designed to inform the U.S. Department of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to the Fund to enable the Fund to determine whether withholding is required.

The Fund (or its administrative agent) is required to report to the IRS and furnish to Fund shareholders the cost basis information for sale transactions of shares purchased on or after January 1, 2012. Shareholders may elect to have one of several cost basis methods applied to their account when calculating the cost basis of shares sold, including average cost, FIFO ("first-in, first-out") or some other specific identification method. Unless you instruct otherwise, the Fund will use average cost as its default cost basis method, and will treat sales as first coming from shares purchased prior to January 1, 2012. If average cost is used for the first sale of Fund shares covered by these rules, the shareholder may only use an alternative cost basis method for shares purchased prospectively. Fund shareholders should consult with their tax advisors to determine the best cost basis method for their tax situation.

When you open your Fund account, you should provide your social security or tax identification number on your investment application. By providing this information, you will avoid being subject to federal backup withholding tax on taxable distributions and redemption proceeds at a rate of 24%. Any withheld amount would be sent to the IRS as an advance payment of your taxes due on your income.

**Share Class Arrangements**

The Fund offers several classes of shares having different distribution arrangements designed to provide you with different purchase options according to your investment needs. Your Financial Intermediary can help you decide which class may be appropriate for you.

This Prospectus offers Class IR shares of the Fund. The Fund also offers Class A, Class L, Class I, Class C and Class R6 shares through a separate prospectus. The Class L shares of the Fund are currently closed to all investors except in the limited circumstances set forth in such prospectus.

In addition, the Adviser may in its sole discretion permit a conversion of one share class to another share class of the Fund in certain circumstances, provided that the Fund's eligibility requirements are met, and subject to the shareholder's consent. Such conversions will be on the basis of the relative NAVs and without the imposition of any redemption fee or other charge. A conversion of shares of one class directly for shares of another class of the Fund normally should not be taxable for federal income tax purposes. Please ask your financial advisor if you are eligible for converting a class of shares pursuant to this conversion feature. You should talk to your tax advisor before making a conversion.

**CLASS IR SHARES** Class IR shares are offered at NAV without any sales charge on purchases or sales. In addition, no distribution (12b-1) or shareholder services fees, sub-accounting or other similar fees, or any finder's fee payments are charged or paid on Class IR shares. To purchase Class IR shares, an investor must meet a minimum initial investment of $5 million or be a defined contribution, defined benefit or other employer sponsored employee benefit plan, in each case provided that the plan trades on an omnibus level, whether or not qualified under the Code and in each case subject to the discretion of the Adviser. Omnibus trades of $5 million or more shall be accepted from certain platforms, including; (i) banks and trust companies; (ii) insurance companies; and (iii) registered investment advisory firms. The $5 million minimum initial investment amount may be waived for Fund shares purchased by or

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

through: (1) certain registered open-end investment companies whose shares are distributed by the Distributor; or (2) investments made in connection with certain mergers and/or reorganizations as approved by the Adviser.

**Potential Conflicts of Interest**

As a diversified global financial services firm, Morgan Stanley, the parent company of the Adviser, engages in a broad spectrum of activities, including financial advisory services, investment management activities, lending, commercial banking, sponsoring and managing private investment funds, engaging in broker-dealer transactions and principal securities, commodities and foreign exchange transactions, research publication and other activities. In the ordinary course of its business, Morgan Stanley is a full-service investment banking and financial services firm and therefore engages in activities where Morgan Stanley's interests or the interests of its clients may conflict with the interests of the Fund. These activities could cause Morgan Stanley to have an interest that is different from, and potentially adverse to, that of the Fund, which may impede the Fund from participating in certain opportunities. Morgan Stanley advises clients and sponsors, manages or advises other investment funds and investment programs, accounts and businesses (collectively, together with any new or successor funds, programs, accounts or businesses sponsored, managed, or advised by the Adviser or one of its investment adviser affiliates, the "Affiliated Investment Accounts") with a wide variety of investment objectives that in some instances may overlap or conflict with the Fund's investment objectives and present conflicts of interest. In addition, Morgan Stanley, the Adviser and/or the Adviser's investment adviser affiliates may also from time to time create new or successor Affiliated Investment Accounts that may compete with the Fund and present similar conflicts of interest. The discussion below enumerates certain actual, apparent and potential conflicts of interest. There is no assurance that conflicts of interest will be resolved in favor of Fund shareholders and, in fact, they may not be.

