Class I Prospectus April 29, 2011 The Universal Institutional Funds, Inc. U.S. Real Estate Portfolio Above average current income and long-term capital appreciation by investing primarily in equity securities of companies in the U.S. real estate industry, including real estate investment trusts. Investment Adviser Morgan Stanley Investment Management Inc. The Universal Institutional Funds, Inc. (the “Fund”) is a mutual fund that provides investment vehicles for variable annuity contracts and variable life insurance policies and for certain tax-qualified investors. The Securities and Exchange Commission (the “Commission”) has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense. Ticker Symbol: UUSRX Table of Contents Portfolio Summary U.S. Real Estate Portfolio 1 Details of the Portfolio U.S. Real Estate Portfolio 4 Additional Risk Factors and Information 6 Fund Management 7 Shareholder Information 8 Financial Highlights 10 Class I Prospectus Portfolio Summary Portfolio Summary U.S. Real Estate Portfolio Objective may be higher or lower, based on these assumptions, The Portfolio seeks to provide above average current income your costs would be: and long-term capital appreciation by investing primarily in equity securities of companies in the U.S. real estate 1 Year 3 Years 5 Years 10 Years industry, including real estate investment trusts. U.S. Real Estate Portfolio $113 $353 $612 $1,352 Fees and Expenses of the Portfolio (Class I) Portfolio Turnover The table below describes the fees and expenses that The Portfolio pays transaction costs when it buys and you may pay if you buy and hold the classes of shares sells securities (or “turns over” its portfolio). A higher that may be offered by the Portfolio. The Portfolio portfolio turnover rate may indicate higher transaction does not charge any sales loads or other fees when you costs and may result in higher taxes when Portfolio purchase or redeem shares. The table and the example shares are held in a taxable account. These costs, which below do not reflect the impact of any charges by your are not reflected in Total Annual Portfolio Operating insurance company. If they did, Total Annual Portfolio Expenses or in the example, affect the Portfolio’s per- Operating Expenses would be higher. formance. During the most recent fiscal year, the Portfolio’s portfolio turnover rate was 22% of the aver- Annual Portfolio Operating Expenses age value of its portfolio. (expenses that you pay each year as a percentage of the value of your investment) Principal Investment Strategies Advisory Fees 0.80% The Adviser seeks a combination of above average cur- Distribution (12b-1) Fee None rent income and long-term capital appreciation by Other Expenses 0.32% investing primarily in equity securities of companies in Total Annual Portfolio Operating Expenses 1.12% the U.S. real estate industry, including real estate investment trusts (“REITs”). The Portfolio focuses on Fee Waiver and/or Expense Reimbursement* 0.01% REITs as well as real estate operating companies Total Annual Portfolio Operating Expenses (“REOCs”) that invest in a variety of property types After Fee Waiver and/or Expense and regions. The Portfolio’s equity investments may Reimbursement 1.11% include convertible securities. * The Portfolio’s adviser, Morgan Stanley Investment Management Inc. (the “Adviser”), has agreed to reduce its Under normal circumstances, at least 80% of the advisory fee and/or reimburse the Portfolio so that Total Portfolio’s assets will be invested in equity securities of Annual Portfolio Operating Expenses, excluding certain companies in the U.S. real estate industry. This policy investment related expenses (such as foreign country tax expense and interest expense on amounts borrowed), will not may be changed without shareholder approval; howev- exceed 1.10%. The fee waivers and/or expense er, you would be notified in writing of any changes. reimbursements are expected to continue for one year or until such time as the Fund’s Board of Directors acts to Principal Risks discontinue all or a portion of such waivers and/or reimbursements when it deems that such action is An investment in the Portfolio is subject to risks, and appropriate. you could lose money on your investment in the Portfolio. There can be no assurance that the Portfolio Example will achieve its investment objective. An investment in This example is intended to help you compare the cost the Portfolio is not a deposit of any bank or other of investing in the Portfolio with the cost of investing insured depository institution and is not insured or in other mutual funds. guaranteed by the Federal Deposit Insurance Corporation or any other government agency. This example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then The Portfolio’s principal investment strategies are sub- redeem all of your shares at the end of those periods. ject to the following principal risks: The example assumes that your