UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number			811-08265
Morgan Stanley S&P 500 Index Fund
(Exact name of registrant as specified in charter)
1221 Avenue of the Americas, New York, New York					10020
(Address of principal executive offices)					(Zip code)
Ronald E. Robison 1221 Avenue of the Americas, New York, New York 10020
(Name and address of agent for service)
Registrant’s telephone number, including area code:				212-762-4000
Date of fiscal year end:	August 31, 2007
Date of reporting period:		February 28, 2007

Item 1 - Report to Shareholders

Welcome, Shareholder:

In this report, you'll learn about how your investment in MorganStanley S&P 500 Index Fund performed during the semiannual period. We will provide an overview of the market conditions, and discuss some of the factors that affected performance during the reporting period. In addition, this report includes the Fund's financial statements and a list of Fund investments.

This material must be preceded or accompanied by a prospectus for the fund being offered.

Market forecasts provided in this report may not necessarily come to pass. There is no assurance that the Fund will achieve its investment objective. The Fund is subject to market risk, which is the possibility that market values of securities owned by the Fund will decline and, therefore, the value of the Fund's shares may be less than what you paid for them. Accordingly, you can lose money investing in this Fund. Please see the prospectus for more complete information on investment risks.

Fund Report

For the six months ended February 28, 2007

Total Return for the 6 Months Ended February 28, 2007
Class A			Class B			Class C			Class D			S&P 500® Index1			Lipper S&P 500 Objective Funds Index2
	8.66	%		8.27	%		8.17	%		8.75	%		8.93	%		8.82	%

The performance of the Fund's four share classes varies because each has different expenses. The Fund's total returns assume the reinvestment of all distributions but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. See Performance Summary for standardized performance and benchmark information.

Market Conditions

Early in the reporting period, market conditions were recovering from a downturn that occurred in May and June of 2006, when concerns about the slowing economy, higher inflation, rising interest rates and soaring oil prices pushed market volatility to levels not seen in several years. By August, however, conditions stabilized and stocks returned to positive territory. The Federal Open Market Committee (the "Fed") left the target federal funds rate unchanged for the remainder of 2006, which helped alleviate investors' concerns that the Fed's two years of monetary tightening would cool the economy too much. Disappointing third quarter gross domestic product (GDP) data did not halt stocks' advance in the fourth quarter. Additionally, consumer spending and confidence, on the whole, did not flag any significant trouble, although consumer debt levels garnered greater attention toward the end of the year. Warmer weather helped energy prices ease in the final months of 2006, and gasoline prices also declined. The jobs market softened but was still in line with expectations, and inflation data reported at year-end did not cause much of a stir. In early 2007, the market slowed its advance, although economic data in the form of payroll, jobs growth and consumer sentiment were received positively. Oil prices continued to retreat in January, and fourth quarter GDP exceeded expectations. At the end of the month, the Fed left the rate unchanged and in its official comments suggested a more upbeat view of the economy. While February began on a generally positive note, stock prices moved sharply lower in the final days of the month. China's equity market dropped significantly, spurring stock volatility in markets across the world. Furthermore, difficulties in the subprime mortgage market and comments made by former Fed Chairman Alan Greenspan reignited recessionary fears in the U.S.

Performance Analysis

Morgan Stanley S&P 500 Index Fund underperformed the S&P 500^® Index and the Lipper S&P 500 Objective Funds Index for the six months ended February 28, 2007, assuming no deduction of applicable sales charges.

All sectors in the S&P 500 Index and the Fund generated positive returns on an absolute basis during the period under review. The groups with the highest returns were materials, telecommunication services and consumer discretionary. The materials sector performed well due to improved earnings at several companies and a major merger and acquisition (M&A) deal in the paper industry. The telecommunication services sector also benefited from ongoing M&A activity. Within the consumer discretionary sector, outsized performance from media, retail and home supplies stocks boosted the sector's overall performance.

2

In contrast, the health care, consumer staples and energy sectors had the smallest gains. The Democratic majority in Congress posed renewed political risks to several areas within the health care sector, including hospitals and pharmaceuticals. The energy sector's gains were muted by declining sentiment for energy stocks amid retreating oil prices. In the consumer staples sector, select beverage stocks declined after Wall Street analysts downgraded the stocks' ratings. Additionally within the sector, drugstore companies suffered from increased competitive pressure, which dampened their earnings outlooks.

Because the S&P 500 Index is market capitalization weighted (and that the Fund seeks to replicate the performance attributes of the index, before Fund fees), the overall contribution of each sector was influenced by its relative size within the index and the Fund portfolio. Accordingly, the top contributors to the Fund's performance during the period were the financials, consumer discretionary and technology sectors. The energy, consumer staples and utilities sectors added the least to overall performance. On an industry basis, the real estate investment trusts (REITs) and consumer durables groups were strongly positive contributors, while the pharmaceuticals and biotechnology industry was the largest detractor.

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

"Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500" and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by the Fund. The Fund is not sponsored, endorsed, sold or promoted by S&P, and S&P makes no representation regarding the advisability of investing in the Fund.

TOP 10 HOLDINGS
Exxon Mobil Corp.	3.3	%
General Electric Co.	2.8
Citigroup, Inc.	1.9
Microsoft Corp.	1.9
AT&T Inc.	1.8
Bank of America Corp.	1.8
Procter & Gamble Co. (The)	1.6
Johnson & Johnson	1.4
Pfizer, Inc.	1.4
Altria Group, Inc.	1.4
TOP FIVE INDUSTRIES
Pharmaceuticals: Major	5.8	%
Integrated Oil	5.6
Major Banks	5.5
Industrial Conglomerates	4.9
Financial Conglomerates	4.5

Data as of February 28, 2007. Subject to change daily. All percentages for top 10 holdings and top five industries are as a percentage of net assets. These data are provided for informational purposes only and should not be deemed a recommendation to buy or sell the securities mentioned. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.

3

Investment Strategy

The Fund will normally invest at least 80 percent of its assets in common stocks of companies included in the S&P 500^® Index. The "Investment Adviser," Morgan Stanley Investment Advisors Inc., "passively" manages the Fund's assets by investing in stocks in approximately the same proportion as they are represented in the S&P 500 Index. For example, if the common stock of a specific company represents five percent of the S&P 500 Index, the Investment Adviser typically will invest the same percentage of the Fund's assets in that stock. The S&P 500 Index is a well-known stock market index that includes common stocks of 500 companies representing a significant portion of the market value of all common stocks publicly traded in the United States. The Fund may invest in foreign companies, including those that are in emerging market countries, that are included in the S&P 500 Index.

For More Information About Portfolio Holdings

Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters. The semiannual reports and the annual reports are filed electronically with the Securities and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley also delivers the semiannual and annual reports to fund shareholders and makes these reports available on its public web site, www.morganstanley.com. Each Morgan Stanley fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Morgan Stanley public web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's web site, http://www.sec.gov. You may also review and copy them at the SEC's public reference room in Washington, DC. Information on the operation of the SEC's public reference room may be obtained by calling the SEC at (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the public reference section of the SEC, Washington, DC 20549-0102.

Proxy Voting Policy and Procedures and Proxy Voting Record

You may obtain a copy of the Fund's Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 869-NEWS or by visiting the Mutual Fund Center on our Web site at www.morganstanley.com. It is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov.

You may obtain information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30 without charge by visiting the Mutual Fund Center on our Web site at www.morganstanley.com. This information is also available on the Securities and Exchange Commission's Web site at http://www.sec.gov.

Householding Notice

To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling (800) 350-6414, 8:00 a.m. to 8:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.

4

Performance Summary

Average Annual Total Returns—Period Ended February 28, 2007
Symbol	Class A Shares* (since09/26/97) SPIAX		Class B Shares** (since 09/26/97) SPIBX		Class C Shares† (since 09/26/97) SPICX		Class D Shares†† (since 09/26/97) SPIDX
1 Year	11.33% 5.48	3 4	10.52% 5.52	3 4	10.51% 9.51	3 4	11.55% —	3
5 Years	6.15 5.01	3 4	5.34 5.01	3 4	5.36 5.36	3 4	6.38 —	3
Since Inception	5.28 4.68	3 4	4.62 4.62	3 4	4.48 4.48	3 4	5.51 —	3

Performance data quoted represents past performance, which is no guarantee of future results and current performance may be lower or higher than the figures shown. For most recent month-end performance figures, please visit www.morganstanley.com or speak with your Financial Advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance for Class A, Class B, Class C, and Class D shares will vary due to differences in sales charges and expenses.

*  The maximum front-end sales charge for Class A is 5.25%.

**  The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The CDSC declines to 0% after six years. Effective April 2005, Class B shares will generally convert to Class A shares approximately eight years after the end of the calendar month in which the shares were purchased. Performance for periods greater than eight years reflects this conversion (beginning April 2005).

†  The maximum contingent deferred sales charge for Class C is 1.0% for shares redeemed within one year of purchase.

††  Class D has no sales charge.

(1)  The Standard & Poor's 500 Index (S&P 500^®) is a broad-based index, the performance of which is based on the performance of 500 widely-held common stocks chosen for market size, liquidity and industry group representation. The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.

(2)  The Lipper S&P 500 Objective Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper S&P 500 Objective Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index. The Fund is in the Lipper S&P 500 Objective Funds classification as of the date of this report.

(3)  Figure shown assumes reinvestment of all distributions and does not reflect the deduction of any sales charges.

(4)  Figure shown assumes reinvestment of all distributions and the deduction of the maximum applicable sales charge. See the Fund's current prospectus for complete details on fees and sales charges.