The conflicts summarized herein do not purport to be a complete list or explanation of the conflicts associated with the financial or other interests the Adviser or its affiliates may have now or in the future. For more information about conflicts of interest, see the section entitled "Potential Conflicts of Interest" in the SAI. Conflicts of interest not described below or in the SAI may also exist. References to the Adviser in this section include the Fund's affiliated sub-adviser (if any) unless otherwise noted.

*Material Nonpublic and Other Information.* It is expected that confidential or material nonpublic information regarding an investment or potential investment opportunity may become available to the Adviser. If such information becomes available, the Adviser may be precluded (including by applicable law or internal policies or procedures) from pursuing an investment or disposition opportunity with respect to such investment or disposition opportunity, including for an extended period of time. This inability to buy or sell an investment could have an adverse effect on the Fund's portfolio due to, among other things, changes in an investment's value during the period its trading is restricted. Morgan Stanley has established certain information barriers and other policies designed to address the sharing of information between different businesses within Morgan Stanley. As a result of information barriers, the Adviser, in certain instances, will not have access, or will have limited access, to certain information and personnel in other areas of Morgan Stanley and, in such instances, will not manage the Fund with the benefit of the information held by such other areas. In other instances, Morgan Stanley personnel, including personnel of the Adviser, will have access to information and personnel of its affiliates. In managing conflicts of interest that arise because of the foregoing, the Adviser generally will be subject to fiduciary requirements. The Adviser also may implement internal information barriers or ethical walls or other internal information sharing protocols, and the conflicts described herein with respect to information barriers and otherwise with respect to Morgan Stanley and the Adviser will also apply internally within the Adviser. Information sharing may limit or restrict the ability of the Adviser to engage in or otherwise effect transactions on behalf of the Fund (including purchasing or selling securities that the Adviser may otherwise have purchased or sold for the Fund in the absence of the sharing of information). The Adviser may face conflicts of interest in determining whether to engage in the sharing of information with its affiliates.

*Investments by Morgan Stanley and its Affiliated Investment Accounts.* In serving in multiple capacities to Affiliated Investment Accounts, Morgan Stanley, including the Adviser and its investment teams, may have obligations to other clients or investors in Affiliated Investment Accounts, the fulfillment of which may not be in the best interests of the Fund or its shareholders. An investment team may have obligations to Affiliated Investment Accounts managed by both the Adviser and one or more of the Adviser's investment adviser affiliates. The Fund's investment objectives may overlap with the investment objectives of certain Affiliated Investment Accounts. As a result, the members of an investment team may face conflicts in the allocation of investment opportunities among the Fund and other investment funds, programs, accounts and businesses advised by or affiliated with the Adviser or its investment adviser affiliates. Certain Affiliated Investment Accounts may provide for higher management or incentive fees or greater expense reimbursements or overhead allocations, all of which may contribute to this conflict of interest and create an incentive for the Adviser to favor such other accounts. To seek to reduce potential conflicts of interest and to attempt to allocate such investment opportunities in a fair and equitable manner, the Adviser has implemented allocation policies and procedures. These policies and procedures are intended to give all clients of the Adviser, including the Fund, fair access to investment opportunities consistent with the requirements of organizational documents, investment strategies, applicable laws and regulations, and the fiduciary duties of the Adviser.

