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: 811-08265 Morgan Stanley S&P 500 Index Fund (Exact name of registrant as specified in charter) 522 Fifth Avenue, New York, New York 10036 (Address of principal executive offices) (Zip code) Ronald E. Robison 522 Fifth Avenue, New York, New York 10036 (Name and address of agent for service) Registrant's telephone number, including area code: 212-296-6990 Date of fiscal year end: August 31, 2007 Date of reporting period: August 31, 2007 Item 1 - Report to Shareholders
Welcome, Shareholder:
In this report, you’ll learn about how your investment in Morgan Stanley S&P 500 Index Fund performed during the annual period. We will provide an overview of the market conditions, and discuss some of the factors that affected performance during the reporting period. In addition, this report includes the Fund’s financial statements and a list of Fund investments.
![]() | This material must be preceded or accompanied by a prospectus for the fund being offered. |
![]() | Market forecasts provided in this report may not necessarily come to pass. There is no assurance that the Fund will achieve its investment objective. The Fund is subject to market risk, which is the possibility that market values of securities owned by the Fund will decline and, therefore, the value of the Fund’s shares may be less than what you paid for them. Accordingly, you can lose money investing in this Fund. Please see the prospectus for more complete information on investment risks. |
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![]() | Fund Report |
![]() | For the year ended August 31, 2007 |
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Total Return for the 12 Months Ended August 31, 2007
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Class A | ![]() | ![]() | ![]() | Class B | ![]() | ![]() | ![]() | Class C | ![]() | ![]() | ![]() | Class D | ![]() | ![]() | ![]() | S&P 500® Index1 | ![]() | ![]() | ![]() | Lipper S&P 500 Objective Funds Index2 | ||||||||||||
 | 14.60 | % | ![]() | ![]() | ![]() |  | 13.76 | % | ![]() | ![]() | ![]() |  | 13.68 | % | ![]() | ![]() | ![]() |  | 14.86 | % | ![]() | ![]() | ![]() |  | 15.13 | % | ![]() | ![]() | ![]() |  | 14.90 | % |
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![]() | The performance of the Fund’s four share classes varies because each has different expenses. The Fund’s total returns assume the reinvestment of all distributions but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. See Performance Summary for standardized performance and benchmark information. |
Market Conditions
For the 12-month period ended August 31, 2007, the stock market performed well but sustained significant periods of volatility. The Federal Open Market Committee (the ‘‘Fed’’) left the target federal funds rate unchanged beginning in August 2006, bolstering investor confidence about the health of the U.S. economy, which in turn contributed to a strong market rally through the end of 2006. In the first few months of 2007, however, sentiment was less upbeat. The housing market began to show significant signs of distress, as problems in the subprime mortgage market (which makes loans to higher risk borrowers) came to light. This news, coupled with volatility in China’s stock market, initiated a down draft in the U.S. and most other world stock markets at the end of February and into March. Although markets recovered during the next few months, bad news about the subprime market continued to accelerate. By June, several hedge funds that invested in subprime-backed securities imploded, and mortgage lenders announced bankruptcies as home foreclosures rose. Conditions worsened in July as a wider credit market crisis began to reveal itself. Illiquidity spelled the end of the cheap borrowing (for both consumers and corporations) that underpinned the market’s strong run-up over the past few years. Companies were no longer able to finance leveraged buyouts, one of the most significant drivers of market performance over the past few years.
From its high point in July, the S&P 500® Index bottomed on August 17 as the Fed lowered the discount rate (the Federal Reserve’s short-term lending rate to banks) and other central banks around the world sought to inject liquidity into the global financial system to help stabilize the stock and bond markets. Investors, however, continued to worry about the full implications of the subprime contagion on the U.S. and global economies. Many observers raised their expectations for recession, factoring in an even weaker dollar, higher oil prices and a still troubled real estate sector. Nonetheless, the S&P 500 Index produced a double-digit gain for the period under review.
Performance Analysis
All share classes of Morgan Stanley S&P 500 Index Fund underperformed the S&P 500® Index and the Lipper S&P 500 Objective Funds Index for the 12 months ended August 31, 2007, assuming no deduction of applicable sales charges.
All 10 sectors in the S&P 500 Index and the Fund had positive returns on an absolute basis for the 12-month
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period, with energy, telecommunication services and materials the top three performing groups. Although energy prices eased in the second half of 2006, they moved higher again in 2007, which continued to provide a favorable backdrop for energy stocks’ performance. Additionally, unlike the stock and bond markets, commodity markets held up well amid the turmoil in July and August. The telecom sector continued to reap the benefits of industry consolidation, and a number of merger and acquisition announcements in the materials sector helped drive investors into the sector. Furthermore, a weak dollar and rising commodity prices aided the performance of materials stocks during the period.
However, the financials sector had the weakest return among the S&P 500 sectors, dragged down by bank stocks. Although a broad group of financial stocks was hit hard in the third quarter by the liquidity crunch and weakening housing market, banking saw the largest declines and was the only industry group with a negative return during the period under review. The health care and consumer staples sectors were also among the bottom three performing sectors for this period.
Because the S&P 500 Index is market capitalization weighted (and that the Fund seeks to replicate the performance attributes of the index, before Fund fees), the overall contribution of each sector was influenced by its relative size within the index and the Fund portfolio. Accordingly, the top contributors to the Fund’s performance during the period were the technology, energy and industrials sectors. In fact, six of the top 10 contributing stocks were from the technology sector, primarily in the technology hardware and equipment industry. Conversely, the utilities, materials and consumer staples sectors contributed the least to the Fund’s performance.
![]() | There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the Fund in the future. |
![]() | ‘‘Standard & Poor’s,’’ ‘‘S&P,’’ ‘‘S&P 500,’’ ‘‘Standard & Poor’s 500’’ and ‘‘500’’ are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by the Fund. The Fund is not sponsored, endorsed, sold or promoted by S&P, and S&P makes no representation regarding the advisability of investing in the Fund. |
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TOP 10 HOLDINGSÂ | ![]() | Â | ||||
Exxon Mobil Corp. | ![]() | Â | 3.6 | %Â | ||
General Electric Co. | ![]() | Â | 3.0 | Â | ||
AT&T Inc. | ![]() | Â | 1.8 | Â | ||
Microsoft Corp. | ![]() | Â | 1.8 | Â | ||
Citigroup, Inc. | ![]() | Â | 1.7 | Â | ||
Bank of America Corp. | ![]() | Â | 1.7 | Â | ||
Procter & Gamble Co. (The) | ![]() | Â | 1.5 | Â | ||
Cisco Systems, Inc. | ![]() | Â | 1.4 | Â | ||
Chevron Corp. | ![]() | Â | 1.4 | Â | ||
Johnson & Johnson | ![]() | Â | 1.3 | Â | ||
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TOP FIVE INDUSTRIESÂ | ![]() | Â | ||||
Integrated Oil | ![]() | Â | 6.2 | %Â | ||
Pharmaceuticals: Major | ![]() | Â | 5.7 | Â | ||
Major Banks | ![]() | Â | 5.1 | Â | ||
Industrial Conglomerates | ![]() | Â | 5.0 | Â | ||
Financial Conglomerates | ![]() | Â | 3.8 | Â | ||
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![]() | Data as of August 31, 2007. Subject to change daily. All percentages for top 10 holdings and top five industries are as a percentage of net assets. These data are provided for informational purposes only and should not be deemed a recommendation to buy or sell the securities mentioned. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. |
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Investment Strategy
The Fund will normally invest at least 80 percent of its assets in common stocks of companies included in the S&P 500® Index. The ‘‘Investment Adviser,’’ Morgan Stanley Investment Advisors Inc., ‘‘passively’’ manages the Fund’s assets by investing in stocks in approximately the same proportion as they are represented in the S&P 500 Index. For example, if the common stock of a specific company represents five percent of the S&P 500 Index, the Investment Adviser typically will invest the same percentage of the Fund’s assets in that stock. The S&P 500 Index is a well-known stock market index that includes common stocks of 500 companies rep resenting a significant portion of the market value of all common stocks publicly traded in the United States. The Fund may invest in foreign companies, including those that are in emerging market countries, that are included in the S&P 500 Index.
For More Information About Portfolio Holdings
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund’s second and fourth fiscal quarters. The semiannual reports and the annual reports are filed electronically with the Securities and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley also delivers the semiannual and annual reports to fund shareholders and makes these reports available on its public web site, www.morganstanley.com. 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 f irst and third fiscal quarters to shareholders, nor are the reports posted to the Morgan Stanley public web site. 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 web site, http://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 at (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC’s e-mail address (publicinfo@sec.gov) or by writing the public reference section of the SEC, Washington, DC 20549-0102.
Proxy Voting Policy and Procedures and Proxy Voting Record
You may obtain a copy of the Fund’s Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 869-NEWS or by visiting the Mutual Fund Center on our Web site at www.morganstanley.com. It is also available on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
You may obtain information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting the Mutual Fund Center on our Web site at www.morganstanley.com. This information is also available on the Securities and Exchange Commission’s Web site at http://www.sec.gov.
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Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling (800) 350-6414, 8:00 a.m. to 8:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
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![]() | Performance Summary |
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Performance of a $10,000 Investment
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Average Annual Total Returns — Period Ended August 31, 2007
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 | ![]() | ![]() | ![]() | Class A Shares* (since 09/26/97) | ![]() | ![]() | ![]() | Class B Shares** (since 09/26/97) | ![]() | ![]() | ![]() | Class C Shares†(since 09/26/97) | ![]() | ![]() | ![]() | Class D Shares††(since 09/26/97) | ||||||||||
Symbol | ![]() | ![]() | ![]() | Â SPIAX | ![]() | ![]() | ![]() | Â SPIBX | ![]() | ![]() | ![]() | Â SPICX | ![]() | ![]() | ![]() | Â SPIDX | ||||||||||
1 Year | ![]() | ![]() | ![]() | Â | 14.60% | 3Â | ![]() | ![]() | ![]() | Â | 13.76% | 3Â | ![]() | ![]() | ![]() | Â | 13.68% | 3Â | ![]() | ![]() | ![]() | Â | 14.86% | 3Â | ||
 | ![]() | ![]() | ![]() |  | 8.58   | 4 | ![]() | ![]() | ![]() |  | 8.76   | 4 | ![]() | ![]() | ![]() |  | 12.68   | 4 | ![]() | ![]() | ![]() |  | —      |  | ||
5 Years | ![]() | ![]() | ![]() | Â | 11.32Â Â Â | 3Â | ![]() | ![]() | ![]() | Â | 10.47Â Â Â | 3Â | ![]() | ![]() | ![]() | Â | 10.50Â Â Â | 3Â | ![]() | ![]() | ![]() | Â | 11.58Â Â Â | 3Â | ||
 | ![]() | ![]() | ![]() |  | 10.13   | 4 | ![]() | ![]() | ![]() |  | 10.20   | 4 | ![]() | ![]() | ![]() |  | 10.50   | 4 | ![]() | ![]() | ![]() |  | —      |  | ||
Since Inception | ![]() | ![]() | ![]() | Â | 5.57Â Â Â | 3Â | ![]() | ![]() | ![]() | Â | 4.92Â Â Â | 3Â | ![]() | ![]() | ![]() | Â | 4.77Â Â Â | 3Â | ![]() | ![]() | ![]() | Â | 5.80Â Â Â | 3Â | ||
 | ![]() | ![]() | ![]() |  | 4.99   | 4 | ![]() | ![]() | ![]() |  | 4.92   | 4 | ![]() | ![]() | ![]() |  | 4.77   | 4 | ![]() | ![]() | ![]() |  | —      |  | ||
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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. For most recent month-end performance figures, please visit www.morganstanley.com/msim or speak with your Financial Advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance for Class A, Class B, Class C, and Class D shares will vary due to differences in sales charges and expenses.
![]() | * | The maximum front-end sales charge for Class A is 5.25%. |
![]() | ** | The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The CDSC declines to 0% after six years. Effective April 2005, Class B shares will generally convert to Class A shares approximately eight years after the end of the calendar month in which the shares were purchased. Performance for periods greater than eight years reflects this conversion. |
![]() | †| The maximum contingent deferred sales charge for Class C is 1.0% for shares redeemed within one year of purchase. |
![]() | ††| Class D has no sales charge. |
![]() | (1) | The Standard & Poor’s 500 ® Index (S&P 500 ® ) is a broad-based index, the performance of which is based on the performance of 500 widely-held common stocks chosen for market size, liquidity and industry group representation. 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 Lipper S&P 500 Objective Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper S&P 500 Objective Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index. The Fund is in the Lipper S&P 500 Objective Funds classification as of the date of this report. |
![]() | (3) | Figure shown assumes reinvestment of all distributions and does not reflect the deduction of any sales charges. |
![]() | (4) | Figure shown assumes reinvestment of all distributions and the deduction of the maximum applicable sales charge. See the Fund’s current prospectus for complete details on fees and sales charges. |
![]() | ‡ | Ending value assuming a complete redemption on August 31, 2007. |
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![]() | Expense Example |
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As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees; and (2) ongoing costs, including advisory fees; distribution and service (12b-1) 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.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 03/01/07 – 08/31/07.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, 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 first line under the heading entitled ‘‘Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about 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 cost 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) and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs, and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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 | ![]() | Beginning Account Value | ![]() | Ending Account Value | ![]() | Expenses Paid During Period* | ||||||||
 | ![]() | 03/01/07 | ![]() | 08/31/07 | ![]() | 03/01/07 – 08/31/07 | ||||||||
Class A | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||
Actual (5.47% return) | ![]() | $ | 1,000.00 | Â | ![]() | $ | 1,054.70 | Â | ![]() | $ | 3.06 | Â | ||
Hypothetical (5% annual return before expenses) | ![]() | $ | 1,000.00 | Â | ![]() | $ | 1,022.23 | Â | ![]() | $ | 3.01 | Â | ||
Class B | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||
Actual (5.08% return) | ![]() | $ | 1,000.00 | Â | ![]() | $ | 1,050.80 | Â | ![]() | $ | 6.93 | Â | ||
Hypothetical (5% annual return before expenses) | ![]() | $ | 1,000.00 | Â | ![]() | $ | 1,018.45 | Â | ![]() | $ | 6.82 | Â | ||
Class C | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||
Actual (5.10% return) | ![]() | $ | 1,000.00 | Â | ![]() | $ | 1,051.00 | Â | ![]() | $ | 6.93 | Â | ||
Hypothetical (5% annual return before expenses) | ![]() | $ | 1,000.00 | Â | ![]() | $ | 1,018.45 | Â | ![]() | $ | 6.82 | Â | ||
Class D | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||
Actual (5.62% return) | ![]() | $ | 1,000.00 | Â | ![]() | $ | 1,056.20 | Â | ![]() | $ | 1.76 | Â | ||
Hypothetical (5% annual return before expenses) | ![]() | $ | 1,000.00 | Â | ![]() | $ | 1,023.49 | Â | ![]() | $ | 1.73 | Â | ||
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![]() | * | Expenses are equal to the Fund’s annualized expense ratios of 0.59%, 1.34%, 1.34% and 0.34% for Class A, Class B, Class C and Class D shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). If the Fund had borne all of its expenses, the annualized expense ratios would have been 0.62%, 1.37%, 1.37% and 0.37%, for Class A, Class B, Class C and Class D shares, respectively. |
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Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Investment Adviser 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 Fund’s Administrator under the Administration Agreement, including accounting, clerical, bookkeeping, compliance, business management and planning, and the provision of supplies, office space and utilities at the Investment Adviser’s expense. (The Investment Adviser and the Administrator together are referred to as the ‘‘Adviser& rsquo;’ 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 provide the advisory and administrative 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 provided were necessary and appropriate for the conduct of the business and investment activities of the Fund. The Board also concluded that the overall quality of the advisory and administrative services was sati sfactory.
Performance Relative to Comparable Funds Managed by Other Advisers
On a regular basis, the Board reviews the performance of all funds in the Morgan Stanley Fund Complex, including the Fund, compared to their peers, paying specific attention to the underperforming funds. In addition, the Board specifically reviewed the Fund’s performance for the one-, three- and five-year periods ended November 30, 2006, as shown in a report provided by Lipper (the ‘‘Lipper Report’’), compared to the performance of comparable funds selected by Lipper. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. The Board concluded that the Fund’s performance was acceptable.
Fees Relative to Other Proprietary Funds Managed by the Adviser with Comparable Investment Strategies
The Board reviewed the advisory and administrative fee (together, the ‘‘management fee’’) rate paid by the Fund under the Management Agreement. The Board noted that the management fee rate was comparable to the management fee rates charged by the Adviser to other proprietary funds it manages with investment strategies comparable to those of the Fund.
Fees and Expenses Relative to Comparable Funds Managed by Other Advisers
The Board reviewed the management fee rate and total expense ratio of the Fund as compared to the average management fee rate and average total expense ratio for funds, selected by Lipper (the ‘‘expense peer group’’), managed by other advisers with investment strategies comparable to those of the Fund, as shown in the Lipper Report. The Board concluded that the Fund’s management fee rate and total expense ratio were competitive with those of its expense peer group.
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Breakpoints and Economies of Scale
The Board reviewed the structure of the Fund’s management fee schedule under the Management Agreement and noted that it includes a breakpoint. The Board also reviewed the level of the Fund’s management fee and noted that the fee as a percentage of the Fund’s net assets would decrease as net assets increase because the management fee includes a breakpoint. The Board concluded that the Fund’s management fee would reflect economics of scale as assets increase.
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and 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. Based on its review of the information it received, the Board concluded that the profits earned by the Adviser and affiliates were not excessive in light of the advisory, administrative and other services provided to the Fund.
Fall-Out Benefits
The Board considered so-called ‘‘fall-out benefits’’ derived by the Adviser and affiliates from their relationship with the Fund and the Morgan Stanley Fund Complex, such as sales charges on sales of Class A shares and ‘‘float’’ benefits derived from handling of checks for purchases and sales of Fund shares, through a broker-dealer affiliate of the Adviser and ‘‘soft dollar’’ benefits (discussed in the next section). The Board also considered that a broker-dealer affiliate of the Adviser receives from the Fund 12b-1 fees for distribution and shareholder services. The Board concluded that the float benefits were relatively small and the sales charges and 1 2b-1 fees were competitive with those of other broker-dealers.
Soft Dollar Benefits
The Board considered whether the Adviser realizes any benefits as a result of brokerage transactions executed through ‘‘soft dollar’’ arrangements. Under such arrangements, brokerage commissions paid by the Fund and/or other funds managed by the Adviser would be used to pay for research that a securities broker obtains from third parties, or to pay for both research and execution services from securities brokers who effect transactions for the Fund. The Adviser informed the Board that the Fund’s commissions are used to pay for execution services only.
Adviser Financially Sound and Financially Capable of Meeting the Fund’s Needs
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement.
Historical Relationship Between the Fund and the Adviser
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 it is beneficial for the Fund to continue its relationship with the Adviser.
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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
On April 25, 2007, after considering and weighing all of the above factors, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year until April 30, 2008. On June 20, 2007, the Board again considered and weighed all of the above factors and concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement to continue until June 30, 2008.