5

Expense Example

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees; and (2) ongoing costs, including advisory fees; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 09/01/06 – 02/28/07.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) and redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs, and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning Account Value		Ending Account Value		Expenses Paid During Period *
	09/01/06		02/28/07		09/01/06 – 02/28/07
Class A
Actual (8.66% return)	$	1,000.00	$	1,086.60	$	3.00
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,021.92	$	2.91
Class B
Actual (8.27% return)	$	1,000.00	$	1,082.70	$	6.92
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,018.15	$	6.71
Class C
Actual (8.17% return)	$	1,000.00	$	1,081.70	$	6.86
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,018.20	$	6.66
Class D
Actual (8.75% return)	$	1,000.00	$	1,087.50	$	1.76
Hypothetical (5% annual return before expenses)	$	1,000.00	$	1,023.11	$	1.71

*  Expenses are equal to the Fund's annualized expense ratios of 0.58%, 1.34%, 1.33% and 0.34% for Class A, Class B, Class C and Class D shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). If the Fund had borne all of its expenses, the annualized expense ratios would have been 0.67%, 1.43%, 1.42% and 0.43%, for Class A, Class B, Class C and Class D shares, respectively.

6

Morgan Stanley S&P 500 Index Fund

Portfolio of Investments  n  February 28, 2007 (unaudited)

NUMBER OF SHARES			VALUE
		Common Stocks (98.7%)
		Advertising/ Marketing Services (0.2%)
	40,956	Interpublic Group of Companies, Inc. (The)*	$	515,636
	15,865	Omnicom Group, Inc.		1,643,773
				2,159,409
		Aerospace & Defense (1.7%)
	73,406	Boeing Co.		6,406,142
	37,564	General Dynamics Corp.		2,872,143
	11,582	Goodrich Corp.		568,097
	11,598	L-3 Communications Holdings, Inc.		1,010,186
	33,055	Lockheed Martin Corp.		3,215,590
	32,065	Northrop Grumman Corp.		2,303,870
	41,276	Raytheon Co.		2,210,330
	15,522	Rockwell Collins, Inc.		1,016,381
				19,602,739
		Agricultural Commodities/ Milling (0.2%)
	61,014	Archer-Daniels-Midland Co.		2,097,661
		Air Freight/Couriers (0.9%)
	28,465	FedEx Corp.		3,250,134
	99,659	United Parcel Service, Inc. (Class B)		6,995,065
				10,245,199
		Airlines (0.1%)
	73,508	Southwest Airlines Co.		1,112,176
		Aluminum (0.2%)
	80,495	Alcoa, Inc.		2,689,338
		Apparel/Footwear (0.4%)
	34,114	Coach, Inc.*		1,610,181
	10,235	Jones Apparel Group, Inc.		336,936
	9,514	Liz Claiborne, Inc.		428,130
	17,455	Nike, Inc. (Class B)		1,823,524
	4,400	Polo Ralph Lauren Corp.		382,712
	8,300	V.F. Corp.		662,423
				5,243,906

NUMBER OF SHARES			VALUE
		Apparel/Footwear Retail (0.3%)
	48,914	Gap, Inc. (The)	$	938,660
	31,751	Limited Brands, Inc.		878,868
	21,237	Nordstrom, Inc.		1,127,472
	42,248	TJX Companies, Inc. (The)		1,161,820
				4,106,820
		Auto Parts: O.E.M. (0.2%)
	13,832	Eaton Corp.		1,120,530
	18,175	Johnson Controls, Inc.		1,704,815
				2,825,345
		Automotive Aftermarket (0.0%)
	16,476	Goodyear Tire & Rubber Co. (The)*		405,639
		Beverages: Alcoholic (0.4%)
	71,371	Anheuser-Busch Companies, Inc.		3,502,889
	7,312	Brown-Forman Corp. (Class B)		478,936
	19,502	Constellation Brands Inc. (Class A)*		457,517
	4,245	Molson Coors Brewing Co. (Class B)		358,448
				4,797,790
		Beverages: Non-Alcoholic (1.6%)
	189,295	Coca-Cola Co. (The)		8,836,291
	25,729	Coca-Cola Enterprises Inc.		516,896
	12,707	Pepsi Bottling Group, Inc. (The)		393,917
	152,438	PepsiCo, Inc.		9,626,460
				19,373,564
		Biotechnology (1.3%)
	108,291	Amgen Inc.*		6,958,780
	31,296	Biogen Idec Inc.*		1,414,266
	34,575	Celgene Corp.*		1,842,847
	24,402	Genzyme Corp.*		1,508,044
	42,687	Gilead Sciences, Inc.*		3,054,682
	22,206	MedImmune, Inc.*		708,593
	4,958	Millipore Corp.*		354,596
				15,841,808

See Notes to Financial Statements
7

Morgan Stanley S&P 500 Index Fund

Portfolio of Investments  n  February 28, 2007 (unaudited) continued

NUMBER OF SHARES			VALUE
		Broadcasting (0.2%)
	45,840	Clear Channel Communications, Inc.	$	1,658,491
	23,418	Univision Communications, Inc. (Class A)*		843,048
				2,501,539
		Building Products (0.2%)
	16,103	American Standard Companies, Inc.		853,298
	36,594	Masco Corp.		1,092,331
				1,945,629
		Cable/Satellite TV (0.8%)
	289,797	Comcast Corp. (Class A)*		7,453,579
	71,560	DIRECTV Group, Inc. (The)*		1,614,394
				9,067,973
		Casino/Gaming (0.2%)
	17,269	Harrah's Entertainment, Inc.		1,459,058
	31,508	International Game Technology		1,299,705
				2,758,763
		Chemicals: Agricultural (0.2%)
	50,436	Monsanto Co.		2,657,473
		Chemicals: Major Diversified (0.8%)
	88,673	Dow Chemical Co. (The)		3,883,877
	85,387	Du Pont (E.I.) de Nemours & Co.		4,333,390
	7,639	Eastman Chemical Co.		451,618
	10,542	Hercules Inc.*		212,527
	13,180	Rohm & Haas Co.		696,695
				9,578,107
		Chemicals: Specialty (0.4%)
	20,455	Air Products & Chemicals, Inc.		1,530,443
	5,307	Ashland Inc.		348,033
	29,975	Praxair, Inc.		1,849,158
	12,243	Sigma-Aldrich Corp.		501,963
				4,229,597

NUMBER OF SHARES			VALUE
		Coal (0.1%)
	16,953	CONSOL Energy, Inc.	$	604,714
	24,490	Peabody Energy Corp.		989,396
				1,594,110
		Commercial Printing/Forms (0.1%)
	20,126	Donnelley (R.R.) & Sons Co.		728,159
		Computer Communications (1.4%)
	42,156	Avaya Inc.*		517,676
	563,744	Cisco Systems, Inc.*		14,623,519
	52,520	Juniper Networks, Inc.*		993,153
	14,635	QLogic Corp.*		257,430
				16,391,778
		Computer Peripherals (0.4%)
	204,454	EMC Corp.*		2,852,133
	9,091	Lexmark International, Inc. (Class A)*		550,551
	34,704	Network Appliance, Inc.*		1,342,004
	45,128	Seagate Technology Inc. (Escrow) (a)		0
				4,744,688
		Computer Processing Hardware (2.0%)
	78,955	Apple Computer, Inc.*		6,680,382
	210,879	Dell Inc.*		4,818,585
	254,264	Hewlett-Packard Co.		10,012,916
	16,543	NCR Corp.*		764,287
	326,729	Sun Microsystems, Inc.*		2,002,849
				24,279,019
		Construction Materials (0.1%)
	8,766	Vulcan Materials Co.		1,021,151
		Containers/Packaging (0.2%)
	9,672	Ball Corp.		447,814
	9,732	Bemis Company, Inc.		322,421
	12,353	Pactiv Corp.*		397,767
	7,484	Sealed Air Corp.		482,269
	9,932	Temple-Inland Inc.		593,934
				2,244,205

See Notes to Financial Statements
8

Morgan Stanley S&P 500 Index Fund

Portfolio of Investments  n  February 28, 2007 (unaudited) continued

NUMBER OF SHARES			VALUE
		Contract Drilling (0.4%)
	14,098	ENSCO International Inc.	$	706,451
	27,789	Nabors Industries, Ltd. (Bermuda)*		832,558
	12,586	Noble Corp. (Cayman Islands)		883,789
	10,252	Rowan Companies, Inc.		314,019
	27,144	Transocean Inc. (Cayman Islands)*		2,081,402
				4,818,219
		Data Processing Services (0.9%)
	11,007	Affiliated Computer Services, Inc. (Class A)*		572,034
	51,114	Automatic Data Processing, Inc.		2,544,966
	15,941	Computer Sciences Corp.*		843,757
	12,791	Convergys Corp.*		328,985
	15,028	Fidelity National Information Services, Inc.		690,537
	71,091	First Data Corp.		1,814,953
	16,076	Fiserv, Inc.*		851,385
	31,431	Paychex, Inc.		1,277,042
	71,152	Western Union Co.		1,541,864
				10,465,523
		Department Stores (0.5%)
	5,651	Dillard's, Inc. (Class A)		188,743
	48,752	Federated Department Stores, Inc.		2,177,264
	30,358	Kohl's Corp.*		2,094,398
	20,885	Penney (J.C.) Co., Inc.		1,693,982
				6,154,387
		Discount Stores (1.8%)
	10,164	Big Lots, Inc.*		254,405
	42,542	Costco Wholesale Corp.		2,377,672
	28,967	Dollar General Corp.		488,963
	14,077	Family Dollar Stores, Inc.		407,811
	7,715	Sears Holdings Corp.*		1,390,629
	79,732	Target Corp.		4,905,910
	228,287	Wal-Mart Stores, Inc.		11,026,262
				20,851,652

NUMBER OF SHARES			VALUE
		Drugstore Chains (0.5%)
	76,454	CVS Corp.	$	2,401,420
	93,152	Walgreen Co.		4,164,826
				6,566,246
		Electric Utilities (3.2%)
	61,658	AES Corp. (The)*		1,314,549
	15,342	Allegheny Energy, Inc.*		724,756
	19,148	Ameren Corp.		1,000,100
	36,722	American Electric Power Co., Inc.		1,647,349
	29,042	CenterPoint Energy, Inc.		518,109
	20,649	CMS Energy Corp.		360,325
	23,839	Consolidated Edison, Inc.		1,158,099
	16,711	Constellation Energy Group, Inc.		1,314,654
	32,836	Dominion Resources, Inc.		2,808,463
	16,521	DTE Energy Co.		764,922
	116,572	Duke Energy Corp.		2,295,303
	30,246	Edison International		1,419,142
	19,203	Entergy Corp.		1,895,336
	62,286	Exelon Corp.		4,106,516
	29,633	FirstEnergy Corp.		1,854,137
	37,527	FPL Group, Inc.		2,216,720
	2,946	Integrys Energy Group, Inc.		164,214
	32,381	PG&E Corp.		1,503,126
	9,269	Pinnacle West Capital Corp.		439,536
	35,422	PPL Corp.		1,346,744
	23,598	Progress Energy, Inc.		1,152,998
	23,413	Public Service Enterprise Group, Inc.		1,753,634
	68,950	Southern Co. (The)		2,468,410
	19,421	TECO Energy, Inc.		325,690
	42,632	TXU Corp.		2,820,107
	37,772	Xcel Energy, Inc.		892,552
				38,265,491
		Electrical Products (0.4%)
	8,439	Cooper Industries Ltd. (Class A) (Bermuda)		774,194
	74,486	Emerson Electric Co.		3,209,602
	13,161	Molex Inc.		386,012
				4,369,808

See Notes to Financial Statements
9

Morgan Stanley S&P 500 Index Fund

Portfolio of Investments  n  February 28, 2007 (unaudited) continued

NUMBER OF SHARES			VALUE
		Electronic Components (0.1%)
	17,145	Jabil Circuit, Inc.	$	458,114
	20,891	SanDisk Corp.*		760,850
	49,464	Sanmina-SCI Corp.*		183,511
	84,901	Solectron Corp.*		273,381
				1,675,856
		Electronic Equipment/ Instruments (0.4%)
	37,939	Agilent Technologies, Inc.*		1,203,425
	19,596	JDS Uniphase Corp.*		317,651
	15,798	Rockwell Automation, Inc.		980,898
	7,657	Tektronix, Inc.		219,067
	89,609	Xerox Corp.*		1,547,547
				4,268,588
		Electronic Production Equipment (0.3%)
	128,936	Applied Materials, Inc.		2,394,341
	18,482	KLA-Tencor Corp.		956,259
	11,474	Novellus Systems, Inc.*		369,463
	17,618	Teradyne, Inc.*		284,002
				4,004,065
		Electronics/Appliance Stores (0.2%)
	37,449	Best Buy Co., Inc.		1,740,255
	13,171	Circuit City Stores - Circuit City Group		250,644
	12,609	RadioShack Corp.		314,847
				2,305,746
		Electronics/Appliances (0.2%)
	26,670	Eastman Kodak Co.		636,880
	6,059	Harman International Industries, Inc.		600,810
	7,276	Whirlpool Corp.		641,816
				1,879,506
		Engineering & Construction (0.1%)
	8,173	Fluor Corp.		690,373
		Environmental Services (0.2%)
	23,572	Allied Waste Industries, Inc.*		302,193
	49,666	Waste Management, Inc.		1,691,127
				1,993,320

NUMBER OF SHARES			VALUE
		Finance/Rental/Leasing (1.5%)
	37,874	Capital One Financial Corp.	$	2,919,328
	18,409	CIT Group, Inc.		1,039,556
	57,656	Countrywide Financial Corp.		2,207,072
	90,516	Fannie Mae		5,134,973
	64,333	Freddie Mac		4,128,892
	5,638	Ryder System, Inc.		290,019
	37,946	SLM Corp.		1,617,259
				17,337,099
		Financial Conglomerates (4.5%)
	111,842	American Express Co.		6,360,454
	456,147	Citigroup, Inc.		22,989,809
	322,031	JPMorgan Chase & Co.		15,908,331
	25,043	Principal Financial Group, Inc.		1,524,868
	44,281	Prudential Financial, Inc.		4,026,914
	30,827	State Street Corp.		2,019,477
				52,829,853
		Financial Publishing/Services (0.3%)
	11,616	Equifax, Inc.		449,772
	32,881	McGraw-Hill Companies, Inc. (The)		2,124,441
	21,819	Moody's Corp.		1,412,126
				3,986,339
		Food Distributors (0.2%)
	57,382	SYSCO Corp.		1,891,311
		Food Retail (0.4%)
	66,600	Kroger Co. (The)		1,709,622
	41,153	Safeway Inc.		1,422,659
	19,112	Supervalu, Inc.		706,380
	13,269	Whole Foods Market, Inc.		633,860
				4,472,521
		Food: Major Diversified (0.6%)
	20,218	Campbell Soup Co.		825,501
	47,302	ConAgra Foods, Inc.		1,193,429
	31,848	General Mills Inc.		1,794,953
	30,587	Heinz (H.J.) Co.		1,403,026
	23,296	Kellogg Co.		1,162,936
	69,330	Sara Lee Corp.		1,141,172
				7,521,017

See Notes to Financial Statements
10

Morgan Stanley S&P 500 Index Fund

Portfolio of Investments  n  February 28, 2007 (unaudited) continued

NUMBER OF SHARES			VALUE
		Food: Meat/Fish/Dairy (0.1%)
	12,417	Dean Foods Co.*	$	559,262
	23,390	Tyson Foods, Inc. (Class A)		426,867
				986,129
		Food: Specialty/Candy (0.2%)
	16,142	Hershey Co. (The)		853,589
	12,199	McCormick & Co., Inc. (Non-Voting)		467,100
	20,378	Wrigley (Wm.) Jr. Co.		1,014,824
				2,335,513
		Forest Products (0.2%)
	21,958	Weyerhaeuser Co.		1,885,533
		Gas Distributors (0.3%)
	35,141	Dynegy, Inc. (Class A)*		288,508
	16,272	KeySpan Corp.		667,803
	4,151	Nicor Inc.		193,188
	25,344	NiSource, Inc.		602,934
	7,971	Questar Corp.		670,680
	24,338	Sempra Energy		1,461,497
				3,884,610
		Home Building (0.2%)
	11,018	Centex Corp.		510,794
	25,619	D.R. Horton, Inc.		649,954
	7,290	KB Home		361,584
	12,798	Lennar Corp. (Class A)		630,174
	19,616	Pulte Homes, Inc.		579,849
				2,732,355
		Home Furnishings (0.1%)
	16,616	Leggett & Platt, Inc.		395,793
	25,733	Newell Rubbermaid, Inc.		787,944
				1,183,737
		Home Improvement Chains (1.1%)
	189,459	Home Depot, Inc. (The)		7,502,576
	141,364	Lowe's Companies, Inc.		4,602,812
	10,388	Sherwin-Williams Co.		691,321
				12,796,709

NUMBER OF SHARES			VALUE
		Hospital/Nursing Management (0.1%)
	22,332	Health Management Associates, Inc. (Class A)	$	445,747
	6,865	Manor Care, Inc.		367,827
	43,754	Tenet Healthcare Corp.*		298,840
				1,112,414
		Hotels/Resorts/Cruiselines (0.6%)
	41,309	Carnival Corp. (Panama)†		1,917,564
	35,890	Hilton Hotels Corp.		1,266,917
	31,199	Marriott International, Inc. (Class A)		1,494,744
	19,681	Starwood Hotels & Resorts Worldwide, Inc.		1,295,010
	18,394	Wyndham Worldwide Corp.*		647,469
				6,621,704
		Household/Personal Care (2.4%)
	41,268	Avon Products, Inc.		1,512,885
	14,094	Clorox Co. (The)		892,996
	47,745	Colgate-Palmolive Co.		3,216,103
	11,822	Estee Lauder Companies, Inc. (The) (Class A)		566,037
	7,244	International Flavors & Fragrances, Inc.		339,019
	42,546	Kimberly-Clark Corp.		2,897,808
	294,163	Procter & Gamble Co. (The)		18,676,409
				28,101,257
		Industrial Conglomerates (4.9%)
	68,359	3M Co.		5,064,035
	22,002	Danaher Corp.		1,576,223
	956,925	General Electric Co.**		33,415,821
	75,798	Honeywell International, Inc.		3,520,059
	28,463	Ingersoll-Rand Co. Ltd. (Class A) (Bermuda)		1,232,733
	17,146	ITT Corp.		1,015,386
	11,645	Textron, Inc.		1,074,717
	184,630	Tyco International Ltd. (Bermuda)		5,692,143
	93,171	United Technologies Corp.		6,114,813
				58,705,930

See Notes to Financial Statements
11

Morgan Stanley S&P 500 Index Fund

Portfolio of Investments  n  February 28, 2007 (unaudited) continued

NUMBER OF SHARES			VALUE
		Industrial Machinery (0.2%)
	38,942	Illinois Tool Works Inc.	$	2,013,301
	10,947	Parker Hannifin Corp.		901,923
				2,915,224
		Industrial Specialties (0.1%)
	16,554	Ecolab Inc.		700,234
	15,342	PPG Industries, Inc.		1,016,408
				1,716,642
		Information Technology Services (1.4%)
	16,764	Citrix Systems, Inc.*		539,801
	13,163	Cognizant Technology Solutions Corp. (Class A)*		1,187,303
	48,015	Electronic Data Systems Corp.		1,345,380
	139,838	International Business Machines Corp.		13,006,332
	31,988	Unisys Corp.*		271,578
				16,350,394
		Insurance Brokers/Services (0.2%)
	28,748	AON Corp.		1,082,362
	51,162	Marsh & McLennan Companies, Inc.		1,505,186
				2,587,548
		Integrated Oil (5.6%)
	202,373	Chevron Corp.		13,884,811
	152,781	ConocoPhillips		9,994,933
	541,443	Exxon Mobil Corp.		38,810,634
	25,132	Hess Corp.		1,333,253
	17,365	Murphy Oil Corp.		899,854
	58,286	Spectra Energy Corp.		1,499,699
				66,423,184
		Internet Retail (0.2%)
	28,680	Amazon.com, Inc.*		1,122,535
	20,720	IAC/InterActiveCorp*		812,224
				1,934,759
		Internet Software/Services (1.1%)
	19,895	Google Inc. (Class A)*		8,941,808
	22,757	VeriSign, Inc.*		575,752
	113,645	Yahoo! Inc.*		3,507,085
				13,024,645

