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			811-22789

Morgan Stanley AIP Series Trust
(Exact name of registrant as specified in charter)

522 Fifth Avenue, New York, New York					10036
(Address of principal executive offices)					(Zip code)

John H. Gernon 522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)

Registrant’s telephone number, including area code:				212-296-0289

Date of fiscal year end:	March 31,

Date of reporting period:		September 30, 2014

As a shareholder of the Fund, you incur two types of costs: (1) transactional costs, including sales charges (loads); and (2) ongoing costs, including advisory fees, administration fees, distribution and shareholder services fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested at the beginning of the six-month period ended September 30, 2014 and held for the entire six-month period.

Actual Expenses

The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the information for each class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning Account Value 4/1/14		Actual Ending Account Value 9/30/14		Hypothetical Ending Account Value		Actual Expenses Paid During Period*		Hypothetical Expenses Paid During Period*		Net Expense Ratio During Period**
AIP Dynamic Alternative Strategies Fund Class A	$	1,000.00	$	993.90	$	1,017.55	$	7.50	$	7.59		1.50	%
AIP Dynamic Alternative Strategies Fund Class C		1,000.00		989.70		1,013.79		11.22		11.36		2.25
AIP Dynamic Alternative Strategies Fund Class I		1,000.00		994.90		1,019.25		5.80		5.87		1.16
AIP Dynamic Alternative Strategies Fund Class IS		1,000.00		994.90		1,019.30		5.75		5.82		1.15

* Expenses are calculated using each Fund Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period, and multiplied by 183/365 (to reflect the most recent one-half year period).

** Annualized.

Nature, Extent and Quality of Services

The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser (as defined herein) under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Administrator (an affiliate of the Adviser and defined herein) under the administration agreement, including accounting, clerical, bookkeeping, compliance, business management and planning, and the provision of supplies, office space and utilities at the Administrator's expense. (The Adviser and Administrator together are referred to as the "Adviser" and the advisory and administration agreements together are referred to as the "Management Agreement.") The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as reported to the Board by Lipper, Inc. ("Lipper").

The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who will provide the administrative and advisory services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services to be provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.

Performance, Fees and Expenses of the Fund

The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as determined by Lipper, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance as of December 31, 2013, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was better than its peer group average for the period since inception on April 30, 2013. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as determined by Lipper. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. The Board noted that the Fund's management fee was lower than it peer group average and the total expense ratio was higher but close to its peer group average. After discussion, the Board concluded that the Fund's (i) management fee was competitive with its peer group average; (ii) total expense ratio was competitive with its peer group average; and (iii) performance was competitive with its peer group average.

Economies of Scale

The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which does not include breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and potential economies of scale of the Fund supports its decision to approve the Management Agreement.

Profitability of the Adviser and Affiliates

The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.

Other Benefits of the Relationship

The Board considered other benefits to the Adviser and its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, research received by the Adviser generated from commission dollars spent on funds' portfolio trading, and fees for trading, distribution and/or shareholder servicing. The Board reviewed with the Adviser each of these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.

Resources of the Adviser and Historical Relationship Between the Portfolio and the Adviser

The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue this relationship with the Adviser.

Other Factors and Current Trends

The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.

General Conclusion

After considering and weighing all of the above factors, the Board concluded that it would be in the best interest of the Portfolio and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single factor referenced above. The Board considered these factors over the course of numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors differently in reaching their individual decisions to approve the Management Agreement.

Performance

For the six-month period ended September 30, 2014, the Fund's Class I shares had a total return based on net asset value and reinvestment of distributions per share of -0.51%, net of fees. The Fund's Class I shares underperformed against the Fund's benchmarks, the Citigroup 3-Month U.S. Treasury Bill Index⁽¹⁾ (the "Index"), which returned 0.02%, and the Customized Allocation Index⁽²⁾ (comprised of 30% S&P 500® Total Return Index and 70% Barclays U.S. Aggregate Total Return Index), which returned 3.47%.

Factors Affecting Performance

• The overall investment environment and the Fund's performance were driven by several themes during the period, including challenging global growth, low global inflation, a strengthening U.S. dollar, and commodity market volatility.

• Over the past six months, consensus expectations for forward economic growth (2015-2016) for the world's two largest economies diverged considerably, with China declining (along with Europe and Japan) and the U.S. remaining at least stable. Chinese gross domestic product (GDP) is expected to slip below the 7.5% rate that is has averaged for the past eight quarters.⁽ⁱ⁾ Following its 4.6% growth rate in the second quarter, U.S. GDP is expected to remain at or above its 3% trend going forward. The benefits of stronger U.S. growth have been felt across the globe, while the spillover from a China slowdown has been mainly concentrated in other emerging market economies, given China's outsized role in driving the commodity markets. As such, stability in the U.S. relative to the rest of the major global economies was beneficial for U.S. equity and our equity-related strategies. Over the reporting period, our internal hedge fund replication strategy, long/short developed equity strategy, our internal listed infrastructure strategy, real estate investment trusts (REITs), and convertible bonds benefited.

• As global growth has been challenging, global inflation remained muted over the reporting period. Market views about inflation appear to have been shifting steadily lower since August in the U.S., and for longer in Europe, as actual measures of U.S. and European inflation (based on consumer prices and wages) continue to moderate. In addition, the collapse in Chinese commodity imports in recent

months has also reduced headline inflation pressure. Global consumer prices rose at a 3.9% annualized rate in the three months through June.⁽ⁱⁱ⁾ In the three months through September, inflation could slip as low as a 1% annualized pace, according to one estimate.⁽ⁱⁱ⁾ Low levels of inflation have kept yields range bound and low, and suggests the likelihood of a rise in U.S. interest rates is not imminent. As such, most credit asset classes benefited, including high yield, mortgage backed securities (MBS), and hard currency emerging market debt.

• Over the reporting period, the U.S. dollar appreciated against the majority of developed and emerging market currencies. Slowing growth in Europe, Japan, and some of the emerging markets have helped the dollar appreciate. In addition, as many commodities are priced in dollars, appreciation in the dollar reduced some commodity consumers' purchasing power, and commodity demand dropped in response. As such, local currency emerging market debt and commodities were negatively affected over the six-month period.

• Commodity markets experienced periods of volatility and a sell-off due to the China slowdown, U.S. dollar strengthening, and oversupply in certain commodity complexes (energy and agriculture). Over the period, commodities overall posted negative returns. Implementation of the commodity strategy is done internally through futures, and implementation decisions have resulted in some underperformance relative to the broad asset class.

• The Fund employs various alternative beta strategies executed through the use of futures, options, and swaps. Since its inception, the Fund has implemented a long/short volatility strategy, foreign currency (FX) carry strategy, value/growth strategy, and merger arbitrage strategy. Long/short volatility, FX carry, and value/growth strategies are implemented through the use of futures and forwards. Merger arbitrage is implemented through use of a swap. Over the period, long/short volatility and FX carry were detractors from Fund performance, while value/growth spread contributed positively. Merger arbitrage was flat.

⁽ⁱ⁾ China GDP data from J.P.Morgan, Oct. 1, 2014

⁽ⁱⁱ⁾ Global inflation data from J.P.Morgan, Oct. 1, 2014

Average Annual Total Returns —
Period Ended September 30, 2014

	Period Ended September 30, 2014 Total Returns⁽³⁾
				Average Annual
	One Year			Five Years		Ten Years		Since Inception⁽⁷⁾
Class A Shares w/o sales charges⁽⁴⁾⁽⁵⁾		1.09	%		—		—		–0.66	%
Class A Shares with maximum sales charges⁽⁶⁾		–4.47			—		—		–4.53
Class C Shares w/o sales charges⁽⁴⁾⁽⁵⁾		0.29			—		—		–1.50
Class C Shares with maximum sales charges⁽⁶⁾		–0.70			—		—		–1.50
Class I Shares w/o sales charges⁽⁴⁾⁽⁵⁾		1.34			—		—		–0.41
Class IS Shares w/o sales charges⁽⁴⁾⁽⁵⁾		1.45			—		—		–0.34

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Total returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance of share classes will vary due to differences in sales charges and expenses.