investment has a 5% return each year and that the Portfolio’s operating • Equity Securities. In general, prices of equity securi- expenses remain the same. Although your actual costs ties are more volatile than those of fixed income UIF U.S. Real Estate Portfolio 1 U.S. Real Estate Portfolio (Cont’d) securities. The prices of equity securities will rise and showing changes in the performance of the Portfolio’s fall in response to a number of different factors, Class I shares year-by-year and by showing how the including events that affect entire financial markets Portfolio’s Class I shares’ average annual returns for the or industries and events that affect particular issuers. past one, five and ten year periods compare with a To the extent that the Portfolio invests in convertible broad measure of market performance, as well as a securities, and the convertible security’s investment comparative sector index, over time. This performance value is greater than its conversion value, its price information does not include the impact of any will be likely to increase when interest rates fall and charges deducted by your insurance company. If it decrease when interest rates rise. If the conversion did, returns would be lower. How the Portfolio has value exceeds the investment value, the price of the performed in the past does not necessarily indicate convertible security will tend to fluctuate directly how the Portfolio will perform in the future. with the price of the underlying equity security. Annual Total Return—Calendar Years (Class I) • Real Estate. Investing in real estate companies entails Commenced operations on March 3, 1997 the risks of the real estate business generally, including sensitivity to economic and business cycles, changing 60% demographic patterns and government actions. In 60 37.51 36.39 38.04 40 28.36 29.96 addition, at times the Portfolio’s market sector, U.S. 20 9.84 17.05 real estate securities, may under perform relative to 0 -0.79 other sectors or the overall market. -20 -17.07 -40 -37.89 • REITs and REOCs. Investing in REITs and REOCs -60 exposes investors to the risks of owning real estate -60 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 directly, as well as to risks that relate specifically to the High way in which REITs and REOCs are organized and Quarter 07/09 - 09/09 30.30% operated. Operating REITs requires specialized man- Low Quarter 10/08 - 12/08 – 37.80% agement skills and the Portfolio indirectly bears REIT management expenses along with the direct expenses of Average Annual Total Return (Class I) the Portfolio. Individual REITs may own a limited (for the calendar periods ended December 31, 2010) number of properties and may concentrate in a partic- U.S. FTSE ular region or property type. REITs also must satisfy Real NAREIT specific requirements of the Internal Revenue Code of Estate Equity S&P 500® 1986, as amended, in order to qualify for the tax-free Portfolio REITs Index* Index** pass through of income. The failure of a company to Past One Year 29.96% 27.96% 15.06% qualify as a REIT could have adverse consequences for Past Five Years 3.47% 3.04% 2.29% the Portfolio, including significantly reducing return to Past Ten Years 10.99% 10.77% 1.42% the Portfolio on its investment in the company. * The FTSE NAREIT (National Association of Real Estate Investment Trusts) Equity REITs Index is a free float-adjusted • Non-Diversified Portfolio. The risks of investing in market capitalization weighted index of tax qualified equity REITs listed on the New York Stock Exchange, NYSE Amex the Portfolio may be intensified because the Portfolio is and the NASDAQ National Market List. Effective non-diversified, which means that it may invest in December 20, 2010, the FTSE NAREIT Equity REITs Index will securities of a limited number of issuers. As a result, not include “Timber REITs.” An index is a hypothetical the performance of a particular investment or a small measure of performance based on the ups and downs of group of investments may affect the Portfolio’s per- securities that make up a particular market. It is not possible to invest directly in an index. formance more than if the Portfolio were diversified and a decline in the value of a particular instrument ** The Standard & Poor’s 500® Index (S&P 500®) measures the would cause the Portfolio’s overall value to decline to a performance of the large-cap segment of the U.S. equities greater degree. market, covering approximately 75% of the U.S. equities market. The Index includes 500 leading companies in leading industries of the U.S. economy. An index is a Performance Information hypothetical measure of performance based on the ups and The bar chart and table below provide some indica- downs of securities that make up a particular market. It is not tion of the risks of investing in the Portfolio by possible to invest directly in an index. 