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			811-05624
Morgan Stanley Institutional Fund, Inc.
(Exact name of registrant as specified in charter)
522 Fifth Avenue New York, NY					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:				1-800-281-2715
Date of fiscal year end:	12/31
Date of reporting period:		12/31/09

Form N-CSR is to be used by management investment companies to file  reports with the Commission not later than 10 days after the transmission to  stockholders of any report that is required to be transmitted to stockholders  under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).  The Commission may use the information provided on Form N-CSR in its  regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form  N-CSR, and the Commission will make this information public. A registrant is  not required to respond to the collection of information contained in Form  N-CSR unless the Form displays a currently valid Office of Management and  Budget (“OMB”) control number. Please direct comments concerning the accuracy  of the information collection burden estimate and any suggestions for reducing  the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street,  NW, Washington, DC 20549-0609. The OMB has reviewed this collection of  information under the clearance requirements of 44 U.S.C. Section 3507.

ITEM 1.  REPORTS TO STOCKHOLDERS.

The Fund’s annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows:

INVESTMENT MANAGEMENT

Morgan Stanley Institutional Fund, Inc.

Global and International Equity Portfolios	U.S. Equity Portfolios
Active International Allocation Portfolio	Capital Growth Portfolio
Emerging Markets Portfolio	Focus Growth Portfolio
Global Franchise Portfolio	Large Cap Relative Value Portfolio
Global Real Estate Portfolio	Small Company Growth Portfolio
International Equity Portfolio	U.S. Real Estate Portfolio
International Growth Equity Portfolio	U.S. Small/Mid Cap Value Portfolio
International Real Estate Portfolio
International Small Cap Portfolio	Fixed Income Portfolio
	Emerging Markets Debt Portfolio

Annual Report

December 31, 2009

2009 Annual Report

December 31, 2009

Table of Contents

Shareholders’ Letter	2
Performance Summary	4
Expense Examples	6
Investment Overview and Portfolios of Investments
Global and International Equity Portfolios:
Active International Allocation	8
Emerging Markets	23
Global Franchise	30
Global Real Estate	34
International Equity	40
International Growth Equity	46
International Real Estate	52
International Small Cap	57
U.S. Equity Portfolios:
Capital Growth	64
Focus Growth	68
Large Cap Relative Value	71
Small Company Growth	77
U.S. Real Estate	82
U.S. Small/Mid Cap Value	87
Fixed Income Portfolio:
Emerging Markets Debt	92
Statements of Assets and Liabilities	97
Statements of Operations	103
Statements of Changes in Net Assets	106
Financial Highlights	116
Notes to Financial Statements	150
Report of Independent Registered Public Accounting Firm	166
Federal Income Tax Information	167
U.S. Privacy Policy	169
Director and Officer Information	172

This report is authorized for distribution only when preceded or accompanied by prospectuses of the Morgan Stanley Institutional Fund, Inc. To receive a prospectus and/or SAI, which contains more complete information such as investment objectives, charges, expenses, policies for voting proxies, risk considerations, and describes in detail each of the Portfolio’s investment policies to the prospective investor, please call toll free 1-(800) 548-7786. Please read the prospectuses carefully before you invest or send money.

Additionally, you can access portfolio information including performance, characteristics, and investment team commentary through Morgan Stanley Investment Management’s website: www.morganstanley.com/im.

Market forecasts provided in this report may not necessarily come to pass. There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the Portfolio in the future. There is no assurance that a Portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that market values of securities owned by the Portfolio will decline and, therefore, the value of the Portfolio’s shares may be less than what you paid for them. Accordingly, you can lose money investing in Portfolios. Please see the prospectus for more complete information on investment risks.

1

2009 Annual Report

December 31, 2009

Shareholders’ Letter

Dear Shareholders:

We are pleased to present to you the Fund’s Annual Report for the year ended December 31, 2009. Our Fund currently offers 15 portfolios providing investors with a full array of global and domestic equity and fixed-income products. The Fund’s portfolios, together with the portfolios of the Morgan Stanley Institutional Fund Trust, provide investors with a means to help them meet specific investment needs and to allocate their investments among equities (e.g., value and growth; small, medium, and large capitalization) and fixed income (e.g., short, medium, and long duration and investment and non-investment grade).

Sincerely,

Randy Takian

President and Principal Executive Officer

January 2010

2

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2009 Annual Report

December 31, 2009

Performance Summary

	Inception Dates				One Year Total Return										Five Year Average Annual Total Return
	Class I	Class P	Class H	Class L	Class I		Class P		Class H		Class L		Comparable Indicies			Class I		Class P		Comparable Indicies
Global and International Equity Portfolios:
Active International Allocation	1/17/92	1/2/96	—	—	27.26	%	26.99	%	—	%	—	%	31.78	%	(1)	4.94	%	4.68	%	3.54	%	(1)
Emerging Markets	9/25/92	1/2/96	—	—	69.54		69.11		—		—		78.51		(2)	14.21		13.91		15.51		(2)
Global Franchise	11/28/01	11/28/01	—	—	29.65		29.24		—		—		29.99		(3)	6.58		6.29		2.01		(3)
Global Real Estate	8/30/06	8/30/06	1/2/08	6/16/08	41.04		40.66		40.59		39.91		37.89		(4)	—		—		—		(4)
International Equity	8/4/89	1/2/96	—	—	21.56		21.18		—		—		31.78		(1)	3.09		2.84		3.54		(1)
International Growth Equity	12/27/05	12/27/05	—	—	38.78		38.46		—		—		31.78		(1)	—		—		—		(1)
International Real Estate	10/1/97	10/1/97	—	—	46.54		46.08		—		—		40.81		(5)	1.73		1.48		0.17		(5)
International Small Cap	12/15/92	10/21/08	—	—	27.45		27.14		—		—		46.78		(6)	0.57		—		3.51		(6)
U.S. Equity Portfolios:
Capital Growth	4/2/91	1/2/96	—	—	62.97		62.66		—		—		37.21		(8)	3.52		3.28		1.63		(8)
Focus Growth	3/8/95	1/2/96	—	—	70.61		70.02		—		—		37.21		(8)	4.10		3.83		1.63		(8)
Large Cap Relative Value	1/31/90	1/2/96	—	—	24.28		24.00		—		—		19.69		(7)	2.24		1.99		—0.25		(7)
Small Company Growth	11/1/89	1/2/96	—	—	47.92		47.41		—		—		34.47		(9)	2.41		2.15		0.87		(9)
U.S. Real Estate	2/24/95	1/2/96	—	—	29.65		29.31		—		—		27.99		(10)	1.80		1.55		0.36		(10)
U.S. Small/Mid Cap Value	9/27/07	9/27/07	—	—	33.61		33.39		—		—		27.68		(11)	—		—		—		(11)
Fixed Income Portfolio:
Emerging Markets Debt	2/1/94	1/2/96	1/2/08	6/16/08	23.75		23.43		23.40		22.80		21.98		(12)	7.75		7.45		8.49		(12)

Performance data quoted assumes that all dividends and distributions, if any, were reinvested and represents past performance, which is no guarantee of future results. Returns do not reflect the deduction of any applicable sales charges for Class H shares. Such costs would lower performance. Current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.morganstanley.com/im or call 1-800-548-7786. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. Please keep in mind that high double-digit returns are highly unusual and cannot be sustained.

Indices:

(1)	MSCI EAFE (Europe, Australasia, and Far East)
(2)	MSCI Emerging Markets Net
(3)	MSCI World
(4)	FTSE EPRA/NAREIT Developed Real Estate — Net Total Return to U.S. Investors
(5)	FTSE EPRA/NAREIT Developed ex-North America Real Estate (80% Europe/20% Asia)
(6)	MSCI EAFE Small Cap Total Return
(7)	Russell 1000® Value
(8)	Russell 1000® Growth
(9)	Russell 2000® Growth
(10)	FTSE NAREIT Equity REITs
(11)	Russell 2500® Value
(12)	J.P. Morgan EMBI Global Bond /J.P. Morgan GBI-EM Global Diversified Bond

4

2009 Annual Report

December 31, 2009

Performance Summary (cont’d)

Ten Year Average Annual Total Return									Since Inception Average Annual Total Return
Class I		Class P		Comparable Indicies			Class I		Comparable Indicies - Class I		Class P		Comparable Indicies - Class P		Class H		Comparable Indicies - Class H		Class L		Comparable Indicies - Class L
1.91	%	1.66	%	1.17	%	(1)	6.40	%	5.69	%	5.56	%	4.48	%	—	%	—	%	—	%	—	%
7.52		7.24		9.82		(2)	9.97		9.68		8.90		8.04		—		—		—		—
—		—		—		(3)	10.65		4.01		10.34		4.01		—		—		—		—
—		—		—		(4)	-5.17		-7.09		-5.44		-7.09		-11.98		-15.10		-13.10		-15.38		(4)
5.79		5.54		1.17		(1)	9.52		4.28		8.63		4.48		—		—		—		—
—		—		—		(1)	1.03		1.07		0.79		1.07		—		—		—		—
11.68		11.39		9.63		(5)	9.21		7.72		8.93		7.72		—		—		—		—
6.08		—		6.04		(6)	9.67		5.37		23.86		32.90		—		—		—		—
-1.27		-1.51		-3.99		(8)	8.67		6.97		6.52		4.93		—		—		—		—
-0.90		-1.15		-3.99		(8)	9.98		6.54		7.59		4.93		—		—		—		—
3.98		3.73		2.47		(7)	8.83		9.22		7.23		7.03		—		—		—		—
2.11		1.86		-1.37		(9)	10.67		5.86		9.24		3.34		—		—		—		—
11.36		11.06		10.63		(10)	12.11		9.86		11.01		9.40		—		—		—		—
—		—		—		(11)	-10.17		-9.28		-10.39		-9.28		—		—		—		—
11.04		10.77		10.72		(12)	10.13		10.23		10.47		11.43		4.98		7.32		5.27		9.06		(12)

5

2009 Annual Report

December 31, 2009 (unaudited)

Expense Examples

Expense Examples

As a shareholder of a Portfolio, you may incur two types of costs: (1) transactional costs, including redemptions fees, and (2) ongoing costs, including management fees, shareholder servicing and distribution fees (in the case of Class P, Class H and Class L) and other Portfolio expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in a Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.

The examples are based on an investment of $1,000 invested at the beginning of the six-month period ended December 31, 2009 and held for the entire six-month period.

Actual Expenses

The table below provides information about actual account values and actual expenses. You may use the information in this table, 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 table under the heading entitled “Actual Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Please note that “Actual Expenses Paid During Period” are grossed up to reflect Portfolio expenses prior to the effect of Expense Offset (See Note F in the Notes to Financial Statements). Therefore, the annualized net expense ratios may differ from the ratio of expenses to average net assets shown in the Financial Highlights.

Hypothetical Example for Comparison Purposes

The table below provides information about hypothetical account values and 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 costs 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 transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Expenses are calculated using each Fund’s annualized expense ratio (as disclosed), multiplied by the average account value over the period, and multiplied by 184/365(to reflect the most recent one-half year period).

6

2009 Annual Report

December 31, 2009 (unaudited)

Expense Examples (cont’d)

Portfolio	Beginning Account Value 7/1/09	Actual Ending Account Value 12/31/09	Hypothetical Ending Account Value	Actual Expenses Paid During Period*	Hypothetical Expenses Paid During Period*	Net Expense Ratio During Period**
Active International Allocation Class I	$1,000.00	$1,206.30	$1,021.22	$ 4.39	$4.02	0.79	%
Active International Allocation Class P	1,000.00	1,204.90	1,019.96	5.78	5.30	1.04
Emerging Markets Class I	1,000.00	1,298.90	1,018.00	8.29	7.27	1.43
Emerging Markets Class P	1,000.00	1,297.30	1,016.74	9.73	8.54	1.68
Global Franchise Class I	1,000.00	1,235.90	1,020.16	5.64	5.09	1.00
Global Franchise Class P	1,000.00	1,233.70	1,018.90	7.04	6.36	1.25
Global Real Estate Class I	1,000.00	1,269.30	1,020.11	5.78	5.14	1.01
Global Real Estate Class P	1,000.00	1,267.60	1,018.85	7.20	6.41	1.26
Global Real Estate Class H	1,000.00	1,269.00	1,018.85	7.21	6.41	1.26
Global Real Estate Class L	1,000.00	1,266.20	1,016.33	10.05	8.94	1.76
International Equity Class I	1,000.00	1,182.40	1,020.47	5.17	4.79	0.94
International Equity Class P	1,000.00	1,180.40	1,019.21	6.54	6.06	1.19
International Growth Equity Class I	1,000.00	1,238.30	1,020.16	5.64	5.09	1.00
International Growth Equity Class P	1,000.00	1,235.80	1,018.90	7.04	6.36	1.25
International Real Estate Class I	1,000.00	1,313.10	1,020.37	5.60	4.89	0.96
International Real Estate Class P	1,000.00	1,311.70	1,019.11	7.05	6.16	1.21
International Small Cap Class I	1,000.00	1,156.70	1,019.46	6.20	5.80	1.14
International Small Cap Class P	1,000.00	1,155.00	1,018.30	7.44	6.97	1.37
Capital Growth Class I	1,000.00	1,297.80	1,021.98	3.71	3.26	0.64
Capital Growth Class P	1,000.00	1,296.50	1,020.72	5.15	4.53	0.89
Focus Growth Class I	1,000.00	1,309.60	1,020.21	5.76	5.04	0.99
Focus Growth Class P	1,000.00	1,306.90	1,018.95	7.21	6.31	1.24
Large Cap Relative Value Class I	1,000.00	1,252.70	1,021.73	3.92	3.52	0.69
Large Cap Relative Value Class P	1,000.00	1,250.60	1,020.47	5.33	4.79	0.94
Small Company Growth Class I	1,000.00	1,233.50	1,019.91	5.91	5.35	1.05
Small Company Growth Class P	1,000.00	1,231.00	1,018.65	7.31	6.61	1.30
U.S. Real Estate Class I	1,000.00	1,410.40	1,020.21	6.01	5.04	0.99
U.S. Real Estate Class P	1,000.00	1,409.60	1,019.00	7.47	6.26	1.23
U.S. Small/Mid Cap Value Class I	1,000.00	1,275.20	1,019.00	7.05	6.26	1.23
U.S. Small/Mid Cap Value Class P	1,000.00	1,275.00	1,017.74	8.49	7.53	1.48
Emerging Markets Debt Class I	1,000.00	1,120.30	1,020.97	4.49	4.28	0.84
Emerging Markets Debt Class P	1,000.00	1,118.90	1,019.71	5.82	5.55	1.09
Emerging Markets Debt Class H	1,000.00	1,118.70	1,019.71	5.82	5.55	1.09
Emerging Markets Debt Class L	1,000.00	1,116.20	1,017.19	8.48	8.08	1.59

*	Expenses are calculated using each Portfolio Class’ annualized net expense ratio (as disclosed), multiplied by the average account value over the period, and multiplied by 184/365 (to reflect the most recent one-half year period).
**	Annualized

7

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview

Active International Allocation Portfolio

The Active International Allocation Portfolio (the “Portfolio”) seeks long-term capital appreciation by investing primarily, in accordance with country and sector weightings determined by the Adviser, in equity securities of non-U.S. issuers which, in the aggregate, replicate broad market indices.

Foreign investing involves certain risks, including currency fluctuations and controls, restrictions on foreign investments, less governmental supervision and regulation, less liquidity and the potential for market volatility and political instability. The risks of investing in emerging-market countries are greater than the risks generally associated with foreign investments.

Performance

For the year ended December 31, 2009, the Portfolio had a total return based on net asset value and reinvestment of distributions per share of 27.26%, net of fees, for Class I shares. The Portfolio’s Class I shares underperformed against its benchmark, the Morgan Stanley Capital International (MSCI) EAFE Index (the “Index”) which returned 31.78%.

Factors Affecting Performance

·For the full year 2009, international equities, as measured by the MSCI EAFE Index, rose 32%. Regionally, emerging markets performed best, up 79%, followed by Asia ex-Japan with a 73% gain, Europe up 36%, U.S. up 26%, and Japan (again last) up 6%. Within the MSCI EAFE Index, the materials sector led, with a gain of 69%. Financials and consumer discretionary were up 38% each, followed by energy up 34%, consumer staples and industrials up 31%, information technology up 22%, health care and telecommunications services up 16%, and utilities up 4%. Full-year currency returns were fairly muted (Japanese yen was down 3% and the euro up 3%), with the exception of the British pound sterling which rose 12%, following its almost 30% decline in 2008.

·For the year, the Portfolio lagged the MSCI EAFE Index. The year 2009 consisted of two very distinct periods in terms of performance. Equities plummeted through mid-March, then rallied strongly through mid-May, continuing to advance through year-end. From a macro perspective, the Portfolio was generally well positioned during the year. We were defensive up to the market bottom in mid-March, but then moved quickly off the bottom, to be fully invested. We added to cyclical positions, and more gradually added to emerging markets exposure. Belatedly, we added financials, and our cautiousness was the one of the Portfolio’s biggest performance drags. Uncertain as to government policies regarding the equity shareholders of financial firms in the U.S. and Europe, we remained underweight banks. In the end, governments did not charge equity shareholders excessively for granting financial firms liquidity, insurance, and capital. Underweights to the U.K. and Australia also detracted from Portfolio returns.

Management Strategies

·Moving into the first weeks of 2010, overall global economic growth momentum looks solid, due to an almost unprecedented surge in fourth quarter 2009 global manufacturing output. After some stuttering in November, Purchasing Manager Indices (PMIs) for December — key leading economic indicators — moved higher across Europe, the U.S., Japan, China and India. JP Morgan’s Global PMI Output and Orders indices each rose above 58 (booming levels) and China’s export growth returned to positive territory in December, the first time in 14 months. Sources of weakness linger (e.g. U.S. jobs, European consumer spending) and future liabilities loom (bank commercial loans, state budgets and residential housing); that said, fourth quarter earnings (and first quarter 2010 jobs) are expected to benefit from the economic improvement. Fears of a double dip have been pushed back further into the New Year.

·That is the good news, but, “Be careful what you wish for.” The economic improvement brought with it a sharp rise in bond yields during December. U.S. Treasury yields rose 60 basis points on the 10-year (3.2% to 3.8%) and 40 basis points on the two-year (0.67% to 1.1%). The Chinese raised their three-month central bank bill rate in early January (admittedly only 4 basis points) — and oil and gasoline prices moved higher. Once the global ship is deemed stable, the Federal Reserve will be under tremendous pressure to reduce liquidity. Bears growl about another bubble in equities, and regulators warn against complacency and returning to dangerous old habits. A fair amount of government fiscal stimulus remains in the system through the first half of 2010 — but in pretty short

8

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

Active International Allocation Portfolio

order the equity market backdrop will be how, where and when will interest rates rise and government liquidity/stimulus be removed.

·Perhaps we are complacent, but we believe that there is enough economic growth to allow the market to grind higher, even as quantitative easing by the Fed and European Central Bank is gradually removed. The strength of the rise in global manufacturing output should have a positive effect on job growth and business and household sentiment. We think equity valuations are neither cheap nor expensive. Based on 12-month forward earnings, equity valuations are a bit above long-term averages in the U.S., but remain cheap in Japan and in most of Europe. The emerging markets have moved above fair value, but based on five-year normalized earnings they appear to have further upside, and there is valuation differential between the countries (i.e., Brazil, India and Indonesia look expensive, while China, Russia and more defensive markets look relatively cheap). Our readings of investor sentiment are generally on the high side; but not excessive. We think equities have some valuation support relative to bonds, and looking at most indicators, equities are underowned. We see it is a good sign that equities have been treading water as bond yields have risen. However, history would tell us that as the Fed gets closer to explicitly tightening, equities tend to sell off 10-15%. Then, if the economy continues to do well, equities tend to rise along with bond yields. The uncertainty as to when the market begins to discount a Fed tightening, and what the duration and quality of the economic cycle will be, makes 2010 a difficult year to predict.

·The tightening of liquidity that we foresee in 2010 will have varying impact by country and sector. We currently are maintaining our cyclical bias, but as we move through time from the end of the recession to the fullness of what could be either a strong or a weak and foreshortened recovery — we may need to rotate to more defensive sectors, such as quality growth. Our sector valuation work on price-to-book and forward price-to-earnings ratios highlights that financials, pharmaceuticals, and food retailing are cheap; materials, technology, and consumer services are expensive. Capital goods and food, beverage, and tobacco look a bit pricey in Europe, less so in the U.S. Japanese banks have bounced off the bottom — and we have added to them. We are intrigued by Japan’s cheap valuations relative to history, the recent weakening of the yen, the beginning of a rise in industrial production, and the potential loosening of fiscal and monetary policy. Because we have been burned many times by Japan in the past, we are cautiously underweight, but watchful.

*  Minimum Investment

In accordance with SEC regulations, Portfolio’s performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class P shares will vary from the Class I shares based upon its different inception date and will be negatively impacted by additional fees assessed to that class.

Performance Compared to the Morgan Stanley Capital International (MSCI) EAFE Index(1) and the Lipper International Large-Cap Core Funds Index(2)

		Total Returns(3)
				Average Annual
	One Year			Five Years		Ten Years		Since Inception(6)
Portfolio — Class I(4)	27.26		%	4.94	%	1.91	%	6.40	%
MSCI EAFE Index	31.78			3.54		1.17		5.69
Lipper International Large-Cap Core Funds Index	29.23			3.26		0.99		6.97
Portfolio — Class P(5)	26.99			4.68		1.66		5.56
MSCI EAFE Index	31.78			3.54		1.17		4.48
Lipper International Large-Cap Core Funds Index	29.23			3.26		0.99		5.79

9

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

Active International Allocation Portfolio

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or 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 of share classes will vary due to difference in expenses.

(1)	The Morgan Stanley Capital International (MSCI) EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the international equity market performance of developed markets, excluding the US & Canada. 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 EAFE Index currently consists of 21 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.
(2)	The Lipper International Large-Cap Core Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper International Large-Cap Core Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index. As of the date of this report, the Portfolio is in the Lipper International Large-Cap Core Funds classification.
(3)	Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and reimbursements, total returns would have been lower. Fee waivers and/or expense reimbursements are voluntary and the Adviser reserves the right to commence or terminate any waiver and/or reimbursement at any time.
(4)	Commenced operations on January 17, 1992.
(5)	Commenced operations on January 2, 1996.
(6)	For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Index.

Portfolio Composition*

Classification	Percentage of Total Investments
Commercial Banks		12.3	%
Oil, Gas & Consumable Fuels		9.1
Metals & Mining		6.2
Pharmaceuticals		5.3
Other**		57.3
Short-Term Investment		9.8
Total Investments		100.0	%

*	Percentages indicated are based upon total investments (excluding Securities held as collateral on Loaned Securities) as of December 31, 2009.
**	Industries representing less than 5% of total investments.

10

2009 Annual Report

December 31, 2009

Portfolio of Investments

Active International Allocation Portfolio

	Shares	Value (000)
Common Stocks (88.3%)
Australia (6.0%)
AGL Energy Ltd.	13,793	$        173
Alumina Ltd. (a)	139,066	228
Amcor Ltd.	73,213	408
AMP Ltd.	53,058	320
Aristocrat Leisure Ltd.	5,450	19
ASX Ltd.	2,832	88
Australia & New Zealand Banking Group Ltd.	132,302	2,692
AXA Asia Pacific Holdings Ltd.	15,474	91
Bendigo & Adelaide Bank Ltd.	4,905	43
BHP Billiton Ltd.	291,892	11,178
Billabong International Ltd. (c)	3,068	30
BlueScope Steel Ltd.	80,548	222
Boral Ltd.	52,392	277
Brambles Ltd.	35,595	216
Caltex Australia Ltd. (a)(c)	11,082	92
CFS Retail Property Trust REIT	31,948	54
Coca-Cola Amatil Ltd.	16,829	173
Cochlear Ltd.	924	57
Commonwealth Bank of Australia	26,738	1,304
Computershare Ltd.	8,016	82
Crown Ltd.	7,679	55
CSL Ltd.	13,430	391
CSR Ltd.	51,295	83
Dexus Property Group REIT	50,456	38
Fairfax Media Ltd. (c)	37,059	57
Fortescue Metals Group Ltd. (a)(c)	117,909	464
Foster’s Group Ltd.	57,016	281
Goodman Fielder Ltd.	23,903	35
GPT Group REIT	72,261	39
Harvey Norman Holdings Ltd.	8,905	33
Incitec Pivot Ltd.	147,127	466
Insurance Australia Group Ltd.	53,694	192
James Hardie Industries N.V. CDI (a)(c)	37,985	286
Leighton Holdings Ltd. (c)	5,464	185
Lend Lease Group	11,930	109
Macquarie Airports	11,500	31
Macquarie Group Ltd.	7,701	330
Macquarie Infrastructure Group	70,911	84
Metcash Ltd.	13,117	52
Mirvac Group REIT	18,442	26
National Australia Bank Ltd.	32,949	802
Newcrest Mining Ltd.	42,925	1,345
Nufarm Ltd.	12,236	120
OneSteel Ltd.	73,773	219
Orica Ltd.	30,759	713
Origin Energy Ltd.	25,507	383
OZ Minerals Ltd. (a)	257,244	269
Perpetual Ltd.	691	23
Qantas Airways Ltd.	15,466	41
QBE Insurance Group Ltd.	24,116	550
Rio Tinto Ltd.	24,575	1,626
Santos Ltd.	18,197	229
Sims Metal Management Ltd.	13,626	267
Sonic Healthcare Ltd.	7,528	104
Stockland REIT	27,296	96
Suncorp-Metway Ltd.	25,441	196
TABCORP Holdings Ltd.	14,239	88
Tatts Group Ltd.	18,850	41
Telstra Corp. Ltd.	99,265	304
Toll Holdings Ltd.	15,843	123
Transurban Group	30,929	153
Wesfarmers Ltd.	31,670	881
Westfield Group REIT	34,221	382
Westpac Banking Corp.	52,071	1,172
Woodside Petroleum Ltd.	16,215	682
Woolworths Ltd.	34,418	862
WorleyParsons Ltd.	2,684	70
		32,725
Austria (0.6%)
Erste Group Bank AG	25,630	950
OMV AG	7,879	345
Raiffeisen International Bank Holding AG	10,046	569
Telekom Austria AG	32,532	464
Verbund-Oesterreichische Elektrizitaetswirtschafts AG, Class A	6,222	264
Vienna Insurance Group	4,033	207
Voestalpine AG	12,630	460
		3,259
Belgium (0.6%)
Anheuser-Busch InBev N.V.	24,388	1,260
Anheuser-Busch InBev N.V. VVPR (a)	17,784	—	@
Belgacom S.A. (c)	6,959	251
Cie Nationale a Portefeuille (c)	3,343	178
Fortis (a)	23,445	87
Groupe Bruxelles Lambert S.A.	7,682	723
Solvay S.A.	3,489	376
UCB S.A. (c)	4,984	209
Umicore	7,292	243
		3,327
Brazil (1.7%)
All America Latina Logistica S.A.	43,200	401
Banco Bradesco S.A. (Preference)	28,122	609
Banco do Brasil S.A.	39,800	671
BM&F Bovespa S.A.	21,600	150
Bradespar S.A. (Preference)	3,264	71
BRF - Brasil Foods S.A.	31,524	825
Centrais Electricas Brasileiras S.A. (Preference), Class B	15,022	279
Cia Energetica de Minas Gerais S.A. (Preference)	9,532	173
Cia Siderurgica Nacional S.A.	7,800	250
Cyrela Brazil Realty S.A.	71,400	990
Empresa Brasileira de Aeronautica S.A.	9,100	50

The accompanying notes are an integral part of the financial statements. 11

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Active International Allocation Portfolio

	Shares	Value  (000)
Brazil (cont’d)
Gerdau S.A. (Preference)	8,897	$        151
Investimentos Itau S.A. (Preference)	36,942	249
Itau Unibanco Holding S.A.	29,971	678
Lojas Renner S.A.	48,400	1,079
Metalurgica Gerdau S.A.	4,083	81
Petroleo Brasileiro S.A. (Preference)	45,522	965
Petroleo Brasiliero S.A. Petrobas	32,500	776
Redecard S.A.	6,000	99
Tele Norte Leste Participacoes S.A. (Preference)	7,853	168
Usinas Siderurgicas de Minas Gerais S.A. (Preference), Class A	4,478	126
Vale S.A.	9,400	272
Vale S.A. (Preference), Class A	13,872	344
		9,457
Canada (0.0%)
Thomson Reuters Corp.	609	20
Denmark (0.6%)
AP Moller - Maersk A/S, Class B	89	622
DSV A/S (a)	14,550	261
Novo-Nordisk A/S, Class B	22,177	1,419
Novozymes A/S, Class B	2,726	283
Vestas Wind Systems A/S (a)	13,894	850
		3,435
Finland (1.1%)
Fortum Oyj	23,056	625
Kesko Oyj, Class B (c)	10,179	336
Kone Oyj, Class B	7,769	332
Metso Oyj	8,028	282
Neste Oil Oyj	6,740	120
Nokia Oyj	195,343	2,508
Outokumpu Oyj (c)	9,511	179
Rautaruukki Oyj (c)	5,946	136
Sampo Oyj, Class A	20,608	500
Stora Enso Oyj, Class R (a)(c)	40,132	281
UPM-Kymmene Oyj (c)	34,907	415
Wartsila Oyj (c)	3,532	141
		5,855
France (8.0%)
Accor S.A.	7,917	430
Air Liquide S.A.	12,978	1,532
Alcatel-Lucent (a)(c)	58,468	196
Alstom S.A. (c)	20,384	1,416
ArcelorMittal	37,233	1,689
Atos Origin S.A. (a)	975	44
AXA S.A.	77,301	1,828
BNP Paribas	48,966	3,864
Bouygues S.A. (c)	9,257	483
Cap Gemini S.A.	5,854	265
Carrefour S.A.	41,238	1,983
Casino Guichard Perrachon S.A. (c)	4,831	433
Cie de Saint-Gobain (c)	10,005	537
Cie Generale de Geophysique-Veritas (a)(c)	14,514	310
Cie Generale d’Optique Essilor International S.A. (c)	11,209	667
CNP Assurances	2,193	212
Compagnie Generale des Etablissements Michelin, Class B (c)	6,205	476
Credit Agricole S.A. (c)	31,119	543
Dassault Systemes S.A.	2,530	144
Electricite de France	187	11
Eurazeo (c)	1,989	139
European Aeronautic Defense & Space Co. N.V.	8,038	161
Fonciere Des Regions REIT (c)	1,185	121
France Telecom S.A.	62,962	1,572
GDF Suez S.A.	19,506	846
Gecina S.A. REIT (c)	954	103
Groupe Danone	18,106	1,103
Hermes International (c)	2,484	330
ICADE REIT	1,000	95
Imerys S.A.	1,510	90
Klepierre REIT (c)	4,414	180
Lafarge S.A.	11,515	947
Lagardere S.C.A. (c)	6,706	271
L’Oreal S.A.	2,329	259
LVMH Moet Hennessy Louis Vuitton S.A.	9,599	1,078
Neopost S.A. (c)	1,320	109
Pernod-Ricard S.A.	1,205	103
Peugeot S.A. (a)(c)	7,232	242
PPR	1,910	229
Publicis Groupe S.A. (c)	3,254	132
Renault S.A. (a)	7,083	361
Safran S.A. (c)	3,452	67
Sanofi-Aventis S.A.	34,527	2,706
Schneider Electric S.A.	9,192	1,065
SCOR SE	8,945	223
Societe BIC S.A.	1,379	95
Societe Generale	27,991	1,937
Societe Television Francaise 1	8,062	149
Sodexo	3,803	217
Technip S.A.	24,045	1,685
Thales S.A.	3,611	185
Total S.A.	109,076	6,990
Unibail-Rodamco SE REIT (c)	4,199	924
Vallourec S.A.	1,749	318
Veolia Environnement (c)	18,504	608
Vinci S.A.	9,243	518
Vivendi S.A.	30,945	914
		44,135
Germany (6.5%)
Adidas AG	6,743	364
Allianz SE (Registered)	15,376	1,914
BASF SE	37,064	2,299
Bayer AG	30,681	2,452
Bayerische Motoren Werke AG	7,594	345