*Payments to Broker-Dealers and Other Financial Intermediaries.* The Adviser, Distributor and/or their affiliates may pay compensation, out of their own funds and not as an expense of the Fund, to certain Financial Intermediaries (which may include affiliates of the

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Morgan Stanley Prospectus \| **Shareholder Information**

Shareholder Information (Con't)

Adviser and the Distributor), including recordkeepers and administrators of various deferred compensation plans, in connection with the sale, distribution, marketing and retention of shares of the Fund and/or shareholder servicing. The prospect of receiving, or the receipt of, additional compensation, as described above, by Financial Intermediaries may provide such Financial Intermediaries and their financial advisors and other salespersons with an incentive to favor sales of shares of the Fund over other investment options with respect to which these Financial Intermediaries do not receive additional compensation (or receives lower levels of additional compensation). These payment arrangements, however, will not change the price that an investor pays for shares of the Fund or the amount that the Fund receives to invest on behalf of an investor. Investors may wish to take such payment arrangements into account when considering and evaluating any recommendations relating to Fund shares and should review carefully any disclosures provided by Financial Intermediaries as to their compensation. In addition, in certain circumstances, the Adviser restricts, limits or reduces the amount of the Fund's investment, or restricts the type of governance or voting rights it acquires or exercises, where the Fund (potentially together with Morgan Stanley) exceeds a certain ownership interest, or possesses certain degrees of voting or control or has other interests.

*Morgan Stanley Trading and Principal Investing Activities.* Notwithstanding anything to the contrary herein, Morgan Stanley will generally conduct its sales and trading businesses, publish research and analysis, and render investment advice without regard for the Fund's holdings, although these activities could have an adverse impact on the value of one or more of the Fund's investments, or could cause Morgan Stanley to have an interest in one or more portfolio investments that is different from, and potentially adverse to, that of the Fund.

*Morgan Stanley's Investment Banking and Other Commercial Activities.* Morgan Stanley advises clients on a variety of mergers, acquisitions, restructuring, bankruptcy and financing transactions. Morgan Stanley may act as an advisor to clients, including other investment funds that may compete with the Fund and with respect to investments that the Fund may hold. Morgan Stanley may give advice and take action with respect to any of its clients or proprietary accounts that may differ from the advice given, or may involve an action of a different timing or nature than the action taken, by the Fund. Morgan Stanley may give advice and provide recommendations to persons competing with the Fund and/or any of the Fund's investments that are contrary to the Fund's best interests and/or the best interests of any of its investments. Morgan Stanley's activities on behalf of its clients (such as engagements as an underwriter or placement agent) may restrict or otherwise limit investment opportunities that may otherwise be available to the Fund.

Morgan Stanley may be engaged to act as a financial advisor to a company in connection with the sale of such company, or subsidiaries or divisions thereof, may represent potential buyers of businesses through its mergers and acquisition activities and may provide lending and other related financing services in connection with such transactions. Morgan Stanley's compensation for such activities is usually based upon realized consideration and is usually contingent, in substantial part, upon the closing of the transaction. Under these circumstances, the Fund may be precluded from participating in a transaction with or relating to the company being sold or participating in any financing activity related to a merger or an acquisition.

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Morgan Stanley Prospectus \| **Financial Highlights**

Financial Highlights

The financial highlights table is intended to help you understand the financial performance of the Class IR shares of the Fund for the past five years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming reinvestment of all dividends and distributions).

The ratio of expenses to average net assets listed in the table below for Class IR shares of the Fund are based on the average net assets of the Fund for each of the periods listed in the table. To the extent that the Fund's average net assets decrease over the Fund's next fiscal year, such expense ratios can be expected to increase, potentially significantly, because certain fixed costs will be spread over a smaller amount of assets.

The information below has been derived from the financial statements audited by Ernst & Young LLP, the Fund's independent registered public accounting firm. Ernst & Young LLP's report, along with the Fund's financial statements, are incorporated by reference into the Fund's SAI. The Fund's financial statements and additional information included in the Fund's report filed on Form N-CSR and SAI are available at no cost from the Fund at the toll-free number noted on the back cover to this Prospectus.