⁽¹⁾ The Citigroup 3-Month U.S. Treasury Bill Index tracks the performance of U.S. Treasury bills with a remaining maturity of three months. The Index is unmanaged and its 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 Customized Allocation Index is comprised of 30% S&P 500 Total Return Index (benchmark that measures the U.S. equity market performance) and 70% Barclays U.S. Aggregate Total Return Index (benchmark that provides a broadbased measure of the global investment grade fixed-rate debt markets). The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

⁽³⁾ Total returns for the Fund reflect expenses waived and/or reimbursed, if applicable, by the Adviser. Without such waivers and/or reimbursements, total returns would have been lower. The fee waivers and/or expense reimbursements will continue for at least one year or until such time as the Fund's Board of Trustees acts to discontinue all or a portion of such waivers and/or reimbursements when it deems such action is appropriate.

⁽⁴⁾ Commenced operations on April 30, 2013.

⁽⁵⁾ Figure shown assumes reinvestment of all distributions and does not reflect the deduction of any sales charges.

⁽⁶⁾ Figure shown assumes reinvestment of all distributions and the deduction of the maximum applicable sales charges. See the Fund's current prospectus for complete details on fees and sales charges.

⁽⁷⁾ For comparative purposes, since inception returns listed for the Indexes refer to the inception date of the Fund, not the inception of the Indexes.

	Shares		Value (000)
Common Stocks (20.6%)
Aerospace & Defense (0.6%)
Lockheed Martin Corp.		162	$	30
Spirit AeroSystems Holdings, Inc., Class A (a)		2,319		88
TransDigm Group, Inc.		174		32
				150
Airlines (0.1%)
American Airlines Group, Inc.		645		23
Auto Components (0.3%)
Goodyear Tire & Rubber Co. (The)		3,487		79
Automobiles (0.1%)
General Motors Co.		766		24
Banks (0.4%)
Banc of California, Inc.		1,526		18
Investors Bancorp, Inc.		8,370		85
				103
Beverages (0.2%)
Constellation Brands, Inc., Class A (a)		646		56
Biotechnology (0.3%)
Gilead Sciences, Inc. (a)		224		24
Incyte Corp. (a)		779		38
				62
Building Products (0.5%)
Armstrong World Industries, Inc. (a)		1,973		111
Capital Markets (2.3%)
Actua Corp. (a)		605		10
American Capital Ltd. BDC (a)		5,119		72
Apollo Investment Corp.		3,124		26
Ares Capital Corp. BDC		1,305		21
BlackRock Kelso Capital Corp. BDC		3,530		30
Blackstone Group LP		1,347		42
Fifth Street Finance Corp. BDC		2,156		20
Gladstone Capital Corp. BDC		2,412		21
Gladstone Investment Corp. BDC		2,603		19
Harris & Harris Group, Inc. BDC (a)		752		2
Hercules Technology Growth Capital, Inc. BDC		1,110		16
KCAP Financial, Inc. BDC		3,668		30
KKR & Co., LP BDC		1,968		44
Main Street Capital Corp. BDC		747		23
MVC Capital, Inc. BDC		2,549		27
NGP Capital Resources Co. BDC		4,333		27
PennantPark Investment Corp. BDC		2,338		26
Prospect Capital Corp. BDC		3,327		33
Safeguard Scientifics, Inc. (a)		395		7
Saratoga Investment Corp. BDC		100		2
Solar Capital Ltd. BDC		1,611		30
TICC Capital Corp. BDC		909		8
Triangle Capital Corp. BDC		691		18
				554
Chemicals (0.4%)
Dow Chemical Co. (The)		1,669		88

	Shares		Value (000)
Communications Equipment (0.5%)
Juniper Networks, Inc.		2,358	$	52
Motorola Solutions, Inc.		142		9
Palo Alto Networks, Inc. (a)		421		42
Procera Networks, Inc. (a)		1,059		10
				113
Containers & Packaging (0.2%)
MeadWestvaco Corp.		1,276		52
Diversified Consumer Services (0.2%)
H&R Block, Inc.		1,431		44
Diversified Financial Services (0.9%)
Compass Diversified Holdings		772		13
McGraw Hill Financial, Inc.		558		47
Moody's Corp.		1,382		131
Resource America, Inc., Class A		1,134		11
				202
Diversified Telecommunication Services (0.4%)
8x8, Inc. (a)		6,851		46
inContact, Inc. (a)		4,548		39
				85
Electric Utilities (0.9%)
Brookfield Infrastructure Partners LP (Canada)		1,269		48
ITC Holdings Corp.		861		31
Northeast Utilities		1,262		56
Pepco Holdings, Inc.		1,127		30
UIL Holdings Corp.		1,135		40
				205
Electrical Equipment (0.2%)
Babcock & Wilcox Co. (The)		1,899		53
Energy Equipment & Services (0.3%)
Rowan Cos., Plc		2,941		74
Gas Utilities (0.5%)
AGL Resources, Inc.		331		17
Laclede Group, Inc. (The)		715		33
Northwest Natural Gas Co.		528		22
Piedmont Natural Gas Co., Inc.		698		24
Southwest Gas Corp.		315		15
WGL Holdings, Inc.		281		12
				123
Health Care Equipment & Supplies (0.2%)
Hologic, Inc. (a)		2,121		52
Health Care Providers & Services (0.2%)
Brookdale Senior Living, Inc. (a)		355		11
Tenet Healthcare Corp. (a)		212		13
VCA, Inc. (a)		341		13
				37
Health Care Technology (0.1%)
HealthStream, Inc. (a)		654		16

	Shares		Value (000)
Hotels, Restaurants & Leisure (0.3%)
Darden Restaurants, Inc.		1,169	$	60
McDonald's Corp.		98		9
				69
Information Technology Services (0.2%)
FleetCor Technologies, Inc. (a)		90		13
Mastercard, Inc., Class A		487		36
				49
Insurance (0.0%)
Atlas Financial Holdings, Inc. (a)		587		8
Internet & Catalog Retail (0.5%)
Expedia, Inc.		127		11
Netflix, Inc. (a)		121		54
Priceline Group, Inc. (a)		55		64
				129
Internet Software & Services (0.3%)
eBay, Inc. (a)		311		18
NetEase, Inc. ADR (China)		133		11
Twitter, Inc. (a)		995		51
				80
Machinery (0.4%)
Harsco Corp.		4,533		97
Media (1.8%)
CBS Corp., Class B		937		50
Charter Communications, Inc., Class A (a)		503		76
Comcast Corp., Class A		1,100		59
Liberty Global PLC Series C (a)		924		38
Liberty Media Corp., Class A (a)		359		17
Time Warner Cable, Inc.		884		127
Twenty-First Century Fox, Inc.		1,577		54
				421
Multi-line Retail (0.2%)
Dollar General Corp. (a)		673		41
Multi-Utilities (0.9%)
CenterPoint Energy, Inc.		1,023		25
Consolidated Edison, Inc.		1,044		59
NiSource, Inc.		334		14
NorthWestern Corp.		939		43
PG&E Corp.		1,000		45
Sempra Energy		181		19
				205
Oil, Gas & Consumable Fuels (1.4%)
Cheniere Energy, Inc. (a)		783		63
EnLink Midstream Partners LP		273		8
Hess Corp.		548		52
Kinder Morgan, Inc.		475		18
ONEOK, Inc.		268		18
Pembina Pipeline Corp. (a)		1,239		52
Spectra Energy Corp.		1,011		40
TransCanada Corp.		434		22

	Shares		Value (000)
Oil, Gas & Consumable Fuels (cont'd)
Williams Cos., Inc. (The)		1,286	$	71
				344
Pharmaceuticals (1.4%)
Actavis plc (a)		403		97
Allergan, Inc.		568		101
Endo International PLC (a)		1,003		69
Valeant Pharmaceuticals International, Inc. (Canada) (a)		565		74
				341
Real Estate Investment Trusts (REITs) (0.5%)
American Tower Corp. REIT		634		59
Crown Castle International Corp.		793		64
				123
Road & Rail (0.2%)
Avis Budget Group, Inc. (a)		159		9
Hertz Global Holdings, Inc. (a)		1,189		30
				39
Semiconductors & Semiconductor Equipment (0.2%)
Micron Technology, Inc. (a)		1,161		40
Software (1.0%)
Autodesk, Inc. (a)		625		35
Microsoft Corp.		1,210		56
PROS Holdings, Inc. (a)		1,001		25
TIBCO Software, Inc. (a)		5,203		123
				239
Specialty Retail (0.2%)
Restoration Hardware Holdings, Inc. (a)		553		44
Tech Hardware, Storage & Peripherals (0.5%)
Hewlett-Packard Co.		1,545		55
NCR Corp. (a)		1,692		56
				111
Water Utilities (0.7%)
American States Water Co.		1,128		34
American Water Works Co., Inc.		1,573		76
Aqua America, Inc.		1,726		41
California Water Service Group		981		22
				173
Wireless Telecommunication Services (0.1%)
SBA Communications Corp., Class A (a)		201		22
Total Common Stocks (Cost $4,827)				4,881

	Shares		Value (000)
Investment Companies/Mutual Funds (76.1%)
AQR Managed Futures Strategy Fund		78,650	$	832
BlackRock High Yield Portfolio		232,098		1,903
Burnham Financial Long/Short Fund		58,570		834
Deutsche Real Estate Securities Fund		14,879		327
Eaton Vance Floating-Rate Advantaged Fund		163,199		1,789
Franklin Convertible Securities Fund		112,407		2,110
Gotham Absolute Return Fund		114,818		1,566
HSBC Frontier Markets Fund		129,300		2,021
Kayne Anderson Energy Development Co.		741		27
MainStay Marketfield Fund		34,939		589
RBC BlueBay Emerging Market Corporate Bond Fund		110,752		1,111
Robeco Boston Partners Long/Short Research Fund		94,514		1,415
TCW Emerging Markets Local Currency Income Fund		60,195		574
TCW Total Return Bond Fund		94,514		970
Templeton Frontier Markets Fund		103,908		1,986
Total Investment Companies/Mutual Funds (Cost $17,733)				18,054

Foreign Currency Forward Exchange Contracts:

The Fund had the following foreign currency forward exchange contracts open at September 30, 2014:

Counterparty	Currency to Deliver (000)		Value (000)		Settlement Date	In Exchange For (000)		Value (000)		Unrealized Appreciation (Depreciation) (000)
JPMorgan Chase Bank NA	AUD	66	$	58	12/18/14	USD	59	$	59	$	1
JPMorgan Chase Bank NA	EUR	38		49	12/18/14	USD	50		50		1
JPMorgan Chase Bank NA	NOK	461		72	12/18/14	USD	72		72		—	@
JPMorgan Chase Bank NA	NZD	53		41	12/18/14	USD	43		43		2
JPMorgan Chase Bank NA	USD	8		8	12/18/14	CHF	7		8		(—	@)
JPMorgan Chase Bank NA	USD	59		59	12/18/14	JPY	6,276		58		(1	)
State Street Bank and Trust Co.	CHF	83		87	12/18/14	USD	89		89		2
State Street Bank and Trust Co.	JPY	8,151		74	12/18/14	USD	76		76		2
State Street Bank and Trust Co.	USD	77		77	12/18/14	AUD	86		75		(2	)
State Street Bank and Trust Co.	USD	89		89	12/18/14	NOK	573		89		(—	@)
State Street Bank and Trust Co.	USD	92		92	12/18/14	NZD	113		88		(4	)
			$	706				$	707	$	1

Futures Contracts:

The Fund had the following futures contracts open at September 30, 2014:

	Number of Contracts		Value (000)			Expiration Date	Unrealized Appreciation (Depreciation) (000)
Long:
CBOE VIX		2	$	34		Dec-14	$	3
CBOE VIX		3		52		Jan-15		4
CBOE VIX		3		54		Feb-15		3
CBOE VIX		1		18		Mar-15		1
Russell 1000 Value		2		196		Dec-14		(3	)
Short:
CBOE VIX		4		(65	)	Oct-14		(6	)
CBOE VIX		3		(50	)	Nov-14		(2	)
Russell 1000 Growth		2		(184	)	Dec-14		3
S&P 500 E-Mini Future		12		(1,179	)	Dec-14		10
							$	13

Total Return Swap Agreements:

The Fund had the following total return swap agreements open at September 30, 2014:

Swap Counterparty

Index

Notional
Amount
(000)

Floating
Rate

Pay/Receive
Total Return
of Referenced
Index

Maturity
Date

Unrealized
Appreciation
(Depreciation)
(000)

Bank of America NA

Bloomberg
Commodity Index

466

3 Month USD LIBOR minus
0.15%

Receive

9/18/15

(—

JP Morgan
Chase Bank NA

JPM
AIP Short U.S. Index^††

568

3 Month USD LIBOR minus
0.05%

Pay

8/24/15

Societe Generale

Societe Generale
Quant Merger
Arbitrage Index

329

3 Month USD LIBOR plus
0.35%

Receive

5/22/15

(—

††See tables below for details of the equity basket holdings underlying the swap.

The following table represents the equity basket holdings underlying the total return swap with AIP Short U.S. Index as of September 30, 2014.

Security Description	Index Weight
AIP Short U.S. Index
Activision Blizzard Inc		2.35	%
Advance Auto Parts Inc		2.57
Aetna Inc		2.73
Alliance Data Systems Corp		2.47
American Realty Capital Properties Inc		2.46
Avista Corp		2.50
Axiall Corp		2.27
Cabot Oil & Gas Corp		2.59
CareFusion Corp		2.66
Celgene Corp		2.73
Cemex SAB de CV		2.66
Charter Communications Inc		2.53
Chipotle Mexican Grill Inc		2.56
Cigna Corp		2.56
ConocoPhillips		2.53
Crown Holdings Inc		2.49
DTE Energy Co		2.62
Eli Lilly & Co		2.78

Security Description	Index Weight
Endo International PLC		2.84	%
EnerNOC Inc		2.27
FirstEnergy Corp		2.69
Gap Inc/The		2.61
Global Payments Inc		2.57
Interpublic Group of Cos Inc/The		2.40
Kraft Foods Group Inc		2.59
Lennar Corp		2.72
Macy's Inc		2.63
Maxwell Technologies Inc		2.44
National Oilwell Varco Inc		2.42
Netflix Inc		2.54
Northrop Grumman Corp		2.73
PulteGroup Inc		2.47
Quest Diagnostics Inc		2.58
Ralph Lauren Corp		2.62
Regional Management Corp		2.73
SINA Corp/China		2.18
Sirius XM Holdings Inc		2.58
SLM Corp		2.53
WellPoint Inc		2.80
		100.00	%

Statement of Assets and Liabilities	September 30, 2014 (000)
Assets:
Investments in Securities of Unaffiliated Issuers, at Value (Cost $22,560)	$	22,935
Investment in Security of Affiliated Issuer, at Value (Cost $681)		681
Total Investments in Securities, at Value (Cost $23,241)		23,616
Cash		1
Receivable for Variation Margin on Futures Contracts		84
Receivable for Portfolio Shares Sold		51
Unrealized Appreciation on Swap Agreements		24
Dividends Receivable		9
Unrealized Appreciation on Foreign Currency Forward Exchange Contracts		8
Receivable from Affiliate		—	@
Other Assets		24
Total Assets		23,817
Liabilities:
Payable for Professional Fees		32
Payable for Advisory Fees		17
Payable for Swap Agreements Termination		14
Unrealized Depreciation on Foreign Currency Forward Exchange Contracts		7
Payable for Sub Transfer Agency Fees — Class A		2
Payable for Sub Transfer Agency Fees — Class I		3
Payable for Sub Transfer Agency Fees — Class C		—	@
Payable for Shareholder Services Fees — Class A		1
Payable for Distribution and Shareholder Services Fees — Class C		2
Payable for Administration Fees		2
Payable for Transfer Agent Fees — Class A		1
Payable for Transfer Agent Fees — Class I		—	@
Payable for Transfer Agent Fees — Class C		—	@
Payable for Transfer Agent Fees — Class IS		—	@
Payable for Custodian Fees		—	@
Unrealized Depreciation on Swap Agreements		—	@
Other Liabilities		18
Total Liabilities		99
Net Assets	$	23,718
Net Assets Consist of:
Paid-in-Capital	$	24,104
Distributions in Excess of Net Investment Income		(162	)
Accumulated Net Realized Loss		(637	)
Unrealized Appreciation (Depreciation) on:
Investments		375
Futures Contracts		13
Swap Agreements		24
Foreign Currency Forward Exchange Contracts		1
Foreign Currency Translations		(—	@)
Net Assets	$	23,718