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Morgan Stanley S&P 500 Index Fund
Portfolio of Investments August 31, 2007
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NUMBER OF SHARES | ![]() | Â | ![]() | VALUEÂ Â Â | ||||||
 |  | ![]() | Common Stocks (97.4%) | ![]() |  |  | ||||
 |  | ![]() | Advertising/Marketing Services (0.2%) | |||||||
 | 39,250 |  | ![]() | Interpublic Group of Companies, Inc. (The)* | ![]() | $ |           429,787 |  | ||
 | 27,691 |  | ![]() | Omnicom Group, Inc. | ![]() |  | 1,410,303 |  | ||
 |  | ![]() |  | ![]() |  | 1,840,090 |  | |||
 |  | ![]() | Aerospace & Defense (1.8%) | ![]() |  |  | ||||
 | 65,912 |  | ![]() | Boeing Co. (The) | ![]() |  | 6,373,690 |  | ||
 | 33,888 |  | ![]() | General Dynamics Corp. | ![]() |  | 2,662,241 |  | ||
 | 10,478 |  | ![]() | Goodrich Corp. | ![]() |  | 661,790 |  | ||
 | 10,458 |  | ![]() | L-3 Communications Holdings, Inc. | ![]() |  | 1,030,218 |  | ||
 | 29,707 |  | ![]() | Lockheed Martin Corp. | ![]() |  | 2,945,152 |  | ||
 | 28,889 |  | ![]() | Northrop Grumman Corp. | ![]() |  | 2,277,609 |  | ||
 | 11,518 |  | ![]() | Precision Castparts Corp. | ![]() |  | 1,500,911 |  | ||
 | 37,155 |  | ![]() | Raytheon Co. | ![]() |  | 2,279,088 |  | ||
 | 14,008 |  | ![]() | Rockwell Collins, Inc. | ![]() |  | 964,731 |  | ||
 |  | ![]() |  | ![]() |  | 20,695,430 |  | |||
 |  | ![]() | Agricultural Commodities/Milling (0.2%) | |||||||
 | 54,639 |  | ![]() | Archer-Daniels-Midland Co. | ![]() |  | 1,841,334 |  | ||
 |  | ![]() | Air Freight/Couriers (0.9%) | ![]() |  |  | ||||
 | 14,328 |  | ![]() | C.H. Robinson Worldwide, Inc. | ![]() |  | 702,645 |  | ||
 | 25,766 |  | ![]() | FedEx Corp. | ![]() |  | 2,826,015 |  | ||
 | 88,651 |  | ![]() | United Parcel Service, Inc. (Class B) | ![]() |  | 6,725,065 |  | ||
 |  | ![]() |  | ![]() |  | 10,253,725 |  | |||
 |  | ![]() | Airlines (0.1%) | ![]() |  |  | ||||
 | 65,363 |  | ![]() | Southwest Airlines Co. | ![]() |  | 987,635 |  | ||
 |  | ![]() | Aluminum (0.2%) | ![]() |  |  | ||||
 | 72,787 |  | ![]() | Alcoa, Inc. | ![]() |  | 2,658,909 |  | ||
 |  | ![]() | Apparel/Footwear (0.4%) | ![]() |  |  | ||||
 | 31,067 |  | ![]() | Coach, Inc.* | ![]() |  | 1,383,413 |  | ||
 | 9,116 |  | ![]() | Jones Apparel Group, Inc. | ![]() |  | 174,936 |  | ||
 | 8,750 |  | ![]() | Liz Claiborne, Inc. | ![]() |  | 298,988 |  | ||
 | 31,737 |  | ![]() | Nike, Inc. (Class B) | ![]() |  | 1,788,063 |  | ||
 | 5,130 |  | ![]() | Polo Ralph Lauren Corp. | ![]() |  | 387,520 |  | ||
 | 7,458 |  | ![]() | V.F. Corp. | ![]() |  | 595,521 |  | ||
 |  | ![]() |  | ![]() |  | 4,628,441 |  | |||
 |  | ![]() | Apparel/Footwear Retail (0.4%) | |||||||
 | 7,387 |  | ![]() | Abercrombie & Fitch Co. (Class A) | ![]() | $ |           581,357 |  | ||
 | 44,380 |  | ![]() | Gap, Inc. (The) | ![]() |  | 832,569 |  | ||
 | 28,647 |  | ![]() | Limited Brands, Inc. | ![]() |  | 663,464 |  | ||
 | 18,789 |  | ![]() | Nordstrom, Inc. | ![]() |  | 903,751 |  | ||
 | 38,077 |  | ![]() | TJX Companies, Inc. (The) | ![]() |  | 1,160,968 |  | ||
 |  | ![]() |  | ![]() |  | 4,142,109 |  | |||
 |  | ![]() | Auto Parts: O.E.M. (0.3%) | ![]() |  |  | ||||
 | 12,263 |  | ![]() | Eaton Corp. | ![]() |  | 1,155,420 |  | ||
 | 16,516 |  | ![]() | Johnson Controls, Inc. | ![]() |  | 1,867,959 |  | ||
 |  | ![]() |  | ![]() |  | 3,023,379 |  | |||
 |  | ![]() | Automotive Aftermarket (0.0%) | |||||||
 | 17,269 |  | ![]() | Goodyear Tire & Rubber Co. (The)* | ![]() |  | 477,661 |  | ||
 |  | ![]() | Beverages: Alcoholic (0.4%) | ![]() |  |  | ||||
 | 63,602 |  | ![]() | Anheuser-Busch Companies, Inc. | ![]() |  | 3,141,939 |  | ||
 | 6,692 |  | ![]() | Brown-Forman Corp. (Class B) | ![]() |  | 478,879 |  | ||
 | 16,172 |  | ![]() | Constellation Brands Inc. (Class A)* | ![]() |  | 391,039 |  | ||
 | 3,963 |  | ![]() | Molson Coors Brewing Co. (Class B) | ![]() |  | 354,530 |  | ||
 |  | ![]() |  | ![]() |  | 4,366,387 |  | |||
 |  | ![]() | Beverages: Non-Alcoholic (1.7%) | |||||||
 | 168,220 |  | ![]() | Coca-Cola Co. (The) | ![]() |  | 9,046,871 |  | ||
 | 23,350 |  | ![]() | Coca-Cola Enterprises Inc. | ![]() |  | 556,197 |  | ||
 | 11,013 |  | ![]() | Pepsi Bottling Group, Inc. (The) | ![]() |  | 380,940 |  | ||
 | 136,355 |  | ![]() | PepsiCo, Inc. | ![]() |  | 9,276,231 |  | ||
 |  | ![]() |  | ![]() |  | 19,260,239 |  | |||
 |  | ![]() | Biotechnology (1.2%) | |||||||
 | 97,073 |  | ![]() | Amgen Inc.* | ![]() |  | 4,864,328 |  | ||
 | 23,918 |  | ![]() | Biogen Idec Inc.* | ![]() |  | 1,526,447 |  | ||
 | 31,801 |  | ![]() | Celgene Corp.* | ![]() |  | 2,041,942 |  | ||
 | 22,003 |  | ![]() | Genzyme Corp.* | ![]() |  | 1,373,207 |  | ||
 | 78,170 |  | ![]() | Gilead Sciences, Inc.* | ![]() |  | 2,843,043 |  | ||
 | 4,518 |  | ![]() | Millipore Corp.* | ![]() |  | 314,814 |  | ||
 |  | ![]() |  | ![]() |  | 12,963,781 |  | |||
![]() |
See Notes to Financial Statements
12
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments August 31, 2007 continued
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
NUMBER OF SHARES | ![]() | Â | ![]() | VALUEÂ Â Â | ||||||
 |  | ![]() | Broadcasting (0.1%) | ![]() |  |  | ||||
 | 13,692 |  | ![]() | Citadel Broadcasting Corp. | ![]() | $ |             55,726 |  | ||
 | 41,551 |  | ![]() | Clear Channel Communications, Inc. | ![]() |  | 1,548,190 |  | ||
 |  | ![]() |  | ![]() |  | 1,603,916 |  | |||
 |  | ![]() | Building Products (0.1%) | ![]() |  |  | ||||
 | 14,721 |  | ![]() | American Standard Companies, Inc. | ![]() |  | 542,174 |  | ||
 | 31,617 |  | ![]() | Masco Corp. | ![]() |  | 822,674 |  | ||
 | 1 |  | ![]() | WABCO Holdings Inc. | ![]() |  | 45 |  | ||
 |  | ![]() |  | ![]() |  | 1,364,893 |  | |||
 |  | ![]() | Cable/Satellite TV (0.7%) | ![]() |  |  | ||||
 | 260,506 |  | ![]() | Comcast Corp. (Class A)* | ![]() |  | 6,796,601 |  | ||
 | 64,538 |  | ![]() | DIRECTV Group, Inc. (The)* | ![]() |  | 1,505,672 |  | ||
 |  | ![]() |  | ![]() |  | 8,302,273 |  | |||
 |  | ![]() | Casino/Gaming (0.2%) | ![]() |  |  | ||||
 | 15,627 |  | ![]() | Harrah’s Entertainment, Inc. | ![]() |  | 1,340,328 |  | ||
 | 27,828 |  | ![]() | International Game Technology | ![]() |  | 1,062,195 |  | ||
 |  | ![]() |  | ![]() |  | 2,402,523 |  | |||
 |  | ![]() | Chemicals: Agricultural (0.3%) | ![]() |  |  | ||||
 | 45,496 |  | ![]() | Monsanto Co. | ![]() |  | 3,172,891 |  | ||
 |  | ![]() | Chemicals: Major Diversified (0.8%) | |||||||
 | 79,795 |  | ![]() | Dow Chemical Co. (The) | ![]() |  | 3,401,661 |  | ||
 | 77,320 |  | ![]() | E.I. du Pont de Nemours & Co. | ![]() |  | 3,769,350 |  | ||
 | 7,042 |  | ![]() | Eastman Chemical Co. | ![]() |  | 470,124 |  | ||
 | 9,760 |  | ![]() | Hercules Inc. | ![]() |  | 203,203 |  | ||
 | 11,914 |  | ![]() | Rohm & Haas Co. | ![]() |  | 673,618 |  | ||
 |  | ![]() |  | ![]() |  | 8,517,956 |  | |||
 |  | ![]() | Chemicals: Specialty (0.4%) | |||||||
 | 18,132 |  | ![]() | Air Products & Chemicals, Inc. | ![]() |  | 1,632,061 |  | ||
 | 4,677 |  | ![]() | Ashland Inc. | ![]() |  | 279,638 |  | ||
 | 26,678 |  | ![]() | Praxair, Inc. | ![]() |  | 2,018,457 |  | ||
 | 10,992 |  | ![]() | Sigma-Aldrich Corp. | ![]() |  | 492,442 |  | ||
 |  | ![]() |  | ![]() |  | 4,422,598 |  | |||
 |  | ![]() | Coal (0.1%)  | ![]() |  |  | ||||
 | 15,243 |  | ![]() | CONSOL Energy, Inc. | ![]() |  | 607,891 |  | ||
 | 22,180 |  | ![]() | Peabody Energy Corp. | ![]() |  | 942,872 |  | ||
 |  | ![]() |  | ![]() |  | 1,550,763 |  | |||
 |  | ![]() | Commercial Printing/Forms (0.1%) | |||||||
 | 18,424 |  | ![]() | Donnelley (R.R.) & Sons Co. | ![]() | $ |           659,948 |  | ||
 |  | ![]() | Computer Communications (1.6%) | |||||||
 | 37,657 |  | ![]() | Avaya Inc.* | ![]() |  | 633,767 |  | ||
 | 508,218 |  | ![]() | Cisco Systems, Inc.* | ![]() |  | 16,222,319 |  | ||
 | 47,404 |  | ![]() | Juniper Networks, Inc.* | ![]() |  | 1,560,540 |  | ||
 | 13,314 |  | ![]() | QLogic Corp.* | ![]() |  | 177,076 |  | ||
 |  | ![]() |  | ![]() |  | 18,593,702 |  | |||
 |  | ![]() | Computer Peripherals (0.4%) | |||||||
 | 175,659 |  | ![]() | EMC Corp.* | ![]() |  | 3,453,456 |  | ||
 | 7,916 |  | ![]() | Lexmark International, Inc. (Class A)* | ![]() |  | 294,950 |  | ||
 | 31,061 |  | ![]() | Network Appliance, Inc.* | ![]() |  | 865,359 |  | ||
 | 45,128 |  | ![]() | Seagate Technology Inc. (Escrow) (a)* | ![]() |  | 0 |  | ||
 |  | ![]() |  | ![]() |  | 4,613,765 |  | |||
 |  | ![]() | Computer Processing Hardware (2.5%) | |||||||
 | 72,404 |  | ![]() | Apple Inc.* | ![]() |  | 10,026,506 |  | ||
 | 190,154 |  | ![]() | Dell Inc.* | ![]() |  | 5,371,851 |  | ||
 | 219,224 |  | ![]() | Hewlett-Packard Co. | ![]() |  | 10,818,704 |  | ||
 | 15,059 |  | ![]() | NCR Corp.* | ![]() |  | 749,486 |  | ||
 | 298,861 |  | ![]() | Sun Microsystems, Inc.* | ![]() |  | 1,601,895 |  | ||
 |  | ![]() |  | ![]() |  | 28,568,442 |  | |||
 |  | ![]() | Construction Materials (0.1%) | |||||||
 | 7,977 |  | ![]() | Vulcan Materials Co. | ![]() |  | 718,010 |  | ||
 |  | ![]() | Containers/Packaging (0.2%) | |||||||
 | 8,546 |  | ![]() | Ball Corp. | ![]() |  | 447,639 |  | ||
 | 8,756 |  | ![]() | Bemis Company, Inc. | ![]() |  | 261,542 |  | ||
 | 10,914 |  | ![]() | Pactiv Corp.* | ![]() |  | 319,235 |  | ||
 | 13,523 |  | ![]() | Sealed Air Corp. | ![]() |  | 357,683 |  | ||
 | 8,858 |  | ![]() | Temple-Inland Inc. | ![]() |  | 487,899 |  | ||
 |  | ![]() |  | ![]() |  | 1,873,998 |  | |||
 |  | ![]() | Contract Drilling (0.5%) | |||||||
 | 12,480 |  | ![]() | ENSCO International Inc. | ![]() |  | 676,666 |  | ||
 | 23,566 |  | ![]() | Nabors Industries, Ltd. (Bermuda)* | ![]() |  | 697,318 |  | ||
 | 22,438 |  | ![]() | Noble Corp. (Cayman Islands) | ![]() |  | 1,100,808 |  | ||
 | 9,262 |  | ![]() | Rowan Companies, Inc. | ![]() |  | 347,695 |  | ||
 | 24,121 |  | ![]() | Transocean Inc. (Cayman Islands)* | ![]() |  | 2,534,876 |  | ||
 |  | ![]() |  | ![]() |  | 5,357,363 |  | |||
![]() |
See Notes to Financial Statements
13
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments August 31, 2007 continued
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
NUMBER OF SHARES | ![]() | Â | ![]() | VALUEÂ Â Â | ||||||
 |  | ![]() | Data Processing Services (0.8%) | |||||||
 | 8,301 |  | ![]() | Affiliated Computer Services, Inc. (Class A)* | ![]() | $ |           415,299 |  | ||
 | 46,311 |  | ![]() | Automatic Data Processing, Inc. | ![]() |  | 2,118,265 |  | ||
 | 14,500 |  | ![]() | Computer Sciences Corp.* | ![]() |  | 811,275 |  | ||
 | 11,460 |  | ![]() | Convergys Corp.* | ![]() |  | 191,955 |  | ||
 | 13,694 |  | ![]() | Fidelity National Information Services, Inc. | ![]() |  | 649,096 |  | ||
 | 63,151 |  | ![]() | First Data Corp. | ![]() |  | 2,097,876 |  | ||
 | 14,079 |  | ![]() | Fiserv, Inc.* | ![]() |  | 654,955 |  | ||
 | 28,454 |  | ![]() | Paychex, Inc. | ![]() |  | 1,264,211 |  | ||
 | 64,678 |  | ![]() | Western Union Co. | ![]() |  | 1,217,887 |  | ||
 |  | ![]() |  | ![]() |  | 9,420,819 |  | |||
 |  | ![]() | Department Stores (0.4%) | |||||||
 | 5,172 |  | ![]() | Dillard’s, Inc. (Class A) | ![]() |  | 122,783 |  | ||
 | 27,007 |  | ![]() | Kohl’s Corp.* | ![]() |  | 1,601,515 |  | ||
 | 38,474 |  | ![]() | Macy’s, Inc. | ![]() |  | 1,220,395 |  | ||
 | 18,833 |  | ![]() | Penney (J.C.) Co., Inc. | ![]() |  | 1,294,957 |  | ||
 |  | ![]() |  | ![]() |  | 4,239,650 |  | |||
 |  | ![]() | Discount Stores (1.6%) | |||||||
 | 9,166 |  | ![]() | Big Lots, Inc.* | ![]() |  | 272,872 |  | ||
 | 37,388 |  | ![]() | Costco Wholesale Corp. | ![]() |  | 2,308,709 |  | ||
 | 12,624 |  | ![]() | Family Dollar Stores, Inc. | ![]() |  | 369,631 |  | ||
 | 6,893 |  | ![]() | Sears Holdings Corp.* | ![]() |  | 989,559 |  | ||
 | 71,277 |  | ![]() | Target Corp. | ![]() |  | 4,699,292 |  | ||
 | 202,925 |  | ![]() | Wal-Mart Stores, Inc. | ![]() |  | 8,853,618 |  | ||
 |  | ![]() |  | ![]() |  | 17,493,681 |  | |||
 |  | ![]() | Drugstore Chains (0.8%) | |||||||
 | 129,204 |  | ![]() | CVS Caremark Corp. | ![]() |  | 4,886,495 |  | ||
 | 83,778 |  | ![]() | Walgreen Co. | ![]() |  | 3,775,874 |  | ||
 |  | ![]() |  | ![]() |  | 8,662,369 |  | |||
 |  | ![]() | Electric Utilities (3.1%) | |||||||
 | 55,883 |  | ![]() | AES Corp. (The)* | ![]() |  | 1,012,041 |  | ||
 | 13,871 |  | ![]() | Allegheny Energy, Inc.* | ![]() |  | 715,882 |  | ||
 | 17,266 |  | ![]() | Ameren Corp. | ![]() |  | 876,767 |  | ||
 | 33,380 |  | ![]() | American Electric Power Co., Inc. | ![]() |  | 1,484,742 |  | ||
 | 26,853 |  | ![]() | CenterPoint Energy, Inc. | ![]() |  | 435,556 |  | ||
 | 18,792 |  | ![]() | CMS Energy Corp. | ![]() |  | 306,685 |  | ||
 | 22,645 |  | ![]() | Consolidated Edison, Inc. | ![]() |  | 1,040,311 |  | ||
 | 15,125 |  | ![]() | Constellation Energy Group, Inc. | ![]() |  | 1,254,468 |  | ||
 | 24,478 |  | ![]() | Dominion Resources, Inc. | ![]() | $ |        2,085,036 |  | ||
 | 14,738 |  | ![]() | DTE Energy Co. | ![]() |  | 704,624 |  | ||
 | 105,428 |  | ![]() | Duke Energy Corp. | ![]() |  | 1,933,550 |  | ||
 | 27,273 |  | ![]() | Edison International | ![]() |  | 1,437,560 |  | ||
 | 16,513 |  | ![]() | Entergy Corp. | ![]() |  | 1,711,077 |  | ||
 | 56,307 |  | ![]() | Exelon Corp. | ![]() |  | 3,979,216 |  | ||
 | 25,517 |  | ![]() | FirstEnergy Corp. | ![]() |  | 1,567,764 |  | ||
 | 34,021 |  | ![]() | FPL Group, Inc. | ![]() |  | 2,001,796 |  | ||
 | 6,335 |  | ![]() | Integrys Energy Group, Inc. | ![]() |  | 317,827 |  | ||
 | 29,424 |  | ![]() | PG&E Corp. | ![]() |  | 1,309,368 |  | ||
 | 8,391 |  | ![]() | Pinnacle West Capital Corp. | ![]() |  | 334,297 |  | ||
 | 32,236 |  | ![]() | PPL Corp. | ![]() |  | 1,555,709 |  | ||
 | 21,279 |  | ![]() | Progress Energy, Inc. | ![]() |  | 976,281 |  | ||
 | 21,159 |  | ![]() | Public Service Enterprise Group, Inc. | ![]() |  | 1,798,303 |  | ||
 | 62,933 |  | ![]() | Southern Co. (The) | ![]() |  | 2,233,492 |  | ||
 | 17,544 |  | ![]() | TECO Energy, Inc. | ![]() |  | 277,897 |  | ||
 | 38,435 |  | ![]() | TXU Corp. | ![]() |  | 2,590,519 |  | ||
 | 34,230 |  | ![]() | Xcel Energy, Inc. | ![]() |  | 705,480 |  | ||
 |  | ![]() |  | ![]() |  | 34,646,248 |  | |||
 |  | ![]() | Electrical Products (0.4%) | |||||||
 | 15,322 |  | ![]() | Cooper Industries Ltd. (Class A) (Bermuda) | ![]() |  | 784,027 |  | ||
 | 66,571 |  | ![]() | Emerson Electric Co. | ![]() |  | 3,277,290 |  | ||
 | 11,890 |  | ![]() | Molex Inc. | ![]() |  | 310,924 |  | ||
 |  | ![]() |  | ![]() |  | 4,372,241 |  | |||
 |  | ![]() | Electronic Components (0.4%) | |||||||
 | 15,002 |  | ![]() | Jabil Circuit, Inc. | ![]() |  | 333,044 |  | ||
 | 18,783 |  | ![]() | MEMC Electronic Materials, Inc.* | ![]() |  | 1,153,652 |  | ||
 | 19,103 |  | ![]() | SanDisk Corp.* | ![]() |  | 1,070,914 |  | ||
 | 75,676 |  | ![]() | Solectron Corp.* | ![]() |  | 293,623 |  | ||
 | 41,487 |  | ![]() | Tyco Electronics Ltd. | ![]() |  | 1,446,652 |  | ||
 |  | ![]() |  | ![]() |  | 4,297,885 |  | |||
 |  | ![]() | Electronic Equipment/Instruments (0.3%) | |||||||
 | 33,145 |  | ![]() | Agilent Technologies, Inc.* | ![]() |  | 1,206,478 |  | ||
 | 17,678 |  | ![]() | JDS Uniphase Corp.* | ![]() |  | 257,392 |  | ||
 | 13,205 |  | ![]() | Rockwell Automation, Inc. | ![]() |  | 930,424 |  | ||
 | 6,840 |  | ![]() | Tektronix, Inc. | ![]() |  | 219,906 |  | ||
 | 78,464 |  | ![]() | Xerox Corp.* | ![]() |  | 1,344,088 |  | ||
 |  | ![]() |  | ![]() |  | 3,958,288 |  | |||
![]() |
See Notes to Financial Statements
14
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments August 31, 2007 continued
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
NUMBER OF SHARES | ![]() | Â | ![]() | VALUEÂ Â Â | ||||||
 |  | ![]() | Electronic Production Equipment (0.3%) | |||||||
 | 115,683 |  | ![]() | Applied Materials, Inc. | ![]() | $ |        2,470,989 |  | ||
 | 16,041 |  | ![]() | KLA-Tencor Corp. | ![]() |  | 921,876 |  | ||
 | 10,577 |  | ![]() | Novellus Systems, Inc.* | ![]() |  | 289,492 |  | ||
 | 15,881 |  | ![]() | Teradyne, Inc.* | ![]() |  | 236,468 |  | ||
 |  | ![]() |  | ![]() |  | 3,918,825 |  | |||
 |  | ![]() | Electronics/Appliance Stores (0.2%) | |||||||
 | 33,887 |  | ![]() | Best Buy Co., Inc. | ![]() |  | 1,489,333 |  | ||
 | 11,577 |  | ![]() | Circuit City Stores – Circuit City Group | ![]() |  | 125,958 |  | ||
 | 11,347 |  | ![]() | RadioShack Corp. | ![]() |  | 269,718 |  | ||
 |  | ![]() |  | ![]() |  | 1,885,009 |  | |||
 |  | ![]() | Electronics/Appliances (0.2%) | |||||||
 | 24,082 |  | ![]() | Eastman Kodak Co. | ![]() |  | 642,267 |  | ||
 | 5,453 |  | ![]() | Harman International Industries, Inc. | ![]() |  | 618,316 |  | ||
 | 6,606 |  | ![]() | Whirlpool Corp. | ![]() |  | 636,884 |  | ||
 |  | ![]() |  | ![]() |  | 1,897,467 |  | |||
 |  | ![]() | Engineering & Construction (0.1%) | |||||||
 | 7,381 |  | ![]() | Fluor Corp. | ![]() |  | 938,494 |  | ||
 |  | ![]() | Environmental Services (0.2%) | |||||||
 | 21,370 |  | ![]() | Allied Waste Industries, Inc.* | ![]() |  | 272,895 |  | ||
 | 43,313 |  | ![]() | Waste Management, Inc. | ![]() |  | 1,631,601 |  | ||
 |  | ![]() |  | ![]() |  | 1,904,496 |  | |||
 |  | ![]() | Finance/Rental/Leasing (1.4%) | |||||||
 | 12,700 |  | ![]() | American Capital Strategies, Ltd. | ![]() |  | 524,383 |  | ||
