Morgan Stanley Select Dimensions Investment Series NCSR Certified annual shareholder report (management investment company)

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			811-07185

Morgan Stanley Select Dimensions Investment Series
(Exact name of registrant as specified in charter)

522 Fifth Avenue, New York, New York					10036
(Address of principal executive offices)					(Zip code)

Randy Takian 522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)

Registrant’s telephone number, including area code:				212-296-6990

Date of fiscal year end:	December 31, 2008

Date of reporting period:		December 31, 2008

Item 1 - Report to Shareholders

MORGAN STANLEY
SELECT DIMENSIONS INVESTMENT SERIES

Annual Report

DECEMBER 31, 2008

The Portfolios are intended to be the funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.

Morgan Stanley Select Dimensions Investment Series

Table of Contents

Letter to the Shareholders	1

Expense Example		20

Portfolio of Investments:

Money Market		25

Flexible Income		28

Balanced		50

Global Infrastructure		66

Dividend Growth		73

Equally-Weighted S&P 500		77

Capital Growth		89

Focus Growth		92

Capital Opportunities		95

Global Equity		98

Mid Cap Growth		102

Financial Statements:

Statements of Assets and Liabilities		106

Statements of Operations		108

Statements of Changes in Net Assets		110

Notes to Financial Statements		118

Financial Highlights		138

Report of Independent Registered Public Accounting Firm		146

U.S. Privacy Policy Notice		147

Trustee and Officer Information		149

Federal Tax Notice		155

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008

Dear Shareholder,

By all accounts, 2008 was one of the worst years in the history of the financial markets. The credit crisis that originated in the U.S. with the collapse of the subprime mortgage market quickly spread across the globe as it became apparent a growing number of financial entities were exposed through their portfolios. Market volatility rose as investors became increasingly concerned about the health of the financial sector. These concerns grew to a full panic by September when the U.S. government took Fannie Mae and Freddie Mac, the two bedrock government-sponsored entities that own or guarantee about half of the nation's outstanding mortgage debt, into receivership, and Lehman Brothers filed for bankruptcy. Risk aversion soared, banks became reluctant to lend and the credit markets seized. As a growing number of large financial institutions in the U.S. and abroad were nationalized, forced to merge, or failed entirely, investor co nfidence plummeted, sparking a dramatic sell off in the markets that accelerated at an alarming pace.

Evidence of slowing economic growth exacerbated the market's deterioration. Concerns about inflation due to rising food and energy costs in the first half of the year were replaced with fears of recession and deflation in the latter months as oil prices fell, the housing market continued to diminish, unemployment rose and consumer spending declined. Although governments and central banks around the world responded with unprecedented monetary and fiscal stimulus measures, their efforts brought little relief to slowing economies and the fear-driven markets. As year end approached, economic indicators continued to weaken and market volatility remained high as investor confidence was further undermined by news that most of the developed world, as well as several emerging economies, had fallen into recession.

Domestic Equity Overview

The credit crisis, the presumed (and eventually confirmed) recession, and the reshuffling of Wall Street led the U.S. equity market to one of its worst years since the Great Depression. The S&P 500^® Index, a widely cited gauge of U.S. stock market performance, fell 37.00% in the year ended December 31, 2008. Volatility was widespread across all sectors, market capitalization and style segments, as investors fled equities for relatively safer U.S. Treasuries and cash.

All ten sectors within the S&P 500 Index had double-digit negative returns during the period. The weakest group was not surprisingly financials, given the sector's historic (in magnitude and speed) bankruptcies, rescues, and mergers during the period. The economically sensitive materials and information technology sectors were also among the bottom performing sectors. The top performers were the consumer staples, health care and utilities sectors, which are traditionally viewed as defensive sectors, or those less affected by slowing economic conditions.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

Small-cap stocks (as measured by the Russell 2000^® Index) performed slightly better than mid- and large-cap stocks, and value stocks beat growth stocks. However, in this case, outperformance only meant a lesser relative decline.

Fixed Income Overview

Although the bond market fared better than equities during the year, performance in most sectors was disappointing. The volatile and risk-averse environment led to a flight to quality as investors shunned riskier assets in favor of the relative safe haven of government bonds and cash. This fueled a prolonged rally in the U.S. Treasury market and a dramatic decline in yields. As a result, Treasury securities were the top-performers in the U.S. market, outpacing all sectors of the stock and bond markets. Within U.S. investment grade fixed income, corporate bonds turned in the weakest performance. This segment of the market was dragged down by the financial sector, which was at the epicenter of the credit crisis and experienced the greatest stress amid the reshaping of the financial industry. Not surprisingly given the environment, high-yield bonds underperformed investment-grade bonds, with all sectors posting negative returns for the year. Within high yield, real estate investment trusts (REITs) was the worst performing sector while the environmental sector turned in the best performance. Fixed income markets outside the U.S. experienced similar trends with developed government bond markets outpacing those of emerging markets.

International Equity Overview

For the most part, international equities began the year seemingly insulated from the U.S. subprime mortgage crisis. However, the credit crisis quickly spread around the world, sapping liquidity and dampening the global economy. Investor sentiment turned decidedly negative as it became apparent that a global recession would be deeper and possibly longer than initially thought. Risk aversion increased dramatically, prompting a downward spiral in equity prices in markets across the world.

Volatility plagued all markets, with both developed markets and emerging markets posting substantial declines in 2008. Developed markets outperformed emerging markets, but only in the sense that the developed world's relative declines were less severe. The U.S. and Japan were among the better relative performers, while emerging Eastern Europe was among the worst.

By the end of the period, most of the developed world had entered into recession, and outlooks remained gloomy. The U.S. and Europe grappled with a wave of negative economic data, while Japan continued to suffer from weak domestic demand and falling exports. The Asia Pacific region excluding Japan dealt with the impact of languishing growth both in the developed world and in China, which until then had served as the region's economic engine.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

Balanced Portfolio

For the 12-month period ended December 31, 2008, Select Dimensions — Balanced Portfolio Class X shares produced a total return of -22.51%, outperforming the Russell 1000^® Value Index ("the Russell Index"), which returned -36.85%, and underperforming the Barclays Capital (formerly Lehman Brothers) U.S. Government/Credit Index ("the Barclays Index"), which returned 5.70%. For the same period, the Portfolio's Class Y shares returned -22.64%. Past performance is no guarantee of future results.

The performance of the Portfolio's two share classes varies because each has different expenses. The Portfolio's total returns assume the reinvestment of all distributions but do not reflect the deduction of any charges by your insurance company. Such costs would lower performance.

All sectors in the Russell Index had negative absolute returns for the period. Although the same was true for the Portfolio, on a relative basis the Portfolio lost less value than the Index. Specifically, stock selection in the financial services sector was a positive contributor to relative performance. The Portfolio had better relative performance in diversified financial services, due to a holding that was more resilient than many of its peers because of its lower subprime mortgage exposure, and in property and casualty insurance. An overweight position in the consumer staples sector was another positive relative contributor, due to a food and staples retailer that benefited from prudent inventory management and scaling down its growth strategy. Stock selection in the materials sector

Performance data quoted represents past performance and is not predictive of future returns. Current performance may be lower or higher than the performance shown. Investment return and principal value will fluctuate. When you sell Portfolio shares, they may be worth less than their original cost. Total returns do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Performance for Class Y shares will vary from the performance of Class X shares due to differences in expenses. Performance assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges. If performance information included the effect of these additional charges, the total returns would be lower.

	Average Annual Total Returns as of December 31, 2008
	1 Year			5 Years			10 Years			Since Inception*
Class X		(22.51	)%		1.71	%		2.55	%		6.49	%
Class Y		(22.64	)%		1.46	%		—			2.83	%

^₍₁₎ Ending value on December 31, 2008 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

^₍₂₎ The Russell 1000^® Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000^® Index companies with lower price-to-book ratios and lower expected growth values. 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.

^₍₃₎ The Barclays Capital (formerly Lehman Brothers) U.S. Government/Credit Index tracks the performance of government and corporate obligations, including U.S. government agency and Treasury securities and corporate and Yankee bonds. 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.

* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

helped the Portfolio sidestep some of the sector's volatility. The Portfolio avoided exposure to the heavily commodity-oriented companies that declined strongly when commodity prices began to fall and instead held a position in a gold mining company which held up better than other metals and mining companies in the difficult environment.

In contrast, the Portfolio's underweight positions in the energy and utilities sectors were relative detractors. Although the sectors had negative returns for the period, they were among the better performing sectors in the Russell Index. Stock selection in the consumer discretionary sector was an area of weakness, as retail holdings were hurt by falling consumer spending and media holdings saw declining advertising revenues.

In the fixed income portfolio, the primary detractor relative performance was an allocation to non-agency mortgage securities, which are not represented in the Barclays Index. Forced selling, coupled with rising mortgage delinquencies and falling home prices, pressured this segment of the market, causing valuations to decline. By year end, the Portfolio's exposure to non-agency mortgages was eliminated.

The Portfolio's yield curve positioning also detracted from relative performance. Our yield curve strategy involved the use of Treasury futures and zero-coupon swap contracts. In the fourth quarter of the year, the performance of the swap contracts waned, hindering the performance of the overall position.

The Portfolio maintained an underweight corporate credit position for most of the reporting period, which boosted performance as credit spreads widened significantly, causing prices to decline. Additionally, an underweight to commercial mortgage-backed securities (CMBS) was extremely helpful as CMBS spreads rose by a staggering amount in the fourth quarter. An underweight allocation to agency debentures further enhanced performance as spreads in the sector continued to widen.

There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

Capital Growth (formerly Growth) Portfolio

For the 12-month period ended December 31, 2008, Select Dimensions — Capital Growth Portfolio Class X shares produced a total return of -48.70%, underperforming the Russell 1000^® Growth Index ("the Index"), which returned -38.44%. For the same period, the Portfolio's Class Y shares returned -48.81%. Past performance is no guarantee of future results.

Relative performance was largely hampered by stock selection in the consumer discretionary sector, despite the benefit of an overweight there. Within the sector, commercial services and hotel/motel holdings were the leading detractors. Both stock selection and an overweight in the financial services sector had a negative impact on relative performance, led by diversified financial services holdings. Finally, stock selection in the technology sector was an area of weakness, solely due to communications technology holdings.

In contrast, stock selection in the other energy sector was the largest positive contributor to relative performance, although an overweight in the sector slightly offset some of the relative gain. Here, natural gas producers drove performance. Both stock selection and an overweight in autos and transportation added relative value, mainly due to

	Average Annual Total Returns as of December 31, 2008
	1 Year			5 Years			10 Years			Since Inception*
Class X		(48.70	)%		(4.16	)%		(2.57	)%		2.98	%
Class Y		(48.81	)%		(4.39	)%		—			(7.90	)%

^₍₁₎ Ending value on December 31, 2008 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

^₍₂₎ The Russell 1000^® Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000^® Index companies with higher price-to-book ratios and higher forecasted growth values. 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.

* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

miscellaneous transportation (logistics) holdings. Finally, the Portfolio benefited from stock selection in the materials and processing sector, especially in steel companies.

There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.

Capital Opportunities Portfolio

For the 12-month period ended December 31, 2008, Select Dimensions — Capital Opportunities Portfolio Class X shares produced a total return of -49.04%, underperforming the Russell 3000^® Growth Index ("the Index"), which returned -38.44%. For the same period, the Portfolio's Class Y shares returned -49.15%. Past performance is no guarantee of future results.

Relative performance was hampered by stock selection in the consumer discretionary sector, despite the benefit of an overweight there. Within the sector, commercial services and consumer electronics holdings were the leading detractors. Stock selection in the technology sector was an area of weakness, chiefly in communications technology holdings. Finally, stock selection in the financial services sector had a negative impact on relative performance, primarily due to diversified financial services holdings.

	Average Annual Total Returns as of December 31, 2008
	1 Year			5 Years			10 Years			Since Inception*
Class X		(49.04	)%		(0.28	)%		(3.58	)%		(1.35	)%
Class Y		(49.15	)%		(0.52	)%		—			(12.99	)%

^₍₁₎ Ending value on December 31, 2008 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

^₍₂₎ The Russell 3000^® Growth Index measures the performance of the broad growth segment of the U.S. equity universe. It includes those Russell 3000^® Index companies with higher price-to-book ratios and higher forecasted growth values. 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.

* Inception dates of January 21, 1997 for Class X and July 24, 2000 for Class Y.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

In contrast, other positions were favorable to relative performance. Although an overweight to the other energy sector hurt relative performance, stock selection there more than offset the negative influence. Within the sector, holdings in natural gas producers boosted relative performance. Stock selection and an overweight in the autos and transportation sector were also additive to relative performance, led by miscellaneous transportation (logistics) holdings. Finally, an avoidance of the producer durables sector also benefited relative results.

There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.

Dividend Growth Portfolio

For the 12-month period ended December 31, 2008, Select Dimensions — Dividend Growth Portfolio Class X shares produced a total return of -36.60%, modestly outperforming the S&P 500^® Index ("the Index"), which returned -37.00%. For the same period, the Portfolio's Class Y shares returned -36.76%. Past performance is no guarantee of future results.

The main contributors to relative performance were stocks in the financials, industrials, and technology

	Average Annual Total Returns as of December 31, 2008
	1 Year			5 Years			10 Years			Since Inception*
Class X		(36.60	)%		(3.41	)%		(1.24	)%		6.14	%
Class Y		(36.76	)%		(3.66	)%		—			(0.94	)%

^₍₁₎ Ending value on December 31, 2008 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

^₍₂₎ The Standard & Poor's 500^® Index (S&P 500^®) measures the performance of the large cap segment of the U.S. equities market, covering approximately 75% of the U.S. equities market. The Index includes 500 leading companies in leading industries of the U.S. economy. 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 dire ctly in an index.

* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

sectors. In addition, overweight positions in the health care and technology sectors further added value to the Portfolio's relative performance.

The main detractors from relative performance were stocks in the health care and energy sector. The Portfolio was also negatively affected by an underweight in the telecommunication services sector.

There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.

Equally-Weighted S&P 500 Portfolio

For the 12-month period ended December 31, 2008, Select Dimensions — Equally-Weighted S&P 500 Portfolio Class X shares produced a total return of -40.02%, underperforming the Standard & Poor's Equal Weight Index ("the Index"), which returned -39.72%. For the same period, the Portfolio's Class Y shares returned -40.19%. Past performance is no guarantee of future results.

The year 2008 was one of the worst years in the history of the financial markets. Over the course of the year, what started as a housing crisis transformed through mortgage-backed securities into a financial crisis, which eventually spilled over into the real

Performance data quoted represents past performance and is not predictive of future returns. Current performance may be lower or higher than the performance shown. Investment return and principal value will fluctuate. When you sell Portfolio shares, they may be worth less than their original cost. Total returns do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Performance for Class Y shares will vary from the performance of Class X shares due to differences in expenses. Performance assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges. If performance information included the eff ect of these additional charges, the total returns would be lower.

	Average Annual Total Returns as of December 31, 2008
	1 Year			5 Years			10 Years			Since Inception*
Class X		(40.02	)%		(2.40	)%		2.32	%		7.12	%
Class Y		(40.19	)%		(2.66	)%		—			0.98	%

^₍₁₎ Ending value on December 31, 2008 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

^₍₂₎ The Standard & Poor's Equal Weight Index (S&P EWI) is the equally-weighted version of the widely regarded S&P 500^® Index, which measures 500 leading companies in leading U.S. industries. The S&P EWI has the same constituents as the capitalization-weighted S&P 500^® Index, but each company in the S&P EWI is allocated a fixed weight, rebalancing quarterly. 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.

* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

economy. Credit tightening along with the collapse or essential takeover of some financial institutions caused massive dislocations in financial markets and incredibly high volatility.

Within the Index and therefore the Portfolio, all ten sectors had negative absolute performance during the 12-month period, with double-digit negative returns. The worst performing sectors were financials, energy, information technology, materials and consumer discretionary. Not surprisingly, credit market turmoil and other developments in the capital markets most severely impacted financial companies, resulting in a huge negative return. Collapsing commodity prices in 2008 led to the underperformance of the materials and energy sectors as well. At the same time, global recession, higher unemployment and declining consumer confidence led to the negative performance of consumer-oriented stocks.

The underperformance was pervasive, affecting all styles and market capitalization segments as investors tried to move out of equities into relatively safe assets. On an individual stock basis, the worst detractors in the overall portfolio were dominated by financial stocks.

Since the Index and the Portfolio are equally-weighted, the overall contribution of each sector reflects its absolute performance. As such, utilities and consumer staples were the best performing sectors, while financials and information technology were the largest detractors.

There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

Flexible Income Portfolio

For the 12-month period ended December 31, 2008, Select Dimensions — Flexible Income Portfolio Class X shares produced a total return of -21.62%, underperforming the Barclays Capital (formerly Lehman Brothers) Intermediate U.S. Government/Credit Index ("the Index"), which returned 5.08%. For the same period, the Portfolio's Class Y shares returned -21.89%. Past performance is no guarantee of future results.

The overwhelming detractor from the Portfolio's relative performance was an allocation to non-agency mortgage securities, which are not included in the Index. Forced selling, coupled with rising mortgage delinquencies and falling home prices, pressured the non-agency mortgage sector, causing valuations to decline. Over the course of the period, we reduced the Portfolio's allocation to the sector, eliminating it entirely by year end.

To a lesser extent, the Portfolio's yield curve positioning also detracted from relative performance. Our yield curve strategy involved the use of Treasury futures and zero-coupon swap contracts. In the fourth quarter of the year the swap contracts lost value, hindering the performance of the overall position.

Within the corporate sector, the Portfolio held an underweight relative to the Index in

	Average Annual Total Returns as of December 31, 2008
	1 Year			5 Years			10 Years			Since Inception*
Class X		(21.62	)%		(1.06	)%		0.48	%		2.40	%
Class Y		(21.89	)%		(1.31	)%		—			0.56	%

^₍₁₎ Ending value on December 31, 2008 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

^₍₂₎ The Barclays Capital (formerly Lehman Brothers) Intermediate U.S. Government/Credit Index tracks the performance of U.S. government and corporate obligations, including U.S. government agency and Treasury securities, and corporate and Yankee bonds with maturities of 1 to 10 years. 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.

* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

investment-grade credits for much of the period. This positioning benefited relative performance as credit spreads widened significantly. In the third quarter of the year, the position was brought to neutral. However, the Portfolio also had a small allocation to high yield corporate credits, which are not included in the Index.

This allocation detracted slightly from relative performance. Lastly, an underweight allocation to agency debentures relative to the Index enhanced performance as spreads in the sector continued to widen.

There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.

Focus Growth Portfolio

For the 12-month period ended December 31, 2008, Select Dimensions — Focus Growth Portfolio Class X shares produced a total return of -51.43%, underperforming the Russell 1000^® Growth Index ("the Index"), which returned -38.44%. For the same period, the Portfolio's Class Y shares returned -51.57%. Past performance is no guarantee of future results.

	Average Annual Total Returns as of December 31, 2008
	1 Year			5 Years			10 Years			Since Inception*
Class X		(51.43	)%		(5.81	)%		(3.01	)%		5.05	%
Class Y		(51.57	)%		(6.05	)%		—			(8.73	)%

^₍₁₎ Ending value on December 31, 2008 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

Stock selection and an overweight in the financial services sector had a negative impact on relative performance, primarily in diversified financial services holdings. Finally, stock selection in the technology sector was an area of weakness, solely due to communications technology holdings.

However, stock selection and an overweight in the autos and transportation sector were additive to relative performance, led by miscellaneous transportation (logistics) holdings. An avoidance of the producer durables sector also benefited relative results. An overweight in the utilities sector was the third largest contributor to relative performance, offsetting the negative influence of stock selection there.

There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.

Global Equity Portfolio

For the 12-month period ended December 31, 2008, Select Dimensions — Global Equity Portfolio Class X shares produced a total return of -45.56%, underperforming the MSCI World Index ("the Index"), which returned -40.71%. For the same period, the Portfolio's Class Y shares returned -45.73%. Past performance is no guarantee of future results.

	Average Annual Total Returns as of December 31, 2008
	1 Year			5 Years			10 Years			Since Inception*
Class X		(45.56	)%		(1.60	)%		0.70	%		3.80	%
Class Y		(45.73	)%		(1.86	)%		—			(3.17	)%

^₍₁₎ Ending value on December 31, 2008 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

^₍₂₎ The Morgan Stanley Capital International (MSCI) World Index is a free float-adjusted market capitalization weighted index that is designed to measure the global equity market performance of developed markets. The term "free float" represents the portion of shares outstanding that are deemed to be available for purchase in the public equity markets by investors. The MSCI World Index currently consists of 23 developed market country indices. The performance of the Index is listed in U.S. dollars and assumes reinvestment of net dividends. 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.

* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

The management team seeks to invest on a bottom-up basis, building a portfolio of securities that we believe are likely to generate consistent long-term earnings growth. While the team does not engage in top-down portfolio construction, the Portfolio's country and sector weights will have an impact on performance relative to the benchmark.

In 2008, the Portfolio's country and sector weights were substantial contributors to relative performance. An overweight allocation to Israel and underweights in Canada and Australia were particularly helpful, while the Portfolio was hurt by underweights in the U.S. and Japan, which were among the best performing markets in 2008. From a sector perspective, the Portfolio benefited from an overweight in health care (the best performing sector in the Index) and underweights in financials and materials (the worst performing sectors in the Index).

However, the positive influence of country and sector allocations was offset by poor stock selection. Particularly detrimental were stock selections in the U.S., Canada and the consumer staples sector. Stock selections in Japan, France, and the telecommunication services sector were slightly additive to relative returns.

Other factors which contributed to relative underperformance included the outperformance of developed markets relative to emerging markets. Although the team can invest up to 15% in emerging market securities to provide added diversification benefits, emerging market securities are not included in the Index. As such, the Portfolio was adversely affected by its exposure to weak performance from emerging markets positions while the Index was not. Additionally, relative performance was hampered by the outperformance of value stocks over growth stocks during the period. Because the team seeks to invest in companies that can generate long-term earnings growth, the Portfolio tends to have a growth bias to its investment style. This growth bias acted as a relative detractor from the Portfolio's performance in this reporting period.

There is no guarantee that any countries or sectors mentioned will continue to perform as discussed above or that securities in such countries or sectors will be held by the Portfolio in the future.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

Global Infrastructure (formerly Utilities) Portfolio

For the 12-month period ended December 31, 2008, Select Dimensions — Global Infrastructure Portfolio Class X shares produced a total return of -33.02%, outperforming the S&P Global BMI Index, which returned -42.42%, the S&P Global Infrastructure Index, which returned -38.98%, and the S&P 500^® Index, which returned -37.00%, and underperforming the S&P 500^® Utilities Index, which returned -28.98% . For the same period, the Portfolio's Class Y shares returned -33.19%. Past performance is no guarantee of future results.

All segments of the utilities sector, in which the Portfolio primarily invested through November 5, 2008, declined significantly during the period, with the independent power producers and energy traders segment and the gas utilities segment experiencing the greatest declines. Conversely, multi-utilities was the best-performing segment, followed by electric utilities. Overall, volatility levels in the utilities sector soared from approximately 15% early in the year to 70% in December. Nonetheless, in keeping with historical trends in highly volatile markets, utilities still outperformed the broad equity market (as measured by S&P 500^® Utilities Index and S&P 500^® Index, respectively).

_{Performance data quoted represents past performance and is not predictive of future returns. Current performance may be lower or higher than the performance shown. Investment return and principal value will fluctuate. When you sell Portfolio shares, they may be worth less than their original cost. Total returns do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or the redemption of Portfolio shares. Performance for Class Y shares will vary from the performance of Class X shares due to differences in expenses. Performance assumes reinvestment of all distributions for the underlying portfolio based on net asset value (NAV). It does not reflect the deduction of insurance expenses, an annual contract maintenance fee, or surrender charges. If performance information included the effect of these additional charges, the total returns would be lower.}

	Average Annual Total Returns as of December 31, 2008
	1 Year			5 Years			10 Years			Since Inception*
Class X		(33.02	)%		6.96	%		3.50	%		8.20	%
Class Y		(33.19	)%		6.70	%		—			(1.12	)%

^₍₁₎ _{Ending value on December 31, 2008 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.}

^₍₂₎ _{The Standard & Poor's Global BMI Index (S&P Global BMI Index) is a broad market index designed to capture exposure to equities in all countries in the world that meet minimum size and liquidity requirements. As of the date of this Report, there are approximately 11,000 index members representing 27 developed and 26 emerging market countries. 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. The Portfolio primary benchmark was changed in November 2008 from the S&P 500}^_®_{Index to the S&P Global BMI Index to more accurately reflect the Portfolio investible universe.}

^₍₃₎ _{The Standard & Poor's 500}^_®_{Index (S&P 500}^_®_{) measures the performance of the large cap segment of the U.S. equities market, covering approximately 75% of the U.S. equities market. The Index includes 500 leading companies in leading industries of the U.S. economy. 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.}

^₍₄₎ _{The Standard & Poor's Global Infrastructure Index (S&P Global Infrastructure Index) is designed to track performance of the stocks of 75 of the largest publicly listed infrastructure companies around the world including both developed and emerging markets. The Index includes companies involved in utilities, energy and transportation infrastructure; airport services; highways and rail tracks; marine ports and services; and electric, gas and water utilities. The Index was launched on November 16, 2001. Returns including periods prior to November 16, 2001 are calculated using the return data of the S&P Global BMI Index through November 16, 2001 and the return data of the S&P Global Infrastructure Index since November 16, 2001. The In dex 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. The Portfolio's secondary benchmark was changed in November 2008 from the S&P 500}^_®_{Utilities Index to the S&P}^_®_{Global Infrastructure Index to more accurately reflect the Portfolio's investible universe.}

^₍₅₎ _{The Standard & Poor's 500}^_®_{Utilities Index (S&P 500}^_®_{Utilities Index) is an unmanaged, market capitalization weighted index consisting of utilities companies in the S&P 500}^_®_{Index and is designed to measure the performance of the utilities sector. It includes reinvested dividends. 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.}

* _{Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.}

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

For the period from January 1, 2008 through November 5, 2008, the primary contributor to performance relative to the S&P 500^® Utilities Index was a significant underweight to electric utilities. Electric utilities lost considerable value and therefore the Portfolio's comparatively lower exposure was beneficial. Security selection in the multi-utilities segment was also additive to performance.

Other positions, however, were disadvantageous. The largest detractor from relative performance was the Portfolio's allocation to the telecommunications sector, which is not represented in the S&P 500^® Utilities Index. The telecommunications sector was dragged down by poor results at several wireless companies and generally negative investor sentiment. Our positions in gas utilities and energy transportation also hindered relative performance.

Effective November 6, 2008, the Portfolio's investment focus transitioned from utilities to global infrastructure securities. The infrastructure sector also declined precipitously during the year in tandem with the broad equity markets, but for the period from November 6 through year end the infrastructure sector lost just slightly more than 4.5%. Of the three major components of the S&P 500^® Global Infrastructure Index, utilities was the top-performer, followed by transportation and energy. The primary contributors to the Portfolio's performance relative to the S&P Global Infrastructure Index included strong security selection in the transportation segment. A relative underweight in energy was also beneficial as falling commodity prices later in the year hindered the segment's performance. Conversely, sector allocation in the telecommunications, multi-utilities and gas utilities segments detracted from re lative performance.

The Portfolio is managed by the Quantitative and Structured Solutions (QSS) team. The QSS equity management process blends best-in-class, sell-side fundamental research with an established quantitative portfolio construction process. The investment team's systematic approach strives to add excess return while targeting volatility and tracking error to help control risk.

As of year end, the Portfolio's transition to global infrastructure was complete. Given the transitioning, we believe portfolio performance in the latter months of the year is not necessarily indicative of the new strategy's long-term potential. That said, we look forward to the opportunities the new, broader investment focus affords us.

There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.

Mid Cap Growth (formerly Developing Growth) Portfolio

For the 12-month period ended December 31, 2008, Select Dimensions — Mid Cap Growth Portfolio Class X shares produced a total return of -48.06%, underperforming the Russell Midcap^® Growth Index

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

("the Index"), which returned -44.32%. For the same period, the Portfolio's Class Y shares returned -48.20%. Past performance is no guarantee of future results.

Stock selection in the consumer discretionary sector had by far the largest negative impact on relative performance, despite the positive influence of an overweight there. The main detractors within the sector were holdings in commercial services and hotel/motel stocks. Stock selection in financial services was another relative detractor, which more than offset the benefit of an overweight in the sector. Here, diversified financial services stocks were the primary area of weakness. The third largest area of relative underperformance came from stock selection in the technology sector, where holdings in computer services software and systems lagged.

In contrast, stock selection in the other energy sector was the largest positive contributor to relative performance, although an underweight in the sector slightly offset some of the relative gain. Good relative performance was primarily due to natural gas producers. Both stock selection and an overweight in autos and transportation added relative value, driven by miscellaneous transportation (logistics) holdings. Finally, the Portfolio benefited from both stock selection and an

	Average Annual Total Returns as of December 31, 2008
	1 Year			5 Years			10 Years			Since Inception*
Class X		(48.06	)%		0.52	%		1.66	%		6.81	%
Class Y		(48.20	)%		0.26	%		—			(4.71	)%

^₍₁₎ Ending value on December 31, 2008 for the underlying portfolio. This figure does not reflect the deduction of any account fees or sales charges.

^₍₂₎ The Russell Midcap^® Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap^® Index companies with higher price-to-book ratios and higher forecasted growth values. 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.

* Inception dates of November 9, 1994 for Class X and July 24, 2000 for Class Y.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

underweight in the producer durables sector. Within the sector, telecommunications equipment stocks were the strongest contributors.

There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.

Money Market Portfolio

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of an investment at $1.00 per share, it is possible to lose money by investing in such funds.

As of December 31, 2008, Select Dimensions Money Market Portfolio had net assets of approximately $216 million with an average portfolio maturity of 27 days. For the seven-day period ended December 31, 2008, the Portfolio's Class X shares provided an effective annualized yield of 0.30% and a current yield of 0.30%, while its 30-day moving average yield for December was 0.48%. Yield quotations more closely reflect the current earnings of the Portfolio. For the 12-month period ended December 31, 2008, the Portfolio's Class X shares returned 2.38%. Past performance is no guarantee of future results.

For the seven-day period ended December 31, 2008, the Portfolio's Class Y shares provided an effective annualized yield of 0.06% and a current yield of 0.06%, while its 30-day moving average yield for December was 0.23%. Yield quotations more closely reflect the current earnings of the Portfolio. For the 12-month period ended December 31, 2008, the Portfolio's Class Y shares returned 2.13%. Past performance is no guarantee of future results.

Our strategy in managing the Portfolio remained consistent with its long-term focus on maintaining preservation of capital and liquidity. Although the aggressive reductions by the Fed drastically lowered short-term yields, the turmoil and uncertainty in the markets remained in force and indeed worsened over the course of the period. As a result, we concentrated the Portfolio on assets with shorter maturities. We also closely reviewed all of the eligible securities on our purchase list to eliminate unacceptable risks that had come to light, a process which resulted in a significant reduction in the number of approved securities. The Portfolio did not contain any derivative securities during the reporting period. We will continue to focus closely on this strategy in an effort to maximize liquidity for the Portfolio and its shareholders.

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

There is no guarantee that any sectors mentioned will continue to perform as discussed above or that securities in such sectors will be held by the Portfolio in the future.

We appreciate your ongoing support of Morgan Stanley Select Dimensions Investment Series and look forward to continuing to serve your investment needs.

Very truly yours,

Randy Takian
President and Principal Executive Officer

Morgan Stanley Select Dimensions Investment Series

Letter to the Shareholders n December 31, 2008 continued

Proxy Voting Policy and Procedures and Proxy Voting Record

You may obtain a copy of the Portfolios' 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 Portfolios 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.

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 accessing the SEC's web site, http://www.sec.gov. You may also review and copy them at the SEC's public reference room in Washington, DC. Information on the operation of the SEC's public reference room may be obtained by calling the SEC at (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the public reference section of the SEC, Washington, DC 20549-0102.

Morgan Stanley Select Dimensions Investment Series

Expense Example n December 31, 2008

As a shareholder of the Portfolio, you incur two types of costs: (1) insurance company charges; and (2) ongoing costs, including advisory fees; distribution and service (12b-1) fees; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 07/01/08 – 12/31/08.

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 accoun t during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical expenses based on the Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio'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 Portfolio 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 insurance company charges. 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 insurance company charges were included, your costs would have been higher.

Morgan Stanley Select Dimensions Investment Series

Expense Example n December 31, 2008 continued

Money Market

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	07/01/08		12/31/08		07/01/08 – 12/31/08
Class X
Actual (0.83% return)	$	1,000.00	$	1,008.30	$	2.93
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,022.22	$	2.95
Class Y
Actual (0.70% return)	$	1,000.00	$	1,007.00	$	4.19
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.96	$	4.22

@ Expenses are equal to the Portfolio's annualized expense ratios of 0.58% and 0.83% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

Flexible Income

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	07/01/08		12/31/08		07/01/08 – 12/31/08
Class X
Actual (-14.80% return)	$	1,000.00	$	852.00	$	3.26
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,021.62	$	3.56
Class Y
Actual (-14.87% return)	$	1,000.00	$	851.30	$	4.42
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.36	$	4.82

@ Expenses are equal to the Portfolio's annualized expense ratios of 0.70% and 0.95% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

Balanced

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	07/01/08		12/31/08		07/01/08 – 12/31/08
Class X
Actual (-14.67% return)	$	1,000.00	$	853.30	$	4.66
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.11	$	5.08
Class Y
Actual (-14.73% return)	$	1,000.00	$	852.70	$	5.82
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,018.85	$	6.34

@ Expenses are equal to the Portfolio's annualized expense ratios of 1.00% and 1.25% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). If the Portfolio had borne all of its expenses, the annualized expense ratios would have been 1.01% and 1.26% for Class X and Class Y shares, respectively.

Morgan Stanley Select Dimensions Investment Series

Expense Example n December 31, 2008 continued

Global Infrastructure

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	07/01/08		12/31/08		07/01/08 – 12/31/08
Class X
Actual (-29.95% return)	$	1,000.00	$	700.50	$	5.00
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,019.25	$	5.94
Class Y
Actual (-30.03% return)	$	1,000.00	$	699.70	$	6.07
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,018.00	$	7.20

@ Expenses are equal to the Portfolio's annualized expense ratios of 1.17% and 1.42% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

Dividend Growth

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	07/01/08		12/31/08		07/01/08 – 12/31/08
Class X
Actual (-28.41% return)	$	1,000.00	$	715.90	$	3.11
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,021.52	$	3.66
Class Y
Actual (-28.52% return)	$	1,000.00	$	714.80	$	4.18
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.26	$	4.93

@ Expenses are equal to the Portfolio's annualized expense ratios of 0.72% and 0.97% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

Equally-Weighted S&P 500

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	07/01/08		12/31/08		07/01/08 – 12/31/08
Class X
Actual (-32.54% return)	$	1,000.00	$	674.60	$	1.43
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,023.43	$	1.73
Class Y
Actual (-32.65% return)	$	1,000.00	$	673.50	$	2.48
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,022.17	$	3.00

@ Expenses are equal to the Portfolio's annualized expense ratios of 0.34% and 0.59% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

Morgan Stanley Select Dimensions Investment Series

Expense Example n December 31, 2008 continued

Capital Growth

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	07/01/08		12/31/08		07/01/08 – 12/31/08
Class X
Actual (-43.02% return)	$	1,000.00	$	569.80	$	3.63
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.51	$	4.67
Class Y
Actual (-43.08% return)	$	1,000.00	$	569.20	$	4.61
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,019.25	$	5.94

@ Expenses are equal to the Portfolio's annualized expense ratios of 0.92% and 1.17% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). If the Portfolio had borne all of its expenses, the annualized expense ratios would have been 0.93% and 1.18% for Class X and Class Y shares, respectively.

Focus Growth

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	07/01/08		12/31/08		07/01/08 – 12/31/08
Class X
Actual (-47.27% return)	$	1,000.00	$	527.30	$	2.61
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,021.72	$	3.46
Class Y
Actual (-47.35% return)	$	1,000.00	$	526.50	$	3.57
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,020.46	$	4.72

@ Expenses are equal to the Portfolio's annualized expense ratios of 0.68% and 0.93% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

Capital Opportunities

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	07/01/08		12/31/08		07/01/08 – 12/31/08
Class X
Actual (-45.88% return)	$	1,000.00	$	541.20	$	4.49
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,019.30	$	5.89
Class Y
Actual (-45.94% return)	$	1,000.00	$	540.60	$	5.46
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,018.05	$	7.15

@ Expenses are equal to the Portfolio's annualized expense ratios of 1.16% and 1.41% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

Morgan Stanley Select Dimensions Investment Series

Expense Example n December 31, 2008 continued

Global Equity

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	07/01/08		12/31/08		07/01/08 – 12/31/08
Class X
Actual (-33.98% return)	$	1,000.00	$	660.20	$	4.67
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,019.51	$	5.69
Class Y
Actual (-34.11% return)	$	1,000.00	$	658.90	$	5.71
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,018.25	$	6.95

@ Expenses are equal to the Portfolio's annualized expense ratios of 1.12% and 1.37% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

Mid Cap Growth

	Beginning Account Value		Ending Account Value		Expenses Paid During Period@
	07/01/08		12/31/08		07/01/08 – 12/31/08
Class X
Actual (-42.47% return)	$	1,000.00	$	575.30	$	3.21
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,021.06	$	4.12
Class Y
Actual (-42.55% return)	$	1,000.00	$	574.50	$	4.20
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,019.81	$	5.38

@ Expenses are equal to the Portfolio's annualized expense ratios of 0.81% and 1.06% for Class X and Class Y shares, respectively, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

Money Market

Portfolio of Investments n December 31, 2008

PRINCIPAL AMOUNT IN THOUSANDS			ANNUALIZED YIELD ON DATE OF PURCHASE			MATURITY DATE	VALUE
		Commercial Paper (58.6%)
		Asset-Backed - Consumer Credit (9.3%)
$	10,000	Old Line Funding, LLC (a)		0.75	%	03/19/09 - 03/20/09	$	9,983,854
	10,000	Ranger Funding Co., LLC (a)		1.15 - 1.40		01/22/09 - 03/20/09		9,979,658
								19,963,512
		Asset-Backed - Consumer Diversified (11.1%)
	2,500	Amsterdam Funding Corp. (a)		1.56		02/18/09		2,494,833
	1,483	Enterprise Funding Co., LLC (a)		1.40		01/08/09		1,482,596
	10,000	Sheffield Receivables Corp. (a)		0.75 - 1.45		01/23/09 - 03/12/09		9,985,719
	10,000	Windmill Funding Corp. (a)		1.15 - 1.40		01/27/09 - 03/19/09		9,982,646
								23,945,794
		Asset-Backed - Consumer Loans (7.0%)
	5,000	Barton Capital, LLC (a)		1.47 - 1.50		01/22/09 - 01/23/09		4,995,476
	5,000	Jupiter Securitization (a)		1.40		01/22/09		4,995,917
	5,000	Yorktown Capital, LLC (a)		1.40 - 1.45		01/21/09 - 01/23/09		4,995,872
								14,987,265
		Asset-Backed - Corporate (4.6%)
	10,000	Atlantis One Funding (a)		0.50 - 0.70		03/17/09 - 04/22/09		9,984,000
		Asset-Backed - Diversified (4.6%)
	10,000	Falcon Asset Securitization Co., LLC (a)		0.50 - 1.40		01/20/09 - 03/20/09		9,990,994
		Asset-Backed - Government (0.9%)
	2,000	Govco, LLC (a)		0.75		03/23/09		1,996,625
		Banking (5.6%)
	4,000	Bank of America Corp.		0.01		01/02/09		3,999,999
	8,000	HSBC USA Inc.		0.30 - 0.32		01/13/09 - 01/14/09		7,999,153
								11,999,152
		International Banks (15.5%)
	3,000	Abbey National N.A., LLC		0.25		01/12/09		2,999,771
	5,000	BNP Paribas Finance Inc.		0.22		01/07/09		4,999,817
	2,000	ING (U.S.) Funding, LLC		0.30		01/16/09		1,999,750
	5,000	Rabobank (U.S.) Finance Corp.		0.01		01/02/09		4,999,999
	500	Royal Bank of Scotland PLC		3.10		03/16/09		496,855
	8,000	Societe Generale N.A., Inc.		0.37 - 0.45		01/16/09		7,998,600
	10,000	UBS Finance (Delaware) LLC		0.70		01/15/09		9,997,278
								33,492,070
		Total Commercial Paper (Cost $126,359,412)						126,359,412

See Notes to Financial Statements
25

Money Market

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			ANNUALIZED YIELD ON DATE OF PURCHASE			MATURITY DATE	VALUE
		Repurchase Agreements (17.6%)
$	7,945	Barclays Capital LLC (dated 12/31/08; proceeds $7,945,026); fully collateralized by Federal National Mortgage Assoc., 3.28%-8.50%, due 02/01/15-10/01/44; Federal Home Loan Mortgage Corp., 4.33%-6.95%, due 04/01/09-07/01/37; Government National Mortgage Assoc., 4.00%, due 02/20/35, valued at $8,183,351		0.06	%	01/02/09	$	7,945,000
	30,000	BNP Paribas Securities (dated 12/31/08; proceeds $30,000,017); fully collateralized by Federal National Mortgage Assoc., 5.50%-6.00%, due 08/01/38-05/01/47; Federal Home Loan Mortgage Corp., 4.50%, due 04/01/19, valued at $30,900,001		0.01		01/02/09		30,000,000
		Total Repurchase Agreements (Cost $37,945,000)						37,945,000
		Certificates of Deposit (16.4%)
		Domestic Banks (1.1%)
	2,500	Branch Banking & Trust Co.		3.19		02/05/09		2,500,000
		International Banks (15.3%)
	10,000	Banco Bilbao Vizcaya Argentaria-NY		0.54		01/14/09		10,000,000
	8,000	Calyon		1.00 - 3.17		01/30/09 - 02/02/09		8,000,000
	10,000	Lloyds TSB Bank PLC		0.80		01/16/09		10,000,000
	5,000	Royal Bank of Scotland PLC		0.95		01/13/09		5,000,000
								33,000,000
		Total Certificates of Deposit (Cost $35,500,000)						35,500,000
		Floating Rate Notes (4.6%)
		Domestic Bank (0.7%)
	1,500	Wachovia Bank, N.A.		4.42	(b)	01/05/09(c)		1,500,000
		International Banks (3.9%)
	1,000	Bank of Nova Scotia		3.11	(b)	02/06/09(c)		1,000,000
	4,000	Barclays Bank PLC		1.48 - 2.64	(b)	01/12/09 - 03/09/09(c)		4,000,000
	1,500	Deutsche Bank AG		1.74	(b)	01/21/09(c)		1,500,000
	2,000	Royal Bank of Scotland PLC		2.28	(b)	01/09/09(c)		2,000,003
								8,500,003
		Total Floating Rate Notes (Cost $10,000,003)						10,000,003

See Notes to Financial Statements
26

Money Market

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			ANNUALIZED YIELD ON DATE OF PURCHASE			MATURITY DATE			VALUE
		Time Deposit (2.3%)
$	5,000	State Street Bank & Trust (Cost $5,000,000)		0.01	%	01/02/09			$	5,000,000
		U.S. Government Agency - Debenture Bonds (0.5%)
	1,000	Federal Home Loan Bank (Cost $1,000,020)		3.66	(b)	01/23/09(c)				1,000,020
		Total Investments (Cost $215,804,435) (d)					100.0	%		215,804,435
		Liabilities in Excess of Other Assets					(0.0	)		(18,989	)
		Net Assets					100.0	%	$	215,785,446

(a) Resale is restricted to qualified institutional investors.

