N-CSR 1 file001.htm N-CSR



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM N-CSR

                   CERTIFIED SHAREHOLDER REPORT OF REGISTERED
                         MANAGEMENT INVESTMENT COMPANIES


Investment Company Act file number: 811-10273

Morgan Stanley International Value Equity Fund
      (Exact name of registrant as specified in charter)

1221 Avenue of the Americas, New York, New York 10020
         (Address of principal executive offices)                (Zip code)

Ronald E. Robison
1221 Avenue of the Americas, New York, New York 10020
            (Name and address of agent for service)

Registrant's telephone number, including area code: 212-762-4000

Date of fiscal year end: August 31, 2003

Date of reporting period: August 31, 2003

Item 1 - Report to Shareholders

Welcome, Shareholder:

In this report, you'll learn about how your investment in Morgan Stanley International Value Equity Fund performed during the annual period. We will provide an overview of the market conditions, and discuss some of the factors that affected performance during the reporting period. In addition, this report includes the Fund's financial statements and a list of Fund investments.

This material must be preceded or accompanied by a prospectus for the fund being offered. Market forecasts provided in this report may not necessarily come to pass. There is no assurance that the Fund will achieve its investment objective. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and, therefore, the value of the Fund shares may be less than what you paid for them. Accordingly you can lose money investing in this Fund.



	Fund Report
	For the year ended August 31, 2003

Total Return for the 12-month period ended August 31, 2003


Class A	Class B			Class C			Class D			MSCI EAFE Index¹			Lipper International Funds Index²
7.12%		6.32	%		6.24	%		7.39	%		9.11	%		9.89	%

The performance of the Fund's four share classes varies because each has different expenses. The Fund's total return figures assume the reinvestment of all distributions but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. Past performance is no guarantee of future results. See Performance Summary for standardized performance information.

Market Conditions

The global equity markets experienced a proverbial roller-coaster ride during the 12-month period ended August 31, 2003. Stocks entered the period buffeted by weakening corporate results as global economies languished with little sign of a near-term recovery. A brief fourth-quarter rally 2002 fizzled out as investors took a sober view of the geopolitical and economic situation, making 2002 the third successive year of negative returns in the global markets. In the months that followed, uncertainty over the prospect of war in Iraq kept investors out of equities as most major markets tested their lows during the first quarter of 2003.

In March, signs of economic improvement and expectations of a quick U.S. victory in Iraq led to improved investor sentiment. These factors triggered a powerful surge in the global equity markets that propelled the MSCI EAFE Index to one of its strongest quarters ever, with a total return of 19.3 percent in U.S. dollar terms for the second quarter of 2003. This equity rally continued unabated through August as investors' confidence in economic recovery grew more resolute.

Performance Analysis

Throughout the 12-month period, the Fund maintained a defensive posture, focusing on such sectors as consumer staples and health care. These areas performed well early in this time frame as investors focused on fundamentals, sound business models and cash-flow generation. The recent momentum-driven rally reversed these forces, however, favoring more-speculative and cyclical stocks. Consequently, the Fund's underperformance relative to the MSCI EAFE Index can be explained primarily by its overweightings in consumer staples and pharmaceuticals during the market's resurgence. An underweighting in banks also detracted from overall performance. Stock selection, especially in telecommunications services and insurance, contributed positively.

Our sector allocations remained relatively stable during the period. From a regional standpoint, we took profits in Europe and the United Kingdom and added to positions in Japan. The net result of these moves was a second-quarter increase in the portfolio's Japanese weighting from just over 20 percent to 26 percent.


TOP 10 HOLDINGS
Nestlé S.A.	3.0	%
GlaxoSmithKline PLC	2.9
Royal Dutch Petroleum Co.	2.8
BP PLC	2.8
Aventis S.A.	2.7
Unilever NV	2.7
Total S.A.	2.5
Millea Holdings, Inc.	2.2
Novartis AG	2.1
Reed Elsevier PLC	2.1


LARGEST COUNTRIES
United Kingdom	26.4	%
Japan	25.9
Switzerland	10.2
France	8.2
Netherlands	8.2

Subject to change daily. All percentages are as a percentage of net assets. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.

Investment Strategy


	1.	The Fund's Investment Manager utilizes a bottom-up investment process that seeks to identify undervalued equity securities of companies located outside the United States. The investment team emphasizes in-depth, fundamental research. This team focuses mostly on stock selection, analyzing companies of any asset size, located in developed or emerging market countries.


	2.	The Fund's London-based portfolio managers work with global industry teams in London and product specialists in New York to


	•	Identify and monitor industry trends


	•	Select and maintain valuation models


	•	Analyze and monitor external research

Annual Householding Notice

To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling (800) 350-6414, 8:00 a.m. to 8:00 p.m. ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.

Proxy Voting Policies and Procedures

A description of the Fund's policies and procedures with respect to the voting of proxies relating to the Fund's portfolio securities is available without charge, upon request, by calling (800) 869-NEWS (6397). This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov.



	Performance Summary

Performance of a $10,000 Investment

Past performance is not predictive of future returns. Investment return and principal value will fluctuate. When you sell fund shares, they may be worth less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance for Class A, Class B, Class C, and Class D shares will vary due to differences in sales charges and expenses.

Average Annual Total Returns — Period Ended August 31, 2003

Class A Shares*
(since 04/26/01)

Class B Shares**
(since 04/26/01)

Class C Shares^†
(since 04/26/01)

Class D Shares^††
(since 04/26/01)

Symbol

IVQAX

IVQBX

IVQCX

IVQDX

1 Year

7.12%

^³

6.32%

^³

6.24%

^³

7.39%

^³

1.50

^⁴

1.32

^⁴

5.24

^⁴

Since Inception

(0.12)

^³

(0.88)

^³

(0.91)

^³

0.08

^³

(2.39)

^⁴

(2.15)

^⁴

(0.91)

^⁴

Notes on Performance

(1)

The Morgan Stanley Capital International (MSCI) EAFE Index measures the performance for a diverse range of global stock markets within Europe, Australia, and the Far East. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends. "Net dividends" reflects a reduction in dividends after taking into account withholding of taxes by certain foreign countries represented in the Index. Indexes are unmanaged and their returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

(2)

The Lipper International Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper International Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index.

(3)

Figure shown assumes reinvestment of all distributions and does not reflect the deduction of any sales charges.

(4)

Figure shown assumes reinvestment of all distributions and the deduction of the maximum applicable sales charge. See the Fund's current prospectus for complete details on fees and sales charges.

The maximum front-end sales charge for Class A is 5.25%.

The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The CDSC declines to 0% after six years.

†

The maximum contingent deferred sales charge for Class C is 1% for shares redeemed within one year of purchase.

††

Class D has no sales charge.

‡

Closing value assuming a complete redemption on August 31, 2003.

Morgan Stanley International Value Equity Fund

Portfolio of Investments August 31, 2003


NUMBER OF SHARES			VALUE
		Common Stocks (95.0%)
		Australia (2.2%)
		Aluminum
	93,161	Alumina Ltd.	$	304,531
		Life/Health Insurance
	374,264	Amp Ltd.		1,615,881
		Major Telecommunications
	1,884,133	Telstra Corp., Ltd.		6,122,388
		Other Metals/Minerals
	418,971	WMC Resources Ltd.*		1,106,496
		Total Australia		9,149,296
		Belgium (0.4%)
		Financial Conglomerates
	97,066	Fortis		1,633,228
		Denmark (0.5%)
		Food: Specialty/Candy
	50,839	Danisco AS		1,939,330
		Finland (1.0%)
		Telecommunication Equipment
	261,850	Nokia Oyj		4,290,841
		France (8.2%)
		Food: Major Diversified
	37,472	Groupe Danone		5,140,322
		Integrated Oil
	66,139	Total S.A.		10,147,873
		Major Banks
	67,582	BNP Paribas S.A.		3,368,344
	31,718	Societe Generale (A Shares)		2,104,087
				5,472,431
		Major Telecommunications
	77,801	France Telecom S.A.*		1,931,144
		Pharmaceuticals: Major
	232,013	Aventis S.A.		11,273,231
		Total France		33,965,001
		Germany (2.9%)
		Electric Utilities
	80,627	E.ON AG		4,170,829
		Major Telecommunications
	160,778	Deutsche Telekom AG (Registered Shares)*	$	2,295,572
		Motor Vehicles
	77,058	Volkswagen AG		3,779,701
		Multi-Line Insurance
	16,981	Muenchener Rueckver AG (Registered Shares)		1,738,202
		Total Germany		11,984,304
		Hong Kong (0.3%)
		Real Estate Development
	833,466	Hong Kong Land Holdings Ltd.		1,116,844
		Italy (3.8%)
		Integrated Oil
	483,043	ENI SpA		7,300,040
		Major Banks
	536,647	UniCredito Italiano SpA		2,493,159
		Major Telecommunications
	3,636,744	Telecom Italia SpA*		5,743,713
		Total Italy		15,536,912
		Japan (25.9%)
		Advertising/Marketing Services
	19,000	Asatsu – DK Inc.		443,902
		Broadcasting
	533	Fuji Television Network, Inc.		2,531,579
		Chemicals: Major Diversified
	241,000	Asahi Kasei Corp.		911,613
		Commercial Printing/Forms
	340,000	Dai Nippon Printing Co., Ltd.		4,326,744
	294,000	Toppan Printing Co., Ltd.		2,375,148
				6,701,892
		Computer Processing Hardware
	1,545,513	Fujitsu Ltd. *		7,380,370
		Containers/Packaging
	104,000	Toyo Seikan Kaisha, Ltd.		1,140,128