 | 34,591 |  | ![]() | Capital One Financial Corp. | ![]() |  | 2,236,654 |  | ||
 | 16,054 |  | ![]() | CIT Group, Inc. | ![]() |  | 603,149 |  | ||
 | 49,672 |  | ![]() | Countrywide Financial Corp. | ![]() |  | 985,989 |  | ||
 | 44,112 |  | ![]() | Discover Financial Services | ![]() |  | 1,020,752 |  | ||
 | 81,453 |  | ![]() | Fannie Mae | ![]() |  | 5,344,131 |  | ||
 | 55,377 |  | ![]() | Freddie Mac | ![]() |  | 3,411,777 |  | ||
 | 5,119 |  | ![]() | Ryder System, Inc. | ![]() |  | 280,265 |  | ||
 | 34,439 |  | ![]() | SLM Corp. | ![]() |  | 1,731,593 |  | ||
 |  | ![]() |  | ![]() |  | 16,138,693 |  | |||
 |  | ![]() | Financial Conglomerates (3.8%) | |||||||
 | 99,498 |  | ![]() | American Express Co. | ![]() |  | 5,832,573 |  | ||
 | 414,061 |  | ![]() | Citigroup, Inc. | ![]() |  | 19,411,180 |  | ||
 | 285,959 |  | ![]() | JPMorgan Chase & Co. | ![]() |  | 12,730,895 |  | ||
 | 6,300 |  | ![]() | Leucadia National Corp.* | ![]() | $ |           279,594 |  | ||
 | 22,416 |  | ![]() | Principal Financial Group, Inc. | ![]() |  | 1,243,864 |  | ||
 | 39,142 |  | ![]() | Prudential Financial, Inc. | ![]() |  | 3,514,169 |  | ||
 |  | ![]() |  | ![]() |  | 43,012,275 |  | |||
 |  | ![]() | Financial Publishing/Services (0.2%) | |||||||
 | 12,177 |  | ![]() | Equifax, Inc. | ![]() |  | 469,058 |  | ||
 | 28,729 |  | ![]() | McGraw-Hill Companies, Inc. (The) | ![]() |  | 1,449,665 |  | ||
 | 19,252 |  | ![]() | Moody’s Corp. | ![]() |  | 882,704 |  | ||
 |  | ![]() |  | ![]() |  | 2,801,427 |  | |||
 |  | ![]() | Food Distributors (0.2%) | |||||||
 | 51,728 |  | ![]() | SYSCO Corp. | ![]() |  | 1,726,681 |  | ||
 |  | ![]() | Food Retail (0.4%) | |||||||
 | 59,263 |  | ![]() | Kroger Co. (The) | ![]() |  | 1,575,211 |  | ||
 | 36,966 |  | ![]() | Safeway Inc. | ![]() |  | 1,172,931 |  | ||
 | 17,396 |  | ![]() | SUPERVALU, Inc. | ![]() |  | 733,241 |  | ||
 | 11,834 |  | ![]() | Whole Foods Market, Inc. | ![]() |  | 523,773 |  | ||
 |  | ![]() |  | ![]() |  | 4,005,156 |  | |||
 |  | ![]() | Food: Major Diversified (1.0%) | |||||||
 | 18,162 |  | ![]() | Campbell Soup Co. | ![]() |  | 685,616 |  | ||
 | 41,695 |  | ![]() | ConAgra Foods Inc. | ![]() |  | 1,071,978 |  | ||
 | 28,994 |  | ![]() | General Mills, Inc. | ![]() |  | 1,620,185 |  | ||
 | 27,193 |  | ![]() | Heinz (H.J.) Co. | ![]() |  | 1,226,132 |  | ||
 | 20,969 |  | ![]() | Kellogg Co. | ![]() |  | 1,151,827 |  | ||
 | 134,278 |  | ![]() | Kraft Foods Inc. (Class A) | ![]() |  | 4,304,953 |  | ||
 | 61,491 |  | ![]() | Sara Lee Corp. | ![]() |  | 1,021,980 |  | ||
 |  | ![]() |  | ![]() |  | 11,082,671 |  | |||
 |  | ![]() | Food: Meat/Fish/Dairy (0.1%) | |||||||
 | 10,882 |  | ![]() | Dean Foods Co. | ![]() |  | 292,291 |  | ||
 | 21,162 |  | ![]() | Tyson Foods, Inc. (Class A) | ![]() |  | 456,041 |  | ||
 |  | ![]() |  | ![]() |  | 748,332 |  | |||
 |  | ![]() | Food: Specialty/Candy (0.2%) | |||||||
 | 14,350 |  | ![]() | Hershey Co. (The) | ![]() |  | 667,275 |  | ||
 | 10,898 |  | ![]() | McCormick & Co., Inc. (Non-Voting) | ![]() |  | 390,584 |  | ||
 | 18,048 |  | ![]() | Wrigley (Wm.) Jr. Co. | ![]() |  | 1,051,296 |  | ||
 |  | ![]() |  | ![]() |  | 2,109,155 |  | |||
 |  | ![]() | Forest Products (0.1%) | |||||||
 | 18,074 |  | ![]() | Weyerhaeuser Co. | ![]() |  | 1,232,105 |  | ||
![]() |
See Notes to Financial Statements
15
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments August 31, 2007 continued
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
NUMBER OF SHARES | ![]() | Â | ![]() | VALUEÂ Â Â | ||||||
 |  | ![]() | Gas Distributors (0.4%) | |||||||
 | 33,675 |  | ![]() | Dynegy, Inc. (Class A)* | ![]() | $ |           272,431 |  | ||
 | 3,769 |  | ![]() | Nicor Inc. | ![]() |  | 156,640 |  | ||
 | 22,942 |  | ![]() | NiSource, Inc. | ![]() |  | 432,227 |  | ||
 | 14,433 |  | ![]() | Questar Corp. | ![]() |  | 721,217 |  | ||
 | 22,083 |  | ![]() | Sempra Energy | ![]() |  | 1,215,227 |  | ||
 | 52,890 |  | ![]() | Spectra Energy Corp. | ![]() |  | 1,229,693 |  | ||
 |  | ![]() |  | ![]() |  | 4,027,435 |  | |||
 |  | ![]() | Home Building (0.1%) | |||||||
 | 9,998 |  | ![]() | Centex Corp. | ![]() |  | 289,042 |  | ||
 | 22,875 |  | ![]() | D.R. Horton, Inc. | ![]() |  | 345,641 |  | ||
 | 6,431 |  | ![]() | KB Home | ![]() |  | 195,117 |  | ||
 | 11,655 |  | ![]() | Lennar Corp. (Class A) | ![]() |  | 329,487 |  | ||
 | 17,784 |  | ![]() | Pulte Homes, Inc. | ![]() |  | 295,926 |  | ||
 |  | ![]() |  | ![]() |  | 1,455,213 |  | |||
 |  | ![]() | Home Furnishings (0.1%) | |||||||
 | 14,829 |  | ![]() | Leggett & Platt, Inc. | ![]() |  | 302,512 |  | ||
 | 23,346 |  | ![]() | Newell Rubbermaid, Inc. | ![]() |  | 602,093 |  | ||
 |  | ![]() |  | ![]() |  | 904,605 |  | |||
 |  | ![]() | Home Improvement Chains (1.0%) | |||||||
 | 165,253 |  | ![]() | Home Depot, Inc. (The) | ![]() |  | 6,330,842 |  | ||
 | 125,985 |  | ![]() | Lowe’s Companies, Inc. | ![]() |  | 3,913,094 |  | ||
 | 9,163 |  | ![]() | Sherwin-Williams Co. | ![]() |  | 632,339 |  | ||
 |  | ![]() |  | ![]() |  | 10,876,275 |  | |||
 |  | ![]() | Hospital/Nursing     Management (0.0%) | |||||||
 | 6,125 |  | ![]() | Manor Care, Inc. | ![]() |  | 391,326 |  | ||
 | 39,596 |  | ![]() | Tenet Healthcare Corp.* | ![]() |  | 134,230 |  | ||
 |  | ![]() |  | ![]() |  | 525,556 |  | |||
 |  | ![]() | Hotels/Resorts/Cruiselines (0.5%) | |||||||
 | 37,033 |  | ![]() | Carnival Corp (Panama) (Units) †| ![]() |  | 1,688,334 |  | ||
 | 32,626 |  | ![]() | Hilton Hotels Corp. | ![]() |  | 1,499,165 |  | ||
 | 27,489 |  | ![]() | Marriott International, Inc. (Class A) | ![]() |  | 1,221,061 |  | ||
 | 18,006 |  | ![]() | Starwood Hotels & Resorts Worldwide, Inc. | ![]() |  | 1,100,527 |  | ||
 | 15,260 |  | ![]() | Wyndham Worldwide Corp. | ![]() |  | 486,794 |  | ||
 |  | ![]() |  | ![]() |  | 5,995,881 |  | |||
 |  | ![]() | Household/Personal Care (2.2%) | |||||||
 | 36,736 |  | ![]() | Avon Products, Inc. | ![]() |  | 1,261,882 |  | ||
 | 12,704 |  | ![]() | Clorox Co. (The) | ![]() |  | 759,699 |  | ||
 | 42,816 |  | ![]() | Colgate-Palmolive Co. | ![]() | $ |        2,839,557 |  | ||
 | 9,876 |  | ![]() | Estee Lauder Companies, Inc. (The) (Class A) | ![]() |  | 410,743 |  | ||
 | 6,500 |  | ![]() | International Flavors & Fragrances, Inc. | ![]() |  | 326,495 |  | ||
 | 35,705 |  | ![]() | Kimberly-Clark Corp. | ![]() |  | 2,452,576 |  | ||
 | 263,593 |  | ![]() | Procter & Gamble Co. (The) | ![]() |  | 17,215,259 |  | ||
 |  | ![]() |  | ![]() |  | 25,266,211 |  | |||
 |  | ![]() | Industrial Conglomerates (5.0%) | |||||||
 | 60,288 |  | ![]() | 3M Co. | ![]() |  | 5,485,605 |  | ||
 | 19,930 |  | ![]() | Danaher Corp. | ![]() |  | 1,547,764 |  | ||
 | 861,210 |  | ![]() | General Electric Co.** | ![]() |  | 33,475,233 |  | ||
 | 65,269 |  | ![]() | Honeywell International, Inc. | ![]() |  | 3,664,854 |  | ||
 | 25,249 |  | ![]() | Ingersoll-Rand Co. Ltd. (Class A) (Bermuda) | ![]() |  | 1,311,180 |  | ||
 | 15,212 |  | ![]() | ITT Corp. | ![]() |  | 1,034,264 |  | ||
 | 21,002 |  | ![]() | Textron, Inc. | ![]() |  | 1,225,257 |  | ||
 | 41,487 |  | ![]() | Tyco International Ltd. (Bermuda) | ![]() |  | 1,832,066 |  | ||
 | 83,243 |  | ![]() | United Technologies Corp. | ![]() |  | 6,212,425 |  | ||
 |  | ![]() |  | ![]() |  | 55,788,648 |  | |||
 |  | ![]() | Industrial Machinery (0.3%) | |||||||
 | 34,486 |  | ![]() | Illinois Tool Works Inc. | ![]() |  | 2,006,051 |  | ||
 | 9,696 |  | ![]() | Parker Hannifin Corp. | ![]() |  | 1,042,029 |  | ||
 |  | ![]() |  | ![]() |  | 3,048,080 |  | |||
 |  | ![]() | Industrial Specialties (0.1%) | |||||||
 | 14,671 |  | ![]() | Ecolab Inc. | ![]() |  | 611,194 |  | ||
 | 13,743 |  | ![]() | PPG Industries, Inc. | ![]() |  | 1,008,049 |  | ||
 |  | ![]() |  | ![]() |  | 1,619,243 |  | |||
 |  | ![]() | Information Technology Services (1.4%) | |||||||
 | 15,117 |  | ![]() | Citrix Systems, Inc.* | ![]() |  | 549,503 |  | ||
 | 12,034 |  | ![]() | Cognizant Technology Solutions Corp. (Class A)* | ![]() |  | 884,619 |  | ||
 | 42,596 |  | ![]() | Electronic Data Systems Corp. | ![]() |  | 975,022 |  | ||
 | 114,349 |  | ![]() | International Business Machines Corp. | ![]() |  | 13,343,385 |  | ||
 | 29,110 |  | ![]() | Unisys Corp.* | ![]() |  | 214,541 |  | ||
 |  | ![]() |  | ![]() |  | 15,967,070 |  | |||
![]() |
See Notes to Financial Statements
16
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments August 31, 2007 continued
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
NUMBER OF SHARES | ![]() | Â | ![]() | VALUEÂ Â Â | ||||||
 |  | ![]() | Insurance Brokers/Services (0.2%) | |||||||
 | 24,578 |  | ![]() | AON Corp. | ![]() | $ |        1,064,719 |  | ||
 | 46,494 |  | ![]() | Marsh & McLennan Companies, Inc. | ![]() |  | 1,239,065 |  | ||
 |  | ![]() |  | ![]() |  | 2,303,784 |  | |||
 |  | ![]() | Integrated Oil (6.2%) | |||||||
 | 179,910 |  | ![]() | Chevron Corp. | ![]() |  | 15,788,902 |  | ||
 | 136,814 |  | ![]() | ConocoPhillips | ![]() |  | 11,203,698 |  | ||
 | 471,555 |  | ![]() | Exxon Mobil Corp. | ![]() |  | 40,426,410 |  | ||
 | 22,841 |  | ![]() | Hess Corp. | ![]() |  | 1,401,752 |  | ||
 | 15,748 |  | ![]() | Murphy Oil Corp. | ![]() |  | 959,683 |  | ||
 |  | ![]() |  | ![]() |  | 69,780,445 |  | |||
 |  | ![]() | Internet Retail (0.2%) | |||||||
 | 26,034 |  | ![]() | Amazon.com, Inc.* | ![]() |  | 2,080,377 |  | ||
 | 18,291 |  | ![]() | IAC/InterActiveCorp.* | ![]() |  | 508,307 |  | ||
 |  | ![]() |  | ![]() |  | 2,588,684 |  | |||
 |  | ![]() | Internet Software/Services (1.1%) | |||||||
 | 13,805 |  | ![]() | Akamai Technologies, Inc.* | ![]() |  | 444,797 |  | ||
 | 18,256 |  | ![]() | Google, Inc. (Class A)* | ![]() |  | 9,406,404 |  | ||
 | 20,520 |  | ![]() | VeriSign, Inc.* | ![]() |  | 660,744 |  | ||
 | 101,243 |  | ![]() | Yahoo!, Inc.* | ![]() |  | 2,301,253 |  | ||
 |  | ![]() |  | ![]() |  | 12,813,198 |  | |||
 |  | ![]() | Investment Banks/Brokers (2.3%) | |||||||
 | 19,692 |  | ![]() | Ameriprise Financial, Inc. | ![]() |  | 1,201,409 |  | ||
 | 9,964 |  | ![]() | Bear Stearns Companies, Inc. (The) | ![]() |  | 1,082,688 |  | ||
 | 3,033 |  | ![]() | CME Group Inc. | ![]() |  | 1,682,708 |  | ||
 | 35,732 |  | ![]() | E*TRADE Group, Inc.* | ![]() |  | 556,705 |  | ||
 | 34,193 |  | ![]() | Goldman Sachs Group, Inc. (The) | ![]() |  | 6,018,310 |  | ||
 | 44,585 |  | ![]() | Lehman Brothers Holdings Inc. | ![]() |  | 2,444,596 |  | ||
 | 72,894 |  | ![]() | Merrill Lynch & Co., Inc. | ![]() |  | 5,372,288 |  | ||
 | 98,268 |  | ![]() | Morgan Stanley (Note 4) | ![]() |  | 6,128,975 |  | ||
 | 79,004 |  | ![]() | Schwab (Charles) Corp. (The) | ![]() |  | 1,564,279 |  | ||
 |  | ![]() |  | ![]() |  | 26,051,958 |  | |||
 |  | ![]() | Investment Managers (0.6%) | |||||||
 | 7,414 |  | ![]() | Federated Investors, Inc. (Class B) | ![]() |  | 260,305 |  | ||
 | 13,792 |  | ![]() | Franklin Resources, Inc. | ![]() |  | 1,817,372 |  | ||
 | 15,520 |  | ![]() | Janus Capital Group, Inc. | ![]() |  | 412,677 |  | ||
 | 11,008 |  | ![]() | Legg Mason, Inc. | ![]() | $ |           955,715 |  | ||
 | 22,235 |  | ![]() | Price (T.) Rowe Group, Inc. | ![]() |  | 1,141,100 |  | ||
 | 29,196 |  | ![]() | State Street Corp. | ![]() |  | 1,791,467 |  | ||
 |  | ![]() |  | ![]() |  | 6,378,636 |  | |||
 |  | ![]() | Life/Health Insurance (0.9%) | |||||||
 | 40,945 |  | ![]() | AFLAC, Inc. | ![]() |  | 2,182,778 |  | ||
 | 35,018 |  | ![]() | Genworth Financial Inc. (Class A) | ![]() |  | 1,014,821 |  | ||
 | 22,666 |  | ![]() | Lincoln National Corp. | ![]() |  | 1,379,906 |  | ||
 | 62,079 |  | ![]() | MetLife, Inc. | ![]() |  | 3,976,160 |  | ||
 | 7,994 |  | ![]() | Torchmark Corp. | ![]() |  | 492,111 |  | ||
 | 28,696 |  | ![]() | UnumProvident Corp. | ![]() |  | 702,191 |  | ||
 |  | ![]() |  | ![]() |  | 9,747,967 |  | |||
 |  | ![]() | Major Banks (5.1%) | |||||||
 | 371,481 |  | ![]() | Bank of America Corp. | ![]() |  | 18,826,657 |  | ||
 | 94,550 |  | ![]() | Bank of New York Mellon Corp. | ![]() |  | 3,822,657 |  | ||
 | 45,417 |  | ![]() | BB&T Corp. | ![]() |  | 1,804,417 |  | ||
 | 13,054 |  | ![]() | Comerica, Inc. | ![]() |  | 728,152 |  | ||
 | 29,498 |  | ![]() | Huntington Bancshares, Inc. | ![]() |  | 507,661 |  | ||
 | 32,839 |  | ![]() | KeyCorp | ![]() |  | 1,093,539 |  | ||
 | 48,196 |  | ![]() | National City Corp. | ![]() |  | 1,296,954 |  | ||
 | 28,873 |  | ![]() | PNC Financial Services Group, Inc. | ![]() |  | 2,031,793 |  | ||
 | 58,990 |  | ![]() | Regions Financial Corp. | ![]() |  | 1,846,387 |  | ||
 | 29,853 |  | ![]() | SunTrust Banks, Inc. | ![]() |  | 2,350,924 |  | ||
 | 145,547 |  | ![]() | U.S. Bancorp | ![]() |  | 4,708,445 |  | ||
 | 160,165 |  | ![]() | Wachovia Corp. | ![]() |  | 7,844,882 |  | ||
 | 279,567 |  | ![]() | Wells Fargo & Co. | ![]() |  | 10,215,378 |  | ||
 |  | ![]() |  | ![]() |  | 57,077,846 |  | |||
 |  | ![]() | Major Telecommunications (3.4%) | |||||||
 | 28,920 |  | ![]() | ALLTEL Corp. | ![]() |  | 1,974,079 |  | ||
 | 516,112 |  | ![]() | AT&T Inc. | ![]() |  | 20,577,385 |  | ||
 | 12,645 |  | ![]() | Embarq Corp. | ![]() |  | 789,301 |  | ||
 | 242,223 |  | ![]() | Sprint Nextel Corp. | ![]() |  | 4,582,859 |  | ||
 | 243,037 |  | ![]() | Verizon Communications, Inc. | ![]() |  | 10,178,390 |  | ||
 |  | ![]() |  | ![]() |  | 38,102,014 |  | |||
 |  | ![]() | Managed Health Care (1.3%) | |||||||
 | 43,227 |  | ![]() | Aetna, Inc. | ![]() |  | 2,200,686 |  | ||
 | 24,091 |  | ![]() | CIGNA Corp. | ![]() |  | 1,245,023 |  | ||
 | 13,086 |  | ![]() | Coventry Health Care, Inc.* | ![]() |  | 750,744 |  | ||
 | 14,066 |  | ![]() | Humana, Inc.* | ![]() |  | 901,490 |  | ||
![]() |
See Notes to Financial Statements
17
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments August 31, 2007 continued
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
NUMBER OF SHARES | ![]() | Â | ![]() | VALUEÂ Â Â | ||||||
 | 112,174 |  | ![]() | UnitedHealth Group Inc. | ![]() | $ |        5,609,822 |  | ||
 | 51,368 |  | ![]() | WellPoint Inc.* | ![]() |  | 4,139,747 |  | ||
 |  | ![]() |  | ![]() |  | 14,847,512 |  | |||
 |  | ![]() | Media Conglomerates (1.7%) | |||||||
 | 61,321 |  | ![]() | CBS Corp. (Class B) | ![]() |  | 1,932,225 |  | ||
 | 165,880 |  | ![]() | Disney (Walt) Co. (The) | ![]() |  | 5,573,568 |  | ||
 | 194,975 |  | ![]() | News Corp. (Class A) | ![]() |  | 3,944,344 |  | ||
 | 316,877 |  | ![]() | Time Warner, Inc. | ![]() |  | 6,014,325 |  | ||
 | 57,686 |  | ![]() | Viacom Inc. (Class B)* | ![]() |  | 2,276,290 |  | ||
 |  | ![]() |  | ![]() |  | 19,740,752 |  | |||
 |  | ![]() | Medical Distributors (0.4%) | |||||||
 | 15,995 |  | ![]() | AmerisourceBergen Corp. | ![]() |  | 765,361 |  | ||
 | 32,198 |  | ![]() | Cardinal Health, Inc. | ![]() |  | 2,201,699 |  | ||
 | 24,727 |  | ![]() | McKesson Corp. | ![]() |  | 1,414,632 |  | ||
 | 11,647 |  | ![]() | Patterson Companies, Inc.* | ![]() |  | 428,376 |  | ||
 |  | ![]() |  | ![]() |  | 4,810,068 |  | |||
 |  | ![]() | Medical Specialties (2.1%) | |||||||
 | 15,365 |  | ![]() | Applera Corp. – Applied Biosystems Group | ![]() |  | 485,688 |  | ||
 | 8,645 |  | ![]() | Bard (C.R.), Inc. | ![]() |  | 720,907 |  | ||
 | 4,549 |  | ![]() | Bausch & Lomb, Inc. | ![]() |  | 287,497 |  | ||
 | 54,538 |  | ![]() | Baxter International, Inc. | ![]() |  | 2,986,501 |  | ||
 | 20,508 |  | ![]() | Becton, Dickinson & Co. | ![]() |  | 1,577,886 |  | ||
 | 19,017 |  | ![]() | Biomet, Inc. | ![]() |  | 871,549 |  | ||
 | 99,325 |  | ![]() | Boston Scientific Corp.* | ![]() |  | 1,274,340 |  | ||
 | 41,487 |  | ![]() | Covidien Ltd. (Bermuda) | ![]() |  | 1,652,427 |  | ||
 | 13,043 |  | ![]() | Hospira, Inc.* | ![]() |  | 504,112 |  | ||
 | 96,396 |  | ![]() | Medtronic, Inc. | ![]() |  | 5,093,565 |  | ||
 | 10,263 |  | ![]() | Pall Corp. | ![]() |  | 391,328 |  | ||
 | 10,025 |  | ![]() | PerkinElmer, Inc. | ![]() |  | 274,785 |  | ||
 | 28,320 |  | ![]() | St. Jude Medical, Inc.* | ![]() |  | 1,233,902 |  | ||
 | 24,998 |  | ![]() | Stryker Corp. | ![]() |  | 1,669,866 |  | ||
 | 35,319 |  | ![]() | Thermo Fisher Scientific, Inc.* | ![]() |  | 1,915,349 |  | ||
 | 10,670 |  | ![]() | Varian Medical Systems, Inc.* | ![]() |  | 430,961 |  | ||
 | 8,446 |  | ![]() | Waters Corp.* | ![]() |  | 520,020 |  | ||
 | 19,820 |  | ![]() | Zimmer Holdings, Inc.* | ![]() |  | 1,552,501 |  | ||
 |  | ![]() |  | ![]() |  | 23,443,184 |  | |||
 |  | ![]() | Miscellaneous Commercial Services (0.0%) | |||||||
 | 11,289 |  | ![]() | Cintas Corp. | ![]() |  | 413,742 |  | ||
 |  | ![]() | Miscellaneous Manufacturing (0.1%) | |||||||
 | 17,111 |  | ![]() | Dover Corp. | ![]() |  | 845,283 |  | ||
 |  | ![]() | Motor Vehicles (0.3%) | |||||||
 | 159,663 |  | ![]() | Ford Motor Co.* | ![]() | $ |        1,246,968 |  | ||
 | 47,358 |  | ![]() | General Motors Corp. | ![]() |  | 1,455,785 |  | ||
 | 21,559 |  | ![]() | Harley-Davidson, Inc. | ![]() |  | 1,159,659 |  | ||
 |  | ![]() |  | ![]() |  | 3,862,412 |  | |||
 |  | ![]() | Multi-Line Insurance (1.7%) | |||||||
 | 217,161 |  | ![]() | American International Group, Inc. | ![]() |  | 14,332,626 |  | ||
 | 26,508 |  | ![]() | Hartford Financial Services Group, Inc. (The) | ![]() |  | 2,356,826 |  | ||
 | 37,312 |  | ![]() | Loews Corp. | ![]() |  | 1,754,037 |  | ||