2 UIF U.S. Real Estate Portfolio Class I Prospectus Portfolio Summary U.S. Real Estate Portfolio (Cont’d) Investment Adviser contract withdrawals and surrenders, and benefit Adviser. Morgan Stanley Investment Management Inc. payments. The contract prospectus describes how con- tract owners may allocate, transfer and withdraw Portfolio Managers. The Real Estate team manages the amounts to, and from, separate accounts. Portfolio. Information about the member primarily responsible for the day-to-day management of the For more information, please refer to the “Shareholder Portfolio is shown below: Information—Purchasing and Selling Portfolio Shares” section of this Prospectus. Date Began Managing the Name Title with Adviser Portfolio Tax Information Theodore R. Bigman Managing Director March 1997 Special tax rules apply to life insurance companies, variable annuity contracts and variable life insurance Purchase and Sale of Portfolio Shares contracts. For information on federal income taxation This Prospectus offers Class I shares of the U.S. Real of a life insurance company with respect to its receipt Estate Portfolio. The Fund also offers Class II shares of of distributions from the Portfolio and federal income the Portfolio through a separate prospectus. Class II taxation of owners of variable annuity or variable life shares are subject to higher expenses due to the imposi- insurance contracts, refer to the contract prospectus. tion of a 12b-1 fee. For eligibility information, contact your insurance company or qualified pension or retire- For more information, please refer to the “Shareholder ment plan. Information—Taxes” section of this Prospectus. Fund shares will be sold at the net asset value (“NAV”) Payments to Broker-Dealers and Other Financial next determined after we receive your redemption Intermediaries request. If you purchase the Portfolio through a broker-dealer or other financial intermediary (such as a bank or The Portfolio offers its shares only to insurance compa- insurance company), the Adviser and/or the Portfolio’s nies for separate accounts that they establish to fund distributor may pay the intermediary for the sale of variable life insurance and variable annuity contracts, Portfolio shares and related services. These payments, and to other entities under qualified pension and which may be significant in amount, may create a con- retirement plans. An insurance company purchases or flict of interest by influencing the broker-dealer or redeems shares of the Portfolio based on, among other other intermediary and your salesperson to recommend things, the amount of net contract premiums or pur- the Portfolio over another investment. Ask your sales- chase payments allocated to a separate account invest- person or visit your financial intermediary’s web site for ment division, transfers to or from a separate account more information. investment division, contract loans and repayments, UIF U.S. Real Estate Portfolio 3 Details of the Portfolio U.S. Real Estate Portfolio Objective performed in the United States or (iii) if it is organized The Portfolio seeks to provide above average current income or has a principal office in the United States; and (2) a and long-term capital appreciation by investing primarily company is considered to be in the real estate industry in equity securities of companies in the U.S. real estate if it (i) derives at least 50% of its revenues or profits industry, including real estate investment trusts. from the ownership, construction, management, financing or sale of residential, commercial or industri- Approach al real estate, or (ii) has at least 50% of the fair market The Adviser seeks a combination of above average cur- value of its assets invested in residential, commercial or rent income and long-term capital appreciation by industrial real estate. investing primarily in equity securities of companies in the U.S. real estate industry, including REITs. The Risks Portfolio focuses on REITs as well as REOCs that Investing in the Portfolio may be appropriate for you if invest in a variety of property types and regions. The you are willing to accept the risks and uncertainties of Adviser’s approach emphasizes bottom-up stock selec- investing in a portfolio of equity securities of U.S. real tion with a top-down asset allocation. estate companies. In general, prices of equity securities are more volatile than those of fixed income securities. Process The prices of equity securities will rise and fall in The Adviser actively manages the Portfolio using a response to a number of different factors. In particular, combination of top-down and bottom-up methodolo- prices of equity securities will respond to events that gies. The top-down asset allocation is determined by affect entire financial markets or industries (changes in focusing on key regional criteria, which include demo- inflation or consumer demand, for example) and to graphic and macroeconomic considerations (for exam- events that affect