See Notes to Financial Statements

Morgan Stanley International Value Equity Fund

Portfolio of Investments August 31, 2003 continued


NUMBER OF SHARES			VALUE
		Electric Utilities
	43,300	Tokyo Electric Power Co., Inc.	$	841,172
		Electrical Products
	695,000	Sumitomo Electric Industries, Ltd.		6,054,857
		Electronic Equipment/Instruments
	117,000	Canon, Inc.		5,617,202
	336,000	Matsushita Electric Industrial Co., Ltd.		4,278,716
				9,895,918
		Electronics/Appliances
	285,000	Fuji Photo Film Co., Ltd.		8,536,585
	94,000	Sharp Corp.		1,407,788
				9,944,373
		Food Retail
	71,100	Lawson, Inc.		2,068,806
		Gas Distributors
	921,000	Tokyo Gas Co., Ltd.		2,798,074
		Home Building
	539,000	Sekisui House, Ltd.		4,728,070
		Investment Banks/Brokers
	598,000	Daiwa Securities Group Inc.		3,853,607
		Major Telecommunications
	1,613	Nippon Telegraph & Telephone Corp.		7,095,267
		Motor Vehicles
	103,400	Toyota Motor Corp.		2,849,362
		Pharmaceuticals: Major
	267,500	Sankyo Co., Ltd.		3,296,534
		Pharmaceuticals: Other
	50,000	Shionogi & Co., Ltd.		734,275
	189,500	Yamanouchi Pharmaceutical Co., Ltd.		4,962,516
				5,696,791
		Property – Casualty Insurers
	862	Millea Holdings, Inc.	$	8,926,145
	408,000	Mitsui Sumitomo Insurance Co., Ltd.		2,433,684
				11,359,829
		Railroads
	535	Central Japan Railway Co.		3,768,122
		Real Estate Development
	700,000	Mitsubishi Estate Co., Ltd.		6,266,153
		Semiconductors
	38,700	Rohm Co., Ltd.		5,047,394
		Tobacco
	379	Japan Tobacco, Inc.		2,212,050
		Total Japan		106,885,863
		Netherlands (8.2%)
		Beverages: Alcoholic
	19,872	Heineken NV		759,743
		Financial Conglomerates
	196,987	ING Groep NV (Share Certificates)		3,842,391
		Food: Major Diversified
	197,430	Unilever NV (Share Certificates)		10,993,655
		Food: Specialty/Candy
	80,638	CSM NV (Share Certificates)		1,625,162
		Industrial Specialties
	97,206	Akzo Nobel NV		3,187,894
		Integrated Oil
	258,766	Royal Dutch Petroleum Co.		11,552,840
		Major Telecommunications
	272,434	Koninklijke (Royal) KPN NV*		1,888,042
		Total Netherlands		33,849,727
		New Zealand (0.5%)
		Major Telecommunications
	644,862	Telecom Corporation of New Zealand Ltd.		1,881,962

See Notes to Financial Statements

Morgan Stanley International Value Equity Fund

Portfolio of Investments August 31, 2003 continued


NUMBER OF SHARES			VALUE
		Portugal (0.2%)
		Electric Utilities
	357,000	Electricidade de Portugal, S.A.	$	776,344
		South Korea (1.9%)
		Semiconductors
	42,322	Samsung Electronics Co., Ltd. (GDR) – 144A**		7,850,731
		Spain (1.1%)
		Major Telecommunications
	379,752	Telefonica S.A. *		4,471,115
		Sweden (1.0%)
		Major Banks
	74,944	ForeningsSparbanken AB		982,634
		Regional Banks
	603,997	Nordea AB		3,073,721
		Total Sweden		4,056,355
		Switzerland (10.2%)
		Building Products
	5,409	Schindler Holding AG*		1,100,568
		Chemicals: Agricultural
	78,439	Syngenta AG		4,311,989
		Chemicals: Specialty
	27,526	Ciba Specialty Chemicals AG (Registered Shares)*		1,893,432
		Construction Materials
	74,304	Holcim Ltd. (Registered Shares)		2,944,151
		Financial Conglomerates
	82,374	UBS AG (Registered Shares)		4,443,032
		Food: Major Diversified
	57,196	Nestle S.A. (Registered Shares)		12,454,330
		Major Banks
	76,390	Credit Suisse Group		2,385,994
		Pharmaceuticals: Major
	239,031	Novartis AG (Registered Shares)	$	8,788,532
	49,592	Roche Holding AG		3,797,203
				12,585,735
		Total Switzerland		42,119,231
		Taiwan (0.3%)
		Major Telecommunications
	73,599	Chunghwa Telecom Co. , Ltd. (ADR)		1,039,218
		United Kingdom (26.4%)
		Advertising/Marketing Services
	111,826	WPP Group PLC		1,015,688
		Aerospace & Defense
	779,901	Rolls-Royce Group PLC		2,085,776
		Beverages: Alcoholic
	779,204	Allied Domecq PLC		4,668,086
		Broadcasting
	1,015,819	Granada PLC		1,640,433
		Catalog/Specialty Distribution
	265,107	GUS PLC		2,856,904
		Chemicals: Specialty
	276,344	BOC Group PLC		3,759,506
		Construction Materials
	111,209	RMC Group PLC		972,852
		Electric Utilities
	106,972	International Power PLC*		252,802
	466,592	National Grid Transco PLC		2,846,736
				3,099,538
		Food: Specialty/Candy
	1,387,727	Cadbury Schweppes PLC		8,351,910
		Household/Personal Care
	115,361	Reckitt Benckiser PLC		2,162,840
		Integrated Oil
	1,684,828	BP PLC		11,387,576

See Notes to Financial Statements

Morgan Stanley International Value Equity Fund

Portfolio of Investments August 31, 2003 continued


NUMBER OF SHARES			VALUE
		Life/Health Insurance
	365,698	Prudential PLC	$	2,514,926
		Major Banks
	915,831	Barclays PLC		6,637,302
		Miscellaneous Commercial Services
	1,845,859	Hays PLC		3,344,373
	1,615,457	Rentokil Initial PLC		5,344,820
				8,689,193
		Other Metals/Minerals
	561,846	BHP Billiton PLC		3,677,958
		Other Transportation
	116,810	BAA PLC		839,196
		Pharmaceuticals: Major
	626,227	GlaxoSmithKline PLC		11,908,511
		Publishing: Books/Magazines
	1,136,986	Reed Elsevier PLC		8,687,909
		Pulp & Paper
	273,304	Bunzl PLC		1,980,716
		Tobacco
	722,704	British American Tobacco PLC		7,275,783
	314,818	Imperial Tobacco Group PLC		4,900,438
				12,176,221
		Wholesale Distributors
	305,327	Wolseley PLC		3,487,560
		Wireless Telecommunications
	3,601,897	Vodafone Group PLC		6,568,568
		Total United Kingdom		109,169,169
		Total Common Stocks (Cost $367,444,858)		391,715,471


PRINCIPAL AMOUNT IN THOUSANDS			VALUE
		Short-Term Investment (5.9%) Repurchase Agreement
$	24,216	Joint repurchase agreement account 1.05% due 09/02/03 (dated 08/29/03; proceeds $24,218,825 (a) (Cost $24,216,000)	$	24,216,000


Total Investments (Cost $391,660,858) (b) (c)	100.9	%		415,931,471
Liabilities in Excess of Other Assets	(0.9	)		(3,591,991	)
Net Assets	100.0	%	$	412,339,480

ADR

American Depository Receipt.

GDR

Global Depository Receipt.

Non-income producing security.

Resale is restricted to qualified institutional investors.

(a)

Collateralized by federal agency and U.S. Treasury obligations.

(b)

Securities have been designated as collateral in an amount equal to $28,278,116 in connection with open forward foreign currency contracts.

(c)

The aggregate cost for federal income tax purposes is $395,781,683. The aggregate gross unrealized appreciation is $30,825,866 and the aggregate gross unrealized depreciation is $10,676,078, resulting in net unrealized appreciation of $20,149,788.

Forward Foreign Currency Contracts Open at August 31, 2003:


CONTRACTS TO DELIVER		IN EXCHANGE FOR		DELIVERY DATE		UNREALIZED APPRECIATION (DEPRECIATION)
EUR	77,536	$	83,909		09/02/03	$	(1,248	)
$	57,109	EUR	52,350		09/02/03		387
JPY	26,899,075	$	230,656		09/02/03		454
JPY	3,857,694	$	33,079		09/02/03		65
JPY	3,450,000,000	EUR	25,804,811		11/14/03		(1,320,966	)
Net unrealized depreciation						$	(1,321,308	)

Currency Abbreviations:


EUR	Euro.


JPY	Japanese Yen.