NUMBER OF SHARES			VALUE
		Investment Banks/Brokers (2.8%)
	22,462	Ameriprise Financial, Inc.	$	1,313,129
	10,890	Bear Stearns Companies, Inc. (The)		1,657,894
	3,232	Chicago Mercantile Exchange Holdings Inc. (Class A)		1,742,468
	39,635	E*TRADE Group, Inc.*		915,172
	39,531	Goldman Sachs Group, Inc. (The)		7,969,450
	49,206	Lehman Brothers Holdings Inc.		3,606,800
	82,061	Merrill Lynch & Co., Inc.		6,866,864
	98,268	Morgan Stanley (Note 4)		7,362,239
	94,954	Schwab (Charles) Corp. (The)		1,754,750
				33,188,766
		Investment Managers (0.6%)
	8,385	Federated Investors, Inc. (Class B)		299,931
	15,475	Franklin Resources, Inc.		1,816,610
	18,398	Janus Capital Group, Inc.		390,958
	12,200	Legg Mason, Inc.		1,253,428
	38,234	Mellon Financial Corp.		1,660,503
	24,474	Price (T.) Rowe Group, Inc.		1,139,509
				6,560,939
		Life/Health Insurance (0.9%)
	45,906	AFLAC, Inc.		2,166,763
	41,144	Genworth Financial Inc. (Class A)		1,455,263
	26,655	Lincoln National Corp.		1,816,538
	70,574	MetLife, Inc.		4,456,748
	9,105	Torchmark Corp.		581,992
	31,799	UnumProvident Corp.		680,817
				11,158,121
		Major Banks (5.5%)
	416,881	Bank of America Corp.		21,206,736
	70,942	Bank of New York Co., Inc. (The)		2,881,664
	50,216	BB&T Corp.		2,133,176
	14,747	Comerica, Inc.		890,571
	22,060	Huntington Bancshares, Inc.		510,689

See Notes to Financial Statements
12

Morgan Stanley S&P 500 Index Fund

Portfolio of Investments  n  February 28, 2007 (unaudited) continued

NUMBER OF SHARES			VALUE
	37,280	KeyCorp	$	1,406,947
	58,630	National City Corp.		2,219,146
	27,275	PNC Financial Services Group		1,999,530
	67,682	Regions Financial Corp.		2,424,369
	32,876	SunTrust Banks, Inc.		2,771,776
	163,186	U.S. Bancorp		5,819,213
	176,941	Wachovia Corp.		9,797,223
	313,398	Wells Fargo & Co.		10,874,911
				64,935,951
		Major Telecommunications (3.3%)
	34,685	ALLTEL Corp.		2,101,564
	581,111	AT&T Inc.		21,384,885
	13,877	Embarq Corp.		768,092
	268,741	Sprint Nextel Corp.		5,181,326
	271,025	Verizon Communications, Inc.		10,144,466
				39,580,333
		Managed Health Care (1.6%)
	48,458	Aetna, Inc.		2,145,236
	39,589	Caremark Rx, Inc.		2,438,287
	9,522	CIGNA Corp.		1,356,885
	14,793	Coventry Health Care, Inc.*		805,035
	15,431	Humana, Inc.*		923,391
	125,045	UnitedHealth Group Inc.		6,527,349
	57,558	WellPoint Inc.*		4,569,530
				18,765,713
		Media Conglomerates (2.0%)
	72,551	CBS Corp. (Class B)		2,201,923
	192,020	Disney (Walt) Co. (The)		6,578,605
	217,293	News Corp. (Class A)		4,895,611
	370,620	Time Warner, Inc.		7,542,117
	64,915	Viacom, Inc. (Class B)*		2,534,282
				23,752,538
		Medical Distributors (0.5%)
	17,832	AmerisourceBergen Corp.		939,211
	37,598	Cardinal Health, Inc.		2,635,244
	27,475	McKesson Corp.		1,532,006
	12,899	Patterson Companies, Inc.*		430,569
				5,537,030

NUMBER OF SHARES			VALUE
		Medical Specialties (1.9%)
	17,007	Applera Corp. - Applied Biosystems Group	$	525,176
	9,560	Bard (C.R.), Inc.		762,888
	4,991	Bausch & Lomb, Inc.		260,830
	60,755	Baxter International, Inc.		3,038,358
	22,896	Becton, Dickinson & Co.		1,739,867
	22,736	Biomet, Inc.		962,415
	109,465	Boston Scientific Corp.*		1,785,374
	14,464	Hospira, Inc.*		553,537
	106,862	Medtronic, Inc.		5,381,570
	11,364	Pall Corp.		392,967
	11,415	PerkinElmer, Inc.		270,536
	32,813	St. Jude Medical, Inc.*		1,301,035
	27,593	Stryker Corp.		1,711,318
	37,883	Thermo Fisher Scientific, Inc.*		1,714,963
	200	Varian Medical Systems, Inc.*		9,190
	9,421	Waters Corp.*		511,183
	22,154	Zimmer Holdings, Inc.*		1,868,247
				22,789,454
		Miscellaneous Commercial Services (0.1%)
	12,669	Cintas Corp.		511,574
	12,289	Sabre Holdings Corp. (Class A)		397,303
				908,877
		Miscellaneous Manufacturing (0.1%)
	18,953	Dover Corp.		905,764
		Motor Vehicles (0.4%)
	175,350	Ford Motor Co.*		1,388,772
	52,507	General Motors Corp.		1,676,023
	24,056	Harley-Davidson, Inc.		1,585,290
				4,650,085
		Multi-Line Insurance (1.8%)
	241,338	American International Group, Inc.		16,193,780
	29,422	Hartford Financial Services Group, Inc. (The)		2,782,144
	42,420	Loews Corp.		1,842,725
	9,771	Safeco Corp.		651,921
				21,470,570

See Notes to Financial Statements
13

Morgan Stanley S&P 500 Index Fund

Portfolio of Investments  n  February 28, 2007 (unaudited) continued

NUMBER OF SHARES			VALUE
		Office Equipment/Supplies (0.1%)
	8,764	Avery Dennison Corp.	$	582,455
	20,598	Pitney Bowes, Inc.		982,731
				1,565,186
		Oil & Gas Pipelines (0.3%)
	65,483	El Paso Corp.		941,646
	9,956	Kinder Morgan, Inc.		1,052,947
	55,359	Williams Companies, Inc. (The)		1,493,032
				3,487,625
		Oil & Gas Production (1.2%)
	42,679	Anadarko Petroleum Corp.		1,716,976
	30,580	Apache Corp.		2,095,647
	38,609	Chesapeake Energy Corp.		1,177,188
	41,032	Devon Energy Corp.		2,696,213
	22,602	EOG Resources, Inc.		1,531,059
	79,978	Occidental Petroleum Corp.		3,693,384
	33,970	XTO Energy Inc.		1,754,890
				14,665,357
		Oil Refining/Marketing (0.6%)
	32,632	Marathon Oil Corp.		2,961,028
	11,429	Sunoco, Inc.		737,399
	56,128	Valero Energy Corp.		3,235,779
				6,934,206
		Oilfield Services/Equipment (1.3%)
	29,775	Baker Hughes Inc.		1,938,650
	27,214	BJ Services Co.		729,063
	93,344	Halliburton Co.		2,882,463
	16,292	National Oilwell-Varco, Inc.*		1,134,575
	109,376	Schlumberger Ltd. (Netherlands Antilles)		6,868,813
	18,510	Smith International, Inc.		758,910
	31,536	Weatherford International Ltd. (Bermuda)*		1,266,170
				15,578,644
		Other Consumer Services (0.4%)
	12,991	Apollo Group, Inc. (Class A)*		614,344
	29,920	Block (H.&R.), Inc.		651,658
	107,417	eBay, Inc.*		3,443,789
				4,709,791

NUMBER OF SHARES			VALUE
		Other Consumer Specialties (0.1%)
	14,053	Fortune Brands, Inc.	$	1,129,861
		Other Metals/Minerals (0.2%)
	18,937	Phelps Dodge Corp.		2,365,421
		Packaged Software (3.1%)
	54,153	Adobe Systems, Inc.*		2,125,505
	21,509	Autodesk, Inc.*		885,095
	19,039	BMC Software, Inc.*		587,543
	38,126	CA Inc.		993,182
	32,699	Compuware Corp.*		299,196
	32,367	Intuit Inc.*		955,150
	803,074	Microsoft Corp.		22,622,595
	31,471	Novell, Inc.*		208,338
	371,377	Oracle Corp.*		6,101,724
	87,078	Symantec Corp.*		1,489,034
				36,267,362
		Personnel Services (0.1%)
	11,917	Monster Worldwide, Inc.*		594,182
	15,557	Robert Half International, Inc.		607,812
				1,201,994
		Pharmaceuticals: Generic Drugs (0.1%)
	9,876	Barr Pharmaceuticals Inc.*		523,428
	19,672	Mylan Laboratories, Inc.		416,456
	9,512	Watson Pharmaceuticals, Inc.*		250,736
				1,190,620
		Pharmaceuticals: Major (5.8%)
	142,485	Abbott Laboratories		7,782,531
	182,576	Bristol-Myers Squibb Co.		4,818,181
	269,154	Johnson & Johnson		16,970,160
	91,392	Lilly (Eli) & Co.		4,810,875
	201,539	Merck & Co., Inc.		8,899,962
	669,362	Pfizer, Inc.		16,707,276
	137,630	Schering-Plough Corp.		3,231,552
	125,017	Wyeth		6,115,832
				69,336,369
		Pharmaceuticals: Other (0.3%)
	14,274	Allergan, Inc.		1,594,548
	29,402	Forest Laboratories, Inc.*		1,521,848
	22,569	King Pharmaceuticals, Inc.*		420,912
				3,537,308