Statement of Assets and Liabilities (cont'd)	September 30, 2014 (000)
CLASS A:
Net Assets	$	3,074
Shares Outstanding (unlimited number of shares authorized, $0.01 par value) (not in 000's)		316,317
Net Asset Value, Redemption Price Per Share	$	9.72
Maximum Sales Load		5.50	%
Maximum Sales Charge	$	0.57
Maximum Offering Price Per Share	$	10.29
CLASS C:
Net Assets	$	2,939
Shares Outstanding (unlimited number of shares authorized, $0.01 par value) (not in 000's)		305,054
Net Asset Value, Offering and Redemption Price Per Share	$	9.63
CLASS I:
Net Assets	$	16,440
Shares Outstanding (unlimited number of shares authorized, $0.01 par value) (not in 000's)		1,686,780
Net Asset Value, Offering and Redemption Price Per Share	$	9.75
CLASS IS:
Net Assets	$	1,265
Shares Outstanding (unlimited number of shares authorized, $0.01 par value) (not in 000's)		129,729
Net Asset Value, Offering and Redemption Price Per Share	$	9.75

@ Amount is less than $500.

Statement of Operations	Six Months Ended September 30, 2014 (000)
Investment Income:
Dividends from Securities of Unaffiliated Issuers (Net of $—@ of Foreign Taxes Withheld)	$	210
Dividends from Security of Affiliated Issuer (Note G)		—	@
Total Investment Income		210
Expenses:
Advisory Fees (Note B)		63
Professional Fees		59
Offering Costs		20
Shareholder Services Fees — Class A (Note D)		4
Distribution and Shareholder Services Fees — Class C (Note D)		14
Registration Fees		17
Shareholder Reporting Fees		14
Custodian Fees (Note F)		11
Administration Fees (Note C)		10
Sub Transfer Agency Fees — Class A		2
Sub Transfer Agency Fees — Class C		3
Sub Transfer Agency Fees — Class I		—	@
Pricing Fees		5
Transfer Agency Fees — Class A (Note E)		1
Transfer Agency Fees — Class C (Note E)		1
Transfer Agency Fees — Class I (Note E)		1
Transfer Agency Fees — Class IS (Note E)		1
Trustees' Fees and Expenses		1
Other Expenses		3
Total Expenses		230
Waiver of Advisory Fees (Note B)		(62	)
Reimbursement of Class Specific Expenses — Class A (Note B)		(1	)
Reimbursement of Class Specific Expenses — Class C (Note B)		(2	)
Reimbursement of Class Specific Expenses — Class IS (Note B)		(1	)
Rebate from Morgan Stanley Affiliate (Note G)		(—	@)
Net Expenses		164
Net Investment Income		46
Realized Gain (Loss):
Investments Sold		558
Foreign Currency Forward Exchange Contracts		1
Foreign Currency Transactions		(—	@)
Futures Contracts		(535	)
Swap Agreements		(50	)
Net Realized Loss		(26	)
Change in Unrealized Appreciation (Depreciation):
Investments		(260	)
Foreign Currency Forward Exchange Contracts		(7	)
Foreign Currency Translations		(—	@)
Futures Contracts		86
Swap Agreements		19
Net Change in Unrealized Appreciation (Depreciation)		(162	)
Net Realized Loss and Change in Unrealized Appreciation (Depreciation)		(188	)
Net Decrease in Net Assets Resulting from Operations	$	(142	)

@ Amount is less than $500.

Statements of Changes in Net Assets	Six Months Ended September 30, 2014 (unaudited) (000)			Period From April 30, 2013^ to March 31, 2014 (000)
Increase (Decrease) in Net Assets:
Operations:
Net Investment Income	$	46		$	206
Net Realized Loss		(26	)		(626	)
Net Change in Unrealized Appreciation (Depreciation)		(162	)		575
Net Increase (Decrease) in Net Assets Resulting from Operations		(142	)		155
Distributions from and/or in Excess of:
Class A:
Net Investment Income		—			(43	)
Paid-in-Capital		—			(16	)
Class C:
Net Investment Income		—			(29	)
Paid-in-Capital		—			(14	)
Class I:
Net Investment Income		—			(320	)
Paid-in-Capital		—			(110	)
Class IS:
Net Investment Income		—			(7	)
Paid-in-Capital		—			(3	)
Total Distributions		—			(542	)
Capital Share Transactions: ⁽¹⁾
Class A:
Subscribed		210			3,871
Distributions Reinvested		—			57
Redeemed		(760	)		(236	)
Class C:
Subscribed		517			2,881
Distributions Reinvested		—			41
Redeemed		(360	)		(92	)
Class I:
Subscribed		1,474			36,606
Distributions Reinvested		—			232
Redeemed		(2,696	)		(18,785	)
Class IS:
Subscribed		94			1,842
Distributions Reinvested		—			8
Redeemed		(60	)		(597	)
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions		(1,581	)		25,828
Total Increase (Decrease) in Net Assets		(1,723	)		25,441
Net Assets:
Beginning of Period		25,441			—
End of Period (Including Distributions in Excess of Net Investment Income of $(162) and $(208))	$	23,718		$	25,441
(1) Capital Share Transactions:
Class A:
Shares Subscribed		21			390
Shares Issued on Distributions Reinvested		—			6
Shares Redeemed		(77	)		(24	)
Net Increase (Decrease) in Class A Shares Outstanding		(56	)		372
Class C:
Shares Subscribed		53			294
Shares Issued on Distributions Reinvested		—			4
Shares Redeemed		(37	)		(9	)
Net Increase in Class C Shares Outstanding		16			289
Class I:
Shares Subscribed		149			3,701
Shares Issued on Distributions Reinvested		—			23
Shares Redeemed		(275	)		(1,912	)
Net Increase (Decrease) in Class I Shares Outstanding		(126	)		1,812
Class IS:
Shares Subscribed		9			185
Shares Issued on Distributions Reinvested		—			1
Shares Redeemed		(6	)		(60	)
Net Increase in Class IS Shares Outstanding		3			126

^ Commencement of Operations.

	Class A
Selected Per Share Data and Ratios	Six Months Ended September 30, 2014 (unaudited)			Period From April 30, 2013^ to March 31, 2014
Net Asset Value, Beginning of Period	$	9.78		$	10.00
Income (Loss) from Investment Operations:
Net Investment Income†		0.01			0.06
Net Realized and Unrealized Loss		(0.07	)		(0.09	)
Total from Investment Operations		(0.06	)		(0.03	)
Distributions from and/or in Excess of:
Net Investment Income		—			(0.14	)
Paid-in-Capital		—			(0.05	)
Total Distributions		—			(0.19	)
Net Asset Value, End of Period	$	9.72		$	9.78
Total Return++		(0.61	)%#		(0.32	)%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	3,074		$	3,643
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.50	%+††*		1.50	%+*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		0.22	%+††*		0.69	%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§††*		0.00	%§*
Portfolio Turnover Rate		95	%#		183	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		2.07	%††*		2.72	%*
Net Investment Loss to Average Net Assets		(0.35	)%††*		(0.53	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value, which does not reflect sales charges, if applicable, as of the last business day of the period.

+ The Ratios of Expenses and Net Investment Income reflect the rebate of certain Fund expenses in connection with the investments in Morgan Stanley affiliates during the period. The effect of the rebate on the ratios is disclosed in the above table as "Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets."