 | 8,888 |  | ![]() | SAFECO Corp.* | ![]() |  | 515,682 |  | ||
 |  | ![]() |  | ![]() |  | 18,959,171 |  | |||
 |  | ![]() | Office Equipment/Supplies (0.1%) | |||||||
 | 7,670 |  | ![]() | Avery Dennison Corp. | ![]() |  | 458,589 |  | ||
 | 18,386 |  | ![]() | Pitney Bowes, Inc. | ![]() |  | 821,303 |  | ||
 |  | ![]() |  | ![]() |  | 1,279,892 |  | |||
 |  | ![]() | Oil & Gas Pipelines (0.2%) | |||||||
 | 58,616 |  | ![]() | El Paso Corp. | ![]() |  | 930,236 |  | ||
 | 50,130 |  | ![]() | Williams Companies, Inc. (The) | ![]() |  | 1,554,030 |  | ||
 |  | ![]() |  | ![]() |  | 2,484,266 |  | |||
 |  | ![]() | Oil & Gas Production (1.3%) | |||||||
 | 38,835 |  | ![]() | Anadarko Petroleum Corp. | ![]() |  | 1,902,138 |  | ||
 | 27,721 |  | ![]() | Apache Corp. | ![]() |  | 2,145,051 |  | ||
 | 34,275 |  | ![]() | Chesapeake Energy Corp. | ![]() |  | 1,105,711 |  | ||
 | 37,235 |  | ![]() | Devon Energy Corp. | ![]() |  | 2,804,168 |  | ||
 | 20,475 |  | ![]() | EOG Resources, Inc. | ![]() |  | 1,379,196 |  | ||
 | 69,798 |  | ![]() | Occidental Petroleum Corp. | ![]() |  | 3,956,849 |  | ||
 | 32,091 |  | ![]() | XTO Energy, Inc. | ![]() |  | 1,744,467 |  | ||
 |  | ![]() |  | ![]() |  | 15,037,580 |  | |||
 |  | ![]() | Oil Refining/Marketing (0.6%) | |||||||
 | 57,421 |  | ![]() | Marathon Oil Corp. | ![]() |  | 3,094,418 |  | ||
 | 10,166 |  | ![]() | Sunoco, Inc. | ![]() |  | 743,541 |  | ||
 | 45,955 |  | ![]() | Valero Energy Corp. | ![]() |  | 3,148,377 |  | ||
 |  | ![]() |  | ![]() |  | 6,986,336 |  | |||
 |  | ![]() | Oilfield Services/Equipment (1.7%) | |||||||
 | 26,815 |  | ![]() | Baker Hughes Inc. | ![]() |  | 2,248,706 |  | ||
 | 24,555 |  | ![]() | BJ Services Co. | ![]() |  | 609,210 |  | ||
 | 76,514 |  | ![]() | Halliburton Co. | ![]() |  | 2,646,619 |  | ||
 | 14,868 |  | ![]() | National-Oilwell Varco, Inc.* | ![]() |  | 1,903,104 |  | ||
![]() |
See Notes to Financial Statements
18
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments August 31, 2007 continued
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
NUMBER OF SHARES | ![]() | Â | ![]() | VALUEÂ Â Â | ||||||
 | 98,656 |  | ![]() | Schlumberger Ltd. (Netherlands Antilles) | ![]() | $ |        9,520,304 |  | ||
 | 16,781 |  | ![]() | Smith International, Inc. | ![]() |  | 1,124,495 |  | ||
 | 28,235 |  | ![]() | Weatherford International Ltd. (Bermuda)* | ![]() |  | 1,648,359 |  | ||
 |  | ![]() |  | ![]() |  | 19,700,797 |  | |||
 |  | ![]() | Other Consumer Services (0.4%) | |||||||
 | 11,715 |  | ![]() | Apollo Group, Inc. (Class A)* | ![]() |  | 687,319 |  | ||
 | 27,032 |  | ![]() | Block (H&R), Inc. | ![]() |  | 536,315 |  | ||
 | 94,757 |  | ![]() | eBay, Inc.* | ![]() |  | 3,231,214 |  | ||
 |  | ![]() |  | ![]() |  | 4,454,848 |  | |||
 |  | ![]() | Other Consumer Specialties (0.1%) | |||||||
 | 12,787 |  | ![]() | Fortune Brands, Inc. | ![]() |  | 1,062,472 |  | ||
 |  | ![]() | Packaged Software (3.0%) | |||||||
 | 49,221 |  | ![]() | Adobe Systems, Inc.* | ![]() |  | 2,104,198 |  | ||
 | 19,353 |  | ![]() | Autodesk, Inc.* | ![]() |  | 896,431 |  | ||
 | 17,074 |  | ![]() | BMC Software, Inc.* | ![]() |  | 522,806 |  | ||
 | 34,433 |  | ![]() | CA Inc. | ![]() |  | 867,367 |  | ||
 | 25,209 |  | ![]() | Compuware Corp.* | ![]() |  | 204,445 |  | ||
 | 28,676 |  | ![]() | Intuit Inc.* | ![]() |  | 783,142 |  | ||
 | 704,728 |  | ![]() | Microsoft Corp. | ![]() |  | 20,246,835 |  | ||
 | 29,155 |  | ![]() | Novell, Inc.* | ![]() |  | 216,913 |  | ||
 | 331,359 |  | ![]() | Oracle Corp.* | ![]() |  | 6,719,960 |  | ||
 | 75,423 |  | ![]() | Symantec Corp.* | ![]() |  | 1,418,707 |  | ||
 |  | ![]() |  | ![]() |  | 33,980,804 |  | |||
 |  | ![]() | Personnel Services (0.1%) | |||||||
 | 10,932 |  | ![]() | Monster Worldwide, Inc.* | ![]() |  | 373,874 |  | ||
 | 13,917 |  | ![]() | Robert Half International, Inc. | ![]() |  | 444,509 |  | ||
 |  | ![]() |  | ![]() |  | 818,383 |  | |||
 |  | ![]() | Pharmaceuticals: Generic Drugs (0.1%) | |||||||
 | 9,187 |  | ![]() | Barr Pharmaceuticals Inc.* | ![]() |  | 467,435 |  | ||
 | 20,794 |  | ![]() | Mylan Laboratories, Inc. | ![]() |  | 313,989 |  | ||
 | 8,583 |  | ![]() | Watson Pharmaceuticals, Inc.* | ![]() |  | 255,945 |  | ||
 |  | ![]() |  | ![]() |  | 1,037,369 |  | |||
 |  | ![]() | Pharmaceuticals: Major (5.7%) | |||||||
 | 128,942 |  | ![]() | Abbott Laboratories | ![]() |  | 6,693,379 |  | ||
 | 164,745 |  | ![]() | Bristol-Myers Squibb Co. | ![]() |  | 4,802,317 |  | ||
 | 82,589 |  | ![]() | Eli Lilly & Co. | ![]() |  | 4,736,479 |  | ||
 | 242,468 |  | ![]() | Johnson & Johnson | ![]() |  | 14,982,098 |  | ||
 | 181,420 |  | ![]() | Merck & Co., Inc. | ![]() |  | 9,101,841 |  | ||
 | 587,491 |  | ![]() | Pfizer, Inc. | ![]() | $ |      14,593,276 |  | ||
 | 124,675 |  | ![]() | Schering-Plough Corp. | ![]() |  | 3,742,744 |  | ||
 | 112,602 |  | ![]() | Wyeth | ![]() |  | 5,213,473 |  | ||
 |  | ![]() |  | ![]() |  | 63,865,607 |  | |||
 |  | ![]() | Pharmaceuticals: Other (0.3%) | |||||||
 | 25,741 |  | ![]() | Allergan, Inc. | ![]() |  | 1,544,717 |  | ||
 | 26,608 |  | ![]() | Forest Laboratories, Inc.* | ![]() |  | 1,001,259 |  | ||
 | 20,397 |  | ![]() | King Pharmaceuticals, Inc.* | ![]() |  | 306,567 |  | ||
 |  | ![]() |  | ![]() |  | 2,852,543 |  | |||
 |  | ![]() | Precious Metals (0.4%) | |||||||
 | 31,426 |  | ![]() | Freeport-McMoRan Copper & Gold, Inc. (Class B) | ![]() |  | 2,747,261 |  | ||
 | 37,761 |  | ![]() | Newmont Mining Corp. | ![]() |  | 1,595,780 |  | ||
 |  | ![]() |  | ![]() |  | 4,343,041 |  | |||
 |  | ![]() | Property – Casualty Insurers (1.1%) | |||||||
 | 27,252 |  | ![]() | ACE Ltd. (Cayman Islands) | ![]() |  | 1,574,076 |  | ||
 | 50,845 |  | ![]() | Allstate Corp. (The) | ![]() |  | 2,783,764 |  | ||
 | 33,607 |  | ![]() | Chubb Corp. (The) | ![]() |  | 1,718,326 |  | ||
 | 14,371 |  | ![]() | Cincinnati Financial Corp. | ![]() |  | 605,594 |  | ||
 | 61,628 |  | ![]() | Progressive Corp. (The) | ![]() |  | 1,253,513 |  | ||
 | 55,583 |  | ![]() | Travelers Companies, Inc. (The) | ![]() |  | 2,809,165 |  | ||
 | 15,565 |  | ![]() | XL Capital Ltd. (Class A) (Cayman Islands) | ![]() |  | 1,186,053 |  | ||
 |  | ![]() |  | ![]() |  | 11,930,491 |  | |||
 |  | ![]() | Publishing: Books/Magazines (0.0%) | |||||||
 | 3,261 |  | ![]() | Meredith Corp. | ![]() |  | 182,290 |  | ||
 |  | ![]() | Publishing: Newspapers (0.2%) | |||||||
 | 5,471 |  | ![]() | Dow Jones & Co., Inc. | ![]() |  | 323,063 |  | ||
 | 19,644 |  | ![]() | Gannett Co., Inc. | ![]() |  | 923,268 |  | ||
 | 12,047 |  | ![]() | New York Times Co. (The) (Class A) | ![]() |  | 264,793 |  | ||
 | 6,978 |  | ![]() | Scripps (E.W.) Co. (Class A) | ![]() |  | 286,796 |  | ||
 | 7,074 |  | ![]() | Tribune Co. | ![]() |  | 194,889 |  | ||
 |  | ![]() |  | ![]() |  | 1,992,809 |  | |||
 |  | ![]() | Pulp & Paper (0.2%) | ![]() |  |  | ||||
 | 36,461 |  | ![]() | International Paper Co. | ![]() |  | 1,280,146 |  | ||
 | 15,439 |  | ![]() | MeadWestvaco Corp. | ![]() |  | 487,718 |  | ||
 |  | ![]() |  | ![]() |  | 1,767,864 |  | |||
![]() |
See Notes to Financial Statements
19
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments August 31, 2007 continued
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
NUMBER OF SHARES | ![]() | Â | ![]() | VALUEÂ Â Â | ||||||
 |  | ![]() | Railroads (0.7%) | ![]() |  |  | ||||
 | 29,810 |  | ![]() | Burlington Northern Santa Fe Corp. | ![]() | $ |        2,419,082 |  | ||
 | 36,594 |  | ![]() | CSX Corp. | ![]() |  | 1,500,354 |  | ||
 | 32,916 |  | ![]() | Norfolk Southern Corp. | ![]() |  | 1,685,628 |  | ||
 | 22,664 |  | ![]() | Union Pacific Corp. | ![]() |  | 2,528,622 |  | ||
 |  | ![]() |  | ![]() |  | 8,133,686 |  | |||
 |  | ![]() | Real Estate Development (0.0%) | |||||||
 | 15,695 |  | ![]() | CB Richard Ellis Group, Inc. (Class A)* | ![]() |  | 463,316 |  | ||
 |  | ![]() | Real Estate Investment Trusts (1.2%) | |||||||
 | 8,133 |  | ![]() | Apartment Investment & Management Co. (Class A) | ![]() |  | 363,545 |  | ||
 | 18,660 |  | ![]() | Archstone-Smith Trust | ![]() |  | 1,097,208 |  | ||
 | 6,500 |  | ![]() | AvalonBay Communities, Inc. | ![]() |  | 743,470 |  | ||
 | 9,962 |  | ![]() | Boston Properties, Inc. | ![]() |  | 996,897 |  | ||
 | 10,459 |  | ![]() | Developers Diversified Realty Corp. | ![]() |  | 559,347 |  | ||
 | 24,338 |  | ![]() | Equity Residential | ![]() |  | 979,361 |  | ||
 | 17,900 |  | ![]() | General Growth Properties, Inc. | ![]() |  | 889,809 |  | ||
 | 43,700 |  | ![]() | Host Hotels & Resorts Inc. | ![]() |  | 974,073 |  | ||
 | 18,986 |  | ![]() | Kimco Realty Corp. | ![]() |  | 812,981 |  | ||
 | 14,796 |  | ![]() | Plum Creek Timber Co., Inc. | ![]() |  | 620,396 |  | ||
 | 21,479 |  | ![]() | ProLogis | ![]() |  | 1,292,177 |  | ||
 | 10,275 |  | ![]() | Public Storage, Inc. | ![]() |  | 778,640 |  | ||
 | 18,699 |  | ![]() | Simon Property Group, Inc. | ![]() |  | 1,774,909 |  | ||
 | 10,933 |  | ![]() | Vornado Realty Trust | ![]() |  | 1,165,348 |  | ||
 |  | ![]() |  | ![]() |  | 13,048,161 |  | |||
 |  | ![]() | Recreational Products (0.2%) | ![]() |  |  | ||||
 | 7,564 |  | ![]() | Brunswick Corp. | ![]() |  | 190,235 |  | ||
 | 25,953 |  | ![]() | Electronic Arts Inc.* | ![]() |  | 1,373,952 |  | ||
 | 13,341 |  | ![]() | Hasbro, Inc. | ![]() |  | 376,350 |  | ||
 | 32,926 |  | ![]() | Mattel, Inc. | ![]() |  | 712,189 |  | ||
 |  | ![]() |  | ![]() |  | 2,652,726 |  | |||
 |  | ![]() | Regional Banks (0.6%) | ![]() |  |  | ||||
 | 16,020 |  | ![]() | Commerce Bancorp, Inc. | ![]() |  | 588,415 |  | ||
 | 11,025 |  | ![]() | Compass Bancshares, Inc. | ![]() |  | 720,484 |  | ||
 | 46,046 |  | ![]() | Fifth Third Bancorp | ![]() |  | 1,643,382 |  | ||
 | 10,526 |  | ![]() | First Horizon National Corp. | ![]() |  | 322,938 |  | ||
 | 6,342 |  | ![]() | M&T Bank Corp. | ![]() |  | 671,491 |  | ||
 | 21,690 |  | ![]() | Marshall & Ilsley Corp. | ![]() |  | 948,070 |  | ||
 | 15,795 |  | ![]() | Northern Trust Corp. | ![]() | $ |           970,761 |  | ||
 | 27,371 |  | ![]() | Synovus Financial Corp. | ![]() |  | 755,987 |  | ||
 | 9,208 |  | ![]() | Zions Bancorporation | ![]() |  | 650,085 |  | ||
 |  | ![]() |  | ![]() |  | 7,271,613 |  | |||
 |  | ![]() | Restaurants (0.8%) | |||||||
 | 11,835 |  | ![]() | Darden Restaurants, Inc. | ![]() |  | 492,336 |  | ||
 | 99,938 |  | ![]() | McDonald’s Corp. | ![]() |  | 4,921,947 |  | ||
 | 62,010 |  | ![]() | Starbucks Corp.* | ![]() |  | 1,708,376 |  | ||
 | 7,304 |  | ![]() | Wendy’s International, Inc. | ![]() |  | 240,229 |  | ||
 | 43,847 |  | ![]() | Yum! Brands, Inc. | ![]() |  | 1,434,674 |  | ||
 |  | ![]() |  | ![]() |  | 8,797,562 |  | |||
 |  | ![]() | Savings Banks (0.3%) | |||||||
 | 40,559 |  | ![]() | Hudson City Bancorp, Inc. | ![]() |  | 576,749 |  | ||
 | 30,228 |  | ![]() | Sovereign Bancorp, Inc. | ![]() |  | 546,522 |  | ||
 | 74,420 |  | ![]() | Washington Mutual, Inc. | ![]() |  | 2,732,702 |  | ||
 |  | ![]() |  | ![]() |  | 3,855,973 |  | |||
 |  | ![]() | Semiconductors (2.3%) | |||||||
 | 46,077 |  | ![]() | Advanced Micro Devices, Inc.* | ![]() |  | 599,001 |  | ||
 | 29,722 |  | ![]() | Altera Corp. | ![]() |  | 707,681 |  | ||
 | 27,381 |  | ![]() | Analog Devices, Inc. | ![]() |  | 1,009,811 |  | ||
 | 38,946 |  | ![]() | Broadcom Corp. (Class A)* | ![]() |  | 1,343,637 |  | ||
 | 486,349 |  | ![]() | Intel Corp. | ![]() |  | 12,523,487 |  | ||
 | 21,248 |  | ![]() | Linear Technology Corp. | ![]() |  | 722,220 |  | ||
 | 64,485 |  | ![]() | LSI Logic Corp.* | ![]() |  | 444,302 |  | ||
 | 26,845 |  | ![]() | Maxim Integrated Products, Inc. | ![]() |  | 805,618 |  | ||
 | 63,314 |  | ![]() | Micron Technology, Inc.* | ![]() |  | 724,945 |  | ||
 | 23,356 |  | ![]() | National Semiconductor Corp. | ![]() |  | 614,730 |  | ||
 | 30,379 |  | ![]() | NVIDIA Corp.* | ![]() |  | 1,554,190 |  | ||
 | 120,014 |  | ![]() | Texas Instruments Inc. | ![]() |  | 4,109,279 |  | ||
 | 24,936 |  | ![]() | Xilinx, Inc. | ![]() |  | 637,614 |  | ||
 |  | ![]() |  | ![]() |  | 25,796,515 |  | |||
 |  | ![]() | Services to the Health Industry (0.5%) | |||||||
 | 22,805 |  | ![]() | Express Scripts, Inc.* | ![]() |  | 1,248,574 |  | ||
 | 16,427 |  | ![]() | IMS Health Inc. | ![]() |  | 491,824 |  | ||
 | 9,844 |  | ![]() | Laboratory Corp. of America Holdings* | ![]() |  | 764,485 |  | ||
 | 23,450 |  | ![]() | Medco Health Solutions Inc.* | ![]() |  | 2,003,803 |  | ||
 | 13,227 |  | ![]() | Quest Diagnostics Inc. | ![]() |  | 724,178 |  | ||
 |  | ![]() |  | ![]() |  | 5,232,864 |  | |||
![]() |
See Notes to Financial Statements
20
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments August 31, 2007 continued
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
NUMBER OF SHARES | ![]() | Â | ![]() | VALUEÂ Â Â | ||||||
 |  | ![]() | Specialty Insurance (0.2%) | ![]() |  |  | ||||
 | 8,532 |  | ![]() | Ambac Financial Group, Inc. | ![]() | $ |           535,980 |  | ||
 | 8,306 |  | ![]() | Assurant, Inc. | ![]() |  | 428,091 |  | ||
 | 10,949 |  | ![]() | MBIA Inc. | ![]() |  | 656,940 |  | ||
 | 6,953 |  | ![]() | MGIC Investment Corp. | ![]() |  | 209,702 |  | ||
 |  | ![]() |  | ![]() |  | 1,830,713 |  | |||
 |  | ![]() | Specialty Stores (0.4%) | |||||||
 | 12,647 |  | ![]() | AutoNation, Inc.* | ![]() |  | 240,040 |  | ||
 | 3,999 |  | ![]() | AutoZone, Inc.* | ![]() |  | 485,039 |  | ||
 | 22,927 |  | ![]() | Bed Bath & Beyond Inc.* | ![]() |  | 794,191 |  | ||
 | 23,144 |  | ![]() | Office Depot, Inc.* | ![]() |  | 565,871 |  | ||
 | 6,307 |  | ![]() | OfficeMax Inc. | ![]() |  | 224,025 |  | ||
 | 59,871 |  | ![]() | Staples, Inc. | ![]() |  | 1,421,936 |  | ||
 | 11,446 |  | ![]() | Tiffany & Co. | ![]() |  | 587,523 |  | ||
 |  | ![]() |  | ![]() |  | 4,318,625 |  | |||
 |  | ![]() | Specialty Telecommunications (0.2%) | |||||||
 | 9,168 |  | ![]() | CenturyTel, Inc. | ![]() |  | 439,881 |  | ||
 | 28,663 |  | ![]() | Citizens Communications Co. | ![]() |  | 415,900 |  | ||
 | 130,027 |  | ![]() | Qwest Communications International, Inc.* | ![]() |  | 1,163,742 |  | ||
 | 39,907 |  | ![]() | Windstream Corp. | ![]() |  | 569,872 |  | ||
 |  | ![]() |  | ![]() |  | 2,589,395 |  | |||
 |  | ![]() | Steel (0.3%) | ![]() |  |  | ||||
 | 8,551 |  | ![]() | Allegheny Technologies, Inc. | ![]() |  | 849,884 |  | ||
 | 25,255 |  | ![]() | Nucor Corp. | ![]() |  | 1,335,990 |  | ||
 | 9,904 |  | ![]() | United States Steel Corp. | ![]() |  | 935,730 |  | ||
 |  | ![]() |  | ![]() |  | 3,121,604 |  | |||
 |  | ![]() | Telecommunication Equipment (1.1%) | |||||||
 | 7,148 |  | ![]() | Ciena Corp.* | ![]() |  | 270,766 |  | ||
 | 131,656 |  | ![]() | Corning, Inc. | ![]() | �� | 3,076,801 |  | ||
 | 193,754 |  | ![]() | Motorola, Inc. | ![]() |  | 3,284,130 |  | ||
 | 139,523 |  | ![]() | QUALCOMM, Inc. | ![]() |  | 5,565,572 |  | ||
 | 36,645 |  | ![]() | Tellabs, Inc.* | ![]() |  | 386,605 |  | ||
 |  | ![]() |  | ![]() |  | 12,583,874 |  | |||
 |  | ![]() | Tobacco (1.2%) | |||||||
 | 176,060 |  | ![]() | Altria Group, Inc. | ![]() |  | 12,220,325 |  | ||
 | 14,322 |  | ![]() | Reynolds American, Inc. | ![]() |  | 946,971 |  | ||
 | 13,408 |  | ![]() | UST, Inc. | ![]() |  | 660,746 |  | ||
 |  | ![]() |  | ![]() |  | 13,828,042 |  | |||
 |  | ![]() | Tools/Hardware (0.1%) | ![]() |  |  | ||||
 | 5,522 |  | ![]() | Black & Decker Corp. | ![]() | $ |           479,034 |  | ||
 | 4,853 |  | ![]() | Snap-On, Inc. | ![]() |  | 237,700 |  | ||
 | 6,980 |  | ![]() | Stanley Works (The) | ![]() |  | 396,045 |  | ||
 |  | ![]() |  | ![]() |  | 1,112,779 |  | |||
 |  | ![]() | Trucks/Construction/Farm Machinery (0.9%) | |||||||
 | 53,607 |  | ![]() | Caterpillar Inc. | ![]() |  | 4,061,802 |  | ||
 | 8,729 |  | ![]() | Cummins Inc. | ![]() |  | 1,033,688 |  | ||
 | 18,833 |  | ![]() | Deere & Co. | ![]() |  | 2,562,418 |  | ||
 | 20,786 |  | ![]() | PACCAR, Inc. | ![]() |  | 1,778,242 |  | ||
 | 8,630 |  | ![]() | Terex Corp.* | ![]() |  | 689,364 |  | ||
 |  | ![]() |  | ![]() |  | 10,125,514 |  | |||
 |  | ![]() | Wholesale Distributors (0.1%) | ![]() |  |  | ||||
 | 14,262 |  | ![]() | Genuine Parts Co. | ![]() |  | 708,536 |  | ||
 | 5,946 |  | ![]() | Grainger (W.W.), Inc. | ![]() |  | 544,713 |  | ||
 |  | ![]() |  | ![]() |  | 1,253,249 |  | |||
 |  | ![]() | Total Common Stocks (Cost $801,542,233) | ![]() |  | 1,096,388,604 |  | |||
NUMBER OF WARRANTS | ![]() | Â | ![]() | Â | Â | |||||
 |  | ![]() | Warrants (0.0%) | |||||||
 |  | ![]() | Aerospace & Defense | ![]() |  |  | ||||
 |        317 |  | ![]() | Raytheon Co (expire 06/16/11)* (Cost $3,867) | ![]() |  | 8,201 |  | ||
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
NUMBER OF SHARES (000) | ![]() | Â | ![]() | Â | ||||||
 |  | ![]() | Short-Term Investment (b) (2.6%) | |||||||
 |  | ![]() | Investment Company | |||||||
 | 28,783 |  | ![]() | Morgan Stanley Institutional Liquidity Money Market Portfolio – Institutional Class (Cost $28,783,088) | ![]() |  | 28,783,088 |  | ||
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
Total Investments (Cost $830,329,188) (c) (d) | ![]() | 100.0% | ![]() | Â | 1,125,179,893 | Â | ||||
Other Assets in Excess of Liabilities | ![]() | Â Â Â Â 0.0Â Â | ![]() | Â | 402,734 | Â | ||||
Net Assets | ![]() | 100.0% | ![]() | $ | 1,125,582,627 | Â | ||||