12 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Active International Allocation Portfolio

	Shares	Value  (000)
Germany (cont’d)
Beiersdorf AG (c)	1,968	$        129
Celesio AG (c)	3,757	95
Commerzbank AG (a)(c)	13,862	116
Daimler AG (c)	47,570	2,542
Deutsche Bank AG (Registered) (c)	25,646	1,808
Deutsche Boerse AG (c)	9,411	782
Deutsche Lufthansa AG (Registered) (c)	9,453	159
Deutsche Post AG (Registered) (c)	30,114	579
Deutsche Postbank AG (a)	2,892	94
Deutsche Telekom AG (c)	102,390	1,512
E.ON AG	103,062	4,303
Fresenius Medical Care AG & Co. KGaA	8,730	462
GEA Group AG	5,541	123
Henkel KGaA (Non-Voting Shares)	2,916	152
Hochtief AG	1,529	117
K&S AG (c)	12,979	746
Linde AG	7,620	917
MAN SE	3,666	286
Merck KGaA	1,673	156
Metro AG (c)	10,612	647
Muenchener Rueckversicherungs-Gesellschaft AG (Registered) (c)	7,067	1,102
Porsche Automobil Holding SE (Non-Voting Shares)	7,142	449
Puma AG Rudolf Dassler Sport	314	104
RWE AG	15,706	1,526
RWE AG (Non-Voting Shares) (c)	1,206	108
SAP AG (c)	38,136	1,799
Siemens AG (Registered) (c)	57,607	5,284
ThyssenKrupp AG	11,702	441
TUI AG (a)	5,333	44
Volkswagen AG (c)	9,152	1,012
Volkswagen AG (Non-Voting Shares)	5,422	510
		35,478
Hong Kong (3.2%)
Agile Property Holdings Ltd.	485,280	703
Bank of East Asia Ltd.	92,757	364
BOC Hong Kong Holdings Ltd.	230,000	517
Cathay Pacific Airways Ltd. (a)	57,000	106
Chaoda Modern Agriculture Holdings Ltd. (c)	294,904	313
Cheung Kong Holdings Ltd.	80,000	1,026
Cheung Kong Infrastructure Holdings Ltd.	17,000	65
China Resources Enterprise Ltd.	170,000	616
China Resources Land Ltd.	241,000	543
China Travel International Investment Hong Kong Ltd.	1,278,000	379
CLP Holdings Ltd.	80,500	544
Esprit Holdings Ltd.	95,809	631
Genting Singapore plc (a)(c)	175,000	160
Hang Lung Group Ltd.	47,000	233
Hang Lung Properties Ltd.	369,500	1,444
Hang Seng Bank Ltd.	49,800	733
Henderson Land Development Co., Ltd.	63,000	469
Hong Kong & China Gas Co., Ltd.	171,000	427
Hong Kong Exchanges & Clearing Ltd.	42,600	758
HongKong Electric Holdings	51,500	280
Hopewell Holdings Ltd.	35,500	114
Hutchison Whampoa Ltd.	94,000	643
Hysan Development Co., Ltd.	32,664	92
Kerry Properties Ltd.	45,500	230
Li & Fung Ltd.	346,000	1,424
Li Ning Co. Ltd. (c)	156,000	590
Link (The) REIT	112,531	286
MTR Corp.	62,889	216
New World Development Ltd.	147,853	302
Noble Group Ltd.	57,000	131
NWS Holdings Ltd.	7,219	13
Shangri-La Asia Ltd.	6,000	11
Sino Land Co., Ltd.	104,159	201
Sun Hung Kai Properties Ltd.	119,500	1,773
Swire Pacific Ltd., Class A	45,500	549
Wharf Holdings Ltd.	82,000	469
Wheelock & Co., Ltd.	57,000	173
Wing Hang Bank Ltd.	8,000	74
Yue Yuen Industrial Holdings Ltd.	28,000	81
		17,683
Indonesia (1.0%)
Astra Agro Lestari Tbk PT	32,500	78
Astra International Tbk PT	582,500	2,140
Bank Central Asia Tbk PT	886,500	456
Bank Danamon Indonesia Tbk PT	233,500	113
Bank Mandiri Tbk PT	497,000	249
Bank Rakyat Indonesia Tbk PT	422,000	341
Bumi Resources Tbk PT	1,255,000	324
Indosat Tbk PT	115,500	58
International Nickel Indonesia Tbk PT	172,500	67
Lippo Karawaci Tbk PT (a)	778,500	42
Perusahaan Gas Negara PT	717,000	296
Semen Gresik Persero Tbk PT	107,000	86
Tambang Batubara Bukit Asam Tbk PT	61,000	112
Telekomunikasi Indonesia Tbk PT	728,000	728
Unilever Indonesia	137,000	161
United Tractors Tbk PT	116,000	192
		5,443
Ireland (0.1%)
Experian plc	34,498	341
Italy (1.9%)
Assicurazioni Generali S.p.A. (c)	63,016	1,689
Banco Popolare S.C. (a)	441	3
Enel S.p.A.	3,756	22
ENI S.p.A.	151,441	3,855
Intesa Sanpaolo S.p.A. (a)	425,800	1,908
Mediobanca S.p.A. (a)(c)	5,584	66
Saipem S.p.A	48,164	1,655
Telecom Italia S.p.A.	10,225	16

The accompanying notes are an integral part of the financial statements. 13

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Active International Allocation Portfolio

	Shares	Value (000)
Italy (cont’d)
UniCredit S.p.A. (a)	303,326	$    1,009
Unione di Banche Italiane SCPA	468	7
		10,230
Japan (16.5%)
77Bank Ltd. (The)	30,000	159
Acom Co., Ltd. (c)	2,180	33
Advantest Corp. (c)	11,390	296
Aeon Co., Ltd. (c)	23,000	186
Aeon Credit Service Co., Ltd. (c)	2,600	25
Aeon Mall Co., Ltd. (c)	400	8
Aioi Insurance Co., Ltd.	3,000	14
Ajinomoto Co., Inc.	38,400	362
Amada Co., Ltd.	16,000	99
Aozora Bank Ltd. (a)	3,100	3
Asahi Breweries Ltd.	11,600	213
Asahi Glass Co., Ltd. (c)	69,800	654
Asahi Kasei Corp.	68,000	340
Astellas Pharma, Inc.	23,500	875
Bank of Kyoto Ltd. (The)	12,000	97
Bank of Yokohama Ltd. (The)	74,000	335
Benesse Holdings, Inc.	3,300	138
Bridgestone Corp.	45,800	803
Canon, Inc.	59,300	2,507
Casio Computer Co., Ltd. (c)	20,000	159
Central Japan Railway Co.	75	500
Chiba Bank Ltd. (The)	31,000	185
Chubu Electric Power Co., Inc. (c)	14,000	334
Chugai Pharmaceutical Co., Ltd.	12,207	227
Chuo Mitsui Trust Holdings, Inc.	27,545	92
Citizen Holdings Co., Ltd.	22,900	130
Coca-Cola West Co., Ltd. (c)	600	11
Credit Saison Co., Ltd. (c)	3,800	43
Dai Nippon Printing Co., Ltd. (c)	22,600	285
Daicel Chemical Industries Ltd. (c)	9,000	53
Daiichi Sankyo Co., Ltd.	31,900	667
Daikin Industries Ltd.	9,900	386
Daito Trust Construction Co., Ltd.	6,800	321
Daiwa House Industry Co., Ltd.	34,600	370
Daiwa Securities Group, Inc.	76,000	381
Denki Kagaku Kogyo KK	28,000	125
Denso Corp.	32,850	985
DIC Corp. (c)	49,000	83
Dowa Holdings, Co., Ltd. (c)	34,000	189
East Japan Railway Co.	18,600	1,174
Eisai Co., Ltd.	10,802	396
FamilyMart Co., Ltd. (c)	3,300	97
Fanuc Ltd.	10,400	967
Fast Retailing Co., Ltd.	4,500	840
Fuji Electric Holdings Co., Ltd. (a)	15,000	26
Fuji Media Holdings, Inc.	28	39
FUJIFILM Holdings Corp.	28,200	842
Fujitsu Ltd.	105,200	677
Fukuoka Financial Group, Inc.	45,000	156
Furukawa Electric Co., Ltd.	35,800	149
Gunma Bank Ltd. (The)	2,000	10
Hachijuni Bank Ltd. (The)	2,000	12
Hirose Electric Co., Ltd.	1,700	177
Hiroshima Bank Ltd. (The)	5,000	19
Hitachi Construction Machinery Co., Ltd. (c)	2,400	63
Hitachi Ltd. (a)	193,000	591
Hokkaido Electric Power Co., Inc.	3,000	54
Hokuhoku Financial Group, Inc.	82,000	167
Honda Motor Co., Ltd.	78,204	2,644
Hoya Corp.	23,800	631
Ibiden Co., Ltd.	7,100	253
IHI Corp. (a)	66,000	105
Inpex Corp.	27	203
Isetan Mitsukoshi Holdings Ltd. (c)	16,680	150
Ito En Ltd.	1,900	28
Itochu Corp.	90,000	662
Itochu Techno-Solutions Corp.	2,500	67
J Front Retailing Co., Ltd.	22,000	97
Jafco Co., Ltd. (c)	300	7
Japan Airlines Corp. (a)(c)	51,000	37
Japan Prime Realty Investment Corp. REIT	3	6
Japan Real Estate Investment Corp. REIT	22	161
Japan Retail Fund Investment Corp. REIT (c)	22	98
Japan Tobacco, Inc.	198	668
JFE Holdings, Inc.	20,800	819
JGC Corp.	15,000	276
Joyo Bank Ltd. (The)	59,000	236
JS Group Corp.	13,800	237
JSR Corp.	8,500	172
Kajima Corp. (c)	73,400	147
Kamigumi Co., Ltd.	1,000	7
Kaneka Corp.	14,000	89
Kansai Electric Power Co., Inc. (The)	20,100	453
Kao Corp.	30,400	710
Kawasaki Heavy Industries Ltd. (c)	61,000	154
Kawasaki Kisen Kaisha Ltd. (a)	5,000	14
Keihin Electric Express Railway Co., Ltd. (c)	20,000	146
Keio Corp. (c)	12,000	72
Keyence Corp.	2,330	480
Kikkoman Corp. (c)	8,000	98
Kinden Corp.	1,000	8
Kintetsu Corp. (c)	87,200	289
Kirin Holdings Co., Ltd.	27,400	437
Kobe Steel Ltd. (a)	109,000	197
Komatsu Ltd.	60,200	1,255
Konami Corp. (c)	6,600	118
Konica Minolta Holdings, Inc.	26,500	272
Kubota Corp. (c)	82,000	754
Kuraray Co., Ltd.	19,500	228
Kurita Water Industries Ltd. (c)	4,000	125

14 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Active International Allocation Portfolio

	Shares	Value (000)
Japan (cont’d)
Kyocera Corp.	9,400	$    829
Kyowa Hakko Kirin Co., Ltd.	15,028	158
Kyushu Electric Power Co., Inc.	8,700	179
Lawson, Inc.	3,100	137
Leopalace21 Corp. (a)(c)	6,600	27
Mabuchi Motor Co., Ltd. (c)	2,200	108
Marubeni Corp.	150,000	817
Marui Group Co., Ltd. (c)	22,000	135
Matsui Securities Co., Ltd. (c)	9,900	69
MEIJI Holdings Co., Ltd. (a)(c)	1,506	57
Minebea Co., Ltd.	26,000	141
Mitsubishi Chemical Holdings Corp.	50,000	211
Mitsubishi Corp.	81,700	2,031
Mitsubishi Electric Corp. (a)	116,800	862
Mitsubishi Estate Co., Ltd.	44,000	698
Mitsubishi Heavy Industries Ltd. (c)	198,000	695
Mitsubishi Logistics Corp. (c)	5,000	59
Mitsubishi Materials Corp. (a)	105,000	257
Mitsubishi Rayon Co., Ltd.	29,000	116
Mitsubishi UFJ Financial Group, Inc. (o)	370,946	1,816
Mitsubishi UFJ Lease & Finance Co., Ltd. (o)	600	18
Mitsui & Co., Ltd.	99,700	1,411
Mitsui Chemicals, Inc.	28,000	72
Mitsui Fudosan Co., Ltd.	31,400	527
Mitsui Mining & Smelting Co., Ltd. (a)(c)	65,000	168
Mitsui OSK Lines Ltd.	9,000	47
Mitsui Sumitomo Insurance Group Holdings, Inc.	17,400	442
Mizuho Financial Group, Inc.	433,300	775
Mizuho Securities Co., Ltd.	32,000	96
Mizuho Trust & Banking Co., Ltd. (a)	6,000	6
Murata Manufacturing Co., Ltd.	11,700	578
Namco Bandai Holdings, Inc.	2,200	21
NEC Corp. (a)	137,400	354
NGK Insulators Ltd. (c)	21,600	470
NGK Spark Plug Co., Ltd. (c)	12,000	135
Nidec Corp.	6,200	570
Nikon Corp.	15,900	314
Nintendo Co., Ltd.	4,500	1,067
Nippon Building Fund, Inc. REIT	27	205
Nippon Electric Glass Co., Ltd.	18,500	252
Nippon Express Co., Ltd.	45,800	187
Nippon Meat Packers, Inc. (c)	10,600	122
Nippon Mining Holdings, Inc.	29,500	126
Nippon Oil Corp.	87,800	406
Nippon Paper Group, Inc.	4,900	125
Nippon Sheet Glass Co., Ltd.	28,000	80
Nippon Steel Corp.	270,000	1,092
Nippon Telegraph & Telephone Corp.	14,400	566
Nippon Yusen KK	58,000	177
Nipponkoa Insurance Co., Ltd.	2,000	11
Nishi-Nippon City Bank Ltd. (The)	29,000	71
Nissan Chemical Industries Ltd.	9,000	128
Nissan Motor Co., Ltd. (a)	116,300	1,016
Nisshin Seifun Group, Inc. (c)	8,000	107
Nisshinbo Holdings, Inc.	4,000	37
Nissin Foods Holdings Co., Ltd.	4,000	130
Nitto Denko Corp.	11,400	406
Nomura Holdings, Inc.	107,000	789
Nomura Real Estate Holdings, Inc.	500	7
Nomura Real Estate Office Fund, Inc. REIT	1	5
Nomura Research Institute Ltd.	8,000	157
NSK Ltd. (c)	40,000	294
NTN Corp.	28,000	126
NTT Data Corp.	87	269
NTT DoCoMo, Inc.	196	273
NTT Urban Development Corp.	7	5
Obayashi Corp. (c)	47,000	160
Obic Co., Ltd.	650	106
OJI Paper Co., Ltd. (c)	62,400	260
Olympus Corp. (c)	6,500	209
Omron Corp.	13,300	237
Onward Holdings Co., Ltd. (c)	10,000	62
Oracle Corp. Japan (c)	2,600	108
Oriental Land Co., Ltd. (c)	3,400	223
ORIX Corp. (c)	590	40
Osaka Gas Co., Ltd.	52,600	177
Panasonic Corp.	103,400	1,479
Panasonic Electric Works Co., Ltd.	17,000	204
Promise Co., Ltd. (a)(c)	2,550	19
Resona Holdings, Inc. (c)	21,500	217
Ricoh Co., Ltd.	38,000	536
Rohm Co., Ltd.	8,200	532
Sanyo Electric Co., Ltd. (a)	88,000	162
Sapporo Hokuyo Holdings, Inc. (c)	2,000	7
Sapporo Holdings Ltd.	9,000	49
SBI Holdings, Inc.	475	84
Secom Co., Ltd.	8,700	412
Seiko Epson Corp. (c)	7,500	120
Sekisui Chemical Co., Ltd.	25,000	155
Sekisui House Ltd.	52,600	472
Seven & I Holdings Co., Ltd.	37,800	767
Sharp Corp.	42,200	531
Shimamura Co., Ltd.	1,200	114
Shimano, Inc.	5,200	208
Shimizu Corp. (c)	49,600	178
Shin-Etsu Chemical Co., Ltd.	21,996	1,240
Shinsei Bank Ltd. (a)	74,000	80
Shionogi & Co., Ltd. (c)	12,000	260
Shiseido Co., Ltd.	18,900	362
Shizuoka Bank Ltd. (The) (c)	27,000	234
Showa Denko KK	43,000	86
Showa Shell Sekiyu KK (c)	10,100	82
SMC Corp.	3,700	418
Softbank Corp.	47,800	1,117
Sompo Japan Insurance, Inc.	40,000	255
Sony Corp.	36,697	1,064

The accompanying notes are an integral part of the financial statements. 15

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Active International Allocation Portfolio

	Shares	Value (000)
Japan (cont’d)
Sony Financial Holdings, Inc.	6	$    16
Stanley Electric Co., Ltd.	4,600	92
Sumitomo Chemical Co., Ltd.	76,600	334
Sumitomo Corp.	59,800	602
Sumitomo Electric Industries Ltd.	37,400	464
Sumitomo Heavy Industries Ltd. (a)	28,000	141
Sumitomo Metal Industries Ltd.	162,000	432
Sumitomo Metal Mining Co., Ltd.	59,800	882
Sumitomo Mitsui Financial Group, Inc. (c)	21,600	616
Sumitomo Realty & Development Co., Ltd. (c)	14,000	263
Sumitomo Trust & Banking Co., Ltd. (The)	59,000	287
Suruga Bank Ltd.	1,000	9
T&D Holdings, Inc.	10,650	217
Taiheiyo Cement Corp. (a)	47,000	53
Taisei Corp.	72,000	123
Taisho Pharmaceutical Co., Ltd.	8,441	144
Takashimaya Co., Ltd.	20,000	126
Takeda Pharmaceutical Co., Ltd.	39,000	1,601
TDK Corp.	7,200	439
Teijin Ltd.	49,400	159
Terumo Corp.	10,200	610
THK Co., Ltd. (c)	3,000	53
Tobu Railway Co., Ltd. (c)	45,400	237
Toho Co., Ltd. (c)	4,500	73
Tohoku Electric Power Co., Inc.	11,900	235
Tokio Marine Holdings, Inc.	34,252	930
Tokyo Broadcasting System, Inc.	5,900	82
Tokyo Electric Power Co., Inc. (The)	29,100	729
Tokyo Electron Ltd. (c)	12,600	806
Tokyo Gas Co., Ltd.	60,600	242
Tokyo Tatemono Co., Ltd.	12,000	46
Tokyu Corp.	54,400	217
Tokyu Land Corp. (c)	2,000	7
TonenGeneral Sekiyu KK (c)	19,000	158
Toppan Printing Co., Ltd. (c)	22,600	183
Toray Industries, Inc. (c)	67,100	362
Toshiba Corp. (a)	167,000	921
Tosoh Corp. (c)	32,000	88
Toto Ltd. (c)	27,600	175
Toyo Seikan Kaisha Ltd. (c)	10,900	165
Toyoda Gosei Co., Ltd.	800	24
Toyota Industries Corp.	4,850	144
Toyota Motor Corp.	126,600	5,319
Trend Micro, Inc. (c)	6,600	251
Unicharm Corp.	2,000	187
UNY Co., Ltd. (c)	7,700	54
Ushio, Inc. (c)	3,100	52
USS Co., Ltd.	1,710	104
West Japan Railway Co.	26	87
Yahoo! Japan Corp.	1,042	311
Yakult Honsha Co., Ltd. (c)	5,500	166
Yamada Denki Co., Ltd. (c)	5,710	384
Yamaha Corp.	6,900	82
Yamaha Motor Co., Ltd. (a)(c)	2,800	35
Yamato Holdings Co., Ltd.	14,400	199
Yamazaki Baking Co., Ltd.	7,000	83
Yokogawa Electric Corp. (c)	14,800	129
		90,337
Luxembourg (0.1%)
Oriflame Cosmetics S.A.	6,989	417
Malaysia (0.0%)
YTL Corp. Bhd	670	1
Malta (0.0%)
BGP Holdings plc (a)(d)	72,261	—
Mexico (0.3%)
Desarrolladora Homex S.A.B. de C.V. ADR (a)(c)	14,300	481
Urbi Desarrollos Urbanos S.A.B de C.V. (a)	77,200	174
Wal-Mart de Mexico S.A.B. de C.V. (c)	280,217	1,249
		1,904
Netherlands (2.7%)
Aegon N.V. (a)(c)	103,372	659
Akzo Nobel N.V.	15,131	997
ASML Holding N.V.	22,764	774
Corio N.V. REIT	2,695	184
Fugro N.V. CVA	11,949	682
Heineken N.V.	13,278	629
ING Groep N.V. CVA (a)	92,039	890
Koninklijke Ahold N.V.	1,806	24
Koninklijke DSM N.V.	16,761	822
Koninklijke KPN N.V.	108,793	1,845
Koninklijke Philips Electronics N.V.	53,183	1,575
Reed Elsevier N.V.	40,092	492
SBM Offshore N.V. (c)	27,469	538
TNT N.V.	39,432	1,207
Unilever N.V. CVA	89,125	2,904
Wolters Kluwer N.V.	27,231	597
		14,819
New Zealand (0.0%)
Telecom Corp. of New Zealand Ltd.	19,672	36
Norway (1.8%)
DNB NOR ASA (a)	57,105	620
Norsk Hydro ASA (a)	78,707	654
Orkla ASA	70,280	686
Renewable Energy Corp. A.S. (a)(c)	10,500	80
SeaDrill Ltd. (c)	51,900	1,315
StatoilHydro ASA	70,578	1,761
Telenor ASA (a)	109,280	1,533
Yara International ASA (c)	74,988	3,395
		10,044
Poland (1.3%)
Asseco Poland S.A.	17,292	378
Bank Handlowy w Warszawie S.A. (a)	11,841	289
Bank Pekao S.A. (a)	12,636	712
Bank Zachodni WBK S.A. (a)	7,434	488
Getin Holding S.A. (a)	83,649	256

16 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Active International Allocation Portfolio

	Shares	Value  (000)
Poland (cont’d)
Globe Trade Centre S.A. (a)	15,400	$        137
KGHM Polska Miedz S.A.	30,679	1,134
PBG S.A. (a)	2,300	162
Polski Koncern Naftowy Orlen S.A. (a)	71,214	836
Polskie Gornictwo Naftowe I Gazownictwo S.A.	182,195	241
Powszechna Kasa Oszczednosci Bank Polski S.A.	127,056	1,671
Telekomunikacja Polska S.A.	176,492	973
		7,277
Portugal (0.2%)
Brisa Auto-Estradas de Portugal S.A.	27,808	284
Energias de Portugal S.A. (c)	34,167	151
Portugal Telecom SGPS S.A.	41,756	508
		943
Russia (1.6%)
Gazprom OAO ADR (c)	116,250	2,898
LUKOIL OAO ADR (c)	23,600	1,322
MMC Norilsk Nickel ADR (a)(c)	37,750	530
Mobile Telesystems OJSC ADR (c)	9,800	479
NovaTek OAO GDR	2,800	181
Polyus Gold Co. ADR (c)	6,600	179
Rosneft Oil Co. GDR	78,500	661
Surgutneftegaz ADR (c)	39,900	354
Tatneft GDR	13,767	400
Vimpel-Communications OJSC ADR	20,300	377
VTB Bank (OJSC) GDR	76,400	359
Wimm-Bill-Dann Foods OJSC ADR (a)(c)	37,200	887
		8,627
Singapore (0.9%)
Ascendas REIT	55,000	86
CapitaLand Ltd. (c)	91,000	270
CapitaMall Trust REIT	78,514	100
City Developments Ltd. (c)	20,741	169
ComfortDelgro Corp., Ltd.	63,538	74
DBS Group Holdings Ltd.	60,678	660
Fraser & Neave Ltd.	37,000	110
Golden Agri-Resources Ltd. (a)	197,315	71
Jardine Cycle & Carriage Ltd.	5,034	96
Keppel Corp. Ltd.	48,000	279
Olam International Ltd. (c)	45,000	84
Oversea-Chinese Banking Corp. Ltd.	89,758	578
SembCorp Industries Ltd.	39,183	102
SembCorp Marine Ltd.	35,000	91
Singapore Airlines Ltd.	29,010	306
Singapore Exchange Ltd. (c)	30,581	180
Singapore Press Holdings Ltd. (c)	53,083	138
Singapore Technologies Engineering Ltd.	46,000	106
Singapore Telecommunications Ltd.	286,115	630
United Overseas Bank Ltd.	41,448	577
Wilmar International Ltd.	48,000	218
		4,925
Spain (3.1%)
Abertis Infraestructuras S.A.	8,813	199
Acerinox S.A. (c)	4,018	83
ACS Actividades de Construccion y Servicios S.A.	225	11
Banco Bilbao Vizcaya Argentaria S.A.	204,614	3,706
Banco Popular Espanol S.A. (c)	27,649	202
Banco Santander S.A.	496,740	8,161
Criteria Caixacorp S.A.	10,084	48
Ferrovial S.A.	3,546	41
Gas Natural SDG S.A.	4,470	96
Iberdrola S.A. (c)	56,265	536
Inditex S.A. (c)	3,811	236
Indra Sistemas S.A. (c)	832	20
Mapfre S.A.	11,872	50
Repsol YPF S.A. (c)	25,520	681
Telefonica S.A.	110,188	3,071
Zardoya Otis S.A.	5,321	104
		17,245
Sweden (2.1%)
Alfa Laval AB (c)	14,789	204
Assa Abloy AB, Class B (c)	16,071	308
Atlas Copco AB, Class A (c)	63,479	928
Atlas Copco AB, Class B	19,194	249
Electrolux AB, Class B (a)	12,800	300
Getinge AB, Class B	14,547	276
Hennes & Mauritz AB, Class B	19,508	1,079
Holmen AB, Class B	3,400	87
Husqvarna AB, Class B (a)	12,800	94
Investor AB, Class B (c)	43,159	798
Lundin Petroleum AB (a)	11,785	93
Nordea Bank AB (c)	113,469	1,149
Sandvik AB (c)	52,290	627
Securitas AB, Class B (c)	800	8
Skanska AB, Class B	15,972	272
SKF AB, Class B (c)	16,200	278
Ssab Svenskt Stal AB, Class A (c)	11,481	194
Svenska Cellulosa AB, Class B	37,666	503
Svenska Handelsbanken AB, Class A	25,083	717
Swedish Match AB	13,822	302
Tele2 AB, Class B	9,285	142
Telefonaktiebolaget LM Ericsson, Class B	183,200	1,685
TeliaSonera AB	94,172	680
Volvo AB, Class A	23,475	199
Volvo AB, Class B (c)	56,409	481
		11,653
Switzerland (7.3%)
ABB Ltd. (Registered) (a)(c)	157,935	3,021
Baloise Holding AG	2,820	235
Compagnie Financiere Richemont S.A.	39,486	1,321
Credit Suisse Group AG (Registered)	62,326	3,070
GAM Holding Ltd. (c)	14,805	180
Geberit AG (Registered)	1,743	309

The accompanying notes are an integral part of the financial statements. 17

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Active International Allocation Portfolio

	Shares	Value  (000)
Switzerland (cont’d)
Givaudan S.A. (Registered)	366	$          291
Holcim Ltd. (Registered) (a)(c)	17,019	1,319
Julius Baer Group Ltd.	14,805	517
Logitech International S.A. (Registered) (a)(c)	9,587	165
Lonza Group AG (Registered) (c)	1,429	100
Nestle S.A. (Registered)	181,613	8,823
Nobel Biocare Holding AG (Registered)	8,814	295
Novartis AG (Registered)	92,921	5,063
Pargesa Holding S.A.	500	44
Roche Holding AG (Genusschein)	27,946	4,754
Schindler Holding AG	2,791	214
STMicroelectronics N.V. (c)	24,716	224
Straumann Holding AG (Registered) (c)	577	163
Swatch Group AG (The)	3,150	151
Swatch Group AG (The), Class B	3,030	763
Swiss Life Holding AG (a)	1,248	158
Swiss Reinsurance (Registered)	23,896	1,145
Swisscom AG (Registered)	1,138	434
Syngenta AG (Registered)	14,405	4,036
Synthes, Inc.	4,449	583
UBS AG (Registered) (a)	84,331	1,295
Zurich Financial Services AG (Registered)	6,992	1,520
		40,193
Turkey (1.6%)
Akbank T.A.S.	162,970	1,031
Anadolu Efes Biracilik Ve Malt Sanayii A.S.	51,804	580
BIM Birlesik Magazalar A.S.	8,248	382
Enka Insaat ve Sanayi A.S.	85,972	395
Eregli Demir ve Celik Fabrikalari T.A.S. (a)	145,705	437
Haci Omer Sabanci Holding A.S.	90,909	350
KOC Holding A.S. (a)	87,216	257
Tupras Turkiye Petrol Rafine	30,158	597
Turk Telekomunikasyon A.S.	117,600	358
Turkcell Iletisim Hizmet A.S.	139,711	983
Turkiye Garanti Bankasi A.S.	340,481	1,446
Turkiye Halk Bankasi A.S.	55,300	440
Turkiye Is Bankasi A.S., Class C	210,802	888
Turkiye Vakiflar Bankasi T.A.O., Class D (a)	141,245	400
Yapi ve Kredi Bankasi A.S. (a)	151,955	334
		8,878
United Kingdom (17.5%)
3I Group plc	38,975	176
Admiral Group plc	8,827	168
Aggreko plc	27,603	411
AMEC plc	59,874	760
Anglo American plc (a)	45,093	1,952
Antofagasta plc	26,092	414
AstraZeneca plc	57,486	2,701
Aviva plc	136,416	864
BAE Systems plc	158,630	914
Balfour Beatty plc	24,916	104
Barclays plc	328,637	1,448
Berkeley Group Holdings plc (a)	4,297	56
BG Group plc	177,539	3,179
BHP Billiton plc	30,993	990
BP plc	1,033,100	9,991
British Airways plc (a)	42,826	128
British American Tobacco plc	77,736	2,522
British Land Co. plc REIT	44,225	339
British Sky Broadcasting Group plc	99,848	899
BT Group plc	475,069	1,029
Bunzl plc	20,471	222
Burberry Group plc	23,273	223
Cadbury plc	44,622	574
Capita Group plc (The)	8,758	106
Carnival plc (a)	8,458	289
Centrica plc	158,610	716
Charter International plc	30,849	357
Cobham plc	55,949	225
Compass Group plc	103,888	742
Diageo plc	113,643	1,982
Firstgroup plc	29,220	199
G4S plc	17,197	72
GlaxoSmithKline plc	216,685	4,590
Hammerson plc REIT	35,435	241
Home Retail Group plc	29,904	136
HSBC Holdings plc	801,782	9,150
ICAP plc	8,511	59
Imperial Tobacco Group plc	30,916	974
Intercontinental Hotels Group plc	17,451	250
International Power plc	21,759	108
Invensys plc	29,780	143
Investec plc	11,541	79
J. Sainsbury plc	54,871	285
Johnson Matthey plc	10,274	254
Kingfisher plc	42,716	157
Ladbrokes plc	29,776	65
Land Securities Group plc REIT	38,932	427
Legal & General Group plc	351,974	453
Liberty International plc REIT	22,973	189
Lloyds Banking Group plc (a)	485,366	390
London Stock Exchange Group plc	1,887	22
Man Group plc	160,082	787
Marks & Spencer Group plc	57,887	376
National Grid plc	179,297	1,960
Next plc	8,917	297
Old Mutual plc (a)	262,692	459
Pearson plc	45,276	651
Petrofac Ltd.	37,300	621
Prudential plc	117,963	1,202
Reckitt Benckiser Group plc	27,948	1,514
Reed Elsevier plc	61,867	508
Rexam plc	32,224	151
Rio Tinto plc	34,083	1,837

18 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Active International Allocation Portfolio

	Shares	Value  (000)
United Kingdom (cont’d)
Rolls-Royce Group plc (a)	86,497	$           675
Royal Bank of Scotland Group plc (a)	837,831	393
Royal Dutch Shell plc, Class A	196,853	5,943
Royal Dutch Shell plc, Class B	144,558	4,212
RSA Insurance Group plc	178,752	348
SABMiller plc	43,048	1,262
Sage Group plc (The)	75,435	268
Schroders plc	5,948	127
Scottish & Southern Energy plc	79,182	1,480
Segro plc REIT	35,834	198
Serco Group plc	6,990	59
Severn Trent plc	26,238	458
Smith & Nephew plc	127,242	1,307
Smiths Group plc	19,042	312
Standard Chartered plc	95,411	2,389
Standard Life plc	100,367	348
Tesco plc	308,257	2,118
TI Automotive Ltd., Class A (a)(d)	1,505	—
Tomkins plc	49,813	154
Unilever plc	45,870	1,468
United Utilities Group plc	10,760	86
Vodafone Group plc	2,947,213	6,825
Whitbread plc	10,255	231
Wolseley plc (a)	2,954	59
WPP plc	173,599	1,695
Xstrata plc (a)	48,109	847
		96,349
Total Common Stocks (Cost $443,349)		485,036
	No. of  Rights
Rights (0.0%)
Australia (0.0%)
Woodside Petroleum Ltd., expires 2/11/10 (a)	1,351	6
Belgium (0.0%)
Fortis, expires 12/31/49 (a)(d)	94,211	—
Japan (0.0%)
Dowa Holdings, Co., Ltd., expires 1/29/10 (a)(d)	49,000	—
Total Rights (Cost $—)		6
	No. of Warrants
Warrants (0.0%)
France (0.0%)
Fonciere Des Regions, expires 12/31/10 (a)(c)	1,185	1
Italy (0.0%)
Mediobanca S.p.A., expires 3/18/11 (a)	5,319	1
Unione Di Banche Italiane SCPA, expires 6/30/11 (a)	468	—	@
		1
Total Warrants (Cost $—)		2
	Shares
Short-Term Investments (19.5%)
Securities held as Collateral on Loaned Securities (9.9%)
Investment Company (8.5%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o)	46,735,056	46,735
	Face  Amount  (000)
Repurchase Agreement (1.4%)
Deutsche Bank Securities, Inc., 0.01%, dated 12/31/09, due 1/4/10, repurchase price $7,361; fully collateralized by U.S. government agency securities at the date of this Portfolio of Investments as follows: Federal Home Loan Mortgage Corp., Adjustable Rate Mortgages, 2.63% to 6.56%, due 11/1/22 to 6/1/38; Federal Home Loan Mortgage Corp., Gold Pool, Fixed Rate Mortgages, 3.50% to 7.50%, due 8/1/13 to 2/1/48; Federal National Mortgage Association, Adjustable Rate Mortgages, 2.52% to 6.29%, due 3/1/18 to 9/1/47; Federal National Mortgage Association, Fixed Rate Mortgages, 4.31% to 4.92%, due 6/1/19 to 12/1/19; Government National Mortgage Association, Adjustable Rate Mortgages, 0.86% to 4.38%, due 8/20/27 to 12/20/58; Government National Mortgage Association, Fixed Rate Mortgages, 3.50% to 7.50%, due 10/15/18 to 5/15/44, valued at $7,509.	$          7,361	7,361
		54,096
	Shares
Investment Company (9.6%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o)	52,710,535	52,711
Total Short-Term Investments (Cost $106,807)		106,807
Total Investments (107.8%) (Cost $550,156) — Including $51,787 of Securities Loaned (v)		591,851
Liabilities in Excess of Other Assets (-7.8%)		(42,788	)
Net Assets (100%)		$549,063

(a)	Non-income producing security.
(c)	All or a portion of security on loan at December 31, 2009.
(d)	At December 31, 2009, the Portfolio held $0 of fair valued securities, representing 0% of net assets. These securities have been fair valued as determined in good faith under procedures established by and under the general supervision of the Portfolio’s Directors.
(o)	See Note G to the financial statements regarding investment in Mitsubishi UFJ Financial Group, Inc., Mitsubishi UFJ Lease & Finance Co., Ltd. and Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class.

The accompanying notes are an integral part of the financial statements. 19

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Active International Allocation Portfolio

(v)	The approximate market value and percentage of total investments, $481,371,000 and 81.3%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Financial Statements.
@	Value is less than $500.
ADR	American Depositary Receipt
CVA	Certificaten Van Aandelen
GDR	Global Depositary Receipt
REIT	Real Estate Investment Trust
VVPR	Verminderde Voorheffing Precompte Reduit

Foreign Currency Exchange Contracts Information:

The Portfolio had the following foreign currency exchange contract(s) open at period end:

Currency to Deliver (000)		Value (000)	Settlement Date	In Exchange For (000)		Value (000)		Net Unrealized Appreciation (Depreciation) (000)
CHF	1,139	$    1,101	1/14/10	USD	1,100		$   1,100		$        (1	)
EUR	206	295	1/14/10	USD	300		300		5
HKD	126,731	16,346	1/14/10	USD	16,348		16,348		2
JPY	2,229,711	23,942	1/14/10	USD	24,863		24,863		921
JPY	742,833	7,977	1/14/10	USD	8,301		8,301		324
JPY	1,725,234	18,524	1/14/10	USD	19,206		19,206		682
JPY	4,320,536	46,392	1/14/10	USD	48,102		48,102		1,710
USD	11,750	11,750	1/14/10	AUD	12,979		11,648		(102	)
USD	2,203	2,203	1/14/10	CHF	2,293		2,217		14
USD	744	744	1/14/10	EUR	511		733		(11	)
USD	2,991	2,991	1/14/10	EUR	2,056		2,948		(43	)
USD	3,373	3,373	1/14/10	EUR	2,316		3,320		(53	)
USD	16,380	16,380	1/14/10	EUR	11,247		16,123		(257	)
USD	6,663	6,663	1/14/10	EUR	4,579		6,564		(99	)
USD	8,432	8,432	1/14/10	EUR	5,809		8,328		(104	)
USD	5,569	5,569	1/14/10	EUR	3,833		5,495		(74	)
USD	12,870	12,870	1/14/10	JPY	1,153,494		12,386		(484	)
USD	8,954	8,954	1/14/10	JPY	802,531		8,617		(337	)
USD	37,346	37,346	1/14/10	JPY	3,356,531		36,041		(1,305	)
USD	30,446	30,446	1/14/10	JPY	2,729,825		29,312		(1,134	)
USD	311	311	1/14/10	JPY	27,972		300		(11	)
		$262,609					$262,252		$    (357	)

AUD	—	Australian Dollar
CHF	—	Swiss Franc
EUR	—	Euro
HKD	—	Hong Kong Dollar
JPY	—	Japanese Yen
USD	—	United States Dollar

Futures Contracts:

The Portfolio had the following futures contract(s) open at period end:

	Number of Contracts	Value (000)	Expiration Date	Net Unrealized Appreciation (Depreciation) (000)
Long:
DAX Index (Germany)	77	$16,446	Mar-10		$485
DJ Euro STOXX 50 (Germany)	508	21,643	Mar-10		676
FTSE 100 IDX (United Kingdom)	9	779	Mar-10		16
H-Shares IDX (Hong Kong)	142	11,711	Jan-10		18
MSCI Sing IX ETS (Singapore)	60	2,985	Jan-10		62
SGX CNX Nifty ETS (Singapore)	571	5,961	Jan-10		85
TOPIX Index Future (Japan)	55	5,342	Mar-10		109
					$1,451

Fair Value Measurement Information:

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2009. (See Note A-11 to the financial statements for further information regarding fair value measurement.)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)		Total (000)
Assets:
Common Stocks
Aerospace & Defense	$        —	$       2,383	$—		$       2,383
Air Freight & Logistics	—	2,108	—		2,108
Airlines	—	777	—		777
Auto Components	—	2,659	—	†	2,659
Automobiles	—	16,615	—		16,615
Beverages	—	7,008	—		7,008
Biotechnology	—	391	—		391
Building Products	—	2,686	—		2,686
Capital Markets	—	9,426	—		9,426
Chemicals	—	21,782	—		21,782
Commercial Banks	—	66,110	—		66,110
Commercial Services & Supplies	—	1,741	—		1,741
Communications Equipment	—	4,389	—		4,389
Computers & Peripherals	—	2,237	—		2,237
Construction & Engineering	—	2,744	—		2,744
Construction Materials	—	3,058	—		3,058
Consumer Finance	—	160	—		160

20 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Active International Allocation Portfolio

Fair Value Measurement Information: (cont’d)

	Level 1	Level 2	Level 3
Investment Type	Quoted prices (000)	Other significant observable inputs (000)	Significant unobservable inputs (000)		Total (000)
Common Stocks (cont’d)
Containers & Packaging	$          —	$         724	$—		$          724
Distributors	—	2,136	—		2,136
Diversified Consumer Services	—	138	—		138
Diversified Financial Services	—	5,685	—	†	5,685
Diversified Telecommunication Services	377	16,820	—		17,197
Electric Utilities	—	10,717	—		10,717
Electrical Equipment	—	8,189	—		8,189
Electronic Equipment, Instruments & Components	—	6,246	—		6,246
Energy Equipment & Services	—	7,636	—		7,636
Food & Staples Retailing	1,249	9,328	—		10,577
Food Products	887	17,537	—		18,424
Gas Utilities	—	1,238	—		1,238
Health Care Equipment & Supplies	—	4,167	—		4,167
Health Care Providers & Services	—	661	—		661
Hotels, Restaurants & Leisure	—	3,244	—		3,244
Household Durables	655	5,462	—		6,117
Household Products	—	2,724	—		2,724
Independent Power Producers & Energy Traders	—	108	—		108
Industrial Conglomerates	—	9,893	—		9,893
Information Technology Services	—	1,109	—		1,109
Insurance	—	18,605	—		18,605
Internet & Catalog Retail	—	136	—		136
Internet Software & Services	—	311	—		311
Leisure Equipment & Products	—	625	—		625
Life Science Tools & Services	—	100	—		100
Machinery	—	11,409	—		11,409
Marine	—	860	—		860
Media	20	6,697	—		6,717
Metals & Mining	—	33,372	—		33,372
Multiline Retail	—	2,522	—		2,522
Multi-Utilities	—	6,024	—		6,024
Office Electronics	—	3,424	—		3,424
Oil, Gas & Consumable Fuels	—	49,198	—		49,198
Paper & Forest Products	—	1,671	—		1,671
Personal Products	—	1,167	—		1,167
Pharmaceuticals	—	28,378	—		28,378
Professional Services	—	447	—		447
Real Estate Investment Trusts (REITs)	—	4,583	—		4,583
Real Estate Management & Development	—	11,327	—		11,327
Road & Rail	—	4,060	—		4,060
Semiconductors & Semiconductor Equipment	—	2,632	—		2,632
Software	—	4,133	—		4,133
Specialty Retail	—	3,545	—		3,545
Textiles, Apparel & Luxury Goods	—	5,134	—		5,134
Tobacco	—	4,466	—		4,466
Trading Companies & Distributors	—	5,935	—		5,935
Transportation Infrastructure	—	858	—		858
Water Utilities	—	458	—		458
Wireless Telecommunication Services	479	9,256	—		9,735
Total Common Stocks	3,667	481,369	—	†	485,036
Foreign Currency Exchange Contracts	—	3,658	—		3,658
Futures	1,451	—	—		1,451
Rights	—	6	—	†	6
Short-Term Investments
Investment Company	99,446	—	—		99,446
Repurchase Agreement	—	7,361	—		7,361
Total Short-Term Investments	99,446	7,361	—		106,807
Warrants	—	2	—		2
Total Assets	104,564	492,396	—	†	596,960
Liabilities:
Foreign Currency Exchange Contracts	—	4,015	—		4,015
Total Liabilities	—	4,015	—		4,015
Total	$104,564	$488,381	$—	†	$592,945

The accompanying notes are an integral part of the financial statements. 21

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Active International Allocation Portfolio

Fair Value Measurement Information: (cont’d)

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

	Common Stocks  (000)		Rights  (000)
Balance as of 12/31/08	$ 22		$—	†
Accrued discounts/premiums	—		—
Realized gain (loss)	—		—
Change in unrealized appreciation (depreciation)	—		—
Net purchases (sales)	—		—
Net transfers in and/or out of Level 3	(22	)	—
Balance as of 12/31/09	$ —	†	$—	†
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at Level 3 at 12/31/09.	$ —		$—

†  Includes a security which is valued at zero.

22 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview

Emerging Markets Portfolio

The Emerging Markets Portfolio (the “Portfolio”) seeks long-term capital appreciation by investing primarily in growth-oriented equity securities of issuers in emerging market countries. Foreign investing involves certain risks, including currency fluctuations and controls, restrictions on foreign investments, less governmental supervision and regulation, less liquidity and the potential for market volatility and political instability. In addition, investing in emerging markets may involve a relative higher degree of volatility.

Performance

For the year ended December 31, 2009, the Portfolio had a total return based on net asset value and reinvestment of distributions per share of 69.54%, net of fees, for the Class I shares. The Portfolio’s Class I shares underperformed against its benchmark the Morgan Stanley Capital International (MSCI) Emerging Markets Net Index (the “Index”) which returned 78.51%.

Factors Affecting Performance

·In 2009 emerging markets equities rebounded from an unprecedented collapse in global financial markets and significant declines in economic activity. The asset class, as measured by the MSCI Emerging Markets Index, posted a 78.5% return for the year and outperformed the developed markets (as measured by the MSCI World Index) by 48.5 percentage points. A healthy banking system across several emerging market countries, strong corporate and government balance sheets, a low interest rate environment, strong current account and fiscal balances, and positive economic momentum from China helped boost commodity prices and equity performance in all regions. The materials, energy, technology and consumer discretionary sectors led the emerging market recovery. On a regional basis, Latin America was the top performer, outperforming the MSCI Emerging Markets Index, followed by Asia and the Europe, Middle East and Africa (EMEA) region, both of which underperformed the Index.

·The Portfolio’s relative performance was driven by positive contributions from an overweight allocation to Indonesia and stock selection there.

·Underweight allocations to Malaysia and Morocco relative to the Index also benefited performance.

·Stock selection in South Africa, Russia, and Turkey were additive to performance.

·Relative gains also came from an overweight to the consumer discretionary sector.

·However, an overweight allocation to Poland and stock selection there detracted from performance.

·Underweight allocations to Brazil and Taiwan hurt performance.

·Additionally, relative performance was held back by stock selection in India.

·Underweight allocations to the energy and materials sectors also dampened relative performance.

Management Strategies

·Extremely high correlations are a symptom of a global boom-bust environment. Correlations between different economies and various financial asset classes that peaked at the height of the financial turmoil in the autumn of 2008 have fallen and we believe will continue to trend lower from here. We expect differentiation among markets based on local factors will matter once more. Within emerging markets, more capital will likely flow to countries that have shown greater resilience on a fundamental basis. Among sectors, materials and energy will likely remain tied to the global macro environment, but consumer stocks with exposure to emerging markets should show steady growth given the relatively low consumer leverage in many developing countries. There is a risk that rising inflation in emerging markets will result in central bank tightening in many countries. Therefore, we continue to position the Portfolio in names that we believe may perform well in stable and weaker market conditions. In particular, we look to decrease the overweight to financials and increase positions in sectors such as consumer staples and telecommunications.

23

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

Emerging Markets Portfolio

*Minimum Investment

In accordance with SEC regulations, Portfolio’s performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class P shares will vary from the Class I shares based upon its different inception date and will be negatively impacted by additional fees assessed to that class.

Performance Compared to the Morgan Stanley Capital International (MSCI) Emerging Markets Net Index(1) and the Lipper Emerging Markets Funds Index(2)

				Total Returns(3)
				Average Annual
		One			Five			Ten		Since
		Year			Years			Years		Inception(6)
Portfolio — Class I(4)	69.54		%	14.21		%	7.52		%	9.97	%
MSCI Emerging Markets Net Index	78.51			15.51			9.82			9.68
Lipper Emerging Markets Funds Index	74.25			13.48			8.97			—
Portfolio — Class P(5)	69.11			13.91			7.24			8.90
MSCI Emerging Markets Net Index	78.51			15.51			9.82			8.04
Lipper Emerging Markets Funds Index	74.25			13.48			8.97			7.94

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or 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 of share classes will vary due to difference in expenses.

(1)The Morgan Stanley Capital International (MSCI) Emerging Markets Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance of emerging 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 Emerging Markets Index currently consists of 22 emerging 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.

(2)The Lipper Emerging Markets Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Emerging Markets Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index. As of the date of this report, the Portfolio is in the Lipper Emerging Markets Funds classification.

(3)Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and reimbursements, total returns would have been lower. Fee waivers and/or expense reimbursements are voluntary and the Adviser reserves the right to commence or terminate any waiver and/or reimbursement at any time.

(4)Commenced operations on September 25, 1992.

(5)Commenced operations on January 2, 1996.

(6)For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Index.

Portfolio Composition*

	Percentage of
Classification	Total Investments
Commercial Banks	21.6		%
Oil, Gas & Consumable Fuels	8.8
Metals & Mining	6.8
Semiconductors & Semiconductor Equipment	5.1
Wireless Telecommunication Services	5.1
Other**	49.0
Short-Term Investment	3.6
Total Investments		100.0	%

*Percentages indicated are based upon total investments (excluding Securities held as collateral on Loaned Securities) as of December 31, 2009.

**Industries representing less than 5% of total investments.

24

2009 Annual Report

December 31, 2009

Portfolio of Investments

Emerging Markets Portfolio

		Value
	Shares	(000)
Common Stocks (95.7%)
Brazil (13.1%)
Banco Bradesco S.A. ADR (c)	748,600	$  16,372
Banco Bradesco S.A. (Preference)	276,700	5,988
Banco Nacional S.A. (Preference) (a)(d)(l)	295,998,880	—
BM&F Bovespa S.A.	1,202,900	8,360
BRF - Brasil Foods S.A.	929,576	24,328
BRF - Brasil Foods S.A. ADR (c)	4,700	246
Cia de Bebidas das Americas (Preference) ADR	221,400	22,381
Cielo S.A.	2,025,800	17,656
Itau Unibanco Holding S.A.	252,062	5,704
Itau Unibanco Holding S.A. (Preference) ADR (c)	1,888,574	43,135
MRV Engenharia e Participacoes S.A.	1,563,000	12,477
NET Servicos de Comunicacao S.A. ADR (a)(c)	16,100	218
NET Servicos de Comunicacao S.A. (Preference) (a)	821,755	11,200
PDG Realty S.A. Empreendimentos e Participacoes	1,173,700	11,518
Petroleo Brasileiro S.A. ADR	258,300	12,316
Petroleo Brasileiro S.A., Class A ADR	330,824	14,024
Petroleo Brasileiro S.A. (Preference)	1,045,972	22,173
Ultrapar Participacoes S.A. (Preference)	206,900	9,638
Vale S.A. ADR (c)	69,900	2,029
Vale S.A. (Preference), Class A	150,084	3,717
Vale S.A. (Preference) ADR (c)	2,005,875	49,786
Vivo Participacoes S.A. (Preference) ADR (c)	401,200	12,437
		305,703
China/Hong Kong (17.6%)
Bank of China Ltd., Class H	27,270,900	14,601
Beijing Enterprises Holdings Ltd.	2,121,000	15,250
Belle International Holdings Ltd.	9,448,000	10,914
China Citic Bank, Class H (c)	19,225,000	16,264
China Communications Services Corp. Ltd., Class H (c)	1,190,000	582
China Construction Bank Corp., Class H (c)	56,507,000	48,098
China Dongxiang Group Co.	6,248,500	4,800
China Life Insurance Co., Ltd., Class H (c)	6,440,000	31,513
China Mobile Ltd.	2,412,000	22,483
China Oilfield Services Ltd., Class H	6,936,000	8,228
China Pacific Insurance Group Co., Ltd., Class H (a)	2,978,000	11,868
China Petroleum & Chemical Corp., Class H	33,676,000	29,734
China Resources Land Ltd. (c)	2,396,000	5,394
China Resources Power
Holdings Co., Ltd.	6,559,900	12,979
China Zhongwang Holdings Ltd. (a)(c)	13,504,400	10,773
Dongfeng Motor Group Co., Ltd., Class H	13,319,000	18,958
Fushan International Energy Group Ltd.	11,368,000	10,954
GOME Electrical Appliances Holdings Ltd. (a)(c)	78,864,258	28,277
Hengan International Group Co., Ltd.	688,000	5,092
Industrial & Commercial Bank of China, Class H (c)	34,415,000	28,243
PetroChina Co., Ltd., Class H	14,656,000	17,461
Ping An Insurance Group Co. of China Ltd., Class H (c)	2,067,500	17,930
Sany Heavy Equipment International Holdings Co., Ltd., Class H (a)	5,068,000	6,412
Shanghai Industrial Holdings Ltd.	4,228,000	21,454
Tsingtao Brewery Co., Ltd., Class H	978,000	5,399
Want Want China Holdings Ltd. (c)	6,967,000	4,859
		408,520
Czech Republic (1.5%)
CEZ A.S.	118,119	5,541
Komercni Banka A.S.	100,586	21,442
Telefonica O2 Czech Republic A.S.	296,113	6,732
		33,715
Egypt (1.4%)
Commercial International Bank	1,775,999	17,704
Orascom Construction Industries	122,102	5,528
Orascom Construction Industries GDR	45,494	2,116
Telecom Egypt	2,337,137	7,706
		33,054
Hong Kong (0.2%)
China Longyuan Power Group Corp., Class H (a)(c)	2,977,000	3,855
Hungary (1.5%)
MOL Hungarian Oil and Gas Nyrt. (a)	143,869	12,834
OTP Bank plc (a)	303,940	8,620
Richter Gedeon Nyrt.	60,844	13,773
		35,227
India (9.0%)
Asian Paints Ltd.	147,440	5,670
Bharat Heavy Electricals Ltd.	215,707	11,092
Colgate-Palmolive India Ltd.	307,915	4,357
Deccan Chronicle Holdings Ltd.	1,323,920	4,680
Dr. Reddy’s Laboratories Ltd.	285,884	7,015
Glenmark Pharmaceuticals Ltd.	1,347,495	7,973
Godrej Consumer Products Ltd.	823,957	4,613
GVK Power & Infrastructure Ltd. (a)	5,651,577	5,603
HDFC Bank Ltd.	731,798	26,625
Hero Honda Motors Ltd.	350,061	12,839
Hindalco Industries Ltd.	2,441,250	8,327
Hindustan Construction Co.	2,020,452	6,303
Hindustan Petroleum Corp. Ltd.	667,611	5,604
Hindustan Unilever Ltd.	882,686	4,993
IndusInd Bank Ltd.	2,323,700	7,144
Infosys Technologies Ltd.	623,008	34,672
ITC Ltd.	845,900	4,529
Jaiprakash Associates Ltd.	3,251,233	10,166
KSK Energy Ventures Ltd. (a)	1,621,000	6,975
Marico Ltd.	1,662,200	3,683
Nestle India Ltd.	67,520	3,702
Tata Motors Ltd.	541,073	9,148
Wipro Ltd.	520,215	7,576
Yes Bank Ltd. (a)	1,138,400	6,457
		209,746

The accompanying notes are an integral part of the financial statements. 25

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Emerging Markets Portfolio

	Shares	Value  (000)
Indonesia (3.4%)
Astra International Tbk PT	3,934,000	$  14,451
Bank Central Asia Tbk PT	28,004,500	14,398
Bank Rakyat Indonesia Tbk PT	12,603,000	10,183
Bumi Resources Tbk PT	28,330,000	7,315
Indocement Tunggal Prakarsa Tbk PT	3,951,500	5,765
Indofood Sukses Makmur Tbk PT	25,317,000	9,494
Perusahaan Gas Negara PT	19,089,500	7,884
Telekomunikasi Indonesia Tbk PT	10,625,500	10,633
		80,123
Israel (0.5%)
Check Point Software Technologies (a)(c)	311,796	10,564
Malaysia (1.0%)
CIMB Group Holdings Bhd	2,813,600	10,547
Sime Darby Bhd	3,848,300	10,078
Tenaga Nasional Bhd	961,900	2,355
		22,980
Mexico (4.7%)
America Movil S.A.B. de C.V., Class L ADR	932,744	43,820
Fomento Economico Mexicano S.A.B. de C.V. ADR	550,900	26,377
Grupo Financiero Banorte S.A.B. de C.V., Class O	5,875,600	21,190
Grupo Televisa S.A. ADR	853,300	17,715
		109,102
Philippines (0.2%)
Metro Pacific Investments Corp. (a)	71,541,000	4,025
Poland (3.2%)
Bank Handlowy w Warszawie S.A. (a)	250,904	6,131
Bank Pekao S.A. (a)	102,693	5,790
Bank Zachodni WBK S.A. (a)	107,975	7,086
Cyfrowy Polsat S.A.	634,442	3,010
Polski Koncern Naftowy Orlen S.A. (a)	1,147,001	13,466
Powszechna Kasa Oszczednosci Bank Polski S.A.	1,772,186	23,311
Telekomunikacja Polska S.A.	2,913,186	16,051
		74,845
Russia (5.2%)
Alliance Cellulose Ltd. (a)(d)(l)	592,359	—
LUKOIL OAO ADR (c)	535,677	30,006
Polyus Gold Co. ADR (c)	306,214	8,297
Rosneft Oil Co. GDR	1,785,085	15,020
RusHydro (a)	53,153,066	2,002
RusHydro ADR (a)	1,180,543	4,459
Sberbank	7,147,855	19,991
Vimpel-Communications ADR	612,191	11,381
Wimm-Bill-Dann Foods OJSC ADR (a)(c)	539,216	12,849
X5 Retail Group N.V. GDR (a)	536,116	17,095
		121,100
Singapore (0.3%)
Golden Agri-Resources Ltd. (a)	19,623,000	7,065
South Africa (6.8%)
Anglo Platinum Ltd. (a)	159,852	17,035
AngloGold Ashanti Ltd.	126,750	5,135
AngloGold Ashanti Ltd. ADR (c)	27,090	1,088
Impala Platinum Holdings Ltd.	812,000	22,074
Imperial Holdings Ltd.	586,400	7,008
Kumba Iron Ore Ltd.	139,300	5,706
MTN Group Ltd.	2,066,992	32,885
Naspers Ltd., Class N	854,896	34,693
SABMiller plc	783,757	22,909
Tiger Brands Ltd.	409,435	9,479
		158,012
South Korea (12.0%)
Amorepacific Corp. (a)	12,681	10,166
Cheil Industries, Inc. (a)	176,912	8,598
Cheil Worldwide, Inc. (a)	38,727	10,445
Hyundai Engineering & Construction Co., Ltd. (a)	173,501	10,503
Hyundai Mobis (a)	80,080	11,681
KB Financial Group, Inc. (a)	343,085	17,502
Kia Motors Corp. (a)	270,011	4,620
Korea Exchange Bank (a)	488,300	6,077
LG Chem Ltd. (a)	116,673	22,762
LG Dacom Corp. (a)	171,980	2,619
LG Display Co., Ltd. (a)	333,930	11,275
LG Display Co., Ltd. ADR (c)	181,700	3,076
NCSoft Corp. (a)	49,140	6,238
NHN Corp. (a)	81,124	13,396
OCI Co., Ltd. (a)	42,526	7,996
Samsung Electronics Co., Ltd.	89,525	61,144
Samsung Electronics Co., Ltd. (Preference)	27,941	12,627
Samsung Fire & Marine Insurance Co., Ltd.	54,979	9,390
Shinhan Financial Group Co., Ltd. (a)	592,546	22,003
Shinsegae Co., Ltd. (a)	20,445	9,438
SSCP Co., Ltd. (a)	325,463	2,243
Woongjin Coway Co., Ltd. (a)	451,952	14,901
		278,700
Taiwan (9.3%)
Acer, Inc.	5,115,661	15,283
AU Optronics Corp.	13,324,130	16,077
Cathay Financial Holding Co., Ltd. (a)	10,415,500	19,299
China Steel Corp.	12,307,000	12,646
Fubon Financial Holding Co., Ltd. (a)	10,235,000	12,471
Hon Hai Precision Industry Co. Ltd.	9,516,412	44,767
HTC Corp.	403,260	4,589
Lite-On Technology Corp.	4,872,000	7,285
MediaTek, Inc.	59,000	1,025
Siliconware Precision Industries Co.	5,882,000	7,902
Taishin Financial Holding Co., Ltd. (a)	15,030,000	5,866
Taiwan Fertilizer Co., Ltd.	3,246,000	11,481
Taiwan Semiconductor Manufacturing Co., Ltd.	17,912,205	35,931
Wistron Corp.	5,764,809	11,134
Yuanta Financial Holding Co., Ltd.	15,852,000	11,553
		217,309
Thailand (2.3%)
Bangkok Bank PCL (Foreign)	48,800	171
Bangkok Bank PCL NVDR (c)	3,846,500	13,390
Banpu PCL	382,700	6,622
Kasikornbank PCL (Foreign)	2,842,700	7,404
Kasikornbank PCL NVDR (c)	1,475,000	3,748

26 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Emerging Markets Portfolio

	Shares	Value (000)
Thailand (cont’d)
PTT Exploration & Production PCL (Foreign)	1,146,200	$   5,038
PTT PCL (Foreign)	557,800	4,101
Siam Cement PCL NVDR (c)	671,800	4,716
Siam Commercial Bank PCL (Foreign)	3,218,300	8,384
		53,574
Turkey (2.5%)
Akbank T.A.S.	1,269,017	8,027
Anadolu Efes Biracilik Ve Malt Sanayii A.S.	775,281	8,686
Coca-Cola Icecek A.S.	411,991	4,138
Turk Telekomunikasyon A.S.	1,197,230	3,644
Turkcell Iletisim Hizmet A.S.	1,116,387	7,856
Turkiye Garanti Bankasi A.S.	3,088,476	13,118
Turkiye Halk Bankasi A.S.	669,502	5,331
Turkiye Is Bankasi, Class C	1,572,315	6,627
		57,427
Total Common Stocks (Cost $1,713,971)		2,224,646
Investment Company (0.9%)
India (0.9%)
Morgan Stanley Growth Fund (a)(o) (Cost $3,415)	17,282,900	21,298
Short-Term Investments (9.9%)
Securities held as Collateral on Loaned Securities (6.3%)
Investment Company (5.5%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o)	127,100,551	127,101
	Face Amount (000)
Repurchase Agreement (0.8%)
Deutsche Bank Securities, Inc., 0.01%, dated 12/31/09, due 1/4/10, repurchase price $20,020; fully collateralized by U.S. government agency securities at the date of this Portfolio of Investments as follows: Federal Home Loan Mortgage Corp., Adjustable Rate Mortgages, 2.63% to 6.56%, due 11/1/22 to 6/1/38; Federal Home Loan Mortgage Corp., Gold Pool, Fixed Rate Mortgages, 3.50% to 7.50%, due 8/1/13 to 2/1/48; Federal National Mortgage Association, Adjustable Rate Mortgages, 2.52% to 6.29%, due 3/1/18 to 9/1/47; Federal National Mortgage Association, Fixed Rate Mortgages, 4.31% to 4.92%, due 6/1/19 to 12/1/19; Government National Mortgage Association, Adjustable Rate Mortgages, 0.86% to 4.38%, due 8/20/27 to 12/20/58; Government National Mortgage Association, Fixed Rate Mortgages, 3.50% to 7.50%, due 10/15/18 to 5/15/44, valued at $20,421.	$       20,020	20,020
		147,121

	Shares
Investment Company (3.6%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o)	83,789,504	83,789
Total Short-Term Investments (Cost $230,910)		230,910
Total Investments (106.5%) (Cost $1,948,296) — Including $140,543 of Securities Loaned (v)		2,476,854
Liabilities in Excess of Other Assets (-6.5%)		(151,574	)
Net Assets (100%)		$2,325,280

(a)Non-income producing security.