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

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

	Class C
Selected Per Share Data and Ratios	Six Months Ended September 30, 2014 (unaudited)			Period From April 30, 2013^ to March 31, 2014
Net Asset Value, Beginning of Period	$	9.73		$	10.00
Income (Loss) from Investment Operations:
Net Investment Income (Loss)†		(0.03	)		0.01
Net Realized and Unrealized Loss		(0.07	)		(0.12	)
Total from Investment Operations		(0.10	)		(0.11	)
Distributions from and/or in Excess of:
Net Investment Income		—			(0.11	)
Paid-in-Capital		—			(0.05	)
Total Distributions		—			(0.16	)
Net Asset Value, End of Period	$	9.63		$	9.73
Total Return++		(1.03	)%#		(1.10	)%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	2,939		$	2,809
Ratio of Expenses to Average Net Assets ⁽¹⁾		2.25	%+††*		2.25	%+*
Ratio of Net Investment Income (Loss) to Average Net Assets ⁽¹⁾		(0.53	)%+††*		0.09	%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§††*		0.00	%§*
Portfolio Turnover Rate		95	%#		183	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		2.93	%††*		3.39	%*
Net Investment Loss to Average Net Assets		(1.21	)%††*		(1.05	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

++ Calculated based on the net asset value, which does not reflect sales charges, if applicable, as of the last business day of the period.

+ The Ratios of Expenses and Net Investment Income (Loss) reflect the rebate of certain Fund expenses in connection with the investments in Morgan Stanley affiliates during the period. The effect of the rebate on the ratios is disclosed in the above table as "Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets."

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

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

	Class I
Selected Per Share Data and Ratios	Six Months Ended September 30, 2014 (unaudited)			Period From April 30, 2013^ to March 31, 2014
Net Asset Value, Beginning of Period	$	9.79		$	10.00
Income (Loss) from Investment Operations:
Net Investment Income†		0.03			0.09
Net Realized and Unrealized Loss		(0.07	)		(0.10	)
Total from Investment Operations		(0.04	)		(0.01	)
Distributions from and/or in Excess of:
Net Investment Income		—			(0.15	)
Paid-in-Capital		—			(0.05	)
Total Distributions		—			(0.20	)
Net Asset Value, End of Period	$	9.75		$	9.79
Total Return++		(0.51	)%#		(0.07	)%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	16,440		$	17,750
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.16	%+††*		1.15	%+*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		0.56	%+††*		1.05	%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§††*		0.00	%§*
Portfolio Turnover Rate		95	%#		183	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		1.67	%††*		2.27	%*
Net Investment Income (Loss) to Average Net Assets		0.05	%††*		(0.07	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

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

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

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

	Class IS
Selected Per Share Data and Ratios	Six Months Ended September 30, 2014 (unaudited)			Period From April 30, 2013^ to March 31, 2014
Net Asset Value, Beginning of Period	$	9.80		$	10.00
Income (Loss) from Investment Operations:
Net Investment Income†		0.03			0.06
Net Realized and Unrealized Loss		(0.08	)		(0.06	)
Total from Investment Operations		(0.05	)		0.00	‡
Distributions from and/or in Excess of:
Net Investment Income		—			(0.15	)
Paid-in-Capital		—			(0.05	)
Total Distributions		—			(0.20	)
Net Asset Value, End of Period	$	9.75		$	9.80
Total Return++		(0.51	)%#		0.03	%#
Ratios and Supplemental Data:
Net Assets, End of Period (Thousands)	$	1,265		$	1,239
Ratio of Expenses to Average Net Assets ⁽¹⁾		1.15	%+††*		1.15	%+*
Ratio of Net Investment Income to Average Net Assets ⁽¹⁾		0.57	%+††*		0.71	%+*
Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets		0.00	%§††*		0.00	%§*
Portfolio Turnover Rate		95	%#		183	%#
⁽¹⁾ Supplemental Information on the Ratios to Average Net Assets:
Ratios Before Expense Limitation:
Expenses to Average Net Assets		1.79	%††*		2.47	%*
Net Investment Loss to Average Net Assets		(0.07	)%††*		(0.61	)%*

^ Commencement of Operations.

† Per share amount is based on average shares outstanding.

‡ Amount is less than $0.005 per share.

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

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

§ Amount is less than 0.005%.

# Not Annualized.

* Annualized.

AIP Dynamic Alternative Strategies Fund (the "Fund") was organized as a separate non-diversified Fund of the AIP Series Trust, a Delaware statutory trust, which was registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company and commenced operations on April 30, 2013. The Fund applies investment company accounting and reporting guidance.

The Fund, under normal market conditions, seeks to achieve its investment objective of long-term capital appreciation with an emphasis on absolute returns and controlling downside risk by allocating the Fund's investments to (i) non-traditional asset classes; (ii) alternative mutual fund strategies; and (iii) Morgan Stanley AIP GP LP's (the "Adviser") proprietary hedge fund replication strategy. The Fund will gain exposure to alternative mutual fund strategies and non-traditional asset classes by investing in funds advised by unaffiliated investment advisers and, to a lesser extent, the Adviser or its affiliates (the "Underlying Funds"). The Fund will invest directly in securities and derivatives to effect the Adviser's proprietary hedge fund replication strategy. The Fund offers four classes of shares — Class A, Class C, Class I and Class IS.

A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Fund in the preparation of its financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.

1. Security Valuation: (1) Investments in Underlying Funds are valued at the net asset value per share of each Underlying Fund determined as of the close of the New York Stock Exchange ("NYSE") on valuation date; (2) an equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), if there were no sales on a given day, the security is valued at the mean between the last reported bid and asked prices; (3) futures are valued at the latest price published by the commodities exchange on which they trade; (4) swaps are marked-to-market daily based upon quotations from market makers; (5) when market quotations are not readily available, including circumstances under which the Adviser determines that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of 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 Board of Trustees (the "Trustees"). Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business of the NYSE. If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Trustees or by the Adviser using a pricing service and/or procedures approved by the Trustees; (6) quotations of foreign portfolio securities, other assets and liabilities and forward contracts stated in foreign currency are translated into U.S. dollar equivalents at the prevailing market rates prior to the close of the NYSE; (7) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value as of the close of each business day; and (8) short-term debt securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, unless the Trustees determine such valuation does not reflect the securities' market value, in which case these securities will be valued at their fair market value determined in good faith under procedures adopted by the Trustees.

Under procedures approved by the Trustees, the Fund's Adviser has formed a Valuation Committee. The Valuation Committee provides administration and oversight of the Fund's valuation policies and procedures, which are reviewed at least annually by the Trustees. These procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available. Under these procedures, the Valuation Committee convenes on a regular and ad hoc basis to review such securities and considers a number of factors, including valuation methodologies and significant unobservable valuation inputs, when arriving at fair value. The Valuation Committee may employ a market-based approach which may use related or

comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The Valuation Committee employs various methods for calibrating these valuation approaches including a regular review of valuation methodologies, key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

2. Fair Value Measurement: Financial Accounting Standards Board ("FASB") Accounting Standards Codification^TM ("ASC") 820, "Fair Value Measurements" ("ASC 820"), defines fair value as the value that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below.

• Level 1 – unadjusted quoted prices in active markets for identical investments

• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

• Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.

The following is a summary of the inputs used to value the Fund's investments as of September 30, 2014.

Investment Type	Level 1 Unadjusted quoted prices (000)		Level 2 Other significant observable inputs (000)		Level 3 Significant unobservable inputs (000)		Total (000)
Assets:
Common Stocks
Aerospace & Defense	$	150	$	—	$	—	$	150
Airlines		23		—		—		23
Auto Components		79		—		—		79
Automobiles		24		—		—		24
Banks		103		—		—		103
Beverages		56		—		—		56
Biotechnology		62		—		—		62
Building Products		111		—		—		111
Capital Markets		554		—		—		554
Chemicals		88		—		—		88
Communications Equipment		113		—		—		113
Containers & Packaging		52		—		—		52
Diversified Consumer Services		44		—		—		44
Diversified Financial Services		202		—		—		202
Diversified Telecommunication Services		85		—		—		85
Electric Utilities		205		—		—		205
Electrical Equipment		53		—		—		53
Energy Equipment & Services		74		—		—		74
Gas Utilities		123		—		—		123
Health Care Equipment & Supplies		52		—		—		52
Health Care Providers & Services		37		—		—		37
Health Care Technology		16		—		—		16