(b) Rate shown is the rate in effect at December 31, 2008.

(c) Date of next interest rate reset.

(d) Cost is the same for federal income tax purposes.

MATURITY SCHEDULE**

1-30 Days	74	%
31-60 Days	6
61-90 Days	18
91-120 Days	2
	100	%

** As a percentage of total investments.

See Notes to Financial Statements
27

Flexible Income

Portfolio of Investments n December 31, 2008

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Government and Corporate Bonds (84.3%)
		Foreign (14.1%)
		Argentina (0.0%)
		Foreign Government Obligations
$	19	Republic of Argentina (a) (b)		8.28	%	12/31/33	$	6,485
		Australia (0.1%)
		Other Metals/Minerals
	35	Rio Tinto Fin USA Ltd.		6.50		07/15/18		25,702
		Bermuda (0.3%)
		Insurance Brokers/Services
	200	Catlin Insurance Co., Ltd. - 144A (d)		7.249	(e)	(f)		79,634
		Brazil (2.0%)
		Foreign Governments & Agencies (1.9%)
	200	Banco Nac De Desen Eono - 144A (d)		6.369		06/16/18		191,000
	150	Federal Republic of Brazil		6.00		01/17/17		155,625
	10	Federal Republic of Brazil		7.125		01/20/37		11,400
	14	Federal Republic of Brazil		8.00		01/15/18		15,750
	160	Federal Republic of Brazil		11.00		08/17/40		209,600
								583,375
		Major Banks (0.1%)
BRL	70	Banco ABN AMRO		16.20		02/22/10		30,467
		Total Brazil						613,842
		Canada (0.9%)
		Financial Conglomerates (0.0%)
$	10	Brookfield Asset Management Inc.		5.80		04/25/17		4,150
		Integrated Oil (0.1%)
	30	Petro - Canada		6.05		05/15/18		24,767
		Media Conglomerates (0.0%)
	1	Canwest Media Inc.		8.00		09/15/12		266
		Oil & Gas Pipelines (0.6%)
	230	Kinder Morgan Finance Co.		5.70		01/05/16		172,500
		Other Metals/Minerals (0.2%)
	90	Brascan Corp.		7.125		06/15/12		55,350
		Total Canada						257,033

See Notes to Financial Statements
28

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Denmark (0.4%)
		Telecommunications
$	80	Nordic Telecommunications Holdings - 144A (d)		8.875	%	05/01/16	$	56,400
EUR	60	TDC AS		6.50		04/19/12		69,641
		Total Denmark						126,041
		Equador (0.1%)
		Foreign Government Obligations
$	100	Republic of Ecuador (g) (h)		9.375		12/15/15		27,500
	50	Republic of Ecuador - 144A (d) (g) (h)		10.00		08/15/30		13,125
		Total Equador						40,625
		France (0.5%)
		Telecommunications (0.2%)
	45	France Telecom S.A.		8.50		03/01/31		56,655
		Media Conglomerates (0.2%)
	85	Vivendi - 144A (d)		6.625		04/04/18		68,705
		Oilfield Services/Equipment (0.1%)
	25	CIE Generale de Geophysique S.A.		7.50		05/15/15		15,625
		Total France						140,985
		Ghana (0.2%)
		Foreign Government Obligations
	100	Republic of Ghana - 144A (d)		8.50		10/04/17		57,000
		Indonesia (0.7%)
		Foreign Government Obligations (0.5%)
	100	Republic of Indonesia		7.75		01/17/38		82,961
	100	Republic of Indonesia - 144A (d)		7.75		01/17/38		83,500
								166,461
		Pulp & Paper (0.2%)
	264	Tjiwi Kimia Finance BV - 144A (d)		0.00	(e)	04/28/27		17,136
	19	Tjiwi Kimia Finance BV - 144A (d)		5.433	(e)	04/28/15		10,269
	107	Tjiwi Kimia Finance BV - 144A (d)		5.525	(e)	04/28/18		30,416
								57,821
		Total Indonesia						224,282

See Notes to Financial Statements
29

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Israel (0.3%)
		Electrical Products
$	140	Ormat Funding Corp.		8.25	%	12/30/20	$	104,667
		Luxembourg (0.4%)
		Major Telecommunications (0.3%)
	65	Telecom Italia Capital SA		4.00		01/15/10		59,814
	35	Telecom Italia Capital SA		6.999		06/04/18		28,439
								88,253
		Steel (0.1%)
	40	ArcelorMittal		6.125		06/01/18		27,434
		Total Luxembourg						115,687
		Mexico (1.9%)
		Foreign Government Obligations (1.1%)
MXN	230	Mexican Fixed Rate Bonds - 144A (d)		8.00		12/17/15		16,682
	540	Mexican Fixed Rate Bonds		10.00		12/05/24		44,889
$	72	United Mexican States Corp.		5.625		01/15/17		72,360
	70	United Mexican States Corp.		5.95		03/19/19		70,350
	10	United Mexican States Corp.		6.05		01/11/40		9,750
	40	United Mexican States Corp.		6.75		09/27/34		42,400
	61	United Mexican States Corp.		8.375		01/14/11		66,185
								322,616
		Oil & Gas Production (0.8%)
	170	Pemex Project Funding Master Trust - 144A (d)		3.296	(e)	06/15/10		161,500
	110	Pemex Project Funding Master Trust - 144A (d)		5.75		03/01/18		97,625
								259,125
		Total Mexico						581,741
		Netherlands (1.1%)
		Electric Utilities (0.3%)
	85	E.ON International Finance BV - 144A (d)		5.80		04/30/18		79,612
		Major Telecommunications (0.4%)
	25	Deutsche Telekom International Finance Corp. NV		8.75	(e)	06/15/30		30,911
	70	Telefonica Europe BV		8.25		09/15/30		82,198
								113,109

See Notes to Financial Statements
30

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Oil - Exploration & Production (0.4%)
$	200	KazMunaiGaz Finance Sub - 144A (d)		9.125	%	07/02/18	$	131,000
		Total Netherlands						323,721
		Peru (0.7%)
		Foreign Government Obligations
	135	Republic of Peru		6.55		03/14/37		121,163
	10	Republic of Peru		7.35		07/21/25		10,000
	73	Republic of Peru		8.75		11/21/33		82,125
		Total Peru						213,288
		Philippines (0.3%)
		Foreign Government Obligations
	87	Republic of Philippines		8.875		03/17/15		92,655
		Russia (1.6%)
		Foreign Government Obligations
	327	Federal Republic of Russia		7.50		03/31/30		287,223
	21	Federal Republic of Russia		8.25		03/31/10		22,189
	90	Federal Republic of Russia		12.75		06/24/28		104,850
	100	Russian Agricultural Bank - 144A (d)		7.175		05/16/13		73,000
		Total Russia						487,262
		Switzerland (0.1%)
		Educational Facility
NGN	5,700	UBS AG JERSEY - 144A (d) (i)		0.00		04/09/09		40,394
		Turkey (1.1%)
		Foreign Government Obligations
$	100	Republic of Turkey		6.75		04/03/18		95,500
	128	Republic of Turkey		11.00		01/14/13		145,280
	55	Republic of Turkey		11.875		01/15/30		78,925
		Total Turkey						319,705
		United Kingdom (0.7%)
		Beverages: Alcoholic (0.2%)
	55	Diageo Capital PLC		7.375		01/15/14		58,650
		Cable/Satellite TV (0.1%)
	40	NTL Cable PLC		8.75		04/15/14		30,200
		Pharmaceuticals: Major (0.2%)
	40	Astrazeneca PLC		5.90		09/15/17		42,582

See Notes to Financial Statements
31

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Tobacco (0.1%)
$	30	BAT International Finance PLC - 144A (d)		9.50	%	11/15/18	$	33,403
		Wireless Telecommunications (0.1%)
	35	Vodafone Group PLC		5.625		02/27/17		33,031
		Total United Kingdom						197,866
		Uruguay (0.0%)
		Foreign Government Obligations
	10	Republic of Uruguay		8.00		11/18/22		9,300
		Venezuela (0.7%)
		Foreign Government Obligations
	70	Republic of Venezuela		8.50		10/08/14		36,750
	255	Republic of Venezuela		9.25		09/15/27		137,700
	80	Republic of Venezuela		10.75		09/19/13		52,800
		Total Venezuela						227,250
		Total Foreign (Cost $5,436,870)						4,285,165
		United States (70.2%)
		Corporate Bonds (37.9%)
		Advertising/Marketing Services (0.2%)
	400	Idearc Inc.		8.00		11/15/16		32,000
	65	Interpublic Group of Companies, Inc. (The)		6.25		11/15/14		29,250
								61,250
		Aerospace & Defense (0.5%)
	100	Bombardier Inc - 144A (d)		6.30		05/01/14		82,750
	25	L-3 Communications Corp		5.875		01/15/15		22,625
	58	Systems 2001 Asset Trust - 144A (d)		6.664		09/15/13		51,369
								156,744
		Alternative Power Generation (0.3%)
	115	NRG Energy Inc.		7.375		01/15/17		106,088
		Apparel/Footwear (0.3%)
	110	Phillips-Van Heusen Corp.		7.25		02/15/11		96,800
		Auto Parts: O.E.M. (0.2%)
	105	ArvinMeritor, Inc.		8.75		03/01/12		57,225
		Automotive Aftermarket (0.1%)
	45	KAR Holdings Inc		8.75		05/01/14		20,025

See Notes to Financial Statements
32

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Beverages: Alcoholic (0.1%)
$	35	FBG Finance Ltd. - 144A (d)		5.125	%	06/15/15	$	28,888
		Broadcasting (0.1%)
	65	XM Satellite Radio Inc. - 144A (d)		13.00		08/01/13		15,275
		Cable/Satellite TV (2.3%)
	101	CCH I LLC/CCH I Cap Co.		11.00		10/01/15		18,180
	70	Comcast Cable Communications, Inc.		5.70		05/15/18		65,763
	40	CSC Holdings Inc. (Series B) - 144A (d)		8.50		06/15/15		35,400
	120	CSC Holdings Inc. (Series B)		7.625		04/01/11		113,700
	125	DIRECTV Holdings		7.625		05/15/16		121,875
	60	EchoStar DBS Corp.		6.375		10/01/11		55,950
	65	EchoStar DBS Corp.		6.625		10/01/14		54,438
	245	Intelsat Corp. - 144A (d)		9.25		06/15/16		224,175
								689,481
		Casino/Gaming (1.3%)
	840	Aladdin Gaming Holdings/Capital Corp. LLC (Series B) (c) (g) (h)		0.00		03/01/10		0
	88	Harrahs Operating Co Inc. - 144A (d)		10.00		12/15/15		37,188
	90	Las Vegas Sands Corp.		6.375		02/15/15		52,650
	335	MGM Mirage Inc.		6.00		10/01/09		321,600
	299	Resort At Summerlin LP/Ras Co. (Series B) (c) (g) (h)		13.00	(j)	12/15/07		0
								411,438
		Chemicals: Major Diversified (0.1%)
	35	Dupont (EI) De Nemours		6.00		07/15/18		36,827
		Chemicals: Specialty (0.6%)
	240	Innophos, Inc.		8.875		08/15/14		169,200
	26	Koppers Industry Inc.		9.875		10/15/13		24,050
								193,250
		Coal (0.1%)
	35	Foundation PA Coal Co.		7.25		08/01/14		28,875
		Computer Processing Hardware (0.1%)
	25	Dell Inc.		5.65		04/15/18		22,415
		Containers/Packaging (1.5%)
	195	Berry Plastics Holding Corp.		8.875		09/15/14		85,800
	150	Graphic Packaging International Corp.		9.50		08/15/13		104,250
	260	Owens-Illinois, Inc.		7.50		05/15/10		258,700
								448,750

See Notes to Financial Statements
33

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Data Processing Services (0.7%)
$	70	Fiserv Inc.		6.80	%	11/20/17	$	62,102
	105	Sungard Data Systems Inc.		9.125		08/15/13		91,350
	80	Sungard Data Systems Inc. - 144A (d)		10.625		05/15/15		68,800
								222,252
		Discount Stores (0.1%)
	20	Walmart Stores		4.25		04/15/13		20,606
	15	Walmart Stores		5.80		02/15/18		16,628
								37,234
		Diversified Manufacturing (0.4%)
	155	Tyco Electonics Group		5.95		01/15/14		134,398
		Drugstore Chains (0.5%)
	81	CVS Lease Pass Through - 144A (d)		6.036		12/10/28		49,418
	185	Rite Aid Corp.		8.625		03/01/15		64,750
	35	Walgreen Co.		4.875		08/01/13		36,082
								150,250
		Electric Utilities (3.4%)
	80	AES Corp. (The)		7.75		03/01/14		70,800
	145	AES Corp. (The) - 144A (d)		8.00		06/01/20		113,100
	10	Alabama Power		5.80		11/15/13		10,418
	20	CenterPoint Energy Resources, Corp.		6.25		02/01/37		14,156
	10	CenterPoint Energy Resources, Corp. (Series B)		7.875		04/01/13		9,271
	50	Detroit Edison Co. (The)		6.125		10/01/10		50,309
	100	Entergy Gulf States, Inc.		2.603		12/01/09		96,338
	10	Georgia Power Company		6.00		11/01/13		10,522
	130	Intergen - 144A (d)		9.00		06/30/17		107,250
	30	IPALCO Enterprises, Inc.		8.625		11/14/11		28,200
	145	Mirant Americas Generation LLC		8.50		10/01/21		110,925
	70	Ohio Power Company (Series K)		6.00		06/01/16		67,073
	100	Texas Competitive Electric Holding Co. - 144A (d)		10.25		11/01/15		71,500
	265	Texas Competitive Electric Holding Co. - 144A (d)		10.50		11/01/15		189,475
	50	Texas Eastern Transmission		7.00		07/15/32		46,349
	35	Union Electric Co.		6.70		02/01/19		31,948
	15	Virginia Electric & Power Co		8.875		11/15/38		19,041
								1,046,675
		Electrical Products (0.1%)
	45	Cooper Industries, Inc.		5.25		11/15/12		45,495
		Electronic Equipment/Instruments (0.1%)
	25	Xerox Corp.		6.35		05/15/18		19,584

See Notes to Financial Statements
34

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Electronic Production Equipment (0.3%)
$	105	KLA Instruments Corp.		6.90	%	05/01/18	$	79,540
		Engineering & Construction (0.1%)
	45	Edison Mission Energy		7.75		06/15/16		40,275
		Finance/Rental/Leasing (1.6%)
	620	Ford Motor Credit Co LLC.		7.25		10/25/11		453,177
	60	SLM Corp.		8.45		06/15/18		47,508
								500,685
		Financial Conglomerates (1.3%)
	389	GMAC LLC 144A (d)		6.875		09/15/11		311,063
	7	GMAC LLC 144A (d)		7.50		12/31/13		5,108
	9	GMAC LLC 144A (d)		8.00		12/31/18		4,719
	45	JPMorgan Chase & Co.		6.00		01/15/18		47,582
	35	Prudential Financial, Inc.		6.625		12/01/37		23,923
								392,395
		Food Retail (1.1%)
	160	Albertson's, Inc.		7.50		02/15/11		148,000
	27	CA FM Lease Trust - 144A (d)		8.50		07/15/17		27,945
	144	Delhaize America, Inc.		9.00		04/15/31		145,981
								321,926
		Food: Major Diversified (0.3%)
	25	ConAgra Foods, Inc.		7.00		10/01/28		24,590
	10	ConAgra Foods, Inc.		8.25		09/15/30		10,996
	50	Kraft Foods Inc.		6.125		08/23/18		49,382
								84,968
		Food: Meat/Fish/Dairy (0.5%)
	85	Michael Foods Inc. (Series B)		8.00		11/15/13		73,525
	100	Pilgrim's Pride Corp. (g) (h)		7.625		05/01/15		27,500
	85	Smithfield Foods Inc.		7.00		08/01/11		60,775
								161,800
		Foods & Beverages (0.1%)
	30	Dr Pepper Snapple Group - 144A (d)		6.82		05/01/18		29,641
		Gas Distributors (0.3%)
	80	Equitable Resources, Inc.		6.50		04/01/18		74,851
	30	NiSource Finance Corp.		6.80		01/15/19		18,892
								93,743

See Notes to Financial Statements
35

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Home Building (0.1%)
$	45	Pulte Homes, Inc.		6.375	%	05/15/33	$	24,075
		Home Improvement Chains (0.2%)
	55	Home Depot Inc.		5.40		03/01/16		49,291
		Hospital/Nursing Management (2.2%)
	125	Columbia/HCA Healthcare Corp.		7.69		06/15/25		59,307
	115	Community Health Systems		8.875		07/15/15		106,375
	95	HCA, Inc.		5.75		03/15/14		57,950
	175	HCA, Inc		6.25		02/15/13		110,250
	135	Sun Healthcare Group Inc.		9.125		04/15/15		118,800
	215	Tenet Healthcare Corp.		7.375		02/01/13		154,263
	70	Tenet Healthcare Corp.		9.875		07/01/14		56,700
								663,645
		Hotels/Resorts/Cruiselines (0.1%)
	25	Starwood Hotels & Resorts		6.75		05/15/18		13,770
		Household/Personal Care (0.2%)
	55	Procter & Gamble Co		4.60		01/15/14		57,699
		Industrial Conglomerates (0.7%)
	185	General Electric Co.		5.25		12/06/17		184,760
	15	Honeywell International, Inc.		5.30		03/01/18		15,332
								200,092
		Industrial Machinery (0.1%)
	30	Parker-Hannifin Corp.		5.50		05/15/18		29,055
		Industrial Specialties (0.4%)
	165	Johnsondiversy, Inc.		9.625		05/15/12		136,125
		Insurance Brokers/Services (0.4%)
	190	Farmers Exchange Capital - 144A (d)		7.05		07/15/28		116,554
		Integrated Oil (0.3%)
	30	ConocoPhillips		5.20		05/15/18		29,250
	30	Marathon Oil Corp.		5.90		03/15/18		25,097
	40	Marathon Oil Corp.		6.00		10/01/17		34,162
								88,509
		Investment Banks/Brokers (0.9%)
	25	Bear Stearns Companies Inc. (The)		7.25		02/01/18		27,442
	10	Goldman Sachs Group Inc. (The)		6.15		04/01/18		9,626
	70	Goldman Sachs Group Inc. (The)		6.75		10/01/37		56,988

See Notes to Financial Statements
36

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
$	100	Merrill Lynch & Co.		6.11	%	01/29/37	$	90,176
	40	Merrill Lynch & Co.		6.875		04/25/18		41,913
	35	NYSE Euronext		4.80		06/28/13		33,982
								260,127
		Major Banks (1.2%)
	105	Bank of America Corp.		5.65		05/01/18		105,813
	10	Bank of America Corp.		5.75		12/01/17		10,002
	15	Bank of New York Mellon		4.50		04/01/13		14,929
	40	Bank of New York Mellon		5.125		08/27/13		40,915
	15	Credit Suisse New York		5.125		08/15/15		13,642
	35	Credit Suisse New York		6.00		02/15/18		32,196
	90	Wachovia Capital Trust III		5.80		03/15/42		53,123
	105	Wells Fargo Company		5.625		12/11/17		109,736
								380,356
		Major Telecommunications (1.0%)
	75	AT&T Corp.		8.00		11/15/31		94,487
	40	Rogers Communications		6.80		08/15/18		40,488
	10	SBC Communications, Inc.		6.15		09/15/34		10,311
	70	Sprint Capital Corp.		6.00		12/01/16		49,421
	45	Sprint Capital Corp.		6.90		05/01/19		32,003
	55	Sprint Capital Corp.		8.75		03/15/32		37,195
	35	Verizon Communications		5.50		02/15/18		33,724
								297,629
		Managed Health Care (0.1%)
	50	UnitedHealth Group Inc.		6.00		02/15/18		46,210
		Media Conglomerates (0.5%)
	30	Time Warner, Inc.		5.875		11/15/16		26,936
	45	Time Warner, Inc.		6.75		07/01/18		43,401
	35	Time Warner, Inc.		8.75		02/14/19		38,121
	70	Viacom, Inc.		6.875		04/30/36		55,466
								163,924
		Medical Specialties (0.6%)
	15	Baxter International		5.375		06/01/18		15,709
	40	Covidien International Finance		6.00		10/15/17		39,527
	110	Hospira, Inc.		1.948		03/30/10		107,344
	40	Invacare Corp.		9.75		02/15/15		35,600
								198,180

See Notes to Financial Statements
37

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Medical/Nursing Services (0.6%)
$	181	Fresenius Medical Care Capital Trust		7.875	%	06/15/11	$	172,855
		Metal Fabrications (0.1%)
	40	Hexcell Corp.		6.75		02/01/15		30,600
		Miscellaneous (0.1%)
	25	Transcanada Pipelines Ltd.		6.50		08/15/18		24,570
		Miscellaneous Commercial Services (0.6%)
	55	Iron Mountain Inc.		7.75		01/15/15		49,638
	140	Iron Mountain Inc.		8.625		04/01/13		132,300
								181,938
		Motor Vehicles (0.2%)
	55	DaimlerChrysler North American Holdings Co.		8.50		01/18/31		40,299
	30	Harley-Davidson Funding - 144A (d)		6.80		06/15/18		16,212
								56,511
		Multi-Line Insurance (0.4%)
	160	AIG SunAmerica Global Financing VI - 144A (d)		6.30		05/10/11		137,650
		Oil - Exploration & Production (0.3%)
	70	Forest Oil Corp		7.25		06/15/19		51,450
	55	Forest Oil Corp		7.75		05/01/14		46,475
								97,925
		Oil & Gas Pipelines (0.8%)
	35	Sonat, Inc		7.625		07/15/11		32,086
	95	Pacific Energy Partners/Finance		7.125		06/15/14		83,066
	175	Williams Companies, Inc. (The)		7.875		09/01/21		134,115
								249,267
		Oil & Gas Production (2.3%)
	110	Chaparral Energy Inc.		8.875		02/01/17		22,550
	320	Chesapeake Energy Corp.		7.50		09/15/13		276,800
	20	Devon Financing Corp.		7.875		09/30/31		22,083
	95	Hilcorp Energy/Finance - 144A (d)		7.75		11/01/15		67,450
	115	Newfield Exploration Co		6.625		09/01/14		94,875
	70	Plains Exploration & Production Co.		7.625		06/01/18		48,300
	55	Plains Exploration & Production Co.		7.75		06/15/15		41,800
	170	Sandrige Energy		8.625		04/01/15		90,100
	45	XTO Energy Inc.		5.50		06/15/18		40,810
								704,768

See Notes to Financial Statements
38

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Oilfield Services/Equipment (0.1%)
$	30	Weatherford International, Inc.		6.00	%	03/15/18	$	25,235
		Packaged Software (0.1%)
	40	Oracle Corp.		5.75		04/15/18		41,914
		Pharmaceuticals: Major (0.3%)
	40	GlaxoSmithKline Cap Inc.		5.65		05/15/18		42,090
	30	Wyeth		5.45		04/01/17		30,605
	10	Wyeth		5.50		02/15/16		10,198
								82,893
		Pharmaceuticals: Other (0.1%)
	40	Axcan Intermediate Holding		12.75		03/01/16		33,800
		Property - Casualty Insurers (0.1%)
	25	Ace In A Holdings		5.60		05/15/15		22,724
		Publishing: Books/Magazines (0.1%)
	95	Dex Media West/Finance		9.875		08/15/13		22,800
		Pulp & Paper (0.2%)
	35	Glatfelter P.H.		7.125		05/01/16		30,625
	45	Newpage Corp		10.00		05/01/12		20,025
								50,650
		Railroads (0.1%)
	30	Union Pacific Corp.		5.45		01/31/13		29,125
		Restaurants (0.1%)
	30	Aramark Corp.		8.50		02/01/15		27,300
	15	Tricon Global Restaurants, Inc.		8.875		04/15/11		15,201
								42,501
		Semiconductors (0.1%)
	70	Freescale Semiconductor		8.875		12/15/14		31,150
		Services to the Health Industry (0.7%)
	40	Biomet Inc.		11.625		10/15/17		34,400
	75	HealthSouth Corp		10.75		06/15/16		69,188
	40	Medco Health Solutions		7.125		03/15/18		37,024
	70	Omnicare Inc.		6.75		12/15/13		59,850
								200,462

See Notes to Financial Statements
39

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Specialty Stores (0.2%)
$	150	Sonic Automotive, Inc.		8.625	%	08/15/13	$	56,625
		Specialty Telecommunications (1.3%)
	85	American Tower Corp.		7.125		10/15/12		84,150
	90	American Tower Corp.		7.50		05/01/12		89,100
	70	Citizens Communications		7.125		03/15/19		47,250
	70	Qwest Capital Funding		7.25		02/15/11		59,150
	110	Qwest Capital Funding		8.875		03/15/12		102,300
								381,950
		Tobacco (0.4%)
	45	Philip Morris International Inc.		5.65		05/16/18		44,690
	75	Reynolds American Inc.		6.50		07/15/10		74,551
								119,241
		Water Utilities (0.3%)
	100	Nalco Co.		7.75		11/15/11		96,500
		Wireless Telecommunications (0.6%)
	50	Nextel Communications		6.875		10/31/13		21,261
	180	Wind Acquisition Finance SA - 144A (d)		10.75		12/01/15		155,700
								176,961
		Total Corporate Bonds (Cost $15,326,612)						11,530,048
		U.S. Government Agencies & Obligations (19.5%)
	200	Federal Home Loan Mortgage Corp.		6.75		03/15/31		294,272
	200	Federal National Mortgage Assoc.		5.00		05/11/17		228,439
		U.S. Treasury Bond
	150			4.50		02/15/36		199,336
	140			4.50		05/15/38		191,122
	16			8.75		05/15/17		23,550
	40			8.875		08/15/17		59,559
	29			8.875		02/15/19		44,592
	41			9.00		11/15/18		63,339
	6			9.125		05/15/18		9,281
		U.S. Treasury Note
	30			3.75		11/15/18		33,970
	725			5.375		02/15/31		996,422

See Notes to Financial Statements
40

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		U.S. Treasury Strips
$	2,015			0.00	%	11/15/19	$	1,428,520
	700			0.00		05/15/21		463,115
	1,975			0.00		11/15/21		1,279,656
	920			0.00		11/15/21		597,225
		Total U.S. Government Agencies & Obligations (Cost $5,103,678)						5,912,398
		U.S. Government Agencies-Mortgage-Backed Securities (9.5%)
	150	Federal Home Loan Mortgage Corp. (0.5%)		5.00		(k)		153,305
		Federal National Mortgage Assoc. (7.6%)
	750			5.00		(k)		765,821
	925			5.50		(k)		948,269
	250			6.00		(k)		257,383
	219			6.50		07/01/29 - 11/01/33		229,436
	35			7.00		02/01/33		37,022
	25			7.50		10/01/31		26,302
	27			8.00		02/01/12 - 01/01/31		28,831
								2,293,064
		Federal National Mortgage Assoc. (ARM) (1.3%)
	220			4.958	(e)	07/01/36		207,175
	211			4.975	(e)	08/01/36		199,231
								406,406
		Government National Mortgage Assoc. (0.1%)
	38			7.50		04/15/26 - 08/15/29		39,988
	1			8.00		06/15/26		772
								40,760
		Total U.S. Government Agencies-Mortgage-Backed Securities (Cost $2,907,167)						2,893,535
		Collateralized Mortgage Obligations (2.1%)
		U.S. Government Agencies (0.7%)
		Federal National Mortgage Assoc. (0.2%)
	103	IO (c)		6.50		12/01/29		10,961
	82	IO (c)		7.00		11/01/19		10,363
	94	IO (c)		7.00		12/01/34		12,950
	158	IO (c)		8.00		06/01/35		23,524
								57,798

See Notes to Financial Statements
41

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
$	184	Federal Home Loan Mortgage Corp. Whole Loan 2005-S001 2A2 (0.5%)		0.621	(e)%	09/25/45	$	152,551
		Total U.S. Government Agencies						210,349
		Private Issues (1.4%)
		American Home Mortgage Investment Trust
	303	2005-2 1A1 (c)		0.771	(e)	09/25/45		123,554
	135	2006-4 1A3 (c)		0.781	(e)	10/25/46		10,621
	136	2007-5 A3 (c)		0.771	(e)	06/25/47		9,999
		Bear Stearns Mortgage Funding Trust
	2,389	2007-N2 12C (IO) (c)		0.00	(e)	01/27/37		239
	3,596	2007-N2 13C (IO) (c)		0.00	(e)	01/27/37		360
	5,109	2007-N2 14C (IO) (c)		0.00	(e)	01/27/37		511
	3,702	2007-N3 10C (IO) (c)		0.00	(e)	06/26/36		370
	3,923	2007-N5 5C (IO) (c)		0.039	(e)	04/25/37		392
		Countrywide Alternative Loan Trust
	149	2006-0A21 A3 (c)		0.788	(e)	03/20/47		13,446
	2,643	2006-0A22 CP (IO) (c)		0.00	(e)	02/25/47		264
	1,323	2007-0A7 CP (c)		0.00	(e)	05/25/47		132
		Deutsche Alt-A Securities Income Mortgage
	144	2006-OA1 A3 (c)		3.086	(e)	02/25/47		15,843
		Greenpoint Mortgage Funding Trust
	425	2006-AR4 M2 (c)		0.901	(e)	09/25/46		2,171
	451	2006-AR5 M2 (c)		0.881	(e)	10/25/46		2,250
	401	2006-AR7 M2 (c)		0.901	(e)	12/25/46		2,301
		Harborview Mortgage Loan Trust
	145	2006-9 NIM - 144A (d) (c)		0.00	(e)	12/15/36		14
		Indymac Index Mortgage Loan Trust
	147	2005-AR4 2A1A (c)		0.751	(e)	03/25/35		67,577
		Mastr Adjustable Rate Mortgages Trust
	125	2006-OA1 3A3 (c)		3.196	(e)	04/25/46		13,096
		Residential Accredit Loans, Inc.
	1,577	2007-Q03 SB (IO) (c)		0.502	(e)	03/25/47		158
	2,768	2007-Q04 SB (IO) (c)		2.046	(e)	05/25/47		277
	7,228	2007-Q05 SB (IO) (c)		0.00	(e)	08/25/47		723
		Structured Asset Mortgage Investments, Inc.
	305	2005-14 A1 (c)		0.781	(e)	07/25/35		127,897
	120	2006-AR6 1A5 (c)		0.751	(e)	07/25/36		14,037
		Total Private Issues						406,232
		Total Collateralized Mortgage Obligations (Cost $3,693,720)						616,581

See Notes to Financial Statements
42

Flexible Income

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Asset-Backed Securities (0.8%)
		Finance/Rental/Leasing
$	250	Capital Auto Receivables Asset Trust 2006-2 A3B		1.255	(e)%	05/15/11	$	239,026
	20	Specialty Underwriting & Residential Finance 2004-BC2 A2		0.741	(e)	05/25/35		9,143
		Total Asset-Backed Securities (Cost $269,102)						248,169
		Convertible Bonds (0.4%)
		Cable/Satellite TV (0.3%)
	130	Charter Communications Inc		10.875		09/15/14		104,650
		Oilfield Services/Equipment (0.1%)
	35	Key Energy Group Inc		8.375		12/01/14		23,275
		Total Convertible Bonds (Cost $134,332)						127,925
		Total United States (Cost $27,434,611)						21,328,656
		Total Government & Corporate Bonds (Cost $32,871,481)						25,613,821

NUMBER OF SHARES
		Common Stocks (0.0%)
		Casino/Gaming (0.0%)
	787	Fitzgeralds Gaming Corp. (c) (l) (m)	0
		Electric Utilities (0.0%)
	13	PNM Resources Inc. (b)	131
		Food: Specialty/Candy (c) (0.0%)
	100	SFAC New Holdings Inc. (n)	0
	18	SFFB New Holdings Inc.	0
			0
		Specialty Telecommunications (b) (l) (0.0%)
	1,171	Birch Telecom Inc. (c) (o)	12
	109	XO Holdings, Inc.	18
			30
		Textiles (0.0%)
	11,192	U.S. Leather, Inc. (b) (c) (l)	0

See Notes to Financial Statements
43

Flexible Income

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES				VALUE
		Wireless Telecommunications (0.0%)
	46	USA Mobility, Inc. (b)		$	532
		Total Common Stocks (Cost $1,904,442)			693
		Preferred Stock (0.1%)
		Financial Conglomerates
	82	Preferred Blocker, Inc (GMAC LLC) 144A (d) (Cost $34,389)			34,389
		Convertible Preferred Stock (0.0%)
		Finance/Rental/Leasing
	360	Fannie Mae SER 2008-1 (Cost $18,000)			392
NUMBER OF WARRANTS			EXPIRATION DATE
		Warrants (l) (0.0%)
		Casino/Gaming (0.0%)
	9,000	Aladdin Gaming Enterprises, Inc. - 144A (c) (d)	03/01/10		0
		Specialty Telecommunications (b) (0.0%)
	219	XO Holdings, Inc. (Series A)	01/15/10		1
	164	XO Holdings, Inc. (Series B)	01/16/10		1
	164	XO Holdings, Inc. (Series C)	01/16/10		0
					2
		Total Warrants (Cost $249)			2
NUMBER OF CONTRACTS
		Call Options Purchased (0.2%)
	27	90 day Euro$ Futures March/2010 @ 97.75 (Cost $24,371)			62,775

See Notes to Financial Statements
44

Flexible Income

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES (000)			COUPON RATE	MATURITY DATE			VALUE
		Short-Term Investments (24.8%)
		Investment Company (p) (21.3%)
	6,477	Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (Cost $6,476,953)			01/02/09		$	6,476,953
PRINCIPAL AMOUNT IN THOUSANDS
		U.S. Government Obligations (q) (3.5%)
$	1,060	U.S. Treasury Bills (Cost $1,059,460)	0.06% - 0.86%		01/15/09			1,059,464
		Total Short-Term Investments (Cost $7,536,413)						7,536,417
		Total Investments (Cost $42,389,345) (r) (s)			109.4	%		33,248,489
		Total Written Options Outstanding (Premiums received $13,428)			(0.1	)		(38,981	)
		Liabilities in Excess of Other Assets			(9.3	)		(2,808,699	)
		Net Assets			100.0	%	$	30,400,809

IO Interest Only security.

ARM Adjustable Rate Mortgage. Interest rate in effect as of December 31, 2008.

(a) Capital appreciation bond.

(b) Acquired through exchange offer.

(c) Securities with a total market value equal to $464,042 have been valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Such fair value measurements may be level 2 measurements if observable inputs are available. See Note 7.

(d) Resale is restricted to qualified institutional investors.

(e) Floating rate security, rate shown is the rate in effect at December 31, 2008.

(f) Security issued with perpetual maturity.

(g) Issuer in bankruptcy.

(h) Non-income producing security; bond in default.

(i) Currency index credit linked unsecured note.

(j) Payment-in-kind security.

(k) Securities purchased on a forward commitment basis with an approximate principal amount and no definite maturity date; the actual principal amount and maturity date will be determined upon settlement.

(l) Non-income producing security.

(m) Resale is restricted; acquired (12/22/98) at a cost basis of $3,549.

See Notes to Financial Statements
45

Flexible Income

Portfolio of Investments n December 31, 2008 continued

(n) Resale is restricted; acquired (06/10/99) at a cost basis of $1.

(o) Resale is restricted; acquired (between 06/18/98 and 08/15/99) at a cost basis of $573,998.

(p) See Note 4 to the financial statements regarding investments in Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class.

(q) All or a portion of this security has been physically segregated in connection with open futures contracts in the amount of $64,705.

(r) Securities have been designated as collateral in an amount equal to $7,946,987 in connection with securities purchased on a forward commitment basis, forward foreign currency, futures and swap contracts.

(s) The aggregate cost for federal income tax purposes is $42,591,849. The aggregate gross unrealized appreciation is $1,028,515 and the aggregate gross unrealized depreciation is $10,371,875, resulting in net unrealized depreciation of $9,343,360.

FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT DECEMBER 31, 2008:

CONTRACTS TO DELIVER		IN EXCHANGE FOR		DELIVERY DATE	UNREALIZED DEPRECIATION
EUR	73,000	$	99,543	01/09/09	$	(1,882	)
$	19,135	MXN	260,000	01/12/09		(441	)
Total Unrealized Depreciation					$	(2,323	)

Currency Abbreviations:

BRL Brazilian Real.

EUR Euro.

MXN Mexican New Peso.

NGN Nigerian Naira.