See Notes to Financial Statements
14

Morgan Stanley S&P 500 Index Fund

Portfolio of Investments  n  February 28, 2007 (unaudited) continued

NUMBER OF SHARES			VALUE
		Precious Metals (0.2%)
	18,281	Freeport-McMoRan Copper & Gold, Inc. (Class B)	$	1,049,512
	41,795	Newmont Mining Corp.		1,883,701
				2,933,213
		Property - Casualty Insurers (1.2%)
	30,222	ACE Ltd. (Cayman Islands)		1,697,267
	58,015	Allstate Corp. (The)		3,484,381
	38,214	Chubb Corp. (The)		1,950,825
	16,083	Cincinnati Financial Corp.		695,107
	70,709	Progressive Corp. (The)		1,621,357
	64,056	Travelers Companies, Inc. (The)		3,251,482
	16,763	XL Capital Ltd. (Class A) (Cayman Islands)		1,190,173
				13,890,592
		Publishing: Books/Magazines (0.0%)
	3,596	Meredith Corp.		210,258
		Publishing: Newspapers (0.2%)
	6,041	Dow Jones & Co., Inc.		217,838
	21,752	Gannett Co., Inc.		1,332,528
	13,348	New York Times Co. (The) (Class A)		330,096
	7,735	Scripps (E.W.) Co. (Class A)		350,782
	17,698	Tribune Co.		531,471
				2,762,715
		Pulp & Paper (0.2%)
	42,236	International Paper Co.		1,520,918
	16,820	MeadWestvaco Corp.		512,169
				2,033,087
		Railroads (0.7%)
	33,346	Burlington Northern Santa Fe Corp.		2,640,670
	40,399	CSX Corp.		1,521,830
	36,844	Norfolk Southern Corp.		1,746,406
	25,039	Union Pacific Corp.		2,469,597
				8,378,503

NUMBER OF SHARES			VALUE
		Real Estate Development (0.1%)
	17,153	CB Richard Ellis Group, Inc. (Class A)*	$	571,538
	19,901	Realogy Corp.*		588,672
				1,160,210
		Real Estate Investment Trusts (1.1%)
	8,957	Apartment Investment & Management Co. (Class A)		527,209
	20,273	Archstone-Smith Trust		1,143,600
	6,500	AvalonBay Communities, Inc.		894,140
	10,845	Boston Properties, Inc.		1,302,484
	27,119	Equity Residential		1,377,374
	20,983	Kimco Realty Corp.		1,054,606
	16,435	Plum Creek Timber Co., Inc.		651,812
	22,971	ProLogis		1,519,072
	11,374	Public Storage, Inc.		1,151,845
	20,543	Simon Property Group, Inc.		2,316,018
	11,987	Vornado Realty Trust		1,524,746
				13,462,906
		Recreational Products (0.3%)
	8,523	Brunswick Corp.		278,276
	28,638	Electronic Arts Inc.*		1,443,928
	14,745	Hasbro, Inc.		417,136
	35,407	Mattel, Inc.		920,936
				3,060,276
		Regional Banks (0.7%)
	17,409	Commerce Bancorp, Inc.		581,809
	12,053	Compass Bancshares, Inc.		831,778
	51,807	Fifth Third Bancorp		2,086,786
	11,555	First Horizon National Corp.		498,598
	7,192	M&T Bank Corp.		862,465
	23,682	Marshall & Ilsley Corp.		1,125,605
	17,403	Northern Trust Corp.		1,049,401
	30,169	Synovus Financial Corp.		976,570
	9,926	Zions Bancorporation		847,482
				8,860,494
		Restaurants (0.8%)
	13,630	Darden Restaurants, Inc.		558,285
	114,810	McDonald's Corp.		5,019,493

See Notes to Financial Statements
15

Morgan Stanley S&P 500 Index Fund

Portfolio of Investments  n  February 28, 2007 (unaudited) continued

NUMBER OF SHARES			VALUE
	70,187	Starbucks Corp.*	$	2,168,778
	8,874	Wendy's International, Inc.		284,767
	24,608	Yum! Brands, Inc.		1,425,787
				9,457,110
		Savings Banks (0.4%)
	15,366	Hudson City Bancorp, Inc.		205,904
	33,365	Sovereign Bancorp, Inc.		843,134
	87,747	Washington Mutual, Inc.		3,780,141
				4,829,179
		Semiconductors (2.1%)
	50,928	Advanced Micro Devices, Inc.*		766,976
	33,592	Altera Corp.*		709,127
	31,749	Analog Devices, Inc.		1,150,901
	43,534	Broadcom Corp. (Class A)*		1,484,074
	535,271	Intel Corp.		10,625,129
	27,752	Linear Technology Corp.		921,089
	37,190	LSI Logic Corp.*		377,107
	29,770	Maxim Integrated Products, Inc.		974,968
	70,034	Micron Technology, Inc.*		830,603
	26,788	National Semiconductor Corp.		686,309
	33,006	NVIDIA Corp.*		1,023,186
	19,478	PMC - Sierra, Inc.*		131,477
	137,752	Texas Instruments Inc.		4,264,802
	31,213	Xilinx, Inc.		799,677
				24,745,425
		Services to the Health Industry (0.4%)
	12,573	Express Scripts, Inc.*		948,130
	18,422	IMS Health Inc.		532,027
	11,641	Laboratory Corp. of America Holdings*		928,370
	27,239	Medco Health Solutions, Inc.*		1,841,629
	14,848	Quest Diagnostics Inc.		757,545
				5,007,701
		Specialty Insurance (0.2%)
	9,849	Ambac Financial Group, Inc.		863,166
	12,515	MBIA Inc.		831,872
	7,707	MGIC Investment Corp.		465,117
				2,160,155

NUMBER OF SHARES			VALUE
		Specialty Stores (0.5%)
	13,886	AutoNation, Inc.*	$	304,937
	4,700	AutoZone, Inc.*		588,863
	26,242	Bed Bath & Beyond Inc.*		1,046,793
	25,845	Office Depot, Inc.*		862,189
	6,914	OfficeMax, Inc.		358,837
	67,084	Staples, Inc.		1,745,526
	12,565	Tiffany & Co.		547,080
				5,454,225
		Specialty Telecommunications (0.2%)
	10,656	CenturyTel, Inc.		476,856
	29,882	Citizens Communications Co.		450,322
	149,281	Qwest Communications International, Inc.*		1,325,615
	44,260	Windstream Corp.		666,113
				2,918,906
		Steel (0.3%)
	9,350	Allegheny Technologies, Inc.		957,907
	28,046	Nucor Corp.		1,707,160
	10,998	United States Steel Corp.		974,643
				3,639,710
		Telecommunication Equipment (1.2%)
	10,883	ADC Telecommunications, Inc.*		178,699
	7,839	CIENA Corp.*		246,693
	145,218	Corning, Inc.*		2,995,847
	224,419	Motorola, Inc.		4,156,240
	153,410	QUALCOMM, Inc.		6,179,355
	41,012	Tellabs, Inc.*		429,806
				14,186,640
		Tobacco (1.5%)
	194,565	Altria Group, Inc.		16,397,938
	15,916	Reynolds American, Inc.		971,672
	14,936	UST, Inc.		867,184
				18,236,794
		Tools/Hardware (0.1%)
	6,315	Black & Decker Corp.		532,165
	5,419	Snap-On, Inc.		271,492
	7,548	Stanley Works (The)		419,442
				1,223,099

See Notes to Financial Statements
16

Morgan Stanley S&P 500 Index Fund

Portfolio of Investments  n  February 28, 2007 (unaudited) continued

NUMBER OF SHARES			VALUE
		Trucks/Construction/ Farm Machinery (0.8%)
	60,391	Caterpillar Inc.	$	3,890,388
	4,870	Cummins Inc.		655,892
	21,463	Deere & Co.		2,327,018
	23,051	PACCAR, Inc.		1,601,814
	7,700	Terex Corp.*		506,968
				8,982,080
		Wholesale Distributors (0.1%)
	15,819	Genuine Parts Co.		770,385
	6,789	Grainger (W.W.), Inc.		523,771
				1,294,156
		Total Common Stocks (Cost $894,955,313)		1,170,950,111
NUMBER OF WARRANTS
		Warrant (0.0%)
		Aerospace & Defense
	317	Raytheon Co. (06/16/11)* (Cost $3,867)		5,668
PRINCIPAL AMOUNT IN THOUSANDS
		Short-Term Investment (1.3%)
		Repurchase Agreement
	$14,894	Joint repurchase agreement account 5.315% due 03/01/07 (dated 02/28/07; proceeds $14,896,199) (b) (Cost $14,894,000)		14,894,000

Total Investments (Cost $909,853,180) (c) (d)	100.0	%		1,185,849,779
Other Assets in Excess of Liabilities	0.0			497,634
Net Assets	100.0	%	$	1,186,347,413

  *  Non-income producing security.

  **  A portion of this security has been physically segregated in connection with open futures contracts in the amount of $616,000.

  †  Consists of one or more class of securities traded as a unit. Stocks with attached paired trust shares.

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

  (b)  Collateralized by federal agency and U.S. Treasury obligations.

  (c)  Securities have been designated as collateral in an amount equal to $16,137,300 in connection with open futures contracts.