Investment Type	Level 1 Unadjusted quoted prices (000)			Level 2 Other significant observable inputs (000)			Level 3 Significant unobservable inputs (000)		Total (000)
Common Stocks (cont'd)
Hotels, Restaurants & Leisure	$	69		$	—		$	—	$	69
Information Technology Services		49			—			—		49
Insurance		8			—			—		8
Internet & Catalog Retail		129			—			—		129
Internet Software & Services		80			—			—		80
Machinery		97			—			—		97
Media		421			—			—		421
Multi-Utilities		205			—			—		205
Multi-line Retail		41			—			—		41
Oil, Gas & Consumable Fuels		344			—			—		344
Pharmaceuticals		341			—			—		341
Real Estate Investment Trusts (REITs)		123			—			—		123
Road & Rail		39			—			—		39
Semiconductors & Semiconductor Equipment		40			—			—		40
Software		239			—			—		239
Specialty Retail		44			—			—		44
Tech Hardware, Storage & Peripherals		111			—			—		111
Water Utilities		173			—			—		173
Wireless Telecommunication Services		22			—			—		22
Total Common Stocks		4,881			—			—		4,881
Investment Companies/Mutual Funds		18,054			—			—		18,054
Short-Term Investment
Investment Company		681			—			—		681
Foreign Currency Forward Exchange Contracts		—			8			—		8
Futures Contracts		24			—			—		24
Total Return Swap Agreement		—			24			—		24
Total Assets		23,640			32			—		23,672
Liabilities:
Foreign Currency Forward Exchange Contracts		—			(7	)		—		(7	)
Futures Contracts		(11	)		—			—		(11	)
Total Liabilities		(11	)		(7	)		—		(18	)
Total	$	23,629		$	25		$	—	$	23,654

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes. The Fund recognizes transfers between the levels as of the end of the period. As of September 30, 2014, the Fund did not have any investments transfer between investment levels.

3. Foreign Currency Translation and Foreign Investments: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:

– investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;

– investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.

Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, 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 fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. Federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. Federal income tax purposes.

Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of unrealized appreciation (depreciation) on the Statement of Assets and Liabilities. The change in unrealized currency gains (losses) on foreign currency translations for the period is reflected in the Statement of Operations.

Foreign security and currency transactions may involve certain considerations and risks not typically associated

with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

Governmental approval for foreign investments may be required in advance of making an investment under certain circumstances in some countries, and the extent of foreign investments in domestic companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations of foreign investment limitations. As a result, an additional class of shares (identified as "Foreign" in the Portfolio of Investments) may be created and offered for investment. The "local" and "foreign shares" market values may differ. In the absence of trading of the foreign shares in such markets, the Fund values the foreign shares at the closing exchange price of the local shares.

4. Derivatives: The Fund may, but is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. Derivatives are financial instruments whose value is based, in part, on the value of an underlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, also affect the value of derivative instruments. A derivative instrument often has risks similar to its underlying asset and may have additional risks, including imperfect correlation between the value of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates, risks that the transactions may not be liquid and risks arising from margin requirements. The use of derivatives involves risks that are different from, and possibly greater than, the risks associated with other portfolio investments. Derivatives may involve the use of highly specialized instruments that require investment techniques and risk analyses different from those associated with other portfolio investments. All of the Fund's holdings, including derivative instruments, are marked-to-market each day with the change in value reflected in unrealized appreciation

(depreciation). Upon disposition, a realized gain or loss is recognized.

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

Following is a description of the derivative instruments and techniques that the Fund used during the period and their associated risks:

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

Swaps: The Fund may enter into over-the-counter ("OTC") swap contracts or cleared swap transactions. A swap contract is an agreement between two parties pursuant to which the parties exchange payments at specified dates on the basis of a specified notional amount, with the payments calculated by reference to specified securities, indices, reference rates, currencies or other instruments. Typically swap agreements provide that when the period payment dates for both parties are the same, the payments are made on a net basis (i.e., the two payment streams are netted out, with only the net amount paid by one party to the other). The Fund's obligations or rights under a swap contract entered into on a net basis will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each party. Cleared swap transactions may help reduce counterparty credit risk. In a cleared swap, the Fund's ultimate counterparty is a clearinghouse rather than a bank, dealer or other financial institution. OTC swap agreements are not entered into or traded on exchanges and often there is no central clearing or guaranty function for OTC swaps. These OTC swaps are often subject to credit risk or the risk of default or non-performance by the counterparty. Both OTC and cleared swaps could result in losses if interest rates, foreign currency exchange rates or other factors are not correctly anticipated by the Fund or if the reference index, security or investments do not perform as expected. During the period swap agreements are open, payments are received from or made to the clearinghouse or counterparty based upon changes in the value of the contract (variation margin). The Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulatory developments require the clearing and exchange-trading of certain standardized swap transactions. Mandatory exchange-trading and clearing is occurring on a phased-in basis.

When the Fund has an unrealized loss on a swap agreement, the Fund has instructed the custodian to pledge cash or liquid securities as collateral with a value approximately equal to the amount of the unrealized loss. Collateral pledges are monitored and subsequently adjusted if and when the swap valuations fluctuate. If applicable, cash collateral is included with "Due from (to) Broker" in the Statement of Assets and Liabilities.

Foreign Currency Forward Exchange Contracts: In connection with its investments in foreign securities, the Fund also entered into contracts with banks, brokers or dealers to purchase or sell securities or foreign currencies at a future date. A foreign currency forward exchange contract ("currency contract") is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the contract. Currency contracts may be used to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. To the extent hedged by the use of currency contracts, the precise matching of the currency contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Furthermore, such transactions reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is additional risk to the extent that currency contracts create exposure to currencies in which the Fund's securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. The use of currency contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract. A currency contract is marked-to-market daily and the change in market value is recorded by the Fund as unrealized gain or loss. The Fund records realized gains (losses) when the currency contract is closed equal to the difference between the value of the currency contract at the time it was opened and the value at the time it was closed.

FASB ASC 815, "Derivatives and Hedging" ("ASC 815"), is intended to improve financial reporting about derivative instruments by requiring enhanced disclosures to enable investors to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their

effects on the Fund's financial position and results of operations.

The following tables set forth the fair value of the Fund's derivative contracts by primary risk exposure as of September 30, 2014.

Asset Derivatives
Statement of Assets and
Liabilities Location

Primary Risk
Exposure

Value
(000)

Foreign Currency
Forward Exchange
Contracts

Unrealized Appreciation on
Foreign Currency
Forward Exchange Contracts

Currency Risk

Futures Contracts

Variation Margin on
Futures Contracts

Equity Risk

(a)

Swap Agreements

Unrealized Appreciation on
Swap Agreements

Equity Risk

Total

Liability Derivatives
Statement of Assets and
Liabilities Location

Primary Risk
Exposure

Value
(000)

Foreign Currency
Forward Exchange
Contracts

Unrealized Depreciation on
Currency Forward
Foreign Exchange Contracts

Currency Risk

)

Futures Contracts

Variation Margin on
Futures Contracts

Equity Risk

(11

)(a)

Swap Agreements

Unrealized Depreciation on
Swap Agreements

Commodity Risk

(—

Swap Agreements

Unrealized Depreciation on
Swap Agreements

Equity Risk

(—

Total

(18

)

@ Amount is less than $500.

(a) This amount represents the cumulative appreciation (depreciation) as reported in the Portfolio of Investments. The Statement of Assets and Liabilities only reflects the current day's net variation margin.

The following tables set forth by primary risk exposure the Fund's realized gains (losses) and change in unrealized appreciation (depreciation) by type of derivative contract for the six months ended September 30, 2014 in accordance with ASC 815.

Realized Gain (Loss)
Primary Risk Exposure	Derivative Type	Value (000)
Currency Risk	Foreign Currency Forward Exchange Contracts	$	1
Equity Risk	Futures Contracts		(535	)
Commodity Risk	Swap Agreements		(15	)
Equity Risk	Swap Agreements		(35	)
	Total	$	(584	)
Change in Unrealized Appreciation (Depreciation)
Primary Risk Exposure	Derivative Type	Value (000)
Currency Risk	Foreign Currency Forward Exchange Contracts	$	(7	)
Equity Risk	Futures Contracts		86
Commodity Risk	Swap Agreements		(—	@)
Equity Risk	Swap Agreements		19
	Total	$	98

@ Amount is less than $500.