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See Notes to Financial Statements
21
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments August 31, 2007 continued
![]() |
![]() | * | Non-income producing security. |
![]() | ** | A portion of this security has been physically segregated in connection with open futures contracts in the amount of $1,275,750. |
![]() | †| Consists of one or more class of securities traded as a unit. Stocks with attached paired trust shares. |
![]() | (a) | A security with total market value equal to $0 has been valued at its fair value as determined in good faith under procedures established by and under general supervision of the Fund’s Trustees. |
![]() | (b) | See Note 4 to the financial statements regarding investments in Morgan Stanley Institutional Liquidity Money Market Portfolio – Institutional Class. |
![]() | (c) | Securities have been designated as collateral in an amount equal to $28,930,920, in connection with open futures contracts. |
![]() | (d) | The aggregate cost for federal income tax purposes is $846,473,584. The aggregate gross unrealized appreciation is $347,083,095 and the aggregate gross unrealized depreciation is $68,376,786, resulting in net unrealized appreciation of $278,706,309. |
Futures Contracts Open at August 31, 2007:
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ||||||||||||
NUMBER OF CONTRACTS | ![]() | LONG/ SHORT | ![]() | DESCRIPTION, DELIVERY MONTH AND YEAR | ![]() | UNDERLYING FACE AMOUNT AT VALUE | ![]() | UNREALIZED APPRECIATION (DEPRECIATION) | ||||||||||||||||||||||
265             | ![]() | Long             | ![]() | S&P 500 Index E-Mini September 2007 | ![]() | $19,566,275             | ![]() | $16,924             | ||||||||||||||||||||||
28             | ![]() | Long             | ![]() | S&P 500 Index September 2007 | ![]() | 10,336,900             | ![]() | (321,041)                             | ||||||||||||||||||||||
 | ![]() |  Net Unrealized Depreciation | ![]() | $(304,117) | ![]() |  | ![]() |  | ![]() |  | ||||||||||||||||||||
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Summary of Investments
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
SECTORS | ![]() | VALUE | ![]() | PERCENT OF TOTAL INVESTMENTS | ||||||
Finance | ![]() | $ | 218,070,597 | Â | ![]() | Â | 19.4 | %Â | ||
Electronic Technology | ![]() | Â | 123,034,927 | Â | ![]() | Â | 10.9 | Â | ||
Health Technology | ![]() | Â | 104,162,484 | Â | ![]() | Â | 9.3 | Â | ||
Energy Minerals | ![]() | Â | 93,355,124 | Â | ![]() | Â | 8.3 | Â | ||
Consumer Non-Durables | ![]() | Â | 81,289,478 | Â | ![]() | Â | 7.2 | Â | ||
Producer Manufacturing | ![]() | Â | 79,847,930 | Â | ![]() | Â | 7.1 | Â | ||
Technology Services | ![]() | Â | 72,181,891 | Â | ![]() | Â | 6.4 | Â | ||
Retail Trade | ![]() | Â | 58,211,558 | Â | ![]() | Â | 5.2 | Â | ||
Consumer Services | ![]() | Â | 53,472,854 | Â | ![]() | Â | 4.7 | Â | ||
Communications | ![]() | Â | 40,691,409 | Â | ![]() | Â | 3.6 | Â | ||
Utilities | ![]() | Â | 38,673,683 | Â | ![]() | Â | 3.4 | Â | ||
Industrial Services | ![]() | Â | 30,385,416 | Â | ![]() | Â | 2.7 | Â | ||
Investment Company | ![]() | Â | 28,783,088 | Â | ![]() | Â | 2.6 | Â | ||
Process Industries | ![]() | Â | 23,215,884 | Â | ![]() | Â | 2.1 | Â | ||
Health Services | ![]() | Â | 20,605,932 | Â | ![]() | Â | 1.8 | Â | ||
Transportation | ![]() | Â | 19,375,046 | Â | ![]() | Â | 1.7 | Â | ||
Consumer Durables | ![]() | Â | 13,425,335 | Â | ![]() | Â | 1.2 | Â | ||
Non-Energy Minerals | ![]() | Â | 12,073,669 | Â | ![]() | Â | 1.1 | Â | ||
Distribution Services | ![]() | Â | 7,789,998 | Â | ![]() | Â | 0.7 | Â | ||
Commercial Services | ![]() | Â | 6,533,590 | Â | ![]() | Â | 0.6 | Â | ||
 | ![]() |  | $1,125,179,893 | ‡ | ![]() |  | 100.0 | % | ||
![]() |
![]() |
![]() | ‡ | Does not include open futures contracts with an underlying face amount of $29,903,175 with net unrealized depreciation of $304,117. |
See Notes to Financial Statements
22
Morgan Stanley S&P 500 Index Fund
Financial Statements
Statement of Assets and Liabilities
August 31, 2007
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
Assets: | ||||||
Investments in securities, at value (cost $798,180,175) | ![]() | $ | 1,090,267,830 | Â | ||
Investments in affiliates, at value (cost $32,149,013) | ![]() | Â | 34,912,063 | Â | ||
Cash | ![]() | Â | 66,822 | Â | ||
Receivable for: | ![]() | Â | Â | |||
Dividends | ![]() | Â | 2,096,040 | Â | ||
Variation margin | ![]() | Â | 319,135 | Â | ||
Shares of beneficial interest sold | ![]() | Â | 203,627 | Â | ||
Dividends from affiliates | ![]() | Â | 110,475 | Â | ||
Investments sold | ![]() | Â | 105,439 | Â | ||
Prepaid expenses and other assets | ![]() | Â | 94,320 | Â | ||
Total Assets | ![]() |  | 1,128,175,751 |  | ||
Liabilities: | ![]() | Â | Â | |||
Payable for: | ![]() | Â | Â | |||
Shares of beneficial interest redeemed | ![]() | Â | 1,643,781 | Â | ||
Distribution fee | ![]() | Â | 542,401 | Â | ||
Administration fee | ![]() | Â | 164,449 | Â | ||
Investments purchased | ![]() | Â | 70,593 | Â | ||
Investment advisory fee | ![]() | Â | 33,832 | Â | ||
Transfer agent fee | ![]() | Â | 4,223 | Â | ||
Accrued expenses and other payables | ![]() | Â | 133,845 | Â | ||
Total Liabilities | ![]() |  | 2,593,124 |  | ||
Net Assets | ![]() | $ | 1,125,582,627 |  | ||
Composition of Net Assets: | ![]() | Â | Â | |||
Paid-in-capital | ![]() | $ | 906,398,998 | Â | ||
Net unrealized appreciation | ![]() | Â | 294,546,588 | Â | ||
Accumulated undistributed net investment income | ![]() | Â | 10,346,791 | Â | ||
Accumulated net realized loss | ![]() | Â | (85,709,750 | )Â | ||
Net Assets | ![]() | $ | 1,125,582,627 |  | ||
Class A Shares: | ![]() | Â | Â | |||
Net Assets | ![]() | $ | 521,525,372 | Â | ||
Shares Outstanding (unlimited authorized, $.01 par value) | ![]() | Â | 32,574,652 | Â | ||
Net Asset Value Per Share | ![]() | $ | 16.01 |  | ||
Maximum Offering Price Per Share, | ||||||
(net asset value plus 5.54% of net asset value) Â | ![]() | $ | 16.90 | Â | ||
Class B Shares: | ![]() | Â | Â | |||
Net Assets | ![]() | $ | 376,771,055 | Â | ||
Shares Outstanding (unlimited authorized, $.01 par value) | ![]() | Â | 24,277,775 | Â | ||
Net Asset Value Per Share | ![]() | $ | 15.52 |  | ||
Class C Shares: | ![]() | Â | Â | |||
Net Assets | ![]() | $ | 131,691,714 | Â | ||
Shares Outstanding (unlimited authorized, $.01 par value) | ![]() | Â | 8,517,526 | Â | ||
Net Asset Value Per Share | ![]() | $ | 15.46 |  | ||
Class D Shares: | ![]() | Â | Â | |||
Net Assets | ![]() | $ | 95,594,486 | Â | ||
Shares Outstanding (unlimited authorized, $.01 par value) | ![]() | Â | 5,910,240 | Â | ||
Net Asset Value Per Share | ![]() | $ | 16.17 |  | ||
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See Notes to Financial Statements
23
Morgan Stanley S&P 500 Index Fund
Financial Statements continued
Statement of Operations
For the year ended August 31, 2007
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
Net Investment Income: | ||||||
Income | ||||||
Dividends | ![]() | $ | 22,253,176 | Â | ||
Interest | ![]() | Â | 896,645 | Â | ||
Dividends from affiliates | ![]() | Â | 320,921 | Â | ||
Total Income | ![]() |  | 23,470,742 |  | ||
Expenses | ![]() | Â | Â | |||
Distribution fee (Class A shares) | ![]() | Â | 1,214,198 | Â | ||
Distribution fee (Class B shares) | ![]() | Â | 4,703,008 | Â | ||
Distribution fee (Class C shares) | ![]() | Â | 1,347,687 | Â | ||
Transfer agent fees and expenses | ![]() | Â | 1,659,670 | Â | ||
Investment advisory fee | ![]() | Â | 1,443,341 | Â | ||
Administration fee | ![]() | Â | 962,228 | Â | ||
Shareholder reports and notices | ![]() | Â | 371,440 | Â | ||
Custodian fees | ![]() | Â | 100,880 | Â | ||
Professional fees | ![]() | Â | 62,798 | Â | ||
Registration fees | ![]() | Â | 40,456 | Â | ||
Trustees’ fees and expenses | ![]() |  | 21,174 |  | ||
Other | ![]() | Â | 209,364 | Â | ||
Total Expenses | ![]() |  | 12,136,244 |  | ||
Less: amounts waived/reimbursed | ![]() | Â | (770,689 | )Â | ||
Less: expense offset | ![]() | Â | (11,195 | )Â | ||
Net Expenses | ![]() |  | 11,354,360 |  | ||
Net Investment Income | ![]() |  | 12,116,382 |  | ||
Net Realized and Unrealized Gain: | ![]() | Â | Â | |||
Net Realized Gain on: | ![]() | Â | Â | |||
Investments | ![]() | Â | 59,470,028 | Â | ||
Investments in affiliates | ![]() | Â | 328,766 | Â | ||
Futures contracts | ![]() | Â | 2,738,684 | Â | ||
Capital gain distribution received | ![]() | Â | 6,289 | Â | ||
Net Realized Gain | ![]() |  | 62,543,767 |  | ||
Net Change in Unrealized Appreciation/Depreciation on: | ![]() | Â | Â | |||
Investments | ![]() | Â | 87,952,912 | Â | ||
Investments in affiliates | ![]() | Â | 127,129 | Â | ||
Futures contracts | ![]() | Â | (708,541 | )Â | ||
Net Change in Unrealized Appreciation/Depreciation | ![]() |  | 87,371,500 |  | ||
Net Gain | ![]() |  | 149,915,267 |  | ||
Net Increase | ![]() | $ | 162,031,649 | Â | ||
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See Notes to Financial Statements
24
Morgan Stanley S&P 500 Index Fund
Financial Statements continued
Statements of Changes in Net Assets
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
 | ![]() | FOR THE YEAR ENDED AUGUST 31, 2007 | ![]() | FOR THE YEAR ENDED AUGUST 31, 2006 | ||||||
Increase (Decrease) in Net Assets: | ![]() | Â | Â | ![]() | Â | Â | ||||
Operations: | ![]() | Â | Â | ![]() | Â | Â | ||||
Net investment income | ![]() | $ | 12,116,382 | Â | ![]() | $ | 12,871,794 | Â | ||
Net realized gain | ![]() | Â | 62,543,767 | Â | ![]() | Â | 85,846,345 | Â | ||
Net change in unrealized appreciation/depreciation | ![]() | Â | 87,371,500 | Â | ![]() | Â | 4,757,045 | Â | ||
Net Increase | ![]() |  | 162,031,649 |  | ![]() |  | 103,475,184 |  | ||
Dividends to Shareholders from Net Investment Income: | ![]() | Â | Â | ![]() | Â | Â | ||||
Class A shares | ![]() | Â | (6,681,274 | )Â | ![]() | Â | (6,005,049 | )Â | ||
Class B shares | ![]() | Â | (2,921,671 | )Â | ![]() | Â | (2,743,790 | )Â | ||
Class C shares | ![]() | Â | (1,008,726 | )Â | ![]() | Â | (918,694 | )Â | ||
Class D shares | ![]() | Â | (1,688,390 | )Â | ![]() | Â | (2,832,584 | )Â | ||
Total Dividends | ![]() |  | (12,300,061 | ) | ![]() |  | (12,500,117 | ) | ||
Net decrease from transactions in shares of beneficial interest | ![]() | Â | (240,962,562 | )Â | ![]() | Â | (432,179,599 | )Â | ||
Net Decrease | ![]() |  | (91,230,974 | ) | ![]() |  | (341,204,532 | ) | ||
Net Assets: | ![]() | Â | Â | ![]() | Â | Â | ||||
Beginning of period | ![]() | Â | 1,216,813,601 | Â | ![]() | Â | 1,558,018,133 | Â | ||
End of Period (Including accumulated undistributed net investment income of $10,346,791 and $10,748,469, respectively) | ![]() | $ | 1,125,582,627 | Â | ![]() | $ | 1,216,813,601 | Â | ||
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See Notes to Financial Statements
25
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements August 31, 2007
1.   Organization and Accounting Policies
Morgan Stanley S&P 500 Index Fund (the ‘‘Fund’’) is registered under the Investment Company Act of 1940, as amended (the ‘‘Act’’), as a diversified, open-end management investment company. The Fund’s investment objective is to provide investment results that, before expenses, correspond to the total return of the Standard & Poor’s 500 Composite Stock Price Index (the ‘‘S&P 500 Index’’). The Fund was organized as a Massachusetts business trust on June 18, 1997 and commenced operations on September 26, 1997.
The Fund offers Class A shares, Class B shares, Class C shares and Class D shares. The four classes are substantially the same except that most Class A shares are subject to a sales charge imposed at the time of purchase and some Class A shares, and most Class B shares and Class C shares are subject to a contingent deferred sales charge imposed on shares redeemed within eighteen months, six years and one year, respectively. Class D shares are not subject to a sales charge. Additionally, Class A shares, Class B shares and Class C shares incur distribution expenses.
The Fund will assess a 2% redemption fee, on Class A shares, Class B shares, Class C shares and Class D shares, which is paid directly to the Fund, for shares redeemed or exchanged within seven days of purchase, subject to certain exceptions. The redemption fee is designed to protect the Fund and its remaining shareholders from the effects of short-term trading.
The following is a summary of significant accounting policies:
A.   Valuation of Investments — (1) an equity portfolio security listed or traded on the New York Stock Exchange (‘‘NYSE’’) or American Stock Exchange or other exchange is valued at its latest sale price prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (2) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) all other portfolio securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as th e primary market; (4) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (5) futures are valued at the latest price published by the commodities exchange on which they trade; (6) when market quotations are not readily available including circumstances under which Morgan Stanley Investment Advisors Inc. (the ‘‘Investment Adviser’’) determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security’s market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund’s Trustees. 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
26
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements August 31, 2007 continued
foreign market on which the securities trade) and the close of business on 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 Fund’s Trustees or by the Investment Adviser using a pricing service and/or procedures approved by the Trustees of the Fund; (7) investments in open-end 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 having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost.
B.   Accounting for Investments — Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Dividend income and other distributions are recorded on the ex-dividend date. Discounts are accreted and premiums are amortized over the life of the respective securities and are included in interest income. Interest income is accrued daily.
C.   Multiple Class Allocations — Investment income, expenses (other than distribution fees), and realized and unrealized gains and losses are allocated to each class of shares based upon the relative net asset value on the date such items are recognized. Distribution fees are charged directly to the respective class.
D.   Futures Contracts — A futures contract is an agreement between two parties to buy and sell financial instruments or contracts based on financial indices at a set price on a future date. Upon entering into such a contract, the Fund is required to pledge to the broker cash, U.S. Government securities or other liquid portfolio securities equal to the minimum initial margin requirements of the applicable futures exchange. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments known as variation margin are recorded by the Fund as unrealized gains and losses. Upon closing of the contract, the Fund realizes a gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
E.   Federal Income Tax Policy — It is the Fund’s policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required.
F.   Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date.
G.   Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.
27
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements August 31, 2007 continued
2.   Investment Advisory/ Administration Agreements
Pursuant to an Investment Advisory Agreement, the Fund pays the Investment Adviser an advisory fee, accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined as of the close of each business day: 0.12% to the portion of the daily net assets not exceeding $2 billion and 0.10% to the portion of the daily net assets in excess of $2 billion.
Pursuant to an Administration Agreement with Morgan Stanley Services Company Inc. (the ‘‘Administrator’’), an affiliate of the Investment Adviser, the Fund pays an administration fee, accrued daily and payable monthly, by applying the annual rate of 0.08% to the Fund’s daily net assets.
The Investment Adviser has agreed to cap the Fund’s operating expenses (except for brokerage and 12B-1 fees) by assuming the Fund’s ‘‘other expenses’’ and/or waiving the Fund’s advisory fees, and the Administrator has agreed to waive the Fund’s administrative fees, to the extent that such operating expenses exceed 0.34% of the average daily net assets of the Fund on an annualized basis.
3.   Plan of Distribution
Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the ‘‘Distributor’’), an affiliate of the Investment Adviser and Administrator. The Fund has adopted a Plan of Distribution (the ‘‘Plan’’) pursuant to Rule 12b-1 under the Act. The Plan provides that the Fund will pay the Distributor a fee which is accrued daily and paid monthly at the following annual rates: (i) Class A – up to 0.25% of the average daily net assets of Class A shares; (ii) Class B – up to 1.0% of the average daily net assets of Class B shares; and (iii) Class C – up to 1.0% of the average daily net assets of Class C shares.