See Notes to Financial Statements

Morgan Stanley International Value Equity Fund

Summary of Investments August 31, 2003


INDUSTRY	VALUE		PERCENT OF NET ASSETS
Advertising/Marketing Services	$	1,459,591		0.4	%
Aerospace & Defense		2,085,776		0.5
Aluminum		304,531		0.1
Beverages: Alcoholic		5,427,828		1.3
Broadcasting		4,172,012		1.0
Building Products		1,100,568		0.3
Catalog/Specialty Distribution		2,856,904		0.7
Chemicals: Agricultural		4,311,989		1.0
Chemicals: Major Diversified		911,613		0.2
Chemicals: Specialty		5,652,938		1.4
Commercial Printing/Forms		6,701,891		1.6
Computer Processing Hardware		7,380,370		1.8
Construction Materials		3,917,003		0.9
Containers/Packaging		1,140,128		0.3
Electric Utilities		8,887,883		2.2
Electrical Products		6,054,857		1.5
Electronic Equipment/Instruments		9,895,918		2.4
Electronics/Appliances		9,944,373		2.4
Financial Conglomerates		9,918,651		2.4
Food Retail		2,068,806		0.5
Food: Major Diversified		28,588,306		6.9
Food: Specialty/Candy		11,916,402		2.9
Gas Distributors		2,798,074		0.7
Home Building		4,728,070		1.1
Household/Personal Care		2,162,840		0.5
Industrial Specialties		3,187,894		0.8
Integrated Oil		40,388,328		9.8
Investment Banks/Brokers		3,853,607		0.9
Life/Health Insurance		4,130,808		1.0
Major Banks		17,971,522		4.3
Major Telecommunications		32,468,421		7.9
Miscellaneous Commercial Services		8,689,194		2.1
Motor Vehicles		6,629,063		1.6
Multi-Line Insurance		1,738,202		0.4
Other Metals/Minerals		4,784,453		1.2
Other Transportation	$	839,196		0.2	%
Pharmaceuticals: Major		39,064,011		9.5
Pharmaceuticals: Other		5,696,791		1.4
Property – Casualty Insurers		11,359,829		2.8
Publishing: Books/Magazines		8,687,909		2.1
Pulp & Paper		1,980,716		0.5
Railroads		3,768,122		0.9
Real Estate Development		7,382,998		1.8
Regional Banks		3,073,721		0.7
Repurchase Agreement		24,216,000		5.9
Semiconductors		12,898,125		3.1
Telecommunication Equipment		4,290,841		1.0
Tobacco		14,388,271		3.5
Wholesale Distributors		3,487,559		0.9
Wireless Telecommunications		6,568,568		1.6
	$	415,931,471		100.9	%

See Notes to Financial Statements

Morgan Stanley International Value Equity Fund

Financial Statements

Statement of Assets and Liabilities

August 31, 2003


Assets:
Investments in securities, at value (cost $391,660,858)	$	415,931,471
Foreign cash		2,047,737
Receivable for:
Shares of beneficial interest sold		2,440,696
Investments sold		1,186,319
Dividends		873,645
Foreign withholding taxes reclaimed		364,480
Prepaid expenses and other assets		37,095
Total Assets		422,881,443
Liabilities:
Unrealized depreciation on open forward foreign currency contracts		1,321,308
Payable for:
Investments purchased		8,271,254
Investment management fee		338,295
Shares of beneficial interest redeemed		332,631
Distribution fee		149,213
Accrued expenses and other payables		129,262
Total Liabilities		10,541,963
Net Assets	$	412,339,480
Composition of Net Assets:
Paid-in-capital	$	399,412,587
Net unrealized appreciation		22,921,830
Accumulated undistributed net investment income		5,719,749
Accumulated net realized loss		(15,714,686	)
Net Assets	$	412,339,480
Class A Shares:
Net Assets	$	19,826,776
Shares Outstanding (unlimited authorized, $.01 par value)		2,023,260
Net Asset Value Per Share	$	9.80
Maximum Offering Price Per Share, (net asset value plus 5.54% of net asset value)	$	10.34
Class B Shares:
Net Assets	$	145,382,346
Shares Outstanding (unlimited authorized, $.01 par value)		14,979,327
Net Asset Value Per Share	$	9.71
Class C Shares:
Net Assets	$	28,556,158
Shares Outstanding (unlimited authorized, $.01 par value)		2,946,496
Net Asset Value Per Share	$	9.69
Class D Shares:
Net Assets	$	218,574,200
Shares Outstanding (unlimited authorized, $.01 par value)		22,274,998
Net Asset Value Per Share	$	9.81

See Notes to Financial Statements

Morgan Stanley International Value Equity Fund

Financial Statements continued

Statement of Operations

For the year ended August 31, 2003


Net Investment Income:
Income
Dividends (net of $1,024,334 foreign withholding tax)	$	7,738,745
Interest		209,388
Total Income		7,948,133
Expenses
Investment management fee		3,048,182
Distribution fee (Class A shares)		24,178
Distribution fee (Class B shares)		1,332,392
Distribution fee (Class C shares)		236,069
Transfer agent fees and expenses		654,643
Custodian fees		182,923
Registration fees		97,759
Shareholder reports and notices		66,372
Professional fees		62,732
Trustees' fees and expenses		13,415
Other		20,406
Total Expenses		5,739,071
Net Investment Income		2,209,062
Net Realized and Unrealized Gain (Loss):
Net Realized Gain/Loss on:
Investments		(8,504,557	)
Foreign exchange transactions		3,600,920
Net Realized Loss		(4,903,637	)
Net Change in Unrealized Appreciation/Depreciation on:
Investments		34,847,435
Translation of forward foreign currency contracts, other assets and liabilities denominated in foreign currencies		(1,369,595	)
Net Appreciation		33,477,840
Net Gain		28,574,203
Net Increase	$	30,783,265

See Notes to Financial Statements

Morgan Stanley International Value Equity Fund

Financial Statements continued

Statement of Changes in Net Assets


	FOR THE YEAR ENDED AUGUST 31, 2003			FOR THE YEAR ENDED AUGUST 31, 2002
Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss)	$	2,209,062		$	(132,094	)
Net realized loss		(4,903,637	)		(5,127,959	)
Net change in unrealized depreciation		33,477,840			(3,933,219	)
Net Increase (Decrease)		30,783,265			(9,193,272	)
Dividends to Shareholders from Net Investment Income:
Class A shares		(66,893	)		(69,070	)
Class B shares		(102,829	)		(950,061	)
Class C shares		(47,743	)		(134,332	)
Class D shares		(1,176,635	)		(125,815	)
Total Dividends		(1,394,100	)		(1,279,278	)
Net increase from transactions in shares of beneficial interest		130,604,410			111,578,046
Net Increase		159,993,575			101,105,496
Net Assets:
Beginning of period		252,345,905			151,240,409
End of Period (Including accumulated undistributed net investment income of $5,719,749 and $1,303,867, respectively)	$	412,339,480		$	252,345,905

See Notes to Financial Statements

Morgan Stanley International Value Equity Fund

Notes to Financial Statements August 31, 2003

1. Organization and Accounting Policies

Morgan Stanley International Value Equity Fund (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund's investment objective is long-term capital appreciation. The Fund seeks to achieve its objective by investing primarily in common stocks and other securities, including depository receipts and securities convertible into common stock, of companies located outside of the United States. The Fund was organized as a Massachusetts business trust on January 11, 2001 and commenced operations on April 26, 2001.

The Fund offers Class A shares, Class B shares, Class C shares and Class D shares. The four classes are substantially the same except that most Class A shares are subject to a sales charge imposed at the time of purchase and some Class A shares, and most Class B shares and Class C shares are subject to a contingent deferred sales charge imposed on shares redeemed within one year, six years and one year, respectively. Class D shares are not subject to a sales charge. Additionally, Class A shares, Class B shares and Class C shares incur distribution expenses.

The following is a summary of significant accounting policies:

A. Valuation of Investments — (1) an equity portfolio security listed or traded on the New York or American Stock Exchange or other exchange is valued at its latest sale price prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (2) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) all other equity portfolio securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (4) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (5) when market quotations are not readily available or Morgan Stanley Investment Advisors Inc. (the "Investment Manager") determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees; (6) certain portfolio securities may be valued by an outside pricing service approved by the Fund's Trustees; and (7) short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost.

Morgan Stanley International Value Equity Fund

Notes to Financial Statements August 31, 2003 continued

B. Accounting for Investments — Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Dividend income and other distributions are recorded on the ex-dividend date except for certain dividends on foreign securities which are recorded as soon as the Fund is informed after the ex-dividend date. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily.

C. Repurchase Agreements — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated entities managed by the Investment Manager, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements and are collateralized by cash, U.S. Treasury or federal agency obligations. The Fund may also invest directly with institutions in repurchase agreements. The Fund's custodian receives the collateral, which is marked-to-market daily to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest.

D. Multiple Class Allocations — Investment income, expenses (other than distribution fees), and realized and unrealized gains and losses are allocated to each class of shares based upon the relative net asset value on the date such items are recognized. Distribution fees are charged directly to the respective class.

E. Foreign Currency Translation and Forward Foreign Currency Contracts — The books and records of the Fund are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities, other assets and liabilities and forward foreign currency contracts ("forward contracts") are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the exchange rates prevailing on the respective dates of such transactions. The resultant exchange gains and losses are recorded as realized and unrealized gain/loss on foreign exchange transactions. Pursuant to U.S. Federal income tax regulations, certain foreign exchange gains/losses included in realized and unrealized gain/loss are included in or are a reduction of ordinary income for federal income tax purposes. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of the securities. Forward contracts are valued daily at the appropriate exchange rates. The resultant unrealized exchange gains and losses are recorded as unrealized foreign currency gain or loss. The Fund records realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (compensated) by entering into a closing transaction prior to delivery.

F. Federal Income Tax Policy — It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required.

Morgan Stanley International Value Equity Fund

Notes to Financial Statements August 31, 2003 continued

G. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date.

H. Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.

2. Investment Management Agreement

Pursuant to an Investment Management Agreement, the Fund pays the Investment Manager a management fee, accrued daily and payable monthly, by applying the annual rate of 1.0% to the net assets of the Fund determined as of the close of each business day.

Effective August 11, 2003, the Investment Manager entered into a Sub-Advisory Agreement with Morgan Stanley Investment Management Limited, an affiliate of the Investment Manager. Under the Sub-Advisory Agreement, the Sub-Advisor invests the Fund's assets including the placing of orders for the purchase and sale of portfolio securities. As compensation for its services provided pursuant to the Sub-Advisory Agreement, the Investment Manager paid the Sub-Advisor compensation of $92,968 for the period August 11, 2003 through August 31, 2003.

3. Plan of Distribution

Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan provides that the Fund will pay the Distributor a fee which is accrued daily and paid monthly at the following annual rates: (i) Class A – up to 0.25% of the average daily net assets of Class A; (ii) Class B – 1.0% of the average daily net assets of Class B; and (iii) Class C – up to 1.0% of the average daily net assets of Class C.

In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by the Distributor but not yet recovered may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B shares. Although there is no legal obligation for the Fund to pay expenses incurred in excess of payments made to the Distributor under the Plan and the proceeds of contingent deferred sales charges paid by investors upon redemption of shares, if for any reason the Plan is terminated, the Trustees will consider at that time the manner in which to treat such expenses. The Distributor has advised the Fund that such excess amounts totaled $4,910,255 at August 31, 2003.

In the case of Class A shares and Class C shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily net assets of Class A or Class C, respectively, will not be

Morgan Stanley International Value Equity Fund

Notes to Financial Statements August 31, 2003 continued

reimbursed by the Fund through payments in any subsequent year, except that expenses representing a gross sales credit to Morgan Stanley Financial Advisors or other selected broker-dealer representatives may be reimbursed in the subsequent calendar year. For the year ended August 31, 2003, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.23% and 1.0%, respectively.

The Distributor has informed the Fund that for the year ended August 31, 2003, it received contingent deferred sales charges from certain redemptions of the Fund's Class A shares, Class B shares and Class C shares of $2,760, $449,238 and $5,672, respectively and received $73,253 in front-end sales charges from sales of the Fund's Class A shares. The respective shareholders pay such charges which are not an expense of the Fund.

4. Security Transactions and Transactions with Affiliates

The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the year ended August 31, 2003 aggregated $220,650,241, and $92,859,366, respectively.

Morgan Stanley Trust, an affiliate of the Investment Manager and Distributor, is the Fund's transfer agent.

5. Purposes of and Risks Relating to Certain Financial Instruments

The Fund may enter into forward contracts to facilitate settlement of foreign currency denominated portfolio transactions or to manage foreign currency exposure associated with foreign currency denominated securities.

Forward contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rates underlying the forward contracts. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

At August 31, 2003, there were outstanding forward contracts.

At August 31, 2003, investments in securities of issuers in the United Kingdom and Japan represents 26.4% and 25.9%, respectively of the Fund's net assets. These investments, as well as other non-U.S. securities, may be affected by economic or political developments in this region.

At August 31, 2003, the Fund's cash balance consisted principally of interest bearing deposits with J.P. Morgan Chase, the Fund's custodian.

6. Federal Income Tax Status

The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted

Morgan Stanley International Value Equity Fund

Notes to Financial Statements August 31, 2003 continued

accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital.

The tax character of distributions paid was as follows:


	FOR THE YEAR ENDED AUGUST 31, 2003	FOR THE YEAR ENDED AUGUST 31, 2002
Ordinary income	$2,364,822	$1,747,368

As of August 31, 2003, the tax-basis components of accumulated earnings were as follows:


Undistributed ordinary income	$	4,516,488
Undistributed long-term gains	—
Net accumulated earnings		4,516,488
Capital loss carryforward*		(5,215,772	)
Post-October losses		(6,378,089	)
Temporary differences		(117,705	)
Net unrealized appreciation		20,121,971
Total accumulated earnings	$	12,926,893

* As of August 31, 2003, the Fund had a net capital loss carryforward of $5,215,772 of which $2,443,651 will expire on August 31, 2010 and $2,772,121 will expire on August 31, 2011 to offset future capital gains to the extent provided by regulations.

As of August 31, 2003, the Fund had temporary book/tax differences primarily attributable to post-October losses (capital losses incurred after October 31 within the taxable year which are deemed to arise on the first business day of the Fund's next taxable year), capital loss deferrals on wash sales and mark-to-market of open forward foreign currency exchange contracts and permanent book/tax differences attributable to foreign currency gains. To reflect reclassifications arising from the permanent differences, accumulated net realized loss was charged and accumulated undistributed net investment income was credited $3,600,920.

Morgan Stanley International Value Equity Fund

Notes to Financial Statements August 31, 2003 continued

7. Shares of Beneficial Interest

Transactions in shares of beneficial interest were as follows:


	FOR THE YEAR ENDED AUGUST 31, 2003						FOR THE YEAR ENDED AUGUST 31, 2002
	SHARES			AMOUNT			SHARES			AMOUNT
CLASS A SHARES
Sold		7,815,592		$	73,357,894			2,756,631		$	25,649,181
Reinvestment of dividends		6,532			57,093			6,221			57,603
Redeemed		(6,807,908	)		(64,466,822	)		(2,693,006	)		(25,214,289	)
Net increase – Class A		1,014,216			8,948,165			69,846			492,495
CLASS B SHARES
Sold		4,376,290			38,333,996			7,305,188			68,949,596
Reinvestment of dividends		10,636			92,543			93,885			866,560
Redeemed		(5,082,826	)		(44,130,517	)		(3,693,315	)		(34,607,723	)
Net increase (decrease) – Class B		(695,900	)		(5,703,978	)		3,705,758			35,208,433
CLASS C SHARES
Sold		1,601,607			13,774,538			2,747,631			25,665,867
Reinvestment of dividends		5,021			43,632			12,831			118,427
Redeemed		(1,281,761	)		(10,945,201	)		(1,764,609	)		(16,418,952	)
Net increase – Class C		324,867			2,872,969			995,853			9,365,342
CLASS D SHARES
Sold		20,304,374			179,785,600			8,877,105			84,667,395
Reinvestment of dividends		106,487			930,697			12,420			115,013
Redeemed		(6,357,467	)		(56,229,043	)		(1,930,870	)		(18,270,632	)
Net increase – Class D		14,053,394			124,487,254			6,958,655			66,511,776
Net increase in Fund		14,696,577		$	130,604,410			11,730,112		$	111,578,046

Morgan Stanley International Value Equity Fund

Financial Highlights

Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:


	FOR THE YEAR ENDED AUGUST 31, 2003			FOR THE YEAR ENDED AUGUST 31, 2002			FOR THE PERIOD APRIL 26, 2001* THROUGH AUGUST 31, 2001
Class A Shares
Selected Per Share Data:
Net asset value, beginning of period	$	9.21		$	9.60		$	10.00
Income (loss) from investment operations:
Net investment income‡		0.09			0.03			0.03
Net realized and unrealized gain (loss)		0.57			(0.33	)		(0.43	)
Total income (loss) from investment operations		0.66			(0.30	)		(0.40	)
Less dividends from net investment income		(0.07	)		(0.09	)		—
Net asset value, end of period	$	9.80		$	9.21		$	9.60
Total Return†		7.12	%		(3.03	)%		(4.00)	% ⁽¹⁾
Ratios to Average Net Assets⁽³⁾:
Expenses		1.59	%		1.70	%		1.88	%^⁽²⁾
Net investment income		1.02	%		0.47	%		0.87	%^⁽²⁾
Supplemental Data:
Net assets, end of period, in thousands		$19,827			$9,297			$9,013
Portfolio turnover rate		32	%		52	%		13	%^⁽¹⁾

Commencement of operations.

†

Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.

‡

The per share amounts were computed using an average number of shares outstanding during the period.

(1)

Not annualized.

(2)

Annualized.

(3)

Reflects overall Fund ratios for investment income and non-class specific expenses.

See Notes to Financial Statements

Morgan Stanley International Value Equity Fund

Financial Highlights continued


	FOR THE YEAR ENDED AUGUST 31, 2003			FOR THE YEAR ENDED AUGUST 31, 2002			FOR THE PERIOD APRIL 26, 2001* THROUGH AUGUST 31, 2001
Class B Shares
Selected Per Share Data:
Net asset value, beginning of period	$	9.14		$	9.57		$	10.00
Income (loss) from investment operations:
Net investment income (loss)‡		0.01			(0.03	)		0.00
Net realized and unrealized gain (loss)		0.57			(0.33	)		(0.43	)
Total income (loss) from investment operations		0.58			(0.36	)		(0.43	)
Less dividends from net investment income		(0.01	)		(0.07	)		—
Net asset value, end of period	$	9.71		$	9.14		$	9.57
Total Return†		6.32	%		(3.74	)%		(4.30)	% ⁽¹⁾
Ratios to Average Net Assets⁽³⁾:
Expenses		2.36	%		2.45	%		2.63	%^⁽²⁾
Net investment income (loss)		0.25	%		(0.28	)%		0.12	%^⁽²⁾
Supplemental Data:
Net assets, end of period, in thousands		$145,382			$143,200			$114,541
Portfolio turnover rate		32	%		52	%		13	%^⁽¹⁾

Commencement of operations.