At September 30, 2014, the Fund's derivative assets and liabilities are as follows:

Gross Amounts of Assets and Liabilities Presented in the Statement of Assets and Liabilities
Derivatives(b)	Assets(c) (000)		Liabilities(c) (000)
Foreign Currency Forward Exchange Contracts	$	8	$	(7	)
Swap Agreements		24		(—	@)
Total	$	32	$	(7	)

@ Amount is less than $500.

(b) Excludes exchange traded derivatives.

(c) Absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.

The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its contract counterparties for certain OTC derivatives in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain OTC derivative financial instruments' payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default, termination and/or potential deterioration in the credit quality of the counterparty. Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as swap, forward, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Fund and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party and may be a feature in certain Master Agreements. In the event the Fund exercises its right to terminate a Master Agreement after a counterparty experiences a termination event as defined in the Master Agreement, the return of collateral with market value in excess of the Fund's net liability may be delayed or denied.

The following tables present derivative financial instruments that are subject to enforceable netting arrangements as of September 30, 2014.

Gross Amounts Not Offset in the Statement of Assets and Liabilities
Counterparty	Gross Asset Derivatives Presented in Statement of Assets and Liabilities (000)			Financial Instrument (000)			Collateral Received (000)		Net Amount (not less than $0) (000)
JPMorgan Chase Bank NA	$	28		$	(1	)	$	—	$	27
State Street Bank and Trust Co.		4			(4	)		—		0
Total	$	32		$	(5	)	$	—	$	27
Gross Amounts Not Offset in the Statement of Assets and Liabilities
Counterparty	Gross Liability Derivatives Presented in Statement of Assets and Liabilities (000)			Financial Instrument (000)			Collateral Pledged (000)		Net Amount (not less than $0) (000)
JPMorgan Chase Bank NA	$	1		$	(1	)	$	—	$	0
Societe Generale		—	@		—			—		—	@
State Street Bank and Trust Co.		6			(4	)		—		2
Total	$	7		$	(5	)	$	—	$	2

@ Amount is less than $500.

For the six months ended September 30, 2014, the approximate average monthly amount outstanding for each derivative type is as follows:

Foreign Currency Forward Exchange Contracts:
Average monthly principal amount	$	1,148,000
Futures Contracts:
Average monthly original value	$	6,311,000
Swap Agreements:
Average monthly notional amount...	$	1,123,000

5. Indemnifications: The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

6. Dividends and Distributions to Shareholders: Dividend income and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid semiannually. Net realized capital gains, if any, are distributed at least annually.

7. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date

(date the order to buy or sell is executed). Realized gains and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date (except for certain foreign dividends which may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes. Interest income is recognized on the accrual basis except where collection is in doubt. Discounts are accreted and premiums are amortized over the life of the respective securities. Most expenses of the Fund can be directly attributed to the Fund. Expenses which cannot be directly attributed are apportioned based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses — distribution, transfer agency and sub transfer agency fees) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.

The Fund owns shares of real estate investment trusts ("REITs") which report information on the source of their distributions annually in the following calendar year. A portion of distributions received from REITs during the year is estimated to be a return of capital and is recorded as a reduction of their cost.

B. Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Fund with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at an annual rate of 0.52% of the Fund's average daily net assets.

The Adviser has agreed to reduce its advisory fee and/or reimburse the Fund so that total annual operating expenses, excluding acquired fund fees and expenses, certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.50% for Class A shares, 2.25% for Class C shares, 1.25% for Class I shares and 1.15% for Class IS shares. The fee waivers and/or expense reimbursements will continue for at least one year or until such time that the Trustees act to discontinue all or a portion of such waivers and/or reimbursements when they deem such action is appropriate. For the six months ended September 30, 2014, approximately $62,000 of advisory fees were waived and approximately $4,000 of other expenses were reimbursed by the Adviser pursuant to this arrangement.

C. Administration Fees: Morgan Stanley Investment Management Inc. ("MSIM Inc."), a wholly-owned subsidiary of

Morgan Stanley, serves as Administrator to the Fund and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund's average daily net assets. Under a Sub-Administration Agreement between the Administrator and State Street Bank and Trust Company ("State Street"), State Street provides certain administrative services to the Fund. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.

D. Distribution and Shareholder Services Fees: Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"), a wholly-owned subsidiary of Morgan Stanley, serves as the Fund's Distributor of the Fund's shares pursuant to a Distribution Agreement. The Fund has adopted a Plan of Distribution (the "Plan") with respect to Class A and Class C shares pursuant to Rule 12b-1 under the Act. Under the Plan, the Fund pays the Distributor a shareholder services fee, accrued daily and paid monthly, at an annual rate of 0.25% of the Fund's average daily net assets attributable to Class A and 1.00 % of the Fund's average daily net assets attributable to Class C shares, of which 0.75% is a distribution fee.

The distribution and shareholder services fees are used to support the expenses associated with servicing and maintaining accounts. The Distributor may compensate other parties for providing shareholder support services to investors who purchase Class A and Class C shares.

The Distributor has informed the Fund that for the six months ended September 30, 2014, it received approximately $20,000 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.

E. Dividend Disbursing and Transfer Agent: The Fund's dividend disbursing and transfer agent is Boston Financial Data Services, Inc. ("BFDS"). Pursuant to a Transfer Agency Agreement, the Fund pays BFDS a fee based on the number of classes, accounts and transactions relating to the Fund.

F. Custodian Fees: State Street (the "Custodian") serves as Custodian for the Fund in accordance with a Custodian Agreement. The Custodian holds cash, securities, and other assets of the Fund as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.

G. Security Transactions and Transactions with Affiliates: For the six months ended September 30, 2014, purchases and sales of investment securities for the Fund, other than long-term U.S. Government securities and short-term investments, were approximately $22,368,000 and $24,656,000, respectively. There were no purchases and sales of long-term U.S. Government securities for the six months ended September 30, 2014.

The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio (the "Liquidity Funds"), an open-end management investment company managed by MSIM Inc. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended September 30, 2014, advisory fees paid were reduced by less than $500 relating to the Fund's investment in the Liquidity Funds.

A summary of the Fund's transactions in shares of the Liquidity Funds during the six months ended September 30, 2014 is as follows:

Value March 31, 2014 (000)				Purchases at Cost (000)				Sales (000)				Dividend Income (000)				Value September 30, 2014 (000)
$	187			$	16,154			$	15,660			$	—	@		$	681

@ Amount is less than $500.

The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Trustee to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Trustees. Each eligible Trustee generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund.

H. Federal Income Taxes: It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for Federal income taxes is required in the financial statements.

The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income

and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.

FASB ASC 740-10, Income Taxes — Overall, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states.

The tax character of distributions paid may differ from the character of distributions shown in the Statement of Changes in Net Assets due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal year 2014 was as follows:

2014 Distributions Paid From:
Ordinary Income (000)		Paid-in-Capital (000)
$	399	$	143

The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.

Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.

Permanent differences, primarily due to differing treatments of gains (losses) related to foreign currency transactions, swap in-

AN IMPORTANT NOTICE CONCERNING OUR U.S. PRIVACY POLICY

This privacy notice describes the U.S. privacy policy of Morgan Stanley Distribution, Inc., and the Morgan Stanley family of mutual funds ("us", "our", "we").

We are required by federal law to provide you with notice of our U.S. privacy policy ("Policy"). This Policy applies to both our current and former clients unless we state otherwise and is intended for individual clients who purchase products or receive services from us for personal, family or household purposes. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders, nor is this Policy applicable to individuals who are either beneficiaries of a trust for which we serve as trustee or participants in an employee benefit plan administered or advised by us. This Policy is, however, applicable to individuals who select us to be a custodian of securities or assets in individual retirement accounts, 401(k) accounts, or accounts subject to the Uniform Gifts to Minors Act.

This notice sets out our business practices to protect your privacy; how we collect and share personal information about you; and how you can limit our sharing or certain uses by others of this information. We may amend this Policy at any time, and will inform you of any changes to our Policy as required by law.

WE RESPECT YOUR PRIVACY

We appreciate that you have provided us with your personal financial information and understand your concerns about your information. We strive to safeguard the information our clients entrust to us. Protecting the confidentiality and security of client information is an important part of how we conduct our business.

This notice describes what personal information we collect about you, how we collect it, when we may share it with others, and how certain others may use it. It discusses the steps you may take to limit our sharing of certain information about you with our affiliated companies, including, but not limited to our affiliated banking businesses, brokerage firms and credit service affiliates. It also discloses how you may limit our affiliates' use of shared information for marketing purposes.