particular issuers (news about the ple, population, employment, household formation success or failure of a new product, for example). To and income). The Adviser employs a value-driven the extent that the Portfolio invests in convertible secu- approach to bottom-up security selection, which rities, and the convertible security’s investment value is emphasizes underlying asset values, values per square greater than its conversion value, its price will be likely foot and property yields. In seeking an optimal matrix to increase when interest rates fall and decrease when of regional and property market exposure, the Adviser interest rates rise. If the conversion value exceeds the considers broad demographic and macroeconomic fac- investment value, the price of the convertible security tors as well as other criteria, such as space demand, will tend to fluctuate directly with the price of the new construction and rental patterns. The Adviser gen- underlying equity security. erally considers selling a portfolio holding when it determines that the holding is less attractive based on a Investing in real estate companies entails the risks of number of factors, including changes in the holding’s the real estate business generally, including sensitivity share price, earnings prospects relative to its peers to economic and business cycles, changing demograph- and/or business prospects. ic patterns and government actions. In addition, at times the Portfolio’s market sector, U.S. real estate Under normal circumstances, at least 80% of the securities, may under perform relative to other sectors Portfolio’s assets will be invested in equity securities of or the overall market. companies in the U.S. real estate industry. This policy may be changed without shareholder approval; howev- Investing in REITs and REOCs exposes investors to er, you would be notified in writing of any changes. the risks of owning real estate directly, as well as to The Portfolio’s equity investments may include con- risks that relate specifically to the way in which REITs vertible securities. and REOCs are organized and operated. REITs gener- ally invest directly in real estate (equity REITs), in A company is considered to be in the U.S. real estate mortgages (mortgage REITs) or in some combination industry if it meets the following tests: (1) a company of the two (hybrid REITs). REOCs are entities that is considered to be from the United States (i) if its generally are engaged directly in real estate manage- securities are traded on a recognized stock exchange in ment or development activities. The Portfolio will the United States, (ii) if alone or on a consolidated invest primarily in equity REITs. Operating REITs basis it derives 50% or more of its annual revenues requires specialized management skills and the from either goods produced, sales made or services Portfolio indirectly bears REIT management expenses 4 UIF U.S. Real Estate Portfolio Class I Prospectus Details of the Portfolio U.S. Real Estate Portfolio (Cont’d) along with the direct expenses of the Portfolio. number of issuers. As a result, the performance of a Individual REITs may own a limited number of prop- particular investment or a small group of investments erties and may concentrate in a particular region or may affect the Portfolio’s performance more than if property type. REITs also must satisfy specific require- the Portfolio were diversified and a decline in the ments of the Internal Revenue Code of 1986, as value of a particular instrument would cause the amended, in order to qualify for the tax-free pass Portfolio’s overall value to decline to a greater degree. through of income. Please see “Additional Risk Factors and Information” The risks of investing in the Portfolio may be intensi- for further information about these and other risks of fied because the Portfolio is non-diversified, which investing in the Portfolio. means that it may invest in securities of a limited UIF U.S. Real Estate Portfolio 5 Class I Prospectus Risk Factors and Information Additional Risk Factors and Information This section discusses Price Volatility Real Estate Investing additional risk factors and The value of your investment in the Portfolio is based The Portfolio invests in companies that are mainly in information relating to the on the market prices of the securities the Portfolio the real estate industry. As a result, these companies Portfolio. The Portfolio’s holds. These prices change daily due to economic and (and, therefore, the Portfolio) will experience the risks investment practices and other events that affect markets generally, as well as of investing in real estate directly. Real estate is a cycli- limitations are described in those that affect particular regions or companies. These cal business, highly sensitive to general and local eco- more detail in the Statement price movements, sometimes called volatility, may be nomic developments and characterized