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 | |||||||
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Morgan Stanley S&P 500 Index Fund | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
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1221 Avenue of the Americas, New York, New York |
| 10020 | ||||||
(Address of principal executive offices) |
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Ronald E. Robison 1221 Avenue of the Americas, New York, New York 10020 | ||||||||
(Name and address of agent for service) | ||||||||
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Registrant’s telephone number, including area code: | 212-762-4000 |
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Date of fiscal year end: | August 31, 2007 |
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Date of reporting period: | February 28, 2007 |
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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 semiannual 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.
Fund Report
For the six months ended February 28, 2007
Total Return for the 6 Months Ended February 28, 2007 | |||||||||||||||||||||||
Class A | Class B | Class C | Class D | S&P 500® Index1 | Lipper S&P 500 Objective Funds Index2 | ||||||||||||||||||
8.66 | % | 8.27 | % | 8.17 | % | 8.75 | % | 8.93 | % | 8.82 | % |
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
Early in the reporting period, market conditions were recovering from a downturn that occurred in May and June of 2006, when concerns about the slowing economy, higher inflation, rising interest rates and soaring oil prices pushed market volatility to levels not seen in several years. By August, however, conditions stabilized and stocks returned to positive territory. The Federal Open Market Committee (the "Fed") left the target federal funds rate unchanged for the remainder of 2006, which helped alleviate investors' concerns that the Fed's two years of monetary tightening would cool the economy too much. Disappointing third quarter gross domestic product (GDP) data did not halt stocks' advance in the fourth quarter. Additionally, consumer spending and confidence, on the whole, did not flag any significant trouble, although consumer debt levels garnered greater attention toward the end of the year. Warmer weather helped energy p rices ease in the final months of 2006, and gasoline prices also declined. The jobs market softened but was still in line with expectations, and inflation data reported at year-end did not cause much of a stir. In early 2007, the market slowed its advance, although economic data in the form of payroll, jobs growth and consumer sentiment were received positively. Oil prices continued to retreat in January, and fourth quarter GDP exceeded expectations. At the end of the month, the Fed left the rate unchanged and in its official comments suggested a more upbeat view of the economy. While February began on a generally positive note, stock prices moved sharply lower in the final days of the month. China's equity market dropped significantly, spurring stock volatility in markets across the world. Furthermore, difficulties in the subprime mortgage market and comments made by former Fed Chairman Alan Greenspan reignited recessionary fears in the U.S.
Performance Analysis
Morgan Stanley S&P 500 Index Fund underperformed the S&P 500® Index and the Lipper S&P 500 Objective Funds Index for the six months ended February 28, 2007, assuming no deduction of applicable sales charges.
All sectors in the S&P 500 Index and the Fund generated positive returns on an absolute basis during the period under review. The groups with the highest returns were materials, telecommunication services and consumer discretionary. The materials sector performed well due to improved earnings at several companies and a major merger and acquisition (M&A) deal in the paper industry. The telecommunication services sector also benefited from ongoing M&A activity. Within the consumer discretionary sector, outsized performance from media, retail and home supplies stocks boosted the sector's overall performance.
2
In contrast, the health care, consumer staples and energy sectors had the smallest gains. The Democratic majority in Congress posed renewed political risks to several areas within the health care sector, including hospitals and pharmaceuticals. The energy sector's gains were muted by declining sentiment for energy stocks amid retreating oil prices. In the consumer staples sector, select beverage stocks declined after Wall Street analysts downgraded the stocks' ratings. Additionally within the sector, drugstore companies suffered from increased competitive pressure, which dampened their earnings outlooks.
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 financials, consumer discretionary and technology sectors. The energy, consumer staples and utilities sectors added the least to overall performance. On an industry basis, the real estate investment trusts (REITs) and consumer durables groups were strongly positive contributors, while the pharmaceuticals and biotechnology industry was the largest detractor.
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.
TOP 10 HOLDINGS | |||||||
Exxon Mobil Corp. | 3.3 | % | |||||
General Electric Co. | 2.8 | ||||||
Citigroup, Inc. | 1.9 | ||||||
Microsoft Corp. | 1.9 | ||||||
AT&T Inc. | 1.8 | ||||||
Bank of America Corp. | 1.8 | ||||||
Procter & Gamble Co. (The) | 1.6 | ||||||
Johnson & Johnson | 1.4 | ||||||
Pfizer, Inc. | 1.4 | ||||||
Altria Group, Inc. | 1.4 | ||||||
TOP FIVE INDUSTRIES | |||||||
Pharmaceuticals: Major | 5.8 | % | |||||
Integrated Oil | 5.6 | ||||||
Major Banks | 5.5 | ||||||
Industrial Conglomerates | 4.9 | ||||||
Financial Conglomerates | 4.5 |
Data as of February 28, 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.
3
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 representing 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 first 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 access ing 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.
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.
4
Performance Summary
Average Annual Total Returns—Period Ended February 28, 2007 | |||||||||||||||||||||||||||||||||||
Symbol | Class A Shares* (since 09/26/97) SPIAX | Class B Shares** (since 09/26/97) SPIBX | Class C Shares† (since 09/26/97) SPICX | Class D Shares†† (since 09/26/97) SPIDX | |||||||||||||||||||||||||||||||
1 Year | 11.33% 5.48 | 3 4 | 10.52% 5.52 | 3 4 | 10.51% 9.51 | 3 4 | 11.55% — | 3 | |||||||||||||||||||||||||||
5 Years | 6.15 5.01 | 3 4 | 5.34 5.01 | 3 4 | 5.36 5.36 | 3 4 | 6.38 — | 3 | |||||||||||||||||||||||||||
Since Inception | 5.28 4.68 | 3 4 | 4.62 4.62 | 3 4 | 4.48 4.48 | 3 4 | 5.51 — | 3 |
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 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 table does 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 (beginning April 2005).
† 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.
5
Expense Example
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 09/01/06 – 02/28/07.
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.
Beginning Account Value | Ending Account Value | Expenses Paid During Period * | |||||||||||||
09/01/06 | 02/28/07 | 09/01/06 – 02/28/07 | |||||||||||||
Class A | |||||||||||||||
Actual (8.66% return) | $ | 1,000.00 | $ | 1,086.60 | $ | 3.00 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,021.92 | $ | 2.91 | |||||||||
Class B | |||||||||||||||
Actual (8.27% return) | $ | 1,000.00 | $ | 1,082.70 | $ | 6.92 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,018.15 | $ | 6.71 | |||||||||
Class C | |||||||||||||||
Actual (8.17% return) | $ | 1,000.00 | $ | 1,081.70 | $ | 6.86 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,018.20 | $ | 6.66 | |||||||||
Class D | |||||||||||||||