In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by the Distributor but not yet recovered may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B shares. Although there is no legal obligation for the Fund to pay expenses incurred in excess of payments made to the Distributor under the Plan and the proceeds of contingent deferred sales charges paid by investors upon redemption of shares, if for any reason the Plan is terminated, the Trustees will consider at that time the manner in which to treat such expenses. The Distributor has advised the Fu nd that such excess amounts totaled $23,541,678 at August 31, 2007.
In the case of Class A shares and Class C shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily net assets of Class A or Class C, respectively, will not be reimbursed by the Fund through payments in any subsequent year, except that expenses representing a gross sales credit to Morgan Stanley Financial Advisors and other authorized financial representatives at the time of sale may be reimbursed in the subsequent calendar year. For the year ended August 31, 2007, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.24% and 0.99%, respectively.
28
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements August 31, 2007 continued
The Distributor has informed the Fund that for the year ended August 31, 2007, it received contingent deferred sales charges from certain redemptions of the Fund’s Class A shares, Class B shares and Class C shares of $1,211, $737,444 and $9,792, respectively and received $160,288 in front-end sales charges from sales of the Fund’s Class A shares. The respective shareholders pay such charges which are not an expense of the Fund.
4.   Security Transactions and Transactions with Affiliates
The Fund invests in Morgan Stanley Institutional Liquidity Money Market Portfolio – Institutional Class, an open-end management investment company managed by the Investment Adviser. Investment advisory fees paid by the Fund are reduced by an amount equal to the advisory and administrative services fees paid by Morgan Stanley Institutional Liquidity Money Market Portfolio – Institutional Class with respect to assets invested by the Fund in Morgan Stanley Institutional Liquidity Money Market Portfolio – Institutional Class. For the year ended August 31, 2007, advisory fees paid were reduced by $2,091 relating to the Fund’s investment in Morgan Stanley Institutional Liquidity Money Market Portfolio &ndash ; Institutional Class. Income distributions earned by the Fund are recorded as dividends from affiliates in the Statement of Operations and totaled $212,801 for the year ended August 31, 2007. During the year ended August 31, 2007, cost of purchases and sales in investments in Morgan Stanley Institutional Liquidity Money Market Portfolio – Institutional Class aggregated $65,722,669 and $36,939,581, respectively.
The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the year ended August 31, 2007, aggregated $29,731,910 and $266,244,540, respectively. Included in the aforementioned are sales of common stock of Morgan Stanley, an affiliate of the Investment Adviser, Administrator and Distributor, of $749,467, as well as a realized gain of $328,766. Included also in the aforementioned are sales with other Morgan Stanley funds of $173,440, including net realized gains of $33,332.
Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and Distributor, is the Fund’s transfer agent.
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.
29
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements August 31, 2007 continued
5.   Purposes of and Risks Relating to Certain Financial Instruments
The Fund may purchase and sell stock index futures (‘‘futures contracts’’) for the following reasons: to simulate full investment in the S&P 500 Index while retaining a cash balance for fund management purposes; to facilitate trading; to reduce transaction costs; or to seek higher investment returns when a futures contract is priced more attractively than stocks comprising the S&P 500 Index.
These futures contracts involve elements of market risk in excess of the amount reflected in the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the value of the underlying securities. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
6.   Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
 | ![]() | FOR THE YEAR ENDED AUGUST 31, 2007 | ![]() | FOR THE YEAR ENDED AUGUST 31, 2006 | ||||||||||||||
 | ![]() | SHARES | ![]() | AMOUNT | ![]() | SHARES | ![]() | AMOUNT | ||||||||||
CLASS A SHARES | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ||||||
Sold | ![]() | Â | 3,539,296 | Â | ![]() | $ | 54,614,316 | Â | ![]() | Â | 3,523,424 | Â | ![]() | $ | 48,232,899 | Â | ||
Conversion from Class B | ![]() | Â | 6,618,766 | Â | ![]() | Â | 102,760,105 | Â | ![]() | Â | 8,733,166 | Â | ![]() | Â | 118,493,975 | Â | ||
Reinvestment of dividends | ![]() | Â | 412,308 | Â | ![]() | Â | 6,291,817 | Â | ![]() | Â | 417,812 | Â | ![]() | Â | 5,707,309 | Â | ||
Redeemed | ![]() | Â | (9,876,598 | )Â | ![]() | Â | (152,182,616 | )Â | ![]() | Â | (11,032,502 | )Â | ![]() | Â | (151,017,548 | )Â | ||
Net increase – Class A | ![]() |  | 693,772 |  | ![]() |  | 11,483,622 |  | ![]() |  | 1,641,900 |  | ![]() |  | 21,416,635 |  | ||
CLASS B SHARES | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ||||||
Sold | ![]() | Â | 933,431 | Â | ![]() | Â | 13,996,770 | Â | ![]() | Â | 969,408 | Â | ![]() | Â | 12,810,167 | Â | ||
Conversion to Class A | ![]() | Â | (6,815,658 | )Â | ![]() | Â | (102,760,105 | )Â | ![]() | Â | (9,016,741 | )Â | ![]() | Â | (118,493,975 | )Â | ||
Reinvestment of dividends | ![]() | Â | 178,146 | Â | ![]() | Â | 2,649,028 | Â | ![]() | Â | 185,895 | Â | ![]() | Â | 2,470,551 | Â | ||
Redeemed | ![]() | Â | (8,941,083 | )Â | ![]() | Â | (134,090,687 | )Â | ![]() | Â | (16,731,749 | )Â | ![]() | Â | (221,399,022 | )Â | ||
Net decrease – Class B | ![]() |  | (14,645,164 | ) | ![]() |  | (220,204,994 | ) | ![]() |  | (24,593,187 | ) | ![]() |  | (324,612,279 | ) | ||
CLASS C SHARES | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ||||||
Sold | ![]() | Â | 698,056 | Â | ![]() | Â | 10,465,417 | Â | ![]() | Â | 601,770 | Â | ![]() | Â | 7,996,284 | Â | ||
Reinvestment of dividends | ![]() | Â | 62,857 | Â | ![]() | Â | 930,915 | Â | ![]() | Â | 65,154 | Â | ![]() | Â | 863,945 | Â | ||
Redeemed | ![]() | Â | (1,875,401 | )Â | ![]() | Â | (28,056,828 | )Â | ![]() | Â | (3,019,678 | )Â | ![]() | Â | (39,979,002 | )Â | ||
Net decrease – Class C | ![]() |  | (1,114,488 | ) | ![]() |  | (16,660,496 | ) | ![]() |  | (2,352,754 | ) | ![]() |  | (31,118,773 | ) | ||
CLASS D SHARES | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ||||||
Sold | ![]() | Â | 748,417 | Â | ![]() | Â | 11,705,728 | Â | ![]() | Â | 1,258,674 | Â | ![]() | Â | 17,358,915 | Â | ||
Reinvestment of dividends | ![]() | Â | 94,934 | Â | ![]() | Â | 1,461,039 | Â | ![]() | Â | 159,078 | Â | ![]() | Â | 2,190,504 | Â | ||
Redeemed | ![]() | Â | (1,842,680 | )Â | ![]() | Â | (28,747,461 | )Â | ![]() | Â | (8,550,208 | )Â | ![]() | Â | (117,414,601 | )Â | ||
Net decrease – Class D | ![]() |  | (999,329 | ) | ![]() |  | (15,580,694 | ) | ![]() |  | (7,132,456 | ) | ![]() |  | (97,865,182 | ) | ||
Net decrease in Fund | ![]() | Â | (16,065,209 | )Â | ![]() | $ | (240,962,562 | )Â | ![]() | Â | (32,436,497 | )Â | ![]() | $ | (432,179,599 | )Â | ||
![]() |
30
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements August 31, 2007 continued
7.   Federal Income Tax Status
The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These ‘‘book/tax’’ differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital.
The tax character of distributions paid was as follows:
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
 | ![]() | FOR THE YEAR ENDED AUGUST 31, 2007 | ![]() | FOR THE YEAR ENDED AUGUST 31, 2006 | ||||||
Ordinary income | ![]() | $ | 12,300,061 | Â | ![]() | $ | 12,500,117 | Â | ||
![]() |
As of August 31, 2007, the tax-basis components of accumulated earnings were as follows:
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
Undistributed ordinary income | ![]() | $ | 10,288,309 | Â | ![]() | Â | ||||
Undistributed long-term gains | ![]() |  | —        |  | ||||||
Net accumulated earnings | ![]() | Â | 10,288,309 | Â | ![]() | Â | ||||
Capital loss carryforward* | ![]() | Â | (69,803,680 | )Â | ![]() | Â | ||||
Temporary differences | ![]() | Â | (7,309 | )Â | ![]() | Â | ||||
Net unrealized appreciation | ![]() | Â | 278,706,309 | Â | ||||||
Total accumulated earnings | ![]() | $ | 219,183,629 | Â | ||||||
![]() |
*Â Â Â During the year ended August 31, 2007, the Fund utilized $60,666,280 of its net capital loss carryforward. As of August 31, 2007, the Fund had a net capital loss carryforward of $69,803,680 of which $45,050,748 will expire on August 31, 2011 and $24,752,932 will expire on August 31, 2012 to offset future capital gains to the extent provided by regulations.
As of August 31, 2007, the Fund had temporary book/tax differences primarily attributable to capital loss deferrals on wash sales and mark-to-market of open futures contracts.
31
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements August 31, 2007 continued
Permanent differences, due to tax adjustments on real estate investment trusts held by the Fund, resulted in the following reclassifications among the Fund’s components of net assets at August 31, 2007:
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
ACCUMULATED UNDISTRIBUTED NET INVESTMENT Â Â Â Â Â Â Â Â Â Â Â INCOMEÂ Â Â Â Â Â Â Â Â Â Â | ![]() | ACCUMULATED NET REALIZED Â Â Â Â Â Â Â Â Â Â Â LOSSÂ Â Â Â Â Â Â Â Â Â Â | ![]() | PAID-IN-CAPITAL | ||||||
$(217,999) | ![]() | $217,999 | ![]() | — | ||||||
![]() |
8.   Expense Offset
The expense offset represents a reduction of the fees and expenses for interest earned on cash balances maintained by the Fund with the transfer agent.
9.   Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position must meet before being recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. The impact to the Fund’s financial statements, if any is currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund’s financial statement disclosures.
32
Morgan Stanley S&P 500 Index Fund
Financial Highlights
Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
 | ![]() | FOR THE YEAR ENDED AUGUST 31, | ||||||||||||||||||||
 | ![]() | 2007 | ![]() | 2006 | ![]() | 2005 | ![]() | 2004 | ![]() | 2003 | ||||||||||||
Class A Shares | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Selected Per Share Data: | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Net asset value, beginning of period | ![]() | $ | 14.17 | Â | ![]() | $ | 13.27 | Â | ![]() | $ | 12.03 | Â | ![]() | $ | 10.97 | Â | ![]() | $ | Â Â 9.91 | Â | ||
Income from investment operations: | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Net investment income‡ | ![]() |  | 0.21 |  | ![]() |  | 0.18 |  | ![]() |  | 0.19 |  | ![]() |  | 0.12 |  | ![]() |  | 0.11 |  | ||
Net realized and unrealized gain | ![]() | Â | 1.85 | Â | ![]() | Â | 0.91 | Â | ![]() | Â | 1.23 | Â | ![]() | Â | 1.05 | Â | ![]() | Â | 1.01 | Â | ||
Total income from investment operations | ![]() | Â | 2.06 | Â | ![]() | Â | 1.09 | Â | ![]() | Â | 1.42 | Â | ![]() | Â | 1.17 | Â | ![]() | Â | 1.12 | Â | ||
Less dividends from net investment income | ![]() | Â | (0.22 | )Â | ![]() | Â | (0.19 | )Â | ![]() | Â | (0.18 | )Â | ![]() | Â | (0.11 | )Â | ![]() | Â | (0.06 | )Â | ||
Net asset value, end of period | ![]() | $ | 16.01 | Â | ![]() | $ | 14.17 | Â | ![]() | $ | 13.27 | Â | ![]() | $ | 12.03 | Â | ![]() | $ | 10.97 | Â | ||
Total Return†| ![]() |  | 14.60 | % | ![]() |  | 8.24 | % | ![]() |  | 11.81 | % | ![]() |  | 10.70 | % | ![]() |  | 11.36 | % | ||
Ratios to Average Net Assets(1)(3): | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Total expenses (before expense offset) | ![]() | Â | 0.58 | % (2)Â | ![]() | Â | 0.62 | %Â | ![]() | Â | 0.64 | %Â | ![]() | Â | 0.70 | %Â | ![]() | Â | 0.70 | %Â | ||
Net investment income | ![]() | Â | 1.37 | % (2)Â | ![]() | Â | 1.32 | %Â | ![]() | Â | 1.52 | %Â | ![]() | Â | 1.03 | %Â | ![]() | Â | 1.11 | %Â | ||
Supplemental Data: | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Net assets, end of period, in millions | ![]() | $ | 521 | Â | ![]() | $ | 452 | Â | ![]() | $ | 401 | Â | ![]() | $ | 301 | Â | ![]() | $ | 233 | Â | ||
Portfolio turnover rate | ![]() | Â | 3 | %Â | ![]() | Â | 4 | %Â | ![]() | Â | 3 | %Â | ![]() | Â | 2 | %Â | ![]() | Â | 2 | %Â | ||
![]() |
![]() |
![]() | ‡ | The per share amounts were computed using an average number of shares outstanding during the period. |
![]() | †| Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. |
![]() | (1) | Reflects overall Fund ratios for investment income and non-class specific expenses. |
![]() | (2) | Reflects waivers of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio – Institutional Class during the period. As a result of such waivers the expenses as a percentage of its net assets had an effect of less than 0.005%. |
![]() | (3) | If the Fund had borne all of its expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios, before expense offset, would have been as follows: |
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
PERIOD ENDED | ![]() | EXPENSE RATIO | ![]() | NET INVESTMENT INCOME RATIO | ||||||
August 31, 2007 | ![]() | Â Â 0.65% | ![]() | Â Â Â 1.30% | ||||||
August 31, 2006 | ![]() | 0.66 | ![]() | 1.28 | ||||||
August 31, 2005 | ![]() | 0.65 | ![]() | 1.51 | ||||||
August 31, 2004 | ![]() | 0.77 | ![]() | 0.96 | ||||||
August 31, 2003 | ![]() | 0.82 | ![]() | 0.99 | ||||||
![]() |
See Notes to Financial Statements
33
Morgan Stanley S&P 500 Index Fund
Financial Highlights continued
   Â
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
 | ![]() | FOR THE YEAR ENDED AUGUST 31, | ||||||||||||||||||||
 | ![]() | 2007 | ![]() | 2006 | ![]() | 2005 | ![]() | 2004 | ![]() | 2003 | ||||||||||||
Class B Shares | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Selected Per Share Data: | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Net asset value, beginning of period | ![]() | $ | 13.72 | Â | ![]() | $ | 12.83 | Â | ![]() | $ | 11.62 | Â | ![]() | $ | 10.60 | Â | ![]() | $ | Â Â 9.60 | Â | ||
Income from investment operations: | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Net investment income‡ | ![]() |  | 0.09 |  | ![]() |  | 0.07 |  | ![]() |  | 0.10 |  | ![]() |  | 0.03 |  | ![]() |  | 0.03 |  | ||
Net realized and unrealized gain | ![]() | Â | 1.79 | Â | ![]() | Â | 0.87 | Â | ![]() | Â | 1.18 | Â | ![]() | Â | 1.02 | Â | ![]() | Â | 0.97 | Â | ||
Total income from investment operations | ![]() | Â | 1.88 | Â | ![]() | Â | 0.94 | Â | ![]() | Â | 1.28 | Â | ![]() | Â | 1.05 | Â | ![]() | Â | 1.00 | Â | ||
Less dividends from net investment income | ![]() |  | (0.08 | ) | ![]() |  | (0.05 | ) | ![]() |  | (0.07 | ) | ![]() |  | (0.03 | ) | ![]() |  |      —     |  | ||
Net asset value, end of period | ![]() | $ | 15.52 | Â | ![]() | $ | 13.72 | Â | ![]() | $ | 12.83 | Â | ![]() | $ | 11.62 | Â | ![]() | $ | 10.60 | Â | ||
Total Return†| ![]() |  | 13.76 | % | ![]() |  | 7.35 | % | ![]() |  | 11.04 | % | ![]() |  | 9.88 | % | ![]() |  | 10.42 | % | ||
Ratios to Average Net Assets(1)(3): | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Total expenses (before expense offset) | ![]() | Â | 1.34 | % (2)Â | ![]() | Â | 1.38 | %Â | ![]() | Â | 1.40 | %Â | ![]() | Â | 1.46 | %Â | ![]() | Â | 1.50 | %Â | ||
Net investment income | ![]() | Â | 0.61 | % (2)Â | ![]() | Â | 0.56 | %Â | ![]() | Â | 0.76 | %Â | ![]() | Â | 0.27 | %Â | ![]() | Â | 0.31 | %Â | ||
Supplemental Data: | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Net assets, end of period, in millions | ![]() | $ | 377 | Â | ![]() | $ | 534 | Â | ![]() | $ | 815 | Â | ![]() | $ | 1,108 | Â | ![]() | $ | 1,160 | Â | ||
Portfolio turnover rate | ![]() | Â | 3 | %Â | ![]() | Â | 4 | %Â | ![]() | Â | 3 | %Â | ![]() | Â | 2 | %Â | ![]() | Â | 2 | %Â | ||
![]() |
![]() |
![]() | ‡ | The per share amounts were computed using an average number of shares outstanding during the period. |
![]() | †| Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. |
![]() | (1) | Reflects overall Fund ratios for investment income and non-class specific expenses. |
![]() | (2) | Reflects waivers of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio – Institutional Class during the period. As a result of such waivers the expenses as a percentage of its net assets had an effect of less than 0.005%. |
![]() | (3) | If the Fund had borne all of its expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios, before expense offset, would have been as follows: |
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
PERIOD ENDED | ![]() | EXPENSE RATIO | ![]() | NET INVESTMENT INCOME RATIO | ||||||
August 31, 2007 | ![]() | Â Â 1.41% | ![]() | Â Â 0.54% | ||||||
August 31, 2006 | ![]() | 1.42 | ![]() | 0.52 | ||||||
August 31, 2005 | ![]() | 1.41 | ![]() | 0.75 | ||||||
August 31, 2004 | ![]() | 1.53 | ![]() | 0.20 | ||||||
August 31, 2003 | ![]() | 1.62 | ![]() | 0.19 | ||||||
![]() |
See Notes to Financial Statements
34
Morgan Stanley S&P 500 Index Fund
Financial Highlights continued
   Â
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
 | ![]() | FOR THE YEAR ENDED AUGUST 31, | ||||||||||||||||||||
 | ![]() | 2007 | ![]() | 2006 | ![]() | 2005 | ![]() | 2004 | ![]() | 2003 | ||||||||||||
Class C Shares | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Selected Per Share Data: | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Net asset value, beginning of period | ![]() | $ | 13.70 | Â | ![]() | $ | 12.83 | Â | ![]() | $ | 11.61 | Â | ![]() | $ | 10.60 | Â | ![]() | $ | Â Â 9.60 | Â | ||
Income from investment operations: | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Net investment income‡ | ![]() |  | 0.09 |  | ![]() |  | 0.08 |  | ![]() |  | 0.10 |  | ![]() |  | 0.03 |  | ![]() |  | 0.03 |  | ||
Net realized and unrealized gain | ![]() | Â | 1.78 | Â | ![]() | Â | 0.87 | Â | ![]() | Â | 1.20 | Â | ![]() | Â | 1.01 | Â | ![]() | Â | 0.97 | Â | ||
Total income from investment operations | ![]() | Â | 1.87 | Â | ![]() | Â | 0.95 | Â | ![]() | Â | 1.30 | Â | ![]() | Â | 1.04 | Â | ![]() | Â | 1.00 | Â | ||
Less dividends from net investment income | ![]() |  | (0.11 | ) | ![]() |  | (0.08 | ) | ![]() |  | (0.08 | ) | ![]() |  | (0.03 | ) | ![]() |  |      —     |  | ||
Net asset value, end of period | ![]() | $ | 15.46 | Â | ![]() | $ | 13.70 | Â | ![]() | $ | 12.83 | Â | ![]() | $ | 11.61 | Â | ![]() | $ | 10.60 | Â | ||
Total Return†| ![]() |  | 13.68 | % | ![]() |  | 7.45 | % | ![]() |  | 11.18 | % | ![]() |  | 9.85 | % | ![]() |  | 10.42 | % | ||
Ratios to Average Net Assets(1)(3): | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Total expenses (before expense offset) | ![]() | Â | 1.33 | % (2)Â | ![]() | Â | 1.34 | %Â | ![]() | Â | 1.34 | %Â | ![]() | Â | 1.46 | %Â | ![]() | Â | 1.49 | %Â | ||
Net investment income | ![]() | Â | 0.62 | % (2)Â | ![]() | Â | 0.60 | %Â | ![]() | Â | 0.82 | %Â | ![]() | Â | 0.27 | %Â | ![]() | Â | 0.32 | %Â | ||
Supplemental Data: | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Net assets, end of period, in millions | ![]() | $ | 132 | Â | ![]() | $ | 132 | Â | ![]() | $ | 154 | Â | ![]() | $ | 173 | Â | ![]() | $ | 161 | Â | ||
Portfolio turnover rate | ![]() | Â | 3 | %Â | ![]() | Â | 4 | %Â | ![]() | Â | 3 | %Â | ![]() | Â | 2 | %Â | ![]() | Â | 2 | %Â | ||
![]() |
![]() |
![]() | ‡ | The per share amounts were computed using an average number of shares outstanding during the period. |
![]() | †| Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. |
![]() | (1) | Reflects overall Fund ratios for investment income and non-class specific expenses. |
![]() | (2) | Reflects waivers of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio – Institutional Class during the period. As a result of such waivers the expenses as a percentage of its net assets had an effect of less than 0.005%. |