by intense of Additional Information greater or less depending on the types of securities the competition and periodic overbuilding. Real estate (“SAI”), which is Portfolio owns and the markets in which the securities income and values may also be greatly affected by incorporated by reference trade. Over time, equity securities have generally demographic trends, such as population shifts or and legally is a part of this shown gains superior to fixed income securities, changing tastes and values. Government actions, such although they have tended to be more volatile in the as tax increases, zoning law changes or environmental Prospectus. For details on short term. As a result of price volatility, there is a risk regulations, may also have a major impact on real how to obtain a copy of the that you may lose money by investing in the Portfolio. estate. Changing interest rates and credit quality SAI and other reports and requirements will also affect the cash flow of real estate information, see the back Equity Securities companies and their ability to meet capital needs. cover of this Prospectus. Equity securities include common stock, preferred stock, convertible securities, depositary receipts, rights Temporary Defensive Investments and warrants. The Portfolio may invest in equity secu- When the Adviser believes that changes in economic, rities that are publicly traded on securities exchanges or financial or political conditions warrant, the Portfolio over the counter or in equity securities that are not may invest without limit in certain short- and medium- publicly traded. Securities that are not publicly traded term fixed income securities that may be inconsistent may be more difficult to sell and their value may fluc- with the Portfolio’s principal investment strategies for tuate more dramatically than other securities. The temporary defensive purposes. If the Adviser incorrect- prices of convertible securities are affected by changes ly predicts the effects of these changes, such defensive similar to those of equity and fixed income securities. investments may adversely affect the Portfolio’s per- The value of a convertible security tends to decline as formance. The Portfolio may not achieve its invest- interest rates rise and, because of the conversion fea- ment objective. ture, tends to vary with fluctuations in the market value of the underlying equity security. 6 UIF U.S. Real Estate Portfolio Class I Prospectus Fund Management Fund Management Investment Adviser connection with the sale, distribution, marketing The Investment Adviser is Morgan Stanley Investment and/or retention of shares of the Portfolio and/or Management Inc. The Adviser, with principal offices at shareholder servicing. Such compensation may be sig- 522 Fifth Avenue, New York, New York 10036, con- nificant in amount and the prospect of receiving any ducts a worldwide portfolio management business, and such compensation may provide such affiliated or provides a broad range of portfolio management servic- unaffiliated entities with an incentive to favor sales of es to customers in the United States and abroad. the Portfolio’s shares over other investment options. Morgan Stanley is the direct parent of the Adviser and Any such payments will not change the net asset value the indirect parent of Morgan Stanley Distribution, or the price of the Portfolio’s shares. For more informa- Inc., the Fund’s distributor (the “Distributor”). tion, please see the Fund’s SAI. Morgan Stanley is a preeminent global financial servic- es firm engaged in securities trading and brokerage Portfolio Management activities, as well as providing investment banking, The Portfolio’s assets are managed by members of the research and analysis, financing and financial advisory Real Estate team. The team consists of a portfolio man- services. As of December 31, 2010, the Adviser, ager and analysts. Theodore R. Bigman is the member together with its affiliated asset management compa- of the team primarily responsible for the day-to-day nies, had approximately $272.2 billion in assets under management of the Portfolio. Mr. Bigman has been management or supervision. associated with the Adviser in an investment manage- ment capacity since 1995. Advisory Fee For the fiscal year ended December 31, 2010, the The Portfolio is managed by Mr. Bigman, who is sup- Adviser received a fee for advisory services (net of fee ported by a team of six research analysts. Together, waivers and/or expense reimbursements) equal to Mr. Bigman and the team determine investment strate- 0.78% of the Portfolio’s average daily net assets. gy, establish asset-allocation frameworks and direct the implementation of investment strategy. A discussion regarding the Board of Directors’ approval of the investment advisory agreement is available in the The Fund’s SAI provides additional information about Fund’s semi-annual report to shareholders for the peri- the portfolio