†

Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.

‡

The per share amounts were computed using an average number of shares outstanding during the period.

(1)

Not annualized.

(2)

Annualized.

(3)

Reflects overall Fund ratios for investment income and non-class specific expenses.

See Notes to Financial Statements

Morgan Stanley International Value Equity Fund

Financial Highlights continued


	FOR THE YEAR ENDED AUGUST 31, 2003			FOR THE YEAR ENDED AUGUST 31, 2002			FOR THE PERIOD APRIL 26, 2001* THROUGH AUGUST 31, 2001
Class C Shares
Selected Per Share Data:
Net asset value, beginning of period	$	9.13		$	9.57		$	10.00
Income (loss) from investment operations:
Net investment income (loss)‡		0.02			(0.03	)		0.00
Net realized and unrealized gain (loss)		0.56			(0.34	)		(0.43	)
Total income (loss) from investment operations		0.58			(0.37	)		(0.43	)
Less dividends from net investment income		(0.02	)		(0.07	)		—
Net asset value, end of period	$	9.69		$	9.13		$	9.57
Total Return†		6.24	%		(3.73	)%		(4.30)	% ⁽¹⁾
Ratios to Average Net Assets⁽³⁾:
Expenses		2.36	%		2.45	%		2.63	%^⁽²⁾
Net investment income (loss)		0.25	%		(0.28	)%		0.12	%^⁽²⁾
Supplemental Data:
Net assets, end of period, in thousands		$28,556			$23,946			$15,558
Portfolio turnover rate		32	%		52	%		13	%^⁽¹⁾

Commencement of operations.

†

Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.

‡

The per share amounts were computed using an average number of shares outstanding during the period.

(1)

Not annualized.

(2)

Annualized.

(3)

Reflects overall Fund ratios for investment income and non-class specific expenses.

See Notes to Financial Statements

Morgan Stanley International Value Equity Fund

Financial Highlights continued


	FOR THE YEAR ENDED AUGUST 31, 2003			FOR THE YEAR ENDED AUGUST 31, 2002			FOR THE PERIOD APRIL 26, 2001* THROUGH AUGUST 31, 2001
Class D Shares
Selected Per Share Data:
Net asset value, beginning of period	$	9.23		$	9.60		$	10.00
Income (loss) from investment operations:
Net investment income‡		0.12			0.10			0.04
Net realized and unrealized gain (loss)		0.55			(0.37	)		(0.44	)
Total income (loss) from investment operations		0.67			(0.27	)		(0.40	)
Less dividends from net investment income		(0.09	)		(0.10	)		—
Net asset value, end of period	$	9.81		$	9.23		$	9.60
Total Return†		7.39	%		(2.82	)%		(4.00)	% ⁽¹⁾
Ratios to Average Net Assets⁽³⁾:
Expenses		1.36	%		1.45	%		1.63	%^⁽²⁾
Net investment income		1.25	%		0.72	%		1.12	%^⁽²⁾
Supplemental Data:
Net assets, end of period, in thousands		$218,574			$75,903			$12,128
Portfolio turnover rate		32	%		52	%		13	%^⁽¹⁾

Commencement of operations.

†

Calculated based on the net asset value as of the last business day of the period.

‡

The per share amounts were computed using an average number of shares outstanding during the period.

(1)

Not annualized.

(2)

Annualized.

(3)

Reflects overall Fund ratios for investment income and non-class specific expenses.

See Notes to Financial Statements

Morgan Stanley International Value Equity Fund

Independent Auditors' Report

To the Shareholders and Board of Trustees of
Morgan Stanley International Value Equity Fund:

We have audited the accompanying statement of assets and liabilities of Morgan Stanley International Value Equity Fund (the "Fund"), including the portfolio of investments, as of August 31, 2003, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Morgan Stanley International Value Equity Fund as of August 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP
New York, New York
October 17, 2003

2003 Federal Tax Notice (unaudited)

The Fund has elected, pursuant to section 853 of the Internal Revenue Code, to pass through foreign taxes of $0.015 per share to its shareholders, of which 100% would be allowable as a credit. The Fund generated net foreign source income of $0.043 per share with respect to this election.

Morgan Stanley International Value Equity Fund

Trustee and Officer Information

Independent Trustees:

Name, Age and Address of
Independent Trustee

Position(s) Held with Registrant

Term of
Office and
Length of
Time
Served*

Principal Occupation(s)
During Past 5 Years**

Number of Portfolios
in Fund Complex Overseen by Trustee***

Other Directorships Held by Trustee

Michael Bozic (62)
c/o Mayer, Brown, Rowe & Maw LLP Counsel to the Independent Directors
1675 Broadway
New York, NY

Trustee

Since
April 1994

Retired; Director or Trustee of the Retail Funds and TCW/DW Term Trust 2003 (since April 1994) and the Institutional Funds (since July 2003); formerly Vice Chairman of Kmart Corporation (December 1998-October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); formerly variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co.

216

Director of Weirton Steel Corporation.

Edwin J. Garn (70)
c/o Summit Ventures LLC
1 Utah Center
201 S. Main Street
Salt Lake City, UT

Trustee

Since January 1993

Director or Trustee of the Retail Funds and TCW/DW Term Trust 2003 (since January 1993) and the Institutional Funds (since July 2003); member of the Utah Regional Advisory Board of Pacific Corp.; formerly United States Senator (R-Utah) (1974-1992) and Chairman, Senate Banking Committee (1980-1986), Mayor of Salt Lake City, Utah (1971-1974), Astronaut, Space Shuttle Discovery (April 12-19, 1985), and Vice Chairman, Huntsman Corporation (chemical company).

216

Director of Franklin Covey (time management systems), BMW Bank of North America, Inc. (industrial loan corporation), United Space Alliance (joint venture between Lockheed Martin and the Boeing Company) and Nuskin Asia Pacific (multilevel marketing); member of the board of various civic and charitable organizations.

Wayne E. Hedien (69)
c/o Mayer, Brown, Rowe & Maw LLP
Counsel to the Independent Directors
1675 Broadway
New York, NY

Trustee

Since September 1997

Retired; Director or Trustee of the Retail Funds and TCW/DW Term Trust 2003; (Since September 1997) and the Institutional Funds (since July 2003); formerly associated with the Allstate Companies (1966-1994), most recently as Chairman of The Allstate Corporation (March 1993-December 1994) and Chairman and Chief Executive Officer of its wholly-owned subsidiary, Allstate Insurance Company (July 1989-December 1994).

216

Director of The PMI Group Inc. (private mortgage insurance); Trustee and Vice Chairman of The Field Museum of Natural History; director of various other business and charitable organizations.

Morgan Stanley International Value Equity Fund

Trustee and Officer Information continued

Name, Age and Address of
Independent Trustee

Position(s) Held with Registrant

Term of
Office and
Length of
Time
Served*

Principal Occupation(s)
During Past 5 Years**

Number of Portfolios
in Fund Complex Overseen by Trustee***

Other Directorships Held by Trustee

Dr. Manuel H. Johnson (54)
c/o Johnson Smick International, Inc.
2099 Pennsylvania
Avenue, N.W.
Suite 950
Washington, D.C.

Trustee

Since
July 1991

Chairman of the Audit Committee and Director or Trustee of the Retail Funds and TCW/DW Term Trust 2003 (since July 1991) and the Institutional Funds (since July 2003); Senior Partner, Johnson Smick International, Inc., a consulting firm; Co-Chairman and a founder of the Group of Seven Council (G7C), an international economic commission; formerly Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury.

216

Director of NVR, Inc. (home construction); Chairman and Trustee of the Financial Accounting Foundation (oversight organization of the Financial Accounting Standards Board); Director of RBS Greenwich Capital Holdings (financial holding company).

Joseph J. Kearns (61)
PMB754
23852 Pacific Coast Highway
Malibu, CA

Trustee

Since
July 2003

Deputy Chairman of the Audit Committee and Director or Trustee of the Retail Funds and TCW/DW Term Trust 2003 (since July 2003) and the Institutional Funds (since August 1994); previously Chairman of the Audit Committee of the Institutional Funds (October 2001-July 2003); President, Kearns & Associates LLC (investment consulting); formerly CFO of the J. Paul Getty Trust.

217

Director of Electro Rent Corporation (equipment leasing), The Ford Family Foundation, and the UCLA Foundation.

Michael E. Nugent (67)
c/o Triumph Capital, L.P.
445 Park Avenue
New York, NY

Trustee

Since
July 1991

Chairman of the Insurance Committee and Director or Trustee of the Retail Funds and TCW/DW Term Trust 2003 (since July 1991) and the Institutional Funds (since July 2001); General Partner of Triumph Capital, L.P., a private investment partnership; formerly Vice President, Bankers Trust Company and BT Capital Corporation (1984-1988).

216

Director of various business organizations.

Fergus Reid (71)
85 Charles Colman Blvd.
Pawling, NY

Trustee

Since
July 2003

Chairman of the Governance Committee and Director or Trustee of the Retail Funds and TCW/DW Term Trust 2003 (since July 2003) and the Institutional Funds (since June 1992); Chairman of Lumelite Plastics Corporation.

217

Trustee and Director of certain investment companies in the JPMorgan Funds complex managed by JP Morgan Investment Management Inc.

Morgan Stanley International Value Equity Fund

Trustee and Officer Information continued

Interested Trustees:

Name, Age and Address of
Independent Trustee

Position(s) Held with Registrant

Term of
Office and
Length of
Time
Served*

Principal Occupation(s)
During Past 5 Years**

Number of Portfolios
in Fund Complex Overseen by Trustee***

Other Directorships Held by Trustee

Charles A. Fiumefreddo (70)
c/o Morgan Stanley Trust
Harborside Financial Center,
Plaza Two,
Jersey City, NJ

Chairman of the Board and Trustee

Since
July 1991

Chairman and Director or Trustee of the Retail Funds and TCW/DW Term Trust 2003 (since July 1991) and the Institutional Funds (since July 2003); formerly Chief Executive Officer of the Retail Funds and the TCW/DW Term Trust 2003 (until September 2002).

216

None

James F. Higgins (55)
c/o Morgan Stanley Trust
Harborside Financial Center,
Plaza Two,
Jersey City, NJ

Trustee

Since
June 2000

Director or Trustee of the Retail Funds and TCW/DW Term Trust 2003 (since June 2000) and the Institutional Funds (since July 2003); Senior Advisor of Morgan Stanley (since August 2000); Director of the Distributor and Dean Witter Realty Inc.; previously President and Chief Operating Officer of the Private Client Group of Morgan Stanley (May 1999-August 2000), and President and Chief Operating Officer of Individual Securities of Morgan Stanley (February 1997-May 1999).

216

Director of AXA Financial, Inc. and The Equitable Life Assurance Society of the United States (financial services).

Philip J. Purcell (59)
1585 Broadway
New York, NY

Trustee

Since
April 1994

Director or Trustee of the Retail Funds and TCW/DW Term Trust 2003 (since April 1994) and the Institutional Funds (since July 2003); Chairman of the Board of Directors and Chief Executive Officer of Morgan Stanley and Morgan Stanley DW Inc.; Director of the Distributor; Chairman of the Board of Directors and Chief Executive Officer of Novus Credit Services Inc.; Director and/or officer of various Morgan Stanley subsidiaries.

216

Director of American Airlines, Inc. and its parent company, AMR Corporation.

This is the earliest date the Trustee began serving the funds advised by Morgan Stanley Investment Advisors Inc. (the "Investment Manager") (the "Retail Funds").

The dates referenced below indicating commencement of services as Director/Trustee for the Retail Funds and the funds advised by Morgan Stanley Investment Management Inc., Morgan Stanley Investments LP and Morgan Stanley AIP GP LP (the "Institutional Funds") reflect the earliest date the Director/Trustee began serving the Retail or Institutional Funds as applicable.

***

The Fund Complex includes all open-end and closed-end funds (including all of their portfolios) advised by the Investment Manager and any funds that have an investment advisor that is an affiliated person of the Investment Manager (including but not limited to Morgan Stanley Investment Management Inc. and Morgan Stanley Investments LP).

Morgan Stanley International Value Equity Fund

Trustee and Officer Information continued

Officers:

Name, Age and Address of
Executive Officer

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time
Served*

Principal Occupation(s) During Past 5 Years**

Mitchell M. Merin (50)
1221 Avenue of the Americas
New York, NY

President

Since May 1999

President and Chief Operating Officer of Morgan Stanley Investment Management Inc.; President, Director and Chief Executive Officer of the Investment Manager and Morgan Stanley Services; Chairman, Chief Executive Officer and Director of the Distributor; Chairman and Director of the Transfer Agent; Director of various Morgan Stanley subsidiaries; President Morgan Stanley Investments LP (since February 2003); President of the Institutional Funds (since July 2003) and President of the Retail Funds and TCW/DW Term Trust 2003 (since May 1999); Trustee (since July 2003) and President (since December 2002) of the Van Kampen Closed-End Funds; Trustee (since May 1999) and President (since October 2002) of the Van Kampen Open-End Funds.

Ronald E. Robison (64)
1221 Avenue of the Americas
New York, NY

Executive Vice President and Principal Executive Officer

Since April 2003

Chief Global Operations Officer and Managing Director of Morgan Stanley Investment Management Inc.; Managing Director of Morgan Stanley & Co. Incorporated; Managing Director of Morgan Stanley; Managing Director, Chief Administrative Officer and Director of the Investment Manager and Morgan Stanley Services; Chief Executive Officer and Director of the Transfer Agent; Executive Vice President and Principal Executive Officer of the Institutional Funds (since July 2003); and the TCW/DW Term Trust 2003 (since April 2003); previously President of the Institutional Funds (March 2001-July 2003) and Director of the Institutional Funds (March 2001-July 2003).

Barry Fink (48)
1221 Avenue of the Americas
New York, NY

Vice President and General Counsel

Since
February 1997

General Counsel (since May 2000) and Managing Director (since December 2000) of Morgan Stanley Investment Management; Managing Director (since December 2000), Secretary (since February 1997) and Director (since July 1998) of the Investment Manager and Morgan Stanley Services; Assistant Secretary of Morgan Stanley DW; Chief Legal Officer of Morgan Stanley Investments LP (since July 2002); Vice President of the Institutional Funds (since July 2003); Vice President and Secretary of the Distributor; previously Secretary of the Retail Funds (February 1997-July 2003); previously Vice President and Assistant General Counsel of the Investment Manager and Morgan Stanley Services (February 1997-December 2001).

Joseph J. McAlinden (60)
1221 Avenue of the Americas
New York, NY

Vice President

Since July 1995

Managing Director and Chief Investment Officer of the Investment Manager, Morgan Stanley Investment Management Inc. and Morgan Stanley Investments LP; Director of the Transfer Agent, Chief Investment Officer of the Van Kampen Funds; Vice President of the Institutional Funds (since July 2003) and the Retail Funds (since July 1995).

Stefanie V. Chang (36)
1221 Avenue of the Americas
New York, NY

Vice President

Since July 2003

Executive Director of Morgan Stanley & Co. and Morgan Stanley Investment Management Inc. and Vice President of the Institutional Funds (since December 1997) and the Retail Funds (since July 2003); formerly practiced law with the New York law firm of Rogers & Wells (now Clifford Chance LLP).

Morgan Stanley International Value Equity Fund

Trustee and Officer Information continued

Name, Age and Address of
Executive Officer

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time
Served*

Principal Occupation(s) During Past 5 Years**

Francis Smith (38)
c/o Morgan Stanley Trust
Harborside Financial Center,
Plaza Two,
Jersey City, NJ

Treasurer and Chief Financial Officer

Treasurer since July 2003 and Chief Financial Officer since September 2002

Executive Director of the Investment Manager and Morgan Stanley Services (since December 2001); previously Vice President of the Retail Funds (September 2002-July 2003); previously Vice President of the Investment Manager and Morgan Stanley Services (August 2000-November 2001) and Senior Manager at PricewaterhouseCoopers LLP (January 1998-August 2000).

Thomas F. Caloia (57)
c/o Morgan Stanley Trust
Harborside Financial Center,
Plaza Two,
Jersey City, NJ

Vice President

Since July 2003

Executive Director (since December 2002) and Assistant Treasurer of the Investment Manager, the Distributor and Morgan Stanley Services; previously Treasurer of the Retail Funds (April 1989-July 2003); formerly First Vice President of the Investment Manager, the Distributor and Morgan Stanley Services.

Mary E. Mullin (36)
1221 Avenue of the Americas
New York, NY

Secretary

Since July 2003

Vice President of Morgan Stanley & Co. Incorporated and Morgan Stanley Investment Management Inc.; Secretary of the Institutional Funds (since June 1999) and the Retail Funds (since July 2003); formerly practiced law with the New York law firms of McDermott, Will & Emery and Skadden, Arps, Slate, Meagher & Flom LLP.

This is the earliest date the Officer began serving the Retail Funds. Each Officer serves an indefinite term, until his or her successor is elected.

The dates referenced below indicating commencement of service as an Officer for the Retail and Institutional Funds reflect the earliest date the Officer began serving the Retail or Institutional Funds as applicable.

(This page has been left blank intentionally.)


Trustees Michael Bozic Charles A. Fiumefreddo Edwin J. Garn Wayne E. Hedien James F. Higgins Dr. Manuel H. Johnson Joseph J. Kearns Michael E. Nugent Philip J. Purcell Fergus Reid Officers Charles A. Fiumefreddo Chairman of the Board Mitchell M. Merin President Ronald E. Robison Executive Vice President and Principal Executive Officer Barry Fink Vice President and General Counsel Joseph J. McAlinden Vice President Stefanie V. Chang Vice President Francis Smith Treasurer and Chief Financial Officer Thomas F. Caloia Vice President Mary E. Mullin Secretary Transfer Agent Morgan Stanley Trust Harborside Financial Center, Plaza Two Jersey City, New Jersey 07311 Independent Auditors Deloitte & Touche LLP Two World Financial Center New York, New York 10281 Investment Manager Morgan Stanley Investment Advisors Inc. 1221 Avenue of the Americas New York, New York 10020 Sub-Advisor Morgan Stanley Investment Management Limited 25 Cabot Square, Canary Wharf London, United Kingdom E14 4QA This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its trustees. It is available, without charge, by calling (800) 869-NEWS. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing. Investments and services offered through Morgan Stanley DW Inc., member SIPC. Morgan Stanley Distributors Inc., member NASD. © 2003 Morgan Stanley 39906RPT 12358J03-OP-10/03		MORGAN STANLEY FUNDS
		Morgan Stanley International Value Equity Fund Annual Report August 31, 2003

     

Item 2.  Code of Ethics.