Actual (8.75% return) | $ | 1,000.00 | $ | 1,087.50 | $ | 1.76 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,023.11 | $ | 1.71 |
* Expenses are equal to the Fund's annualized expense ratios of 0.58%, 1.34%, 1.33% 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 181/365 (to reflect the one-half year period). If the Fund had borne all of its expenses, the annualized expense ratios would have been 0.67%, 1.43%, 1.42% and 0.43%, for Class A, Class B, Class C and Class D shares, respectively.
6
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments n February 28, 2007 (unaudited)
NUMBER OF SHARES | VALUE | ||||||||||
Common Stocks (98.7%) | |||||||||||
Advertising/ Marketing Services (0.2%) | |||||||||||
40,956 | Interpublic Group of Companies, Inc. (The)* | $ | 515,636 | ||||||||
15,865 | Omnicom Group, Inc. | 1,643,773 | |||||||||
2,159,409 | |||||||||||
Aerospace & Defense (1.7%) | |||||||||||
73,406 | Boeing Co. | 6,406,142 | |||||||||
37,564 | General Dynamics Corp. | 2,872,143 | |||||||||
11,582 | Goodrich Corp. | 568,097 | |||||||||
11,598 | L-3 Communications Holdings, Inc. | 1,010,186 | |||||||||
33,055 | Lockheed Martin Corp. | 3,215,590 | |||||||||
32,065 | Northrop Grumman Corp. | 2,303,870 | |||||||||
41,276 | Raytheon Co. | 2,210,330 | |||||||||
15,522 | Rockwell Collins, Inc. | 1,016,381 | |||||||||
19,602,739 | |||||||||||
Agricultural Commodities/ Milling (0.2%) | |||||||||||
61,014 | Archer-Daniels-Midland Co. | 2,097,661 | |||||||||
Air Freight/Couriers (0.9%) | |||||||||||
28,465 | FedEx Corp. | 3,250,134 | |||||||||
99,659 | United Parcel Service, Inc. (Class B) | 6,995,065 | |||||||||
10,245,199 | |||||||||||
Airlines (0.1%) | |||||||||||
73,508 | Southwest Airlines Co. | 1,112,176 | |||||||||
Aluminum (0.2%) | |||||||||||
80,495 | Alcoa, Inc. | 2,689,338 | |||||||||
Apparel/Footwear (0.4%) | |||||||||||
34,114 | Coach, Inc.* | 1,610,181 | |||||||||
10,235 | Jones Apparel Group, Inc. | 336,936 | |||||||||
9,514 | Liz Claiborne, Inc. | 428,130 | |||||||||
17,455 | Nike, Inc. (Class B) | 1,823,524 | |||||||||
4,400 | Polo Ralph Lauren Corp. | 382,712 | |||||||||
8,300 | V.F. Corp. | 662,423 | |||||||||
5,243,906 |
NUMBER OF SHARES | VALUE | ||||||||||
Apparel/Footwear Retail (0.3%) | |||||||||||
48,914 | Gap, Inc. (The) | $ | 938,660 | ||||||||
31,751 | Limited Brands, Inc. | 878,868 | |||||||||
21,237 | Nordstrom, Inc. | 1,127,472 | |||||||||
42,248 | TJX Companies, Inc. (The) | 1,161,820 | |||||||||
4,106,820 | |||||||||||
Auto Parts: O.E.M. (0.2%) | |||||||||||
13,832 | Eaton Corp. | 1,120,530 | |||||||||
18,175 | Johnson Controls, Inc. | 1,704,815 | |||||||||
2,825,345 | |||||||||||
Automotive Aftermarket (0.0%) | |||||||||||
16,476 | Goodyear Tire & Rubber Co. (The)* | 405,639 | |||||||||
Beverages: Alcoholic (0.4%) | |||||||||||
71,371 | Anheuser-Busch Companies, Inc. | 3,502,889 | |||||||||
7,312 | Brown-Forman Corp. (Class B) | 478,936 | |||||||||
19,502 | Constellation Brands Inc. (Class A)* | 457,517 | |||||||||
4,245 | Molson Coors Brewing Co. (Class B) | 358,448 | |||||||||
4,797,790 | |||||||||||
Beverages: Non-Alcoholic (1.6%) | |||||||||||
189,295 | Coca-Cola Co. (The) | 8,836,291 | |||||||||
25,729 | Coca-Cola Enterprises Inc. | 516,896 | |||||||||
12,707 | Pepsi Bottling Group, Inc. (The) | 393,917 | |||||||||
152,438 | PepsiCo, Inc. | 9,626,460 | |||||||||
19,373,564 | |||||||||||
Biotechnology (1.3%) | |||||||||||
108,291 | Amgen Inc.* | 6,958,780 | |||||||||
31,296 | Biogen Idec Inc.* | 1,414,266 | |||||||||
34,575 | Celgene Corp.* | 1,842,847 | |||||||||
24,402 | Genzyme Corp.* | 1,508,044 | |||||||||
42,687 | Gilead Sciences, Inc.* | 3,054,682 | |||||||||
22,206 | MedImmune, Inc.* | 708,593 | |||||||||
4,958 | Millipore Corp.* | 354,596 | |||||||||
15,841,808 |
See Notes to Financial Statements
7
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments n February 28, 2007 (unaudited) continued
NUMBER OF SHARES | VALUE | ||||||||||
Broadcasting (0.2%) | |||||||||||
45,840 | Clear Channel Communications, Inc. | $ | 1,658,491 | ||||||||
23,418 | Univision Communications, Inc. (Class A)* | 843,048 | |||||||||
2,501,539 | |||||||||||
Building Products (0.2%) | |||||||||||
16,103 | American Standard Companies, Inc. | 853,298 | |||||||||
36,594 | Masco Corp. | 1,092,331 | |||||||||
1,945,629 | |||||||||||
Cable/Satellite TV (0.8%) | |||||||||||
289,797 | Comcast Corp. (Class A)* | 7,453,579 | |||||||||
71,560 | DIRECTV Group, Inc. (The)* | 1,614,394 | |||||||||
9,067,973 | |||||||||||
Casino/Gaming (0.2%) | |||||||||||
17,269 | Harrah's Entertainment, Inc. | 1,459,058 | |||||||||
31,508 | International Game Technology | 1,299,705 | |||||||||
2,758,763 | |||||||||||
Chemicals: Agricultural (0.2%) | |||||||||||
50,436 | Monsanto Co. | 2,657,473 | |||||||||
Chemicals: Major Diversified (0.8%) | |||||||||||
88,673 | Dow Chemical Co. (The) | 3,883,877 | |||||||||
85,387 | Du Pont (E.I.) de Nemours & Co. | 4,333,390 | |||||||||
7,639 | Eastman Chemical Co. | 451,618 | |||||||||
10,542 | Hercules Inc.* | 212,527 | |||||||||
13,180 | Rohm & Haas Co. | 696,695 | |||||||||
9,578,107 | |||||||||||
Chemicals: Specialty (0.4%) | |||||||||||
20,455 | Air Products & Chemicals, Inc. | 1,530,443 | |||||||||
5,307 | Ashland Inc. | 348,033 | |||||||||
29,975 | Praxair, Inc. | 1,849,158 | |||||||||
12,243 | Sigma-Aldrich Corp. | 501,963 | |||||||||
4,229,597 |
NUMBER OF SHARES | VALUE | ||||||||||
Coal (0.1%) | |||||||||||
16,953 | CONSOL Energy, Inc. | $ | 604,714 | ||||||||
24,490 | Peabody Energy Corp. | 989,396 | |||||||||
1,594,110 | |||||||||||
Commercial Printing/Forms (0.1%) | |||||||||||
20,126 | Donnelley (R.R.) & Sons Co. | 728,159 | |||||||||
Computer Communications (1.4%) | |||||||||||
42,156 | Avaya Inc.* | 517,676 | |||||||||
563,744 | Cisco Systems, Inc.* | 14,623,519 | |||||||||
52,520 | Juniper Networks, Inc.* | 993,153 | |||||||||
14,635 | QLogic Corp.* | 257,430 | |||||||||
16,391,778 | |||||||||||
Computer Peripherals (0.4%) | |||||||||||
204,454 | EMC Corp.* | 2,852,133 | |||||||||
9,091 | Lexmark International, Inc. (Class A)* | 550,551 | |||||||||
34,704 | Network Appliance, Inc.* | 1,342,004 | |||||||||
45,128 | Seagate Technology Inc. (Escrow) (a) | 0 | |||||||||
4,744,688 | |||||||||||
Computer Processing Hardware (2.0%) | |||||||||||
78,955 | Apple Computer, Inc.* | 6,680,382 | |||||||||
210,879 | Dell Inc.* | 4,818,585 | |||||||||
254,264 | Hewlett-Packard Co. | 10,012,916 | |||||||||
16,543 | NCR Corp.* | 764,287 | |||||||||
326,729 | Sun Microsystems, Inc.* | 2,002,849 | |||||||||
24,279,019 | |||||||||||
Construction Materials (0.1%) | |||||||||||
8,766 | Vulcan Materials Co. | 1,021,151 | |||||||||
Containers/Packaging (0.2%) | |||||||||||
9,672 | Ball Corp. | 447,814 | |||||||||
9,732 | Bemis Company, Inc. | 322,421 | |||||||||
12,353 | Pactiv Corp.* | 397,767 | |||||||||
7,484 | Sealed Air Corp. | 482,269 | |||||||||
9,932 | Temple-Inland Inc. | 593,934 | |||||||||
2,244,205 |
See Notes to Financial Statements
8
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments n February 28, 2007 (unaudited) continued
NUMBER OF SHARES | VALUE | ||||||||||
Contract Drilling (0.4%) | |||||||||||
14,098 | ENSCO International Inc. | $ | 706,451 | ||||||||
27,789 | Nabors Industries, Ltd. (Bermuda)* | 832,558 | |||||||||
12,586 | Noble Corp. (Cayman Islands) | 883,789 | |||||||||
10,252 | Rowan Companies, Inc. | 314,019 | |||||||||
27,144 | Transocean Inc. (Cayman Islands)* | 2,081,402 | |||||||||
4,818,219 | |||||||||||
Data Processing Services (0.9%) | |||||||||||
11,007 | Affiliated Computer Services, Inc. (Class A)* | 572,034 | |||||||||
51,114 | Automatic Data Processing, Inc. | 2,544,966 | |||||||||
15,941 | Computer Sciences Corp.* | 843,757 | |||||||||
12,791 | Convergys Corp.* | 328,985 | |||||||||
15,028 | Fidelity National Information Services, Inc. | 690,537 | |||||||||
71,091 | First Data Corp. | 1,814,953 | |||||||||
16,076 | Fiserv, Inc.* | 851,385 | |||||||||
31,431 | Paychex, Inc. | 1,277,042 | |||||||||