manager’s compensation structure, other od ended June 30, 2010. accounts managed by the portfolio manager and the portfolio manager’s ownership of securities in the The Adviser and/or the Distributor may pay compen- Portfolio. sation (out of their own funds and not as an expense of the Portfolio) to certain affiliated or unaffiliated bro- The composition of the team may change from time to kers, dealers and/or certain insurance companies or time. other financial intermediaries or service providers in UIF U.S. Real Estate Portfolio 7 Shareholder Information Share Class About Net Asset Value This Prospectus offers Class I shares of the U.S. Real The NAV per share of the Portfolio is determined by Estate Portfolio. The Fund also offers Class II shares of dividing the total of the value of the Portfolio’s invest- the Portfolio through a separate prospectus. Class II ments and other assets, less any liabilities, by the total shares are subject to higher expenses due to the imposi- number of outstanding shares of the Portfolio. In mak- tion of a 12b-1 fee. For eligibility information, contact ing this calculation, the Portfolio generally values secu- your insurance company or qualified pension or retire- rities at market price. If market prices are unavailable ment plan. or may be unreliable because of events occurring after the close of trading, the value for those securities will Purchasing and Selling Portfolio Shares be determined in good faith at fair value using meth- Shares are offered on each day that the New York ods approved by the Board of Directors. Stock Exchange (the “NYSE”) is open for business. Fair value pricing involves subjective judgments and it The Portfolio offers its shares only to insurance compa- is possible that the fair value determined for a security nies for separate accounts that they establish to fund is materially different than the value that could be real- variable life insurance and variable annuity contracts, ized upon the sale of that security. The Portfolio may and to other entities under qualified pension and hold portfolio securities that are listed on foreign retirement plans. An insurance company purchases or exchanges. These securities may trade on weekends or redeems shares of the Portfolio based on, among other other days when the Portfolio does not calculate its things, the amount of net contract premiums or pur- NAV. As a result, the value of these investments may chase payments allocated to a separate account invest- change on days when you cannot purchase or sell ment division, transfers to or from a separate account shares. To the extent the Portfolio invests in open-end investment division, contract loans and repayments, management companies that are registered under the contract withdrawals and surrenders, and benefit pay- Investment Company Act of 1940, as amended, the ments. The contract prospectus describes how contract Portfolio’s NAV is calculated based upon the NAV of owners may allocate, transfer and withdraw amounts such funds. The prospectuses for such funds explain to, and from, separate accounts. the circumstances under which they will use fair value pricing and its effects. There are no known disadvantages to variable product contract owners or qualified plan participants arising The NAV of Class I shares will differ from that of out of the fact that the Portfolio offers its shares to sep- Class II shares because of class-specific expenses that arate accounts of various insurance companies that each class may pay. offer variable annuity and variable life insurance prod- ucts and various other entities under qualified pension Dividends and Distributions and retirement plans. Nevertheless, the Board of The Portfolio distributes its net investment income, if Directors that oversees the Portfolio intends to monitor any, at least annually as dividends and makes distribu- events to identify any material irreconcilable conflicts tions of its net realized capital gains, if any, at least that may possibly arise due to these arrangements and annually. to determine what action, if any, should be taken in response. Taxes The Portfolio expects that it will not have to pay feder- Pricing of Portfolio Shares al income taxes if it distributes annually all of its net The price per share will be the NAV per share next investment income and net realized capital gains. The determined after the Fund or the insurance company Portfolio does not expect to be subject to federal excise receives your purchase or redemption order. The NAV taxes with respect to undistributed income. for one share is the value of that share’s portion of all of the net assets in the Portfolio. The Fund determines Special tax rules apply to life insurance companies, the NAV per share for the Portfolio as of the close of variable annuity contracts and variable life insurance the NYSE (normally 4:00 p.m. Eastern Time) on each contracts. For information on federal income taxation day that the Portfolio is open for business. of a life insurance company with respect to its receipt of distributions from the Portfolio and federal income taxation of owners of variable annuity or variable life insurance contracts, refer to the contract prospectus. 