(a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to
its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the Fund or a third
party.

(b) No information need be disclosed pursuant to this paragraph.

(c) The Fund has amended its Code of Ethics during the period covered by the
shareholder report presented in Item 1 hereto

(d) The Fund has granted a waiver or an implicit waiver from a provision of its
Code of Ethics.

(e) Not applicable.

(f)

     (1) The Fund's Code of Ethics is attached hereto as Exhibit A.

     (2) Not applicable.

     (3) Not applicable.

Item 3.  Audit Committee Financial Expert.

The Fund's Board of Trustees has determined that it has two "audit committee
financial experts" serving on its audit committee, each of whom are
"independent" Trustees: Dr. Manuel H. Johnson and Joseph J. Kearns. Under
applicable securities laws, a person who is determined to be an audit committee
financial expert will not be deemed an "expert" for any purpose, including
without limitation for the purposes of Section 11 of the Securities Act of 1933,
as a result of being designated or identified as an audit committee financial
expert. The designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations, or
liabilities that are greater than the duties, obligations, and liabilities
imposed on such person as a member of the audit committee and Board of Trustees
in the absence of such designation or identification.



Item 9 - Controls and Procedures

(a) The Fund's principal executive officer and principal financial officer have
concluded that the Fund's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Fund in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.

There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Fund's internal controls
or in other factors that could significantly affect the Fund's internal controls
subsequent to the date of their evaluation.

(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal half-year
(the registrant's second fiscal half-year in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.


                                       2



Item 10 Exhibits

(a) The Code of Ethics for Principal Executive and Senior Financial Officers is
attached hereto.

(b) A separate certification for each principal executive officer and principal
financial officer of the registrant are attached hereto as part of EX-99.CERT.

Items 4 - 8  are not applicable


                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Morgan Stanley International Value Equity Fund
Ronald E. Robison
Principal Executive Officer
October 20, 2003

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.

Ronald E. Robison
Principal Executive Officer
October 20, 2003

Francis Smith
Principal Financial Officer
October 20, 2003



                                       3


                                                                    EXHIBIT 10 A

      CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS
      --------------------------------------------------------------------
                              ADOPTED JULY 31, 2003
                              ---------------------



I.   This Code of Ethics (the "Code") for the investment companies within the
     Morgan Stanley complex identified in Exhibit A (collectively, "Funds" and
     each, a "Fund") applies to each Fund's Principal Executive Officer,
     President, Principal Financial Officer and Treasurer (or persons performing
     similar functions) ("Covered Officers" each of whom are set forth in
     Exhibit B) for the purpose of promoting:

     o   honest and ethical conduct, including the ethical handling of actual or
         apparent conflicts of interest between personal and professional
         relationships.

     o   full, fair, accurate, timely and understandable disclosure in reports
         and documents that a company files with, or submits to, the Securities
         and Exchange Commission ("SEC") and in other public communications made
         by the Fund;

     o   compliance with applicable laws and governmental rules and regulations;

     o   prompt internal reporting of violations of the Code to an appropriate
         person or persons identified in the Code; and

     o   accountability for adherence to the Code.

     Each Covered Officer should adhere to a high standard of business ethics
and should be sensitive to situations that may give rise to actual as well as
apparent conflicts of interest. Any question about the application of the Code
should be referred to the General Counsel or his/her designee (who is set forth
in Exhibit C).

II.  COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF
     INTEREST



                                       4


     OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private
interest interferes, or appears to interfere, with the interests of, or his
service to, the Fund. For example, a conflict of interest would arise if a
Covered Officer, or a member of his family, receives improper personal benefits
as a result of his position with the Fund.

     Certain conflicts of interest arise out of the relationships between
Covered Officers and the Fund and already are subject to conflict of interest
provisions in the Investment Company Act of 1940 ("Investment Company Act") and
the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example,
Covered Officers may not individually engage in certain transactions (such as
the purchase or sale of securities or other property) with the Fund because of
their status as "affiliated persons" (as defined in the Investment Company Act)
of the Fund. The Fund's and its investment adviser's compliance programs and
procedures are designed to prevent, or identify and correct, violations of these
provisions. This Code does not, and is not intended to, repeat or replace these
programs and procedures, and such conflicts fall outside the parameters of this
Code, unless or until the General Counsel determines that any violation of such
programs and procedures is also a violation of this Code.

     Although typically not presenting an opportunity for improper personal
benefit, conflicts may arise from, or as a result of, the contractual
relationship between the Fund and its investment adviser of which the Covered
Officers are also officers or employees. As a result, this Code recognizes that
the Covered Officers will, in the normal course of their duties (whether
formally for the Fund or for the investment adviser, or for both), be involved
in establishing policies and implementing decisions that will have different
effects on the Fund and its investment adviser. The participation of the Covered
Officers in such activities is inherent in the contractual relationship between
the Fund and the investment adviser and is consistent with the performance by
the Covered Officers of their duties as officers of the Fund. Thus, if performed
in conformity with the provisions of the Investment Company Act and the
Investment Advisers Act, such activities will be deemed to have been handled
ethically. In addition, it is recognized by the Funds' Boards of
Directors/Trustees ("Boards") that the Covered Officers may also be officers or
employees of one or more other investment companies covered by this or other
codes.

     Other conflicts of interest are covered by the Code, even if such conflicts
of interest are not subject to provisions in the Investment Company Act and the
Investment Advisers Act. The following list provides examples of conflicts of
interest under the Code, but Covered Officers should keep in mind that these
examples are not exhaustive. The overarching principle is that the personal
interest of a Covered Officer should not be placed improperly before the
interest of the Fund.

     Each Covered Officer must not:

     o   use his personal influence or personal relationships improperly to
         influence investment decisions or financial reporting by the Fund
         whereby the Covered Officer would benefit personally (directly or
         indirectly) to the detriment of the Fund;


                                       5


     o   cause the Fund to take action, or fail to take action, for the
         individual personal benefit of the Covered Officer rather than the
         benefit of the Fund; or

     o   use material non-public knowledge of portfolio transactions made or
         contemplated for, or actions proposed to be taken by, the Fund to trade
         personally or cause others to trade personally in contemplation of the
         market effect of such transactions.

     Each Covered Officer must, at the time of signing this Code, report to the
General Counsel all affiliations or significant business relationships outside
the Morgan Stanley complex and must update the report annually.

     Conflict of interest situations should always be approved by the General
Counsel and communicated to the relevant Fund or Fund's Board. Any activity or
relationship that would present such a conflict for a Covered Officer would
likely also present a conflict for the Covered Officer if an immediate member of
the Covered Officer's family living in the same household engages in such an
activity or has such a relationship. Examples of these include:

     o   service or significant business relationships as a director on the
         board of any public or private company;

     o   accepting directly or indirectly, anything of value, including gifts
         and gratuities in excess of $100 per year from any person or entity
         with which the Fund has current or prospective business dealings, not
         including occasional meals or tickets for theatre or sporting events or
         other similar entertainment; provided it is business-related,
         reasonable in cost, appropriate as to time and place, and not so
         frequent as to raise any question of impropriety;

     o   any ownership interest in, or any consulting or employment relationship
         with, any of the Fund's service providers, other than its investment
         adviser, principal underwriter, or any affiliated person thereof; and

     o   a direct or indirect financial interest in commissions, transaction
         charges or spreads paid by the Fund for effecting portfolio
         transactions or for selling or redeeming shares other than an interest
         arising from the Covered Officer's employment, such as compensation or
         equity ownership.

III. DISCLOSURE AND COMPLIANCE

     o   Each Covered Officer should familiarize himself/herself with the
         disclosure and compliance requirements generally applicable to the
         Funds;

     o   each Covered Officer must not knowingly misrepresent, or cause others
         to misrepresent, facts about the Fund to others, whether within or
         outside the

                                       6


         Fund, including to the Fund's Directors/Trustees and auditors, or to
         governmental regulators and self-regulatory organizations;

     o   each Covered Officer should, to the extent appropriate within his area
         of responsibility, consult with other officers and employees of the
         Funds and their investment advisers with the goal of promoting full,
         fair, accurate, timely and understandable disclosure in the reports and
         documents the Funds file with, or submit to, the SEC and in other
         public communications made by the Funds; and

     o   it is the responsibility of each Covered Officer to promote compliance
         with the standards and restrictions imposed by applicable laws, rules
         and regulations.