![]() | (3) | If the Fund had borne all of its expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios, before expense offset, would have been as follows: |
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![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
PERIOD ENDED | ![]() | EXPENSE RATIO | ![]() | NET INVESTMENT INCOME RATIO | ||||||
August 31, 2007 | ![]() | Â Â 1.40% | ![]() | 0.55% | ||||||
August 31, 2006 | ![]() | 1.38 | ![]() | 0.56 | ||||||
August 31, 2005 | ![]() | 1.35 | ![]() | 0.81 | ||||||
August 31, 2004 | ![]() | 1.53 | ![]() | 0.20 | ||||||
August 31, 2003 | ![]() | 1.61 | ![]() | 0.20 | ||||||
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See Notes to Financial Statements
35
Morgan Stanley S&P 500 Index Fund
Financial Highlights continued
   Â
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 | ![]() | FOR THE YEAR ENDED AUGUST 31, | ||||||||||||||||||||
 | ![]() | 2007 | ![]() | 2006 | ![]() | 2005 | ![]() | 2004 | ![]() | 2003 | ||||||||||||
Class D Shares | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Selected Per Share Data: | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Net asset value, beginning of period | ![]() | $ | 14.31 | Â | ![]() | $ | 13.40 | Â | ![]() | $ | 12.14 | Â | ![]() | $ | 11.06 | Â | ![]() | $ | 10.00 | Â | ||
Income from investment operations: | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Net investment income‡ | ![]() |  | 0.25 |  | ![]() |  | 0.21 |  | ![]() |  | 0.23 |  | ![]() |  | 0.15 |  | ![]() |  | 0.13 |  | ||
Net realized and unrealized gain | ![]() | Â | 1.86 | Â | ![]() | Â | 0.92 | Â | ![]() | Â | 1.24 | Â | ![]() | Â | 1.06 | Â | ![]() | Â | 1.02 | Â | ||
Total income from investment operations | ![]() | Â | 2.11 | Â | ![]() | Â | 1.13 | Â | ![]() | Â | 1.47 | Â | ![]() | Â | 1.21 | Â | ![]() | Â | 1.15 | Â | ||
Less dividends from net investment income | ![]() | Â | (0.25 | )Â | ![]() | Â | (0.22 | )Â | ![]() | Â | (0.21 | )Â | ![]() | Â | (0.13 | )Â | ![]() | Â | (0.09 | )Â | ||
Net asset value, end of period | ![]() | $ | 16.17 | Â | ![]() | $ | 14.31 | Â | ![]() | $ | 13.40 | Â | ![]() | $ | 12.14 | Â | ![]() | $ | 11.06 | Â | ||
Total Return†| ![]() |  | 14.86 | % | ![]() |  | 8.46 | % | ![]() |  | 12.11 | % | ![]() |  | 10.97 | % | ![]() |  | 11.59 | % | ||
Ratios to Average Net Assets(1)(3): | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Total expenses (before expense offset) | ![]() | Â | 0.34 | % (2)Â | ![]() | Â | 0.38 | %Â | ![]() | Â | 0.40 | %Â | ![]() | Â | 0.46 | %Â | ![]() | Â | 0.50 | %Â | ||
Net investment income | ![]() | Â | 1.61 | % (2)Â | ![]() | Â | 1.56 | %Â | ![]() | Â | 1.76 | %Â | ![]() | Â | 1.27 | %Â | ![]() | Â | 1.31 | %Â | ||
Supplemental Data: | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | ![]() | Â | Â | |||||||
Net assets, end of period, in millions | ![]() | $ | 96 | Â | ![]() | $ | 99 | Â | ![]() | $ | 188 | Â | ![]() | $ | 198 | Â | ![]() | $ | 180 | Â | ||
Portfolio turnover rate | ![]() | Â | 3 | %Â | ![]() | Â | 4 | %Â | ![]() | Â | 3 | %Â | ![]() | Â | 2 | %Â | ![]() | Â | 2 | %Â | ||
![]() |
![]() |
![]() | ‡ | The per share amounts were computed using an average number of shares outstanding during the period. |
![]() | †| Calculated based on the net asset value as of the last business day of the period. |
![]() | (1) | Reflects overall Fund ratios for investment income and non-class specific expenses. |
![]() | (2) | Reflects waivers of certain Fund expenses in connection with the investments in Morgan Stanley Institutional Liquidity Money Market Portfolio – Institutional Class during the period. As a result of such waivers the expenses as a percentage of its net assets had an effect of less than 0.005%. |
![]() | (3) | If the Fund had borne all of its expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios, before expense offset, would have been as follows: |
![](https://capedge.com/proxy/N-CSR/0000950136-07-007615/spacer.gif)
![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() | ![]() |
PERIOD ENDED | ![]() | EXPENSE RATIO | ![]() | NET INVESTMENT INCOME RATIO | ||||||
August 31, 2007 | ![]() | Â Â 0.41% | ![]() | Â Â 1.54% | ||||||
August 31, 2006 | ![]() | 0.42 | ![]() | 1.52 | ||||||
August 31, 2005 | ![]() | 0.41 | ![]() | 1.75 | ||||||
August 31, 2004 | ![]() | 0.53 | ![]() | 1.20 | ||||||
August 31, 2003 | ![]() | 0.62 | ![]() | 1.19 | ||||||
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See Notes to Financial Statements
36
Morgan Stanley S&P 500 Index Fund
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of
Morgan Stanley S&P 500 Index Fund:
We have audited the accompanying statement of assets and liabilities of Morgan Stanley S&P 500 Index Fund (the ‘‘Fund’’), including the portfolio of investments, as of August 31, 2007, and the related statements of operations for the year then ended and changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Ac cordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2007, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Morgan Stanley S&P 500 Index Fund as of August 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
October 22, 2007
37
Morgan Stanley S&P 500 Index Fund
Trustee and Officer Information (unaudited)
Independent Trustees:
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Name, Age and Address of Independent Trustee | ![]() | Position(s) Held with Registrant | ![]() | Term of Office and Length of Time Served* | ![]() | Principal Occupation(s) During Past 5 Years | ![]() | Number of Portfolios in Fund Complex Overseen by Independent Trustee** | ![]() | Other Directorships Held by Independent Trustee | ||||||||||||
Frank L. Bowman (62) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | ![]() | Trustee | ![]() | Since August 2006 | ![]() | President and Chief Executive Officer, Nuclear Energy Institute (policy organization) (since February 2005); Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); Chairperson of the Insurance Sub-Committee of the Valuation, Insurance and Compliance Committee (since February 2007); formerly, variously, Admiral in the U.S. Navy, Director of Naval Nuclear Propulsion Program and Deputy Administrator—Naval Reactors in the National Nuclear Security Administration at the U.S. Department of Energy (1996-2004). Honorary Knight Commander of the Most Excellent Order of the British Empire. | ![]() | 171 | ![]() | Director of the National Energy Foundation, the U.S. Energy Association, the American Council for Capital Formation and the Armed Services YMCA of the USA. | ||||||||||||
Michael Bozic (66) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | ![]() | Trustee | ![]() | Since April 1994 | ![]() | Private investor; Chairperson of the Valuation, Insurance and Compliance Committee (since October 2006); Director or Trustee of the Retail Funds (since April 1994) and the Institutional Funds (since July 2003); formerly, Chairperson of the Insurance Committee (July 2006-September 2006); Vice Chairman of Kmart Corporation (December 1998-October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co. | ![]() | 173 | ![]() | Director of various business organizations. | ||||||||||||
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38
Morgan Stanley S&P 500 Index Fund
Trustee and Officer Information (unaudited) continued
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Name, Age and Address of Independent Trustee | ![]() | Position(s) Held with Registrant | ![]() | Term of Office and Length of Time Served* | ![]() | Principal Occupation(s) During Past 5 Years | ![]() | Number of Portfolios in Fund Complex Overseen by Independent Trustee** | ![]() | Other Directorships Held by Independent Trustee | ||||||||||||
Kathleen A. Dennis (54) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | ![]() | Trustee | ![]() | Since August 2006 | ![]() | President, Cedarwood Associates (mutual fund consulting) (since July 2006); Chairperson of the Money Market and Alternatives Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly, Senior Managing Director of Victory Capital Management (1993-2006). | ![]() | 171 | ![]() | None. | ||||||||||||
Dr. Manuel H. Johnson (58) c/o Johnson Smick Group, Inc. 888 16th Street, N.W. Suite 740 Washington, D.C. 20006 | ![]() | Trustee | ![]() | Since July 1991 | ![]() | Senior Partner, Johnson Smick International, Inc. (consulting firm); Chairperson of the Investment Committee (since October 2006) and Director or Trustee of the Retail Funds (since July 1991) and the Institutional Funds (since July 2003); Co-Chairman and a founder of the Group of Seven Council (G7C) (international economic commission); formerly, Chairperson of the Audit Committee (July 1991-September 2006); Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury. | ![]() | 173 | ![]() | Director of NVR, Inc. (home construction); Director of Evergreen Energy. | ||||||||||||
Joseph J. Kearns (65) c/o Kearns & Associates LLC PMB754 23852 Pacific Coast Highway Malibu, CA 90265 | ![]() | Trustee | ![]() | Since August 1994 | ![]() | President, Kearns & Associates LLC (investment consulting); Chairperson of the Audit Committee (since October 2006) and Director or Trustee of the Retail Funds (since July 2003) and the Institutional Funds (since August 1994); formerly, Deputy Chairperson of the Audit Committee (July 2003- September 2006) and Chairperson of the Audit Committee of the Institutional Funds (October 2001-July 2003); CFO of the J. Paul Getty Trust. | ![]() | 174 | ![]() | Director of Electro Rent Corporation (equipment leasing), The Ford Family Foundation, and the UCLA Foundation. | ||||||||||||
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39
Morgan Stanley S&P 500 Index Fund
Trustee and Officer Information (unaudited) continued
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Name, Age and Address of Independent Trustee | ![]() | Position(s) Held with Registrant | ![]() | Term of Office and Length of Time Served* | ![]() | Principal Occupation(s) During Past 5 Years | ![]() | Number of Portfolios in Fund Complex Overseen by Independent Trustee** | ![]() | Other Directorships Held by Independent Trustee | ||||||||||||
Michael F. Klein (48) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | ![]() | Trustee | ![]() | Since August 2006 | ![]() | Managing Director, Aetos Capital, LLC (since March 2000) and Co-President, Aetos Alternatives Management, LLC (since January 2004); Chairperson of the Fixed-Income Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly, Managing Director, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management, President, Morgan Stanley Institutional Funds (June 1998-March 2000) and Principal, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management (August 1997-December 1999). | ![]() | 171 | ![]() | Director of certain investment funds managed or sponsored by Aetos Capital, LLC. Director of Sanitized AG and Sanitized Marketing AG (specialty chemicals). | ||||||||||||
Michael E. Nugent (71) c/o Triumph Capital, L.P. 445 Park Avenue New York, NY 10022 | ![]() | Chairperson of the Board and Trustee | ![]() | Chairperson of the Boards since July 2006 and Trustee since July 1991 | ![]() | General Partner, Triumph Capital, L.P. (private investment partnership); Chairperson of the Boards of the Retail Funds and Institutional Funds (since July 2006); Director or Trustee of the Retail Funds (since July 1991) and the Institutional Funds (since July 2001); formerly, Chairperson of the Insurance Committee (until July 2006); Vice President, Bankers Trust Company and BT Capital Corporation (1984-1988). | ![]() | 173 | ![]() | None. | ||||||||||||
W. Allen Reed (60) c/o Kramer Levin Naftalis & Frankel LLP Counsel to the Independent Trustees 1177 Avenue of the Americas New York, NY 10036 | ![]() | Trustee | ![]() | Since August 2006 | ![]() | Chairperson of the Equity Sub-Commitee of the Investment Committee (since October 2006) and Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly, President and CEO of General Motors Asset Management; Chairman and Chief Executive Officer of the GM Trust Bank and Corporate Vice President of General Motors Corporation (August 1994-December 2005). | ![]() | 171 | ![]() | Director of GMAC (financial services) and Temple-Inland Industries (packaging, banking and forest products); Director of Legg Mason, Inc. and Director of the Auburn University Foundation. | ||||||||||||
Fergus Reid (75) c/o Lumelite Plastics Corporation 85 Charles Colman Blvd. Pawling, NY 12564 | ![]() | Trustee | ![]() | Since June 1992 | ![]() | Chairman of Lumelite Plastics Corporation; Chairperson of the Governance Committee and Director or Trustee of the Retail Funds (since July 2003) and the Institutional Funds (since June 1992). | ![]() | 174 | ![]() | Trustee and Director of certain investment companies in the JPMorgan Funds complex managed by J.P. Morgan Investment Management Inc. | ||||||||||||
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40
Morgan Stanley S&P 500 Index Fund
Trustee and Officer Information (unaudited) continued
Interested Trustee:
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Name, Age and Address of Interested Trustee | ![]() | Position(s) Held with Registrant | ![]() | Term of Office and Length of Time Served* | ![]() | Principal Occupation(s) During Past 5 Years | ![]() | Number of Portfolios in Fund Complex Overseen by Interested Trustee** | ![]() | Other Directorships Held by Interested Trustee | ||||||||||||
James F. Higgins (59) c/o Morgan Stanley Trust Harborside Financial Center Plaza Two Jersey City, NJ 07311 | ![]() | Trustee | ![]() | Since June 2000 | ![]() | Director or Trustee of the Retail Funds (since June 2000) and the Institutional Funds (since July 2003); Senior Advisor of Morgan Stanley (since August 2000). | ![]() | 173 | ![]() | Director of AXA Financial, Inc. and The Equitable Life Assurance Society of the United States (financial services). | ||||||||||||
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![]() |    * | This is the earliest date the Trustee began serving the funds advised by Morgan Stanley Investment Advisors Inc. (the ‘‘Investment Adviser’’) (the ‘‘Retail Funds’’) or the funds advised by Morgan Stanley Investment Management Inc. and Morgan Stanley AIP GP LP (the ‘‘Institutional Funds’’). |
![]() | Â ** | The Fund Complex includes all open-end and closed-end funds (including all of their portfolios) advised by the Investment Adviser and any funds that have an investment adviser that is an affiliated person of the Investment Adviser (including, but not limited to, Morgan Stanley Investment Management Inc.). |
41
Morgan Stanley S&P 500 Index Fund
Trustee and Officer Information (unaudited) continued
Executive Officers:
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Name, Age and Address of Executive Officer | ![]() | Position(s) Held with Registrant | ![]() | Â Â Â Â Term of Office and Length of Time Served* | ![]() | Principal Occupation(s) During Past 5 Years | ||||||||
Ronald E. Robison (68) 522 Fifth Avenue New York, NY 10036 | ![]() | President and Principal Executive Officer | ![]() | President since September 2005 and Principal Executive Officer since May 2003 | ![]() | President (since September 2005) and Principal Executive Officer (since May 2003) of funds in the Fund Complex; President (since September 2005) and Principal Executive Officer (since May 2003) of the Van Kampen Funds; Managing Director, Director and/or Officer of the Investment Adviser and various entities affiliated with the Investment Adviser; Director of Morgan Stanley SICAV (since May 2004). Formerly, Executive Vice President (July 2003-September 2005) of funds in the Fund Complex and the Van Kampen Funds; President and Director of the Institutional Funds (March 2001-July 2003); Chief Administrative Officer of the Investment Adviser; Chief Administrative Officer of Morgan Stanley Services Company Inc. | ||||||||
J. David Germany (53) Morgan Stanley Investment Management Limited 20 Bank Street Canary Wharf, London, England E144AD | ![]() | Vice President | ![]() | Since February 2006 | ![]() | Managing Director and (since December 2005) Chief Investment Officer – Global Fixed Income of Morgan Stanley Investment Management; Managing Director and Director of Morgan Stanley Investment Management Limited; Vice President of the Retail Funds and Institutional Funds (since February 2006). | ||||||||
Dennis F. Shea (54) 522 Fifth Avenue New York, NY 10036 | ![]() | Vice President | ![]() | Since February 2006 | ![]() | Managing Director and (since February 2006) Chief Investment Officer – Global Equity of Morgan Stanley Investment Management; Vice President of the Retail Funds and Institutional Funds (since February 2006). Formerly, Managing Director and Director of Global Equity Research at Morgan Stanley. | ||||||||
Amy R. Doberman (45) 522 Fifth Avenue New York, NY 10036 | ![]() | Vice President | ![]() | Since July 2004 | ![]() | Managing Director and General Counsel, U.S. Investment Management of Morgan Stanley Investment Management (since July 2004); Vice President of the Retail Funds and the Institutional Funds (since July 2004); Vice President of the Van Kampen Funds (since August 2004); Secretary (since February 2006) and Managing Director (since July 2004) of the Investment Adviser and various entities affiliated with the Investment Adviser. Formerly, Managing Director and General Counsel – Americas, UBS Global Asset Management (July 2000-July 2004). | ||||||||
Carsten Otto (43) 522 Fifth Avenue New York, NY 10036 | ![]() | Chief Compliance Officer | ![]() | Since October 2004 | ![]() | Managing Director and Global Director of Compliance for Morgan Stanley Investment Management (since April 2007); Managing Director and Chief Compliance Officer of Morgan Stanley Investment Management. Formerly, U.S. Director of Compliance (October 2004-April 2007) and Assistant Secretary and Assistant General Counsel of the Retail Funds. | ||||||||
Stefanie V. Chang Yu (40) 522 Fifth Avenue New York, NY 10036 | ![]() | Vice President | ![]() | Since December 1997 | ![]() | Executive Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Vice President of the Retail Funds (since July 2002) and the Institutional Funds (since December 1997). Formerly, Secretary of various entities affiliated with the Investment Adviser. | ||||||||
Francis J. Smith (42) c/o Morgan Stanley Trust Harborside Financial Center Plaza Two Jersey City, NJ 07311 | ![]() | Treasurer and Chief Financial Officer | ![]() | Treasurer since July 2003 and Chief Financial Officer since September 2002 | ![]() | Executive Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Treasurer and Chief Financial Officer of the Retail Funds (since July 2003). Formerly, Vice President of the Retail Funds (September 2002 to July 2003). | ||||||||
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42
Morgan Stanley S&P 500 Index Fund
Trustee and Officer Information (unaudited) continued
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Name, Age and Address of Executive Officer | ![]() | Position(s) Held with Registrant | ![]() | Â Â Â Â Term of Office and Length of Time Served* | ![]() | Principal Occupation(s) During Past 5 Years | ||||||||
Mary E. Mullin (40) 522 Fifth Avenue New York, NY 10036 | ![]() | Secretary | ![]() | Since June 1999 | ![]() | Executive Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Secretary of the Retail Funds (since July 2003) and the Institutional Funds (since June 1999). | ||||||||
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![]() | Â Â Â Â * | This is the earliest date the Officer began serving the Retail Funds or the Institutional Funds. |
   Â
2007 Federal Tax Notice (unaudited)
During the fiscal year ended August 31, 2007, 100% of the ordinary dividends paid by the Fund qualified for the dividends received deduction available to corporations. Additionally, please note that 100% of the Fund’s ordinary dividends paid during the fiscal year ended August 31, 2007 qualified for the lower income tax rate available to individuals under the Jobs and Growth Tax Relief Reconciliation Act of 2003.