71,152 | Western Union Co. | 1,541,864 | |||||||||
10,465,523 | |||||||||||
Department Stores (0.5%) | |||||||||||
5,651 | Dillard's, Inc. (Class A) | 188,743 | |||||||||
48,752 | Federated Department Stores, Inc. | 2,177,264 | |||||||||
30,358 | Kohl's Corp.* | 2,094,398 | |||||||||
20,885 | Penney (J.C.) Co., Inc. | 1,693,982 | |||||||||
6,154,387 | |||||||||||
Discount Stores (1.8%) | |||||||||||
10,164 | Big Lots, Inc.* | 254,405 | |||||||||
42,542 | Costco Wholesale Corp. | 2,377,672 | |||||||||
28,967 | Dollar General Corp. | 488,963 | |||||||||
14,077 | Family Dollar Stores, Inc. | 407,811 | |||||||||
7,715 | Sears Holdings Corp.* | 1,390,629 | |||||||||
79,732 | Target Corp. | 4,905,910 | |||||||||
228,287 | Wal-Mart Stores, Inc. | 11,026,262 | |||||||||
20,851,652 |
NUMBER OF SHARES | VALUE | ||||||||||
Drugstore Chains (0.5%) | |||||||||||
76,454 | CVS Corp. | $ | 2,401,420 | ||||||||
93,152 | Walgreen Co. | 4,164,826 | |||||||||
6,566,246 | |||||||||||
Electric Utilities (3.2%) | |||||||||||
61,658 | AES Corp. (The)* | 1,314,549 | |||||||||
15,342 | Allegheny Energy, Inc.* | 724,756 | |||||||||
19,148 | Ameren Corp. | 1,000,100 | |||||||||
36,722 | American Electric Power Co., Inc. | 1,647,349 | |||||||||
29,042 | CenterPoint Energy, Inc. | 518,109 | |||||||||
20,649 | CMS Energy Corp. | 360,325 | |||||||||
23,839 | Consolidated Edison, Inc. | 1,158,099 | |||||||||
16,711 | Constellation Energy Group, Inc. | 1,314,654 | |||||||||
32,836 | Dominion Resources, Inc. | 2,808,463 | |||||||||
16,521 | DTE Energy Co. | 764,922 | |||||||||
116,572 | Duke Energy Corp. | 2,295,303 | |||||||||
30,246 | Edison International | 1,419,142 | |||||||||
19,203 | Entergy Corp. | 1,895,336 | |||||||||
62,286 | Exelon Corp. | 4,106,516 | |||||||||
29,633 | FirstEnergy Corp. | 1,854,137 | |||||||||
37,527 | FPL Group, Inc. | 2,216,720 | |||||||||
2,946 | Integrys Energy Group, Inc. | 164,214 | |||||||||
32,381 | PG&E Corp. | 1,503,126 | |||||||||
9,269 | Pinnacle West Capital Corp. | 439,536 | |||||||||
35,422 | PPL Corp. | 1,346,744 | |||||||||
23,598 | Progress Energy, Inc. | 1,152,998 | |||||||||
23,413 | Public Service Enterprise Group, Inc. | 1,753,634 | |||||||||
68,950 | Southern Co. (The) | 2,468,410 | |||||||||
19,421 | TECO Energy, Inc. | 325,690 | |||||||||
42,632 | TXU Corp. | 2,820,107 | |||||||||
37,772 | Xcel Energy, Inc. | 892,552 | |||||||||
38,265,491 | |||||||||||
Electrical Products (0.4%) | |||||||||||
8,439 | Cooper Industries Ltd. (Class A) (Bermuda) | 774,194 | |||||||||
74,486 | Emerson Electric Co. | 3,209,602 | |||||||||
13,161 | Molex Inc. | 386,012 | |||||||||
4,369,808 |
See Notes to Financial Statements
9
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments n February 28, 2007 (unaudited) continued
NUMBER OF SHARES | VALUE | ||||||||||
Electronic Components (0.1%) | |||||||||||
17,145 | Jabil Circuit, Inc. | $ | 458,114 | ||||||||
20,891 | SanDisk Corp.* | 760,850 | |||||||||
49,464 | Sanmina-SCI Corp.* | 183,511 | |||||||||
84,901 | Solectron Corp.* | 273,381 | |||||||||
1,675,856 | |||||||||||
Electronic Equipment/ Instruments (0.4%) | |||||||||||
37,939 | Agilent Technologies, Inc.* | 1,203,425 | |||||||||
19,596 | JDS Uniphase Corp.* | 317,651 | |||||||||
15,798 | Rockwell Automation, Inc. | 980,898 | |||||||||
7,657 | Tektronix, Inc. | 219,067 | |||||||||
89,609 | Xerox Corp.* | 1,547,547 | |||||||||
4,268,588 | |||||||||||
Electronic Production Equipment (0.3%) | |||||||||||
128,936 | Applied Materials, Inc. | 2,394,341 | |||||||||
18,482 | KLA-Tencor Corp. | 956,259 | |||||||||
11,474 | Novellus Systems, Inc.* | 369,463 | |||||||||
17,618 | Teradyne, Inc.* | 284,002 | |||||||||
4,004,065 | |||||||||||
Electronics/Appliance Stores (0.2%) | |||||||||||
37,449 | Best Buy Co., Inc. | 1,740,255 | |||||||||
13,171 | Circuit City Stores - Circuit City Group | 250,644 | |||||||||
12,609 | RadioShack Corp. | 314,847 | |||||||||
2,305,746 | |||||||||||
Electronics/Appliances (0.2%) | |||||||||||
26,670 | Eastman Kodak Co. | 636,880 | |||||||||
6,059 | Harman International Industries, Inc. | 600,810 | |||||||||
7,276 | Whirlpool Corp. | 641,816 | |||||||||
1,879,506 | |||||||||||
Engineering & Construction (0.1%) | |||||||||||
8,173 | Fluor Corp. | 690,373 | |||||||||
Environmental Services (0.2%) | |||||||||||
23,572 | Allied Waste Industries, Inc.* | 302,193 | |||||||||
49,666 | Waste Management, Inc. | 1,691,127 | |||||||||
1,993,320 |
NUMBER OF SHARES | VALUE | ||||||||||
Finance/Rental/Leasing (1.5%) | |||||||||||
37,874 | Capital One Financial Corp. | $ | 2,919,328 | ||||||||
18,409 | CIT Group, Inc. | 1,039,556 | |||||||||
57,656 | Countrywide Financial Corp. | 2,207,072 | |||||||||
90,516 | Fannie Mae | 5,134,973 | |||||||||
64,333 | Freddie Mac | 4,128,892 | |||||||||
5,638 | Ryder System, Inc. | 290,019 | |||||||||
37,946 | SLM Corp. | 1,617,259 | |||||||||
17,337,099 | |||||||||||
Financial Conglomerates (4.5%) | |||||||||||
111,842 | American Express Co. | 6,360,454 | |||||||||
456,147 | Citigroup, Inc. | 22,989,809 | |||||||||
322,031 | JPMorgan Chase & Co. | 15,908,331 | |||||||||
25,043 | Principal Financial Group, Inc. | 1,524,868 | |||||||||
44,281 | Prudential Financial, Inc. | 4,026,914 | |||||||||
30,827 | State Street Corp. | 2,019,477 | |||||||||
52,829,853 | |||||||||||
Financial Publishing/Services (0.3%) | |||||||||||
11,616 | Equifax, Inc. | 449,772 | |||||||||
32,881 | McGraw-Hill Companies, Inc. (The) | 2,124,441 | |||||||||
21,819 | Moody's Corp. | 1,412,126 | |||||||||
3,986,339 | |||||||||||
Food Distributors (0.2%) | |||||||||||
57,382 | SYSCO Corp. | 1,891,311 | |||||||||
Food Retail (0.4%) | |||||||||||
66,600 | Kroger Co. (The) | 1,709,622 | |||||||||
41,153 | Safeway Inc. | 1,422,659 | |||||||||
19,112 | Supervalu, Inc. | 706,380 | |||||||||
13,269 | Whole Foods Market, Inc. | 633,860 | |||||||||
4,472,521 | |||||||||||
Food: Major Diversified (0.6%) | |||||||||||
20,218 | Campbell Soup Co. | 825,501 | |||||||||
47,302 | ConAgra Foods, Inc. | 1,193,429 | |||||||||
31,848 | General Mills Inc. | 1,794,953 | |||||||||
30,587 | Heinz (H.J.) Co. | 1,403,026 | |||||||||
23,296 | Kellogg Co. | 1,162,936 | |||||||||
69,330 | Sara Lee Corp. | 1,141,172 | |||||||||
7,521,017 |
See Notes to Financial Statements
10
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments n February 28, 2007 (unaudited) continued
NUMBER OF SHARES | VALUE | ||||||||||
Food: Meat/Fish/Dairy (0.1%) | |||||||||||
12,417 | Dean Foods Co.* | $ | 559,262 | ||||||||
23,390 | Tyson Foods, Inc. (Class A) | 426,867 | |||||||||
986,129 | |||||||||||
Food: Specialty/Candy (0.2%) | |||||||||||
16,142 | Hershey Co. (The) | 853,589 | |||||||||
12,199 | McCormick & Co., Inc. (Non-Voting) | 467,100 | |||||||||
20,378 | Wrigley (Wm.) Jr. Co. | 1,014,824 | |||||||||
2,335,513 | |||||||||||
Forest Products (0.2%) | |||||||||||
21,958 | Weyerhaeuser Co. | 1,885,533 | |||||||||
Gas Distributors (0.3%) | |||||||||||
35,141 | Dynegy, Inc. (Class A)* | 288,508 | |||||||||
16,272 | KeySpan Corp. | 667,803 | |||||||||
4,151 | Nicor Inc. | 193,188 | |||||||||
25,344 | NiSource, Inc. | 602,934 | |||||||||
7,971 | Questar Corp. | 670,680 | |||||||||
24,338 | Sempra Energy | 1,461,497 | |||||||||
3,884,610 | |||||||||||
Home Building (0.2%) | |||||||||||
11,018 | Centex Corp. | 510,794 | |||||||||
25,619 | D.R. Horton, Inc. | 649,954 | |||||||||
7,290 | KB Home | 361,584 | |||||||||
12,798 | Lennar Corp. (Class A) | 630,174 | |||||||||
19,616 | Pulte Homes, Inc. | 579,849 | |||||||||
2,732,355 | |||||||||||
Home Furnishings (0.1%) | |||||||||||
16,616 | Leggett & Platt, Inc. | 395,793 | |||||||||
25,733 | Newell Rubbermaid, Inc. | 787,944 | |||||||||
1,183,737 | |||||||||||
Home Improvement Chains (1.1%) | |||||||||||
189,459 | Home Depot, Inc. (The) | 7,502,576 | |||||||||
141,364 | Lowe's Companies, Inc. | 4,602,812 | |||||||||
10,388 | Sherwin-Williams Co. | 691,321 | |||||||||
12,796,709 |
NUMBER OF SHARES | VALUE | ||||||||||