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Morgan Stanley Prospectus \| **Financial Highlights**

**Income Opportunities Fund**

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Class IR** | **Class IR** | **Class IR** | **Class IR** | **Class IR** |
| | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** | **Year Ended October 31,** |
| <br>**Selected Per Share Data:** | **2024** | **2023** | **2022** | **2021** | **2020** |
| **Net asset value, beginning of period** | $4.93 | $5.03 | $5.75 | $5.77 | $5.81 |
| **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** | **Income (loss) from investment operations:** |
| &nbsp;&nbsp;&nbsp; Net investment income<sup>(1)</sup>  | 0.27 | 0.25 | 0.18 | 0.16 | 0.17 |
| &nbsp;&nbsp;&nbsp; Net realized and unrealized gain (loss)  | 0.30 | &nbsp;&nbsp;&nbsp; (0.01)<br>| &nbsp;&nbsp;&nbsp; (0.67)<br>| &nbsp;&nbsp;&nbsp; (0.01)<br>| &nbsp;&nbsp;&nbsp; (0.01)<br>|
| &nbsp;&nbsp;&nbsp;&nbsp; Total income (loss) from investment operations  | 0.57 | 0.24 | &nbsp;&nbsp;&nbsp; (0.49)<br>| 0.15 | 0.16 |
| **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** | **Less distributions from:** |
| &nbsp;&nbsp;&nbsp; Net investment income  | &nbsp;&nbsp;&nbsp; (0.24)<br>| &nbsp;&nbsp;&nbsp; (0.29)<br>| &nbsp;&nbsp;&nbsp; (0.23)<br>| &nbsp;&nbsp;&nbsp; (0.16)<br>| &nbsp;&nbsp;&nbsp; (0.20)<br>|
| &nbsp;&nbsp;&nbsp; Net realized gain  |  |  |  | &nbsp;&nbsp;&nbsp; (0.01)<br>|  |
| &nbsp;&nbsp;&nbsp; Paid-in-capital  | &nbsp;&nbsp;&nbsp; (0.04)<br>| &nbsp;&nbsp;&nbsp; (0.05)<br>|  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total distributions  | &nbsp;&nbsp;&nbsp; (0.28)<br>| &nbsp;&nbsp;&nbsp; (0.34)<br>| &nbsp;&nbsp;&nbsp; (0.23)<br>| &nbsp;&nbsp;&nbsp; (0.17)<br>| &nbsp;&nbsp;&nbsp; (0.20)<br>|
| **Net asset value, end of period** | $5.22 | $4.93 | $5.03 | $5.75 | $5.77 |
| **Total Return** | 11.74<br> %<br> <sup>(2)(3)</sup> <br>| 4.78<br> %<br> <sup>(2)</sup> <br>| (8.66)%<br> <sup>(2)</sup> <br>| 2.59<br> %<br> <sup>(4)</sup> <br>| 2.93<br> %<br> <sup>(4)</sup> <br>|
| **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** | **Ratios to Average Net Assets:** |
| Net expenses | 0.46<br> %<br> <sup>(5)(6)(7)</sup> <br>| 0.49<br> %<br> <sup>(5)(6)</sup> <br>| 0.48<br> %<br> <sup>(5)(6)</sup> <br>| 0.47<br> %<br> <sup>(5)(6)</sup> <br>| 0.47<br> %<br> <sup>(5)(6)</sup> <br>|
| Net expenses excluding interest expenses | N/A | N/A | 0.48<br> %<br> <sup>(5)(6)</sup> <br>| N/A | 0.47<br> %<br> <sup>(5)(6)</sup> <br>|
| Net investment income | 5.27<br> %<br> <sup>(5)(6)(7)</sup> <br>| 4.92<br> %<br> <sup>(5)(6)</sup> <br>| 3.32<br> %<br> <sup>(5)(6)</sup> <br>| 2.74<br> %<br> <sup>(5)(6)</sup> <br>| 2.97<br> %<br> <sup>(5)(6)</sup> <br>|
| Rebate from Morgan Stanley affiliate | 0.01<br> %<br>| 0.01<br> %<br>| 0.00<br> %<br> <sup>(8)</sup> <br>| 0.00<br> %<br> <sup>(8)</sup> <br>| 0.01<br> %<br>|
| **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** | **Supplemental Data:** |
| Net assets, end of period, in thousands | $12 | $11 | $10 | $11 | $11 |
| Portfolio turnover rate | 155<br> %<br>| 118<br> %<br>| 62<br> %<br>| 115<br> %<br>| 106<br> %<br>|