8 UIF U.S. Real Estate Portfolio Class I Prospectus Shareholder Information Shareholder Information (Cont’d) Because each investor’s tax circumstances are unique contract owners. However, the Portfolio has entered and the tax laws may change, you should consult your into agreements with insurance companies and quali- tax advisor about the federal, state and local tax conse- fied plans whereby the insurance companies and quali- quences applicable to your investment. fied plans are required to provide certain contract owner identification and transaction information Frequent Purchases and Redemptions of Shares upon the Portfolio’s request. The Portfolio may use Frequent purchases and redemptions of shares pur- this information to help identify and prevent market- suant to the instructions of insurance company con- timing activity in the Portfolio. There can be no assur- tract owners or qualified plan participants is referred ance that the Portfolio will be able to identify or pre- to as “market-timing” or “short-term trading” and may vent all market-timing activity. present risks for other contract owners or participants with long-term interests in the Portfolio, which may If the Portfolio identifies suspected market-timing include, among other things, dilution in the value of activity, the insurance company or qualified plan will the Portfolio’s shares indirectly held by contract owners be contacted and asked to take steps to prevent further or participants with long-term interests in the Portfolio, market-timing activity (e.g., sending warning letters or interference with the efficient management of the blocking frequent trading by underlying contract own- Portfolio, increased brokerage and administrative costs ers or participants). Insurance companies may be pro- and forcing the Portfolio to hold excess levels of cash. hibited by the terms of the underlying insurance con- tract from restricting short-term trading of mutual Investments in other types of securities also may be sus- fund shares by contract owners, thereby limiting the ceptible to short-term trading strategies. These invest- ability of such insurance company to implement reme- ments include securities that are, among other things, dial steps to prevent market-timing activity in the thinly traded, traded infrequently or relatively illiquid, Portfolio. If the insurance company or qualified plan is which have the risk that the current market price for unwilling or unable to take remedial steps to discour- the securities may not accurately reflect current market age or prevent frequent trading, or does not take action values. A contract owner may seek to engage in short- promptly, certain contract owners or participants may term trading to take advantage of these pricing differ- be able to engage in frequent trading to the detriment ences (referred to as “price-arbitrage”). The Portfolio’s of contract owners or participants with long-term policies with respect to valuing portfolio securities are interests in the Portfolio. If the insurance company or described above in “About Net Asset Value.” qualified plan refuses to take remedial action, or takes action that the Portfolio deems insufficient, a determi- The Fund’s Board of Directors has adopted policies nation will be made whether it is appropriate to termi- and procedures to discourage frequent purchases and nate the relationship with such insurance company or redemptions of Portfolio shares by Portfolio share- qualified plan. holders. Insurance companies or qualified plans gener- ally do not provide specific contract owner or plan Portfolio Holdings Information participant transaction instructions to the Portfolio on A description of the Fund’s policies and procedures an ongoing basis. Therefore, to some extent, the with respect to the disclosure of the Portfolio’s securi- Portfolio relies on the insurance companies and quali- ties is available in the Fund’s SAI. fied plans to monitor frequent short-term trading by UIF U.S. Real Estate Portfolio 9 Class I Prospectus Financial Highlights Financial Highlights The financial highlights table is intended to help you average net assets decrease over the Portfolio’s next fis- understand the financial performance of the Portfolio’s cal year, such expense ratios can be expected to Class I shares for the past five fiscal years. Certain increase, potentially significantly, because certain fixed information reflects financial results for a single costs will be spread over a smaller amount of assets. Portfolio share. The total returns in the table represent The information has been audited by Ernst & Young the rate that an investor would have earned (or lost) on LLP an