(c)All or a portion of security on loan at December 31, 2009.

(d)At December 31, 2009, the Portfolio held $0 of fair valued securities, representing 0% of net assets. These securities have been fair valued as determined in good faith under procedures established by and under the general supervision of the Portfolio’s Directors.

(l)Security has been deemed illiquid at December 31, 2009.

(o)See Note G within the Notes to Financial Statements regarding investments in the Morgan Stanley Growth Fund and the Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class.

(v)The approximate market value and percentage of total investments, $1,900,214,000 and 76.8%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Financial Statements.

ADRAmerican Depositary Receipt

GDRGlobal Depositary Receipt

NVDRNon-Voting Depositary Receipt

Foreign Currency Exchange Contracts Information:

The Portfolio had the following foreign currency exchange contract(s) open at period end:

											Net
Currency						In					Unrealized
to						Exchange					Appreciation
Deliver		Value			Settlement	For		Value			(Depreciation)
(000)		(000)			Date	(000)		(000)			(000)
HKD	434	$		56	1/4/10	USD	56	$		56	$		—	@
HKD	903	116			1/5/10	USD	116	116			—			@
MYR	1,055	308			1/4/10	USD	308	308			—			@
PLN	333	117			1/4/10	USD	116	116			(1			)
PLN	59	20			1/5/10	USD	20	20			—			@
TWD	3,382	106			1/4/10	USD	105	105			(1			)
USD	140	140			1/4/10	EGP	767	140			—			@
USD	1,008	1,008			1/4/10	EGP	5,510	1,005			(3			)
USD	99	99			1/4/10	EGP	541	99			—			@
USD	277	277			1/4/10	MYR	948	277			—			@
USD	41	41			1/6/10	PLN	117	41			—			@
			$	2,288					$	2,283		$	(5	)

The accompanying notes are an integral part of the financial statements. 27

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Emerging Markets Portfolio

EGP	— Egyptian Pound
HKD	— Hong Kong Dollar
MYR	— Malaysian Ringgit
PLN	— Polish Zloty
TWD	— Taiwan Dollar
USD	— United States Dollar
@	Value is less than $500.

Fair Value Measurement Information:

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2009. (See Note A-11 to the financial statements for further information regarding fair value measurement.)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)		Total (000)
Assets:
Common Stocks
Auto Components	$         —	$      11,681	$—		$     11,681
Automobiles	—	50,868	—		50,868
Beverages	48,758	41,132	—		89,890
Capital Markets	—	11,553	—		11,553
Chemicals	—	58,750	—		58,750
Commercial Banks	80,697	421,975	—	†	502,672
Computers & Peripherals	—	38,291	—		38,291
Construction & Engineering	2,116	22,334	—		24,450
Construction Materials	—	10,481	—		10,481
Distributors	—	7,008	—		7,008
Diversified Financial Services	—	24,856	—		24,856
Diversified Telecommunication Services	11,381	47,967	—		59,348
Electric Utilities	—	21,332	—		21,332
Electrical Equipment	—	11,092	—		11,092
Electronic Equipment, Instruments & Components	3,076	72,119	—		75,195
Energy Equipment & Services	—	8,228	—		8,228
Food & Staples Retailing	—	26,533	—		26,533
Food Products	13,095	58,927	—		72,022
Gas Utilities	—	7,884	—		7,884
Household Durables	—	38,896	—		38,896
Household Products	—	9,606	—		9,606
Independent Power Producers & Energy Traders	—	22,437	—		22,437
Industrial Conglomerates	—	56,948	—		56,948
Information Technology Services	—	59,904	—		59,904
Insurance	—	90,000	—		90,000
Internet Software & Services	—	13,396	—		13,396
Machinery	—	15,560	—		15,560
Media	17,933	64,028	—		81,961
Metals & Mining	52,903	104,664	—		157,567
Oil, Gas & Consumable Fuels	14,024	191,328	—		205,352
Paper & Forest Products	—	—	—	†	—	†
Personal Products	—	23,298	—		23,298
Pharmaceuticals	—	28,761	—		28,761
Real Estate Management & Development	—	5,394	—		5,394
Semiconductors & Semiconductor Equipment	—	118,629	—		118,629
Software	10,564	6,238	—		16,802
Specialty Retail	—	39,191	—		39,191
Textiles, Apparel & Luxury Goods	—	4,800	—		4,800
Tobacco	—	4,529	—		4,529
Wireless Telecommunication Services	56,257	63,224	—		119,481
Total Common Stocks	310,804	1,913,842	—	†	2,224,646
Investment Company	—	21,298	—		21,298
Short-Term Investments
Investment Company	210,890	—	—		210,890
Repurchase Agreement	—	20,020	—		20,020
Total Short-Term Investments	210,890	20,020	—		230,910
Total Assets	$521,694	$1,955,160	$—	†	$2,476,854
Liabilities:
Foreign Currency Exchange Contracts	—	5	—		5
Total Liabilities	—	5	—		5
Total	$521,694	$1,955,155	$—	†	$2,476,849

28 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Emerging Markets Portfolio

Fair Value Measurement Information: (cont’d)

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

	Common Stocks (000)
Balance as of 12/31/08	$—	†
Accrued discounts/premiums	—
Realized gain (loss)	—
Change in unrealized appreciation (depreciation)	—
Net purchases (sales)	—
Net transfers in and/or out of Level 3	—
Balance as of 12/31/09	$—	†
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at Level 3 at 12/31/09.	$—

†  Includes a security which is valued at zero.

The accompanying notes are an integral part of the financial statements. 29

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview

Global Franchise Portfolio

The Global Franchise Portfolio (the “Portfolio”) seeks long-term capital appreciation by investing primarily in equity securities of issuers located throughout the world, that it believes have, among other things, resilient business franchises and growth potential. This Portfolio’s concentration of its assets in a smaller number of companies may subject it to greater investment risk than a portfolio with a larger number of companies. Foreign investing involves certain risks, including currency fluctuations and controls, restrictions on foreign investments, less governmental supervision and regulation, less liquidity and the potential for market volatility and political instability.

Performance

For the year ended December 31, 2009, the Portfolio had a total return based on net asset value and reinvestment of distributions per share of 29.65%, net of fees, for the Class I shares. The Portfolio’s Class shares underperformed against its benchmark the Morgan Stanley Capital International (MSCI) World Index (the “Index”) which returned 29.99%.

Factors Affecting Performance

·Equity investors experienced a bit of a roller coaster ride as most global markets hit new lows in March and then rebounded substantially, with the MSCI World Index returning 30% for the year. Since March, the preference of the market has been for leveraged balance sheets, leveraged profit structures and cyclical (that is, economically sensitive) sectors. The market’s preference suggests that the worst of the recession is past and economic activity is returning to normal.

·The Portfolio outperformed the Index in the first quarter as cyclicals, particularly financials and materials, continued to be downgraded for most of the quarter, and the Portfolio benefited from underweight allocations to these sectors. However, market conditions shifted dramatically in mid-March as massive government stimulus packages, incentive programs and monetary easing rekindled the market’s appetite for risk. The Portfolio underperformed the next two quarters as cyclical sectors — particularly banks, industrials and materials — soared with confidence that financial Armageddon had been avoided. The fourth quarter saw a bit of a pullback in financials as investors started questioning the adequacy of banks’ tier 1 capital ratios and the possibility of a more stringent regulatory environment. The Portfolio outperformed as financials sold off to the benefit of defensive sectors such as consumer staples, the Portfolio’s largest sector weighting.

·For the period overall, the Portfolio’s underweights in the market’s weakest sectors (utilities and telecommunications), along with good stock selection decisions in consumer staples and industrials, were beneficial to relative returns. This positioning allowed the Portfolio to perform largely in line with the Index for the period.

·The Portfolio’s overweight allocation to consumer staples and the underweight to the strong performing technology sector detracted from performance on a relative basis for the 12-month period.

·Positive contributors to performance during the period were Swedish Match, Harley-Davidson and British American Tobacco.

·The largest detractors were Kao Corp., Pernod Ricard and Brown-Forman.

Management Strategies

·During the year, we sold out of Harley-Davidson and C&C Group. We reduced positions in Starbucks and eBay on the back of concerns of franchise erosion. We initiated a position in Dr. Pepper Snapple Group and added to positions in Reckitt Benckiser and Procter & Gamble.

·We do not attempt to predict from a macro perspective the direction of the markets. Our focus remains on the Global Franchise philosophy of seeking exceptional quality at compelling value.

·We continue to seek investment opportunities in companies with strong business franchises protected by a dominant intangible asset. Additionally, we demand sound management, substantial free cash flow and growth potential. We invest in these high quality companies only when we can identify compelling value as measured by a current free cash flow yield in excess of the risk-free bond yield. We seek to deliver attractive returns while minimizing business and valuation risk. Our goal is for the Portfolio to outperform broadly-based benchmarks over the long term with less than average volatility.

30

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

Global Franchise Portfolio

*Minimum Investment

**Commenced Operations on November 28, 2001.

In accordance with SEC regulations, Portfolio’s performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class P shares will vary from the Class I shares based upon its different inception date and will be negatively impacted by additional fees assessed to that class.

Performance Compared to the Morgan Stanley Capital International (MSCI) World Index(1) and the Lipper Global Multi-Cap Growth Funds Index(2)

	Total Returns(3)
			Average Annual
	One		Five		Since
	Year		Years		Inception(5)
Portfolio — Class I(4)	29.65	%	6.58	%	10.65	%
MSCI World Index	29.99		2.01		4.01
Lipper Global Multi-Cap Growth Funds Index	40.23		4.87		5.78
Portfolio — Class P(4)	29.24		6.29		10.34
MSCI World Index	29.99		2.01		4.01
Lipper Global Multi-Cap Growth Funds Index	40.23		4.87		5.78

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or 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 of share classes will vary due to difference in expenses.

(1)    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.

(2)The Lipper Global Multi-Cap Growth Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Global Multi-Cap Growth Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 10 funds represented in this Index. As of the date of this report, the Portfolio is in the Lipper Global Multi-Cap Growth Funds classification.

(3)Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and reimbursements, total returns would have been lower. Fee waivers and/or expense reimbursements are voluntary and the Adviser reserves the right to commence or terminate any waiver and/or reimbursement at any time.

(4)Commenced operations on November 28, 2001.

(5)For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Index.

Portfolio Composition

	Percentage of
Classification	Total Investments
Tobacco	24.8		%
Food Products	19.8
Household Products	10.0
Media	9.5
Beverages	7.4
Other*	24.9
Short-Term Investment	3.6
Total Investments		100.0	%

*Industries representing less than 5% of total investments.

31

2009 Annual Report

December 31, 2009

Portfolio of Investments

Global Franchise Portfolio

	Shares	Value (000)
Common Stocks (95.8%)
Finland (3.2%)
Kone Oyj, Class B	91,704	$    3,919
France (2.8%)
Groupe Danone	55,885	3,403
Ireland (4.4%)
Experian plc	543,382	5,372
Japan (2.4%)
Kao Corp.	122,700	2,864
Netherlands (6.6%)
Reed Elsevier N.V.	296,733	3,641
Wolters Kluwer N.V.	199,313	4,369
		8,010
Sweden (5.3%)
Swedish Match AB	293,029	6,406
Switzerland (8.8%)
Nestle S.A. (Registered)	130,472	6,339
Novartis AG (Registered)	80,234	4,371
		10,710
United Kingdom (29.4%)
British American Tobacco plc	314,411	10,200
Cadbury plc	386,210	4,970
Diageo plc	169,439	2,955
Imperial Tobacco Group plc	235,477	7,421
Reckitt Benckiser Group plc	84,174	4,560
Unilever plc	170,597	5,461
		35,567
United States (32.9%)
Brown-Forman Corp., Class B	51,564	2,762
Career Education Corp. (a)	72,028	1,679
Dr. Pepper Snapple Group, Inc.	115,296	3,263
eBay, Inc. (a)	162,166	3,817
Fortune Brands, Inc.	54,014	2,333
Kellogg Co.	69,528	3,699
McGraw-Hill Cos., Inc. (The)	103,388	3,465
Moody’s Corp.	110,279	2,956
Philip Morris International, Inc.	122,169	5,887
Procter & Gamble Co. (The)	77,053	4,672
Scotts Miracle-Gro Co. (The), Class A	49,031	1,927
Starbucks Corp. (a)	55,048	1,269
Weight Watchers International, Inc.	72,932	2,127
		39,856
Total Common Stocks (Cost $95,985)		116,107
Short-Term Investment (3.6%)
Investment Company (3.6%)
Morgan Stanley Institutional Liquidity Funds — Government Portfolio — Institutional Class (o) (Cost $4,358)	4,357,613	4,358
Total Investments (99.4%) (Cost $100,343) (v)		120,465
Other Assets in Excess of Liabilities (0.6%)		719
Net Assets (100%)		$121,184

(a)Non-income producing security.

(o)See Note G to the financial statements regarding investment in Morgan Stanley Institutional Liquidity Funds — Government Portfolio — Institutional Class.

(v)The approximate market value and percentage of total investments, $76,251,000 and 63.3%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Financial Statements.

Foreign Currency Exchange Contracts Information:

The Portfolio had the following foreign currency exchange contract(s) open at period end:

											Net
Currency						In					Unrealized
to						Exchange					Appreciation
Deliver		Value			Settlement	For		Value			(Depreciation)
(000)		(000)			Date	(000)		(000)			(000)
GBP	2,744	$  4,431			1/7/10	USD	4,543	$    4,543			$  112
GBP	2,744	4,432			1/7/10	USD	4,541	4,541			109
GBP	2,744	4,432			1/7/10	USD	4,543	4,543			111
GBP	2,744	4,432			1/7/10	USD	4,543	4,543			111
JPY	28,706	308			1/4/10	USD	311	311			3
			$	18,035					$	18,481		$	446

GBP	—  British Pound
JPY	—  Japanese Yen
USD	—  United States Dollar

Fair Value Measurement Information:

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2009. (See Note A-11 to the financial statements for further information regarding fair value measurement.)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)	Total (000)
Assets:
Common Stocks
Beverages	$  6,025	$    2,955	$—	$    8,980
Chemicals	1,927	—	—	1,927
Diversified Consumer Services	3,806	—	—	3,806
Diversified Financial Services	2,956	—	—	2,956
Food Products	3,699	20,173	—	23,872
Hotels, Restaurants & Leisure	1,269	—	—	1,269
Household Durables	2,333	—	—	2,333
Household Products	4,672	7,424	—	12,096
Internet Software & Services	3,817	—	—	3,817
Machinery	—	3,919	—	3,919

32 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Global Franchise Portfolio

Fair Value Measurement Information: (cont’d)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)	Total (000)
Common Stocks (cont’d)
Media	$3,465	$   8,010	$—	$  11,475
Pharmaceuticals	—	4,371	—	4,371
Professional Services	—	5,372	—	5,372
Tobacco	5,887	24,027	—	29,914
Total Common Stocks	39,856	76,251	—	116,107
Foreign Currency Exchange Contracts	—	446	—	446
Short-Term Investment
Investment Company	4,358	—	—	4,358
Total Assets	44,214	76,697	—	120,911
Total	$44,214	$76,697	$—	$120,911

The accompanying notes are an integral part of the financial statements. 33

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview

Global Real Estate Portfolio

The Global Real Estate Portfolio (the “Portfolio”) seeks to provide current income and capital appreciation by investing primarily in equity securities of companies in the real estate industry located throughout the world, including real estate operating companies, real estate investment trusts and similar entities established outside the U.S. (foreign real estate companies). Foreign investing involves certain risks, including currency fluctuations and controls, restrictions on foreign investments, less governmental supervision and regulation, less liquidity and the potential for market volatility and political instability. The risks of investing in emerging-market countries are greater than the risks generally associated with foreign investments. In addition to the general risks associated with real-estate investment, REIT investing entails other risks, such as credit and interest-rate risk.

Performance

For the year ended December 31, 2009, the Portfolio had a total return based on net asset value and reinvestment of distributions per share of 41.04% for the Class I shares, net of fees. The Portfolio’s Class I shares outperformed against its benchmarks, the FTSE EPRA/NAREIT Developed Real Estate Index — Net Total Return to U.S. Investors (the “Index”) which returned 37.89% and the MSCI World Index which returned 29.99%.

Factors Affecting Performance

·The global real estate securities market gained 37.9% in the 12-month period ending December 31, 2009, as measured by the FTSE EPRA/NAREIT Developed Real Estate Index — Net Total Return to U.S. Investors, but the stocks have still experienced significant declines from peak levels.

·North American, European and Asian real estate securities posted large declines through mid-March, as share prices appeared to be impacted by negative investor sentiment in response to a continuation of weak economic data and the deterioration of the credit markets. Subsequently, the sector rallied significantly on the back of an improved outlook for the global economy, the strong rally in the broader equity and debt markets, overall improvements in capital market conditions, and the significant volume of successful public real estate company equity offerings which allowed the companies to delever their balance sheets and address upcoming debt maturities.

·Significant outperformance within each of the regional sub-portfolios contributed to relative returns, while allocation among the regional sub-portfolios and cash held detracted from relative returns.

·In Asia, the Portfolio benefited from stock selection within and the overweight to Hong Kong, an underweight to Australia, and stock selection in Japan and Singapore. The benefits of those positions were partially offset by the impact of an underweight to Singapore.

·In Europe, the Portfolio benefited from stock selection in the U.K. and an underweight to Belgium, though was modestly offset by stock selection in France.

·In the U.S., the Portfolio benefited from stock selection within and an overweight to the hotel and mall sectors and stock selection in the apartment, office and diversified sectors. This was partially offset by stock selection in the health care sector.

Management Strategies

·The Portfolio is comprised of three regional sub-portfolios with a global allocation, which weights each of the three major regions (U.S., Europe and Asia) based on our view of the relative attractiveness of each region in terms of underlying real estate fundamentals and public market valuations. Moreover, each of the regional sub-portfolios reflects our core investment philosophy as a real estate value investor, which results in the ownership of stocks that we believe provide the best valuation relative to their underlying real estate values, while maintaining portfolio diversification.

·Our company-specific research leads us to specific preferences for sub-segments within each of the property sectors and countries. For the period ending December 31, 2009, the Portfolio was overweight the Asian listed property sector and underweight the U.S. and European listed property sectors.

·Within Asia, we expect underlying property fundamentals and asset values in key markets within Japan and Hong Kong to remain relatively more stable than other markets given relatively low vacancy and limited new supply over the next few years. The overweight to the Asian region was

34

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

Global Real Estate Portfolio

predominated by real estate operating companies (REOCs) in Japan and Hong Kong. The Hong Kong REOCs posted significant gains and outperformed, ending the period trading at a narrow discount to the net asset values (NAVs) of their underlying property, which may be poised for growth given prospects for a recovery in rents and asset values. The Japanese REOCs underperformed, only posting modest gains and continue to trade at a wide discount to their NAVs, despite better than expected prime office market fundamentals. We continue to maintain a preference for the major REOCs with predominant exposure to prime assets given what we believe are their relatively more favorable property fundamentals, the ability to engage in value-added opportunities such as development and redevelopment, well-positioned balance sheets and continued access to financing. This contrasts widely to the Asian REITs, which are passive, externally managed vehicles limited to property ownership, many of which are capital constrained with more limited access to financing and maintain predominant exposure to secondary assets. The Portfolio was underweight the Australian limited property trust (LPT) sector, which trades at a wide premium to NAVs.

·In Europe, the Portfolio ended the year overweight the U.K., France and Italy and underweight the remainder of the Continent. Valuations on the Continent ended the period at par to NAV (based on reported NAVs, which reflect only marginal capital value declines since the start of the credit crisis due to limited transactional evidence thus far); however NAVs are generally expected to decline further in most markets. Valuations in the U.K. ended the year at an average 8% premium to reported NAVs, which have started to show positive growth after declining by a cumulative 57% since June 2007.

·The Portfolio was underweight the U.S., which trades at a premium to downward adjusted NAVs. There continues to be a lack of clarity in underlying asset values due to the stagnant investment market, driven by the wide bid-ask spreads for real estate assets. Within the U.S., the Portfolio was overweight to companies that are focused in the ownership of apartment properties and upscale urban hotels and underweight to companies concentrated in the ownership of industrial assets.

·In contrast to the relatively more stable outlook for underlying property valuations in Asia, and emerging evidence of capital value improvements in the U.K., in the U.S. and Continental Europe, there are expectations for further weakness in underlying property fundamentals and asset values. However, a key question remains the magnitude of prospective asset value declines from peak levels since transactional evidence continues to be limited in most markets due to the wide bid-ask spread between buyers and sellers. It is notable that given the improvements in the capital markets and the significant amount of equity issued by the public companies to improve their balance sheets, a debate has emerged as to whether the magnitude of asset value declines will be less than previously expected. In some sub-segments of these markets, we believe current share price valuations already reflect the prospective weakening in underlying fundamentals and asset values. In the short term, share prices may experience incremental weakness, but we believe that expected returns over the medium and long-term are compelling given the current pricing for many of the companies provides an entry point that already reflects downside risks.

*Minimum Investment

**Commenced operations on August 30, 2006.

In accordance with SEC regulations, Portfolio’s performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class P, Class H, and Class L shares will vary from the Class I shares based upon its different inception date and will be negatively impacted by additional fees assessed to these classes.

35

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

Global Real Estate Portfolio

Performance Compared to the FTSE EPRA/NAREIT Developed Real Estate Index — Net Total Return to U.S. Investors(1), the Morgan Stanley Capital International (MSCI) World Index(2)and the Lipper Global Real Estate Funds Average(3)

	Total Returns(4)
			Average Annual
	One Year		Since Inception(8)
Portfolio — Class I(5)	41.04	%	–5.17	%
FTSE EPRA/NAREIT Developed Real  Estate Index — Net Total Return to U.S. Investors	37.89		–7.09
MSCI World Index	29.99		–2.42
Lipper Global Real Estate Funds Average	35.12		–7.92
Portfolio — Class P(5)	40.66		–5.44
FTSE EPRA/NAREIT Developed Real  Estate Index — Net Total Return to  U.S. Investors	37.89		–7.09
MSCI World Index	29.99		–2.42
Lipper Global Real Estate Funds Average	35.12		–7.92
Portfolio — Class H w/o sales charges(6)	40.59		–11.98
Portfolio — Class H with maximum 4.75% sale charges(6)	33.97		–14.12
FTSE EPRA/NAREIT Developed Real  Estate Index — Net Total Return to  U.S. Investors	37.89		–15.10
MSCI World Index	29.99		–11.95
Lipper Global Real Estate Funds Average	35.12		–13.81
Portfolio — Class L(7)	39.91		–13.10
FTSE EPRA/NAREIT Developed Real  Estate Index — Net Total Return to  U.S. Investors	37.89		–15.38
MSCI World Index	29.99		–11.81
Lipper Global Real Estate Funds Average	35.12		–14.40

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or 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 of share classes will vary due to difference in sales charges and expenses.

(1)The FTSE EPRA/NAREIT Developed Real Estate Index — Net Total Return to U.S. Investors is a market capitalization weighted index designed to reflect the stock performance of companies engaged in the North American, European and Asian real estate markets. The performance of the Index is listed in U.S. dollars and assumes reinvestment of dividends. “Net Total Return to U.S. investors” reflects a reduction in total returns after taking into account the withholding tax on dividends by certain foreign countries represented in the Index for periods after 1/31/05 (gross returns used prior to 1/31/05). The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

(2)The 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. As of June 2007, the MSCI World Index consisted 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.

(3)The Lipper Global Real Estate Funds Average tracks the performance of all funds in the Lipper Global Real Estate Funds classification. The Average, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. As of the date of this report, the Portfolio is in the Lipper Global Real Estate Funds classification.

(4)Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and reimbursements, total returns would have been lower. Fee waivers and/or expense reimbursements are voluntary and the Adviser reserves the right to commence or terminate any waiver and/or reimbursement at any time.

(5)Commenced operations on August 30, 2006.

(6)Commenced operations on January 2, 2008.

(7)       Commenced operations on June 16, 2008.

(8)       For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Index.

Portfolio Composition

	Percentage of
Classification	Total Investments
Diversified	40.6		%
Retail	18.3
Residential	12.2
Office	12.0
Other*	14.9
Short-Term Investment	2.0
Total Investments		100.0	%

*Industries representing less than 5% of total investments.