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| | | | |
|:---|:---|:---|:---|
| (1) | The per share amounts were computed using an average number of shares outstanding during the period. | The per share amounts were computed using an average number of shares outstanding during the period. | The per share amounts were computed using an average number of shares outstanding during the period. |
| (2) | Calculated based on the net asset value as of the last business day of the period. | Calculated based on the net asset value as of the last business day of the period. | Calculated based on the net asset value as of the last business day of the period. |
| (3) | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class IR shares. | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class IR shares. | Refer to Note 4 in the Notes to Financial Statements for discussion of prior period transfer agency and sub transfer agency fees that were reimbursed in the current period. The amount of the reimbursement was immaterial to the total return of Class IR shares. |
| (4) | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. | Calculated using the NAV for US GAAP financial reporting purposes and as such differs from the total return presented in the Fund Report and Performance Summary. |
| (5) | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." | The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate." |
| (6) | If the Fund had borne all of its expenses that were waived by the Adviser/Administrator, the annualized expense and net investment loss ratios would have been as follows: | If the Fund had borne all of its expenses that were waived by the Adviser/Administrator, the annualized expense and net investment loss ratios would have been as follows: | If the Fund had borne all of its expenses that were waived by the Adviser/Administrator, the annualized expense and net investment loss ratios would have been as follows: |
|  | PERIOD ENDED | EXPENSE<br>RATIO | NET INVESTMENT<br>LOSS RATIO |
|  | October 31, 2024 | 19.12% | (13.39)% |
|  | October 31, 2023 | 20.67 | (15.26) |
|  | October 31, 2022 | 18.79 | (14.99) |
|  | October 31, 2021 | 19.14 | (15.93) |
|  | October 31, 2020 | 19.09 | (15.65) |
| (7) | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class IR shares: | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class IR shares: | If the Fund had not received the reimbursement of transfer agency and sub transfer agency fees from the Adviser, the net expenses and net investment income ratios, would have been as follows for Class IR shares: |
|  | PERIOD ENDED | EXPENSE<br>RATIO | NET INVESTMENT<br>INCOME RATIO |
|  | October 31, 2024 | 0.48% | 5.25% |
| (8) | Amount is less than 0.005%. | Amount is less than 0.005%. | Amount is less than 0.005%. |

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Where to Find Additional Information

Additional information about the Fund's investments is available in the Fund's Shareholder Reports and Fund's financial statements and additional information. In the Fund's Annual Report, among other things, you will find a brief summary of the key factors that materially affected the Fund's performance during the reporting period. In the Fund's Form N-CSR, you will find the Fund's financial statements and additional information.

The Fund's SAI, dated February 28, 2025 (as may be supplemented from time to time) also provides additional information about the Fund. The SAI is incorporated herein by reference (legally is part of this Prospectus). For a free copy of the Fund's Shareholder Reports, SAI or financial statements and additional information included in the Fund's report filed on Form N-CSR, to request other information about the Fund or to make shareholder inquiries, please call toll-free **1-800-869-6397**. Free copies of these documents are also available from our Internet site at: **www.morganstanley.com/im/shareholderreports.**

You also may obtain information about the Fund by calling your Financial Intermediary or by visiting our Internet site.

Shareholder Reports and other information about the Fund, such as Fund financial statements, are available on the EDGAR Database on the SEC's Internet site at: http://www.sec.gov, and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov.

Morgan Stanley Distribution, Inc., member FINRA.

(THE FUND'S 1940 ACT FILE NO. IS 811-6515)© 2025 Morgan Stanley

MSIOIRPRO 6/25

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