Throughout this Policy, we refer to the nonpublic information that personally identifies you as "personal information." We also use the term "affiliated company" in this notice. An affiliated company is a company in our family of companies and includes companies with the Morgan Stanley name. These affiliated companies are financial institutions such as broker-dealers, banks, investment advisers and credit card issuers. We refer to any company that is not an affiliated company as a nonaffiliated third party. For purposes of Section 5 of this notice, and your ability to limit certain uses of personal information by our affiliates, this notice applies to the use of personal information by our affiliated companies.

1. WHAT PERSONAL INFORMATION DO WE COLLECT FROM YOU?

We may collect the following types of information about you: (i) information provided by you, including information from applications and other forms we receive from you, (ii) information about your transactions with us or our affiliates, (iii) information about your transactions with nonaffiliated third parties, (iv) information from consumer reporting agencies, (v) information obtained from our websites, and (vi) information obtained from other sources. For example:

• We collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us.

• We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources.

• We may obtain information about your creditworthiness and credit history from consumer reporting agencies.

• We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements.

2. WHEN DO WE DISCLOSE PERSONAL INFORMATION WE COLLECT ABOUT YOU?

We may disclose personal information we collect about you in each of the categories listed above to affiliated and nonaffiliated third parties.

a. Information We Disclose to Affiliated Companies. We may disclose personal information that we collect about you to our affiliated companies to manage your account(s) effectively, to service and process your transactions, and to let you know about products and services offered by us and affiliated companies, to manage our business, and as otherwise required or permitted by law. Offers for products and services from affiliated companies are developed under conditions designed to safeguard your personal information.

b. Information We Disclose to Third Parties. We may disclose personal information that we collect about you to nonaffiliated third parties to provide marketing services on our behalf or to other financial institutions with whom we have joint marketing agreements. We may also disclose all of the information we collect to other nonaffiliated third parties for our everyday business purposes, such as to process transactions, maintain account(s), respond to court orders and legal investigations, report to credit bureaus, offer our own products and services, protect against fraud, for institutional risk control, to perform services on our behalf, and as otherwise required or permitted by law.

When we share personal information about you with a nonaffiliated third party, they are required to limit their use of personal information about you to the particular purpose for which it was shared and they are not allowed to share personal information about you with others except to fulfill that limited purpose or as may be permitted or required by law.

3. HOW DO WE PROTECT THE SECURITY AND CONFIDENTIALITY OF PERSONAL INFORMATION WE COLLECT ABOUT YOU?

We maintain physical, electronic and procedural security measures that comply with applicable law and regulations to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information by employees. Third parties that provide support or marketing services on our behalf may also receive personal information about you, and we require them to adhere to appropriate security standards with respect to such information.

4. HOW CAN YOU LIMIT OUR SHARING CERTAIN PERSONAL INFORMATION ABOUT YOU WITH OUR AFFILIATED COMPANIES FOR ELIGIBILITY DETERMINATION?

By following the opt-out procedures in Section 6 below, you may limit the extent to which we share with our affiliated companies, personal information that was collected to determine your eligibility for products and services such as your credit reports and other information that you have provided to us or that we may obtain from third parties ("eligibility information"). Eligibility information does not include your identification information or personal information pertaining to our transactions or experiences with you. Please note that, even if you direct us not to share eligibility information with our affiliated companies, we may still share your personal information, including eligibility information, with our affiliated companies under circumstances that are permitted under applicable law, such as to process transactions or to service your account.

5. HOW CAN YOU LIMIT THE USE OF CERTAIN PERSONAL INFORMATION ABOUT YOU BY OUR AFFILIATED COMPANIES FOR MARKETING?

By following the opt-out instructions in Section 6 below, you may limit our affiliated companies from marketing their products or services to you based on personal information we disclose to them. This information may include, for example, your income and account history with us. Please note that, even if you choose to limit our affiliated companies from using personal information about you that we may share with them for marketing their products and services to you, our affiliated companies may use your personal information that they obtain from us to market to you in circumstances permitted by law, such as if the affiliated party has its own relationship with you.

6. HOW CAN YOU SEND US AN OPT-OUT INSTRUCTION?

If you wish to limit our sharing of eligibility information about you with our affiliated companies, or our affiliated companies' use of personal information for marketing purposes, as described in this notice, you may do so by:

• Calling us at (800) 548-7786
Monday–Friday between 8a.m. and 6p.m. (EST)

• Writing to us at the following address:

Boston Financial Data Services, Inc.
c/o Privacy Coordinator
P.O. Box 219804
Kansas City, Missouri 64121

If you choose to write to us, your request should include: your name, address, telephone number and account number(s) to which the opt-out applies and whether you are opting out with respect to sharing of eligibility information (Section 4 above), or information used for marketing (Section 5 above), or both. Written opt-out requests should not be sent with any other correspondence. In order to process your request, we require that the request be provided by you directly and not through a third party. Once you have informed us about your privacy preferences, your opt-out preference will remain in effect with respect to this Policy (as it may be amended) until you notify us otherwise. If you are a joint account owner, we will accept instructions from any one of you and apply those instructions to the entire account.

Please understand that if you limit our sharing or our affiliated companies' use of personal information, you and any joint account holder(s) may not receive information about our affiliated companies' products and services, including products or services that could help you manage your financial resources and achieve your investment objectives.

If you have more than one account or relationship with us, please specify the accounts to which you would like us to apply your privacy choices. If you have accounts or relationships with our affiliates, you may receive multiple privacy policies from them, and will need to separately notify those companies of your privacy choices for those accounts or relationships.

7. WHAT IF AN AFFILIATED COMPANY BECOMES A NONAFFILIATED THIRD PARTY?

If, at any time in the future, an affiliated company becomes a nonaffiliated third party, further disclosures of personal information made to the former affiliated company will be limited to those described in Section 2(b) above relating to nonaffiliated third parties. If you elected under Section 6 to limit disclosures we make to affiliated companies, or use of personal information by affiliated companies, your election will not apply to use by any former affiliated company of your personal information in their possession once it becomes a nonaffiliated third party.

SPECIAL NOTICE TO RESIDENTS OF VERMONT

The following section supplements our Policy with respect to our individual clients who have a Vermont address and supersedes anything to the contrary in the above Policy with respect to those clients only.

The State of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with nonaffiliated third parties, or eligibility information with affiliated companies, other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with nonaffiliated third parties or eligibility information with affiliated companies, unless you provide us with your written consent to share such information.

SPECIAL NOTICE TO RESIDENTS OF CALIFORNIA

The following section supplements our Policy with respect to our individual clients who have a California address and supersedes anything to the contrary in the above Policy with respect to those clients only.

In response to a California law, if your account has a California home address, your personal information will not be disclosed to nonaffiliated third parties except as permitted by applicable California law, and we will limit sharing such personal information with our affiliates to comply with California privacy laws that apply to us.

Reporting to Shareholders

Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its semi-annual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters by filing the schedule electronically with the Securities and Exchange Commission (SEC). The semi-annual reports are filed on Form N-CSRS and the annual reports are filed on Form N-CSR. Morgan Stanley also delivers the semi-annual and annual reports to fund shareholders and makes these reports available on its public website, www.morganstanley.com/im. Each Morgan Stanley fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Morgan Stanley public website. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You may also review and copy them at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling the SEC toll free at 1 (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's email address (publicinfo@sec.gov) or by writing the Public Reference Room of the SEC, Washington, DC 20549-0102.

Proxy Voting Policies and Procedures and Proxy Voting Record

You may obtain a copy of the Fund's Proxy Voting Policy and Procedures and information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll free 1 (800) 548-7786 or by visiting our website at www.morganstanley.com/im. This information is also available on the SEC's website at www.sec.gov.

This report is authorized for distribution only when preceded or accompanied by a prospectus of the AIP Dynamic Alternative Strategies Fund, which describes in detail the Fund's investment policies, risks, fees and expenses. Please read the prospectus carefully before you invest or send money. For additional information, including information regarding the investments comprising the Fund, please visit our website at www.morganstanley.com/im or call toll free 1 (800) 548-7786.