See Notes to Financial Statements
46

Flexible Income

Portfolio of Investments n December 31, 2008 continued

FUTURES CONTRACTS OPEN AT DECEMBER 31, 2008:

NUMBER OF CONTRACTS		LONG/SHORT	DESCRIPTION, DELIVERY MONTH AND YEAR	UNDERLYING FACE AMOUNT AT VALUE			UNREALIZED APPRECIATION (DEPRECIATION)
	6	Long	U.S.Treasury Bonds 20 Year, March 2009	$	828,281		$	45,532
	7	Long	U.S.Treasury Notes 2 Year, March 2009		1,526,438			12,337
	3	Short	Swap Future 5 Year, March 2009		(353,578	)		(335	)
	1	Short	U.S.Treasury Notes 5 Year, March 2009		(119,055	)		(1,366	)
	23	Short	Swap Future 10 Year, March 2009		(2,977,781	)		(72,986	)
	19	Short	U.S.Treasury Notes 10 Year, March 2009		(2,389,250	)		(151,949	)
Net Unrealized Depreciation							$	(168,767	)

INTEREST RATE SWAP CONTRACTS OPEN AT DECEMBER 31, 2008:

COUNTERPARTY

NOTIONAL
AMOUNT
(000'S)

PAYMENTS
RECEIVED
BY FUND

PAYMENTS
MADE
BY FUND

TERMINATION
DATE

UNREALIZED
APPRECIATION
(DEPRECIATION)

Bank of America N.A. ***

1,088

Fixed Rate 5.37 %

Floating Rate 0.00#%

February 12, 2018

110,911

Bank of America N.A. ***

860

Fixed Rate 5.07

Floating Rate 0.00#

April 14, 2018

75,895

Bank of America N.A. ***

1,340

Fixed Rate 4.982

Floating Rate 0.00#

April 15, 2018

113,297

Bank of America N.A. ***

5,818

Fixed Rate 4.778

Floating Rate 0.00#

October 10, 2018

424,190

Bank of America N.A. ***

4,171

Fixed Rate 5.557

Floating Rate 0.00#

July 24, 2023

318,956

Bank of America N.A. ***

2,692

Fixed Rate 4.797

Floating Rate 0.00#

October 7, 2023

131,688

Deutsche Bank AG

7,100

Fixed Rate 5.349

Floating Rate 2.153#

May 24, 2017

1,547,658

Deutsche Bank AG

2,500

Fixed Rate 5.198

Floating Rate 4.207#

October 4, 2017

537,025

Goldman Sachs
International ***

3,200

Fixed Rate 5.63

Floating Rate 0.00#

February 28, 2018

360,736

Goldman Sachs
International ***

1,346

Fixed Rate 4.79

Floating Rate 0.00#

October 7, 2023

65,478

JPMorgan Chase Bank N.A.
New York

2,765

Fixed Rate 4.07

Floating Rate 2.148#

May 16, 2013

230,822

JPMorgan Chase Bank N.A.
New York

1,000

Fixed Rate 5.472

Floating Rate 2.148#

August 16, 2017

232,240

JPMorgan Chase Bank N.A.
New York

1,000

Fixed Rate 5.463

Floating Rate 2.148#

August 17, 2017

231,640

See Notes to Financial Statements
47

Flexible Income

Portfolio of Investments n December 31, 2008 continued

COUNTERPARTY	NOTIONAL AMOUNT (000'S)		PAYMENTS RECEIVED BY FUND	PAYMENTS MADE BY FUND	TERMINATION DATE	UNREALIZED APPRECIATION (DEPRECIATION)
JPMorgan Chase Bank N.A. New York	$	1,000	Fixed Rate 5.451 %	Floating Rate 2.217#%	August 20, 2017	$	230,830
Bank of America N.A. ***		1,398	Floating Rate 0.00#	Fixed Rate 5.815	February 12, 2023		(122,800	)
Bank of America N.A.		1,750	Floating Rate 3.761#	Fixed Rate 4.745	June 30, 2018		(330,208	)
Bank of America N.A.		2,840	Floating Rate 3.026#	Fixed Rate 4.67	August 4, 2018		(514,580	)
Bank of America N.A.		1,320	Floating Rate 4.818#	Fixed Rate 4.242	October 10, 2038		(397,544	)
Bank of America N.A. ***		3,253	Floating Rate 0.00#	Fixed Rate 5.38	July 24, 2018		(323,608	)
Bank of America N.A. ***		2,155	Floating Rate 0.00#	Fixed Rate 4.80	October 7, 2018		(159,239	)
Bank of America N.A. ***		1,100	Floating Rate 0.00#	Fixed Rate 5.47	April 14, 2023		(81,840	)
Bank of America N.A. ***		1,610	Floating Rate 0.00#	Fixed Rate 5.38	April 15, 2023		(114,552	)
Barclays Bank ^^		1,225	Floating Rate 4.141#	Fixed Rate 0.00	November 15, 2019		(160,272	)
Barclays Bank ^^		920	Floating Rate 4.026#	Fixed Rate 0.00	November 15, 2021		(131,101	)
Deutsche Bank AG ^^		750	Floating Rate 4.117#	Fixed Rate 0.00	November 15, 2021		(94,395	)
Goldman Sachs International ***		1,077	Floating Rate 0.00#	Fixed Rate 4.80	October 7, 2018		(79,601	)
Goldman Sachs International ***		4,105	Floating Rate 0.00#	Fixed Rate 6.035	February 28, 2023		(392,110	)
JPMorgan Chase Bank N.A. New York		3,300	Floating Rate 3.192#	Fixed Rate 4.408	May 1, 2018		(516,153	)
JPMorgan Chase Bank N.A. New York ^^		535	Floating Rate 4.314#	Fixed Rate 0.00	November 15, 2019		(65,812	)
JPMorgan Chase Bank N.A. New York ^^		700	Floating Rate 3.946#	Fixed Rate 0.00	May 15, 2021		(101,419	)
JPMorgan Chase Bank N.A. New York ^^		1,225	Floating Rate 4.141#	Fixed Rate 0.00	November 15, 2021		(168,736	)
UBS AG ^^		255	Floating Rate 4.526#	Fixed Rate 0.00	November 15, 2019		(29,860	)
Bank of America N.A. ***	EUR	1,450	Fixed Rate 4.415	Floating Rate 0.00^	October 7, 2018		8,766
Deutsche Bank AG ***		5,460	Fixed Rate 5.268	Floating Rate 0.00^	July 3, 2023		197,938
Deutsche Bank AG ***		2,178	Fixed Rate 4.957	Floating Rate 0.00^	July 24, 2018		80,169
Bank of America N.A. ***		1,818	Floating Rate 0.00^	Fixed Rate 4.39	October 7, 2023		607
Deutsche Bank AG ***		4,355	Floating Rate 0.00^	Fixed Rate 4.934	July 1, 2018		(157,758	)
Deutsche Bank AG ***		2,730	Floating Rate 0.00^	Fixed Rate 5.187	July 24, 2023		(89,937	)
Net Unrealized Appreciation						$	867,321

# Floating rate based on USD-3 Months LIBOR.

^ Floating rate based on EUR-6 Months EURIBOR.

^^ Fund will make payment of $475,043, $412,031, $323,463, $202,414 $306,551, $545,072, and $95,443, respectively, on termination date.

*** Forward interest rate swap. Periodic payments on specified notional contract amount with future effective date, unless terminated earlier.

See Notes to Financial Statements
48

Flexible Income

Portfolio of Investments n December 31, 2008 continued

CREDIT DEFAULT SWAP CONTRACTS OPEN AT DECEMBER 31, 2008:

SWAP
COUNTERPARTY &
REFERENCE
OBLIGATION

BUY/SELL
PROTECTION

NOTIONAL
AMOUNT
(000'S)

INTEREST
RATE

TERMINATION
DATE

UNREALIZED
APPRECIATION

UPFRONT
PAYMENT

VALUE

CREDIT
RATING OF
REFERENCE
OBLIGATION+

(unaudited)

Bank of America, N.A.
Carnival Corp.

Buy

115

1.57

March 20, 2018

15,064

—

15,064

A-2

+ Credit rating as issued by Standard and Poor's.

OPTIONS WRITTEN AT DECEMBER 31, 2008:

NUMBER OF CONTRACTS				DESCRIPTION				STRIKE PRICE				EXPIRATION DATE				PREMIUM				VALUE
	27			Call Options on 90 day Euro$ Futures				$	98.25			March 2010				$	13,428			$	38,981

See Notes to Financial Statements
49

Balanced

Portfolio of Investments n December 31, 2008

NUMBER OF SHARES			VALUE
		Common Stocks (65.4%)
		Aerospace & Defense (1.6%)
	13,340	Raytheon Co.	$	680,874
		Airlines (0.4%)
	9,900	Continental Airlines, Inc. (Class B) (b)		178,794
		Auto Parts: O.E.M. (0.2%)
	3,629	Autoliv, Inc.		77,878
		Beverages: Non-Alcoholic (0.7%)
	6,410	Coca-Cola Co. (The)		290,181
		Cable/Satellite TV (1.3%)
	32,806	Comcast Corp. (Class A)		553,765
		Chemicals: Major Diversified (1.7%)
	12,360	Bayer AG (ADR) (Germany)		734,184
		Computer Communications (0.9%)
	22,270	Cisco Systems, Inc. (b)		363,001
		Computer Peripherals (0.2%)
	6,300	EMC Corp. (b)		65,961
		Computer Processing Hardware (1.1%)
	12,360	Hewlett-Packard Co.		448,544
		Department Stores (0.4%)
	17,700	Macy's, Inc.		183,195
		Discount Stores (1.4%)
	10,800	Wal-Mart Stores, Inc.		605,448
		Electric Utilities (3.8%)
	24,320	American Electric Power Co., Inc.		809,370
	3,990	Entergy Corp.		331,689
	9,710	FirstEnergy Corp.		471,712
				1,612,771
		Electronic Production Equipment (0.5%)
	10,700	ASML Holding N.V. (NY Registered Shares) (Netherlands)		193,349
		Electronics/Appliances (0.8%)
	15,000	Sony Corp. (ADR) (Japan)		328,050
		Financial Conglomerates (3.7%)
	45,685	JPMorgan Chase & Co.		1,440,448
	19,112	Mizuho Financial Group, Inc. (ADR) (Japan)		110,276
				1,550,724

See Notes to Financial Statements
50

Balanced

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Food: Major Diversified (2.7%)
	10,850	Kraft Foods Inc. (Class A)	$	291,323
	34,930	Unilever N.V. (NY Registered Shares) (Netherlands)		857,532
				1,148,855
		Food: Specialty/Candy (1.8%)
	20,999	Cadbury PLC (ADR) (United Kingdom)		749,041
		Home Improvement Chains (1.3%)
	24,482	Home Depot, Inc. (The)		563,576
		Household/Personal Care (1.7%)
	9,080	Estee Lauder Cos. Inc. (The) (Class A)		281,117
	2,490	Kimberly-Clark Corp.		131,323
	5,260	Procter & Gamble Co. (The)		325,173
				737,613
		Industrial Conglomerates (1.8%)
	20,300	General Electric Co.		328,860
	3,740	Siemens AG (ADR) (Germany)		283,305
	7,202	Tyco International Ltd. (Bermuda)		155,563
				767,728
		Insurance Brokers/Services (2.4%)
	42,130	Marsh & McLennan Cos., Inc.		1,022,495
		Integrated Oil (4.4%)
	6,800	BP PLC (ADR) (United Kingdom)		317,832
	3,580	ConocoPhillips		185,444
	8,120	Exxon Mobil Corp.		648,220
	2,400	Hess Corp.		128,736
	10,940	Royal Dutch Shell PLC (ADR) (United Kingdom)		579,164
				1,859,396
		Investment Banks/Brokers (0.9%)
	23,392	Schwab (Charles) Corp. (The)		378,249
		Major Banks (3.9%)
	32,766	Bank of America Corp.		461,345
	19,891	KeyCorp		169,471
	8,738	Mitsubishi UFJ Financial Group, Inc. (ADR) (Japan)		54,263
	10,688	PNC Financial Services Group, Inc.		523,712
	23	Sumitomo Mitsui Financial Group, Inc. (g)		99,630
	11,665	SunTrust Banks, Inc.		344,584
				1,653,005
		Major Telecommunications (1.7%)
	21,330	Verizon Communications Inc.		723,087

See Notes to Financial Statements
51

Balanced

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Media Conglomerates (3.5%)
	86,754	Time Warner Inc.	$	872,745
	31,758	Viacom Inc. (Class B) (b)		605,307
				1,478,052
		Medical Distributors (0.5%)
	5,900	Cardinal Health, Inc.		203,373
		Medical Specialties (1.4%)
	29,290	Boston Scientific Corp. (b)		226,705
	9,892	Covidien Ltd. (Bermuda)		358,486
				585,191
		Motor Vehicles (0.3%)
	8,002	Harley-Davidson, Inc.		135,794
		Oil & Gas Production (2.6%)
	6,000	Anadarko Petroleum Corp.		231,300
	3,900	Devon Energy Corp.		256,269
	10,410	Occidental Petroleum Corp.		624,496
				1,112,065
		Oilfield Services/Equipment (0.5%)
	4,600	Schlumberger Ltd. (Netherlands Antilles)		194,718
		Other Consumer Services (1.0%)
	31,400	eBay Inc. (b)		438,344
		Packaged Software (0.1%)
	4,256	Symantec Corp. (b)		57,541
		Personnel Services (0.4%)
	3,200	Manpower Inc.		108,768
	2,900	Robert Half International, Inc.		60,378
				169,146
		Pharmaceuticals: Major (7.9%)
	11,770	Abbott Laboratories		628,165
	26,290	Bristol-Myers Squibb Co.		611,243
	9,410	Novartis AG (ADR) (Switzerland)		468,242
	6,780	Roche Holdings AG (ADR) (Switzerland)		518,602
	46,150	Schering-Plough Corp.		785,935
	8,440	Wyeth		316,584
				3,328,771
		Precious Metals (1.0%)
	10,250	Newmont Mining Corp.		417,175

See Notes to Financial Statements
52

Balanced

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Property - Casualty Insurers (2.9%)
	12,022	Chubb Corp. (The)	$	613,122
	13,421	Travelers Cos., Inc. (The)		606,629
				1,219,751
		Restaurants (0.4%)
	16,700	Starbucks Corp. (b)		157,982
		Semiconductors (0.7%)
	18,919	Intel Corp.		277,352
		Telecommunication Equipment (0.2%)
	47,990	Alcatel-Lucent (ADR) (France) (b)		103,178
		Tobacco (0.7%)
	6,880	Phillip Morris International Inc.		299,348
		Total Common Stocks (Cost $33,349,286)		27,647,545

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE
		Corporate Bonds (10.3%)
		Accident & Health Insurance (0.1%)
$	25	Travelers Cos, Inc. (The)		5.80	%	05/15/18	24,126
		Aerospace & Defense (0.1%)
	37	Systems 2001 Asset Trust - 144A (Cayman Islands) (a)		6.664		09/15/13	32,876
		Agricultural Commodities/Milling (0.0%)
	20	Archer-Daniels-Midland Co.		5.45		03/15/18	19,722
		Airlines (0.1%)
	92	America West Airlines, LLC (Series 01-1)		7.10		04/02/21	56,884
		Beverages: Alcoholic (0.1%)
	25	Diageo Capital PLC (United Kingdom)		7.375		01/15/14	26,659
	35	FBG Finance Ltd. - 144A (Australia) (a)		5.125		06/15/15	28,888
							55,547
		Biotechnology (0.2%)
	35	Amgen Inc.		5.85		06/01/17	36,206
	30	Biogen Idec Inc.		6.875		03/01/18	29,361
							65,567
		Cable/Satellite TV (0.1%)
	25	Comcast Corp.		5.70		05/15/18	23,487
	15	Comcast Corp.		6.50		01/15/15	14,762
							38,249

See Notes to Financial Statements
53

Balanced

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Chemicals: Agricultural (0.0%)
$	10	Monsanto Co.		5.125	%	04/15/18	$	10,512
		Chemicals: Major Diversified (0.0%)
	20	E.I. du Pont de Nemours & Co.		6.00		07/15/18		21,044
		Computer Processing Hardware (0.1%)
	25	Dell Inc.		5.65		04/15/18		22,415
	10	Hewlett-Packard Co.		5.50		03/01/18		10,110
								32,525
		Department Stores (0.2%)
	95	General Electric Capital Corp.		5.625		05/01/18		95,861
		Discount Stores (0.1%)
	40	Wal-Mart Stores, Inc.		4.25		04/15/13		41,211
		Diversified Manufacturing (0.2%)
	75	Tyco Electronics Group S.A. (Luxembourg)		5.95		01/15/14		65,032
		Drugstore Chains (0.1%)
	5	CVS Caremark Corp.		5.75		06/01/17		4,715
	5	CVS Caremark Corp.		5.75		08/15/11		5,020
	43	CVS Pass Through Trust - 144A (a)		6.036		12/10/28		26,163
	15	Walgreen Co.		4.875		08/01/13		15,464
								51,362
		Electric Utilities (1.0%)
	10	Alabama Power Co.		5.80		11/15/13		10,418
	35	Carolina Power & Light Inc.		5.125		09/15/13		35,146
	20	CenterPoint Energy Resources Corp.		6.25		02/01/37		14,156
	10	CenterPoint Energy Resources Corp. (Series B)		7.875		04/01/13		9,271
	25	Consolidated Natural Gas Co. (Series C)		6.25		11/01/11		25,143
	20	Consumers Energy Co. (Series H)		4.80		02/17/09		19,959
	20	Detroit Edison Co. (The)		6.125		10/01/10		20,124
	55	E.ON International Finance BV - 144A (Netherlands) (a)		5.80		04/30/18		51,514
	45	Entergy Gulf States, Inc.		2.603	(e)	12/01/09		43,352
	10	Georgia Power Co.		6.00		11/01/13		10,522
	25	Ohio Edison Co.		6.40		07/15/16		22,477
	45	Ohio Power Co. (Series K)		6.00		06/01/16		43,118
	20	PECO Energy Co.		5.35		03/01/18		19,127
	20	PPL Energy Supply LLC		6.30		07/15/13		18,535
	20	Public Service Co. of Colorado		6.50		08/01/38		22,391
	25	Public Service Electric & Gas Co. (Series B)		5.00		01/01/13		24,408
	25	Texas Eastern Transmission LP		7.00		07/15/32		23,174
	20	Union Electric Co.		6.70		02/01/19		18,256
	5	Virginia Electric & Power Co.		8.875		11/15/38		6,347
								437,438

See Notes to Financial Statements
54

Balanced

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Electrical Products (0.1%)
$	30	Cooper US Inc.		5.25	%	11/15/12	$	30,330
		Electronic Components (0.1%)
	40	Koninklijke Philips Electronics N.V. (Netherlands)		5.75		03/11/18		36,918
		Electronic Equipment/Instruments (0.0%)
	25	Xerox Corp.		6.35		05/15/18		19,584
		Electronic Production Equipment (0.0%)
	30	KLA-Tencor Corp.		6.90		05/01/18		22,726
		Electronics/Appliances (0.0%)
	25	LG Electronics Inc. - 144A (South Korea) (a)		5.00		06/17/10		22,212
		Finance/Rental/Leasing (0.1%)
	40	Nationwide Building Society - 144A (United Kingdom) (a)		4.25		02/01/10		39,597
		Financial Conglomerates (0.6%)
	40	American Express Credit Corp.		7.30		08/20/13		40,983
	20	Brookfield Asset Management Inc. (Canada)		5.80		04/25/17		8,300
	40	Citigroup Inc.		5.875		05/29/37		40,107
	50	Citigroup Inc.		6.125		11/21/17		50,613
	25	Citigroup Inc.		6.125		05/15/18		25,323
	60	JPMorgan Chase & Co.		4.75		05/01/13		59,263
	15	Prudential Financial, Inc. (Series MTN)		6.625		12/01/37		10,253
								234,842
		Food Retail (0.1%)
	10	Delhaize America, Inc.		9.00		04/15/31		10,138
	15	Kroger Co. (The)		5.00		04/15/13		14,454
	5	Kroger Co. (The)		6.40		08/15/17		5,051
								29,643
		Food: Major Diversified (0.2%)
	25	ConAgra Foods, Inc.		7.00		10/01/28		24,590
	10	ConAgra Foods, Inc.		8.25		09/15/30		10,996
	20	General Mills, Inc.		5.25		08/15/13		20,141
	40	Kraft Foods Inc.		6.125		08/23/18		39,506
								95,233
		Foods & Beverages (0.0%)
	20	Dr Pepper Snapple Group, Inc. - 144A (a)		6.82		05/01/18		19,761
		Gas Distributors (0.2%)
	15	Equitable Resources, Inc.		6.50		04/01/18		14,035
	25	NiSource Finance Corp.		2.723	(e)	11/23/09		22,531
	25	NiSource Finance Corp.		6.80		01/15/19		15,743
	25	Questar Market Resources, Inc.		6.80		04/01/18		24,096
								76,405

See Notes to Financial Statements
55

Balanced

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Home Improvement Chains (0.1%)
$	35	Home Depot, Inc. (The)		5.40	%	03/01/16	$	31,367
		Hotels/Resorts/Cruiselines (0.0%)
	30	Starwood Hotels & Resorts Worldwide, Inc.		6.75		05/15/18		16,524
		Household/Personal Care (0.1%)
	35	Procter & Gamble Co. (The)		4.60		01/15/14		36,718
		Industrial Conglomerates (0.3%)
	125	General Electric Co.		5.25		12/06/17		124,838
	20	Honeywell International Inc.		5.30		03/01/18		20,442
								145,280
		Industrial Machinery (0.0%)
	20	Parker Hannifin Corp. (Series MTN)		5.50		05/15/18		19,370
		Integrated Oil (0.2%)
	45	ConocoPhillips		5.20		05/15/18		43,875
	10	Marathon Oil Corp.		5.90		03/15/18		8,366
	30	Marathon Oil Corp.		6.00		10/01/17		25,622
	20	Petro-Canada (Canada)		6.05		05/15/18		16,511
								94,374
		International Banks (0.1%)
	25	UBS AG/Stamford Branch (Series DPNT)		5.875		12/20/17		23,005
		Investment Banks/Brokers (0.7%)
	20	Bear Stearns Cos. LLC (The)		6.40		10/02/17		20,818
	45	Bear Stearns Cos. LLC (The)		7.25		02/01/18		49,396
	60	Goldman Sachs Group, Inc.		6.15		04/01/18		57,757
	100	Goldman Sachs Group, Inc.		6.75		10/01/37		81,412
	70	Merrill Lynch & Co., Inc. (Series MTN)		6.875		04/25/18		73,348
	25	NYSE Euronext		4.80		06/28/13		24,273
								307,004
		Life/Health Insurance (0.1%)
	25	MetLife, Inc. (Series A)		6.817		08/15/18		23,851
		Major Banks (1.0%)
	110	Bank of America Corp.		5.75		12/01/17		110,018
	35	Bank of New York Mellon Corp. (Series MTN)		4.50		04/01/13		34,835
	35	Credit Suisse/New York NY (Switzerland)		6.00		02/15/18		32,196
	15	Credit Suisse Inc.		5.125		08/15/15		13,642
	55	HSBC Finance Corp.		6.75		05/15/11		54,791
	40	Popular North America Inc. (Series MTN)		5.65		04/15/09		39,631
	70	Wachovia Corp (Series MTN)		5.50		05/01/13		69,285
	75	Wells Fargo & Co.		5.625		12/11/17		78,383
								432,781

See Notes to Financial Statements
56

Balanced

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Major Telecommunications (0.8%)
$	15	AT&T Corp.		8.00	(e) %	11/15/31	$	18,897
	5	AT&T Inc.		5.60		05/15/18		5,100
	60	AT&T Inc.		6.30		01/15/38		63,644
	15	Deutsche Telekom International Finance BV (Netherlands)		8.75	(e)	06/15/30		18,547
	30	France Telecom S.A. (France)		8.50	(e)	03/01/31		37,770
	20	SBC Communications, Inc.		6.15		09/15/34		20,623
	30	Telecom Italia Capital S.A. (Luxembourg)		4.00		01/15/10		27,607
	5	Telecom Italia Capital S.A. (Luxembourg)		4.95		09/30/14		3,811
	25	Telecom Italia Capital S.A. (Luxembourg)		6.999		06/04/18		20,314
	40	Telefonica Europe BV (Netherlands)		8.25		09/15/30		46,970
	40	Verizon Communications Inc.		5.50		02/15/18		38,542
	10	Verizon Communications Inc.		8.95		03/01/39		12,957
	25	Verizon New England, Inc.		6.50		09/15/11		24,832
								339,614
		Managed Health Care (0.1%)
	25	UnitedHealth Group Inc.		6.00		02/15/18		23,105
		Marine Shipping (0.1%)
	30	Union Pacific Corp.		7.875		01/15/19		34,334
		Media Conglomerates (0.4%)
	35	Time Warner Cable Inc.		6.75		07/01/18		33,756
	20	Time Warner Cable Inc.		8.75		02/14/19		21,784
	40	Time Warner Inc.		5.875		11/15/16		35,914
	40	Viacom Inc.		6.875		04/30/36		31,695
	45	Vivendi - 144A (France) (a)		6.625		04/04/18		36,373
								159,522
		Medical Specialties (0.1%)
	5	Baxter International Inc.		5.375		06/01/18		5,236
	30	Covidien International Finance S.A. (Luxembourg)		6.00		10/15/17		29,645
								34,881
		Miscellaneous (0.0%)
	20	TransCanada Pipelines Ltd. (Canada)		6.50		08/15/18		19,656
		Motor Vehicles (0.1%)
	35	Daimler Finance North American LLC		8.50		01/18/31		25,645
	25	Harley-Davidson Funding Corp. - 144A (a)		6.80		06/15/18		13,510
								39,155
		Multi-Line Insurance (0.3%)
	130	AIG SunAmerica Global Financing VI - 144A (a)		6.30		05/10/11		111,841

See Notes to Financial Statements
57

Balanced

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Oil & Gas Pipelines (0.1%)
$	25	Kinder Morgan Energy Partners, L.P.		5.95	%	02/15/18	$	21,372
	50	Plains All American Pipeline LP/PAA Finance Corp.		6.70		05/15/36		33,170
								54,542
		Oil & Gas Production (0.1%)
	15	Devon Financing Corp. ULC (Canada)		7.875		09/30/31		16,562
	30	XTO Energy, Inc.		5.50		06/15/18		27,207
								43,769
		Oil Refining/Marketing (0.1%)
	30	Valero Energy Corp.		3.50		04/01/09		29,798
		Oilfield Services/Equipment (0.0%)
	25	Weatherford International Ltd. (Bermuda)		6.00		03/15/18		21,029
		Other Metals/Minerals (0.1%)
	70	Brascan Corp. (Canada)		7.125		06/15/12		43,050
	15	Rio Tinto Finance Ltd. (Australia)		6.50		07/15/18		11,015
								54,065
		Packaged Software (0.1%)
	35	Oracle Corp.		5.75		04/15/18		36,675
		Pharmaceuticals: Major (0.3%)
	30	AstraZeneca PLC (United Kingdom)		5.90		09/15/17		31,936
	40	Bristol-Myers Squibb Co.		5.45		05/01/18		41,491
	40	GlaxoSmithKline Capital Inc.		5.65		05/15/18		42,090
	20	Wyeth		5.45		04/01/17		20,404
								135,921
		Property - Casualty Insurers (0.3%)
	20	ACE INA Holding Inc.		5.60		05/15/15		18,179
	50	Berkshire Hathaway Finance Corp.		5.40		05/15/18		51,492
	10	Chubb Corp. (The)		5.75		05/15/18		9,619
	30	Platinum Underwriters Finance Inc. (Series B)		7.50		06/01/17		19,501
	35	Xlliac Global Funding - 144A (a)		4.80		08/10/10		24,505
								123,296
		Railroads (0.1%)
	25	Burlington Northern Santa Fe Corp.		6.125		03/15/09		25,057
	10	Canadian National Railway Co. (Canada)		5.55		05/15/18		10,003
								35,060
		Restaurants (0.1%)
	30	Tricon Global Restaurants, Inc.		8.875		04/15/11		30,402

See Notes to Financial Statements
58

Balanced

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		Savings Banks (0.2%)
$	25	Household Finance Corp.		6.375	%	10/15/11	$	24,612
	55	Sovereign Bancorp, Inc.		1.728	(e)	03/23/10		48,851
								73,463
		Services to the Health Industry (0.1%)
	30	Medco Health Solutions, Inc.		7.125		03/15/18		27,767
		Steel (0.1%)
	35	ArcelorMittal (Luxembourg)		6.125		06/01/18		24,004
		Tobacco (0.1%)
	20	BAT International Finance PLC - 144A (United Kingdom) (a)		9.50		11/15/18		22,268
	40	Philip Morris International Inc.		5.65		05/16/18		39,724
								61,992
		Trucks/Construction/Farm Machinery (0.1%)
	10	Caterpillar Financial Services Corp. (Series MTN)		4.90		08/15/13		9,381
	15	John Deere Capital Corp. (Series MTN)		5.75		09/10/18		14,625
								24,006
		Wireless Telecommunications (0.1%)
	30	Vodafone Group PLC (United Kingdom)		5.625		02/27/17		28,312
		Total Corportate Bonds (Cost $4,699,236)						4,371,690
		Foreign Government Obligation (0.3%)
	100	Federal Republic of Brazil (Cost $102,017)		6.00		01/17/17		103,750
		U.S. Government Agencies & Obligations (13.1%)
		Federal National Mortgage Assoc.
	100			5.00		05/11/17		114,220
		Federal Home Loan Mortgage Corp.
	340			5.50		08/23/17		401,674
	100			6.75		03/15/31		147,136
		U.S. Treasury Bonds
	215			4.50		05/15/38		293,509
	200			6.00		02/15/26		279,188
	800			7.125		02/15/23		1,160,875
	49			8.75		05/15/17		72,122
	120			8.875		08/15/17		178,678
	88			8.875		02/15/19		135,314
	127			9.00		11/15/18		196,195
	19			9.125		05/15/18		29,389

See Notes to Financial Statements
59

Balanced

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE	VALUE
		U.S. Treasury Notes
$	2,400			1.50		%10/31/10	$	2,436,564
	86			3.75		11/15/18		97,381
		Total U.S. Government Agencies & Obligations (Cost $5,382,905)						5,542,245
		Asset-Backed Securities (0.4%)
		Finance/Rental/Leasing
	74	Capital Auto Receivables Assets Trust 2007-SN1 A3B		1.255	(e)	07/15/10		68,738
	36	Capital One Auto Finance Trust 2006-C A3A		5.07		07/15/11		34,788
	47	CIT Equipment Collateral 2006-VT2 A3		5.07		02/20/10		47,292
	9	Ford Credit Auto Owner Trust 2006-A A3		5.05		03/15/10		8,823
		Total Asset-Backed Securities (Cost $165,796)						159,641
		U.S. Government Agencies-Mortgage-Backed Securities (2.3%)
		Federal National Mortgage Assoc. (1.0%)
	260			5.50		(f)		266,541
	42			7.50		09/01/25 - 08/01/31		44,897
	75			8.00		12/01/28 - 10/01/31		79,160
								390,598
		Federal National Mortgage Assoc. (ARM) (1.3%)
	118			4.255		03/01/36		111,347
	333			4.261		01/01/36		315,841
	146			4.278		03/01/36		138,141
								565,329
		Government National Mortgage Assoc. (0.0%)
	13			7.50		08/15/23 - 08/15/29		13,745
		Total U.S. Government Agencies-Mortgage-Backed Securities (Cost $1,012,632)						969,672
		Collateralized Mortgage Obligations (0.5%)
		U.S. Government Agencies
	82	Federal Home Loan Mortgage Corp. Whole Loan 2005-S001 2A2		0.621	(e)	09/25/45		67,800
		Federal National Mortgage Assoc.
	357	2005-68 XI (IO) (g)		6.00		08/25/35		29,207

See Notes to Financial Statements
60

Balanced

Portfolio of Investments n December 31, 2008 continued

PRINCIPAL AMOUNT IN THOUSANDS			COUPON RATE			MATURITY DATE			VALUE
$	119	2006-28 1A1		0.581	(e)%		03/25/36		$	103,688
	1,453	2006-28 1P (IO) (g)		3.623	(e)		03/25/36			10,896
		Total U.S. Government Agencies								211,591
		Private Issue
	50	Harborview Mortgage Loan Trust 2006-SB1 M1 (g)		0.961	(e)		12/19/36			272
		Total Collateralized Mortgage Obligations (Cost $292,761)								211,863
NUMBER OF CONTRACTS
		Call Options Purchased (0.1%)
	11	90 day Euro$ Futures March 2010 @ 97.75 (Cost $9,929)								25,575
PRINCIPAL AMOUNT IN THOUSANDS
		Short-Term Investments (8.4%)
		U.S. Government Obligation (0.2%)
$	100	U.S. Treasury Bill (c) (d) (Cost $99,972)		0.72			01/15/09			99,972
NUMBER OF SHARES (000)
		Investment Company (h) (i) (8.2%)
	3,473	Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (Cost $3,472,743)								3,472,743
		Total Short-Term Investments Cost $3,572,715)								3,572,715
		Total Investments (Cost $48,587,277) (j) (k)					100.8	%		42,604,696
		Liabilities in Excess of Other Assets					(0.8	)		(315,734	)
		Total Written Options Outstanding (Premium received $5,470)					0.0			(15,881	)
		Net Assets					100.0	%	$	42,273,081

See Notes to Financial Statements
61

Balanced

Portfolio of Investments n December 31, 2008 continued

IO Interest only security.

ADR American depositary receipt.

ARM Adjustable rate mortgage.

(a) Resale is restricted to qualified institutional investors.

(b) Non-income producing security.

(c) A portion of this security has been physically segregated in connection with open futures contracts in an amount equal to $58,469.

(d) Purchased on a discount basis. The interest rates shown have been adjusted to reflect a money market equivalent yield.

(e) Floating Rate security, rate shown is the rate in effect at December 31, 2008.

(f) Security was purchased on a forward commitment basis with an approximate principal amount and no definite date, the actual principal amount and maturity date will be determined upon settlement.

(g) Securities with a total market value equal to $140,005 have been valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Such fair value measurements may be level 2 measurements if observable inputs are available. (See Note 7).

(h) See Note 4 to the financial statements regarding investments in Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class.

(i) May include cash designated as collateral in connection with open swap contracts.

(j) Securities have been designated as collateral in an amount equal to $3,005,086 in connection with securities purchased on a forward commitment basis, futures, option and swap contracts.

(k) The aggregate cost for federal income tax purposes is $48,715,664. The aggregate gross unrealized appreciation is $1,965,975 and the aggregate gross unrealized depreciation is $8,076,943 resulting in net unrealized depreciation of $6,110,968.

FUTURES CONTRACTS OPEN AT DECEMBER 31, 2008:

NUMBER OF CONTRACTS		LONG/SHORT	DESCRIPTION, DELIVERY MONTH AND YEAR	UNDERLYING FACE AMOUNT AT VALUE			UNREALIZED APPRECIATION (DEPRECIATION)
	5	Long	U.S.Treasury Notes 5 Year, March 2009	$	595,273		$	6,365
	4	Long	Swap Future 5 Year, March 2009		471,438			8,188
	1	Long	U.S.Treasury Bonds 20 Year, March 2009		138,047			(2,077	)
	10	Short	U.S.Treasury Notes 10 Year, March 2009		(1,257,500	)		(30,937	)
	21	Short	Swap Future 10 Year, March 2009		(2,718,844	)		(74,919	)
Net Unrealized Depreciation							$	(93,380	)

See Notes to Financial Statements
62

Balanced

Portfolio of Investments n December 31, 2008 continued

INTEREST RATE SWAP CONTRACTS OPEN AT DECEMBER 31, 2008:

COUNTERPARTY

NOTIONAL
AMOUNT
(000'S)

PAYMENTS
RECEIVED
BY FUND

PAYMENTS
MADE
BY FUND

TERMINATION
DATE

UNREALIZED
APPRECIATION
(DEPRECIATION)

Bank of America N.A. ***

355

Fixed Rate 5.37 %

Floating Rate 0.00#%

February 12, 2018

36,189

Bank of America N.A. ***

385

Fixed Rate 5.07

Floating Rate 0.00#

April 14, 2018

33,976

Bank of America N.A. ***

805

Fixed Rate 4.983

Floating Rate 0.00#

April 15, 2018

68,063

Bank of America N.A. ***

1,857

Fixed Rate 5.558

Floating Rate 0.00#

July 24, 2023

142,005

Bank of America N.A. ***

1,199

Fixed Rate 4.798

Floating Rate 0.00#

October 7, 2023

58,645

Citibank N.A. New York

300

Fixed Rate 5.338

Floating Rate 2.153#

May 24, 2017

65,130

Citibank N.A. New York

700

Fixed Rate 5.448

Floating Rate 2.388#

August 9, 2017

160,853

Citibank N.A. New York

1,400

Fixed Rate 5.239

Floating Rate 1.466#

September 27, 2017

304,640

Citibank N.A. New York

200

Fixed Rate 4.648

Floating Rate 2.181#

February 27, 2018

34,956

Goldman Sachs
International ***

1,335

Fixed Rate 5.63

Floating Rate 0.00#

February 28, 2018

150,495

Goldman Sachs
International ***

600

Fixed Rate 4.79

Floating Rate 0.00#

October 7, 2023

29,171

JPMorgan Chase Bank N.A.
New York

1,185

Fixed Rate 4.07

Floating Rate 2.149#

May 16, 2013

98,924

JPMorgan Chase Bank N.A.
New York

850

Fixed Rate 5.448

Floating Rate 2.181#

May 29, 2017

191,998

Bank of America N.A. ***

1,444

Floating Rate 0.00#

Fixed Rate 5.38

July 24, 2018

(143,649

)

Bank of America N.A.

800

Floating Rate 3.026#

Fixed Rate 4.67

August 4, 2018

(144,952

)

Bank of America N.A. ***

956

Floating Rate 0.00#

Fixed Rate 4.80

October 7, 2018

(70,680

)

Bank of America N.A. ***

457

Floating Rate 0.00#

Fixed Rate 5.815

February 12, 2023

(40,143

)

Bank of America N.A. ***

490

Floating Rate 0.00#

Fixed Rate 5.47

April 14, 2023

(36,456

)

Bank of America N.A. ***

995

Floating Rate 0.00#

Fixed Rate 5.38

April 15, 2023

(70,794

)

Goldman Sachs
International ***

478

Floating Rate 0.00#

Fixed Rate 4.80

October 7, 2018

(35,329

)

Goldman Sachs
International ***

1,715

Floating Rate 0.00#

Fixed Rate 6.035

February 28, 2023

(163,817

)

Bank of America N.A. ***

EUR

651

Fixed Rate 4.415

Floating Rate 0.00^

October 7, 2018

3,935

Deutsche Bank AG
Frankfurt ***

978

Fixed Rate 4.958

Floating Rate 0.00^

July 24, 2018

35,999

Deutsche Bank AG
Frankfurt ***

1,225

Fixed Rate 5.268

Floating Rate 0.00^

July 2, 2023

44,409

Deutsche Bank AG
Frankfurt ***

645

Fixed Rate 5.239

Floating Rate 0.00^

July 9, 2023

22,603

Deutsche Bank AG
Frankfurt ***

585

Fixed Rate 5.24

Floating Rate 0.00^

July 10, 2023

20,525

Bank of America N.A. ***

818

Floating Rate 0.00^

Fixed Rate 4.39

October 7, 2023

273

See Notes to Financial Statements
63

Balanced

Portfolio of Investments n December 31, 2008 continued

COUNTERPARTY

NOTIONAL
AMOUNT
(000'S)

PAYMENTS
RECEIVED
BY FUND

PAYMENTS
MADE
BY FUND

TERMINATION
DATE

UNREALIZED
APPRECIATION
(DEPRECIATION)

Deutsche Bank AG
Frankfurt ***

EUR

975

Floating Rate 0.00^%

Fixed Rate 4.934%

July 1, 2018

(35,319

)

Deutsche Bank AG
Frankfurt ***

515

Floating Rate 0.00^

Fixed Rate 4.861

July 9, 2018

(16,522

)

Deutsche Bank AG
Frankfurt ***

465

Floating Rate 0.00^

Fixed Rate 4.86

July 10, 2018

(14,879

)

Deutsche Bank AG
Frankfurt ***

1,227

Floating Rate 0.00^

Fixed Rate 5.188

July 24, 2023

(40,426

)

Net Unrealized Appreciation

689,823

EUR Euro.

# Floating rate based on USD-3 Months LIBOR.

^ Floating rate based on EUR-6 Months EURIBOR.

*** Forward interest rate swap. Periodic payments on specified notional contract amount with future effective date, unless terminated earlier.

CREDIT DEFAULT SWAP CONTRACTS OPEN AT DECEMBER 31, 2008:

SWAP COUNTERPARTY & REFERENCE OBLIGATION	BUY/SELL PROTECTION	NOTIONAL AMOUNT (000'S)		INTEREST RATE			TERMINATION DATE	UNREALIZED APPRECIATION		UPFRONT PAYMENTS		VALUE		CREDIT RATING OF REFERENCE OBLIGATION
														(unaudited)
JPMorgan Chase Bank N.A. Nordstrom, Inc.	Buy	$	30		1.07	%	March 20, 2018	$	6,500		—	$	6,500	NR
Bank of America, N.A. Sealed Air Corp.	Buy		10		1.12		March 20, 2018		2,263		—		2,263	NR
Total Credit Default Swaps		$	40					$	8,763		—	$	8,763

NR - Not Rated

OPTIONS WRITTEN AT DECEMBER 31, 2008:

NUMBER OF CONTRACTS				DESCRIPTION				STRIKE PRICE				EXPIRATION DATE				PREMIUM				VALUE
	11			Call Options on 90 day Euro$ Futures				$	98.25			March 2010				$	5,470			$	15,881

See Notes to Financial Statements
64

Balanced

Portfolio of Investments n December 31, 2008 continued

SUMMARY OF INVESTMENTS

TYPE OF INVESTMENT	VALUE			PERCENT OF TOTAL INVESTMENTS
Common Stocks	$	27,647,545			64.9	%
U.S. Government Agencies & Obligations		5,542,245			13.0
Corporate Bonds		4,371,690			10.3
Short-Term Investments		3,572,715			8.4
U.S. Government Agencies-Mortgage-Backed Securities		969,672			2.3
Collateralized Mortgage Obligations		211,863			0.5
Asset-Backed Securities		159,641			0.4
Foreign Government Obligation		103,750			0.2
Call Options Purchased		25,575			0.0
	$	42,604,696	^^		100.0	%

^^ Does not include open long/short futures contracts with an underlying face amount of $5,181,102 with unrealized depreciation of $93,380. Also does not include open swap contracts with net unrealized appreciation of $698,586 and options written with value of $15,881.

See Notes to Financial Statements
65

Global Infrastructure

Portfolio of Investments n December 31, 2008

NUMBER OF SHARES			VALUE
		Common Stocks (98.5%) Australia (5.9%)
		Industrial (0.5%)
	463,000	ConnectEast Group (b)	$	178,758
		Investment Trusts/Mutual Funds (1.7%)
	514,034	Macquarie Infrastructure Group (b)		616,529
		Other Transportation (3.7%)
	271,129	Macquarie Airports (b)		456,638
	235,086	Transurban Group (b)		902,725
				1,359,363
		Total Australia		2,154,650
		Austria (0.3%)
		Other Transportation
	2,065	Flughafen Wien AG (a) (b)		92,331
		Belgium (0.3%)
		Shipping
	8,313	Euronav S.A. (b)		114,061
		Bermuda (3.5%)
		Other Transportation (1.2%)
	426,000	Cosco Pacific Ltd. (b)		438,583
		Shipping (1.7%)
	13,000	Frontline Ltd. (b)		379,121
	7,600	Nordic American Tanker Shipping Ltd.		256,500
				635,621
		Marine Shipping (0.6%)
	18,600	Ship Finance International Ltd.		205,530
	1,600	Tsako Energy Navigation Ltd.		29,312
				234,842
		Total Bermuda		1,309,046

NUMBER OF SHARES			VALUE
		Brazil (1.0%)
		Electric Utilities (0.9%)
	300	CPFL Energia S.A. (ADR)	$	11,721
	4,600	Companhia Energetica de Minas Gerais (ADR)		63,204
	24,000	Electropaulo Metropolitanna S.A. (b)		269,166
				344,091
		Miscellaneous (0.1%)
	1,100	Companhia de Saneamento Basico do Estado de Sao Paulo (ADR)		26,631
		Total Brazil		370,722
		Canada (8.0%)
		Electric Utilities (0.4%)
	4,800	Canadian Utilities Ltd.		157,473
		Gas Distributors (5.0%)
	68,900	TransCanada Corp.		1,851,286
		Investment Trusts/Mutual Funds (0.1%)
	5,300	Westshore Terminals Income Fund		41,215
		Natural Gas - Pipelines (0.1%)
	3,200	AltaGas Income Trust		44,585
		Oil & Gas Pipelines (2.4%)
	26,300	Enbridge Inc.		842,793
	4,000	Pembina Pipeline Income Fund		49,380
				892,173
		Total Canada		2,986,732
		Chile (0.5%)
		Electric Utilities
	4,100	Enersis S.A. (ADR)		52,234
	528,089	Enersis S.A. (b)		135,177
		Total Chile		187,411

See Notes to Financial Statements
66

Global Infrastructure

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		China (1.8%)
		Electric Utilities (0.1%)
	1,100	Huaneng Power International, Inc. (ADR)	$	32,098
		Oil Related (0.2%)
	237,800	Dalian Port (PDA) Co. Ltd. (b)		60,524
		Other Transportation (1.5%)
	208,000	Beijing Capital International Airport Co. Ltd. (b)		105,361
	196,000	Jiangsu Expressway Co. Ltd. (b)		145,252
	512,000	Zhejiang Expressway Co., Ltd. (H Shares) (b)		303,144
				553,757
		Total China		646,379
		Czech Republic (0.4%)
		Specialty Telecommunications
	6,789	Telefonica 02 Czech Republic A.S. (b)		149,319
		Denmark (0.3%)
		Transportation
	9,250	Dampskibsselskabet Torm A.S. (b)		101,654
		Finland (0.5%)
		Electric Utilities
	8,838	Fortum Oyj (b)		189,835
		France (7.4%)
		Electric Utilities (0.6%)
	3,774	Electricite de France (EDF) (b)		219,348
		Gas Distributors (4.4%)
	33,605	GDF Suez (b)		1,664,353
		Other Transportation (1.0%)
	5,200	Aeroports de Paris (ADP) (b)		351,908
		Transportation (0.8%)
	4,416	Societe des Autoroutes Paris-Rhin-Rhone (SAPRR) (b)		306,801

NUMBER OF SHARES			VALUE
		Waste Management (0.1%)
	15,773	Derichebourg S.A. (b)	$	35,770
		Water Utilities (0.5%)
	6,037	Veolia Environnement (b)		189,470
		Total France		2,767,650
		Germany (11.5%)
		Electric Utilities (9.4%)
	50,506	E.ON AG (b)		2,042,316
	16,097	RWE AG (b)		1,447,064
				3,489,380
		Other Transportation (2.1%)
	10,826	Fraport AG (b)		472,788
	9,873	Hamburger Hafen und Logistik AG (HHLA) (b)		328,833
				801,621
		Total Germany		4,291,001
		Hong Kong (3.0%)
		Electric Utilities (1.0%)
	54,500	CLP Holdings Ltd. (b)		370,554
		Industrial Conglomerates (0.0%)
	40,000	Guangdong Investment Ltd. (b)		16,154
		Other Transportation (2.0%)
	378,000	China Merchants Holdings International Co. Ltd. (b)		744,872
		Total Hong Kong		1,131,580
		Italy (6.9%)
		Electric Utilities (2.7%)
	156,297	Enel S.p.A. (b)		999,534
		Industrial (0.3%)
	8,900	Ansaldo STS S.p.A. (b)		125,396
		Other Transportation (3.9%)
	78,733	Atlantia S.p.A. (b)		1,447,818
		Total Italy		2,572,748

See Notes to Financial Statements
67

Global Infrastructure

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Japan (8.8%)
		Electric Utilities (4.8%)
	11,200	Kansai Electric Power Co., Inc. (The) (b)	$	324,545
	44,000	Tokyo Electric Power Co., Inc. (The) (b)		1,469,126
				1,793,671
		Major Telecommunications (0.5%)
	34	Nippon Telegraph & Telephone Corp. (NTT) (b)		182,733
		Marine Shipping (1.3%)
	54,000	Kamigumi Co., Ltd. (b)		483,594
		Other Transportation (2.2%)
	19,300	Japan Airport Terminal Co., Ltd. (b)		259,516
	43,000	Mitsubishi Logistics Corp. (b)		541,193
				800,709
		Total Japan		3,260,707
		Marshall Island (0.2%)
		Marine Shipping
	2,680	General Maritime Corp.		28,944
	2,900	Teekay Corp.		56,985
		Total Marshall Island		85,929
		Mexico (1.2%)
		Other Transportation
	5,900	Grupo Aeroportuario del Pacifico SAB de CV (ADR)		135,818
	28,300	Grupo Aeroportuario del Pacifico SAB de CV (B Shares)		64,229
	6,800	Grupo Aeroportuario del Sureste SAB de CV (ADR)		254,184
		Total Mexico		454,231
		Netherlands (2.0%)
		Transportation - International
	16,218	Koninklijke Vopak NV (b)		615,364
	2,200	Smit Internationale NV (b)		108,184
		Total Netherlands		723,548

NUMBER OF SHARES			VALUE
		New Zealand (0.4%)
		Other Transportation
	159,730	Auckland International Airport Ltd. (b)	$	151,730
		Portugal (1.7%)
		Electric Utilities (0.6%)
	57,644	Energias de Portugal, S.A. (b)		217,257
		Other Transportation (1.1%)
	53,566	Brisa (b)		400,240
		Total Portugal		617,497
		South Korea (1.0%)
		Electric Utilities (0.3%)
	8,100	Korea Electric Power Corp. (ADR)		94,041
		Major Telecommunications (0.7%)
	10,640	KT Freetel Co., Ltd. (a) (b)		264,673
		Total South Korea		358,714
		Spain (8.3%)
		Electric Utilities (3.4%)
	137,785	Iberdrola S.A. (b)		1,279,359
		Engineering & Construction (1.4%)
	69,018	Cintra Concesiones de Infraestructuras de Transporte S.A. (b)		519,272
		Gas Distributors (0.1%)
	1,942	Gas Natural SDG, S.A. (b)		52,967
		Other Transportation (3.4%)
	70,253	Abertis Infraestructuras S.A. (b)		1,250,156
		Total Spain		3,101,754
		Switzerland (0.4%)
		Transportation - International
	668	Flughafen Suerich AG (b)		156,818

See Notes to Financial Statements
68

Global Infrastructure

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Turkey (0.5%)
		Specialty Telecommunications
	78,700	Turk Telekomunikasyon A.S. (a) (b)	$	178,393
		United Kingdom (5.2%)
		Electric Utilities (2.1%)
	13,560	Drax Group PLC (b)		109,922
	34,684	National Grid PLC (b)		342,771
	18,360	Scottish & Southern Energy PLC (b)		323,280
				775,973
		Gas Distributors (2.0%)
	196,136	Centrica PLC (b)		753,691
		Major Telecommunications (0.2%)
	35,173	BT Group PLC (b)		69,108
		Marine Shipping (0.5%)
	13,727	Forth Ports PLC (b)		181,839
		Miscellaneous Commercial Services (0.4%)
	165,500	BBA Aviation PLC (b)		165,307
		Total United Kingdom		1,945,918
		United States (17.5%)
		Electric Utilities (10.6%)
	12,700	AES Corp. (The) (a)		104,648
	5,500	Alliant Energy, Corp.		160,490
	6,100	American Electric Power Co., Inc.		203,008
	14,600	Constellation Energy Group Inc.		366,314
	8,300	Dominion Resources, Inc.		297,472
	17,610	Duke Energy Corp.		264,326
	3,100	Entergy Corp.		257,703
	11,700	Exelon Corp. (a)		650,637
	4,700	FirstEnergy Corp.		228,326
	6,500	FPL Group, Inc.		327,145
	5,700	Integrys Energy Group, Inc.		244,986

NUMBER OF SHARES			VALUE
	6,300	PPL Corp.	$	193,347
	8,500	Public Service Enterprise Group Inc.		247,945
	10,800	Southern Co.		399,600
				3,945,947
		Energy (4.7%)
	12,650	MDU Resources Group, Inc.		272,987
	47,355	Spectra Energy Corp.		745,368
	50,100	Williams Companies, Inc. (The)		725,448
				1,743,803
		Gas Distributors (0.9%)
	6,300	Atmos Energy Corp.		149,310
	4,400	Piedmont Natural Gas Co., Inc.		139,348
	1,900	UGI Corp.		46,398
				335,056
		Investment Trusts/Mutual Funds (0.2%)
	15,400	Macquarie Infrastructure Company LLC		58,058
		Marine Shipping (0.1%)
	1,200	Overseas Shipholding Group, Inc.		50,532
		Oil & Gas Pipelines (1.0%)
	48,500	El Paso Corp.		379,755
		Oil & Gas Production (0.0%)
	2,600	Crosstex Energy, Inc.		10,140
		Total United States		6,523,291
		Total Common Stocks (Cost $34,601,052)		36,623,649

See Notes to Financial Statements
69

Global Infrastructure

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES (000)					VALUE
		Short-Term Investment (1.0%)
		Investment Company (c)
	365	Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (Cost $364,986)			$	364,986
Total Investments (Cost $34,966,038) (d) (e)			99.5	%		36,988,635
Other Assets in Excess of Liabilities			0.5			194,089
Net Assets			100.0	%	$	37,182,724

ADR American Depositary Receipt.

(a) Non-income producing security.

(b) Securities with a total market value equal to $25,802,196 have been valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Such fair value measurements may be level 2 measurements if observable inputs are available. See Note 7.

(c) See Note 4 to the financial statements regarding investments in Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class.

(d) Securities have been designated as collateral in an amount equal to $1,312,395 in connection with forward foreign currency contracts.

(e) The aggregate cost for federal income tax purposes is $35,327,603. The aggregate gross unrealized appreciation is $3,338,071 and the aggregate gross unrealized depreciation is $1,677,039 resulting in net unrealized appreciation of $1,661,032.

See Notes to Financial Statements
70

Global Infrastructure

Portfolio of Investments n December 31, 2008 continued

FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT DECEMBER 31, 2008:

CONTRACTS TO DELIVER		IN EXCHANGE FOR		DELIVERY DATE	UNREALIZED APPRECIATION (DEPRECIATION)
AUD	1,093,710	$	714,431	01/15/09	$	46,754
$	261,827	BRL	636,240	01/15/09		(9,345	)
$	119,766	CAD	150,415	01/15/09		(2,038	)
CHF	143,303	$	119,768	01/15/09		14,887
$	151,413	CLP	100,386,795	01/15/09		(5,513	)
$	139,986	CZK	2,772,152	01/15/09		(3,442	)
$	75,212	DKK	432,319	01/15/09		(5,419	)
EUR	280,483	$	364,418	01/15/09		25,180
$	140,567	GBP	95,183	01/15/09		3,783
$	394,129	HKD	3,054,065	01/15/09		26
$	285,466	JPY	26,488,429	01/15/09		(6,837	)
$	215,359	KRW	291,596,000	01/15/09		(16,465	)
$	49,148	MXN	668,163	01/15/09		1,160
$	224,922	NOK	1,591,663	01/15/09		(2,121	)
NZD	207,623	$	113,778	01/15/09		7,262
$	173,779	TRY	273,876	01/15/09		(2,609	)
Net Unrealized Appreciation					$	45,263

Currency Abbreviations:

AUD Australian Dollar.

BRL Brazilian Real.

CAD Canadian Dollar.

CHF Swiss Franc.

CLP Chilean Peso.

CZK Czech Republic Koruna.

DKK Danish Krone.

EUR Euro.

GBP British Pound.

HKD Hong Kong Dollar.

JPY Japanese Yen.

KRW South Korean Won.

MXN Mexican New Peso.

NOK Norwegian Krone.

NZD New Zealand Dollar.

TRY Turkish Lira.

See Notes to Financial Statements
71

Global Infrastructure

Summary of Investments n December 31, 2008

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Electric Utilities	$	14,095,972		38.1	%
Other Transportation		8,847,319		23.9
Gas Distributors		4,657,353		12.6
Energy		1,743,803		4.7
Oil & Gas Pipelines		1,271,928		3.5
Marine Shipping		1,036,736		2.8
International		880,366		2.4
Shipping		749,682		2.0
Mutual Funds		715,802		1.9
Engineering & Construction		519,272		1.4
Major Telecommunications		516,514		1.4
Transportation		408,455		1.1
Investment Company		364,986		1.0
Specialty Telecommunications		327,712		0.9

INDUSTRY	VALUE			PERCENT OF TOTAL INVESTMENTS
Industrial	$	304,154			0.8	%
Miscellaneous Commercial Services		165,307			0.5
Water Utilities		189,470			0.5
Oil Related		60,524			0.2
Investment Trust/ Miscellaneous		26,631			0.1
Transportation - Waste Management		35,770			0.1
Natural Gas - Pipelines		44,585			0.1
Oil & Gas Production		10,140			0.0
Industrial Conglomerates		16,154			0.0
	$	36,988,635	^		100.0	%

^ Does not include open forward foreign currency contracts with net unrealized appreciation of $45,263.

See Notes to Financial Statements
72

Dividend Growth

Portfolio of Investments n December 31, 2008

NUMBER OF SHARES			VALUE
		Common Stocks (98.6%)
		Aerospace & Defense (3.7%)
	17,070	Boeing Co.	$	728,377
	10,820	L-3 Communications Holdings, Inc.		798,300
	21,708	Northrop Grumman Corp.		977,728
	25,100	Raytheon Co.		1,281,104
				3,785,509
		Agricultural Commodities/ Milling (1.0%)
	19,260	Bunge Ltd. (Bermuda)		997,090
		Apparel/Footwear (1.9%)
	21,320	Nike, Inc. (Class B)		1,087,320
	16,349	V.F. Corp.		895,435
				1,982,755
		Apparel/Footwear Retail (1.2%)
	95,730	Gap, Inc. (The)		1,281,825
		Auto Parts: O.E.M. (0.8%)
	16,730	Eaton Corp.		831,648
		Biotechnology (1.3%)
	23,250	Amgen Inc. (a)		1,342,687
		Chemicals: Agricultural (1.2%)
	17,213	Monsanto Co.		1,210,935
		Computer Communications (1.2%)
	75,639	Cisco Systems, Inc. (a)		1,232,916
		Computer Processing Hardware (1.5%)
	40,860	Hewlett-Packard Co.		1,482,809
		Contract Drilling (1.2%)
	25,810	Transcocean Ltd. (Switzerland) (a)		1,219,522
		Drugstore Chains (1.7%)
	59,963	CVS/Caremark Corp.		1,723,337
		Electric Utilities (4.1%)
	44,409	Exelon Corp.		2,469,584
	15,820	FirstEnergy Corp.		768,536

NUMBER OF SHARES			VALUE
	30,670	Public Service Enterprise Group Inc.	$	894,644
				4,132,764
		Engineering & Construction (3.0%)
	33,500	Fluor Corp.		1,503,145
	32,420	Jacobs Engineering Group, Inc. (a)		1,559,402
				3,062,547
		Financial Conglomerates (2.1%)
	67,310	JPMorgan Chase & Co.		2,122,284
		Hotels/Resorts/ Cruiselines (0.9%)
	64,480	Royal Caribbean Cruises Ltd. (Liberia)		886,600
		Household/ Personal Care (3.1%)
	51,292	Procter & Gamble Co. (The)		3,170,871
		Industrial Conglomerates (6.8%)
	183,799	General Electric Co.		2,977,544
	72,809	United Technologies Corp.		3,902,562
				6,880,106
		Information Technology Services (1.9%)
	23,510	International Business Machines Corp.		1,978,602
		Integrated Oil (6.2%)
	27,460	BP PLC (ADR) (United Kingdom)		1,283,480
	47,641	Exxon Mobil Corp.		3,803,181
	43,370	Marathon Oil Corp.		1,186,603
				6,273,264
		Internet Retail (1.5%)
	71,280	GameStop Corp. (Class A) (a)		1,543,925
		Internet Software/ Services (1.1%)
	3,694	Google Inc. (Class A) (a)		1,136,459

See Notes to Financial Statements
73

Dividend Growth

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Investment Banks/ Brokers (0.8%)
	9,653	Goldman Sachs Group, Inc. (The)	$	814,617
		Life/Health Insurance (3.4%)
	40,140	Aflac, Inc.		1,840,018
	16,098	Lincoln National Corp.		303,286
	36,832	MetLife, Inc.		1,283,964
				3,427,268
		Major Banks (3.0%)
	94,670	Bank of America Corp.		1,332,954
	59,405	Bank of New York Mellon Corp.		1,682,944
				3,015,898
		Major Telecommunications (2.0%)
	72,336	AT&T Inc.		2,061,576
		Managed Health Care (1.5%)
	36,150	WellPoint Inc. (a)		1,523,000
		Media Conglomerates (1.7%)
	77,320	Disney (Walt) Co. (The)		1,754,391
		Medical Specialties (1.1%)
	31,970	Covidien Ltd. (Bermuda)		1,158,593
		Office Equipment/ Supplies (1.3%)
	52,148	Pitney Bowes, Inc.		1,328,731
		Oil & Gas Production (2.5%)
	18,680	Occidental Petroleum Corp.		1,120,613
	41,577	XTO Energy, Inc.		1,466,421
				2,587,034
		Oil Refining/Marketing (1.9%)
	88,950	Valero Energy Corp.		1,924,878
		Oilfield Services/ Equipment (1.0%)
	56,460	Halliburton Co.		1,026,443

NUMBER OF SHARES			VALUE
		Packaged Software (4.5%)
	149,423	Microsoft Corp.	$	2,904,783
	95,730	Oracle Corp. (a)		1,697,293
				4,602,076
		Pharmaceuticals: Generic Drugs (1.6%)
	60,600	Watson Pharmaceuticals, Inc. (a)		1,610,142
		Pharmaceuticals: Major (8.1%)
	30,699	Johnson & Johnson		1,836,721
	187,984	Pfizer, Inc.		3,329,197
	80,999	Wyeth		3,038,272
				8,204,190
		Property - Casualty Insurers (4.0%)
	39,150	ACE Ltd. (Switzerland)		2,071,818
	60,990	Allstate Corp. (The)		1,998,032
				4,069,850
		Pulp & Paper (0.7%)
	63,470	International Paper Co.		748,946
		Railroads (0.8%)
	24,040	CSX Corp.		780,579
		Restaurants (2.7%)
	44,270	McDonald's Corp.		2,753,151
		Semiconductors (1.1%)
	75,776	Intel Corp.		1,110,876
		Specialty Telecommunications (0.0%)
	439	FairPoint Communications, Inc.		1,440
		Steel (1.7%)
	21,200	Nucor Corp.		979,440
	19,910	United States Steel Corp.		740,652
				1,720,092

See Notes to Financial Statements
74

Dividend Growth

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Tobacco (4.3%)
	74,479	Altria Group, Inc.	$	1,121,654
	74,479	Philip Morris International Inc.		3,240,581
				4,362,235
		Trucks/Construction/ Farm Machinery (1.5%)
	34,420	Caterpillar Inc.		1,537,541
		Total Common Stocks (Cost $123,600,069)		100,402,002

NUMBER OF SHARES (000)					VALUE
		Short-Term Investment (b) (0.7%) Investment Company
	723	Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (Cost $722,532)			$	722,532
Total Investments (Cost $124,322,601) (c)			99.3	%		101,124,534
Other Assets in Excess of Liabilities			0.7			658,661
Net Assets			100.0	%	$	101,783,195

ADR American Depositary Receipt.

(a) Non-income producing security.

(b) See Note 4 to the financial statements regarding Investments in Morgan Stanley Liquidity Funds - Money Market Portfolio - Institutional Class.

(c) The aggregate cost for federal income tax purposes is $124,585,061. The aggregate gross unrealized appreciation is $6,129,918 and the aggregate gross unrealized depreciation is $29,590,445, resulting in net unrealized depreciation of $23,460,527.

See Notes to Financial Statements
75

Dividend Growth

Summary of Investments n December 31, 2008

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Pharmaceuticals: Major	$	8,204,190		8.1	%
Industrial Conglomerates		6,880,106		6.8
Integrated Oil		6,273,264		6.2
Packaged Software		4,602,076		4.6
Tobacco		4,362,235		4.3
Electric Utilities		4,132,764		4.1
Property - Casualty Insurers		4,069,850		4.0
Aerospace & Defense		3,785,509		3.8
Life/Health Insurance		3,427,268		3.4
Household/Personal Care		3,170,871		3.1
Engineering & Construction		3,062,547		3.0
Major Banks		3,015,898		3.0
Restaurants		2,753,151		2.7
Oil & Gas Production		2,587,034		2.6
Financial Conglomerates		2,122,284		2.1
Major Telecommunications		2,061,576		2.0
Apparel/Footwear		1,982,755		2.0
Information Technology Services		1,978,602		2.0
Oil Refining/Marketing		1,924,878		1.9
Media Conglomerates		1,754,391		1.7
Drugstore Chains		1,723,337		1.7
Steel		1,720,092		1.7
Pharmaceuticals: Generic Drugs		1,610,142		1.6
Internet Retail		1,543,925		1.5
Trucks/Construction/ Farm Machinery		1,537,541		1.5

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Managed Health Care	$	1,523,000		1.5	%
Computer Processing Hardware		1,482,809		1.5
Biotechnology		1,342,687		1.3
Office Equipment/ Supplies		1,328,731		1.3
Apparel/Footwear Retail		1,281,825		1.3
Computer Communications		1,232,916		1.2
Contract Drilling		1,219,522		1.2
Chemicals: Agricultural		1,210,935		1.2
Medical Specialties		1,158,593		1.2
Internet Software/Services		1,136,459		1.1
Semiconductors		1,110,876		1.1
Oilfield Services/ Equipment		1,026,443		1.0
Agricultural Commodities/ Milling		997,090		1.0
Hotels/Resorts/Cruiselines		886,600		0.9
Auto Parts: O.E.M.		831,648		0.8
Investment Banks/ Brokers		814,617		0.8
Railroads		780,579		0.8
Pulp & Paper		748,946		0.7
Investment Company		722,532		0.7
Specialty Telecommunications		1,440		0.0
	$	101,124,534		100.0	%

See Notes to Financial Statements
76

Equally-Weighted S&P 500

Portfolio of Investments n December 31, 2008

NUMBER OF SHARES			VALUE
		Common Stocks (99.9%)
		Advertising/Marketing Services (0.4%)
	37,290	Interpublic Group of Companies, Inc. (The) (a)	$	147,668
	6,078	Omnicom Group, Inc.		163,620
				311,288
		Aerospace & Defense (2.1%)
	4,087	Boeing Co.		174,392
	5,637	FLIR Systems, Inc. (a)		172,943
	2,918	General Dynamics Corp.		168,048
	4,837	Goodrich Corp.		179,066
	2,405	L-3 Communications Holdings, Inc.		177,441
	2,154	Lockheed Martin Corp.		181,108
	3,705	Northrop Grumman Corp.		166,873
	2,845	Precision Castparts Corp.		169,221
	3,472	Raytheon Co.		177,211
	4,571	Rockwell Collins, Inc.		178,680
				1,744,983
		Agricultural Commodities/ Milling (0.2%)
	5,559	Archer-Daniels-Midland Co. (b)		160,266
		Air Freight/Couriers (0.9%)
	3,328	C.H. Robinson Worldwide, Inc.		183,140
	5,376	Expeditors International of Washington, Inc.		178,860
	2,682	FedEx Corp.		172,050
	3,231	United Parcel Service, Inc. (Class B)		178,222
				712,272
		Airlines (0.2%)
	19,032	Southwest Airlines Co.		164,056
		Aluminum (0.2%)
	16,069	Alcoa, Inc.		180,937
		Apparel/Footwear (1.0%)
	8,204	Coach, Inc. (a)		170,397
	25,059	Jones Apparel Group, Inc.		146,846
	3,361	Nike, Inc. (Class B)		171,411

NUMBER OF SHARES			VALUE
	3,565	Polo Ralph Lauren Corp.	$	161,887
	3,126	V.F. Corp.		171,211
				821,752
		Apparel/Footwear Retail (1.0%)
	6,824	Abercrombie & Fitch Co. (Class A)		157,430
	12,696	Gap, Inc. (The)		169,999
	16,599	Limited Brands, Inc.		166,654
	12,273	Nordstrom, Inc.		163,354
	7,792	TJX Companies, Inc. (The)		160,281
				817,718
		Auto Parts: O.E.M. (0.4%)
	3,478	Eaton Corp.		172,891
	8,664	Johnson Controls, Inc.		157,338
				330,229
		Automotive Aftermarket (0.2%)
	25,469	Goodyear Tire & Rubber Co. (The) (a)		152,050
		Beverages: Alcoholic (0.6%)
	3,465	Brown-Forman Corp. (Class B)		178,413
	10,018	Constellation Brands Inc. (Class A) (a)		157,984
	3,730	Molson Coors Brewing Co. (Class B)		182,472
				518,869
		Beverages: Non-Alcoholic (1.0%)
	3,878	Coca-Cola Co. (The)		175,557
	14,549	Coca-Cola Enterprises Inc.		175,024
	9,870	Dr Pepper Snapple Group Inc.		160,388
	7,663	Pepsi Bottling Group, Inc. (The)		172,494
	3,186	PepsiCo, Inc.		174,497
				857,960
		Biotechnology (1.7%)
	2,980	Amgen Inc. (a)		172,095
	3,686	Biogen Idec Inc. (a)		175,564
	3,152	Celgene Corp. (a)		174,243

See Notes to Financial Statements
77

Equally-Weighted S&P 500

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
	2,011	Cephalon, Inc. (a)	$	154,927
	2,527	Genzyme Corp. (a)		167,717
	3,470	Gilead Sciences, Inc. (a)		177,456
	7,882	Life Technologies Corp		183,729
	3,375	Millipore Corp. (a)		173,880
				1,379,611
		Building Products (0.2%)
	13,356	Masco Corp.		148,652
		Cable/Satellite TV (0.6%)
	10,932	Comcast Corp. (Class A)		184,532
	7,864	DIRECTV Group, Inc. (The) (a)		180,164
	7,397	Scripps Networks Interactive (Class A)		162,734
				527,430
		Casino/Gaming (0.4%)
	13,712	International Game Technology		163,036
	3,620	Wynn Resorts, Ltd. (a)		152,981
				316,017
		Chemicals: Agricultural (0.4%)
	3,252	CF Industries Holdings Inc.		159,868
	2,141	Monsanto Co.		150,619
				310,487
		Chemicals: Major Diversified (0.9%)
	7,762	Dow Chemical Co. (The)		117,129
	6,088	Du Pont (E.I.) de Nemours & Co.		154,026
	5,276	Eastman Chemical Co.		167,302
	5,579	International Flavors & Fragrances, Inc.		165,808
	2,572	Rohm & Haas Co.		158,924
				763,189
		Chemicals: Specialty (0.6%)
	3,342	Air Products & Chemicals, Inc.		168,002
	2,700	Praxair, Inc.		160,272
	4,252	Sigma-Aldrich Corp.		179,604
				507,878

NUMBER OF SHARES			VALUE
		Coal (0.6%)
	5,305	CONSOL Energy, Inc.	$	151,617
	11,719	Massey Energy Co.		161,605
	6,738	Peabody Energy Corp.		153,290
				466,512
		Commercial Printing/ Forms (0.2%)
	11,571	Donnelley (R.R.) & Sons Co.		157,134
		Computer Communications (0.6%)
	9,368	Cisco Systems, Inc. (a)		152,698
	9,470	Juniper Networks, Inc. (a)		165,820
	13,428	QLogic Corp. (a)		180,472
				498,990
		Computer Peripherals (0.6%)
	15,748	EMC Corp. (a)		164,882
	6,153	Lexmark International, Inc. (Class A) (a)		165,516
	11,905	NetApp Inc.		166,313
	5,600	Seagate Technology Inc. (Escrow) (a) (d)		0
				496,711
		Computer Processing Hardware (0.8%)
	1,808	Apple Inc. (a)		154,313
	15,318	Dell Inc. (a)		156,856
	4,867	Hewlett-Packard Co.		176,623
	37,469	Sun Microsytems (a)		143,132
				630,924
		Construction Materials (0.2%)
	2,565	Vulcan Materials Co.		178,473
		Containers/Packaging (1.0%)
	4,171	Ball Corp.		173,472
	6,826	Bemis Company, Inc.		161,640
	5,921	Owens-Illinois, Inc. (a)		161,821
	7,158	Pactiv Corp. (a)		178,091
	11,070	Sealed Air Corp.		165,386
				840,410

See Notes to Financial Statements
78

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Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Contract Drilling (0.8%)
	5,645	ENSCO International Inc.	$	160,261
	13,880	Nabors Industries, Ltd. (Bermuda) (a)		166,144
	7,140	Noble Corp. (Cayman Islands)		157,723
	9,985	Rowan Companies, Inc.		158,762
				642,890
		Data Processing Services (1.6%)
	3,908	Affiliated Computer Services, Inc. (Class A) (a)		179,573
	4,582	Automatic Data Processing, Inc.		180,256
	23,833	Convergys Corp. (a)		152,770
	10,165	Fidelity National Information Services, Inc.		165,385
	4,728	Fiserv, Inc. (a)		171,957
	6,564	Paychex, Inc.		172,502
	12,219	Total System Services, Inc.		171,066
	11,270	Western Union Co.		161,612
				1,355,121
		Department Stores (0.6%)
	4,829	Kohl's Corp. (a)		174,810
	14,677	Macy's Inc.		151,907
	7,824	Penney (J.C.) Co., Inc.		154,133
				480,850
		Discount Stores (1.2%)
	9,979	Big Lots, Inc. (a)		144,596
	3,203	Costco Wholesale Corp.		168,158
	6,805	Family Dollar Stores, Inc.		177,406
	3,982	Sears Holdings Corp. (a)		154,780
	4,773	Target Corp.		164,812
	3,091	Wal-Mart Stores, Inc.		173,281
				983,033
		Drugstore Chains (0.4%)
	6,391	CVS/Caremark Corp.		183,677
	6,606	Walgreen Co.		162,970
				346,647
		Electric Utilities (5.9%)
	19,780	AES Corp. (The) (a)		162,987
	5,461	Allegheny Energy, Inc. (a)		184,909

NUMBER OF SHARES			VALUE
	5,271	Ameren Corp.	$	175,313
	5,399	American Electric Power Co., Inc.		179,679
	13,872	CenterPoint Energy, Inc.		175,065
	17,725	CMS Energy Corp.		179,200
	4,459	Consolidated Edison, Inc.		173,589
	7,111	Constellation Energy Group		178,415
	4,926	Dominion Resources, Inc.		176,548
	4,953	DTE Energy Co.		176,674
	11,736	Duke Energy Corp.		176,157
	5,524	Edison International		177,431
	2,105	Entergy Corp.		174,989
	3,269	Exelon Corp.		181,789
	3,534	FirstEnergy Corp.		171,682
	3,419	FPL Group, Inc.		172,078
	4,133	Integrys Energy Group, Inc.		177,636
	10,177	Pepco Holdings, Inc.		180,744
	4,463	PG&E Corp.		172,763
	5,732	Pinnacle West Capital Corp.		184,169
	5,764	PPL Corp.		176,897
	4,430	Progress Energy, Inc.		176,536
	6,001	Public Service Enterprise Group Inc.		175,049
	4,044	SCANA Corp.		143,966
	4,807	Southern Co. (The)		177,859
	14,405	TECO Energy, Inc.		177,902
	3,760	Wisconsin Energy Corp.		157,845
	9,389	Xcel Energy, Inc.		174,166
				4,892,037
		Electrical Products (0.6%)
	5,520	Cooper Industries Ltd. (Class A) (Bermuda)		161,350
	5,065	Emerson Electric Co.		185,430
	10,953	Molex Inc.		158,709
				505,489
		Electronic Components (1.0%)
	6,610	Amphenol Corporation (Class A)		158,508
	24,663	Jabil Circuit, Inc.		166,475
	10,749	MEMC Electronic Materials, Inc. (a)		153,496

See Notes to Financial Statements
79

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Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
	16,236	SanDisk Corp. (a)	$	155,866
	9,915	Tyco Electronics Ltd. (Bermuda)		160,722
				795,067
		Electronic Equipment/ Instruments (0.8%)
	9,574	Agilent Technologies, Inc. (a)		149,642
	39,065	JDS Uniphase Corp. (a)		142,587
	5,596	Rockwell Automation, Inc.		180,415
	20,009	Xerox Corp. (a)		159,472
				632,116
		Electronic Production Equipment (0.8%)
	16,021	Applied Materials, Inc.		162,293
	7,420	KLA-Tencor Corp.		161,682
	12,142	Novellus Systems, Inc. (a)		149,832
	36,334	Teradyne, Inc. (a)		153,329
				627,136
		Electronics/Appliance Stores (0.4%)
	6,078	Best Buy Co., Inc.		170,853
	14,683	RadioShack Corp.		175,315
				346,168
		Electronics/Appliances (0.6%)
	25,263	Eastman Kodak Co.		166,231
	9,412	Harman International Industries, Inc.		157,463
	3,624	Whirlpool Corp.		149,852
				473,546
		Engineering & Construction (0.4%)
	3,807	Fluor Corp.		170,820
	3,747	Jacobs Engineering Group, Inc. (a)		180,231
				351,051
		Environmental Services (0.4%)
	7,328	Republic Services, Inc.		181,661
	5,521	Waste Management, Inc.		182,966
				364,627

NUMBER OF SHARES			VALUE
		Finance/Rental/Leasing (1.3%)
	44,978	American Capital Ltd.	$	145,729
	5,033	Capital One Financial Corp.		160,502
	33,665	CIT Group, Inc.		152,839
	16,706	Discover Financial Services		159,208
	1,024	Mastercard Inc. Class A (a)		146,360
	4,242	Ryder System, Inc.		164,505
	17,692	SLM Corp.		157,459
				1,086,602
		Financial Conglomerates (1.1%)
	8,022	American Express Co.		148,808
	22,204	Citigroup, Inc.		148,989
	5,140	JPMorgan Chase & Co.		162,064
	7,433	Leucadia National Corp. (a)		147,173
	7,674	Principal Financial Group, Inc.		173,202
	5,332	Prudential Financial, Inc.		161,346
				941,582
		Financial Publishing/ Services (0.8%)
	2,118	Dun & Bradstreet Corp. (a)		163,510
	6,741	Equifax, Inc.		178,771
	6,543	McGraw-Hill Companies, Inc. (The)		151,732
	7,172	Moody's Corp.		144,085
				638,098
		Food Distributors (0.2%)
	7,158	SYSCO Corp.		164,205
		Food Retail (0.8%)
	6,778	Kroger Co. (The)		179,007
	7,410	Safeway Inc.		176,136
	11,962	SUPERVALU, Inc.		174,645
	15,649	Whole Foods Market, Inc.		147,727
				677,515
		Food: Major Diversified (1.5%)
	6,071	Campbell Soup Co.		182,191
	10,782	ConAgra Foods Inc.		177,903
	2,921	General Mills, Inc.		177,451
	4,625	Heinz (H.J.) Co.		173,900
	4,042	Kellogg Co.		177,242

See Notes to Financial Statements
80

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Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
	6,460	Kraft Foods Inc. (Class A)	$	173,451
	17,412	Sara Lee Corp.		170,463
				1,232,601
		Food: Meat/Fish/Dairy (0.4%)
	10,046	Dean Foods Co.		180,527
	19,243	Tyson Foods, Inc. (Class A)		168,569
				349,096
		Food: Specialty/Candy (0.6%)
	4,914	Hershey Foods Co. (The)		170,712
	5,470	McCormick & Co., Inc. (Non-Voting)		174,274
	3,732	Smucker (J.M.) Co.		161,820
				506,806
		Forest Products (0.2%)
	4,640	Weyerhaeuser Co.		142,030
		Gas Distributors (1.4%)
	73,179	Dynegy, Inc. (Class A) (a)		146,358
	5,000	Equitable Resources, Inc.		167,750
	4,902	Nicor Inc.		170,295
	15,763	NiSource, Inc.		172,920
	5,256	Questar Corp.		171,819
	4,206	Sempra Energy		179,302
	10,147	Spectra Energy Corp.		159,714
				1,168,158
		Home Building (0.9%)
	14,327	Centex Corp.		152,439
	20,950	D.R. Horton, Inc.		148,116
	10,777	KB Home		146,783
	15,602	Lennar Corp. (Class A)		135,269
	14,930	Pulte Homes, Inc.		163,185
				745,792
		Home Furnishings (0.4%)
	10,728	Leggett & Platt, Inc.		162,958
	16,407	Newell Rubbermaid, Inc.		160,460
				323,418
		Home Improvement Chains (0.8%)
	4,888	Fastenal Co.		170,347
	7,114	Home Depot, Inc. (The)		163,764

NUMBER OF SHARES			VALUE
	7,644	Lowe's Companies, Inc.	$	164,499
	3,114	Sherwin-Williams Co.		186,062
				684,672
		Hospital/Nursing Management (0.2%)
	145,675	Tenet Healthcare Corp. (a)		167,526
		Hotels/Resorts/ Cruiselines (0.8%)
	6,441	Carnival Corp. (c) (Units) (Panama)		156,645
	9,043	Marriott International, Inc. (Class A)		175,886
	8,886	Starwood Hotels & Resorts Worldwide, Inc.		159,059
	22,492	Wyndham Worldwide Corp. (a)		147,323
				638,913
		Household/ Personal Care (1.2%)
	6,644	Avon Products, Inc.		159,655
	3,216	Clorox Co. (The)		178,681
	2,651	Colgate-Palmolive Co.		181,699
	5,260	Estee Lauder Companies, Inc. (The) (Class A)		162,850
	3,371	Kimberly-Clark Corp.		177,787
	2,863	Procter & Gamble Co. (The)		176,991
				1,037,663
		Industrial Conglomerates (1.8%)
	3,043	3M Co.		175,094
	3,129	Danaher Corp.		177,133
	9,474	General Electric Co. (b)		153,479
	5,341	Honeywell International, Inc.		175,345
	9,545	Ingersoll-Rand Co. Ltd. (Class A) (Bermuda)		165,606
	3,901	ITT Corp.		179,407
	10,221	Textron, Inc.		141,765
	7,290	Tyco International Ltd. (Bermuda)		157,464
	3,354	United Technologies Corp.		179,774
				1,505,067
		Industrial Machinery (0.6%)
	2,994	Flowserve Corp. (a)		154,191

See Notes to Financial Statements
81

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Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
	4,667	Illinois Tool Works Inc.	$	163,578
	4,295	Parker Hannifin Corp.		182,709
				500,478
		Industrial Specialties (0.4%)
	4,869	Ecolab Inc.		171,145
	3,759	PPG Industries, Inc.		159,494
				330,639
		Information Technology Services (1.0%)
	7,557	Citrix Systems, Inc. (a)		178,118
	9,119	Cognizant Technology Solutions Corp. (Class A) (a)		164,689
	5,198	Computer Sciences Corp. (a)		182,658
	2,128	International Business Machines Corp.		179,092
	11,433	Teradata Corp		169,551
				874,108
		Insurance Brokers/ Services (0.4%)
	3,972	AON Corp.		181,441
	7,455	Marsh & McLennan Companies, Inc.		180,933
				362,374
		Integrated Oil (1.2%)
	2,432	Chevron Corp.		179,895
	3,081	ConocoPhillips		159,596
	2,297	Exxon Mobil Corp.		183,370
	3,292	Hess Corp.		176,583
	6,006	Marathon Oil Corp.		164,324
	3,580	Murphy Oil Corp.		158,773
				1,022,541
		Internet Retail (0.4%)
	2,989	Amazon.com, Inc. (a)		153,276
	6,757	Gamestop Corp (Class A) (a)		146,357
				299,633
		Internet Software/ Services (0.8%)
	11,058	Akamai Technologies, Inc. (a)		166,865
	543	Google Inc. (Class A) (a)		167,054

NUMBER OF SHARES			VALUE
	8,220	VeriSign, Inc. (a)	$	156,838
	11,963	Yahoo! Inc. (a)		145,949
				636,706
		Investment Banks/ Brokers (1.7%)
	6,821	Ameriprise Financial, Inc.		159,339
	730	CME Group Inc.		151,920
	106,427	E*TRADE Group, Inc. (a)		122,391
	1,981	Goldman Sachs Group, Inc. (The)		167,177
	2,149	Intercontinental Exchange Inc.		177,164
	10,088	Morgan Stanley (Note 4)		161,812
	6,351	Nasdaq Stock Market Inc. (a)		156,933
	5,857	NYSE Euronext		160,365
	10,295	Schwab (Charles) Corp. (The)		166,470
				1,423,571
		Investment Managers (1.4%)
	9,104	Federated Investors, Inc. (Class B)		154,404
	2,484	Franklin Resources, Inc.		158,429
	11,853	Invesco Ltd.		171,157
	20,563	Janus Capital Group, Inc.		165,121
	7,280	Legg Mason, Inc.		159,505
	4,685	Price (T.) Rowe Group, Inc.		166,036
	3,952	State Street Corp.		155,432
				1,130,084
		Life/Health Insurance (1.1%)
	3,873	AFLAC, Inc.		177,538
	45,980	Genworth Financial Inc. (Class A)		130,123
	8,203	Lincoln National Corp.		154,544
	4,133	MetLife, Inc.		144,076
	3,904	Torchmark Corp.		174,509
	9,498	UnumProvident Corp.		176,663
				957,453
		Major Banks (2.2%)
	11,295	Bank of America Corp.		159,034
	6,556	Bank of New York Mellon Corp.		185,731
	6,253	BB&T Corp.		171,707