Hospital/Nursing Management (0.1%) | |||||||||||
22,332 | Health Management Associates, Inc. (Class A) | $ | 445,747 | ||||||||
6,865 | Manor Care, Inc. | 367,827 | |||||||||
43,754 | Tenet Healthcare Corp.* | 298,840 | |||||||||
1,112,414 | |||||||||||
Hotels/Resorts/Cruiselines (0.6%) | |||||||||||
41,309 | Carnival Corp. (Panama)† | 1,917,564 | |||||||||
35,890 | Hilton Hotels Corp. | 1,266,917 | |||||||||
31,199 | Marriott International, Inc. (Class A) | 1,494,744 | |||||||||
19,681 | Starwood Hotels & Resorts Worldwide, Inc. | 1,295,010 | |||||||||
18,394 | Wyndham Worldwide Corp.* | 647,469 | |||||||||
6,621,704 | |||||||||||
Household/Personal Care (2.4%) | |||||||||||
41,268 | Avon Products, Inc. | 1,512,885 | |||||||||
14,094 | Clorox Co. (The) | 892,996 | |||||||||
47,745 | Colgate-Palmolive Co. | 3,216,103 | |||||||||
11,822 | Estee Lauder Companies, Inc. (The) (Class A) | 566,037 | |||||||||
7,244 | International Flavors & Fragrances, Inc. | 339,019 | |||||||||
42,546 | Kimberly-Clark Corp. | 2,897,808 | |||||||||
294,163 | Procter & Gamble Co. (The) | 18,676,409 | |||||||||
28,101,257 | |||||||||||
Industrial Conglomerates (4.9%) | |||||||||||
68,359 | 3M Co. | 5,064,035 | |||||||||
22,002 | Danaher Corp. | 1,576,223 | |||||||||
956,925 | General Electric Co.** | 33,415,821 | |||||||||
75,798 | Honeywell International, Inc. | 3,520,059 | |||||||||
28,463 | Ingersoll-Rand Co. Ltd. (Class A) (Bermuda) | 1,232,733 | |||||||||
17,146 | ITT Corp. | 1,015,386 | |||||||||
11,645 | Textron, Inc. | 1,074,717 | |||||||||
184,630 | Tyco International Ltd. (Bermuda) | 5,692,143 | |||||||||
93,171 | United Technologies Corp. | 6,114,813 | |||||||||
58,705,930 |
See Notes to Financial Statements
11
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments n February 28, 2007 (unaudited) continued
NUMBER OF SHARES | VALUE | ||||||||||
Industrial Machinery (0.2%) | |||||||||||
38,942 | Illinois Tool Works Inc. | $ | 2,013,301 | ||||||||
10,947 | Parker Hannifin Corp. | 901,923 | |||||||||
2,915,224 | |||||||||||
Industrial Specialties (0.1%) | |||||||||||
16,554 | Ecolab Inc. | 700,234 | |||||||||
15,342 | PPG Industries, Inc. | 1,016,408 | |||||||||
1,716,642 | |||||||||||
Information Technology Services (1.4%) | |||||||||||
16,764 | Citrix Systems, Inc.* | 539,801 | |||||||||
13,163 | Cognizant Technology Solutions Corp. (Class A)* | 1,187,303 | |||||||||
48,015 | Electronic Data Systems Corp. | 1,345,380 | |||||||||
139,838 | International Business Machines Corp. | 13,006,332 | |||||||||
31,988 | Unisys Corp.* | 271,578 | |||||||||
16,350,394 | |||||||||||
Insurance Brokers/Services (0.2%) | |||||||||||
28,748 | AON Corp. | 1,082,362 | |||||||||
51,162 | Marsh & McLennan Companies, Inc. | 1,505,186 | |||||||||
2,587,548 | |||||||||||
Integrated Oil (5.6%) | |||||||||||
202,373 | Chevron Corp. | 13,884,811 | |||||||||
152,781 | ConocoPhillips | 9,994,933 | |||||||||
541,443 | Exxon Mobil Corp. | 38,810,634 | |||||||||
25,132 | Hess Corp. | 1,333,253 | |||||||||
17,365 | Murphy Oil Corp. | 899,854 | |||||||||
58,286 | Spectra Energy Corp. | 1,499,699 | |||||||||
66,423,184 | |||||||||||
Internet Retail (0.2%) | |||||||||||
28,680 | Amazon.com, Inc.* | 1,122,535 | |||||||||
20,720 | IAC/InterActiveCorp* | 812,224 | |||||||||
1,934,759 | |||||||||||
Internet Software/Services (1.1%) | |||||||||||
19,895 | Google Inc. (Class A)* | 8,941,808 | |||||||||
22,757 | VeriSign, Inc.* | 575,752 | |||||||||
113,645 | Yahoo! Inc.* | 3,507,085 | |||||||||
13,024,645 |
NUMBER OF SHARES | VALUE | ||||||||||
Investment Banks/Brokers (2.8%) | |||||||||||
22,462 | Ameriprise Financial, Inc. | $ | 1,313,129 | ||||||||
10,890 | Bear Stearns Companies, Inc. (The) | 1,657,894 | |||||||||
3,232 | Chicago Mercantile Exchange Holdings Inc. (Class A) | 1,742,468 | |||||||||
39,635 | E*TRADE Group, Inc.* | 915,172 | |||||||||
39,531 | Goldman Sachs Group, Inc. (The) | 7,969,450 | |||||||||
49,206 | Lehman Brothers Holdings Inc. | 3,606,800 | |||||||||
82,061 | Merrill Lynch & Co., Inc. | 6,866,864 | |||||||||
98,268 | Morgan Stanley (Note 4) | 7,362,239 | |||||||||
94,954 | Schwab (Charles) Corp. (The) | 1,754,750 | |||||||||
33,188,766 | |||||||||||
Investment Managers (0.6%) | |||||||||||
8,385 | Federated Investors, Inc. (Class B) | 299,931 | |||||||||
15,475 | Franklin Resources, Inc. | 1,816,610 | |||||||||
18,398 | Janus Capital Group, Inc. | 390,958 | |||||||||
12,200 | Legg Mason, Inc. | 1,253,428 | |||||||||
38,234 | Mellon Financial Corp. | 1,660,503 | |||||||||
24,474 | Price (T.) Rowe Group, Inc. | 1,139,509 | |||||||||
6,560,939 | |||||||||||
Life/Health Insurance (0.9%) | |||||||||||
45,906 | AFLAC, Inc. | 2,166,763 | |||||||||
41,144 | Genworth Financial Inc. (Class A) | 1,455,263 | |||||||||
26,655 | Lincoln National Corp. | 1,816,538 | |||||||||
70,574 | MetLife, Inc. | 4,456,748 | |||||||||
9,105 | Torchmark Corp. | 581,992 | |||||||||
31,799 | UnumProvident Corp. | 680,817 | |||||||||
11,158,121 | |||||||||||
Major Banks (5.5%) | |||||||||||
416,881 | Bank of America Corp. | 21,206,736 | |||||||||
70,942 | Bank of New York Co., Inc. (The) | 2,881,664 | |||||||||
50,216 | BB&T Corp. | 2,133,176 | |||||||||
14,747 | Comerica, Inc. | 890,571 | |||||||||
22,060 | Huntington Bancshares, Inc. | 510,689 |
See Notes to Financial Statements
12
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments n February 28, 2007 (unaudited) continued
NUMBER OF SHARES | VALUE | ||||||||||
37,280 | KeyCorp | $ | 1,406,947 | ||||||||
58,630 | National City Corp. | 2,219,146 | |||||||||
27,275 | PNC Financial Services Group | 1,999,530 | |||||||||
67,682 | Regions Financial Corp. | 2,424,369 | |||||||||
32,876 | SunTrust Banks, Inc. | 2,771,776 | |||||||||
163,186 | U.S. Bancorp | 5,819,213 | |||||||||
176,941 | Wachovia Corp. | 9,797,223 | |||||||||
313,398 | Wells Fargo & Co. | 10,874,911 | |||||||||
64,935,951 | |||||||||||
Major Telecommunications (3.3%) | |||||||||||
34,685 | ALLTEL Corp. | 2,101,564 | |||||||||
581,111 | AT&T Inc. | 21,384,885 | |||||||||
13,877 | Embarq Corp. | 768,092 | |||||||||
268,741 | Sprint Nextel Corp. | 5,181,326 | |||||||||
271,025 | Verizon Communications, Inc. | 10,144,466 | |||||||||
39,580,333 | |||||||||||
Managed Health Care (1.6%) | |||||||||||
48,458 | Aetna, Inc. | 2,145,236 | |||||||||
39,589 | Caremark Rx, Inc. | 2,438,287 | |||||||||
9,522 | CIGNA Corp. | 1,356,885 | |||||||||
14,793 | Coventry Health Care, Inc.* | 805,035 | |||||||||
15,431 | Humana, Inc.* | 923,391 | |||||||||
125,045 | UnitedHealth Group Inc. | 6,527,349 | |||||||||
57,558 | WellPoint Inc.* | 4,569,530 | |||||||||
18,765,713 | |||||||||||
Media Conglomerates (2.0%) | |||||||||||
72,551 | CBS Corp. (Class B) | 2,201,923 | |||||||||
192,020 | Disney (Walt) Co. (The) | 6,578,605 | |||||||||
217,293 | News Corp. (Class A) | 4,895,611 | |||||||||
370,620 | Time Warner, Inc. | 7,542,117 | |||||||||
64,915 | Viacom, Inc. (Class B)* | 2,534,282 | |||||||||
23,752,538 | |||||||||||
Medical Distributors (0.5%) | |||||||||||
17,832 | AmerisourceBergen Corp. | 939,211 | |||||||||
37,598 | Cardinal Health, Inc. | 2,635,244 | |||||||||
27,475 | McKesson Corp. | 1,532,006 | |||||||||
12,899 | Patterson Companies, Inc.* | 430,569 | |||||||||
5,537,030 |
NUMBER OF SHARES | VALUE | ||||||||||
Medical Specialties (1.9%) | |||||||||||
17,007 | Applera Corp. - Applied Biosystems Group | $ | 525,176 | ||||||||
9,560 | Bard (C.R.), Inc. | 762,888 | |||||||||
4,991 | Bausch & Lomb, Inc. | 260,830 | |||||||||
60,755 | Baxter International, Inc. | 3,038,358 | |||||||||
22,896 | Becton, Dickinson & Co. | 1,739,867 | |||||||||
22,736 | Biomet, Inc. | 962,415 | |||||||||
109,465 | Boston Scientific Corp.* | 1,785,374 | |||||||||
14,464 | Hospira, Inc.* | 553,537 | |||||||||
106,862 | Medtronic, Inc. | 5,381,570 | |||||||||
11,364 | Pall Corp. | 392,967 | |||||||||
11,415 | PerkinElmer, Inc. | 270,536 | |||||||||
32,813 | St. Jude Medical, Inc.* | 1,301,035 | |||||||||