IV.  REPORTING AND ACCOUNTABILITY

     Each Covered Officer must:

     o   upon adoption of the Code (thereafter as applicable, upon becoming a
         Covered Officer), affirm in writing to the Boards that he has received,
         read and understands the Code;

     o   annually thereafter affirm to the Boards that he has complied with the
         requirements of the Code;

     o   not retaliate against any other Covered Officer, other officer or any
         employee of the Funds or their affiliated persons for reports of
         potential violations that are made in good faith; and

     o   notify the General Counsel promptly if he/she knows or suspects of any
         violation of this Code. Failure to do so is itself a violation of this
         Code.

     The General Counsel is responsible for applying this Code to specific
situations in which questions are presented under it and has the authority to
interpret this Code in any particular situation. However, any waivers(1) sought
by a Covered Officer must be considered by the Board of the relevant Fund or
Funds.

     The Funds will follow these procedures in investigating and enforcing this
Code:

     o   the General Counsel will take all appropriate action to investigate any
         potential violations reported to him;

---------------------
(1)      Item 2 of Form N-CSR defines "waiver" as "the approval by the
         registrant of a material departure from a provision of the code of
         ethics."



                                       7


     o   if, after such investigation, the General Counsel believes that no
         violation has occurred, the General Counsel is not required to take any
         further action;

     o   any matter that the General Counsel believes is a violation will be
         reported to the relevant Fund's Audit Committee;

     o   if the directors/trustees/managing general partners who are not
         "interested persons" as defined by the Investment Company Act (the
         "Independent Directors/Trustees/Managing General Partners") of the
         relevant Fund concur that a violation has occurred, they will consider
         appropriate action, which may include review of, and appropriate
         modifications to, applicable policies and procedures; notification to
         appropriate personnel of the investment adviser or its board; or a
         recommendation to dismiss the Covered Officer or other appropriate
         disciplinary actions;

     o   the Independent Directors/Trustees/Managing General Partners of the
         relevant Fund will be responsible for granting waivers of this Code, as
         appropriate; and

     o   any changes to or waivers of this Code will, to the extent required, be
         disclosed as provided by SEC rules.

V.   OTHER POLICIES AND PROCEDURES

     This Code shall be the sole code of ethics adopted by the Funds for
purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and
forms applicable to registered investment companies thereunder. Insofar as other
policies or procedures of the Funds, the Funds' investment advisers, principal
underwriters, or other service providers govern or purport to govern the
behavior or activities of the Covered Officers who are subject to this Code,
they are superseded by this Code to the extent that they overlap or conflict
with the provisions of this Code unless any provision of this Code conflicts
with any applicable federal or state law, in which case the requirements of such
law will govern. The Funds' and their investment advisers' and principal
underwriters' codes of ethics under Rule 17j-1 under the Investment Company Act
and Morgan Stanley's Code of Ethics are separate requirements applying to the
Covered Officers and others, and are not part of this Code.

VI.  AMENDMENTS

     Any amendments to this Code, other than amendments to Exhibits A, B

or C, must be approved or ratified by a majority vote of the Board of each Fund,
including a majority of Independent Directors/Trustees/Managing General
Partners.

VII. CONFIDENTIALITY


                                       8


     All reports and records prepared or maintained pursuant to this Code will
be considered confidential and shall be maintained and protected accordingly.
Except as otherwise required by law or this Code, such matters shall not be
disclosed to anyone other than the Independent Directors/Trustees/Managing
General Partners of the relevant Fund or Funds and their counsel, the relevant
Fund or Funds and their counsel and the relevant investment adviser and its
counsel.




                                       9


VIII.    INTERNAL USE

         The Code is intended solely for the internal use by the Funds and does
not constitute an admission, by or on behalf of any Fund, as to any fact,
circumstance, or legal conclusion

I have read and understand the terms of the above Code. I recognize the
responsibilities and obligations incurred by me as a result of my being subject
to the Code. I hereby agree to abide by the above Code.


-------------------------

Date:
     --------------------





                                       10


                                    EXHIBIT B
                                    ---------

                               INSTITUTIONAL FUNDS
                                COVERED OFFICERS
                                ----------------

                          Mitchell M. Merin - President
  Ronald E. Robison - Executive Vice President and Principal Executive Officer
            James W. Garrett - Chief Financial Officer and Treasurer

                                  RETAIL FUNDS
                                COVERED OFFICERS
                                ----------------

                          Mitchell M. Merin - President
  Ronald E. Robison - Executive Vice President and Principal Executive Officer
               Frank Smith - Chief Financial Officer and Treasurer






                                       11


                                    EXHIBIT C
                                    ---------

                                 GENERAL COUNSEL
                                 ---------------

                                   Barry Fink























                                       12


                                                                   EXHIBIT 10 B1

                  CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

                                 CERTIFICATIONS
                                 --------------

I, Ronald E. Robison, certify that:

     1.     I have reviewed this report on Form N-CSR of Morgan Stanley
            International Value Equity Fund;

     2.     Based on my knowledge, this report does not contain any untrue
            statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this report;

     3.     Based on my knowledge, the financial statements, and other financial
            information included in this report, fairly present in all material
            respects the financial condition, results of operations, changes in
            net assets, and cash flows (if the financial statements are required
            to include a statement of cash flows) of the registrant as of, and
            for, the periods presented in this report;

     4.     The registrant's other certifying officers and I are responsible for
            establishing and maintaining disclosure controls and procedures (as
            defined in Rule 30a-2(c) under the Investment Company Act of 1940)
            for the registrant and have:

     a)     designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this report
            is being prepared;

     b)     evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this report (the "Evaluation Date"); and

     c)     presented in this report our conclusions about the effectiveness of
            the disclosure controls and procedures based on our evaluation as of
            the Evaluation Date;

     5.     The registrant's other certifying officers and I have disclosed,
            based on our most recent evaluation, to the registrant's auditors
            and the audit committee of the registrant's board of directors (or
            persons performing the equivalent functions):


                                       13


     a)     all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize, and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

     b)     any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

     6.     The registrant's other certifying officers and I have indicated in
            this report whether or not there were significant changes in
            internal controls or in other factors that could significantly
            affect internal controls subsequent to the date of our most recent
            evaluation, including any corrective actions with regard to
            significant deficiencies and material weaknesses.

     Date: October 20, 2003




                                                  Ronald E. Robison

                                                  Principal Executive Officer


                                       14


                                                                   EXHIBIT 10 B2

                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

                                 CERTIFICATIONS
                                 --------------

I, Francis Smith, certify that:

     1.     I have reviewed this report on Form N-CSR of Morgan Stanley
            International Value Equity Fund;

     2.     Based on my knowledge, this report does not contain any untrue
            statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this report;

     3.     Based on my knowledge, the financial statements, and other financial
            information included in this report, fairly present in all material
            respects the financial condition, results of operations, changes in
            net assets, and cash flows (if the financial statements are required
            to include a statement of cash flows) of the registrant as of, and
            for, the periods presented in this report;

     4.     The registrant's other certifying officers and I are responsible for
            establishing and maintaining disclosure controls and procedures (as
            defined in Rule 30a-2(c) under the Investment Company Act of 1940)
            for the registrant and have:

     (i)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this report
            is being prepared;

     (ii)   evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this report (the "Evaluation Date"); and

     (iii)  presented in this report our conclusions about the effectiveness of
            the disclosure controls and procedures based on our evaluation as of
            the Evaluation Date;

     5.     The registrant's other certifying officers and I have disclosed,
            based on our most recent evaluation, to the registrant's auditors
            and the audit committee of the registrant's board of directors (or
            persons performing the equivalent functions):


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     a)     all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize, and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

     b)     any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

     6.     The registrant's other certifying officers and I have indicated in
            this report whether or not there were significant changes in
            internal controls or in other factors that could significantly
            affect internal controls subsequent to the date of our most recent
            evaluation, including any corrective actions with regard to
            significant deficiencies and material weaknesses.

     Date: October 20, 2003

                                                  Francis Smith

                                                  Principal Financial Officer



                                       16


                            SECTION 906 CERTIFICATION

                Certification Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002

Morgan Stanley International Value Equity Fund

     In connection with the Report on Form N-CSR (the "Report") of the
above-named issuer for the period ended August 31, 2003 that is accompanied by
this certification, the undersigned hereby certifies that:

     1.  The Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

     2.  The information contained in the Report fairly presents, in all
         material respects, the financial condition and results of operations of
         the Issuer.



Date: October 20, 2003                            Ronald E. Robison
                                                  Principal Executive Officer


A signed original of this written statement required by Section 906 has been
provided to Morgan Stanley International Value Equity Fund and will be retained
by Morgan Stanley International Value Equity Fund and furnished to the
Securities and Exchange Commission or its staff upon request.




                                       17


                            SECTION 906 CERTIFICATION

                Certification Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002

Morgan Stanley International Value Equity Fund

     In connection with the Report on Form N-CSR (the "Report") of the
above-named issuer for the period ended August 31, 2003 that is accompanied by
this certification, the undersigned hereby certifies that:

     1.  The Report fully complies with the requirements of Section 13(a) or
         15(d) of the Securities Exchange Act of 1934; and

     2.  The information contained in the Report fairly presents, in all
         material respects, the financial condition and results of operations of
         the Issuer.



Date: October 20, 2003                               Francis Smith
                                                     Principal Financial Officer


A signed original of this written statement required by Section 906 has been
provided to Morgan Stanley International Value Equity Fund and will be retained
by Morgan Stanley International Value Equity Fund and furnished to the
Securities and Exchange Commission or its staff upon request.







                                       18