36

2009 Annual Report

December 31, 2009

Portfolio of Investments

Global Real Estate Portfolio

	Shares	Value (000)
Common Stocks (97.5%)
Australia (8.9%)
CFS Retail Property Trust REIT	2,590,745	$           4,388
Commonwealth Property Office Fund REIT	2,860,528	2,474
Dexus Property Group REIT	428,855	324
GPT Group REIT	12,142,285	6,521
Mirvac Group REIT	514,126	715
Stockland REIT	3,459,984	12,159
Westfield Group REIT	3,121,902	34,816
		61,397
Austria (0.2%)
Conwert Immobilien Invest SE (a)	89,565	1,096
Belgium (0.1%)
Befimmo SCA Sicafi REIT	10,666	941
Brazil (0.7%)
BR Malls Participacoes S.A. (a)	397,640	4,853
Canada (0.7%)
Extendicare REIT	118,480	1,078
RioCan REIT	198,515	3,768
		4,846
Finland (0.2%)
Sponda Oyj (a)	437,100	1,710
France (5.3%)
Fonciere Des Regions REIT	17,158	1,755
Gecina S.A. REIT	9,749	1,055
ICADE REIT	59,109	5,621
Klepierre REIT	74,069	3,013
Mercialys S.A. REIT	36,192	1,273
Silic REIT	19,723	2,401
Unibail-Rodamco SE REIT	99,767	21,963
		37,081
Germany (0.3%)
Alstria Office AG REIT	87,898	949
Deutsche Euroshop AG	34,648	1,176
		2,125
Hong Kong (20.4%)
China Overseas Land & Investment Ltd.	7,652,240	16,023
China Resources Land Ltd.	4,317,000	9,718
Guangzhou R&F Properties Co., Ltd., Class H	2,953,500	5,156
Hang Lung Properties Ltd.	2,811,000	10,982
Henderson Land Development Co., Ltd.	1,223,400	9,116
Hongkong Land Holdings Ltd.	4,107,000	20,212
Hysan Development Co., Ltd.	1,203,386	3,407
Kerry Properties Ltd.	2,534,220	12,796
KWG Property Holding Ltd.	828,500	632
Poly Hong Kong Investments Ltd.	1,856,000	2,301
Shimao Property Holdings Ltd.	1,392,000	2,611
Sino Land Co., Ltd.	472,294	912
Sino-Ocean Land Holdings Ltd.	520,000	476
Sun Hung Kai Properties Ltd.	3,076,700	45,653
Swire Pacific Ltd., Class A	7,000	84
Wharf Holdings Ltd.	232,000	1,327
		141,406
Italy (0.3%)
Beni Stabili S.p.A.	2,577,508	2,119
Japan (12.2%)
Japan Real Estate Investment Corp. REIT	541	3,971
Mitsubishi Estate Co., Ltd.	1,835,000	29,106
Mitsui Fudosan Co., Ltd.	1,564,000	26,264
Nippon Building Fund, Inc. REIT	711	5,386
NTT Urban Development Corp.	5,310	3,521
Sumitomo Realty & Development Co., Ltd.	862,000	16,167
		84,415
Malta (0.0%)
BGP Holdings plc (a)(d)	12,867,024	—
Netherlands (1.4%)
Corio N.V. REIT	63,442	4,333
Eurocommercial Properties N.V. CVA REIT	77,558	3,200
ProLogis European Properties (a)	220,421	1,358
Vastned Retail N.V. REIT	13,963	917
		9,808
Singapore (3.5%)
Allgreen Properties Ltd.	754,000	654
CapitaCommercial Trust REIT	2,804,000	2,320
CapitaLand Ltd.	4,327,000	12,816
CapitaMall Trust REIT	2,088,000	2,648
City Developments Ltd.	30,000	245
Keppel Land Ltd.	893,000	2,206
Suntec REIT	1,683,000	1,610
Wing Tai Holdings Ltd.	1,096,000	1,418
		23,917
Sweden (0.5%)
Castellum AB	83,686	844
Hufvudstaden AB, Class A	385,332	2,912
		3,756
Switzerland (0.9%)
Allreal Holding AG	4,525	538
PSP Swiss Property AG (Registered) (a)	101,164	5,725
		6,263
United Kingdom (7.3%)
Big Yellow Group plc REIT (a)	359,784	2,052
British Land Co. plc REIT	857,494	6,573
Capital & Regional plc (a)	1,667,321	912
Derwent London plc REIT	112,329	2,373
Development Securities plc	188,593	1,040
Grainger plc	1,009,580	2,068
Great Portland Estates plc REIT	314,008	1,455
Hammerson plc REIT	764,082	5,189
Land Securities Group plc REIT	728,340	7,982
Liberty International plc REIT	452,030	3,723
LXB Retail Properties PLC (a)	865,005	1,355

The accompanying notes are an integral part of the financial statements. 37

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Global Real Estate Portfolio

	Shares	Value (000)
United Kingdom (cont’d)
Minerva plc (a)	552,296	$        669
Quintain Estates & Development plc (a)	2,290,776	2,201
Safestore Holdings plc	937,454	2,497
Segro plc REIT	935,588	5,164
Shaftesbury plc REIT	121,871	773
ST Modwen Properties plc (a)	426,706	1,325
Unite Group plc (a)	634,607	3,069
		50,420
United States (34.6%)
Acadia Realty Trust REIT	137,920	2,327
AMB Property Corp. REIT	66,341	1,695
Apartment Investment & Management Co., Class A REIT	38,110	607
Assisted Living Concepts, Inc., Class A (a)	84,049	2,216
AvalonBay Communities, Inc. REIT	149,270	12,257
Boston Properties, Inc. REIT	174,745	11,720
Brookfield Properties Corp.	809,422	9,810
Cabot Industrial Value Fund III, LP (a)(d)(i)(l)	1,324	662
Camden Property Trust REIT	151,233	6,408
Capital Senior Living Corp. (a)	68,580	344
Colony Financial, Inc. REIT	63,450	1,293
Cousins Properties, Inc. REIT	269,603	2,057
CreXus Investment Corp. REIT (a)	58,750	820
DCT Industrial Trust, Inc. REIT	424,280	2,130
Digital Realty Trust, Inc. REIT	42,720	2,148
Duke Realty Corp. REIT	107,760	1,311
Equity Lifestyle Properties, Inc. REIT	116,291	5,869
Equity Residential REIT	687,703	23,231
Essex Property Trust, Inc. REIT	2,250	188
Exeter Industrial Value Fund, LP (a)(d)(i)(l)	1,300,000	910
Federal Realty Investment Trust REIT	76,624	5,189
Forest City Enterprises, Inc., Class A (a)	570,041	6,715
HCP, Inc. REIT	285,796	8,728
Healthcare Realty Trust, Inc. REIT	253,557	5,441
Host Hotels & Resorts, Inc. REIT (a)	803,809	9,380
Keystone Industrial Fund II, LP (a)(d)(i)(l)	18,750	19
Kilroy Realty Corp. REIT	26,030	798
Kite Realty Group Trust REIT	109,880	447
Liberty Property Trust REIT	137,734	4,409
LTC Properties, Inc. REIT	21,230	568
Macerich Co. (The) REIT	18,694	672
Mack-Cali Realty Corp. REIT	126,638	4,378
Morgans Hotel Group Co. (a)	203,970	924
Nationwide Health Properties, Inc. REIT	8,150	287
Parkway Properties, Inc. REIT	252	5
Pebblebrook Hotel Trust (a)	42,370	933
Post Properties, Inc. REIT	204,111	4,001
PS Business Parks, Inc. REIT	40,123	2,008
Public Storage REIT	155,665	12,679
Regency Centers Corp. REIT	303,321	10,634
Retail Opportunity Investments Corp. (a)	135,600	1,371
Senior Housing Properties Trust REIT	390,652	8,544
Simon Property Group, Inc. REIT	340,524	27,174
Sovran Self Storage, Inc. REIT	16,189	578
Starwood Hotels & Resorts Worldwide, Inc.	344,295	12,591
Starwood Property Trust, Inc. REIT	89,320	1,687
Taubman Centers, Inc. REIT	45,655	1,640
Ventas, Inc. REIT	115,140	5,036
Vornado Realty Trust REIT	219,931	15,382
		240,221
Total Common Stocks (Cost $740,471)		676,374
	No. of Warrants
Warrants (0.0%)
France (0.0%)
Fonciere Des Regions, expires 12/31/10 (a) (Cost $—)	17,158	15
	Shares
Short-Term Investment (2.0%)
Investment Company (2.0%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o) (Cost $13,984)	13,984,474	13,984
Total Investments (99.5%) (Cost $754,455) (v)		690,373
Other Assets in Excess of Liabilities (0.5%)		3,244
Net Assets (100%)		$693,617

(a)	Non-income producing security.
(d)	At December 31, 2009, the Portfolio held approximately $1,591,000 of fair valued securities, representing 0.2% of net assets. These securities have been fair valued as determined in good faith under procedures established by and under the general supervision of the Portfolio’s Directors.
(i)	Restricted security valued at fair value and not registered under the Securities Act of 1933, Cabot Industrial Value Fund III, LP was acquired between 12/08 - 11/09 and has a current cost basis of $662,000. Exeter Industrial Value Fund, LP was acquired between 11/07 - 12/09 and has a current cost basis of $1,300,000. Keystone Industrial Fund II, LP was acquired in 1/09 and has a current cost basis of $19,000. At December 31, 2009, these securities had an aggregate market value of $1,591,000 representing 0.22% of net assets.
(l)	Security has been deemed illiquid at December 31, 2009.
(o)	See Note G to the financial statements regarding investment in Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class.
(v)	The approximate market value and percentage of total investments, $431,322,000 and 62.5%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A within the Notes to Financial Statements.
CVA	Certificaten Van Aandelen
REIT	Real Estate Investment Trust

38 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Global Real Estate Portfolio

Foreign Currency Exchange Contract Information:

The Portfolio had the following foreign currency exchange contract(s) open at period end:

									Net
Currency					In				Unrealized
to					Exchange				Appreciation
Deliver		Value		Settlement	For		Value		(Depreciation)
(000)		(000)		Date	(000)		(000)		(000)
GBP	94		$153	1/4/10	EUR	104		$150		$(3	)
JPY	33,426		359	1/5/10	USD	363		363		4
USD	201		201	1/4/10	HKD	1,562		201		—	@
			$713					$714		$ 1

EUR	—	Euro
GBP	—	British Pound
HKD	—	Hong Kong Dollar
JPY	—	Japanese Yen
USD	—	United States Dollar

Fair Value Measurement Information:

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2009. (See Note A-11 to the financial statements for further information regarding fair value measurement.)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)		Total (000)
Assets:
Common Stocks
Diversified	$  24,154	$256,459	$     —		$280,613
Health Care	32,242	—	—		32,242
Industrial	3,825	6,522	1,591		11,938
Industrial\Office	7,728	—	—		7,728
Lodging\Resorts	23,828	—	—		23,828
Office	26,711	56,356	—		83,067
Residential	52,561	31,516	—		84,077
Retail	53,222	72,836	—		126,058
Self Storage	13,257	4,549	—		17,806
Specialty	5,948	3,069	—	†	9,017
Total Common Stocks	243,476	431,307	1,591		676,374
Foreign Currency Exchange Contracts	—	4	—		4
Short-Term Investment Investment Company	13,984	—	—		13,984
Warrants	—	15	—		15
Total Assets	257,460	431,326	1,591		690,377
Liabilities:
Foreign Currency Exchange Contracts	—	3	—		3
Total Liabilities	—	3	—		3
Total	$257,460	$431,323	$1,591		$690,374

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

	Common Stocks (000)
Balance as of 12/31/08	$   911
Accrued discounts/premiums	—
Realized gain (loss)	—
Change in unrealized appreciation (depreciation)	(390	)
Net purchases (sales)	1,070
Net transfers in and/or out of Level 3	—
Balance as of 12/31/09	$1,591
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at Level 3 at 12/31/09.	$  (390	)

The accompanying notes are an integral part of the financial statements. 39

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview

International Equity Portfolio

The International Equity Portfolio (the “Portfolio”) seeks long-term capital appreciation by investing primarily in equity securities of non-U.S. issuers. Foreign investing involves certain risks, including currency fluctuations and controls, restrictions on foreign investments, less governmental supervision and regulation, less liquidity and the potential for market volatility and political instability. The risks of investing in emerging-market countries are greater than the risks generally associated with foreign investments.

Performance

For the year ended December 31, 2009, the Portfolio had a total return based on net asset value and reinvestment of distributions per share of 21.56% net of fees, for Class I shares. The Portfolio’s Class I shares underperformed against its benchmark, the Morgan Stanley Capital International (MSCI) EAFE Index (the “Index”) which returned 31.78%.

Factors Affecting Performance

·A central theme of dollar weakness against most currencies magnified the 24.7% local return of the MSCI EAFE Index (the “Index”) to a barnstorming 31.8% increase for the year in U.S. dollar terms.

·The standout winning countries for the year were the commodity-based countries: Australia (up 76.4% in U.S. dollar terms) and the Nordic countries (up 47.1%). The MSCI Emerging Markets Index even managed to top those countries, up 78.5%. The Euro bloc slightly underperformed (up 31.0%), weighed down somewhat by Ireland (up 12.3%), Greece and Germany (both up 25.1%). Despite its somewhat rickety economy, the U.K. managed to close the year up 43.3%. Japan put in the worst performance, up only 6.3% for the year.

·The relative underperformance of the Portfolio for the year generally reflects a bias towards higher quality in what has been an enormous lower quality beta rally. More specifically, the largest contributor to underperformance was our positioning in financials, where we were squeezed both ways from being overweight moribund Japanese financials and underweight rocketing Anglo-Saxon financials. Cash also detracted from performance, particularly during the spectacular rally from March through September. These more than offset positive contributions from stock selection in industrials and utilities, as well as stock selection and an overweight in materials.

Management Strategies

·The key question for 2010 is that of the normalcy of the recovery seen in the over-indebted Anglo-Saxon economies (especially the U.S.) following massive intervention by governments and central banks to avoid systemic collapse.

·Based on our usual yardstick of valuation, the market clearly believes that such Western economies will see a fairly normal cyclical recovery and has rated stocks accordingly, particularly banks, industrials and certain materials stocks. A normal cyclical recovery in the U.S. would generally involve a recovery in consumer and investment (i.e., capital expenditure) demand, re-leveraging and consequent tightening of monetary policy as the early signs of inflation start to pick up. While we would concede that a recovery in investment spending from current deeply depressed levels is probably overdue, this in itself is not enough to sustainably power the U.S. economy given its still very significant reliance on consumer expenditure as a percent of GDP. It is worth remembering that consumption as a whole has only fallen slightly in real terms over the last year or so, and that personal disposable income is at an all-time high as a percent of GDP. The drop of U.S. GDP over the last year has been primarily driven by a sharp decline in investment and the shrinking trade deficit, not a humiliated consumer. Also worth noting is the U.S. government’s net personal income tax take from GDP has fallen to all-time lows (6% of GDP versus around 13% historically).

·The evidence still suggests a backdrop of deleveraging and sluggish personal income growth, which indicates a difficult consumer backdrop for a probably extended period. If this remains the case going forward (as we believe it will), the U.S. faces a long period of sluggish top-line growth and, consequently, low interest rates for some time to come.

·From a valuation standpoint, we are not overwhelmed by the galaxy of opportunities on offer. In broad terms, we are concerned that the principal areas of potential danger are banks and industrials. For banks, we still do not find them generally attractive following their massive rebound from the abyss, believing that the market continues to overvalue future potential return on equity. The

40

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

International Equity Portfolio

only large-scale pocket of potential value we see at the moment remains Japanese banks, although to date they have behaved precisely like value traps, not withstanding a recent bounce. We have very selectively added to certain Western banks and insurance companies where we believe risks appear less potentially hair-raising than they had been in the middle of the financial meltdown.

·Industrials, particularly European industrials, appear to be priced for perfection. They have clearly done a better job than we expected preserving margins by heroic cost cutting but now seem to be valued based on earnings revisions driven by resurgent top lines, which we consider highly unlikely. We think this sector will face an overdue appointment with reality in 2010 as the market takes on board low-capacity utilization around the world in most industries, following generally record levels of investment by corporates and governments in the last five years. This should become evident in a margin shock as finite cost cutting potential meets a sluggish top line.

·In our view, the principal areas of interest from a valuation standpoint are high quality and Japan. Getting both sides of this right — avoiding the implosions and riding the upward horses — will be critical for performance in 2010.

·Japan — as usual — gives good reason as to why it basks in the (low) esteem it currently enjoys in the eyes of foreign investors. We have decidedly mixed feelings about Japan, but we like the historically low valuation levels as a starting point and continue to look for the opportunity to buy some good companies cheaply.

·We also notice the recent pick-up in the Japanese lead indicator, which may focus the attention of predominantly departed foreign investors that there is life yet stirring in the Japanese undergrowth.

·We continue to like consumer staples and high quality companies generally, which look very undervalued against 10-year bond yields (particularly if interest rates do indeed remain low for much longer than most expect), and those companies that are in fairly low risk businesses in somewhat shark-infested economic waters.

·Clearly, 2009 was not an ideal backdrop to be running a lower beta, risk averse portfolio, with two back-to-back quarters fueling one of the biggest beta rallies ever. However, we think there is generally good absolute and relative value in the Portfolio which we believe should do well if our assessment of a potentially more challenging 2010 turns out to be correct.

*  Minimum Investment

In accordance with SEC regulations, Portfolio’s performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class P shares will vary from the Class I shares based upon its different inception date and will be negatively impacted by additional fees assessed to that class.

41

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

International Equity Portfolio

Performance Compared to the Morgan Stanley Capital International (MSCI) EAFE Index(1)and the Lipper International Multi-Cap Core Funds Index(2)

	Total Returns(3)
			Average Annual
	One Year		Five Years		Ten Years		Since Inception(6)
Portfolio — Class I(4)	21.56	%	3.09	%	5.79	%	9.52	%
MSCI EAFE Index	31.78		3.54		1.17		4.28
Lipper International Multi-Cap Core Funds Index	33.71		4.58		2.27		7.02
Portfolio — Class P(5)	21.18		2.84		5.54		8.63
MSCI EAFE Index	31.78		3.54		1.17		4.48
Lipper International Multi-Cap Core Funds Index	33.71		4.58		2.27		6.55

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or 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 of share classes will vary due to difference in expenses.

(1)The Morgan Stanley Capital International (MSCI) EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the international equity market performance of developed markets, excluding the US & Canada. 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 EAFE Index curently consists of 21 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.

(2)The Lipper International Multi-Cap Core Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper International Multi-Cap Core Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index. As of the date of this report, the Portfolio is in the Lipper International Multi-Cap Core Funds classification.

(3)Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and reimbursements, total returns would have been lower. Fee waivers and/or expense reimbursements are voluntary and the Adviser reserves the right to commence or terminate any waiver and/or reimbursement at any time.

(4)Commenced operations on August 4, 1989.

(5)Commenced operations on January 2, 1996.

(6)For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Index.

Portfolio Composition*

Classification	Percentage of Total Investments
Pharmaceuticals	9.4		%
Oil, Gas & Consumable Fuels	8.7
Food Products	7.7
Tobacco	7.5
Insurance	5.8
Electric Utilities	5.6
Other**	52.7
Short-Term Investment		2.6
Total Investments		100.0	%

*Percentages indicated are based upon total investments (excluding Securities held as collateral on Loaned Securities) as of December 31, 2009.

**Industries representing less than 5% of total investments.

42

2009 Annual Report

December 31, 2009

Portfolio of Investments

International Equity Portfolio

	Shares	Value (000)
Common Stocks (97.3%)
Australia (3.7%)
AMP Ltd.	8,958,548	$        53,955
Orica Ltd.	290,811	6,741
OZ Minerals Ltd. (a)	35,505,657	37,126
Santos Ltd.	4,618,916	58,161
		155,983
Austria (0.7%)
Telekom Austria AG (c)	2,213,436	31,603
Canada (1.0%)
Cenovus Energy, Inc.	746,020	18,903
EnCana Corp.	746,020	24,331
		43,234
Denmark (0.3%)
Novo-Nordisk A/S, Class B	187,077	11,970
France (8.3%)
ArcelorMittal	521,340	23,645
Electricite de France (c)	1,649,450	98,151
France Telecom S.A.	1,491,993	37,251
Legrand S.A. (c)	1,777,841	49,575
Total S.A.	1,030,654	66,046
Vallourec S.A. (c)	445,816	81,088
		355,756
Germany (5.4%)
Bayer AG (c)	1,464,358	117,039
E.ON AG (c)	1,854,716	77,430
RWE AG (c)	384,145	37,330
		231,799
Greece (0.5%)
OPAP S.A.	859,273	18,811
Hong Kong (0.5%)
Esprit Holdings Ltd. (c)	3,461,343	22,781
Ireland (1.8%)
CRH plc	2,824,534	76,510
Italy (1.6%)
ENI S.p.A.	2,696,418	68,648
Japan (23.4%)
Asatsu-DK, Inc. (c)	673,085	13,216
Astellas Pharma, Inc.	1,749,900	65,181
Chiba Bank Ltd. (The) (c)	5,631,000	33,604
Hoya Corp. (c)	1,340,000	35,524
Inpex Corp.	3,076	23,087
JSR Corp. (c)	1,586,000	32,150
Kao Corp.	2,516,000	58,736
Keyence Corp.	346,310	71,396
Mitsubishi Corp.	1,882,900	46,814
Mitsubishi Electric Corp. (a)	5,463,000	40,334
Mitsubishi Estate Co., Ltd.	3,637,000	57,688
Mitsui OSK Lines Ltd.	4,550,391	23,886
Mitsui Sumitomo Insurance Group Holdings, Inc. (c)	2,567,800	65,170
NGK Spark Plug Co., Ltd. (c)	3,708,000	41,745
Nintendo Co., Ltd.	114,400	27,120
Nitto Denko Corp.	616,300	21,962
NTT DoCoMo, Inc.	28,101	39,145
Rohm Co., Ltd.	506,000	32,859
Sega Sammy Holdings, Inc. (c)	1,384,100	16,496
Sekisui House Ltd.	5,225,000	46,864
Sumitomo Mitsui Financial Group, Inc. (c)	905,732	25,822
Sumitomo Trust & Banking Co.,Ltd. (The)	9,840,000	47,836
T&D Holdings, Inc.	2,637,850	53,763
Taiyo Nippon Sanso Corp. (c)	1,959,000	20,777
TDK Corp.	402,200	24,525
Toyota Motor Corp.	841,600	35,361
		1,001,061
Netherlands (4.6%)
Akzo Nobel N.V.	676,740	44,606
ING Groep N.V. CVA (a)	2,160,406	20,885
Unilever N.V. CVA (c)	4,066,612	132,511
		198,002
Spain (1.2%)
Telefonica S.A.	1,838,113	51,231
Switzerland (8.4%)
Nestle S.A. (Registered)	3,110,317	151,108
Novartis AG (Registered)	1,936,630	105,512
Roche Holding AG (Genusschein)	597,495	101,644
		358,264
United Kingdom (34.7%)
Admiral Group plc	1,253,882	23,919
Barclays plc	12,267,281	54,058
BG Group plc	3,005,885	53,829
BHP Billiton plc	1,830,261	58,464
BP plc	6,277,454	60,710
British American Tobacco plc	4,780,554	155,084
Bunzl plc	3,928,566	42,589
Cadbury plc	3,551,770	45,705
Diageo plc	2,843,275	49,585
Hays plc	32,309,791	53,864
Imperial Tobacco Group plc	5,212,716	164,280
Intercontinental Hotels Group plc	2,326,765	33,297
Lloyds Banking Group plc (a)	23,967,102	19,241
Lonmin plc (a)	491,188	15,249
National Grid plc	3,233,178	35,342
Prudential plc	5,205,655	53,030
Reckitt Benckiser Group plc	2,455,211	133,018
Reed Elsevier plc	10,062,510	82,631
Scottish & Southern Energy plc	3,482,754	65,083
Smiths Group plc	4,233,953	69,278
Vodafone Group plc	47,466,834	109,919
WM Morrison Supermarkets plc	8,897,220	39,666
Wolseley plc (a)	3,423,953	68,496
		1,486,337

The accompanying notes are an integral part of the financial statements. 43

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

International Equity Portfolio

	Shares	Value (000)
United States (1.2%)
Dr. Pepper Snapple Group, Inc. (c)	1,807,297	$     51,147
Total Common Stocks (Cost $3,946,137)		4,163,137
Short-Term Investments (10.1%)
Securities held as Collateral on Loaned Securities (7.5%)
Investment Company (6.5%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o)	277,981,912	277,982
	Face Amount (000)
Repurchase Agreement (1.0%)
Deutsche Bank Securities, Inc., 0.01%, dated 12/31/09,due 1/4/10, repurchase price $43,786; fully collateralized by U.S. government agency securities at the date of this Portfolio of Investments as follows: Federal Home Loan Mortgage Corp., Adjustable Rate Mortgages, 2.63% to 6.56%, due 11/1/22 to 6/1/38; Federal Home Loan Mortgage Corp., Gold Pool, Fixed Rate Mortgages, 3.50% to 7.50%, due 8/1/13 to 2/1/48; Federal National Mortgage Association, Adjustable Rate Mortgages, 2.52% to 6.29%, due 3/1/18 to 9/1/47; Federal National Mortgage Association, Fixed Rate Mortgages, 4.31% to 4.92%, due 6/1/19 to 12/1/19; Government National Mortgage Association, Adjustable Rate Mortgages, 0.86% to 4.38%, due 8/20/27 to 12/20/58; Government National Mortgage Association, Fixed Rate Mortgages, 3.50% to 7.50%, due 10/15/18 to 5/15/44, valued at $44,662.	$       43,786	43,786
		321,768
	Shares
Investment Company (2.6%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o)	112,240,514	112,240
Total Short-Term Investments (Cost $434,008)		434,008
Total Investments (107.4%) (Cost $4,380,145) — including $307,513 of Securities Loaned (v)		4,597,145
Liabilities in Excess of Other Assets (-7.4%)		(316,246	)
Net Assets (100%)		$4,280,899

(a)	Non-income producing security.
(c)	All or a portion of security on loan at December 31, 2009.
(o)	See Note G to the financial statements regarding investment in Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class.
(v)	The approximate market value and percentage of total investments, $4,068,756,000 and 88.5%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Financial Statements.
CVA	Certificaten Van Aandelen

Foreign Currency Exchange Contracts Information:

The Portfolio had the following foreign currency exchange contract(s) open at period end:

									Net
Currency					In				Unrealized
to					Exchange				Appreciation
Deliver		Value		Settlement	For		Value		(Depreciation)
(000)		(000)		Date	(000)		(000)		(000)
GBP	228,707		$369,392	1/15/10	EUR	252,252		$361,616		$(7,776	)
JPY	113		1	1/4/10	USD	1		1		—	@
JPY	8,051		87	1/5/10	USD	88		88		1
JPY	10,853,000		116,534	1/12/10	USD	124,947		124,947		8,413
JPY	7,010,000		75,270	1/12/10	USD	79,725		79,725		4,455
			$561,284					$566,377		$ 5,093

EUR	—	Euro
GBP	—	British Pound
JPY	—	Japanese Yen
USD	—	United States Dollar
@		Value is less than $500.

Fair Value Measurement Information:

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2009. (See Note A-11 to the financial statements for further information regarding fair value measurement.)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)	Total(000)
Assets:
Common Stocks
Auto Components	$          —	$      41,745	$—	$      41,745
Automobiles	—	35,361	—	35,361
Beverages	51,147	49,585	—	100,732
Chemicals	—	126,236	—	126,236
Commercial Banks	—	180,561	—	180,561
Construction Materials	—	76,510	—	76,510
Diversified Financial Services	—	20,885	—	20,885
Diversified Telecommunication Services	—	120,085	—	120,085
Electric Utilities	—	240,664	—	240,664

44 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

International Equity Portfolio

Fair Value Measurement Information: (cont’d)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)	Total(000)
Common Stocks (cont’d)
Electrical Equipment	$          —	$     89,909	$—	$     89,909
Electronic Equipment, Instruments & Components	—	131,445	—	131,445
Food & Staples Retailing	—	39,666	—	39,666
Food Products	—	329,324	—	329,324
Hotels, Restaurants & Leisure	—	52,108	—	52,108
Household Durables	—	46,864	—	46,864
Household Products	—	191,754	—	191,754
Industrial Conglomerates	—	69,278	—	69,278
Insurance	—	249,837	—	249,837
Leisure Equipment & Products	—	16,496	—	16,496
Machinery	—	81,088	—	81,088
Marine	—	23,886	—	23,886
Media	—	95,847	—	95,847
Metals & Mining	—	134,484	—	134,484
Multi-Utilities	—	72,672	—	72,672
Oil, Gas & Consumable Fuels	43,234	330,481	—	373,715
Pharmaceuticals	—	401,346	—	401,346
Professional Services	—	53,864	—	53,864
Real Estate Management & Development	—	57,688	—	57,688
Semiconductors & Semiconductor Equipment	—	32,859	—	32,859
Software	—	27,120	—	27,120
Specialty Retail	—	22,781	—	22,781
Tobacco	—	319,364	—	319,364
Trading Companies & Distributors	—	157,899	—	157,899
Wireless Telecommunication Services	—	149,064	—	149,064
Total Common Stocks	94,381	4,068,756	—	4,163,137
Foreign Currency Exchange Contracts	—	12,869	—	12,869
Short-Term Investments Investment Company	390,222	—	—	390,222
Repurchase Agreement	—	43,786	—	43,786
Total Short-Term Investments	390,222	43,786	—	434,008
Total Assets	484,603	4,125,411	—	4,610,014
Liabilities:
Foreign Currency Exchange Contracts	—	7,776	—	7,776
Total Liabilities	—	7,776	—	7,776
Total	$484,603	$4,117,635	$—	$4,602,238

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

	Common Stocks (000)
Balance as of 12/31/08	$ 18,265
Accrued discounts/premiums	—
Realized gain (loss)	—
Change in unrealized appreciation (depreciation)	—
Net purchases (sales)	—
Net transfers in and/or out of Level 3	(18,265	)
Balance as of 12/31/09	$       —
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at Level 3 at 12/31/09.	$       —

The accompanying notes are an integral part of the financial statements. 45

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview

International Growth Equity Portfolio

The International Growth Equity Portfolio (the “Portfolio”) seeks long-term capital appreciation, with a secondary objective of income by investing primarily in a diversified portfolio of equity securities of issuers located in countries other than the United States. Foreign investing involves certain risks, including currency fluctuations and controls, restrictions on foreign investments, less governmental supervision and regulation, less liquidity and the potential for market volatility and political instability. The risks of investing in emerging-market countries are greater than the risks generally associated with foreign investments.

Performance

For the year ended December 31, 2009, the Portfolio had a total return based on net asset value and reinvestment of distributions per share of 38.78%, net of fees, for Class I shares. The Portfolio’s Class I shares outperformed against its benchmark, the Morgan Stanley Capital International (MSCI) EAFE Index (the “Index”) which returned 31.78%.

Factors Affecting Performance

·International equity markets experienced significant price increases in 2009 fueled by the global monetary and fiscal stimulus put in place following 2008’s global financial maelstrom, finishing the year up 31.78% as measured by the MSCI EAFE Index.

·The Index’s return to positive territory began during the first quarter and continued throughout the year. The downslide in 2008 continued into the first quarter with the Index returning —13.94% for the quarter and bottoming on March 9, 2009. Both the second and third quarters of 2009 saw sizeable gains in the Index, increasing 25.43% and 19.47%, respectively. While second quarter returns were driven by broad gains in all EAFE sectors and regions and an even larger gain in the emerging markets, in the third quarter highly geared companies with more operational leverage outperformed with initial signs of improvement in the developed markets. During the fourth quarter, investors appeared to return their focus to firms’ fundamentals; as such, the Index increased 2.18% for the quarter with the MSCI EAFE Growth Index outperforming the MSCI EAFE Value Index by over 3%.

·For the year, all regional benchmarks had positive returns. Japan increased the least of the regions at 6.25%. Japan’s performance is directly related to the moribund Japanese economy and the stock market having less to recover as it was the region that decreased the least in 2008. Within developed markets, the Asia Pacific Ex-Japan region increased the most for the year (72.81%). Emerging markets, as measured by the MSCI Emerging Markets Index, experienced a significant rebound during the year (78.51%). EAFE sector returns were up universally for the year. The more cyclical sectors outperformed with materials the best performing (69.98%), and financials (38.65%) and consumer discretionary (37.96%) tied for a distant second. Utilities was the worst performing sector, increasing the least (5.26%). The U.S. dollar decreased against most foreign currencies including 2.50% versus the euro and 10.81% versus the pound; however, it gained 2.63% versus the yen for the year.

·The Portfolio outperformed in four out of five regions for 2009. Stock selection in Europe, Japan and emerging markets was the main driver of outperformance. Within Japan, the strongest performers were the exporters while the domestically focused companies underperformed due to the lagging economy and shrinking population. In Europe, performance was led by a position in Norway’s largest publicly traded insurer. Shares in the stock gained as the company continued to realize cost savings and synergies from an acquisition and from an increase in the value of its investments as financial markets strengthened. Within emerging markets, a Chinese internet company was the Portfolio’s top performer for the year. The domestically focused company has consistently grown revenue and earnings throughout the year, building on its leading social networking business and by introducing internet gaming.

·Holdings in North America (Canada) were also solid positive contributors for the year, driven by a holding in the world’s largest producer of uranium. Shares increased based on the improving outlook for nuclear power demand, the company’s consistent revenue and earnings growth, and the sale of its non-core gold business.

·In Asia ex-Japan, the Portfolio’s underweighting led to underperfomance due to the region’s strong recovery, particularly in Australia.

46

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

International Growth Equity Portfolio

·The Portfolio outperformed in eight out of ten sectors for 2009, led by holdings in information technology and industrials. Within information technology, gains were driven by the aforementioned Chinese internet company and a Japanese specialty glass manufacturer that appreciated during the year as a result of increased demand and higher capacity utilization. In industrials, shares of a global leader in elevator and escalator production outperformed due to growth in its higher-margin modernization and service business and its growing market share in Asian countries with more stable economies. Additionally, a holding in the world’s largest maker of oil rigs increased during the year due to a doubling of profits in the second quarter and third quarter earnings that beat analysts’ expectations, combined with an increase in contracts. However, the Portfolio underperformed the Index in materials, where an underweight position dampened relative performance, and in consumer discretionary.

Management Strategies

·After an apocalyptic 2008 in the financial markets, the fiscal and monetary stimulus initiated by governments worldwide during the fourth quarter of 2008 began to take effect and stimulate growth in 2009. While stimulative policies continue to be introduced, for example Japan’s $80 billion stimulus package announced December 8, 2009, positive trends in economic indicators appear to signal the broader recovery is gaining momentum and is beginning to be driven by real demand. Although China continues to be the recovery leader with reports of increased industrial production, imports and vehicle sales, the U.S. and Europe are also showing signs of positive growth. In the U.S., banks have been repaying TARP (Troubled Asset Relief Program) funds, jobless claims decreased in December and the ISM Manufacturing Index has increased. While Europe is expected to recover more slowly than the U.S., Europe’s manufacturing industry expanded for a second month in December. As noted in previous commentaries, Australia continues to see a strong recovery in its economy.

·As 2010 progresses, we will watch to see if the positive trends continue. The markets may face considerable headwinds such as premature stimulus pullback, global risk of inflationary pressures and U.S. and pan-European governmental fiscal crunches. While we are clearly in a global recovery, many strategists think the equity markets have discounted the recovery to a large extent. In this environment, we continue to believe that our investment strategy of bottom-up stock selection focused on high quality, growth equities will be critical for generating long-term outperformance.

*      Minimum Investment

**    Commenced operations on December 27, 2005.

In accordance with SEC regulations, Portfolio’s performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class P shares will vary from the Class I shares based upon its different inception date and will be negatively impacted by additional fees assessed to that class.

Performance Compared to the Morgan Stanley Capital International (MSCI) EAFE Index(1)and the Lipper International Large-Cap Growth Funds Index(2)

	Total Returns(3)
			Average Annual
	One Year		Since Inception(5)
Portfolio — Class I(4)	38.78	%	1.03	%
MSCI EAFE Index	31.78		1.07
Lipper International Large-Cap Growth Funds Index	31.87		1.90
Portfolio — Class P(4)	38.46		0.79
MSCI EAFE Index	31.78		1.07
Lipper International Large-Cap Growth Funds Index	31.87		1.90

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end

47

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

International Growth Equity Portfolio

performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or 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 of share classes will vary due to difference in expenses.

(1)The Morgan Stanley Capital International (MSCI) EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the international equity market performance of developed markets, excluding the US & Canada. 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 EAFE Index currently consists of 21 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.

(2)The Lipper International Large-Cap Growth Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper International Large-Cap Growth Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index. As of the date of this report, the Portfolio is in the Lipper International Large-Cap Growth Funds classification.

(3)Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and reimbursements, total returns would have been lower. Fee waivers and/or expense reimbursements are voluntary and the Adviser reserves the right to commence or terminate any waiver and/or reimbursement at any time.

(4)Commenced operations on December 27, 2005.

(5)For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Indexes.

Portfolio Composition*

Classification	Percentage of Total Investments
Commercial Banks	12.2		%
Oil, Gas & Consumable Fuels	8.3
Insurance	6.2
Pharmaceuticals	5.9
Other**	65.9
Short-Term Investment		1.5
Total Investments		100.0	%

*Percentages indicated are based upon total investments (excluding Securities held as collateral on Loaned Securities) as of December 31, 2009.

**Industries representing less than 5% of total investments.

48

2009 Annual Report

December 31, 2009

Portfolio of Investments

International Growth Equity Portfolio

	Shares	Value (000)
Common Stocks (98.3%)
Australia (4.0%)
BHP Billiton Ltd.	27,850	$         1,067
CSL Ltd.	27,962	813
Westpac Banking Corp.	37,046	834
		2,714
Austria (1.4%)
Vienna Insurance Group	18,415	946
Belgium (1.1%)
Groupe Bruxelles Lambert S.A. (c)	7,663	721
Canada (2.7%)
Cameco Corp.	33,326	1,081
EnCana Corp.	23,294	760
		1,841
Denmark (0.9%)
Vestas Wind Systems A/S (a)	9,737	596
Egypt (0.9%)
Orascom Construction Industries GDR	13,142	611
Finland (3.4%)
Fortum Oyj	43,992	1,192
Kone Oyj, Class B	25,741	1,100
		2,292
France (8.4%)
ArcelorMittal	27,955	1,268
AXA S.A.	37,365	884
BNP Paribas	17,001	1,341
LVMH Moet Hennessy Louis Vuitton S.A. (c)	8,142	914
Total S.A.	19,196	1,230
		5,637
Germany (4.6%)
Bayer AG	10,544	843
Deutsche Bank AG (Registered) (c)	13,845	976
Linde AG	10,776	1,297
		3,116
Greece (2.2%)
Coca-Cola Hellenic Bottling Co. S.A.	34,186	779
National Bank of Greece S.A. (a)	28,560	728
		1,507
Hong Kong (6.8%)
China Construction Bank Corp., Class H (c)	983,531	837
China Resources Power Holdings Co., Ltd.	383,046	758
CNOOC Ltd.	699,294	1,089
Li & Fung Ltd.	200,000	823
Tencent Holdings Ltd.	48,113	1,037
		4,544
India (1.1%)
Reliance Industries Ltd.	32,355	753
Ireland (1.5%)
Ryanair Holdings plc ADR (a)	36,982	992
Israel (1.7%)
Teva Pharmaceutical Industries Ltd. ADR	20,717	1,164
Italy (1.0%)
ENI S.p.A.	26,800	682
Japan (18.0%)
Benesse Holdings, Inc.	15,653	654
FamilyMart Co., Ltd. (c)	19,500	575
Fast Retailing Co., Ltd.	7,144	1,333
Honda Motor Co., Ltd.	21,500	727
Jupiter Telecommunications Co., Ltd.	860	852
Komatsu Ltd.	42,398	884
Kurita Water Industries Ltd. (c)	26,200	819
Nidec Corp.	11,070	1,018
Nippon Electric Glass Co., Ltd.	87,000	1,187
Rakuten, Inc.	1,184	900
Shin-Etsu Chemical Co., Ltd.	16,700	941
Shionogi & Co., Ltd. (c)	33,381	722
Sony Financial Holdings, Inc.	198	516
Stanley Electric Co., Ltd.	47,080	947
		12,075
Luxembourg (1.2%)
Millicom International Cellular S.A.	10,833	799
Mexico (1.3%)
America Movil S.A.B. de C.V., L, Class L ADR	18,390	864
Norway (1.3%)
Storebrand ASA (a)	127,364	864
Portugal (2.3%)
Banco Espirito Santo S.A. (Registered)	121,747	791
Jeronimo Martins SGPS S.A.	77,015	766
		1,557
Singapore (3.2%)
DBS Group Holdings Ltd.	128,646	1,399
Keppel Corp. Ltd.	129,470	753
		2,152
South Korea (0.8%)
LG Electronics, Inc.	5,140	533
Spain (2.9%)
Banco Santander S.A.	67,066	1,102
Red Electrica Corporacion S.A.	14,747	817
		1,919
Sweden (2.7%)
Investor AB, Class B (c)	44,715	827
Tele2 AB, Class B	62,234	953
		1,780

The accompanying notes are an integral part of the financial statements. 49

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

International Growth Equity Portfolio

	Shares	Value (000)
Switzerland (7.0%)
Nestle S.A. (Registered)	29,035	$     1,411
Roche Holding AG (Genusschein)	7,149	1,216
SGS S.A. (Registered)	953	1,241
Syngenta AG (Registered)	3,092	866
		4,734
United Kingdom (15.9%)
Aggreko plc	60,359	899
Autonomy Corp. plc (a)	32,262	787
Cobham plc	240,684	970
Prudential plc	96,013	978
Reckitt Benckiser Group plc	24,475	1,326
SABMiller plc	33,076	970
Smith & Nephew plc	89,497	919
Standard Chartered plc	46,218	1,157
Tesco plc	152,647	1,049
Vedanta Resources plc (c)	22,184	917
Vodafone Group plc	299,042	692
		10,664
Total Common Stocks (Cost $64,558)		66,057
Short-Term Investments (9.1%)
Securities held as Collateral on Loaned Securities (7.6%)
Investment Company (6.6%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o)	4,413,480	4,413
	Face Amount (000)
Repurchase Agreement (1.0%)
Deutsche Bank Securities, Inc., 0.01%, dated 12/31/09, due 1/4/10, repurchase price $696; fully collateralized by U.S government agency securities at the date of this Portfolio of Investments as follows: Federal Home Loan Mortgage Corp., Adjustable Rate Mortgages, 2.63% to 6.56%, due 11/1/22 to 6/1/38; Federal Home Loan Mortgage Corp., Gold Pool, Fixed Rate Mortgages, 3.50% to 7.50%, due 8/1/13 to 2/1/48; Federal National Mortgage Association, Adjustable Rate Mortgages, 2.52% to 6.29%, due 3/1/18 to 9/1/47; Federal National Mortgage Association, Fixed Rate Mortgages, 4.31% to 4.92%, due 6/1/19 to 12/1/19; Government National Mortgage Association, Adjustable Rate Mortgages, 0.86% to 4.38%, due 8/20/27 to 12/20/58; Government National Mortgage Association, Fixed Rate Mortgages, 3.50% to 7.50%, due 10/15/18 to 5/15/44, valued at $709.	$      696	696
		5,109
	Shares
Investment Company (1.5%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o)	982,258	982
Total Short-Term Investments (Cost $6,091)		6,091
Total Investments (107.4%) (Cost $70,649) — Including $4,883 of Securities Loaned (v)		72,148
Liabilities in Excess of Other Assets (-7.4%)		(4,961	)
Net Assets (100%)		$67,187

(a)	Non-income producing security.
(c)	All or a portion of security on loan at December 31, 2009.
(o)	See Note G to the financial statements regarding investment in Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class.
(v)	The approximate market value and percentage of total investments, $59,786,000 and 82.9%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A within the Notes to Financial Statements.
ADR	American Depositary Receipt
GDR	Global Depositary Receipt

Foreign Currency Exchange Contract Information:

The Portfolio had the following foreign currency exchange contract(s) open at period end:

Currency to Deliver (000)		Value (000)		Settlement Date	In Exchange For (000)		Value (000)		Net Unrealized Appreciation (Depreciation) (000)
CAD	4		$4	1/4/10	USD	4		$4		$—	@

CAD  —  Canadian Dollar

USD  —  United States Dollar

@            Value is less than $500.

Fair Value Measurement Information:

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2009. (See Note A-11 to the financial statements for further information regarding fair value measurement.)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)	Total (000)
Assets:
Common Stocks
Aerospace & Defense	$      —	$      970	$—	$      970
Airlines	992	—	—	992
Auto Components	—	947	—	947

50 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

International Growth Equity Portfolio

Fair Value Measurement Information: (cont’d)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)		Level 3 Significant unobservable inputs (000)	Total (000)
Common Stocks (cont’d)
Automobiles	$       —	$     727		$—	$     727
Beverages	—	1,749		—	1,749
Biotechnology	—	813		—	813
Capital Markets	—	976		—	976
Chemicals	—	3,104		—	3,104
Commercial Banks	—	8,189		—	8,189
Commercial Services & Supplies	—	899		—	899
Construction & Engineering	611	—		—	611
Distributors	—	823		—	823
Diversified Consumer Services	—	654		—	654
Diversified Financial Services	—	1,548		—	1,548
Diversified Telecommunication Services	—	953		—	953
Electric Utilities	—	2,009		—	2,009
Electrical Equipment	—	596		—	596
Electronic Equipment, Instruments & Components	—	2,205		—	2,205
Food & Staples Retailing	—	2,390		—	2,390
Food Products	—	1,411		—	1,411
Health Care Equipment & Supplies	—	919		—	919
Household Durables	—	533		—	533
Household Products	—	1,326		—	1,326
Independent Power Producers & Energy Traders	—	758		—	758
Industrial Conglomerates	—	753		—	753
Insurance	—	4,188		—	4,188
Internet & Catalog Retail	—	900		—	900
Internet Software & Services	—	1,037		—	1,037
Machinery	—	2,803		—	2,803
Media	—	852		—	852
Metals & Mining	—	3,252		—	3,252
Oil, Gas & Consumable Fuels	1,841	3,754		—	5,595
Pharmaceuticals	1,164	2,781		—	3,945
Professional Services	—	1,241		—	1,241
Software	—	787		—	787
Specialty Retail	—	1,333		—	1,333
Textiles, Apparel & Luxury Goods	—	914		—	914
Wireless Telecommunication Services	1,663	692		—	2,355
Total Common Stocks	6,271	59,786		—	66,057
Short-Term Investments
Investment Company	5,395	—		—	5,395
Repurchase Agreement	—	696		—	696
Total Short-Term Investments	5,395	696		—	6,091
Total Assets	11,666	60,482		—	72,148
Liabilities:
Foreign Currency Exchange Contracts	—	—	@	—	—	@
Total Liabilities	—	—	@	—	—	@
Total	$11,666	$60,482		$—	$72,148

The accompanying notes are an integral part of the financial statements. 51

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview

International Real Estate Portfolio

The International Real Estate Portfolio (the “Portfolio”) seeks to provide current income and long-term capital appreciation by investing primarily in equity securities of companies in the real estate industry located in various global markets throughout the world (excluding the United States and Canada). Foreign investing involves certain risks, including currency fluctuations and controls, restrictions on foreign investments, less governmental supervision and regulation, less liquidity and the potential for market volatility and political instability. The risks of investing in emerging-market countries are greater than the risks generally associated with foreign investments. In addition to the general risks associated with real-estate investment, REIT investing entails other risks, such as credit and interest-rate risk.

Performance

For the year ended December 31, 2009, the Portfolio had a total return based on net asset value and reinvestment of distributions per share of 46.54% for the Class I shares, net of fees. The Portfolio’s Class I shares outperformed against the FTSE EPRA/NAREIT Developed ex-North America Real Estate Index (80% Europe/20% Asia) which returned 40.81% and the MSCI EAFE Index which returned 31.78%.

Factors Affecting Performance

·The international real estate securities market posted large gains in the 12-month period ending December 31, 2009, but the stocks have still experienced significant declines from peak levels.

·European and Asian real estate securities posted large declines through mid-March, as share prices appeared to be impacted by negative investor sentiment in response to a continuation of weak economic data and the deterioration of the credit markets. Subsequently, the sector rallied significantly on the back of an improved outlook for the global economy, the strong rally in the broader equity and debt markets, overall improvements in capital market conditions, and the significant volume of successful public real estate company equity offerings which allowed the companies to delever their balance sheets and address upcoming debt maturities.

·Significant outperformance within each of the regional sub-portfolios contributed to relative returns. Global allocation among the regional portfolios also contributed to relative returns, while cash held in the Portfolio detracted from relative returns.

·In Asia, the Portfolio benefited from stock selection within and an overweight to Hong Kong, an underweight to Australia, and stock selection in Singapore and Japan. The benefits of these positions were partially offset by the impact of an underweight to Singapore.

·In Europe, the Portfolio benefited from stock selection in the U.K. and an underweight to Belgium; this was modestly offset by stock selection in France.

Management Strategies

·The Portfolio is comprised of two regional sub-portfolios with an allocation which weights each major region (Europe and Asia) based on our view of its relative attractiveness in terms of underlying real estate fundamentals and public market valuations. Moreover, each of the regional portfolios reflects our core investment philosophy as a real estate value investor, which results in the ownership of stocks that we believe provide the best valuation relative to their underlying real estate values, while maintaining portfolio diversification.

·Our company-specific research leads us to specific preferences for sub-segments within each property market. For the period ended December 31, 2009, the Portfolio was overweight the Asian listed property sector and underweight the European listed property sector.

·Within Asia, we expect underlying property fundamentals and asset values in key markets within Japan and Hong Kong to remain relatively more stable than other markets given relatively low vacancy and limited new supply over the next few years. The overweight to the Asian region was predominated by real estate operating companies (REOCs) in Japan and Hong Kong. The Hong Kong REOCs posted significant gains and outperformed, ending the period trading at a narrow discount to the net asset values (NAVs) of their underlying property, which may be poised for growth given prospects for a recovery in rents and asset values. The Japanese REOCs underperformed, only posting modest gains and continue to trade at a wide discount to their NAVs, despite better than expected prime office market fundamentals. We continue to maintain a preference for the major REOCs with predominant exposure to prime assets

52

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

International Real Estate Portfolio

given what we believe are their relatively more favorable property fundamentals, the ability to engage in value-added opportunities such as development and redevelopment, well-positioned balance sheets and continued access to financing. This contrasts widely to the Asian REITs, which are passive, externally managed vehicles limited to property ownership, many of which are capital constrained with more limited access to financing and maintain predominant exposure to secondary assets. The Portfolio was underweight the Australian LPT sector, which trades at a wide premium to NAVs.

·In Europe, the Portfolio ended the year overweight the U.K., France and Italy and underweight the remainder of the Continent. Valuations on the Continent ended the period at par to NAV (based on reported NAVs, which reflect only marginal capital value declines since the start of the credit crisis due to limited transactional evidence thus far); however NAVs are generally expected to decline further in most markets. Valuations in the U.K. ended the year at an average 8% premium to reported NAVs, which have started to show positive growth after declining by a cumulative 57% since June 2007.

·In contrast to the relatively more stable outlook for underlying property valuations in Asia, and emerging evidence of capital value improvements in the U.K., in Continental Europe there are expectations for further weakness in underlying property fundamentals and asset values. However, a key question remains the magnitude of prospective asset value declines from peak levels since transactional evidence continues to be limited in most markets due to the wide bid-ask spread between buyers and sellers. It is notable that given the improvements in the capital markets and the significant amount of equity issued by the public companies to improve their balance sheets, a debate has emerged as to whether the magnitude of asset value declines will be less than previously expected. In some sub-segments of these markets, we believe current share price valuations already reflect the prospective weakening in underlying fundamentals and asset values. In the short term, share prices may experience incremental weakness, but we believe that expected returns over the medium and long-term are compelling given the current pricing for many of the companies provides an entry point that already reflects downside risks.

*Minimum Investment

In accordance with SEC regulations, Portfolio’s performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class P shares will vary from the Class I shares based upon its different inception date and will be negatively impacted by additional fees assessed to that class.

53

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

International Real Estate Portfolio

Performance Compared to the FTSE EPRA/NAREIT Developed ex-North America Real Estate Index (80% Europe/20% Asia)(1) and the Morgan Stanley Capital International (MSCI) EAFE Index(2)

	Total Returns(3)
			Average Annual
	One  Year		Five  Years		Ten   Years		Since    Inception		(5)
Portfolio — Class I(4)	46.54	%	1.73	%	11.68	%	9.21	%
FTSE EPRA/NAREIT Developed ex- North America Real Estate Index  (80% Europe/20% Asia)	40.81		0.17		9.63		7.72
MSCI EAFE Index	31.78		3.54		1.17		3.77
Portfolio — Class P(4)	46.08		1.48		11.39		8.93
FTSE EPRA/NAREIT Developed ex- North America Real Estate Index (80% Europe/20% Asia)	40.81		0.17		9.63		7.72
MSCI EAFE Index	31.78		3.54		1.17		3.77

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or 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 of share classes will vary due to difference in expenses.

(1)The FTSE EPRA/NAREIT Developed ex-North America Real Estate Index (80% Europe 20% Asia) — Net Total Return to U.S. investors is a customized benchmark, 80% of which consists of the performance of the FTSE EPRA/NAREIT Developed Real Estate Index: Europe Series — Net Total Return to U.S. investors and 20% of which consists of the performance of the FTSE EPRA/NAREIT Developed Real Estate Index: Asia Series — Net Total Return to U.S. investors. These series are components of the FTSE EPRA/NAREIT Developed Real Estate Index — Net Total Return to U.S. investors, which is a market capitalization weighted index designed to reflect the stock performance of companies engaged in the North American, European and Asian real estate markets. The performance of the Index is listed in U.S. dollars and assumes reinvestment of dividends. “Net Total Return to U.S. investors” reflects a reduction in total returns after taking into account the withholding tax on dividends by certain foreign countries represented in the Index for periods after 1/31/05 (gross returns used prior to 1/31/05). The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

(2)The Morgan Stanley Capital International (MSCI) EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the international equity market performance of developed markets, excluding the U.S. & Canada. 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 EAFE Index currently consists of 21 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.

(3)Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and reimbursements, total returns would have been lower. Fee waivers and/or expense reimbursements are voluntary and the Adviser reserves the right to commence or terminate any waiver and/or reimbursement at any time.

(4)Commenced operations on October 1, 1997.

(5)For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Index.

Portfolio Composition

	Percentage of
Classification	Total Investments
Diversified	51.3		%
Retail	19.3
Office	15.1
Other*	12.9
Short-Term Investment	1.4
Total Investments		100.0	%

*Industries representing less than 5% of total investments.

54

2009 Annual Report

December 31, 2009

Portfolio of Investments

International Real Estate Portfolio

	Shares	Value (000)
Common Stocks (98.5%)
Australia (5.2%)
CFS Retail Property Trust REIT	1,056,088	$   1,789
Commonwealth Property Office Fund REIT	1,243,007	1,075
Dexus Property Group REIT	187,501	142
GPT Group REIT	4,893,358	2,628
Mirvac Group REIT	212,174	295
Stockland REIT	1,393,331	4,896
Westfield Group REIT	1,239,935	13,828
		24,653
Austria (0.6%)
Conwert Immobilien Invest SE (a)	248,219	3,038
Belgium (0.7%)
Befimmo SCA Sicafi REIT	35,983	3,174
Finland (1.1%)
Sponda Oyj (a)	1,303,646	5,101
France (22.9%)
Fonciere Des Regions REIT	53,839	5,506
Gecina S.A. REIT	22,298	2,413
ICADE REIT	175,219	16,664
Klepierre REIT	221,827	9,024
Mercialys S.A. REIT	92,402	3,251
Silic REIT	60,749	7,394
Unibail-Rodamco SE REIT	289,044	63,630
		107,882
Germany (1.2%)
Alstria Office AG REIT	234,666	2,535
Deutsche Euroshop AG	98,680	3,348
		5,883
Hong Kong (12.0%)
China Overseas Land & Investment Ltd.	2,944,240	6,165
China Resources Land Ltd.	1,543,000	3,473
Guangzhou R&F Properties Co., Ltd., Class H	1,142,800	1,995
Hang Lung Properties Ltd.	1,118,000	4,368
Henderson Land Development Co., Ltd.	580,000	4,322
Hong Kong Land Holdings Ltd.	1,695,000	8,342
Hysan Development Co., Ltd.	558,803	1,582
Kerry Properties Ltd.	1,038,771	5,245
KWG Property Holding Ltd.	248,000	189
Poly Hong Kong Investments Ltd.	711,000	882
Shimao Property Holdings Ltd.	587,500	1,102
Sino Land Co., Ltd.	201,969	390
Sino-Ocean Land Holdings Ltd.	137,500	126
Sun Hung Kai Properties Ltd.	1,219,300	18,092
Swire Pacific Ltd., Class A	3,500	42
Wharf Holdings Ltd.	92,000	526
		56,841
Italy (1.4%)
Beni Stabili S.p.A.	8,185,274	6,728
Japan (7.4%)
Japan Real Estate Investment Corp. REIT	237	1,740
Mitsubishi Estate Co., Ltd.	750,000	11,896
Mitsui Fudosan Co., Ltd.	640,000	10,747
Nippon Building Fund, Inc. REIT	307	2,326
NTT Urban Development Corp.	2,294	1,521
Sumitomo Realty & Development Co., Ltd.	353,000	6,621
		34,851
Malta (0.0%)
BGP Holdings plc (a)(d)	4,769,371	—
Netherlands (6.6%)
Corio N.V. REIT	183,484	12,532
Eurocommercial Properties N.V. CVA REIT	218,686	9,024
ProLogis European Properties (a)	680,945	4,195
Vastned Retail N.V. REIT	39,789	2,612
Wereldhave N.V. REIT	29,261	2,796
		31,159
Singapore (2.1%)
Allgreen Properties Ltd.	324,000	281
CapitaCommercial Trust REIT	1,187,000	982
CapitaLand Ltd.	1,820,000	5,391
CapitaMall Trust REIT	913,000	1,158
City Developments Ltd.	12,000	98
Keppel Land Ltd.	365,000	902
Suntec REIT	499,000	477
Wing Tai Holdings Ltd.	474,000	613
		9,902
Sweden (2.4%)
Castellum AB	269,204	2,717
Hufvudstaden AB, Class A	1,132,731	8,559
		11,276
Switzerland (4.0%)
Allreal Holding AG	11,285	1,342
PSP Swiss Property AG (Registered) (a)	305,880	17,310
		18,652
United Kingdom (30.9%)
Big Yellow Group plc REIT (a)	1,077,227	6,143
British Land Co. plc REIT	2,510,445	19,244
Capital & Regional plc (a)	4,672,138	2,556
Derwent London plc REIT	336,206	7,101
Development Securities plc	539,810	2,977
Grainger plc	3,054,361	6,258
Great Portland Estates plc REIT	885,815	4,103
Hammerson plc REIT	2,204,765	14,972
Land Securities Group plc REIT	2,179,948	23,891
Liberty International plc REIT	1,308,727	10,778
LXB Retail Properties PLC (a)	2,156,260	3,378
Minerva plc (a)	1,643,133	1,990
Quintain Estates & Development plc (a)	6,970,646	6,697
Safestore Holdings plc	2,453,744	6,537

The accompanying notes are an integral part of the financial statements. 55

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

International Real Estate Portfolio

	Shares	Value (000)
United Kingdom (cont’d)
Segro plc REIT	2,801,235	$  15,463
Shaftesbury plc REIT	252,386	1,600
ST Modwen Properties plc (a)	1,159,406	3,601
Unite Group plc (a)	1,741,628	8,422
		145,711
Total Common Stocks (Cost $753,877)		464,851
	No. of Warrants
Warrants (0.0%)
France (0.0%)
Fonciere Des Regions, expires 12/31/10 (a) (Cost $—)	53,839	45
	Shares
Short-Term Investment (1.4%)
Investment Company (1.4%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o) (Cost $6,805)	6,805,453	6,805
Total Investments (99.9%) (Cost $760,682) (v)		471,701
Other Assets in Excess of Liabilities (0.1%)		377
Net Assets (100%)		$472,078

(a)Non-income producing security.

(d)At December 31, 2009, the Portfolio held a fair valued security valued at $0, representing 0%, of net assets. This security has been fair valued as determined in good faith under procedures established by and under the general supervision of the Portfolio’s Directors.

(o)See Note G to the financial statements regarding investment in Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class.

(v)The approximate market value and percentage of total investments, $464,896,000 and 98.6%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Financial Statements.

CVACertificaten Van Aandelen

REITReal Estate Investment Trust

Foreign Currency Exchange Contracts Information:

The Portfolio had the following foreign currency exchange contract(s) open at period end:

Currency to Deliver (000)		Value (000)		Settlement Date	In Exchange For (000)		Value (000)		Net Unrealized Appreciation (Depreciation) (000)
JPY	31,951		$344	1/5/10	USD	347		$347		$ 3
USD	84		84	1/4/10	HKD	653		84		—	@
			$428					$431		$ 3

HKD	—	Hong Kong Dollar
JPY	—	Japanese Yen
USD	—	United States Dollar
@		Value is less than $500.

Fair Value Measurement Information:

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2009. (See Note A-11 to the financial statements for further information regarding fair value measurement.)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)		Total (000)
Assets:
Common Stocks
Diversified	$    —	$ 241,770	$—		$ 241,770
Industrial	—	19,658	—		19,658
Office	—	71,058	—		71,058
Residential	—	20,036	—		20,036
Retail	—	91,227	—		91,227
Self Storage	—	12,680	—		12,680
Specialty	—	8,422	—	†	8,422
Total Common Stocks	—	464,851	—	†	464,851
Foreign Currency Exchange Contracts	—	3	—		3
Short-Term Investment
Investment Company	6,805	—	—		6,805
Warrants	—	45	—		45
Total Assets	6,805	464,899	—	†	471,704
Total	$6,805	$464,899	$—	†	$471,704

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

	Common Stocks (000)
Balance as of 12/31/08	$—
Accrued discounts/premiums	—
Realized gain (loss)	—
Change in unrealized appreciation (depreciation)	—
Net purchases (sales)	—	†
Net transfers in and/or out of Level 3	—
Balance as of 12/31/09	$—	†
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at Level 3 at 12/31/09.	$—

†  Includes a security which is valued at zero.

56 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview

International Small Cap Portfolio

The International Small Cap Portfolio (the “Portfolio”) seeks long-term capital appreciation by investing primarily in equity securities of small non-U.S. companies. Investments in small sized corporations are more vulnerable to financial risks and other risks than larger corporations and may involve a higher degree of price volatility than investments in the general equity markets. Foreign investing involves certain risks, including currency fluctuations and controls, restrictions on foreign investments, less governmental supervision and regulation, less liquidity and the potential for market volatility and political instability. The risks of investing in emerging-market countries are greater than the risks generally associated with foreign investments.

Performance

For the year ended December 31, 2009, the Portfolio had a total return based on net asset value and reinvestment of distributions per share of 27.45%, net of fees, for the Class I shares. The Portfolio’s Class I shares underperformed against its benchmark, the Morgan Stanley Capital International (MSCI) EAFE Small Cap Total Return Index (the “Index”) which returned 46.78%.

Factors Affecting Performance

·The MSCI EAFE Small Cap Index (the “Index”) posted an impressive return of 46.8% for the final year of the decade. While it was a strong year overall for the Index, nearly 60% of the return was achieved in the months of April and May when the Index rose 15% and 14%, respectively.

·During the year, the cyclical sectors dominated the Index performance with the energy sector rising 93%, driven by a rise in oil prices from $33 to $83. Information technology, materials and consumer discretionary rose 66%, 58% and 51%, respectively. The industrials sector, the largest sector, was in line with the Index return of 47%. The sector’s performance was “held back” by the more modest rise of 9% for Japanese industrials. Financials lagged the Index with a return of 35%, but there was a sharp contrast in the performance of the underlying sectors. Real estate companies rose 57% versus banks, which closed the year up a mere 0.02% on weakness in Japanese banks. Three of the four defensive sectors (utilities, health care and consumer staples) all ended the year behind the Index.

·For the year, the Portfolio’s underperformance was split almost equally between two key drivers — our significant underperformance during the low quality rally in the first half of the year and Japan dominating the second half.

·April saw the Index rally 15%, its highest monthly performance ever. The rally reflected the market’s total change in sentiment following Citigroup’s better-than-expected results in March. The stocks that rallied hardest were those that had been most financially distressed. Not owning these companies, given our focus on strong balance sheets and coverage ratios, led the Portfolio to underperform by 8% in one month. This underperformance was particularly marked in the U.K. and to a lesser extent in Ireland and Scandinavia, primarily in the consumer discretionary and industrial sectors in those countries. The scale of the move in these stocks dominated the full year sector and country attribution despite some strong stock selection in each of these sectors and markets throughout the rest of the year.

·Our overweight to Japan, and in particular Japanese financials, accounted for the remainder of this year’s underperformance. Early in 2009, profit taking in Japan followed the country’s strong relative performance at the end of 2008. In the interim months (May to August), the Portfolio’s performance started to catch up on the back of broadly based, strong stock selection and Japan no longer serving as a drag. Going into the fourth quarter, however, Japan significantly underperformed as investors took a negative view (unfairly, we believe) of Japan’s economic prospects for recovery. In December, Japan’s poor performance reversed sharply (in local currency terms) and the Portfolio immediately benefited. For the month, the Portfolio outperformed the Index, driven by strong stock selection, most particularly in Japan.

Management Strategies

·2009 marked a year of higher portfolio turnover. After the decline in the market in 2008 and early 2009, the value screens, which drive our fundamental research, swung from being tilted toward defensive sectors to almost fully populated by cyclicals. We bought a raft of high quality, typically cash rich and lowly indebted, high returning cyclicals across Europe and Asia. These cyclicals were starting to more than discount our own conservative outlook, which was based on the companies returning over

The accompanying notes are an integral part of the financial statements. 57

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

International Small Cap Portfolio

time to their mid-cycle margins and returns. By mid-year 2009, the Portfolio’s allocation was 16% defensives and 84% cyclicals, essentially in line with the Index and this was little changed at year end. The strong move into cyclicals was correct but our focus on high quality didn’t find a place in the low beta rally or get handed a “get out of jail free card” that many of the most financially distressed companies gratefully grasped.

·Not surprisingly, given the strong recovery in cyclicals, we are seeing a more even spread of value now in our screens between defensive and cyclical sectors. There is no question that the market will continue to be preoccupied with looking for evidence of a recovery in corporate top lines as well as bottom lines but, given the attractive valuations on which we are still able to buy many small caps, little recovery is yet priced into the names owned in the portfolio as of this writing.

·Japan remains overweight in the Portfolio namely because we believe valuations haven’t been as attractive, absolutely or relatively, in Japan for 20 years and because the same key drivers of performance present in all the other markets in 2009 are just as evident in Japan. There are clear signs of improving industrial production, rising capacity utilization, stabilizing inventory levels, recovering consumer confidence and significant corporate cost cutting. The fact that the market failed to price this in last year is all the more surprising given Japan’s significant economic leverage and, in particular, its leading role as a beneficiary of the growth in China and the region. Japan finally appears to be getting some attention, as evidenced by December’s improved performance.

·Within the Japanese market, we like financials and we believe that the significant underperformance last year reflected the market’s preoccupation with weakness in the Japanese economy and the possibility of the banks needing to raise additional capital. We believe the underlying fundamentals for the Japanese companies that we own are strong and each company is, without exception, sufficiently capitalized. We believe the catalyst for a higher share price will be emerging signs that the 2% deflation priced into the bond market is no longer justified. The market seems to believe that Japanese banks are structurally rather than cyclically depressed. We disagree.

·We remain positive on the outlook for international small caps. Despite 2009’s 47% rise, the asset class remains cheap both absolutely and relatively, in our view. The quality bias that hurt the Portfolio’s performance in 2009 reflects investments in a raft of companies that, in our view, have made the best use of a bad crisis to emerge stronger than ever. This is yet to be reflected in their valuations.

*Minimum Investment

In accordance with SEC regulations, Portfolio performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class P shares vary from Class I shares based upon their different inception dates and will be negatively impacted by additional fees assessed to that class.

Performance Compared to the Morgan Stanley Capital International (MSCI) EAFE Small Cap Total Return Index(1) and the Lipper International Small/Mid-Cap Value Funds Average(2)

	Total Returns(3)
			Average Annual
	One Year		Five Years		Ten Years		Since Inception(6)
Portfolio — Class I(4)	27.45	%	0.57	%	6.08	%	9.67	%
MSCI EAFE Small Cap Total Return Index	46.78		3.51		6.04		5.37
Lipper International Small/Mid-Cap Value Funds Average	50.45		4.61		8.20		—	(7)

58

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

International Small Cap Portfolio

	Total Returns(3)
			Average Annual
	One Year		Five Years		Ten Years		Since Inception(6)
Portfolio — Class P(5)	27.14	%	—	%	—	%	23.86	%
MSCI EAFE Small Cap Total Return Index	46.78		—		—		32.90
Lipper International Small/Mid-Cap Value Funds Average	50.45		—		—		37.08

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or 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 of share classes will vary due to difference in expenses.

(1)	The Morgan Stanley Capital International (MSCI) EAFE Small Cap Total Return Index is an unmanaged, market value weighted average of the performance of over 900 securities of companies listed on the stock exchanges of countries in Europe, Australasia and the Far East, including price performance and income from dividend payments. The MSCI EAFE Small Cap Total Return Index commenced as of January 31, 2002. Returns, including periods prior to January 31, 2002, are calculated using the return data of the MSCI EAFE Small Cap Index through January 30, 2002 and the return data of the MSCI EAFE Small Cap Total Return Index since January 31, 2002. The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
(2)	The Lipper International Small/Mid-Cap Value Funds Average tracks the performance of all funds in the Lipper International Small/Mid-Cap Value Funds classification. The Average, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. As of the date of this report, the Portfolio is in the Lipper International Small/Mid-Cap Value Funds classification.
(3)	Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and reimbursements, total returns would have been lower. Fee waivers and/or expense reimbursements are voluntary and the Adviser reserves the right to commence or terminate any waiver and/or reimbursement at any time.
(4)	Commenced operations on December 15, 1992.
(5)	Commenced operations on October 21, 2008.
(6)	For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Index.
(7)	Return information for the Lipper International Small/Mid-Cap Value Funds Average since inception is not available.

Portfolio Composition

Classification	Percentage of Total Investments
Machinery		13.0	%
Commercial Banks		8.1
Food Products		6.9
Semiconductors & Semiconductor Equipment		5.9
Diversified Financial Services		5.6
Real Estate Management & Development		5.5
Construction Materials		5.1
Other*		48.0
Short-Term Investment		1.9
Total Investments		100.0	%

*  Industries representing less than 5% of total investments.

59

2009 Annual Report

December 31, 2009

Portfolio of Investments

International Small Cap Portfolio

	Shares	Value (000)
Common Stocks (99.0%)
Australia (4.9%)
BlueScope Steel Ltd.	1,633,195	$   4,507
CSR Ltd.	2,237,473	3,599
Goodman Fielder Ltd.	1,574,253	2,291
Iluka Resources Ltd. (a)	1,568,938	4,993
Infomedia Ltd.	8,539,155	2,443
Pacific Brands Ltd. (a)	2,592,435	2,601
		20,434
Denmark (3.7%)
Jyske Bank A/S (a)	188,717	7,345
NKT Holding A/S (a)	52,918	2,943
Sydbank A/S (a)	116,848	3,010
Topdanmark A/S (a)	14,337	1,941
		15,239
Finland (2.0%)
Konecranes Oyj	140,609	3,824
Rautaruukki Oyj	198,223	4,552
		8,376
France (2.3%)
Euler Hermes S.A.	27,861	2,070
Sa des Ciments Vicat	37,917	3,181
Teleperformance	129,548	4,183
		9,434
Germany (8.0%)
Demag Cranes AG	114,680	3,827
GEA Group AG	145,905	3,248
Gerresheimer AG	92,643	3,112
GFK SE	59,298	2,055
Kontron AG	256,409	2,933
Leoni AG	182,421	4,279
Praktiker Bau-und Heimwerkermaerkte AG	170,765	1,889
Rheinmetall AG	67,616	4,337
Sartorius AG (Non-Voting Shares)	102,692	2,342
SCS Standard Computersysteme AG (a)(d)(l)	21,289	—
Tognum AG	290,393	4,818
		32,840
Greece (1.4%)
Folli-Follie S.A.	86,144	1,624
Hellenic Exchanges S.A. Holding Clearing Settlement and Registry	384,960	3,990
		5,614
Hong Kong (2.5%)
Asia Satellite Telecommunications Holdings Ltd.	598,500	846
Midland Holdings Ltd.	7,674,000	6,569
Techtronic Industries Co.	3,759,000	3,114
		10,529
Ireland (4.9%)
FBD Holdings plc	437,919	4,333
Glanbia plc	1,305,625	5,392
Kerry Group plc, Class A	65,989	1,945
Smurfit Kappa Group plc (a)	937,042	8,448
		20,118
Italy (4.2%)
Brembo S.p.A	362,537	2,698
Buzzi Unicem S.p.A.	401,207	6,444
Davide Campari-Milano S.p.A.	96,470	1,005
Interpump Group S.p.A. (a)	849,831	4,502
Maire Tecnimont S.p.A.	612,698	2,177
SAES Getters S.p.A. (a)	73,368	633
		17,459
Japan (36.0%)
Alpha Systems, Inc.	140,100	2,601
Axell Corp.	203,900	7,176
Chuo Mitsui Trust Holdings, Inc.	2,243,000	7,486
Daibiru Corp.	604,400	4,318
Fuji Machine Manufacturing Co., Ltd.	661,800	8,170
Fuyo General Lease Co., Ltd.	323,700	6,807
Harmonic Drive Systems, Inc.	665	1,503
Hikari Tsushin, Inc.	105,219	1,902
Jaccs Co., Ltd.	3,735,000	8,779
Japan Securities Finance Co., Ltd.	1,684,192	12,900
Leopalace21 Corp. (a)	828,600	3,367
Maxvalu Tokai Co., Ltd.	120,000	1,362
Miraial Co., Ltd.	309,900	8,251
Mori Seiki Co., Ltd.	555,300	4,959
Nakanishi, Inc.	25,286	2,009
Nihon Micro Coating Co., Ltd. (a)	396,000	532
Ohara, Inc.	210,200	3,574
Okinawa Cellular Telephone Co.	997	1,666
Osaki Engineering Co., Ltd.	1,512	1,460
Sawada Holdings Co., Ltd. (a)	603,700	2,225
Shinkawa Ltd.	295,300	4,655
St. Marc Holdings Co., Ltd.	50,400	1,372
Sumitomo Osaka Cement Co., Ltd.	3,296,970	5,043
Sun Frontier Fudousan Co., Ltd. (a)	12,368	1,933
Taiheiyo Cement Corp. (a)	5,962,000	6,784
THK Co., Ltd.	122,100	2,157
TOC Co., Ltd.	1,197,200	4,522
Toei Animation Co., Ltd.	291,300	5,067
Tokyo Tomin Bank Ltd. (The)	618,781	8,402
Union Tool Co.	205,000	5,366
Vantec Corp.	3,245	4,709
Yachiyo Bank Ltd. (The)	330,900	7,440
		148,497
Netherlands (1.1%)
Draka Holding N.V. (a)	239,601	4,578
New Zealand (0.5%)
Fisher & Paykel Healthcare Corp., Ltd.	833,707	2,043
Norway (5.6%)
Acergy S.A.	350,993	5,535
Fred Olsen Energy ASA	57,401	2,197

60 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

International Small Cap Portfolio

	Shares	Value (000)
Norway (cont’d)
Pronova BioPharma A/S (a)	1,604,933	$   4,856
Prosafe SE	845,179	5,352
Schibsted ASA (a)	240,287	5,380
		23,320
Spain (1.6%)
Grifols S.A.	133,225	2,321
Miquel y Costas & Miquel S.A.	39,908	856
Viscofan S.A.	138,741	3,520
		6,697
Sweden (1.3%)
Husqvarna AB, Class B (a)	292,316	2,158
Saab AB, Class B	65,602	1,082
SKF AB, Class B	124,355	2,136
		5,376
Switzerland (3.1%)
Bucher Industries AG (Registered)	39,373	4,257
Georg Fischer AG (Registered) (a)	12,062	3,036
Kuoni Reisen Holding AG (Registered)	16,194	5,468
		12,761
United Kingdom (15.9%)
Bodycote plc	723,578	1,857
Britvic plc	355,892	2,345
Catlin Group Ltd.	387,484	2,126
Chemring Group plc	90,193	4,244
CVS Group plc (a)	1,251,663	3,540
Debenhams plc (a)	769,588	960
Dignity plc	217,073	2,115
Home Retail Group plc	571,222	2,604
Informa plc	827,750	4,235
Kesa Electricals plc	1,564,676	3,731
Luminar Group Holdings plc (a)	3,559,038	2,168
Melrose plc	701,542	2,021
Premier Foods plc (a)	17,844,017	10,211
Savills plc	427,191	2,208
SIG plc (a)	2,303,707	4,133
Tate & Lyle plc	778,626	5,415
Wincanton plc	1,940,331	6,349
Wolseley plc (a)	266,547	5,332
		65,594
Total Common Stocks (Cost $409,160)		408,909
	No. of Warrants
Warrants (0.0%)
Italy (0.0%)
Interpump Group S.p.A, expires 10/31/12 (a) (Cost $—)	178,840	59

	Shares
Short-Term Investment (2.0%)
Investment Company (2.0%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o) (Cost $8,025)	8,024,659	$     8,025
Total Investments (101.0%) (Cost $417,185) (v)		416,993
Liabilities in Excess of Other Assets (-1.0%)		(4,078	)
Net Assets (100%)		$412,915

(a)	Non-income producing security.
(d)	At December 31, 2009, the Portfolio held a fair value security valued at $0, representing 0% of net assets. This security has been fair valued as determined in good faith under procedures established by and under the general supervision of the Portfolio’s Directors.
(l)	Security has been deemed illiquid at December 31, 2009.
(o)	See Note G to the financial statements regarding investment in Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class.
(v)	The approximate market value and percentage of total investments, $408,968,000 and 98.1%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Financial Statements.

Foreign Currency Exchange Contracts Information:

The Portfolio had the following foreign currency exchange contract(s) open at period end:

Currency to Deliver (000)		Value (000)		Settlement Date	In Exchange For (000)		Value (000)		Net Unrealized Appreciation (Depreciation) (000)
EUR	25		$       36	1/4/10	USD	36		$       36		$     —	@
EUR	62		89	1/6/10	USD	89		89		—	@
JPY	14,355		154	1/5/10	USD	156		156		2
JPY	1,450,000		15,569	1/8/10	USD	16,713		16,713		1,144
USD	294		294	1/5/10	AUD	327		294		—	@
USD	206		206	1/4/10	CHF	214		207		1
USD	129		129	1/5/10	DKK	667		129		—	@
USD	712		712	1/4/10	EUR	496		711		(1	)
USD	392		392	1/5/10	EUR	273		391		(1	)
USD	1,023		1,023	1/4/10	GBP	645		1,042		19
USD	156		156	1/5/10	HKD	1,208		156		—	@
USD	31		31	1/4/10	JPY	2,811		30		(1	)
USD	2,244		2,244	1/6/10	JPY	207,111		2,224		(20	)
USD	376		376	1/5/10	NOK	2,177		376		—	@
USD	33		33	1/6/10	NZD	46		33		—	@
USD	70		70	1/5/10	SEK	503		70		—	@
			$21,514					$22,657		$1,143

The accompanying notes are an integral part of the financial statements. 61

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

International Small Cap Portfolio

AUD	—	Australian Dollar
CHF	—	Swiss Franc
DKK	—	Denmark Krone
EUR	—	Euro
GBP	—	British Pound
HKD	—	Hong Kong Dollar
JPY	—	Japanese Yen
NOK	—	Norwegian Krone
NZD	—	New Zealand Dollar
SEK	—	Swedish Krona
USD	—	United States Dollar
@		Value is less than $500.

Fair Value Measurement Information:

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2009. (See Note A-11 to the financial statements for further information regarding fair value measurement.)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)		Total (000)
Assets:
Common Stocks
Aerospace & Defense	$     —	$    5,326	$—		$    5,326
Air Freight & Logistics	—	11,058	—		11,058
Auto Components	—	6,977	—		6,977
Beverages	—	3,350	—		3,350
Biotechnology	—	2,321	—		2,321
Capital Markets	—	2,225	—		2,225
Chemicals	—	4,106	—		4,106
Commercial Banks	—	33,683	—		33,683
Construction & Engineering	—	2,177	—		2,177
Construction Materials	—	21,452	—		21,452
Consumer Finance	—	8,779	—		8,779
Containers & Packaging	—	8,448	—		8,448
Distributors	—	2,601	—		2,601
Diversified Consumer Services	—	2,115	—		2,115
Diversified Financial Services	—	23,697	—		23,697
Diversified Telecommunication Services	—	846	—		846
Electrical Equipment	—	9,396	—		9,396
Electronic Equipment, Instruments & Components	—	633	—		633
Energy Equipment & Services	—	13,084	—		13,084
Food & Staples Retailing	—	1,362	—		1,362
Food Products	—	28,774	—		28,774
Health Care Equipment & Supplies	—	6,394	—		6,394
Health Care Providers & Services	—	3,540	—		3,540
Hotels, Restaurants & Leisure	—	9,008	—		9,008
Household Durables	—	5,272	—		5,272
Industrial Conglomerates	—	7,936	—		7,936
Information Technology Services	—	—	—	†	—	†
Insurance	—	10,470	—		10,470
Internet & Catalog Retail	—	2,604	—		2,604
Life Science Tools & Services	—	3,112	—		3,112
Machinery	—	53,806	—		53,806
Media	—	14,682	—		14,682
Metals & Mining	—	14,052	—		14,052
Multiline Retail	—	960	—		960
Paper & Forest Products	—	856	—		856
Pharmaceuticals	—	4,856	—		4,856
Professional Services	—	6,238	—		6,238
Real Estate Management & Development	—	22,917	—		22,917
Semiconductors & Semiconductor Equipment	—	24,475	—		24,475
Software	—	5,044	—		5,044
Specialty Retail	—	7,522	—		7,522
Textiles, Apparel & Luxury Goods	—	1,624	—		1,624
Trading Companies & Distributors	—	9,465	—		9,465
Wireless Telecommunication Services	—	1,666	—		1,666
Total Common Stocks	—	408,909	—	†	408,909
Foreign Currency Exchange Contracts	—	1,166	—		1,166
Short-Term Investment
Investment Company	8,025	—	—		8,025
Warrants	—	59	—		59
Total Assets	8,025	410,134	—	†	418,159
Liabilities:
Foreign Currency Exchange Contracts	—	23	—		23
Total Liabilities	—	23	—		23
Total	$8,025	$410,111	$—	†	$418,136

62 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

International Small Cap Portfolio

Fair Value Measurement Information: (cont’d)

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

	Common Stocks (000)
Balance as of 12/31/08	$—	†
Accrued discounts/premiums	—
Realized gain (loss)	—
Change in unrealized appreciation (depreciation)	—
Net purchases (sales)	—
Net transfers in and/or out of Level 3	—
Balance as of 12/31/09	$—	†
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at Level 3 at 12/31/09.	$—

†  Includes a security which is valued at zero.

The accompanying notes are an integral part of the financial statements. 63

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview

Capital Growth Portfolio

The Capital Growth Portfolio (the “Portfolio”) seeks long-term capital appreciation by investing primarily in growth-oriented equity securities of large capitalization companies. There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the portfolio will decline and that the value of portfolio shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in this portfolio. Please be aware that this portfolio may be subject to certain additional risks. Equity. In general equity securities’ values also fluctuate in response to activities specific to a company. Foreign and emerging markets. Investments in foreign markets entail special risks such as currency, political, economic, and market risks. The risks of investing in emerging-market countries are greater than the risks generally associated with foreign investments.

Performance

For the year ended December 31, 2009, the Portfolio had a total return based on net asset value and reinvestment of distributions per share of 62.97%, net of fees, for Class I shares. The Portfolio’s Class I shares outperformed against its benchmark, the Russell 1000® Growth Index (the “Index”) which returned 37.21%.

Factors Affecting Performance

·In many ways, 2009 was as surprising for investors as 2008. We made few changes to the Portfolio during the downturn, as we believed our high quality companies with sustainable competitive advantages had the potential to perform well over time. Staying true to our philosophy and process proved advantageous in 2009, as higher quality names — those with attractive returns on invested capital and strong balance sheets — led for most of the year. As it became more apparent we were not headed for a total meltdown, the recovery broadened across the Portfolio’s holdings. While turnover remained low, we did add new names as several of the Portfolio’s holdings graduated from mid- to large-cap and as we found more compelling opportunities. For the period overall, stock selection drove the Portfolio’s relative outperformance.

·Stock selection in consumer discretionary had the largest positive effect on relative performance, although an overweight there slightly detracted. Within the sector, outperformance was driven by the diversified retail industry.

·Stock selection in technology also produced relative gains, but was slightly offset by the negative impact of an underweight in the sector. The computer services software and systems industry led performance within the sector.

·Both stock selection and an overweight in financial services added to relative performance. Here, exposure to the securities brokerage and services industry was the primary contributor.

·However, stock selection in materials and processing detracted from relative performance, despite the benefit of an overweight position in the sector. The sole underperformer was in the building materials industry.

Management Strategies

·As a team, we do not spend a great deal of time thinking about a market outlook, as we believe it is nearly impossible to correctly anticipate what will happen over short periods of time. While current conditions seem encouraging, with initial public offerings and merger and acquisition activity expanding, we cannot rule out volatility around short-term events. Our focus is on assessing company prospects over three to five years, and owning a portfolio of what we consider to be high quality companies with diverse business drivers not tied to a particular market environment.

*Minimum Investment

In accordance with SEC regulations, Portfolio’s performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class P shares will vary from the Class I shares based upon its different inception date and will be negatively impacted by additional fees assessed to that class.

64

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

Capital Growth Portfolio

Performance Compared to the Russell 1000®Growth Index(1)and the Lipper Multi-Cap Growth Funds Index(2)

	Total Returns(3)
			Average Annual
	One Year		Five Years		Ten Years		Since Inception(6)
Portfolio — Class I(4)	62.97	%	3.52	%	–1.27	%	8.67	%
Russell 1000® Growth Index	37.21		1.63		–3.99		6.97
Lipper Multi-Cap Growth Funds Index	39.17		1.49		–2.85		7.47
Portfolio — Class P(5)	62.66	%	3.28	%	–1.51	%	6.52	%
Russell 1000® Growth Index	37.21		1.63		–3.99		4.93
Lipper Multi-Cap Growth Funds Index	39.17		1.49		–2.85		4.99

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or 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 of share classes will vary due to difference in expenses.

(1)	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 Russell 1000® Index is an index of approximately 1,000 of the largest U.S. companies based on a combination of market capitalization and current index membership. The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
(2)	The Lipper Multi-Cap Growth Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Multi-Cap Growth Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index. As of the date of this report, the Portfolio is in the Lipper Multi-Cap Growth Funds classification.
(3)	Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and reimbursements, total returns would have been lower. Fee waivers and/or expense reimbursements are voluntary and the Adviser reserves the right to commence or terminate any waiver and/or reimbursement at any time.
(4)	Commenced operations on April 2, 1991.
(5)	Commenced operations on January 2, 1996.
(6)	For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Index.

Portfolio Composition

Classification	Percentage of Total Investments
Computer Services Software & Systems		19.6	%
Consumer Lending		9.2
Diversified Retail		8.1
Commercial Services		7.2
Computer Technology		6.9
Alternative Energy		5.1
Other*		40.5
Short-Term Investment		3.4
Total Investments		100.0	%

*  Industries representing less than 5% of total investments.

65

2009 Annual Report

December 31, 2009

Portfolio of Investments

Capital Growth Portfolio

	Shares	Value (000)
Common Stocks (96.7%)
Air Transport (1.8%)
Expeditors International of Washington, Inc.	399,874	$  13,888
Alternative Energy (5.1%)
Range Resources Corp.	201,928	10,066
Ultra Petroleum Corp. (a)	596,026	29,718
		39,784
Asset Management & Custodian (1.4%)
BlackRock, Inc.	45,763	10,626
Biotechnology (1.8%)
Illumina, Inc. (a)	445,450	13,653
Casinos & Gambling (3.8%)
Las Vegas Sands Corp. (a)	599,486	8,957
Wynn Resorts Ltd.	349,241	20,336
		29,293
Cement (2.2%)
Cemex S.A.B. de C.V. ADR (a)	614,916	7,268
Martin Marietta Materials, Inc.	108,700	9,719
		16,987
Chemicals: Diversified (4.2%)
Monsanto Co.	401,710	32,840
Commercial Finance & Mortgage Companies (2.1%)
BM&F Bovespa S.A.	2,324,742	16,156
Commercial Services (7.2%)
China Merchants Holdings International Co. Ltd.	2,787,328	8,979
Corporate Executive Board Co. (The)	197,027	4,496
eBay, Inc. (a)	497,461	11,710
Leucadia National Corp. (a)	678,746	16,148
Monster Worldwide, Inc. (a)	244,934	4,262
SGS S.A. (Registered)	8,059	10,494
		56,089
Communications Technology (4.7%)
America Movil S.A.B. de C.V., Class L ADR	248,605	11,679
Cisco Systems, Inc. (a)	444,142	10,633
Research In Motion Ltd. (a)	211,664	14,296
		36,608
Computer Services Software & Systems (19.7%)
Adobe Systems, Inc. (a)	304,338	11,194
Baidu, Inc. ADR (a)	43,032	17,696
Google, Inc., Class A (a)	92,115	57,109
Salesforce.com, Inc. (a)	261,665	19,303
Tencent Holdings Ltd.	1,475,900	31,809
Visa, Inc., Class A	102,135	8,933
VMware, Inc., Class A (a)	142,149	6,024
		152,068
Computer Technology (6.9%)
Apple, Inc. (a)	252,533	53,249
Consumer Lending (9.2%)
American Express Co.	406,188	16,459
Berkshire Hathaway, Inc., Class B (a)	4,081	13,410
Mastercard, Inc., Class A	94,289	24,136
Redecard S.A.	1,033,134	17,024
		71,029
Diversified Financial Services (1.8%)
CME Group, Inc.	42,057	14,129
Diversified Media (0.8%)
McGraw-Hill Cos., Inc. (The)	182,563	6,118
Diversified Retail (8.1%)
Amazon.com, Inc. (a)	414,549	55,765
Sears Holdings Corp. (a)	87,129	7,271
		63,036
Insurance: Multi-Line (1.5%)
Loews Corp.	310,418	11,284
Medical Equipment (1.4%)
Intuitive Surgical, Inc. (a)	36,717	11,137
Pharmaceuticals (1.8%)
Allergan, Inc.	161,124	10,152
Gen-Probe, Inc. (a)	90,508	3,883
		14,035
Real Estate Investment Trusts (REIT) (3.4%)
Brookfield Asset Management, Inc., Class A	1,197,955	26,571
Restaurants (1.6%)
Starbucks Corp. (a)	531,563	12,258
Securities Brokerage & Services (1.5%)
Charles Schwab Corp. (The)	609,931	11,479
Semi-Conductors/Components (0.6%)
First Solar, Inc. (a)	31,483	4,263
Shipping (1.4%)
C.H. Robinson Worldwide, Inc.	177,976	10,452
Wholesale & International Trade (2.7%)
Li & Fung Ltd.	4,985,601	20,518
Total Common Stocks (Cost $635,859)		747,550
Short-Term Investment (3.4%)
Investment Company (3.4%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o) (Cost $26,477)	26,477,359	26,477
Total Investments (100.1%) (Cost $662,336) (v)		774,027
Liabilities in Excess of Other Assets (-0.1%)		(482	)
Net Assets (100%)		$773,545

(a)	Non-income producing security.
(o)	See Note G to the financial statements regarding investment in Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class.
(v)	The approximate market value and percentage of total investments, $71,800,000 and 9.3%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Financial Statements.
ADR	American Depositary Receipt

66 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Capital Growth Portfolio

Fair Value Measurement Information:

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2009. (See Note A-11 to the financial statements for further information regarding fair value measurement.)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)	Total (000)
Assets:
Common Stocks
Air Transport	$   13,888	$     —	$—	$   13,888
Alternative Energy	39,784	—	—	39,784
Asset Management & Custodian	10,626	—	—	10,626
Biotechnology	13,653	—	—	13,653
Casinos & Gambling	29,293	—	—	29,293
Cement	16,987	—	—	16,987
Chemicals: Diversified	32,840	—	—	32,840
Commercial Finance & Mortgage Companies	16,156	—	—	16,156
Commercial Services	36,616	19,473	—	56,089
Communications Technology	36,608	—	—	36,608
Computer Services Software & Systems	120,259	31,809	—	152,068
Computer Technology	53,249	—	—	53,249
Consumer Lending	71,029	—	—	71,029
Diversified Financial Services	14,129	—	—	14,129
Diversified Media	6,118	—	—	6,118
Diversified Retail	63,036	—	—	63,036
Insurance: Multi-Line	11,284	—	—	11,284
Medical Equipment	11,137	—	—	11,137
Pharmaceuticals	14,035	—	—	14,035
Real Estate Investment Trusts (REIT)	26,571	—	—	26,571
Restaurants	12,258	—	—	12,258
Securities Brokerage & Services	11,479	—	—	11,479
Semi-Conductors/Components	4,263	—	—	4,263
Shipping	10,452	—	—	10,452
Wholesale & International Trade	—	20,518	—	20,518
Total Common Stocks	675,750	71,800	—	747,550
Short-Term Investment
Investment Company	26,477	—	—	26,477
Total Assets	702,227	71,800	—	774,027
Total	$702,227	$71,800	$—	$774,027

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

	Common Stocks (000)
Balance as of 12/31/08	$—	†
Accrued discounts/premiums	—
Realized gain (loss)	19
Change in unrealized appreciation (depreciation)	—
Net purchases (sales)	(19	)
Net transfers in and/or out of Level 3	—
Balance as of 12/31/09	$—
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at Level 3 at 12/31/09.	—

†  Includes a security which is valued at zero.