See Notes to Financial Statements
82

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Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
	8,199	Comerica, Inc.	$	162,750
	21,323	Huntington Bancshares, Inc.		163,334
	19,315	KeyCorp		164,564
	3,511	PNC Financial Services Group		172,039
	19,315	Regions Financial Corp.		153,747
	5,339	SunTrust Banks, Inc.		157,714
	6,772	U.S. Bancorp		169,368
	5,868	Wells Fargo & Co.		172,989
				1,832,977
		Major Telecommunications (0.8%)
	6,127	AT&T Inc.		174,619
	5,430	Embarq Corp.		195,263
	80,346	Sprint Nextel Corp.		147,033
	5,191	Verizon Communications, Inc.		175,975
				692,890
		Managed Health Care (1.2%)
	6,289	Aetna, Inc.		179,237
	9,633	CIGNA Corp.		162,316
	11,554	Coventry Health Care, Inc. (a)		171,924
	4,766	Humana, Inc. (a)		177,676
	6,504	UnitedHealth Group Inc.		173,006
	4,077	WellPoint Inc. (a)		171,764
				1,035,923
		Media Conglomerates (1.0%)
	20,216	CBS Corp. (Class B)		165,569
	7,339	Disney (Walt) Co. (The)		166,522
	18,553	News Corp. (Class A)		168,647
	15,541	Time Warner, Inc.		156,342
	9,453	Viacom Inc. (Class B) (a)		180,174
				837,254
		Medical Distributors (0.8%)
	5,009	AmerisourceBergen Corp.		178,621
	4,838	Cardinal Health, Inc.		166,766
	4,467	McKesson Corp.		173,007
	8,471	Patterson Companies, Inc. (a)		158,831
				677,225

NUMBER OF SHARES			VALUE
		Medical Specialties (3.4%)
	2,161	Bard (C.R.), Inc.	$	182,086
	3,203	Baxter International, Inc.		171,649
	2,582	Becton, Dickinson & Co.		176,583
	20,035	Boston Scientific Corp. (a)		155,071
	4,271	Covidien Ltd.		154,781
	6,367	DENTSPLY International, Inc.		179,804
	6,396	Hospira, Inc. (a)		171,541
	1,241	Intuitive Surgical, Inc. (a)		157,595
	4,839	Medtronic, Inc.		152,041
	6,536	Pall Corp.		185,818
	11,197	PerkinElmer, Inc.		155,750
	5,263	St. Jude Medical, Inc. (a)		173,468
	3,993	Stryker Corp.		159,520
	4,791	Thermo Fisher Scientific, Inc. (a)		163,229
	4,505	Varian Medical Systems, Inc. (a)		157,855
	4,409	Waters Corp. (a)		161,590
	3,918	Zimmer Holdings, Inc. (a)		158,366
				2,816,747
		Medical/Nursing Services (0.2%)
	3,445	DaVita, Inc. (a)		170,769
		Miscellaneous Commercial Services (0.2%)
	7,698	Cintas Corp.		178,825
		Miscellaneous Manufacturing (0.2%)
	4,908	Dover Corp.		161,571
		Motor Vehicles (0.5%)
	52,838	Ford Motor Co. (a)		120,999
	34,715	General Motors Corp.		111,088
	9,395	Harley-Davidson, Inc.		159,433
				391,520
		Multi-Line Insurance (0.4%)
	97,420	American International Group, Inc.		152,949

See Notes to Financial Statements
83

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Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
	9,131	Hartford Financial Services Group, Inc. (The) (Note 4)	$	149,931
				302,880
		Office Equipment/ Supplies (0.4%)
	5,266	Avery Dennison Corp.		172,356
	6,774	Pitney Bowes, Inc.		172,601
				344,957
		Oil & Gas Pipelines (0.4%)
	21,236	El Paso Corp.		166,278
	11,205	Williams Companies, Inc. (The)		162,248
				328,526
		Oil & Gas Production (2.4%)
	4,194	Anadarko Petroleum Corp.		161,679
	2,093	Apache Corp.		155,991
	6,018	Cabot Oil & Gas Corp.		156,468
	9,760	Chesapeake Energy Corp.		157,819
	2,415	Devon Energy Corp.		158,690
	2,627	EOG Resources, Inc.		174,906
	3,602	Noble Energy, Inc.		177,290
	3,047	Occidental Petroleum Corp.		182,789
	9,598	Pioneer Natural Resources Co. (a)		155,296
	4,669	Range Resources Corp.		160,567
	6,103	Southwestern Energy Co. (a)		176,804
	4,451	XTO Energy, Inc.		156,987
				1,975,286
		Oil Refining/Marketing (0.6%)
	4,073	Sunoco, Inc.		177,013
	13,590	Tesoro Corp.		178,980
	7,432	Valero Energy Corp.		160,828
				516,821
		Oilfield Services/ Equipment (1.6%)
	5,197	Baker Hughes Inc.		166,668
	13,843	BJ Services Co.		161,548
	7,832	Cameron International Corp. (a)		160,556
	8,901	Halliburton Co.		161,820

NUMBER OF SHARES			VALUE
	6,641	National-Oilwell Varco, Inc. (a)	$	162,306
	3,854	Schlumberger Ltd. (Netherlands Antilles)		163,140
	6,655	Smith International, Inc.		152,333
	15,649	Weatherford International Ltd. (Bermuda) (a)		169,322
				1,297,693
		Other Consumer Services (0.8%)
	2,062	Apollo Group, Inc. (Class A) (a)		157,990
	7,903	Block (H&R), Inc.		179,556
	10,787	eBay Inc. (a)		150,587
	19,125	Expedia, Inc. (a)		157,590
				645,723
		Other Consumer Specialties (0.2%)
	3,923	Fortune Brands, Inc.		161,941
		Other Metals/Minerals (0.2%)
	19,415	Titanium Metals Corp.		171,046
		Packaged Software (2.4%)
	7,043	Adobe Systems, Inc. (a)		149,945
	8,416	Autodesk, Inc. (a)		165,374
	6,536	BMC Software, Inc. (a)		175,884
	9,503	CA Inc.		176,091
	23,007	Compuware Corp. (a)		155,297
	7,410	Intuit Inc. (a)		176,284
	4,900	McAfee Inc. (a)		169,393
	9,011	Microsoft Corp. (b)		175,174
	44,147	Novell, Inc. (a)		171,732
	9,690	Oracle Corp. (a)		171,804
	4,825	Salesforce.com Inc. (a)		154,448
	12,809	Symantec Corp. (a)		173,178
				2,014,604
		Personnel Services (0.4%)
	12,673	Monster Worldwide Inc. (a)		153,217
	8,688	Robert Half International, Inc.		180,884
				334,101

See Notes to Financial Statements
84

Equally-Weighted S&P 500

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Pharmaceuticals: Generic Drugs (0.4%)
	17,853	Mylan Laboratories, Inc.	$	176,566
	7,064	Watson Pharmaceuticals, Inc. (a)		187,690
				364,256
		Pharmaceuticals: Major (1.7%)
	3,296	Abbott Laboratories		175,907
	7,553	Bristol-Myers Squibb Co.		175,607
	2,928	Johnson & Johnson		175,182
	4,503	Lilly (Eli) & Co.		181,336
	6,033	Merck & Co., Inc.		183,403
	9,959	Pfizer, Inc.		176,374
	10,135	Schering-Plough Corp.		172,599
	4,635	Wyeth		173,859
				1,414,267
		Pharmaceuticals: Other (0.6%)
	4,298	Allergan, Inc.		173,295
	6,984	Forest Laboratories, Inc. (a)		177,882
	16,874	King Pharmaceuticals, Inc. (a)		179,209
				530,386
		Precious Metals (0.4%)
	6,681	Freeport-McMoRan Copper & Gold, Inc.		163,283
	4,521	Newmont Mining Corp.		184,005
				347,288
		Property - Casualty Insurers (1.4%)
	5,305	Allstate Corp. (The)		173,792
	3,499	Chubb Corp. (The)		178,449
	5,717	Cincinnati Financial Corp.		166,193
	6,216	Loews Corp.		175,602
	11,989	Progressive Corp. (The)		177,557
	4,022	Travelers Companies, Inc. (The)		181,794
	38,968	XL Capital Ltd. (Class A) (Cayman Islands)		144,182
				1,197,569

NUMBER OF SHARES			VALUE
		Publishing: Books/ Magazines (0.2%)
	9,278	Meredith Corp.	$	158,839
		Publishing: Newspapers (0.6%)
	20,216	Gannett Co., Inc.		161,728
	23,617	New York Times Co. (The) (Class A)		173,113
	402	Washington Post Co. (The) (Class B)		156,880
				491,721
		Pulp & Paper (0.4%)
	12,734	International Paper Co.		150,261
	13,769	MeadWestvaco Corp.		154,075
				304,336
		Railroads (0.8%)
	2,427	Burlington Northern Santa Fe Corp.		183,748
	4,932	CSX Corp.		160,142
	3,432	Norfolk Southern Corp.		161,476
	3,292	Union Pacific Corp.		157,358
				662,724
		Real Estate Development (0.2%)
	39,361	CB Richard Ellis Group, Inc. (Class A) (a)		170,039
		Real Estate Investment Trusts (2.4%)
	11,667	Apartment Investment & Management Co. (Class A)		134,754
	2,476	AvalonBay Communities, Inc.		149,996
	2,653	Boston Properties, Inc.		145,915
	5,278	Equity Residential		157,390
	6,347	HCP INC		176,256
	20,138	Host Hotels & Resorts Inc.		152,445
	8,269	Kimco Realty Corp.		151,157
	5,015	Plum Creek Timber Co., Inc.		174,221
	16,869	ProLogis		234,310
	2,288	Public Storage, Inc.		181,896
	2,851	Simon Property Group, Inc.		151,474
	2,597	Vornado Realty Trust		156,729
				1,966,543

See Notes to Financial Statements
85

Equally-Weighted S&P 500

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Recreational Products (0.6%)
	8,963	Electronic Arts Inc. (a)	$	143,767
	5,907	Hasbro, Inc.		172,307
	11,509	Mattel, Inc.		184,144
				500,218
		Regional Banks (1.2%)
	20,375	Fifth Third Bancorp		168,297
	16,874	First Horizon National Corp.		178,357
	2,725	M&T Bank Corp.		156,442
	12,111	Marshall & Ilsley Corp		165,194
	3,168	Northern Trust Corp.		165,180
	6,249	Zions Bancorporation		153,163
				986,633
		Restaurants (0.8%)
	6,035	Darden Restaurants, Inc.		170,066
	2,857	McDonald's Corp.		177,677
	15,795	Starbucks Corp. (a)		149,421
	5,669	Yum! Brands, Inc.		178,573
				675,737
		Retail Strip Centers (0.2%)
	32,954	Developers Diversified Realty Corp.		160,816
		Savings Banks (0.6%)
	11,579	Hudson City Bancorp, Inc.		184,801
	8,907	People's United Financial Inc.		158,812
	54,122	Sovereign Bancorp, Inc.		161,284
				504,897
		Semiconductors (2.5%)
	68,666	Advanced Micro Devices, Inc. (a)		148,319
	10,480	Altera Corp.		175,121
	8,786	Analog Devices, Inc.		167,110
	9,795	Broadcom Corp. (Class A) (a)		166,221
	11,931	Intel Corp.		174,908
	7,789	Linear Technology Corp.		172,293
	40,662	LSI Logic Corp. (a)		133,778
	7,997	Microchip Technology Inc.		156,181
	52,634	Micron Technology, Inc. (a)		138,954
	15,326	National Semiconductor Corp.		154,333
	20,221	NVIDIA Corp. (a)		163,183

NUMBER OF SHARES			VALUE
	10,329	Texas Instruments Inc.	$	160,306
	9,953	Xilinx, Inc.		177,362
				2,088,069
		Services to the Health Industry (1.2%)
	2,809	Express Scripts, Inc. (a)		154,439
	11,602	IMS Health Inc.		175,886
	2,731	Laboratory Corp. of America Holdings (a)		175,904
	4,007	Medco Health Solutions Inc. (a)		167,933
	3,435	Quest Diagnostics Inc.		178,311
	3,259	Stericycle, Inc. (a)		169,729
				1,022,202
		Specialty Insurance (0.4%)
	5,619	Assurant, Inc.		168,570
	30,744	MBIA Inc.		125,128
				293,698
		Specialty Stores (1.2%)
	17,853	AutoNation, Inc. (a)		176,388
	1,309	AutoZone, Inc. (a)		182,566
	6,624	Bed Bath & Beyond Inc. (a)		168,382
	54,884	Office Depot, Inc. (a)		163,554
	9,415	Staples, Inc.		168,717
	6,968	Tiffany & Co.		164,654
				1,024,261
		Specialty Telecommunications (1.1%)
	5,850	American Tower Corp. (Class A) (a)		171,522
	6,478	CenturyTel, Inc.		177,044
	20,127	Frontier Communications Corp		175,910
	49,937	Qwest Communications International, Inc. (a)		181,771
	18,788	Windstream Corp.		172,850
				879,097
		Steel (0.8%)
	16,152	AK Steel Holding Corp. (a)		150,537
	6,356	Allegheny Technologies, Inc.		162,269

See Notes to Financial Statements
86

Equally-Weighted S&P 500

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
	4,049	Nucor Corp.	$	187,064
	4,198	United States Steel Corp.		156,166
				656,036
		Telecommunication Equipment (1.2%)
	23,229	Ciena Corp. (a)		155,634
	17,732	Corning Inc.		168,986
	4,623	Harris Corp.		175,905
	35,027	Motorola, Inc.		155,170
	5,003	QUALCOMM, Inc.		179,257
	41,118	Tellabs, Inc. (a)		169,406
				1,004,358
		Tobacco (1.0%)
	11,275	Altria Group, Inc.		169,801
	2,998	Lorillard Inc		168,937
	4,117	Philip Morris International		179,131
	4,236	Reynolds American, Inc.		170,753
	2,506	UST, Inc.		173,866
				862,488
		Tools/Hardware (0.6%)
	3,607	Black & Decker Corp.		150,809
	4,357	Snap-On, Inc.		171,579
	5,068	Stanley Works (The)		172,819
				495,207
		Trucks/Construction/ Farm Machinery (1.0%)
	3,779	Caterpillar Inc.		168,808
	5,879	Cummins Inc.		157,146
	3,908	Deere & Co.		149,755
	17,814	Manitowoc Co., Inc.		154,269
	5,721	PACCAR, Inc.		163,621
				793,599

NUMBER OF SHARES					VALUE
		Wholesale Distributors (0.4%)
	4,644	Genuine Parts Co.			$	175,822
	2,346	Grainger (W.W.), Inc.				184,959
						360,781
		Total Common Stocks (Cost $83,564,004)				83,143,251
Total Investments (Cost $83,564,004) (e) (f)			99.9	%		83,143,251
Other Assets in Excess of Liabilities			0.1			118,360
Net Assets			100.0	%	$	83,261,611

(a) Non-income producing security.

(b) A portion of this security is physically segregated in connection with open futures contracts in the amount of $19,800.

(c) Consists of one or more class of securities traded together as a unit. Stocks with attached paired trust shares.

(d) A security with total market value equal to $0 has been valued at its fair value as determind in good faith under procedures established by and under the general supervision of the Fund's Trustees.

(e) Securities have been designated as collateral in an amount equal to $160,220 in connection with open futures contracts.

(f) The aggregate cost for federal income tax purposes is $86,493,641. The aggregate gross unrealized appreciation is $21,634,464, and the aggregate gross unrealized depreciation is $24,984,854, resulting in net unrealized depreciation of $3,350,390.

FUTURES CONTRACTS OPEN AT DECEMBER 31, 2008:

NUMBER OF CONTRACTS				LONG/SHORT				DESCRIPTION, DELIVERY MONTH AND YEAR				UNDERLYING FACE AMOUNT AT VALUE				UNREALIZED APPRECIATION
	4			Long				S&P 500 Mini Index March 2009				$	180,020			$	5,534

See Notes to Financial Statements
87

Equally-Weighted S&P 500

Summary of Investments n December 31, 2008

SECTOR	VALUE		PERCENT OF TOTAL INVESTMENTS
Finance	$	13,317,718		16.0	%
Electronic Technology		8,518,354		10.2
Health Technology		6,505,267		7.8
Consumer Non-Durables		6,187,235		7.4
Utilities		6,060,195		7.3
Retail Trade		5,660,497		6.8
Technology Services		4,880,539		5.9
Consumer Services		4,291,634		5.2
Producer Manufacturing		4,290,042		5.2
Energy Minerals		3,981,160		4.8
Consumer Durables		3,243,692		3.9
Process Industries		3,217,205		3.9

SECTOR	VALUE			PERCENT OF TOTAL INVESTMENTS
Industrial Services	$	2,984,787			3.6	%
Health Services		2,396,420			2.9
Non-Energy Minerals		1,675,810			2.0
Commercial Services		1,619,446			1.9
Communications		1,571,987			1.9
Transportation		1,539,052			1.9
Distribution Services		1,202,211			1.4
	$	83,143,251	^		100.0	%

^ Does not include open futures contracts with an underlying face amount of $180,020 with total unrealized appreciation of $5,534.

See Notes to Financial Statements
88

Capital Growth

Portfolio of Investments n December 31, 2008

NUMBER OF SHARES			VALUE
		Common Stocks (93.7%)
		Air Freight/Couriers (5.4%)
	8,998	C.H. Robinson Worldwide, Inc.	$	495,160
	20,248	Expeditors International of Washington, Inc.		673,651
				1,168,811
		Biotechnology (4.4%)
	4,520	Genentech, Inc. (a)		374,753
	4,067	Gen-Probe Inc. (a)		174,230
	15,468	Illumina, Inc. (a)		402,941
				951,924
		Casino/Gaming (2.9%)
	14,746	Wynn Resorts, Ltd. (a)		623,166
		Chemicals: Agricultural (6.9%)
	21,242	Monsanto Co.		1,494,375
		Computer Communications (2.2%)
	29,338	Cisco Systems, Inc. (a)		478,209
		Computer Peripherals (0.0%)
	20,100	Seagate Technology Inc. (Escrow) (a) (b)		0
		Computer Processing Hardware (4.7%)
	11,759	Apple Inc. (a)		1,003,631
		Construction Materials (3.4%)
	28,802	Cemex SAB de C.V. (ADR) (Mexico) (a)		263,253
	4,885	Martin Marietta Materials, Inc.		474,236
				737,489
		Electronic Components (0.9%)
	1,415	First Solar, Inc. (a)		195,213
		Finance/Rental/Leasing (6.2%)
	4,237	MasterCard Inc. (Class A)		605,594
	45,033	Redecard SA (Brazil) (b)		502,114
	4,573	VISA Inc. (Class A)		239,854
				1,347,562

NUMBER OF SHARES			VALUE
		Financial Conglomerates (8.2%)
	16,535	American Express Co.	$	306,724
	53,830	Brookfield Asset Management Inc. (Class A) (Canada)		821,984
	32,046	Leucadia National Corp. (a)		634,511
				1,763,219
		Information Technology Services (0.7%)
	6,387	VMware Inc (Class A) (a)		151,308
		Internet Retail (6.1%)
	25,636	Amazon.com, Inc. (a)		1,314,614
		Internet Software/ Services (9.1%)
	1,934	Baidu.com, Inc. (ADR) (Cayman Islands) (a)		252,522
	4,139	Google Inc. (Class A) (a)		1,273,363
	66,000	Tencent Holdings Ltd. (Cayman Islands) (b)		429,676
				1,955,561
		Investment Banks/ Brokers (3.1%)
	104,461	BM&F BOVESPA SA (Brazil) (b)		274,880
	1,890	CME Group Inc.		393,328
				668,208
		Medical Specialties (1.0%)
	1,650	Intuitive Surgical, Inc. (a)		209,534
		Miscellaneous Commercial Services (0.9%)
	8,853	Corporate Executive Board Co. (The)		195,297
		Oil & Gas Production (7.2%)
	21,546	Southwestern Energy Co. (a)		624,188
	26,782	Ultra Petroleum Corp. (Canada) (a)		924,247
				1,548,435
		Other Consumer Services (2.0%)
	30,661	eBay Inc. (a)		428,028

See Notes to Financial Statements
89

Capital Growth

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Personnel Services (0.6%)
	11,006	Monster Worldwide Inc. (a)	$	133,063
		Pharmaceuticals: Other (1.2%)
	6,456	Allergan, Inc.		260,306
		Property - Casualty Insurers (4.7%)
	215	Berkshire Hathaway Inc. (Class B) (a)		691,010
	11,626	Loews Corp.		328,435
				1,019,445
		Restaurants (1.9%)
	43,601	Starbucks Corp. (a)		412,465
		Telecommunication Equipment (4.2%)
	13,556	QUALCOMM, Inc.		485,711
	10,175	Research In Motion Ltd. (Canada) (a)		412,902
				898,613
		Wholesale Distributors (2.0%)
	248,000	Li & Fung Ltd. (Bermuda) (b) (c)		427,879
		Wireless Telecommunications (3.8%)
	14,533	America Movil SAB de C.V. (Series L) (ADR) (Mexico)		450,378
	7,280	China Mobile Ltd. (ADR) (Hong Kong)		370,188
				820,566
		Total Common Stocks (Cost $29,007,999)		20,206,921

NUMBER OF SHARES (000)					VALUE
		Short-Term Investment (d) (6.5%) Investment Company
	1,403	Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (Cost $1,402,700)			$	1,402,700
Total Investments (Cost $30,410,699) (e)			100.2	%		21,609,621
Liabilities in Excess of Other Assets			(0.2	)		(36,293	)
Net Assets			100.0	%	$	21,573,328

ADR American Depositary Receipt.

(a) Non-income producing security.

(b) Securities with a total market value of $1,634,549 have been valued at their fair value as determined in good faith under procedures established by and the general supervision of the Fund's Trustees. Such fair value measurements may be level 2 measurements if observable inputs are available. See Note 7.

(c) Security trades on a Hong Kong exchange.

(d) See Note 4 to the financial statements regarding Investments in Morgan Stanley Liquidity Funds - Money Market Portfolio - Institutional Class.

(e) The aggregate cost for federal income tax purposes is $30,598,666. The aggregate gross unrealized appreciation is $1,417,447 and the aggregate gross unrealized depreciation is $10,406,492, resulting in net unrealized depreciation of $8,989,045.

See Notes to Financial Statements
90

Capital Growth

Summary of Investments n December 31, 2008

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Internet Software/Services	$	1,955,561		9.0	%
Financial Conglomerates		1,763,219		8.2
Oil & Gas Production		1,548,435		7.2
Chemicals: Agricultural		1,494,375		6.9
Investment Company		1,402,700		6.5
Finance/Rental/Leasing		1,347,562		6.2
Internet Retail		1,314,614		6.1
Air Freight/Couriers		1,168,811		5.4
Property - Casualty Insurers		1,019,445		4.7
Computer Processing Hardware		1,003,631		4.6
Biotechnology		951,924		4.4
Telecommunication Equipment		898,613		4.2
Wireless Telecommunications		820,566		3.8

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Construction Materials	$	737,489		3.4	%
Investment Banks/Brokers		668,208		3.1
Casino/Gaming		623,166		2.9
Computer Communications		478,209		2.2
Other Consumer Services		428,028		2.0
Wholesale Distributors		427,879		2.0
Restaurants		412,465		1.9
Pharmaceuticals: Other		260,306		1.2
Medical Specialties		209,534		1.0
Miscellaneous Commercial Services		195,297		0.9
Electronic Components		195,213		0.9
Information Technology Services		151,308		0.7
Personnel Services		133,063		0.6
	$	21,609,621		100.0	%

See Notes to Financial Statements
91

Focus Growth

Portfolio of Investments n December 31, 2008

NUMBER OF SHARES			VALUE
		Common Stocks (97.0%)
		Air Freight/Couriers (7.9%)
	37,323	C.H. Robinson Worldwide, Inc.	$	2,053,885
	87,077	Expeditors International of Washington, Inc.		2,897,052
				4,950,937
		Casino/Gaming (3.8%)
	57,291	Wynn Resorts, Ltd. (a)		2,421,118
		Chemicals: Agricultural (8.9%)
	79,291	Monsanto Co.		5,578,122
		Computer Communications (1.1%)
	44,209	Cisco Systems, Inc. (a)		720,607
		Computer Processing Hardware (6.1%)
	44,712	Apple Inc. (a)		3,816,169
		Construction Materials (1.2%)
	84,541	Cemex SAB de C.V. (ADR) (Mexico) (a)		772,705
		Finance/Rental/Leasing (4.8%)
	21,275	Mastercard Inc. (Class A) (a)		3,040,836
		Financial Conglomerates (9.1%)
	207,172	Brookfield Asset Management Inc. (Class A) (Canada)		3,163,516
	128,523	Leucadia National Corp. (a)		2,544,755
				5,708,271
		Internet Retail (10.1%)
	123,502	Amazon.com, Inc. (a)		6,333,182
		Internet Software/ Services (13.4%)
	10,118	Baidu, Inc. (ADR) (Cayman Islands) (a)		1,321,107
	16,145	Google Inc. (Class A) (a)		4,967,009
	329,200	Tencent Holdings Ltd. (Cayman Islands) (b)		2,143,171
				8,431,287

NUMBER OF SHARES			VALUE
		Investment Banks/ Brokers (5.8%)
	640,229	BM&F BOVESPA SA (Brazil) (b)	$	1,684,709
	9,353	CME Group Inc.		1,946,453
				3,631,162
		Miscellaneous Commercial Services (1.2%)
	34,843	Corporate Executive Board Co. (The)		768,637
		Oil & Gas Production (8.2%)
	149,990	Ultra Petroleum Corp. (Canada) (a)		5,176,155
		Other Consumer Services (2.6%)
	119,238	eBay Inc. (a)		1,664,562
		Property - Casualty Insurers (3.8%)
	739	Berkshire Hathaway Inc. (Class B) (a)		2,375,146
		Telecommunication Equipment (2.9%)
	45,112	Research In Motion Ltd. (Canada) (a)		1,830,645
		Wholesale Distributors (2.5%)
	930,000	Li & Fung Ltd. (Bermuda) (b) (c)		1,604,545
		Wireless Telecommunications (3.6%)
	72,472	America Movil SAB de C.V. (Series L) (ADR) (Mexico)		2,245,907
		Total Common Stocks (Cost $93,288,240)		61,069,993

See Notes to Financial Statements
92

Focus Growth

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES (000)					VALUE
		Short-Term Investment (d) (3.2%) Investment Company
	1,980	Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (Cost $1,980,477)			$	1,980,477
Total Investments (Cost $95,268,717) (e)			100.2	%		63,050,470
Liabilities in Excess of Other Assets			(0.2	)		(123,024	)
Net Assets			100.0	%	$	62,927,446

ADR American Depositary Receipt.

(a) Non-income producing security.

(b) Securities with total market value equal to $5,432,425 have been valued at its fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Such fair value measurements may be level 2 measurements if observable inputs are available. See Note 7.

(c) Security trades on a Hong Kong exchange.

(d) See Note 4 to the financial statements regarding investments in Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class.

(e) The aggregate cost for federal income tax purposes is $95,268,722. The aggregate gross unrealized appreciation is $2,980,455 and the aggregate gross unrealized depreciation is $35,198,707 resulting in net unrealized depreciation of $32,218,252.

See Notes to Financial Statements
93

Focus Growth

Summary of Investments n December 31, 2008

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Internet Software/Services	$	8,431,287		13.4	%
Internet Retail		6,333,182		10.0
Financial Conglomerates		5,708,271		9.1
Chemicals: Agricultural		5,578,122		8.9
Oil & Gas Production		5,176,155		8.2
Air Freight/Couriers		4,950,937		7.9
Computer Processing Hardware		3,816,169		6.1
Investment Banks/Brokers		3,631,162		5.8
Finance/Rental/Leasing		3,040,836		4.8
Casino/Gaming		2,421,118		3.8
Property - Casualty Insurers		2,375,146		3.8

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Wireless Telecommunications	$	2,245,907		3.6	%
Investment Company		1,980,477		3.1
Telecommunication Equipment		1,830,645		2.9
Other Consumer Services		1,664,562		2.6
Wholesale Distributors		1,604,545		2.5
Construction Materials		772,705		1.2
Miscellaneous Commercial Services		768,637		1.2
Computer Communications		720,607		1.1
	$	63,050,470		100.0	%

See Notes to Financial Statements
94

Capital Opportunities

Portfolio of Investments n December 31, 2008

NUMBER OF SHARES			VALUE
		Common Stocks (95.5%)
		Air Freight/Couriers (3.7%)
	16,798	Expeditors International of Washington, Inc.	$	558,870
		Biotechnology (7.7%)
	19,198	Illumina, Inc. (a)		500,108
	10,538	Techne Corp. (a)		679,912
				1,180,020
		Casino/Gaming (3.0%)
	11,013	Wynn Resorts, Ltd. (a)		465,409
		Chemicals: Agricultural (6.4%)
	13,918	Monsanto Co.		979,131
		Computer Processing Hardware (4.5%)
	8,078	Apple Inc. (a)		689,457
		Construction Materials (1.2%)
	20,114	Cemex SAB de C.V. (ADR) (Mexico) (a)		183,842
		Finance Energy (1.6%)
	21,650	Brookfield Infrastructure LP		242,480
		Finance/Rental/ Leasing (7.0%)
	4,830	Mastercard Inc. Class A (a)		690,352
	34,660	Redecard SA (Brazil) (c)		386,456
				1,076,808
		Financial Conglomerates (7.0%)
	40,318	Brookfield Asset Management Inc. (Class A) (Canada)		615,656
	23,150	Leucadia National Corp. (a)		458,370
				1,074,026
		Financial Publishing/ Services (2.1%)
	8,987	Morningstar, Inc. (a)		319,039
		Home Building (0.5%)
	7,785	Gafisa S.A. (ADR) (Brazil)		72,089

NUMBER OF SHARES			VALUE
		Internet Retail (8.6%)
	19,579	Amazon.com, Inc. (a)	$	1,004,011
	13,386	Ctrip.com International Ltd. (ADR) (Cayman Islands)		318,587
				1,322,598
		Internet Software/ Services (12.0%)
	2,339	Baidu.com, Inc. (ADR) (Cayman Islands) (a)		305,403
	3,159	Google Inc. (Class A) (a)		971,866
	86,400	Tencent Holdings Ltd. (Cayman Islands) (c)		562,485
				1,839,754
		Investment Banks/Brokers (8.9%)
	77,884	BM&F BOVESPA SA (c)		204,945
	1,425	CME Group Inc.		296,557
	12,438	Greenhill & Co., Inc.		867,799
				1,369,301
		Miscellaneous Commercial Services (4.6%)
	8,938	Corporate Executive Board Co. (The)		197,172
	15,216	Costar Group, Inc. (a)		501,215
				698,387
		Oil & Gas Production (10.3%)
	29,743	Southwestern Energy Co. (a)		861,655
	20,599	Ultra Petroleum Corp. (Canada) (a)		710,871
				1,572,526
		Telecommunication Equipment (1.9%)
	7,265	Research In Motion Ltd. (Canada) (a)		294,814
		Wholesale Distributors (2.3%)
	204,974	Li & Fung Ltd. (Bermuda) (c) (d)		353,645

See Notes to Financial Statements
95

Capital Opportunities

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Wireless Telecommunications (2.2%)
	10,815	America Movil SAB de C.V. (Series L) (ADR) (Mexico)	$	335,157
		Total Common Stocks (Cost $19,993,398)		14,627,353

NUMBER OF SHARES (000)					VALUE
		Short-Term Investment (4.8%) Investment Company (b)
	735	Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (Cost $735,117)			$	735,117
Total Investments (Cost $20,728,515) (e)			100.3	%		15,362,470
Liabilities in Excess of Other Assets			(0.3	)		(47,217	)
Net Assets			100.0	%	$	15,315,253

ADR American Depositary Receipt.

(a) Non-income producing security.

(b) See Note 4 to the financial statements regarding investments in Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class.

(c) Securities with total market value of $1,507,531 have been valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Such fair value measurements may be level 2 measurements if observable inputs are available. See Note 7.

(d) Security trades on a Hong Kong exchange.

(e) The aggregate cost for federal income tax purposes is $20,805,970. The aggregate gross unrealized appreciation is $1,440,952 and the aggregate gross unrealized depreciation is $6,884,452 resulting in net unrealized depreciation of $5,443,500.

See Notes to Financial Statements
96

Capital Opportunities

Summary of Investments n December 31, 2008

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Internet Software/Services	$	1,839,754		12.0	%
Oil & Gas Production		1,572,526		10.2
Investment Banks/Brokers		1,369,301		8.9
Internet Retail		1,322,598		8.6
Biotechnology		1,180,020		7.7
Finance/Rental/Leasing		1,076,808		7.0
Financial Conglomerates		1,074,026		7.0
Chemicals: Agricultural		979,131		6.4
Investment Company		735,117		4.7
Miscellaneous Commercial Services		698,387		4.5
Computer Processing Hardware		689,457		4.5

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Air Freight/Couriers	$	558,870		3.6	%
Casino/Gaming		465,409		3.0
Wholesale Distributors		353,645		2.3
Wireless Telecommunications		335,157		2.2
Financial Publishing/ Services		319,039		2.1
Telecommunication Equipment		294,814		2.0
Finance Energy		242,480		1.6
Construction Materials		183,842		1.2
Home Building		72,089		0.5
	$	15,362,470		100.0	%

See Notes to Financial Statements
97

Global Equity

Portfolio of Investments n December 31, 2008

NUMBER OF SHARES			VALUE
		Common Stocks (99.1%) Australia (c) (2.0%)
		Data Processing Services
	100,475	Computershare Ltd.	$	549,426
		Bermuda (5.5%)
		Apparel/Footwear Retail
	66,100	Esprit Holdings Ltd. (c)		376,772
		Multi-Line Insurance
	23,815	Axis Capital Holdings Ltd.		693,493
		Wholesale Distributors
	260,800	Li & Fung Ltd. (c) (d)		449,963
		Total Bermuda		1,520,228
		China (c) (1.0%)
		Coal
	130,000	China Shenhua Energy Company Ltd. (H Shares)		278,780
		Finland (c) (1.2%)
		Electronic Components
	13,058	Vacon Oyj		335,657
		France (c) (5.8%)
		Food: Major Diversified
	7,189	Groupe Danone		433,891
		Miscellaneous Commercial Services
	9,789	Sodexo		541,722
		Pharmaceuticals: Other
	15,826	Ipsen S.A.		617,935
		Total France		1,593,548
		Germany (c) (8.4%)
		Apparel/Footwear
	13,659	Adidas AG		525,327
		Internet Software/Services
	50,500	United Internet AG		451,979
		Medical/Nursing Services
	19,099	Fresenius Medical Care AG & Co. KGaA		895,611

NUMBER OF SHARES			VALUE
		Miscellaneous Commercial Services
	77,097	Wirecard AG (a)	$	457,103
		Total Germany		2,330,020
		Greece (c) (0.9%)
		Regional Banks
	32,485	EFG Eurobank Ergasias		257,769
		Ireland (1.1%)
		Pharmaceuticals: Other
	14,600	ICON PLC (ADR) (a)		287,474
		Israel (4.6%)
		Food: Specialty/Candy
	37,401	Strauss Group Ltd. (c)		365,788
		Pharmaceuticals: Other
	21,400	Teva Pharmaceutical Industries Ltd. (ADR)		910,998
		Total Israel		1,276,786
		Japan (c) (6.2%)
		Home Building
	22,700	Daito Trust Construction Co., Ltd.		1,188,601
		Pharmaceuticals: Other
	122	EPS Co., Ltd.		526,454
		Total Japan		1,715,055
		Mexico (2.0%)
		Beverages: Non-Alcoholic
	18,700	Fomento Economico Mexicano, S.A.B. de C.V. (ADR) (Units) (b)		563,431
		South Africa (c) (1.9%)
		Pharmaceuticals: Generic Drugs
	146,606	Aspen Pharmacare Holdings Ltd. (a)		535,256

See Notes to Financial Statements
98

Global Equity

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		South Korea (c) (1.8%)
		Internet Software/Services
	4,884	NHN Corp. (a)	$	495,604
		Spain (c) (4.3%)
		Major Banks
	44,657	Banco Santander S.A.		430,990
		Major Telecommunications
	34,286	Telefonica S.A.		768,535
		Total Spain		1,199,525
		Switzerland (c) (2.4%)
		Biotechnology
	7,117	Lonza Group AG (Registered Shares)		657,931
		United Kingdom (c) (10.6%)
		Beverages: Alcoholic
	43,326	SABMiller PLC		729,494
		Investment Managers
	68,826	Man Group PLC		237,563
		Major Banks
	34,272	Standard Chartered PLC		438,110
		Miscellaneous Commercial Services
	14,200	Homeserve PLC		200,996
	68,902	Intertek Group PLC		780,469
				981,465
		Pharmaceuticals: Other
	36,472	Shire PLC		533,359
		Total United Kingdom		2,919,991
		United States (39.4%)
		Beverages: Non-Alcoholic
	12,400	PepsiCo, Inc.		679,148
		Biotechnology
	16,630	Gilead Sciences, Inc. (a)		850,458
		Computer Processing Hardware
	9,091	Apple Inc. (a)		775,917
		Data Processing Services
	31,200	NeuStar, Inc. (Class A) (a)		596,856

NUMBER OF SHARES			VALUE
		Electronic Components
	20,300	Amphenol Corporation (Class A)	$	486,794
		Environmental Services
	48,800	EnergySolutions Inc.		275,720
		Financial Conglomerates
	14,900	Prudential Financial, Inc.		450,874
		Food: Meat/Fish/Dairy
	68,100	Smart Balance Inc. (a)		463,080
		Life/Health Insurance
	22,500	Aflac, Inc.		1,031,400
		Media Conglomerates
	47,600	News Corp. (Class A)		432,684
		Medical Specialties
	9,650	Bard (C.R.), Inc.		813,109
	25,200	Qiagen N.V. (Netherlands) (a)		442,512
	19,510	Thermo Fisher Scientific, Inc. (a)		664,706
	16,700	West Pharmaceutical Services, Inc.		630,759
				2,551,086
		Miscellaneous Commercial Services
	15,400	FTI Consulting Inc. (a)		688,072
		Specialty Stores
	21,900	Staples, Inc.		392,448
		Wireless Telecommunications
	44,700	MetroPCS Communications, Inc. (a)		663,795
	31,000	NII Holdings Inc. (a)		563,580
				1,227,375
		Total United States		10,901,912
		Total Common Stocks (Cost $33,336,277)		27,418,393

See Notes to Financial Statements
99

Global Equity

Portfolio of Investments n December 31, 2008 continued

NUMBER OF RIGHTS			VALUE
		United Kingdom (c) (0.2%)
		Major Banks
	11,298	Standard Chartered PLC (Cost $0)	$	59,855

SHARES (000)		NUMBER OF			VALUE
		Short-Term Investments (e) (0.8%)
		Investment Company
	207	Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (Cost $207,178)			$	207,178
Total Investments (Cost $33,543,455) (f)			100.1	%		27,685,426
Liabilities in Excess of Other Assets			(0.1	)		(31,737	)
Net Assets			100.0	%	$	27,653,689

ADR American Depositary Receipt.

(a) Non-income producing security.

(b) Consist of one or more class of securities traded together as a unit; stocks with attached warrants.

(c) Securities with a total market value equal to $14,120,940 have been valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Such fair value measurements may be level 2 measurements if observable inputs are available. See Note 7.

(d) Security trades on a Hong Kong exchange.

(e) See Note 4 to the financial statements regarding investments in Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class.

(f) The aggregate cost for federal income tax purposes is $33,548,612. The aggregate gross unrealized appreciation is $2,418,180 and the aggregate gross unrealized depreciation is $8,281,366, resulting in net unrealized depreciation of $5,863,186.

See Notes to Financial Statements
100

Global Equity

Summary of Investments n December 31, 2008

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Pharmaceuticals: Other	$	2,876,220		10.4	%
Miscellaneous Commercial Services		2,668,362		9.6
Medical Specialties		2,551,086		9.2
Biotechnology		1,508,389		5.5
Beverages: Non-Alcoholic		1,242,579		4.5
Wireless Telecommunications		1,227,375		4.4
Home Building		1,188,601		4.3
Data Processing Services		1,146,282		4.1
Life/Health Insurance		1,031,400		3.7
Internet Software/Services		947,583		3.4
Major Banks		928,955		3.4
Medical/Nursing Services		895,611		3.2
Electronic Components		822,451		3.0
Computer Processing Hardware		775,917		2.8
Major Telecommunications		768,535		2.8

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Beverages: Alcoholic	$	729,494		2.6	%
Multi-Line Insurance		693,493		2.5
Pharmaceuticals: Generic Drugs		535,256		1.9
Apparel/Footwear		525,327		1.9
Food: Meat/Fish/Dairy		463,080		1.7
Financial Conglomerates		450,874		1.6
Wholesale Distributors		449,963		1.6
Food: Major Diversified		433,891		1.6
Media Conglomerates		432,684		1.6
Specialty Stores		392,448		1.4
Apparel/Footwear Retail		376,772		1.4
Food: Specialty/Candy		365,788		1.3
Coal		278,780		1.0
Environmental Services		275,720		1.0
Regional Banks		257,769		0.9
Investment Managers		237,563		0.9
Investment Company		207,178		0.8
	$	27,685,426		100.0	%

See Notes to Financial Statements
101

Mid Cap Growth

Portfolio of Investments n December 31, 2008

NUMBER OF SHARES			VALUE
		Common Stocks (93.0%)
		Air Freight/Couriers (6.0%)
	10,393	C.H. Robinson Worldwide, Inc.	$	571,927
	21,561	Expeditors International of Washington, Inc.		717,334
				1,289,261
		Alternative Power Generation (1.8%)
	17,504	Covanta Holding Corp. (a)		384,388
		Apparel/Footwear Retail (1.6%)
	10,715	Abercrombie & Fitch Co. (Class A)		247,195
	11,343	Lululemon Athletica Inc. (Canada) (a)		89,950
				337,145
		Biotechnology (8.2%)
	9,498	Gen-Probe Inc. (a)		406,894
	25,968	Illumina, Inc. (a)		676,466
	10,442	Techne Corp.		673,718
				1,757,078
		Broadcasting (1.8%)
	13,095	Discovery Communications Inc. (Class C) (a)		175,342
	14,673	Grupo Televisa S.A. (ADR) (Mexico)		219,215
				394,557
		Casino/Gaming (2.8%)
	14,100	Wynn Resorts Ltd. (a)		595,866
		Chemicals: Major Diversified (1.4%)
	25,520	Nalco Holding Co. (a)		294,501
		Chemicals: Specialty (0.4%)
	8,722	Rockwood Holdings Inc. (a)		94,198
		Construction Materials (4.3%)
	7,849	Martin Marietta Materials, Inc.		761,981
	4,912	Texas Industries, Inc.		169,464
				931,445

NUMBER OF SHARES			VALUE
		Engineering & Construction (1.6%)
	11,008	Aecom Technology Corp. (a)	$	338,276
		Finance/Rental/Leasing (2.3%)
	44,511	Redecard SA (Brazil) (c)		496,294
		Financial Conglomerates (4.5%)
	24,684	Brookfield Asset Management Inc. (Class A) (Canada)		376,925
	29,871	Leucadia National Corp. (a)		591,446
				968,371
		Financial Publishing/ Services (1.9%)
	11,410	Morningstar, Inc. (a)		405,055
		Gas Distributors (1.1%)
	7,228	Questar Corp.		236,283
		Home Building (1.8%)
	14,456	Gafisa S.A. (ADR) (Brazil)		133,863
	530	NVR, Inc. (a)		241,812
				375,675
		Home Furnishings (0.8%)
	4,121	Mohawk Industries, Inc. (a)		177,079
		Information Technology Services (1.0%)
	15,001	Teradata Corp. (a)		222,465
		Internet Retail (3.0%)
	3,975	Amazon.com, Inc. (a)		203,838
	18,101	Ctrip.com International Ltd. (ADR) (Cayman Islands)		430,804
				634,642
		Internet Software/ Services (7.4%)
	3,126	Baidu.com, Inc. (ADR) (Cayman Islands) (a)		408,162
	4,042	Equinix, Inc. (a)		214,994
	115,400	Tencent Holdings Ltd. (Cayman Islands) (c)		751,282
	17,677	Yahoo! Inc. (a)		215,659
				1,590,097

See Notes to Financial Statements
102

Mid Cap Growth

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES			VALUE
		Investment Banks/ Brokers (3.1%)
	3,523	Greenhill & Co., Inc.	$	245,800
	4,993	IntercontinentalExchange Inc. (a)		411,623
				657,423
		Investment Managers (0.7%)
	20,824	Calamos Asset Management, Inc. (Class A)		154,098
		Investment Trusts/ Mutual Funds (1.0%)
	29,915	Groupe Aeroplan, Inc.		210,338
		Media Conglomerates (0.7%)
	10,963	Discovery Communications Inc. (Series A) (a)		155,236
		Medical Specialties (2.1%)
	1,608	Intuitive Surgical, Inc. (a)		204,200
	13,720	Mindray Medical International Limited (ADR) (Cayman Islands)		246,960
				451,160
		Miscellaneous Commercial Services (3.1%)
	11,428	Corporate Executive Board Co. (The)		252,102
	11,053	IHS Inc. (Class A) (a)		413,603
				665,705
		Oil & Gas Production (11.0%)
	6,890	Petrohawk Energy Corp. (a)		107,691
	5,483	Range Resources Corp.		188,560
	40,011	Southwestern Energy Co. (a)		1,159,119
	26,314	Ultra Petroleum Corp. (Canada) (a)		908,096
				2,363,466

NUMBER OF SHARES			VALUE
		Other Consumer Services (6.7%)
	278,000	Alibaba.com Ltd. (Cayman Islands) (a)(c)	$	202,367
	7,110	New Oriental Education & Technology Group, Inc. (ADR) (Cayman Islands) (a)		390,410
	6,702	Priceline.com Inc. (a)		493,602
	1,668	Strayer Education, Inc.		357,636
				1,444,015
		Other Metals/Minerals (0.7%)
	7,609	Intrepid Potash, Inc. (a)		158,039
		Other Transportation (1.1%)
	10,711	Grupo Aeroportuario del Pacifico SAB de CV (ADR) (Mexico)		246,567
		Packaged Software (2.2%)
	14,949	Salesforce.com, Inc. (a)		478,517
		Personnel Services (0.9%)
	15,690	Monster Worldwide, Inc. (a)		189,692
		Property - Casualty Insurers (1.0%)
	797	Alleghany Corp. (a)		224,754
		Restaurants (1.8%)
	41,357	Starbucks Corp. (a)		391,237
		Wholesale Distributors (2.2%)
	268,185	Li & Fung Ltd. (Bermuda) (c) (d)		462,704
		Wireless Telecommunications (1.0%)
	11,550	NII Holdings Inc. (a)		209,979
		Total Common Stocks (Cost $32,011,672)		19,985,606
		Convertible Preferred Stock (0.8%)
		Biotechnology
	14,664	Ironwood Pharmaceuticals (b) (c) (Cost $175,968)		175,968

See Notes to Financial Statements
103

Mid Cap Growth

Portfolio of Investments n December 31, 2008 continued

NUMBER OF SHARES (000)					VALUE
		Short-Term Investment (e) (6.4%)
		Investment Company
	1,376	Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class (Cost $1,376,350)			$	1,376,350
Total Investments (Cost $33,563,990) (f)			100.2	%		21,537,924
Liabilities in Excess of Other Assets			(0.2	)		(46,089	)
Net Assets			100.0	%	$	21,491,835

ADR American Depositary Receipt.

(a) Non-income producing security.

(b) Resale is restricted to qualified institutional investors.

(c) Securities with a total market value equal to $2,088,615 have been valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Such fair value measurements may be level 2 measurements if observable inputs are available. See Note 7.

(d) Security trades on a Hong Kong exchange.

(e) See Note 4 to the financial statements regarding investments in Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class.

(f) The aggregate cost for federal income tax purposes is $33,615,106. The aggregate gross unrealized appreciation is $910,583 and the aggregate gross unrealized depreciation is $12,987,765, resulting in net unrealized depreciation of $12,077,182.

See Notes to Financial Statements
104

Mid Cap Growth

Summary of Investments n December 31, 2008

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Oil & Gas Production	$	2,363,466		11.0	%
Biotechnology		1,933,046		9.0
Internet Software/Services		1,590,097		7.4
Other Consumer Services		1,444,015		6.7
Investment Company		1,376,350		6.4
Air Freight/Couriers		1,289,261		6.0
Financial Conglomerates		968,371		4.5
Construction Materials		931,445		4.3
Miscellaneous Commercial Services		665,705		3.1
Investment Banks/Brokers		657,423		3.1
Internet Retail		634,642		2.9
Casino/Gaming		595,866		2.8
Finance/Rental/Leasing		496,294		2.3
Packaged Software		478,517		2.2
Wholesale Distributors		462,704		2.2
Medical Specialties		451,160		2.1
Financial Publishing/ Services		405,055		1.9
Broadcasting		394,557		1.8
Restaurants		391,237		1.8
Alternative Power Generation		384,388		1.8

INDUSTRY	VALUE		PERCENT OF TOTAL INVESTMENTS
Home Building	$	375,675		1.7	%
Engineering & Construction		338,276		1.6
Apparel/Footwear Retail		337,145		1.6
Chemicals: Major Diversified		294,501		1.4
Other Transportation		246,567		1.1
Gas Distributors		236,283		1.1
Property - Casualty Insurers		224,754		1.0
Information Technology Services		222,465		1.0
Investment Trusts/Mutual Funds		210,338		1.0
Wireless Telecommunications		209,979		1.0
Personnel Services		189,692		0.9
Home Furnishings		177,079		0.8
Other Metals/Minerals		158,039		0.7
Media Conglomerates		155,236		0.7
Investment Managers		154,098		0.7
Chemicals: Specialty		94,198		0.4
	$	21,537,924		100.0	%

See Notes to Financial Statements
105

Morgan Stanley Select Dimensions Investment Series

Financial Statements

Statements of Assets and Liabilities
For the year ended December 31, 2008

	Money Market			Flexible Income			Balanced			Global Infrastructure			Dividend Growth			Equally- Weighted S&P 500
Assets:
Investments in securities, at value*	$	215,804,435	⁽¹⁾	$	26,771,536		$	39,131,953		$	36,623,649		$	100,402,002		$	82,831,508
Investments in affiliates, at value**		—			6,476,953			3,472,743			364,986			722,532			311,743
Cash		5,003			175,437	⁽²⁾		3,494	⁽²⁾		21,185	⁽²⁾		—			—
Receivable for:
Investments sold		—			723,872			124,915			—			571,731			567,589
Interest		103,586			483,849			129,932			—			—			—
Dividends		—			—			43,512			30,886			211,412			209,596
Shares of beneficial interest sold		107,791			—			—			—			—			—
Foreign withholding taxes reclaimed		—			1,628			—			11,222			36,401			—
Dividends from affiliate		—			5,301			3,448			336			1,058			247
Variation margin		—			39,375			34,125			—			—			2,380
Foreign dividends		—			—			—			100,937			—			—
Periodic interest payment on open swap contracts		—			192,284			53,482			—			—			—
Unrealized appreciation on open forward foreign currency contracts		—			—			—			99,052			—			—
Unrealized appreciation on open swap contracts		—			4,913,910			1,511,552			—			—			—
Prepaid expenses and other assets		27,846			3,751			3,617			36,316			4,648			25,411
Total Assets		216,048,661			39,787,896			44,512,773			37,288,569			101,949,784			83,948,474
Liabilities:
Written call options outstanding, at value		—			38,981	⁽³⁾		15,881	⁽³⁾		—			—			—
Payable for:
Investments purchased		—			2,642,929			499,812			—			—			487,044
Shares of beneficial interest redeemed		74,973			39,955			25,754			2,146			37,017			43,563
Investment advisory fee		89,310			7,461			18,533			17,919			48,020			8,585
Distribution fee		40,214			3,417			3,738			2,317			5,312			10,098
Administration fee		9,961			2,120			2,966			2,537			7,110			5,794
Periodic interest payment on open swap contracts		—			148,366			24,354			—			—			—
Swap contracts termination		—			146,184			—			—			—			—
Transfer agent fee		500			500			500			500			500			500
Unrealized depreciation on open forward foreign currency contracts		—			2,323			—			53,789			—			—
Swap contracts collateral due to brokers		—			2,290,000			770,000			—			—			—
Unrealized depreciation on open swap contracts		—			4,031,525			812,966			—			—			—
Payable to bank		—			—			—			—			—			54,850
Accrued expenses and other payables		48,257			33,326			65,188			26,637			68,630			76,429
Total Liabilities		263,215			9,387,087			2,239,692			105,845			166,589			686,863
Net Assets	$	215,785,446		$	30,400,809		$	42,273,081		$	37,182,724		$	101,783,195		$	83,261,611
Composition of Net Assets:
Paid-in-capital	$	215,785,470		$	64,073,198		$	49,377,802		$	35,379,385		$	200,479,436		$	82,088,994
Accumulated undistributed net investment income (net investment loss)		159			2,220,402			1,168,937			1,071,777			1,798,267			2,108,550
Accumulated net realized gain (loss)		(183	)		(27,436,182	)		(2,885,872	)		(1,338,730	)		(77,296,441	)		(520,714	)
Net unrealized appreciation (depreciation)		—			(8,456,609	)		(5,387,786	)		2,070,292			(23,198,067	)		(415,219	)
Net Assets	$	215,785,446		$	30,400,809		$	42,273,081		$	37,182,724		$	101,783,195		$	83,261,611
*Cost	$	215,804,435		$	35,912,392		$	45,114,534		$	34,601,052		$	123,600,069		$	83,191,167
**Affiliated Cost	$	—		$	6,476,953		$	3,472,743		$	364,986		$	722,532		$	372,837
Class X Shares:
Net Assets	$	42,190,075		$	14,742,648		$	25,225,492		$	26,296,968		$	77,428,299		$	36,814,381
Shares Outstanding (unlimited authorized shares of $.01 par value)		42,190,101			2,700,099			2,282,217			1,325,854			6,576,694			3,171,571
Net Asset Value Per Share	$	1.00		$	5.46		$	11.05		$	19.83		$	11.77		$	11.61
Class Y Shares:
Net Assets	$	173,595,371		$	15,658,161		$	17,047,589		$	10,885,756		$	24,354,896		$	46,447,230
Shares Outstanding (unlimited authorized shares of $.01 par value)		173,595,369			2,882,691			1,550,099			550,343			2,075,566			4,055,906
Net Asset Value Per Share	$	1.00		$	5.43		$	11.00		$	19.78		$	11.73		$	11.45

(1) Including repurchase agreements of $37,945,000.

(2) Including foreign currency valued at $6,022, $1,525, $17,887 and $7, respectively with a cost of $6,123, $1,562, $16,949 and $9, respectively.

(3) Premium received $13,428 and $5,470, respectively

See Notes to Financial Statements
106

	Capital Growth			Focus Growth			Capital Opportunities			Global Equity			Mid Cap Growth
Assets:
Investments in securities, at value*	$	20,206,921		$	61,069,993		$	14,627,353		$	27,478,248		$	20,161,574
Investments in affiliates, at value**		1,402,700			1,980,477			735,117			207,178			1,376,350
Cash		—			7	⁽²⁾		—			—			406
Receivable for:
Investments sold		—			—			—			—			—
Interest		—			—			—			—			—
Dividends		4,840			8,957			557			12,481			3,893
Shares of beneficial interest sold		—			7,173			7,816			—			—
Foreign withholding taxes reclaimed		—			—			—			33,958			—
Dividends from affiliate		1,621			2,312			830			195			1,359
Variation margin		—			—			—			—			—
Foreign dividends		—			—			—			—			—
Periodic interest payment on open swap contracts		—			—			—			—			—
Unrealized appreciation on open forward foreign currency contracts		—			—			—			—			—
Unrealized appreciation on open swap contracts		—			—			—			—			—
Prepaid expenses and other assets		2,152			2,557			8,336			770			3,715
Total Assets		21,618,234			63,071,476			15,380,009			27,732,830			21,547,297
Liabilities:
Written call options outstanding, at value		—			—			—			—			—
Payable for:
Investments purchased		—			—			—			—			—
Shares of beneficial interest redeemed		1,864			58,272			6,254			7,895			10,021
Investment advisory fee		9,231			30,211			8,990			18,571			7,652
Distribution fee		2,892			3,188			1,896			1,092			1,181
Administration fee		1,542			4,530			1,085			1,935			1,491
Periodic interest payment on open swap contracts		—			—			—			—			—
Swap contracts termination		—			—			—			—			—
Transfer agent fee		500			500			500			500			500
Unrealized depreciation on open forward foreign currency contracts		—			—			—			—			—
Swap contracts collateral due to brokers		—			—			—			—			—
Unrealized depreciation on open swap contracts		—			—			—			—			—
Payable to bank		—			—			618			3,351			—
Accrued expenses and other payables		28,877			47,329			45,413			45,797			34,617
Total Liabilities		44,906			144,030			64,756			79,141			55,462
Net Assets	$	21,573,328		$	62,927,446		$	15,315,253		$	27,653,689		$	21,491,835
Composition of Net Assets:
Paid-in-capital	$	55,561,654		$	300,544,370		$	97,878,977		$	34,664,281		$	46,654,867
Accumulated undistributed net investment income (net investment loss)		(459	)		(118,510	)		18,697			252,587			(2,507	)
Accumulated net realized gain (loss)		(25,186,799	)		(205,280,165	)		(77,216,383	)		(1,407,304	)		(13,134,467	)
Net unrealized appreciation (depreciation)		(8,801,068	)		(32,218,249	)		(5,366,038	)		(5,855,875	)		(12,026,058	)
Net Assets	$	21,573,328		$	62,927,446		$	15,315,253		$	27,653,689		$	21,491,835
*Cost	$	29,007,999		$	93,288,240		$	19,993,398		$	33,336,277		$	32,187,640
**Affiliated Cost	$	1,402,700		$	1,980,477		$	735,117		$	207,178		$	1,376,350
Class X Shares:
Net Assets	$	8,620,766		$	48,721,790		$	6,744,047		$	22,632,682		$	16,022,597
Shares Outstanding (unlimited authorized shares of $.01 par value)		759,394			4,753,829			878,102			2,390,973			964,535
Net Asset Value Per Share	$	11.35		$	10.25		$	7.68		$	9.47		$	16.61
Class Y Shares:
Net Assets	$	12,952,562		$	14,205,656		$	8,571,206		$	5,021,007		$	5,469,238
Shares Outstanding (unlimited authorized shares of $.01 par value)		1,157,758			1,399,343			1,139,930			535,180			334,621
Net Asset Value Per Share	$	11.19		$	10.15		$	7.52		$	9.38		$	16.34

107

Morgan Stanley Select Dimensions Investment Series

Financial Statements continued

Statements of Operations
For the year ended December 31, 2008

	Money Market		Flexible Income			Balanced			Global Infrastructure			Dividend Growth			Equally- Weighted S&P 500
Investment Income:
Income
Interest†	$	4,809,131	$	2,795,510		$	897,260			—			—			—
Dividends from affiliates		—		71,073			102,586		$	39,996		$	111,820		$	57,015
Dividends†		—		604			945,181			1,613,720			3,470,237			2,655,448
Total Income		4,809,131		2,867,187			1,945,027			1,653,716			3,582,057			2,712,463
†Net of foreign withholding tax		—		(1,365	)		(23,105	)		(48,650	)		(2,128	)		(316	)
Expenses
Investment advisory fee		778,506		127,901			290,201			301,930			832,714			161,724
Administration fee		86,539		31,975			44,646			42,376			122,233			107,817
Distribution fee (Class Y shares)		332,100		52,196			55,806			38,234			91,109			189,745
Professional fees		53,098		39,820			44,965			67,034			45,452			33,717
Mutual fund insurance (Note 9)		20,890		—			—			—			—			—
Shareholder reports and notices		20,559		22,068			23,889			21,403			66,076			72,858
Custodian fees		23,275		28,621			47,237			4,001			13,151			24,755
Trustees' fees and expenses		2,223		1,076			968			928			2,619			1,922
Transfer agent fees and expenses		500		500			500			500			500			500
Other		10,700		20,846			21,682			6,685			13,977			18,860
Total Expenses		1,328,390		325,003			529,894			483,091			1,187,831			611,898
Less: rebate from Morgan Stanley affiliated cash sweep (Note 4)		—		(3,389	)		(3,662	)		(1,453	)		(4,319	)		(1,436	)
Net Expenses		1,328,390		321,614			526,232			481,638			1,183,512			610,462
Net Investment Income (Loss)		3,480,741		2,545,573			1,418,795			1,172,078			2,398,545			2,102,001
Net Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss) on:
Investments		—		(7,992,158	)		(2,508,499	)		10,489,122			(17,925,754	)		1,243,364
Investments in affiliates		—		—			(88,047	)		—			—			(76,985	)
Futures contracts		—		(932,473	)		(289,145	)		—			—			(1,301,648	)
Option contracts		—		(50,352	)		961			—			75,342			—
Swap contracts		—		419,411			542,105			—			—			—
Foreign exchange transactions		—		118,518			(675	)		179,185			—			—
Net Realized Gain (Loss)		—		(8,437,054	)		(2,343,300	)		10,668,307			(17,850,412	)		(135,269	)
Net Change in Unrealized Appreciation/Depreciation on:
Investments		—		(3,879,742	)		(13,337,389	)		(32,032,715	)		(50,166,655	)		(63,973,208	)
Investments in affiliates		—		—			—			—			—			(498,819	)
Futures contracts		—		(87,259	)		(92,435	)		—			—			84,088
Swap contracts		—		103,905			279,164			—			—			—
Option contracts		—		69,796			10,193			—			17,585			—
Translation of other assets and liabilities denominated in foreign currencies		—		(24,617	)		—			47,695			—			—
Net Depreciation		—		(3,817,917	)		(13,140,467	)		(31,985,020	)		(50,149,070	)		(64,387,939	)
Net Loss		—		(12,254,971	)		(15,483,767	)		(21,316,713	)		(67,999,482	)		(64,523,208	)
Net Increase (Decrease)	$	3,480,741	$	(9,709,398	)	$	(14,064,972	)	$	(20,144,635	)	$	(65,600,937	)	$	(62,421,207	)

See Notes to Financial Statements
108

	Capital Growth			Focus Growth			Capital Opportunities			Global Equity			Mid Cap Growth
Investment Income:
Income
Interest†	$	169			—		$	7			—			—
Dividends from affiliates		47,616		$	157,183			39,453		$	16,891		$	48,282
Dividends†		171,152			448,627			147,123			766,139			153,315
Total Income		218,937			605,810			186,583			783,030			201,597
†Net of foreign withholding tax		(6,607	)		(20,826	)		(1,672	)		(60,856	)		(5,785	)
Expenses
Investment advisory fee		182,814			652,005			185,302			351,476			154,227
Administration fee		29,250			95,707			22,126			36,517			29,376
Distribution fee (Class Y shares)		52,059			67,734			38,025			20,519			22,937
Professional fees		33,494			42,412			29,156			42,744			39,184
Mutual fund insurance (Note 9)		—			—			—			—			—
Shareholder reports and notices		28,966			22,940			36,595			21,568			19,906
Custodian fees		17,561			18,222			9,579			19,774			23,658
Trustees' fees and expenses		692			2,176			530			861			707
Transfer agent fees and expenses		500			500			500			500			500
Other		6,116			11,699			5,102			12,838			5,843
Total Expenses		351,452			913,395			326,915			506,797			296,338
Less: rebate from Morgan Stanley affiliated cash sweep (Note 4)		(2,116	)		(6,675	)		(1,437	)		(626	)		(1,929	)
Net Expenses		349,336			906,720			325,478			506,171			294,409
Net Investment Income (Loss)		(130,399	)		(300,910	)		(138,895	)		276,859			(92,812	)
Net Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss) on:
Investments		(100,080	)		(5,000,830	)		(2,128,910	)		(1,388,333	)		(1,315,134	)
Investments in affiliates		—			—			—			—			—
Futures contracts		—			—			—			—			—
Option contracts		—			—			—			—			—
Swap contracts		—			—			—			—			—
Foreign exchange transactions		(23,359	)		(50,550	)		(12,435	)		(23,825	)		(15,201	)
Net Realized Gain (Loss)		(123,439	)		(5,051,380	)		(2,141,345	)		(1,412,158	)		(1,330,335	)
Net Change in Unrealized Appreciation/Depreciation on:
Investments		(21,420,083	)		(68,239,878	)		(13,749,035	)		(25,444,497	)		(20,148,629	)
Investments in affiliates		—			—			—			—			—
Futures contracts		—			—			—			—			—
Swap contracts		—			—			—			—			—
Option contracts		—			—			—			—			—
Translation of other assets and liabilities denominated in foreign currencies		(209	)		3			7			390			22
Net Depreciation		(21,420,292	)		(68,239,875	)		(13,749,028	)		(25,444,107	)		(20,148,607	)
Net Loss		(21,543,731	)		(73,291,255	)		(15,890,373	)		(26,856,265	)		(21,478,942	)
Net Increase (Decrease)	$	(21,674,130	)	$	(73,592,165	)	$	(16,029,268	)	$	(26,579,406	)	$	(21,571,754	)

109

Morgan Stanley Select Dimensions Investment Series

Financial Statements continued

Statements of Changes in Net Assets

	Money Market						Flexible Income						Balanced
	For The Year Ended			For The Year Ended			For The Year Ended			For The Year Ended			For The Year Ended			For The Year Ended
	December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	3,480,741		$	5,692,540		$	2,545,573		$	3,413,525		$	1,418,795		$	1,842,741
Net realized gain (loss)		—			(183	)		(8,437,054	)		(14,669	)		(2,343,300	)		7,086,836
Net change in unrealized appreciation/depreciation		—			—			(3,817,917	)		(1,460,032	)		(13,140,467	)		(5,764,016	)
Net Increase (Decrease)		3,480,741			5,692,357			(9,709,398	)		1,938,824			(14,064,972	)		3,165,561
Dividends and Distributions to Shareholders from:
Net investment income
Class X shares		(939,829	)		(2,008,292	)		(443,828	)		(1,584,967	)		(278,395	)		(1,230,873	)
Class Y shares		(2,540,820	)		(3,684,226	)		(467,814	)		(1,484,033	)		(167,071	)		(679,026	)
Net realized gain
Class X shares		—			—			—			—			(4,165,125	)		(3,856,860	)
Class Y shares		—			—			—			—			(2,847,875	)		(2,319,112	)
Paid-in-capital
Class X shares		—			—			—			(46,420	)		—			—
Class Y shares		—			—			—			(43,464	)		—			—
Total Dividends and Distributions		(3,480,649	)		(5,692,518	)		(911,642	)		(3,158,884	)		(7,458,466	)		(8,085,871	)
Net increase (decrease) from transactions in shares of beneficial interest		93,025,321			1,790,060			(8,494,169	)		(4,194,509	)		(6,225,884	)		(9,823,141	)
Total Increase (Decrease)		93,025,413			1,789,899			(19,115,209	)		(5,414,569	)		(27,749,322	)		(14,743,451	)
Net Assets:
Beginning of period		122,760,033			120,970,134			49,516,018			54,930,587			70,022,403			84,765,854
End of Period	$	215,785,446		$	122,760,033		$	30,400,809		$	49,516,018		$	42,273,081		$	70,022,403
Accumulated Undistributed Net Investment Income (Net Investment Loss)	$	159		$	67		$	2,220,402		$	194,594		$	1,168,937		$	(103,102	)

See Notes to Financial Statements
110

	Global Infrastructure						Dividend Growth						Equally-Weighted S&P 500
	For The Year Ended			For The Year Ended			For The Year Ended			For The Year Ended			For The Year Ended			For The Year Ended
	December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007			December 31, 2008			December 31, 2007
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	1,172,078		$	1,238,174		$	2,398,545		$	2,585,109		$	2,102,001		$	2,753,795
Net realized gain (loss)		10,668,307			9,039,953			(17,850,412	)		14,860,981			(135,269	)		30,981,403
Net change in unrealized appreciation/depreciation		(31,985,020	)		2,530,416			(50,149,070	)		(6,780,050	)		(64,387,939	)		(29,424,330	)
Net Increase (Decrease)		(20,144,635	)		12,808,543			(65,600,937	)		10,666,040			(62,421,207	)		4,310,868
Dividends and Distributions to Shareholders from:
Net investment income
Class X shares		(228,880	)		(913,278	)		(524,657	)		(2,049,527	)		(1,225,564	)		(1,353,767	)
Class Y shares		(83,579	)		(294,884	)		(137,934	)		(484,081	)		(1,332,310	)		(1,348,006	)
Net realized gain
Class X shares		—			—			—			—			(13,484,166	)		(8,266,186	)
Class Y shares		—			—			—			—			(17,706,568	)		(9,864,510	)
Paid-in-capital
Class X shares		—			—			—			—			—			—
Class Y shares		—			—			—			—			—			—
Total Dividends and Distributions		(312,459	)		(1,208,162	)		(662,591	)		(2,533,608	)		(33,748,608	)		(20,832,469	)
Net increase (decrease) from transactions in shares of beneficial interest		(9,705,138	)		(14,642,163	)		(34,650,154	)		(60,859,159	)		1,882,742			(22,651,084	)
Total Increase (Decrease)		(30,162,232	)		(3,041,782	)		(100,913,682	)		(52,726,727	)		(94,287,073	)		(39,172,685	)
Net Assets:
Beginning of period		67,344,956			70,386,738			202,696,877			255,423,604			177,548,684			216,721,369
End of Period	$	37,182,724		$	67,344,956		$	101,783,195		$	202,696,877		$	83,261,611		$	177,548,684
Accumulated Undistributed Net Investment Income (Net Investment Loss)	$	1,071,777		$	32,973		$	1,798,267		$	62,313		$	2,108,550		$	2,671,300

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Financial Statements continued

Statements of Changes in Net Assets continued

	Capital Growth						Focus Growth						Capital Opportunities
	For The Year Ended December 31, 2008			For The Year Ended December 31, 2007			For The Year Ended December 31, 2008			For The Year Ended December 31, 2007			For The Year Ended December 31, 2008			For The Year Ended December 31, 2007
Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss)	$	(130,399	)	$	120,151		$	(300,910	)	$	649,352		$	(138,895	)	$	51,545
Net realized gain (loss)		(123,439	)		6,989,883			(5,051,380	)		20,761,724			(2,141,345	)		5,863,139
Net change in unrealized appreciation/depreciation		(21,420,292	)		2,822,244			(68,239,875	)		13,132,647			(13,749,028	)		235,282
Net Increase (Decrease)		(21,674,130	)		9,932,278			(73,592,165	)		34,543,723			(16,029,268	)		6,149,966
Dividends and Distributions to Shareholders from:
Net investment income
Class X shares		(52,598	)		—			(378,716	)		—			—			—
Class Y shares		(614	)		—			(17,783	)		—			—			—
Net realized gain
Class X shares		—			—			—			—			—			—
Class Y shares		—			—			—			—			—			—
Total Dividends and Distributions		(53,212	)		—			(396,499	)		—			—			—
Net decrease from transactions in shares of beneficial interest		(6,205,790	)		(11,410,088	)		(27,436,195	)		(44,167,611	)		(4,125,299	)		(5,918,791	)
Total Increase (Decrease)		(27,933,132	)		(1,477,810	)		(101,424,859	)		(9,623,888	)		(20,154,567	)		231,175
Net Assets:
Beginning of period		49,506,460			50,984,270			164,352,305			173,976,193			35,469,820			35,238,645
End of Period	$	21,573,328		$	49,506,460		$	62,927,446		$	164,352,305		$	15,315,253		$	35,469,820
Accumulated Undistributed Net Investment Income (Net Investment Loss)	$	(459	)	$	116,930		$	(118,510	)	$	629,449		$	18,697		$	36,329

See Notes to Financial Statements
112

	Global Equity						Mid Cap Growth
	For The Year Ended December 31, 2008			For The Year Ended December 31, 2007			For The Year Ended December 31, 2008			For The Year Ended December 31, 2007
Increase (Decrease) in Net Assets:
Operations:
Net investment income (loss)	$	276,859		$	386,035		$	(92,812	)	$	255,252
Net realized gain (loss)		(1,412,158	)		3,012,050			(1,330,335	)		9,908,370
Net change in unrealized appreciation/depreciation		(25,444,107	)		7,233,154			(20,148,607	)		422,372
Net Increase (Decrease)		(26,579,406	)		10,631,239			(21,571,754	)		10,585,994
Dividends and Distributions to Shareholders from:
Net investment income
Class X shares		(373,382	)		(376,292	)		(200,849	)		(160,805	)
Class Y shares		(55,610	)		(50,146	)		(42,690	)		(15,686	)
Net realized gain
Class X shares		(2,427,746	)		(8,038,444	)		—			—
Class Y shares		(546,736	)		(1,596,154	)		—			—
Total Dividends and Distributions		(3,403,474	)		(10,061,036	)		(243,539	)		(176,491	)
Net decrease from transactions in shares of beneficial interest		(7,586,193	)		(6,824,500	)		(7,549,908	)		(11,210,192	)
Total Increase (Decrease)		(37,569,073	)		(6,254,297	)		(29,365,201	)		(800,689	)
Net Assets:
Beginning of period		65,222,762			71,477,059			50,857,036			51,657,725
End of Period	$	27,653,689		$	65,222,762		$	21,491,835		$	50,857,036
Accumulated Undistributed Net Investment Income (Net Investment Loss)	$	252,587		$	423,372		$	(2,507	)	$	315,994

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Financial Statements continued

Statements of Changes in Net Assets continued
Summary of Transactions in Shares of Beneficial Interest

	Money Market						Flexible Income						Balanced
	For The Year Ended December 31, 2008			For The Year Ended December 31, 2007			For The Year Ended December 31, 2008			For The Year Ended December 31, 2007			For The Year Ended December 31, 2008			For The Year Ended December 31, 2007
Class X Shares
Shares
Sold		21,538,342			16,758,648			71,029			115,879			40,927			28,148
Reinvestment of dividends and distributions		939,829			2,008,292			64,680			226,051			339,971			301,300
Redeemed		(18,323,669	)		(27,462,316	)		(823,887	)		(951,692	)		(689,333	)		(824,224	)
Net increase (decrease) - Class X		4,154,502			(8,695,376	)		(688,178	)		(609,762	)		(308,435	)		(494,776	)
Amount
Sold	$	21,538,342		$	16,758,648		$	403,477		$	843,071		$	533,009		$	495,812
Reinvestment of dividends and distributions		939,829			2,008,292			443,828			1,631,387			4,443,520			5,087,733
Redeemed		(18,323,669	)		(27,462,316	)		(5,207,215	)		(6,895,353	)		(9,409,851	)		(14,291,156	)
Net increase (decrease) - Class X	$	4,154,502		$	(8,695,376	)	$	(4,359,910	)	$	(4,420,895	)	$	(4,433,322	)	$	(8,707,611	)
Class Y Shares
Shares
Sold		139,265,862			56,399,876			306,600			279,090			54,637			45,410
Reinvestment of dividends and distributions		2,540,820			3,684,226			68,448			212,456			231,801			178,027
Redeemed		(52,935,863	)		(49,598,666	)		(1,067,817	)		(459,484	)		(419,750	)		(284,008	)
Net increase (decrease) - Class Y		88,870,819			10,485,436			(692,769	)		32,062			(133,312	)		(60,571	)
Amount
Sold	$	139,265,862		$	56,399,876		$	1,972,386		$	2,016,718		$	729,768		$	783,180
Reinvestment of dividends and distributions		2,540,820			3,684,226			467,814			1,527,497			3,014,946			2,998,138
Redeemed		(52,935,863	)		(49,598,666	)		(6,574,459	)		(3,317,829	)		(5,537,276	)		(4,896,848	)
Net increase (decrease) - Class Y	$	88,870,819		$	10,485,436		$	(4,134,259	)	$	226,386		$	(1,792,562	)	$	(1,115,530	)

See Notes to Financial Statements
114

	Global Infrastructure						Dividend Growth
	For The Year Ended December 31, 2008			For The Year Ended December 31, 2007			For The Year Ended December 31, 2008			For The Year Ended December 31, 2007
Class X Shares
Shares
Sold		19,928			10,548			22,280			3,773
Reinvestment of dividends and distributions		8,601			32,153			31,118			108,909
Redeemed		(334,421	)		(502,410	)		(1,721,581	)		(2,985,599	)
Net increase (decrease) - Class X		(305,892	)		(459,709	)		(1,668,183	)		(2,872,917	)
Amount
Sold	$	505,860		$	305,405		$	258,592		$	70,406
Reinvestment of dividends and distributions		228,880			913,278			524,657			2,049,527
Redeemed		(8,392,248	)		(14,049,005	)		(26,613,525	)		(56,058,686	)
Net increase (decrease) - Class X	$	(7,657,508	)	$	(12,830,322	)	$	(25,830,276	)	$	(53,938,753	)
Class Y Shares
Shares
Sold		73,907			69,357			33,846			21,703
Reinvestment of dividends and distributions		3,143			10,381			8,191			25,745
Redeemed		(157,444	)		(141,307	)		(600,343	)		(416,439	)
Net increase (decrease) - Class Y		(80,394	)		(61,569	)		(558,306	)		(368,991	)
Amount
Sold	$	1,886,951		$	1,905,076		$	534,770		$	403,541
Reinvestment of dividends and distributions		83,579			294,884			137,934			484,081
Redeemed		(4,018,160	)		(4,011,801	)		(9,492,582	)		(7,808,028	)
Net increase (decrease) - Class Y	$	(2,047,630	)	$	(1,811,841	)	$	(8,819,878	)	$	(6,920,406	)

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Financial Statements continued

Statements of Changes in Net Assets continued
Summary of Transactions in Shares of Beneficial Interest

	Equally Weighted S&P 500						Capital Growth						Focus Growth
	For The Year Ended December 31, 2008			For The Year Ended December 31, 2007			For The Year Ended December 31, 2008			For The Year Ended December 31, 2007			For The Year Ended December 31, 2008			For The Year Ended December 31, 2007
Class X Shares
Shares
Sold		45,914			44,887			15,330			5,102			13,579			2,885
Reinvestment of dividends and distributions		854,720			354,065			2,641			—			19,481			—
Redeemed		(791,694	)		(1,077,133	)		(244,005	)		(336,933	)		(1,220,491	)		(2,006,705	)
Net increase (decrease) - Class X		108,940			(678,181	)		(226,034	)		(331,831	)		(1,187,431	)		(2,003,820	)
Amount
Sold	$	626,399		$	1,265,579		$	237,995		$	113,821		$	209,355		$	57,077
Reinvestment of dividends and distributions		14,709,730			9,619,953			52,598			—			378,716			—
Redeemed		(14,439,208	)		(29,861,425	)		(4,302,340	)		(6,727,872	)		(20,577,432	)		(38,295,449	)
Net increase (decrease) - Class X	$	896,921		$	(18,975,893	)	$	(4,011,747	)	$	(6,614,051	)	$	(19,989,361	)	$	(38,238,372	)
Class Y Shares
Shares
Sold		96,471			86,080			185,940			62,316			59,759			44,676
Reinvestment of dividends and distributions		1,119,934			416,977			32			—			922			—
Redeemed		(1,142,802	)		(630,596	)		(293,052	)		(300,080	)		(498,859	)		(361,767	)
Net increase (decrease) - Class Y		73,603			(127,539	)		(107,080	)		(237,764	)		(438,178	)		(317,091	)
Amount
Sold	$	1,754,862		$	2,315,805		$	2,868,438		$	1,253,798		$	1,067,781		$	899,880
Reinvestment of dividends and distributions		19,038,878			11,212,516			614			—			17,783			—
Redeemed		(19,807,919	)		(17,203,512	)		(5,063,095	)		(6,049,835	)		(8,532,398	)		(6,829,119	)
Net increase (decrease) - Class Y	$	985,821		$	(3,675,191	)	$	(2,194,043	)	$	(4,796,037	)	$	(7,446,834	)	$	(5,929,239	)

See Notes to Financial Statements
116

	Capital Opportunities						Global Equity						Mid Cap Growth
	For The Year Ended December 31, 2008			For The Year Ended December 31, 2007			For The Year Ended December 31, 2008			For The Year Ended December 31, 2007			For The Year Ended December 31, 2008			For The Year Ended December 31, 2007
Class X Shares
Shares
Sold		22,242			20,705			14,954			10,695			11,659			5,972
Reinvestment of dividends and distributions		—			—			195,065			473,536			6,957			5,464
Redeemed		(279,009	)		(399,787	)		(687,088	)		(850,961	)		(236,726	)		(406,431	)
Net increase (decrease) - Class X		(256,767	)		(379,082	)		(477,069	)		(366,730	)		(218,110	)		(394,995	)
Amount
Sold	$	247,289		$	303,270		$	177,611		$	209,580		$	282,887		$	176,600
Reinvestment of dividends and distributions		—			—			2,801,128			8,414,736			200,849			160,805
Redeemed		(3,438,512	)		(5,503,147	)		(9,524,181	)		(16,135,596	)		(6,229,858	)		(12,019,866	)
Net increase (decrease) - Class X	$	(3,191,223	)	$	(5,199,877	)	$	(6,545,442	)	$	(7,511,280	)	$	(5,746,122	)	$	(11,682,461	)
Class Y Shares
Shares
Sold		234,377			173,342			24,944			47,966			31,369			90,892
Reinvestment of dividends and distributions		—			—			42,270			93,381			1,501			541
Redeemed		(335,799	)		(230,338	)		(149,318	)		(101,031	)		(102,005	)		(81,822	)
Net increase (decrease) - Class Y		(101,422	)		(56,996	)		(82,104	)		40,316			(69,135	)		9,611
Amount
Sold	$	2,941,000		$	2,365,584		$	386,405		$	901,334		$	816,596		$	2,819,460
Reinvestment of dividends and distributions		—			—			602,346			1,646,300			42,690			15,686
Redeemed		(3,875,076	)		(3,084,498	)		(2,029,502	)		(1,860,854	)		(2,663,072	)		(2,362,877	)
Net increase (decrease) - Class Y	$	(934,076	)	$	(718,914	)	$	(1,040,751	)	$	686,780		$	(1,803,786	)	$	472,269

117

Morgan Stanley Select Dimensions Investment Series

Notes to Financial Statements n December 31, 2008

1. Organization and Accounting Policies

Morgan Stanley Select Dimensions Investment Series (the "Fund") is registered under the Investment Company Act of 1940 as amended (the "Act"), as a diversified (except Focus Growth is non-diversified, effective August 8, 2007), open-end management investment company. The Fund is offered exclusively to life insurance companies in connection with particular life insurance and/or annuity contracts they offer. The Fund, which consists of 11 separate portfolios ("Portfolios"), was organized on June 2, 1994, as a Massachusetts business trust and commenced operations on November 9, 1994, with the exception of Capital Opportunities which commenced operations on January 21, 1997.

On July 24, 2000, the Fund commenced offering one additional class of shares (Class Y shares). The two classes are identical except that Class Y shares incur distribution expenses. Class X shares are generally available to holders of contracts offered before May 1, 2000. Class Y shares are available to holders of contracts offered on or after July 24, 2000.

The investment objectives of each Portfolio are as follows:

PORTFOLIO				INVESTMENT OBJECTIVE
Money Market				Seeks high current income, preservation of capital and liquidity.

Flexible Income				Seeks, as a primary objective, to earn a high level of current income and, as a secondary objective, to maximize total return, but only to the extent consistent with its primary objective.

Balanced				Seeks to provide capital growth with reasonable current income.

Global Infrastructure* (Formerly Utilities)				Seeks both capital appreciation and current income.

Dividend Growth				Seeks to provide reasonable current income and long-term growth of income and capital.

Equally-Weighted S&P 500				Seeks to achieve a high level of total return on its assets through a combination of capital appreciation and current income.

Capital Growth** (Formerly Growth)				Seeks long-term capital growth.

Focus Growth				Seeks long-term capital growth.

Capital Opportunities				Seeks long-term capital growth.

Global Equity				Seeks to obtain total return on its assets primarily through long-term capital growth and to a lesser extent from income.

Mid Cap Growth** (Formerly Developing Growth)				Seeks long-term capital growth.

* Name change effective November 3, 2008.

** Name change effective May 1, 2008.

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Notes to Financial Statements n December 31, 2008 continued

The following is a summary of significant accounting policies:

A. Valuation of Investments — Money Market: securities are valued at amortized cost which approximates market value, in accordance with rule 2a-7 of the Act. All remaining Portfolios: (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 exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (5) futures are valued at the latest price published by the commodities exchange on which they trade; (6) credit default/interest rate swaps are marked-to-market daily based upon quotations from market makers; (7) listed/written options are valued at the latest sale price on the exchange on which they are listed unless no sale of such options have taken place that day, in which case they are valued at the mean between their latest bid and asked price; (8) when market quotations are not readily available including circumstances under which Morgan Stanley Investment Advisors Inc. (the "Investment Adviser") determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the 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; (9) certain portfolio securities may be valued by an outside pricing service approved by the Fu nd's Trustees; (10) investments in investment trusts and open-end mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value as of the close of each business day; and (11) 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, which approximates market value.

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Notes to Financial Statements n December 31, 2008 continued

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 except certain dividends on foreign securities which are recorded as soon as the Fund is informed after the ex-dividend date. Interest income is accrued daily except where collection is not expected. The Fund amortizes premiums and accretes discounts over the life of the respective securities.

C. Repurchase Agreements — The Fund may 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. If such a decrease occurs, additional collateral will be requested and, when received, will be added to the account to maintain full collateralization.

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 which is known as variation margin. Such receipts or payments are recorded by the Fund as unrealized gains or 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 val ue at the time it was closed.

F. Swaps — The Fund adopted the provisions of the FASB Staff Position Paper No. FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No.45 ("FSP FAS 133-1 and FIN 45-4"), effective December 31, 2008. FSP FAS 133-1 and FIN 45-4 requires the seller of credit derivatives to provide additional disclosure about its credit derivatives.

The Fund may enter into credit default swap contracts, a type of credit derivative, for hedging purposes or to gain exposure to a credit or index of credits in which the Fund may otherwise invest. A credit default swap is an agreement between two parties to exchange the credit risk of an issuer or index of issuers. A buyer of a credit default swap is said to buy protection by paying periodic fees in return for a contingent

120

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Notes to Financial Statements n December 31, 2008 continued

payment from the seller if the issuer has a credit event such as bankruptcy, a failure to pay outstanding obligations or deteriorating credit while the swap is outstanding. A seller of a credit default swap is said to sell protection and thus collects the periodic fees and profits if the credit of the issuer remains stable or improves while the swap is outstanding. The seller in a credit default swap contract would be required to pay an agreed-upon amount, to the buyer in the event of an adverse credit event of the issuer. This agreed-upon amount approximates the notional amount of the swap as disclosed in the table following the Portfolio of Investments and is estimated to be the maximum potential future payment that the seller could be required to make under the credit default swap contract. In the event of an adverse credit event, the seller generally does not have any contractual remedies against the issuer or any other thir d party. However, if a physical settlement is elected, the seller would receive the defaulted credit and, as a result, become a creditor of the issuer.

The current credit rating of each individual issuer is listed in the table following the Portfolio of Investments and serves as an indicator of the current status of the payment/performance risk of the credit derivative. Alternatively, for credit default swaps on an index of credits, the quoted market prices and current values serve as an indicator of the current status of the payment/performance risk of the credit derivative. Generally, lower credit ratings and increasing market values, in absolute terms, represent a deterioration of the credit and a greater likelihood of an adverse credit event of the issuer.

The Fund accrues for the periodic fees on credit default swaps on a daily basis with the net amount accrued recorded within realized gain/loss on swap contracts on the Statement of Operations. Net unrealized gains are recorded as an asset or net unrealized losses are reported as a liability on the Statement of Assets and Liabilities. The change in value of the swap contracts is reported as unrealized gains or losses on the Statement of Operations. Payments received or made upon entering into a credit default swap contract, if any, are recorded as realized gain or loss on the Statement of Operations upon termination or maturity of the swap. Credit default swaps may involve greater risks than if a Fund had invested in the issuer directly. Credit default swaps are subject to general market risk, counterparty risk and credit risk.

The Fund may also enter into interest rate swaps primarily to preserve a return or spread on a particular investment or portion of its portfolio, as a duration management technique or to protect against any increase in the price of securities the Fund anticipates purchasing at a later date. Interest rate swaps are contractual agreements to exchange periodic interest payment streams calculated on a predetermined notional principal amount. Interest rate swaps generally involve one party paying a fixed interest rate and the other party paying a variable rate. The Fund will usually enter into interest rate swaps on a net basis, i.e, the two payment streams are netted out in a cash settlement on the payment date or dates specified in the

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instrument, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. The Fund accrues the net amount with respect to each interest rate swap on a daily basis. This net amount is recorded within realized gain/loss on swap contracts on the Statement of Operations. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contracts.

Swap agreements are not entered into or traded on exchanges and there is no central clearing or guaranty function for swaps. Therefore, swaps are subject to the risk of default or non-performance by the counterparty. If there is a default by the counterparty to a swap agreement, the Fund will have contractual remedies pursuant to the agreements related to the transaction. Counterparties are required to pledge collateral daily (based on the valuation of each swap) on behalf of the Fund with a value approximately equal to the amount of any unrealized gain. Reciprocally, when the Fund has an unrealized loss on a swap contract, the Fund has instructed the custodian to pledge cash or liquid securities as collateral with a value approximately equal to the amount of the unrealized loss. Collateral pledges are monitored and subsequently adjusted if and when the swap valuations fluctuate. For cash collateral received, the Fund pays a mon thly fee to the counterparty based on the effective rate for Federal Funds.

G. Options — When the Fund writes a call or put option, an amount equal to the premium received is included in the Fund's Statement of Assets and Liabilities as a liability which is subsequently marked-to-market to reflect the current market value of the option written. If a written option either expires or the Fund enters into a closing purchase transaction, the Fund realizes a gain or loss without regard to any unrealized gain or loss on the underlying security or currency and the liability related to such option is extinguished. If a written call option is exercised, the Fund realizes a gain or loss from the sale of the underlying security or currency and the proceeds from such sale are increased by the premium originally received. If a written put option is exercised, the amount of the premium originally received reduces the cost of the secur ity, which the Fund purchases upon exercise of the option. By writing a covered call option, the Fund, in exchange for the premium, foregoes the opportunity for capital appreciation above the exercise price, should the market price of the underlying security increase. By writing a put option, the Fund, in exchange for the premium, accepts the risk of having to purchase a security at an exercise price that is above the current market price.

When the Fund purchases a call or put option, the premium paid is recorded as an investment which is subsequently marked-to-market to reflect the current market value. If a purchased option expires, the Fund will realize a loss to the extent of the premium paid. If the Fund enters into a closing sale transaction, a gain or loss is realized for the difference between the proceeds from the sale and the cost of the option. If a put option is exercised, the cost of the security or currency sold upon exercise will be increased by the premium originally paid. If a call option is exercised, the cost of the security purchased upon exercise will be increased

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by the premium originally paid. The maximum exposure to loss for any purchased option is limited to the premium initially paid for the option.

Transactions in written options for the year ended December 31, 2008 for Flexible Income were as follows:

	CONTRACT AMOUNT			PREMIUM
Options written, outstanding at beginning of the period		—			—
Options written		112		$	55,703
Options exercise		—			—
Options closed		(85	)		(42,275	)
Options expired		—			—
Options written, outstanding at end of period		27		$	13,428

Transactions in written options for the year ended December 31, 2008 for Balanced were as follows:

	CONTRACT AMOUNT			PREMIUM
Options written, outstanding at beginning of the period		—			—
Options written		47		$	23,375
Options exercised		—			—
Options closed		(36	)		(17,905	)
Options expired		—			—
Options written, outstanding at end of period		11		$	5,470

Transactions in written options for the year ended December 31, 2008 for Dividend Growth were as follows:

	CONTRACT AMOUNT			PREMIUM
Options written, outstanding at beginning of the period		256		$	17,005
Options written		1,310			90,468
Options exercise		(213	)		(17,128	)
Options expired		(1,353	)		(90,345	)
Options written, outstanding at end of period		—		$	—

H. Foreign Currency Translation and Forward Foreign Currency Contracts — The books and records of the Fund are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities, other assets and liabilities and forward foreign currency contracts ("forward contracts") are translated at the exchange rates prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the exchange rates prevailing on the respective dates of such transactions. The resultant exchange gains and losses are recorded as realized and unrealized gain/loss on foreign exchange

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transactions. Pursuant to U.S. Federal income tax regulations, certain foreign exchange gains/losses included in realized and unrealized gain/loss are included in or are a reduction of ordinary income for federal income tax purposes. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of the securities held. Forward contracts are valued daily at the appropriate exchange rates. The resultant unrealized exchange gains and losses are recorded as unrealized foreign currency gains or losses. The Fund records realized gains or losses on delivery of the currency or at the time the forward contract is extinguished (compensated) by entering into a closing transaction prior to delivery.

I. Federal Income Tax Policy — It is the Fund's policy to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no provision for federal income tax is required. The Fund files tax returns with the U.S. Internal Revenue Service, New York State and New York City. The Fund follows the provisions of the Financial Accounting Standards Board ("FASB") Interpretation No. 48 ("FIN 48") Accounting for Uncertainty in Income Taxes. FIN 48 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. There are no unrecognized tax benefits in the accompanying financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in other expenses in the Statement of Operations. Each of the tax years in the four year period ended December 31, 2008, remains subject to examination by taxing authorities.

J. Dividends and Distributions to Shareholders — The Fund records dividends and distributions to its shareholders on the ex-dividend date.

K. Expenses — Direct expenses are charged to the respective Portfolio and general Fund expenses are allocated on the basis of relative net assets or equally among the Portfolios.

L. Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles in the United States 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 and Sub-Advisory Agreements

Pursuant to an Investment Advisory Agreement with the Investment Adviser, the Fund pays an advisory fee, accrued daily and payable monthly, by applying the annual rates listed below to each Portfolio's net assets determined at the close of each business day.

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Money Market — 0.45% to the portion of the daily net assets not exceeding $250 million; 0.375% to the portion of the daily net assets exceeding $250 million but not exceeding $750 million; 0.325% to the portion of the daily net assets exceeding $750 million but not exceeding $1.25 billion; 0.30% to the portion of the daily net assets exceeding $1.25 billion but not exceeding $1.5 billion and 0.275% to the portion of the daily net assets in excess of $1.5 billion.

Flexible Income — 0.32%.

Balanced — 0.52% to the portion of the daily net assets not exceeding $500 million and 0.495% to the portion of the daily net assets in excess of $500 million.

Global Infrastructure — 0.57% to the portion of the daily net assets not exceeding $500 million; 0.47% to the portion of the daily net assets exceeding $500 million but not exceeding $1 billion; 0.445% to the portion of the daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.42% to the portion of the daily net assets exceeding $1.5 billion but not exceeding $2.5 billion; 0.395% to the portion of the daily net assets exceeding $2.5 billion but not exceeding $3.5 billion; 0.37% to the portion of the daily net assets exceeding $3.5 billion but not exceeding $5 billion and 0.345% to the portion of the daily net assets in excess of $5 billion.

Effective June 30, 2008, the Global Infrastructure Portfolio entered into a Sub-Advisory Agreement with Morgan Stanley Investment Management Limited (the "Sub-Adviser"). Under the Sub-Advisory Agreement, the Sub-Adviser provides the Portfolio with investment advice and portfolio management relating to the Portfolio's investments in securities, subject to the overall supervision of the Investment Adviser. As compensation for its services provided pursuant to the Sub-Advisory Agreement, the Investment Adviser paid the Sub-Adviser as compensation in the amounts of $70,173, for the year ended December 31, 2008.

Dividend Growth — 0.545% to the portion of the daily net assets not exceeding $250 million; 0.42% to the portion of the daily net assets exceeding $250 million but not exceeding $1 billion; 0.395% to the portion of the daily net assets exceeding $1 billion but not exceeding $2 billion and 0.37% to the portion of the daily net assets in excess of $2 billion.

Equally-Weighted S&P 500 — 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.

Capital Growth — 0.50% to the portion of the daily net assets not exceeding $1 billion; 0.45% to the portion of the daily net assets exceeding $1 billion but not exceeding $2 billion; 0.40% to the portion of the daily net assets exceeding $2 billion but not exceeding $3 billion and 0.35% to the portion of the daily net assets in excess of $3 billion.

Focus Growth — 0.545% to the portion of the daily net assets not exceeding $250 million; 0.42% to the portion of the daily net assets exceeding $250 million but not exceeding $2.5 billion; 0.395% to the portion of

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the daily net assets exceeding $2.5 billion but not exceeding $3.5 billion; 0.37% to the portion of the daily net assets exceeding $3.5 billion but not exceeding $4.5 billion and 0.345% to the portion of the daily net assets in excess of $4.5 billion.

Capital Opportunities — 0.67% to the portion of the daily net assets not exceeding $500 million; 0.645% to the portion of the daily net assets exceeding $500 million but not exceeding $2 billion; 0.62% to the portion of the daily net assets exceeding $2 billion but not exceeding $3 billion and 0.595% to the portion of the daily net assets in excess of $3 billion.

Global Equity — 0.77%.

Mid Cap Growth — 0.42% to the portion of the daily net assets not exceeding $500 million and 0.395% to the portion of the daily net assets in excess of $500 million.

Pursuant to an Administration Agreement with Morgan Stanley Services Company Inc. (the "Administrator"), an affiliate of the Investment Adviser, each Portfolio pays an administration fee, accrued daily and payable monthly, by applying the annual rate of 0.08% (Money Market 0.05%) to each Portfolio's daily net assets.

Under an agreement between the Administrator and State Street Bank and Trust Company ("State Street"), State Street provides certain administrative services to the Fund. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.

The Investment Adviser has agreed to waive expenses in the amount of $342 for the Money Market Portfolio, which was netted against advisory fees in the Statement of Operations.

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. Under the Plan, Class Y shares of each Portfolio bear a distribution fee, which is accrued daily and paid monthly at the annual rate of 0.25% of the average daily net assets of the class.

4. Security Transactions and Transactions with Affiliates

Each Portfolio (except Money Market) may invest in Morgan Stanley Institutional Liquidity Funds – Money Market Portfolio – Institutional Class, an open-end management investment company managed by an affiliate of the Investment Adviser. Investment advisory fees paid by the Portfolio are reduced by an amount equal to the advisory and administrative service fees paid by Morgan Stanley Institutional Liquidity Funds – Money Market Portfolio – Institutional Class with respect to assets invested by the Portfolio in Morgan Stanley Institutional Liquidity Funds – Money Market Portfolio – Institutional Class. For the year ended December 31, 2008, the tables below identify, for each Portfolio that invested in Morgan Stanley Institutional

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Liquidity Funds – Money Market Portfolio – Institutional Class, the investment advisory fee reduction and the income distributions earned, if any, by each Portfolio for that Portfolio's investment in Morgan Stanley Institutional Liquidity Funds – Money Market Portfolio – Institutional Class. Income distributions are recorded as "dividends from affiliates" in the Statement of Operations.

PORTFOLIO	INCOME DISTRIBUTION EARNED		ADVISORY FEE REDUCE
Flexible Income	$	71,073	$	3,389
Balanced		91,958		3,662
Global Infrastructure		39,996		1,453
Dividend Growth		111,820		4,319
Equally-Weighted S&P 500		41,145		1,436
Capital Growth		47,616		2,116
Focus Growth .		157,183		6,675
Capital Opportunities		39,453		1.437
Global Equity		16,891		626
Mid Cap Growth		48,282		1,929

During the year ended December 31, 2008, each Portfolio's cost of purchases and proceeds from sales of investments in Morgan Stanley Institutional Liquidity Funds – Money Market Portfolio – Institutional Class were as follows:

PORTFOLIO	PURCHASES		SALES
Flexible Income	$	27,556,431	$	22,637,352
Balanced		28,937,218		27,837,002
Global Infrastructure		19,711,118		20,390,389
Dividend Growth		47,389,479		50,968,795
Equally-Weighted S&P 500		19,144,419		26,635,903
Capital Growth		14,664,832		15,048,770
Focus Growth		37,675,589		48,140,037
Capital Opportunities		8,592,458		10,501,754
Global Equity		16,709,715		16,502,537
Mid Cap Growth		16,699,794		18,047,768

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Purchases and sales/maturities/prepayments of portfolio securities, excluding short-term investments (except for the Money Market Portfolio), for the year ended December 31, 2008 were as follows:

	U.S. GOVERNMENT SECURITIES				OTHER
	PURCHASES		SALES/PREPAYMENTS MATURITIE		PURCHASES		SALES/PREPAYMENTS MATURITIES
Money Market	$	18,731,281	$	19,032,170	$	7,456,321,948	$	7,365,411,738
Flexible Income		13,845,259		15,210,766		13,096,843		21,520,251
Balanced		15,602,100		21,475,351		18,544,268		26,954,396
Global Infrastructure.		—		—		39,803,386		47,809,309
Dividend Growth .		—		—		91,531,330		120,907,995
Equally-Weighted S&P 500		—		—		42,667,921		65,249,311
Capital Growth		—		—		14,896,325		21,426,915
Focus Growth		—		—		36,417,236		54,273,097
Capital Opportunities		—		—		8,745,871		10,951,510
Global Equity		—		—		14,301,586		24,661,409
Mid Cap Growth		—		—		15,360,396		21,957,348

Equally-Weighted S&P 500 had transactions in Morgan Stanley common stock, an affiliate of the Investment Adviser, Administrator and Distributor:

PURCHASES		SALES		NET REALIZED LOSS			INCOME		VALUE
$	161,526	$	65,670	$	(53,495	)	$	8,261	$	161,812

The following Portfolios had transactions in Hartford Financial Services Group, Inc., an affiliate of the Fund:

	PURCHASES		SALES		NET REALIZED LOSS			INCOME		VALUE
Balanced	$	9,770	$	221,123	$	(88,047	)	$	10,628		—
Equally-Weighted S&P 500		149,737		46,689		(23,490	)		7,609	$	149,931

The following Portfolios had transactions with other Morgan Stanley funds during the year ended December 31, 2008:

	PURCHASES		SALES		NET REALIZED GAIN (LOSS)
Balanced	$	2,139	$	18,934	$	1,393
Global Infrastructure		856,957		1,562,218		963,309
Dividend Growth		—		188,406		(346,380	)
Capital Growth		83,581		201,438		(30,059	)
Focus Growth		—		1,035,313		(612,637	)

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	PURCHASES		SALES		NET REALIZED GAIN (LOSS)
Capital Opportunities	$	113,533	$	357,628	$	(26,495	)
Mid Cap Growth		374,792		517,211		(80,128	)

For the year ended December 31, 2008, the following Portfolios incurred brokerage commissions with Morgan Stanley & Co., Inc., an affiliate of the Investment Adviser, Administrator and Distributor, for portfolio transactions executed on behalf of the Portfolio:

BALANCED		GLOBAL INFRASTRUCTURE		DIVIDEND GROWTH		CAPITAL OPPORTUNITIES
$	290	$	112	$	9,682	$	650

		GLOBAL EQUITY		MID CAP GROWTH		EQUALLY- WEIGHTED S&P 500
		$	3,727	$	1,440	$	66

Morgan Stanley Trust, an affiliate of the Investment Adviser, Administrator and Distributor, is the Fund's transfer agent.

5. Purposes of and Risks Relating to Certain Financial Instruments

Certain Portfolios may enter into forward contracts for many purposes, including to facilitate settlement of foreign currency denominated Portfolio transactions or to manage foreign currency exposure associated with foreign currency denominated securities. Forward contracts involve elements of market risk in excess of the amounts reflected in the Statement of Assets and Liabilities. The respective Portfolios bears the risk of an unfavorable change in the foreign exchange rates underlying the forward contracts. Risks may also arise upon entering into these forward contracts from the potential inability of the counterparties to meet the terms of their contracts.

Certain Portfolios may purchase and sell interest rate and index futures ("futures contracts") and options to facilitate trading, increase or decrease the Portfolio's market exposure, seek higher investment returns, or to seek to protect against a decline in the value of the Portfolio's securities or an increase in prices of securities that may be purchased. These futures and option contracts involve elements of market risk in excess of the amount reflected in the Statement of Assets and Liabilities. The Portfolio bears the risk of an unfavorable change in the value of the underlying securities. Risk may also arise upon entering into these contracts from potential inability of the counterparts to meet the terms of their contracts.

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Certain Portfolios may enter into credit default swaps for hedging purposes, to add leverage to its portfolio or gain exposure to a credit in which the Portfolio may otherwise invest. Credit default swaps may involve greater risks than if a fund had invested in the issuer directly. Credit default swaps are subject to general market risks, counterparty risk and credit risk. If the Portfolio is a buyer and no credit event occurs, it will lose its investments. In addition, if the Portfolio is a seller and credit event occurs, the value of the referenced obligation received by the Portfolio coupled with the periodic payments previously received may be less than the maximum payout amount it pays to the buyer, resulting in a loss to the Portfolio.

Certain Portfolios may enter into interest rate swaps and may purchase or sell interest rate caps, floors and collars. The Portfolio expects to enter into these transactions primarily to manage interest rate risk, hedge portfolio positions and preserve a return or spread on a particular investment or portion of its portfolio. The Portfolio may also enter into these transactions to protect against any increase in the price of securities the Portfolio anticipates purchasing at a later date. Interest rate swap transactions are subject to market risk, riskof default by the other party to the transaction, risk of imperfect correlation and manager risk. Such risk may exceed the related amounts shown in the Statement of Assets and Liabilities.

Certain Portfolios may invest in mortgage securities, including securities issued by Federal National Mortgage Assoc. ("FNMA") and Federal Home Loan Mortgage Corp. ("FHLMC"). These are fixed income securities that derive their value from or represent interests in a pool of mortgages or mortgage securities. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may adversely affect the value of a mortgage-backed security and could result in losses to the Portfolio. The risk of such defaults is generally higher in the case of mortgage pools that include sub-prime mortgages. Sub-prime mortgages refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments on their mortgages. The securities held by the Portfolios are not backed by subprime borrowers.

Additionally, securities issued by FNMA and FHLMC are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury.

On September 7, 2008, the Federal Housing Finance Agency ("FHFA") was appointed as conservator of FNMA and FHLMC. In addition, the U.S. Department of the Treasury has agreed to provide capital as needed to ensure FNMA and FHLMC continue to provide liquidity to the housing and mortgage markets.

6. 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

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reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital.

The tax character of distributions paid for the years ended December 31, 2007 and December 31, 2008 for all portfolios was the same as the book character shown on the Statement of Changes except as follows:

	Balanced				Equally-Weighted S&P 500				Global Equity
	For the Year Ended December 31, 2008		For the Year Ended December 31, 2007		For the Year Ended December 31, 2008		For the Year Ended December 31, 2007		For the Year Ended December 31, 2007
Ordinary income	$	1,038,204	$	2,164,147	$	4,338,685	$	3,876,377	$	2,756,616
Long-term capital gains		6,420,262		5,921,724		29,409,923		16,956,092		7,304,420
Total distributions	$	7,458,466	$	8,085,871	$	33,748,608	$	20,832,469	$	10,061,036

As of December 31, 2008, the tax-basis components of accumulated earnings (losses) were as follows:

	FLEXIBLE INCOME			BALANCED			GLOBAL INFRASTRUCTURE			DIVIDEND GROWTH			EQUALLY- WEIGHTED S&P 500
Undistributed ordinary income	$	2,136,284		$	1,187,900		$	1,131,218		$	1,800,596		$	2,078,730
Undistributed long-term gains		—			—			—			—			3,410,383
Net accumulated earnings		2,136,284			1,187,900			1,131,218			1,800,596			5,489,113
Capital loss carryforward*		(23,031,879	)		(1,121,612	)		(977,114	)		(66,709,610	)		—
Post-October losses		(4,234,120	)		(1,742,157	)		—			(10,324,118	)		(964,064	)
Temporary differences		(41,800	)		(824	)		(714	)		(2,582	)		(2,042	)
Net unrealized appreciation (depreciation)		(8,500,874	)		(5,428,028	)		1,649,949			(23,460,527	)		(3,350,390	)
Total accumulated earnings (losses)	$	(33,672,389	)	$	(7,104,721	)	$	1,803,339		$	(98,696,241	)	$	1,172,617
	CAPITAL GROWTH			FOCUS GROWTH			CAPITAL OPPORTUNITIES			GLOBAL EQUITY			MID CAP GROWTH
Undistributed ordinary income	$	—		$	69,778		$	—		$	258,470		$	—
Undistributed long-term gains		—			—			—			955,856			—
Net accumulated earnings		—			69,778			—			1,214,326			—
Foreign tax credit pass-through		—			—			—			58,417			—
Capital loss carryforward*		(24,910,099	)		(202,304,302	)		(76,902,778	)		—			(10,927,737	)
Post-October losses		(88,701	)		(2,975,687	)		(237,906	)		(2,363,182	)		(2,157,588	)
Temporary differences		(491	)		(188,459	)		20,453			(59,121	)		(533	)
Net unrealized appreciation		(8,989,035	)		(32,218,254	)		(5,443,493	)		(5,861,032	)		(12,077,174	)
Total accumulated earnings (losses)	$	(33,988,326	)	$	(237,616,924	)	$	(82,563,724	)	$	(7,010,592	)	$	(25,163,032	)

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*As of December 31, 2008, the following Portfolios had a net capital loss carryforward which may be used to offset future capital gains to the extent provided by regulations.

(AMOUNTS IN THOUSANDS)

AVAILABLE THROUGH DECEMBER 31,	2009		2010		2011		2012		2013		2014		2016		TOTAL
Flexible Income	$	2,688	$	6,782	$	6,161	$	1,199	$	562	$	939	$	4,701	$	23,032
Balanced		—		—		—		—		—		—		1,122		1,122
Global Infrastructure		—		977		—		—		—		—		—		977
Dividend Growth		—		37,657		21,222		—		—		—		7,831		66,710
Capital Growth		5,305		16,400		3,145		60		—		—		—		24,910
Focus Growth		122,700		74,785		—		—		—		—		4,819		202,304
Capital Opportunities		17,415		57,567		—		—		—		—		1,921		76,903
Mid Cap Growth		—		10,928		—		—		—		—		—		10,928

During the year ended December 31, 2008, the following Portfolios utilized net capital loss carryforwards: Global Infrastructure — $10,020,202; Capital Growth — $70,296; Mid Cap Growth — $849,355.

At December 31, 2008, the primary reason(s) for significant temporary/permanent book/tax differences were as follows:

TEMPORARY DIFFERENCES

PERMANENT DIFFERENCES

POST-
OCTOBER
LOSSES

LOSS
DEFERRALS FROM
WASH SALES

FOREIGN
CURRENCY
GAINS/LOSSES

NET
OPERATING
LOSS

Flexible Income

•

Balanced

•

Global Infrastructure

•

Dividend Growth

•

Equally-Weighted S&P 500

•

Capital Growth

•

Focus Growth

•

Capital Opportunities

•

Global Equity

•

Mid Cap Growth

•

Additionally, the following Portfolios had other temporary differences: Flexible Income — interest on bonds in default and capital loss deferrals on straddles; Flexible Income, Balanced, Global Infrastructure and Equally-Weighted S&P 500 — gain/loss from the mark-to-market of futures, options and/or forward foreign currency exchange contracts; Equally-Weighted S&P 500 — tax adjustments on real estate investment trusts (REITs) held by the Portfolio. The following Portfolios had other permanent

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differences: Flexible Income and Balanced — reclassification of net losses on paydowns; Equally-Weighted S&P 500 — tax adjustments on REITs held/sold by the Portfolio; Flexible Income — expired capital loss carryforward; Flexible Income and Balanced — gains on swaps. The following Portfolios had temporary and/or permanent differences attributable to book amortization of premiums/discounts on debt securities: Flexible Income and Balanced.

The permanent differences resulted in the following reclassifications among the Portfolios' components of net assets at December 31, 2008:

	ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)			ACCUMULATED NET REALIZED GAIN (LOSS)			PAID-IN-CAPITAL
Flexible Income	$	391,877		$	1,117,204		$	(1,509,081	)
Balanced		298,710			(298,710	)		—
Global Infrastructure		179,185			(179,185	)		—
Equally-Weighted S&P 500		(106,877	)		106,877			—
Capital Growth		66,222			23,359			(89,581	)
Focus Growth		(50,550	)		50,550			—
Capital Opportunities		121,263			12,435			(133,698	)
Global Equity		(18,652	)		24,010			(5,358	)
Mid Cap Growth		17,850			15,202			(33,052	)

7. Fair Valuation Measurements

The Fund adopted FASB Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("SFAS 157"), effective January 1, 2008. In accordance with SFAS 157, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market the most advantageous market for the investment or liability. SFAS 157 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below.

• Level 1 — quoted prices in active markets for identical investments

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• Level 2 — other significant observable inputs (including quoted prices for similarinvestments, interest rates, prepayment speeds, credit risk, etc.)

• Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.

The following is a summary of the inputs used as of December 31, 2008 in valuing the Fund's investments carried at value:

			Fair Value Measurements at December 31, 2008 Using
	Total		Quoted Prices In Active Market for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money Market
Investments in Securities	$	215,804,435		—		$	215,804,435		—
Flexible Income
Investments in Securities	$	33,185,714	$	8,602,393		$	24,119,279	$	464,042
Other Financial Instruments*		735,089		(144,972	)		880,061		—
Total	$	33,920,803	$	8,457,421		$	24,999,340	$	464,042
Balanced
Investments in Securities	$	42,579,121	$	30,553,015		$	11,985,731	$	40,375
Other Financial Instruments*		614,900		(83,686	)		698,586		—
Total	$	43,194,021	$	30,469,329		$	12,684,317	$	40,375
Global Infrastructure
Investments in Securities	$	36,988,635	$	11,186,439		$	25,802,196		—
Other Financial Instruments*		45,263		—			45,263		—
Total	$	37,033,898	$	11,186,439		$	25,847,459		—
Dividend Growth
Investments in Securities	$	101,124,534	$	101,124,534			—		—
Equally Weighted S&P 500
Investments in Securities	$	83,143,251	$	83,143,251			—	$	0
Other Financial Instruments*		5,534		5,534			—		—
Total	$	83,148,785	$	83,148,785			—	$	0

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			Fair Value Measurements at December 31, 2008 Using
	Total		Quoted Prices In Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Capital Growth
Investments in Securities	$	21,609,621	$	19,975,072	$	1,634,549	$	0
Focus Growth
Investments in Securities	$	63,050,470	$	57,618,045	$	5,432,425		—
Capital Opportunities
Investments in Securities	$	15,362,470	$	13,854,939	$	1,507,531		—
Global Equity
Investments in Securities	$	27,685,426	$	13,564,486	$	14,061,085	$	59,855
Mid Cap Growth
Investments in Securities	$	21,537,924	$	19,449,309	$	1,912,647	$	175,968

* Other financial instruments include futures, forwards, options and swap contracts.

Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining value:

	Investments in Securities
	Flexible Income			Balanced
Beginning Balance	$	51,811			—
Net purchases (sales)		(29,792	)	$	14
Transfers in and/or out		526,719			41,170
Change in unrealized appreciation/depreciation		419,589			(809	)
Realized gains (losses)		(504,285	)		—
Ending Balance	$	464,042		$	40,375
Net change in unrealized appreciation/ depreciation from investments still held as of December 31, 2008	$	(69,093	)	$	(809	)

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	Global Equity		Mid Cap Growth
Beginning Balance		—		—
Net purchases (sales)		—	$	175,968
Transfers in and/or out	$	50,559		—
Change in unrealized appreciation/depreciation		9,296		—
Realized gains (losses)		—		—
Ending Balance	$	59,855	$	175,968
Net change in unrealized appreciation/ depreciation from investments still held as of December 31, 2008	$	9,296		—

Equally-Weighted S&P 500 and Capital Growth held one level 3 security with a value of $0 for the entire period.

8. Accounting Pronouncement

On March 19, 2008, FASB released Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 ("SFAS 161"). SFAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. The application of SFAS 161 is required for fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. At this time, management is evaluating the implications of SFAS 161 and its impact on the Fund's financial statements has not yet been determined.

9. Guarantee Program for Money Market Funds

On September 29, 2008, the Trustees approved the participation by the Money Market Portfolio in the U.S. Treasury's Temporary Guarantee Program for Money Market Funds (the "Program"). Under this Program, the U.S. Treasury will guarantee to investors that they will receive $1.00 for each money market fund share held as of close of business on September 19, 2008. Eligible funds must be regulated under Rule 2a-7 of the Act, must maintain a stable share price of $1.00 and must be publicly offered and registered with the Securities and Exchange Commission ("SEC"). To participate in the Program, eligible funds must pay a fee. While the program protects the accounts of investors, each money market fund makes the decision of sign up for the Program. Investors cannot sign up for the Program indiv idually. The Program was in effect for an initial three month term, expiring December 18, 2008. On November 24, 2008, the U.S. Treasury announced an extension of the Program through April 30, 2009. All money market funds that currently participate in the Program and meet the extension requirements are eligible to continue to participate for an additional fee. The Money Market Portfolio has applied to participate in the extension. The Program will continue to provide coverage to shareholders up to amounts that they held in participating money market funds as of the close of business on September 19, 2008. The Secretary of the Treasury has the option to extend the Program up to the close of business on September 18, 2009.

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Financial Highlights

Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:


FOR THE YEAR ENDED DECEMBER 31			NET ASSET VALUE BEGINNING OF PERIOD		NET INVESTMENT INCOME (LOSS)(a)		NET REALIZED AND UNREALIZED GAIN (LOSS)			TOTAL FROM INVESTMENT OPERATIONS			DIVIDENDS TO SHAREHOLDERS			DISTRIBUTIONS TO SHAREHOLDERS			TOTAL DIVIDENDS AND DISTRIBUTIONS
MONEY MARKET CLASS X SHARES
	2004		$	1.00	$	0.01		—		$	0.01		$	(0.01	)		—		$	(0.01	)
	2005			1.00		0.03		—			0.03			(0.03	)		—			(0.03	)
	2006			1.00		0.04		—			0.04			(0.04	)		—			(0.04	)
	2007			1.00		0.05		—			0.05			(0.05	)		—			(0.05	)
	2008			1.00		0.02		—			0.02			(0.02	)		—			(0.02	)
CLASS Y SHARES
	2004			1.00		0.01		—			0.01			(0.01	)		—			(0.01	)
	2005			1.00		0.02		—			0.02			(0.02	)		—			(0.02	)
	2006			1.00		0.04		—			0.04			(0.04	)		—			(0.04	)
	2007			1.00		0.05		—			0.05			(0.05	)		—			(0.05	)
	2008			1.00		0.02		—			0.02			(0.02	)		—			(0.02	)
FLEXIBLE INCOME CLASS X SHARES
	2004			7.80		0.38	$	0.14			0.52			(0.64	)		—			(0.64	)
	2005			7.68		0.38		(0.17	)		0.21			(0.54	)		—			(0.54	)
	2006			7.35		0.46		(0.04	)		0.42			(0.47	)		—			(0.47	)
	2007	��		7.30		0.48		(0.21	)		0.27			(0.44	)	$	(0.01	)(d)		(0.45	)
	2008			7.12		0.41		(1.93	)		(1.52	)		(0.14	)		—			(0.14	)
CLASS Y SHARES
	2004			7.78		0.36		0.13			0.49			(0.62	)		—			(0.62	)
	2005			7.65		0.36		(0.16	)		0.20			(0.52	)		—			(0.52	)
	2006			7.33		0.44		(0.05	)		0.39			(0.45	)		—			(0.45	)
	2007			7.27		0.46		(0.20	)		0.26			(0.42	)		(0.01	)(d)		(0.43	)
	2008			7.10		0.39		(1.93	)		(1.54	)		(0.13	)		—			(0.13	)
BALANCED CLASS X SHARES
	2004			14.71		0.31		1.28			1.59			(0.35	)		—			(0.35	)
	2005			15.95		0.34		0.95			1.29			(0.36	)		—			(0.36	)
	2006			16.88		0.41		1.60			2.01			(0.44	)		(0.88	)		(1.32	)
	2007			17.57		0.42		0.28			0.70			(0.45	)		(1.42	)		(1.87	)
	2008			16.40		0.36		(3.77	)		(3.41	)		(0.11	)		(1.83	)		(1.94	)
CLASS Y SHARES
	2004			14.68		0.27		1.28			1.55			(0.31	)		—			(0.31	)
	2005			15.92		0.30		0.95			1.24			(0.32	)		—			(0.32	)
	2006			16.84		0.37		1.59			1.96			(0.40	)		(0.88	)		(1.28	)
	2007			17.52		0.38		0.29			0.67			(0.41	)		(1.42	)		(1.83	)
	2008			16.36		0.33		(3.76	)		(3.43	)		(0.10	)		(1.83	)		(1.93	)

See Notes to Financial Statements
138

									RATIOS TO AVERAGE NET ASSETS(c)
FOR THE YEAR ENDED DECEMBER 31		NET ASSET VALUE END OF PERIOD		TOTAL RETURN(b)			NET ASSETS END OF PERIOD (000'S)		EXPENSES			NET INVESTMENT INCOME (LOSS)			PORTFOLIO TURNOVER RATE
MONEY MARKET CLASS X SHARES
	2004	$	1.00		0.86	%	$	67,945		0.55	%		0.84	%		N/A
	2005		1.00		2.73			52,030		0.57			2.68			N/A
	2006		1.00		4.59			46,731		0.58			4.56			N/A
	2007		1.00		4.93			38,036		0.58			4.79			N/A
	2008		1.00		2.38			42,190		0.58			2.34			N/A
CLASS Y SHARES
	2004		1.00		0.61			33,468		0.80			0.59			N/A
	2005		1.00		2.48			37,010		0.82			2.43			N/A
	2006		1.00		4.34			74,239		0.83			4.31			N/A
	2007		1.00		4.67			84,724		0.83			4.54			N/A
	2008		1.00		2.13			173,595		0.83			1.91			N/A
FLEXIBLE INCOME CLASS X SHARES
	2004		7.68		7.00			43,658		0.69			4.96			201	%
	2005		7.35		2.88			35,755		0.60			5.11			83
	2006		7.30		5.76			29,166		0.56			6.30			52
	2007		7.12		3.89			24,135		0.61			6.62			51
	2008		5.46		(21.62	)		14,743		0.67	(f)		6.48	(f)		73
CLASS Y SHARES
	2004		7.65		6.61			26,927		0.94			4.71			201
	2005		7.33		2.62			25,624		0.85			4.86			83
	2006		7.27		5.68			25,765		0.81			6.05			52
	2007		7.10		3.64			25,381		0.86			6.37			51
	2008		5.43		(21.89	)		15,658		0.92	(f)		6.23	(f)		73
BALANCED CLASS X SHARES
	2004		15.95		10.93			75,517		0.69			2.04			62
	2005		16.88		8.21			64,663		0.70			2.07			55
	2006		17.57		12.67			54,204		0.74			2.42			45
	2007		16.40		3.86			42,488		0.78			2.44			86
	2008		11.05		(22.51	)		25,225		0.84	(f)		2.65	(f)		65
CLASS Y SHARES
	2004		15.92		10.68			27,308		0.94			1.79			62
	2005		16.84		7.89			27,970		0.95			1.82			55
	2006		17.52		12.37			30,562		0.99			2.17			45
	2007		16.36		3.60			27,535		1.03			2.19			86
	2008		11.00		(22.64	)		17,048		1.09	(f)		2.40	(f)		65

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Financial Highlights continued


FOR THE YEAR ENDED DECEMBER 31		NET ASSET VALUE BEGINNING OF PERIOD		NET INVESTMENT INCOME (LOSS)(a)		NET REALIZED AND UNREALIZED GAIN (LOSS)			TOTAL FROM INVESTMENT OPERATIONS			DIVIDENDS TO SHAREHOLDERS			DISTRIBUTIONS TO SHAREHOLDERS			TOTAL DIVIDENDS AND DISTRIBUTIONS
GLOBAL INFRASTRUCTURE CLASS X SHARES
	2004	$	15.46	$	0.36	$	3.37		$	3.73		$	(0.37	)		—		$	(0.37	)
	2005		18.82		0.43		2.62			3.05			(0.44	)		—			(0.44	)
	2006		21.43		0.46		3.88			4.34			(0.48	)		—			(0.48	)
	2007		25.29		0.51		4.49			5.00			(0.52	)		—			(0.52	)
	2008		29.77		0.58		(10.37	)		(9.79	)		(0.15	)		—			(0.15	)
CLASS Y SHARES
	2004		15.45		0.32		3.37			3.69			(0.33	)		—			(0.33	)
	2005		18.81		0.38		2.62			3.00			(0.39	)		—			(0.39	)
	2006		21.42		0.40		3.87			4.27			(0.42	)		—			(0.42	)
	2007		25.27		0.45		4.48			4.93			(0.45	)		—			(0.45	)
	2008		29.75		0.52		(10.36	)		(9.84	)		(0.13	)		—			(0.13	)
DIVIDEND GROWTH CLASS X SHARES
	2004		14.83		0.23		0.99			1.22			(0.24	)		—			(0.24	)
	2005		15.81		0.20		0.67			0.87			(0.20	)		—			(0.20	)
	2006		16.48		0.22		1.62			1.84			(0.23	)		—			(0.23	)
	2007		18.09		0.22		0.55			0.77			(0.22	)		—			(0.22	)
	2008		18.64		0.26		(7.06	)		(6.80	)		(0.07	)		—			(0.07	)
CLASS Y SHARES
	2004		14.81		0.20		0.98			1.18			(0.20	)		—			(0.20	)
	2005		15.79		0.16		0.66			0.82			(0.16	)		—			(0.16	)
	2006		16.45		0.18		1.62			1.80			(0.18	)		—			(0.18	)
	2007		18.07		0.17		0.55			0.72			(0.18	)		—			(0.18	)
	2008		18.61		0.22		(7.04	)		(6.82	)		(0.06	)		—			(0.06	)
EQUALLY-WEIGHTED S&P 500 CLASS X SHARES
	2004		21.13		0.23		3.27			3.50			(0.18	)		—			(0.18	)
	2005		24.45		0.32		1.54			1.86			(0.23	)	$	(0.37	)		(0.60	)
	2006		25.71		0.37		3.45			3.82			(0.34	)		(1.44	)		(1.78	)
	2007		27.75		0.41		0.20			0.61			(0.42	)		(2.57	)		(2.99	)
	2008		25.37		0.32		(8.73	)		(8.41	)		(0.45	)		(4.90	)		(5.35	)
CLASS Y SHARES
	2004		20.99		0.18		3.23			3.41			(0.15	)		—			(0.15	)
	2005		24.25		0.26		1.53			1.79			(0.19	)		(0.37	)		(0.56	)
	2006		25.48		0.30		3.42			3.72			(0.29	)		(1.44	)		(1.73	)
	2007		27.47		0.34		0.19			0.53			(0.35	)		(2.57	)		(2.92	)
	2008		25.08		0.27		(8.63	)		(8.36	)		(0.37	)		(4.90	)		(5.27	)

See Notes to Financial Statements
140

									RATIOS TO AVERAGE NET ASSETS(c)
FOR THE YEAR ENDED DECEMBER 31		NET ASSET VALUE END OF PERIOD		TOTAL RETURN(b)			NET ASSETS END OF PERIOD (000'S)		EXPENSES			NET INVESTMENT INCOME (LOSS)			PORTFOLIO TURNOVER RATE
GLOBAL INFRASTRUCTURE CLASS X SHARES
	2004	$	18.82		24.44	%	$	63,052		0.71	%		2.19	%		29	%
	2005		21.43		16.28			59,823		0.72			2.12			38
	2006		25.29		20.50			52,892		0.74			2.02			21
	2007		29.77		19.86			48,582		0.75			1.83			8
	2008		19.83		(33.02	)		26,297		0.84	(g)		2.28	(g)		77
CLASS Y SHARES
	2004		18.81		24.15			15,650		0.96			1.94			29
	2005		21.42		16.00			16,267		0.97			1.87			38
	2006		25.27		20.17			17,495		0.99			1.77			21
	2007		29.75		19.59			18,763		1.00			1.58			8
	2008		19.78		(33.19	)		10,886		1.09	(g)		2.03	(g)		77
DIVIDEND GROWTH CLASS X SHARES
	2004		15.81		8.29			307,093		0.65			1.54			44
	2005		16.48		5.57			249,516		0.63			1.26			38
	2006		18.09		11.25			201,169		0.67			1.31			115
	2007		18.64		4.27			153,676		0.67			1.18			48
	2008		11.77		(36.60	)		77,428		0.71	(f)		1.63	(f)		61
CLASS Y SHARES
	2004		15.79		8.03			59,314		0.90			1.29			44
	2005		16.45		5.32			56,061		0.88			1.01			38
	2006		18.07		10.98			54,255		0.92			1.06			115
	2007		18.61		3.95			49,021		0.92			0.93			48
	2008		11.73		(36.76	)		24,355		0.96	(f)		1.38	(f)		61
EQUALLY-WEIGHTED S&P 500 CLASS X SHARES
	2004		24.45		16.65			142,320		0.50			1.07			20
	2005		25.71		7.81			120,117		0.27			1.30			17
	2006		27.75		15.69			103,824		0.27			1.40			17
	2007		25.37		1.47			77,688		0.28			1.48			17
	2008		11.61		(40.02	)		36,814		0.31	(g)		1.70	(g)		32
CLASS Y SHARES
	2004		24.25		16.33			80,900		0.75			0.82			20
	2005		25.48		7.57			101,156		0.52			1.05			17
	2006		27.47		15.34			112,897		0.52			1.15			17
	2007		25.08		1.23			99,861		0.53			1.23			17
	2008		11.45		(40.19	)		46,447		0.56	(g)		1.45	(g)		32

141

Morgan Stanley Select Dimensions Investment Series

Financial Highlights continued


FOR THE YEAR ENDED DECEMBER 31		NET ASSET VALUE BEGINNING OF PERIOD		NET INVESTMENT INCOME (LOSS)(a)			NET REALIZED AND UNREALIZED GAIN (LOSS)			TOTAL FROM INVESTMENT OPERATIONS			DIVIDENDS TO SHAREHOLDERS			DISTRIBUTIONS TO SHAREHOLDERS		TOTAL DIVIDENDS AND DISTRIBUTIONS
CAPITAL GROWTH CLASS X SHARES
	2004	$	14.16	$	0.05		$	1.03		$	1.08		$	(0.03	)		—	$	(0.03	)
	2005		15.21		0.01			2.35			2.36			(0.06	)		—		(0.06	)
	2006		17.51		(0.01	)		0.70			0.69			—			—		—
	2007		18.20		0.08			3.91			3.99			—			—		0.00
	2008		22.19		(0.04	)		(10.74	)		(10.78	)		(0.06	)		—		(0.06	)
CLASS Y SHARES
	2004		14.05		0.03			1.01			1.04			(0.01	)		—		(0.01	)
	2005		15.08		(0.03	)		2.32			2.29			(0.04	)		—		(0.04	)
	2006		17.33		(0.05	)		0.69			0.64			—			—		—
	2007		17.97		0.03			3.86			3.89			—			—		—
	2008		21.86		(0.08	)		(10.59	)		(10.67	)		0.00	(e)		—		0.00	(e)
FOCUS GROWTH CLASS X SHARES
	2004		14.03		0.08			1.08			1.16			(0.05	)		—		(0.05	)
	2005		15.14		0.01			2.15			2.16			(0.11	)		—		(0.11	)
	2006		17.19		(0.03	)		0.09			0.06			0.00	(e)		—		0.00	(e)
	2007		17.25		0.08			3.85			3.93			—			—		—
	2008		21.18		(0.03	)		(10.83	)		(10.86	)		(0.07	)		—		(0.07	)
CLASS Y SHARES
	2004		13.96		0.05			1.06			1.11			(0.02	)		—		(0.02	)
	2005		15.05		(0.03	)		2.15			2.12			(0.07	)		—		(0.07	)
	2006		17.10		(0.07	)		0.09			0.02			—			—		—
	2007		17.12		0.04			3.81			3.85			—			—		—
	2008		20.97		(0.08	)		(10.73	)		(10.81	)		(0.01	)		—		(0.01	)
CAPITAL OPPORTUNITIES CLASS X SHARES
	2004		7.79		(0.03	)		1.79			1.76			—			—		—
	2005		9.55		(0.03	)		2.19			2.16			—			—		—
	2006		11.71		(0.04	)		0.95			0.91			—			—		—
	2007		12.62		0.04			2.41			2.45			—			—		—
	2008		15.07		(0.05	)		(7.34	)		(7.39	)		—			—		—
CLASS Y SHARES
	2004		7.72		(0.05	)		1.78			1.73			—			—		—
	2005		9.45		(0.06	)		2.16			2.10			—			—		—
	2006		11.55		(0.07	)		0.94			0.87			—			—		—
	2007		12.42		0.00			2.37			2.37			—			—		—
	2008		14.79		(0.08	)		(7.19	)		(7.27	)		—			—		—

See Notes to Financial Statements
142

									RATIOS TO AVERAGE NET ASSETS(c)
FOR THE YEAR ENDED DECEMBER 31		NET ASSET VALUE END OF PERIOD		TOTAL RETURN(b)			NET ASSETS END OF PERIOD (000'S)		EXPENSES			NET INVESTMENT INCOME (LOSS)			PORTFOLIO TURNOVER RATE
CAPITAL GROWTH CLASS X SHARES
	2004	$	15.21		7.64	%	$	34,038		0.93	%		0.37	%		168	%
	2005		17.51		15.55			31,126		0.70			0.05			83
	2006		18.20		3.94			23,975		0.71			(0.04	)		61
	2007		22.19		21.92			21,863		0.70			0.38			55
	2008		11.35		(48.70	)		8,621		0.81	(f)		(0.21	)(f)		42
CLASS Y SHARES
	2004		15.08		7.38			10,934		1.18			0.12			168
	2005		17.33		15.21			21,746		0.95			(0.20	)		83
	2006		17.97		3.75			27,009		0.96			(0.29	)		61
	2007		21.86		21.58			27,644		0.95			0.13			55
	2008		11.19		(48.81	)		12,953		1.06	(f)		(0.46	)(f)		42
FOCUS GROWTH CLASS X SHARES
	2004		15.14		8.29			212,736		0.67			0.60			134
	2005		17.19		14.39			186,633		0.67			0.06			73
	2006		17.25		0.37			137,081		0.69			(0.15	)		98
	2007		21.18		22.78			125,826		0.72			0.44			48
	2008		10.25		(51.43	)		48,722		0.70	(f)		(0.19	)(f)		31
CLASS Y SHARES
	2004		15.05		7.96			43,269		0.92			0.35			134
	2005		17.10		14.16			42,906		0.92			(0.19	)		73
	2006		17.12		0.12			36,895		0.94			(0.40	)		98
	2007		20.97		22.49			38,526		0.97			0.19			48
	2008		10.15		(51.57	)		14,206		0.95	(f)		(0.44	)(f)		31
CAPITAL OPPORTUNITIES CLASS X SHARES
	2004		9.55		22.59			25,408		0.90			(0.32	)		118
	2005		11.71		22.62			24,087		0.89			(0.33	)		87
	2006		12.62		7.86			19,112		0.90			(0.32	)		59
	2007		15.07		19.32			17,108		0.94			0.26			57
	2008		7.68		(49.04	)		6,744		1.04	(f)		(0.37	)(f)		33
CLASS Y SHARES
	2004		9.45		22.41			13,980		1.15			(0.57	)		118
	2005		11.55		22.22			15,897		1.14			(0.58	)		87
	2006		12.42		7.53			16,127		1.15			(0.57	)		59
	2007		14.79		19.08			18,362		1.19			0.01			57
	2008		7.52		(49.15	)		8,571		1.29	(f)		(0.62	)(f)		33

143

Morgan Stanley Select Dimensions Investment Series

Financial Highlights continued


FOR THE YEAR ENDED DECEMBER 31		NET ASSET VALUE BEGINNING OF PERIOD		NET INVESTMENT INCOME (LOSS)(a)			NET REALIZED AND UNREALIZED GAIN (LOSS)			TOTAL FROM INVESTMENT OPERATIONS			DIVIDENDS TO SHAREHOLDERS			DISTRIBUTIONS TO SHAREHOLDERS			TOTAL DIVIDENDS AND DISTRIBUTIONS
GLOBAL EQUITY CLASS X SHARES
	2004	$	14.17	$	0.09		$	1.06		$	1.15		$	(0.03	)		—		$	(0.03	)
	2005		15.29		0.13			1.49			1.62			(0.11	)		—			(0.11	)
	2006		16.80		0.11			3.31			3.42			(0.14	)	$	(1.31	)		(1.45	)
	2007		18.77		0.11			2.81			2.92			(0.13	)		(2.82	)		(2.95	)
	2008		18.74		0.09			(8.26	)		(8.17	)		(0.15	)		(0.95	)		(1.10	)
CLASS Y SHARES
	2004		14.09		0.06			1.05			1.11			(0.01	)		—			(0.01	)
	2005		15.19		0.09			1.47			1.56			(0.07	)		—			(0.07	)
	2006		16.68		0.06			3.30			3.36			(0.10	)		(1.31	)		(1.41	)
	2007		18.63		0.07			2.78			2.85			(0.09	)		(2.82	)		(2.91	)
	2008		18.57		0.06			(8.20	)		(8.14	)		(0.10	)		(0.95	)		(1.05	)
MID CAP GROWTH CLASS X SHARES
	2004		16.36		(0.03	)		3.68			3.65			—			—			—
	2005		20.01		(0.03	)		3.78			3.75			—			—			—
	2006		23.76		0.12			2.40			2.52			—			—			—
	2007		26.28		0.16			5.87			6.03			(0.12	)		—			(0.12	)
	2008		32.19		(0.05	)		(15.34	)		(15.39	)		(0.19	)		—			(0.19	)
CLASS Y SHARES
	2004		16.22		(0.07	)		3.64			3.57			—			—			—
	2005		19.79		(0.08	)		3.72			3.64			—			—			—
	2006		23.43		0.05			2.38			2.43			—			—			—
	2007		25.86		0.09			5.76			5.85			(0.04	)		—			(0.04	)
	2008		31.67		(0.11	)		(15.10	)		(15.21	)		(0.12	)		—			(0.12	)

(a) The per share amounts were computed using an average number of shares outstanding during the period.

(b) Calculated based on the net asset value as of the last business day of the period. Performance shown does not reflect fees and expenses imposed by your insurance company. If performance information included the effect of these additonal charges, the total returns would be lower.

(c) Reflects overall Portfolio ratios for investment income and non-class specific expenses.

(d) Distribution from paid-in capital.

(e) Includes dividends of less than $0.001.

(f) Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class during the period. The rebate had an effect of 0.01%.

(g) Reflects rebate of certain Portfolio expenses in connection with the investments in Morgan Stanley Institutional Liquidity Funds - Money Market Portfolio - Institutional Class during the period. The rebate had an effect of less than 0.005%.

See Notes to Financial Statements
144

									RATIOS TO AVERAGE NET ASSETS(c)
FOR THE YEAR ENDED DECEMBER 31		NET ASSET VALUE END OF PERIOD		TOTAL RETURN(b)			NET ASSETS END OF PERIOD (000'S)		EXPENSES			NET INVESTMENT INCOME (LOSS)			PORTFOLIO TURNOVER RATE
GLOBAL EQUITY CLASS X SHARES
	2004	$	15.29		8.17	%	$	73,290		1.11	%		0.64	%		48	%
	2005		16.80		10.64			64,377		1.12			0.83			75
	2006		18.77		21.59			60,727		1.05			0.60			42
	2007		18.74		16.45			53,757		0.99			0.59			18
	2008		9.47		(45.56	)		22,633		1.06	(g)		0.66	(g)		31
CLASS Y SHARES
	2004		15.19		7.89			8,399		1.36			0.39			48
	2005		16.68		10.32			8,975		1.37			0.58			75
	2006		18.63		21.35			10,750		1.30			0.35			42
	2007		18.57		16.15			11,465		1.24			0.34			18
	2008		9.38		(45.73	)		5,021		1.31	(g)		0.41	(g)		31
MID CAP GROWTH CLASS X SHARES
	2004		20.01		22.31			52,359		0.64			(0.19	)		135
	2005		23.76		18.69			49,116		0.63			(0.15	)		102
	2006		26.28		10.69			41,466		0.63			0.47			65
	2007		32.19		22.94			38,069		0.67			0.54			78
	2008		16.61		(48.06	)		16,023		0.74	(f)		(0.19	)(f)		43
CLASS Y SHARES
	2004		19.79		21.95			8,943		0.89			(0.44	)		135
	2005		23.43		18.40			10,704		0.88			(0.40	)		102
	2006		25.86		10.42			10,192		0.88			0.22			65
	2007		31.67		22.65			12,788		0.92			0.29			78
	2008		16.34		(48.20	)		5,469		0.99	(f)		(0.44	)(f)		43

145

Morgan Stanley Select Dimensions Investment Series

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees of
Morgan Stanley Select Dimensions Investment Series:

We have audited the accompanying statements of assets and liabilities of Morgan Stanley Select Dimensions Investment Series (the "Fund"), comprised of the Money Market Portfolio, Flexible Income Portfolio, Balanced Portfolio, Global Infrastructure Portfolio, Dividend Growth Portfolio, Equally-Weighted S&P 500 Portfolio, Capital Growth Portfolio, Focus Growth Portfolio, Capital Opportunities Portfolio, Global Equity Portfolio and Mid Cap Growth Portfolio (the "Portfolios"), including the portfolio of investments as of December 31, 2008, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financ ial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2008, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Portfolios of Morgan Stanley Select Dimensions Investment Series as of December 31, 2008, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP
New York, New York
February 27, 2009

146

Morgan Stanley Select Dimensions Investment Series

An Important Notice Concerning Our U.S. Privacy Policy (unaudited)

We are required by federal law to provide you with a copy of our Privacy Policy annually.

The following Policy applies to current and former individual investors in Morgan Stanley Advisor funds. This Policy is not applicable to partnerships, corporations, trusts or other non-individual clients or account holders. Please note that we may amend this Policy at any time, and will inform you of any changes to this Policy as required by law.

We Respect Your Privacy

We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Policy describes what non-public personal information we collect about you, why we collect it, and when we may share it with others. We hope this Policy will help you understand how we collect and share non-public personal information that we gather about you. Throughout this Policy, we refer to the non-public information that personally identifies you or your accounts as "personal information."

1. What Personal Information Do We Collect About You?

To serve you better and manage our business, it is important that we collect and maintain accurate information about you. We may obtain this information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources.

For example:

n We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through applications and other forms you submit to us.

n We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources.

n We may obtain information about your creditworthiness and credit history from consumer reporting agencies.

n We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements.

n If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, your use of our Web sites and your product and service

147

Morgan Stanley Select Dimensions Investment Series

An Important Notice Concerning Our U.S. Privacy Policy (unaudited) continued

preferences, through the use of "cookies." "Cookies" recognize your computer each time your return to one of our sites, and help to improve our sites' content and personalize your experience on our sites by, for example, suggesting offerings that may interest you. Please consult the Terms of Use of these sites for more details on our use of cookies.

2. When Do We Disclose Personal Information We Collect About You?

To provide you with the products and services you request, to serve you better and to manage our business, we may disclose personal information we collect about you to our affiliated companies and to non-affiliated third parties as required or permitted by law.

A. Information We Disclose to Our Affiliated Companies. We do not disclose personal information that we collect about you to our affiliated companies except to enable them to provide services on our behalf or as otherwise required or permitted by law.

B. Information We Disclose to Third Parties. We do not disclose personal information that we collect about you to non-affiliated third parties except to enable them to provide services on our behalf, to perform joint marketing agreements with other financial institutions, or as otherwise required or permitted by law. For example, some instances where we may disclose information about you to nonaffiliated third parties include: for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with these companies, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal informatio n with others except to fulfill that limited purpose.

3. How Do We Protect the Security and Confidentiality of Personal Information We Collect About You?

We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information.

148

Morgan Stanley Select Dimensions Investment Series

Trustee and Officer Information (unaudited)

Independent Trustees:

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Independent
Trustee**

Other Directorships
Held by Independent Trustee

Frank L. Bowman (64)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since
August 2006

Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); Chairperson of the Insurance Sub-Committee of the Insurance, Valuation and Compliance Committee (since February 2007); served as President and Chief Executive Officer of the Nuclear Energy Institute (policy organization) through November 2008; retired as Admiral, U.S. Navy in January 2005 after serving over 8 years as Director of the Naval Nuclear Propulsion Program and Deputy Administrator – Naval Reactors in the National Nuclear Security Administration at the U.S. Department of Energy (1996-2004), Knighted as Honorary Knight Commander of the Most Excellent Order of the British Empire; Awarded the Officer de l'Orde National du Mérite by the French Government.

161

Director of the Armed Services YMCA of the USA; member, BP America External Advisory Council (energy); member, National Academy of Engineers

Michael Bozic (68)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since
April 1994

Private investor; Chairperson of the Insurance, Valuation and Compliance Committee (since October 2006); Director or Trustee of the Retail Funds (since April 1994) and Institutional Funds (since July 2003); formerly, Chairperson of the Insurance Committee (July 2006-September 2006); Vice Chairman of Kmart Corporation (December 1998-October 2000), Chairman and Chief Executive Officer of Levitz Furniture Corporation (November 1995-November 1998) and President and Chief Executive Officer of Hills Department Stores (May 1991-July 1995); variously Chairman, Chief Executive Officer, President and Chief Operating Officer (1987-1991) of the Sears Merchandise Group of Sears, Roebuck & Co.

163

Director of various business
organizations.

149

Morgan Stanley Select Dimensions Investment Series

Trustee and Officer Information (unaudited) continued

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Independent
Trustee**

Other Directorships
Held by Independent Trustee

Kathleen A. Dennis (55)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since
August 2006

President, Cedarwood Associates (mutual fund and investment management) (since July 2006); Chairperson of the Money Market and Alternatives Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly, Senior Managing Director of Victory Capital Management (1993-2006).

161

Director of various non-profit organizations.

Dr. Manuel H. Johnson (60)
c/o Johnson Smick Group, Inc.
888 16th Street, N.W.
Suite 740
Washington, D.C. 20006

Trustee

Since
July 1991

Senior Partner, Johnson Smick International, Inc. (consulting firm); Chairperson of the Investment Committee (since October 2006) and Director or Trustee of the Retail Funds (since July 1991) and Institutional Funds (since July 2003); Co-Chairman and a founder of the Group of Seven Council (G7C) (international economic commission); formerly, Chairperson of the Audit Committee (July 1991-September 2006); Vice Chairman of the Board of Governors of the Federal Reserve System and Assistant Secretary of the U.S. Treasury.

163

Director of NVR, Inc. (home construction); Director of Evergreen Energy.

Joseph J. Kearns (66)
c/o Kearns & Associates LLC
PMB754
23852 Pacific Coast Highway
Malibu, CA 90265

Trustee

Since
August 1994

President, Kearns & Associates LLC (investment consulting); Chairperson of the Audit Committee (since October 2006) and Director or Trustee of the Retail Funds (since July 2003) and Institutional Funds (since August 1994); formerly, Deputy Chairperson of the Audit Committee (July 2003-September 2006) and Chairperson of the Audit Committee of the Institutional Funds (October 2001-July 2003); CFO of the J. Paul Getty Trust.

164

Director of Electro Rent Corporation (equipment leasing) and The Ford Family Foundation.

150

Morgan Stanley Select Dimensions Investment Series

Trustee and Officer Information (unaudited) continued

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Independent
Trustee**

Other Directorships
Held by Independent Trustee

Michael F. Klein (50)
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since
August 2006

Managing Director, Aetos Capital, LLC (since March 2000) and Co-President, Aetos Alternatives Management, LLC (since January 2004); Chairperson of the Fixed Income Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly, Managing Director, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management, President, Morgan Stanley Institutional Funds (June 1998-March 2000) and Principal, Morgan Stanley & Co. Inc. and Morgan Stanley Dean Witter Investment Management (August 1997-December 1999).

161

Director of certain investment funds managed or sponsored by Aetos Capital, LLC. Director of Sanitized AG and Sanitized Marketing AG (specialty chemicals).

Michael E. Nugent (72)
c/o Triumph Capital, L.P.
445 Park Avenue
New York, NY 10022

Chairperson of the Board and Trustee

Chairperson of the Boards since July 2006 and Trustee since July 1991

General Partner, Triumph Capital, L.P. (private investment partnership); Chairperson of the Boards of the Retail Funds and Institutional Funds (since July 2006); Director or Trustee of the Retail Funds (since July 1991) and Institutional Funds (since July 2001); formerly, Chairperson of the Insurance Committee (until July 2006).

163

None.

151

Morgan Stanley Select Dimensions Investment Series

Trustee and Officer Information (unaudited) continued

Name, Age and Address of
Independent Trustee

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Independent
Trustee**

Other Directorships
Held by Independent Trustee

W. Allen Reed (61)†
c/o Kramer Levin Naftalis & Frankel LLP
Counsel to the Independent Trustees
1177 Avenue of the Americas
New York, NY 10036

Trustee

Since
August 2006

Chairperson of the Equity Sub-Committee of the Investment Committee (since October 2006) and Director or Trustee of various Retail Funds and Institutional Funds (since August 2006); formerly, President and CEO of General Motors Asset Management; Chairman and Chief Executive Officer of the GM Trust Bank and Corporate Vice President of General Motors Corporation (August 1994-December 2005).

161

Director of Temple-Inland Industries (packaging and forest products); Director of Legg Mason, Inc. and Director of the Auburn University Foundation.

Fergus Reid (76)
c/o Lumelite Plastics Corporation
85 Charles Colman Blvd.
Pawling, NY 12564

Trustee

Since
June 1992

Chairman of Lumelite Plastics Corporation; Chairperson of the Governance Committee and Director or Trustee of the Retail Funds (since July 2003) and Institutional Funds (since June 1992).

164

Trustee and Director of certain investment companies in the JPMorgan Funds complex managed by JP Morgan Investment Management Inc.

Interested Trustee:

Name, Age and Address of
Interested Trustee

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios
in Fund
Complex
Overseen by
Interested
Trustee**

Other Directorships
Held by Interested Trustee

James F. Higgins (61)
c/o Morgan Stanley Trust
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311

Trustee

Since
June 2000

Director or Trustee of the Retail Funds (since June 2000) and Institutional Funds (since July 2003); Senior
Advisor of Morgan Stanley (since August 2000).

162

Director of AXA Financial, Inc. and The Equitable Life Assurance Society of the United States (financial services).

* This is the earliest date the Trustee began serving the funds advised by Morgan Stanley Investment Advisors Inc. (the "Investment Adviser") (the "Retail Funds") or the funds advised by Morgan Stanley Investment Management Inc. and Morgan Stanley AIP GP LP (the "Institutional Funds").

** The Fund Complex includes all open-end and closed-end funds (including all of their portfolios) advised by the Investment Adviser and any funds that have an investment adviser that is an affiliated person of the Investment Adviser (including, but not limited to, Morgan Stanley Investment Management Inc.).

† For the period September 26, 2008 through February 3, 2009, W. Allen Reed was an Interested Trustee. At all other time covered by this report, Mr. Reed was an Independent Trustee.

152

Morgan Stanley Select Dimensions Investment Series

Trustee and Officer Information (unaudited) continued

Executive Officers:

Name, Age and Address of
Executive Officer

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s) During Past 5 Years

Randy Takian (34)
522 Fifth Avenue
New York, NY 10036

President and Principal Executive Officer

President and Principal Executive Officer (since September 2008)

President and Principal Executive Officer (since September 2008) of funds in the Fund Complex; President and Chief Executive Officer of Morgan Stanley Services Company Inc. (since September 2008). President of the Investment Adviser (since July 2008). Head of the Retail and Intermediary business within Morgan Stanley Investment Management (since July 2008). Head of Liquidity and Bank Trust business (since July 2008) and the Latin American franchise (since July 2008) at Morgan Stanley Investment Management. Managing Director, Director and/or Officer of the Investment Adviser and various entities affiliated with the Investment Adviser. Formerly Head of Strategy and Product Development for the Alternatives Group and Senior Loan Investment Management. Formerly with Bank of America (July 1996-March 2006), most recently as Head of the Strategy, Mergers and Acquisitions team for Global Wealth and Investment Management.

Kevin Klingert (46)
522 Fifth Avenue
New York, NY 10036

Vice President

Since June 2008

Global Head, Chief Operating Officer and acting Chief Investment Officer of the Global Fixed Income Group of Morgan Stanley Investment Management Inc. and the Investment Adviser (since March 2008). Head of Global Liquidity Portfolio Management and co-Head of Liquidity Credit Research of Morgan Stanley Investment Management (since December 2007). Managing Director of Morgan Stanley Investment Management Inc. and the Investment Adviser (since December 2007). Previously, Managing Director on the Management Committee and head of Municipal Portfolio Management and Liquidity at BlackRock (October 1991 to January 2007).

Amy R. Doberman (46)
522 Fifth Avenue
New York, NY 10036

Vice President

Since July 2004

Managing Director of Morgan Stanley Investment Management (since July 2004); Vice President of the Retail Funds and Institutional Funds (since July 2004); Vice President of the Van Kampen Funds (since August 2004); Secretary (since February 2006) and Managing Director (since July 2004) of the Investment Adviser and various entities affiliated with the Investment Adviser. Formerly, Managing Director and General Counsel – Americas, UBS Global Asset Management (July 2000-July 2004).

Carsten Otto (45)
522 Fifth Avenue
New York, NY 10036

Chief Compliance Officer

Since October 2004

Managing Director and Global Head of Compliance for Morgan Stanley Investment Management (since April 2007) and Chief Compliance Officer of the Retail Funds and Institutional Funds (since October 2004). Formerly, U.S. Director of Compliance (October 2004-April 2007) and Assistant Secretary and Assistant General Counsel of the Retail Funds.

Stefanie V. Chang Yu (42)
522 Fifth Avenue
New York, NY 10036

Vice President

Since December 1997

Managing Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Vice President of the Retail Funds (since July 2002) and Institutional Funds (since December 1997). Formerly, Secretary of various entities affiliated with the Investment Adviser.

153

Morgan Stanley Select Dimensions Investment Series

Trustee and Officer Information (unaudited) continued

Name, Age and Address of
Executive Officer

Position(s)
Held with
Registrant

Term of
Office and
Length of
Time Served*

Principal Occupation(s) During Past 5 Years

Francis J. Smith (43)
c/o Morgan Stanley Trust Harborside Financial Center Plaza Two
Jersey City, NJ 07311

Treasurer and Chief Financial Officer

Treasurer since July 2003 and Chief Financial Officer since September 2002

Executive Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Treasurer and Chief Financial Officer of the Retail Funds (since July 2003).

Mary E. Mullin (41)
522 Fifth Avenue
New York, NY 10036

Secretary

Since June 1999

Executive Director of the Investment Adviser and various entities affiliated with the Investment Adviser; Secretary of the Retail Funds (since July 2003) and Institutional Funds (since June 1999).

* This is the earliest date the Officer began serving the Retail Funds or Institutional Funds.

154

Morgan Stanley Select Dimensions Investment Series

Federal Tax Notice n December 31, 2008 (unaudited)

For Federal income tax purposes, the following information is furnished with respect to the distributions paid by each applicable Portfolio during the taxable year ended December 31, 2008. For corporate shareholders, the following percentages of dividends paid by each Portfolio qualified for the dividends received deduction. Additionally, the following percentages of each Portfolio's dividends was attributable to qualifying U.S. Government obligations. (Please consult your tax advisor to determine if any portion of the dividends you received is exempt from state income tax.)

FUND	DIVIDENDS RECEIVED DEDUCTION%			QUALIFYING U.S. GOVT. INCOME%
Balanced Portfolio		43.15	%		8.45	%
Capital Growth Portfolio		0.00	%		0.00	%
Capital Opportunities Portfolio		0.00	%		0.00	%
Dividend Growth Portfolio		100.00	%		0.00	%
Equally-Weighted S&P 500 Portfolio		75.42	%		0.00	%
Flexible Income Portfolio		0.00	%		3.67	%
Focus Growth Portfolio		100.00	%		0.00	%
Global Equity Portfolio		42.89	%		0.00	%
Global Infrastructure Portfolio		92.89	%		0.00	%
Mid Cap Growth Portfolio		0.00	%		0.00	%
Money Market Portfolio		0.00	%		0.00	%

Each of the applicable Portfolios designated and paid the following amounts as a long-term capital gain distribution:

FUND	AMOUNT
Balanced Portfolio	$	6,420,262
Equally-Weighted S&P 500 Portfolio		29,409,923
Global Equity Portfolio		2,974,482

For Federal income tax purpose, the following information is furnished with respect to the earnings of each applicable Portfolio for the taxable year ended December 31, 2008. The Global Equity Portfolio intends to pass through foreign tax credits of $58,417, and has derived net income from sources within foreign countries amounting to $271,721.

155

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Trustees
Frank L. Bowman				Joseph J. Kearns

Michael Bozic				Michael F. Klein

Kathleen A. Dennis				Michael E. Nugent

James F. Higgins				W. Allen Reed

Dr. Manuel H. Johnson				Fergus Reid

Officers
Michael E. Nugent Chairperson of the Board

Randy Takian President and Principal Executive Officer

Kevin Klingert 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				Independent Registered Public Accounting Firm
Morgan Stanley Trust Harborside Financial Center, Plaza Two Jersey City, New Jersey 07311				Deloitte & Touche LLP Two World Financial Center New York, New York 10281

Legal Counsel				Counsel to the Independent Trustees
Clifford Chance US LLP 31 West 52nd Street New York, New York 10019				Kramer Levin Naftalis & Frankel LLP 1177 Avenue of the Americas New York, New York 10036

Investment Adviser				Sub-Adviser (Global Infrastructure)
Morgan Stanley Investment Advisors Inc. 522 Fifth Avenue New York, New York 10036				Morgan Stanley Investment Management Limited 25 Cabot Square, London, E14 4QA, England

This report is submitted for the general information of shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its trustees. It is available without charge, by calling (800) 869-NEWS.

This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.

Morgan Stanley Distributors Inc., member FINRA.

SELDIMANN
IU09-00766P-Y12/08

#40474

Item 2. Code of Ethics.

(a) The Fund has adopted a code of ethics (the “Code of Ethics”) that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Fund or a third party.

(b) No information need be disclosed pursuant to this paragraph.

(d) Not applicable.

(e) Not applicable.

(f)

(1) The Fund’s Code of Ethics is attached hereto as Exhibit 12 A.

(2) Not applicable.

(3) Not applicable.

Item 3. Audit Committee Financial Expert.

The Fund’s Board of Trustees has determined that Joseph J. Kearns, an “independent” Trustee, is an “audit committee financial expert” serving on its audit committee. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification

Item 4. Principal Accountant Fees and Services.

(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:

2008

	Registrant			Covered Entities(1)
Audit Fees	$	238,605		N/A

Non-Audit Fees
Audit-Related Fees	$		(2)	$	6,418,000	(2)
Tax Fees	$	49,401	(3)	$	881,000	(4)
All Other Fees	$			$
Total Non-Audit Fees	$	49,401		$	7,299,000

Total	$	288,006		$	7,299,000

2007

	Registrant			Covered Entities(1)
Audit Fees	$	179,750		N/A

Non-Audit Fees
Audit-Related Fees	$	—	(2)	$	6,121,000	(2)
Tax Fees	$	43,054	(3)	$	964,000	(4)
All Other Fees	$			$		(5)
Total Non-Audit Fees	$	43,054		$	7,085,000

Total	$	222,804		$	7,085,000

N/A- Not applicable, as not required by Item 4.

(1)		Covered Entities include the Adviser (excluding sub-advisors) and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant.
(2)		Audit-Related Fees represent assurance and related services provided that are reasonably related to the performance of the audit of the financial statements of the Covered Entities’ and funds advised by the Adviser or its affiliates, specifically data verification and agreed-upon procedures related to asset securitizations and agreed-upon procedures engagements.
(3)		Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the preparation and review of the Registrant’s tax returns.
(4)		Tax Fees represent tax compliance, tax planning and tax advice services provided in connection with the review of Covered Entities’ tax returns.
(5)		All other fees represent project management for future business applications and improving business and operational processes.

(e)(1) The audit committee’s pre-approval policies and procedures are as follows:

APPENDIX A

AUDIT COMMITTEE

AUDIT AND NON-AUDIT SERVICES

PRE-APPROVAL POLICY AND PROCEDURES

OF THE

MORGAN STANLEY RETAIL AND INSTITUTIONAL FUNDS

AS ADOPTED AND AMENDED JULY 23, 2004,(1)

1. Statement of Principles

The Audit Committee of the Board is required to review and, in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities in order to assure that services performed by the Independent Auditors do not impair the auditor’s independence from the Fund.

The SEC has issued rules specifying the types of services that an independent auditor may not provide to its audit client, as well as the audit committee’s administration of the engagement of the independent auditor. The SEC’s rules establish two different approaches to pre-approving services, which the SEC considers to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the Audit Committee (“general pre-approval”); or require the specific pre-approval of the Audit Committee or its delegate (“specific pre-approval”). The Audit Committee believes that the combination of these two approaches in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors. As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated) if it is to be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval by the Audit Committee.

The appendices to this Policy describe the Audit, Audit-related, Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations.

(1)

This Audit Committee Audit and Non-Audit Services Pre-Approval Policy and Procedures (the “Policy”), adopted as of the date above, supersedes and replaces all prior versions that may have been adopted from time to time.

The purpose of this Policy is to set forth the policy and procedures by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee’s responsibilities to pre-approve services performed by the Independent Auditors to management.

The Fund’s Independent Auditors have reviewed this Policy and believes that implementation of the Policy will not adversely affect the Independent Auditors’ independence.

2. Delegation

As provided in the Act and the SEC’s rules, the Audit Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

3. Audit Services

The annual Audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures required to be performed by the Independent Auditors to be able to form an opinion on the Fund’s financial statements. These other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to the audit. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items.

In addition to the annual Audit services engagement approved by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.

The Audit Committee has pre-approved the Audit services in Appendix B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).

4. Audit-related Services

Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Fund’s financial statements and, to the extent they are Covered Services, the Covered Entities or that are traditionally performed by the Independent Auditors. Because the Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the SEC’s rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters

not classified as “Audit services”; assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting requirements under Forms N-SAR and/or N-CSR.

The Audit Committee has pre-approved the Audit-related services in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).

5. Tax Services

The Audit Committee believes that the Independent Auditors can provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax planning and tax advice without impairing the auditor’s independence, and the SEC has stated that the Independent Auditors may provide such services.

Pursuant to the preceding paragraph, the Audit Committee has pre-approved the Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).

6. All Other Services

The Audit Committee believes, based on the SEC’s rules prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted. Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and are consistent with the SEC’s rules on auditor independence.

The Audit Committee has pre-approved the All Other services in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee (or by any member of the Audit Committee to which pre-approval has been delegated).

7. Pre-Approval Fee Levels or Budgeted Amounts

Pre-approval fee levels or budgeted amounts for all services to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services.

8. Procedures

All requests or applications for services to be provided by the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund’s Chief Financial Officer and must include a detailed description of the services to be

rendered. The Fund’s Chief Financial Officer will determine whether such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the Independent Auditors and the Fund’s Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence.

The Audit Committee has designated the Fund’s Chief Financial Officer to monitor the performance of all services provided by the Independent Auditors and to determine whether such services are in compliance with this Policy. The Fund’s Chief Financial Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the Fund’s Chief Financial Officer and management will immediately report to the chairman of the Audit Committee any breach of this Policy that comes to the attention of the Fund’s Chief Financial Officer or any member of management.

9. Additional Requirements

The Audit Committee has determined to take additional measures on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor’s independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships between the Independent Auditors and the Fund, consistent with Independence Standards Board No. 1, and discussing with the Independent Auditors its methods and procedures for ensuring independence.

10. Covered Entities

Covered Entities include the Fund’s investment adviser(s) and any entity controlling, controlled by or under common control with the Fund’s investment adviser(s) that provides ongoing services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Fund’s audit committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include:

Morgan Stanley Retail Funds

Morgan Stanley Investment Advisors Inc.

Morgan Stanley & Co. Incorporated

Morgan Stanley DW Inc.

Morgan Stanley Investment Management Inc.

Morgan Stanley Investment Management Limited

Morgan Stanley Investment Management Private Limited

Morgan Stanley Asset & Investment Trust Management Co., Limited

Morgan Stanley Investment Management Company

Van Kampen Asset Management

Morgan Stanley Services Company, Inc.

Morgan Stanley Distributors Inc.

Morgan Stanley Trust FSB

Morgan Stanley Institutional Funds

Morgan Stanley Investment Management Inc.

Morgan Stanley Investment Advisors Inc.

Morgan Stanley Investment Management Limited

Morgan Stanley Investment Management Private Limited

Morgan Stanley Asset & Investment Trust Management Co., Limited

Morgan Stanley Investment Management Company

Morgan Stanley & Co. Incorporated

Morgan Stanley Distribution, Inc.

Morgan Stanley AIP GP LP

Morgan Stanley Alternative Investment Partners LP

(e)(2) Beginning with non-audit service contracts entered into on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services were pre-approved by the audit committee pursuant to the Audit Committee’s pre-approval policies and procedures (attached hereto).

(f) Not applicable.

(g) See table above.

(h) The audit committee of the Board of Trustees has considered whether the provision of services other than audit services performed by the auditors to the Registrant and Covered Entities is compatible with maintaining the auditors’ independence in performing audit services.

Item 5. Audit Committee of Listed Registrants.

(a)

The Fund has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act whose members are: Joseph Kearns, Michael Nugent and Allen Reed.

(b) Not applicable.

Item 6. Schedule of Investments

(a) Refer to Item 1.

(b) Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Applicable only to reports filed by closed-end funds.

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Applicable only to reports filed by closed-end funds.

Item 9. Closed-End Fund Repurchases

Applicable only to reports filed by closed-end funds.

Item 10. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 11. Controls and Procedures

(a) The Fund’s principal executive officer and principal financial officer have concluded that the Fund’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.

(b) There were no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits

(a) The Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto.

(b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT.

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 Select Dimensions Investment Series

/s/ Randy Takian
Randy Takian
Principal Executive Officer
February 19, 2009

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/ Randy Takian
Randy Takian
Principal Executive Officer
February 19, 2009

/s/ Francis Smith
Francis Smith
Principal Financial Officer
February 19, 2009

Morgan Stanley Select Dimensions Investment Series Inactive N-CSRCertified annual shareholder report (management investment company)