43
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Trustees Frank L. Bowman Officers Michael E. Nugent Ronald E. Robison J. David Germany Dennis F. Shea Amy R. Doberman Carsten Otto Stefanie V. Chang Yu Francis J. Smith Mary E. Mullin Transfer Agent Morgan Stanley Trust Independent Registered Public Accounting Firm Deloitte & Touche LLP Legal Counsel Clifford Chance US LLP Counsel to the Independent Trustees Kramer Levin Naftalis & Frankel LLP Investment Adviser Morgan Stanley Investment Advisors Inc. This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund’s Statement of Additional Information contains additional information about the Fund, including its trustees. It is available, without charge, by calling (800) 869-NEWS. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing. Morgan Stanley Distributors Inc., member FINRA. © 2007 Morgan Stanley     ![]() SPIANN-MN-IUIU07-04113P-T08/07 | ![]() | MORGAN STANLEY FUNDS |
Morgan Stanley S&P 500 Index Fund Annual Report August 31, 2007 | ||
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Item 2. Code of Ethics. (a) The Fund has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Fund or a third party. (b) No information need be disclosed pursuant to this paragraph. (c) Not applicable. (d) Not applicable. (e) Not applicable. (f) (1) The Fund's Code of Ethics is attached hereto as Exhibit 12 A. (2) Not applicable. (3) Not applicable. Item 3. Audit Committee Financial Expert. The Fund's Board of Trustees has determined that Joseph J. Kearns, an "independent" Trustee, is an "audit committee financial expert" serving on its audit committee. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification 2
Item 4. Principal Accountant Fees and Services. (a)(b)(c)(d) and (g). Based on fees billed for the periods shown: 2007 REGISTRANT COVERED ENTITIES(1) AUDIT FEES ................. $ 29,550 N/A NON-AUDIT FEES AUDIT-RELATED FEES ..... $ $ 5,041,000(2) TAX FEES ............... $ 5,400(3) $ 761,000(4) ALL OTHER FEES ......... $ -- $ TOTAL NON-AUDIT FEES ....... $ 5,400 $ 5,802,000 TOTAL ...................... $ 34,950 $ 5,802,000 2006 REGISTRANT COVERED ENTITIES(1) AUDIT FEES ................. $ 27,789 N/A NON-AUDIT FEES AUDIT-RELATED FEES ..... 540(2) $ 5,328,768(2) TAX FEES ............... $ 5,481(3) $ 1,640,675(4) ALL OTHER FEES ......... $ -- $ TOTAL NON-AUDIT FEES ....... $ 6,021 $ 6,969,443 TOTAL ...................... $ 33,810 $ 6,969,443 N/A- Not applicable, as not required by Item 4. (1) Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant. (2) Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities' and funds advised by the Adviser or its affiliates, specifically data verification and agreed-upon procedures related to asset securitizations and agreed-upon procedures engagements. (3) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the preparation and review of the Registrant's tax returns. (4) Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the review of Covered Entities' tax returns. 3
(e)(1) The audit committee's pre-approval policies and procedures are as follows: APPENDIX A AUDIT COMMITTEE AUDIT AND NON-AUDIT SERVICES PRE-APPROVAL POLICY AND PROCEDURES OF THE MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS AS ADOPTED AND AMENDED JULY 23, 2004,(1) 1. STATEMENT OF PRINCIPLES The Audit Committee of the Board is required to review and, in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities in order to assure that services performed by the Independent Auditors do not impair the auditor's independence from the Fund. The SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committee's administration of the engagement of the independent auditor. The SEC's rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee ("general pre-approval"); or require the specific pre-approval of the Audit Committee or its delegate ("specific pre-approval"). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated) if it is to be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee. The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations. __________________ (1) This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the "Policy"), adopted as of the date above, supersedes and replaces all prior versions that may have been adopted from time to time. 4
The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee's responsibilities to pre-approve services performed by the Independent Auditors to management. The Fund's Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors' independence. 2. DELEGATION As provided in the Act and the SEC's rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting. 3. AUDIT SERVICES The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Fund's financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items. In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings. The Audit Committee has pre-approved the Audit services in Appendix B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 4. AUDIT-RELATED SERVICES Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Fund's financial statements and, to the extent they are Covered Services, the Covered Entities or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC's rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters 5
not classified as "Audit services"; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and/or N-CSR. The Audit Committee has pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 5. TAX SERVICES The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditor's independence, and the SEC has stated that the Independent Auditors may provide such services. Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 6. ALL OTHER SERVICES The Audit Committee believes, based on the SEC's rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC's rules on auditor independence. The Audit Committee has pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated). 7. PRE-APPROVAL FEE LEVELS OR BUDGETED AMOUNTS Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services. 8. PROCEDURES All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund's Chief Financial Officer and must include a detailed description of the services to be 6
rendered. The Fund's Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the Independent Auditors and the Fund's Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC's rules on auditor independence. The Audit Committee has designated the Fund's Chief Financial Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Fund's Chief Financial Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Fund's Chief Financial Officer and management will immediately report to the chairman of the Audit Committee any breach of this Policy that comes to the attention of the Fund's Chief Financial Officer or any member of management. 9. ADDITIONAL REQUIREMENTS The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor's independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with Independence Standards Board No. 1, and discussing with the Independent Auditors its methods and procedures for ensuring independence. 10. COVERED ENTITIES Covered Entities include the Fund's investment adviser(s) and any entity controlling, controlled by or under common control with the Fund's investment adviser(s) that provides ongoing services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Fund's audit committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include: Morgan Stanley Retail Funds --------------------------- Morgan Stanley Investment Advisors Inc. Morgan Stanley & Co. Incorporated Morgan Stanley DW Inc. Morgan Stanley Investment Management Inc. Morgan Stanley Investment Management Limited Morgan Stanley Investment Management Private Limited Morgan Stanley Asset & Investment Trust Management Co., Limited Morgan Stanley Investment Management Company Van Kampen Asset Management Morgan Stanley Services Company, Inc. Morgan Stanley Distributors Inc. Morgan Stanley Trust FSB 7
Morgan Stanley Institutional Funds ---------------------------------- Morgan Stanley Investment Management Inc. Morgan Stanley Investment Advisors Inc. Morgan Stanley Investment Management Limited Morgan Stanley Investment Management Private Limited Morgan Stanley Asset & Investment Trust Management Co., Limited Morgan Stanley Investment Management Company Morgan Stanley & Co. Incorporated Morgan Stanley Distribution, Inc. Morgan Stanley AIP GP LP Morgan Stanley Alternative Investment Partners LP (e)(2) Beginning with non-audit service contracts entered into on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services were pre-approved by the audit committee pursuant to the Audit Committee's pre-approval policies and procedures (attached hereto). (f) Not applicable. (g) See table above. (h) The audit committee of the Board of Trustees has considered whether the provision of services other than audit services performed by the auditors to the Registrant and Covered Entities is compatible with maintaining the auditors' independence in performing audit services. Item 5. Audit Committee of Listed Registrants. (a) The Fund has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: Joseph Kearns, Michael Nugent and Allen Reed. (b) Not applicable. Item 6. Schedule of Investments Refer to Item 1. 8
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Applicable only to reports filed by closed-end funds. Item 8. Portfolio Managers of Closed-End Management Investment Companies Applicable only to reports filed by closed-end funds. Item 9. Closed-End Fund Repurchases Applicable only to reports filed by closed-end funds. Item 10. Submission of Matters to a Vote of Security Holders Not applicable. Item 11. Controls and Procedures (a) The Fund's principal executive officer and principal financial officer have concluded that the Fund's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits (a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto. (b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT. 9
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Morgan Stanley S&P 500 Index Fund /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer October 18, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer October 18, 2007 /s/ Francis Smith Francis Smith Principal Financial Officer October 18, 2007 10
EXHIBIT 12 A CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS ADOPTED SEPTEMBER 28, 2004, AS AMENDED SEPTEMBER 20, 2005 I. This Code of Ethics (the "Code") for the investment companies within the Morgan Stanley complex identified in Exhibit A (collectively, "Funds" and each, a "Fund") applies to each Fund's Principal Executive Officer, President, Principal Financial Officer and Treasurer (or persons performing similar functions) ("Covered Officers" each of whom are set forth in Exhibit B) for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. o full, fair, accurate, timely and understandable disclosure in reports and documents that a company files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Fund; o compliance with applicable laws and governmental rules and regulations; o prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. Any question about the application of the Code should be referred to the General Counsel or his/her designee (who is set forth in Exhibit C). II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes, or appears to interfere, with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment 11
Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as "affiliated persons" (as defined in the Investment Company Act) of the Fund. The Fund's and its investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside the parameters of this Code, unless or until the General Counsel determines that any violation of such programs and procedures is also a violation of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Fund and its investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Fund or for the investment adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Fund and its investment adviser. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the investment adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Directors/Trustees ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund. Each Covered Officer must not: o use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally (directly or indirectly); o cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Fund; or o use material non-public knowledge of portfolio transactions made or contemplated for, or actions proposed to be taken by, the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. 12
Each Covered Officer must, at the time of signing this Code, report to the General Counsel all affiliations or significant business relationships outside the Morgan Stanley complex and must update the report annually. Conflict of interest situations should always be approved by the General Counsel and communicated to the relevant Fund or Fund's Board. Any activity or relationship that would present such a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if an immediate member of the Covered Officer's family living in the same household engages in such an activity or has such a relationship. Examples of these include: o service or significant business relationships as a director on the board of any public or private company; o accepting directly or indirectly, anything of value, including gifts and gratuities in excess of $100 per year from any person or entity with which the Fund has current or prospective business dealings, not including occasional meals or tickets for theatre or sporting events or other similar entertainment; provided it is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any ownership interest in, or any consulting or employment relationship with, any of the Fund's service providers, other than its investment adviser, principal underwriter, or any affiliated person thereof; and o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. DISCLOSURE AND COMPLIANCE o Each Covered Officer should familiarize himself/herself with the disclosure and compliance requirements generally applicable to the Funds; o each Covered Officer must not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund's Directors/Trustees and auditors, or to governmental regulators and self-regulatory organizations; o each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and their investment advisers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and 13
o it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon adoption of the Code (thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he has received, read and understands the Code; o annually thereafter affirm to the Boards that he has complied with the requirements of the Code; o not retaliate against any other Covered Officer, other officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and o notify the General Counsel promptly if he/she knows or suspects of any violation of this Code. Failure to do so is itself a violation of this Code. The General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any waivers(2) sought by a Covered Officer must be considered by the Board of the relevant Fund or Funds. The Funds will follow these procedures in investigating and enforcing this Code: o the General Counsel will take all appropriate action to investigate any potential violations reported to him; o if, after such investigation, the General Counsel believes that no violation has occurred, the General Counsel is not required to take any further action; o any matter that the General Counsel believes is a violation will be reported to the relevant Fund's Audit Committee; o if the directors/trustees/managing general partners who are not "interested persons" as defined by the Investment Company Act (the "Independent Directors/Trustees/Managing General Partners") of the relevant Fund concur that a violation has occurred, they will consider appropriate action, which may include review of, and appropriate modifications to, applicable ___________________ (2) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics." 14
policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer or other appropriate disciplinary actions; o the Independent Directors/Trustees/Managing General Partners of the relevant Fund will be responsible for granting waivers of this Code, as appropriate; and o any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' investment advisers, principal underwriters, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code unless any provision of this Code conflicts with any applicable federal or state law, in which case the requirements of such law will govern. The Funds' and their investment advisers' and principal underwriters' codes of ethics under Rule 17j-1 under the Investment Company Act and Morgan Stanley's Code of Ethics are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibits A, B or C, must be approved or ratified by a majority vote of the Board of each Fund, including a majority of Independent Directors/Trustees/Managing General Partners. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Independent Directors/Trustees/Managing General Partners of the relevant Fund or Funds and their counsel, the relevant Fund or Funds and their counsel and the relevant investment adviser and its counsel. 15
VIII. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion I have read and understand the terms of the above Code. I recognize the responsibilities and obligations incurred by me as a result of my being subject to the Code. I hereby agree to abide by the above Code. __________________________ Date:_____________________ 16
EXHIBIT A FUND LIST AT AUGUST 31, 2007 RETAIL FUNDS OPEN-END RETAIL FUNDS TAXABLE MONEY MARKET FUNDS -------------------------- 1. Active Assets Government Securities Trust ("AA Government") 2. Active Assets Institutional Government Securities Trust ("AA Institutional Government") 3. Active Assets Institutional Money Trust ("AA Institutional Money") 4. Active Assets Money Trust ("AA Money") 5. Morgan Stanley Liquid Asset Fund Inc. ("Liquid Asset") 6. Morgan Stanley U.S. Government Money Market Trust ("Government Money") TAX-EXEMPT MONEY MARKET FUNDS ----------------------------- 7. Active Assets California Tax-Free Trust ("AA California") 8. Active Assets Tax-Free Trust ("AA Tax-Free") 9. Morgan Stanley California Tax-Free Daily Income Trust ("California Tax-Free Daily") 10. Morgan Stanley New York Municipal Money Market Trust ("New York Money") 11. Morgan Stanley Tax-Free Daily Income Trust ("Tax-Free Daily") EQUITY FUNDS 12. Morgan Stanley Allocator Fund ("Allocator Fund")+ 13. Morgan Stanley Capital Opportunities Trust ("Capital Opportunities")+ 14. Morgan Stanley Developing Growth Securities Trust ("Developing Growth")+ 15. Morgan Stanley Dividend Growth Securities Inc. ("Dividend Growth")+ 16. Morgan Stanley Equally-Weighted S&P 500 Fund ("Equally-Weighted S&P 500")+ 17. Morgan Stanley European Equity Fund Inc. ("European Equity")+ 18. Morgan Stanley Financial Services Trust ("Financial Services")+ 19. Morgan Stanley Focus Growth Fund ("Focus Growth")+ 20. Morgan Stanley Fundamental Value Fund ("Fundamental Value")+ 21. Morgan Stanley FX Series - FX Alpha Plus Strategy Portfolio ("Alpha Plus")+ 22. Morgan Stanley FX Series - FX Alpha Strategy Portfolio ("Alpha")+ 23. Morgan Stanley Global Advantage Fund ("Global Advantage")+ 24. Morgan Stanley Global Dividend Growth Securities ("Global Dividend Growth")+ 17
25. Morgan Stanley Health Sciences Trust ("Health Sciences")+ 26. Morgan Stanley Institutional Strategies Fund ("Institutional Strategies")+ 27. Morgan Stanley International Fund ("International Fund")+ 28. Morgan Stanley International SmallCap Fund ("International SmallCap")+ 29. Morgan Stanley International Value Equity Fund ("International Value")+ 30. Morgan Stanley Japan Fund ("Japan Fund")+ 31. Morgan Stanley Mid-Cap Value Fund (Mid-Cap Value")+ 32. Morgan Stanley Multi-Asset Class Fund ("Multi-Asset Class")+ 33. Morgan Stanley Nasdaq-100 Index Fund ("Nasdaq-100")+ 34. Morgan Stanley Natural Resource Development Securities Inc. ("Natural Resource")+ 35. Morgan Stanley Pacific Growth Fund Inc. ("Pacific Growth")+ 36. Morgan Stanley Real Estate Fund ("Real Estate")+ 37. Morgan Stanley Small-Mid Special Value Fund (Small-Mid Special Value")+ 38. Morgan Stanley S&P 500 Index Fund ("S&P500 Index")+ 39. Morgan Stanley Special Growth Fund ("Special Growth")+ 40. Morgan Stanley Special Value Fund ("Special Value")+ 41. Morgan Stanley Technology Fund ("Technology")+ 42. Morgan Stanley Total Market Index Fund ("Total Market Index")+ 43. Morgan Stanley Utilities Fund ("Utilities Fund")+ 44. Morgan Stanley Value Fund ("Value Fund")+ BALANCED FUNDS -------------- 45. Morgan Stanley Balanced Fund ("Balanced")+ ASSET ALLOCATION FUND --------------------- 46. Morgan Stanley Strategist Fund ("Strategist Fund")+ TAXABLE FIXED-INCOME FUNDS -------------------------- 47. Morgan Stanley Convertible Securities Trust ("Convertible Securities")+ 48. Morgan Stanley Flexible Income Trust ("Flexible Income")+ 49. Morgan Stanley Income Trust ("Income Trust")+ 50. Morgan Stanley High Yield Securities Inc. ("High Yield Securities")+ 51. Morgan Stanley Limited Duration Fund ("Limited Duration Fund") 52. Morgan Stanley Limited Duration U.S. Government Trust ("Limited Duration U.S. Government") 53. Morgan Stanley Mortgage Securities Trust ("Mortgage Securities")+ 54. Morgan Stanley U.S. Government Securities Trust ("Government Securities")+ TAX-EXEMPT FIXED-INCOME FUNDS ----------------------------- 55. Morgan Stanley California Tax-Free Income Fund ("California Tax-Free")+ 56. Morgan Stanley Limited Term Municipal Trust ("Limited Term Municipal") 18
57. Morgan Stanley New York Tax-Free Income Fund ("New York Tax-Free")+ 58. Morgan Stanley Tax-Exempt Securities Trust ("Tax-Exempt Securities")+ SPECIAL PURPOSE FUNDS --------------------- 59. Morgan Stanley Select Dimensions Investment Series ("Select Dimensions") o Balanced Growth Portfolio o Capital Opportunities Portfolio o Developing Growth Portfolio o Dividend Growth Portfolio o Equally-Weighted S&P 500 Portfolio o Flexible Income Portfolio o Focus Growth Portfolio o Global Equity Portfolio o Growth Portfolio o Money Market Portfolio o Utilities Portfolio 60. Morgan Stanley Variable Investment Series ("Variable Investment") o Aggressive Equity Portfolio o Dividend Growth Portfolio o Equity Portfolio o European Equity Portfolio o Global Advantage Portfolio o Global Dividend Growth Portfolio o High Yield Portfolio o Income Builder Portfolio o Limited Duration Portfolio o Money Market Portfolio o Income Plus Portfolio o S&P 500 Index Portfolio o Strategist Portfolio o Utilities Portfolio CLOSED-END RETAIL FUNDS TAXABLE FIXED-INCOME CLOSED-END FUNDS ------------------------------------- 61. Morgan Stanley Income Securities Inc. ("Income Securities") 62. Morgan Stanley Prime Income Trust ("Prime Income") TAX-EXEMPT FIXED-INCOME CLOSED-END FUNDS ---------------------------------------- 19
63. Morgan Stanley California Insured Municipal Income Trust ("California Insured Municipal") 64. Morgan Stanley California Quality Municipal Securities ("California Quality Municipal") 65. Morgan Stanley Insured California Municipal Securities ("Insured California Securities") 66. Morgan Stanley Insured Municipal Bond Trust ("Insured Municipal Bond") 67. Morgan Stanley Insured Municipal Income Trust ("Insured Municipal Income") 68. Morgan Stanley Insured Municipal Securities ("Insured Municipal Securities") 69. Morgan Stanley Insured Municipal Trust ("Insured Municipal Trust") 70. Morgan Stanley Municipal Income Opportunities Trust ("Municipal Opportunities") 71. Morgan Stanley Municipal Income Opportunities Trust II ("Municipal Opportunities II") 72. Morgan Stanley Municipal Income Opportunities Trust III ("Municipal Opportunities III") 73. Morgan Stanley Municipal Premium Income Trust ("Municipal Premium") 74. Morgan Stanley New York Quality Municipal Securities ("New York Quality Municipal") 75. Morgan Stanley Quality Municipal Income Trust ("Quality Municipal Income") 76. Morgan Stanley Quality Municipal Investment Trust ("Quality Municipal Investment") 77. Morgan Stanley Quality Municipal Securities ("Quality Municipal Securities") +- Denotes Retail Multi-Class Fund INSTITUTIONAL FUNDS OPEN-END INSTITUTIONAL FUNDS 1. Morgan Stanley Institutional Fund, Inc. ("Institutional Fund Inc.") Active Portfolios: o Active International Allocation Portfolio o Emerging Markets Portfolio o Emerging Markets Debt Portfolio o Focus Equity Portfolio o Global Franchise Portfolio o Global Real Estate Portfolio o Global Value Equity Portfolio o International Equity Portfolio o International Growth Equity Portfolio o International Magnum Portfolio o International Real Estate Portfolio o International Small Cap Portfolio o Large Cap Relative Value Portfolio 20
o Money Market Portfolio o Municipal Money Market Portfolio o Small Company Growth Portfolio o Systematic Active large Cap Core Portfolio o Systematic Active Small Cap Core Portfolio o Systematic Active Small Cap Growth Portfolio o Systematic Active Small Cap Value Portfolio o U.S. Large Cap Growth Portfolio o U.S. Real Estate Portfolio Inactive Portfolios*: o China Growth Portfolio o Gold Portfolio o Large Cap Relative Value Portfolio o MicroCap Portfolio o Mortgage-Backed Securities Portfolio o Municipal Bond Portfolio o U.S. Equity Plus Portfolio 2. Morgan Stanley Institutional Fund Trust ("Institutional Fund Trust") Active Portfolios: o Advisory Portfolio o Advisory Foreign Fixed Income II Portfolio o Advisory Foreign Fixed Income Portfolio o Balanced Portfolio o Core Fixed Income Portfolio o Core Plus Fixed Income Portfolio o Equity Portfolio o Equity Plus Portfolio o High Yield Portfolio o Intermediate Duration Portfolio o International Fixed Income Portfolio o Investment Grade Fixed Income Portfolio o Limited Duration Portfolio o Long Duration Fixed Income Portfolio o Mid-Cap Growth Portfolio o Municipal Portfolio o U.S. Mid-Cap Value Portfolio __________________________ * Have not commenced or have ceased operations 21
o U.S. Small-Cap Value Portfolio o Value Portfolio Inactive Portfolios*: o Balanced Plus Portfolio o Growth Portfolio o Investment Grade Credit Advisory Portfolio o Mortgage Advisory Portfolio o New York Municipal Portfolio o Targeted Duration Portfolio o Value II Portfolio 3. The Universal Institutional Funds, Inc. ("Universal Funds") Active Portfolios: o Core Plus Fixed Income Portfolio o Emerging Markets Debt Portfolio o Emerging Markets Equity Portfolio o Equity and Income Portfolio o Equity Growth Portfolio o Global Franchise Portfolio o Global Real Estate Portfolio o Global Value Equity Portfolio o High Yield Portfolio o International Growth Equity Portfolio o International Magnum Portfolio o Mid-Cap Growth Portfolio o Small Company Growth Portfolio o U.S. Mid-Cap Value Portfolio o U.S. Real Estate Portfolio o Value Portfolio Inactive Portfolios*: o Balanced Portfolio o Capital Preservation Portfolio o Core Equity Portfolio o International Fixed Income Portfolio o Investment Grade Fixed Income Portfolio o Latin American Portfolio o Multi-Asset Class Portfolio o Targeted Duration Portfolio __________________________ 22
4. Morgan Stanley Institutional Liquidity Funds ("Liquidity Funds") Active Portfolios: o Government Portfolio o Money Market Portfolio o Prime Portfolio o Tax-Exempt Portfolio o Treasury Portfolio Inactive Portfolios*: o Government Securities Portfolio o Treasury Securities Portfolio CLOSED-END INSTITUTIONAL FUNDS 5. Morgan Stanley Asia-Pacific Fund, Inc. ("Asia-Pacific Fund") 6. Morgan Stanley Eastern Europe Fund, Inc. ("Eastern Europe") 7. Morgan Stanley Emerging Markets Debt Fund, Inc. ("Emerging Markets Debt") 8. Morgan Stanley Emerging Markets Fund, Inc. ("Emerging Markets Fund") 9. Morgan Stanley Global Opportunity Bond Fund, Inc. ("Global Opportunity") 10. Morgan Stanley High Yield Fund, Inc. ("High Yield Fund") 11. The Latin American Discovery Fund, Inc. ("Latin American Discovery") 12 The Malaysia Fund, Inc. ("Malaysia Fund") 13. The Thai Fund, Inc. ("Thai Fund") 14. The Turkish Investment Fund, Inc. ("Turkish Investment") 15. India Investment Fund ("India Investment") CLOSED-END FUND OF HEDGE FUNDS 16. Morgan Stanley Institutional Fund of Hedge Funds ("Fund of Hedge Funds") IN REGISTRATION MORGAN STANLEY RETAIL FUNDS 1. Morgan Stanley American Franchise Fund FUNDS OF HEDGE FUNDS 1. Morgan Stanley Absolute Return Fund 2. Morgan Stanley Institutional Fund of Hedge Funds II __________________________ * Have not commenced or have ceased operations 23
EXHIBIT B INSTITUTIONAL FUNDS COVERED OFFICERS Ronald E. Robison -President and Principal Executive Officer James W. Garrett - Chief Financial Officer and Treasurer RETAIL FUNDS COVERED OFFICERS Ronald E. Robison -President and Principal Executive Officer Francis Smith - Chief Financial Officer and Treasurer MORGAN STANLEY INDIA INVESTMENT FUND, INC. COVERED OFFICERS Ronald E. Robison - President and Principal Executive Officer James W. Garrett - Chief Financial Officer and Treasurer 24
EXHIBIT C GENERAL COUNSEL Arthur Lev 25
EXHIBIT 12 B1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER CERTIFICATIONS I, Ronald E. Robison, certify that: 1. I have reviewed this report on Form N-CSR of Morgan Stanley S&P 500 Index Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): 26
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: October 18, 2007 /s/ Ronald E. Robison Ronald E. Robison Principal Executive Officer 27
EXHIBIT 12 B2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER CERTIFICATIONS I, Francis Smith, certify that: 1. I have reviewed this report on Form N-CSR of Morgan Stanley S&P 500 Index Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): 28
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting. Date: October 18, 2007 /s/ Francis Smith Francis Smith Principal Financial Officer 29
SECTION 906 CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Morgan Stanley S&P 500 Index Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended August 31, 2007 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: October 18, 2007 /s/ Ronald E. Robison --------------------------- Ronald E. Robison Principal Executive Officer A signed original of this written statement required by Section 906 has been provided to Morgan Stanley S&P 500 Index Fund and will be retained by Morgan Stanley S&P 500 Index Fund and furnished to the Securities and Exchange Commission or its staff upon request. 30
SECTION 906 CERTIFICATION Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Morgan Stanley S&P 500 Index Fund In connection with the Report on Form N-CSR (the "Report") of the above-named issuer for the period ended August 31, 2007 that is accompanied by this certification, the undersigned hereby certifies that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Date: October 18, 2007 /s/ Francis Smith ---------------------- Francis Smith Principal Financial Officer A signed original of this written statement required by Section 906 has been provided to Morgan Stanley S&P 500 Index Fund and will be retained by Morgan Stanley S&P 500 Index Fund and furnished to the Securities and Exchange Commission or its staff upon request. 31