27,593 | Stryker Corp. | 1,711,318 | |||||||||
37,883 | Thermo Fisher Scientific, Inc.* | 1,714,963 | |||||||||
200 | Varian Medical Systems, Inc.* | 9,190 | |||||||||
9,421 | Waters Corp.* | 511,183 | |||||||||
22,154 | Zimmer Holdings, Inc.* | 1,868,247 | |||||||||
22,789,454 | |||||||||||
Miscellaneous Commercial Services (0.1%) | |||||||||||
12,669 | Cintas Corp. | 511,574 | |||||||||
12,289 | Sabre Holdings Corp. (Class A) | 397,303 | |||||||||
908,877 | |||||||||||
Miscellaneous Manufacturing (0.1%) | |||||||||||
18,953 | Dover Corp. | 905,764 | |||||||||
Motor Vehicles (0.4%) | |||||||||||
175,350 | Ford Motor Co.* | 1,388,772 | |||||||||
52,507 | General Motors Corp. | 1,676,023 | |||||||||
24,056 | Harley-Davidson, Inc. | 1,585,290 | |||||||||
4,650,085 | |||||||||||
Multi-Line Insurance (1.8%) | |||||||||||
241,338 | American International Group, Inc. | 16,193,780 | |||||||||
29,422 | Hartford Financial Services Group, Inc. (The) | 2,782,144 | |||||||||
42,420 | Loews Corp. | 1,842,725 | |||||||||
9,771 | Safeco Corp. | 651,921 | |||||||||
21,470,570 |
See Notes to Financial Statements
13
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments n February 28, 2007 (unaudited) continued
NUMBER OF SHARES | VALUE | ||||||||||
Office Equipment/Supplies (0.1%) | |||||||||||
8,764 | Avery Dennison Corp. | $ | 582,455 | ||||||||
20,598 | Pitney Bowes, Inc. | 982,731 | |||||||||
1,565,186 | |||||||||||
Oil & Gas Pipelines (0.3%) | |||||||||||
65,483 | El Paso Corp. | 941,646 | |||||||||
9,956 | Kinder Morgan, Inc. | 1,052,947 | |||||||||
55,359 | Williams Companies, Inc. (The) | 1,493,032 | |||||||||
3,487,625 | |||||||||||
Oil & Gas Production (1.2%) | |||||||||||
42,679 | Anadarko Petroleum Corp. | 1,716,976 | |||||||||
30,580 | Apache Corp. | 2,095,647 | |||||||||
38,609 | Chesapeake Energy Corp. | 1,177,188 | |||||||||
41,032 | Devon Energy Corp. | 2,696,213 | |||||||||
22,602 | EOG Resources, Inc. | 1,531,059 | |||||||||
79,978 | Occidental Petroleum Corp. | 3,693,384 | |||||||||
33,970 | XTO Energy Inc. | 1,754,890 | |||||||||
14,665,357 | |||||||||||
Oil Refining/Marketing (0.6%) | |||||||||||
32,632 | Marathon Oil Corp. | 2,961,028 | |||||||||
11,429 | Sunoco, Inc. | 737,399 | |||||||||
56,128 | Valero Energy Corp. | 3,235,779 | |||||||||
6,934,206 | |||||||||||
Oilfield Services/Equipment (1.3%) | |||||||||||
29,775 | Baker Hughes Inc. | 1,938,650 | |||||||||
27,214 | BJ Services Co. | 729,063 | |||||||||
93,344 | Halliburton Co. | 2,882,463 | |||||||||
16,292 | National Oilwell-Varco, Inc.* | 1,134,575 | |||||||||
109,376 | Schlumberger Ltd. (Netherlands Antilles) | 6,868,813 | |||||||||
18,510 | Smith International, Inc. | 758,910 | |||||||||
31,536 | Weatherford International Ltd. (Bermuda)* | 1,266,170 | |||||||||
15,578,644 | |||||||||||
Other Consumer Services (0.4%) | |||||||||||
12,991 | Apollo Group, Inc. (Class A)* | 614,344 | |||||||||
29,920 | Block (H.&R.), Inc. | 651,658 | |||||||||
107,417 | eBay, Inc.* | 3,443,789 | |||||||||
4,709,791 |
NUMBER OF SHARES | VALUE | ||||||||||
Other Consumer Specialties (0.1%) | |||||||||||
14,053 | Fortune Brands, Inc. | $ | 1,129,861 | ||||||||
Other Metals/Minerals (0.2%) | |||||||||||
18,937 | Phelps Dodge Corp. | 2,365,421 | |||||||||
Packaged Software (3.1%) | |||||||||||
54,153 | Adobe Systems, Inc.* | 2,125,505 | |||||||||
21,509 | Autodesk, Inc.* | 885,095 | |||||||||
19,039 | BMC Software, Inc.* | 587,543 | |||||||||
38,126 | CA Inc. | 993,182 | |||||||||
32,699 | Compuware Corp.* | 299,196 | |||||||||
32,367 | Intuit Inc.* | 955,150 | |||||||||
803,074 | Microsoft Corp. | 22,622,595 | |||||||||
31,471 | Novell, Inc.* | 208,338 | |||||||||
371,377 | Oracle Corp.* | 6,101,724 | |||||||||
87,078 | Symantec Corp.* | 1,489,034 | |||||||||
36,267,362 | |||||||||||
Personnel Services (0.1%) | |||||||||||
11,917 | Monster Worldwide, Inc.* | 594,182 | |||||||||
15,557 | Robert Half International, Inc. | 607,812 | |||||||||
1,201,994 | |||||||||||
Pharmaceuticals: Generic Drugs (0.1%) | |||||||||||
9,876 | Barr Pharmaceuticals Inc.* | 523,428 | |||||||||
19,672 | Mylan Laboratories, Inc. | 416,456 | |||||||||
9,512 | Watson Pharmaceuticals, Inc.* | 250,736 | |||||||||
1,190,620 | |||||||||||
Pharmaceuticals: Major (5.8%) | |||||||||||
142,485 | Abbott Laboratories | 7,782,531 | |||||||||
182,576 | Bristol-Myers Squibb Co. | 4,818,181 | |||||||||
269,154 | Johnson & Johnson | 16,970,160 | |||||||||
91,392 | Lilly (Eli) & Co. | 4,810,875 | |||||||||
201,539 | Merck & Co., Inc. | 8,899,962 | |||||||||
669,362 | Pfizer, Inc. | 16,707,276 | |||||||||
137,630 | Schering-Plough Corp. | 3,231,552 | |||||||||
125,017 | Wyeth | 6,115,832 | |||||||||
69,336,369 | |||||||||||
Pharmaceuticals: Other (0.3%) | |||||||||||
14,274 | Allergan, Inc. | 1,594,548 | |||||||||
29,402 | Forest Laboratories, Inc.* | 1,521,848 | |||||||||
22,569 | King Pharmaceuticals, Inc.* | 420,912 | |||||||||
3,537,308 |
See Notes to Financial Statements
14
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments n February 28, 2007 (unaudited) continued
NUMBER OF SHARES | VALUE | ||||||||||
Precious Metals (0.2%) | |||||||||||
18,281 | Freeport-McMoRan Copper & Gold, Inc. (Class B) | $ | 1,049,512 | ||||||||
41,795 | Newmont Mining Corp. | 1,883,701 | |||||||||
2,933,213 | |||||||||||
Property - Casualty Insurers (1.2%) | |||||||||||
30,222 | ACE Ltd. (Cayman Islands) | 1,697,267 | |||||||||
58,015 | Allstate Corp. (The) | 3,484,381 | |||||||||
38,214 | Chubb Corp. (The) | 1,950,825 | |||||||||
16,083 | Cincinnati Financial Corp. | 695,107 | |||||||||
70,709 | Progressive Corp. (The) | 1,621,357 | |||||||||
64,056 | Travelers Companies, Inc. (The) | 3,251,482 | |||||||||
16,763 | XL Capital Ltd. (Class A) (Cayman Islands) | 1,190,173 | |||||||||
13,890,592 | |||||||||||
Publishing: Books/Magazines (0.0%) | |||||||||||
3,596 | Meredith Corp. | 210,258 | |||||||||
Publishing: Newspapers (0.2%) | |||||||||||
6,041 | Dow Jones & Co., Inc. | 217,838 | |||||||||
21,752 | Gannett Co., Inc. | 1,332,528 | |||||||||
13,348 | New York Times Co. (The) (Class A) | 330,096 | |||||||||
7,735 | Scripps (E.W.) Co. (Class A) | 350,782 | |||||||||
17,698 | Tribune Co. | 531,471 | |||||||||
2,762,715 | |||||||||||
Pulp & Paper (0.2%) | |||||||||||
42,236 | International Paper Co. | 1,520,918 | |||||||||
16,820 | MeadWestvaco Corp. | 512,169 | |||||||||
2,033,087 | |||||||||||
Railroads (0.7%) | |||||||||||
33,346 | Burlington Northern Santa Fe Corp. | 2,640,670 | |||||||||
40,399 | CSX Corp. | 1,521,830 | |||||||||
36,844 | Norfolk Southern Corp. | 1,746,406 | |||||||||
25,039 | Union Pacific Corp. | 2,469,597 | |||||||||
8,378,503 |
NUMBER OF SHARES | VALUE | ||||||||||
Real Estate Development (0.1%) | |||||||||||
17,153 | CB Richard Ellis Group, Inc. (Class A)* | $ | 571,538 | ||||||||
19,901 | Realogy Corp.* | 588,672 | |||||||||
1,160,210 | |||||||||||
Real Estate Investment Trusts (1.1%) | |||||||||||
8,957 | Apartment Investment & Management Co. (Class A) | 527,209 | |||||||||
20,273 | Archstone-Smith Trust | 1,143,600 | |||||||||
6,500 | AvalonBay Communities, Inc. | 894,140 | |||||||||
10,845 | Boston Properties, Inc. | 1,302,484 | |||||||||
27,119 | Equity Residential | 1,377,374 | |||||||||
20,983 | Kimco Realty Corp. | 1,054,606 | |||||||||
16,435 | Plum Creek Timber Co., Inc. | 651,812 | |||||||||
22,971 | ProLogis | 1,519,072 | |||||||||
11,374 | Public Storage, Inc. | 1,151,845 | |||||||||
20,543 | Simon Property Group, Inc. | 2,316,018 | |||||||||
11,987 | Vornado Realty Trust | 1,524,746 | |||||||||
13,462,906 | |||||||||||
Recreational Products (0.3%) | |||||||||||
8,523 | Brunswick Corp. | 278,276 | |||||||||
28,638 | Electronic Arts Inc.* | 1,443,928 | |||||||||
14,745 | Hasbro, Inc. | 417,136 | |||||||||
35,407 | Mattel, Inc. | 920,936 | |||||||||
3,060,276 | |||||||||||
Regional Banks (0.7%) | |||||||||||
17,409 | Commerce Bancorp, Inc. | 581,809 | |||||||||
12,053 | Compass Bancshares, Inc. | 831,778 | |||||||||
51,807 | Fifth Third Bancorp | 2,086,786 | |||||||||
11,555 | First Horizon National Corp. | 498,598 | |||||||||
7,192 | M&T Bank Corp. | 862,465 | |||||||||
23,682 | Marshall & Ilsley Corp. | 1,125,605 | |||||||||
17,403 | Northern Trust Corp. | 1,049,401 | |||||||||
30,169 | Synovus Financial Corp. | 976,570 | |||||||||
9,926 | Zions Bancorporation | 847,482 | |||||||||
8,860,494 | |||||||||||
Restaurants (0.8%) | |||||||||||
13,630 | Darden Restaurants, Inc. | 558,285 | |||||||||
114,810 | McDonald's Corp. | 5,019,493 |
See Notes to Financial Statements
15
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments n February 28, 2007 (unaudited) continued
NUMBER OF SHARES | VALUE | ||||||||||
70,187 | Starbucks Corp.* | $ | 2,168,778 | ||||||||
8,874 | Wendy's International, Inc. | 284,767 | |||||||||
24,608 | Yum! Brands, Inc. | 1,425,787 | |||||||||
9,457,110 | |||||||||||
Savings Banks (0.4%) | |||||||||||
15,366 | Hudson City Bancorp, Inc. | 205,904 | |||||||||
33,365 | Sovereign Bancorp, Inc. | 843,134 | |||||||||
87,747 | Washington Mutual, Inc. | 3,780,141 | |||||||||
4,829,179 | |||||||||||
Semiconductors (2.1%) | |||||||||||
50,928 | Advanced Micro Devices, Inc.* | 766,976 | |||||||||
33,592 | Altera Corp.* | 709,127 | |||||||||
31,749 | Analog Devices, Inc. | 1,150,901 | |||||||||
43,534 | Broadcom Corp. (Class A)* | 1,484,074 | |||||||||
535,271 | Intel Corp. | 10,625,129 | |||||||||
27,752 | Linear Technology Corp. | 921,089 | |||||||||
37,190 | LSI Logic Corp.* | 377,107 | |||||||||
29,770 | Maxim Integrated Products, Inc. | 974,968 | |||||||||
70,034 | Micron Technology, Inc.* | 830,603 | |||||||||
26,788 | National Semiconductor Corp. | 686,309 | |||||||||
33,006 | NVIDIA Corp.* | 1,023,186 | |||||||||
19,478 | PMC - Sierra, Inc.* | 131,477 | |||||||||
137,752 | Texas Instruments Inc. | 4,264,802 | |||||||||
31,213 | Xilinx, Inc. | 799,677 | |||||||||
24,745,425 | |||||||||||
Services to the Health Industry (0.4%) | |||||||||||
12,573 | Express Scripts, Inc.* | 948,130 | |||||||||
18,422 | IMS Health Inc. | 532,027 | |||||||||
11,641 | Laboratory Corp. of America Holdings* | 928,370 | |||||||||
27,239 | Medco Health Solutions, Inc.* | 1,841,629 | |||||||||
14,848 | Quest Diagnostics Inc. | 757,545 | |||||||||
5,007,701 | |||||||||||
Specialty Insurance (0.2%) | |||||||||||
9,849 | Ambac Financial Group, Inc. | 863,166 | |||||||||
12,515 | MBIA Inc. | 831,872 | |||||||||
7,707 | MGIC Investment Corp. | 465,117 | |||||||||
2,160,155 |
NUMBER OF SHARES | VALUE | ||||||||||
Specialty Stores (0.5%) | |||||||||||
13,886 | AutoNation, Inc.* | $ | 304,937 | ||||||||
4,700 | AutoZone, Inc.* | 588,863 | |||||||||
26,242 | Bed Bath & Beyond Inc.* | 1,046,793 | |||||||||
25,845 | Office Depot, Inc.* | 862,189 | |||||||||
6,914 | OfficeMax, Inc. | 358,837 | |||||||||
67,084 | Staples, Inc. | 1,745,526 | |||||||||
12,565 | Tiffany & Co. | 547,080 | |||||||||
5,454,225 | |||||||||||
Specialty Telecommunications (0.2%) | |||||||||||
10,656 | CenturyTel, Inc. | 476,856 | |||||||||
29,882 | Citizens Communications Co. | 450,322 | |||||||||
149,281 | Qwest Communications International, Inc.* | 1,325,615 | |||||||||
44,260 | Windstream Corp. | 666,113 | |||||||||
2,918,906 | |||||||||||
Steel (0.3%) | |||||||||||
9,350 | Allegheny Technologies, Inc. | 957,907 | |||||||||
28,046 | Nucor Corp. | 1,707,160 | |||||||||
10,998 | United States Steel Corp. | 974,643 | |||||||||
3,639,710 | |||||||||||
Telecommunication Equipment (1.2%) | |||||||||||
10,883 | ADC Telecommunications, Inc.* | 178,699 | |||||||||
7,839 | CIENA Corp.* | 246,693 | |||||||||
145,218 | Corning, Inc.* | 2,995,847 | |||||||||
224,419 | Motorola, Inc. | 4,156,240 | |||||||||
153,410 | QUALCOMM, Inc. | 6,179,355 | |||||||||
41,012 | Tellabs, Inc.* | 429,806 | |||||||||
14,186,640 | |||||||||||
Tobacco (1.5%) | |||||||||||
194,565 | Altria Group, Inc. | 16,397,938 | |||||||||
15,916 | Reynolds American, Inc. | 971,672 | |||||||||
14,936 | UST, Inc. | 867,184 | |||||||||
18,236,794 | |||||||||||
Tools/Hardware (0.1%) | |||||||||||
6,315 | Black & Decker Corp. | 532,165 | |||||||||
5,419 | Snap-On, Inc. | 271,492 | |||||||||
7,548 | Stanley Works (The) | 419,442 | |||||||||
1,223,099 |
See Notes to Financial Statements
16
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments n February 28, 2007 (unaudited) continued
NUMBER OF SHARES | VALUE | ||||||||||
Trucks/Construction/ Farm Machinery (0.8%) | |||||||||||
60,391 | Caterpillar Inc. | $ | 3,890,388 | ||||||||
4,870 | Cummins Inc. | 655,892 | |||||||||
21,463 | Deere & Co. | 2,327,018 | |||||||||
23,051 | PACCAR, Inc. | 1,601,814 | |||||||||
7,700 | Terex Corp.* | 506,968 | |||||||||
8,982,080 | |||||||||||
Wholesale Distributors (0.1%) | |||||||||||
15,819 | Genuine Parts Co. | 770,385 | |||||||||
6,789 | Grainger (W.W.), Inc. | 523,771 | |||||||||
1,294,156 | |||||||||||
Total Common Stocks (Cost $894,955,313) | 1,170,950,111 | ||||||||||
NUMBER OF WARRANTS | |||||||||||
Warrant (0.0%) | |||||||||||
Aerospace & Defense | |||||||||||
317 | Raytheon Co. (06/16/11)* (Cost $3,867) | 5,668 | |||||||||
PRINCIPAL AMOUNT IN THOUSANDS | |||||||||||
Short-Term Investment (1.3%) | |||||||||||
Repurchase Agreement | |||||||||||
$14,894 | Joint repurchase agreement account 5.315% due 03/01/07 (dated 02/28/07; proceeds $14,896,199) (b) (Cost $14,894,000) | 14,894,000 |
Total Investments (Cost $909,853,180) (c) (d) | 100.0 | % | 1,185,849,779 | ||||||||
Other Assets in Excess of Liabilities | 0.0 | 497,634 | |||||||||
Net Assets | 100.0 | % | $ | 1,186,347,413 |
* Non-income producing security.
** A portion of this security has been physically segregated in connection with open futures contracts in the amount of $616,000.
† 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) Collateralized by federal agency and U.S. Treasury obligations.
(c) Securities have been designated as collateral in an amount equal to $16,137,300 in connection with open futures contracts.
(d) The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $365,131,738 and the aggregate gross unrealized depreciation is $89,135,139, resulting in net unrealized appreciation of $275,996,599.
See Notes to Financial Statements
17
Morgan Stanley S&P 500 Index Fund
Portfolio of Investments n February 28, 2007 (unaudited) continued
Futures Contracts Open at February 28, 2007:
NUMBER OF CONTRACTS | LONG/ SHORT | DESCRIPTION, DELIVERY MONTH AND YEAR | UNDERLYING FACE AMOUNT AT VALUE | UNREALIZED DEPRECIATION | |||||||||||||||
37 | Long | S&P 500 Index March 2007 | $ | 13,032,325 | $ | (166,158 | ) | ||||||||||||
35 | Long | S&P 500 Index E-Mini March 2007 | 2,465,575 | (22,951 | ) | ||||||||||||||
Total Unrealized Depreciation | $ | (189,109 | ) |
Summary of Investments
SECTOR | VALUE | PERCENT OF TOTAL INVESTMENTS | |||||||||
Finance | $ | 254,432,383 | 21.4 | % | |||||||
Electronic Technology | 113,904,466 | 9.6 | |||||||||
Health Technology | 112,695,559 | 9.5 | |||||||||
Energy Minerals | 88,117,158 | 7.4 | |||||||||
Consumer Non-Durables | 86,595,970 | 7.3 | |||||||||
Producer Manufacturing | 82,214,966 | 6.9 | |||||||||
Technology Services | 76,107,924 | 6.4 | |||||||||
Retail Trade | 64,643,065 | 5.5 | |||||||||
Consumer Services | 61,842,391 | 5.2 | |||||||||
Utilities | 43,649,800 | 3.7 | |||||||||
Communications | 42,499,239 | 3.6 | |||||||||
Industrial Services | 26,568,181 | 2.2 | |||||||||
Health Services | 24,885,828 | 2.1 | |||||||||
Process Industries | 24,556,772 | 2.1 | |||||||||
Transportation | 19,735,878 | 1.7 | |||||||||
Consumer Durables | 16,264,558 | 1.4 | |||||||||
Repurchase Agreement | 14,894,000 | 1.3 | |||||||||
Non-Energy Minerals | 14,534,366 | 1.2 | |||||||||
Commercial Services | 8,984,778 | 0.8 | |||||||||
Distribution Services | 8,722,497 | 0.7 | |||||||||
$ | 1,185,849,779 | * | 100.0 | % |
* Does not include open long futures contracts with an underlying face amount of $15,497,900 with total unrealized depreciation of $189,109.
See Notes to Financial Statements
18
Morgan Stanley S&P 500 Index Fund
Financial Statements
Statement of Assets and Liabilities
February 28, 2007 (unaudited)
Assets: | |||||||
Investments in securities, at value (cost $905,809,942) | $ | 1,178,487,541 | |||||
Investments in an affiliate, at value (cost $4,043,238) | 7,362,238 | ||||||
Receivable for: | |||||||
Dividends | 2,570,978 | ||||||
Shares of beneficial interest sold | 1,718,399 | ||||||
Variation margin | 160,501 | ||||||
Interest | 2,199 | ||||||
Prepaid expenses and other assets | 113,590 | ||||||
Total Assets | 1,190,415,446 | ||||||
Liabilities: | |||||||
Payable for: | |||||||
Shares of beneficial interest redeemed | 3,013,131 | ||||||
Distribution fee | 575,220 | ||||||
Investment advisory fee | 159,100 | ||||||
Administration fee | 75,371 | ||||||
Transfer agent fee | 30,422 | ||||||
Accrued expenses and other payables | 214,789 | ||||||
Total Liabilities | 4,068,033 | ||||||
Net Assets | $ | 1,186,347,413 | |||||
Composition of Net Assets: | |||||||
Paid-in-capital | $ | 1,029,847,034 | |||||
Net unrealized appreciation | 275,807,490 | ||||||
Accumulated undistributed net investment income | 4,729,407 | ||||||
Accumulated net realized loss | (124,036,518 | ) | |||||
Net Assets | $ | 1,186,347,413 | |||||
Class A Shares: | |||||||
Net Assets | $ | 492,675,426 | |||||
Shares Outstanding (unlimited authorized, $.01 par value) | 32,461,320 | ||||||
Net Asset Value Per Share | $ | 15.18 | |||||
Maximum Offering Price Per Share, (net asset value plus 5.54% of net asset value) | $ | 16.02 | |||||
Class B Shares: | |||||||
Net Assets | $ | 460,825,541 | |||||
Shares Outstanding (unlimited authorized, $.01 par value) | 31,205,072 | ||||||
Net Asset Value Per Share | $ | 14.77 | |||||
Class C Shares: | |||||||
Net Assets | $ | 132,862,148 | |||||
Shares Outstanding (unlimited authorized, $.01 par value) | 9,030,573 | ||||||
Net Asset Value Per Share | $ | 14.71 | |||||
Class D Shares: | |||||||
Net Assets | $ | 99,984,298 | |||||
Shares Outstanding (unlimited authorized, $.01 par value) | 6,529,115 | ||||||
Net Asset Value Per Share | $ | 15.31 |
See Notes to Financial Statements
19
Morgan Stanley S&P 500 Index Fund
Financial Statements continued
Statement of Operations
For the six months ended February 28, 2007 (unaudited)
Net Investment Income: Income | |||||||
Dividends | $ | 11,459,582 | |||||
Dividends from an affiliate | 55,055 | ||||||
Interest | 605,795 | ||||||
Total Income | 12,120,432 | ||||||
Expenses | |||||||
Distribution fee (Class A shares) | 558,999 | ||||||
Distribution fee (Class B shares) | 2,551,202 | ||||||
Distribution fee (Class C shares) | 662,336 | ||||||
Transfer agent fees and expenses | 874,934 | ||||||
Investment advisory fee | 728,868 | ||||||
Administration fee | 485,912 | ||||||
Shareholder reports and notices | 283,312 | ||||||
Professional fees | 72,967 | ||||||
Custodian fees | 53,274 | ||||||
Registration fees | 17,975 | ||||||
Trustees' fees and expenses | 11,434 | ||||||
Other | 109,213 | ||||||
Total Expenses | 6,410,426 | ||||||
Less: amounts waived/reimbursed | (565,850 | ) | |||||
Less: expense offset | (5,143 | ) | |||||
Net Expenses | 5,839,433 | ||||||
Net Investment Income | 6,280,999 | ||||||
Net Realized and Unrealized Gain: Net Realized Gain on: | |||||||
Investments | 22,247,183 | ||||||
Futures contracts | 1,852,760 | ||||||
Investments in an affiliate | 328,766 | ||||||
Capital gain distribution received | 6,289 | ||||||
Net Realized Gain | 24,434,998 | ||||||
Net Change in Unrealized Appreciation on: | |||||||
Investments | 68,542,855 | ||||||
Investments in an affiliate | 683,080 | ||||||
Futures contracts | (593,533 | ) | |||||
Net Appreciation | 68,632,402 | ||||||
Net Gain | 93,067,400 | ||||||
Net Increase | $ | 99,348,399 |
See Notes to Financial Statements
20
Morgan Stanley S&P 500 Index Fund
Financial Statements continued
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED FEBRUARY 28, 2007 | FOR THE YEAR ENDED AUGUST 31, 2006 | ||||||||||
(unaudited) | |||||||||||
Increase (Decrease) in Net Assets: | |||||||||||
Operations: | |||||||||||
Net investment income | $ | 6,280,999 | $ | 12,871,794 | |||||||
Net realized gain | 24,434,998 | 85,846,345 | |||||||||
Net change in unrealized appreciation | 68,632,402 | 4,757,045 | |||||||||
Net Increase | 99,348,399 | 103,475,184 | |||||||||
Dividends to Shareholders from Net Investment Income: | |||||||||||
Class A shares | (6,681,274 | ) | (6,005,049 | ) | |||||||
Class B shares | (2,921,671 | ) | (2,743,790 | ) | |||||||
Class C shares | (1,008,726 | ) | (918,694 | ) | |||||||
Class D shares | (1,688,390 | ) | (2,832,584 | ) | |||||||
Total Dividends | (12,300,061 | ) | (12,500,117 | ) | |||||||
Net decrease from transactions in shares of beneficial interest | (117,514,526 | ) | (432,179,599 | ) | |||||||
Net Decrease | (30,466,188 | ) | (341,204,532 | ) | |||||||
Net Assets: | |||||||||||
Beginning of period | 1,216,813,601 | 1,558,018,133 | |||||||||
End of Period (Including accumulated undistributed net investment income of $4,729,407 and $10,748,469, respectively) | $ | 1,186,347,413 | $ | 1,216,813,601 |
See Notes to Financial Statements
21
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements n February 28, 2007 (unaudited)
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 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 the primary market; (4) for equity securities traded on foreign e xchanges, 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
22
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements n February 28, 2007 (unaudited) continued
may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business 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; and (7) 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. Interest income is accrued daily.
C. Repurchase Agreements — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated entities managed by the Investment Adviser, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements and are collateralized by cash, U.S. Treasury or federal agency obligations. The Fund may also invest directly with institutions in repurchase agreements. The Fund's custodian receives the collateral, which is marked-to-market daily to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest.
D. 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.
E. 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.
23
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements n February 28, 2007 (unaudited) continued
F. 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.
G. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date.
H. 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.
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 0.40% of the average daily net assets of the Fund on an annualized basis and will continue to do so on a permanent basis. In addition, effective June 1, 2006, the Investment Adviser has agreed to an additional, voluntary fee waiver by assuming the Fund's operating expenses (except for brokerage and 12b-1 fees) to the extent that such operating expenses exceed 0.34% of the average net assets of the Fund on an annualized basis. This voluntary fee waiver will remain in effect until the Investment Adviser determines that such fee waiver is no longer required.
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; (ii) Class B – up to 1.0% of the average daily net assets of Class B; and (iii) Class C – up to 1.0% of the average daily net assets of Class C.
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
24
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements n February 28, 2007 (unaudited) continued
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 Fund that such excess amounts totaled $25,414,357 at February 28, 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 six months ended February 28, 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.
The Distributor has informed the Fund that for the six months ended February 28, 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 $1,190, $402,978 and $2,743, respectively and received $94,362 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 cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended February 28, 2007, aggregated $16,377,822 and $124,865,945, 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.
Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and Distributor, is the Fund's transfer agent.
At February 28, 2007, Morgan Stanley Multi-Asset Class Fund, an affiliate of the Investment Adviser, Administrator and Distributor, held 338,252 Class D shares of beneficial interest of the Fund.
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.
25
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements n February 28, 2007 (unaudited) 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:
FOR THE SIX MONTHS ENDED FEBRUARY 28, 2007 | FOR THE YEAR ENDED AUGUST 31, 2006 | ||||||||||||||||||
(unaudited) | |||||||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||||||||||||
CLASS A SHARES | |||||||||||||||||||
Sold | 2,325,728 | $ | 35,332,189 | 3,523,424 | $ | 48,232,899 | |||||||||||||
Conversion from Class B | 3,562,598 | 53,963,917 | 8,733,166 | 118,493,975 | |||||||||||||||
Reinvestment of dividends | 412,308 | 6,291,817 | 417,812 | 5,707,309 | |||||||||||||||
Redeemed | (5,720,194 | ) | (85,827,416 | ) | (11,032,502 | ) | (151,017,548 | ) | |||||||||||
Net increase — Class A | 580,440 | 9,760,507 | 1,641,900 | 21,416,635 | |||||||||||||||
CLASS B SHARES | |||||||||||||||||||
Sold | 587,967 | 8,663,728 | 969,408 | 12,810,167 | |||||||||||||||
Conversion to Class A | (3,668,788 | ) | (53,963,917 | ) | (9,016,741 | ) | (118,493,975 | ) | |||||||||||
Reinvestment of dividends | 178,146 | 2,649,028 | 185,895 | 2,470,551 | |||||||||||||||
Redeemed | (4,815,192 | ) | (70,184,660 | ) | (16,731,749 | ) | (221,399,022 | ) | |||||||||||
Net decrease — Class B | (7,717,867 | ) | (112,835,821 | ) | (24,593,187 | ) | (324,612,279 | ) | |||||||||||
CLASS C SHARES | |||||||||||||||||||
Sold | 377,574 | 5,527,195 | 601,770 | 7,996,284 | |||||||||||||||
Reinvestment of dividends | 62,857 | 930,915 | 65,154 | 863,945 | |||||||||||||||
Redeemed | (1,041,872 | ) | (15,160,399 | ) | (3,019,678 | ) | (39,979,002 | ) | |||||||||||
Net decrease — Class C | (601,441 | ) | (8,702,289 | ) | (2,352,754 | ) | (31,118,773 | ) | |||||||||||
CLASS D SHARES | |||||||||||||||||||
Sold | 431,363 | 6,602,132 | 1,258,674 | 17,358,915 | |||||||||||||||
Reinvestment of dividends | 94,934 | 1,461,039 | 159,078 | 2,190,504 | |||||||||||||||
Redeemed | (906,751 | ) | (13,800,094 | ) | (8,550,208 | ) | (117,414,601 | ) | |||||||||||
Net decrease — Class D | (380,454 | ) | (5,736,923 | ) | (7,132,456 | ) | (97,865,182 | ) | |||||||||||
Net decrease in Fund | (8,119,322 | ) | $ | (117,514,526 | ) | (32,436,497 | ) | $ | (432,179,599 | ) |
26
Morgan Stanley S&P 500 Index Fund
Notes to Financial Statements n February 28, 2007 (unaudited) continued
7. 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.
8. 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.
As of August 31, 2006, the Fund had a net capital loss carryforward of $130,563,904 of which $531,072 will expire on August 31, 2008, $1,186,260 will expire on August 31, 2009, $104,093,640 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, 2006, the Fund had temporary book/tax differences primarily attributable to capital loss deferrals on wash sales and mark-to-market of open futures contracts.
9. New 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.
27
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:
FOR THE SIX | FOR THE YEAR ENDED AUGUST 31, | ||||||||||||||||||||||||||
MONTHS ENDED | |||||||||||||||||||||||||||
FEBRUARY 28, 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.17 | $ | 13.27 | $ | 12.03 | $ | 10.97 | $ | 9.91 | $ | 12.17 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income‡ | 0.11 | 0.18 | 0.19 | 0.12 | 0.11 | 0.08 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 1.12 | 0.91 | 1.23 | 1.05 | 1.01 | (2.34 | ) | ||||||||||||||||||||
Total income (loss) from investment operations | 1.23 | 1.09 | 1.42 | 1.17 | 1.12 | (2.26 | ) | ||||||||||||||||||||
Less dividends from net investment income | (0.22 | ) | (0.19 | ) | (0.18 | ) | (0.11 | ) | (0.06 | ) | – | ||||||||||||||||
Net asset value, end of period | $ | 15.18 | $ | 14.17 | $ | 13.27 | $ | 12.03 | $ | 10.97 | $ | 9.91 | |||||||||||||||
Total Return† | 8.66 | %(1) | 8.24 | % | 11.81 | % | 10.70 | % | 11.36 | % | (18.57 | )% | |||||||||||||||
Ratios to Average Net Assets(3)(4): | |||||||||||||||||||||||||||
Total expenses (before expense offset) | 0.58 | %(2) | 0.62 | % | 0.64 | % | 0.70 | % | 0.70 | % | 0.73 | % | |||||||||||||||
Net investment income | 1.42 | %(2) | 1.32 | % | 1.52 | % | 1.03 | % | 1.11 | % | 0.73 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net assets, end of period, in millions | $ | 493 | $ | 452 | $ | 401 | $ | 301 | $ | 233 | $ | 161 | |||||||||||||||
Portfolio turnover rate | 1 | %(1) | 4 | % | 3 | % | 2 | % | 2 | % | 12 | % |
‡ 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) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific expenses.
(4) 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:
PERIOD ENDED: | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
February 28, 2007 | 0.67 | % | 1.33 | % | |||||||
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 | |||||||||
August 31, 2002 | 0.80 | 0.66 |
See Notes to Financial Statements
28
Morgan Stanley S&P 500 Index Fund
Financial Highlights continued
FOR THE SIX | FOR THE YEAR ENDED AUGUST 31, | ||||||||||||||||||||||||||
MONTHS ENDED | |||||||||||||||||||||||||||
FEBRUARY 28, 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||
Class B Shares | |||||||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.72 | $ | 12.83 | $ | 11.62 | $ | 10.60 | $ | 9.60 | $ | 11.88 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income (loss)‡ | 0.05 | 0.07 | 0.10 | 0.03 | 0.03 | (0.01 | ) | ||||||||||||||||||||
Net realized and unrealized gain (loss) | 1.08 | 0.87 | 1.18 | 1.02 | 0.97 | (2.27 | ) | ||||||||||||||||||||
Total income (loss) from investment operations | 1.13 | 0.94 | 1.28 | 1.05 | 1.00 | (2.28 | ) | ||||||||||||||||||||
Less dividends from net investment income | (0.08 | ) | (0.05 | ) | (0.07 | ) | (0.03 | ) | – | – | |||||||||||||||||
Net asset value, end of period | $ | 14.77 | $ | 13.72 | $ | 12.83 | $ | 11.62 | $ | 10.60 | $ | 9.60 | |||||||||||||||
Total Return† | 8.27 | %(1) | 7.35 | % | 11.04 | % | 9.88 | % | 10.42 | % | (19.19 | )% | |||||||||||||||
Ratios to Average Net Assets(3)(4): | |||||||||||||||||||||||||||
Total expenses (before expense offset) | 1.34 | %(2) | 1.38 | % | 1.40 | % | 1.46 | % | 1.50 | % | 1.50 | % | |||||||||||||||
Net investment income (loss) | 0.66 | %(2) | 0.56 | % | 0.76 | % | 0.27 | % | 0.31 | % | (0.04 | )% | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net assets, end of period, in millions | $ | 461 | $ | 534 | $ | 815 | $ | 1,108 | $ | 1,160 | $ | 1,169 | |||||||||||||||
Portfolio turnover rate | 1 | %(1) | 4 | % | 3 | % | 2 | % | 2 | % | 12 | % |
‡ 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) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific expenses.
(4) 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 (loss) ratios, before expense offset, would have been as follows:
PERIOD ENDED: | EXPENSE RATIO | NET INVESTMENT INCOME (LOSS) RATIO | |||||||||
February 28, 2007 | 1.43 | % | 0.57 | % | |||||||
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 | |||||||||
August 31, 2002 | 1.57 | (0.11 | ) |
See Notes to Financial Statements
29
Morgan Stanley S&P 500 Index Fund
Financial Highlights continued
FOR THE SIX | FOR THE YEAR ENDED AUGUST 31, | ||||||||||||||||||||||||||
MONTHS ENDED | |||||||||||||||||||||||||||
FEBRUARY 28, 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||
Class C Shares | |||||||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 13.70 | $ | 12.83 | $ | 11.61 | $ | 10.60 | $ | 9.60 | $ | 11.88 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income‡ | 0.05 | 0.08 | 0.10 | 0.03 | 0.03 | 0.00 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 1.07 | 0.87 | 1.20 | 1.01 | 0.97 | (2.28 | ) | ||||||||||||||||||||
Total income (loss) from investment operations | 1.12 | 0.95 | 1.30 | 1.04 | 1.00 | (2.28 | ) | ||||||||||||||||||||
Less dividends from net investment income | (0.11 | ) | (0.08 | ) | (0.08 | ) | (0.03 | ) | – | – | |||||||||||||||||
Net asset value, end of period | $ | 14.71 | $ | 13.70 | $ | 12.83 | $ | 11.61 | $ | 10.60 | $ | 9.60 | |||||||||||||||
Total Return† | 8.17 | %(1) | 7.45 | % | 11.18 | % | 9.85 | % | 10.42 | % | (19.19 | )% | |||||||||||||||
Ratios to Average Net Assets(3)(4): | |||||||||||||||||||||||||||
Total expenses (before expense offset) | 1.33 | %(2) | 1.34 | % | 1.34 | % | 1.46 | % | 1.49 | % | 1.49 | % | |||||||||||||||
Net investment income (loss) | 0.67 | %(2) | 0.60 | % | 0.82 | % | 0.27 | % | 0.32 | % | (0.03 | )% | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net assets, end of period, in millions | $ | 133 | $ | 132 | $ | 154 | $ | 173 | $ | 161 | $ | 147 | |||||||||||||||
Portfolio turnover rate | 1 | %(1) | 4 | % | 3 | % | 2 | % | 2 | % | 12 | % |
‡ 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) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific expenses.
(4) 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 (loss) ratios, before expense offset, would have been as follows:
PERIOD ENDED: | EXPENSE RATIO | NET INVESTMENT INCOME (LOSS) RATIO | |||||||||
February 28, 2007 | 1.42 | % | 0.58 | % | |||||||
August 31, 2006 | 1.38 | 0.01 | |||||||||
August 31, 2005 | 1.35 | 0.81 | |||||||||
August 31, 2004 | 1.53 | 0.20 | |||||||||
August 31, 2003 | 1.61 | 0.20 | |||||||||
August 31, 2002 | 1.56 | (0.10 | ) |
See Notes to Financial Statements
30
Morgan Stanley S&P 500 Index Fund
Financial Highlights continued
FOR THE SIX | FOR THE YEAR ENDED AUGUST 31, | ||||||||||||||||||||||||||
MONTHS ENDED | |||||||||||||||||||||||||||
FEBRUARY 28, 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||
Class D Shares | |||||||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 14.31 | $ | 13.40 | $ | 12.14 | $ | 11.06 | $ | 10.00 | $ | 12.26 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income‡ | 0.13 | 0.21 | 0.23 | 0.15 | 0.13 | 0.11 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 1.12 | 0.92 | 1.24 | 1.06 | 1.02 | (2.37 | ) | ||||||||||||||||||||
Total income (loss) from investment operations | 1.25 | 1.13 | 1.47 | 1.21 | 1.15 | (2.26 | ) | ||||||||||||||||||||
Less dividends from net investment income | (0.25 | ) | (0.22 | ) | (0.21 | ) | (0.13 | ) | (0.09 | ) | – | ||||||||||||||||
Net asset value, end of period | $ | 15.31 | $ | 14.31 | $ | 13.40 | $ | 12.14 | $ | 11.06 | $ | 10.00 | |||||||||||||||
Total Return† | 8.75 | %(1) | 8.46 | % | 12.11 | % | 10.97 | % | 11.59 | % | (18.43 | )% | |||||||||||||||
Ratios to Average Net Assets(3)(4): | |||||||||||||||||||||||||||
Total expenses (before expense offset) | 0.34 | %(2) | 0.38 | % | 0.40 | % | 0.46 | % | 0.50 | % | 0.50 | % | |||||||||||||||
Net investment income | 1.66 | %(2) | 1.56 | % | 1.76 | % | 1.27 | % | 1.31 | % | 0.96 | % | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net assets, end of period, in millions | $ | 100 | $ | 99 | $ | 188 | $ | 198 | $ | 180 | $ | 136 | |||||||||||||||
Portfolio turnover rate | 1 | %(1) | 4 | % | 3 | % | 2 | % | 2 | % | 12 | % |
‡ 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) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific expenses.
(4) 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:
PERIOD ENDED: | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
February 28, 2007 | 0.43 | % | 1.57 | % | |||||||
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 | |||||||||
August 31, 2002 | 0.57 | 0.89 |
See Notes to Financial Statements
31
Trustees
Frank L. Bowman
Michael Bozic
Kathleen A. Dennis
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Michael E. Nugent
W. Allen Reed
Fergus Reid
Officers
Michael E. Nugent
Chairperson of the Board
Ronald E. Robison
President and Principal Executive Officer
J. David Germany
Vice President
Dennis F. Shea
Vice President
Barry Fink
Vice President
Amy R. Doberman
Vice President
Carsten Otto
Chief Compliance Officer
Stefanie V. Chang Yu
Vice President
Francis J. Smith
Treasurer and Chief Financial Officer
Mary E. Mullin
Secretary
Transfer Agent
Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
Legal Counsel
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019
Counsel to the Independent Trustees
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036
Investment Adviser
Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020
The financial statements included herein have been taken from the records of the Fund without examination by the independent auditors and accordingly they do not express an opinion thereon.
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 NASD.
© 2007 Morgan Stanley
SPISAR IU07-00463P-T02/07
MORGAN STANLEY FUNDS
Morgan Stanley
S&P 500
Index Fund
Semiannual Report
February 28, 2007
Item 2. Code of Ethics.
Not applicable for semiannual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semiannual reports.
Item 4. Principal Accountant Fees and Services
Not applicable for semiannual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semiannual reports.
Item 6.
Refer to Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable for semiannual reports.
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 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) Code of Ethics – Not applicable for semiannual reports.
(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.
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
April 19, 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
April 19, 2007
/s/ Francis Smith |
|
Francis Smith
Principal Financial Officer
April 19, 2007