Filed Pursuant to Rule 497e


                                                            January 5, 2005
                                                                  Supplement

[GRAPHIC OMITTED]



 SUPPLEMENT DATED JANUARY 5, 2005 TO THE STATEMENT OF ADDITIONAL INFORMATION OF

        Morgan Stanley American Opportunities Fund, dated March 18, 2004
           Morgan Stanley Balanced Growth Fund, dated March 30, 2004
           Morgan Stanley Balanced Income Fund, dated March 30, 2004
      Morgan Stanley Capital Opportunities Trust, dated February 27, 2004
         Morgan Stanley KLD Social Index Fund, dated February 27, 2004
         Morgan Stanley Nasdaq-100 Index Fund, dated February 27, 2004
            Morgan Stanley Real Estate Fund, dated February 27, 2004
              Morgan Stanley Utilities Fund, dated March 18, 2004

     The disclosure in the Fund's Statement of Additional Information entitled
"Investment Management and Other Services" should be amended to include the
following disclosure in a new section I, entitled "Revenue Sharing:"

I. REVENUE SHARING

     The Investment Adviser and/or Distributor may pay compensation, out of
their own funds and not as an expense of the Fund, to Morgan Stanley DW and
certain unaffiliated brokers, dealers or other financial Intermediaries
("Intermediaries") in connection with the sale or retention of Fund shares
and/or shareholder servicing. For example, the Investment Adviser or the
Distributor may pay additional compensation to Morgan Stanley DW and to
Intermediaries for the purpose of promoting the sale of Fund shares,
maintaining share balances and/or for sub-accounting, administrative or
shareholder processing services. Such payments are in addition to any
distribution fees, service fees and/or transfer agency fees that may be payable
by the Fund. The additional payments may be based on factors, including level
of sales (based on gross or net sales or some specified minimum sales or some
other similar criteria related to sales of the Fund and/or some or all other
Morgan Stanley Funds), amount of assets invested by the Intermediary's
customers (which could include current or aged assets of the Fund and/or some
or all other Morgan Stanley Funds), the Fund's advisory fees, some other agreed
upon amount, or other measures as determined from time to time by the
Investment Adviser and/or Distributor. The amount of these payments, as
determined from time to time by the Investment Adviser or the Distributor, may
be different for different Intermediaries.

     These payments currently include the following amounts which are paid to
Financial Advisors and Intermediaries or their salespersons in accordance with
the applicable compensation structure:

   (1)   On sales of $1 million or more of Class A shares (for which no sales
         charge was paid) or net asset value purchases by certain employee
         benefit plans, Morgan Stanley DW and other Intermediaries receive a
         gross sales credit of up to 1.00% of the amount sold.

   (2)   On sales of Class D shares other than shares held by participants in
         the Investment Adviser's mutual fund asset allocation program and in
         the Morgan Stanley Choice Program, Morgan Stanley DW and other
         Intermediaries receive a gross sales credit of 0.25% of the amount
         sold and an annual residual commission of up to 0.10% of the current
         value of the accounts. There is a chargeback of 100% of the gross
         sales credit amount paid if the Class D shares are redeemed in the
         first year and a chargeback of 50% of the gross sales credit amount
         paid if the shares are redeemed in the second year.

   (3)   On sales (except purchases through 401(k) platforms) through Morgan
         Stanley DW's Mutual Fund Network:

         o  An amount equal to 0.20% of gross sales of Fund shares; and

         o  For those shares purchased beginning January 1, 2001, an annual fee
            in an amount up to 0.05% of the value of such Fund shares held for a
            one-year period or more.

   (4)   An amount equal to 0.20% on the value of shares sold through 401(k)
         platforms.

     The prospect of receiving, or the receipt of, additional compensation, as
described above, by Morgan Stanley DW or other Intermediaries may provide
Morgan Stanley DW or other Intermediaries and/or Financial Advisors and other
salespersons with an incentive to favor sales of shares of the Fund over other
investment options with respect to which Morgan Stanley DW or an Intermediary
does not receive additional compensation (or receives lower levels of
additional compensation). These payment arrangements, however, will not change
the price that an investor pays for shares of the Fund. Investors may wish to
take such payment arrangements into account when considering and evaluating any
recommendations relating to Fund shares.


     You should review carefully any disclosure by such brokers, dealers or
other Intermediaries as to their compensation.


     In addition, the following disclosure should be eliminated from the
section of the Statement of Additional Information entitled "V. Investment
Management and Other Services, E. Rule 12b-1 Plan":


     With respect to Class A shares, Morgan Stanley DW compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for
the sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value
of the respective accounts for which they are the Financial Advisors or dealers
of record in all cases. On orders of $1 million or more (for which no sales
charge was paid) or net asset value purchases by employer-sponsored employee
benefit plans, whether or not qualified under the Internal Revenue Code, for
which (i) the Transfer Agent serves as Trustee, (ii) Morgan Stanley's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement or (iii) an entity independent from Morgan
Stanley serves as recordkeeper under an alliance or similar agreement with
Morgan Stanley's Retirement Plan Services ("Morgan Stanley Eligible Plans"),
the Investment Manager compensates Financial Advisors by paying them, from its
own funds, a gross sales credit of 1.0% of the amount sold.


     Such language should be replaced with the following disclosure:


     With respect to Class A shares, Morgan Stanley DW compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for
the sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold and an annual residual commission, currently a residual of up to
0.25% of the current value of the respective accounts for which they are the
Financial Advisors or dealers of record in all cases.


     The following disclosure should also be removed from the section of the
Statement of Additional Information entitled "V. Investment Management and
Other Services, E. Rule 12b-1 Plan":


     With respect to Class D shares other than shares held by participants in
the Investment Manager's mutual fund asset allocation program and in the Morgan
Stanley Choice Program, the Investment Manager compensates Morgan Stanley DW's
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class D shares, currently a gross sales credit of up to 1.0% of the amount
sold. There is a chargeback of 100% of the amount paid if the Class D shares
are redeemed in the first year and a chargeback of 50% of the amount paid if
the Class D shares are redeemed in the second year after purchase. The
Investment Manager also compensates Morgan Stanley DW's Financial Advisors by
paying them, from its own funds, an annual residual commission, currently up to
0.10% of the current value of the respective accounts for which they are the
Financial Advisors of record (not including accounts of participants in the
Investment Manager's mutual fund asset allocation program and the Morgan
Stanley Choice Program).


     The Investment Manager pays a retention fee to Morgan Stanley Financial
Advisors at an annual rate of 0.05% of the value of shares of the Fund held for
at least one year. Shares purchased through the reinvestment of dividends will
be eligible for a retention fee, provided that such dividends were earned on
shares otherwise eligible for a retention fee payment. Shares owned in variable
annuities, closed-end fund shares and shares held in 401(k) plans where the
Transfer Agent or Morgan Stanley's Retirement Plan Services is either
recordkeeper or trustee are not eligible for a retention fee.


     The retention fees are paid by the Investment Manager from its own assets,
which may include profits from investment management fees payable under the
Investment Management Agreement, as well as from borrowed funds.


              PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE.