Morgan Stanley AIP Absolute

Return Fund

Fund Investment Objectives

Morgan Stanley AIP Absolute Return Fund ("Absolute Return Fund" or the "Fund") is a fund of hedge funds that invests substantially all its assets in private investment funds who employ different absolute return investment strategies in pursuit of attractive risk-adjusted returns consistent with the preservation of capital. Absolute Return refers to a broad class of investment strategies that are managed without reference to the performance of equity, debt and other markets. Absolute Return investment strategies allow investment managers the flexibility to use leveraged or short-sale positions to take advantage of perceived inefficiencies across the global capital markets. Absolute Return strategies can be contrasted with relative return strategies which generally seek to outperform a corresponding benchmark equity or fixed income index. The Fund seeks attractive "risk-adjusted" returns (which are returns adjusted to take into account volatility of those returns) that are neither highly correlated with fixed income or equity indices. The Fund intends to invest in private investment funds that employ the following principal strategies: relative value strategies, security selection strategies, special credit strategies and directional strategies. AUM begins January 2011.