The accompanying notes are an integral part of the financial statements. 67

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview

Focus Growth Portfolio

The Focus Growth Portfolio (the “Portfolio”) seeks capital appreciation by investing primarily in growth-oriented equity securities of large capitalization companies. The Portfolio’s concentration of its assets in a small number of issuers will subject it to greater risks.

Performance

For the year ended December 31, 2009, the Portfolio had a total return based on net asset value per share of 70.61%, net of fees, for Class I shares. The Portfolio’s Class I shares outperformed against its benchmark, the Russell 1000® Growth Index (the “Index”) which returned 37.21%.

Factors Affecting Performance

·In many ways, 2009 was as surprising for investors as 2008. We made few changes to the Portfolio during the downturn, as we believed our high quality companies with sustainable competitive advantages had the potential to perform well over time. Staying true to our philosophy and process proved advantageous in 2009, as higher quality names — those with attractive returns on invested capital and strong balance sheets — led for most of the year. As it became more apparent we were not headed for a total meltdown, the recovery broadened across the Portfolio’s holdings. While turnover remained low, we did add new names as several of the Portfolio’s holdings graduated from mid- to large-cap and as we found more compelling opportunities. For the period overall, stock selection drove the Portfolio’s relative outperformance.

·Stock selection and an overweight in technology by far was the largest positive contributor to relative performance. The computer services software and systems industry led performance within the sector.

·Stock selection in consumer discretionary also had a positive effect on relative performance, although an overweight there slightly detracted. Within the sector, outperformance was driven by the diversified retail industry.

·Both stock selection and an overweight in financial services added to relative performance. Here, exposure to the securities brokerage and services industry was the primary contributor.

·However, stock selection in materials and processing detracted from relative performance, despite the benefit of an overweight position in the sector. While none of our holdings had negative returns, they did not keep pace with the stronger performing industries within the sector. In particular, the diversified chemicals and copper industries, in which the Portfolio had no exposure, saw large rebounds in 2009.

Management Strategies

·As a team, we do not spend a great deal of time thinking about a market outlook, as we believe it is nearly impossible to correctly anticipate what will happen over short periods of time. While current conditions seem encouraging, with initial public offerings and merger and acquisition activity expanding, we cannot rule out volatility around short-term events. Our focus is on assessing company prospects over three to five years, and owning a portfolio of what we consider to be high quality companies with diverse business drivers not tied to a particular market environment.

*Minimum Investment

In accordance with SEC regulations, Portfolio’s performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class P shares will vary from the Class I shares based upon its different inception date and will be negatively impacted by additional fees assessed to that class.

68

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

Focus Growth Portfolio

Performance Compared to the Russell 1000®Growth Index(1)and the Lipper Multi-Cap Growth Funds Index(2)

	Total Returns(3)
			Average Annual
	One Year		Five Years		Ten Years		Since Inception(6)
Portfolio — Class I(4)	70.61	%	4.10	%	-0.90	%	9.98	%
Russell 1000® Growth Index	37.21		1.63		-3.99		6.54
Lipper Multi-Cap Growth Funds Index	39.17		1.49		-2.85		6.53
Portfolio — Class P(5)	70.02		3.83		-1.15		7.59
Russell 1000® Growth Index	37.21		1.63		-3.99		4.93
Lipper Multi-Cap Growth Funds Index	39.17		1.49		-2.85		4.99

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or 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 of share classes will vary due to difference in expenses.

(1)	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 Russell 1000® Index is an index of approximately 1,000 of the largest U.S. companies based on a combination of market capitalization and current index membership. The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
(2)	The Lipper Multi-Cap Growth Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Multi-Cap Growth Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index. As of the date of this report, the Portfolio is in the Lipper Multi-Cap Growth Funds classification.
(3)	Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and reimbursements, total returns would have been lower. Fee waivers and/or expense reimbursements are voluntary and the Adviser reserves the right to commence or terminate any waiver and/or reimbursement at any time.
(4)	Commenced operations on March 8, 1995.
(5)	Commenced operations on January 2, 1996.
(6)	For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Index.

Portfolio Composition

Classification	Percentage of Total Investments
Computer Services Software & Systems		22.6	%
Consumer Lending		10.1
Diversified Retail		9.3
Computer Technology		8.6
Alternative Energy		6.9
Chemicals: Diversified		5.6
Communications Technology		5.0
Other*		28.4
Short-Term Investment		3.5
Total Investments		100.0	%

*  Industries representing less than 5% of total investments.

69

2009 Annual Report

December 31, 2009

Portfolio of Investments

Focus Growth Portfolio

	Shares	Value (000)
Common Stocks (96.6%)
Air Transport (2.8%)
Expeditors International of Washington, Inc.	7,602	$   264
Alternative Energy (6.9%)
Ultra Petroleum Corp. (a)	12,903	643
Biotechnology (2.2%)
Illumina, Inc. (a)	6,699	205
Casinos & Gambling (3.3%)
Wynn Resorts Ltd.	5,245	305
Chemicals: Diversified (5.6%)
Monsanto Co.	6,410	524
Commercial Finance & Mortgage Companies (4.1%)
BM&F Bovespa S.A.	55,079	383
Commercial Services (3.6%)
Corporate Executive Board Co. (The)	2,998	68
Leucadia National Corp. (a)	11,222	267
		335
Communications Technology (5.0%)
Cisco Systems, Inc. (a)	8,860	212
Research In Motion Ltd. (a)	3,819	258
		470
Computer Services Software & Systems (22.7%)
Baidu, Inc. ADR (a)	870	358
Google, Inc., Class A (a)	1,389	861
Salesforce.com, Inc. (a)	3,900	288
Tencent Holdings Ltd.	28,400	612
		2,119
Computer Technology (8.6%)
Apple, Inc. (a)	3,796	801
Consumer Lending (10.2%)
American Express Co.	6,981	283
Berkshire Hathaway, Inc., Class B (a)	60	197
Mastercard, Inc., Class A	1,830	469
		949
Diversified Financial Services (2.8%)
CME Group, Inc.	785	264
Diversified Retail (9.3%)
Amazon.com, Inc. (a)	6,450	868
Real Estate Investment Trusts (REIT) (4.2%)
Brookfield Asset Management, Inc., Class A	17,824	395
Shipping (2.0%)
C.H. Robinson Worldwide, Inc.	3,169	186
Wholesale & International Trade (3.3%)
Li & Fung Ltd.	76,100	313
Total Common Stocks (Cost $8,404)		9,024
Short-Term Investment (3.6%)
Investment Company (3.6%)
Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class (o) (Cost $332)	331,956	332
Total Investments (100.2%) (Cost $8,736) (v)		9,356
Liabilities in Excess of Other Assets (-0.2%)		(18	)
Net Assets (100%)		$9,338

(a)	Non-income producing security.
(o)	See Note G to the financial statements regarding investment in Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class.
(v)	The approximate market value and percentage of total investments, $1,308,000 and 9.9%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A within the Notes to Financial Statements.
ADR	American Depositary Receipt

Fair Value Measurement Information:

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2009. (See Note A-11 to the financial statements for further information regarding fair value measurement.)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)	Total (000)
Assets:
Common Stocks
Air Transport	$    264	$   —	$—	$    264
Alternative Energy	643	—	—	643
Biotechnology	205	—	—	205
Casinos & Gambling	305	—	—	305
Chemicals: Diversified	524	—	—	524
Commercial Finance & Mortgage Companies	—	383	—	383
Commercial Services	335	—	—	335
Communications Technology	470	—	—	470
Computer Services Software & Systems	1,507	612	—	2,119
Computer Technology	801	—	—	801
Consumer Lending	949	—	—	949
Diversified Financial Services	264	—	—	264
Diversified Retail	868	—	—	868
Real Estate Investment Trusts (REIT)	395	—	—	395
Shipping	186	—	—	186
Wholesale & International Trade	—	313	—	313
Total Common Stocks	7,716	1,308	—	9,024
Short-Term Investment
Investment Company	332	—	—	332
Total Assets	8,048	1,308	—	9,356
Total	$8,048	$1,308	$—	$9,356

70 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview

Large Cap Relative Value Portfolio

The Large Cap Relative Value Portfolio (the “Portfolio”) seeks high total return by investing primarily in equity securities that the Advisor believes to be undervalued relative to the stock market in general at the time of purchase. Investments in foreign markets entail special risks such as currency, political, economic, and market risks.

Performance

For the year ended December 31, 2009, the Portfolio had a total return based on net asset value and reinvestment of distributions per share of 24.28%, net of fees, for Class I shares. The Portfolio’s Class I shares outperformed against its benchmark, the Russell 1000® Value Index (the “Index”) which returned 19.69%.

Factors Affecting Performance

·Equities advanced from mid-March through year end as the financial system improved, policy actions helped stabilize the credit markets, and corporate earnings were able to beat lowered expectations. As the period progressed, the rate of decline in some economic indicators continued to slow, but the economy and market still faced many headwinds, most notably high unemployment rates and the weak real estate market.

·The energy sector was additive to relative performance, especially exploration and production (E&P) companies. E&P companies benefited from rising energy prices and the improving economic environment, whereas integrated oil companies (which we deemphasized in the Portfolio) lagged the broad sector. Although we increased the Portfolio’s exposure to the energy sector overall, the sector remained a relative underweight.

·Health care also contributed to outperformance during the period. The Portfolio has historically maintained an overweight in the sector; however, over the past 12 months the weight has declined. Most of the exposure in health care has been in the pharmaceutical industry and the Portfolio benefited from holding two companies that were targeted for acquisition. Given the relative strength in health care over the preceding fiscal year and the merger and acquisition tailwind in pharmaceuticals in this fiscal year, we reduced the Portfolio’s exposure in the sector and used the proceeds to invest in other areas we believed had better risk/reward opportunities.

·In the technology sector, exposure to both software and services, and semiconductors, added to relative gains. In software and services, we bought an undervalued Internet company undergoing a management change. The company’s stock price appreciated as the new management drove revenue growth and sold a non-core asset.

·Although we decreased the Portfolio’s consumer staples exposure during the period, the sector contributed to relative performance. One of the Portfolio’s top holdings was a confectionary company that performed strongly following an announcement that a competitor had made an offer to acquire them. Toward the end of the period, we began adding attractive consumer staples companies that met our value-with-a-catalyst criteria.

·The financials sector was the largest relative detractor during the review period. The Portfolio has maintained a significant underweight in financials versus the Index for some time, which benefited the Portfolio significantly in 2007 and 2008. However, over the past 12 months, financial stocks rebounded from their earlier dramatic decline. The Portfolio’s exposure has been focused on financial companies that we believe possess conservative balance sheets and appropriate risk/return characteristics, and these companies did not participate in the rally to the degree that others in the sector (such as banks and diversified financials) did. The Portfolio’s underexposure was based on our concerns regarding quality of balances sheets, uncertainty regarding additional capital requirements and incremental dividend cuts, and the unpredictability of government influence.

·The materials sector also dampened relative gains. The Portfolio’s underweight in the sector meant that it had less exposure to these economically sensitive stocks, which performed well as the market rebounded.

Management Strategies

·Over the past 12 months, equity markets have had tremendous volatility. The market initially experienced a significant sell-off, followed by a strong rally as investor confidence improved when signs of an economic recovery — or at least stabilization — began to emerge. Although cautiously optimistic,

71

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

Large Cap Relative Value Portfolio

we are guarded as post the rally, valuations are relatively less compelling and other challenges continue. We continue to be concerned about high unemployment, an earnings recovery driven by massive cost cutting versus top-line revenue growth, and the still weak real estate market. We believe that going forward, the market will become more of a stock pickers’ market. In other words, whereas in the rally off the March bottom one might have been rewarded for just the appearance of value, we believe that going forward managers will be more likely to be rewarded for uncovering value with improving or good fundamentals. We think the market will more markedly differentiate between those companies that have more sustainable fundamental momentum with value as a backdrop versus those that just appear to provide value. Given our philosophy and process, which focuses on uncovering value combined with a catalyst, we are excited about what we believe will be this next phase in the market.

·We seek to find out-of-favor and undervalued companies that are experiencing a change or catalyst that we believe should have a positive impact on the stock valuation. Such catalysts could be fundamental in nature (e.g., revenues reaccelerating, returns improving), may take the form of growth or consolidation within an industry/sector, or could be a management change — or some combination of these elements. This process is designed to tilt risk/reward scales in our favor. We believe that if we are purchasing stocks that are out of favor and undervalued, expectations (and generally downside) will be more limited. We also believe that if we combine these attributes with a catalyst, we go a long way working toward helping our investors’ during a down market, while offering our investors the potential opportunity to outperform the market.

*Minimum Investment

In accordance with SEC regulations, Portfolio’s performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class P shares will vary from the Class I shares based upon its different inception date and will be negatively impacted by additional fees assessed to that class.

Performance Compared to the Russell 1000® Value Index(1) and the Lipper Large-Cap Value Funds Index(2)

	Total Returns(3)
			Average Annual
	One Year		Five Years		Ten Years		Since Inception(6)
Portfolio — Class I(4)	24.28	%	2.24	%	3.98	%	8.83	%
Russell 1000® Value Index	19.69		-0.25		2.47		9.22
Lipper Large-Cap Value Funds Index	24.96		0.28		0.85		8.29
Portfolio — Class P(5)	24.00		1.99		3.73		7.23
Russell 1000® Value Index	19.69		-0.25		2.47		7.03
Lipper Large-Cap Value Funds Index	24.96		0.28		0.85		5.81

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or 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 of share classes will vary due to difference in expenses.

(1)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 forecasted growth values. The Russell 1000® Index is an index of approximately 1,000 of the largest U.S.

72

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

Large Cap Relative Value Portfolio

	securities based on a combination of market capitalization and current index membership. The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
(2)	The Lipper Large-Cap Value Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Large-Cap Value Fund classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index. As of the date of this report, the Portfolio is in the Lipper Large-Cap Value Funds classification.
(3)	Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and reimbursements, total returns would have been lower. Fee waivers and/or expense reimbursements are voluntary and the Adviser reserves the right to commence or terminate any waiver and/or reimbursement at any time.
(4)	Commenced operations on January 31, 1990.
(5)	Commenced operations on January 2, 1996.
(6)	For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Index.

Portfolio Composition

Classification	Percentage of Total Investments
Diversified Financial Services		8.4	%
Pharmaceuticals		7.1
Oil: Integrated		6.0
Alternative Energy		5.6
Other*		69.7
Short-Term Investment		3.2
Total Investments		100.0	%

*  Industries representing less than 5% of total investments.

73

2009 Annual Report

December 31, 2009

Portfolio of Investments

Large Cap Relative Value Portfolio

	Shares	Value (000)
Common Stocks (96.4%)
Alternative Energy (5.6%)
Anadarko Petroleum Corp.	90,500	$   5,649
Devon Energy Corp.	39,910	2,933
Occidental Petroleum Corp.	76,460	6,220
		14,802
Automobiles (0.1%)
Ford Motor Co. (a)	32,600	326
Banks: Diversified (4.7%)
BB&T Corp.	67,600	1,715
Fifth Third Bancorp.	141,600	1,381
First Horizon National Corp. (a)	58,470	783
PNC Financial Services Group, Inc.	94,036	4,964
U.S. Bancorp	52,000	1,171
Wells Fargo & Co.	92,400	2,494
		12,508
Beverages: Soft Drinks (1.0%)
Coca-Cola Co. (The)	44,940	2,562
Cable Television Services (0.9%)
Time Warner Cable, Inc.	59,419	2,459
Chemicals: Diversified (2.8%)
Bayer AG ADR	54,610	4,358
Dow Chemical Co. (The)	107,400	2,967
		7,325
Commercial Services (3.8%)
Cintas Corp.	49,800	1,297
eBay, Inc. (a)	241,990	5,697
Manpower, Inc.	31,601	1,725
Robert Half International, Inc.	48,900	1,307
		10,026
Communications Technology (2.9%)
Cisco Systems, Inc. (a)	169,930	4,068
Vodafone Group plc ADR	152,300	3,517
		7,585
Computer Services Software & Systems (0.3%)
Symantec Corp. (a)	36,942	661
Computer Technology (2.6%)
Dell, Inc. (a)	96,400	1,384
Hewlett-Packard Co.	104,549	5,386
		6,770
Consumer Electronics (0.8%)
Yahoo!, Inc. (a)	125,200	2,101
Consumer Lending (2.9%)
Marsh & McLennan Cos., Inc.	351,847	7,769
Consumer Staples — Miscellaneous (0.5%)
Avery Dennison Corp.	36,000	1,314
Copper (0.8%)
Freeport-McMoran Copper & Gold, Inc. (a)	25,200	2,023
Cosmetics (1.0%)
Estee Lauder Cos., Inc. (The), Class A	54,000	2,611
Diversified Financial Services (8.0%)
Bank of America Corp.	313,500	4,721
Citigroup, Inc.	557,100	1,844
JPMorgan Chase & Co.	316,404	13,185
State Street Corp.	33,800	1,472
		21,222
Diversified Manufacturing Operations (4.6%)
Dover Corp.	84,700	3,524
Ingersoll-Rand plc	58,037	2,074
Siemens AG ADR	29,410	2,697
Tyco International Ltd. (a)	108,545	3,873
		12,168
Diversified Materials & Processing (0.7%)
Newmont Mining Corp.	38,150	1,805
Diversified Media (4.3%)
Time Warner, Inc.	160,126	4,666
Viacom, Inc., Class B (a)	226,692	6,740
		11,406
Diversified Retail (4.5%)
Gap, Inc. (The)	94,100	1,971
Home Depot, Inc.	160,216	4,635
Wal-Mart Stores, Inc.	98,100	5,244
		11,850
Drug & Grocery Store Chains (1.0%)
Walgreen Co.	72,800	2,673
Electrical Components (0.5%)
General Dynamics Corp.	19,700	1,343
Energy Equipment (1.3%)
Schlumberger Ltd.	53,640	3,491
Foods (3.9%)
Kraft Foods, Inc., Class A	195,500	5,314
Sysco Corp.	101,300	2,830
Unilever N.V. (NY Shares)	65,240	2,109
		10,253
Health Care Providers & Services (0.9%)
UnitedHealth Group, Inc.	73,500	2,240
Household Equipment & Products (1.3%)
Sony Corp. ADR	119,900	3,477
Insurance: Property Casualty (3.1%)
Chubb Corp.	69,080	3,397
Transatlantic Holdings, Inc.	16,100	839
Travelers Cos., Inc. (The)	80,200	3,999
		8,235
Medical & Dental Instruments & Supplies (2.1%)
Boston Scientific Corp. (a)	203,610	1,832
Covidien plc	79,155	3,791
		5,623
Multi-Sector Companies (2.5%)
General Electric Co.	442,900	6,701

74 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Large Cap Relative Value Portfolio

	Shares	Value (000)
Oil Well Equipment & Services (0.8%)
Smith International, Inc.	77,400	$   2,103
Oil: Integrated (6.0%)
BP plc ADR	49,030	2,842
ConocoPhillips	43,510	2,222
Exxon Mobil Corp.	53,300	3,635
Hess Corp.	32,900	1,990
Royal Dutch Shell plc, Class A ADR	87,150	5,239
		15,928
Pharmaceuticals (7.1%)
Abbott Laboratories	40,200	2,170
Bristol-Myers Squibb Co.	187,680	4,739
Cardinal Health, Inc.	51,100	1,647
Merck & Co., Inc.	89,198	3,259
Pfizer, Inc.	211,200	3,842
Roche Holding AG ADR	74,400	3,140
		18,797
Production Technology Equipment (0.9%)
Lam Research Corp. (a)	57,970	2,273
Radio & TV Broadcasters (1.4%)
Comcast Corp., Class A	224,798	3,790
Recreational Vehicles & Boats (0.5%)
Harley-Davidson, Inc.	55,577	1,401
Restaurants (0.3%)
Starbucks Corp. (a)	29,230	674
Scientific Instruments : Gauges & Meters (1.2%)
Agilent Technologies, Inc. (a)	104,600	3,250
Securities Brokerage & Services (1.5%)
Charles Schwab Corp. (The)	208,372	3,922
Semi-Conductors/Components (1.2%)
Intel Corp.	148,031	3,020
Transportation — Miscellaneous (0.5%)
FedEx Corp.	15,800	1,318
Utilities: Electrical (4.5%)
American Electric Power Co., Inc.	163,149	5,676
Edison International	37,000	1,287
Entergy Corp.	27,190	2,225
FirstEnergy Corp.	58,250	2,706
		11,894
Utilities: Telecommunications (1.1%)
Verizon Communications, Inc.	85,665	2,838
Total Common Stocks (Cost $243,876)		254,537
Preferred Stock (0.3%)
Diversified Financial Services (0.3%)
Bank of America Corp. (Convertible) (Cost $945) (a)	63,000	940
Short-Term Investment (3.2%)
Investment Company (3.2%)
Morgan Stanley Institutional Liquidity Funds —  Money Market Portfolio — Institutional Class (o) (Cost $8,486)	8,486,334	8,486
Total Investments (99.9%) (Cost $253,307)		263,963
Other Assets in Excess of Liabilities (0.1%)		197
Net Assets (100%)		$264,160

(a)	Non-income producing security.
(o)	See Note G to the financial statements regarding investment in Morgan Stanley Institutional Liquidity Funds — Money Market Portfolio — Institutional Class.

Fair Value Measurement Information:

The following is a summary of the inputs used to value the Portfolio’s net assets as of December 31, 2009. (See Note A-11 to the financial statements for further information regarding fair value measurement.)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)	Total (000)
Assets:
Common Stocks
Alternative Energy	$   14,802	$—	$—	$   14,802
Automobiles	326	—	—	326
Banks: Diversified	12,508	—	—	12,508
Beverages: Soft Drinks	2,562	—	—	2,562
Cable Television Services	2,459	—	—	2,459
Chemicals: Diversified	7,325	—	—	7,325
Commercial Services	10,026	—	—	10,026
Communications Technology	7,585	—	—	7,585
Computer Services Software & Systems	661	—	—	661
Computer Technology	6,770	—	—	6,770
Consumer Electronics	2,101	—	—	2,101
Consumer Lending	7,769	—	—	7,769
Consumer Staples — Miscellaneous	1,314	—	—	1,314
Copper	2,023	—	—	2,023
Cosmetics	2,611	—	—	2,611
Diversified Financial Services	21,222	—	—	21,222
Diversified Manufacturing Operations	12,168	—	—	12,168
Diversified Materials & Processing	1,805	—	—	1,805
Diversified Media	11,406	—	—	11,406

The accompanying notes are an integral part of the financial statements. 75

2009 Annual Report

December 31, 2009

Portfolio of Investments (cont’d)

Large Cap Relative Value Portfolio

Fair Value Measurement Information: (cont’d)

Investment Type	Level 1 Quoted prices (000)	Level 2 Other significant observable inputs (000)	Level 3 Significant unobservable inputs (000)	Total (000)
Common Stocks (cont’d)
Diversified Retail	$11,850	$—	$—	$11,850
Drug & Grocery Store Chains	2,673	—	—	2,673
Electrical Components	1,343	—	—	1,343
Energy Equipment	3,491	—	—	3,491
Foods	10,253	—	—	10,253
Health Care Providers & Services	2,240	—	—	2,240
Household Equipment & Products	3,477	—	—	3,477
Insurance: Property-Casualty	8,235	—	—	8,235
Medical & Dental Instruments & Supplies	5,623	—	—	5,623
Multi-Sector Companies	6,701	—	—	6,701
Oil Well Equipment & Services	2,103	—	—	2,103
Oil: Integrated	15,928	—	—	15,928
Pharmaceuticals	18,797	—	—	18,797
Production Technology Equipment	2,273	—	—	2,273
Radio & TV Broadcasters	3,790	—	—	3,790
Recreational Vehicles & Boats	1,401	—	—	1,401
Restaurants	674	—	—	674
Scientific Instruments : Gauges & Meters	3,250	—	—	3,250
Securities Brokerage & Services	3,922	—	—	3,922
Semi-Conductors/Components	3,020	—	—	3,020
Transportation — Miscellaneous	1,318	—	—	1,318
Utilities: Electrical	11,894	—	—	11,894
Utilities: Telecommunications	2,838	—	—	2,838
Total Common Stocks	254,537	—	—	254,537
Preferred Stock
Diversified Financial Services	940	—	—	940
Short-Term Investment
Investment Company	8,486	—	—	8,486
Total Assets	263,963	—	—	263,963
Total	$263,963	$—	$—	$263,963

76 The accompanying notes are an integral part of the financial statements.

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview

Small Company Growth Portfolio

The Small Company Growth Portfolio (the “Portfolio”) seeks long-term capital appreciation by investing primarily in growth-oriented equity securities of small capitalization companies. Investments in small sized corporations are more vulnerable to financial risks and other risks than larger corporations and may involve a higher degree of price volatility than investments in the general equity markets.

Performance

For the year ended December 31, 2009, the Portfolio had a total return based on net asset value and reinvestment of distributions per share of 47.92%, net of fees, for Class I shares. The Portfolio’s Class I shares outperformed against its benchmark, the Russell 2000® Growth Index (the “Index”) which returned 34.47%.

Factors Affecting Performance

·In many ways, 2009 was as surprising for investors as 2008. We made few changes to the Portfolio during the downturn, as we believed our high quality companies with sustainable competitive advantages had the potential to perform well over time. Staying true to our philosophy and process proved advantageous in 2009, as higher quality names — those with attractive returns on invested capital and strong balance sheets — led for most of the year. As it became more apparent we were not headed for a total meltdown, the recovery broadened across the Portfolio’s holdings. While turnover remained low, we did add new names as several of the Portfolio’s holdings graduated from mid- to large-cap and as we found more compelling opportunities. For the period overall, stock selection drove the Portfolio’s relative outperformance.

·Both stock selection and an overweight in consumer discretionary by far had the largest positive effect on relative performance. Within the sector, the specialty retail industry was the leading contributor.

·Both stock selection and an underweight in producer durables were also additive. Here, outperformance was driven by the commercial services industry.

·An underweight in health care was advantageous to relative performance, although it was somewhat offset by the negative influence of stock selection there. Within the sector, the medical equipment industry outperformed the Index.

·Conversely, stock selection in energy was the largest drag on relative performance, as natural gas producers underperformed the Index.

·An underweight in technology also detracted from relative performance, despite the benefit of stock selection in the sector. The main area of underperformance was in the computer technology industry.

·An overweight in financial services hampered relative performance, although stock selection did help. The financial data and systems industry lagged the most.

Management Strategies

·As a team, we do not spend a great deal of time thinking about a market outlook, as we believe it is nearly impossible to correctly anticipate what will happen over short periods of time. While current conditions seem encouraging, with initial public offerings and merger and acquisition activity expanding, we cannot rule out volatility around short-term events. Our focus is on assessing company prospects over three to five years, and owning a portfolio of what we consider to be high quality companies with diverse business drivers not tied to a particular market environment.

*Minimum Investment

In accordance with SEC regulations, Portfolio’s performance shown assumes that all recurring fees (including management fees) were deducted and all dividends and distributions were reinvested. The performance of Class P shares will vary from the Class I shares based upon its different inception date and will be negatively impacted by additional fees assessed to that class.

77

2009 Annual Report

December 31, 2009 (unaudited)

Investment Overview (cont’d)

Small Company Growth Portfolio

Performance Compared to the Russell 2000® Growth Index(1) and the Lipper Small-Cap Growth Funds Index(2)

	Total Returns(3)
			Average Annual
	One Year		Five Years		Ten Years		Since Inception(6)
Portfolio — Class I(4)	47.92	%	2.41	%	2.11	%	10.67	%
Russell 2000® Growth Index	34.47		0.87		-1.37		5.86
Lipper Small-Cap Growth Funds Index	38.03		0.25		-0.63		8.07
Portfolio — Class P(5)	47.41		2.15		1.86		9.24
Russell 2000® Growth Index	34.47		0.87		-1.37		3.34
Lipper Small-Cap Growth Funds Index	38.03		0.25		-0.63		5.05

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. Performance assumes that all dividends and distributions, if any, were reinvested. For the most recent month-end performance figures, please visit www.morganstanley.com/im. Investment return and principal value will fluctuate so that Portfolio shares, when redeemed, may be worth more or 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 of share classes will vary due to difference in sales charges and expenses.

(1)	The Russell 2000® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000® Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 2000® Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market capitalization and current index membership. The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
(2)	The Lipper Small-Cap Growth Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Small-Cap Growth Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index. As of the date of this report, the Portfolio is in the Lipper Small-Cap Growth Funds classification.
(3)	Total returns for the Portfolio reflect fees waived and expenses reimbursed, if applicable, by the Adviser. Without such waivers and expense reimbursements, total returns would have been lower. Fee waivers and/or expense reimbursements are voluntary and the Adviser reserves the right to commence or terminate any waiver and/or reimbursement at any time.
(4)	Commenced operations on November 1, 1989.
(5)	Commenced operations on January 2, 1996.
(6)	For comparative purposes, average annual since inception returns listed for the Indexes refer to the inception date or initial offering of the respective share class of the Portfolio, not the inception of the Index.

Portfolio Composition