independent registered public accounting firm. an investment in the Portfolio (assuming reinvestment Ernst & Young LLP’s unqualified report appears in the of all dividends and distributions). In addition, this Portfolio’s Annual Report to Shareholders and is incor- performance information does not include the impact porated by reference in the SAI. The Annual Report of any charges by your insurance company. If it did, and the Portfolio’s financial statements, as well as the returns would be lower. The ratio of expenses to aver- SAI, are available at no cost from the Portfolio at the age net assets listed in the table below are based on the toll free number noted on the back cover to this average net assets of the Portfolio for each of the peri- Prospectus or from your insurance company. ods listed in the table. To the extent that the Portfolio’s Year Ended December 31, Selected Per Share Data and Ratios 2010 2009 2008 2007 2006 Net Asset Value, Beginning of Period $10.15 $8.20 $22.05 $29.37 $23.09 Income (Loss) from Investment Operations: Net Investment Income† 0.14 0.17 0.31 0.32 0.36 Net Realized and Unrealized Gain (Loss) 2.87 2.04 (5.87) (4.90) 8.02 Total from Investment Operations 3.01 2.21 (5.56) (4.58) 8.38 Distributions from and/or in Excess of: Net Investment Income (0.25) (0.26) (0.69) (0.31) (0.30) Net Realized Gain – – (7.60) (2.43) (1.80) Total Distributions (0.25) (0.26) (8.29) (2.74) (2.10) Net Asset Value, End of Period $12.91 $10.15 $8.20 $22.05 $29.37 Total Return++ 29.96% 28.36% (37.89)% (17.07)% 38.04% Ratios and Supplemental Data: Net Assets, End of Period (Thousands) $288,516 $244,866 $396,921 $761,902 $1,408,168 Ratio of Expenses to Average Net Assets(1) 1.11%+†† 1.13%+ 1.07%+ 1.04%+ 1.01% Ratio of Expenses to Average Net Assets Excluding Non-Operating Expenses 1.10%+†† 1.10%+ 1.05%+ 1.02%+ 1.01% Ratio of Net Investment Income to Average Net Assets 1.20%+†† 2.25%+ 2.01%+ 1.14%+ 1.40% Ratio of Rebate from Morgan Stanley Affiliates to Average Net Assets 0.00%††§ 0.00%§ 0.00%§ 0.00%§ N/A Portfolio Turnover Rate 22% 36% 35% 41% 25% (1) Supplemental Information on the Ratios to Average Net Assets: Ratios Before Expense Limitation: Expenses to Average Net Assets 1.12%+†† 1.14%+ N/A N/A N/A Net Investment Income to Average Net Assets 1.19%+†† 2.24%+ N/A N/A N/A † 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. Performance does not reflect fees and expenses imposed by your insurance company’s separate account. If performance information included the effect of these additional charges, the total return would be lower. + The Ratios of Expenses and Net Investment Income reflect the rebate of certain Portfolio 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 Portfolio ratios for investment income and non-class specific expenses. § Amount is less than 0.005%. 10 UIF U.S. Real Estate Portfolio [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] Where to Find Additional Information Statement of Additional Information Information about the Fund, including the SAI, and In addition to this Prospectus, the Fund has a SAI, the annual and semi-annual reports, may be obtained dated April 29, 2011, which contains additional, more from the Commission in any of the following ways: detailed information about the Fund and the Portfolio. (1) In person: you may review and copy documents in The SAI is incorporated by reference into this the Commission’s Public Reference Room in Prospectus and, therefore, legally forms a part of this Washington, D.C. (for information on the operation Prospectus. of the Public Reference Room, call 1-202-551-8090); (2) On-line: you may retrieve information from the Shareholder Reports EDGAR Database on the Commission’s web site at The Fund publishes annual and semi-annual reports http://www.sec.gov; or (3) By mail: you may request containing financial statements. These reports contain documents, upon payment of a duplicating fee, by additional information about the Portfolio’s invest- writing to the Securities and Exchange Commission, ments. In the Fund’s shareholder reports, you will find Public Reference Section, Washington, D.C. a discussion of the market conditions and the invest- 20549-1520. You may also obtain this information, ment strategies that significantly affected the Portfolio’s upon payment of a duplicating fee, by e-mailing the performance during that period. Commission at the following address: firstname.lastname@example.org. To aid you in obtaining this infor- For additional Fund information, including informa- mation, the Fund’s Investment Company Act registra- tion regarding the investments comprising the tion number is 811-7607. Portfolio, and to make shareholder inquiries, please call 1-800-281-2715 or contact your insurance company. You may obtain the SAI and shareholder reports with- out charge by contacting the Fund at the toll-free number above or your insurance company or on our web site at www.morganstanley.com/im.