  (d)  The aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $365,131,738 and the aggregate gross unrealized depreciation is $89,135,139, resulting in net unrealized appreciation of $275,996,599.

See Notes to Financial Statements
17

Morgan Stanley S&P 500 Index Fund

Portfolio of Investments  n  February 28, 2007 (unaudited) continued

Futures Contracts Open at February 28, 2007:

NUMBER OF CONTRACTS		LONG/ SHORT	DESCRIPTION, DELIVERY MONTH AND YEAR	UNDERLYING FACE AMOUNT AT VALUE		UNREALIZED DEPRECIATION
	37	Long	S&P 500 Index March 2007	$	13,032,325	$	(166,158	)
	35	Long	S&P 500 Index E-Mini March 2007		2,465,575		(22,951	)
Total Unrealized Depreciation						$	(189,109	)

Summary of Investments

SECTOR	VALUE			PERCENT OF TOTAL INVESTMENTS
Finance	$	254,432,383			21.4	%
Electronic Technology		113,904,466			9.6
Health Technology		112,695,559			9.5
Energy Minerals		88,117,158			7.4
Consumer Non-Durables		86,595,970			7.3
Producer Manufacturing		82,214,966			6.9
Technology Services		76,107,924			6.4
Retail Trade		64,643,065			5.5
Consumer Services		61,842,391			5.2
Utilities		43,649,800			3.7
Communications		42,499,239			3.6
Industrial Services		26,568,181			2.2
Health Services		24,885,828			2.1
Process Industries		24,556,772			2.1
Transportation		19,735,878			1.7
Consumer Durables		16,264,558			1.4
Repurchase Agreement		14,894,000			1.3
Non-Energy Minerals		14,534,366			1.2
Commercial Services		8,984,778			0.8
Distribution Services		8,722,497			0.7
	$	1,185,849,779	*		100.0	%

*  Does not include open long futures contracts with an underlying face amount of $15,497,900 with total unrealized depreciation of $189,109.

See Notes to Financial Statements
18

Morgan Stanley S&P 500 Index Fund

Financial Statements

Statement of Assets and Liabilities

February 28, 2007 (unaudited)

Assets:
Investments in securities, at value (cost $905,809,942)	$	1,178,487,541
Investments in an affiliate, at value (cost $4,043,238)		7,362,238
Receivable for:
Dividends		2,570,978
Shares of beneficial interest sold		1,718,399
Variation margin		160,501
Interest		2,199
Prepaid expenses and other assets		113,590
Total Assets		1,190,415,446
Liabilities:
Payable for:
Shares of beneficial interest redeemed		3,013,131
Distribution fee		575,220
Investment advisory fee		159,100
Administration fee		75,371
Transfer agent fee		30,422
Accrued expenses and other payables		214,789
Total Liabilities		4,068,033
Net Assets	$	1,186,347,413
Composition of Net Assets:
Paid-in-capital	$	1,029,847,034
Net unrealized appreciation		275,807,490
Accumulated undistributed net investment income		4,729,407
Accumulated net realized loss		(124,036,518	)
Net Assets	$	1,186,347,413
Class A Shares:
Net Assets	$	492,675,426
Shares Outstanding (unlimited authorized, $.01 par value)		32,461,320
Net Asset Value Per Share	$	15.18
Maximum Offering Price Per Share, (net asset value plus 5.54% of net asset value)	$	16.02
Class B Shares:
Net Assets	$	460,825,541
Shares Outstanding (unlimited authorized, $.01 par value)		31,205,072
Net Asset Value Per Share	$	14.77
Class C Shares:
Net Assets	$	132,862,148
Shares Outstanding (unlimited authorized, $.01 par value)		9,030,573
Net Asset Value Per Share	$	14.71
Class D Shares:
Net Assets	$	99,984,298
Shares Outstanding (unlimited authorized, $.01 par value)		6,529,115
Net Asset Value Per Share	$	15.31

See Notes to Financial Statements
19

Morgan Stanley S&P 500 Index Fund

Financial Statements continued

Statement of Operations

For the six months ended February 28, 2007 (unaudited)

Net Investment Income: Income
Dividends	$	11,459,582
Dividends from an affiliate		55,055
Interest		605,795
Total Income		12,120,432
Expenses
Distribution fee (Class A shares)		558,999
Distribution fee (Class B shares)		2,551,202
Distribution fee (Class C shares)		662,336
Transfer agent fees and expenses		874,934
Investment advisory fee		728,868
Administration fee		485,912
Shareholder reports and notices		283,312
Professional fees		72,967
Custodian fees		53,274
Registration fees		17,975
Trustees' fees and expenses		11,434
Other		109,213
Total Expenses		6,410,426
Less: amounts waived/reimbursed		(565,850	)
Less: expense offset		(5,143	)
Net Expenses		5,839,433
Net Investment Income		6,280,999
Net Realized and Unrealized Gain: Net Realized Gain on:
Investments		22,247,183
Futures contracts		1,852,760
Investments in an affiliate		328,766
Capital gain distribution received		6,289
Net Realized Gain		24,434,998
Net Change in Unrealized Appreciation on:
Investments		68,542,855
Investments in an affiliate		683,080
Futures contracts		(593,533	)
Net Appreciation		68,632,402
Net Gain		93,067,400
Net Increase	$	99,348,399

See Notes to Financial Statements
20

Morgan Stanley S&P 500 Index Fund

Financial Statements continued

Statements of Changes in Net Assets

	FOR THE SIX MONTHS ENDED FEBRUARY 28, 2007			FOR THE YEAR ENDED AUGUST 31, 2006
	(unaudited)
Increase (Decrease) in Net Assets:
Operations:
Net investment income	$	6,280,999		$	12,871,794
Net realized gain		24,434,998			85,846,345
Net change in unrealized appreciation		68,632,402			4,757,045
Net Increase		99,348,399			103,475,184
Dividends to Shareholders from Net Investment Income:
Class A shares		(6,681,274	)		(6,005,049	)
Class B shares		(2,921,671	)		(2,743,790	)
Class C shares		(1,008,726	)		(918,694	)
Class D shares		(1,688,390	)		(2,832,584	)
Total Dividends		(12,300,061	)		(12,500,117	)
Net decrease from transactions in shares of beneficial interest		(117,514,526	)		(432,179,599	)
Net Decrease		(30,466,188	)		(341,204,532	)
Net Assets:
Beginning of period		1,216,813,601			1,558,018,133
End of Period (Including accumulated undistributed net investment income of $4,729,407 and $10,748,469, respectively)	$	1,186,347,413		$	1,216,813,601

See Notes to Financial Statements
21

Morgan Stanley S&P 500 Index Fund

Notes to Financial Statements  n  February 28, 2007 (unaudited)

1. Organization and Accounting Policies

Morgan Stanley S&P 500 Index Fund (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund's investment objective is to provide investment results that, before expenses, correspond to the total return of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index"). The Fund was organized as a Massachusetts business trust on June 18, 1997 and commenced operations on September 26, 1997.

The Fund offers Class A shares, Class B shares, Class C shares and Class D shares. The four classes are substantially the same except that most Class A shares are subject to a sales charge imposed at the time of purchase and some Class A shares, and most Class B shares and Class C shares are subject to a contingent deferred sales charge imposed on shares redeemed within eighteen months, six years and one year, respectively. Class D shares are not subject to a sales charge. Additionally, Class A shares, Class B shares and Class C shares incur distribution expenses.

The Fund will assess a 2% redemption fee, on Class A shares, Class B shares, Class C shares, and Class D shares, which is paid directly to the Fund, for shares redeemed within seven days of purchase, subject to certain exceptions. The redemption fee is designed to protect the Fund and its remaining shareholders from the effects of short-term trading.

The following is a summary of significant accounting policies:

A. Valuation of Investments — (1) an equity portfolio security listed or traded on the New York Stock Exchange ("NYSE") or American Stock Exchange or other exchange is valued at its latest sale price prior to the time when assets are valued; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (2) an equity portfolio security listed or traded on the Nasdaq is valued at the Nasdaq Official Closing Price; if there were no sales that day, the security is valued at the mean between the last reported bid and asked price; (3) all other portfolio securities for which over-the-counter market quotations are readily available are valued at the mean between the last reported bid and asked price. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (4) for equity securities traded on foreign exchanges, the last reported sale price or the latest bid price may be used if there were no sales on a particular day; (5) futures are valued at the latest price published by the commodities exchange on which they trade; (6) when market quotations are not readily available including circumstances under which Morgan Stanley Investment Advisors Inc. (the "Investment Adviser") determines that the latest sale price, the bid price or the mean between the last reported bid and asked price do not reflect a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees. Occasionally, developments affecting the closing prices of securities and other assets

22

Morgan Stanley S&P 500 Index Fund

Notes to Financial Statements  n  February 28, 2007 (unaudited) continued

may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the NYSE. If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Fund's Trustees or by the Investment Adviser using a pricing service and/or procedures approved by the Trustees of the Fund; and (7) short-term debt securities having a maturity date of more than sixty days at time of purchase are valued on a mark-to-market basis until sixty days prior to maturity and thereafter at amortized cost based on their value on the 61st day. Short-term debt securities having a maturity date of sixty days or less at the time of purchase are valued at amortized cost.

B. Accounting for Investments — Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Dividend income and other distributions are recorded on the ex-dividend date. Discounts are accreted and premiums are amortized over the life of the respective securities. Interest income is accrued daily.

C. Repurchase Agreements — Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated entities managed by the Investment Adviser, may transfer uninvested cash balances into one or more joint repurchase agreement accounts. These balances are invested in one or more repurchase agreements and are collateralized by cash, U.S. Treasury or federal agency obligations. The Fund may also invest directly with institutions in repurchase agreements. The Fund's custodian receives the collateral, which is marked-to-market daily to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest.

D. Multiple Class Allocations — Investment income, expenses (other than distribution fees), and realized and unrealized gains and losses are allocated to each class of shares based upon the relative net asset value on the date such items are recognized. Distribution fees are charged directly to the respective class.

E. Futures Contracts — A futures contract is an agreement between two parties to buy and sell financial instruments or contracts based on financial indices at a set price on a future date. Upon entering into such a contract, the Fund is required to pledge to the broker cash, U.S. Government securities or other liquid portfolio securities equal to the minimum initial margin requirements of the applicable futures exchange. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments known as variation margin are recorded by the Fund as unrealized gains and losses. Upon closing of the contract, the Fund realizes a gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.

23

Morgan Stanley S&P 500 Index Fund

Notes to Financial Statements  n  February 28, 2007 (unaudited) continued

F. Federal Income Tax Policy — It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required.

G. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date.

H. Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.

2. Investment Advisory/Administration Agreements

Pursuant to an Investment Advisory Agreement, the Fund pays the Investment Adviser an advisory fee, accrued daily and payable monthly, by applying the following annual rates to the net assets of the Fund determined as of the close of each business day: 0.12% to the portion of the daily net assets not exceeding $2 billion and 0.10% to the portion of the daily net assets in excess of $2 billion.

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

The Investment Adviser has agreed to cap the Fund's operating expenses (except for brokerage and 12b-1 fees) by assuming the Fund's "other expenses" and/or waiving the Fund's advisory fees, and the Administrator has agreed to waive the Fund's administrative fees, to the extent that such operating expenses exceed 0.40% of the average daily net assets of the Fund on an annualized basis and will continue to do so on a permanent basis. In addition, effective June 1, 2006, the Investment Adviser has agreed to an additional, voluntary fee waiver by assuming the Fund's operating expenses (except for brokerage and 12b-1 fees) to the extent that such operating expenses exceed 0.34% of the average net assets of the Fund on an annualized basis. This voluntary fee waiver will remain in effect until the Investment Adviser determines that such fee waiver is no longer required.

3. Plan of Distribution

Shares of the Fund are distributed by Morgan Stanley Distributors Inc. (the "Distributor"), an affiliate of the Investment Adviser and Administrator. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan provides that the Fund will pay the Distributor a fee which is accrued daily and paid monthly at the following annual rates: (i) Class A – up to 0.25% of the average daily net assets of Class A; (ii) Class B – up to 1.0% of the average daily net assets of Class B; and (iii) Class C – up to 1.0% of the average daily net assets of Class C.

In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by the Distributor but not yet recovered may be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon

24

Morgan Stanley S&P 500 Index Fund

Notes to Financial Statements  n  February 28, 2007 (unaudited) continued

redemption of Class B shares. Although there is no legal obligation for the Fund to pay expenses incurred in excess of payments made to the Distributor under the Plan and the proceeds of contingent deferred sales charges paid by investors upon redemption of shares, if for any reason the Plan is terminated, the Trustees will consider at that time the manner in which to treat such expenses. The Distributor has advised the Fund that such excess amounts totaled $25,414,357 at February 28, 2007.

In the case of Class A shares and Class C shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily net assets of Class A or Class C, respectively, will not be reimbursed by the Fund through payments in any subsequent year, except that expenses representing a gross sales credit to Morgan Stanley Financial Advisors and other authorized financial representatives at the time of sale may be reimbursed in the subsequent calendar year. For the six months ended February 28, 2007, the distribution fee was accrued for Class A shares and Class C shares at the annual rate of 0.24% and 0.99%, respectively.

The Distributor has informed the Fund that for the six months ended February 28, 2007, it received contingent deferred sales charges from certain redemptions of the Fund's Class A shares, Class B shares and Class C shares of $1,190, $402,978 and $2,743, respectively and received $94,362 in front-end sales charges from sales of the Fund's Class A shares. The respective shareholders pay such charges which are not an expense of the Fund.

4. Security Transactions and Transactions with Affiliates

The cost of purchases and proceeds from sales of portfolio securities, excluding short-term investments, for the six months ended February 28, 2007, aggregated $16,377,822 and $124,865,945, respectively. Included in the aforementioned are sales of common stock of Morgan Stanley, an affiliate of the Investment Adviser, Administrator and Distributor, of $749,467, as well as a realized gain of $328,766.

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

At February 28, 2007, Morgan Stanley Multi-Asset Class Fund, an affiliate of the Investment Adviser, Administrator and Distributor, held 338,252 Class D shares of beneficial interest of the Fund.

The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan") which allows each independent Trustee to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Trustees. Each eligible Trustee generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the net asset value of the Fund.

25

Morgan Stanley S&P 500 Index Fund

Notes to Financial Statements  n  February 28, 2007 (unaudited) continued

5. Purposes of and Risks Relating to Certain Financial Instruments

The Fund may purchase and sell stock index futures ("futures contracts") for the following reasons: to simulate full investment in the S&P 500 Index while retaining a cash balance for fund management purposes; to facilitate trading; to reduce transaction costs; or to seek higher investment returns when a futures contract is priced more attractively than stocks comprising the S&P 500 Index.

These futures contracts involve elements of market risk in excess of the amount reflected in the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the value of the underlying securities. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

6. Shares of Beneficial Interest

Transactions in shares of beneficial interest were as follows:

	FOR THE SIX MONTHS ENDED FEBRUARY 28, 2007						FOR THE YEAR ENDED AUGUST 31, 2006
	(unaudited)
	SHARES			AMOUNT			SHARES			AMOUNT
CLASS A SHARES
Sold		2,325,728		$	35,332,189			3,523,424		$	48,232,899
Conversion from Class B		3,562,598			53,963,917			8,733,166			118,493,975
Reinvestment of dividends		412,308			6,291,817			417,812			5,707,309
Redeemed		(5,720,194	)		(85,827,416	)		(11,032,502	)		(151,017,548	)
Net increase — Class A		580,440			9,760,507			1,641,900			21,416,635
CLASS B SHARES
Sold		587,967			8,663,728			969,408			12,810,167
Conversion to Class A		(3,668,788	)		(53,963,917	)		(9,016,741	)		(118,493,975	)
Reinvestment of dividends		178,146			2,649,028			185,895			2,470,551
Redeemed		(4,815,192	)		(70,184,660	)		(16,731,749	)		(221,399,022	)
Net decrease — Class B		(7,717,867	)		(112,835,821	)		(24,593,187	)		(324,612,279	)
CLASS C SHARES
Sold		377,574			5,527,195			601,770			7,996,284
Reinvestment of dividends		62,857			930,915			65,154			863,945
Redeemed		(1,041,872	)		(15,160,399	)		(3,019,678	)		(39,979,002	)
Net decrease — Class C		(601,441	)		(8,702,289	)		(2,352,754	)		(31,118,773	)
CLASS D SHARES
Sold		431,363			6,602,132			1,258,674			17,358,915
Reinvestment of dividends		94,934			1,461,039			159,078			2,190,504
Redeemed		(906,751	)		(13,800,094	)		(8,550,208	)		(117,414,601	)
Net decrease — Class D		(380,454	)		(5,736,923	)		(7,132,456	)		(97,865,182	)
Net decrease in Fund		(8,119,322	)	$	(117,514,526	)		(32,436,497	)	$	(432,179,599	)

26

Morgan Stanley S&P 500 Index Fund

Notes to Financial Statements  n  February 28, 2007 (unaudited) continued

7. Expense Offset

The expense offset represents a reduction of the fees and expenses for interest earned on cash balances maintained by the Fund with the transfer agent.

8. Federal Income Tax Status

The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. These "book/tax" differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in-capital.

As of August 31, 2006, the Fund had a net capital loss carryforward of $130,563,904 of which $531,072 will expire on August 31, 2008, $1,186,260 will expire on August 31, 2009, $104,093,640 will expire on August 31, 2011 and $24,752,932 will expire on August 31, 2012 to offset future capital gains to the extent provided by regulations.

As of August 31, 2006, the Fund had temporary book/tax differences primarily attributable to capital loss deferrals on wash sales and mark-to-market of open futures contracts.

9. New Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement 109 (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position must meet before being recognized in the financial statements. FIN 48 is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the effective date. The impact to the Fund's financial statements, if any is currently being assessed.

In addition, in September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of SFAS 157 will have on the Fund's financial statement disclosures.

27

Morgan Stanley S&P 500 Index Fund

Financial Highlights

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

	FOR THE SIX			FOR THE YEAR ENDED AUGUST 31,
	MONTHS ENDED
	FEBRUARY 28, 2007			2006			2005			2004			2003			2002
	(unaudited)
Class A Shares
Selected Per Share Data:
Net asset value, beginning of period	$	14.17		$	13.27		$	12.03		$	10.97		$	9.91		$	12.17
Income (loss) from investment operations:
Net investment income‡		0.11			0.18			0.19			0.12			0.11			0.08
Net realized and unrealized gain (loss)		1.12			0.91			1.23			1.05			1.01			(2.34	)
Total income (loss) from investment operations		1.23			1.09			1.42			1.17			1.12			(2.26	)
Less dividends from net investment income		(0.22	)		(0.19	)		(0.18	)		(0.11	)		(0.06	)		–
Net asset value, end of period	$	15.18		$	14.17		$	13.27		$	12.03		$	10.97		$	9.91
Total Return†		8.66	%(1)		8.24	%		11.81	%		10.70	%		11.36	%		(18.57	)%
Ratios to Average Net Assets(3)(4):
Total expenses (before expense offset)		0.58	%(2)		0.62	%		0.64	%		0.70	%		0.70	%		0.73	%
Net investment income		1.42	%(2)		1.32	%		1.52	%		1.03	%		1.11	%		0.73	%
Supplemental Data:
Net assets, end of period, in millions	$	493		$	452		$	401		$	301		$	233		$	161
Portfolio turnover rate		1	%(1)		4	%		3	%		2	%		2	%		12	%

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

  †  Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.

  (1)  Not annualized.

  (2)  Annualized.

  (3)  Reflects overall Fund ratios for investment income and non-class specific expenses.

  (4)  If the Fund had borne all of its expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios, before expense offset, would have been as follows:

PERIOD ENDED:	EXPENSE RATIO			NET INVESTMENT INCOME RATIO
February 28, 2007		0.67	%		1.33	%
August 31, 2006		0.66			1.28
August 31, 2005		0.65			1.51
August 31, 2004		0.77			0.96
August 31, 2003		0.82			0.99
August 31, 2002		0.80			0.66

See Notes to Financial Statements
28

Morgan Stanley S&P 500 Index Fund

Financial Highlights continued

	FOR THE SIX			FOR THE YEAR ENDED AUGUST 31,
	MONTHS ENDED
	FEBRUARY 28, 2007			2006			2005			2004			2003			2002
	(unaudited)
Class B Shares
Selected Per Share Data:
Net asset value, beginning of period	$	13.72		$	12.83		$	11.62		$	10.60		$	9.60		$	11.88
Income (loss) from investment operations:
Net investment income (loss)‡		0.05			0.07			0.10			0.03			0.03			(0.01	)
Net realized and unrealized gain (loss)		1.08			0.87			1.18			1.02			0.97			(2.27	)
Total income (loss) from investment operations		1.13			0.94			1.28			1.05			1.00			(2.28	)
Less dividends from net investment income		(0.08	)		(0.05	)		(0.07	)		(0.03	)		–			–
Net asset value, end of period	$	14.77		$	13.72		$	12.83		$	11.62		$	10.60		$	9.60
Total Return†		8.27	%(1)		7.35	%		11.04	%		9.88	%		10.42	%		(19.19	)%
Ratios to Average Net Assets(3)(4):
Total expenses (before expense offset)		1.34	%(2)		1.38	%		1.40	%		1.46	%		1.50	%		1.50	%
Net investment income (loss)		0.66	%(2)		0.56	%		0.76	%		0.27	%		0.31	%		(0.04	)%
Supplemental Data:
Net assets, end of period, in millions	$	461		$	534		$	815		$	1,108		$	1,160		$	1,169
Portfolio turnover rate		1	%(1)		4	%		3	%		2	%		2	%		12	%

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

  †  Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.

  (1)  Not annualized.

  (2)  Annualized.

  (3)  Reflects overall Fund ratios for investment income and non-class specific expenses.

  (4)  If the Fund had borne all of its expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income (loss) ratios, before expense offset, would have been as follows:

PERIOD ENDED:	EXPENSE RATIO			NET INVESTMENT INCOME (LOSS) RATIO
February 28, 2007		1.43	%		0.57	%
August 31, 2006		1.42			0.52
August 31, 2005		1.41			0.75
August 31, 2004		1.53			0.20
August 31, 2003		1.62			0.19
August 31, 2002		1.57			(0.11	)

See Notes to Financial Statements
29

Morgan Stanley S&P 500 Index Fund

Financial Highlights continued

	FOR THE SIX			FOR THE YEAR ENDED AUGUST 31,
	MONTHS ENDED
	FEBRUARY 28, 2007			2006			2005			2004			2003			2002
	(unaudited)
Class C Shares
Selected Per Share Data:
Net asset value, beginning of period	$	13.70		$	12.83		$	11.61		$	10.60		$	9.60		$	11.88
Income (loss) from investment operations:
Net investment income‡		0.05			0.08			0.10			0.03			0.03			0.00
Net realized and unrealized gain (loss)		1.07			0.87			1.20			1.01			0.97			(2.28	)
Total income (loss) from investment operations		1.12			0.95			1.30			1.04			1.00			(2.28	)
Less dividends from net investment income		(0.11	)		(0.08	)		(0.08	)		(0.03	)		–			–
Net asset value, end of period	$	14.71		$	13.70		$	12.83		$	11.61		$	10.60		$	9.60
Total Return†		8.17	%(1)		7.45	%		11.18	%		9.85	%		10.42	%		(19.19	)%
Ratios to Average Net Assets(3)(4):
Total expenses (before expense offset)		1.33	%(2)		1.34	%		1.34	%		1.46	%		1.49	%		1.49	%
Net investment income (loss)		0.67	%(2)		0.60	%		0.82	%		0.27	%		0.32	%		(0.03	)%
Supplemental Data:
Net assets, end of period, in millions	$	133		$	132		$	154		$	173		$	161		$	147
Portfolio turnover rate		1	%(1)		4	%		3	%		2	%		2	%		12	%

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

  †  Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.

  (1)  Not annualized.

  (2)  Annualized.

  (3)  Reflects overall Fund ratios for investment income and non-class specific expenses.

  (4)  If the Fund had borne all of its expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income (loss) ratios, before expense offset, would have been as follows:

PERIOD ENDED:	EXPENSE RATIO			NET INVESTMENT INCOME (LOSS) RATIO
February 28, 2007		1.42	%		0.58	%
August 31, 2006		1.38			0.01
August 31, 2005		1.35			0.81
August 31, 2004		1.53			0.20
August 31, 2003		1.61			0.20
August 31, 2002		1.56			(0.10	)

See Notes to Financial Statements
30

Morgan Stanley S&P 500 Index Fund

Financial Highlights continued

	FOR THE SIX			FOR THE YEAR ENDED AUGUST 31,
	MONTHS ENDED
	FEBRUARY 28, 2007			2006			2005			2004			2003			2002
	(unaudited)
Class D Shares
Selected Per Share Data:
Net asset value, beginning of period	$	14.31		$	13.40		$	12.14		$	11.06		$	10.00		$	12.26
Income (loss) from investment operations:
Net investment income‡		0.13			0.21			0.23			0.15			0.13			0.11
Net realized and unrealized gain (loss)		1.12			0.92			1.24			1.06			1.02			(2.37	)
Total income (loss) from investment operations		1.25			1.13			1.47			1.21			1.15			(2.26	)
Less dividends from net investment income		(0.25	)		(0.22	)		(0.21	)		(0.13	)		(0.09	)		–
Net asset value, end of period	$	15.31		$	14.31		$	13.40		$	12.14		$	11.06		$	10.00
Total Return†		8.75	%(1)		8.46	%		12.11	%		10.97	%		11.59	%		(18.43	)%
Ratios to Average Net Assets(3)(4):
Total expenses (before expense offset)		0.34	%(2)		0.38	%		0.40	%		0.46	%		0.50	%		0.50	%
Net investment income		1.66	%(2)		1.56	%		1.76	%		1.27	%		1.31	%		0.96	%
Supplemental Data:
Net assets, end of period, in millions	$	100		$	99		$	188		$	198		$	180		$	136
Portfolio turnover rate		1	%(1)		4	%		3	%		2	%		2	%		12	%

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

  †  Calculated based on the net asset value as of the last business day of the period.

  (1)  Not annualized.

  (2)  Annualized.

  (3)  Reflects overall Fund ratios for investment income and non-class specific expenses.

  (4)  If the Fund had borne all of its expenses that were reimbursed or waived by the Investment Adviser and Administrator, the annualized expense and net investment income ratios, before expense offset, would have been as follows:

PERIOD ENDED:	EXPENSE RATIO			NET INVESTMENT INCOME RATIO
February 28, 2007		0.43	%		1.57	%
August 31, 2006		0.42			1.52
August 31, 2005		0.41			1.75
August 31, 2004		0.53			1.20
August 31, 2003		0.62			1.19
August 31, 2002		0.57			0.89

See Notes to Financial Statements
31

Trustees

Frank L. Bowman
Michael Bozic
Kathleen A. Dennis
James F. Higgins
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Michael E. Nugent
W. Allen Reed
Fergus Reid

Officers

Michael E. Nugent
Chairperson of the Board

Ronald E. Robison
President and Principal Executive Officer

J. David Germany
Vice President

Dennis F. Shea
Vice President

Barry Fink
Vice President

Amy R. Doberman
Vice President

Carsten Otto
Chief Compliance Officer

Stefanie V. Chang Yu
Vice President

Francis J. Smith
Treasurer and Chief Financial Officer

Mary E. Mullin
Secretary

Transfer Agent

Morgan Stanley Trust
Harborside Financial Center, Plaza Two
Jersey City, New Jersey 07311

Independent Registered Public Accounting Firm

Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281

Legal Counsel

Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019

Counsel to the Independent Trustees

Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036

Investment Adviser

Morgan Stanley Investment Advisors Inc.
1221 Avenue of the Americas
New York, New York 10020

The financial statements included herein have been taken from the records of the Fund without examination by the independent auditors and accordingly they do not express an opinion thereon.

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

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

Morgan Stanley Distributors Inc., member NASD.

© 2007 Morgan Stanley

SPISAR IU07-00463P-T02/07

MORGAN STANLEY FUNDS

Morgan Stanley
S&P 500
Index Fund

Semiannual Report

February 28, 2007

Item 2.  Code of Ethics.

Not applicable for semiannual reports.

Item 3.  Audit Committee Financial Expert.

Not applicable for semiannual reports.

Item 4. Principal Accountant Fees and Services

Not applicable for semiannual reports.

Item 5. Audit Committee of Listed Registrants.

Not applicable for semiannual reports.

Item 6.

Refer to Item 1.

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

Not applicable for semiannual reports.

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

Applicable only to reports filed by closed-end funds.

Item 9. Closed-End Fund Repurchases

Applicable to reports filed by closed-end funds.

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

Not applicable.

Item 11. Controls and Procedures

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

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

Item 12. Exhibits

(a) Code of Ethics – Not applicable for semiannual reports.

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Morgan Stanley S&P 500 Index Fund

/s/ Ronald E. Robison

Ronald E. Robison

Principal Executive Officer

April 19, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Ronald E. Robison

Ronald E. Robison

Principal Executive Officer

April 19, 2007

/s/ Francis Smith

Francis Smith

Principal Financial Officer

April 19, 2007